Yes, let's beat up on China

Brad DeLong says it's "bad news" that Senators Obama and Clinton favor threatening China with punitive tariffs in order to force them to revalue their currency. His argument in a nutshell:

Of course, then the candidates will be attacking US consumers (who will pay higher prices for imports), workers in the construction industry, US borrowers (who will then pay higher interest rates to domestic and foreign creditors), and US homeowners (who will see the higher interest rates push down housing prices and reduce their equity). The net short-run effect is surely a minus--it's not as though we desperately need to swap construction jobs for manufacturing jobs right now, and we surely don't need a more-rapid decline in housing prices right now.

In the long run of three to five years, yes: The renminbi needs to become worth a lot more (primarily for China's sake). Pressure on China to adopt better policies is helpful (provided we don't shoot ourselves in the foot). But this strikes me as a classic threat to shoot ourselves in the foot: it is not a good policy move on either Obama's or Rodham Clinton's part.

But this is a curious argument. The Yuan is overvalued, by something like 30 percent. Normal economic forces are not bringing about a correction because China is supporting the exchange rate by buying up US securities by the hundreds of billions. So if a correction is ever to come, it will have to come because China's government changes its policy. So far China's government has shown no inclination to change its policy, so to a correction will only happen as a result of pressure from Congress of the type proposed by Obama and Clinton.

I would be astonished if, Obama and Clinton now being on board, the legislation will be instantaneously passed by Congress, signed by the president, and implemented. Congress will consider the measure slowly, the President may veto it or force changes giving him flexibility in implementation. The legislation itself probably sets a deadline rather than calling for an immediate revaluation. So I would guess that, if Obama and Clinton hop to it right away, we might see action in a year. Is that too soon? Well, it will never be a good time. All of the adjustments will be painful in the short-run, whether they take place in 2008 or 2009 or whenever. The same argument could be made to support delaying action on the budget deficit or restrictions on subprime lending or implementation of Sarbanes-Oxley, all of which might involve short-run pain.

If he wants to argue that the adjustment should never come, fine. But if he thinks the adjustment should come, he shouldn't criticize those who are trying to bring it about.