Washington Extra – Braving the weather
President Barack Obama quipped that Chinese President Hu Jintao was brave for going to his hometown at this time of year. But what about the visit to Capitol Hill today?
Between the warm reception at the White House and the chilly weather in Chicago, Hu met lawmakers who were quite cool in their welcome. They brought up China’s currency, human rights, the Chinese Nobel Peace Prize winner who wasn’t allowed to attend the ceremony, Tibet, the economy and trade.
“The U.S. and China do not share values and principles as some have claimed in recent days,” House Foreign Affairs Committee Chairwoman Ileana Ros-Lehtinen said.
Senate Foreign Relations Committee Chairman John Kerry summed up the uneasiness that still accompanies the U.S.-China relationship: “It’s critical that leaders in both countries don’t allow mutual suspicions to degenerate into fear-mongering and demagoguery.”
Vice President Joe Biden, caught in the hallway by our senior congressional correspondent Tom Ferraro, told Reuters the Chinese understood they needed to work on the currency dispute. “They indicate that they understand that — that they have to work on it,” he said.
When asked whether Hu had made any commitments, Biden replied: “Nothing specific.”
Here are our top stories from Washington today…
Geithner tells Congress: calling China names doesn’t get you anywhere
U.S. lawmakers are mad and want Treasury Secretary Timothy Geithner to step in and call China a name – ”currency manipulator” — which may not sound like much on city streets but can be quite an insult in world financial circles.
“At a time when the U.S. economy is trying to pick itself up off the ground, China’s currency manipulation is like a boot to the throat of our recovery. This administration refuses to try and take that boot off our neck.” That’s not a Republican raging against President Barack Obama’s Treasury Secretary, it’s Senator Charles Schumer, a Democrat from New York (where Wall Street happens to be located).
“Mr. Secretary, although there may be some modest disagreement about what to do, I’m increasingly coming to the view that the only person in this room who believes that China is not manipulating its currency is you,” Schumer said.
The New York senator, never one to hold back when it comes to words, let loose on Geithner at a Senate Banking Committee hearing on China’s exchange rate policies which are a source of friction with the United States.
“What is the administration so afraid of? You know we are right. You know the United States is put at a terrible disadvantage and you refuse to act. What are you afraid of?” Schumer bellowed.
They were about the loudest fireworks to emerge from a hearing that was fairly drama-free given the controversial subject matter. Especially since Geithner has come under general fire from Republicans and other Obama critics over the struggling economy with some even calling for his ouster.
It is within the powers of the Treasury Department to declare China a “currency manipulator” in its next foreign exchange report due on Oct. 15 — which is what lawmakers want. But Geithner, without tipping his hand on what the semi-annual report would conclude about China’s currency tactics, said it really wouldn’t accomplish anything to pin such a label on Beijing.
Apparently, the Chinese have learned from the economic failures of socialism, while the US Congress has learned nothing.
Washington Extra – I see your gauntlet, and raise you a gauntlet
On Friday, President Barack Obama threw down the gauntlet to Republicans on taxes, effectively daring them to vote against a tax cut for the middle classes, just so that they can give an average of $100,000 in tax cuts to millionaires.
Over the weekend, Republican leader of the House John Boehner seemed to shirk the challenge, but on Monday, Senate minority leader Mitch McConnell picked up the gauntlet and threw it right back. McConnell has promised to introduce legislation “today” to ensure that “no one in this country pays higher income taxes next year than they are right now.” There are no Republicans who support a tax hike, he said, effectively daring Democrats to vote for higher taxes when the economy is in the mire.
Washington Extra is not sure who will blink first. But whichever side you take in this debate, one thing is for sure: this “wrestling match,” as Obama called it, or game of high-stakes political poker if you prefer, does the economy no good at all.
Another big story bubbling up this week is a series of hearings on the Hill over China’s currency and trade policies, with Treasury Secretary Tim Geithner among those scheduled to appear. We are told that 93 lawmakers in the House have signed a letter urging Democratic leaders to get tough with China over its exchange rate practices. This looks from the outside more like political posturing than any real threat that legislation will be passed this year, but Beijing will be watching closely. The yuan has risen less than one percent since its currency peg was eased ahead of the G20 summit in June, but that appreciation has quickened in recent days, in what might be an attempt to dampen congressional anger.
Here are our top stories from today…
Senate Republicans firm on tax cuts for rich
Let me ask a question regarding President Obama’s tax cut to the middle class, by phasing out the Bush tax cuts to the rich. Which group – the middle class or the rich – will recycle the majority of the funds received back into the economy, and therefore provides a greatly needed boost to economic activity?
I put it to you that in the present economic climate the people controlling and holding the wealth are not actively investing, rather there are looking to indicators of continued and robust economic growth before once again investing in equities. It therefore follows suit, they will simply sit on the tax cuts if extended.
If however the rich are able to put the fear of double dip recession behind them will look to shore up their investment portfolios, whereas the stimulus however packaged need be directed to the consumption of goods and services.
It is by directing the tax cuts to the middle class one drives the consumption of goods and services, with the added addition of working to the benefit of the rich as economic activity and therefore asset prices increase, fuelled by the uptick in consumption.
The coming conflict with China
2008 was the last presidential election when voters didn’t know or care about the candidates views on China, argues political risk analyst Ian Bremmer.
Bremmer’s new book “The End of the Free Market” argues that the Chinese economic model — which he calls state capitalism — is so fundamentally different from Western free market capitalism that tensions and economic conflict are inevitable in the years ahead.
The main goal of China’s state-directed capitalism is to harness economic growth to ensure political stability and keep the Communist Party in power, Bremmer says. And since the financial crisis, China has seen the United States and the West as “less indispensable”.
Bremmer is not predicting a military confrontation, but an economic war, in which China reserves large parts of its domestic market to domestic firms, and elbows out Western multinationals — he explains Google’s withdrawal from China in terms of protecting China’s top internet search engine Baidu, which is already reaping the benefits.
The Obama administration, which often stresses the mutual interests of the two nations and talks in terms of partnership, sometimes underestimates some of the zero-sum games involved in the relationship, he says.
But there is no doubt the administration does see challenges ahead — last November, Obama told Reuters the two nations needed to address economic imbalances or risk “enormous strains” on their relationship.
There is talk of a yuan revaluation soon, but that alone is unlikely to make much of a dent on those imbalances or calm for long protectionist pressures in the U.S. Congress or elsewhere.
THE ONLY THINGS OF VALUE TO THE CHINESE IS ONLY FOOD AND HIGH TECHNOLOGY! SOUND FAMILIAR…REMEMBER JAPAN BEFORE WW2…!!! IF CHINA CONTINUE TO BUY US$, THEY CANNOT BE CONTAIN!!!!!!!
Obama handles China delicately
It’s too early to tell whether President Barack Obama’s new approach to China will be more successful than his predecessor’s. But this week’s high-level dialogue in Washington underlined how the balance of power is shifting.
The U.S. side, determined to be more respectful and less confrontational, tiptoed around the sensitive issue of China’s currency, avoiding any public appeal for an upwards revaluation in the yuan.
There was a passing reference to the rights of China’s ethnic and religious minorities, but no sign the other side would take any more notice of foreign interference in its internal affairs than it has in the past.
Not was there any evidence the Chinese and Americans were any closer on issues from climate change to how to deal with countries like North Korea and Sudan.
The Chinese, though, seemed less circumspect, more confident even in their public statements. Washington, they argued, should rein in its budget deficit and refrain from flooding the world with dollars.
They are, after all, holding more than $800 billion in U.S. Treasury debt, and don’t want to see the value of those investments fall.
And when you have such a big customer, you better listen to them, as the Wall Street Journal pointed out this morning.
Obama,s “why can,t we all be friends”policy seems not to be getting any traction.the much awaited”change” that was going to bring in “an new era cooperation”is not working.it was expected to follow automatically after Obama apologized for Americas past deeds.the only moderate success obama has had is with hugo chaves,and that is if he tries to sell his book.but relationships with other countries are now worse than when bush was in office!hillary has offended north korea,biden has infuriated russia,and protesters are marching in israel against obama.china has told obama to be careful with his spending and india has told him to keep his nose out of their energy policy.this is not what we were told to expect!
