Shortsighted On King Dollar

Matt Steinglass argues that the American obsession with a falling dollar isn't irrational:

People have been reporting Americans’ discomfort with the idea of a falling dollar as if it were completely irrational and based on linguistic confusion, as if Americans just like the idea of “strength”.

Dan Drezner hypothesized in late October that Republicans were just looking for an anti-Obama economic talking point, and Ezra Klein advocated switching to the locutions “high dollar” and “low dollar”. But in fact, the short-term benefits of a strong dollar are much more widely shared than those of a weak dollar. Only 11.7 million Americans worked in manufacturing as of October 2009, according to the Bureau of Labor Statistics. (That has been falling relentlessly since 1979; it was at 17.3 million just 10 years ago.) Even fewer work in agriculture and resource extraction. People in knowledge-based industries with international or export components, like software or television, do benefit somewhat from a weaker dollar, but I’m not sure how strongly they benefit or even where to look for an analysis of that effect. 

Meanwhile, every consumer benefits from a strong dollar. It means cheaper gas, cheaper mobile phones, cheaper kids’ toys in short, cheaper almost everything. Of course this is something of a vicious circle: because our manufacturing employment has shrunk and we buy so much from abroad, we don’t feel the effects of a boost to our manufacturing as strongly or as rapidly as we feel the effects of a blow to our import-purchasing power. And in the long run, the dollar has to fall, because we can’t keep importing more than we export forever. Gradually, the effects of more competitive American goods and a falling trade deficit will show up in increased prosperity. But the short-term impact runs in the other direction for most Americans, and to some extent the popular desire for a “strong dollar” is not so much irrational as shortsighted.