For all the talk about the looming trade deficit, Larry Kudlow makes the case that it is actually the sign of a good economy.

As the U.S. economy rises, tax collections go up and the budget deficit goes down, but the trade gap widens unless our major trading partners take pro-growth policy steps to cut taxes, deregulate markets and end socialism. This is what China and India have done as they liberalize their policies, increase their growth rates, and become important buyers of U.S. goods and services. Not until our G-7 partners take pro-growth policy steps will the trade gap begin to narrow.

Well, that makes sense. We are buying foreign products because we can afford them, and they aren't buying ours because of their socialist economic policies.

But what about the value of the dollar? Kudlow notes that it is way undervalued. If we continue the pro-growth tax policies, foreign investment in the United States will eventually catch up and increase the value of the dollar.