The grand charade
ERNEST F. HOLLINGS, former U. S. senator
2011 -- When President Obama says: "I am concerned about the fact
that the recovery that we're on is not producing jobs as quickly as I
want it to happen," the people feel there is no recovery. And when
Mark Zandi says on ABC: "We've dug ourselves into a big hole, and
it's going to take a long time to dig ourselves out," the people
feel that we're still digging.
are right. It's not an economic cycle; it's a trade war. Globalization
is nothing more than a trade war, and Washington is refusing to fight.
The President and Congress refuse to fight because their biggest contributor,
Corporate America, is making out like gangbusters with off-shoring profits
and no concerns of labor, health, safety, environment and legacy. Wall
Street and the big banks want to keep these off-shore profits flowing
so the business and financial elite, together with their economists, act
as if anything is done to compete in this war, it will start a trade war.
The President and Congress don't want to do anything to turn off their
contributors, so they join in the charade.
The President and Congress encourage the off-shoring of our economy with
a tax benefit. Corporate taxes are exempted on off-shore profits unless
repatriated, so the incentive is to reinvest for more off-shoring. If
Boeing off-shores its production to Japan or China, the government gives
Boeing a tax exemption. But if Boeing locates production in South Carolina,
the government sues Boeing. President Obama appoints the champion of off-shoring
the economy, Jeffrey Immelt, the CEO of General Electric, to create jobs
in the United States. GE has already off-shored a majority of its production
and jobs, and, shortly after his appointment, Immelt off-shored a $550
million research center to Brazil.
people are not waiting for the economy to turn around but for Washington
to turn around and fight in this trade war - start competing in
globalization. Quit giving us this innovation, retraining, green
jobs, recovery, charade. Don't give us a long-term plan for future
Congresses to pay the debt. Start paying it. Cut out the politics
and replace the corporate tax with a 6% VAT. Cut spending and start
paying for government."
in globalization or this trade war, 136 countries have a value added tax
that's rebated on export. With computerization, it's easily installed
and administered. The average VAT in globalization is 15%. But the U.
S. relies on the corporate income tax that's not rebated on export. So
in globalization, U. S. exports are not only emburdened with the corporate
tax, but are levied a 19% VAT when the export reaches Germany. We're losing
manufacture, not only from cheap labor off-shore, but Germany uses its
19% VAT to produce the President's green jobs in Charleston, S. C. Germany
produces the parts at high cost in Germany; ships the parts to Charleston
at 3% cost; assembles the parts at 3% cost, producing windmills 13% cheaper
than any domestic production. Any manufacture of a substantial nature
in the United States will soon face off-shore competition using cheap
labor and the VAT to put it out of business. Today, it's difficult to
produce for a profit in the United States.
To reverse this trend, to engage in the trade war and make it profitable
to produce in the United States, we need to eliminate the corporate tax
and replace it with a 6% VAT. This will promote exports and permit Corporate
America to repatriate $1 trillion in off-shore profits to create jobs
in the United States. Revenue for the 2010 corporate tax amounted to $194.1
billion, whereas a 6% VAT for 2010 amounts to $700 billion. Exemptions
of $70 billion for the poor, leaves $630 billion to pay down the debt.
Spending cuts that Congress agrees upon gives us more than $630 billion
to pay down the debt. With an average corporate tax of 23% being replaced
with a 6% VAT, those looking for tax cuts will be enthralled - even Grover
Norquist of the Americans for Tax Reform. The pledge that Grover Norquist
has obtained from Congressmen and Senators is against tax increases. If
Norquist objects to this tax cut, it's because he would lose control of
As Paul Krugman says, we're in a "slump that goes on and on."
But the slump will continue unless we expose the grand charade of the
financial and business elite. They are a fifth column in this trade war.
Their economists don't realize we're facing the controlled capitalism
of China that has a population and market of 1.3 billion to retain control.
China is determined to take over the world economically. It faces many
problems at home, but to extend its power globally, China is buying up
markets all around the world. We keep thinking that a nation gains preeminence
with its military, but China is proving in globalization, "it's the
The people are not waiting for the economy to turn around but for Washington
to turn around and fight in this trade war - start competing in globalization.
Quit giving us this innovation, retraining, green jobs, recovery, charade.
Don't give us a long-term plan for future Congresses to pay the debt.
Start paying it. Cut out the politics and replace the corporate tax with
a 6% VAT. Cut spending and start paying for government.
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,
Government Work (University of South Carolina Press, 2008).
Ernest F. Hollings. All rights reserved. Contact
us for republication permission.
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
Today, Hollings continues
to be influential in public affairs and offers this Web site as a compendium
of current and past positions on public issues. Learn
more about Fritz Hollings.
Hollings receives French honor
France honored retired
U.S. Sen. Fritz Hollings on in 2013 by awarding him the Legion of Honor for
his World War II service. More.
commentary via The Huffington Post
Please visit Sen.
Hollings' section of The Huffington Post where you can get an RSS of his
columns, subscribe by email or use social media.
here to learn more about Hollings' impressive and distinguished record
of public service.
the new book
University of South Carolina Press in 2008 published Making
Government Work, a new book by Sen. Hollings. Learn