Bush "Misguided" Economic Policies Leading to Weak Dollar

It's not just Mr.Bush's foreign policies that are disastrous. The recent turbulence in the stock market has the administration's fingerprint:

Despite the Federal Reserve's latest stay-the-course message, investors are betting on at least one interest-rate cut by January, intended to quell turmoil in the markets and to juice the slow economy. But with the dollar also weak - recently hitting its lowest point in 15 years against an index of other major currencies - the Fed may be reluctant to oblige.

A declining dollar is a source of inflationary pressure because it can boost the cost of imports. So if the Fed tried to rev up the economy with a rate cut at the same time the dollar is falling, it could end up provoking even more inflation. That would be a drag on economic growth rather than a boost. In an extreme case, it could result in a toxic combination of weak growth and high prices that is a central banker's nightmare.

How did the Fed lose room to maneuver? The answer is rooted in the Bush administration's misguided economic policies.

Bush is not totally to blame. But his total ineptitude has compounded a serious problem. We are debtor nation that depends on the generosity of strangers. One of those donors is a threat to us--China:

Over the last several years, America's imbalances in trade and other global transactions have worsened dramatically, requiring the United States to borrow billions of dollars a day from abroad just to balance its books.

The only lasting way to fix the imbalances - and reduce that borrowing - is to increase America's savings. But the administration has rejected that responsible approach since it would require rolling back excessive tax cuts and engaging in government-led health care reform - both anathema to President George W. Bush. It would also require revamping the nation's tax incentives so that they create new savings by typical families, instead of new shelters for the existing wealth of affluent families - another nonstarter for this White House.