Although laid low with a wicked flu now for a week, I nevertheless know that I’ll be unable to sleep without writing some response to Robert Lighthizer’s lastest tendentious apology for protectionism. There’s much, much more to say in response, as his essay is stuffed with both factual and analytical howlers.
Editor, New York Times
620 Eighth Avenue
New York, NY 10018Editor:
Conceptual problems galore infect Robert Lighthizer’s case that U.S. trade deficits are a problem in need of solution (“Want Free Trade? May I Introduce You to the Tariff.” Feb. 10). Not the least of these problems is evident when he writes that “in the last 20 years, we have transferred some $20 trillion of our wealth (in the form of equity in our companies, debt and real estate) to the governments and citizens” of foreign countries.
Mr. Lighthizer here does single-entry bookkeeping. When foreigners acquire dollar-denominated assets from Americans, Americans acquire valuable goods, services, or assets in return. Because each and every one of these exchanges is voluntary, every American party to these exchanges believed himself or herself to be made better off as a result. Who is Mr. Lighthizer to second-guess these decisions made by fellow Americans regarding their own property?
The voluntary nature of these exchanges creates a powerful presumption that they’re in no need of being ‘corrected’ by protectionist interventions. Yet this presumption is only further strengthened by the data. In the third quarter of 2024, the real net worth of the average American household was, at $1,207,509, 55 percent greater than was the real net worth in 2004.*
If Mr. Lighthizer’s implication about U.S. trade deficits were correct, American households over the past 20 years would have suffered declining net worth. But in fact the opposite occurred – testifying that the foreign investments in the U.S. that generate U.S. trade deficits not only make the American economy more productive, but Americans themselves more prosperous.
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* Data on nominal household net worth are available here; I converted the 2004 dollars into 2024 dollars using this GDP deflator calculator. I then adjusted for the rise in the number of households by using these data.
