Political, not economic

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


OCT. 7, 2014 -- Globalization is nothing more than a trade war with production looking for a country cheaper to produce. David Ricardo's theory of comparative advantage in globalization is Japan's and China's closed market and predatory practices. With closed markets and predatory practices setting the competition, countries must move to protect and build their economies.

The United States was founded in a trade war (Boston Tea Party) and the Founding Fathers showed us how to protect and build the economy by enacting the Tariff Act of 1787 - two years before The Constitution and four years before Madison's First Amendment Rights.

The Princeton economist Alan Blinder estimated in December 2006 that the U.S. would offshore in the next ten years 30-40 million jobs. Our trouble is we are still averaging the offshoring of 3-4 million jobs and payrolls each year. And we wonder why the economy hasn't jumped back. The economists blame the Great Recession that has been over for five years. In the Washington Post (10/5/14) the economist Robert J. Samuelson writes the United States "…seem trapped between high debts and deficit demand and…there is no consensus on how to proceed." He goes on to state: "we've lost control of the economy between those who advocate 'stimulus' to strengthen demand and those who fear more debt." The problem is not economic but political.

Every Governor works to attract industry and develop their state's economy. Our trouble is that President Obama fails to enforce our trade laws to protect the economy and Congress fails to build the economy by making it profitable for Corporate America to produce in America, limiting the offshoring. Wall Street, the big banks and Corporate America want to keep the offshore profits flowing so they contribute to President Obama and Congress to do nothing about countries devaluing their currencies; for the President to do nothing about enforcing our trade laws against closed markets and predatory practices; for Congress to do nothing about passing a competitive tax for business; to do nothing about our balance in the deficit of trade and living on imports.

The President and Congress do nothing. If President Obama would enforce the Defense Production Act of 1950 like President Kennedy enforced in 1961, we wouldn't be begging Russia for helicopters or importing uniforms for our G.I.'s. If President Obama would enforce our trade laws against the deficit in the balance of trade like President Nixon in 1971, it would create millions of jobs. If President Obama would protect vital production as President Reagan did in 1984 when he protected steel, motor vehicles, computers and machine tools, it would create millions of jobs. If Congress would replace the devastating 35 percent Corporate Tax with a 7 percent value added tax that 160 countries use to compete in globalization, it would close all loopholes giving instant tax reform. This would immediately release $2 trillion in offshore profits for Corporate America to repatriate tax free, create millions of jobs and jumpstart the economy. This VAT tax cut also produces billions for Congress to balance the budget in two years rather than ten.

South Carolina's unemployment rate has jumped to 6.4 percent because we've lost the textile industry. We have the skills to make "the ultimate driving machine" for BMW and Boeing's Globemaster. That's because BMW manufactures the engines and key parts in Germany and uses Germany's 19 percent VAT to assemble the parts in Greer, SC. Toyota is doing the same thing in Alabama, Nissan in Mississippi and Volkswagen in Tennessee. Japan put GM and Detroit into bankruptcy as it made Toyota number one. GM announced that it is going for the China market; Ford is buying parts from China and Chrysler is owned by the Italians. The automobile, electronics, computer and machine tool industries are gone and we wonder why California has such a high unemployment rate (7.4 percent). Corporate America continues to offshore our research, innovation, technology, production, jobs and payrolls - our economy. The economists engage in the ying and yang of stimulus to strengthen demand and fear of more debt.

Once and for all our problem is political - the President and Congress - not economic.

Senator Fritz 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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