In real trouble
By ERNEST F. HOLLINGS, former U. S. senator
JAN. 14, 2011
-- Time magazine's cover article, Where the Jobs Are, Zachary Karabell
writes "There is no going back, and the manufacturing jobs that have
been lost are gone forever." Thank heavens, our founding fathers
didn't feel that way.
In the beginning, the Mother Country, calling for free trade to maintain its colonization, restricted manufacturing in the Colony. Pursuant to David Ricardo's doctrine of "comparative advantage," England told the future United States: "You have a comparative advantage in timber, and we have a comparative advantage in manufacture. So exercising each's comparative advantage both countries will engage in free trade." Trade wasn't free. England used the Colony's timber to manufacture ships, but the Navigation Act of 1635 required exports from the Colony to be carried in English bottoms.
Hamilton rallied the forefathers on manufacturing, publishing his Report
on Manufacturers in 1791, and the Constitution of 1787 called on Congress
to regulate trade both domestic and foreign. The founding fathers were
so intent on regulating trade that they could agree on trade in 1787,
but it took the forefathers four more years before they could agree on
first amendment rights. The first act of the first Congress on July 4,
1789, was a protectionist tariff bill. We built the United States into
an industrial power with protectionist tariffs, not passing the income
tax until 1913. Edmund Morris in his book, "Theodore Rex," describes
the nation at the turn of the century: "The first year of the new
century found her worth twenty-five billion dollars more than her nearest
rival, Great Britain, with a gross national product more than twice that
of Germany and Russia. The United States was already so rich in goods
and services that she was more self-sustaining than any industrial power
in history." At the time, President Theodore Roosevelt exclaimed
in a letter: "Thank God I'm not a Free Trader." Morris writes:
"Current advertisements in British magazines gave the impression
that the typical Englishman woke to the ring of an Ingersoll alarm, shaved
with a Gillette razor, combed his hair with Vaseline tonic, buttoned his
Arrow shirt, hurried downstairs for Quaker Oats, California figs, and
Maxwell House coffee, commuted in a Westinghouse tram (body by Fisher),
rose to his office in an Otis elevator and worked all day with his Waterman
pen under the efficient glare of Edison lightbulbs."
would have people believe that the recession is the only cause of job
loss. Off-shoring is more the cause. Alan Blinder, the Princeton economist,
estimated in February 2007, long before the recession, that the country
in ten years would lose thirty to forty million jobs to off-shoring. In
the last ten years we've lost a third of our manufacture. And we are losing
job benefits, job safety, environmental protections -- our standard of
living. At this rate, we'll lose our democracy.
is nothing more than a trade war with production looking for a cheaper
country to produce. Off-shoring hemorrhaged under President Bush and continues
unabated under President Obama. And the biggest farce today is that President
Obama has to get right with business. Business chants "free trade,"
"protectionism," and opposes the government competing in globalization.
President Obama chants "free trade," "protectionism,"
and refuses to compete in globalization by enforcing our trade laws. If
the President enforces our trade laws, coming down on his head to defeat
him will be Wall Street, the big banks, the Business Roundtable and the
United States Chamber of Commerce. So President Obama does nothing.
A VAT is on consumption rather than production. The more you consume, the more you pay. The less you consume, the less you pay. The poor that are required to spend most of their income on food, health, and housing, can be exempted. But with exemptions, a 5% VAT will bring in $400 billion more than the corporate tax, and we can start paying down the debt. The corporate tax is not rebated on exports, but the VAT is. This will immediately promote exports and create jobs. The VAT substitution will immediately free up Corporate America's $1 trillion in off-shore profits that can be repatriated tax free for production and jobs. The average corporate tax is 27%. Replacing it with a 5% VAT is cutting taxes.
Obama can bring the jobs home and rebuild our economy by cutting taxes.
But instead of going for the country, he goes for the campaign. He hires
Bill Daley from J. P. Morgan Chase to help raise a billion dollars for
the campaign. This is the same financial crowd that got us into trouble.
Two more years of this nonsense, we'll really be in trouble.
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 the recently published book, Making Government Work (University of South Carolina Press, 2008).
© 2011, Ernest F. Hollings. All rights reserved. Contact us for republication permission.
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