"An overlooked way to create jobs"
Kudos to Peterson Institute director Fred Bergsten for his excellent op-ed in today's New York Times.
An assistant Treasury secretary from 1977 to 1981, Bergsten eloquently explains why Congress and the Administration are missing the boat on job creation at a time when U.S. workers are clamoring for any semblance of a jobs plan:
By virtually ignoring trade, President Obama and Congressional Republicans are missing a major opportunity to create jobs. The United States runs an annual trade deficit of about $600 billion, or 4 percent of our entire economy. Eliminating that imbalance would create three million to four million jobs, according to Commerce Department estimates, at no cost to the budget.
Bergsten is absolurely correct. Addressing unbalanced trade, particularly with China, wouldn't involve massive expenditures of U.S. tax dollars. Citing China for its ongoing currency manipulation, for example, could create 2.25 million new jobs while boosting U.S. GDP by $285.7 billion.
Bergsten frets that the Obama Administration has done little to achive its goal of boosting U.S. exports. He says a revaluation of the U.S. dollar could help to boost exports and create jobs, an action not without precedent:
First, the United States must, in effect, weaken the dollar by 10 to 20 percent. This step alone would produce one million to three million jobs. It’s been done before: In 1971, President Richard M. Nixon ended the dollar’s convertibility in gold, and in 1985, Treasury Secretary James A. Baker III reached an agreement with foreign countries to devalue the dollar relative to the yen and the Deutsche mark.
Similarly, he sees no reason not to take strong action on China's mercantilism:
The United States should take China to the World Trade Organization in Geneva for engaging in illegal competitive currency devaluation, and retaliate if China does not cease this protectionist policy.
There are other sensible steps that are simply not being taken. According to Bergsten, the U.S. should seek a "reduction in foreign regulations, monopoly practices and other barriers to the export of American services." Additionally, the U.S. "must get serious about defending intellectual property rights."
Time is running out, and Bergsten urges action: "If we want to avoid bankruptcy and raise growth, we have got to attack the trade deficit."
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