Saving the Country

Having been governor, I am frequently asked the difference of being a governor and senator. As governor, if you want to raise revenue you raise taxes. As senator, if you want to raise revenue you cut taxes. In Washington you become smart. You become an economist and learn to stimulate the economy by cutting taxes. And promising not to raise taxes will guarantee your re-election. The Congressional Budget Office made a study of the cause of the increase in deficits the first four years of President George W. Bush: 48% due to tax cuts; 37% due to the cost of wars and national security; and 15% due to spending increases. The Bush administration and Congress have put the government on steroids for eight years, increasing the debt (as of 9/30/08) - not revenues -- $2.672 trillion.

Another smart thing you learn is how to low-ball the deficit by subtracting the trust funds. For example, the White House projected a FY 2008 deficit of $425 billion. The actual deficit is $1074 billion. The President and Congress constantly use Social Security surpluses to report a lower deficit. Section 13-301 of the Budget Act forbids this. But the President and Congress violate the law to appear fiscally responsible. Then they report Social Security is in trouble. Social Security reports a surplus of $2.4 trillion and is not in trouble.

Now we have the economists' charade of free trade. As Henry Clay, one of John F. Kennedy's Profiles in Courage, said in 1832: "Free Trade! Free Trade! The call for free trade, is as unavailing as the cry of a spoiled child, .... It never existed; it never will exist...." After World War II, we took up the chant of free trade as we spread capitalism with the Marshall Plan. Our goal in chanting free trade was to open the markets of the assisted countries. But Japan kept its market closed, starting a trade war for market share, selling at cost in international trade and making up the profit in its closed domestic market. Concerned that capitalism prevail over communism in the Cold War, we refused to compete in this trade war. We refused to force Japan to open its market. Now, Toyota is #1 as General Motors and Ford struggle. Now Corporate America is outsourcing like gangbusters and shout free trade for fear that the U. S. will engage in the trade war and stop the outsourcing.

I worked with Corporate America to protect our textile industry by passing a protectionist trade bill through the United States Senate in 1968. President Lyndon B. Johnson had Wilbur Mills, the Chairman of the Ways & Means Committee, block the measure in the House of Representatives. Then we passed four protectionist trade bills through both Houses of Congress only to be vetoed, one by President Jimmy Carter, two by President Ronald Reagan, and one by President George H. W. Bush. Corporate America was for protectionism not free trade. Denied protection by both Republican and Democratic administrations, Corporate America began outsourcing. Now making enormous profits from outsourcing they chant "free trade" to dump their offshore production into the United States.

The Economist reports: "Globalisation used to mean, by and large, that business expanded from developed to emerging economies. Now it flows in both directions, and increasingly also from one developing economy to another. Business these days is all about 'competing with everyone from everywhere for everything', write the authors of "Globality", a new book on this latest phase of globalization by the Boston Consulting Group (BCG)." But the United States refuses to compete, to trade.

Globalization is a trade war with the U. S. AWOL. We started a trade war with the Mother Country at the adoption of a Constitution in Philadelphia in 1787. England had prevented manufacture in the colony, even prohibiting the printing of the Bible. In l787 we reached a consensus on protectionism directing the regulation of trade to the Congress in Article I, Section 8, of the Constitution. It took the United States four more years to reach a consensus on First Amendment rights of freedom of speech, religion, assembly, and the press. President Washington, in his first message to the first Congress in 1789 counseled: "A free people should promote such manufactories as tend to render them independent on others for essential, particularly military supplies." After the adoption of the nation's seal, the first bill to pass Congress, on July 4, 1789, was a 50% tariff on numerous articles. We financed and built this industrial giant, the United States of America, with protectionism. We didn't pass the income tax until 1913. Edmund Morris, in Theodore Rex, describes the United States winning the trade war with England: "This first year of the new century (1900) found her worth twenty-five billion more than her nearest rival, Great Britain, with a gross national product more than twice that of Germany and Russia. The United States was already so rich in goods and services that she was more self-sustaining than any industrial power in history." Theodore Roosevelt exclaimed at the time: "Thank God I am not a free trader."

While spreading capitalism with the Marshall Plan, the United States raised our standard of living with the minimum wage, health care, safe working place, safe machinery, parental leave, plant closing notice, and started protecting the environment by instituting NOAA and the Environmental Protection Agency ensuring clean air and clean water. This high standard of living raised the cost of production. Corporate America could avoid this cost by outsourcing. But now, if your competition outsourced and you continued to work your own people, you would go bankrupt. Production in America, in order to compete, finds itself forced to outsource. And the outsourcing and free trade charade are destroying the economy. We are outsourcing not just jobs and production, but research, technology, investment, the economy - even the debt. With the shocking $700 billion bailout, outsourcing the debt will be difficult. The country finds itself in the predicament of having to protect it's production and standard of living or end up a banana republic. We learn that David Riccardo's "comparative advantage" in economics is no longer English woolens and Portuguese wine, but government. The Japanese and Chinese governments set the competition of managed trade in globalization. Bottom line, we can't depend on our business leadership calling for free trade to prescribe our trade policy. Congress, under Article I, Section 8 of the Constitution, must assume the responsibility of regulating trade. Congress must make it profitable to produce in the United States.

We've got to stop our binge of free trade, cutting taxes, deregulating, contracting out, and getting rid of the government. We have to put America back to work, pay for the government we provide, and instead of getting rid of the government make the government work.

We need to compete in globalization. We need to put a tourniquet on outsourcing. We need money. A value added tax is in order. Every industrialized country but the United States has a value added tax, which is rebated at export. Our corporate taxes are not rebated, which puts the United States at a tremendous disadvantage in international trade. A VAT would remove this disadvantage and begin to eliminate both the fiscal and trade deficits. A VAT could also provide the money to finance health care, infrastructure, and energy. Raising the price of imports with a VAT will require the consumer to save. And exports that have been saving the economy will be promoted. It will take a year for business and the Internal Revenue Service to gear up for a VAT. In the meantime, we should institute a 10% surcharge on imports as President Richard Nixon did successfully in 1971. Everyone has been worried about the shortage of troops for Iraq and Afghanistan, the exhaustion of our military. But equally important is that we don't have the military supplies to go to war. Chairman of the Joint Chiefs of Staff, Admiral Crowe, warned of this shortage in 1991. Globalization and outsourcing have imperiled our security. We had to await flat panel displays from Japan before invading Kuwait. We had to await Swiss crystals before invading Iraq. We can't produce planes unless we get the parts from India. We can't produce helicopters unless we get the parts from Turkey. This nonsense has got to stop. We must activate the Secretary of Commerce's list of materials critical to our national security. Tariff or quota military imports and producing in country these supplies necessary to our security, we can put America back to work.

As Lincoln said: "As our case is new, we must think anew and act anew. We must disenthrall ourselves [from this free trade charade, and working together] we can save our country."

Comments

[kaski]

Respectfully Senator, be honest with the American people, tell them why the income tax was created and what bill passed in the Congress two days before Xmas in 1913 when most Senators and the House were at home for the holidays. It was the Federal Reserve act that gave control of our central banking system to the Robber Baron families, such as the Rockefellers, Morgans, Warburgs... The Federal Reserve is a privately owned banking corporation and is no more Federal than Federal Express is. Alexander Hamilton set up our current central banking system and saw to it that it was owned and controlled by the elite rich, controlling America and it's citizens thru debt owed them with interest. Our economic situation is not all that complicated and enough with the so called complicated BS fed to "We the People." Congress, can overturn the 1913 Federal Reserve Act and take over our central banking system, guaranteeing bank accounts, IRA's, pension funds, Social Security... and wipe our national debt to these Robber Baron elite families clean.
"The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed it's inhabitants under burdens ever accumulating." Thomas Jefferson
"History record's that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it's issuance." James Madison
Two Presidents that physically tried to stop them were Lincoln and JFK. Put two and two together.

[BillCarson]

"We've got to stop our binge of free trade, cutting taxes, deregulating, contracting out, and getting rid of the government. We have to put America back to work, pay for the government we provide, and instead of getting rid of the government make the government work.

This should be the manifesto of the Democratic party. But it won't be. With the DLC in control, we'll be looking at four more years of republican-lite.

[OTOH]

Sen. Hollings is exactly right.

Blind faith in free trade and the benefits of globalization have become an ideology among most economists and politicians. Ideological positions on practical matters are dangerous. Marxism, another economic ideology, drove the USSR to the ground before its citizens realized it was not the absolute truth they believed it was. Our economy is being driven to the ground by a similarly unrealistic, dangerous ideology that has no basis in fact -- only in the writings of an 18th century economist whose theories are being grossly misinterpreted and misapplied in situations where they do not fit. Advocates of Ricardo's comparative advantage have been saying that, as we outsourced all manufacturing and many services, we retained an advantage in information technology, arms industries, and financial services. Yet we are gradually losing these as well -- and we have seen how solid the "advantage" in financial services has been.

[bitterinsc]

Thank you, Senator. Since you retired Democrats in South Carolina essentially have no voice in ANY level of government. I hope that will change. We miss your unique perspective, vision, honesty, and statesmanship.

[Indie2008]

We miss you as Senator Fritz. I didn't always agree with you, but regard you as an intelligent and honest public servant- And that, after all the campaign rhetoric ends, is the real legacy of a person.

[feo]

Associated question: If tax cuts are so wondrous, why is the economy in such turmoil after years of Bush tax cuts? I, for one, would love to pay more taxes; unfortunately, my income has fallen by one-half thanks to Bushthink and corporate incompetence.

[BobsNotWorking]

I think you missed his point. I think Fritz was being a little sarcastic.

[Soulsurfer]

I've wondered myself for many years about corporations sending good jobs away......who do they think is going to buy their cars, stereos, computers, homes, clothes, TV's? Someone making 25K a year managing a Denny's? Why exactly should I have to compete with a Chinese or Indian engineer, when the company is American, the technology is American, and the corporate leaders all live in America? They want it both ways, low or no taxes, a cheap educated disposable work force, great infrastructure, and relative safety and security for their families. What really burns is the way these same corporate masters wrap themselves in the flag and brag about how much they love the country.......while they send YOUR kids off to do the fighting for a foreign policy geared to their business plan. The US CAN compete with cheaper work forces, and we should be sealing any tax loop hole or government subsidy that encourages off shoring of jobs. Hold the other countries to the same labor and environmental standards as we have, or don't trade with them.

[charleydan]

This comment is pending approval and won't be displayed until it is approved.

This needs to be in place to balance exports versus imports which is income versus expenses for the American government. In other words the tax goes to which ever one is out of balance.

Paraphrased Quote:
Marshall plan raised the standard of living at the cost of corporations not able to compete, went to outsourcing.

When an employer hands you a check with your taxes taken out. He places that tax along with the rest of your wages in the product. You pay for it upon purchase.

That is why taxation of any kind hurts the poor the most. Because they spend the most of their income for essentials. Paying for that tax at time of purchase.

Only rich use tax deductions for their pleasures.

Obama/McCain it does not matter. Either one spend as Repluocrats.

Government expenditures are only taking freedoms from American People one at a time and putting them in the hand Government officials who spend this money as they see required and not my indivicual freedom.

This works because the government takes money from the poor, middle class and everyone else and put it in a kitty and spend it as they see fit. They welfare not only the welfare of the poor but the corporations welfare. There never is or was welfare just for the poor. Unless you hand deliver the welfare from your hand to theirs.


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[charleydan]

This needs to be in place to balance exports versus imports which is income versus expenses for the American government. In other words the tax goes to which ever one is out of balance.

Paraphrased Quote:
Marshall plan raised the standard of living at the cost of corporations not able to compete, went to outsourcing.

When an employer hands you a check with your taxes taken out. He places that tax along with the rest of your wages in the product. You pay for it upon purchase.

That is why taxation of any kind hurts the poor the most. Because they spend the most of their income for essentials. Paying for that tax at time of purchase.

Only rich use tax deductions for their pleasures.

Obama/McCain it does not matter. Either one spend as Repluocrats.

Government expenditures are only taking freedoms from American People one at a time and putting them in the hand Government officials who spend this money as they see required and not my indivicual freedom.

This works because the government takes money from the poor, middle class and everyone else and put it in a kitty and spend it as they see fit. They welfare not only the welfare of the poor but the corporations welfare. There never is or was welfare just for the poor. Unless you hand deliver the welfare from your hand to theirs.

[Aaror]

Senator,
I agree with all of your points but one...
Social Security is a crisis, though not the way people assume.
As Medicare and Social Security are no longer able to fund our national debt, we will have to get more money from other sources. Before Bush I think the debt was 2/3rds owed to the trust funds, now it is closer to 2/5ths. In 2017 (estimated) Social Security will have to stop buying T-bills, and start selling. Medicare did so this year. Who is going to buy all this debt?
Once the supply of T-bills gets larger than the demand, prices will go down-which means higher interest rates. Right now T-bills pay the time value of money and inflation, but our debts have reached the point that a risk premium will occur soon.
If interest rates on a 10 trillion dollar debt go up 1%, that is a billion dollars a year. If there is serious doubt of our ability to pay-aka our ability to keep issuing enough debt to pay interest-our interest rates will shoot up. Imagine paying 700 billion a year in interest (we are already paying more than half that).
As the Social Security trust fund stops paying for the government, we could well see the dollar collapse, that is my worry (in fairness, I have planned for this, including starting research on a country to move to if that happens).

[jsh]

Sorry Aaror, but a 1% increase in interest rates on $10 trillion is $100 billion. Last year we paid somewhere around $400 billion in interest on our debt. Imagine what it will be this year! You don't solve the problems of a a huge credit bubble with more credit. That is the road to madness and destruction.

[DougNTexas]

Sen. Hollings we need men like you today in the Senate and House. It's a sad day that we no longer have men who serve with honor and the best interest of the USA instead of the best interests of Corporate America.

[SCG]

Thank you Sen. Hollings. I recall a number of hearings on C-Span when I noticed you as a sole voice, questioning, the unquestionable wisdom of "free trade". Anyway, this country would be far better off if we would take the wisdom of Lincoln to heart more often.

I'm afraid we insist on learning the hard way. Let's hope the democratic party has finally found it's voice, and a clear sense of purpose.

Hope springs eternal.

[Herrington]

Thank you Senator, that was like a breath of air for a suffocating man. Words and convictions rarely heard in a national dialogue dominated by Fox News. The rehearsed litany of economic deceptions from the right have gone on, unchallenged, too long. You list a good many, that protectionism is bad, is among the most egregious. Protectionism is, simply, prudent. When it benefits you, trade, when it does not, protect. The trouble is the lines are blurred by specious claims motivated by suspect interests. But this is a country, not a company or an investment bank trying to maximize profits without regard to the impact on the country. Regulating the conduct of business so that self interest does not do harm to the country is now, more clearly than at any time in three generations, being revealed as one of the major responsibilities of government. It is not socialism, it is patriotism.

American business has fully exhibited that it is fully capable of caring more for profit than it does the existence and well being of the United States of America.

[dukeitout]

Thanks Senator for an excellent article. I believe (correct me if I'm wrong) you suggest that social security taxes usually exceed ss outlays each year. This surplus is habitually taken by Congress to support other programs. And still the government operates in the red. Hopefully, this fact will be publicized. Social security bashing by the free-marketers is unfair and may be based on ignorance.

[dadw5boys]

SS FUNDS ARE THE OFF SETS FOR THE BUSH TAX CUTS FOR THE WEALTHY !!!!!

TRANSFER OF WEALTH UPWARD.

THE TRICKLE UP THEORY !!!!

[racom]

This is historical fact, been going on for years by both parties. It has been public knowledge for years, nothing new.

[rich misty]

Excellent article, thank you Senator