Current political talks are focused on the impending trade deficit our country continues to run. Both candidates for the presidency have argued for ways in which they intend to bring balance to the economy. The United States has been running a consistent trade deficit with its trading partners since the 1970s (Budget of the, 2012). The Great Recession (2008-2012) saw huge deficits that are continuing to worry American citizens. Many Americans are asking the government to find a way to balance the federal budget. However, not all believe that trade deficits are bad for the economy. In fact, some would argue that growing trade deficits are showing that the economy is growing alongside income levels (Markheim,2010). The following will explore the balance of trade history while looking at contributing factors as well as observing important trade partners for the United States.
The United States has traditionally run stagnant trade surplus/deficits up until the 1970s. The only exception was during World War II. During the war the U.S. was importing goods at high rates as most of the work force was fighting overseas. The U.S. began running a trade deficit in 1971 and has continued to do so, with the exception of 1975, until today (Balance on goods, 2012). The cause for the deficit in the 1970s can be attributed to a number of factors (e.g. oil prices, value of U.S. dollar). Most notably, the United States experienced large price changes in oil as a result of the oil crisis’. The U.S. reached peak oil production in the early 1970s which caused U.S. oil exports to decrease dramatically. This began the downward trend that would continue well into the 21st century (Bernheim, 1988). Along with volatile oil prices, the United States also began running budget deficits under President Ronald Reagan in 1982. He continued these budget deficits throughout his presidency which would prove to have a profound effect on the economy (Bernheim, 1988). Also, during this time the...
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