WHEN LITTLE ROCK LEADERSHIP IS NO GIBRALTER

The U.S. dollar is a measure of the color of the U.S. economic grass in the eyes of alert worldwide investors.

-- Pollster and demographer Albert Sindlinger

"Alert investors don't like what they see. The recent plunge of the dollar is a vote of no confidence in America's economic policies. It should also be a sober warning to everyone who expects the economy to gather strength in the months to come. ..."

-- Excerpt from the July issue of Strategic Investment, a monthly newsletter

Like you, perhaps, I watch the arcane developments of international finance with roughly equal parts bewilderment and fascination. Lacking special expertise in such matters as exchange rates between currencies and the like, I read as much as I have time for from experts in the field. The above-quoted excerpt from Strategic Investment is one such.

Easily the most lucid piece I have read on the dollar's plunge to historic lows against the Japanese yen is from the July issue of Louis Rukeyser's Wall Street newsletter. Rukeyser's comments are all the more impressive because they come from a man who ordinarily avoids political commentary.

"Dear Mr. President:

"The Wall Street Journal reported that you were, in fact, 'baffled' by the dollar's recent slide and had asked your advisers for explanations. ...

"The dollar is weak, Mr. President, because the world increasingly perceives the United States as weak. This has several causes. The first is that, if you'll pardon my saying so, nobody (including those representing you) seems to have a confident handle, from one day to the next, on what America's foreign policy really is. The litany of significant reversals -- Somalia, Bosnia, Haiti -- seems so endless that it's scarcely surprising that Jimmy Carter, as your unofficial envoy to North Korea, wound up in an embarrassing long-distance debate with the government he was supposed to be representing. Foreign policy may not immediately affect the polls, but you'd be surprised what it can do to a nation's reputation abroad.

"... The less comfortable reality is that the world leadership has been thrust upon America in the past half century (it is not a role we ever desired), and if we fail to exercise such leadership now, there will be no shortage of others eager to do the job -- to our detriment, and that of the world. It's time to move American foreign policy out of the isolationist living room and into the real world of practical, coherent leadership. And that would help the dollar.

"The second reason the dollar has been showing such striking weakness is the impression, among holders of currency at home and abroad, that American domestic policy is not exactly a Rock of Gibraltar, either. In part this is a reflection of the troubles surrounding you on the personal legal front, but more importantly it is a comment on both the strength and the correctness of your domestic initiatives. Increasing national doubts about the wisdom of solving some obvious, specific health care dilemmas by recklessly turning more than a seventh of the economy over to lawyers, bureaucrats and politicians contribute significantly to this equation. But there is a deeper uneasiness about whether the fundamental economic policies are moving in the right direction.

"You won't hear much of this from Washington, which deludes itself that it is the source of economic progess. ... Yet the rewards of the earlier (1980s) effort to restrain government on three fronts (taxes, spending and regulation) continue to be evident. American industry is infinitely more streamlined and competitive today than it was 15 years ago; indeed, U.S. manufacturing productivity growth from 1990 to 1993 was at an impressive annual rate of 2.6 percent, as high as it was in the 1950s and 1960s -- when the dollar was dominant. What scares many holders of greenbacks is that your administration often seems unwilling to recognize this striking improvement, in its partisan efforts to tag its predecssors as merchants of debt and stagnation.

"It would be wiser to recognize now that economic policy veered off course with the savagely redistributionist tax increases that began under George Bush. It's time to repeal both of the ill-advised tax hikes of the 1990s, and to start encouraging vigorous economic growth again by meaningfully reducing taxes on investment and savings. This would create jobs, expand the economy and make you look like a hero. And it would help the dollar.

"... The authentic problem is not the deficit, but the spending. And the way you solve that problem is certainly not by adding another runaway government 'entitlement' program on health care.

"... It's clearly time to pull back from a policy of more solutions than the nation has problems. And that would help the dollar.

"Finally, Mr. President, it might help clarify your own thinking on these matters if you got yourself some new advisers ..."

Peter Kinder is associate publisher of the Southeast Missourian. He represents the 27th district in the General Assembly.