Paul Krugman writes:
A more plausible route to sustained recovery would be a drastic reduction in the U.S. trade deficit, which soared at the same time the housing bubble was inflating. By selling more to other countries and spending more of our own income on U.S.-produced goods, we could get to full employment without a boom in either consumption or investment spending.
I have two questions about this strategy:
1) How would Krugman propose to achieve this "drastic reduction"? He seems to be proposing some action to make this happen, but he doesn't say what this action is. In particular, he doesn't mention whether he wants to impose high trade barriers to cause U.S. consumers to spend more on "U.S. produced goods," but I'm not sure how else he would accomplish this.
2) What does Krugman think about the employment effect this would have on our trading partners, and their reaction to it? If we are spending less on their goods and more on our goods, they are likely to spend more on their goods and less on our goods.
