President Barack Obama criticized China’s currency policy, praised his economic team and called predictions of a Republican takeover of the House of Representatives “premature.”
China’s leaders haven’t done “everything they said would be done” to allow the nation’s currency to rise in value, Obama said yesterday, echoing the views expressed by administration officials and lawmakers at congressional hearings last week. “What we’ve said to them is you need to let your currency rise,” he said in an hour-long town hall discussion on the economy broadcast on CNBC television.
The yuan is “valued lower than market conditions say it should be” and that gives China “an advantage in trade,” the president said before scheduled talks with Premier Wen Jiabao at this week’s United Nations General Assembly in New York.
In response, Jiang Yu, a Chinese Foreign Ministry spokeswoman, called U.S. criticisms of the exchange rate “unwise and short-sighted.” Appreciation of the yuan cannot solve the U.S. trade deficit and America should focus on economic recovery, she said today on a government website.
China’s currency rose to the highest level since 1993 today, with yuan forwards gaining for a fourth day.
White House press secretary Robert Gibbs said today that currency is part of discussions between the U.S. and Chinese government “at many different levels” and likely will be a topic when Obama and Wen meet at the UN.
Obama used the forum to defend his administration’s handling of the economy and insist that he doesn’t harbor any bias against Wall Street or business. Still, he said it would be “irresponsible” for Congress to extend tax cuts for the wealthiest Americans, and he pleaded for time to create more jobs. The recession, while officially over, is “still very real” for too many Americans, he said.
Obama repeated arguments that his decisions to press for a stimulus package and help bail out the auto industry, however unpopular, were necessary to rescue the economy. Obama also praised two remaining members of his core economic team, Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers.
They “have done an outstanding job, as has my whole economic team,” Obama said.
He declined to say whether Geithner and Summers would serve for the remainder of his four-year term and hinted that he would understand if they decide to leave.
“I have not made any determinations about personnel,” Obama said. “They have been at it for two years. They are going to have a range of decisions about families that will factor into this as well.”
As for the Tea Party’s success in some primaries leading up to November’s congressional elections, Obama said Americans have a “healthy skepticism about government.” He urged the Tea Party, which promotes limited government spending, to offer concrete ideas about reforming entitlement programs.
“The challenge for the Tea Party movement is to identify specifically what would you do to help turn around the economy and produce jobs,” he said.
Obama also pointed to his differences with Republicans on taxes, saying rates are at historic lows.
“Our tax rates are lower now than they were under Ronald Reagan,” he said. “The federal government is probably less intrusive now than it was 30 years ago.”
Obama has proposed initiatives to spur economic growth and hiring and supports extending Bush-era tax cuts for individuals earning less than $200,000 a year and up to $250,000 for couples. The president’s approach would mean the marginal tax rate would increase to 39.6 percent from 35 percent for the highest earners.
He criticized Republican demands to extend the tax cuts for the highest earners, saying it would cost the government $700 billion in revenue at a time of record budget deficits.
With elections to decide control of Congress less than two months away, Obama is heading for a confrontation with Republicans over his stewardship of the world’s largest economy. The biggest fight may be over the tax cuts passed under former President George W. Bush and set to expire at the end of the year.
House Republican leader John Boehner of Ohio and Senate Republican leader Mitch McConnell of Kentucky support extending tax cuts for everyone, including the top earners. Boehner also has proposed to freeze federal spending at the 2008 level, except for defense, national security and veterans’ programs.
Asked if he would agree to debate Boehner as the possible future House speaker, Obama said, “It’s premature to say that John Boehner is going to be speaker of the House.”
On China, Obama hinted at the kind of trade enforcement that members of his own party have been calling for.
“We are going to continue to insist that on this issue and all trade issues with China, it’s a two-way street,” Obama said. “Our trade relationship has to be fair. You can’t just sell to us and we can’t sell to you.”
The yuan gained 0.2 percent to 6.7085 per dollar as of 3:24 p.m. in Shanghai, earlier touching a high of 6.6987, according to the China Foreign Exchange Trading System. Twelve-month non-deliverable forwards climbed 0.5 percent to 6.5818, reflecting bets the currency will strengthen 1.8 percent from the spot rate, according to data compiled by Bloomberg.
China’s central bank set the daily reference rate stronger than 6.7 per dollar for the first time since July 2005, when it started managing the exchange rate against a basket of currencies. The currency is allowed to trade up to 0.5 percent either side of the fixing rate, set at 6.6997 today.
Geithner said last week the U.S. will use every available tool to urge China to let the yuan rise more quickly. Calls to let the currency strengthen will grow as China faces swelling trade protectionism against its exports, Li Daokui, an adviser to the People’s Bank of China, said on Sept. 19.