The Bush assministration set yet another record in 2004 with a $665.9 billion trade deficit.
The United States deficit in the broadest measure of international trade soared to an all-time high of $665.9 billion in 2004, showing in stark terms the speed with which the country is becoming indebted to the rest of the world.
The Commerce Department reported Wednesday that the shortfall in the current account was 25.5 percent higher than the previous record, the $530.7 billion deficit set in 2003. The department also noted that the deficit was worsening as the year ended with the shortfall in the fourth quarter hitting a record $187.9 billion, up 13.3 percent from the third quarter deficit.
The Bush administration contends the soaring trade deficits reflect a U.S. economy that is growing faster than the rest of the world, pushing up imports and dampening demand for U.S. exports. But private economists are worried that the huge level of resources being transferred into the hands of foreigners will eventually result in lower U.S. living standards.
The current account trade deficit is closely watched by economists because it is the broadest measure of international trade, covering not only trade in goods but also trade in services and investment flows between nations. The deficit for 2004 was not only a record in dollar terms but also as a percentage of the total U.S. economy, climbing to 5.7 percent of the gross domestic product, up from 4.8 percent of GDP in 2003.
The dollar’s value against other currencies has been declining for three years but so far that decline has been orderly.
However, some private analysts worry that one day the dollar might begin falling in value more sharply if foreigners suddenly decide to diversify into other currencies and begin cashing in their holdings of U.S. stocks, bonds and Treasury securities. Such a development could send stock prices in this country plunging and interest rates surging.
Investor Warren Buffett warned in this year’s letter to shareholders of Berkshire Hathaway Inc. that the United States could become a “sharecropper’s society” by the continued transfer of U.S. assets into foreign hands. He estimated the country’s debt to foreigners could surge to $11 trillion by 2015.