New word of the week – deficit.  A deficit is a lack of something when compared to something else.  This could apply to so many things in Washington, DC, but this past week featured a few key deficits (some meaningful and some not).  

The most striking deficit hyped by the government and media was the trade deficit.  Because on ‘Liberation Day’ (April 2nd) we learned that the trade deficit was the boogeyman to our sinking economy (which had been growing quite nicely, as well as employment and real income).  So last week’s word of the week (tariff) was used to strike fear in the hearts of our trading partners.  Apparently, what it did instead was strike fear in the stock and bond markets (and overall confidence in the US dollar and economy), resulting in a major retrenchment of the new tariff policy that was liberating us (except with China, and then maybe not them either when it comes to smartphones, computers, and microchips).  Here’s the problem – countries don’t buy goods from countries, businesses and people do.  When domestic companies sell products of high quality and competitive cost, they are purchased all around the world.  And when foreign companies do the same, Americans (with their excess wealth, relative to the rest of the world) buy those goods.  Americans view it as a fair trade – they give up their money for the goods made readily available to them.  I’ve got a trade deficit with my supermarket – I’m not mad about that (except for when my favorite ice cream isn’t on sale).  Astonishingly, the White House labels this a disaster – apparently they won’t be satisfied until real income falls and we are making our own towels again.

The White House was so excited about the phrase ‘trade deficit’, that they decided to use it in a scientific-looking formula (but looks can be deceiving).  It didn’t take long for actual economists (not ones like Peter Navarro, who write books that quote imaginary economists to make their point) to spell out the error in the formula provided.  Heck, even the economist the US Trade Representative cited for it’s formulation disagreed with the calculation.  And the greatest amount of argument is coming from the most conservative voices out there.  But all of this hasn’t stopped the administration from defending its error (because while the White House has a deficit in humility, it has a surplus in hubris – can’t wait to see the formula for that one).  Bottom line, blaming countries for exporting surplus goods at competitive prices is exactly why Americans need to pay more taxes (tariffs) to the government – I’ll discuss this type of deficit in a minute.

At the far end of the Capitol Mall, the Congress was ostensibly debating another type of deficit – the budget deficit.  But debate is a strong word – it appears that the debate was more about how to ignore it (and how large to grow it).  In the Senate, the Republican majority have decided to pretend that extending the current tax cuts beyond their expiration dates has no impact on the budget deficit (but apparently impacts the national debt, since they lift the debt limit by $5 trillion).  This is the equivalent of your accountant telling you that you are getting a 5% raise every year (which you aren’t), but just making sure the limits on your credit cards are increasing each year to balance your budget.  In the House, the Republicans did the one fiscal thing they do every time they are in control – complain about deficits while simultaneously exploding them – agreeing to the massive increases in debt without corresponding cuts.  The only reliable deficit in Congress is fiscal responsibility.

This week demonstrated the real deficits in DC – intelligence.  Pretending that poor countries that sell us cheap products is a problem that we need to fix is stupid.  Applying 10% tariffs on countries even when we have trade surpluses with them is imbecilic.  Coming up with pseudo-intellectual bases for non-sensical trade policy choices is embarrassingly dim-witted.  Pretending that there are no budget consequences for creating tax cuts in 2026 that do not currently exist in the tax code is foolish and devious (aside from being dangerous to the economy).  Applying tariffs to countries that can materially retaliate and harm American exporters, farmers, and other producers (as China is already doing) is empty-headed.  Telling Americans to just wait a bit for the ‘amazing’ results of all of these ludicrous policies – its despicable.

And the national disgrace continues…