The trade deficit for the first six months of this year was more than for all of 1998, and is setting new records by the month. Are these imposing deficits a harbinger of trouble down the road? Are we spending our way into oblivion?
In the short term, we're not. The trade deficit is a symptom of our health, not our weakness. But, down the line, it could trigger the kind of instability that might end this remarkable expansion.
As large as our "payments deficit" is (that is, not only our imports in excess of our exports, but the net amounts we owe foreigners who own US stock, bonds, and businesses), it's not an imminent danger.
Our payments deficit is growing because the US economy is growing, and growing more rapidly than our principal trading partners - Canada, Mexico, Europe, and Asia.
Fueled with money to burn, the US is on a shopping spree, so it stands to reason that we will draw in more products from other economies than theirs will from ours.
So far, so good. But the longer term answer is not as sanguine.
Sustained economic growth is an act of balance, and the trade deficit, like any other imbalance, has a shadow. Foreigners, having sold us their goods and services, find themselves holding the extra dollars we sent them in payment.
What can they buy with them? The answer is: our assets - our stocks, bonds, companies, and all our other forms of wealth.
And that is what they've been doing - and with a vengeance. Foreign investors are snapping up US stock: Foreign businesses are buying up US companies directly at a record pace. In one sense, that's not surprising - all the money we sent abroad has to come back to the US one way or another.
The question is, what are the terms on which foreigners will be willing to invest here, giving us that money back? The answer today is: easy ones.
The US is in the throes of a technological revolution that makes it the most attractive investment climate on earth. Investors are providing us with their dollars even faster than we can take them.
The proof is the strong dollar. The clamor to invest in America is so strong that the dollars you need to buy a stake in America are gaining in value, even as we pour them out into the rest of the world at a record pace.
The strong dollar, in turn, helps keep inflation down and competitive pressure on US firms up, which in turn makes them more attractive, and so the virtuous circle turns.
But for how long? Will foreigners be willing to keep investing here in rising amounts indefinitely? If they lose their formidable appetites for our assets and trim their positions, they could precipitate a run against US stocks and the dollar - both could drop, and take the economy down with them. After all, nothing grows forever: Trees don't pierce the sky.
So the trade deficit is sustainable - and benign - only so long as foreigners see the US as the hot place to put their money.
Will they think so forever? Probably not. When will they stop? Beats me.
The record trade deficit also shows that the theories economists use to reach these conclusions are, to put it nicely, old.
They were born in a long-ago world in which countries were base camps from which goods and services were exported, while capital stayed home.
In today's integrated world, stocks, other securities, investments, and currency itself move as effortlessly as do products, and, when summed, in greater quantities.
So perhaps economists have the sequence of events all wrong. Perhaps the US is the most promising economy on earth and investors are clamoring to buy a part of it.
To do so, they need dollars, the same way a poker player needs chips. As they rush to invest here, they bid the dollar up (which makes imports cheaper), even as they pump new money into our economy. Our economy grows, imports are cheap - no wonder we have a record trade deficit!
In today's integrated economy, where capital moves at the speed of light, the trade deficit may be a consequence, not a cause, and far more sustainable, and less pernicious, than we thought.
The bottom line is nonetheless this: So long as the US remains the darling of the world's investors, it can have its cake and eat it too - it can buy the world's products in prodigious quantities and then allow foreign investors bearing our hard-spent dollars to place them back in our markets.
The record deficits we're running, however, may one day be so large as to test their willingness to do so.
Should that day ever come, the trade deficit, which now seems a symptom of economic vitality, may be the seeds of our undoing.
*Ev Ehrlich, former undersecretary of Commerce, is author of the new novel 'Grant Speaks'
(c) Copyright 2000. The Christian Science Publishing Society