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Good Deficit

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Here’s a letter to the Wall Street Journal:

Editor:

Your plea for calm over the news of a rise in the U.S. trade deficit is excellent (“Trade Deficit Freak Out [2],” March 7). But I go even further than your description of this rise as “a benign byproduct of a healthier American economy.”

I instead describe this rise in the U.S. trade deficit both as a welcome bit of evidence that investment in the U.S. economy remains relatively attractive, and a beneficial source of capital and entrepreneurial ideas. This inflow of capital and ideas further fuels our economic growth.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

……

Protectionists cling to the myth that a trade deficit is both evidence of, and a source of, economic trouble. They do so because the very words “trade deficit” are easy to use in demagoguery. Not one in 10,000 non-economists understands the balance of payments, and so most people are easily duped into believing that something called a “trade deficit” indicates a problem that the state must solve with restraints on ordinary people’s freedom to trade.

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