Trade deficits are a tricky thing. The common way of thinking, is that if you are buying more than you are selling, you will eventually run out, and have to either stop buying, or start borrowing. This is not true in the economic world. It is true that if nominally dollars did not increase, that the former would happen. We do not live in that world. We live in a fiat money world where the value of our currency is for the most part pegged to the value of its economy. The US is constantly creating more value to the world. If the money supply were to stay the same, you would have constant deflation, but we dont. The reason for this is the constant increase of the money supply.(I wont go into the side effects of inflation by over production, as its a separate issue to globalization.)
So, while the US is explicitly in a nominal trade deficit, the real question is are we in a real trade deficit. There is also the issue of what happens to the liquid capital that we are sending abroad. A vary large chunk of that money comes back into the US as investment.
Now, I should be clear and say that I do believe we are in a real trade deficit, because the US government has found it far easier to keep current levels of spending by borrowing, vs explicitly increasing taxes. Again, that is another issue all together.
Now, onto to immigration and outsourcing. The argument is that these are bad, as cheap labor is now competing with more expensive labor. I dont think the issue you are putting forth is one of skilled vs unskilled in relation to labor, as they would be in different markets.
So, does immigration hurt the economy? Well, it does if its contained in a state structure that pays for the immigrants. That is the structure we live in, for better or worse, and its not likely to change. The question then becomes, what is the least costly way to deal with this issue? My answer is to let in people who want to work. Fighting immigration is very expensive, and always will be. The expense is far greater than the savings it brings. Yes, low skilled labor will be pushed down, but again, I dont think that can be stopped. What you want are those people to work their way up, and command higher wages. With that, you increase productivity and thus it becomes a net benefit. In this way, it becomes an investment that turns into a net benefit. This also applies to outsourcing, even if it takes longer. The short term will be a negative, but the long term is a net positive. China is a great example of this trend. They are buying ever more from not only the US, but things around the world. That demand is being met globally and that is becoming a benefit to the world. The middle class of China is booming and they are starting to demand more and more goods/services. The US among others will meet this demand and be better off.
As for wealth being relative, you are correct. Not only is it relative to others, but to the past. Compared to the past, the poor of today are far better off than the poor of the previous 10 years, and it only looks better as you go back. I do believe that some of the wealth at the top has been at the expense of the lower classes, but that does not have to do with globalization, but I am more than willing to talk about it in a different post, as this one is quite long. I do agree that right or wrong, people get angry when the top grows faster than they do.
This is where opportunity cost start to come into play. By "protecting" the labor, you are increasing the price of the labor. The argument is always that by protecting aka keeping the price of that labor high, we are better off, because those jobs bring money to people who spend. The desired effect is even greater when applied to the middle class. That money is then a multiplier and makes everyone better off.
So, tariff has the effect of establishing a minimum wage independent to the productivity relative to the global market. So, instead of capital flowing to other goods/services, its now tied up in those jobs that have been artificially kept high. This means there is less money to go into other sectors that could create jobs. This is supposedly offset by the net multiplier effect that the higher wages brings to the economy. That might be true, up until innovation happens and the US is left behind.
A great example of this is the auto industry in the us post 1960. Global innovation was happening and the US auto industry did not get the feedback because the US auto market is isolated. The US auto manufactures kept making cars that the US market wanted, and the US market could only buy cars the had around. Tariffs kept out foreign cars for the most part. It was not until the 1980s that things really hit the fan. The US cars were way behind the demand. We no longer produced cars that the world wanted, and suddenly, the tariff was not enough to keep out foreign cars. The industry here was caught off guard, and had losses. It then had to cut many jobs to stay alive. We never fully recovered, and its why our auto industry is not the powerhouse it once was. All because we created an artificial market that could not be sustained.
Im going to stop here, only because this went way longer than I thought it would, and Im sure people can respond and break this apart so I can then reply to that.
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