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U.S. trade deficit plunges
Other countries may not be buying as much of U.S. stuff, but our buying more of theirs is an indication of consumer strength.
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The nation’s trade deficit plunged in December, likely giving the U.S. economy an unexpected boost to round out the year. The Commerce Department reports the trade gap dropped nearly 21 percent to $38.5 billion.
If you want to thank somebody -- in this case something -- gratitude goes to oil and natural gas. The U.S. exported an extra billion dollars of the stuff, all while importing the fewest barrels of crude oil in almost 16 years.
“It’s two months in a row that exports have grown, and the big driver there is the Chinese economy is beginning to pick up again,” says Chris Lowe, chief economist at FTN Financial.
Lowe says even though we import a lot of stuff from China, that country relies pretty heavily on us.
“They need raw materials, and we make a lot of the equipment from oil rigs to big construction equipment that they make get those raw materials out of the ground,” he says.
The strong showing means the GDP will likely be revised up enough to show growth, rather than decline.
ahhh, well, I work the oil biz, sometimes in the critical and troubled areas of the world. The German or Norwegian salesmen and Project managers go to the critical oil regions under the blessing of their governments----or at minimum, they just leave them alone. It seems that they are doing alright for their companies. Myself: my US govt follows me.
While I work in these regions, I am required to file more than triple the paperwork that a US homelander files. The accountant costs are easily over $2500 per year. The penalties for making any mistakes (I have) are draconian. Oftentimes, the paperwork needed from my employers for US taxes is just plainly not available.
While I am working there, the Qatarian or Bahranian or Algerian or Saudi Arabian banks are required to track, collate, and store all of my financial and personal information. Then, they are to send that data to their govt and/or the IRS directly, according to FATCA rules. Does my country improve my personal security in these regions, or has it made me into a target?
If I work as a business manager, CFO, or accounts receivable clerk, I am required to also report the financial information of my Company directly to the IRS, regardless of my confidentiality agreement, of the rules of the industry, or of the laws of the country I work (ref FBAR form, section 4).
It is not in my interest to work in those areas and sell US Products or services. It is not in the company's interest to hire me as an American.
I try to hide my identity as a US Citizen every method possible, but the IRS is there in those countries , forcing me to declare myself and simultaneously looking to find me and to penalize me.
US Citizens are fragged by their own Congress (Carl Levin, Harry Reid, Barbara Boxer, Carl Schumer, Bill Nelson, etc) and president.
FATCA, The Worst Law the US has Never Known
Jeremy
Hate to say it, but Roger is right. Hard to get excited about a one quarter report when we have had 37 years of deficits unsolved. 'Plunge' is not a word I would use to describe anything related to the minuscule noise level this report represents. There is NO story in one quarter of data. One data point on a graph does not a trend make.
Maybe the story should have been "U.S. Trade deficits Soar AGAIN for 2012."
Oil is an important competent of the deficit, so I don't mean to down play it, but so is our inability to afford and keep Americans living and working abroad as U.S. Salesman to increase our Exports around the world. Germany is an excellent example of a country that does it well, as Roger points out.
America myopically thinks that, since immigration to America means so many want U.S Citizenship, there is no need to pay attention to or place policy importance on emigration, except to send military around the world. We don't need more soldiers in Humvees, we need salesmen with purchase orders in the brief cases residing round the world. Military can't create export jobs for Americans like a salesman can living and working abroad.
Instead of an enlightened trade and emigration policy, that emphasizes the positive impacts Americans abroad can bring back to the Homeland, our complex and vindictive tax system with the burdens it places on them, including the recent FATCA legislation, just assures that Americans give up in frustration and come home. More jobs and more exports are lost as a result, but the consequences of these actions never get media attention in the US.
If you are interested and want to try to understand the story, I have a couple reading suggestions for you.
One, is Roger's Report to the House Ways and Means Committee. He speaks from experience. http://1.usa.gov/VIszBc
Two, is this recent story from Geneva Lunch. It is an anecdotal story, but you should pay attention to it. "Packing Up and Going Home." http://bit.ly/TTGPbB
I hope someday, sometime, somewhere, some journalist can look into the impacts of U.S misguided Citizenship tax policy on the U.S deficit. The deficit story is way more than just FX rates (the current Conventional Wisdom of most journalist) and Oil, which does in fact play a significant role, but not the full story.
Just a small correction to Roger on FATCA withholding:
The rules went final on January 28th this year, unreported by any media in the US.
The Portal of Mordor for the registration process for EVERY foreign financial institution (FFI) in the world begins later this year (no later than July 15th).
All FFIs must be registered with the IRS by October 25, 2013 to ensure that they will not be subject to withholding which begins to go into effect in 2014. There are phasing issues related to types of U.S. source income subject to the 30% withholding that runs out until 2017, but those are probably more technical details than you want. :)
Bottomline, FATCA is the Tax Story of the Century, or maybe EVER in the history of mankind, and still ignored in the U.S. Media for reasons I don't understand. Certainly every Financial Institution in the world, and the BIG FOUR Accounting firms know of what I speak. Journalist seem to be the ones not interested.
'FATCA, the worst piece of Legislation that most Americans know nothing about!'
So it goes.
Jeremy, please take off your rose-colored glasses and tell it like it really is. We closed 2012 with a $900 million higher trade deficit than 2011. That’s hardly “plunge.” The US trade deficit accounts for 60% of all of the trade-deficit nations in the world. Last year our imports were $2 billion/day more than our exports.
Look at our industrialized nation competitors. Germany has a $230 billion trade surplus and unemployment is at a 21-year low. The Euro’s value increased 90% vs. our dollar in the past 10 years, making German products higher priced than ours. Germany is recruiting abroad to fill jobs. Germany is just one example of many
The question is why? The answer is very simple. They all encourage their best to relocate abroad and capture export markets that create jobs at home. But the US punishes Americans who would go abroad to sell our exports. How? Through our tax laws: When foreigners relocate to a different country they are taxed by that country. Only Americans continue to be also subject to our home-country taxation by the IRS on top of the foreign tax. No other country subjects its overseas citizens to this double tax liability. And with FATCA – the Foreign Account Tax Compliance Act, every foreign bank in the 192 other countries must now submit detailed reports to the IRS on every account held by a US citizen. For the IRS to obtain this same information from a bank in the US, it must obtain a court order with evidence of tax fraud, but foreign banks are required by US law to reveal to the IRS full details of all their US citizen accounts. A not-IRS-certified foreign bank, effective this year is subject to a US 30% withholding tax levied on all income transfers from the US. It is illegal, under their laws, for banks to divulge this information to anybody, let alone a foreign government, without a court order. So instead of complying they are closing down the accounts of Americans abroad, without which they cannot survive. They refuse violate their own laws to be subservient to US law.
Until the US repeals FATCA and replaces citizenship-based taxation with the residence- based taxation, we continue to lose export markets and destroy American jobs. We need more American feet on the ground abroad, not fewer.
Our cumulative trade deficit since double taxation was enacted as a vendetta against overseas Americans in 1976, now exceeds $9 trillion.
