Hollings: Seven ways to right what’s wrong with America’s economy

BY ERNEST F. HOLLINGS
President Obama is worried about what’s wrong with his campaign. What about what’s wrong with the nation?

1) The first thing wrong is that President Bush cut taxes, waged wars, added prescription drugs to Medicare, stimulated, bailed out — increasing the national debt $5 trillion in eight years. But President Obama cut taxes, waged wars, added prescription drugs to Medicare, stimulated, bailed out — increasing the national debt $5 trillion in four years. The government has been stimulated $10 trillion in twelve years and is on steroids. The president rejected the findings of his debt commission and the Democrat Senate hasn’t passed a budget in three years.

2) The second thing wrong is that more steroids for growth won’t work and hiring policemen, firemen and teachers doesn’t build the economy. You’ve got to go to the private sector. Washington’s responsibility is to fashion an industrial policy for Corporate America to invest in and make a profit. Tax laws, labor laws, environmental laws, trade laws all comprise an industrial policy. The founding fathers adopted an industrial policy two years before the Constitution with the enactment of the Tariff Act of 1787.

3) The third thing wrong is that President Obama refuses to compete in globalization. Globalization is nothing more than a trade war with production looking for a country where it’s cheaper to produce. China sets the competition with its controlled capitalism. We can’t lower our standard of living to China’s but we will have to adjust to survive globalization.

4) The fourth thing wrong is that the president refuses to enforce the trade laws. If President Obama enforced the War Production Act of 1950 he wouldn’t have to beg Russia for helicopters for Afghanistan and we’d have employment instead of unemployment.

5) The fifth thing wrong is that we are losing more jobs than we are creating. Alan Blinder, the Princeton economist, estimated in 2006 that for 10 years industry would offshore 3-4 million jobs a year. When President Obama says he has created 2.3 million jobs in the past 27 months, he’s right. But we lost 6 to 8 million old jobs.

6) The sixth thing wrong is that President Obama refuses to consider a Value Added Tax.One hundred and forty-one countries compete in globalization with a VAT and don’t find it complicated, regressive, or a money machine. We had hearings on a VAT in 1989 before the Senate Finance Committee and Sen. John Chafee of Rhode Island told me: “If we had a secret ballot the Committee would report out a VAT unanimously.” I tried to pay for the Iraq War with a 2 percent VAT but the White House killed it.

Replacing the personal income tax with a VAT requires exemptions. But replacing the corporate tax with a VAT is a winner. It immediately releases $2 trillion for Corporate America to invest and create jobs. The VAT closes all loopholes giving instant tax reform. The VAT is self-enforcing, cutting the size of government (IRS). The VAT promotes exports and stops the offshoring of payrolls.

Last year the corporate tax produced $181.1 billion in revenues. A 6 percent VAT for 2011 would have produced $728 billion. Along with spending cuts, the VAT produces billions to pay down the debt and creates millions of jobs.

7) The seventh thing wrong is that as Fareed Zakaria, editor-at-large of Time magazine, wrote in The Washington Post on June 8: “The one idea that is almost certain not to jump-start this economy is a tax cut.”

Cancelling the 35 percent corporate tax and replacing it with a 6 percent VAT is a tax cut that will jump-start the economy. But Wall Street, the big banks and their entities like the Council on Foreign Relations, the Trilateral Commission and the U.S. Chamber of Commerce want to continue offshoring the economy and keep the China profits flowing. They will object. Grover Norquist wants to reduce the size of government so “it can be drowned in a bathtub.” He will object.

The president can right these wrongs by getting the tax cut introduced in Congress and debated.

If it passes, he’ll be on Easy Street.

If it’s filibustered or doesn’t pass, at least he’s fixed the responsibility for the lack of jobs and the budget.

Ernest F. “Fritz” Hollings, a Democrat, served as governor of South Carolina from 1959-63 and in the U.S. Senate from 1966-2005.