Dennis Sevakis rejoinder to Steven Warshawsky

I will concede that Mr. Warshawsky is mostly correct in his criticism of my thesis if I were claiming that "trade deficits" should be viewed as cause rather than symptom. Though I may have created some confusion to that effect in a short piece that was intended to stimulate thought rather than serve as a definitive treatise on the subject, that was not my intention. The accumulated current account deficit is the result of our national trade and economic policies, whether explicit or implied, not their progenitor. I mention two possible foreign policy consequences of such economic policies while Mr. Warshawsky correctly describes others. Therefore, my question of whether or not you should worry about the current account deficit is in reality a concern as to whether or not there are long-term negative consequences of those policies. Mr. Warshawsky also seems to think that may be the case.

Regarding the issue of whether or not our trade deficit does or does not represent a net transfer of wealth to foreign entities, private or sovereign as the case may be, I would contend that the issue is to some extent one of semantics. I will be more than happy to concede that it's not a transfer of wealth overseas if Mr. Warshawsky will concede that trade deficits represent a claim against American assets of whatever stripe the holding foreign entity may desire, including banks, of both the commercial and investment variety. And such claims are a form of debt. Okay, so we're not sending our wealth overseas, just writing checks that have to be covered. Is this a less onerous description of the financial burden being placed upon Americans?

To paraphrase Clausewitz, politics is a continuation of commerce by other means. As I said, two sides of the same coin.