By Michael Stumo
At a time of harsh political division in Washington, it’s encouraging to see examples of bipartisan agreement that put America first—rather than political party. Senators Tammy Baldwin (D-WI) and Josh Hawley (R-MO) may have brokered just such a breakthrough with their introduction of new legislation intended to make the U.S. dollar more competitive.
Right now, the dollar’s value is being pushed ever higher by a flood of foreign capital pouring into America’s financial markets. Wall Street likes this investment since it drives the sale of stocks, bonds, and other dollar-backed assets. But the real economy — where America’s working families live — suffers because our factory goods, agricultural products, and labor are becoming artificially overpriced in international markets.
The bill sponsored by Senators Baldwin and Hawley would realign the overvalued dollar at a time when currency is coming to the fore as a political issue. Both President Trump and Senator Elizabeth Warren (D-MA) have expressed concerns about the dollar. The president recently tweeted that China and Europe are playing a “big currency manipulation game.” And Sen. Warren observed that “foreign investors and central banks have driven up the value of our currency for their own benefit.”
Currency has been a problem for at least two decades. U.S. manufacturers have long been harmed when China and other countries intentionally weaken their currencies to push the dollar up and make their own goods cheaper in the U.S. Currency manipulation has been a prime driver of America’s soaring goods trade deficit, which reached a record $875 billion last year. Massive annual trade deficits have cost the nation millions of manufacturing jobs over the past 20 years.
More recently, foreign government currency manipulation has ebbed. But overseas hedge funds and banks keep pouring capital into U.S. financial markets, which drives up the dollar. And that makes America’s airplanes, soybeans, and services more costly as a result. Economists estimate that the dollar is now overvalued by roughly 27 percent. The Fed confirms this, reporting that the dollar has climbed 25 percent in the past five years.
Baldwin and Hawley’s innovative legislation would require the Fed to achieve balanced trade by managing the value of the dollar. Instead of placing tariffs on imports, the bill would impose a fee on incoming foreign capital. Foreign investment would be slowed, making the dollar — and our economy — more competitive. That would jumpstart job creation, lift wages, raise farm prices, and rebuild domestic manufacturing.
Senators Baldwin and Hawley know that achieving a competitive dollar is not a partisan issue. It’s an American concern that can boost manufacturing, raise incomes for farm families, and rebuild our middle class. Those are goals we can all share.
Michael Stumo is CEO of the Coalition for a Prosperous America (CPA).