The US Census Bureau's Bureau of Economic Analysis released the latest monthly U.S. trade figures this morning. And we have a winner -- September's $30.5 billion monthly goods trade deficit with China sets a new record.
Also in September, the overall U.S. international goods and services trade deficit rose to $41.8 billion, up from $38.7 billion in August, (revised).
The trade deficit is the real deficit we should worry about. The trade deficit drains jobs and money from our economy. Last week economists Jared Bernstein and Dean Baker wrote in the NY Times, in Taking Aim at the Wrong Deficit,
Simply put, lowering the budget deficit right now leads to slower growth. But reducing the trade deficit would have the opposite effect. Not only that, but by increasing growth and getting more people back to work in higher-than-average value-added jobs, a lower trade deficit would itself help to reduce the budget deficit.
Running a trade deficit means that income generated in the United States is being spent elsewhere. In that situation, labor demand — jobs to produce imported goods — shifts from here to there.
When we run a trade deficit, as we have since 1976, we are spending more than we are producing. When that happens, the national savings rate goes into the red. Either private savings (by households and businesses) or government savings, or both, must be negative.
[. . .] If we continue to run large, persistent trade deficits, we have no good choices. We can offset that exported demand with either bubbles or budget deficits. Or we can go austere and slog along with unacceptably high levels of unemployment and weak growth.
But if we shift our focus from reducing the budget deficit to the trade deficit, we could make a big difference, not just in the national accounts, but in the lives of people for whom that unfavorable math has meant hardship for far too long.
It is so important to get this. Wall Street and corporate conservatives have the money to scare people into worrying about the wrong deficit, but it is the trade deficit that is the problem that is holding back the economy.