Yes, that's the point! There's no question restoring balance to an international deficit country means reducing the incentive of trade partners to sell excess goods for paper (or of domestic publics to issue paper for excess goods). 1/

But with a tax, the process of rebalancing can be titrated gradually. 2/

Rebalancing does mean reducing consumption as a share of GDP, at least relative to a counterfactual of not rebalancing, because domestic investment will have to replace foreign inflows. 3/

But done gradually, the absolute hit to consumption can be small or none, as growth can cover a slowly increasing domestic investment share. 4/

Spread out over a decade-ish, the process wouldn't need to be so disruptive, the fiscal deficit could decline as domestic incomes increase and the demand for US paper decreases. /fin