Maybe now the message will be heard: Deficits do matter

For years, this page has been preaching a doctrine that deficits have consequences, both budget deficits and trade deficits.

And the two are connected, because the U.S. trade deficit has pumped billions of dollars off shore, encouraging other countries to use those dollars to invest in the U.S. Treasury notes that allow the administration and Congress to run the country on credit.

Such observations by our editorial writers and those at dozens, if not hundreds, of other newspapers have largely been ignored.

Finally, it seems, someone may have said something on the subject that will get Washington’s attention. And from whence does this wake-up call come? From China, of all places.

The same China that has siphoned more than $1 trillion from the United States since 2000 because of ever-growing trade deficits. The U.S. trade deficit grew from $84 billion in 2000 to more than $233 billion in 2006, and it is on-track to exceed that number in 2007.

Our interest in the trade deficit was somewhat parochial. Being from the old industrial heartland, we have seen too many jobs lost to cheap imports. In recent years, one of the industries most severely affected by Chinese exports has been the common pipe industry. Hundreds of Mahoning Valley and Shenango Valley jobs have been lost and the survival of area pipe companies is endangered by a 40-fold increase in Chinese exports over five years.

Not impressed

But such mundane matters of lost jobs did not impress President Bush. His basic philosophy was stated in 2005 when critics of his trade policy were calling for action. If Americans bought fewer Chinese products, the deficit would be reduced, he said. Never mind that only the government, not individual consumers, could address China’s currency manipulation, its trademark and patent infringement and its willingness to dump its products on the American market at below cost (just to keep its factories humming while ours closed).

But, as we said, maybe now those of us who have been alarmed at growing deficits will find an ally in the White House, because two senior Communist Party officials have defined the trade relationship between our countries on what rises to a national security level.

Britain’s Daily Telegraph reported last week: “The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of U.S. Treasury bonds if Washington imposes trade sanctions to force a yuan revaluation.”

If China starting dumping its dollar reserves — it is estimated to hold $900 billion in Treasury bonds — it would certainly drive down the value of the dollar and could cause it to crash. Of course, if the dollar crashed, China would lose as well, but as a young economy, with an enormous and growing production capacity, it might be in a better position to rebound than our mature economy.

The administration cannot be comfortable being on the receiving end of threats from Chinese Communists. Perhaps this is enough to make President Bush and Congress consider more seriously the damage that is being done to the country by its addiction to cheap imports.

And every American might want to consider this: If China is bold enough to suggest an attack on the U.S. dollar in 2007, what would it be likely to do in 2015 or 2020, if we simply continue to buy and borrow from China at the rate of about a quarter-billion dollars a year?