Untying the knot

By ERNEST F. HOLLINGS, former U. S. senator

APRIL 9 , 2012 -- Grover Norquist has the President and Congress tied in a knot. Norquist's pledge against taxes forbids bipartisanship. Defeating a bipartisan budget last week in the House of Representatives patterned after Bowles-Simpson, Norquist said: … "the need for compromise is nonsense…" NY Times 4/4/12.


Budget rhetoric in Washington is askew. Instead of discussing taxes we ought to be discussing the merit of programs and how to pay for them. But programs are never debated. It's always "for taxes" or "against taxes". It's the "size of government." It's never paying for government by cutting programs or increasing taxes. For eight years under President Bush, Congressmen Boehner, Cantor, and Ryan voted for tax cuts, wars and prescription drugs and never paid for them. Now, Congressmen Boehner, Cantor and Ryan want to pay for tax cuts, war, and prescription drugs with spending cuts. President Obama is running annual deficits of $1 Trillion or more. I would like to see their list of $1 Trillion in spending cuts.

In 1948 we had a rule in the S.C. House of Representatives that on second reading, any spending bill had to have a certificate from the Controller that the expenditures were within the revenues or the bill was sent back to the Ways and Means Committee. In 1959, as Governor of South Carolina, we raised taxes and in 1960 South Carolina was the first southern state to receive a AAA credit rating. All Governors think of paying for this year's government. We used to in Congress. In 1993 without a single Republican vote in either the House or Senate, we cut spending and increased taxes - even on Social Security - and the U.S. enjoyed its strongest economy for 8 years. We gave President Bush a balanced budget in 2001. But today in Washington we never pay for this years government. We just debate 10 year plans to cut $4 Trillion in spending for later Congresses to do the cutting. It's a grand charade.

To untie the knot in Washington, we have to excise the cancer of money on the body politic. First, we must amend the Constitution: "The Congress is empowered to regulate or control contributions and spending in federal elections." This doesn't commit to a particular solution - that's for later Congresses. But authorizing Congress to limit spending will limit Norquist and the lobbyists, limit fundraising, give time for the Senator to do his or her work, and return control of the government back to the people. This will take time.

"The recession ended over 2 1/2 years ago and we wonder why the recovery is anemic. The economy would come alive by replacing the 35 percent corporate tax with a 6 percent VAT."

-- Hollings

There is an immediate solution to deficit spending and creating jobs - just replace the 35% Corporate Tax with a 6% VAT. The 2011 Corporate Tax produced revenues of $181.1 Billion. A 2011 6% VAT would have produced $728 Billion. This will cut taxes, eliminate loopholes, give instant tax reform, promote exports, free up $2 Trillion in offshore profits for Corporate America to create jobs in the United States, provide billions to avoid deficits, and create millions of jobs. Everyone in Congress is for these initiatives but not one of the 535 members will introduce the VAT solution, nor will President Obama. Why not? Because Corporate America doesn't want to increase the cost of their China exports to the United States. U.S. exports to China are taxed twice: the 35% corporate tax and a 17% VAT when exports reach China. China's exports to the United States are tax free. 141 countries compete in globalization with a VAT that is rebated on exports. Wall Street, the big banks, and Corporate America are the biggest contributors to the President and Congress. Contributions for reelection in Washington come before the nation's economy. Talk shows and the political pundits don't mention the VAT solution because the press and media are owned or in bed with Corporate America.

In 2006, the Princeton economist, Alan Blinder, estimated that for the next decade off-shoring would cost the U.S. Economy an average of 3 to 4 million jobs per year. We are off-shoring jobs faster than we can create them. The recession ended over 2 ½ years ago and we wonder why the recovery is anemic. The economy would come alive by replacing the 35% corporate tax with a 6% VAT.

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 Making Government Work (University of South Carolina Press, 2008).

© 2012, Ernest F. Hollings. All rights reserved. Contact us for republication permission.

About Fritz Hollings

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 Representatives.

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