Dean Baker Doesn't Understand National Income Accounting

Commenting on the increase in the U.S. trade deficit that I mentioned yesterday, Dean Baker asserts:

This is also bad news for fans of income accounting. If we have a trade deficit, then national savings must be negative. That means either or both negative private savings or negative public savings (e.g. budget deficits). That's the rules -- there is no way around this one.

Yes, there is, as someone who claims to be a fan of income accounting should now. National savings is not a function of the trade balance alone, it is a function of the trade balance (or actually the current account balance) and investments. It is thus often the case that a rising national savings rate is associated with a higher trade deficit, as in the late 1990s, or that a falling national savings rate is associated with a lower trade deficit, as in the 2007-09 recession.