Wednesday, April 19, 2006

Chuck Schumer’s growing problem:

In the beginning it seemed Senator Schumer was making a great political move. With the American public’s lack of knowledge on trade and economics, getting on his soapbox in the Senate to champion a bill against China seemed like a good idea for his political future. With U.S. trade deficits at all time highs attacking China with their cheap labor and snails pace of currency reform made Schumer’s plan of placing 27% tariffs on Chinese goods look like he was fighting for the people. He did the TV rounds and gave speeches about how China needs to act or he would. Senator Schumer even took his saber rattling to the next level by taking a trip to China to show the American people he meant business.

Unfortunately for Schumer all his hard work appears to be coming back to bite him in the rear hurting his reputation not helping it. First as the months have passed the American public has become more educated on the topic. Thanks to the hundreds of economic experts that have been gracing the TV, the American public has learned that Senator Schumer’s plans would be a disaster for the U.S. economy and worse not change the U.S. trade deficit. Though the U.S. trade deficit is high, China account for less then 20%, which means even if China was to revalue their currency it would only lower the U.S. trade deficit by a mere 10%.

Worse then having no effect on the deficit it would open up the U.S. economy to problems. His tariffs would raise the cost of goods on thousands of products that many, including the poorest in the U.S. must consume everyday. This would mean fewer products would be consumed which would raise unemployment, as layoffs would ensue. What the American public is starting to learn is that we have tried this once before, it was called the Smoot-Hawley Tariff Act. The Act in an attempt to help the U.S. economy raised import tariffs on thousands of goods, what followed was the great depression.

The problem for Schumer is that everyday now the talking heads are discussing China with part of that discussion being about the “Schumer Bill”. The discussion tough is never positive with all the parties in the group agreeing the “Schumer Bill” is bad. The signs that it’s taking its toll on Schumer is the fact that he has stopped making his rounds and came back from China backpedaling saying he would not act on his tariff scheme just yet.

As someone who is not a big fan of Senator Schumer I enjoy watching him flounder in his own ignorance though as a citizen of what is the capital of finance, it’s embarrassing that the state’s senator is 90 cents short of a dollar on the topic.

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