Diversion from Health Care Reform

Is anyone besides me tired of health care reform? You’ll inevitably get some health care postings from me, but for now, let’s switch to an entirely different topic.  Let’s talk about how the trade deficit went up—and it’s a good thing!  

In the shadow of last night’s health care speech, the Bureau of Economic Analysis this morning released July trade data showing that the deficit widened notably.  Yes, we still have a large trade deficit, and yes, we’d prefer to have a much smaller one, but the increase in the deficit is largely symptomatic of improvements in the domestic economy.  For the past year, we have seen the trade deficit narrow, as anemic domestic demand caused our imports to plummet.  Slower global demand caused our exports to fall as well, but not as quickly as imports.  The lower trade deficit was similar to a fever—it can help fight the sickness in the economy, but it is also indicative that something is deeply wrong (sorry, I guess I can’t help but think in health metaphors).  July’s increase in the deficit was marked by a resurgence in both imports and exports, with imports growing more strongly, as the U.S. economy has picked up.  Hopefully this will continue through the next few months, a sign the economy is on its way back to normalcy!