Why the China currency bill deserves a second look
posted at 5:26 pm on October 11, 2011 by Tina Korbe
In case you didn’t know, I really admire Sen. Jeff Sessions, Republican of Alabama. Maybe it’s because I have ties to Birmingham and Mobile. Maybe it’s because he has such a reassuring Southern accent. Maybe (and I think this is the most likely reason) it’s because, as ranking member of the Senate Budget Committee, he consistently points out the need for meaningful action on debt and deficit reduction. During the debt ceiling debate, he made it popular to count the number of days since the Senate last produced a budget. In return, I counted the list of reasons I love Jeff Sessions.
So, when I learned Sessions supports the China currency bill currently up for a vote in the Senate, it gave me pause. Sen. Sessions, standing in support of a bill many liberals demand and conservatives oppose? Here’s Scott Wong with the story:
Alabama’s partisan pit bull has turned his sharp tongue on fellow Republicans in recent days, pressuring them to back a China currency bill and taking on critics on the right who say the legislation doesn’t represent core conservative values.
Sessions has branded the head of the Club for Growth a hypocrite for sponsoring a similar China bill when he served in the House. He said he was “offended” by Republican colleagues who have dismissed the bill as protectionist given that two GOP presidential candidates — Mitt Romney and Jon Huntsman — have voiced support for slapping sanctions on countries found to be undervaluing their currency.
And he helped deal an embarrassing blow to Senate Minority Leader Mitch McConnell (R-Ky.), whipping just enough GOP support for the bill to defeat a McConnell-led filibuster and guarantee final passage in the Senate on Tuesday.
Sure, it doesn’t bolster Sessions’ conservative credibility to cite support for the bill from Romney and Huntsman — but, then again, Romney knows a thing or two about business and Huntsman knows a thing or two about China. And (just in case you forgot) this is Jeff Sessions we’re talking about. He’s a free trade advocate, such a conservative supporter of pro-growth economic policies that the Club for Growth gave him a 100 percent rating in 2008 and a 94 percent rating in 2010. Wong makes it sound as though the economic downturn and the high unemployment rate have suddenly turned Sessions soft, awakened in him some parochial protectionist tendency that’s been dormant for a bit. So, is Sessions touting this as a bring-jobs-back-to-America bill even if that means higher prices for consumers and more restrictions on trade, as Harry Reid is? Not really. According to the article, Sessions frequently cites a study that shows Alabama lost 2.2 percent of its jobs to China from 2001 to 2010. No doubt that’s some motivation to make it harder for China to export at deceptively cheap prices. But Sessions’ quotes don’t sound like he’s seeking to protect Alabaman jobs at the expense of free trade or what’s best for consumers. They sound like he just flat-out thinks it’s a violation of free trade principles for one of the trade partners to devalue its currency. And that makes sense.
But the bill, which the Senate is about to pass right now and which purports to right the trade imbalance between China and the United States and create jobs in the U.S., still doesn’t.
Let’s tackle those two one at a time. What’s the real source of China’s leverage in our trading relationship? China is the largest foreign holder of American debt, owning more than $1 trillion in U.S. treasuries. This currency bill won’t suddenly inspire China to respect us: If anything, because the Federal Reserve is also intentionally devaluing the U.S. dollar to support Obama’s failed economic policies (i.e. we’re not playing by the rules, either), the bill might spark a trade war.
And regarding American jobs? Is it true that China’s currency devaluation costs American jobs? Nope, writes The Heritage Foundation’s Derek Scissors:
[O]ver the past 20 years, U.S. unemployment has been low when the yuan is weak and high when the yuan is strong. It has been so because American, not Chinese, policies determine unemployment levels. The yuan is incidental. Congressional action to punish China for its exchange rate policy, such as that now being considered, will do nothing to create jobs in the U.S.
In other words, would it be nice if China would stop devaluing its currency? Yes. But is this currency bill an answer to the nation’s jobs crisis? Of course not. What will restore the U.S. to a position of economic prosperity are the solutions Sessions effectively touts day in and day out: meaningful action on debt and deficit reduction.