Differences

This shows you the differences between two versions of the page.

--- deficit [2026/09/18 10:40] – ultracomfy
+++ deficit [2026/09/18 11:55] (current) – ultracomfy
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 {{ ::deficitlosstrump.png?nolink |}}\\
-Trump: Deficit = Loss, the USA is losing 1.5Tr USD
+Trump: Deficit = Loss, the USA is losing 1.5Tr USD annually
 </WRAP>
+To be very clear, to me this isn't about Trump. I don't care about Trump. He was democratically elected and delivers the kind of politics all of us roughly expected him to deliver, regardless of what that means to either you, me, or the other side of the political spectrum. No, this one is different because I have general knowledge of what he is talking about, and in addition I also have words this time that I think would constitute a nice and clean response to that social media post.
+====== Spending Deficit ======
+That answer, specifically, is: Being out of money and being bankrupt are not the same. Similarly, deficit and loss are not the same. All of us should know that many people store some or much of their value in assets. For these people, running out of cash on hand doesn't mean a lot and certainly doesn't mean that they're bankrupt now. If you are capable of making this distinction, then you are capable of distinguishing between loss and deficit, too.
+So, typically the term deficit is used in economy to describe government spending. When a government spends more money than it makes through, for example, taxes, it is running at a deficit. Spending more than you have accumulates to debt. Accumulating //debt// and operating at a //loss// are not the same. Because even if your government has a spending deficit, they are still getting things for their spending. For example, the United States routinely imports semiconductors and microchips, the spending for which is added to the national debt. But, critically, the United States //is actually getting// those semiconductors and microchips, so the money wasn't just //lost//. This spending adds to the spending deficit, but it is not the same as just losing money.
+This is the reason why deficit is called deficit, because the calculation of deficit is a calculation of subtraction. Not all subtraction calculations equal loss. Real losses happen in investments (which are not the same as spending), when the revenue does not match or exceed the original investment. Movies can run at a loss. Companies might sell products at a loss, the United States might export goods at a loss if it sells at a price lower than what it cost the United States to produce the goods. There might be a discussion about whether some government spending could be considered a loss if it doesn't align with one's personal values on what the government should or should not spend money on in the first place. But that's not the kind of conversation that I want to have, and it's not the conversation Trump is having, because he talks about the //trade deficit//.
+====== Trade Deficit ======
+The United States of America is a country that, economically, does a lot of imports. Particularly, the US imports a lot of machinery, nuclear reactors, boilers, and electrical and electronic equipment. These alone constitute an import value of over 1.1Tr USD or, in other words, the United States buys machinery and all of the above worth over 1.1Tr from other countries.
+The United States has one of the biggest economies of the world, buying as much as 1Tr USD worth of stuff from other countries isn't unusual, right? What's happening here is that the United States wants a particular product and, instead of bartering cows and goats like savages, uses money as a means of exchange to complete the transaction. //This// is basically a trade deficit. If the new year just started and this was the first ever trade of that year, the United States would have a trade deficit of 1.1Tr USD at that moment. Importantly though, the United States hasn't "lost" any money. It bought a product for money. It received goods in return. The most you could say is that money has exited the United States, but that isn't a loss. **Deficit isn't loss, and trade deficit isn't loss either.**
+The deficit is a result of a mathematical operation called subtraction, in this case that the United States buys more from other countries than other countries sell to it. This is just how trade works, all of this is voluntary. If the United States is unhappy with the prices then it can just not buy, or not sell. The United States is engaging in normal global trade and it just so happens that the United States needs more stuff from other countries than it has on offer for others. Again, //deficit is not inherently bad, a deficit is the result of a subtraction//. In the US's case, this is because the US is a service economy and doesn't rely on exports to work. Countries with oil or bananas typically rely on their exports and therefore have a trade surplus, but that too only means that they sell more than they buy, not that anyone is losing money.
+Any transaction where a good is bought in exchange of money necessarily implies a trading deficit. To avoid trading deficit, one would have to go out of their way to buy something in exchange for another good instead of just using money. In a way, Trump disliking the trade deficit so much kind of implies that he thinks that all transactions involving money are a bad thing, and that we should indeed go back to bartering with physical items.
+Of course he does not actually believe that (especially considering that Trump values the United States Dollar quite a bit and wants to continue using it and wants it to continue to be the world's reserve currency) but that is because he does not know what the trade deficit really is. Now personally, as a true United States patriot, I am fully in favor of more "Made in USA". But even if that would reduce the trade deficit, it only means that the United States would be exporting more. That's all. There is no loss here, no problem to be solved, the United States is not victim of a global trading conspiracy, nobody is losing money. Countries are trading money for goods, and that has been like this and will continue to be like this for a long, long time to come.