More Corporate Welfare, in the Form of a Currency War
From the Hill, the ghost of Hawley-Smoot returns
The Senate voted Monday to advance legislation pressuring the Chinese government to stop undervaluing its currency, a practice most economists agree is giving the country an unfair trade advantage and is costing the U.S. jobs.
The Senate voted 79-19 to end debate on a motion to proceed to the bill, the Currency Exchange Rate Oversight Reform Act of 2011. While the vote does not mean the bill has passed, the strong show of support suggests it could well be approved in the upper chamber by the week’s end. Passage through the House is less clear, however, and GOP leaders have given no indication they will move forward with it.
Senate Democratic leadership, responsible for bringing the legislation to the Senate floor, heralded it as a way to create jobs and right a long-standing trade imbalance with China.
“China is by far the biggest exploiter of predatory currency practices,” Sen. Charles Schumer (D-N.Y.) said Monday. “[T]hese currency policies artificially raise the price of U.S. exports and suppress the price of imports into the United States, undermining the economic health of American manufacturers and their ability to compete at home and around the globe.”
This is a great example of how a group, in this case the Democratic Party, can say they are against corporate welfare, but in fact be 100% behind it simply by changing the terms used.
Look at the sentence in bold. Another way to write this would be "we want a law to help a few visible and influential manufacturers who most compete with China, but hurts consumers (ie every single American) and every business that uses imported raw materials.
Protectionism like this is corporate welfare for a few large manufacturers. I find it amazing the reporter can say that "most economists agree" an undervalued Chinese currency is costing us jobs. My sense is that most economists don't agree with this statement. All this law will do is unilaterally increase consumer prices and raw material costs, and I know few economists who think this is stimulative.
A cheap yuan is a direct subsidy of American consumers by the Chinese, and I am not sure why we shouldn't let it continue as long as they are dumb enough to keep doing it.
