PolitiFact Ohio practices opinion journalism under the guise of fact-checking. They often get things wrong — particularly, we’ve noticed, in their coverage of U.S. senate candidates Sherrod Brown (Democrat) and Josh Mandel (Republican). So we bring you PolitiFact or Fiction, a semi-regular review of pronouncements issued by PolitiFact Ohio, a blog run by staff at the Cleveland Plain Dealer and supported by Politifact.com.
By Jon Cassidy | Ohio Watchdog
It is not “mostly true” that the U.S. trade deficit is $2 billion a day.
Sen. Sherrod Brown made that claim in November 2010, a month in which the daily national trade deficit averaged $1,295,000,000.
It took Cleveland Plain Dealer Washington Bureau Chief Stephen Koff 1,700 words to reach the opposite conclusion for PolitiFact Ohio, perhaps because it can take a while to kick up enough dirt to obscure the plain truth.
2006 is the only year on record when the trade deficit reached $2 billion per day. In 2009, the last full year for which Koff had data, it was $1.03 billion per day.
Koff was checking a claim by Sen. Brown that the North American Free Trade Agreement and trade with China had “brought a $2 billion per day trade deficit and the loss of millions of manufacturing jobs – jobs that should go to Ohio’s skilled workers.”
“You’d think it would be as easy as comparing the value of goods and services exported from the United States with those imported from other countries,” Koff writes.
Note to Koff: it’s exactly that easy.
“This drives us nuts too,” he wrote, “but as we dug into the subject, we realized that different groups use different measures to describe the size of the trade deficit.”
What drives us nuts is the hypocrisy of fact-checkers, whose only reason for being is to cut through the fog of “he said, she said,” pretending that there’s any dispute about what trade deficit means.
The trade balance, for those new to economics (koff, koff), is the difference between imports and exports of goods and services. It is closely related to another measurement, the current account, which factors in foreign-owned domestic production and American-owned production abroad; this is also the difference between Gross Domestic Product and Gross National Product. Both figures are commonly used.
The term “trade deficit,” however, does not refer to just goods or just services. Koff, for reasons of his own, insists that the term can be used to describe the balance of trade in goods.
If you’re a football fan, this is like using NFL and AFC interchangeably — the AFC is a big part of the whole, it matters in its own right, and you might even be interested only in the AFC. It’s still wrong and embarrassing to insist the terms are synonymous. If you want to talk about the balance of trade in goods, you use terms like “balance of trade in goods,” “goods trade deficit,” or “trade-in-goods surplus.”
Real complicated stuff. Or so Koff wants you to think:
“Depending on how one chooses to sort the data, a higher trade deficit can result. Brown’s office told us that his data came from the (International Trade Commission). So we, too, turned to the ITC, and its staff helped guide us in using its online database. The ITC cautioned that the official figures come from Commerce, but various trade professionals use ITC data to drill down further for other purposes.
“We drilled,” Koff wrote. “The result: A much higher trade deficit — as high as $500.9 billion last year, in the depths of the recession, and $800 billion — averaging $2.19 billion a day — for 2008.”
Impressive drilling. Note that he doesn’t he tell the reader yet what criteria he’s using, just that these are trade deficit figures from another government agency.
We drilled, too — if that means double-clicking an Excel file from the Commerce Department. We found the same basic numbers, listed in columns of “Goods,” “Services,” and “Total.” For goods, the 2009 deficit was $506 billion; it was $830 billion for 2008.
At no point does Koff explain why his exercise might be necessary, other than to manufacture a number that suits Brown. Well, he gives one reason: Ohio makes stuff rather than does stuff, so let’s just look at the stuff-making numbers. That has zero to do with the factuality of Brown’s claim, but as Koff puts it, “Factories that make things employ a lot more people.” And here you thought he was going to condescend.
Then Koff starts double-counting imports to get an even higher number and we lose interest.
Sherrod Brown embraces a 500-year-old, zero-sum view of trade. As Thomas Mun laid it out in 1664, “The ordinary means therefore to encrease our wealth and treasure is by Forraign Trade, wherein wee must ever observe this rule; to sell more to strangers yearly than wee consume of theirs in value.”
The U.S. managed to do just that through most of the Great Depression.
A persistent trade deficit just means we get more stuff than we give out, and the foreigners hanging onto all those dollars we print have to invest them in our country. It’s truly tragic. The great risk is that if those foreigners decided dollars weren’t so great, they could start dumping them, driving down the dollar’s value, thereby reducing imports and increasing exports, which is what Brown wants in the first place.
The trade deficit is benign; it’s the national deficit that’s dangerous.
What matters is total commerce, as every individual transaction by rule benefits both parties. Trade has boomed since 1993, going from $643 billion in exports and $713 billion in imports to $2.1 trillion in exports and $2.7 trillion in imports in 2011. Those $4.8 trillion represent hundreds of billions of dollars in wealth creation spread across the economy.
Aside from the factual claim of $2 billion, Brown’s point was that liberalized trade relations had created the trade deficit, which Koff didn’t address before finding the claim “mostly true.”
Both might be interested to know that for the last four years, the U.S. has run an overall trade surplus with its free trade partners. It used to have deficits with most of them.
In 2011, that was a $49.8 billion surplus with free trade partners and a $498.8 million deficit with the rest of the world.
We’ll save the “loss of millions of manufacturing jobs” for another day. It’s quite real, but it’s driven by productivity improvements and global markets rather than bilateral relations.
The fact-checkers may come to a different opinion, but that’s all it is.
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