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.