On his radio spot today, CBS newsman Charles Osgood spoke about the U.S. trade deficit. Here’s the whole transcript and a button to listen in, if you wish.
I sent the following letter to Mr. Osgood in response:
9 August 2006
Mr. Charles Osgood
The Osgood File
CBS Radio News
Dear Mr. Osgood:
Your
report today on the trade deficit missed some important points. First,
when the U.S. trade deficit increases, Americans do not necessarily go
further into debt. If, for example, BMW sells cars to Americans and
then uses the dollars it earns to build a factory in South Carolina,
the U.S. trade deficit rises even though no debt is created by these
transactions.
Second, as the example of the BMW factory in South
Carolina highlights, the size of the capital stock isn’t fixed. Much
foreign investment in the U.S. creates productive capital goods that
would not otherwise exist. So, you’re mistaken to say that a rising
U.S. trade deficit means that foreigners are "buying America." As has
been true for much of our history since 1607, foreign investment in
critical to making America.
Sincerely,
Donald J. Boudreaux
