Tuesday, September 2, 2008
People have worried about the trade deficit for decades. It couldn't continue to widen forever, and it hasn't. It's now narrowing, thanks to incredibly strong growth (up over 20% in the past year!) in exports, alongside fairly steady growth in imports. The bad way for the deficit to have narrowed was always what concerned the doomsayers: they thought imports would have to collapse as the economy collapsed. But instead, the economy continues to grow, and demand for imports has been relatively unaffected by the housing crisis. Meanwhile, the weaker dollar and very strong growth overseas have combined to make exports one of the biggest sources of growth these days. This is the way to fix a deficit: grow your way out of it.
Posted by Scott Grannis at 12:40 PM