Sen. Fritz Hollings: The Economists

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JUNE 18, 2013 -- In 2006, the Princeton economist Alan Blinder estimated that in 10 years the U.S. would offshore 30-40 million jobs.

Today, Corporate America continues to enfeeble the U.S. economy as it builds China's -- offshoring our innovation, research, technology, production and jobs. The economists ignore the offshoring and blame a lack of consumer confidence for the lethargic economy. It's lack of money -- offshoring payrolls. Worst of all, the economists ignore the responsibility of the President and Congress to make it attractive for Corporate America to invest by adopting favorable taxes, assisting research and development and protecting vital production.

Blinder says there is a fine line between protectionism and protecting vital production to make it attractive for Corporate America to invest and he's against protectionism. Today we have no choice. China with its closed market and predatory practices sets the competition in globalization and Corporate America rushes to offshore its production to China.

The economists give the impression that Washington is trying hard for jobs by yacking about the Great Recession when the recession has been over for four years. Then the economists talk about the need for education, skills and innovation. We have the best universities in the world. South Carolina has the skills to make "the ultimate driving machine" for BMW and Boeing's Globemaster but we still have 8 percent unemployment because our textile industry has been offshored.

The U.S. has the world's best research and development and had the best innovation program, The Advanced Technology Program, but Presidents Bush and Obama abolished it. Then the economists cover their backside by calling for "growth," stimulation and 10 year plans to pay down the long-term debt. Growth is "the cup of tea" for the politician. So long as the economy needs growth, 10 year plans can be submitted that don't cut spending or increase taxes; which don't pay for government; which gets Congress by the next election. All can vote for it, but later Congresses never pay. We haven't paid for government for twelve years.

Serving on the Budget Committee for 30 years, no one ever submitted a 10 year plan. We always worried about paying for this years and next year's government. Now the economists are all for tax reform. We had three: 1976, 1986 and 2003 and lost revenues. The lobbyists help you close 2 or 3 loopholes and sneak in a couple more. It took us six years to find the ethanol loophole and repeal it. That's why I insist on a Value Added Tax. It has no loopholes and is self-enforcing. You either pay the VAT or pass it on. We can cut the size of government (IRS) and a VAT gives you instant tax reform.

Everyone is for tax cuts. We can cut taxes by replacing the 35 percent Corporate Tax with a 7 percent VAT which immediately releases $2 trillion in offshore profits for Corporate America to repatriate tax-free and create millions of jobs. The VAT tax cut produces billions to balance the budget in two years rather than 10. 150 countries compete in globalization with a VAT that's rebated on exports. The Corporate tax is not rebated. Canada adopted a VAT in 1991 and has had a surplus ever since. Worst of all, not having a VAT is killing manufacture in the U.S. An entrepreneur can be making a profit but has to pay the 35 percent Corporate Tax and another 17 percent VAT when his exports reach China. A competitor can produce the same product in China, bring it back to the United States tax-free and put the entrepreneur out of business. The economists know all this but insist on borrowing, submitting 10 year plans and are all for tax reform -- that is Christmas for the lobbyists.

Paul Krugman, the Pulitzer economist, keeps calling for infrastructure stimulation. After stimulating the economy $10 trillion in twelve years, we'll stimulate another $642 billion this year to retain government jobs and the economy will still lag. I've come to know and admire economists like Paul Volker but today I feel like Jock the Butcher in Henry VI: "Kill all the economists."

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 "Making Government Work" (University of South Carolina Press, 2008). You can learn more about Hollings online at www.FritzHollings.com.

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Source: http://www.huffingtonpost.com/sen-ernest-frederick-hollings/the-economists_b_3521647.html

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