Why Congress Should Pass the China Currency Bill

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- The China Currency Bill is the most significant jobs bill Congress could pass. It enjoys the bi-partisan support of nearly 80 Republican and Democratic Senators, yet President Obama and Speaker Boehner oppose it, illustrating both are out of touch with the problems besetting the American economy.

The nearly $600 billion trade deficit is destroying more American jobs than the mortgage crisis, too much business regulation, and high health care costs combined.

Americans haven't forgotten how to make things or compete. Unlike what President Obama would have us believe, Americans are not undereducated dolts, unenlightened in the ways of global competition. Rather through a failure to act on issues the President has identified -- Chinese mercantilism -- and on issues where his ideology prevents action -- the development of abundant U.S. energy -- Americans are being denied their fair opportunity to compete.

Simply, the U.S. economy suffers from too little demand for what Americans make. Americans are spending again, but since the first quarter of 2009, the trade deficit is up 55%. In the second quarter, it was nearly $600 billion or 4% of GDP -- thanks almost entirely to surging imports of subsidized imports from China, barriers to U.S. exports into the Middle Kingdom and higher oil prices.

Every dollar that goes abroad to purchase Chinese goods or oil that does not return to purchase exports is lost purchasing power that could be creating American jobs. Halving the nearly $600 billion annual trade deficit would create at least 5 million jobs.

To keep Chinese products artificially inexpensive on U.S. store shelves, Beijing undervalues the yuan by 40% -- simply, it prints yuan and purchases about 450 billion dollars annually in currency markets to keep its currency and exports cheap. In the bargain, it uses some of those dollars to subsidize oil imports and drive up gasoline prices in the U.S.

In addition, China provides domestic industries with more than 200 export subsidies and blocks competitive imports of U.S. cars, alternative energy products and just about anything else it chooses to promote. Currency manipulation, subsidies and insidious barriers to the sales of foreign products ranging from cars to solar panels violate the letter and spirit of China's WTO obligations to promote freer trade and provide open access to foreign goods in its markets.

All President Obama does is complain; Speaker Boehner prefers to do even less. Both, with feet planted firmly in the past, cling each to ideological prescriptions that do little to address these problems.

President Obama remains faithful to Food Co-Op Capitalism -- more government spending, income redistribution, overregulation, industrial policies, and free trade agreements that don't reduce the trade deficit and destroy jobs. Meanwhile Speaker Boehner adheres to Knickers Era Capitalism -- indiscriminant cuts in taxes, spending and regulation. Both have failed America -- the former since 2008, when the Democrats took control of the House and bloated the bureaucracy and deficit, and the latter during the first six years of the Bush presidency.

The China Currency Bill would permit U.S. firms and workers harmed by China's 40% undervalued currency to obtain relief through offsetting duties until China stops intervening in currency markets. That should jog China into finally compromising on the issue. If not, it would move some jobs back to the U.S. that should not have left in the first place.

American companies like GE and Caterpillar that have outsourced American jobs and corporate functions to China and are now clients of Beijing's protectionism have convinced President Obama that the China Currency Bill is protectionist and would start a trade war.

What China does is protectionist and America is already in a trade war -- China is throwing rocks and President Obama is throwing words.

China is bullying America, President Obama refuses to stand up to the bully, and Speaker Boehner is just fine with that.

Growing up in a tough blue collar neighborhood and the smallest boy at school, I learned that whining about bullies doesn't work. Sometimes you just need to get a big stick and strike back. After a few hard blows, even big bullies can be brought to reason.

The world is a messy place and full of nasty people. Americans must address it as they find it, not as Mr. Obama's friends in neatly pressed Brooks Brothers suits tell us it should be.

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Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.

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