Treasury Secretary Paul O'Neill told Congress on Wednesday that the US economy, rocked last year by a recession and the Sept. 11 terrorist attacks, "has regained its economic footing."
O'Neill predicted that the US rebound would help lead the global economy to stronger growth by the second half of this year.
PHOTO: AP
O'Neill delivered an optimistic assessment of US growth prospects to the Senate Banking Committee. The hearing was called to air complaints from American companies that they are being hammered by the high value of the US dollar, which has priced their goods out of overseas markets and opened them up to a flood of cheaper-priced imports.
However, O'Neill made it abundantly clear during the hearing that the administration had no intention of changing its view that a strong dollar is in the best interests of the US.
"There is no intent with anything I say to give comfort to those who think I am going to change our policy," O'Neill said in response to committee questions.
The Bush administration's allegiance to a strong dollar policy is copied from the Clinton administration. Both the Democratic and Republican administrations maintained that the US economy reaps enormous benefits from a strong dollar, which helps to hold down inflation, provides consumers with a wealth of product choices from all over the world and attracts the billions of dollars in foreign investment the country needs to offset its huge trade deficits.
"I am convinced that the United States has regained its economic footing," O'Neill said, noting last week's report that the economy in the first three months of this year was surging ahead at a 5.8 percent annual rate, the fastest performance in two years.
However, the committee heard a far different view from officials of the National Association of Manufacturers, the AFL-CIO, farmers groups and others who warned that the huge US trade deficit was a threat to the economy that had already cost thousands of jobs. They blamed much of the increase in the deficit on a 30 percent rise in the value of the dollar since early 1997.
NAM President Jerry Jasinowski said the administration had to recognize the suffering an overvalued dollar was creating in the manufacturing world and work with US allies to gradually reduce the dollar's value against other currencies, such as the Japanese yen and the European euro.
"The overvalued dollar is ... perhaps the single most serious economic problem facing manufacturing in this country," Jasinowski said in his testimony. "It is decimating US manufactured goods exports, artificially stimulating imports and putting hundreds of thousands of Americans out of work."
C. Fred Bergsten, who heads the Institute for International Economics says the "worst policy" for the administration, would be to continue its support for a strong-dollar and wait for market sentiment to change and start bringing the dollar down.
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