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Saving deficit, not China, threatens American dream

By Stephen S . Roach | China Daily | Updated: 2016-06-02 07:33

US politicians invariably bemoan trade as the enemy of the middle class, the major source of pressure on jobs and wages. The current presidential campaign is no exception: Republicans and Democrats alike have taken aim at both China and the Trans-Pacific Partnership Agreement, holding them up as the scourge of beleaguered US workers. While this explanation may be politically expedient, the truth lies elsewhere.

When it comes to trade, as I recently argued, the United States has made its own bed. The culprit is a large saving deficit, the country has been living beyond its means for decades and drawing freely on surplus saving from abroad to fund the greatest consumption binge in history. Politicians, of course, don't want to blame voters for their profligacy; it is much easier to point the finger at others.

The saving critique merits further analysis. The data show that countries with saving deficits tend to run trade deficits, while those with saving surpluses tend to run trade surpluses. The US is the most obvious example, with a net national saving rate of 2.6 percent in late 2015 - less than half the 6.3 percent average in the final three decades of the twentieth century - and trade deficits with 101 countries.

Saving deficit, not China, threatens American dream

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