Former Senator Fritz Hollings gives some advice to President-elect Obama in a column from Economy In Crisis. For many years, Senator Hollings has been warning about the dangers of "free trade" and the destruction of America's industrial capacity.
Barack Obama's call to Change
Published 01/02/09
by Senator Ernest F. "Fritz" Hollings
Economy in Crisis www.economyincrisis.com
Two changes for the President of Change: (1) During his four years, President Barack Obama will have to raise taxes and the best time is now. (2) During his four years, President Obama will have to stop the outsourcing of jobs and engage in the trade war and the best time is now.
The collapse of the economy was caused by several things: sub-prime mortgages, derivatives, credit default swaps, etc. The biggest cause of all was never debated in the presidential campaign: deficit spending for eight years to the tune of $5 trillion has kept the government on steroids, over-stimulating the economy. Deficit spending has doubled the national debt, creating the biggest government waste of all: $500 billion interest costs, that can’t be cut, must be paid. President Obama will have to raise taxes to stop the waste and rebuild the economy. Fortunately, a value added tax will help stop deficit spending and put a tourniquet on the outsourcing of jobs. But President-Elect Obama says all economists, both conservative and liberal, agree that we need to stimulate to jump-start the economy. Stimulation won’t work. Needed infrastructure spending is good, but won’t jump-start the economy. These are the same economists that counseled the banking, housing and automobile industries to go broke.
After thirty-eight years in the Senate I’ve learned that most of the economists are high-paid lobbyists. The interests that cause them to recommend stimulation are invested in outsourcing. Their economists know stimulation won’t work, but they’ve got to keep their jobs. Two years ago the Princeton economist, Allen Blinder, estimated that in ten years we will lose forty million jobs to outsourcing. As the economists palaver whether to stimulate $300 billion, $600 billion as recommended by Paul Krugman and Robert Reich, or now $780 billion in two years for three million jobs, it will still be five million jobs short. President Obama can’t wait for economists submitting plans to create jobs that loses them faster than being created.
After World War II, Japan started the trade war by subsidizing its manufacturing, targeting items of export, closing its market and selling the targeted export at cost, making up the profit in the closed domestic market. After fifty years, Toyota is #1 while Ford and General Motors struggle. China increased the competition with tax policy, controlling its labor and opening its country to produce in China in exchange for investment, research, technology – and jobs.
We have been importing subsidized foreign cars for eight years at the rate of $10 billion a month. No U. S. industry can withstand $5 trillion of subsidized competition. And a good place to start is with the bail-out plan. When Japan attacked Pearl Harbor, President Franklin Roosevelt put everybody to work 24/7and had Ford produce the tanks and General Motors produce the B-24 bombers. A nation must have rolling stock. Before long we will be importing subsidized Chinese hybrid cars 17 percent cheaper than Detroit’s manufacture. Detroit must pay all taxes, but China rebates its 17 percent VAT at export, and all bail-out plans now considered will be found wanting. We need to immediately impose import quotas on foreign cars. We need a VAT to compete in globalization and the trade war. It will take a year for the Internal Revenue Service and business to gear up for a VAT. In the meantime, we need to impose a 10 percent surcharge on all imports as President Nixon did so successfully in 1971. Those that argue that an import surcharge or VAT will cut off stimulation can forget about it. People are not consuming. They’re desperately trying to save.
Fortunately, a value added tax will help stop deficit spending and put a tourniquet on the outsourcing of jobs. The Secretary of Commerce is required to promulgate a list of weaponry necessary to our national security, so that the United States can be assured of domestic production and supply. But the Defense Department ignores this caution. We had to await flat panel displays from Japan before invading Kuwait in Desert Storm. Our fighter aircraft depends on parts from India and Sikorsky must import a vital part for its helicopter from Turkey. At any crisis now, Marine One could cause the Commander-in-Chief to be grounded.
President Obama can harken the lesson of our first President’s first message to the first Congress in 1789. President Washington stated: “A free people should promote manufactories to render them independent of essential, particularly military, supplies.” Refurbishing our production of defense material will put America back to work.
http://www.economyincrisis.org/articles/show/2274
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