Critical needs ignored

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


NOV. 7. 2012 -- The Presidential campaign ignored the real needs of the country. Four problems - four solutions.

First, Congress needs to take the government back from the lobbyists. When I came to the Senate in 1966, six Republicans and six Democrats met every Wednesday night - coats and ties off, the designated wife prepared a salad and we gave each other hell. We became fast friends. But after the Supreme Court in Buckley v. Valeo overturned our attempt to limit spending in campaigns we were forced to constantly raise money against each other - resulting in partisanship.

Today lobbyists in Washington work with each other. Important votes are fixed by the lobbyists long before the roll is called. In fact, lobbyists tell the leader when to call the roll. Lyndon Johnson couldn't lead the Senate today. Money, lobbyists control. Congress can limit the fundraising and take control of the government by limiting spending in campaigns as Congress did in 1973. To get by the Supreme Court, Congress needs to amend the Constitution: "the Congress is empowered to regulate or control spending in federal elections." This doesn't commit to a particular solution. Once ratified a later Congress can agree on limiting so much per registered voter; provide public financing, or any other solution. Once spending in campaigns is limited; fundraising is limited; lobbyists are limited; partisanship is limited and Congress has time to do its work.

Second, we must pay for government - not plan to pay. In 2001 we gave President Bush a balanced budget but he and President Obama have refused to pay, adding $10 trillion to the debt in twelve years. Now everyone is running around with plans for later Congresses to pay. Ryan's Budget doesn't balance for thirty years. Nonsense. Congress can pay for government now by replacing the 35% Corporate Income Tax with a 7% Value Added Tax. 150 countries compete in globalization with a VAT that's rebated on exports. The Corporate Tax is not rebated. A U.S. Manufacturer exporting to China pays the 35% Corporate Tax and is levied a 17% VAT when exports reach Shanghai. But a China manufacturer exports to the U.S. tax free. This 52% difference is killing manufacture in the United States.

The Corporate VAT is not regressive, needs no exemptions and eliminates all loopholes - instant tax reform. Last year's Corporate Tax produced $181.1 billion in revenues. A 7% VAT for 2011 would have produced $872 billion. This tax cut, with spending cuts, will balance the budget in two years. Eliminating the Corporate Tax releases $1 trillion in offshore profits for Corporate America to create jobs in the United States.

Third, we make wars in Iraq, Afghanistan, Pakistan, Somalia and Yemen; threaten wars in Syria and Iran, but refuse to fight in the trade war in which the world is engaged. Globalization is nothing more than a trade war with production looking for a country cheaper to produce. This puts countries protecting their economies. Tax cuts and federal aid for policemen, firemen and teachers don't build a strong economy. It takes private investment. The President and Congress must make it profitable to invest in the United States and protect the investment. The VAT tax cut is a good start.

The United States was founded in a Trade War - Boston Tea Party. Instead of calling for "free trade" the Founding Fathers rejected David Ricardo's Comparative Advantage in agriculture and opted for manufacture by enacting the Tariff Act of 1787 - two years before the Constitution. This protectionism worked so well that Edmund Morris in Theodore Rex writes that after a hundred years the Colony was "$25 billion richer" than the Mother Country. But Wall Street, the big banks, and the U.S. Chamber of Commerce want to keep the China profits flowing. So they shout "Free trade! Protectionism!" and contribute to the President and Congress to do nothing. The President and Congress do nothing.

In 2006 the Princeton economist Alan Blinder estimated that in ten years the U.S. would offshore 30-40 million jobs or an average of 3-4 million jobs a year. David Wessel reports in the Wall Street Journal (4/18/12) "between 2007 and 2010 (U.S. Firms) added 200,000 U.S. jobs and 600,000 outside the U.S. …" BusinessWeek headlined (10/14/12) "despite profits near record highs many executives are planning to trim their payrolls." We lose 4 million jobs a year due to our deficit in the balance of trade. Great Recession? The recession has been over for three years. We are having a weak recovery because we are offshoring more jobs than we are creating.

"We must pull in our military horns and return to our Good Neighbor Policy. In foreign policy - it's the economy stupid!"

-- Hollings

The security of the United States rests on a three legged stool: values, military and economic. The values and military legs are strong. The economic leg is fractured. We must enforce our trade laws and protect our economic security. If Presidents would protect the economy like President Nixon in 1971 by levying a 10% surcharge on imports when our trade deficit was a minuscule of what it is today it would create millions of jobs. If Presidents would protect steel, motor vehicles, computers and machine tools like President Reagan in 1984 we could create millions of jobs.

Finally, we must compete with China becoming an economic superpower. China saw us retreat to the 38th parallel in the Korean War. China watched us avoid bombing North Vietnam for fear of bringing in China. China knows it has manpower superiority over the United States and any hot war would go nuclear. So China opts for the economic. In 1989 after Tiananmen Square, the U.S. obtained a resolution in the United Nations to investigate human rights in China. China went to its economic friends in Africa and the Pacific and there has never been a hearing on the resolution. China matches our technology and positions itself to become the world's economic superpower. It buys strategic properties around the world. It furnishes work crews and assistance while the U.S. drone kills - making enemies.

We have 196,000 G.I's stationed around the world and threaten war everywhere. Australia is not going to war with China. We are not going to war with China. Stationing 2,500 Marines in Australia is embarrassing. We must pull in our military horns and return to our Good Neighbor Policy. In foreign policy - it's the economy 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 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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