Oil imports could be cut by two-thirds by boosting U.S. oil production to 10 million barrels a day, and immediately implementing more feasible solutions like the aggressive use of natural gas in fleet vehicles and more fuel efficient internal combustion engines.
To keep Chinese products artificially inexpensive on U.S. store shelves, Beijing undervalues the yuan through government intervention in currency markets. It pirates U.S. technology, subsidizes exports and imposes high tariffs on imports.
Reagan was a forceful advocate for U.S. economic interests with the preeminent rivals of his day, like Japan. Obama, like President George W. Bush, has sought to alter Chinese policies through endless pleadings and negotiations.
Beijing offers token gestures, knowing President Obama will not take the strong actions, advocated by economists across the ideological and political spectrum, to force China to abandon its mercantilists policies. It successfully cultivates political support for the American policy of appeasement among large U.S. multinationals and banks doing business and profiting from mercantilism in the Middle Kingdom.
Cutting the trade deficit by $300 billion, through domestic energy development and conservation, and forcing China's hand on currency manipulation and other protectionist practices would increase GDP by about $500 billion a year and create at least 5 million jobs.
Longer term, large trade deficits shift resources from manufacturing and service activities that compete in global markets to domestically focused industries. The former undertake much more R&D and investments in human capital.
Cutting the trade deficit in half would raise U.S. economic growth by one to two percentage points. But for the trade deficits of the Bush and Obama years, U.S. GDP would be 10% to 20% greater than it is today, per capital income as much as $5,000 to $10,000 higher and unemployment not much of a problem.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.