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Thread: Tax Cut To Widen Trade Gap That Riles Trump

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    Radical Centrist BigLeRoy's Avatar
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    Tax Cut To Widen Trade Gap That Riles Trump

    On Thursday, April 19 (2018), an article with that title appeared on page A2 of The Wall Street Journal, in the weekly Capital Account column by the very knowledgeable Greg Ip. His columns are highly recommended, BTW. I would link to the article, but you would run into an immediate paywall. A few brief excerpts:

    Among President Trump's most deeply held convictions is that trade deficits are bad, yet his signature economic policy---a major tax cut---likely will deepen the trade deficits for years to come.

    But in the long run wider trade deficits will make Americans poorer. That's not because foreigners are stealing American jobs, as Mr. Trump often contends. Rather, it's because Americans will increasingly borrow from foreigners to sustain their standard of living. Paying them back will wipe out a sizable chunk of the tax cut's benefit.

    The U.S. runs a trade deficit because it consumes more than it produces while its trading partners, collectively, do the opposite. (Another way of saying this is that the U.S. invests more than it saves, while other countries save more than they invest.)

    Permanently reducing the U.S. trade deficit requires some combination of the U.S. saving more and other countries saving less, a tall order because saving is heavily driven by structural factors such as aging, the social safety net and the availability of credit......Permanently higher budget deficits make trade deficits worse by diminishing national saving. Larry Kudlow, Mr. Trump's chief economic adviser, in an interview with The Wall Street Journal, disputed the link between the budget and trade deficits. But economists at Goldman Sachs recently studied the historical record and found that all else equal, every $100 boost to the budget deficit raises the trade deficit by $35.

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    Radical Centrist BigLeRoy's Avatar
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    And what will happen as the trade deficit actually gets larger and LARGER, under the Trumpian economic policies?

    Well, I actually suspect you all KNOW what will happen.

    Mr. Trump will get angrier, and angrier, and ANGRIER!!!

    And he will, of course, blame all of them foreigners.
    Thanks from Friday13

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    Thought Provocateur NightSwimmer's Avatar
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    Quote Originally Posted by BigLeRoy View Post
    And what will happen as the trade deficit actually gets larger and LARGER, under the Trumpian economic policies?

    Well, I actually suspect you all KNOW what will happen.

    Mr. Trump will get angrier, and angrier, and ANGRIER!!!

    And he will, of course, blame all of them foreigners.

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    Quote Originally Posted by BigLeRoy View Post
    On Thursday, April 19 (2018), an article with that title appeared on page A2 of The Wall Street Journal, in the weekly Capital Account column by the very knowledgeable Greg Ip. His columns are highly recommended, BTW. I would link to the article, but you would run into an immediate paywall. A few brief excerpts:

    Among President Trump's most deeply held convictions is that trade deficits are bad, yet his signature economic policy---a major tax cut---likely will deepen the trade deficits for years to come.

    But in the long run wider trade deficits will make Americans poorer. That's not because foreigners are stealing American jobs, as Mr. Trump often contends. Rather, it's because Americans will increasingly borrow from foreigners to sustain their standard of living. Paying them back will wipe out a sizable chunk of the tax cut's benefit.

    The U.S. runs a trade deficit because it consumes more than it produces while its trading partners, collectively, do the opposite. (Another way of saying this is that the U.S. invests more than it saves, while other countries save more than they invest.)

    Permanently reducing the U.S. trade deficit requires some combination of the U.S. saving more and other countries saving less, a tall order because saving is heavily driven by structural factors such as aging, the social safety net and the availability of credit......Permanently higher budget deficits make trade deficits worse by diminishing national saving. Larry Kudlow, Mr. Trump's chief economic adviser, in an interview with The Wall Street Journal, disputed the link between the budget and trade deficits. But economists at Goldman Sachs recently studied the historical record and found that all else equal, every $100 boost to the budget deficit raises the trade deficit by $35.
    Mr. Leroy:

    https://www.marketwatch.com/story/us...rch-2018-04-26

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    Radical Centrist BigLeRoy's Avatar
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    Quote Originally Posted by Kallie Knoetze View Post
    Yes, I'm aware. But the trade deficit of $68 billion for March still would translate into an annual trade deficit of a cool $816 billion. It is still the case that we have the highest trade deficit in more than TEN years, Kallie. Since before the Presidency of Barack Obama, in fact.
    Thanks from Friday13

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    Your view and I might add Trump's view of trade deficits is fundamentally flawed:


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    Radical Centrist BigLeRoy's Avatar
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    Quote Originally Posted by publius3 View Post
    Your view and I might add Trump's view of trade deficits is fundamentally flawed:

    I don't have time to watch this tonight, and won't tomorrow, but I will this weekend, and will respond then. I am familiar with Professor Boudreaux. Meanwhile, perhaps you should sit down and write a nasty letter-to-the-editor of The Wall Street Journal.....

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    BigLeRoy, I'm among those contending annual trade deficits are always net detrimental to their nation's GDP and drag upon their numbers of jobs.

    This is the justification for USA adopting the trade policy described by Wikipedia's “Import Certificates” article. Import Certificate policy does favor among goods to the extent that they're produced in their own nation, and all entities are expected to continue behaving in manners they perceive to be to their own best interests.

    [Import Certificate policy does not discriminate among foreign nations; if we consider importing and exporting as a single foreign trade industry, it does not discriminate among industries or individual enterprises; it is not applicable to the values of specifically listed scarce or precious mineral materials integral to goods, but otherwise does not discriminate among types of goods.]

    USA Import Certificate policy would be of some net benefit to USA products of producers that compete or aspire to compete with foreign produced goods anywhere in the world.

    Refer to Wikipedia's “Import Certificates” article.
    Respectfully, Supposn

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    DEEP STATE CEO Blues63's Avatar
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    Quote Originally Posted by BigLeRoy View Post
    ...And he will, of course, blame all of them foreigners.
    Zoinks! Foiled again *shakes fist at sky* "Damn you Johnny Foreigner!"

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    Veteran Member HenryPorter's Avatar
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    Quote Originally Posted by BigLeRoy View Post
    And what will happen as the trade deficit actually gets larger and LARGER, under the Trumpian economic policies?

    Well, I actually suspect you all KNOW what will happen.

    Mr. Trump will get angrier, and angrier, and ANGRIER!!!

    And he will, of course, blame all of them foreigners.
    Ah, Trumptopia!

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