Understanding Washington

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


NOV. 5, 2015 -- Everybody complains that Washington does nothing but they don't seem to understand that Wall Street, the big banks and Corporate America pay the Congress and President to do nothing.

They want to keep the China offshore profits flowing. They don't want to annoy China. So, they do nothing about China's devaluation of its currency; do nothing about China's required transfer of technology; do nothing about China's closed market; do nothing about China's human rights. And Washington does nothing.

If the political pundits and editorialists would start publicizing the fact that Washington gets paid to do nothing, then something will happen. The people seem to enjoy the outrageous money that is spent in politics. The people seem to enjoy the race between Republican fundraising and Democratic fundraising. The Democratic Party goes after the Koch brothers and the Supreme Court's decision, Citizens United, which allows unlimited and unattributed corporate giving. But, they've never caught on to the simple solution passed by Congress in 1971 and 1973. Congress limited spending in federal elections and President Nixon signed the '73 law. Senator Strom Thurmond and I were limited to so much per registered voter -- about $687,000. My seventh time to be elected to the Senate in 1998, cost $8.5 million. A contested race for the U.S. Senate in South Carolina today would cost $12-$15 million. Outrageous!

The U.S. Supreme Court reversed the '73 decision on spending in Buckley vs. Valeo by equating free spending with free speech. We attempted to correct Buckley with the McCain-Feingold law, public financing, etc. But only a constitutional amendment empowering Congress to limit or control spending in elections will suffice. After 30 years of trying, I again proposed a constitutional amendment to limit spending in 2002. The Republicans in control of the Senate proposed a constitutional amendment to ban flag burning and asked that I withhold my spending amendment. I refused and no joint resolution was considered in the U.S. Senate in 2002, 2003 or 2004.

Located amongst 10,000 lobbyists in Washington, senators don't want to lose their six-year advantage of fundraising morning, noon and night. The people have yet to catch on. The fundraising has allowed the lobbyists to take control of Congress and you can't get a vote on immigration, gun control, etc. No one in Congress mentions a constitutional amendment to limit spending. Once spending is limited, the fundraising is limited, partisanship is limited, gridlock broken and the lobbyists lose control of Congress.

It's not a problem of the middle class but a problem of the country. The economy of the country is being drained. In December 2006, the Princeton economist Alan Blinder estimated that in 10 years Corporate America would offshore 30-40 million jobs. That's 3 or 4 million jobs a year. The economists attribute the loss of 9,000 jobs for every $1 billion deficit in the balance of trade. Last year, our deficit in the balance of trade was $505 billion which means we lost 4,545,000 jobs. Earlier this year, Ford announced a $2.5 billion plant in Mexico; General Motors a $5 billion plant in Mexico and Nabisco announced it was moving from Chicago to Mexico. Corporate America continues to offshore its research technology, production, jobs, payrolls - our economy. People think it's the middle class and income inequality but its offshoring our economy.
Economists complain about the "Great Recession" and lack of consumer confidence in the economy. The 2008 recession ended in June 2009 and it's not the lack of confidence but the lack of money. Imagine a country that you can't produce for a profit. That today is the United States of America. We want to keep our labor, environmental and health provisions but the President and Congress must make is profitable to produce in order to limit the offshoring.

The solution is to replace the 35 percent corporate tax with a 9.7 percent value-added tax (VAT). This immediately releases $2 trillion in offshore profits for corporate America to repatriate tax-free and create millions of jobs. It not only aligns the United States with the majority of countries on refusing to tax for offshore profits but it also would replace the payroll tax which would make it profitable to produce in the United States.

But no congressman, no senator, no President, no political pundit mentions a VAT that is used by 164 countries to compete in globalization. Germany also uses its 19 percent VAT to produce in the United States. BMW, Volkswagen, Siemens all produce the engines and vital parts in Germany, ship the parts for assembly in the United States at 3 percent cost, assemble the parts to make automobiles in the U.S. so that they have to pay no Corporate Tax and ship the finished automobile at 3 percent cost back to Europe for sale. For three years, the "ultimate driving machine," assembled in Greer, S.C., wasn't sold in the United States. It was shipped back to Europe for sale.

Those countries with a VAT helped put GM and Detroit into bankruptcy. We've got to replace the corporate tax with a VAT to compete in globalization but Wall Street, the big banks and corporate America oppose the VAT or 10 percent increase in the cost of imports. We can't wait on imports to defend the country and a superpower can't live on imports.

Senator Fritz 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).

© 2015, 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 website as a compendium of current and past positions on public issues. Learn more about Fritz Hollings.

The Hollings legacy

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