Saving the country
By
ERNEST F. HOLLINGS, former U. S. senator
(click
here for printable version)
OCT.
3, 2008 -- Having
been governor, I am frequently asked the difference of being a
governor and senator. As governor, if you want to raise revenue
you raise taxes. As senator, if you want to raise revenue you
cut taxes. In Washington you become smart. You become an economist
and learn to stimulate the economy by cutting taxes. And promising
not to raise taxes will guarantee your re-election.
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Hollings
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The
Congressional Budget Office made a study of the cause of the increase
in deficits the first four years of President George W. Bush:
48 percent due to tax cuts; 37 percent due to the cost of wars
and national security; and 15 percent due to spending increases.
The Bush administration and Congress have put the government on
steroids for eight years, increasing the debt (as of 9/30/08)
- not revenues -- $2.672 trillion.
Another
smart thing you learn is how to low-ball the deficit by subtracting
the trust funds. For example, the White House projected a FY 2008
deficit of $425 billion. The actual deficit is $1074 billion.
The President and Congress constantly use Social Security surpluses
to report a lower deficit. Section 13-301 of the Budget Act forbids
this. But the
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PREVIOUS HOLLINGS COMMENTARY
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President
and Congress violate the law to appear fiscally responsible. Then
they report Social Security is in trouble. Social Security reports
a surplus of $2.4 trillion and is not in trouble.
Now
we have the economists' charade of free trade. As Henry Clay,
one of John F. Kennedy's Profiles in Courage, said in 1832: "Free
Trade! Free Trade! The call for free trade, is as unavailing as
the cry of a spoiled child, …. It never existed; it never
will exist…." After World War II, we took up the chant
of free trade as we spread capitalism with the Marshall Plan.
Our goal in chanting free trade was to open the markets of the
assisted countries. But Japan kept its market closed, starting
a trade war for market share, selling at cost in international
trade and making up the profit in its closed domestic market.
Concerned that capitalism prevail over communism in the Cold War,
we refused to compete in this trade war. We refused to force Japan
to open its market. Now, Toyota is #1 as General Motors and Ford
struggle. Now Corporate America is outsourcing like gangbusters
and shout free trade for fear that the U. S. will engage in the
trade war and stop the outsourcing.
I
worked with Corporate America to protect our textile industry
by passing a protectionist trade bill through the United States
Senate in 1968. President Lyndon B. Johnson had Wilbur Mills,
the Chairman of the Ways & Means Committee, block the measure
in the House of Representatives. Then we passed four protectionist
trade bills through both Houses of Congress only to be vetoed,
one by President Jimmy Carter, two by President Ronald Reagan,
and one by President George H. W. Bush. Corporate America was
for protectionism not free trade. Denied protection by both Republican
and Democratic administrations, Corporate America began outsourcing.
Now making enormous profits from outsourcing they chant "free
trade" to dump their offshore production into the United
States.
The
Economist reports: "Globalisation used to mean, by and large,
that business expanded from developed to emerging economies. Now
it flows in both directions, and increasingly also from one developing
economy to another. Business these days is all about 'competing
with everyone from everywhere for everything', write the authors
of "Globality", a new book on this latest phase of globalization
by the Boston Consulting Group (BCG)." But the United States
refuses to compete, to trade.
US
is AWOL in trade war
Globalization
is a trade war with the U. S. AWOL. We started a trade war with
the Mother Country at the adoption of a Constitution in Philadelphia
in 1787. England had prevented manufacture in the colony, even
prohibiting the printing of the Bible. In l787 we reached a consensus
on protectionism directing the regulation of trade to the Congress
in Article I, Section 8, of the Constitution. It took the United
States four more years to reach a consensus on First Amendment
rights of freedom of speech, religion, assembly, and the press.
President Washington, in his first message to the first Congress
in 1789 counseled: "A free people should promote such manufactories
as tend to render them independent on others for essential, particularly
military supplies."
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"We've
got to stop our binge of free trade, cutting taxes, deregulating,
contracting out, and getting rid of the government. We have
to put America back to work, pay for the government we provide,
and instead of getting rid of the government make the government
work."
--
Ernest F. Hollings
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After
the adoption of the nation's seal, the first bill to pass Congress,
on July 4, 1789, was a 50% tariff on numerous articles. We financed
and built this industrial giant, the United States of America,
with protectionism. We didn't pass the income tax until 1913.
Edmund Morris, in Theodore Rex, describes the United States winning
the trade war with England: "This first year of the new century
(1900) found her worth twenty-five billion more than her nearest
rival, Great Britain, with a gross national product more than
twice that of Germany and Russia. The United States was already
so rich in goods and services that she was more self-sustaining
than any industrial power in history." Theodore Roosevelt
exclaimed at the time: "Thank God I am not a free trader."
While
spreading capitalism with the Marshall Plan, the United States
raised our standard of living with the minimum wage, health care,
safe working place, safe machinery, parental leave, plant closing
notice, and started protecting the environment by instituting
NOAA and the Environmental Protection Agency ensuring clean air
and clean water. This high standard of living raised the cost
of production. Corporate America could avoid this cost by outsourcing.
But now, if your competition outsourced and you continued to work
your own people, you would go bankrupt. Production in America,
in order to compete, finds itself forced to outsource. And the
outsourcing and free trade charade are destroying the economy.
We are outsourcing not just jobs and production, but research,
technology, investment, the economy - even the debt. With the
shocking $700 billion bailout, outsourcing the debt will be difficult.
The country finds itself in the predicament of having to protect
it's production and standard of living or end up a banana republic.
We learn that David Riccardo's "comparative advantage"
in economics is no longer English woolens and Portuguese wine,
but government.
The
Japanese and Chinese governments set the competition of managed
trade in globalization. Bottom line, we can't depend on our business
leadership calling for free trade to prescribe our trade policy.
Congress, under Article I, Section 8 of the Constitution, must
assume the responsibility of regulating trade. Congress must make
it profitable to produce in the United States.
Make
the government work!
We've
got to stop our binge of free trade, cutting taxes, deregulating,
contracting out, and getting rid of the government. We have to
put America back to work, pay for the government we provide, and
instead of getting rid of the government make the government work.
We
need to compete in globalization. We need to put a tourniquet
on outsourcing.
We
need money. A value added tax is in order. Every industrialized
country but the United States has a value added tax, which is
rebated at export. Our corporate taxes are not rebated, which
puts the United States at a tremendous disadvantage in international
trade. A VAT would remove this disadvantage and begin to eliminate
both the fiscal and trade deficits. A VAT could also provide the
money to finance health care, infrastructure, and energy. Raising
the price of imports with a VAT will require the consumer to save.
And exports that have been saving the economy will be promoted.
It will take a year for business and the Internal Revenue Service
to gear up for a VAT. In the meantime, we should institute a 10%
surcharge on imports as President Richard Nixon did successfully
in 1971.
Everyone
has been worried about the shortage of troops for Iraq and Afghanistan,
the exhaustion of our military. But equally important is that
we don't have the military supplies to go to war. Chairman of
the Joint Chiefs of Staff, Admiral Crowe, warned of this shortage
in 1991. Globalization and outsourcing have imperiled our security.
We had to await flat panel displays from Japan before invading
Kuwait. We had to await Swiss crystals before invading Iraq. We
can't produce planes unless we get the parts from India. We can't
produce helicopters unless we get the parts from Turkey. This
nonsense has got to stop. We must activate the Secretary of Commerce's
list of materials critical to our national security. Tariff or
quota military imports and producing in country these supplies
necessary to our security, we can put America back to work.
As
Lincoln said: "As our case is new, we must think anew and
act anew. We must disenthrall ourselves [from this free trade
charade, and working together] we can save our country."
Ernest
F. Hollings served as South Carolina's governor from 1959 to 1963
and as a United States senator from 1966 to 2005.
