4.20.2005
The Dollar Danger (WashingtonPost.com)
EDITORIAL
Tuesday, April 19, 2005; Page A18
TREASURY Secretary John W. Snow did his best to sound serious over the weekend about the fault lines in the world economy. He called on China to stop pegging its currency to the dollar, a reform intended to allow the Chinese currency to rise, easing the flood of cheap exports that contributes to the record U.S. trade deficit. At the same time, Mr. Snow promised cuts in the U.S. budget deficit, which would reduce the nation's consumption, including the consumption of imports; Japan and the European Union were urged to promote growth, which would suck in U.S. exports. All of these reforms are intended to bring the nation's trade deficit back toward balance. If they fail, markets may cut the trade deficit in their own blunt way -- via a precipitous collapse of the dollar.
The problem is that nobody believes Mr. Snow's rhetoric. He reiterated the administration's plan to cut the deficit to less than 2 percent of gross domestic product, down from 3.6 percent last year. But this plan leaves out the cost of operations in Iraq and the general war on terrorism, and it assumes no reform of the alternative minimum tax and no rise in federal spending. Using more plausible assumptions, the Center on Budget and Policy Priorities expects the budget deficit to hit a low of 2.5 percent in 2010 and then start rising again.
(More ... The Dollar Danger (washingtonpost.com)) ¶ 08:14
Tuesday, April 19, 2005; Page A18
TREASURY Secretary John W. Snow did his best to sound serious over the weekend about the fault lines in the world economy. He called on China to stop pegging its currency to the dollar, a reform intended to allow the Chinese currency to rise, easing the flood of cheap exports that contributes to the record U.S. trade deficit. At the same time, Mr. Snow promised cuts in the U.S. budget deficit, which would reduce the nation's consumption, including the consumption of imports; Japan and the European Union were urged to promote growth, which would suck in U.S. exports. All of these reforms are intended to bring the nation's trade deficit back toward balance. If they fail, markets may cut the trade deficit in their own blunt way -- via a precipitous collapse of the dollar.
The problem is that nobody believes Mr. Snow's rhetoric. He reiterated the administration's plan to cut the deficit to less than 2 percent of gross domestic product, down from 3.6 percent last year. But this plan leaves out the cost of operations in Iraq and the general war on terrorism, and it assumes no reform of the alternative minimum tax and no rise in federal spending. Using more plausible assumptions, the Center on Budget and Policy Priorities expects the budget deficit to hit a low of 2.5 percent in 2010 and then start rising again.
(More ... The Dollar Danger (washingtonpost.com)) ¶ 08:14
