JAN. 17, 2013 -- No longer in Washington, I try to withhold judgment. But when the best of writers, E.J. Dionne in the Washington Post (1/13/13) writes: "America is not in decline or retreat" -- please, tell me what we are doing right?
Domestic and foreign policy both are headed in the wrong direction and we play the game "the government is too big", "cut spending". Boehner, Cantor and McConnell have no credibility on cutting spending. For eight years, they helped President Bush cut taxes, wage wars, add prescription drugs to Medicare, stimulate and bailout - all without paying for them. They had eight years to cut spending but instead added $5 trillion to the national debt. Paying for all of its wars, recessions, depressions, stimulations and bailouts, it took two hundred years before the United States reached a national debt of $1 trillion in 1981. Boehner, Cantor and McConnell have had eight years to cut spending. Instead they helped President Bush add a thousand years of national debt to the debt. President Obama is no better. He's added a thousand years of national debt to the debt in four years. We've got to cut programs that we no longer can afford and increase revenues to pay for government. The right size of government is a government that's paid for.
Globalization is nothing more than a trade war with production looking for a country cheaper to produce. Countries like the United States, with a developed economy, move immediately with an industrial policy to protect its economy. Instead, the U.S. builds China's economy as it tears down ours. We think we are spreading Democracy in China but we are ruining Democracy at home. We refuse to compete in globalization. Instead we play the Wall Street game of stimulating the economy and profits when the economy and budget are on steroids. We complain about a lack of consumer confidence in the economy, a lack of consumer demand when it's lack of money. We offshore our economy as fast as we can.
Corporate America offshores its research, technology, innovation, production, jobs and payrolls to China. China takes our technology, alters it slightly, patents the alteration and soon the product becomes the article in trade. In a few years when China needs the jobs for its people, Corporate America will return home with nothing to produce. China knows what it is doing. It knows the U.S. is sensitive about casualties. It knows we retreated to the 38th parallel in Korea and knows we refused to bomb North Vietnam for fear that China would enter the War. It knows that any conflict with the United States is likely to go nuclear so it readies itself to become the economic superpower of the world. China buys strategic properties the world around and uses our Good Neighbor Policy to build ports and railroads.
In contrast, the United States puffs and blows militarily, deploying 196,000 G.I.'s the world around. The only threat to our security is drone killing which makes more Al Qaeda than it eliminates. We Drone kill in Afghanistan, Pakistan, Yemen, Somalia and now Mali. We can't get it through our heads that regardless of intelligence we can't change a countries culture militarily. President Obama stations 2500 Marines in Australia. Australia is not going to war with China. Neither are we.
We can sober up by replacing the 35 percent Corporate Tax with a 7 percent Value Added Tax. 150 countries compete in Globalization with a VAT. Not having a VAT in the U.S. is destroying our manufacture. An entrepreneur in the U.S. can start production, develop the market and be making a profit in two or three years but he has to pay the 35 percent Corporate Tax and when his exports reach Shanghai he has to pay a 17 percent VAT. A competitor in the United States can produce the same product in China, export back to the U.S. tax free and put the entrepreneur out of business. This 52 percent difference destroys manufacture in the U.S. The VAT is easily implemented with computers. The multinationals pay little Corporate Tax. Small business on Main Street pays the full 35 percent. The 2011 Corporate Tax produced revenues of $181.1 billion. A 2011 7 percent VAT would have produced $872 billion. Corporate America sits on $1 trillion in offshore profits waiting for the President and Congress to determine the increase in taxes. With the cancellation of the Corporate Tax all loopholes are closed, we have instant tax reform, and Corporate America has a trillion dollars to invest and create millions of jobs. With spending cuts, the VAT tax cut will permit us to balance the budget in two years rather than ten years.
All of this works like a charm except for money. When the Supreme Court in Buckley vs. Valeo struck down our spending limits in campaigns, we started raising money against each other - starting the partisanship and gridlock. People have no idea of the enormous sums of money in campaigns and the enormous advantage of Congress raising it. I raised $8.5 million in my seventh time to be elected to the U.S. Senate. This factors out to $30,000 a week, each week, every week for six years. Congress is afraid of Grover Norquist and the NRA because of money. Grover brags about beating President George H.W. Bush in 1992 because he broke his pledge. Wall Street, the big banks and Corporate America want to keep the China profits flowing, so they contribute to the President and Congress to do nothing. And the President and Congress do nothing.
Obama proved you could get reelected by campaigning rather than governing.
Question, will he continue campaigning on hot button issues like guns
and immigration or save the economy in globalization. The United States
was born in an industrial policy when the founding fathers adopted the
Tariff Act of 1787 - two years before the Constitution. This protectionism
worked so well that Edmund Morris writes in Theodore Rex that after a
hundred years the Colony was "$25 billion richer" than the Mother
Country. We need Corporate America to build our economy instead of China's.
Corporate America needs certainty. It must know that the government will
protect certain production. I passed Bills through both Houses of Congress
to protect textiles only to be blocked or vetoed by four Presidents. Neither
President George W. Bush nor President Obama enforced our trade laws.
If President Obama had enforced the Defense Production Act of 1950 like
President Kennedy did in 1961 to save the textile industry we wouldn't
have 7.8 percent unemployment in South Carolina and wouldn't be 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 create millions of jobs. Question: will President Obama
continue the campaign and go for the contributions or go for the country
with an industrial policy to save our economy?
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).
© 2013, Ernest F. Hollings. All rights reserved. Contact us for republication permission.
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