As a thirty-seven year old Governor of South Carolina in 1959 we had the same problem that the United States has nationally -- jobs! I knew no CEO in New York would listen to a young Governor from a State that was operating in the red. My first task was to raise taxes and balance our budget. Fortunately, I didn't know any economists. But I heard the same objections from the Chamber of Commerce: "You had to have strong economic growth before you could raise taxes."
Be that as it may, I had breakfast after breakfast at the Governor's Mansion for the members of the State Legislature, who finally voted a tax increase in a state with no industry, no economy. Then with Jeff Bates, the State Treasurer, we went to New York and secured a "Triple A" credit rating from Moody's and Standard & Poor. In 1959 South Carolina was the first state in the South to receive this rating, and the "Triple A" rating was my calling card to get in the door of the CEOs in New York. We brought five GEs to South Carolina, four Westinghouses, and three DuPonts. We traveled to Europe, and today we have over one hundred German plants in South Carolina. Now, fifty-one years later, I'm hearing the same economics in Washington that I heard in South Carolina.
E. J. Dionne pinpointed our trouble in The Washington Post on Monday, June 14th. Referring to Larry Summers, President Obama's top economic advisor, Dionne states: "We will never deal effectively with our deficit problem until we get the economy moving." Then, quoting Summers: "It is not possible to imagine sound budgets in the absence of economic growth and solid economic performance." If we had listened to this argument back in South Carolina, the State today would be a wasteland. Instead, South Carolina's "Triple A" credit rating has just helped us attract Boeing's production of its Dreamliner.
I can't find an economist who will agree with me that stimulation is spent. In his eight year term, President George W. Bush stimulated the economy $5 trillion, borrowing and adding $5 trillion to the national debt. Then in the closing months of his term, President Bush and the Federal Reserve stimulated the economy another $2.5 trillion. During Bush's eight year term, household debt increased $7 trillion, stimulating the economy $7 trillion. President Obama borrowed and stimulated the economy at least $1 trillion his first year and, by June 16th, he has borrowed and stimulated another $1 trillion, $168 billion (6/17/10) for a grand total of $16.6 trillion stimulation in nine and a half years. Stimulation is spent. We're still losing jobs, and it's not difficult to find the reason.
Long before the recession, in February 2007, the Princeton economist, Alan Blinder, estimated that for ten years we would be losing an average of 300,000 jobs a month to off-shoring. Larry Summers refuses to recognize the problem of off-shoring in globalization. Globalization is nothing more than a trade war with production looking for a country cheaper to produce. Trade is business; business is trade, and regulated to keep the market open. Locally, business or trade is regulated: a license, safety and health requirements, when you can open and when you can close. Interstate business or trade has many regulations, such as Teddy Roosevelt's anti-trust regulations to guard against a business becoming too big to succeed as in a monopoly. International business or trade is regulated by numerous provisions, such as anti-dumping to protect domestic production.
Summers and the Obama administration act as if globalization is a given. Since anything can be produced anywhere in the world, the United States with its high standard of living, just has to hunker down and adjust its labor, safety, and environmental regulations downward to meet global competition. Nonsense! We have trade laws to protect our production and economy. If we don't enforce these trade laws, there's no chance for the United States to survive China's communist control in globalization.
Summers and the Obama administration act as if we had no trade laws -- act helpless. By Executive Order, President Obama could immediately institute an import surcharge like President Nixon instituted in 1971 when deficits in trade were a fraction of those today. Like President Kennedy in 1961, President Obama could enforce the War Production Act of 1950 to remove our dependence on foreign supply of materials necessary for our national security, and create millions of jobs. President Obama doesn't have to wait for Corporate America to go bankrupt, needing a bailout. Under Section 201 of the Trade Act he could move with tariffs or import quotas to protect domestic production that is endangered. President Obama keeps calling for the nation to increase its exports. Instead he could call on Congress to eliminate the corporate tax and replace it with a 2% VAT that's rebateable on exports. This would immediately promote exports, eliminate a big incentive to off-shore production, and actually bring in more revenues. Instead of whining about "protectionist signals," the president could immediately release competitive America to compete in globalization. Instead the president leaves the nation hogtied, going out of business. Why?
Because Wall Street, the big banks, and the financial crowd, want to keep the market up with Corporate America's profits in China. Summers, who represents this crowd, can only think of stimulation to keep the market up and not to build a strong economy with production and jobs. The financial crowd that wrecked the economy with derivatives and credit default swaps are interested in production and jobs in China -- not the United States. They could care less about paying for the government we provide and building a strong economy. Unfortunately, Corporate America has joined them. And corporate America and the financial crowd furnish the contributions for the President's and Congress's re-election.
Under the Constitution, tax or trade measures must originate in the House of Representatives and no House Member will introduce a tax bill or a measure to enforce our trade laws unless sanctioned by President Obama. So the people can only look to President Obama to change direction and start paying for government and rebuilding our economy.
For ten years before taking office, President Obama was out campaigning with little experience governing. As a former editor of a law review and a law professor, President Obama looks to authorities. That's why the president looked leaderless on the Gulf catastrophe. There were no authorities on this type of catastrophe. The president's authorities keep the United States AWOL in the trade war. To keep consumption up rather than paying down the debt, the President's advisors have him appoint a commission to study the deficit and debt. Waste on interest payments now estimated at $500 billion keeps growing.
To President Obama's advisors, Afghanistan appeared as an opportunity. Democrats are always vulnerable on defense, so the president could one-up Republicans by announcing the war in Afghanistan necessary. But not necessary to pay for it. For the troops losing their arms and legs and laying down their lives, the war in Afghanistan is real. But to the Commander-in-Chief and Congress, Afghanistan has become a play war. After a five-year attempt to take a valley, the superpower of the world withdrew. The surge of troops announced last December has yet to appear. It was more of a surge of money than troops. We have more CIA and independent contractors fixing warlords in Afghanistan than troops fighting the war. After almost nine years at war, senators were pleased to hear yesterday Secretary of Defense Gates state: "I think we are regaining the initiative, ... I think that we are making headway." With no sacrifice for us at home, Afghanistan has become a play war.
If the president can continue to play governing as well as he plays war, he can get re-elected.
Read more commentary by Senator Hollings at Citizens for a Competitive America.
It's privatize the profits, socialize the losses. Except these days the privatized profits don't even stay in the USA.
"The surge of troops announced last December has yet to appear. It was more of a surge of money than troops."
Stop funding the war and dare Congress and the Contractors to leave the troops in harms way like hostages.