Friday Rant: Deficit Reduction, Slowing Growth and the Widening Trade Gap – Let's Watch the Balls

One of my all time favorite parables is about a King who was so pleased when firemen saved his castle, that he decreed all his subjects become firefighters. The kingdom, of course, fell apart as equally vital services went unfulfilled. It reminds of me of the recent U.S. legislative obsession with cost cutting at the expense of tending to other metrics that are equally vital to economic recovery.

Deficit reduction is clearly essential, but the chest beating that's surrounded it is deafening. And while there isn't a single magic bullet that will solve our economic woes, if we could get the official jobless rate of 9% (forecast for August) down just 50%, the deficit, GDP (forecast at 1.6% for August), and widening trade gap (currently down 4.4%), would all begin to change course.

Today's WSJ reports "The U.S. trade deficit in June jumped to its widest point since fall 2008 as exports tumbled... The trade gap widened 4.4% from a month earlier to about $53 billion [and] Exports slid 2.3% to about $171 billion, marking the first decline in two consecutive months since early 2009. A drop in demand from U.S. consumers and businesses was among factors pushing imports down 0.8% to $224 billion." This is especially troubling in light of a continuing weak U.S. dollar.

Increasing employment will not only dramatically enhance consumer and investment confidence, it will increase domestic spending and tax revenue. Forgive me for highlighting the obvious, but why aren't we incenting U.S. businesses and manufacturers to hire via tax breaks and changing our tax code to make us the most attractive multinational corporate home base rather than the least attractive that it is today?

Unemployment that persistently pushes 10% is equivalent to not having any base runners. Let's end the fire drills and get the bases loaded. Is this concept as opaque to our legislators as it appears?

- William Busch

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