Economic Woes Begin at Home
by Rep. Ron Paul, MD
by Rep. Ron Paul, MD
However, instead of debating America's monetary policy, Congress wants to debate China's monetary policy. The goal is to pressure China to change the valuation of its currency, to unlink it from the U.S. dollar so that its value fluctuates. The main beneficiary of this would be certain U.S. manufacturers, at least in the short run. But American consumers would be the overwhelming losers in the long run, as the price of countless consumer items would rise. Manufacturing interests have powerful lobbies in Congress, but consumers do not.
China exports many products into the United States, which makes her a convenient scapegoat for our economic problems. Demanding that China adjust its currency valuation is merely a distraction from addressing the real economic dilemmas facing our country, however. Congress should be focused on our own disastrous monetary policies. As long as the Fed can print money at will and set interest rates, the value of our dollars will be subject to the whims of politicians and the perceived economic needs of politically powerful special interests.
Congress should consider the sobering fact that the Chinese hold billions of dollars of U.S. debt. The dollars the Chinese acquire by selling us goods and services eventually must be returned to the United States. Since the Chinese are not buying an equivalent amount of American goods and services, they use dollars to finance our extravagant spending.
In fact, our ability to continue funding the welfare-warfare state without destroying the American economy depends on foreigners buying our debt. Perhaps we should think twice before we start bullying and browbeating our foreign creditors to change their economic or other polices to our liking.
Instead of promoting global economic government, Congress should reform those policies that reduce our manufacturers' competitiveness. Recently, a prominent financial journalist visited with businessmen who are launching new enterprises in China. When he asked them why they chose to invest in China, they answered: It is so much easier to start a business in China than in the United States, especially in places like Massachusetts and California.
This answer should send a clear message to every lawmaker in America: the taxes and regulations imposed on American businesses are hurting economic growth and killing jobs. If we are serious about creating jobs, we should be working on an aggressive agenda of cutting taxes and repealing needless regulations. We should be working to adopt a stable, gold-backed dollar whose value is determined by the market. We don't need to bully our foreign competitors, we just need to stop subsidizing them while releasing the regulatory and tax stranglehold on American businesses.
November 4, 2003
Dr. Ron Paul is a Republican member of Congress from Texas.