BY ERNEST F. HOLLINGS
The recession that began in June 2008 was over by June 2009 - almost five years ago. The Federal Reserve in Minneapolis has determined that the nation has experienced its weakest recovery since World War II. Economists think that the trouble with the economy is lack of confidence by consumers in the economy.
Now some columnists think that the trouble with the economy is psychological.
In Sunday's New York Times, Frank Bruni asks: "What happened to our country's stride and spirit?"
In Tuesday's Washington Post, Eugene Robinson's column is headlined: "Time for some happy talk from Democrats."
The trouble with the economy is not a lack of confidence by consumers; it's not psychological. The trouble is Washington. The president and Congress have become so bogged down in a chase for money that they have forgotten that politics is a competition for ideas, for programs. Debates over climate change, class warfare, inequality, increasing the minimum wage and unemployment compensation don't create jobs, don't build the economy.
The Founding Fathers pointed the way. The colonies had been forbidden to manufacture or create jobs. So in 1787, two years before the Constitution, Congress instituted the Tariff Act of 1787 to engender and protect manufacture and jobs. It worked so well that Edmund Morris, in "Theodore Rex," writes that in 100 years, the former colonies were "$25 billion richer" than the Mother Country.
The first order of business is to get rid of the corporate tax. One hundred and sixty countries compete in globalization with a value added or consumption tax that's rebated on exports.
The corporate tax is not rebated. The corporate tax is full of loopholes for the multinationals.
The value added tax (VAT) is self-enforcing - you either pass it on or pay it. As a consequence, the corporate tax stultifies manufacture in the United States.
An entrepreneur in the U.S. has to pay 35 percent corporate tax on his production and is levied a 17 percent VAT when his exports reach China. A competitor can produce the same product in China and import it tax-free to the U.S. The 52 percent difference puts the entrepreneur out of business. Constituents get confused over a VAT. They worry that the VAT is regressive. The VAT is not to replace the personal income tax but the corporate income tax. Replacing the 35 percent corporate tax with a 7 percent VAT is not regressive but a tax cut.
Last year's corporate tax produced revenues of $288 billion. A 7 percent VAT for 2013 would have produced $945 billion - permitting a balanced budget in two years rather than 10. Eliminating the corporate tax would release $2 trillion in offshore profits for Corporate America to repatriate tax-free, invest and create millions of jobs.
Having corrected our tax problem, we would then have to protect production vital to a strong economy.
President Harry Truman assured the nation of material vital to our defense by the enactment of the Defense Production Act of 1950.
In 1961, President John F. Kennedy held a Cabinet hearing and determined that textiles were vital to the economy - parachute cloth, body armor, and uniforms.
In 1971, President Richard Nixon imposed a 10 percent surcharge on imports to protect the economy when our trade deficit was a miniscule of what it is today.
In 1984, President Ronald Reagan protected steel, motor vehicles, computers and machine tools vital to a strong economy.
Two years ago, President Barack Obama was begging Russia for helicopters for Afghanistan. The New York Times reported on Dec. 20, 2013, that the U.S. was depending upon foreign countries to furnish the U.S. military with uniforms and clothing.
But all you hear from President Obama and Congress are cries for "Free Trade, Free Trade!" and against "Protectionism!"
As Henry Clay declared in 1836 on the floor of the U.S. Senate about Free Trade: "It never existed. It never will exist."
The U.S., one of the richest countries in the world, has been borrowing to keep the doors open for the government going on 14 years. Japan and China set the competition in globalization with closed markets and predatory practices.
Presidents George W. Bush and Obama have failed to enforce trade laws against predatory practices. For jobs and the economy, President Obama and Congress must:
1) Stop the borrowing and pay for government.
2) Replace the corporate tax.
23) Enforce trade laws.
Ernest F. Hollings, a Democrat, served as South Carolina's governor from 1959-63 and in the U.S. Senate from 1966-2005.
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