Fee on foreign transactions could make dollar more competitive
Washington. The Coalition for a Prosperous America (CPA) today released a groundbreaking study on the benefits of realigning the U.S. dollar. Currently overvalued by an estimated 27 percent, the U.S. dollar has become a serious impediment to U.S. export competitiveness. The CPA study found that a Market Access Charge (MAC) of 5 percent imposed on incoming foreign capital would lower the dollar’s exchange rate by 27 percent, gradually eliminating the U.S. trade deficit and creating up to 4.6 million jobs.
“U.S. manufacturers and agricultural producers are facing a serious currency challenge,” said CPA Chair Dan DiMicco. “The dollar is now so overvalued that it’s working against them. There is bipartisan consensus in Congress that the dollar must be realigned. This study tells us exactly how to move the dollar in order to solve America’s massive trade imbalances.”
The MAC concept was introduced in bipartisan legislation last year by Senators Tammy Baldwin (D-WI) and Josh Hawley (R-MO). CPA’s study used federal data on international capital flows to estimate the MAC’s impact. CPA determined that a 5 percent MAC fee imposed on foreign purchases of U.S. financial assets would realign the dollar’s exchange value and stimulate the economy.
One of the authors of the study, CPA Chief Economist Jeff Ferry, said, “Huge, persistent demand for U.S. securities from foreign investors has given us an excessively overvalued dollar. That’s making life hard for U.S. manufacturers, farmers, and industries involved in international trade. The MAC is an ingenious way to bring the dollar to an equilibrium level without undoing its role as the linchpin of the world trading system.”
The CPA study found that a MAC of 5 percent would add $1 trillion to U.S. gross domestic product and create 4.6 million new jobs, including 1.7 million new manufacturing jobs. It would also generate more than $300 billion in additional revenue for the U.S. Treasury from MAC fees paid by foreign investors.
Studies have shown that, as the dollar becomes more competitive, agricultural prices rise and U.S. farm incomes increase. Conversely, an overvalued dollar has been a problem for farmers, manufacturers, and exporters.
Michael Stumo, CEO of the CPA, said, “The dollar has been weaponized against us by international investors as well as by foreign governments that manipulate their currencies downward against the dollar. It’s time for Congress to pass the Baldwin-Hawley bill and give the Federal Reserve the power to solve our dollar problem once and for all.”
Read more about an overvalued dollar and the need for a “Market Access Charge” on incoming foreign capital flows.