Reply #9: Exports HAVE Held Ground [View All]

[On the Road]

Imports have been the issue, especially since China joined the WTO in 2001. A lot of these are from foreign divisions of US companies as Chomsky is fond of pointing out.

The problem in the US is more one of income distribution and wages for the bottom half of workers. A lot of changes are needed in the tax code, the minimum wage, and other means of balancing the playing field. Shutting down international trade is a very blunt instrument that is likely to do more harm than good, and has not worked for countries like Mexico that have tried to adopt it. The trick is to reduce the trade imabalances with low-wage countries like China without killing the goose that laid the golden egg.

The US is an attractive place to invest. It's become a lot cheaper for foreign investors because of the weak dollar.



I think Zakaria has blinders on about the long-term effect of the federal deficit, but still, many of his points are well taken. As far as the 'antiquated' numbers, I believe what he was trying to say is that in the past, there was a consensus among economists that the current trade deficits, foreign exchance deficits, and budget deficits and zero savings rates would have caused massive repercussions long before now. New models are really needed to evaluate the new economy, and so far I don't know of anyone who's successfully done that.