Has investment banker Felix Rohatyn -- a possible Democratic Treasury secretary -- been in outer space? Writing in the New York Review of Books, he says the United States has lost its economic independence because we've become the world's largest debtor nation. Gosh, it's hardly such a watershed. Our economic independence has been eroding for decades. Remember the 1970s gas lines? We still import two-fifths of our oil. American farmers and manufacturers depend heavily on overseas markets.

But Rohatyn is in good company. Few subjects have inspired as much economic hysteria and confusion as the United States' emergence as a "debtor nation." We're compared with Brazil and Mexico. Americans, it's said, will suffer a prolonged drop in living standards as we repay our huge foreign debts. Writing in Foreign Affairs, analyst Robert Reich of Harvard says our debtor status signifies a "decline in our capacity to add value to the world economy" -- a phrase as ominous as it is empty.

What's generally meant by our becoming a debtor nation is that our massive trade deficits are causing foreigners to hold more dollars than they owe us. But comparisons with Third World debtors are strained. Mexico suffers as a debtor because it owes dollars to foreign banks that can be repaid only by earning the dollars through exports. This situation doesn't apply to the United States, because the dollar is the major international currency. We can service our debts and pay for our imports with our own currency.

A more plausible threat to U.S. living standards is a depreciating dollar. If foreigners don't want to hold dollars, they can sell them for Japanese yen, West German marks or other currencies. Our exports would become cheaper, while imports became more expensive. We would sell more abroad and buy less. Indeed, the dollar's 45 percent decline since early 1985 has already started to reduce the U.S. trade deficit. But the change hardly portends a collapse of American living standards.

Remember that trade surpluses in the 1950s and 1960s didn't prevent higher living standards. What primarily raises living standards is increased productivity: how much more efficient our economy becomes. Contrary to what Reich says, we do add value to our economy and the world's. Between 1980 and 1986, productivity rose at an annual rate of 1.6 percent, more than double the 0.6 percent average of the late 1970s.

This means that eliminating our trade deficits represents a small burden on future living standards. Our gross national product totals $4.5 trillion. On paper, we could end trade deficits by exporting the equivalent of two years' productivity gains. (A 1.6 percent increase of $4.5 trillion is nearly $75 billion, about half the current trade deficit.) Of course, the trade deficit won't drop so mechanically. Any change will take longer. But this arithmetic shows that ending the trade deficits won't, by itself, impoverish Americans. If productivity gains continue -- a big if -- few Americans will notice a change.

Contrary to popular wisdom, Americans have spent more abroad than we've earned for decades. Until the 1970s, excess spending went for military programs, foreign aid and overseas investment. Now the excess is going for imports. In general, the world welcomed the dollar outflows. Other countries accepted dollars to finance their trade; multinational companies used dollars to expand; wealthy individuals made dollar investments as a hedge against the instability of their own currencies. But when dollar outflows became too great, periodic financial crises resulted.

It's precisely the dollar's special global role that confounds the measurement and meaning of our status as an international debtor. The Commerce Department's estimate of our net worldwide investment -- a negative $264 billion in 1986 and perhaps $400 billion now -- is rife with statistical flaws. Nor does this figure include many dollars borrowed and lent in Eurocurrency markets. Those could raise the total by hundreds of billions of dollars. But trying to repay all these "debts" would be idiotic. A world economy without dollars would collapse.

What's also clear, however, is that the world is now being flooded with too many dollars. The greatest danger is another crisis of confidence, warns economist Shafiqul Islam of the Council on Foreign Relations. A flight from the dollar could cause a sharp depreciation, which might hurt both the United States and other economies. Higher import prices could raise inflation, triggering a U.S. recession that would spread to other countries.

Rohatyn wants us to restore our economic "independence." The phrase sounds good but is meaningless. The United States can't extricate itself from the world economy. Consider our present predicament. What's needed now is stronger economic growth in other countries, allowing the United States to continue an export-led expansion. This shift would slow the outflow of dollars and avoid a global recession.

Some economists argue that the United States ultimately will need a trade surplus to stop the dollar outflow and pay interest on existing dollar investments. If so, a trade surplus wouldn't hobble living standards. A $75 billion surplus (equal to another year's productivity growth) would service a foreign debt of $500 billion to $1 trillion. But it's unclear that a surplus is necessary. A growing world economy would still need more dollars. A modest U.S. balance of payments deficit is one way of providing them.

The paradox is this: An expanding world economy needs a reasonably stable dollar, but a stable dollar may be impossible without an expanding world economy. For Americans, the dollar's instability creates its own troubles. If today's danger is excessive dollar depreciation, the problem of the early 1980s was just the opposite. The dollar's rapid rise devastated U.S. industries and farmers by making their exports less competitive.

We need to temper these violent exchange-rate movements. One way is to control inflation, which affects confidence in the currency. Other needed steps aren't so clear. No one fully understands the quirks of the foreign-exchange markets. But the United States can't solve these problems alone. The quest for "independence" is a fantasy. Our real problem is finding ways to advance our national interests in an interdependent world.