By: Paige Hubbard
The United States just blames others rather than taking its own responsibility for the budget deficits that are largely due to the savings shortfall and supply chain distortions, said a U.S. economist on Friday in New York City.
Stephen S. Roach, a senior research fellow at Yale University’s Jackson Institute for Global Affairs and a senior lecturer at Yale’s School of Management, recently published a signed article on Project Syndicate, titled “America’s False Narrative on China.”
In his article, the former chairman of Morgan Stanley Asia and the chief economist of the firm said the U.S. ran deficits with 102 countries in 2018, which reflects a profound shortfall of domestic savings, owning in a large part to the reckless budget deficits approved by none other than Congress and the U.S. president.
“When countries don’t save a lot, and they want to grow, which is very much the case in the United States, we then have to import surplus savings from abroad, and run a large current-account deficit to attract the capital by buying foreign goods and so we then have a large trade deficit driven by our shortfall of saving. The major reason for the weak saving in the U.S. is the lack of saving by the government which is in a very steep deficit position,” he said in an exclusive interview with China Central Television (CCTV).
He also elaborated on the major reason for the U.S.-China bilateral trade imbalance.
“It’s a multilateral trade deficit with 102 countries in 2018. China is the biggest piece of that, but there are still 101 other countries that we run deficits with. So to a large extent, the trade imbalance is a reflection of America’s own structural savings imbalance, rather than necessarily a result of other countries trying to take advantage of the United States,” he said.
The U.S.-China trade imbalance is overstated by as much as 35 to 40 percent, he said in his article. In the interview, he took the iPhone as an example to explain it.
“The iPhone is a case. In point, iPhones are assembled in China and shipped to the United States, but there are components from all over the world embedded in the iPhone and yet we count those as 100 percent Chinese exports to the U.S. The OECD and the World Trade Organization have put together a project to measure the value-added in one country that gets shipped to another. And based on their estimates of trade and value-added, the U.S.-China bilateral trade deficit, adjusted for these supply chain impacts or distortions, would be 35 to 40 percent below the published figures,” he said.
Roach said that it is apparently much easier for the U.S. government to fixate on scapegoats than taking responsibilities.
“We don’t want to cut budget deficits in the United States. We want to have a defense budget that is larger than the combined defense budgets of the next seven largest military powers in the world, including China. We want to cut taxes. We want to do all those things, but we don’t understand that to do that when we don’t save a lot, means we have to bring in the savings from abroad. So we want to blame people outside of the United States like China today, Japan 30 years ago for threatening our industries and our jobs, when in a large part the threat is something that comes from within by a nation that lives too far beyond its means and has to run trade deficits to attract the foreign saving to grow. So it’s too easy to blame other people and not take responsibility for the budget deficits, the savings shortfall that are fundamental to this problem,” he said.