The presidential campaign ignored the real needs of the country.
Four problems — four solutions:
First, Congress needs to take the government back from the lobbyists. When I came to the Senate in 1966, six Republicans and six Democrats met every Wednesday night — coats and ties off, the designated wife prepared a salad and we gave each other hell. We became fast friends.
But after the Supreme Court, in Buckley vs. Valeo, overturned our attempt to limit spending in campaigns, we were forced to constantly raise money against each other — resulting in more partisanship. Today, lobbyists in Washington work with each other. Important votes are fixed by the lobbyists long before the roll is called.
In fact, lobbyists tell the leader when to call the roll. To get by the Supreme Court ruling, Congress needs to amend the Constitution: “the Congress is empowered to regulate or control spending in federal elections.”
This doesn’t commit to a particular solution. Once ratified, a later Congress can agree on limiting so much per registered voter, providing public financing or any other solution. Once campaign spending is limited, fundraising is limited, lobbyists are limited, partisanship is limited and Congress has time to do its work.
Second, we must pay for government — not plan to pay. In 2001 we gave President Bush a balanced budget, but he and President Obama have refused to pay, adding $10 trillion to the debt in 12 years. Now everyone is running around with plans for later Congresses to pay.
Paul Ryan’s budget doesn’t balance for 30 years. Nonsense. Congress can pay for government now by replacing the 35 percent corporate income tax with a 7 percent VAT (value added tax).
One hundred and fifty countries compete in globalization with a VAT that’s rebated on exports. The corporate tax is not rebated. A U.S. manufacturer exporting to China pays the 35 percent corporate tax and is levied a 17 percent VAT when exports reach Shanghai. But a China manufacturer exports to the U.S. tax free. This 52 percent difference is killing U.S. manufacturing.
The corporate VAT is not regressive, needs no exemptions and eliminates all loopholes — instant tax reform.
Last year’s corporate tax produced $181.1 billion in revenues. A 7 percent VAT for 2011 would have produced $872 billion. The VAT, with spending cuts, will balance the budget in two years.
Third, we make wars in Iraq, Afghanistan, Pakistan, Somalia and Yemen and threaten wars in Syria and Iran, but refuse to fight in the trade war in which the world is engaged. Globalization is nothing more than a trade war, with production looking for a country cheaper to produce.
Tax cuts and federal aid for policemen, firemen and teachers don’t build a strong economy. It takes private investment. The president and Congress must make it profitable to invest in the U.S. and protect the investment. The VAT tax cut is a good start.
The U.S. was founded in a trade war — the Boston Tea Party. Instead of calling for “free trade,” the Founding Fathers rejected David Ricardo’s “comparative advantage” in agriculture and opted for manufacture by enacting the Tariff Act of 1787 — two years before the Constitution. This protectionism worked so well that Edmund Morris, in “Theodore Rex,” writes that after a hundred years the colony was “$25 billion richer” than the mother country.
But Wall Street, the big banks and the U.S. Chamber of Commerce want to keep the China profits flowing. So they shout “Free trade! Protectionism!” and contribute to the president and Congress to do nothing. The president and Congress do nothing. In 2006, Princeton economist Alan Blinder estimated that in 10 years the U.S. would offshore 30 to 40 million jobs or an average of 3 to 4 million jobs a year.
Great Recession? It’s been over for three years. We are having a weak recovery because we are offshoring more jobs than we are creating. The security of the U.S. rests on a three-legged stool: values, the military and the economy. The values and military legs are strong. The economic leg is fractured. If presidents would protect the economy like President Nixon in 1971 by levying a 10 percent surcharge on imports when our trade deficit was a fraction of what it is today it would create millions of jobs. If presidents would protect steel, motor vehicles, computers and machine tools like President Reagan in 1984 we could create millions of jobs.
Finally, we must compete with China becoming an economic superpower. We must pull in our military horns and return to our Good Neighbor Policy. In foreign policy, it’s the economy, stupid!
Ernest F. “Fritz” Hollings, a Democrat, was governor of South Carolina from 1959-63 and served in the U.S. Senate from 1966-2005.
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