The Case of the Vanishing Savings: A Benoit Blanc Economic Deduction

Scene: Mar A Lago. Businessmen, politicians, and journalists fill the seats. DETECTIVE BENOIT BLANC stands center stage, beside a whiteboard covered with economic formulas. He twirls his ornate fountain pen thoughtfully before addressing the audience. Greg Mankiw’s book Principles of Economics lays open on the table.

BLANC: (voice resonating through the hall) I have been summoned here today, my friends, to unravel what appears to be a most peculiar economic conundrum. A mystery that has plagued this great nation for decades! (dramatically gestures to a chart showing the growing U.S. trade deficit)

ECONOMIST PARKER: (interrupting) Detective Blanc, with all due respect, what could a private investigator possibly contribute to macroeconomic theory?

BLANC: (smiles knowingly) Ah, Dr. Parker! What indeed? Perhaps the very same thing I bring to every case—the ability to see what is hiding in plain sight! To connect the threads that others have deemed... unconnectable.

BLANC begins pacing the stage, his Southern drawl becoming more pronounced as his excitement grows.

BLANC: Ladies and gentlemen, we stand before a mystery spanning four decades. The Case of the American Trade Deficit! (points to another chart) A persistent imbalance where our nation consumes more than it produces, imports more than it exports, and—most curiously—seems unable to escape this pattern despite the most... vigorous... economic debates.

SENATOR COLLINS: (calling out) It's globalization! Unfair trade practices!

BLANC: (holds up a finger) A common assumption, Senator, and not entirely without merit. But like a donut hole inside a donut's hole, there exists a deeper truth! One that has been obscured by political theater and economic sleight of hand.

BLANC walks to the whiteboard and writes the equation: S = I + (X-M)

BLANC: This, my friends, is not merely a formula. It is a confession! The mathematical admission of our economic reality. National savings must equal domestic investment plus net exports. When rearranged, we see that the trade balance—exports minus imports—equals national savings minus investment.

BLANC circles the equation with dramatic flourish.

BLANC: Now, gather 'round this equation as you would a body at a crime scene! For here lies our first critical clue. When national savings decline while investment remains constant or grows, the trade deficit must—by mathematical necessity—expand!

JOURNALIST RIVERA: (skeptically) And you're suggesting tax cuts are behind this?

BLANC: (eyes twinkling) What I am suggesting, Ms. Rivera, is that we follow the money! Let us travel back to the 1980s, when the first significant tax cuts for the wealthy were enacted under President Reagan. Tax cuts for the wealthy, while glittering with promise, have likely stoked the flames of the American trade deficit. By draining national savings, they’ve pushed the nation to borrow more from the world, widening the gap between what we buy and what we sell. It’s not a simple villain’s plot—global winds, dollar strength, and a host of factors play their parts—but the connection is undeniable, a thread woven through decades of policy!

BLANC flips the whiteboard to reveal a timeline of tax cuts and corresponding trade deficit increases.

BLANC: The pattern repeats like footprints in freshly fallen snow! The Reagan tax cuts, the Bush tax cuts, the Trump tax cuts—each followed by a significant expansion of the trade deficit! Coincidence? (laughs) In my line of work, coincidences make for poor alibis!

ECONOMIST PARKER: (standing) But there were other factors at play—recessions, market conditions, monetary policy—

BLANC: (nodding vigorously) Indeed, Dr. Parker! Indeed! The economic stage is crowded with actors, each playing their part. But I ask you to consider the mechanism by which these tax cuts influence our trade balance.

BLANC draws a flow chart on the board.

BLANC: When the government reduces taxes, particularly for the wealthy, two things occur simultaneously. First, public savings—the government's fiscal balance—deteriorates as revenue falls. Second, private savings increase, as the beneficiaries of these tax cuts retain more of their income. But wait, there’s a co-conspirator lurking in the wings—the mighty U.S. dollar! Strong and proud, it makes our exports costly and imports cheap, tipping the scales further. And let’s not overlook the “twin deficits”—the budget deficit and trade deficit moving in tandem, like partners in a grim ballet. Historical evidence nods in agreement: after Reagan’s cuts in the ‘80s, Bush’s in the 2000s, and Trump’s in 2017, the trade deficit surged. Other forces were at play—recessions, booms—but the pattern is as plain as a footprint in wet cement!

BLANC pauses dramatically, looking over the audience.

BLANC: But here's where our mystery deepens! The increase in private savings is almost invariably smaller than the decrease in public savings! Like a magician's disappearing act, some savings simply... vanish!

SENATOR COLLINS: (interrupting) Because tax cuts stimulate growth!

BLANC: (with a polite smile) A common deflection, Senator, but one that fails to address our mathematical reality. Even accounting for growth effects, the net result has consistently been a reduction in national savings. And with this reduction—(points back to the equation)—comes an inevitable expansion of the trade deficit!

BLANC moves to another part of the stage, where a globe sits on a pedestal.

BLANC: To finance this gap between savings and investment, we must borrow from abroad! Foreign capital flows in, the dollar strengthens, our exports become more expensive, imports become cheaper, and—(spins the globe with a flourish)—the trade deficit widens further!

BUSINESS LEADER JOHNSON: (standing angrily) This is absurd! Tax cuts put money back in the hands of job creators! They drive the economy forward!

BLANC: (calm but forceful) Mr. Johnson, I am not here to litigate the broader effects of tax policy. I am merely following the evidence where it leads! And that evidence points to what economists call the "twin deficits"—budget deficits and trade deficits moving in tandem, like dance partners in an economic waltz!

BLANC returns to the whiteboard, writing: "Trade Deficit = National Savings Shortfall"

BLANC: The wealthy, for all their virtues, simply do not increase their savings by the full amount of their tax cuts. Their marginal propensity to consume—though lower than that of middle and lower-income households—is still positive! They spend some of this windfall, and that spending, in an open economy like ours, leaks into imports.

JOURNALIST RIVERA: But couldn't Ricardian equivalence offset this? If people save more in anticipation of future tax increases?

BLANC: (impressed) An excellent observation, Ms. Rivera! Ricardian equivalence suggests that forward-looking households might indeed save their tax cuts, anticipating future tax increases. But the empirical evidence suggests this effect is limited at best. Our national savings have consistently fallen following major tax cuts!

BLANC walks to center stage, his voice dropping to a conspiratorial tone.

BLANC: And now we come to the most fascinating twist in our economic mystery: the false suspect!

ECONOMIST PARKER: (confused) False suspect?

BLANC: For decades, my friends, we have been led to believe that the primary culprits behind our trade deficit were currency manipulators, unfair trade practices, and globalization! (dramatically) Red herrings! All of them! While these factors certainly play supporting roles in our economic drama, they distract from the fundamental imbalance between our national savings and investment!

The audience murmurs, some nodding, others shaking their heads.

BLANC: Consider the counterfactual! Had we maintained higher national savings—through more modest tax cuts or even tax increases on those most able to bear them—our dependence on foreign capital would have been reduced! The dollar might not have strengthened so persistently! Our trade balance might have been more... balanced!

BLANC walks to the front of the stage, making eye contact with audience members.

BLANC: I put it to you, ladies and gentlemen, that the connection between tax cuts for the wealthy and our persistent trade deficit is not merely correlation, but a causal relationship rooted in the fundamental accounting identities of macroeconomics!

SENATOR COLLINS: (dismissively) This is just a theory, Detective. You have no proof!

BLANC: (smiling) Ah, Senator Collins! You remind me of so many suspects who have sat across from me, denying the evidence before them! But in this case, the proof is mathematical! It is in the national accounts! It is in the historical record!

BLANC points directly at COLLINS.

BLANC: You, Senator, advocated for the 2017 tax cuts, assuring the public they would pay for themselves through growth. Yet the budget deficit expanded, national savings declined, and the trade deficit—(gestures to the chart)—grew! The very outcome that basic macroeconomics would predict!

COLLINS slumps in his seat, visibly uncomfortable.

BLANC: (addressing the entire audience now) The truth, my friends, is that we cannot have it all! We cannot dramatically cut taxes, maintain investment, and expect our trade deficit to magically disappear! The mathematics of national accounting simply won't allow it!

BLANC takes a breath, his tone softening.

BLANC: Now, I am not here to prescribe policy. That is not my role. But as a detective, I am obligated to reveal the truth, however uncomfortable it may be. And the truth is that our national savings matter! They matter profoundly for our position in the global economy!

BLANC walks to the whiteboard one last time, circling the equation S = I + (X-M).

BLANC: This equation is not just an academic curiosity. It is an economic law as binding as gravity! We ignore it at our peril. (pauses) The case, I believe, is solved. The connection between tax cuts for the wealthy and our trade deficit stands revealed—not as a political opinion, but as an economic reality.

JOURNALIST RIVERA: (after a long silence) So what's the solution, Detective Blanc?

BLANC: (with a slight smile) Ah, Ms. Rivera, that is where economics ends and politics begins! The solution depends on our national priorities. Do we prioritize lower taxes for the wealthy? Or a smaller trade deficit? Do we wish to be a nation of savers or borrowers? These are choices for the American people and their elected representatives.

BLANC straightens his jacket and prepares to leave the stage.

BLANC: I have merely laid bare the mechanism, exposed the connection that has been hiding in plain sight! Like all good mysteries, the solution was there all along, obscured only by our reluctance to see it. (picks up his hat) Good day to you all.

As BLANC turns to exit, a thought seems to strike him. He turns back.

BLANC: Oh, and one final observation! The next time someone promises that tax cuts will miraculously reduce our trade deficit—(smiles knowingly)—perhaps consider the source! As we say in detective work: when the suspect's story contradicts the physical evidence, it is rarely the evidence that is mistaken!

BLANC bows slightly and exits stage right as the lights dim.

END SCENE