China Provides More Grist for the White House Political Mill

Via Brad DeLong, The Financial Times reports that the decision for a more public, confrontational approach to pressuring China to revalue the RMB was made in the White House, which has taken over direction of the China exchange rate initiative from the Treasury Department:

The Treasury's policy - widely supported by China experts who say Beijing is less likely to move in the face of public hectoring - was overturned because of White House concern at rising protectionist pressure in Congress.

The sharp change was the clearest sign yet that economic policy in President George W. Bush's second term is going to be led firmly from the White House. A tight team of close associates of the president is calling the shots, say current and former administration officials.

This group consists of Dick Cheney, vice-president, Andrew Card, the president's chief of staff, Joshua Bolten, director of the Office of Management and Budget, and Karl Rove, the president's political adviser who has assumed a broader co-ordinating role, including overseeing economic policy.


It was expected that in Bush’s second term the White House—with political guru Karl Rove assuming an official role as policy advisor--would be even more dominating and less consultative on setting policy than it was in the first term.

At the State Department, this transition was symbolized by the appointment of Secretary Rice, who sees her job as enabling the President’s wishes and overcoming professional resistance in the State Department, in contradistinction to Colin Powell, who considered it his job to provide objective advice and at times dissent, and assert the prerogatives of the experts and professionals at State.

It was also feared that putting the White House staff in charge of setting policy would make the process more political, with policies chosen and pushed primarily on the basis of the political imperative of helping President Bush maintain his domestic political standing.

It remains to be seen whether or not China will be adopted as the latest foreign object to demonstrate the righteousness, courage, and invincibility of President Bush, regardless of the diplomatic, economic, and perhaps military consequences for America or the rest of the world.

But the first sign—using an overt attack on China’s foreign exchange regime to deflect the political pressure caused by America’s yawning trade deficit—is not encouraging.