Pat Buchanan posted this column on 2/25/11, titled Manufacturing's Dismal Decade, http://buchanan.org/blog/manufacturings-dismal-decade-4612, where he used many facts and figures on the trade deficit to make several points in his column. I went to the Census Bureau http://www.census.gov/econ/currentdata/ftd/ to get US trade data from Jan 1992 to Dec 2010 to cover the last decade and more. I prefer to look at data over longer time frames to establish periods of consistent performance and when there are statistically significant changes. In this case, I looked at total Imports, Exports and the resulting Trade Deficit (Trade Balance).
In Mr. Buchanan's first 4 paragraphs, I can confirm his percentage changes in Exports and Imports versus 2009, however, he states that the total annual deficit from 2009 to 2010 rose 33% (actually 32.8%...why reduce the precision of the first 2 paragraphs?) and then goes on to say this is "the largest percentage increase in a decade". Here is another idea: compare the two years after the recession to the two years before the recession.
So why didn't Mr Buchanan tell us this: Trade deficit reduced by 37.7% after the recession rather than this is the largest percentage increase in the last decade? Mr Buchanan, if you are writing about the last decade, please use more than 2 years of data to form your conclusions. By the way, the two year US deficit has not been as low as it is in 2009/2010 since 9/01!
However, I get nervous using year on year indices to form conclusions which is a common technique in business, government and industry since it is NOT statistically sound. Since trade numbers are continually increasing over time, a better approach is to use compounding growth rates with statistical limits to ensure that your indices are not calculated using a statistical outlier. Also notice the graph above, that the last two years do not stay within the statistical boundaries. So here is a better technique applied to Exports, since the Balance of Trade is a negative number and makes compounding problematic.
The two years prior to the recession yield a best fit exponential line of 16.3% annual growth. The next highest 2 year growth rate over the last 18 years was 12%. Seems as though we are doing pretty good post recession at 16.0% compounded growth, although from a smaller base number.
In a similar analysis of the import numbers, in the two years prior to the recession, US Imports grew at 10.5% compounded annually. After the recession the two year growth of Imports was 18.5%, also from a smaller base. The good news is that growth for 2010 has slowed to 11.7% helping to slow the deficit growth. Even with these recent growth rates, it will be over 40 years before the deficit can be eliminated, so there is still work to be done in getting our products sold to the rest of the world.
Finally, in Mr. Buchanan's column, he states:
" In that decade, America ran a total of $6.1 trillion in trade deficits, more than our entire economic growth. To finance those 10 years of deficits, America had to borrow$1,533 billion every day."First of all, the 10 year deficit was $5.6 trillion, not $6.1 trillion. In any case, dividing this $6.1 trillion by the 3,650 days in 10 years, the daily amount is $1,671 MILLION not $1,533 BILLION as is stated in the column! Pat, your article is about the trade deficit not the Federal deficit! If we import $5.6 trillion more than we export, this deficit is not paid by the Federal Government by borrowing. It is $1,542 million dollars that US consumers paid to "foreign" manufacturers more than "foreign" consumers paid US manufacturers, which they might have borrowed on their credit cards! The Feds are not involved in this deficit, other than collecting tariffs.
Do you believe everything you read?? Check it out before you act on it! If you have other data you would like analyzed, send it to me. I am planning on working on the Federal Deficit, Medicare, and Social Security soon, so come back
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