Here’s a letter to the Wall Street Journal:
In today’s “Daily Shot” your reporter writes “the US trade deficit was worse than expected last month.”
I urge you – especially because yours is among the world’s most read and respected financial newspapers – to stop describing rising US trade deficits as if they are bad news. While scenarios can be imagined under which rising US trade deficits signal problems with the American economy, the far more common reality is that rising US trade deficits are a cause for applause – namely, America remains a preferred destination for investors’ resources. Remember that to say “rising US trade (or, more precisely, current-account) deficits” is simply another way to say “rising US capital (or financial) account surpluses.” Why should we Americans bemoan the fact that investors worldwide find opportunities the US economy to be relatively attractive? And why should we fear larger inflows of capital into our economy?
When a corporation has a successful IPO, do you report this success as bad news for that corporation? When an entrepreneur attracts venture-capital funding, do you report the receipt of this funding as a set-back for that entrepreneur? When creditors agree to help an established firm expand its operations, do you report this firm’s fortunes as growing worse? Of course not. And so the very same reasons that lead you to report as positive news the success of each individual enterprise at attracting investment funds from others should lead you to report as positive news the success of the collection of enterprises in the US at attracting investment funds from others.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030