AND THE INVESTMENT IS POURING IN:

Two Cheers For A Big U.S. Trade Deficit (David Bier and Ivan Osorio, 9/18/11, Forbes)

While a "deficit" in trade sounds bad, no real deficit exists. Most trade statistics simply fail to account for foreign investment. Foreign investors do not sit on their dollars. If they do not buy American goods and services, they invest in dollar-denominated assets like stocks and bonds, real estate, or even government debt.

The trade deficit has helped the U.S. maintain the highest level of foreign direct investment in the world by far. In 2010, foreigners invested almost $2.6 trillion in U.S. banks, businesses, real estate and, to a lesser extent, the government -- more than 4.5 times the level of foreign investment in China last year. Companies invest this foreign capital in research and development, factories, and workers. This creates new wealth and jobs, driving economic growth and raising living standards.

Trade imbalances don't harm the economy. Lower trade deficits have accompanied low levels of economic growth. During the Great Depression, for example, the U.S. actually ran trade surpluses every year. By contrast, real GDP since 1980 grew 3.5 times faster when the deficit rose than when it declined, as a study by the Cato Institute notes. Over the same period, employment, manufacturing, and the stock market all also increased the fastest alongside a widening trade gap.

Follow @brothersjudd