Treasury Secretary Henry Paulson voiced support for a strong dollar on Tuesday and said America “must welcome competition, not run away from it” if the country wants to maintain a competitive advantage.
Delivering his first major speech since he was sworn in three weeks ago as the nation’s 74th Treasury secretary, Paulson said he would work to tackle long-term problems such as the need to overhaul the government’s three huge benefit programs — Social Security, Medicare and Medicaid.
Mindful that the country must borrow $2 billion daily from foreigners to finance its huge trade deficits, Paulson, like his predecessors, expressed unwavering support for keeping the dollar’s value strong against other currencies.
“I believe that a strong dollar is in our nation’s interest and that currency values should be determined in open and competitive markets in response to underlying fundamentals,” Paulson said in a speech to students at Columbia University’s School of Business in New York. Copies of his remarks were distributed in Washington.
Paulson voiced concern about protectionist tendencies. And his comments on the dollar stuck closely to the views expressed by John Snow, his immediate predecessor, and also other Treasury secretaries beginning with Robert Rubin in the mid-1990s.
Both the Clinton and Bush administrations have been careful to avoid any comments that could be viewed as efforts to devalue the dollar for fear that currency markets could push the dollar’s value down so sharply that it could destabilize the U.S. economy.
While America’s current account trade deficit hit an all-time high of $804.9 billion last year, Paulson said it would be wrong for the United States to erect protectionist barriers to keep out foreign products.
Paulson said he was “very concerned about the anti-trade rhetoric I hear coming from some quarters here and around the world.”
Echoing comments made by President Bush on Monday, Paulson said the administration would keep searching for ways to revive the Doha Round of global trade liberalization talks, which collapsed a week ago.
Paulson was selected by Bush earlier this year to succeed Snow in a shake-up aimed at finding a more effective spokesman for the administration’s stalled second-term economic agenda.
The White House hope is that Paulson, the former head of Goldman Sachs, a premier Wall Street investment firm, will bring the same star power to this administration that Rubin, another former Goldman Sachs chief executive, brought to the Clinton administration.
Paulson said his top priorities would be achieving reform of Social Security and the other benefit programs, advancing the nation’s energy security, bolstering global trade and addressing the problems of income inequality between the wealthy and lower-income Americas.
Bush suffered a major defeat last year when his plan to overhaul Social Security by introducing private investment accounts for younger workers stalled in Congress.
Paulson said he would work to achieve a bipartisan agreement on this issue. He offered no new ideas on how Social Security could be reformed to meet the financing needs of 78 million baby boomers, but he said a solution must be found soon.
“The longer we wait to fix this problem, the more limited will be the options available to us, the greater the cost and the more severe the economic impact on our nation,” he said.
He discounted warnings about the political problems in dealing with the nation’s big benefit programs.
“I have always tried to live by the philosophy that when there is a big problem that needs fixing, you should run toward it, rather than away from it,” he said.