Trade Deficit Hits New Record High

We've been running trade deficits for decades, and almost doesn't seem to matter. In fact, many free-enterprisers believe its a good thing. The reality is that massive trade deficits have decimated our manufacturing base, and good middle class jobs along with it. It also means we need to borrow from foreigners:

The current account is the broadest measure of U.S. trade because it tracks not only the flow of goods and services across borders but also investment flows. The figure is closely watched by economists because it represents the amount of money the country must borrow from foreigners to make up the difference between what America imports and what it sells overseas.

It actually hurts the economy directly, as well as long term:

The Commerce Department reported Monday that the current account trade deficit increased 3.9 percent to a record $225.6 billion in the July-September quarter. That represented 6.8 percent of the country's total economy, up from 6.6 percent of the gross domestic product in the spring quarter.

The biggest perpetrator country in the deficit imbalance is China:

Critics have singled out the biggest culprit as China, the country which is posting the biggest trade surpluses with the United States. A high-level delegation of seven members of Bush's Cabinet, led by Treasury Secretary Henry Paulson, held two days of talks in Beijing last week to launch a new strategic economic dialogue with China aimed at resolving long-festering trade problems between the two countries.

However, the two sides reported no breakthoughs after the initial discussions on the biggest issues such as American manufacturers' complaints that China is manipulating the value of its currency to gain trade advantages.

We are a debtor nation:

The deficit in investment flows meaning that the United States is now having to pay foreigners more than Americans' earn on their overseas investments rose by $1.6 billion to an all-time high of $3.8 billion.

And it will get worse:

Economists expect that figure to climb even higher in coming years representing the growing size of U.S. assets now in the hands of foreigners, reflecting all of the trade deficits run up over the past three decades.