FEB. 22, 2016 | This morning's Wall Street Journal (2/22/16) headlines an article by Martin Feldstein: "The U.S. Economy is in Good Shape." Feldstein, an eminent economist, knows what he is talking about. I am not an economist but I know from having listened to the best economists for 30 years on the Budget Committee that no one is in charge of building and protecting the economy of the United States.
We were spoiled in the twentieth century by Corporate America fashioning the economy. But here in the twenty first century, with globalization, Corporate America is fending for itself. Globalization is nothing more than a trade war with production looking for a country cheaper to produce. In globalization, the Congress of the United States must protect and build a strong economy.
Fathers pointed the way. The Congress took charge of the economy when
it created the Tariff Act of 1787, two years before the Constitution in
1789. The economy of the United States was built on protectionism - not
free trade. For those observing that manufactured products could be obtained
cheaper from the Mother Country and crying "free trade," JFK's
Profile in Courage, Henry Clay in 1836 on the floor of the U.S. Senate
cried about "free trade" "
it never existed. It never
When President Lincoln wanted to build the Transcontinental Railroad, it was suggested that the steel could be obtained cheaper from the Mother Country. Lincoln said: "No we will build a steel mill and when we are through, we will not only have a Transcontinental Railroad, but also a steel capacity."
worked so well that Edmund Morris in Theodore Rex writes "current
advertisements in British magazines gave the impression that the typical
Englishman woke to the ring of an Ingersoll Alarm, shaved with a Gillette
razor, combed his hair with Vaseline Tonic, buttoned his Arrow Shirt,
hurried downstairs for Quaker Oats, California Figs, and Maxwell House
coffee, commuted in a Westinghouse tram (body by Fisher), rose to his
office in an Otis elevator, and worked all day with his Waterman pen under
the efficient flare of Edison light bulbs
The first year of the
New Century found the United States worth $25 billion more than her nearest
rival Great Britain
with a gross national product more than twice
that of Germany and Russia." (Theodore Rex, pp. 20-21.)
of Congress cry about Wall Street creating billionaires, income inequality,
etc., but they avoid their primary responsibility. Congress is responsible
for the economy. Today Corporate America can't produce for a profit in
the United States. A successful entrepreneur in the U.S. has to pay the
35 percent corporate income tax and when his exports reach China, a 17
percent value-added tax. A U.S. competitor can produce the same product
in China, import it tax free and the 52 percent difference will put the
entrepreneur out of business.
sixty four countries compete in globalization with a value-added tax.
The VAT has no loopholes and is self-enforcing. The cost of doing business,
or value added, is passed on or absorbed. If we replace the 35 percent
corporate tax with a 15 percent VAT, we could:
Congress must protect the production of items vital to a strong economy
as President Reagan protected steel, motor vehicles, computers and machine
tools in 1984. Begin with the enforcement by President Obama of the Defense
Production act of 1950.
economist Alan Blinder in December 2006 estimated that in 10 years the
U.S. would offshore 30 million to 40 million jobs. In the 10-year period,
60,000 factories were lost. (Mulloy: "U.S. Opportunities and Challenges
in the Asia Pacific," 2/26/15). The U.S. continues to offshore its
research, technology, jobs, payrolls - its economy. Congress complains
and sits idly by watching the tide or economy go out.
Buy a mirror.
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).
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