Skip to comments.U.S. 2002 Trade Deficit Reaches $435.2B
Posted on 02/20/2003 9:31:20 AM PST by Enemy Of The State
U.S. 2002 Trade Deficit Reaches $435.2B
By MARTIN CRUTSINGER
WASHINGTON (AP) - The United States recorded a $435.2 billion trade deficit for 2002, the largest imbalance in history, as the weak global economy set back American exports while imports of autos and other consumer goods were hitting all-time highs.
In other economic news, the Labor Department reported Thursday that inflation at the wholesale level shot up by 1.6 percent in January, the biggest increase in 13 years, led by a sharp 4.8 percent rise in energy costs.
Even though the surge was concentrated in energy, prices of other items such as new cars showed big advances as well and the overall increase was certain to raise concerns about whether inflation, which has been well-behaved for years, was threatening to get out of control. The government will report on January consumer prices on Friday.
In a third report, the government said that the number of newly laid off workers filing unemployment claims jumped to a seven-week high of 402,000 last week, up by 21,000 from the previous week, showing that the labor market is still struggling with an uneven economic recovery.
The trade report showed that even in agricultural products, normally a U.S. bulwark, Americans bought more imported wine, cheese and other foods than American farmers were able to sell abroad - resulting in only the second U.S. trade deficit in farm goods on record.
The Commerce Department reported Thursday that the deficit for all of last year was up 21.5 percent from the $358.3 billion trade gap recorded in 2001 and surpassed the old record deficit of $378.7 billion set in 2000.
By country, the United States ran up the largest trade gap with China, a deficit of $103.1 billion, marking the third straight year that the United States has recorded its largest trade deficit with that nation. It pushed the former front-runner in this category, Japan, into second place.
In addition to the record for all of 2002, the United States set a new monthly high of $44.2 billion in December, up 10.5 percent from the previous record set in November of $40.0 billion.
Opponents of President Bush's trade policies contend that the huge trade deficits represent the loss of millions of manufacturing jobs as U.S. companies have been battered by what the critics say is unfair competition from low-wage countries that stifle labor rights and have lax environmental protections.
American manufacturing companies have been lobbying for the Bush administration to drop its support for a strong dollar policy, arguing that an overpriced dollar has made their goods noncompetitive in foreign markets while opening them to a flood of competition from cheaper priced imports.
Treasury Secretary John Snow, who was meeting with British finance officials on Thursday on his way to a weekend meeting in Paris of America's major economic allies, insisted during his Senate confirmation hearing that the administration intends to make no change in its strong dollar policy. A strong U.S. dollar makes investments in U.S. stocks and bonds more attractive to foreigners.
For 2002, exports of goods and services fell 2.5 percent to $973 billion, marking the second consecutive annual decline, as American exporters found it increasingly difficult to sell overseas. This reflected a spreading global economic slowdown and the strong dollar.
American manufacturers were the hardest hit sector of the economy during the 2001 recession with a loss of nearly 2 million workers. While the economy began a recovery in 2002, the progress has been uneven and so far it has not resulted in a rebound in hiring.
American imports, which fell 6 percent in 2001, reflecting the U.S. recession, staged a rebound in 2002, rising by 3.8 percent to $1.41 trillion. That, however, was still below the all-time high of $1.44 trillion set in 2000.
But in individual categories, imports of autos and auto parts set a record high $203.9 billion and imports of other consumer goods, a category that includes everything from clothes to televisions and toys, also hit a record high of $307.7 billion last year.
Imports of oil totaled $103.6 billion last year, basically unchanged from the level in 2001.
After China, deficits with other countries included imbalances of $$70.1 billion with Japan; $49.8 billion with Canada and $37.2 billion with Mexico.
On the export side, manufactured goods suffered a setback but sales of American farm products managed to eke out a tiny 0.3 percent increase to $49.54 billion last year over the 2001 level.
However, imports of farm products rose a much faster 6.6 percent to $49.72 billion, representing in a deficit in farm trade of $176 million, the second such deficit in history. Farm imports topped exports in 1986 as well.
``I agree with Zell, with this economic theory that when a person has more money in his pocket, they're likely to demand that somebody produce them a good or a service,'' he said.
Bush ignores the economic reality that undermines his economic "stimulus" plan: U.S. trade deficit hit record $435.2 billion in 2002
Any "trickle down effect" normally associated with tax cuts is quickly diverted overseas.
American taxpayers are subsequently mired deeper in debt. Government Hits $6.4 Trillion Debt Limit
Dubya's lack of fiscal responsibility will weaken our nation and lead to his political defeat in 2004.
Like his father, ol' Juanterm is economicly clueless, even when current headlines hit him square in the face.
So the government shouldn't cut my taxes because I might spend my own money on a foreign product?
The "Two-party Cartel" at their best. And the sheeple will vote the same ones in the next election. 80% want the borders secured. Good luck, sheeple. but vote them back in next time. BTW, Hillary is talking about closing the borders. If so, her stock went up a bunch.
There comes a time when you (as a citizen) have to own up to your financial responsibilities and obligations. Debts must be paid, unless you think declaring National Bankruptcy is going to save your sorry butt.
The only true key to wealth lies in production. While you can increase your own wealth at the expense of others, we all become wealthier when productive resources are increased. Greater wealth for our economy lies in increasing the quantity or quality of productive resources -- labor, capital, and natural resources. This is done by investing in education, capital goods, research and development, and technology.
Fundamentally, we believe that the U.S. government needs to devote more resources and put in place new programs to build wider expertise about China and to protect our industrial base from eroding as a result of our economic relations with China.
-- C. Richard DAmato, chairman
U.S.-China Security Review Commission
(How to improve U.S.-China relations )
According to free market economics, there is ONE single determinant of standards of living in a nation: The per capita capital investment in domestic labor.
The things you quote - education, capital goods, R&D, technology - are all in line with that.
Every policy, not just economic policy, needs to be run through a single minded filter: Will it increase or at least not decrease per capita capital investment in domestic labor? And if it would tend to depress such investment, such policy ought to be rejected outright.
Free trade (i.e., division of labor) without the rights and responsibilities of statehood ought to be rejected outright.
You don't know what you're talking about. Exports keep going up.
Sounds like you wasted a full year of your life without learning anything. That's a shame.
Wealth is created only by engaging in value-added activities. By the same token, Service sector activities do not create wealth, they merely transfer, redistribute and eventually dissipate wealth as consumption. Thus, as value-added activities move offshore and the U.S. labor force shifts to the Service Sector, wealth is dissipated, not created. And the U.S. standard of living declines as a result.
WEALTH: The net ownership of material possessions and productive resources. In other words, the difference between physical and financial assets that you own and the liabilities that you owe. Wealth includes all of the tangible consumer stuff that you possess, like cars, houses, clothes, jewelry, etc.; any financial assets, like stocks, bonds, bank accounts, that you lay claim to; and your ownership of resources, including labor, capital, and natural resources. Of course, you must deduct any debts you owe.
VALUE ADDED: The increase in the value of a good at each stage of the production process. The value that's being increased is specifically the ability of a good to satisfy wants and needs either directly as a consumption good or indirectly as a capital good. A good that provides greater satisfaction has greater value. In essence, the whole purpose of production is to transform raw materials and natural resources that have relatively little value into goods and services that have greater value.
SERVICE: An activity that provides direct satisfaction of wants and needs without the production of a tangible product or good. Examples include information, entertainment, and education. This term good should be contrasted with the term good, which involves the satisfaction of wants and needs with tangible items. You're likely to see the plural combination of these two into a single phrase, "goods and services," to indicate the wide assortment of economic production from the economy's scarce resources.
I'm saying that the economic stimulative effects normally associated with tax cuts by the "trickle down effect" are siphoned away from our domestic economy by the trade deficit.
This can be rectified by shifting the source of federal revenue from excessive dependence on corporate and individual income taxes to imposing a flat revenue tariff on ALL imported goods. Increasing tariffs in conjunction with lowering other forms of federal taxation will redirect the trickle down effect back into our domestic economy.
If you're talking about foreign products I've bought, I paid when I bought them.
Debts must be paid, unless you think declaring National Bankruptcy is going to save your sorry butt.
If you're talking about the National Debt, I vote we cut government spending. Is my butt saved?
Your share of the National Debt is $22,178.02. (U.S. NATIONAL DEBT CLOCK)
If you're married, your wife owes the same amount.
If you have children or other dependents, they each owe the same amount as well.
Cough it up.
OK, you think the best economy would be closer to 100% manufacturing than 100% services. You also think that the trade deficit is bad.
So, what countries have the largest trade surplus? Are their economies better than ours? Are their citizens better off than ours?
Cough it up.
Take it out of my share of the federal lands. After we sell them off, I'll cough up my share of the remaining debt.
Here we go again part 2. Education manufactures an educated person from a non educated person. For example education can take someone and turn him into a scientist, a doctor, an auto repair guy etc. That is as valuable as taking cotton and making a shirt out of it. Entertainment manufactures an entertained person out of a unentertained person. This is also valuable as "all work and no play makes jack a dull boy" Just ask the military if entertainment has no value to troop moral or efficiency. Information is much like education in that it manufactures a more effective use of resources from less effective use of resources. Information helps you design and manufacture stuff. Information allows for better more effective drugs. Information may be the difference between a dosage of drug that is ineffective (too little), lethal (too much) or curative (just right). Information is also as important as manufacturing. It is probably essential to manufacturing.
So you propose we sell Alaska and ANWR to China?
How lazy and shortsighted of you, but not surprising.
Oooh, now there's an economy-killer! < /kidding! >
There YOU go again.
I'm not going to waste my time on your economicly irrelevant gibberish.
How about we sell it to Americans instead? They'll do something productive with it which will create jobs and increase economic activity.
Any "trickle down effect" normally associated with tax cuts is quickly diverted overseas. American taxpayers are subsequently mired deeper in debt.
You sound like Bill Clinton. "I suppose we could cut your taxes and hope you spend it the right way.
Why don't we double our taxes and then no one will have any money to buy any foreign products?
Current 10yr Treasury rate 3.85%. My share is only costing me $854 a year in interest. I can afford $71 a month.
Even more sensible people would make the comparison to that portion of our GDP which represents our wealth creating private sector. Watering down the impact with the nonvalue-added service sector and bloated government portions of the GDP merely sidesteps the issue.
Don't know what you mean. My share is $22,178. The government is borrowing on my behalf and currently paying 3.85%. Sounds like that's the rate I'm paying.
3.6% of our annual GDP is lost in our annual trade deficit. OK, but how much did our economy grow in that same year? 4.7%.
Moreover, I find it difficult to claim that the service sector, such as doctor extending the productive life of a worker, is not adding even the slightest bit of value.
In fact, we could be ramping up production to world-record levels, but if said manufacturing production was all in horse-buggy-whips that no one wanted to buy, then that manufacturing would be a net drag on our economy.
So I remain unconvinced of even "service" jobs as being "valueless" or manufacturing jobs always being the panacea.
Some of each would seem to be the best course, in fact.
It's a great scam.
Shhh, the godless foreigners will hear you.
It's not. Medical services are benefits earned by the productive efforts of the worker. No work, no benefits. And the service sector collapses due to the excessive burden of its own demands.
What we have now is trickle down deficits.
When is a service not a service? When it's a benefit. So, are benefit services better or worse than just plain services?
What if a manufactured good is a benefit, like a company car? Is that better or worse than just a regular car?
They should cut taxes but they must also cut government spending especially on welfare programs ---I haven't seen any plans of that. Cutting taxes so people can buy foreign products won't help the US economy at all, it won't create a single American job. A tax cut to induce spending helps China even more and makes the trade deficit higher.
Makes absolutely no difference if it's unaffordable.
If it's unaffordable, then it'll no longer exist.
What about the welfare class? Is their share the same amount? If so then you'd have to add their share in with those of the working class because the welfare class can't pay theirs.
It's the same amount for everybody, regardless of class.
If so then you'd have to add their share in with those of the working class because the welfare class can't pay theirs.
Yep, I'm afraid so. Gonna get stuck supporting them one way or the other.
My preference, though, is to downsize government welfare and promote domestic manufacturing to provide the welfare class opportunity to earn their keep.
I agree completely.
Cutting taxes so people can buy foreign products won't help the US economy at all, it won't create a single American job.
You sound like Clinton, you only like it when people spend money the way you think is best. Whatever happened to freedom?
A tax cut to induce spending helps China even more and makes the trade deficit higher.
So, we should raise taxes? The amount of money spent on Chinese or any foreign good is a relatively small part of the economy (about 11% of GDP). You'd sacrifice the 89% that would be spent on U.S. goods?
A trade deficit isn't automatically bad, a trade surplus isn't automatically good.
Actually, they have, if you bother to look at the stats. Our exports have more than doubled in the last 10 years but its not our fault our competitors can't afford more because they are socialistic and protectionist.
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