China Currency Head Fake

Just after 5:30 p.m. today, the Senate will invoke cloture on the China currency bill, S.1619.  Passage by late Wednesday is assured. The bill imposes tougher reporting requirements on the Treasury Department and allows countervailing duty suits to be brought for currency manipulation.  House passage is very unlikely despite majority support in both parties because Speaker John Boehner (R-OH) won’t take it up, even though the House passed a similar bill last year.  What’s going on here?

This is an exercise in blame avoidance, but given Congress’ record low popularity, it doesn’t seem to be working.  Unemployed workers across the country have seen their jobs move to China in part because of China’s currency manipulation that keeps the Renminbi undervalued by approximately 30%, although estimates vary widely as explained in this Congressional Research Service report.  Congressional leaders understand that retaliating against China, which holds $1.2 trillion of our debt (See this Treasury table.), could have severe repercussions.  So the drill today is to pass the bill so senators can say they voted for it without revealing that it has no chance of enactment.  I don’t believe voters will be so easily fooled.

Close observers of Washington infighting may notice that Senator Reid scheduled the China currency bill ahead of President Obama’s American Jobs Act, S.1549, to send a message of his displeasure about not being consulted in their formulation of the Jobs Act to Mr. Obama and his aides.  This is one more example how contentious and difficult governing has become in Washington.  As Washington paddles in all directions at once, our economy goes nowhere.

About Pete Davis 99 Articles

Affiliation: Davis Capital Investment Ideas

Pete Davis advises Wall Street money managers on Washington policy developments that affect the financial markets. President of his own consulting firm since 1992, Davis Capital Investment Ideas, he draws on 11 years of experience as a Capitol Hill economist with the Joint Committee on Taxation (1974-1981), the Senate Budget Committee (1981-1983), and Senator Robert C. Byrd (1992). He worked in the House and Senate, and for Republicans and Democrats.

Davis brought the first computer policy model, the Treasury Individual Income Tax Model, to Capitol Hill in early 1974, when he became a revenue estimator on the Joint Committee on Taxation. He formulated the 1975 rebate, the earned income tax credit, the 1976 estate tax rates, the 1978 marginal tax rates, and the Roth-Kemp tax cut. He left Capitol Hill in 1983 for the Washington Research Office of Prudential-Bache Securities, where he advised investors for seven years.

Davis has long written a newsletter on the Washington-Wall Street connection for his clients; Capital Gains and Games is his first foray into the blogosphere.

Visit: Capital Gains and Games

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