Some Links

by Don Boudreaux on April 12, 2011

in Balance of Payments, Myths and Fallacies, Regulation, Taxes, Trade, Video, Work

Dan Griswold’s latest, data-rich study on the U.S. trade deficit is a must-read.  Here’s the abstract:

A nearly universal consensus prevails that the goal of U.S. trade policy should be to promote exports over imports, and that rising imports and trade deficits are bad for economic growth and employment.

The consensus creed is based on a misunderstanding of how U.S. gross domestic product is calculated. Imports are not a “subtraction” from GDP. They are merely removed from the final calculation of GDP because they are not a part of domestic production.

Contrary to the prevailing view, imports are not a “leakage” of demand abroad. In the annual U.S. balance of payments, all transactions balance. The net outflow of dollars to purchase imports over exports are offset each year by a net inflow of foreign capital to purchase U.S. assets. This capital surplus stimulates the U.S. economy while boosting our productive capacity.

An examination of the past 30 years of U.S. economic performance offers no evidence that a rising level of imports or growing trade deficits have negatively affected the U.S. economy. In fact, since 1980, the U.S. economy has grown more than three times faster during periods when the trade deficit was expanding as a share of GDP compared to periods when it was contracting. Stock market appreciation, manufacturing output, and job growth were all significantly more robust during periods of expanding imports and trade deficits.

The goal of U.S. trade policy should not be to promote exports at the expense of imports, but to maximize the freedom of Americans to trade goods, services, and assets in the global marketplace.

Speaking of trade deficits, in this video, Dan Mitchell exposes an IRS proposal that, if implemented, would certainly reduce America’s trade deficit – and, in doing so, make Americans poorer.

Writing in today’s Wall Street Journal, Carrie Lukas offers evidence against the proposition that women are paid less in the U.S. economy than are comparably productive men.  Here’s a key passage:

Recent studies have shown that the wage gap shrinks—or even reverses—when relevant factors are taken into account and comparisons are made between men and women in similar circumstances. In a 2010 study of single, childless urban workers between the ages of 22 and 30, the research firm Reach Advisors found that women earned an average of 8% more than their male counterparts. Given that women are outpacing men in educational attainment, and that our economy is increasingly geared toward knowledge-based jobs, it makes sense that women’s earnings are going up compared to men’s.

And more speaking of: speaking of comparing men’s to women’s pay, consider these data offered by Carpe Diem’s Mark Perry.

All Marylanders should toast this policy change! (HT Daniel Kuehn)

Atlas Shrugged hits theaters on Friday!  Here’s the New York Post‘s Kyle Smith’s take on this movie.  I saw it a few weeks ago and thoroughly enjoyed it.

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{ 44 comments }

muirgeo April 12, 2011 at 1:52 pm

“An examination of the past 30 years of U.S. economic performance offers no evidence that a rising level of imports or growing trade deficits have negatively affected the U.S. economy.”

LOL. Well at least if you exclude the current Great Recession from the data but other than that! Unreal!

Woodand6 April 12, 2011 at 2:00 pm

I wouldn’t blame the recent recession on trade deficits, so I think that statement is true. All it is saying is that the trade deficit did not impact the U.S. economy, not that the U.S. economy was growing the whole time.

muirgeo April 12, 2011 at 2:28 pm

So what would you blame the current economy on?

E.G. April 12, 2011 at 2:29 pm

Not enough taxing of excess wealth…I think.

Ken April 12, 2011 at 2:50 pm

EG,

Is this a serious comment or sarcasm? If it’s not sarcasm, what do you mean by excess wealth?

Regards,
Ken

E.G. April 12, 2011 at 2:55 pm

Ken. Serious comment of course. What else could it be? Muirgeo has made some very convincing arguments, that have decisively changed my mind into agreeing with him; some people should have all their income taken away from them, first and foremost Muirgeo.

Methinks1776 April 12, 2011 at 3:28 pm

Well, I know you’re dead serious and all, but here’s Walter Williams in today’s IBD on the subject.

http://www.investors.com/NewsAndAnalysis/Article/568737/201104111831/Tax-The-Rich-Good-Luck-With-That.htm

E.G. April 12, 2011 at 4:21 pm

Oh yeah? Well Walter Williams has clearly never attended a Socialist Worker paper sale in front of the GMU library. Those guys will teach him a thing or two about equality and justice.

And the paper only costs $1, so even the most exploited of workers can afford it. (Did I say workers? I meant teenagers)

Troll Finder April 12, 2011 at 6:44 pm

You be trollin’.

Chucklehead April 12, 2011 at 8:52 pm

Stop wasting my money and giving it to your friends.

Richard Stands April 12, 2011 at 9:36 pm

Here’s another variant of Walter Williams’ article, done in video form, called Eat the Rich. It runs 9:05 minutes. Entertaining.

Richard Stands April 12, 2011 at 9:42 pm

Clarification (In lieu of editing): The video linked above is only connected to Prof. Williams in its topic, not its author or sponsor.

Ken April 12, 2011 at 2:49 pm

muirgeo,

The FED, congress, Fannie Mae, and Freddie Mac. At a time when the economy shrank by 5% (2007-2010) the federal government spending increased by 30%.

In short irresponsible politicians taking hard earned money from tax payers and their children, then handing that money to their political cronies.

Regards,
Ken

Methinks1776 April 12, 2011 at 4:07 pm

Ken,

Krugman told Muirdiot (via the NYT) that the government didn’t spend enough. He cuts and pastes things he doesn’t understand – usually reassembling the material in nonsensical ways in his posts – directly from the source. It completely bi-passes the waste between his ears, which is just as well.

Asking that moron to think is like asking a rhinoceros to perform Swan Lake. It might be amusing, but nothing good will come of it.

kyle8 April 12, 2011 at 6:09 pm

There is no hope convincing Mureigo, but to clarify. The recession was caused by exactly the same thing that caused all other recessions.

1) first a boom caused by speculation in a specific industry,(this time it was real estate, last time it was the Dot com bubble).

2) said speculation was taken widespread by Easy money policies and poor lending policies. (both caused, this time, by the federal government)

3) the fall was triggered by an outside factor, in this case the huge run-up in Oil prices in the summer of 2008. In the great depression it was the default of loans given to Germany to pay their war debt.

Recessions are not a mystery, they don’t come from nowhere, they come from the natural boom-bust business cycle being somehow artificially “Superheated” usually by ill conceived government policies.

BTW – I know you know this, I just wanted to offer it as a way to concentrate my own mind on the subject.

Dano April 12, 2011 at 3:53 pm

Blame the current economy on? The data shows GDP has grown — did you think it has shrunk?

Dano April 12, 2011 at 3:48 pm

From the BEA Table GDP (in billions $):
1980 2,768.9
1994 7,017.5
2004 11,867.8
2009 14,119.0
2010 14,660.4

Trade Balance (Millions $)
1994 – 98,493
2004 -609,345
2009 -374,908
2010 -495,728

So tell me, even including the recession, What is the affect of the trade deficit on GDP?

SaulOhio April 12, 2011 at 1:56 pm

I already paid for my tickets for a 4:50 showing of Atlas Shrugged. Can’t wait.

I’ll even be wearing my “Who is John Galt?” T-Shirt.

Frank33328 April 12, 2011 at 2:11 pm

I have my ticket as well, and hoping that it wont suck…….

E.G. April 12, 2011 at 2:31 pm

There’s no way it won’t suck.

Frank33328 April 12, 2011 at 3:05 pm

I fear you are correct but lack your certainty. The Dr’s comment of having thoroughly enjoyed it gave me some hope. To date, the reviews have been polarized to put it lightly.

John Galt April 12, 2011 at 3:58 pm

Thanks for the links Don. It’s good for your second-handers to hear Hank’s voice. It know it always brings a smile to my eyes and a swagger to my steps.

For many years you’ve been asking “Who is John Galt?” This is John Galt speaking. I’m the man who’s taken away your victims and thus destroyed your world. I’m the consultant and trader that has shown the way to move manufacturing and innovation to private clandestine locales. Like starving vampires, your civilization will perish when the few productive men still in your regulatory & military captivity spill out their last remaining drops.

You’ve heard it said that this is an age of moral crisis and that Man’s sins are destroying the world. But your chief virtue has been sacrifice, and you’ve demanded more sacrifices at every disaster. You’ve sacrificed justice to mercy and happiness to duty. So why should you be afraid of the world around you?

Your world is only the product of your sacrifices. While you were dragging the men who made your happiness possible to your sacrificial altars, I beat you to the punch. I’ve been reaching them first and told them about the game you were playing and where it would take them. I explained the consequences of your ‘brother-love’ morality, which they had been too innocently generous to understand. You can’t touch them now, when you need them more than ever.

They are on strike against your creed of unearned rewards and unrewarded duties. If you want to know how I made them quit, I told them exactly what I’m telling you today. I taught them the morality of Reason — that it was right to pursue one’s own happiness as one’s principal goal in life. I don’t consider the pleasure of others my goal in life, nor do I consider my pleasure the goal of anyone else’s life.

I am a consultant & trader. I earn what I get in trade for what I produce. I ask for nothing more or nothing less than what I earn. That is justice. You have witnessed the coercive power of Nato, Opec, & the churches. As your prices continue to increase, you will be unable to deny the awesome spontaneously emerging powers of the Cartels of the Mind.

Ken April 12, 2011 at 4:06 pm

Don,

As for the wine link in Maryland, this also corresponds to a tax increase from 6% to 9% (a 50% increase) on alcohol in Maryland.

http://articles.baltimoresun.com/2011-04-12/news/bs-md-sine-die-20110411_1_college-tuition-alcohol-tax-illegal-immigrants

Regards,
Ken

muirgeo April 12, 2011 at 4:12 pm

“I am a consultant & trader. I earn what I get in trade for what I produce.”

A consutant and trader… in ther words you don’t produce anything. Who does now a days when it’s easier to steal from the productive economy trading and consulting. If you actually had to produce something of true value you would likely go hungry… well except for the welfare checks.

Methinks1776 April 12, 2011 at 4:22 pm

Hi, idiot.

Do you know what a “trader” is? ‘Splain in your own words. Cutting and pasting doesn’t count as it shows no reading comprehension.

Dazzle us, chimp.

vikingvista April 12, 2011 at 4:48 pm

Dawkins says that given enough time, a chimp could hammer out the works of Shakespeare on a keyboard. How many more years do you suppose before Muirpot hammers out something coherent? Or are we talking geologic time frames?

kyle8 April 12, 2011 at 6:00 pm

I don’t agree with Dawkins, neither thing will ever happen.

vikingvista April 12, 2011 at 6:44 pm

Shakespeare’s works are finite, so random pecking would produce them in finite time. Is there enough time in the universe? It is a fairly straight forward calculation, and the answer is yes. Will there ever be a chimp continuously tapping at a keyboard for eons? No, but that isn’t the point.

E.G. April 12, 2011 at 4:24 pm

You’re doctor. You’ve never produced anything in your life either. Neither has Krugman. Do you get dumber by the day, or are you inhaling your own nitrous oxide?

Methinks1776 April 12, 2011 at 4:31 pm

Why can’t it be both?

Methinks1776 April 12, 2011 at 4:32 pm

…and you’re wrong! I bet Muirdiot has produced MANY near-death experiences for his patients.

vikingvista April 12, 2011 at 5:35 pm

Muirde has probably produced plenty for the local morticians.

brotio April 14, 2011 at 12:13 am

Thanks for another name to add to the list of muirphemisms! :) )

vikingvista April 14, 2011 at 12:34 am

“Thanks for another name to add to the list”

You’re welcome, and pardon the French.

Ken April 12, 2011 at 5:09 pm

muirgeo,

YOU are a consultant and trader. Aren’t you a doctor? That means people pay you to consult with them about their bodies. You trade your time and knowledge for their money.

Is this really so hard to understand?

Regards,
Ken

Sandre April 12, 2011 at 5:26 pm

Yes, it is really hard for muirgeo to understand! Muirgeo should be taxed at 100%. He doesn’t produce anything.

Sam Grove April 12, 2011 at 5:36 pm

And he likes to party in distant woods with fellow non-producers, I mean, Sierra clubbers, so he doesn’t have to see those manual labors he condescends to treat.

John V April 12, 2011 at 6:20 pm

He’s not a doctor, IMO.

He’s a degenerate little nothing who obsesses with trolling. Personally, I think there’s a certain level of overall intelligence and maturity that one would expect from a doctor when he communicates that is totally void in anything that little twit ever says.

Methinks1776 April 12, 2011 at 8:25 pm

Oh, I wish I could agree with you. Unfortunately, I’ve met too many doctors.

JohnK April 13, 2011 at 8:16 am

Being a doctor doesn’t mean the person got straight A’s at a reputable medical school. They could have been a D student at a hack school.

Being educated doesn’t mean a person is intelligent. They might be good at retaining and regurgitating information, but be incapable of understanding it. Education is a function of pleasing educators, not intelligence.

vikingvista April 13, 2011 at 5:27 pm

“good at retaining and regurgitating information”

This is by far most important to success at medical school.

kyle8 April 12, 2011 at 5:59 pm

You say that there is a balance of imports in the form of investment to balance the cash going out. But I wonder if this is the whole truth. Couldn’t a nation, let us say Mexico, use the dollars it recieves as just another form of currency?

Or could a nation, let us say the Philipines, use those dollars to turn around and pay off it’s own debts to another nation?

Or could a nation, let us say China, use those dollars as a fractional reserve in it’s banking system and make loans with it?

I am curious.

SaulOhio April 12, 2011 at 6:52 pm

muirgeo is not dumb, or affected by chemicals. His problem is the altruist-collectivist morality he clings to so desperately. I’m not sure what social or personal pressures are at work here, but anything that smacks of self-interest or free markets are a threat to his personal self-worth. That is what Atlas Shrugged is all about. It is a threat to those who cannot give up self-sacrifice as the center of their moral world. They know they cannot live their morality consistently. Though this is not because of any failing of their own, it is the moral code that won’t work, they fear they are the ones who are evil by their own standards. So they have to scream their hatred of any opposing idea, no matter how unintelligibly, to try to prove to themselves and the world that they do, in fact, still believe their nonsensical, mystical, unworkable moral code.

dsylexic April 13, 2011 at 3:11 am

the trade deficit matters inasmuch as it fuels national debt/fiscal deficit/money printing.it is ok if the foreigners buy private debt/equity/toxic trash,but once they start buying treasuries ,you have gotta worry.because the govt will continue issuing those treasuries to those govts who want to punish their own citizens by manipulating their own currencies (so that they can boost exports for whatever misguided reason). those treasuries put the american taxpayer at risk .does anyone disagree?.
the only solution would probably be in restricting the national debt or amount of treasuries the govt can issue.

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