employment with high social costs while proponents claim it is a sign of economic strength.
Some economists believe that GDP and employment
can bedragged down by an over-large deficit over the long run.
Free trade concepts presume free floating currencies; however, in thereal world, currencies such as China's are not free floating, while othersmay be manipulated by governments.Since thestagflationof the 1970s, the U.S. economy has beencharacterized by slower GDP growth. In 1985, the U.S. began itsgrowing trade deficit with China. Over the long run, nations with tradesurpluses tend also to have a savings surplus while the U.S. has beenplagued by persistently lower savings rates than its trading partnerswhich tend to have trade surpluses with the U.S. Germany, France, Japan, and Canada have maintained higher savings rates than the U.S.over the long run. In 2006, the primary economic concerns havecentered around: highnational debt($9 trillion), high non-bankcorporate debt ($9 trillion), high mortgage debt ($9 trillion), highfinancial institution debt ($12 trillion), high unfunded Medicare liability($30 trillion), high unfunded Social Security liability ($12 trillion), highexternal debt(amount owed to foreign lenders) and a seriousdeterioration in the United Statesnet international investment position (NIIP) (-24% of GDP),
Those who defend deficits revert to explanations of comparativeadvantage. Buyers in the receiving country send the money back. Afirm in America sends dollars for Brazilian sugarcane, and the Brazilianreceivers use the money to buy stock in an American company. Thismay lead to profits leaving the U.S however as Americans may forfeitcontrol. Although this is a form of capital account reinvestment, it maynot be a liability on anyone in America.