My Falling Trade Deficit with Safeway

By John Tamny

In his book Labyrinths of Prosperity, Canadian economist Reuven Brenner professed that, "Macroeconomics is a tautology and a myth, a dangerous one at that, sustaining the illusion that prosperity is necessarily linked with territory, national units, and government spending in general."

Perhaps nowhere is the absurdity of macroeconomics more apparent than in the discussion of the trade deficit. To read the vast majority of media accounts concerning the number, a country is better off economically if its trade deficit is falling, while it faces future economic pain if its deficit is rising.

The problem here is that countries do not for the most part engage in trade. Individuals trade with other individuals, and once that reality is considered, the very notion of a deficit when it comes to the beneficial exchange of goods becomes ridiculous.

While the word brainwashing is perhaps too extravagant when applied to the notion of trade deficits, it could be said that readers of the mainstream media have been bombarded so consistently and so long about the major negatives of trade imbalances, that the debate is now settled. Our alleged trade imbalances will eventually destroy our economy.

The above idea makes for good headlines, but if we as individuals stop and think about how we go about our daily lives, we’ll quickly see that what has the media and many economists so hot and bothered is quite irrelevant. It is, because in the end, all trade must balance.

In my case, I run a trade surplus with Real Clear Holdings, my employer. At least a third of my surplus with my employer then goes to the federal government, the entity with which I run my largest trade deficit; though it’s sometimes hard to figure what I get in return from Washington.

With what’s left over, I run a variety of trade deficits, including a large one with a Safeway supermarket located in the Glover Park section of Washington, D.C. Unfortunately, as many customers of this Safeway are presently aware, it’s going through a partial re-model. As a result, many of the goods I would normally buy are not available thanks to the store’s reduced level of inventory.

If I were a country, economists and journalists would rejoice. Either because I can’t find much of what I used to buy, or because it’s not in stock due to the re-model, my trade deficit with Safeway has plummeted of late.

Am I better off? If we factor in that the goods I buy at Safeway tend to be healthier than my alternative choices, probably not. Economists would point to my falling Safeway deficit and say that I’m at least economically better off, but then my reduced trade deficit with Safeway has occurred alongside rising deficits with both Popeye’s Chicken and Domino’s Pizza. Whatever one thinks of my non-Safeway alternatives, I’m certainly worse off because at least at present, I can’t consume my surplus in the most optimal way.

In short, when we reduce trade to individual exchange, we see there can’t be deficits. We can only engage in deficit trading to the extent that we have a trade surplus elsewhere; usually with our employers, but sometimes with lenders and investors willing to curtail immediate consumption in order to capture a portion of the economic upside we offer.

The problem as always is that journalists and economists tend to look at trade through the prism of countries rather than individuals. Broken down to individuals, we can see that falling trade deficits, far from being good, are usually signals of our not being able to purchase what we want, or our not being able to attract the investment that we need.

John Tamny is editor of RealClearMarkets and Forbes Opinions, a senior economic adviser to H.C. Wainwright Economics, and a senior economic adviser to Toreador Research and Trading ( He can be reached at

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