The world has done surprisingly well since the Great Recession began at not making things worse with trade protectionism. But that may soon change thanks to the U.S. Senate, which is expected to vote as early as this week on the most dangerous trade legislation in many years, the Currency Exchange Rate Oversight Reform Act. This is when an American President would normally step in and defend the U.S. and world economies, but Barack Obama is bobbing and weaving for his own narrow political ends. This is risky business.

Senators Chuck Schumer and Lindsey Graham have pushed since 2005 to impose punitive tariffs on China if the value of the yuan doesn’t rise faster. The legislation is now coming to the floor because Senate Democrats want protectionist political cover against unions in return for voting on the free-trade pacts with Colombia, Panama and Korea that President Obama finally sent to Congress yesterday. But what is cynical posturing in Washington may look more threatening to the rest of the world, and once trade wars start they can be hard to stop.

The senators speak during a news conference on Sept. 22, to discuss unfair currency manipulation.

Unlike America’s last great trade blunder, the Tariff Act of 1930 (aka Smoot-Hawley), the China bill wouldn’t raise tariffs across the board, but would instead allow companies to seek countervailing duties by treating a “misaligned” currency as a subsidy. This would nonetheless open the floodgates to applications from American companies, and the resulting tariffs would violate World Trade Organization rules. China would undoubtedly retaliate, meaning companies and consumers in both countries would lose.

If other countries follow suit, there would be knock-on effects throughout the global economy. As the erstwhile leader of the world’s trading system as well as one of its main beneficiaries, the U.S. bears a special responsibility to avoid this outcome.

It’s fun and easy for politicians like Sen. Schumer and Sen. Graham to blame China’s monetary policy or “free trade” for the loss of American manufacturing jobs… It’s a much more difficult thing for politicians to admit that the tax and regulatory policies they and their colleagues have saddled American industry with are at least partly to blame for the job losses.

In short Senators Schumer and Graham and their ilk should spend less time worrying about the international economy and more time worrying about our national economy. They should be focusing on comprehensive, common sense tax and regulatory reforms that make it more lucrative for American manufacturers to produce quality, affordable goods here rather than overseas. Instead they’re focused on pushing foolish protectionist trade policies that could set off a global trade war.

One has to wonder what would happen if Washington’s policy makers reduced corporate tax rates, ended the punitive double taxation of repatriated profits from foreign subsidiaries, and reduced regulatory burdens? Call me crazy, but I suspect we’d see a boom in American industry.

A bipartisan group of senators who sought a compromise in the rancorous energy debate won’t introduce their bill before lawmakers adjourn for the elections, several Senate aides said Thursday.

Instead, the so-called Gang of 20 will offer a statement of principals outlining their agreement on a host of divisive issues, including expanded offshore drilling. They plan to offer legislation once the political season has ended, according to an aide to a Democrat involved in the discussions. The aide said that the election-year environment has poisoned the atmosphere and hampered the chances of passing a bill on such a controversial campaign topic.

I guess we can breathe a sigh of relief that their sham energy bill won’t be coming up for a vote before the November elections. The bill would have imposed higher taxes on oil companies and limited new drilling to select areas while cementing the current temporary drill ban into statute for the rest of the country.

I’ve said this before and it bears repeating: Like it or not oil is the life blood of our economy and its high time we faced that reality and started to exploit our domestic oil and natural gas reserves.

Hat Tip: Michelle Malkin