Bush has made a statement today that CAFTA will promote Democracy in Central America. For me, that statement was what I've always thought. (See previous post) Bush has been using fast track authority as a dodge around Congress to implement his foreign policy. This process has made the job of the Federal Reserve more difficult.
On one hand, this process has made the calculations of how much more the US economy can continue to fund its current account deficit more difficult. See Is the Current Account Sustainable? The term that is at risk is the unilateral transfers (foreign aid). Bush is trying to shift the burden of foreign aid from all taxpayers to the middle class. In other words, income redistribution from the middle class to the poor of those countries. Sounds like the Communism Doctrine is being promoted by the leader of the free nations.
On the other hand, labor arbitrage lowers the income in the US and makes the job of forecasting inflation and inflationary expectations more difficult and less accurate.
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