The NYT rightly criticizes Senator McCain for putting out a target of balancing the budget in 2013 while proposing nothing but tax cuts. It then presents the list of items that will be needed to set the economy right. The one obviously crucial item that is missing from this list is a lower dollar. The United States is running a current account deficit that is equal to 5 percent of GDP. This logically implies means that the public and private sector must together be dissaving (i.e. borrowing) by an amount equal to 5 percent of GDP. While this can be reasonable for a rapidly growing country like China or India, it is not a sustainable position for a rich country with a slow growing labor force like the United States. The only plausible mechanism for adjustment for the current account deficit is a lower value of the dollar. It is understandable that politicians would be reluctant to call for a weak dollar. But a newspaper that purports to be responding to the real needs of the country should have the courage to discuss the issue more seriously.
--Dean Baker