The $600 billion annual deficit is the most significant barrier to achieving a robust economic recovery and creating jobs, and oil and consumer goods from China account for virtually the entire problem.
Economists agree the pace of economic recovery has been too slow because of too little demand for what Americans make.
Consumers are spending again -- the process of winding down household debt that followed the Great Recession ended more than a year ago. However, too many U.S. consumer dollars go abroad to purchase Middle East oil and Chinese consumer goods, but don't return to buy U.S. exports. Consequently, businesses can't justify expanding U.S. facilities and hiring workers.
Since the economic recovery began in June 2009, the trade deficit has doubled and gross domestic product growth has averaged a disappointing 2.4 percent a year. Unemployment has fallen from 10 percent to 8.1 percent mostly because Americans have quit looking for work, not because they found jobs.
Like U.S. President Barack Obama, Ronald Reagan inherited a deeply troubled economy. He, too, implemented radical measures to reorient the private sector and accepted large budget deficits to buy time for his measures to work. As Reagan campaigned for re-election, his recovery posted a 7.1 percent growth rate and unemployment fell much more rapidly than it has during the Obama recovery, even as more adults joined the labor force and looked for work.
Obama administration regulatory limits on conventional petroleum development are premised on false assumptions about the immediate potential of electric cars and alternative energy sources, such as solar panels and windmills. And those make the United States even more dependent on imported oil and overseas creditors to pay for it and impeding growth and jobs creation.
Oil imports could be cut in half by boosting U.S. petroleum production 4 million barrels a day and cutting gasoline consumption 10 percent through better use of conventional internal combustion engines and fleet use of natural gas in major cities.
To keep Chinese products artificially inexpensive on U.S. store shelves, China undervalues the yuan by 40 percent. Faced with mounting difficulties in its real estate market and banks, Beijing is boosting tariffs and putting up new barriers to the sale of U.S. goods in the Middle Kingdom.
Obama has sought to alter Chinese policies through negotiations but Beijing offers only token gestures and cultivates political support among U.S. multinationals producing in China and large banks seeking business there.
The United States should impose a tax on dollar-yuan conversions until China revalues its currency. That would neutralize China's currency subsidies that steal U.S. factories and jobs. The duration of that tax would be in Beijing's hands -- revalue the yuan and the tax ends. Such a policy would not be protectionism; rather, in the face of virulent Chinese mercantilism, it would be self-defense.
Cutting the trade deficit in half, through domestic energy development and conservation and offsetting Chinese exchange rate subsidies would increase GDP by about $525 billion a year and create at least 5 million jobs.
(Peter Morici is a professor at the Smith School of Business, University of Maryland School, and former chief economist at the U.S. International Trade Commission.
(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)