Turned off

ERNEST F. HOLLINGS, former U. S. senator from South Carolina (D). This is a must read!



The columnists and pundits are in a competition trying to explain the frustration of the people by analyzing President Obama - "doing big things," "not fiery enough," "trying to do too much," etc. None of that! People are frustrated because the President doesn't do anything about two important concerns critical to the economy -- deficit spending and a trade war that's developed into a war on the economy.


President Obama articulates his concern about deficits and the debt, saying he's reviewing each item in the budget line by line. But no President serious about stopping deficit spending and paying down the national debt would submit a budget showing deficits in excess of a trillion dollars each year for ten years. (President's F/Y 2011 budget, page 178). Now the House and Senate are in a standoff, refusing to adopt a budget resolution showing deficits as far as the eye can see. The budget law requires both Houses to have conferenced and adopted a budget resolution by April 15th. Instead, both bodies now plan to use the Pelosi rule of "deeming" a budget resolution having been passed and making what spending cuts they can.


"Like Eliza Doolittle in My Fair Lady: 'Words! Words! Words! I'm so sick of words! I get words all day through; first from him, now from you! Is that all you blighters can do?'"

-- Ernest F. Hollings

The President's study commission on the budget is a costly delay. The deficit for F/Y 2010 has already reached $1 trillion, 21 billion (5/12/10) and we have 4 ½ more months of borrowing and spending left in this fiscal year. Interest costs waste $500 billion a year. Reporting in December any recommendation by the commission can't take effect until 2012 - an election year. Members will oppose voting to cut spending in an election year. Members will oppose raising taxes in an election year. It is doubtful that Congress will adopt the commission's recommendations. Mayors and City Councils, Governors and State Legislatures over the land are struggling to pay for this year's government. People are frustrated over the President and Congress considering 10-year budgets with trillion dollar deficits and waiting for anything to be done about the deficit and debt.

No President serious about creating jobs would ignore the off-shoring of the nation's economy in a trade war. I'll never forget the briefing by Lee Kuan Yew, the Prime Minister of Singapore, forty years ago when he stated: "Japan doesn't act like it lost World War II. It teaches in its schools that the war was only a temporary set back. And Japan is determined to take over the world economically."

After World War II, Japan started a trade war by closing its domestic market, subsidizing its manufacture, selling its export at cost, and making up the profit in the closed market. Now after forty years, General Motors is bankrupt with Toyota #1. Six years ago Senator Richard Shelby (R-Al) and I were in Singapore, and I wanted Lee Kuan Yew to tell Shelby what he had told me about Japan. Instead, Lee told of the visit of the incoming president of China, Hu Jintao, who wanted to learn how Singapore, so diverse of population and with no natural resources, could become so economically strong. Lee counseled: "You have to watch China now. China is determined to take over the world economically, and I am banding together countries in the Pacific to counter China. We need the United States to help us."
China changed the trade war into a war for not only trade, but investment, research, technology, development, production, jobs -- the economy. It not only operated from a closed market for market share, but with communist control of its market and labor, China invaded the production of the industrialized countries seeking their technology and expertise. For a 49% interest producing and developing in China, it has attracted U. S. investment, research, and technology.

Instead of helping Lee Kuan Yew counter China's assault, Corporate America is building China into an economic superpower. It's making communism work. Malaysia, Singapore, Thailand, Vietnam and other countries have joined China's assault, with globalization resulting in nothing more than a trade war with production looking for a country cheaper to produce. Off-shoring began in the eighties and hemorrhaged under the eight years of President George W. Bush, with almost a third of our manufacture being lost. South Carolina lost the textile industry long before the recession; Michigan the automobile industry; Intel and advanced technology had long since bailed out of Silicon Valley, and Bill Gates' research had long since left for China. We're losing more jobs from off-shoring than the recession, but only act for job loss from the recession. That's the people's frustration.


"Instead of helping Lee Kuan Yew counter China's assault, Corporate America is building China into an economic superpower. It's making communism work. Malaysia, Singapore, Thailand, Vietnam and other countries have joined China's assault, with globalization resulting in nothing more than a trade war with production looking for a country cheaper to produce."

-- Ernest F. Hollings

President Obama has no experience in trade and takes the advice of Larry Summers, Tim Geithner, and the financial crowd. Summers and the financial crowd feel that as long as Corporate America's profits keep flowing from China with the Wall Street market up, the U. S. has a strong economy. All needs to be done is to stimulate the financial community and consumption for the economy to recover. With imports soaring, we're stimulating the production of China, not the United States. The Obama administration refuses to enforce our trade laws to protect the economy and change our tax laws to promote exports.

Corporate America, producing in China, has a 17% VAT rebated at export and pays no tax on its imports to the U. S.; whereby Corporate America, producing in the United States, pays on an average of 27% corporate tax plus a 17% VAT when its export reaches Hong Kong, for a total of 44%. This 44% is a substantial incentive for Corporate America to off-shore its production to China. Eliminating the corporate tax and replacing it with a 2% VAT would not only remove this incentive, but promote exports and raise more revenues. This should be done now.

President Obama fails to enforce our trade laws that would protect domestic production and jobs. Section 201 of the Trade Act calls on the President to impose import tariffs or quotas when American production is endangered. President Obama should have enforced Section 201 and not wait for General Motors to go bankrupt and need a bailout. The War Production Act of 1950 calls on the President to protect America's production and supply of those items necessary for our national security. Boeing can't build a fighter plane except with an important part manufactured in India. Sikorsky cannot produce its helicopter except with a tail motor coming from Turkey. Our defenses are down, and the President could create millions of jobs by exercising his authority under the War Production Act.

The trade war is kept "top secret" by the economists and the media. The economists know better but respond to their employ. Corporate America doesn't want to return from off-shore and produce in the U. S. for less profit and worry about labor, safety, and the environment. Of course, Wall Street, the big banks, and the financial community and their entities, the Business Roundtable and United States Chamber of Commerce, join this opposition. And this opposition crowd furnishes the contributions for and against the President's and Congress's re-election.

Thomas Jefferson's free press has joined his free government. And "mums the word" on off-shoring the economy with the media and the pundits. The media and the pundits want to be smart and, if Wall Street, the financial community, Corporate America, Congress and the President don't mention off-shoring the economy, they're bound not to. As all of the industrialized countries protect and build their economies in the trade war, the United States stays AWOL and is on the road to ruin. This is why the people are turned off against Washington. We could all be turned on by the President and Congress beginning to solve the deficit, debt, jobs, economy, and health cost problems by replacing the corporate tax with a 5% VAT - NOW! When could there be a better time?

Former South Carolina Senator Fritz Hollings Thought on Jobs

Washington's job fraud By Earnest "Fritz" Hollings (D-South Carolina)

Washington engages in the grandest fraud on jobs. The people are led to believe that tax cuts stimulate growth and jobs and that borrowing and spending money stimulates jobs.


I'll never forget as Chairman of the Budget Committee briefing Ronald Reagan with Alan Greenspan in the Blair House just before Reagan was sworn in as President. The economy was not good, and I can hear Reagan exclaiming now: "I promised to balance the budget in a year, and there's no way to do it." I explained it would take three years, and I would be glad to help in a bi-partisan effort to try to bring it in balance. The rest is history. President Reagan launched the policy of "growth" to stimulate the economy by cutting taxes, giving the United States its first trillion dollar debt in his first term, with another trillion dollar growth in debt in his second term. President George W. Bush, bragging that he was a Reaganite, stimulated the economy by cutting taxes, which increased the national debt $5 trillion. Instead of growth, the economy lost 673,000 private jobs in eight years under President George W. Bush.

Elected President in November 1992, then Governor Clinton was told in Little Rock by Wall Street and its economists that he not only had to cut spending, but had to increase taxes. Taking office, President Clinton submitted an energy tax increase that was killed in the United States Senate by the farmers. Then we moved desperately to repair our defeat in the Senate with a package of tax increases on everything -- income, beer, tobacco, even Social Security. This tax increase passed both the House and the Senate without a single Republican vote in 1993, with Vice President Gore breaking the tie. Wall Street was given predictability, and the United States enjoyed its strongest economy in history, giving President George W. Bush surpluses "as far as the eye can see."

With spending cuts and tax increases, President Bill Clinton created 21,814,000 private jobs in eight years, more than Reagan, Papa Bush and Junior Bush created in twenty years with tax cuts for "growth." And in the last eighteen months, Paulson, Obama, and the Federal Reserve have borrowed and spent over $2.5 trillion stimulating the economy. But the only growth experienced is in debt, and we're still losing jobs.

We lost one-third of our manufacturing jobs during President George W. Bush's eight-year term. Corporate America was rushing pell-mell to China. With a stimulated economy, a manufacturer going to the bank for a loan, the first question the banker asks is: "Can your product meet the China price?" If not, no matter how innovative the product, someone will go to China in a couple of years and import the same article at a lower price, putting you out of business and making the bank lose on its loan. Today, it doesn't pay to produce in the United States.


"With spending cuts and tax increases, President Bill Clinton created 21,814,000 private jobs in eight years, more than Reagan, Papa Bush and Junior Bush created in twenty years with tax cuts for "growth." And in the last eighteen months, Paulson, Obama, and the Federal Reserve have borrowed and spent over $2.5 trillion stimulating the economy. But the only growth experienced is in debt, and we're still losing jobs."

-- Ernest F. Hollings

An important part of the job fraud is to make the people feel like the loss of jobs is due to the recession, not off-shoring. Long before the recession, South Carolina lost its textile industry; North Carolina lost its furniture industry; Detroit its automobile industry, and California its computer industry, etc. President Obama wants to increase exports, but we have nothing to export. Today, the United States has the export profile of an eighteenth century colony, with the only value added products exported being chemicals, agriculture and airplanes. Last week The Wall Street Journal announced that the largest chemical producer in the United States was off-shoring. Most of the job loss is from off-shoring, not the recession. But Washington acts as if nothing can be done to limit the off-shoring and protect our economy.

Globalization has developed into a trade war with production looking for the cheapest country to produce, with fierce competition for industry and jobs. Necessarily, every country has developed an industrial policy in this competition to protect its economy. Alexander Hamilton, in his famous "Report on Manufacturers," founded the United States in a trade war with an industrial policy of protective tariffs that financed and built this country into an industrial power. We had the only industry after World War II. To spread capitalism, we instituted the Marshall Plan to develop industry and jobs in Europe and the Pacific Rim. At the same time, we enhanced our industrial policy with trade laws to protect our economy. But President Obama and Congress act as if these trade laws and policies don't exist. They would have the people think that all we can do is stimulate the economy to supplant job loss from the recession. Trade laws and policies should be enforced to make it profitable once again to produce in the United States; to limit off-shoring, and protect our economy. In globalization, off-shoring can't be stopped, but off-shoring of essentials must be limited to prevent the economy from being destroyed.

President Obama and the Congress should immediately take the following steps:

1. Suffering a $5.8 trillion dollar trade deficit in the last ten years, President Obama should levy a 10% surcharge on imports like President Nixon did in 1971.

2. Don't wait for a basic industry to go bankrupt like General Motors, but once production is endangered, institute import quotas or tariffs under Section 201 of the Trade Act.

3. Activate the 1950 War Production Act reauthorized as the Defense Production Act of 2009 (S.1677). This requires the nation to have a ready supply of materiel necessary for our national security. Today, we can't go to war save the favor of some foreign country for supplies. Stop the off-sets for military sales and activate this law and policy, creating millions of jobs. President Kennedy used this law in 1961 to launch his 7-point program, saving the textile industry. Hearings before a Cabinet Committee determined that next to steel, textiles were the second most important to our economy. The Committee found in 1961 that "we can't go to war in Japanese uniforms."

4. Stop subsidizing off-shoring and cancel the exemption of off-shore profits unless repatriated.

5. Stop equivocating on "Buy American" and institute a "buy domestic" program like other countries competing in globalization.

6. President Obama can boost exports, pay for health reform and start paying down the debt by replacing the corporate income tax with a 5% VAT. Three percent will more than replace the revenues from the corporate income tax; 1% will pay for health reform, and 1% will start paying down the debt. The ox is in the ditch. We don't have time for a study commission.

I suggested canceling the corporate tax and replacing it with a 5% VAT to the Administration a year ago. It's a winner, but the President refuses to act. Why? To begin with, President Obama is inexperienced on trade and does generally what Larry Summers advises. Larry Summers is of the bail-out and bonus crowd, and he and Wall Street insist on continuing off-shore profits. They could care less about the United States economy. So Summers' and the Democrats' favorite economist, Paul Krugman, give the silent treatment to the off-shoring of investment, research, development, technology, production and jobs. They act as if nothing can be done to limit the off-shoring and strengthen our economy. The CEOs of Corporate America are interested also in continuing off-shore profits so they and their entities, such as the Business Roundtable, the United States Chamber of Commerce, and Americans for Tax Reform, oppose any move to compete in globalization. Any move by the President and Congress to compete is met with chants: "Free trade," "Protectionism," "Don't start a trade war." Like Tom Donahue of the U. S. Chamber, Corporate America threatens to cut off contributions.

The United States is not organized for profit, but for the common good. Under Article I, Section 8, of the Constitution, Congress is charged with regulating foreign commerce and protecting our economy. The Constitution also requires all trade measures to originate in the House of Representatives. So members of the Senate are given a free ride. They give trade and the economy the silent treatment - and get the contributions. And Members of the House are not about to introduce a trade measure to create jobs and protect our economy unless approved by the White House. House Members also give off-shoring jobs the silent treatment and get the contributions. Nothing gets done.

One grand fraud!


Senator Hollings of South Carolina served 38 years in the United States Senate, and for many years was Chairman of the Commerce, Space, Science & Transportation Committee. He is the author of the recently published book, Making Government Work (University of South Carolina Press, 2008).