Reason #46: The Widening Trade Deficit

In 2006, we bought $838 billion more in goods from other nations than we sold them in American-made stuff. That’s a world record, but it’s nothing new. From 2002 to 2006, we set a world-record trade deficit every year. The trade deficit with China alone was $233 billion in 2006, a new world record between two countries.

Back in 1996, our trade deficit was “only” $191 billion. People thought we were in trouble then. Who knew the debt balloon could stretch so much? And why does it keep expanding? Simply put, our political and corporate leaders have never looked beyond their own noses to consider the long-term wellbeing of our country. All they see is short-term profits in the form of cheap labor overseas. But while U.S. corporations have been raking in record profits from their newly outsourced operations, America’s overall economic health has paid the price.

Even if our politicians finally grew backbones and our corporate leadership finally grew a heart, it wouldn’t help. The industrial infrastructure required to restore our productivity is already gone.

Things have gotten so bad, we might not be able solve this problem even if we decide to finally try to take action. Economist David Hale wrote in a 2005 Financial Times article that the United States no longer has enough manufacturing capacity left to close the trade deficit. In other words, even if our politicians finally grew backbones and our corporate leadership finally grew a heart, it wouldn’t help. The industrial infrastructure required to restore our productivity is already gone.

You might ask, so what? Who cares if we have to ship in everything we need instead of making it ourselves? After all, when I go to the store I can still find what I’m looking for. Well, the problem is that America is now so outsourced, indebted, and reliant on consumerism that we can’t even take care of our most basic national needs anymore. And it’s only a matter of time until we start feeling the hurt of our situation so sharply that we can no longer ignore it.

Sending those hundreds of billions overseas robs us of our own capital and hammers the value of our currency. Rivers of dollars flow out every year and most of that money is not invested so much as lost. Instead of spurring growth in our economy here at home, it floods into the global market, benefiting other nations and other countries’ citizens. Moreover, it creates a huge glut of greenbacks in the world, which accounts in part for the continuing fall of the dollar’s value. The more the dollar falls, the more all those imports cost us.

We keep buying and buying from overseas, and every year it’s making us poorer and poorer at home.

NEXT: Reason #47: GDP - Our Gross Disgusting Product