How we got here

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

JAN. 7, 2013 -- First elected to the U.S. Senate in 1966, I had just voted against the Horse Bill when the most Senior Republican Senator, John Cooper of Kentucky, had come all the way across the Chamber tapping me on the shoulder and exclaiming: "Change that vote!" Senator Cooper exclaimed that he knew the Horse people in South Carolina and didn't want to see me get in trouble with the Horse people. I changed the vote and became a Cooper man from then on.


Six Democrats and six Republicans used to meet every Wednesday night: coats and ties off, the designated wife prepared dinner and we gave each other hell. We became fast friends. If it didn't hurt our state, we gave each other votes when needed. We wheeled and dealed like in the Lincoln movie. But Buckley vs. Valeo changed this. In 1973, Congress limited spending in federal elections. President Nixon signed it into law but the Supreme Court set aside the law. Fundraising began. The Democratic and Republican Senatorial Committees pressured the Senators to raise money against each other. One morning a staffer asked me about a fundraiser downtown for my opponent. I said: "So what?" "Every Republican Senator on your Commerce Committee except Senator Stevens was there" the staffer replied. I began thinking, if Republican Senators at the fundraiser wanted to get rid of me; I wanted to get rid of them. That started the partisanship. We spend most of our time trying to get the other side in trouble.

Washington fundraises morning, noon and night. We withhold voting so that members can get back and cast their vote. Schedules are arranged for breaks every month to fundraise. On Feb. 22, Washington's Birthday, a junior Senator used to read Washington's Farewell Address at noon and then we'd have votes in the afternoon. Now Lincoln's Birthday, Feb. 12th, has been merged with Washington's so that we that we can take a ten day break to go to California to fundraise. We used to have Policy Committee meetings every Thursday at lunch. Today, instead, the members go to the Party Headquarters nearby to get a sandwich and call for money for two hours. Weekends are spent back home fundraising. Fundraising puts the lobbyists on K Street in charge of government. Instead of meeting every Wednesday night, lobbyists have drinks together every night and know each Senator's lobbyist that can influence his vote. On important issues, the vote is made up by the lobbyists long before the roll is called. In fact, they tell the Leader or Speaker when to call the roll.

President Obama has lost his ability to lead. When Clinton led on the NAFTA vote, Evelyn Dubrow had the vote count in the House and I had the vote count in the Senate to kill NAFTA. But President Clinton gave Congressman Jake Pickle a Cultural Center in Texas, 2 C-17's for another Congressman in Texas, and played golf rounds changing the votes and passing NAFTA. President Obama can't do this now because the lobbyists are in charge. The only way to limit the lobbyists and give the Senator time to do his work is a Constitutional Amendment to empower Congress to limit spending in federal elections. I received a majority vote for such an amendment but never the two thirds required to pass a joint resolution to amend. The Governor's conference called and asked that States be included so States are ready to ratify.

Today, Congress has the advantage in fundraising and doesn't want the authority to limit money in campaigns. Instead, Congress engages in the best off Broadway show: enacting the fiscal cliff; shouting "the government is too big"; tax cuts; spending cuts. On Morning Joe, (1/2/12) Joe Scarborough, complaining that the Cliff Bill contained no spending cuts, exclaimed: "Everyone knows spending is the problem". $4 trillion in spending cuts would not be needed if the Cliff Bill didn't cut taxes $4 trillion. The problem is not spending, but paying for government. The right size of government is a government that's paid for.

"Bottom line: country or contributions."

-- Hollings

The Pulitzer Prize economist, Paul Krugman, wants to stimulate the economy when it's overstimulated. Given a balanced budget in 2001, President Bush cut taxes and waged wars without paying for them - adding $5 trillion to the national debt in eight years. Now President Obama adds $5 trillion in four years. We haven't paid for government in twelve years. The United States paid for all its wars, tax cuts, depressions, recessions and it took over two hundred years to increase the national debt to $1 trillion in 1981. Bush and Obama have increased the debt two thousand years of national debt. Now increasing 200 years of national debt every year, the budget and economy is on steroids. Borrowing for infrastructure is good. Borrowing $1 trillion a year for day to day government is the last thing we need. Interest cost on the national debt in 2012 was $437 billion (waste).

Corporate America develops the economy of China by offshoring its research, technology, innovation, production, jobs and payrolls to China. We need Corporate America to onshore its research, technology, innovation, production, jobs and payrolls to develop the economy of the United States. We can't prevent the offshoring but we've got to attract enough onshoring to maintain a strong economy by giving Corporate America certainty. Business knows taxes are going up and withholds a trillion dollars in offshore profits ready to repatriate and invest, waiting for the President and Congress to determine the increase. Instead the President and Congress have just cut $4 trillion in taxes.

We can stop this charade and give Corporate America certainty by cancelling the 35 percent Corporate Tax and replace it with a 7 percent Value Added Tax. Last year's Corporate Tax produced $181.1 billion in revenues. A 7 percent VAT for 2011 would have produced $872 billion in revenues. This tax cut with spending cuts permits Congress to balance the budget in two years instead of these ten year plans. This tax cut permits Corporate America to repatriate offshore profits tax free and invest and create millions of jobs in the United States. Replacing the Corporate Tax with the VAT will start rebuilding the economy. It eliminates all loopholes, gives instant tax reform, is self-enforcing, permitting a reduction in the size of government (IRS) and is easily implemented with computers. The multinationals have all the loopholes and pay little tax. Main Street is paying the full 35 percent. So this tax cut gives small business a break.

Then Corporate America needs certainty to know that we will enforce our trade laws to protect its investment. If President Obama would enforce the Defense Production Act of 1950, like President Kennedy in 1961, we would create millions of jobs instead of begging Russia for helicopters for Afghanistan. If President Obama would protect steel, motor vehicles, computers and machine tools, like President Reagan in 1984, it would give Corporate America certainty and create millions of jobs. But the President refuses to enforce the trade laws and Congress refuses to replace the Corporate Tax with a VAT. Why? Because Wall Street, the big banks, and Corporate America want to keep the China profits flowing. They contribute to Congress to do nothing to irritate China; or limit the profits; or compete in globalization. Congress does nothing. It just engages in the charade of growth, stimulation and tax cuts - everything but paying for government.

Instituting a VAT is not just a good idea. It's necessary. 150 countries compete in globalization with a VAT that's rebated on exports. Jones & Co. can start manufacturing in the U.S.; in three years develop the market and make a profit. Jones pays the 35 percent Corporate Tax and when its exports reach Shanghai pays another 17 percent VAT tax. Smith & Co. can offshore to China, produce the same product and export to the U.S. tax free and put Jones out of business. This 52 percent difference is killing manufacture in the United States.

Both sides lack credibility on the budget. President Obama rejected his Simpson Bowles Commission report on the budget that even his leader Senator Durbin favored. He hasn't submitted a budget for the last three years that the Democrat Senate would pass. Boehner, Cantor and McConnell all supported President Bush's tax cuts, wars, adding prescription drugs to Medicare, stimulation and bailouts - all without paying for them - adding $5 trillion to the debt. Now that President Obama's in, Boehner, Cantor and McConnell all want to pay for government only with spending cuts. Running $1 trillion deficits each year, they never list $1trillion in spending cuts. Now the debt limit crisis looms. Will the President and Congress go for the contributions, continuing the charade of not paying for government? Or go for the country by developing an industrial policy to survive in globalization by replacing the Corporate Tax with a VAT and enforcing our trade laws. Bottom line: country or contributions.

© 2013, 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.

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.

NEWS: 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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