Why can't we run deficits in op-ed writers and Tea Partiers

A recent poll by NBC and The Wall Street Journal shows that 61% of Tea Party sympathizers believe that free trade has hurt the United States. To me this is yet another piece of inductive evidence of the fact that there is absolutely nothing good that can be said about the Tea Party.

There is also not one good thing that can be said about recent NYT op-ed that defends this particular belief. I'll quote just two sentences in which the density of confusion seems to reach its peak:

Tea Partyers also have an instinctive aversion to deficits, and they are undoubtedly concerned that our enormous trade imbalances — which require us to sell hundreds of billions of dollars in assets each year — will leave our children dependent on foreign decision makers. Indeed, the value of foreign investments in the United States now exceeds the value of American investments abroad by $2.74 trillion (...)

Sure, it may be the case that Tea Parties oppose free trade because their "instinctive aversion to deficits" makes them worry about trade deficit; but if that's the case, all it means is that they're too ignorant to know the difference between budget deficits and current account deficits. The talk of "leaving our children" with all sorts of disasters suggests that the op-ed writer shares that ignorance. And it is nothing more than ignorance. Trade deficit is not debt. It's excess of monetary value of imports over exports. It can lead to debt, but it doesn't have to, depending on how it's financed. In most general terms there are three ways of doing it. First, you can finance it through foreign currency reserves. Of course you can't do it forever as one day you'll deplete those reserves, but while you're at it, no debt is being created. Second, you can borrow foreign currency. Third (and this is what the U.S. does), you can have an economy competitive enough to induce foreigners to invest the excess capital due to their trade surpluses with you in your assets. So, businesses from countries that run surpluses with us consider it a good deal to invest in U.S. assets such as stocks, T-bills, factories or real estate, and that inflowing capital allows us to finance our current account deficits (and other things). Theoretically, this could go on forever without any danger of turning into an ever-increasing debt burden that "our children" would have to deal with. We simply import capital; that's all there really is to it.

Now the op-ed writer is indeed correct (as well as highly original) in his or her observation that importing capital makes us dependent on foreign decision-makers. Here's my question though: what doesn't? Exports make us just as dependent on foreign decision-makers as imports do. If we start running huge trade surpluses with Japan and then out of the blue Japan goes into a depression, we're screwed. Also, in free trade there really is no dependency; there's only co-dependency (or in nerdspeak, a feedback loop). Importing capital makes us dependent on foreign investors and also makes foreign investors dependent on us. In other words, it makes us dependent on each other. It is almost as if trade had created a common interest or something.

For God's sake, can anyone who writes about free trade at least understand one simple fact that in every transaction all sides are dependent on one another? If you don't want to be dependent on foreign decision-makers, there is really only one thing you can do. Stop trading anything, with anyone. See where that gets you.

Now look at the second sentence in the quote: "Indeed, the value of foreign investments in the United States exceeds the value of American investments abroad by $2.74 trillion." This, according to the writer, is another fact showing that we're increasing our "dependency on foreign decision-makers." Note what an absurd metric this is though; if you're worried about all them foreigners buying your country out, you should be looking at foreign-owned assets in the U.S. as a fraction of total assets in the U.S., shouldn't you? (About 11%, in case you were wondering.)

To sum up: the writer would like the U.S. to run current account surpluses and also own more assets abroad than foreigners own in the U.S. In other words, the writer (and presumably the Tea Party as well) wants the U.S. to become net exporter of capital. I'd like to point out the fact, always overlooked by those who advocate for such changes, that exporting capital amounts to shipping jobs overseas.