April 15, 2017
Washington Post economics reporter Max Ehrenfreund featured a piece highlighting former Donald Trump adviser Steven Moore’s views of Trump’s recent shifts on economic policy. In particular, Moore took issue with Trump’s desire to see the value of the dollar fall. He argued that the dollar rose with strong economies under President Reagan and Clinton, while it was weak under Nixon, Ford, and Carter.
Actually, it is not especially accurate to claim the dollar rose under President Reagan. Using the Federal Reserve Board’s broad real index, it was trivially higher in January of 1989 than it was when Reagan took office in January of 1981 (91.3 in 1989 compared to 89.7 in 1981). The comparison goes the other way if we use December of 1988 (89.8) and December of 1989 (90.6), the last full month of Carter and Reagan’s terms.
As a practical matter, the run-up in the dollar in the first part of the Reagan administration led to a large trade deficit, causing serious hardship in manufacturing sectors. In response, Reagan’s Treasury secretary negotiated an orderly decline in the value of the dollar to bring down the deficit, which it did.
Also, if we are using the value of the dollar as a measure of the strength of the economy under different presidents, we find that it was virtually unchanged through President George H.W. Bush’s presidency and Clinton’s first term. The former was a period of weak growth, while the latter was a period of strong growth.
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