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DEC. 2, 2010 -- Every Southern Governor knows how to create jobs. Luther Hodges of North Carolina set the pace, and I followed in competition. We both went to Europe, and I went to Latin America for industry and our ports' business. We now have over 100 German industries in South Carolina. I learned early on to give extra attention to the number six man, who was charged with developing industry's investment. If you didn't have good schools for that man's children and his team's children, you knew he would flyblow South Carolina and industry would never come. Luther and I both instituted the finest skilled training, which now produces in South Carolina the "ultimate driving machine" for BMW and Boeing's Dreamliner.

I raised taxes and obtained for South Carolina the first Triple A credit rating of any Southern state. Thank heavens we didn't have economists with a plan to reduce our deficit as a certain percentage of the GDP. We paid the bill for each year's government to maintain our Triple A credit rating. As a result, I attracted five GEs, four Westinghouses, four Duponts, Timpken Roller Bearing, etc., and we proudly announced the multiplying factor of job creation for each industry. I would have been embarrassed to announce the multiplying factor for a small business like a furniture store or a McDonald's. Small business doesn't create jobs. Manufacture creates jobs and is the engine of growth. And we fought in the trade war.

After World War II, Japan started a trade war by closing its market, subsidizing its manufacture, selling its export at cost, and making up the profit in the closed market. In 1960, I was drafted in the trade war to testify before the old Tariff Commission against Japan's cheating, and in 1961 President Kennedy enforced our trade laws against Japan, saving thousands of textile jobs. President Reagan enforced our trade laws saving Harley-Davidson and obtained voluntary restraint agreements on steel, automobiles, computers and machine tools from Japan. In the United States Senate we worked side-by-side with Corporate America to protect its production and jobs, passing trade measures through both Houses of Congress. But Presidents Johnson, Carter, Reagan and "Papa" Bush, yielding to the Cold War, vetoed our efforts. When the Cold War ended, President Clinton sold out the country's production and jobs with NAFTA with Mexico and led the way for China's entry into the World Trade Organization. Off-shoring jobs began in earnest under Clinton and hemorrhaged under Bush and Obama.
Corporate America has now joined China in the trade war calling for free trade. Ridiculous! There is no chance of free trade with China's communist control of its financing, labor, and market. China sets the competition in this trade war as it violates every tenet of free trade. Providing China the technology and expertise, Corporate America has moved the country's research and production to China. As a result, China had made manufacture in the United States no longer profitable.

If the President tries to make manufacture profitable by enforcing our trade laws or a member of Congress introduces a trade bill, coming down on their heads with contributions for their defeat will be Wall Street, Corporate America, and Tom Donahue of the United States Chamber of Commerce. Wall Street and Corporate America want to keep the off-shore profits flowing, and the President and Congress want to keep the campaign contributions flowing. Washington puts on an act of creating jobs with stimulation and freebies for small business but refuses to get in the trade war and is not serious about the economy and jobs. The President and Congress are paid to do nothing, and they do nothing.

Politicians constantly cry: "Government doesn't create jobs." In this trade war with China, the United States government is the principal protector of our economy and creator of jobs. Government can jump-start the economy by eliminating the corporate income tax and replace it with a 5% value added tax. The 2010 estimate for corporate income tax is $156.7 billion, whereas a 5% value added tax raises $600 billion. More money is raised by cutting taxes. VAT exemptions for food, health and housing for the low income still leaves $350 billion to pay down the debt. The VAT eliminates the biggest incentive to off-shore jobs and, rebated on exports, it promotes the President's plan to boost exports. Eliminating the corporate tax frees the trillions in off-shore profits held by Corporate America to invest in domestic production and jobs. The VAT law should prohibit off-shore profits being used for bonuses and excess profits. If the debt is paid down, the VAT will allow us to lower personal income taxes. Now Corporate America can produce for a profit in the United States. But government still has to enforce the trade laws to protect Corporate America's domestic investment and production.

Rather than performing its duty under the Constitution to regulate foreign commerce and enforce our trade laws, the Congress and President have turned Washington into the best off-Broadway show. When the President offers a budget for deficits in excess of a trillion dollars each year, every year, for ten years, Congress engages in a charade of hearings and deliberations, knowing that the budget will never be called for debate in either House. The 112 filibusters in the 110th Congress were all a charade. The Senate never follows through by bringing out the cots, debating around the clock until there is a compromise. In a charade, a Republican Senator holds the Republican floor, a Democratic Senator holds the Democratic side, and the rest of the Senators go to New York or California for fund raisers. The Social Security Trust Funds shows a surplus of $2.586 trillion. But Washington acts like Social Security is in crisis because we've spent the Social Security Trust Funds for everything but Social Security.
Then they act like increasing the age for Social Security seventy-five years from now is a tough decision. Congress has no idea of putting the government on a pay-as-you-go basis. The proposal to cut spending to the 2008 level still leaves a deficit of $641 billion and requires borrowing $641 billion from China. Paying a billion dollars a day interest costs for nothing, the recommendation of Alan Greenspan and Paul Volcker to let the Bush tax cuts lapse and start paying down the debt is not even discussed. The debate is whether to increase the debt by borrowing $3.5 trillion from China or an additional $700 billion for the idle rich. Even the hard work and conscientious endeavors of Erskine
Bowles and Alan Simpson of the Debt Commission is turning into a charade.

On 9/11, the State Department reported that al Qaeda was in forty-five countries - but not in Iraq, but in the United States. The staff checked with the FBI and it reported we had seventeen al Qaeda cells in the United States that we were watching. We cleaned out al Qaeda from Afghanistan in four weeks but continue in a ten year charade of eliminating al Qaeda from Afghanistan so that al Qaeda can no longer be a threat to our security. According to the State Department report, we have forty-four other countries to conquer, including the United States. One would think the rampant corruption in Afghanistan would sober us up. We have yet to heed the lesson of Vietnam: more people are willing to die for a government other than democracy. Afghanistan has become a test of the political partys' will on defense. Democracy comes from within, but President Obama's announcement of four more years of force feeding democracy is greeted with approval. No one seems to care that this charade is costing us legs and arms and lives.

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).

© 2010, Ernest F. Hollings. All rights reserved. Contact us for republication permission.

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Ernest F. Hollings served the public for 56 years -- 38 years in the United States Senate and as South Carolina's governor, lieutenant governor and a member of the S.C. House of Representatives.

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