<blockquote>Despite the Federal Reserves stay-the-course message yesterday, investors are betting on at least one interest-rate cut by January, intended to quell turmoil in the markets and to juice the slow economy. But with the dollar also weak recently hitting its lowest point in 15 years against an index of other major currencies the Fed may be reluctant to oblige. A declining dollar is a source of inflationary pressure because it can boost the cost of imports. So if the Fed tried to rev up the economy with a rate cut at the same time the dollar is falling, it could end up provoking even more inflation. That would be a drag on economic growth rather than a boost. In an extreme case, it could result in a toxic combination of weak growth and high prices that is a central bankers nightmare. How did the Fed lose room to maneuver? The answer is rooted in the Bush administrations misguided economic policies. Over the last several years, Americas imbalances in trade and other global transactions have worsened dramatically, requiring the United States to borrow billions of dollars a day from abroad just to balance its books. - <a href=http://www.nytimes.com/2007/08/08/opinion/08wed1.html?ei=5088&en=1044bec877b0e02b&ex=1344225600&partner=rssnyt&emc=rss&pagewanted=print>NYT</a></blockquote> What's needed to fix the problem? A dramatic reversal of the Bush administration's economic policies, starting with a roll-back of Bush's tax cuts. Tax policies need to be aimed at giving the average person incentives to save rather than expanding the already generous tax-shelters for America's wealthiest families. Also, the rapidly growing burden of health-care costs need to be addressed by the government in a responsible manner. Neither of which this administration is likely to do. More importantly, however, the government MUST be weened off of the sugar-teat of foreign borrowing. Rather than do the responsible thing and raise taxes to finance the disastrous war in Iraq, the Bush administration has borrowed money from abroad to pay for it, leaving this nation vulnerable to economic black-mail, such as <a href=http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/07/bcnchina107a.xml>China is now doing</a>. Strong leadership is required to guide this nation through the economic pit-falls it now faces, leadership the Bush administration has utterly failed to provide. They have abandoned their responsibilities in this arena as they have in so many others.