Neglect of duty

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


JAN. 23, 2014 -- The United States was born in a trade war (Boston Tea Party) -- which continues today. Globalization is nothing more than a trade war with the troops (Corporate America) fighting for our competition.

We must be prepared for this cold war as we are for the hot war. As other governments close their markets, demand technology, and protect production, our government must counter their predatory practices and protect production. To meet the competition in this trade war, we don't want to weaken our environmental, safety or health laws. We must protect production vital to a strong economy.

Robert Gates, the former Secretary of Defense has just published his book, Duty. The duty of the President and Congress is to develop and maintain a strong economy. No entrepreneur will invest unless his production is protected from predatory practices. The Founding Fathers enacted the Tariff Act of 1787 (two years before the Constitution), to protect our manufacture. In 1961, President John F. Kennedy held a Cabinet Hearing that determined textiles were vital to our national security. We couldn't send troops to war in a Japanese uniform. Then President Kennedy promulgated his Seven Point Program to protect textile production.

Now, the New York Times (12/20/13) reports on various countries furnishing the U.S. military with uniforms and clothing. A couple of years ago President Obama was begging Russia for helicopters for Afghanistan. The Defense Production Act of 1950 is not enforced. Our defenses are down in both the hot and cold wars. The President and Congress continue their fetish of "free trade" and "against protectionism". As Henry Clay exclaimed on the floor of the U.S. Senate in 1836 about free trade: "…it doesn't exist. It never will exist".

It's time to get real. Rather than federal aid for policemen, firemen and teachers and talking jobs, President Obama must act like a Governor - make the United States attractive for Corporate America to invest and produce. The President must tell the people:

1.) We are offshoring jobs faster than we are creating them and unless we make it attractive for Corporate America to invest in America, our country will end up a banana republic without bananas.

2.) We will maintain our workplace and environment but we need to attract enough investment and production for a strong economy.

3.) 150 countries compete in globalization with a value added tax that's rebated on exports.

The Corporate Tax is not rebated. An entrepreneur in the U.S. must pay the 35% Corporate Tax and when his exports reach China, another 17% VAT. A competitor can produce the same product in China, import it tax free to the United States and put the entrepreneur out of business. So we are going to replace the 35% Corporate Tax with a 7% VAT.

This immediately releases $2 trillion in offshore profits for Corporate America to repatriate tax free, invest and create millions of jobs. 4.) Last year's Corporate Tax produced revenues of $288 billion. A 7% VAT for 2013 would have produced $945 billion permitting Congress to balance its budget in two years rather than ten. 5.) We will enforce our trade laws and protect the production of items vital to a strong economy.

The reason this doesn't happen is money. Wall Street, the big banks and Corporate America want to keep the China profits flowing, the market up, so they contribute to the President and Congress against the VAT tax cut; to do nothing about China's and Japan's closed markets; to do nothing about China's devaluing its currency; to do nothing about enforcing trade laws against predatory practices - to do nothing. The President and Congress do nothing.

The President and Congress neglect their duty.

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).

© 2014, 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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