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Democracy & Technology Blog “Embrace the Deficit”

David Malpass of Bear Stearns has, not surprisingly, written the best article on the “trade deficit.” Malpass, along with George Gilder, Ken Fisher, and I, agree that the U.S. needs more debt, not less, in both our trade and domestic budget accounts.
Malpass explains how the trade deficit is actually a capital surplus, why we will never have to “pay back” these supposed debts, and why the U.S. is not “squanderville” but a haven for capital-hungry growth and innovation:

Like young households, many companies also spend more than they produce, using bonds and bank loans, some from foreigners, to make up the difference. They add employees, machines, supplies and advertising before they produce. Growing corporations are expected to be cash hungry. This leverage is treated as a positive for companies but a negative for countries, a key inconsistency in popular economics. Rather than paying the debt back, the growing company rolls the debt over and adds more, just as the U.S. has been doing throughout most of its prosperous economic history. Part of each additional bond offering puts the company and the U.S. in the position of investing more than we save, drawing in foreign investment and contributing to the trade deficit.

Are you listening Sen. Schumer? Sen. Graham? Mr. Buffett? Anyone there?
-Bret Swanson

Bret Swanson

Bret Swanson is a Senior Fellow at Seattle's Discovery Institute, where he researches technology and economics and contributes to the Disco-Tech blog. He is currently writing a book on the abundance of the world economy, focusing on the Chinese boom and developing a new concept linking economics and information theory. Swanson writes frequently for the editorial page of The Wall Street Journal on topics ranging from broadband communications to monetary policy.