In other words, globalization is a huge factor that the authors of the paper don't seem to be accounting for.
In fact, after Ctrl+F'ing "foreign", I get:
>By December 2015 holdings of liquid assets by foreign subsidiaries rose to $2.4 Trillion (see Whalen and McCoy (2016)) while domestic holdings of liquid assets rose since 2008 by about $1.9 Trillion. These foreign assets increased due to a legal provision that allows Indefinitely Reinvested Foreign Earnings to be free of US income tax. Hence, $2.4 Trillion are kept abroad not out of productive needs but rather as a device to save income tax hence not necessary for productive capacity
...so maybe American companies are using IT to store wealth abroad, but maybe American companies are being taken over by foreign entities? That would explain how our trade deficit has persisted for several decades.
1. The US Copyright Act of 1976 extended copyright from a fixed term of 28 years (with opt-in 28 year extension) to the life of the author plus 70 years.
2. The Patent Cooperation Treaty became active in 1978, making it much easier to obtain patents in multiple countries.
It would seem that IP was strengthened (both as a method of avoiding tax and suppressing competition) in the late 1970s. The deregulation of the banking industry which happened in the early 1980s seems like it would have helped also.