One of my favorite complaints from politicians (Mike Huckabee, in particular) has been about the recently passed (in the House, anyways) Economic Stimulus Package. I keep hearing about how we are going to "BORROW $150 BILLION FROM THE CHINESE!!!!" Seriously, let's all ease up a little bit. Several things bother me here.
First, the implications that because it is THE CHINESE!!!! we have to be particularly worried. Would it generate the same political soundbite if we said "We're borrowing $150 billion from the British?" That's what I thought. Enough with the China bashing
Second, unless I'm mistaken, the "tax rebates" (see below) will be paid by the U.S. Treasury, not the Chinese. They will be paid by the government's favorite tactic, deficit spending. The government will issue $150 billion in new bonds on the open market which will be repaid in 10 or 30 years by our children and grandchildren in the form of taxes. (Note: while I have little problem with running a large trade deficit, I am not a fan of large government deficits.)
Calling these "rebates" is dumb. Most people getting them are getting back as much or more as they paid in taxes. Ugh. Call them "gifts" or "the dole" or "our children's future" or whatever--just not rebates.
Next, these rebates are a joke. Seriously. I remember the last time we got these things. I used it to buy new brakes for my car. $150 billion is a little over 1% of GDP. Nothing to sneeze at, but can the government really not come up with a better use of $150 billion? How about working to eliminate poverty or find a cure for cancer? How about giving Western Oregon its timber money back so I can have a decent library? Scholarships for high-performing University students? Anything but giving Joe Blow $300 so he can have a booze party!
Anyways, if you feel passionately, call or e-mail your Senator and tell them the stimulus package is a joke and to vote against it. We're not in a recession. If we were, this wouldn't get us out. We don't need the checks.
Now, if anyone is still awake, let's talk briefly about the trade deficit. I worry that sometimes we as a nation have the cart and the horse confused. The trade deficit represents foreign capital coming into the U.S. to fund investment opportunities that we as a nation cannot fund. Why? Because our savings rate is negative (as a nation and as consumers). This means the Chinese, and Japanese, and other nations invest their savings to fund US capital investments. In other words, these investors see the US economy as a good place to invest their money.
Allow me to ask a rhetorical question. Would you rather US banks have so much extra capital that they were investing in Chinese and European companies, thus creating jobs abroad, or have foreign banks investing in US companies creating jobs here in the U.S.? I personally prefer the latter.
I know this is a gross oversimplification of trade deficits. I'm sure I've left out some valid concerns. But I'm sick of politicians beating up the Chinese just because we are running a huge trade deficit with them. If it weren't China, it would be some other country. Why? Because the U.S. economy is still a good place to invest.
