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And Then There are These Facts…

Here’s a letter to the Wall Street Journal:

Gerard Gayou eloquently explains some of the several errors that infect President Trump’s, and trade advisor Peter Navarro’s, understanding of trade deficits (“A Trade Deficit Isn’t A Mortgage,” Nov. 16).

Here are three additional pieces of data that belie the Trump administration’s insistence that trade deficits are economically harmful to Americans. Compared in inflation-adjusted dollars to 1975,* the last year in which America ran an annual trade surplus,

the size of the capital stock in America is today nearly three times as large;

the total value of financial assets owned by American households and nonprofit organizations is today four-and-a-half times larger;

the total net worth of American households and non-profit organizations is today four times higher.

Even the most contorted and illogical train of ‘reasoning’ can’t even begin to square these realities with Messrs. Trump’s and Navarro’s claims about trade deficits.

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

* When I had to adjust for inflation, I used this calculator (which, because it uses the consumer price index, almost certainly overstates inflation and, hence, understates the growth in the real value of the reported figures).