Well, it didn’t take long for a re-elected President Obama to choose China and multi-national businesses over the blue-collar electoral base that enabled his victories throughout the Midwest earlier this month. The Obama Administration announced that it would not label China a currency manipulator. When the Chinese currency—the yuan—is undervalued against the dollar, it makes Chinese goods cheaper when they enter the United States, thereby undercutting American-based competition.
It was U.S. manufacturers who sought to have China branded a manipulator and it’s their employees who have been suffering the brunt of the economic losses that come when domestic manufacturing loses market share to China. Furthermore, it cannot be argued that the Chinese are producing a better product—not when it requires currency manipulation—on top of lower wage and environmental compliance costs—to beat out their U.S. competitors.
The people Obama’s decision does work for is international businesses that can continue to set up shop in China, knowing they can ship the goods back into the United States duty-free.
Obama—as previous presidents, including Republican ones before him—argues that branding China will trigger a trade war, which will hurt U.S. exporters. But who has the bigger consumer market as leverage? Is access to the American market more important for Chinese exporters or vice-versa? The United States, at least for the time being, has its wealthy consumer market to use as leverage to protect its manufacturing jobs.
Given the current state of the economy, this may not always be the case, so the time to act is now. As Frank Pentangeli advised Michael Corleone in Godfather II, “lets hit ‘em now, while we’ve got the muscle.”
In fairness to Obama, one of the dilemmas he does face is that China owns a huge chunk of the national debt, and as such, any sort of hardball becomes dicey. Of course on the flip side of this, Obama has happily chosen to be a part of the problem in Washington when it comes to running up the national debt, rather than part of the solution. Come to think of it, if there’s anyone in Washington who’s a part of the solution—at least anyone with real power—I’d love to hear their name.
The proper first step would be for Obama, in a joint conference with Speaker John Boehner, to announce that budget negotiations are off, and we’re going to let the mix of spending cuts and tax increases take effect on January 1.
In an ideal world, I’d have preferred a different deal, as I’m sure would most people of either party. But when it comes to budget policy, a re-elected Democratic President and a strengthened Republican Congress each have to try acting like adults, and acknowledging the need for this politically unpopular deficit reduction would be a good start.
With the government’s fiscal house then on the road to being in order, Obama would have a strengthened hand to deal with China. The voters who stand to benefit the most from this in the long run are the ones who gave the president his margin of victory and are ones the Republicans could reasonably win over.
If doing the right thing for its own sake isn’t enough—and let’s face it, in Washington it never is—then taking care of voters you need can suffice as each party’s form of imperfect contrition.
Dan Flaherty is the author of Fulcrum, an Irish Catholic novel set in postwar Boston with a traditional Democratic mayoral campaign at its heart, and he is the editor-in-chief of TheSportsNotebook.com