Deficits Tax Exporters via Strong Dollar

Large sustained fiscal deficits can raise real interest rates and thus attract capital, strengthening the currency; that appreciation functions like a hidden tax on exporters and tradable‑goods industries, shifting the cost of deficits onto regions and sectors exposed to foreign competition. The Reagan‑era episode (Feldstein’s 1984 report and the White House reaction) illustrates how the feared inflationary catastrophe may not materialize while the quieter currency‑channel costs accumulate over decades. — Frames deficits not only as a fiscal accounting problem but as a distributional and industrial policy lever that shifts economic pain into exchange‑rate effects, informing debates over tax cuts, defense spending, and industrial revival.