It's the government, stupid.
By ERNEST F. HOLLINGS, former U. S. senator
2010 -- In commenting on Harold Meyerson's Washington Post column "Jobs
in the cards?" (8/4/10), let me first acknowledge: Meyerson is
brilliant and knows way more about the economy than I do. And I agree
that Elizabeth Warren should head the new Consumer Protection Agency.
since Robert Reich wrote twenty years ago in The Work of Nations that
the Fortune 500 hadn't created a job in ten years and that the only jobs
created have been by small business, Meyerson, Congress, and the President
have been off touting small business and totally ignoring manufacturing.
Manufacturing generates small business, and the reason small business
isn't creating jobs is that we have been off-shoring manufacturing for
fifty years. Textiles, electronics, computers, communications, automobiles
and other industries have been decimated. One-third of the nation's manufacturing
was lost in the ten years ending President Bush's term, and President
Obama, like Bush, has done nothing to stop the hemorrhage.
ignore the fact that the recession started with a double dip. Bush increased
the debt $7.5 trillion, and household debt increased or stimulated the
economy another $7 trillion for a total of $14.5 trillion stimulation
in eight years. When President Obama moved to stimulate, we were losing
799,000 jobs a month. And with Obama's stimulation of $2.5 trillion, we
still lost jobs the past two months. Stimulation is spent. Consumers are
saving. As Robert Kuttner writes in his new book, A Presidency in Peril:
"We need a comprehensive industrial strategy to reclaim manufacturing
and a companion trade policy
." We need to make manufacturing
profitable in the United States. In globalization, "It's the government,
stupid." Globalization is nothing more than a trade war with production
looking for a country cheaper to produce. The competition is not company
versus company but country versus country. And China has turned the trade
war into a war for the economy - a war for investment, research, technology,
development, production, jobs, trade, the economy.
201 of the Trade Act, when an industry vital to the economy as automobiles
are, President Bush and President Obama are called upon to institute tariffs
or import quotas to protect the endangered industry. But Bush, and now
Obama, fail to act. Our manufacture can be rejuvenated and millions of
jobs created under the War Production Act of 1950. This law protects the
production and jobs for materiel and equipment necessary to the nation's
security. In 1961, President John F. Kennedy called a Cabinet hearing
on the damage done to textile production which subsidized imports and
determined that next to steel, textiles was the second most important
to our national security. I can hear President Kennedy now: "We can't
send them to war in a Japanese uniform." It is not necessary or desirable
to save the entire industry in globalization, but today textile items
like winter clothing, camouflage, parachute cloth, composites for body
armor, must be at hand. We have the troops for Afghanistan, but not the
equipment. The Pentagon has just pleaded with Russia for helicopters.
We can't go to war or defend the country save the favor of some foreign
European countries with their VAT tax advantage have already made a beachhead in the United States with automobile and green jobs. And Microsoft, the best of research, and Intel, the best of technology, are already in China. We're in real trouble. But we can begin the march back by cutting out the childish politics of "the government is too big," "get rid of the government." We are number one in the world because of our government in Washington, and the people ought to sober up from pandering politics and call on the government to act.
The march back to the strongest economy can begin by canceling the corporate income tax and replacing it with a 2% VAT. The average corporate income tax is 27% and cutting its taxation 2% will eliminate the principal cause of off-shoring, production and jobs. Moreover, it will immediately comply with the President's goal of boosting exports by reducing the cost of exports by one-third. A 2% VAT as a replacement for the corporate tax will be cutting taxes, raise more revenues (about $86 billion more), and we can start paying down the debt. But Wall Street and the financial crowd that got us into this trouble will oppose our country getting competitive in globalization because they want to keep the China profits flowing to keep the market up. And Corporate America's CEOs, with few exceptions, will be with Wall Street. The CEOs are not about building a strong economy but about keeping their stock up for the golden parachute. And the question is will President Obama and Congress yield to the need of the country for a strong economy or to the needs of contributions for the campaign for re-election?
President Obama has to get a new economic team. As Kuttner writes: "They
richly deserve to be thrown under the proverbial bus." Then the President
and Congress and the people all have to learn that in globalization, "It's
the government, stupid."
Senator Hollings of South Carolina served 38 years in the United States Senate, and for many years was Chairman of the Commerce, Space, Science & Transportation Committee. He is the author of the recently published book, Making Government Work (University of South Carolina Press, 2008).
© 2010, Ernest F. Hollings. All rights reserved. Contact us for republication permission.
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