by Spencer P. Morrison Steve Hanke recently set out to prove “why President Trump’s trade message and protectionist policies are rubbish” in a Forbes article. Instead, the Johns Hopkins University economist exposed himself as a word-mincing, logic-twisting sophist – just like every other intellectual mercenary associated with the faux-libertarian propaganda mill that is the Cato Institute. Hanke’s argument: trade deficits don’t exist, China is not screwing America, and President Trump (the village idiot) is jousting windmills. The real problem is lazy Americans who shop-til-they-drop and demand welfare “gimmies” from Uncle Sam. Faust’s Bargain Hanke begins his argument by explaining that trade deficits don’t really exist. Instead, the goods trade deficit is simply one half of the equation: In economics, identities play an important role. These identities are obtained by equating two different breakdowns of a single aggregate. Identities are interesting, and usually important, by definition. In national income accounting, the following identity can be derived. It is the key to understanding the trade deficit. (Imports – Exports ) ≡ (Investment – Savings) + (Government Spending – Taxes) Given this identity, which must hold, the trade deficit is equal to the excess of private sector investment over savings, plus the excess of government spending over tax revenue.…
Read the full story