Tuesday, the Commerce Department reported the March deficit on international trade in goods and services was $40.4 billion. Overall, the deficit is up from $25 billion since the economic recovery began in mid-2009, and poses a significant barrier to stronger economic growth.
Household spending has recovered but too many of those dollars go to pay for imported oil, consumer goods from China and autos from Japan.
In the first quarter, GDP growth was a paltry 0.1 percent—consumer spending added 2.0 percentage points to growth. However, the increase in the trade deficit subtracted 0.8 percentage points. The increase in the trade gap negated 40 percent of the increase in consumer spending and cost at least 300,000 jobs.
Consequently, businesses remain pessimistic about demand for domestically produced goods in the U.S. market and are reluctant to invest. With the majority of U.S. businesses subject to higher personal, as opposed to corporate tax rates, more onerous and costly regulations and paying more for employee health insurance, they remain reluctant to hire workers and continue to rely on offshore jobs.
Fracking in the Lower 48 has not delivered enough new oil—the United States still imports about 5.3 million barrels a day.
A full push on U.S. potential in the Gulf, off the Atlantic and Pacific Coasts and in Alaska would add 4 million barrels a day to domestic production. Shifting federal subsidies from electric cars, wind and solar to more fuel efficient internal combustion engines, plug-in hybrid vehicles and liquefied natural gas in rail and trucking could slice another 1 or 2 million barrels a day off U.S. demand and eliminate dependence on imported oil altogether.
Lower natural gas prices have substantially improved the international competitiveness of industries like petrochemicals, fertilizers, plastics, and primary metals. However, the Department of Energy’s push to boost liquefied gas exports will handicap growth and create millions fewer jobs than keeping the gas at home for manufacturing and alternatives to diesel in transportation.
China systematically undervalues currency against the dollar to keep its goods cheap in U.S. stores. It systemically steals technology, subsidizes exports and imposes high tariffs on imports, while effectively distracting the Obama Administration from these commercial issues with persistent intransience on cyber-security and incursions on the sovereign waters of American allies in the Pacific.