I’ve long been a fan of the economist Alan Blinder, he of the hard head, soft heart (a great book, absolutely crying for an update, Alan!). In fact, Alan co-authored an important paper for our Full Employment Project on the policy lessons from the Great Recession.

So I was a bit blind(er)-sided by his WSJ oped this AM, 5 Big Truths About Trade, given that some of his truths are not true at all.

It’s essential to get this right as the populist campaign has elevated this trade debate in ways that can be used or misused. The latter would lead to protectionism, walls, and damaging tariffs like those touted by Trump. Alan’s right, for example, not to conflate trade agreements with trade, a theme I’ve tried to trumpet loudly in these parts.

But it also misuses the moment to argue, as Alan does, that the problem is simply that some workers are displaced and, if we only do more to help them, we’ll otherwise be fine. What this view ignores is the damage done to our and other economies through economically large and persistent trade imbalances. Alan’s “truth” #3 maintains trade imbalances “are inevitable and mostly uninteresting.”

Wait, what?!

First, we should recognize that those directly displaced by trade are not the only workers hurt by this dynamic. As displaced production workers move over to low-end service-sector jobs, the supply effect puts downward pressure on wages in that part of the job market as well. Economist Josh Bivens finds that non-college educated workers have lost around $1,800 in earnings per year through this channel. That’s a lot of money for them, and surely the root of a lot of the populist anger that’s elevating trade in the campaigns.

Persistent deficits of the magnitude we’ve had here in the U.S. have, in fact, been highly problematic, a fact recognized by Ben Bernanke back in 2005, when he recognized the extent to which the “savings glut” was contributing to large trade imbalances as surplus countries (like China then and Germany now) exported large amounts of savings to deficit countries. Far from “uninteresting,” this tactic has long been a strategy of mercantilist countries to over-save, under-consume, and under-invest, causing big problems in lots of other places.

Problems like a housing bubble, which Bernanke had the foresight to note in his 2005 paper (though he hoped it would unwind without causing much damage, which…um…didn’t quite happen); or before that, a dot.com bubble that led to the prior recession of 2001, which, while much milder in GDP terms, was also followed by a jobless and wageless recovery.

Consider these dynamics re Alan’s assertion that “…people who claim that our trade deficit kills jobs need to explain how the U.S. managed to achieve 4% unemployment in 2000, when our trade deficit was larger, as a share of GDP, than it is today.”

He might also point out—he who has written with great insight about the damage of the housing bubble and the innovative finance that inflated it—that unemployment was in the mid-4’s in 2007, right before the worst recession since the Great Recession, one we’re still climbing out of.

No one is saying that trade deficits prevent full employment. What we are saying is that the magnitude of the trade deficits we’ve run—averaging -4% of GDP since 2000 and -2.8% in the most recent quarter—must be offset if we are going to get to full employment. In recent decades, the excess savings flowing in from surplus countries, interacting with under-regulated financial markets, have turned that offsetting process into a bubble machine. (Dean Baker nicely ties these points to secular stagnation; see also this recent academic analysis tying savings glut dynamics to demand shortfalls in deficit countries.)

Alan also makes the mistake of scolding us for not saving enough. “Spendthrift nations like the U.S. have trade deficits because we don’t save much. But these saving decisions are domestic.” Nuh-uh!

When one country runs a trade surplus, another country must run a trade deficit. When Germany runs an 8 percent trade surplus (!), other countries with whom they trade–particularly those in the rest of the Eurozone–must consume that much more than they produce. If somebody’s consuming or investing less than they save somebody else must invest or spend more than they save. It is in this manner that surplus countries not only export goods to deficit countries. They also import labor demand from those countries, some of whom, like peripheral Europe, could really use that demand.

As I wrote recently, the goal here is not balanced trade, nor is it protectionism. “As long as there’s been trade, there’s been imbalanced trade, as countries invariably produce more than they consume, i.e., they’ll run a trade surplus, while others, like us, will do the opposite. To somehow insist on balanced trade for all would be a huge policy mistake, one that would preclude billions of people from the reaping the benefits of trade, both as consumers and producers.”

But to ignore the role of the international dynamics that have led to large, persistent US trade deficits, contributing to stagnant demand offset by lastingly damaging bubbles is to dismiss a force that a lot of people are justifiably pissed off about.

What to do about it is a good question, one for my next post on this topic.