The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.NEW YORK ( TheStreet) -- Friday, the Commerce Department is expected to report the deficit on international trade in goods and services was $48.4 billion in January, only slightly changed from December. The $580 billion annual trade deficit is the most significant barrier to jobs creation and lowering unemployment, and oil and consumer goods from China account for virtually the entire problem. Economists agree, the pace of economic recovery has disappointed, because of too little demand for what Americans make. Consumers are spending again -- the process of winding down consumer debt that followed the Great Recession ended last April; however, every dollar that goes abroad to purchase oil or Chinese consumer goods, and does not return to purchase U.S. exports, is lost domestic demand that could be creating American jobs.
Just to keep up with productivity growth, which averages at about 2% a year, and natural increase in the adult population, which is about 1%, the economy must grow at about 3% a year -- unless more adults quit looking for work altogether. As stronger growth attracts immigration and encourages idle adults to reenter the labor force, growth in the range of 3.5% is needed to sustain a full employment economy.
Oil imports could be cut in half by boosting U.S. petroleum production by 4 million barrels a day, and cutting gasoline consumption by 10% 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, Beijing undervalues the yuan by 40%. It accomplishes this by printing yuan and selling those for dollars and other currencies in foreign exchange markets. In addition, faced with difficulties in its housing and equity markets and troubled banks, it is boosting tariffs and putting up new barriers to the sale of U.S. goods in the Middle Kingdom. Presidents Bush and Obama have 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 U.S. should impose a tax on dollar-yuan conversions in an amount equal to China's currency market intervention. That would neutralize China's currency subsidies that steal U.S. factories and jobs. That amount of the tax would be in Beijing's hands -- if it reduced or eliminated currency market intervention, the tax would go down or disappear. The tax would not be protectionism; rather, in the face of virulent Chinese currency manipulation and 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.
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