ERNEST F. HOLLINGS, former U. S. senator
2010 -- The greatest off-Broadway show continues in the nation's capitol
with the President and Congress engaged in a grand charade of creating
jobs to revive the economy. The President's problem is that the overstimulation
of public debt and household debt has converged with the hemorrhage of
jobs to off-shoring, causing the economy to collapse. The confusion is
that the problem of stimulation is being used as a solution, and the solution
of getting into the trade war is being used as a problem to avoid.
Bush stimulated the economy by adding $7.5 trillion to the national debt
while household debt increased or stimulated the economy $7 trillion during
the same eight years. By the time Obama raised his hand to become President,
the economy had been stimulated $14.5 trillion, and we were losing 799,000
jobs a month. President Obama has now stimulated the economy an additional
$2.7 trillion, and we are still losing jobs. Stimulation is spent.
Real job creation will come and the economy will rebound when the United
States engages in globalization or the trade war. Globalization is nothing
more than a trade war with production looking for a cheaper country to
produce. All countries save the United States compete fiercely, attracting
investment, production -- even research. Bill Gates' Microsoft is in China,
and China alters acquired technology, patents it, and with its volume
market it becomes the article in world trade. Meanwhile, the United States
acts like there is no need to manufacture and avoids the trade war with
such "red herrings" as the need to educate, to innovate, calling
for free trade, "don't start a trade war with protectionism."
To understand our dilemma, the people must rid their minds of these demons.
The United States was born in a trade war. The Mother Country prohibited
manufacture in the Colony and required the Colony's exports to be carried
in English bottoms. Trade and manufacture were foremost in the minds of
the forefathers. The founders couldn't agree on the four freedoms of the
first amendment to the Constitution until 1791. But four years earlier,
in 1787, Article I, Section 8, of the Constitution called on Congress
to regulate foreign commerce. The first act of Congress in its history,
on July 4, 1789, was for a protectionist tariff. We didn't pass the income
tax until 1913. For over a hundred years we financed and built these United
States into an industrial power that excelled the Mother Country with
tariffs and protectionism. The Mother Country's insistence on free trade
to continue its policy of colonization caused Senator Henry Clay to exclaim
in 1832 about free trade: "It never existed; it never will exist
Later, Teddy Roosevelt exclaimed: "Thank God, I'm not a Free Trader."
It was TR who instituted the nation's industrial policy for domestic commerce
with anti-trust measures, and Congress created an industrial policy for
foreign commerce by enacting trade laws to protect our economy.
All agree that the more education and innovation the better. But the lack
of education on jobs should be dispelled. Little South Carolina has enough
education to attract over one hundred German industries and produces the
"ultimate driving machine" for BMW and the most sophisticated
technology, Boeing's "Dreamliner." Tom Friedman's innovation
doesn't create jobs. The development of innovation creates jobs, and Andy
Groves' best of innovation, Intel, is being developed in Ireland, China
like we're not in the trade war jeopardizes the nation's security.
Today we don't have enough helicopters to continue the war in Afghanistan.
The Pentagon is begging Russia for helicopters. The only war we
have won since World War II is Charlie Wilson's War."
Ernest F. Hollings
end of World War II we were the only industrial power in the free world
and wisely enacted the Marshall Plan to spread capitalism against communism.
But Japan started a trade war for market share. Japan closed its domestic
market, subsidized its manufacture, sold its export at cost, and made
up the profit in the closed market. It worked. Toyota is #1 as General
Motors is in bankruptcy. Communist China embellished the trade war by
closing its market for products domestically produced, controlling every
facet of its market from banking to labor, and attracting on a limited
basis foreign investment, research, technology, development and production.
Corporate America for years avoided off-shoring its production and made
attempt after attempt in Congress to have presidents enforce trade laws
to protect its production. I worked with Corporate America to pass such
trade bills that were vetoed by presidents of both parties because of
the Cold War. Presidents allowed the violation of trade laws for the greater
national interest of spreading capitalism against communism. When the
Cold War was over, President Clinton sold out American production with
NAFTA with Mexico, Permanent Normal Trade Relations with China, and sponsoring
China's entry into the World Trade Organization in 2000. Under President
Bush, the gradual off-shoring of production and jobs hemorrhaged. President
Bush refused to enforce our trade laws, losing during his eight years
almost a third of our manufacture and manufacturing jobs. Corporate America
now calls for free trade to dump its subsidized off-shore production back
into the United States.
President Obama should come in from the cold in the trade war as follows:
the United States suffering $6 trillion in trade deficits in the last
ten years, President Obama should institute a 10% surcharge on imports
like President Nixon did in 1971 when our trade deficit was a fraction
of what it is today.
of jobs can be created by President Obama enforcing the War Production
Act of 1950, which President Kennedy used to save the textile industry
in l961. President Kennedy held Cabinet hearings to determine that textiles
were important to our national security. He then promulgated his seven-point
program, saving the industry. Today, the entire industry need not be
saved. In globalization, we want foreign competition to keep our domestic
industries competitive. The only textile items necessary to our national
security that need to be saved are items such as camouflage, parachute
cloth and composites for body armor.
of waiting for a vital industry like automobiles to go bankrupt and
needing a bailout, President Obama should move under Section 201 of
the Trade Act when production is endangered. President Reagan threatened
Japan under Section 201 on steel, autos, machine tools and semi-conductors,
obtaining voluntary restraint agreements. This not only saved Intel,
but President Reagan saved Harley-Davidson by imposing quotas on motorcycle
imports. For those worried about "industrial policy," none
other than President Reagan picked winners over losers on steel, autos,
machine tools, semi-conductors, and motorcycles.
jobs are good, but long range. Brown jobs have an immediate impact and
are needed. President Obama should jump-start the economy by calling
on Congress to replace the corporate tax with a 5% VAT - actually increasing
revenues by cutting taxes. A hundred and thirty-five countries compete
in globalization with a value added tax that's rebated on export. The
U. S. corporate tax is not rebated on export, not only putting domestic
exports at a disadvantage but threatening the Obama policy for green
jobs. Germany invades Charleston, S.C., with a windmill plant, using
its 19% VAT to make a beachhead for green jobs in the United States.
Manufacturing the parts in Germany, the 19% VAT is rebated at export
to South Carolina, permitting Germany to produce windmills 15% cheaper
than any domestic production. With a 3% shipping charge of the parts
and highballing the cost of production in Germany to not pay more than
1% income tax in the U. S., Germany is already ahead of the curve on
green jobs in the United States as President Obama politics for them.
A 5% VAT to replace the corporate tax will immediately put the United
States in the trade war. It eliminates our policy of favoring off-shoring
and gives a tremendous boost to exports. A 5% VAT raises $600 billion.
The corporate tax for 2010 is estimated at $156.7 billion, leaving $443.3
billion to stop borrowing from China and pay down the national debt.
Corporate America would be put on notice that their domestic investment
would be protected and off-shored production could come home. As Paul
Craig Roberts, former Assistant Secretary of the Treasury for Ronald
Reagan, states: "The only way that the United States will again
have an economy is by bringing back the off-shored jobs."
like we're not in the trade war jeopardizes the nation's security. Today
we don't have enough helicopters to continue the war in Afghanistan. The
Pentagon is begging Russia for helicopters. The only war we have won since
World War II is Charlie Wilson's War. Victory was obtained by Congressman
Wilson having Israel ship stinger missiles to Pakistan to be used in Afghanistan
to shoot down Russian helicopters. All the Taliban has to do now is point
to the Russian helicopters and say: "See, it's the same foreigners
trying to change our culture." We create terrorism rather than eliminate
it with Russian helicopters. It's a helluva note when the United States
can't defend itself save the favor of some foreign country.
mystery is that the free press and TV pundits treat manufacture
and the trade war "top secret." Perhaps the free press
feels that globalization has scrambled the trade egg and to unscramble
it will start a trade war. This ignores the trade war that rages
today and, most importantly, there must be an egg to scramble."
Ernest F. Hollings
charade continues. If President Obama enforces our trade laws or Congress
initiates a tax or trade measure to protect domestic manufacture, coming
down on their heads in opposition will be Wall Street, the big banks,
the Conference Board, The Business Roundtable, the National Federation
of Independent Business, the National Retail Federation, the United States
Chamber of Commerce and Corporate America. These entities will not only
deny contributions to the President and Congress, but contribute to their
defeat. Since money is the mother's milk of politics, the charade of doing
nothing to get the contributions courses along. Manufacture, the engine
of growth, and the trade war remain "top secret."
The mystery is that the free press and TV pundits treat manufacture and
the trade war "top secret." Perhaps the free press feels that
globalization has scrambled the trade egg and to unscramble it will start
a trade war. This ignores the trade war that rages today and, most importantly,
there must be an egg to scramble. We're now on course to losing the egg
or nation by failing to get in the trade war. Schools are being closed;
fire stations are being eliminated; roads are being plowed up so they
won't need repair, and the United States is on course to becoming a colony
again. Wall Street, Corporate America, and the idle rich insist that the
President and Congress do nothing in order to protect their subsidized
profits. The same crowd that caused our economic collapse with derivatives
and credit default swaps is in charge insisting that Washington do nothing.
Jefferson remarked: "Were it left to me to decide whether we should
have a government without newspapers, or newspapers without a government,
I should not hesitate a moment to prefer the latter." Jefferson no
doubt had in mind that the government would remain free so long as there
was a free press to keep the government honest. In globalization today,
the free press has become a co-conspirator of government doing nothing.
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,
Government Work (University of South Carolina Press, 2008).
Ernest F. Hollings. All rights reserved. Contact
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Ernest F. Hollings served
the public for 56 years -- 38 years in the United States Senate and as South
Carolina's governor, lieutenant governor and a member of the S.C. House of
Today, Hollings continues
to be influential in public affairs and offers this Web site as a compendium
of current and past positions on public issues. Learn
more about Fritz Hollings.
Hollings receives French honor
France honored retired
U.S. Sen. Fritz Hollings on in 2013 by awarding him the Legion of Honor for
his World War II service. More.
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