Warren And Trump: Both Want To Sink The Dollar

Elizabeth Warren and Donald Trump are wrong together on at least one thing: Both want the dollar to collapse.

Active Management

Warren proposes "actively managing our currency value” to promote exports.

The left-wing Economic Policy Institute embraced the idea in this NYT Op-Ed: Warren’s Radical Plan to Fix the Dollar.

Ms. Warren and Donald Trump agree on at least one thing: America’s currency problems are hurting workers.

Overseas currency manipulation by central governments made American exports more expensive all over the world. And it made products manufactured in China and other countries cheaper in comparison. It’s the primary reason America’s trade deficit soared over the last 20 years, wiping out almost five million manufacturing jobs, roughly 90,000 factories and the livelihood of thousands of the nation’s farmers.

Revaluing the dollar could create two million to five million good-paying jobs, according to research by my organization, the Economic Policy Institute. And that could set off a much-needed economic revival.

What is standing in the way of such a change? Over the past decade, currency manipulation has become a bipartisan concern. In a 2008 campaign appearance, Barack Obama announced that, if China kept “manipulating” its currency, the United States would “start shutting off” market access. Similarly, Donald Trump promised in 2015 to declare Beijing a currency manipulator on Day 1 of his presidency. Neither one followed through, however, and meaningful action stalled in Washington.

Several economists have estimated that the dollar must fall by roughly 27 percent in order to rebalance trade flows in three to five years.

Revaluation Options

EPI senior economic Robert E. Scott discusses options to implement Warren's radical "active management" idea.

  1. Federal intervention to buy foreign currency assets
  2. Impose a withholding tax on the profits and dividends earned by foreign investors, both public and private.
  3. Citing Nixon in 1971, the executive branch could negotiate directly with its trading partners to realign the dollar against competing currencies, a precedent set by previous Republican administrations.
  4. President Richard Nixon imposed a 10 percent import surcharge that coerced allies into raising the value of their currencies.
  5. Tariff threats
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