One of the components of GDP is "net exports". As you know, net exports went seriously negative since about 1980:
|Graph #1: Balance on Current Account|
See also this comparison at FRED
But how big is that trade imbalance, anyway? What if we could zero it out? What would GDP look like if we don't reduce it for net exports? I mean, we can add the value of those imports to GDP, as if we produced the stuff here. It will bring the GDP number up -- but how much? What would Real GDP growth look like, then? Would it still be trending down? In other words, do imports really account for the decline of US production?
Here's how the Balance on Current Account looks in comparison to GDP:
|Graph #2:Balance on Current Account (blue) and GDP (red)|
If we subtract our growing trade deficit from GDP we get a number that's larger than GDP by the amount of the trade deficit. Graph #3:
|Graph #3: GDP (red) and GDP with the Trade Deficit Subtracted (blue)|
It's higher, yes, but not a lot higher.
These things always surprise me.
So now, if we look at the growth rates of those two lines...
|Graph #4:Growth Rate Comparison|
And if I show Graph #3 after taking the natural log of the values, the two lines follow a similar path. Both show a slowdown in the early 1980s:
|Graph #5:Log Scale Comparison|
Two more graphs to look at, and we're done. I want to strip out the inflation, and compare the two versions of "real" GDP:
|Graph #6: "Real" Values, Log Scale Comparison|
|Graph #7: "Real" Values, Growth Rate Comparison|