During the early years of the recovery consumer demand did expand as the household deleveraging process ended. However, too many of those dollars were spent on imports that did not return to buy U.S. exports. The gap between new imports and new exports was lost demand for U.S. goods and services.

At about $500 billion, the trade deficit is almost entirely attributable to the gaps in trade with China and on oil.

Confronting China more forcefully about its undervalued currency and other mercantilist practices and opening up more offshore and Alaskan oil reserves for development could cut the trade deficit in half, jump-start robust growth and create five million jobs, and offer the opportunity for more substantial deficit reduction.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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.

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