Sewell Chan of the New York Times wrote an article on October 22 on the White House’s proposal to restrain trade imbalances and work with G-20 nations to “agree to curb persistent surpluses and deficits that could contribute to the next financial crisis.” The White House released a letter from Treasury Secretary Tim Geithner he wrote to G-20 nations to reduce external imbalances (positive or negative) below four percent of gross domestic product within the next four years.

Chen writes that “Four countries have current-account surpluses exceeding 4 percent: Saudi Arabia (6.7 percent), Germany (6.1 percent), China (4.7 percent) and Russia (4.7 percent.) But under the American proposal, countries like Russia and Saudi Arabia that are “structurally large exporters of raw materials” would be exempt from the 4 percent limit, so the pressure would have fallen on China and Germany. Two G-20 countries have current-account deficits larger than 4 percent: Turkey (5.2 percent) and South Africa (4.3 percent). The United States is next, at 3.2 percent.”

What Chen ignores are the benefits of having current-account deficits. In terms of economic accounting, this results in a capital-account surplus, meaning we receive a net inflow of capital because the United States is an attract place to invest. In other words, as George Mason economist Don Boudreaux writes, ““The Obama administration on Friday urged the world’s biggest economies to set a numerical limit on the amounts that their citizens invest in the U.S. economy.” Not presenting the benefits of running a current-account deficit misrepresents the economic position of the United States and makes Geithner’s plan sound like a good idea, but it is not. It is more economic planning.