Tonelson & Kearns Peddle Ptolemaic Economics

by Don Boudreaux on September 10, 2010

in Balance of Payments, Myths and Fallacies, Seen and Unseen, Trade

Here’s a letter to the New York Times:

Alan Tonelson’s and Kevin Kearns’s case for taxing or otherwise throwing obstacles in the way of American consumers who seek to buy foreign-made products is a string of errors and misconceptions (“Trading Away the Stimulus,” Sept. 10).

For example, these authors assert that America’s trade deficit is “a central reason why American growth has lagged and President Obama’s stimulus hasn’t led to a robust recovery.”  Nonsense.  While it’s true that the 2010 trade deficit is higher than it was at the same time in 2009, the 2009 trade deficit was less than half the size of the trade deficit in 2007.  Research by Cato Institute economist Dan Griswold reveals that trade deficits grow when the U.S. economy booms and shrink when it slows.

Tonelson and Kearns allege that those of us who would repair the economy with tax cuts are naively out-of-touch because we rely on a theory “rooted in” the 1980s.  Perhaps.  But the thoroughly discredited theory that Tonelson and Kearns rely on – mercantilism – is rooted in the seventeenth century.

Sincerely,
Donald J. Boudreaux

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