Democratic Debate

There were some interesting comments made at the Democratic Debate the other night, which I don't necessarily agree with:

"You know, six and a half years ago, we had a balanced budget and a surplus; now we are in deep debt with a rising deficit, and it is absolutely true that George Bush has put it on the credit card, expecting our children and grandchildren to pay for it." -- Sen. Hillary Clinton.

The last time I checked, the budget deficit for this year was forecast to be $207 billion, half of what it was in 2004. (The budget might actually be back in the black when the next president takes office.) And while Bush did inherit a balanced budget and surplus from Clinton, neither administration successfully fixed the $100 trillion unfunded liability problem with Social Security and Medicare.

"Well, look, people don't want a cheaper T-shirt if they're losing a job [from free trade] in the process." -- former Sen. John Edwards.

Inexpensive T-shirts vs. outsourced jobs isn' t really the debate. According to research from the International Institute for Economics, Americans are $7,000 to $13,000 richer because of trade, and removing all trade barriers would permanently increase our wealth by $4,000 to $13,000 per household. Since the North American Free Trade Agreement took effect in 1994, America has added nearly 30 million net new jobs.

"It means that we are also not running up deficits and asking China to bail us out and finance them, because it's pretty hard to have a tough negotiation when the Chinese are our banker." -- Sen. Barack Obama.

This is the myth that "China holds all the cards." The Chinese government needs fast growth to hold down social unrest and justify the continued dominance of the Communist Party there. The most likely cause of a slowdown in China would be a slowdown here first. The last thing China wants to do is start dumping U.S. bonds and cause a recession here.