NCPA - National Center for Policy Analysis


October 2, 2006

America's borrow-and-spend ways have juiced the global economy.  But the resulting indebtedness makes the country vulnerable to protectionism, as well as to broader economic disarray, says the New York Times.

For example:

  • Many American businesses -- and politicians -- see the mounting trade deficit and immediately cry foul. 
  • Demands for tariffs are the predictable, if misguided, reaction; protectionism conveniently shifts the blame for trade-related hardships to foreigners, which is easier than adapting homegrown business practices to make America more competitive.
  • There are other dangers; if lenders like China began to doubt the strength of the American economy, they could put their money elsewhere, driving up American interest rates, perhaps sharply.

To reduce excessive foreign borrowing, it is imperative to reduce the federal deficit, says the Times.  To that end, Treasury secretary, Henry Paulson Jr. has pledged to help the Bush administration find ways to curb Social Security, Medicare and Medicaid. 

Source: Editorial, "Curing the Debt Addiction," New York Times, October 2, 2006.

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