The Current Account Deficit Re-Branded: Please call it The Current Account Surplus

Nouriel Roubini points out an attempt by the White House Council of Economic Advisors to label the Current Account Deficit as the Current Account Surplus:

"... The latest example of this Orwellian doublespeak is the Economic Report of the President (ERP) published today by the White House Council of Economic Advisers. Its chapter on international macro issues is titled "The U.S. Capital Account Surplus" when the more appropriate and honest title would have been "The U.S. Current Account Deficit" . While Ben Bernanke's name is nowhere in this year's ERP, his heavy hand in this chapter - and the rest of the ERP - is clear. His March 2005 speech on the global current account imbalances being due to a "global savings glut" rather than, in large part in 2000-2004, due to the U.S. fiscal deficit is the intellectual baseline for this "US Capital Account Surplus" interpretation of the US international financial position.

The thesis is clear: we do not run a current account deficit; we run a capital account surplus because the rest of the world wants to invest in the high productivity high growth U.S. Of course, the appropriate economic causality is here reversed. The logical causality is that, if we save less than we invest and if we spend more than we have income, we will run a current account deficit and we will have to borrow from the rest of the world to finance it. But our borrowing - now mostly in the form of debt as net FDI and equity inflows have been sharply negative for the last few years - turns in the Orwellian language of the ERP into a "capital account surplus". Of course, as the BOP is by definition in balance, a current account deficit needs to be financed with a capital inflow that is defined as a capital account surplus. But having the Chutzpah to title this deficit as a capital account surplus and then go on for the entire chapter to interpret all of the global current account imbalances as a matter of capital exporting countries (i.e. countries who run current account surpluses) and capital importing countries (i.e. the few countries who run current account deficits) is to confuse cause and effect."

The fact that a "hard landing" hasn't happened doesn't mean that the odds of one isn't increasing. The common argument is that the US deficit is growing because the rest of World isn't growing. Paul Blustein recently had a nice article on this subject:
"It's true that many of us have been concerned that foreigners will grow tired of financing these ever larger trade deficits, and so far there hasn't been much sign of that," said Jeffrey A. Frankel, a Harvard University economist who served on President Bill Clinton's Council of Economic Advisers.

"But there are plenty of reasons to be concerned," Frankel said. "We know [the trade deficit] means we're borrowing against the future, and that our children will have lower standards of living than they would otherwise. And just because a 'hard landing' hasn't happened yet doesn't mean it won't."

To some extent, every administration paints a rosy picture especially during an election year. The present administration though takes it to another level. When they do get called on it, they don't like to admit mistakes. From the pre-war intelligence on Iraq, to the NSA wiretapping, the Medicare Prescription Drug fiasco, and now on Hurricane Katrina.

The mainstream media is now pushing back -- check out the testy exchange between Scott McLellan and NBC news correspondent David Gregory. I'm not sure that a slight delay in announcing Cheney's hunting accident is really a big deal, but the media just has had enough of the White House, or so it seems.