How issues involving China will play in the 2008 U.S. presidential election is yet mostly uncharted territory, but Senator Hillary Clinton revealed revealed some China talking points this week after the Shanghai market’s burp heard round the world.
Sounding bells of economic populism, Clinton told CNBC the United States faces a “slow erosion of our economic sovereignty.” She sent a letter to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, saying the stock market turbulence “underscores the exposure of our economy to economic developments in countries like China. As we have been running trade and budget deficits, they have been buying our debt and in essence becoming our banker.” Her letter went on to warn the government’s economic czars that “if China or Japan made a decision to decrease their massive holdings of U.S. dollars, there could be a currency crisis and the U.S. would have to raise interest rates and invite conditions for a recession.” (A nice sound bite from the letter: “The writing may not be on the wall, but yesterday, the writing was on the Big Board.”)
An unnamed “Democratic strategist not currently working for any of the presidential contenders” (well, not that he admits) told MSNBC that China may be a liability for Clinton:
“Arguably, no candidate may be more vulnerable on China, and Wal-Mart than Senator Clinton,” he said. Why? Because she once served as a member of Wal-Mart’s board of directors and because, as president, her husband persuaded Congress in 2000 to award China with permanent normal trade relations status and smooth the accession of China to the World Trade Organization.
But if the mood of the electorate in 2008 is anti-China, other Democratic presidential contenders would have their own China history to contend with: as senators, John Edwards, Chris Dodd, and Joe Biden all voted for the Clinton administration’s China trade deal.
So what’s the policy message? How is the U.S. to get out of this bind? Clinton’s letter to Bernanke and Paulson and her public statements (as far as MSNBC and I have found) have been short on details, but she did endorse a plan by “Senator Dorgan and then Congressman Cardin that sounds an alarm bell when US foreign owned debt reaches 25 percent of GDP or the trade deficit reaches 5% of GDP. It would require the administration to develop a plan of action to address these conditions, and report their findings to Congress.”
OK great. The solution is to require someone else to come up with the solution. Sloughing off responsibility from Congress onto the executive branch may look good when you’re running for reelection as a senator from the great state of New York, but people concerned with her China background are going to need more from Clinton if she wants to run the executive. Not that anyone else is giving us much to go on so far. Not to worry! We’ve got 10 more months of this clown show before the primaries.