According to the Bureau of Economic Analysis, a subsection of the Commerce Department, after peaking at $321 billion in 2000 it then began a precipitous decline, dropping to $167 billion in 2001 then to $84 billion in 2002 and $64 billion in 2003. This figure has since recovered jumping to $184 billion in 2006; however, it is still meaningfully below the 2000 peak, with the upswing being very erratic from year-to-year, suggesting many countries are still hesitant to invest in the U.S.

The decline in foreign direct investment has had an impact on U.S. employment data as well. The number of Americans employed by foreign companies within the U.S. from 2000 to 2005 is down, declining from 5.7 million to 5.1 million. This is not a good number when considering the US economy has had four solid years of growth. Even with a downturn in foreign direct investment one would expect, purely from inertia, employment to have gone up.

Treasury Secretary Paulson is attempting to put the foreign direct investment tide on a sustainable uptrend, albeit doing so with a political touch. Paulson needs to soften the blow many foreigners felt following the Bush Administration's unilateral withdrawal from the Kyoto agreement, the Dubai Ports World debacle and the tough scrutiny of the Alcatel-Lucent ADS (NYSE: ALU) transaction which all left foreigners with a bad taste in their mouths.

Historically, even during good times, foreigners like to allocate a good portion of their new-found wealth into the U.S. Despite cheaper labor costs in emerging-market economies like China and India, the U.S. has a highly productive labor force, a society which produces millions of college educated students each year, a very solid currency and a flexible real estate market to construct buildings or plants in rural or urban areas. These are all attributes that can be found in few other major cosmopolitan cities.

Paulson's actions suggest the U.S. has a lot of fences that need mending. Forget the trade deficit, focus on foreign direct investment numbers to get a real sense of what the world thinks of the U.S.