US Economy Dr. Peter Morici: Pass the China Currency Bill
By Professor Peter Morici
Oct 11, 2011 - 4:01 AM
Former Chicago Bears coach Mike Ditka and defensive coordinator Buddy Ryan, right, present a jersey to President Barack Obama during the ceremony for the 1985 Super Bowl Champion Chicago Bears to celebrate the 25th anniversary of their Super Bowl victory, on the South Portico of the White House, Oct. 7, 2011. In 1986, the team’s White House reception was canceled due to the Space Shuttle Challenger tragedy.
Dr. Peter Morici: The China Currency Bill is the
most significant jobs bill Congress could pass. It enjoys the bi-partisan
support of nearly 80 Republican and Democratic Senators, yet President Obama and
Speaker Boehner oppose it, illustrating both are out of touch with the problems
besetting the American economy.
The nearly $600bn trade deficit is destroying more
American jobs than the mortgage crisis, too much business regulation, and high
health care costs combined.
Americans haven’t forgotten how to make things or
compete. Unlike what President Obama would have us believe, Americans are not
undereducated dolts, unenlightened in the ways of global competition. Rather
through a failure to act on issues the President has identified - -
Chinese mercantilism - - and on issues where his ideology prevents action—the
development of abundant US energy - - Americans are being denied their fair
opportunity to compete.
Simply, the US economy suffers from too little
demand for what Americans make. Americans are spending again, but since the
first quarter of 2009, the trade deficit is up 55%. In the second quarter, it
was nearly $600bn or 4% of GDP - - thanks almost entirely to surging imports of
subsidized imports from China, barriers to US exports into the Middle Kingdom
and higher oil prices.
Every dollar that goes abroad to purchase Chinese
goods or oil that does not return to purchase exports is lost purchasing power
that could be creating American jobs. Halving the nearly$600bn
annual trade deficit would create at least 5m jobs.
To keep Chinese products artificially inexpensive on
US store shelves, Beijing undervalues the yuan by 40% - - simply, it prints yuan
and purchases about 450bn dollars annually in currency markets to keep its
currency and exports cheap. In the bargain, it uses some of those dollars to
subsidize oil imports and drive up gasoline prices in the United States.
In addition, China provides domestic industries with
more than 200 export subsidies and blocks competitive imports of US cars,
alternative energy products and just about anything else it chooses to promote.
Currency manipulation, subsidies and insidious barriers to the sales of foreign
products ranging from cars to solar panels violate the letter and spirit of
China’s WTO obligations to promote freer trade and provide open access to
foreign goods in its markets.
All President Obama does is complain, Speaker
Boehner prefers to do even less, and both, with feet planted firmly in the past,
cling each to ideological prescriptions that do little to address these
President Obama remains faithful to Food Co-Op
Capitalism - - more government spending, income redistribution, overregulation,
industrial policies, and free trade agreements that don’t reduce the trade
deficit and destroy jobs. Meanwhile Speaker Boehner adheres to Knickers Era
Capitalism -- indiscriminant cuts in taxes, spending and regulation. Both have
failed America - - the former since 2008, when the Democrats took control of the
House and bloated the bureaucracy and deficit, and the latter during the first
six years of the Bush presidency.
The China Currency Bill would permit US firms and
workers harmed by China’s 40% undervalued currency to obtain relief through
offsetting duties until China stops intervening in currency markets. That should
jog China into finally compromising on the issue. If not, it would move some
jobs back to the United States that should not have left in the first place.
American companies like GE and Caterpillar who have
outsourced American jobs and corporate functions to China and are now clients of
Beijing’s protectionism have convinced President Obama the China Currency Bill
is protectionist and would start a trade war.
What China does is protectionist and America is
already in a trade war - - China is throwing rocks and President Obama is throwing
China is bullying America, President Obama refuses
to stand up to the bully, and Speaker Boehner is just fine with that.
Growing up in a tough blue collar neighborhood and
the smallest boy at school, I learned whining about bullies doesn’t work.
Sometimes you just need to get a big stick and strike back. After a few hard
blows, even big bullies can be brought to reason. The world is a messy place and full of nasty people.
Americans must address it as they find it, not as Mr. Obama’s friends in neatly
pressed Brooks Brothers suits tell us it should be.
When China Cheats, We Lose
Jobs: Sen. Robert Casey, (D-PA), and joint economic committee chairman,
discusses Fed chief Ben Bernanke's testimony before Congress, specifically his
views on China's "fixed" currency. "I was pleasantly... China's policy
on the world recovery":
Professor, Robert H. Smith School of Business, University of Maryland,