The U.S. Trade Deficit: Does it Impact You?

President Obama announced a National Export Initiative in his January 27, 2010 State of the Union
address. The President stated, "So tonight, we set a new goal: We will double our exports over the next
five years, an increase that will support two million jobs in America." The full content of President
Obama's speech can be found on the White House website. www.whitehouse.gov.

The U.S. Department of Commerce issued a press release on February 10, 2010 highlighting 2009
trade figures. In the release, Commerce Secretary Gary Locke points out that December 2009 was the
eighth consecutive month of US export growth. Secretary Locke further stated, "However, it is critical we
redouble our efforts to increase our competitiveness and meet President Obama's goal of doubling
U.S. exports over the next five years to spur economic growth and support jobs at home."
(www.commerce.gov)

Let's take a look at some of the figures. The trade deficit for 2009 was $381 billion; exports were $1.55
trillion while imports were $1.93 trillion. The trade deficit is actually significantly down from the $695.9
billion posted for 2008. This is a good trend but there are several extraordinary variables impacting the
year over year data. First, the economy has been through the ringer and the American consumer has
been pulling back on spending; this applies to both domestic and foreign goods. Remember in 2008
how gasoline prices skyrocketed? The United States imports a tremendous amount of petroleum
products, specifically large quantities of crude oil. Crude oil imports did decrease slightly in 2009 but
the cost dramatically decreased. In 2009, the U.S. paid $56.92 per barrel down from the 2008 price of
$95.22 per barrel.

The U.S. needs to ramp up exports but also needs to address imports. We all remember the historical
Presidential campaign of 2008. Some of the key hot buttons of both parties were energy dependence,
off shoring and outsourcing. Energy dependence, off shoring and outsourcing all impact the import
statistics and the U.S. clearly needs to make strides in managing these issues. It is vital that we
become able to produce the bulk of our energy from clean, renewable sources here in the U.S.; this
would not only have a positive impact on the trade deficit but on our economy generally. The concept of
off shoring and outsourcing is not all bad; they give access to cheaper goods and can help prevent a
rise in inflation. The problem is there is no control on off shoring and outsourcing. Does the word
"rust-belt" mean anything to you? The U.S. has been giving up its manufacturing strengths for decades.
With the current unemployment rate of approximately 10%, America can not afford to lose more jobs; in
fact, some jobs should be brought home. Reducing off shoring and out sourcing would positively
impact the trade deficit.

A positive trade balance gives a country a number of benefits. One of America's main trading partners
is China. China's exports to the United States far exceed imports. China has been adding to its
monetary reserves and owns substantial amounts of U.S. Treasury Bills. China has cash reserves
while the U.S. maintains a hefty national deficit and is large debtor nation. China has the ability and is
investing in their economy. China also has the cash on hand to invest in good global opportunities as
they arise.

The U.S. has not had a positive trade balance since 1975. Let me compare the trade deficit to
managing a checking account. You can't keep writing large checks over a sustained period with limited
funds coming in. Sooner or later you will go broke.

How does this impact you? Are you secure in your job? If you are unemployed or become unemployed
can you find a similar paying job? What opportunities will your children and grandchildren have?
The trade deficit and the national debt impact us all. If Americans were producing more of the goods
and services used domestically and increased export production, unemployment would decrease.
Every American is impacted whether you are employed or have been laid off. Think of the difference
between a 5% unemployment rate and a 10% unemployment rate. At 5% the government is taking in
more tax revenues (personal and business) and is spending less on entitlements such as
unemployment benefits. With a low unemployment rate consumer confidence rises, fueling consumer
spending, generating more business and increasing sales tax revenues. Increased tax revenues would
allow the Federal Government to pare down the national debt, increase government services or provide
some relief to the overburdened taxpayer. An upswing in sales taxes would benefit state budgets.

Sometimes it is difficult to deal with the staggering figures but the trade deficit impacts every American. I
support President Obama's export initiative and appreciate his leadership. I would hope the action plan
would also look at the import side of our international trade.

(Author's note: Opinions and conclusions contained in this article belong to the author. Supporting
documentation for quotes and statistical information can be found at the White House web site
www.whitehouse.gov and the U.S. Department of Commerce website www.commerce.gov. The U.S.
Department of Commerce contains links to the U.S. Census Bureau and the U.S. Bureau of Economic
Analysis.)