Senator Eliot Shapleigh - El Paso, Texas

WASHINGTON – Japan's decision to throw out the old economic guard in Sunday's election is one more hint that the United States needs to come out of this recession with an economy led by exports – which means led by Texas.

Exports, along with households bent on saving rather than consuming, are vital to reducing our need to borrow trillions of dollars from Japan and China.

The Japanese and Chinese governments hold U.S. Treasuries and other bonds worth about one-fourth of the $7.4 trillion public debt. For almost a year now, Chinese officials have publicly worried about the value of these debts. The winners in Japan's election made similar noises during the campaign.

The Democratic Party of Japan's leader, Yukio Hatoyama, blames fundamentalist American capitalism for the recession. He's urged East Asians to create their own currency to lessen their reliance on the U.S. dollar in international trade.

"The financial crisis has suggested to many that the era of U.S. unilateralism may come to an end," Hatoyama wrote in an essay published two weeks ago by The New York Times. "It has also raised doubts about the permanence of the dollar as the key global currency."

The dollar's worldwide use lets the Federal Reserve determine money supply with less fear of inflation. Commodities such as oil that are priced in dollars respond sluggishly when the Fed floods banks with cash and credit. More important, we don't have to borrow in yen, yuan or euros. If the dollar falls against other currencies, our obligations remain constant even as the debts held by our creditors lose value.

In June, Japan held $711.8 billion in U.S. Treasuries. A 10 percent drop in the value of the dollar would reduce the value of Japan's dollar portfolio in yen by an equal amount.

If Americans were big savers, we could buy the government's debts ourselves. Since we're not, that gives Japan and China leverage.

The Chinese and Japanese economies depend heavily on exports. That's the reason both governments buy so much dollar debt. If they don't, their currencies would rise so much in value that their exports would get expensive. American consumers would quit buying.

Cheap goods and huge debts helped propel the financial excesses that created this recession. But China and Japan need those dollar-denominated debts to pay for the great health and retirement needs of their aging societies. The Chinese and now the Japanese leadership see a need to diversify away from the dollar.

White House economic adviser Larry Summers said in July that the United States has to break with the past by becoming an export-oriented economy.

"The rebuilt American economy must be more export-oriented and less consumption-oriented, more environmentally oriented and less fossil energy-oriented, more bio- and software engineering-oriented and less financial engineering-oriented, more middle class-oriented and less oriented to income growth that disproportionately favors a very small share of the population," he told an audience at the Peterson Institute for International Economics.

Texas has been the leading exporting state for several years. When Texas exports fell, so did the Texas economy.

Texas exports started to recover in April, but there's a long way to go. After 10 months of declines, U.S. imports rose in June.

Much of Texas' export market is in Mexico. But for the kind of change Summers is talking about, the state's export prowess will have to extend far and wide.

"Its absolutely necessary, not just for the United States, but for the whole world" that the U.S. become an export-led economy, said Frank Vargo of the National Association of Manufacturers. "The global economic model where everybody exports to us and we consume all of it just won't work anymore."