FEB. 11, 2013 -- We are at the crossroads. Economists believe that a severe recession was not properly stimulated but if we show patience and continue to spend and stimulate, a recovery will occur. Realists realize the recession has been over 3 ½ years; that the reason for the slow growth is the offshoring of our economy and no policy to protect our economy.
the Princeton economist Alan Blinder estimated that in ten years the U.S.
would offshore 30-40 million jobs. The Economist special report on offshoring
(1/25/13) notes: "
according to a survey conducted by the Harvard
Business School last year, many firms are still deciding against basing
activities in America". We continue to offshore our research, technology,
innovation, production, jobs, payrolls and blame the consumer for not
having confidence in the economy. It's not lack of confidence, its lack
of money. Offshoring is the culprit.
is nothing more than a trade war with production looking for a country
cheaper to produce. China with its controlled production, controlled market,
and its controlled trade is the superpower in this war. China sets the
competition and developed countries must protect their economies with
an industrial policy to survive.
Fathers faced the same crossroads in a trade war -- The Boston Tea Party.
Thomas Jefferson contended that agriculture could build a strong economy.
Alexander Hamilton contended that it took manufacture. Congress opted
for manufacture by adopting an industrial policy - The Tariff Act of 1787.
This protectionism worked so well that Edmund Morris writes in Theodore
Rex that after 100 years the Colony was "$25 billion richer"
than the Mother Country: "
the excellence of her (U.S.) manufactured
products guaranteed her dominance of world markets".
The Economist special report emphasizes the lack of a policy to protect our economy in globalization: "America's government is not making the country's business environment attractive enough for companies to want to come back" (Economist 1/25/13). Corporate America likes certainty. It withholds $1 trillion in offshore profits because it knows taxes are going up. It awaits the President and Congress to determine the increase.
Ten year plans for later Congresses to cut spending is uncertainty. Certainty is eliminating the 35 percent Corporate Income Tax and replacing it with a 7 percent Value Added Tax. This releases $1 trillion in offshore profits for Corporate America to repatriate tax free; invest and create millions of jobs in the United States. But we refuse to enforce our trade laws to give Corporate America the certainty that its investment will be protected.
If we enforced
the Defense Production Act of 1950, like President Kennedy in 1961to protect
the textile industry we would create millions of jobs and wouldn't be
begging Russia for helicopters for Afghanistan. If we imposed a surcharge
on motor vehicle imports, as President Nixon did in 1971 when our trade
deficit was a miniscule of what it is today, we wouldn't have needed to
bailout Detroit. If President Obama would protect steel, motor vehicles,
computers and machine tools like President Reagan in 1984, it would create
millions of jobs. The VAT tax cut and enforcement of trade laws comprises
an industrial policy.
the big banks and Corporate America want to keep the China profits flowing.
Corporate America doesn't want the U.S. to compete in globalization. It
opposes enforcement of our trade laws because it will complicate its production
in China. It opposes a VAT because it will increase the cost of its China
imports by 7 percent. So Wall Street, the big banks and Corporate America
contribute to the President and Congress to do nothing. The President
and Congress do nothing.
are necessary in politics. But contributions to the President and Congress
to not do their jobs; contributions against the interests of the United
States is treasonous and catastrophic.
don't mention that it takes private investment to build a strong economy.
They don't mention that the U.S. has no policy or plan to attract private
investment. It's obvious that Corporate America must compete in globalization;
that the government can't outlaw offshoring. It's also obvious that the
United States must compete in globalization; that the government can't
punish Corporate America but has to reward it. As the Economist observes,
the need is to make it attractive enough for Corporate America to come
home and maintain a strong economy. The VAT tax cut and enforcement of
our trade laws will start bringing Corporate America home. But if all
of business; if all of commentators and pundits; all of government think
that we shouldn't have an industrial policy to compete in globalization
- that's all the people know.
Financial Times has just headlined "US economy slips into reverse"
(1/31/13). The ox is in the ditch. Unless America has an awakening, the
economy will be drained and those "rights", "fairness"
and the economy that the media and pundits wax about will be gone.
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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