Politics Like Cancer
Politics is like cancer - if you don't catch it in time, you don't have a chance. If the budget deficits and deficits in jobs from offshoring are not caught now, by 2012 we'll give it back to the Republicans.
After subprime mortgages, derivatives, and credit default swaps, we should have learned by now to never let the big banks or financial crowd take charge of the U. S. economy. Banks love debt - the more debt, the more fees, the more interest costs. Debt is the lifeblood of bankers... not the economy. If there is such a thing as greed, the big bankers have it. Overcome with greed, the big bankers knew their subprime mortgages were a ponzi scheme, but "outgreeded" each other to collapse. The big bankers could care less about the U. S. economy. They are concerned about financing and profits from global trade, trade deficits, household debt, business debt and government debt.
Last September when the collapse of the economy was imminent, the Secretary of the Treasury, Henry Paulson, started bailing out the big banks and insurance companies and his old firm, Goldman-Sachs, changed to a bank to qualify for stimulus money. But stimulus was the problem. Stimulus for infrastructure, business development, education, health care is always good. But stimulus for consumption was the problem. The economy had been stimulated for eight years by an astounding $5 trillion increase in the national debt, and the economy was exhausted from stimulation. Moreover, household debt had increased $7 trillion in the same period and consumers had begun to save. They weren't looking for loans. Paulson's concern about confidence in the failed financial system was just a cover for bailouts. Moreover, our economy's investment, research, development, production and jobs were being forced offshore by a fraudulent free trade policy, and there was little left to stimulate.
Last year we stimulated the economy $1 trillion. Already, this year, we have stimulated the economy another $1 trillion, $376 billion (6/18/09) and are still losing jobs like gangbusters. Trillions are being spent to stimulate consumption and jobs, but nothing is being done to plug the offshoring hole in the economy that is killing production and jobs.
After the savings and loan debacle in the eighties, we said "never again" to "too big to fail," and passed a law that, with another collapse of the economy, toxic entities were to be put in receivership. Paulson should have complied with the law. Instead, he started throwing trillions at the problem and President Obama followed suit. Now the usual suspects that had lockjaw for the past eight years on deficits have finally found their voices.
Highly competitive, the big banks had cut their profits in-country to nil by the 1970's and started offshoring. By 1973, Citi and Chase Manhattan were making most of their profits outside of the United States. Banks funded the Trilateral Commission and think tanks like Heritage and Cato to push for deregulation against "protectionism" and "free trade," so offshored production could be dumped back into the United States. But Corporate America fought offshoring. Henry Ford had developed the middle class by doubling the minimum wage and providing health care and pension benefits. And the Ford Foundation developed communities. Corporate America was interested in the U. S. economy and moved for the President to protect the economy by enforcing our trade laws. I know. Working with Corporate America, five of my bills to enforce trade laws passed both Houses of Congress, but were blocked or vetoed by Presidents responding to the financial crowd's cry of "free trade." Faced with offshored production, subsidized and dumped back into the United States, Corporate America was forced to offshore in order to compete. NAFTA with Mexico and PNTR with China caused the trickle of offshoring to flood to China, India and Mexico. Now Corporate America is interested in the economies of China, India and Mexico.
International trade was globalized by the transfer of finance and technology by satellite and air delivery of production. Today, globalization is nothing more that a trade war with production looking for a cheaper country to produce. Offshoring is sustained by the big banks and the financial crowd calling for "free trade," "don't start a trade war." If a member introduces a trade bill in Congress, coming down on his or her head will be Wall Street, the big banks, the think tanks, the National Association of Manufacturers, the Business Roundtable, the Retail Federation of America, the daily editorialists making their profit from retail advertising, and the National Chamber of Commerce - all calling for "free trade." This "free trade" crowd finances Congressional campaigns so members of Congress join in the chant of "free trade." Nothing gets done to stop offshoring.
As Henry Clay said years ago, free trade "never existed, it never will." Every country moves to protect its economy. China protects its economy by controlling labor, finance, and every facet of its market and trade. Moreover, China proved that in foreign affairs "it's the economy, stupid." After Tiananmen Square in 1989, the United Nations passed a resolution to investigate human rights in China. China, with economic ties in Africa and the Pacific Rim, went to its friends, and there has never been a hearing on the resolution. Now China, with a $2 trillion war chest of foreign reserves, a space program, nuclear, satellite, missiles, and an economy controlling in foreign affairs is already playing the tune that most countries dance. Meanwhile, our economy is enfeebled. In the worst recession since the Depression the United States cannot produce its needs. We depend on imports. Every major weapons system in our national defense depends on foreign production. We can't defend the United States except by the favor of another country. And the economy is in the hands of those who would destroy it. The President and the Congress must take over.
President Obama and the Congress are on course with health care. But the President must move Congress to control the cancer of budget deficits and the deficit of jobs from offshoring. A value added tax will go a long way to eliminate both deficits and could easily provide the cost of health care. A hundred and fifty countries levy a value added tax on business that is rebated at export and levied on imports. For example, China rebates its 17% VAT at export to the United States and levies a 17% VAT on imports from the United States. But Corporate America has to pay an income or business tax averaging 27% that is not rebated on export to China. But a 17% VAT is levied when it arrives in China. A 3% VAT to replace the corporate income tax would be tax-neutral. With corporate tax rates now averaging 27%, substituting a 3% VAT would save consumers 24% and Corporate America could cut its export cost 24%. This would really stimulate the economy. Many members of Congress are pledged to Grover Norquist and Americans for Tax Reform against any increase in taxes. But since a 3% VAT is tax-neutral they can keep their pledge. The Internal Revenue Service says it will take the IRS and business a year to gear up for a VAT, so a VAT couldn't take effect until after the 2010 election.
Pollster politics and triangulation are good for the campaign, but in governing, cutting the deficit in half, and wearing a blue tie won't do it. Governing requires decisive leadership. President Obama must get real. He can't get by his remaining 3 ½ years and not do something substantial about taxes. Now is the time! A 3% or 4% VAT is in order. A 4% VAT to replace the corporate tax would provide a trillion and a half dollars additional that the President is trying to find for health costs. If the Republicans vote either VAT down, the President can say he tried to eliminate the "highest corporate tax of any in the world" - that he tried to stop the offshoring of jobs with health care and a VAT - that he tried to stop deficit spending - but Republicans wanted to continue the corporate tax, wanted to continue the loss of jobs, wanted to continue deficit spending. The VAT is a win-win initiative for President Obama. If the VAT prevails, the President and the country win. If the VAT is defeated, the President will recoup his credibility on jobs, deficits, and the economy.
Yes, we can! Now!
P.S. I'm sending a copy of this to Robert Gibbs, who helped run my last campaign eleven years ago. He used to listen.
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The Senator is spot on. I'm not sure about the VAT (simply because I don't know enough about the subject) but free trade has been an abysmal failure. As an Obama supporter, I am concerned about his weak posture on trade. I believe the finance industry and free traders are using fear mongering to gain his support on free trade.
The Cato Institute and Heritage Foundation are part of the problem. They aren't a "think tank". They are paid lobbyists disquised as a "think tank". The rhetoric drives their findings, not the facts.
Our Dem and liberal officials do not know how to debate !
They could even win a single payer debate, but trade and jobs is one thing every Amerian feels in his gut and understands. They also understand that Obama will not go after the issue for some reason and they are beginning to suspect why. Not that both parties are not owned in that way and brainwashed.
Trade and industrial policy was good enough for our founding fathers but not anymore ! How can we not have a trade and industrial policy. We may have to order parts from China for our military. Oh, but China is looking out for our interest I am sure as they practice cyber warfare and protect their markets.
Obama has shut out all his progressive economic advisors. So much for diversity of opinion. He has taken up the Wall Streeters and behavioral economist. Sorry Mr. President, soon , people pretending economy is getting better might meet with reality. Positive thought only gets you so far if you do not deal with real issues !
I do not understand Obama based on his value of work rhetoric. Although, he did show incredible differance to Wall Street ideas and enslavement trade, I mean free trade for Wall Street. This is where liberals and prgrogressives fall down. If we moved strongly here and on healthcare, the Dems would be voted in for decades into congress and likely the Whitehouse no matter how much money was paid to the Repubs. This, and the fact they are owned by insurance, is why the repubs do not want change on healthcare. If we offered univerals coverage that everyone paid into, eventually everyone almost everyone would be grateful.
Obama is either ignorant of the role of fianance or trying to fool the American People. Where is some out of the box thinking ? With the money the US, via treasury and Fed, are throwing around, we could reinvent our financing to make a real economy.
Too bad this man who talks about the bad role of debt and cheap money does not know how to make his actions match his rhetoric. We should have known better when Obama had and thought Robert Rubin was a genious and pointed to him for his economic chops. He disappeared after Citi hit the fan and almost every other one of his projects. Bring in proteges Geithner and Summers to continue the Wall Street is your God mentallity ! Bow and Worship !
Brilliant insight sir. Particularly how you note they started financing right wing finance think tanks to fool us and give them a bigger voice.
The white collar types and college boys sold out there blue collar brethern in thinking that part of the coalition does not matter and we can make some good money pretending we are like the fat cat finance types. I will make more money crushing my blue collar brethern. NAFTA passed by 1 vote. If not for Bill Clinton, it could not have passed. He also gave us our horrible drug laws, deregulation that greatly contributed to this mess as he dimissed the lessons of the depression thanks to Larry Summer and Robert Rubin and yes, Phil Graham. He further contributed by doubling down on the crap FCC changes Ronald Reagan started.
Now the country and the white collar types are being consumed by the forces they unleashed to our detriment. I know the blues voted for Ronald but an effort should have been made to bring them back.
Very few other countries offshore their production to their local markets. Sorry folks, Obama is Wall Street's boy and his move with Geithner and the Fed is frightening.
Folks, we have been creeping slowly towards a fascist state. Thank you Senator for your insight but Obama is not your man for this job. We need a candidate that has not taken a lot of money from fiance people unless it is truly the peon types. This is why Obama is soft on trade and Goolsbee told the truth that Obama was making fools of the people. Ohio saw it but few other states did.
Unfortunately, may be because Obama has bought into, and been paid a lot by Wall Street, he will not lead this change. Despite his talk of a bottom up economy, he is focused on trickle down, but there is not much trickle down. These people also do not care as long as the sucker people in the US so ok. No consequences to Wall Street for their recklessness. In any other country, people would have really protested and ask that the too big laws force receivership, companies and people get investigated, ana go to jail.
It's sad but true. We have the best government that money can buy.
RE: nothing is being done to plug the off shoring hole in the economy that is killing production and jobs.
I could have sworn that Obama said during campaigning that he was going to repeal the tax breaks for companies that off-shore. Another broken promise? Or one of those cases where what is being done is so weak as to be useless?
As usual, Fritz has a handle on Washington. I hope Obama will use his good counsel.
Dear Senator. Thank you.
I have to admit that you are spot on, but need to add that the current plitical system in the USA does NOT solve problems.
Instead of turng this problem over the republicans in 2012, I sincerely hope that it will be turned over to an independent group of smart, honest people who are not part of either political party. I hope these people represent citizens, rather than business.
Senator Hollings,
What ever happened to the Gramm-Rudman-Hollings Act? I asked Senator Rudman when he had a blog but received no response. I know that law somehow died but how? Was it the sunset law because it had a time limit to it?
Globalization = the end of American prosperity. The new global feudalism.
The fact that a major media outlet asked "Is the American Dream Dead?" answers the question.
Thank you, Senator, for a much-needed dose of economic reality.
'Tis a pity so few in the current D.C. establishment possess your wisdom.
Oh,. Senator Hollings, I do so wish that President Obama would listen to you. Would you please, please,please make sure that he gets this because I don't think that what's he's doing so far,however well intended, is working.
He has to be bold and decisive. He has to not really give a flying fig about politics as usual. His transformational election has to be followed by a truly transformational presidency,which means decisive action.
The United States, it seems to me is in the throes of a slow death, but we can resurrect the country, only with decisive action.
Yes, please forward this to President Obama, and Senator Hollings, do more. than that, keep at it until the President listens.
1. Get energy independent. Brazil has done it, so can we.
2. Control medical and education costs. Those industries have had no incentive to control there own since we always want to help people pay for those needs. You can't vote against sick people and kids right? Only this enabling has spiraled the problem out of control.
3. Make adjustments from there. If it means protectionism, so be it, but our priorities must be straightened out.
Senator Hollings,
Spot on. How refreshing to see a politician who understands that "free trade" isn't free at all, and is in fact enormously costly to the American people, never mind the US and local and state tax coffers. Free trade is and always was designed to increase profits for corporations and investors, never benefit the Middle Class.
I am ignorant regarding VAT. I will see what else I can learn and hope you continue to blog.
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