Here’s a letter to the Washington Post.
Editor:
The conclusion of Ramesh Ponnuru’s otherwise excellent exposé of J.D. Vance’s poor understanding of the U.S. dollar’s role as global reserve currency includes a small misstep (“JD Vance vs. King Dollar, revisited,” August 25). Mr. Ponnuru writes there that “lower budget and trade deficits, lower taxes, more manufacturing jobs, cheaper goods and services: These are all appealing but can’t be had simultaneously.”
He’s correct that these outcomes can’t be had simultaneously. He’s correct also that lower budget deficits, lower taxes, and cheaper goods and services are desirable. But he’s incorrect to suggest that lower trade deficits and more manufacturing jobs are necessarily desirable.
U.S. trade deficits are the counterpart of net capital inflows; they reflect the U.S. economy’s unusually great appeal as a destination for investment capital from around the world. Therefore, lower trade deficits brought about by reducing this appeal would be an outcome to jeer rather than to cheer. Similarly, any increase in American manufacturing jobs made possible by tariffs or subsidies that destroy higher-paying American jobs in the roughly 90 percent of the U.S. economy that’s not manufacturing would also be worthy, not of commendation, but of condemnation.
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
