I have to admit, I enjoy watching how ignorantly the personalities of FOXNews can wax on about things they really have no understanding of. They spew opinionated rhetoric and hope no one will do any fact-checking on their asses and handily serve them some humble pie. That is of course, why I also like it when Neil Cavuto goes on the air to say things like this:
So let’s cut to the chase: The problem isn’t our buying. It’s their “not” buying.
Nothing’s wrong with our economy. A lot is wrong with their economies.
They criticize our budget deficit. But as a percentage of GDP, they know full well they have even bigger deficits. But you don’t hear that.
Just like you “don’t” hear them owning up to their costly and out-dated socialist societies that sap every government dollar and hurt every European citizen.
Now, Neil may have a little economic knowledge [edit: I’d bet the only economics PhD that’s been in his head was the time he sucked off Ben Stein], but he’s a partisan hack by trade. So it’s funny when an economist with no axe to grind writes on the issue and has a rebuttal that succinctly refutes Cavuto’s “it’s their fault, not ours” talking points. Along comes an excellent article from the Economist that blows poor little Cavuto’s argument clear out of the water in The passing of the buck?:
What about the second argument, that sluggish demand in the rest of the world is to blame for America’s external deficit? If only Europe and Asia would save less, spend more and so import more from America, it is argued, the deficit would simply vanish. Martin Barnes, an economist at the Bank Credit Analyst, a Canadian investment-research firm, reckons that this is much exaggerated. In 2001, when domestic demand did grow slightly faster in Europe and Japan than in America, America’s deficit barely budged.
The problem is that America’s imports are 50% bigger than its exports, so if exports and imports simply grow at the same pace, the trade deficit automatically widens. If imports rise by, say 10%, then exports need to grow by 15% just to prevent the deficit from widening. This means that while stronger foreign demand would undoubtedly help, it would be virtually impossible for America to reduce its deficit significantly through stronger exports alone. Li Ruogu, the deputy governor of the People’s Bank of China, said last week that America should put its own house in order–ie, save more–and stop blaming others for its problems. He was right.
Some economies, such as Australia and New Zealand, have built up bigger debt ratios without obvious adverse economic consequences, but they are small countries so their current-account deficits absorb only a tiny fraction of global saving. This year alone, America’s new borrowing from abroad will mop up a massive 75% of the world’s surplus saving.
I think it’s disingenious for Cavuto to spout one-liners without bothering to qualify his statements with uh… fact, but that’s what makes him popular to to watch. Of course, no media outlet is tackling this economic issue head on in any substantial way, but at least the other outlets aren’t out there saying things that are so patently false.
Neil Cavuto is clearly wrong, and is stupid for yammering on about things he has no clue about.