Cop out

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


JUNE 24, 2015 -- President Obama said it best: "Just because you refuse to use the 'N' word, you have not overcome racism." As Hillary Clinton said in Missouri: "Segregation in the schools still exists." We all know that segregation is the reason for the Republican Party in the South. As soon as a state elects a Republican Governor and a Republican Legislature, they move to gerrymander or segregate the blacks from their party. Congressman James Clyburn's Sixth District covers sixteen counties. That's ridiculous. Removing the Confederate Flag doesn't rid the country of racism.

Fast Track is a cop out for a trade agreement. We all know that President Obama's trade representative and Corporate America have haggled over the Transpacific Partnership Agreement for months, if not years, but Fast Track is a cop out for business to have its way and labor not considered. All labor knows is that previous trade agreements have cost jobs.

The President is caught in his own cop out. He maintains that TPP will not cost jobs but he says he won't sign Fast Track until trade adjustment assistance is passed to take care of the lost jobs. Under Fast Track, Members of Congress go into a secure room and read the agreement but they can't discuss classified sections; they can't clarify technical language. The most deliberate body, the U.S. Senate, can't deliberate and the trade agreement can't be amended. All the members can do is vote yes or no and the TPP is not called for a vote until President has fixed the vote.

With a balanced budget in 2001, President George W. Bush cut taxes, started wars, added prescription drugs to Medicare, stimulated and bailed out - all without paying for them; increasing the national debt $5 trillion in eight years. Now, President Obama has increased the national debt $7 trillion in six years. No one believes that we can get back to a balanced budget by cutting spending $12 billion. Grover Norquist's pledge against taxes is a cop out and cutting spending is the biggest cop out.

Doubling the minimum wage to develop the middle class is another cop out. "The rich are getting richer because of corporate greed" cries Senator Bernie Sanders -- another cop out. The rich are getting richer because the President and Congress fail to make it profitable for Corporate America to produce in America. The President and Congress fail to protect business's investment and production of items vital to a strong economy.

All the President and Congress have to do is replace the 35 percent Corporate Tax with a 5 percent VAT. This immediately releases $2 trillion in offshore profit for Corporate America to repatriate tax free, create millions of jobs and develop the middle class. When Congress competes in globalization; when business has to compete for workers, a middle class will develop. The Founding Fathers pointed the way with the Tariff Act of 1787 -- two years before the Constitution. The United States was built on protectionism. Free trade is a cop out. As Henry Clay said on the floor of the U.S. Senate in 1836 on Free Trade: "It never existed…it never will exist."

One hundred sixty four countries compete in globalization with a VAT that's rebated on exports. The Corporate Tax is not rebated on exports. A U.S. entrepreneur has to pay the 35 percent Corporate Tax on his production and an additional 17 percent VAT when his exports reach China. A U.S. competitor can produce the same product in China, import it tax free and put U.S. production out of business. Not having a VAT stultifies production in the U.S.

But business engages in a cop out by calling the VAT a sales tax. The VAT is no more than the cost of doing business. At present, Corporate America factors in its cost of doing business, imposes its profit and pays the Corporate Tax of 35 percent. Business loves the Corporate Tax because it is full of loopholes. One year GE paid no taxes. The VAT has no loopholes, is self-enforcing and permits the cutting of the size of government (IRS). Last year's corporate tax produced revenues of $327 billion. A 2014 5-percent VAT would have produced $898 billion; permitting Congress to balance the budget in two years rather than ten.

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).

© 2015, 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. Today, Hollings continues to be influential in public affairs and offers this website as a compendium of current and past positions on public issues. Learn more about Fritz Hollings.

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