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This was a column by former senator Fritz Hollings that hits both parties.
"Pundits keep analyzing the president trying to get the economy going and create jobs.
It's not that the president lectures like a professor. It's not waiting for the recession to end and growth to resume. And it's not the need for more bipartisanship.
Bipartisanship is our trouble. The president, Congress, Republicans and Democrats in Washington all agree on tax cuts, deficit spending, defense spending, wars, and chasing contributions for re-election. Worst of all, there's a bipartisan agreement to avoid competing in the trade war. "
"In the last 10 years we've lost a third of the nation's manufacture in the trade war to offshoring. Long before the recession, Princeton economist Alan Blinder estimated that in 10 years the country would lose 30 million to 40 million jobs to offshoring. President Obama didn't inherit just a recession. He inherited a financial collapse together with a job collapse from offshoring.
Stimulation won't do. President Bush increased the debt and stimulated the economy $5 trillion in eight years. In the same period, household debt increased or stimulated the economy another $7 trillion. The Federal Reserve stimulated the economy a trillion dollars in the remainder of 2008. By January 2009, when Obama was sworn in as President, the economy had been stimulated $13 trillion in eight years, and we were losing exactly 799,000 jobs a month. President Obama in two years has now stimulated the economy another $3 trillion and last month unemployment increased. Stimulation is spent. We're losing jobs not only from the recession but because we are not competing in the trade war.
The United States was founded in a trade war. The Mother Country forbade manufacture in the colony and required exports from the colony to be carried in the bottom of English ships. The Boston Tea Party that triggered the Revolution framed a Constitution calling for Congress to regulate trade -- not freeing trade. In fact, the forefathers agreed to regulate trade four years before they could agree on First Amendment rights. The first bill to pass the United States Congress on July 4, 1789, was a protectionist tariff. We didn't pass the income tax until 1913. We financed and built the United States into an industrial power with protectionism for the first hundred years, causing Teddy Roosevelt to exclaim in a letter: "Thank God I'm not a Free Trader."
"After World War II, Japan started the present trade war by closing its domestic market, subsidizing its manufacture, selling its export at cost, and making up the profit in the closed market. Japan's thrust for market share put General Motors into bankruptcy with Toyota No. 1. I worked with business in this trade war to protect its domestic production, passing numerous trade bills, only to be vetoed by presidents of both parties because of the Cold War. But when President Clinton passed NAFTA with Mexico, offshoring began in earnest. And 10 years ago, when China entered the World Trade Organization, offshoring hemorrhaged. Now, Corporate America, instead of fighting free trade, cries "free trade," "protectionism," "don't start a trade war." Globalization is nothing more than a trade war with manufacture looking for a cheaper country to produce goods. "
Every excuse in the world is given for the lack of jobs except the trade war. Pundits blame the lack of jobs on education and innovation. We need a lot more education in South Carolina, but we have the skills to produce the "ultimate driving machine" for BMW and Boeing's Dreamliner. And the best of innovation, Intel, has long since left for Ireland, China, and now Vietnam. Persons with graduate degrees can't find jobs. Silicon Valley suffers 11 percent unemployment.
The best example of a president sleep-walking through the trade war is his hectoring CEOs to invest in production and jobs in-country. If you were a CEO, would you invest in-country? The first thing the banker asks is: "Can you meet the China price?" If not, even though your investment succeeds, cheaper imports from China of the same article will soon put you out of business and the loan goes bad. The harsh truth is that in globalization it is difficult to produce goods for a profit in the U.S. In globalization only the government can make it profitable to manufacture and protect Corporate America's investment.
In globalization, the task is for the president and Congress to make it profitable to produce in the U.S. Congress can make it profitable and jump-start the economy by eliminating the corporate income tax and replacing it with a 5 percent value added tax. The corporate tax estimate for 2010 is $156.7 billion in revenues. A 5 percent VAT reaps $600 billion. For those with low incomes, exemptions for food, health and housing still leave $350 billion to start paying down the debt. Since the VAT is rebated on export, it promotes exports. Cancelling the corporate tax releases $1 trillion in offshore profits that can be repatriated tax free to invest in creating jobs in the U.S.
America exports 2 things....
Our jobs and our dollars.
Soon we won't have any dollars left and our jobs will be gone with them.
The solution is simple but that would require the US government to remove its trade deals. We have trade deals that make it easier to move our jobs and our money to other countries. Congress is not interested in protecting anything let alone even understanding the trade system.
They do have somethings the government does control constitutionally for security reasons alone they might want to consider.
1. Visas. end all work visas and HB1 visa which will destroy alot of the IT outsourcing to India jobs and labor from Mexico.
You can site 911 if you want be generally the idea of letting people into this country to work from other countries so they can learn our jobs and put Americans out of work is just crazy.
2. Remove all trade agreements and put a tariff on all imports and remove the income tax removing the 16th amendment on all citizens replacing it with a 3% federal sales tax on goods and services.
In one year you would have the fast going economy in history built on freedom and fair reasonable trade.
A really interesting read, especially the short but succinct history of Japanese policies that allowed it to become the second largest economy (only recently eclipsed by China). But I found it puzzling that when it comes to solutions, Hollings call for an end to corporate taxes replacing them with a value added tax while interesting failed to resolve the issue that underscored the majority of his piece, the trade deficit, and outsourcing. If ending corporate taxes will end outsourcing, I am open to the discussion but I have serious questions about what guarantees could be put in place to end outsourcing, and I have severe reservations about the implications of provoking a global trade war.
A really interesting read, especially the short but succinct history of Japanese policies that allowed it to become the second largest economy (only recently eclipsed by China). But I found it puzzling that when it comes to solutions, Hollings call for an end to corporate taxes replacing them with a value added tax while interesting failed to resolve the issue that underscored the majority of his piece, the trade deficit, and outsourcing. If ending corporate taxes will end outsourcing, I am open to the discussion but I have serious questions about what guarantees could be put in place to end outsourcing, and I have severe reservations about the implications of provoking a global trade war.
Exactly, eliminating corproate taxes willl not the change the fact that the biggest reason this country is losing jobs is that it cannot compete with the labor cost of other countries in a global economic system.
A really interesting read, especially the short but succinct history of Japanese policies that allowed it to become the second largest economy (only recently eclipsed by China). But I found it puzzling that when it comes to solutions, Hollings call for an end to corporate taxes replacing them with a value added tax while interesting failed to resolve the issue that underscored the majority of his piece, the trade deficit, and outsourcing. If ending corporate taxes will end outsourcing, I am open to the discussion but I have serious questions about what guarantees could be put in place to end outsourcing, and I have severe reservations about the implications of provoking a global trade war.
I think it's interesting as well. You make a good point about whether the end of corporate tax would be enough to bring the jobs back. I have to think it would help. It's certainly worth a look because what we're doing now isn't working.
His point about the trade war is that it's already happening, but we're not involved.
America exports 2 things....
Our jobs and our dollars.
Hopefully that was only a rhetorical device and not an attempt to make a statement of fact.
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The solution is simple but that would require the US government to remove its trade deals.
If it were only that simple. Here is a list of current trade agreements, I don't know how many of them there are, its hard counting on a scrolling screen, but there were more than I could count on a single screen). Some of those trade agreements insure protection for intellectual property, others insure that certain precious materials are available for U.S. manufacture, I could go on but I think you get the point.
As for your suggestions:
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Visas. end all work visas and HB1 visa which will destroy alot of the IT outsourcing to India jobs and labor from Mexico.
I am a total loss as to understand how limiting the number of workers coming into the country limits the number of jobs going out? Companies will simply hire these individuals in place or simply shift those jobs out of the country completely.
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Remove all trade agreements and put a tariff on all imports
And what will be the response of exporting countries to these tariffs when it comes to U.S. exports?
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In one year you would have the fast going economy in history built on freedom and fair reasonable trade.
Fair and reasonable trade with whom? You've place tarrifs on imported goods do you really thing that other nations are going to say, "hey that's cool, we won't place tariffs or even go so far as to close our markets to your products?"
If you can come up with answers to those issues, I am open to your suggestions.
I think it's interesting as well. You make a good point about whether the end of corporate tax would be enough to bring the jobs back. I have to think it would help. It's certainly worth a look because what we're doing now isn't working.
My concern is that corporations will like get their free ride, pocket the profits and still move jobs offshore. If Hollings and others want me to take them serious on this issue, I want guarantees that those profits are poured into American jobs.
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His point about the trade war is that it's already happening, but we're not involved.
Well that is quite true, the problem is that we long ago moved from being a producer to a consumer and to become a producer again there has to be an external market for our products. Of course there was a time when a well placed battle ship was good enough to insure raw materials and the opening of markets that were formerly closed, of course reliance on that sort of free trade agreement has sailed into history, so how do we enter this new war of trade with little of either the raw materials or markets?
My concern is that corporations will like get their free ride, pocket the profits and still move jobs offshore. If Hollings and others want me to take them serious on this issue, I want guarantees that those profits are poured into American jobs.
That's certainly a valid concern, and I don't know the answer to the question. I'm not sure how to set it up so there would be a guarantee. Maybe it would have to be something where there were conditions to make companies eligible, but things like that get messy and always have unintended consequences. I think that the idea deserves a look and that examination should involve people from the business community, not just politicians.
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Originally Posted by ovcatto
Well that is quite true, the problem is that we long ago moved from being a producer to a consumer and to become a producer again there has to be an external market for our products. Of course there was a time when a well placed battle ship was good enough to insure raw materials and the opening of markets that were formerly closed, of course reliance on that sort of free trade agreement has sailed into history, so how do we enter this new war of trade with little of either the raw materials or markets?
There are still still markets for our products, we just now produce them elsewhere. There needs to be an environment that makes it financially attractive for companies to produce those same products here in the US - financial reasons are why they left.
There are still still markets for our products, we just now produce them elsewhere. There needs to be an environment that makes it financially attractive for companies to produce those same products here in the US - financial reasons are why they left.
The reasons my U.S. companies hightailed it to China is a bit more complex and regulatory controls and taxes. In the beginning, in order to enter the Chinese market, the Chinese demanded that the manufacture of products slated for their market required companies to produce those products in China. As the largest potential market in the world it was a deal they could not refuse. Overtime, China gained the manufacturing expertise that made it extremely profitable to use their manufacturing infrastructure for exports as well.
In the case of India, it was just plain cheaper, especially for textiles. Donna Karon could make a $600 dress for $6 dollars. That had nothing to do with taxes or regulatory controls. As for the IT and tech support, the same held true.
As for Japan... well the Japanese Ministry of Industry and Trade developed a highly planned strategy combining massive government subsidies and industrial strategies to target certain industries, so much for arguments about government intervening in the markets. Yikes.
Ross Perot predicted this would happen 20 years ago.
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