Word: deficits
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Dates: during 1980-1989
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While all the Democratic presidential candidates have made the need for an improved economy and reducing the budget deficit key points in their campaign, Gov. Michael S. Dukakis is taking an alternative tack...
...regain control of its economic destiny, it will have to do far more than let its dollar fall. A weakened dollar is no substitute for forceful action to reduce the budget deficit, which would not only ease demand for foreign capital and imports but show that America had the political will and leadership to put its house in order. Nor will a devaluation remove the need for U.S. manufacturers to improve their quality and efficiency and learn how to promote their products in foreign markets. A gradually declining dollar may be a painful necessity now, but the U.S. should never...
That, at least, is the theory. In practice, the mechanisms have been more complex and less effective. Since early 1985, the dollar has declined by about 50% against major currencies like the Japanese yen and the West German mark. Yet the U.S. trade deficit is as high as ever. Admittedly, it takes time for consumers and businesses to change their buying habits, and an improvement in the trade balance may be in the pipeline. But several forces are holding the deficit up. For one thing, foreign manufacturers have shown a dogged determination to hold down their U.S. prices to maintain...
...perverse effect takes place: as the price of foreign products increases, Americans spend even more dollars for the same volume of goods. Meanwhile, they earn fewer yen, francs and marks for U.S. products that do sell well abroad, like Boeing aircraft and IBM computers. As a result, the trade deficit actually increases in dollar terms...
...interest rates, the U. S. allows the dollar to plummet against other major currencies. Although most economists agree the dollar' s fall is inevitable, it is a dangerous move that will carry a new set of economic risks. Meanwhile, the U. S. is making progress toward cutting its budget deficit and encouraging global economic coordination...