Here’s a letter to the Washington Post:
A headline today at your website reads: “U.S. posts a record trade deficit in goods despite ‘America First’ policies.”
I’m everlastingly mystified that reporters find newsworthy the fact that a country whose economic output is about 80 percent services buys from other countries more goods – more tangible stuff – than it sells to other countries.
Consider the Jones household in which dad works as a teacher, mom works as a reporter, and daughter Ann works in the garage manufacturing hand-made jewelry that she then sells. It is not unreasonable to suppose that of the value of the Joneses’ total output – the sum of the value of mom’s labor, of dad’s labor, and of Ann’s jewelry – 80 percent is services rather than goods.
Given that 80 percent of what the Joneses produce and sell is services, would it be newsworthy that the Joneses buy more groceries, more clothing, more furniture, more medicines, and more of other physical goods from others than they sell to others? Should the Joneses fret that, year after year after year, they run trade deficits in goods? Would the Joneses increase their household wealth if, in order to eliminate their ‘goods deficits,’ mom and dad quit their relatively high-paying jobs to join Ann in making homemade jewelry?
If you understand that the answers to these questions are all ‘no,’ why do you continue to report the U.S. economy’s trade deficit in goods as if it is not only newsworthy, but also troubling?
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