Every time an international terrorist event occurs, like the al-Qaida assassination attempt on former Pakistani Prime Minister Benazir Bhutto, the dollar falls. When the Turks threaten military action in Kurdistan, Iraq, with speculation that they might march toward the Kirkuk oilfields, the dollar falls. When comrade Vladimir Putin shows up in Iran, with mischief-making statements that support trade and nuclear partnerships with that terrorist government, the dollar falls. It seems as though any nasty international event leads to a dollar decline. This is not good. The dollar needs some propping up.
Ronald Reagan stated frequently that a great country should have a reliable currency. And it was the pro-growth tax cuts and counter-inflationary money of the Reagan era that ultimately reversed a 15-year dollar decline. In President Clinton's second term, a similar policy was undertaken, and a dollar slide that began in the late 1980s under Papa Bush was reversed.
In recent news, Treasury man Paulson has in fact taken a strong-dollar step with his proposal to slash corporate tax rates. The former Goldman head honcho is working with House Ways and Means Chairman Charlie Rangel to reduce the 35 percent corporate tax rate all the way down to 25 percent. This is a terrific idea. Studies have shown that 70 percent of the benefits of a corporate tax cut would go to the American workforce, boosting jobs and wages.
Right now, Wall Street is worried about the housing recession, a subprime credit hangover and slowing domestic profits. But a big corporate tax cut would lift the animal spirits. In fact, cutting business taxes with the potential for better wage and investment returns is a much better economic stimulant than depreciating the currency. And business tax reform would add real meat and muscle to a steadier dollar.
King Dollar just might reign again.