$60.3 Billion Trade Deficit: What is going to happen to the USA ?

[steve2470]

I am not an economist, hence the question. I remember reading a quasi-economics article about 15 years ago on this very topic, and the economist said if large trade deficits continue monthly for a long time, that we would end up a third world country. What is the truth of the matter, my economist colleagues ?

[musette_sf]

1. Haven't you heard?

Snow says everything is GREAT!

Thanks for tuning into the Ned Flanders World Financial Report!

[SunDrop23]

2. Elimination of the middle class for starters

[Nederland]

3. We will become poorer

That's the simple answer.

The inequality between the US and the rest of the world is and always has been unsustainable. In fact, I'm shocked that the US was able to keep ahead of the rest of the world for as long as it did. In the end however, the huge inequalities in wages and standard of living resulted in the US becoming non-competitive in the global marketplace. You can therefore expect this shift in wealth to continue until US living standards are on par with the rest of the world and the current inequality disappears.

[Jeff in Cincinnati]

4. We're selling Nebraska on E-Bay

[DELUSIONAL]

7. What about Texas?

But who or what nation would want to buy Texas?

The problem with the incompetent fools now in power in Washington D.C. they only care about the bottom line -- they have zero future vision. Like daddy bush -- they lack the vision thing.

[Old and In the Way]

5. Standard of living will go down, down, down.

Don't look for any help from a Republican Congress. They've looted the Treasury and they have theirs. No doubt they've invested in economies where capital appreciates.

[TexasLawyer]

6. Higher interest rates, falling dollar, lower standard of living,

then, its on to becoming a banana republic-- unless the U.S. gets its fiscal house in order. U.S. treasuries will need to yield high interest rates in order to entice ever more skeptical buyers of U.S. debt to support this country's wanton spending and wanton tax cuts.

"The Iceberg Cometh," by Paul Krugman

http://www.pkarchive.org/

Article originally published in The New York Times, 1.11.05

<snip> We already have a large budget deficit, the result of President Bush's insistence on cutting taxes while waging a war. And it will get worse: a rise in spending on entitlements - mainly because of Medicare, but with a smaller contribution from Medicaid and, in a minor supporting role, Social Security - looks set to sharply increase the deficit after 2010.

Add borrowing for privatization to the mix, and the budget deficit might well exceed 8 percent of G.D.P. at some time during the next decade. That's a deficit that would make Carlos Menem's Argentina look like a model of responsibility. It would be sure to cause a collapse of investor confidence, sending the dollar through the floor, interest rates through the roof and the economy into a tailspin.

And when investors started fleeing because they believed that America had turned into a banana republic, they wouldn't be reassured by claims that someday, in the distant future, privatization would do great things for the budget. Just ask the Argentines: their version of Social Security privatization was also supposed to save money in the long run, but all it did was move forward the date of their crisis.

A responsible administration would reverse course on tax cuts and the botched 2003 Medicare drug bill, both of which pose much greater threats to the government's solvency than the modest financial shortfall of the Social Security system. But Mr. Bush has declared his tax cuts inviolable, and he says that his drug bill will actually save money. (The Medicare trustees say it will cost $8 trillion.)

<snip>