It’s the Trade Deficit, Stupid

It’s been four years since the greatest economic melt down since the great depression. The underlying reason behind this depression is the economic structure of American and European banks. In addition to that, there is a more insidious problem with the American economy – the trade deficit.

America is perhaps the greatest nation in the history of civilization because it had the largest sustained trade surplus in the history of time. Starting in the early 1900’s, American products and innovation led the entire world and the many American inventions, products and companies made the world as we know it today. Included in this list is the light bulb, the radio, the television, the car, the airplane, and of course the computer. These were American products that were designed and manufactured in the United States. These products were also exported throughout the world.

We ran a hug trade surplus that drove the highest standard living in the entire world. It is the trade surplus that creates true jobs and sustains the economy. When a country has a trade surplus, then all the other related jobs such as policemen, barbers, stock brokers, accountants and everything other category rises naturally. The trade surplus is the tide that lifts all boats.

Go back to my favorite trade surplus item, computers. At Gateway, where I worked in the 1990’s, all of our computers were made in the United States, and more importantly the products were sold and supported via telephone all by people that resided in the United States. Since that time, the manufacture of the computers have moved to China, and the support has moved to India. That is a ton of jobs to lose in such a short time. It is this exodus of jobs that is creating our current trade deficit, and at the core of our economic demise.

It is too late to move all of those jobs back to the United States, although I do think that there should be a tax penalty to companies that ship telephone support jobs off shore. However we must recognize the core problem before we can fix it. We need to begin again creating and building products that the entire world wants.

Of course the problem is worse than that. For some insane reason, almost everything that Americans purchase is no longer made in the United States. Simple things such as a cutting board, clothes and nails are no longer made in the US. Big items such as lawn mowers, washing machines, and so on are all made in foreign countries.

I bought a new guitar a few months ago and it made me sad to see that the guitar was made in China. It is a nice guitar but Americans once made great guitars. Since we no longer produce very much any more, we are quickly losing all of our blue color jobs which is essential to our economy and the American dream. BTW. The American dream is not and should never be to own a house. The American dream is that we can create a better future for our children.

Even back in the 1990’s, the US was running a surplus and then in a scan 10 years, we went from trade surpluses to huge deficits. In order to get our country back on track, we need a plan. Here is my plan.

1. Call centers. A lot of the call centers that dotted the country are now gone and been moved to India. There should be a tax penalty to companies that out source the call center jobs to India, Phillipines and other places. Personally, I hate talking to people in other countries to solve matters in my own country. Some times it is laughable how bad their English is.

2. Tourism. The government should promote foreigners to visit our country as tourists. America is still today the most difficult country to visit in the world. We need to make it easier and more affordable for all these people to visit. The beautiful thing about tourism is something that Wall Street can’t export to China. We need to get a lot better at being nice to tourists and perhaps even learning foreign languages. There is a certain arrogance in America because we have once been the greatest country in the world that foreigners are somehow inferior to us. They are not.

3. Bring the troops home. Here’s a great way to fix the trade balance. Bring all the troops home. They spend all of their salaries in foreign lands creating economic stimulus to Japan, the Phillipines, Germany and the other hundred places where we have bases. Let’s bring them all home and create new bases throughout the Unite States. Tons of domestic problems will miraculously go away like border and school security and then on top of that our military will spend all of their salaries inside of their own country. Time to end the stupidity of the cold war.

4. The Walmart Tax. My opinion is that a very key element of Walmart’s strategy is to prefer companies that manufacture outside of the US and in particular in China. Walmart should pay a penalty for all these goods. Sorry, but they should not be able to base a business and become the nation’s largest retailers on killing jobs. Walmart is like a leech on the economy.

It was during the Clinton election of 1996, when they said “It’s the economy, stupid”. This more true than ever but now the economy has become significant worse, it is more than ever the trade deficit, stupid.

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