Stop Right There or I Will Shoot Myself!
It has become a Capitol Hill ritual: A few senators, always including the New York Democrat Charles E. Schumer, introduce a bill to punish China
if its leaders do not raise the value of the nation's currency. Photos
are taken, news releases are issued, but nothing really happens.This
year, the atmosphere on the Hill is markedly different. Powerful
senators from both sides of the aisle, Schumer among them, are pushing
two bills that threaten retaliatory action if China does not budge. For
the first time, the idea is gaining broad support. The bills are moving
swiftly through the Senate, and many analysts expect one will pass.
If the bill's authors are successful, the effect at a minimum will be to raise consumer prices in the United States and lower them for Chinese citizens. So we are going to "punish" China by making our own citizens pay higher prices. How does this make any sense? Also, in the process, let's make sure we reduce the capacity of China to buy US government debt, which to this point has been reducing the cost of the Federal budget deficit.
Tyler Cowen argues this is the best we can expect -- the worst is a substantial debalization in the Chinese economy... and ours. I wrote much more on continuing to allow the Chinese government to subsidize American consumers here.
Craig:
It's hard to determine who the absolute worst senator is, because there are so many candidates. Most of the time, though, I think it's Schumer.
August 2, 2007, 8:12 amStephen Macklin:
It's not terribly hard to understand. A good economy hurts their chances at keeping their congressional majority and taking the White House. Bad economic news is good for the Democrats. If there isn't enough bad news - make some.
August 2, 2007, 5:49 pmBeata:
This is a very contradictory problem.Reducing the trade deficit requires increasing exports and decreasing imports. That requires inducing foreigners to buy more U.S. made goods, and inducing Americans to “switch†their spending from imports to domestic made goods. Market economies accomplish this through changed relative prices. That calls for exchange rate adjustment that makes foreign goods more expensive for US consumers, and US goods cheaper for foreign consumers. The U.S. deficit with China reflects that US need export more to China.
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