AUG. 10, 2015 -- The Republican debates revealed that the Republican Party suffers from two strains. One, the anti-government strain represented by the Tea Party - against government's size; against regulation; against taxes, etc. The second strain, represented by Donald Trump, is against politicians; against national debt of $18 trillion; is for immigration reform; for Washington doing something, etc.
The FOX panel busied themselves with "gotcha" questions. They ignored concerns of present interest like infrastructure. The Congress is about to rob the Strategic Petroleum Reserve to pay for the Highway Trust Fund. No questions about this or other infrastructure needs. With the Supreme Court requiring unlimited spending in campaigns, the lobbyists and billionaires have taken control of Congress. Money is a cancer on politics. No question about a Constitutional Amendment empowering Congress to limit or control spending in elections like Congress did in 1971 and '73. There was little discussion of ISIS. Rand Paul talked about Humvees and Ted Cruz promised to destroy ISIS in ninety days.
But, no question about Saudi Arabia producing ISIS. In Saudi Arabia, there is no separation of Church and State. The State or Emirs control not only religion, but education. The Saudi's require the teaching of the Salafi or Wahhabi version of the Muslim religion that is intolerant of other Muslims. In the ninth grade, youngsters are taught that Christians and Jews are infidels; ought to be eliminated; ought to be beheaded. ISIS is only practicing what they have learned in the ninth grade. Saudi Arabia is creating more ISIS than we can eliminate. Of course the Saudi government will continue to teach religion, but we must get a commitment from Saudi Arabia not to teach violence against other religions. No question on trade. The United States is living on imports. Last year our deficit in the balance of trade was $505 billion. The economists attribute the loss of 9,000 jobs for every $1 billion deficit in the balance of trade which means we lost 4,545,000 jobs last year.
Ford recently announced (Reuters Commercial Article 4/17/15) a $2.5 billion investment in Mexico to build engines and transmissions, creating 3,800 jobs. The same article mentions that General Motors will invest $5 billion in Mexico. In December 2006, the Princeton Economist Alan Blinder estimated that in the next ten years Corporate America would offshore 30-40 million jobs. Corporate America continues to offshore our research, technology, production, jobs, payrolls - our economy. No questions about offshoring our economy.
Our main concern is economic growth. Republicans think all taxes are unfair but Mike Huckabee mentioned a "fair" tax for growth and Rick Santorum proposed a flat tax for economic growth which is unfair. A flat tax of 5 percent on one making $1 million a year and another making $35,000 a year is unfair. As BusinessWeek (8/3-8/9/15) quoted Bruce Bartlett, an official for the Reagan Administration, "If there was a tax cut that could get the economy growing at four percent, any politician - whether it's Jeb or Bernie Sanders would be pushing it."
There was no mention of a Value Added Tax. 164 countries compete in globalization with a VAT that's rebated on exports. The Corporate Tax is not rebated. Not having a VAT stultifies manufacture in the United States. An entrepreneur producing in the U.S. has to pay the 35 percent Corporate Tax and a 17 percent VAT when his exports reach China. A U.S. competitor can produce the same product in China, import it tax free into the U.S. and put the entrepreneur out of business. At present the Corporate Tax is full of loopholes for the multinationals which pay little or no tax. The Main Street merchant or small business has to pay the full 35 percent tax.
has no loopholes and is self-enforcing, permitting Congress to reduce
the size of government (IRS). Congress could easily replace the 35 percent
Corporate Tax with a 5 percent VAT. This would immediately release $2
trillion in offshore profits for Corporate America to repatriate tax free,
creating millions of jobs; eliminating income inequality and building
the middle class. Last year's 35 percent Corporate Tax produced $327 billion
in revenues; a 2014 5 percent VAT would have produced $898 billion - permitting
Congress to balance its 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
The Hollings legacy
Read the book
Receive commentary via The Huffington Post