More Meyerson Muddleheadedness

by Don Boudreaux on December 8, 2010

in Balance of Payments, Trade

Here’s a letter to the Washington Post:

Harold Meyerson bewilderingly writes, “But money invested in American companies these days is as likely to be spent abroad as in the United States.  By 2008, 48 percent of the revenue of the Standard & Poor’s leading 500 companies came from abroad – up from 32 percent in 2001″ (“The paucity of hope – and other victims of Obama’s tax-cut deal,” Dec. 8).

The first muddle is that Mr. Meyerson confuses investment with revenue. The former is an expense and the latter is a receipt, but Mr. Meyerson interprets a rise in U.S. businesses’ foreign-earned revenues as a rise in U.S. businesses’ foreign-investment spending.

The second muddle is his lament that the revenue earned abroad by S&P 500 companies is increasing.  Because Mr. Meyerson frequently complains about America’s trade deficit, he should applaud increased earnings from abroad – for the more revenue American firms earn abroad, the lower is America’s trade (or, more accurately, current-account) deficit.

Sincerely,
Donald J. Boudreaux

Be Sociable, Share!

Comments

comments

27 comments    Share Share    Print    Email

Previous post:

Next post: