Dean Baker often addresses the weak dollar.
It is clear that NPR is unhappy with the deficit, calling it "unprecedented flood of red ink," which it compares to: "the previous record deficit was $459 billion and was set just last year." Serious reporters would have told listeners that the 2009 deficit was approximately equal to 10 percent of GDP. The previous post-World War II record was 6.0 percent of GDP in 1982. The actual records were more than 20 percent of GDP set during the war years.
The piece goes on to tell listeners: "the huge deficits have raised worries about the willingness of foreigners to keep purchasing Treasury debt." Yes, people worry about all sorts of things. Millions of people are worried that President Obama was not born in the United States. While some people no doubt have the worried that NPR notes, it might have been more informative to tell listeners that in spite of the large deficits, foreigners are willing to hold U.S. debt at historically low interest rates. This is very strong evidence that the foreigners are not worried.
It might also have been worth noting that if foreigners (notably China) stopped purchasing Treasury debt, then their currency would rise against the dollar. This would increase our exports to these countries and reduce our imports from them. In the case of China, this has been exactly the policy shift that both the Bush and Obama administration have been publicly demanding. It might have been worth providing readers with this information.
In other words, what determines the relative strength of the dollar is what it can buy compared to other currencies. A trade deficit has more impact on the value of the dollar than a budget deficit. Foreign capital that comes into the US to finance the budget deficit serves to keep the dollar stronger than it would otherwise be, or equivalently, keeps foreign currencies weaker than they would otherwise be. If the value of the Chinese Yuan increased, say, 50%, then China's export-fed growth would slow dramatically. They can't afford that, so they will continue to buy dollars for the foreseeable future.
As usual, things aren't as simple as they appear at first glance. The world economy is much more inter-connected than it was 25 years ago, so foreign governments can't simply decide to stop buying dollars. There are, of course, long-term costs in having foreigners finance our budget...
Cheers,
Scott.