Here’s a letter to my regular full-on protectionist correspondent Nolan McKinney:
Complaining about my alleged “flippant irresponsibility toward US trade deficits,” you again repeat the mistaken claim that these deficits necessarily signal rising American indebtedness.
Frankly, I’m tired of explaining why American trade deficits do not necessarily cause Americans’ indebtedness to rise . But your e-mail does prompt me to ask you and other protectionists this question: Assuming (contrary to fact) that American trade deficits do necessarily cause Americans’ indebtedness to foreigners to rise, why do you bemoan these deficits? Why not instead cheer them?
You’ll think my query silly, and answer that it’s undesirable for us Americans to be indebted to foreigners. But from your protectionist perspective, why is such indebtedness undesirable? Being indebted to foreigners means that we Americans must repay these debts, which in turn means that we Americans must in the future work to produce more goods and services for export. Isn’t this situation precisely what you and other protectionists want? Isn’t a rise in the demand for American exports – especially a rise not derived from, or offset by, a simultaneous rise in American imports – your very ideal?
You and your fellow protectionists fear above all that we Americans will soon have too few opportunities to produce and, hence, have too few jobs. And so if (also contrary to fact) such a fear had some basis in reality, you should stop warning of trade-deficit-induced increases in American indebtedness to foreigners and start celebrating every increase in this indebtedness with fireworks and grand parades.
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