Kevin L. Kearns is President of The United States Business and Industry Council. Prior to joining USBIC in 1993, he was a Senior Fellow at the Manufacturing Policy Project, a Washington, DC think tank. For 13 years before that he was a U.S. Foreign Service Officer with overseas assignments in Germany, Korea, and Japan, where he witnessed firsthand the operation of highly cartelized, mercantilist economies.

The final U.S. trade deficit figures for the year 2000 were announced today. They reached a stunning all-time high of $369.69 billion. The overall current account deficit, to be announced shortly, is also expected to reach a record 4.5% of GDP. But the real news is ? that these numbers are not news at all.

No one seems to care that this nation is on an unsustainable consumption binge, which may well end in economic chaos ? for ourselves and the rest of the world. If foreigners no longer want to hold the billions of IOUs, commonly called dollars, that we give them each year for their manufactured goods ? because they have lost confidence in our ability to repay ? then they could dump the dollars on world markets and precipitate a major crisis.

Yet the record trade deficit is being largely ignored by the media, policy makers, and the American public. No major industrial nation has racked up such a deficit as a percentage of GDP since World War II and its aftermath ? and this in spite of our blistering growth of late. But we have become so dependent on foreign manufacturing that there is no end in sight to these massive and growing deficits. Not only are there no policies in place to cope with the situation, there is apparently no realization of the consequences which lie ahead.

Like a dissolute heir, who continually borrows against the worth of the family estate until his creditors occupy his ancestral lands and he winds up as a stable hand, America continues to consume more than it produces, heedless of the consequences. Rather than correct our profligate ways, we take comfort in feel-good nostrums promulgated by economic talking heads.

They spout all sorts of nonsense about American triumphalism, or record imports showing the strength of our "new economy," or an economic future in services and hi-tech, with the dot.coms (whoops) as our salvation. If these rationalizations had any real validity, the trade deficit would be headed lower at this point, not spiraling into the stratosphere. So, like the wanton heir, rather than stop the music, we simply say, in the current idiom, "Party on, dude!"

There was a time when the trade patterns of the last few years would have provoked soul-searching and a response. But this was once a more serious country. During the early 1970s and again in the mid-1980s, trade deficits reached then record levels. Two Republican presidents, Richard Nixon and Ronald Reagan, took unprecedented steps to try to resolve their respective crises. Nixon pulled the United States off the gold standard, and Reagan devalued the dollar sharply following an emergency G-7 meeting at New York?s Plaza Hotel. In retrospect, the trade deficits they faced were a fraction of today?s.

Both presidents devalued following economic orthodoxy, which holds that trade deficits are supposed to disappear as exchange rates adjust, lowering the value of the deficit country?s currency, thus causing imports to fall as they become more expensive and exports to rise as they become cheaper for foreigners. But since the deficits were not the result of misaligned currency valuations per se, the devaluations had little lasting impact. In the wake of the Plaza Accords, we thought that we had learned an important lesson: We had to address non-tariff barriers, intellectual property theft, and other structural impediments, such as subsidies that our trading partners used to hold down American exports and make their own goods more competitive.

There followed hundreds of rounds of trade talks, both multilateral and bilateral, all designed to get at these other factors. We entered into NAFTA; created the World Trade Organization; held auto-textile-steel-intellectual property talks, and attended G-7 summits. But these too have proved abysmal failures as our market remains relatively more open than others, and our manufacturers have moved their plants overseas to remain competitive with dollar-a-day labor. The new trade numbers are the incontrovertible evidence of those failures.

The Bush Administration has as its trade priority, unfortunately, more of the same: a new Free Trade Area of the Americas and a new round of WTO talks. Bush officials want to show "American leadership" on trade regardless of the cost. But it is laughable to think that foreign leaders, unaffected by our wealth and superpower hubris, would follow our lead in taking the world?s exports, while remaining at a disadvantage in overseas markets, until they too run massive trade deficits and dismantle their industrial bases.

Where does this leave us? The new trade figures should give pause to anyone who takes America?s economic future seriously. The Bush Administration must take corrective steps immediately and not, in a fit of free trade boosterism, dismiss the deficit as a sign of America?s strength. Mr. Bush has the benefit of knowing what Presidents Nixon and Reagan did not, i.e. the multitude of tricks our major trading partners have used to blunt our market opening initiatives over the years. Trade deficits at this level are unsustainable over time. Without corrective action, economic disaster lies ahead.

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