Eldrige Financial Review – Free Trade Policy: As the Employment Grows, Trade Deficits

The uncontrolled unemployment in the United States is one of the issues that the country is facing right now in which many of the Americans are keep on asking to have a policy that will bring the problem of under control. However, the current free trade policies are paralleled to the unemployment and the trade deficit. As unemployment decreases, the trade deficit increases as it was being analyzed. And, this only means that until the trade policies is properly fixed; any gains in unemployment will be tempered by expanding the trade deficit. An economy with a massive trade shortfall is indefensible, and it is a must to change the trade policies if the nation wants to prosper.

In fact, the currently official unemployed are 8.2 percent. Various economists estimate the rate at which the economy is considered to be at full employment to be about 4 percent, because even under the best conditions there will be individuals seeking jobs. Indeed full employment is enviable, but under our current policies it would do little to create any long-term prosperity for the United States. In the previous year, the deficit was over $500 billion, but it is estimated at the full employment they would have a trade deficit $750 billion or more. As more Americans get jobs the purchasing power also increases. Unluckily most of the items from the overseas are the best items purchase by the Americans that sends American dollars overseas instead of keeping them in the U.S.

The money has to come from somewhere when the American purchases more than they sell that leads to debt. The debts that can come in the form of public debt or private debt, but both can be damaging. Many Americans, both conservative and liberal, are very concerned with the rising national debt. They target the lavish spending of government, be it social programs, national defense or entitlement spending as the cause of fiscal problems. They rarely point to the trade deficit. When they do recognize that the trade deficit is a problem they tend to blame Americans for refusing to adapt to stay competitive. In order to remain competitive with many of the countries they trade with they would have to accept basement-level wages and hostile working conditions. This is clearly a misunderstanding of the problem.

The United States needs to be smart about how it crawls its way out of recession. Creating more service sector jobs is not the answer, to a certain extent they need to create jobs that allow Americans to purchase American made goods. Then if they ignore, they will be pushing the financial problems down the road rather than truly fixing the economic problem. » Eldrige Financial Review – Free Trade Policy: As the Employment Grows, Trade Deficits