WASHINGTON — President Bush, facing complaints from a European ally about the weakening dollar, said Wednesday that he favored a strong dollar and would work with Congress to cut the massive federal budget deficit that puts downward pressure on the U.S. currency.
But before Bush spoke, Vice President Dick Cheney reiterated to a White House economic conference that the administration supported more tax cuts, which some analysts said could deepen the budget deficit and threaten the dollar's value.
The White House conference, which continues today, is intended to pave the way for Bush to promote changes to Social Security that the White House has said would probably require more federal borrowing.
Despite Bush's statement of support for a strong dollar, the U.S. currency weakened further on international markets, losing more than 1% of its value against the Japanese yen and nearly 1% against the euro.
The dollar's slide illustrates the difficulty Bush faces as he tries to assemble a set of economic policies that work in concert with his political goals. Trading partners have complained about the weak dollar, which makes U.S. goods cheaper on international markets, and Bush said Wednesday that he wanted to cut spending and reduce the deficit to create an environment that would strengthen the dollar.
At the same time, the president's top priorities include extending tax cuts, revamping Social Security and spending money for the Iraq war, all of which could add to the deficit and weaken the dollar.
From Europe's viewpoint, the euro's ascent compared with the dollar had damaged sales of its goods in the United States. This is why Italian Prime Minister Silvio Berlusconi, on a visit Wednesday to the White House, complained to Bush about the weak dollar, which has declined about 35% against the euro since February 2002. The euro is the currency of Italy and 10 other European nations.
"The policy of my government is a strong-dollar policy," Bush said after meeting with Berlusconi.
"He expressed his concerns about the relationship between the dollar and the euro," Bush told reporters in a brief Oval Office interview, with the Italian leader by his side. "I told him we're going to take this issue on seriously with the Congress. The best thing that we can do from the executive branch of government in America is to work with Congress to deal with our deficits."
Analysts said Bush had little choice but to stand behind the dollar.
