Project Syndicate: Will Economic Illiteracy Trigger a Trade War?

An introduction to economics defines a nation’s deficit or surplus – “The current-account balance, measuring the balance of trade in goods, services, net factor income, and transfer payments from abroad, is equal to national saving minus domestic investment.” The Trump administration is mistaken about the source of the US deficit, overlooking the low US rate of saving and instead blaming Germany, China and other countries with surpluses. “A country runs a current-account deficit if investment exceeds national saving, and runs a surplus when investment is less than national saving,” Sachs notes adding that “embrace of economic ignorance could lead to disaster.” To reduce the deficit, the United States must save more, spend less and strive for an appropriate tax structure that delivers adequate revenue. A country steeped in debt cannot expect strong economic growth. – YaleGlobal

Project Syndicate: Will Economic Illiteracy Trigger a Trade War?

US leaders demonstrate ignorance about economic principles by blaming trade partners for deficits rather than the country’s low savings rate
Jeffrey D. Sachs
Friday, April 28, 2017

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Jeffrey D. Sachs, Professor of Sustainable Development and Professor of Health Policy and Management at Columbia University, is Director of Columbia’s Center for Sustainable Development and of the UN Sustainable Development Solutions Network. His books include The End of Poverty, Common Wealth, The Age of Sustainable Development, and, most recently, Building the New American Economy.

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