Budget Deficits Undermine U.S. Trade Policy Agenda

Bryan Riley / March 10, 2011

The Office of the U.S. Trade Representative (USTR) just released its 2011 Trade Policy Agenda, which highlights several initiatives designed to boost exports. Nowhere in the 443-page document is a mention of the biggest barrier to U.S. exports: the federal budget deficit.

Budget deficits require the government to borrow money that otherwise could be spent on U.S.-made exports or invested in our economy’s productive private sector. In 2010, the federal government financed its deficit spending by selling $708 billion in Treasury securities to foreign buyers. To put that in perspective, foreigners spent more on Treasury securities than on any of the following types of U.S. exports: agricultural goods, services, industrial supplies, consumer products, or capital goods.

If not for federal borrowing from abroad, the United States easily could have registered a trade surplus in 2010. Because foreigners spent billions on Treasury bonds instead of exports, we ran a $498 billion trade deficit instead. (more…)