By Jeff Ferry
Bipartisan bill would realign U.S.
dollar to eliminate trade deficit
The Coalition for a Prosperous
America (CPA) today offered its highest possible support and endorsement of the
new, bipartisan Competitive Dollar for Jobs and Prosperity Act (CDJPA)
introduced by Senators Tammy Baldwin (D-WI) and Josh Hawley (R-MO). The bill would
require the Federal Reserve to achieve and maintain balanced trade for the
United States through management of the U.S. dollar’s exchange rate.
Domestic producers have long
considered an overvalued dollar to be a major impediment to U.S. trade
competitiveness. The CDJPA provides the Fed with new tools to carry out its
mandate, including the ability to directly counter foreign currency
manipulation. The bill also establishes a market access charge (MAC) which
would strategically slow the destructive flood of foreign capital currently
driving the dollar’s value to noncompetitive levels.
“This is a groundbreaking piece of
legislation to realign the dollar - and should be considered priority number
one for domestic producers,” said CPA Chair Dan DiMicco. “Dollar misalignment
is the key obstacle to America’s manufacturing competitiveness. The past
several decades have shown that large foreign capital inflows from central
banks and hedge funds are weaponizing the U.S. dollar against American goods,
services, and labor. We congratulate Senators Baldwin and Hawley for their bold
leadership in filing this important bill, and we look forward to getting it to
the president’s desk.”
A wide array of economists have
consistently assessed the US dollar as being overvalued by up to 30 percent. In
2007, former Federal Reserve chairman Ben Bernanke identified the prime driver
of this currency misalignment - a “global savings glut.” America’s financial
markets continue to absorb this toxic glut, which is driving up the dollar’s
value.
In February, our research team studied
the impact of currency misalignment and found that adjusting the dollar’s value
by 27 percent in a linear fashion would lead to 12 percent average annual
growth in manufacturing exports over a five-year period. It would also balance
trade in that time and create an additional 5.2 million U.S. jobs.
Additionally, it would place helpful upward pressure on prices for U.S.
soybeans, corn, beef, and milk.
This is a big deal, and we
congratulate Senators Baldwin and Hawley for their intelligence and vision. A
realigned dollar is the most important tool available to spur growth and job
creation in the U.S. economy. Their bill takes a major stand for working
families and says that we will no longer allow the U.S. dollar to be weaponized
against America’s Heartland. It’s time to fundamentally change how we view the
dollar.
Jeff Ferry is
Research Director at the Coalition for a Prosperous America, responsible for
building CPA’s resources of original research and analysis regarding trade and
industrial policies to re-establish America’s prosperity and world-leading
economic growth. Jeff is an experienced economist, financial and technology
journalist, technology executive, and author.