NOV. 28, 2012 -- Apparently President Obama and Congress believe that they are not responsible for the economy; that all they have to do is let market forces work; that government is not responsible for the economy. They waxed eloquently about jobs in the campaign but never mentioned anything to make a CEO want to produce in the United States. Federal aid for policemen, firemen and teachers do not build an economy. It takes private investment. Government must make it profitable for Corporate America to invest and produce in the United States. We can maintain our standard of living by protecting items critical to our economy as President Reagan protected steel, motor vehicles, computers and machine tools in 1984.
studies the costs in the United States and offshore of capital, labor,
safety, health, environment and legacy costs. In China, the government
takes care of them. All a CEO has to do is put in a quality control guy;
check him daily on the internet or cell phone. The CEO has no worries.
He has certainty. With the U.S. Government running $1 trillion deficits
each year, the CEO's know taxes are going up. They've been waiting to
repatriate offshore profits for two years for the President and Congress
to determine the increase. There is no certainty.
is nothing more than a trade war with production looking for a country
cheaper to produce. Today, a CEO worries about where his competition is
investing. The CEO can be making a profit in the U.S. but if his competition
goes to China it could put him out of business. China and 149 countries
compete in globalization with a Value Added Tax that's rebated on exports.
Our corporate income tax is not rebated. A U.S. Manufacturer pays a 35
percent Corporate Tax and a 17 percent VAT when exports reach China. The
China competitor is bringing into the U.S. the same goods tax free. This
52 percent difference is killing manufacture in the United States. Congress
could correct this by replacing the 35 percent Corporate Tax with a 7
percent VAT. Last year's Corporate Tax produced $181.1 billion in revenues.
A 7 percent VAT for 2011 would have produced $872 billion.This
tax cut produces billions to pay down the debt and releases $1 trillion
in offshore profits for Corporate America to create millions of jobs in
the United States.
Obama and Congress must stop their nonsense of calling for "free
trade". The United States was born in a trade war- Boston Tea Party.
The Founding Fathers rejected David Ricardo's Free Trade Doctrine of Comparative
Advantage in agriculture and opted for manufacture by adopting the Tariff
Act of 1787 - two years before the Constitution. This industrial policy
of protectionism worked so well that Edmund Morris in Theodore Rex writes
(p 21) that after a hundred years the Colony was "$25 billion richer"
than the Mother Country. In globalization, markets and trade are controlled
War II, Japan closed its market, subsidized its manufacture; sold its
exports near cost making up the profit in its closed market. This bankrupted
General Motors and made Toyota number one. South Korea, Taiwan and other
countries followed suit putting South Carolina's textile industry out
of business. Tom Friedman always cites jobs that can't be filled for a
lack of skills (NY Times 11/18/12). We have the skills in South Carolina
to make the "ultimate driving machine" for BMW and the Globemaster
for Boeing. But South Carolina has 8.6 percent unemployment.
government completely controls its market. If you want to sell in China,
you must produce in China. To produce in China, you must surrender your
technology. China takes this technology, alters it slightly, patents it
and soon the China article becomes the article in trade. China realizes
that with nuclear weapons there is no military superpower. China uses
its large market to not only control trade but foreign policy. After Tiananmen
Square in 1989, the U.S. obtained a resolution in the U.N. 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. Two
years ago, Japan seized a China ship Captain. China withheld rare earth
supplies vital to Japan's computer industry and Japan quietly returned
the ship Captain. China aims to become the world's economic superpower
as the United States goes broke.
Obama would politic the Congress for a VAT tax cut to stop the deficit
spending and create jobs; if he would protect our vital production to
give Corporate America certainty; if he would organize the economy as
well as he had Jim Messina organize the vote, the U.S. will come out on
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.
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