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Article Artículo

Donald Trump’s Trade War: Report from the Front

Donald Trump is bravely carrying on a trade war, not just with the bad guys with China, but with longtime allies like Canada and the European Union. Incredibly, the media just don’t seem that interested in reporting on the ongoing progress.

Last week the Commerce Department released trade data for August, and it got almost no attention whatsoever. The report showed that the trade deficit increased modestly from $54.0 billion in July to $54.9 billion in August. This is virtually identical to the deficit from August of 2018, so comparing these two months year over year, at least the trade deficit is not expanding.

Looking at a slightly bigger picture, in 2016, the last year of the Obama administration, the trade deficit was $518.8 billion, or 2.8 percent of GDP. The trade deficit expanded in both 2017 and 2018, reaching $638.2 billion in 2018, or 3.1 percent of GDP. It looks to come in slightly higher in 2019, with the deficit averaging $648.3 billion in the first half of 2019.

There are many factors behind the rise in the trade deficit. Growth in the U.S. has been somewhat faster than in major trading partners like the EU and Japan. The dollar has also risen in value, although most of that rise pre-dates Trump. But putting these aside, if Trump’s goal was to bring the trade deficit closer to balance, he’s been going the wrong way in the first two and half years of his administration.

If we look at his major nemeses in the international arena, there are not many signs of Trumpian success. Starting with China, in the last year of the Obama administration, the trade deficit in goods with China was $346.8 billion.[1] This had increased to $419.6 billion last year. It looks like the trade deficit is coming down somewhat in 2019, with the deficit for the first eight months at $231.6 billion, compared to just over $260.0 billion last year. Nonetheless, we are still likely to end up with a higher deficit with China in 2019 than we had in the last year of the Obama administration.

CEPR / October 06, 2019

Article Artículo

The Solution to the Country’s Debt and Deficit Problem

For most people, the country’s national debt and annual deficit are not major concerns. However, for a substantial portion of the policy types who make, write, and talk about economic and budget policy, debt and deficits are really big deals. And, the fact that our budget deficit and debt are both large by historic standards, and growing rapidly, is an especially big deal.

The list of people in this category is lengthy. It starts with the Peter J. Peterson Foundation (which displays the debt in big numbers right on its home page) and the many groups funded by them. The most important is the Committee for a Responsible Federal Budget, which is virtually guaranteed prominent placement in stories on the budget by major news outlets.

The Washington Post (both its news and opinion sections) has a high standing in deficit hawk circles. House Speaker Nancy Pelosi and other members of the Democratic leadership have at least one foot in the deficit hawk camp. And, of course, Republicans are big deficit hawks when a Democrat is in the White House.

In order to make these deficit hawks happy, I have a proposal – we’ll call it the “Baker Budget Fix” – that can eliminate debts and deficits forever. It’s fun, simple, and can give us balanced budgets for all eternity.

The basic point is that the government can sell off all sorts of patent and copyright monopolies and collect massive amounts of revenue. Regular readers know that I am not a big fan of patents and copyrights, but since I’ve made little headway in getting these policies questioned in public debate, why not just embrace them? After all, since everyone who matters seems to be just fine with ever longer and stronger patent and copyright protection, let’s use them to raise a ton of money for the government and make the deficit hawks happy.

CEPR / September 27, 2019