12, 2012 -- The US continues to live in a dream world. The President,
The Congress, Republicans, Democrats - Washington thinks it's in charge
of the world's economy while it depletes the US economy. After World War
II Japan closed its market, subsidized its manufacture, and sold its imports
at cost, making up the profit of the closed market. Toyota became number
one as GM went bankrupt. Now China sets the competition in globalization.
In order to sell in China one must produce in China. In order to produce
in China Corporate America must surrender its technology. China devalues
its Yuan, controls its labor, health, safety, environment, legacy costs,
banking, subsidies, market - its economy. And Corporate America rushes
pell-mell to profit in China.
Globalization is nothing more than a trade war with production looking for a country cheaper to produce. To survive in globalization nations develop an industrial policy to maintain their economies. The US has the makings of an industrial policy but fails to compete in globalization. Given a balanced budget in 2001 Washington stimulated the economy almost 10 trillion dollars in 12 years, bailed the economy boat as fast as it could, ignored the off-shoring hole in the bottom, increased the debt and lost jobs.
economy has 5.2 million fewer jobs now than it did four years ago, even
as the population has grown," Wall Street Journal -- 3/10/12. We
can solve the jobs, debt, and off-shoring problems by taking the tax benefit
to off-shore jobs and give it to Corporate America to onshore jobs - replace
the 35% Corporate Tax with a 6% VAT. The 2010 Corporate Tax produced $194.1
billion in revenues. A 2010 6% VAT produces $700B in revenues. Exemptions
for the poor leave billions to pay down the debt. The VAT is on consumption
instead of income - the more you spend the more you pay. A VAT has no
loopholes giving instant tax reform. Rebatable on exports, the VAT promotes
exports. This tax cut releases $1.2 trillion in off-shore profits for
Corporate America to invest and create millions of jobs.
Street, the big banks and Corporate America want to keep the off-shore
profits flowing. In China CEO's have no labor, safety, environmental or
legacy worries. The CEO's don't want to come home and go to work. So they
howl: "The VAT is regressive; the VAT adds to the sales tax."
False. Exemptions for the poor negates regressivety. The 6% VAT is added
at each stage of manufacture, factored in to the cost of production instead
of factoring in the 35% corporate tax.
141 countries compete in globalization with a VAT. Today an entrepreneur can start a production in the United States and after a few years of success someone could go to China and put the US production out of business. US exports are double taxed - the corporate tax and levied a 17% VAT when exports reach China. China's exports to the US are tax free. Germany uses its 19% VAT to produce windmills in Charleston, SC. Producing the parts in Germany; shipping the parts at 3% cost; assembling the parts at 3% cost in the US; Germany produces green jobs 13% cheaper than any domestic production. In globalization trade laws must be enforced.
Obama enforced the War Production Act instead of begging Russia for helicopters
for Afghanistan it would create millions of jobs. If President Obama levied
a 10% surcharge on imports like President Nixon did in 1971 when our trade
deficit was a miniscule of a today's, it would create millions of jobs.
If President Obama protected steel, motor vehicles, computers, and machine
tools like President Reagan did in 1984, it would create millions of jobs.
If President Bush and President Obama had levied a tariff on automobile
imports like Brazil there would have been no need for bankruptcy and a
bailout. Incentives for research, a VAT, avoiding deficit spending, avoiding
deficits in the balance of trade, enforcing trade laws, protecting basic
production, all comprised an industrial policy. The US is going out of
business for the want of an industrial policy.
the big banks and Corporate America oppose an industrial policy crying:
"It will start a trade war." We are in a trade war with this
cabal fighting against us. Wall Street, the big banks and Corporate America
contribute to the President, Congress, Republicans and Democrats to oppose
an industrial policy, to do nothing to compete in globalization. So Washington
does nothing. Washington continues to subsidize the off-shoring of jobs;
refuses to enforce trade laws, refuses to develop an industrial policy
while Corporate America shouts "free trade" as it depletes the
economy of the US and develops China's closed market.
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).
© 2012, Ernest F. Hollings. All rights reserved. Contact us for republication permission.
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