Hit by a Clue-by-Four

     Lou Dobbs wants answers. In his December 14 broadcast of CNNs Lou Dobbs Tonight, the business anchor gathered torches and pitchforks in response to the news of an overall trade deficit [that] hit almost $69 billion in the month of October alone. Dobbss conniption fit couldnt have been a surprise to many. Hes consistently aired one sided attacks on free trade.

     After correspondent Kitty Pilgrim read off a litany of complaints about the trade deficit from Congressional Democrat press releases, Dobbs asked in a video clip, How can you say that all of this is so good for the United States when weve run 29 consecutive years of trade deficits. Even though that question answers itself, the man demands an answer:
    As the Cato Institutes Daniel Griswold has shown, hot economies are best characterized by large trade deficits. As a matter of fact, the two have a correlating relationship. As Griswolds January 11, 2005 Trade Bulletin acknowledged, How valid is the widespread assumption that a growing trade deficit means slower economic growth? Hard evidence of such a connection appears to be lacking. In fact, an analysis of economic data from the last quarter century (emphasis added) shows that a growing current account deficit (as a percent of GDP) is actually associated with faster, not slower, economic growth, as well as rising manufacturing output and falling unemployment. Free trade has kept prices and inflation steady amidst tumultuous shocks to energy markets. Inexpensive imports have allowed for cheaper consumer products and more efficient business methods, and as a result have kept prices steady. As American Enterprise Institute Scholar James Glassman pointed out in a 1998 Washington Post op-ed, imports lower inflation. Complaints from Dobbs that the trade deficit results in totally unsustainable debt levels have no basis in economic reality. As Griswold pointed out in his February, 2003 primer on the trade deficit, money sent abroad to foreign countries is reinvested in our domestic economy. The resulting net surplus of investment capital buys new machinery, expands productive capacity, funds new research and keeps interest rates lower than they otherwise would be. Evidence from 2001 and 2002 shows that a lower trade deficit could actually hurt manufacturing. According to Griswold: While manufacturing output was falling 4.1% in 2001 from the year before, real imports of manufactured goods were falling 5.4% after four straight years of double-digit increases.

Source: Cato Institute

     Over the last 25 years, the United States has made amazing gains in productivity, wealth, jobs, and standard of living. Free trade and imports have contributed to this growth and to growth abroad.

     In her report, Kitty Pilgrim had the audacity to ask, Why is America not getting the point? After almost a year of reporting from a default position of economic illiteracy with no discernable balancing view point, the more compelling question is Why is Lou Dobbs Tonight not getting the point?