The real value of U.S. industrial output is near an all-time high and U.S. trade deficits represent a net inflow into America of capital that expands our productive capacity

By Donald J. Boudreaux.

"Here’s a letter to the Wall Street Journal:

Editor:

Greg Ip quotes Oren Cass offering his now-familiar claim that “things that used to be made in America are now made elsewhere in exchange for pieces of paper” (“Republicans Are Fracturing on the Economy,” July 11). Nothing could be more misleading. The implication that Americans no longer produce tangible things is false: The real value of U.S. industrial output hit an all-time high in September 2018 and is today only a fraction of a percentage point below that level. Importantly, U.S. industrial output is now 21 percent higher than in 1998 – the year just prior to the so-called “China Shock” – and 152 percent higher than in 1975, the last year that America ran an annual trade surplus.

Equally wrongheaded is Cass’s suggestion that when the U.S. runs trade deficits it receives in exchange only “pieces of paper.” In fact, U.S. trade deficits represent a net inflow into America of capital that expands our productive capacity, one result of which is that U.S. industrial capacity is today at an all-time high. Further, as Colin Grabow reports, “manufacturing value added on a per‐​worker basis shows America to be the world leader at over $141,000. That’s 45 percent higher than second‐​place South Korea and over seven times that of workers in China. Such high productivity helps explain why manufacturing attracted over $55 billion in foreign direct investment last year [2022] – more than any other sector.” By comparison, FDI in 2022 for Chinese manufacturing was, at $49.67 billion, nearly ten percent less than in the U.S. This fact is yet another that’s impossible to square with Cass’s suggestion that Americans no longer make things."