Bush pledges strong-dollar policy

WASHINGTON — President Bush pledged Wednesday to work with Congress to reduce the government’s huge budget deficit as a key step in assuring the world that his administration supports a strong dollar.

“We’ll do everything we can in the upcoming legislative session to send a signal to the markets that we’ll deal with our deficit, which, hopefully, will cause people to want to buy dollars,” Bush told reporters.

Bush’s comments came following a meeting at the White House with Italian Prime Minister Silvio Berlusconi, who had raised the issue of the dollar’s plunge in value against the euro, the currency of Italy and 10 other European nations.

“The policy of my government is a strong-dollar policy,” Bush said during a brief news conference following the Oval Office meeting, echoing statements he and Treasury Secretary John Snow have made numerous times over the past three years as the dollar’s value has fallen sharply against many major currencies.

Financial markets, which for the most part ignored the president’s comments, believe that the administration, while publicly supporting a strong dollar, secretly wants the greenback to fall further as a way of dealing with America’s record trade deficits.

A weaker U.S. currency would make American exports cheaper and thus more attractive in foreign markets while driving up the costs of imported cars, television sets and the billions of dollars of other foreign products that American consumers have been snapping up.

Bush’s comments on the dollar came one day after the government reported that the U.S. trade deficit hit a monthly record of $55.5 billion in October.

Bush told reporters that the trade deficit was “easy to resolve. People can buy more United States products if they’re worried about the trade deficit.”

The swelling size of the trade deficit has raised concerns among economists that the dollar’s decline, which has been gradual so far, could suddenly accelerate as foreigners grow worried about the ability of the United States to keep attracting enough foreign capital to finance trade deficits at such high levels.

If the dollar were to suddenly plummet in value, that could cause foreign investors in U.S. stocks and bonds to rush for the exits. Such a development would send stock prices plunging and interest rates soaring. Some analysts believe the shock would be enough to push the country into another recession.

Bush said that the administration’s efforts to support the dollar by reducing government borrowing levels would address the unfunded liabilities in the government’s huge entitlement programs, Social Security and Medicare.

“I told the prime minister that Social Security reform will be at the top of my agenda,” Bush said, speaking as the White House kicked off a two-day economic conference designed to build support for Bush’s second term agenda.

Those economic goals include creating private accounts for Social Security, overhauling the tax system to make it simpler and more pro-growth, making Bush’s first term tax cuts permanent and breaking the logjam in Congress that has prevented passage of tort reform legislation.

Meeting with a small group of reporters, Treasury Secretary John Snow called reducing the budget deficit “the lynchpin of the second-term economic policies.” The administration has vowed to cut the deficit, which hit a record $412 billion in 2004, in half by 2009.

Snow said putting controls on government spending was “right at the heart of deficit reduction.”