The problem with getting to a currency policy that creates jobs, especially manufacturing jobs, is linguistic, not substantive. Economists and politicians describe a lower-value currency as a weak dollar. That sounds unpatriotic.
A better name would be a competitive dollar or a sound dollar.
Past fears about a weak dollar, to be fair, were not without merit. Economists used to fear that a weak dollar would just mean more money to Canada, Mexico, Venezuela, Nigeria, Norway and the Middle East for oil. But the United States has become so much more efficient in using carbon fuels, and it produces so much more now, we are essentially meeting our own outsize demand for fossil fuels.
Nowadays it is having too strong a dollar that should worry us. The dollar's strength is a major factor in more than 2.8 million U.S. manufacturing jobs' being lost just to China. That loss is the equivalent of throwing everyone in greater Philadelphia out of work permanently.
In the 1980s the Reagan administration's strong-dollar policy, which sounded patriotic, was a huge boon to Japanese carmakers, which grew their exports to the United States while using all sorts of subtle rules to limit imports. This strong-dollar policy helped devastate U.S. manufacturing, destroying the domestic automobile industry.
In 1985, for every dollar of goods we sold to Japan, we imported $3 worth. The gap between the values of the dollar and yen has since narrowed, and some trade policies have changed, and in September that import-export ratio was 2 to 1 — still a net trade deficit with Japan of more than $200 million per day.
Japanese Prime Minister Shinzo Abe is trying to improve Japan's exports by, in part, lowering the value of the yen against other currencies. As the yen comes down, the dollar rises relative to it.
U.S. government action to lower the dollar's value would, no doubt, brings howls of protest. But a more competitive dollar is essential to making American products more competitive, which can spark a needed revival of American manufacturing. It would not only help the country make greater use of its existing capacity but also spur investment in new factories where the latest manufacturing efficiencies could be applied. That means more smart jobs in developing manufacturing processes.
The idea that the U.S. can prosper by designing products that others make is as fantastic as thinking your brain will pick up knowledge from a book placed under your pillow. If you do not make things, you do not learn from the manufacturing process. Whether it is the knowledge required to put the same nooks and crannies — as well as taste — in Thomas' English muffins no matter where they are baked or to reduce the hours needed to manufacture an automobile, refinement grows from actual experience on the shop floor.
Carefully calibrated reductions in the value of the dollar could help create a robust private sector with full employment, which in turn would reduce human misery significantly, make the rich much richer and generate both budget surpluses and more tax revenue to invest in the nation's future through education, infrastructure and research.
The U.S.'s economic outlook is dire. The country is short 9 million jobs right now, compared with the level of employment in 2007, before the Great Recession began that December, and accounting for the growth of the working-age population since.
By a more accurate measure, however, the jobs situation is worse. The U.S. is short 11 million jobs if population growth since 2000 is factored in. That is not the conventional measure used by economists, but it is a better one, in my view, because of the long-term trend toward older Americans continuing to work, especially in white-collar jobs. Some of that senior labor is due to improved health and longevity, but in large part it is because millions of people cannot afford to retire.
Washington can fix this. But it requires making the millions of Americans out of work the highest government priority instead of scoring points about flawed government websites, four murders in Benghazi and other costly diversions that add no economic or social value.