LARGE infographic showing the scale and scope of the US economy. Some interesting facts and figures...

[Source: U.S. Census Bureau]

Entitlement Spending and Public Investment in 3 easy graphs. Hey, this is not a flashy subject but none more important...

The following sets of graphs illustrate the "Emperor has no clothes" in terms of the Federal Budget. Everyone knows the problem but no one does much about it.
Mandatory, or non-discretionary, Federal spending is concentrated in 3 major areas--Social Security, Medicare and Medicaid (and its subprograms). As illustrated in the first graph, these programs over time have steadily consumed a larger part of the Federal budget---approx. 47%!

Other parts of the budget consist of non-mandatory, or discretionary, spending.  Within this category you have "Investment Spending" by the Federal government. The following is a definition of Federal Investment from HERE:

"Federal investment is the portion of Federal spending intended to yield long-term benefits for the economy and the country. It promotes improved efficiency within Federal agencies, as well as growth in the national economy by increasing the overall stock of capital. Investment spending can take the form of direct Federal spending or of grants to State and local governments. It can be designated for physical capital, which creates a tangible asset that yields a stream of services over a period of years. It also can be for research and development, education, or training, all of which are intangible but still increase income in the future or provide other long-term benefits."

The graph below shows the decline over time of Federal Investment as a percentage of the Federal budget.  The implication is that there is significantly less funding for public works projects that confer benefits on everyone that the private market does not supply.

The last graph puts these two areas of the Federal budget together.  Budget dollars are not unlimited.  Over time, mandatory transfer payments to senior citizens and the poor have significantly surpassed non-mandatory public expenditures/investment in infrastructure. 

The Federal government does not do much of anything anymore in terms of physical public goods. They pretty much just write checks.  Think about that.

How do we address this issue? I dunno, I am just a high school economics teacher.  You will have to ask the Emperor and the Court Jesters we call the Executive and Legislative branches.

Foreign Direct Investment is good for US. The Trade Deficit is bad for the US. How did my two-sided coin just become one-sided?

Foreign Investment in U.S. Jumped 49% in 2010 From 2009

Despite a world struggling through an economic crisis, direct foreign investment in the U.S. jumped $75 billion in 2010, the White House said Monday.

“The United States remains the No. 1 destination for foreign investment in the entire world,” said the chairman of U.S. President Barack Obama‘s Council of Economic Advisers, Austan Goolsbee. In times of crisis, he said, the U.S. is the “safest harbor.”

Direct foreign investment in the U.S. jumped 49% to $228 billion from $153 billion in 2009. Goolsbee said these investments support 5.7 million workers in the U.S.

President Obama, in a statement, hailed the important role of foreign investments in the U.S. He said the country’s openness to foreign investors helps explain the boost. He said the U.S. has the “world’s most productive workforce,” a culture of innovation, remarkable colleges, and a business environment marked by transparency and the rule of law.

If this is good news, then why is this NOT:

Source: Calculated Risk

The BLUE line represents the US trade deficit with the rest of the world.  It is negative because on a consistent basis we buy more stuff from the rest of the world than they buy from us.  On net, after imports are subtracted from exports, we get "stuff" and they get dollars. What do they do with those dollars? They can buy some of our goods/services. They can buy US financial assets (stocks, corporate bonds, government debt/bonds, mortgages, etc). They can buy US physical assets (buildings and such) or invest in building new physical assets in the US (Honda or Mercedes building a auto manufacturing plant). 

A dollar spent on imported goods/services does not disappear.  Unless lost or hoarded, those dollars we exchange with foreigners MUST make their way back to the US at SOME TIME in the future, right?  Otherwise, they are relatively worthless to the holder. 

So, I guess as the Administration (Dem or Rep) is touting the good news of increased Foreign Direct Investment in the US, it SHOULD show as much enthusiasm for the trade deficit. But it does not seem to work that way.  I guess if you believe there is such a thing as a one-sided coin, then I suppose it is possible.

To learn more about this concept of the "Balance of Payments", I encourage you to go to Welkerswikinomics. A much more detailed explanation from a REAL economics teacher...