- Cafe Hayek - http://cafehayek.com -

But So Many Media Darlings Say It Ain’t So!

Tweet [1]

Here’s a letter to the Wall Street Journal:

In today’s report entitled “Foreign Investment Surges [2],” there’s a line that should be quoted on each of the gazillion occasions when grandstanding politicians such as Lindsey Graham [3], bloviating (and hypocritical [4]) buffoons such as Donald Trump [5], proud yet utterly misinformed protectionists such as Ian Fletcher [6], and populist economists such as the ubiquitous Peter Morici bemoan the U.S. trade deficit as being a drag on the U.S. economy [7] in general, and on job creation in particular: “The pickup in foreign direct investment in the U.S. has boosted stock prices and employment in the manufacturing sector, a cornerstone of the recovery.”

Because increased foreign investment in the U.S. requires that foreigners spend a smaller portion of their dollars on buying American exports, a rise in foreign direct investment in the U.S. necessarily increases the U.S. trade deficit (or reduces the U.S. trade surplus).  As your report makes clear, however, such foreign investment is a boon to the U.S. economy and is no drain on jobs here.

Alas, you can be sure that this fact will be ignored the next time – which I guarantee will be soon – some politician or pundit takes to the airwaves to “explain” that America’s trade deficit is a symptom and source of U.S. economic decline or of foreign-government perniciousness (or both).

Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA  22030