Politics & Policy

Did Tax Cuts Hurt The Dollar?

Not a chance.

In its November 13 edition, the New York Times blamed the current fall of the dollar on the federal budget deficits. BuzzCharts is having a hard time figuring out how the paper can make such a claim when it doesn’t fit with the historical record.

In the late 1970s we had modest deficits and a very rapidly depreciating dollar. In the 1980s we had tax cuts, large deficits, and a very strong dollar. In the 1990s we again had a strong dollar, but ironically the lowest gold prices and some of the highest dollar valuations occurred after Bill Clinton’s capital-gains tax cut of 1997.

The New York Times also blamed the deficits on the Bush tax cuts. So, in essence, the Times is blaming the weak dollar on the Bush tax cuts.

On the contrary, tax cuts strengthen currencies, not weaken them. In America, low marginal tax rates and low capital-gains tax rates make a more inviting environment for foreign investors. These investors must first cash in their yen, euros, and yuans in order to buy dollars that they then use to purchase dollar-denominated assets. Want to create a short-term rally in the dollar? Zero out the capital-gains tax and foreigners will line up at the foreign-exchange desk to get a part of the U.S. action.

One additional point is that over the long run a strongly growing economy by definition is creating more goods and services. So the same dollars chasing more goods actually equals mild deflation.

As the chart above clearly shows, there is no correlation between federal deficits and exchange rates. The dollar problem is a real one, however, and is now the greatest threat to the Bush boom. The Federal Reserve should ignore the New York Times and realize that the Bush tax cuts are working. The Fed’s policy should reflect the fact that no country can print its way into prosperity. America needs more tax cuts and fewer dollars, not the other way around.

– Jerry Bowyer is the author of The Bush Boom and an economic advisor to Blue Vase Capital Management. He can be reached through www.BowyerMedia.com.

Jerry Bowyer is the president of Bowyer Research and editor of Townhall Financial.

Most Popular

U.S.

The Lies We’re Told about the American Story

Editor’s Note: The following essay was adapted from remarks delivered to the annual dinner of the Lincoln Club of Orange County, in California, on October 4. Every American heart must break when lies are told to boys and girls, who then grow up to think the worst about their past: that the American ... Read More
U.S.

The Lies We’re Told about the American Story

Editor’s Note: The following essay was adapted from remarks delivered to the annual dinner of the Lincoln Club of Orange County, in California, on October 4. Every American heart must break when lies are told to boys and girls, who then grow up to think the worst about their past: that the American ... Read More

The Pollster Who Thinks Trump Is Ahead

The polling aggregator on the website RealClearPolitics shows the margin in polls led by Joe Biden in a blue font and the ones led by Donald Trump in red. For a while, the battleground states have tended to be uniformly blue, except for polls conducted by the Trafalgar Group. If you are a firm believer only in ... Read More

The Pollster Who Thinks Trump Is Ahead

The polling aggregator on the website RealClearPolitics shows the margin in polls led by Joe Biden in a blue font and the ones led by Donald Trump in red. For a while, the battleground states have tended to be uniformly blue, except for polls conducted by the Trafalgar Group. If you are a firm believer only in ... Read More
Film & TV

Bill Murray: The King of Cool

Bill Murray’s Bill Murray impression is priceless in On the Rocks, the way John Wayne did a fantastic John Wayne parody in True Grit and Al Pacino found a new level of Pacino-ness in Scent of a Woman. I want to quote every line of dialogue Murray delivers in his new movie for Apple TV+ -- every hilarious piece ... Read More
Film & TV

Bill Murray: The King of Cool

Bill Murray’s Bill Murray impression is priceless in On the Rocks, the way John Wayne did a fantastic John Wayne parody in True Grit and Al Pacino found a new level of Pacino-ness in Scent of a Woman. I want to quote every line of dialogue Murray delivers in his new movie for Apple TV+ -- every hilarious piece ... Read More
Media

The Media’s Shameful Hunter Biden Abdication

In an interview with National Public Radio’s public editor today, Terence Samuel, managing editor for news, explained why readers haven’t seen any stories about the New York Post’s Hunter Biden email scoop. “We don’t want to waste our time on stories that are not really stories, and we don’t want ... Read More
Media

The Media’s Shameful Hunter Biden Abdication

In an interview with National Public Radio’s public editor today, Terence Samuel, managing editor for news, explained why readers haven’t seen any stories about the New York Post’s Hunter Biden email scoop. “We don’t want to waste our time on stories that are not really stories, and we don’t want ... Read More