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Building the Economy

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Just at the time we need government, all the candidates run "against big government." "I served in government, but didn't inhale." "Get government out of the way so market forces can work." Who do they think developed the economy? Not market forces. Not Corporate America, whose executives caterwaul "free trade;" "protectionism." The government of China develops the most closed, controlled economy in history, and Corporate America off-shores to China.

The founding fathers taught us that government creates the economy. The U.S. was born in a trade war (the Boston Tea Party) and President George Washington's first message to Congress emphasized "manufactories." The government developed our economy with the Tariff Act of 1789. The Mother Country opposed this development, cautioning against protectionism, calling for "free trade," and nagging David Ricardo's "doctrine of comparative advantage" -- England's textiles versus Portugal's wines. But Alexander Hamilton saved us with his famous "Report on Manufactures," and Henry Clay exclaimed on the floor of the United States Senate in 1836 that free trade "never existed; it never will exist... " Abraham Lincoln was a protectionist. Theodore Roosevelt wrote a friend: "Thank God I'm not a free trader." We didn't pass the income tax until 1913. We built this nation with protectionism into an economic superpower, "... twenty-five billion dollars more than her nearest rival, Great Britain... " (Theodore Rex, Edmund Morris, p. 20). President Theodore Roosevelt kept market forces from working with anti-trust laws so that we have an open market today.

How do you think government builds a strong economy? Paying its bills, incentives and enforcing its trade laws to protect investment. Globalization is nothing more than a trade war with production looking for a government cheaper to produce. In globalization the war has expanded from trade to research, technology, innovation, production, jobs, payrolls -- the economy. Corporate America has $3 trillion ready to invest, waiting for the President and Congress to determine the increase in revenues bound to occur. Corporate America demands protection. Rather than bailing out Detroit, President Obama could have protected motor vehicles by imposing a tariff on auto imports like Brazil is now imposing. Rather than begging Russia for helicopters, President Obama should enforce the War Production Act of 1950 which would create millions of jobs. Everyone knows that you can't build a strong economy with federal aid to keep the policemen, firemen and teachers in their jobs or cut payroll taxes which Wall Street executive, Steve Rattner, says: "... provides little lasting benefit. We could just as effectively throw borrowed hundred-dollar bills out of airplanes."

How could President Obama and Congress bring Corporate America back from China? Easy. Just take the tax benefit to off-shore and give it to Corporate America to on-shore -- cancel the 35 percent corporate tax and replace it with a 6 percent value added tax. Immediately, the CEOs, tax lawyers and tax lobbyists cry: "We can't have a national sales tax." 141 countries compete in globalization with a VAT or national sales tax. Replacing the corporate tax with a 6 percent VAT is on value added, not sales, and a tax cut. Reason for the howls: a VAT has no loopholes. The CEOs and Corporate America with today's loopholes are not paying any tax. They could care less about building our economy. China is getting difficult every day. This tax cut releases $3 trillion for Corporate America to create millions of jobs in the United States. The 2010 corporate tax produced $194.1 billion in revenues. A 2010 6 percent VAT would have produced $700 billion in revenues. Exemptions for the poor leave billions to pay down the debt. The VAT is on consumption -- the more you consume, the more you pay. Now folks can pay their fair share of taxes. The VAT promotes exports and is self-enforcing. A good bit of the IRS is eliminated, reducing the size of government.

Given a balanced budget in 2001, Washington has been running trillion dollar deficits and has added $10 trillion to the national debt in twelve years. The government is on steroids. The solution is not some ten-year plan to pay later. Pay billions now with a VAT. We are not awaiting a recovery. The recession ended 2 ½ years ago. The economy is still fragile because it is being off-shored. The VAT stops off-shoring, cuts taxes, and creates millions of jobs. Someone in Congress or President Obama should submit the VAT solution. Pass it or filibuster it. Even if the filibuster can't be broken, at least an honest try has been made to build our economy. We can't waste another year doing nothing.