NEW YORK ( TheStreet) -- The economy added 103,000 jobs in December but that was disappointing after recent surges in retail sales and business spending. Simply too many dollars Americans spend go to imports but don't return to buy U.S. exports, leaving too many Americans jobless, wages stagnant, and federal and state governments with budget woes.

Analysts expect the Commerce Department Thursday to report the deficit on international trade in goods and services was $40.7 billion in November, up from $27 billion when the recovery began. This rising deficit subtracts from demand for U.S. products, just as stimulus spending and tax cuts add to it. The deficit is taxing growth and jobs creation, and the Obama administration hasn't offered a credible policy to reduce it.

Jobs Creation

By the end of 2013, about 13 million private-sector jobs must be added to bring unemployment down to 6%. Current policies are not creating conditions for 5% gross domestic product growth that could be achieved and is necessary for businesses to hire 350,000 workers each month.

Since December 2009, the private sector has added 112,000 jobs per month, but most of those have been in government subsidized health care and social services, and temporary business services. Netting those out, core private-sector jobs creation has been a meager 58,000 per month -- that comes to 18 new jobs per county for more than 5,000 job seekers per county.

During the early stages of an economic expansion, temporary jobs appear first but 18 months into the recovery, permanent, non-government subsidized jobs creation should be accelerating. Instead, core private-sector jobs were up only 60,000 in December.

Trade Deficit

Imports grew so much more rapidly than exports that the trade gap subtracted 1.7% from demand for U.S. goods and services and third-quarter GDP.

But for the growing trade gap, GDP would have increased 4.3% instead of 2.6%. At that pace, unemployment would fall to about 7% by the end of 2013.

Oil and goods from China account for nearly the entire trade deficit, and without a dramatic change in energy and trade policies the U.S. economy faces unacceptably high unemployment indefinitely.

Limits on offshore drilling and otherwise curtailing conventional energy supplies -- premised on false assumptions about the immediate potential of electric cars and alternative energy sources -- are making the U.S. even more dependent on imported oil and more indebted to China and other overseas investors.

Detroit could build many more attractive and efficient gasoline-powered vehicles now, and a national policy to accelerate fleet replacement would spur growth and create jobs much more rapidly than investments in battery and electric technologies.

To keep Chinese products artificially inexpensive on U.S. store shelves, Beijing undervalues the yuan by 40%. It accomplishes this by printing yuan and selling those for dollars in foreign exchange markets. Annually, those purchases exceed $450 billion, or about 10% of China's GDP, or 35% of China's exports.

President Obama has pleaded with China to stop manipulating its currency, but Beijing shrewdly recognizes Obama lacks the will to meaningfully counter Chinese mercantilism with strong, effective actions, hence Beijing offers token gestures and cultivates political support among U.S. businesses like Caterpillar ( CAT) who lead in outsourcing jobs to China and profit from Chinese protectionism at the expense of American workers.

The president should impose a tax on dollar-yuan conversions in an amount equal to China's currency market intervention divided by its exports -- about 35%. That would neutralize China's currency subsidies that steal U.S. factories and jobs. It is not protectionism; rather, in the face of virulent Chinese currency manipulation and mercantilism, it's self-defense.
Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.