WASHINGTON (Reuters) - Leading Republicans echoed Sarah Palin on Thursday in attacking President Barack Obama over the weakness of the U.S. dollar.
Analysts warn it is risky business playing politics with the U.S. currency, which has traditionally been off limits as a play to score points against political opponents.
That taboo appears to have been broken.
Palin, the former Republican vice presidential candidate and ex-governor of Alaska, launched her dollar criticism on her Facebook page. She linked dollar weakness to U.S. dependence on foreign oil, large U.S. deficits and questions about whether the dollar deserves to retain its vaunted status of reserve currency.
“We can see the effect of this in the price of gold, which hit a record high today in response to fears about the weakened dollar,” Palin wrote on Facebook this week.
“All of this is a result of our out-of-control debt. This is why we need to rein in spending, and this is also why we need energy independence.”
Republicans in Congress said the previous Republican administration of former President George W. Bush also deserved blame for dollar weakness but, since taking office on January 20, Democrat Obama was calling the shots.
“I agree with her,” Senator Charles Grassley, top Republican on the Senate Finance Committee, said when asked by Reuters about Palin’s dollar criticism.
“A lot of the recession we are in now goes back to Bush. But the extent to which we passed the $787 billion stimulus bill that is not doing any good — this president is responsible for,” he said.
“It is not the Bush administration anymore. It is nine months into this administration. You can’t blame Bush anymore,” Grassley added.
The dollar is a sensitive subject and U.S. officials who are in office will almost always decline to discuss it in public for fear of moving the market.
Dollar weakness also strikes at the very heart of America’s image of itself as a world power.
“It sounds like the new frontier is the declining dollar,” Darrell West, director of governance studies at The Brookings Institution said.
“It’s unusual for there to be party attacks on the value of the dollar,” he said. “Historically that has been a bipartisan issue because you don’t want to play politics with the dollar, it’s a very risky game.”
The danger is that partisan attacks can drive the dollar lower because of the appearance that the country is divided, West said.
“I don’t view this as a partisan thing. It is bad for America to have a policy of a weak dollar,” assistant Senate Republican leader Jon Kyl told Reuters when asked about Palin’s comments.
“All Treasury secretaries say, ‘Oh, our policy is to have a strong dollar.’ But the question is what do they do. I don’t think either this administration or the Bush administration have followed the appropriate policy,” Kyl said.
With the 2010 Congressional elections a year away, Republicans are seizing on opportunities to throw the Democrats off their stride. More Republicans were expected to take up dollar weakness as a tool to hammer the Obama administration, analysts said.
“It’ll be a straight line, dollar equals deficit,” Ethan Siegal, an analyst at The Washington Exchange, said.
“For the out party in the modern era there’s nothing off limits anymore,” he said. “The dollar certainly is not off limits.”
Palin still has star power. Her comments resonate with a good segment of the conservative Republican base and with Americans who view her as talking “common sense” in the face of the country’s elites, analysts said.
Her written comments on the dollar made the front-page lead story of the Financial Times on Thursday.
Palin has successfully used Facebook to rally supporters of her viewpoint. The “death panels” term that rocked the healthcare debate during raucous summer town hall meetings sprung from a Palin Facebook post.
“She was the vice presidential candidate in the last election, that’s marquee status right there. There are no other Republicans who can say that who want to be the next president of the United States,” Siegal said. “So she gets a seat at the table just because of that.”
A weak dollar as representing a bad economy will be one of many lines of attack for Republicans against Obama and the Democrats, Norman Ornstein, a resident scholar at the American Enterprise Institute, said. “I don’t think it’s particularly smart.”
Having Palin lead the charge on this issue rather than someone strong in international economics is “a potentially shaky way to go,” he said.
But, Ornstein added, the view among some Americans that Palin reflects a more down-to-earth view was a “powerful, powerful theme.”
Additional reporting by Thomas Ferraro, Editing by Howard Goller