On Tuesday, the Obama Treasury Department sparked bipartisan outrage when it released a report denying that China manipulates its currency, a belief widely held by Democrats and Republicans alike.
By artificially lowering the value of its currency, Chinese companies sell products and services at lower prices than their American competitors. That means fewer U.S. jobs and more outsourcing to China.
“Today’s currency report by the Treasury Department makes it clear that China is still cheating on its currency and stealing American jobs,” said Sen. Robert Casey Jr. (D-PA). “However, once again, the administration failed to act.”
Democratic New York Sen. Charles Schumer also blasted the Obama Administration’s refusal to label China a currency manipulator. “This report all but admits China’s currency is being manipulated, but stops short of saying so explicitly,” he said. “The formal designation matters because there can be no penalties without it. It’s time for the Obama administration to rip off the band-aid, and force China to play by the same rules as all other countries.”
Republicans joined Democrats in condemning the Obama Treasury Department’s report. “The Obama administration has refused to take on China’s currency manipulation eight times,” said Sen. Rob Portman (R-OH). “During this time of anemic economic growth, record-setting national debt and stubbornly high unemployment, we cannot afford to sit idly by as China refuses to play by the rules.”
The Obama Administration’s refusal to apply rigorous pressure on Chinese currency manipulation has come at a price. From 2005 to 2008, President George W. Bush’s hard line against undervalued Chinese currency resulted in the value of the yuan rising 21% in three years. Under Mr. Obama, the yuan has risen just 8.5% in value over four years.
Analysts say that even a modest revaluation of China’s currency would create hundreds of thousands of American jobs. The Peterson Institute for International Economics estimates that a revaluation of less than half the yuan’s fair market rate would produce between 300,000 to 700,000 American jobs in just two to three years. By some estimates, the current trade deficit costs 1 percent of GDP growth every year. That’s a loss of nearly 1 million jobs annually.
Even leftist New York Times columnist Paul Krugman has reluctantly conceded the indefensibility of not cracking down on Chinese currency manipulation. “In normal times,” wrote Mr. Krugman, “I’d be among the first people to reject claims that China is stealing other people’s jobs, but right now it’s the simple truth… Something must be done about China’s currency.”
Perhaps that explains why the Obama Administration chose to delay Tuesday’s semi-annual report to Congress on international exchange rates. The Treasury Department’s report was originally scheduled to be released in October, before the presidential election.