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2016 Fiscal Fact Sheet

February 9, 2015
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I think it’s important to be clear on the latest BEA numbers which shows that the December increase in the goods and services deficit reflected an increase in the GOODS DEFICIT of $6.9 billion to $66.0 billion and an increase in the SERVICES SURPLUS of $0.1 billion to $19.5 billion.

For the US, the objective is to reduce deficits to below 3% of GDP.  Our GDP is about $16.8 trillion and 3% of that is about $504 billion.  For 2014, the goods and services deficit was $505.0 billion, and I think that the focus on the deficit is somewhat misaligned as the US is more or less meeting its goal.  Additionally, in the 2016 Fiscal Fact Sheet, Obama puts the onus of achieving these goals on “replacing mindless austerity with smart reforms, paying for all new investments, and obtaining $1.8 trillion in deficit reduction primarily from health, tax, and immigration reforms– all reforms that the Republican-led House refuses to pass.

As far as Wall St is concerned, what is more worrying than the manufacturing deficit, is the very low increase in the services surplus. The US usually has a very high surplus in the trade-in-service (TIS) sectors, and this suggests that the financial, insurance, investment, R&D, pharmaceutical, environmental, entertainment, IP, telecom, etc. sectors– as an aggregate– may have not done well this quarter, which really enhances the argument for TPP trade cooperation.

According to the Feb. 5, 2015, recent BEA release, exports of services increased $22.9 billion to $710.3 billion in 2014. For the US, it is the trade-in-service sector jobs that Obama is really talking about growing when he is talking about his middle-class economics policy. When Obama talks about building a “21st Century Economy,” Obama is speaking specifically about providing the resources to launch seven manufacturing institutes in 2016, building on the nine institutes already funded through 2015, and calls for the full investment required to complete a national network of 45 manufacturing institutes.  These institutes according to the January 27, 2015 National Network for Manufacturing Innovation Fact Sheet are exclusively in the Defense and Energy sectors.

Wall St. investment leverages debt off the labor and commodity resources of developing countries and the decline of US Foregn Direct Investment clearly shows that the countries who are moving towards closer economic relations with China/BRICS is having an impact on US TIS. As the US (and the 500+ corporate advisors) seek to write the rules for global trade and investment– rules that perpetuate neoliberal privatization– the decline in Trade in Service surplus that provides the stronger argument for giving Obama his TPA, than a rising deficit of goods.

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