Money & Politics with Larry Kudlow

McCain Must Get Behind King Dollar

If Sen. John McCain wants to run as a candidate of change, and if he’s truly interested in distancing himself from President Bush, he should reverse the declining fortunes of the Bush wartime dollar. America's prestige is on the line.

Right now the greenback is in virtual freefall. It’s a disorderly drop. As a result, U.S. inflation rates are rising across the board as the global commodity boom leaks into higher domestic inflation.

Inflation is the cruelest tax of all. It robs consumer and wage-earner purchasing power. It erodes business profits. It reduces the real worth of investor portfolios.

It’s also the single biggest cause of recession, and it may well be tipping the economy into negative territory.

For the first time in a decade I’ve become genuinely worried about inflation. Over the last year and a half, inflation has climbed from 1.5 percent to nearly 4.5 percent, and in the past three to four months it has trended sharply higher.

But there’s another side of the dollar story that’s equally important. The falling U.S. greenback has become a symbol of American decline.

Folks are making fun of the dollar. Our enemies around the world are pointing to the unreliable dollar as evidence of American weakness. It’s as though the administration’s neglect of the dollar is “peso-izing” or “Latin-Americanizing” the greenback.

Something must be done to reverse this trend, and McCain is in a good spot to do it. Remember, McCain was a foot soldier in the Reagan revolution. Borrowing a page from the Gipper — who always said a great nation has a strong currency — he should argue on the campaign trail for a dollar surge.

For patriotic reasons alone it is time to reverse the decline of the dollar. A strong dollar should be emblematic of a strong America and a strong defense. Sen. McCain should insist that a President McCain will order the Treasury Department to back up its stale “strong dollar is in the nation’s interest” rhetoric with real open-market actions to boost the greenback. He should say that his Treasury will take actions to strengthen the greenback by conducting dollar diplomacy with Europe, Britain, Canada, and Japan. He should also state that a President McCain will appoint a Federal Reserve chief who will stop ignoring the dollar, as Fed Head Ben Bernanke did last week before Congress.

Sen. McCain can bolster his agent-of-change credentials by placing the U.S. dollar front-and-center in his campaign. The time has come to end the dollar’s freefall. The time has come to end the period in which the greenback has become the subject of international ridicule. The time has come to show voters on Wall Street and Main Street that $1,000 gold, $100-plus oil, and a rising inflation rate will not stand.

It is time to get behind King Dollar.