President Obama, the constant campaigner, continues to campaign instead of reporting the State of the Union. As headlined in The Wall Street Journal: "Obama Makes His Case" -- instead of the Union's. The nation needs the president to campaign on three problems: deficit and debt, trade war, and foreign policy.
Given a balanced budget in 2001, Presidents Bush and Obama refuse to pay for tax cuts, wars, and prescription drugs, adding $9 trillion to the debt and running trillion dollar deficits. The country is on steroids. The problem is to get the country off steroids; stop the borrowing to keep the country going; put the country on a pay-as-you-go basis -- not some ten-year plan for future Congresses to pay down the debt.
The United States was born in a trade war (Boston Tea Party) and developed into an economic superpower with protectionism (Tariff Act 1789). Japan continued the trade war after World War II with its predatory practices, and now China has enlarged the trade war to research, technology, techniques, production, jobs, payrolls -- the economy. President Obama stays AWOL in the trade war. In his address to the Joint Congress, he asks industry: "... what you can do to bring jobs back to your country?" Industry's answer: "Nothing." Industry is happy with its off-shore profits, and President Obama does nothing. Industry is not going to invest in a country that doesn't protect its investment from predatory practices. We have trade laws to protect our economy. If President Obama would enforce the War Production Act of 1950 like President Kennedy, it would create millions of jobs. If the President would protect steel, motor vehicles, computers and machine tools like President Reagan, it would create millions of jobs. President Obama refuses to enforce our trade laws.
We need to get in step with 141 countries that use a VAT to compete in globalization. The VAT is rebated on exports, creating jobs and removes the subsidy of foreign imports. Substituting the 35% corporate tax with a 6% VAT is a tax cut and releases $1.2 trillion in off-shore profits that Corporate America can repatriate tax free and create millions of jobs. The VAT is on consumption rather than income - the more you spend the more you pay. Now the rich pays its fair share. In 2010, the corporate income tax produced $194.1 billion in revenues. A 6% VAT in 2010 would have produced $700 billion in revenues. Since the poor spend most of their income on food, health, and housing, exemptions for the poor still leave billions to pay down the debt. The VAT is self-enforcing -- you either pay it or pass it on. Much of the IRS can be eliminated, cutting the size of government. The VAT has no loopholes, giving instant tax reform. It puts the tax lobbyists out of business. They will howl: "We can't have a national sales tax." Substituting the corporate tax with a VAT is not a sales tax. Corporate America merely factors in the 6% as a cost of production rather than 35%. The lobbyists will call for tax reform -- the lobbyists' playground. We always end up closing two loopholes and adding four more. It took us six years to find the Ethanol loophole. When I left the Senate in 2005, tax expenditures or loopholes were costing the budget $1.3 trillion every year.
President Obama pursues the Pentagon's Quadrille Defense (Review Report 2006) of "the long war." The President is stationing military personnel in countries the world around to find terrorists, fix the coordinates, and drone kill them before they kill us. The President deploys 2500 Marines to Australia, making "it clear that America is a Pacific power." Australia is not going to war with China. Neither are we. Congress does nothing about our drone killing in Somalia and Yemen as drone killing has already turned Pakistan into a questionable friend. China makes friends with our Good Neighbor Policy, while we threaten wars everywhere.
After Tiananmen Square in 1989, we obtained a Resolution in the United Nations to investigate human rights in China. China went to its economic friends in Africa and the Pacific Rim, and there has never been a hearing. When Japan seized China's ship captain, China cut off rare earth supplies to Japan, and Japan promptly returned the ship captain. China becomes an economic superpower, while the United States becomes a muscle-bound banana republic. In globalization, it's the economy, stupid.