Buy American and Fairer Trade Can Solve Job Woes: Alan Tonelson
By Alan Tonelson - Sep 18, 2011
’s new jobs plan, if passed by Congress, might spark some activity and even some employment in the moribund U.S.
economy. But it’s unlikely to foster the growth and job creation we urgently need, without adding new debt, because the plan ignores a key
obstacle to genuine prosperity: the nation’s immense trade deficit.
Before the financial crisis peaked two years ago, most Americans and their leaders understandably, if not wisely, ignored the economic costs of
the nation’s trade gap. This chronic shortfall reduced U.S. output and employment, and most economists warned that it was unsustainable.
But a string of asset bubbles fueled enough growth and hiring to more than compensate, and the day of reckoning seemed comfortably far off.
Today, however, the importance of the trade deficit can no longer reasonably be denied. In the year through June, it was $422.9 billion (on an
annualized inflation-adjusted basis), almost 3.9 percent higher than the year-earlier period. The increase in the
since June 2009,
when the recession technically ended, has reduced the growth of the American economy by much more (over 14 percent) than falling
government purchases (about 6 percent) or the still-shrinking housing industry (less than 2 percent).
At this point, a substantial reduction in the trade deficit must be made a priority. Otherwise, any economic stimulus produced by the various
recovery proposals offered by Democrats and Republicans, including Obama’s, would still leave America’s underlying debts dangerously large.
Stimulus Isn’t Enough
History shows that stricter government austerity, with or without reforms to government regulations or the tax system, can’t alone meet the
challenge adequately. Nor could any new stimulus, whether in the form of spending or tax cuts, make up for enough of the money lost when
Americans buy imported goods and make investments abroad at the rate they do now.
Reducing the trade deficit drastically, however, could speed growth while actually lessening the need to prop up domestic demand. It could,