A strong economy

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


Hollings

JAN. 28, 2014 -- On Morning Joe (1/28/14) it was all about raising the minimum wage. The President and Congress keep attacking the result instead of the cause. We believe the economists wag about the "worst recession." The recession has been over three and a half years. The trouble with the economy is that it is being offshored - research, technology, production, jobs.

The Princeton economist Alan Blinder estimated in December 2006 that the U.S. would offshore in the next ten years 30-40 million jobs. The economy suffers not from a lack of consumer demand; its lack of consumer money. We are offshoring payrolls. Washington acts like we're not supposed to compete in globalization; that we must pursue the Council on Foreign Relations and Trilateral Commission's policy of free trade. The competition in globalization is closed markets (Japan and China), and Corporate America rushes to get in to the soon to be world's largest market - China. The problem is to limit the flow of Corporate America's offshoring enough to maintain a strong economy. We can't continue as a world power unless we produce steel, motor vehicles, machine tools, computers, etc - a strong economy.

The Wall Street Journal (1/27/13) headlines: "Steel Imports into the U.S. Surge". Highlighting a weak economy, the article states: "There's no major source of steel on the east coast anymore between Baltimore and New England." After World War II, we closed production causing shortages in the Korean War. President Truman called for the Defense Production Act of 1950, guaranteeing the nation the materiel necessary for our security. Today the Defense Production Act is ignored. Recently President Obama was begging Russia for helicopters for Afghanistan. The New York Times (12/20/13) reported on various countries furnishing the U.S. military with uniforms and clothing. Now, BusinessWeek (2/2/14) headlines: "Factory jobs are gone. Get over it." Corporate America is so intent on keeping the China profits flowing that it opposes the President and Congress developing a strong economy. A strong economy is not only needed for our defense but for foreign policy.

After Tiananmen Square in 1989, the U.S. obtained a Resolution in the United Nations to investigate human rights in China. China went to its economic friends in Africa and the Pacific and there has never been a hearing on the Resolution. When Japan seized China's ship captain, China withheld rare earth supplies from Japan. Japan promptly returned the ship captain. Today, nuclear weaponry has equalized military power. In foreign affairs "it's the economy, stupid".

A strong economy forbids increasing the national debt. The U.S. paid for all its wars, depressions, recessions and it took over 200 years to reach a national debt of $1 trillion in 1981. Now, the President and Congress act like there is no need to pay for government - there is no need for a strong economy. Given a balanced budget in 2001, Democrats and Republicans refused to pay for wars, tax cuts, prescription drugs, stimulation, bailouts, etc. and in thirteen years have increased the national debt $11.5 trillion.

Every Governor hustles for industrial investment but Washington acts like it's a given that the United States can't compete in globalization. The President and Congress neglect their duty of making it attractive for Corporate America to invest and produce in the United States.

The President and Congress must act like Governors:

1.) Replace the 35% Corporate Income Tax with a 7% value added tax. 150 countries compete in globalization with a VAT that's rebated on exports. The Corporate Tax is not rebated. This immediately releases $2 trillion in offshore profits for Corporate America to repatriate tax free, invest in the U.S. and create millions of jobs. CBO estimates that last year's Corporate Tax will produce $288 billion. A 7% VAT for 2013 would have produced $945 billion. This will allow the budget to be balanced in two years rather than ten.

2.) The President and Congress must protect items vital to a strong economy , like President Reagan protected steel, motor vehicles, computers and machine tools in 1984.

3.) President Obama can impose a surcharge on imports vital to a strong economy, like President Nixon in 1971. 4.) President Obama must enforce the Defense Production Act of 1950, like President Kennedy in 1961.

This is what I hope to hear from President Obama's State of the Union.

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).

© 2014, 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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