Too much power

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


JUNE 11, 2014 -- I'm not worried about the middle class. I'm not worried about the rich or inequality. I'm worried about the country. I 'm worried about the country's economy. Wall Street, which includes the Big Banks and Corporate America, has the President and Congress constantly seeking growth in the economy - so much so that the economy suffers from an enlarged debt.

Now a Professor in the Harvard Business School, Gautum Mukunda, writes in the Harvard Business Review (6/4/14) that Wall Street exercises too much power in the economy. He states: "The American economy is suffering from an enlarged heart" and he lists several reforms to correct "the enlarged heart". Wall Street's marijuana need of "growth" in the economy excuses Washington's scandalous conduct. The richest nation continues on borrowed billions for fourteen years.

In 2001, we gave President George W. Bush a balanced budget. The first thing he called for was tax cuts for "growth" in the economy. Then the Afghanistan War. We've always paid for our wars but Bush said we didn't need to pay for the Afghanistan War because of the need for "growth". Then, he instituted prescription drugs, stimulations, bailouts, government spending - all without paying for them -increasing the national debt $5 trillion in eight years.

Now, President Obama increases the national debt $7 trillion in six years. The U.S. paid for all its wars, depressions, recessions, government and it took over 200 years to incur a national debt of $1 trillion in 1981. Bush and Obama have increased the national debt $12 trillion in fourteen years. No one mentions it. CBO estimates that the deficit this year will be $514 billion. That means that we'll borrow half a trillion dollars this year to keep the doors open. The interest costs on the national debt already amounts to $423 billion and in ten years, CBO estimates that the interest cost will be $1.2 trillion.

Absolute waste. Nobody cares.

Wall Street supports this scandalous conduct. It could care less about the economy of the U.S. It cares about the economy of China. Wall Street wants to keep the China profits flowing, to keep the market up. It contributes to the President and Congress to oppose making it attractive to invest and produce in the U.S.; to oppose the VAT tax cut and to oppose enforcing our trade laws against the closed market and predatory practices of China. Wall Street says the VAT is complicated, difficult to administer. 160 countries use the VAT, that's rebated on exports, and don't find it complicated. In fact, foreign countries use the VAT to put our automobile industry out of business. BMW ships the parts to Greer, SC, pays American workers to assemble the parts and for the first five years BMW shipped the assembled cars back to Europe.

Germany has a 19 percent VAT and BMW makes a big profit after assembling and shipping costs. Now for sale in the U.S., Mercedes, Nissan, Toyota, Volkswagen, Hyundai, Kia follow suit and Detroit goes broke. Not having a VAT stultifies manufacture in the U.S. An entrepreneur in the U.S. has to pay the 35 percent Corporate Tax, that's not rebated on exports, and when his exports reach China, a 17 percent VAT. A U.S. competitor can produce the same product in China, import it tax free, and put the entrepreneur out of business. All the economists talk of The Great Recession. The Great Recession has been over five years. The failure to limit the offshoring of our economy by making it attractive for Corporate America to invest and produce in America is the culprit.

I have been suggesting the replacement of the 35 percent Corporate Tax with a 7 percent VAT to all Senators, Republican and Democrat. This tax cut would immediately release $2 trillion in offshore profits for Corporate America to repatriate tax free and create millions of jobs.

Last year's Corporate Tax produced revenues of $288 billion in revenues. A 7 percent VAT for 2013 would have produced $945 billion permitting Congress to balance the budget in two years rather than ten. Congress says it's for tax cuts and tax reform to close loopholes. The VAT tax cut closes all loopholes, giving instant tax reform.

Wall Street contributes to the President and Congress against tax cuts and against protecting products vital to a strong economy. Wall Street gets rich as the United States goes broke.

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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