In the Real World the Trade Deficit Is More Important Than the Budget Deficit

Washington politicians like to hyperventilate about the budget deficit. However changes in the budget deficit are overwhelmingly a response to economic conditions rather than the result of deliberate policy. In other words, politicians didn't have much to do with the changes. Furthermore, since the budget is responding to economic changes, it is not giving us new information about the economy.

On the other hand the trade deficit is a direct measure of the amount of demand that is going overse...