I’m not an economist, but as a member of the Senate Budget Committee for 30 years, I listened to the best economists. Today, economists all talk about the “Great Recession,” but the recession started in June 2008 and was over in June 2009. The economists put on a big show about the “Great Recession” to cover the offshoring or draining of our economy.
Now come the candidates with the problem of gridlock. They never mention an obvious solution. In 1971 and 1973 the Congress limited spending in federal elections. President Nixon signed the ’73 law, which the U.S. Supreme Court reversed in Buckley vs. Valeo. Before Buckley, senators would never think of raising money against each other. They partied together, traveled together and as a courtesy, always notified the two senators from a state that you were going to make a talk on the weekend. After Buckley, we started raising money against each other. Partisanship set in. Gridlock! We attempted to correct Buckley with McCain-Feingold, public financing, etc. But only a constitutional amendment empowering Congress to limit or control spending in elections will suffice. I proposed a constitutional amendment to limit spending. The Republicans in power proposed a constitutional amendment to ban flag burning and asked that I withhold my amendment to limit spending. I refused, and no joint resolution was considered in the U.S. Senate in 2002, 2003 or 2004. Located amongst 10,000 lobbyists in Washington, senators don’t want to lose their six-year advantage of fund raising morning, noon and night. Once a constitutional amendment is passed, spending is limited, the constant fund raising against each other in Congress subsides, partisanship is limited, gridlock is broken and lobbyists lose control of the Congress. But no one mentions a constitutional amendment to limit spending. It’s a mystery.
Every superpower must have a strong economy. You can’t wait for imports to defend the country. It’s the duty of Congress to make it profitable to produce those items vital to a strong economy such as steel, motor vehicles, computers and machine tools. The Founding Fathers pointed the way when Congress passed the Tariff Act of 1787 — two years before the Constitution. Protectionism developed the agrarian colony into a manufacturing colossus.
In December 2006, Princeton economist Alan Blinder estimated that in ten years Corporate America would offshore 30-40 million jobs. That’s 3 or 4 billion jobs a year. The economists attribute the loss of 9,000 jobs for every $1 billion deficit in the balance of trade. Last year our deficit in the balance of trade was $505 billion which means we lost 4,545,000 jobs. The Federal Reserve hesitates raising rates because of a weak economy, but economists refuse to mention the offshoring of the nation’s economy. Earlier this year, Ford and General Motors announced a multi-billion plant in Mexico. The U.S. continues to offshore its research technology, production, jobs, payrolls — the nations’ economy. But the economists attribute the lack of growth to lack of consumer demand. It’s the lack of money. All the presidential candidates’ mention corporate greed, income inequality, but there is no mention of the offshoring. It’s a mystery.
One hundred sixty-four countries compete in globalization and build their economy with a value added tax that’s rebated on exports. The corporate tax is not rebated. Congressman Paul Ryan could propose a tax cut by replacing the 35 percent corporate tax with a 9.7 percent VAT which would offset both the payroll tax and the corporate tax. The Congressional Budget Office estimates that the corporate tax for 2015 raised revenues of $341.7 billion and the payroll tax raised revenues of $1.065 trillion.
A VAT would immediately release $2 trillion in offshore profits for corporate America to repatriate tax free and create millions of jobs. It also replaces the payroll tax, which makes it profitable for Corporate America to produce in America. But no president, no one in Congress, no candidate for the president, no political pundit mentions a value added tax or competing in globalization or maintaining a strong economy.
It’s a mystery to me.
Ernest F. Hollings, a Democrat, served from 1959-63 as S.C. governor and from 1966-2005 in the U.S. Senate.