The ox is in the ditch

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

FEB. 11, 2013 -- We are at the crossroads. Economists believe that a severe recession was not properly stimulated but if we show patience and continue to spend and stimulate, a recovery will occur. Realists realize the recession has been over 3 ½ years; that the reason for the slow growth is the offshoring of our economy and no policy to protect our economy.


Hollings

In 2006, the Princeton economist Alan Blinder estimated that in ten years the U.S. would offshore 30-40 million jobs. The Economist special report on offshoring (1/25/13) notes: "…according to a survey conducted by the Harvard Business School last year, many firms are still deciding against basing activities in America". We continue to offshore our research, technology, innovation, production, jobs, payrolls and blame the consumer for not having confidence in the economy. It's not lack of confidence, its lack of money. Offshoring is the culprit.

Globalization is nothing more than a trade war with production looking for a country cheaper to produce. China with its controlled production, controlled market, and its controlled trade is the superpower in this war. China sets the competition and developed countries must protect their economies with an industrial policy to survive.

The Founding Fathers faced the same crossroads in a trade war -- The Boston Tea Party. Thomas Jefferson contended that agriculture could build a strong economy. Alexander Hamilton contended that it took manufacture. Congress opted for manufacture by adopting an industrial policy - The Tariff Act of 1787. This protectionism worked so well that Edmund Morris writes in Theodore Rex that after 100 years the Colony was "$25 billion richer" than the Mother Country: "…the excellence of her (U.S.) manufactured products guaranteed her dominance of world markets".

"The ox is in the ditch. Unless America has an awakening, the economy will be drained and those "rights", "fairness" and the economy that the media and pundits wax about will be gone. "

-- Hollings

The Economist special report emphasizes the lack of a policy to protect our economy in globalization: "America's government is not making the country's business environment attractive enough for companies to want to come back" (Economist 1/25/13). Corporate America likes certainty. It withholds $1 trillion in offshore profits because it knows taxes are going up. It awaits the President and Congress to determine the increase.

Ten year plans for later Congresses to cut spending is uncertainty. Certainty is eliminating the 35 percent Corporate Income Tax and replacing it with a 7 percent Value Added Tax. This releases $1 trillion in offshore profits for Corporate America to repatriate tax free; invest and create millions of jobs in the United States. But we refuse to enforce our trade laws to give Corporate America the certainty that its investment will be protected.

If we enforced the Defense Production Act of 1950, like President Kennedy in 1961to protect the textile industry we would create millions of jobs and wouldn't be begging Russia for helicopters for Afghanistan. If we imposed a surcharge on motor vehicle imports, as President Nixon did in 1971 when our trade deficit was a miniscule of what it is today, we wouldn't have needed to bailout Detroit. If President Obama would protect steel, motor vehicles, computers and machine tools like President Reagan in 1984, it would create millions of jobs. The VAT tax cut and enforcement of trade laws comprises an industrial policy.

Wall Street, the big banks and Corporate America want to keep the China profits flowing. Corporate America doesn't want the U.S. to compete in globalization. It opposes enforcement of our trade laws because it will complicate its production in China. It opposes a VAT because it will increase the cost of its China imports by 7 percent. So Wall Street, the big banks and Corporate America contribute to the President and Congress to do nothing. The President and Congress do nothing.

Contributions are necessary in politics. But contributions to the President and Congress to not do their jobs; contributions against the interests of the United States is treasonous and catastrophic.
The media, commentators, and political pundits talk about the economy but don't distinguish China's controlled capitalism from our free market capitalism. They fail to warn that the U.S. can't survive the competition in globalization without an industrial policy to protect against China's predatory practices. The pundits never talk about the lack of an industrial policy. All weekend the pundits talked about drone killing. They didn't talk about Corporate America killing the U.S. economy. They didn't talk about Corporate America's contributing so it can drain our economy. Federal aid for policemen, firemen and teachers doesn't build a strong economy.

The pundits don't mention that it takes private investment to build a strong economy. They don't mention that the U.S. has no policy or plan to attract private investment. It's obvious that Corporate America must compete in globalization; that the government can't outlaw offshoring. It's also obvious that the United States must compete in globalization; that the government can't punish Corporate America but has to reward it. As the Economist observes, the need is to make it attractive enough for Corporate America to come home and maintain a strong economy. The VAT tax cut and enforcement of our trade laws will start bringing Corporate America home. But if all of business; if all of commentators and pundits; all of government think that we shouldn't have an industrial policy to compete in globalization - that's all the people know.

The Financial Times has just headlined "US economy slips into reverse" (1/31/13). The ox is in the ditch. Unless America has an awakening, the economy will be drained and those "rights", "fairness" and the economy that the media and pundits wax about will be gone.

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).

© 2013, 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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