Truth about Trade Deficits and Jobs | Daniel Griswold | Cato Institute: Commentary

Truth about Trade Deficits and Jobs | Daniel Griswold | Cato Institute: Commentary: "A trade deficit doesn't mean those dollars flowing abroad just disappear. They quickly return to the United States. If they are not used to buy our goods and services to export, they are used to buy American assets — Treasury bills, corporate stock and bonds, real estate and bank deposits.

In this way, America's trade deficit is always and almost exactly offset by a foreign investment surplus. The net surplus of foreign investment into the U.S. each year keeps long-term interest rates down, prevents the crowding out of private investment by government borrowing and promotes job creation through direct investment in U.S. factories and businesses."

"Since 1980, real U.S. GDP has grown at an annualized rate of 3.6 percent during those periods of rising trade deficits, compared to a sluggish 1.0 percent during periods of shrinking deficits. So much for trade deficits being a drag on growth."

"Despite worries about the U.S. industrial base, manufacturing output during periods of expanding trade deficits rose a healthy 5.2 percent per year. During periods of declining (i.e. 'improving') trade deficits, manufacturing output contracted at an annualized rate of 2.0 percent."

"during periods of rising trade deficits, employment has grown at an annualized average of 1.4 percent, compared to zero growth on average during periods of declining deficits. The unemployment rate dropped by an average of 0.4 percentage points a year during periods of rising deficits, compared to a painful 1.0 point per year when the deficit was declining"