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Inconsequential Washington

AUG. 16, 2011 -- Announcing for President, Governor Rick Perry promised: "I'll work every day to make Washington as inconsequential in your life as I can." He'll have a hard time making Washington more inconsequential.

Congress does nothing but campaign for contributions for reelection. With breaks every month to hit the trail for money, the Senate loves filibusters. One Senator on either side of the aisle holds the floor while the rest of the Senators go to California or New York to raise money. Surrounded by lobbyists, there are fundraisers morning, noon and night in Washington. In fact, the leaders no longer control -- the lobbyists control. Lobbyists can tell you when the Senate will have a vote and usually the outcome before the vote. Lobbyists like Grover Norquist constantly counsel against votes that will hurt your reelection. As a result, the Senate has had less votes this year than ever. Nothing gets done.

President Obama fundraises more than Congress. But he doesn't govern. He's smart, likeable, and a good campaigner. But the crowd around him misleads. After he and Speaker Boehner agreed on a plan to raise the debt limit, the President should have told the Speaker to get the House to agree or bring back a clean bill raising the debt limit, or he, as President, would enforce the Constitutional provision that the nation's debt cannot be questioned. He would raise the debt limit himself. Continually campaigning, President Obama insulates himself so that whatever the Super Committee agrees to; whatever the trigger causes, almost all the cuts won't take effect until after the election. The President keeps kicking the can down the road.

Now the President is out campaigning, promising to stimulate the economy with more payroll tax credits, more unemployment compensation, and an infrastructure plan that won't recover the economy quickly. President Bush increased the debt $5 trillion stimulating the economy over eight years $5 trillion. Household debt increased or stimulated the economy $7 trillion during the same eight years. According to the Congressional Budget Office, by the end of next month President Obama will have stimulated the economy $4.4 trillion more. With $16.4 trillion stimulation in eleven years, Paul Krugman and the economists call for more stimulation to obtain growth and create jobs. The economists have it backwards. Growth doesn't produce jobs; jobs produce growth. Who creates jobs? Corporate America creates jobs - but not in the United States. The economy is not suffering from a recession that began three years ago. The problem is the economy is being exported to China, Mexico, Vietnam, Brazil, etc. Our challenge is to make it profitable for Corporate America to invest and create jobs in the United States - to stop the hemorrhaging of jobs off-shore.

Globalization is nothing more than a war for the economy, with production looking for a country cheaper to produce. Each country competes vigorously in this war for innovation, research, technology, development, production and jobs, each building its economy - except the United States. President Obama stays bogged down in the hot wars, totally ignoring the cold or economy war. The President could easily recover by transferring the subsidy the U. S. gives to off-shore jobs and giving it to on-shore jobs: cancel the corporate income tax and replace it with a 6% value added tax. The VAT is easily implemented and administered with computers. 140 countries compete in globalization with a VAT and don't find it regressive or "a money machine." The VAT is rebated on exports, but the income tax is not rebated. With a VAT, the more you consume, the more you pay; the less you consume, the less you pay. The poor that must consume for food, health and housing, are given exemptions from the VAT. Last year, the corporate tax produced $194.1 billion in revenues. A 2010 VAT would have produced $700 billion. $70 billion exemptions for the poor, still leaves $630 billion to pay down the debt. Spending cuts can produce more to pay down the debt. The VAT promotes exports, creating jobs. With the corporate tax cancelled, Corporate America can invest its $1.2 trillion in off-shore profits to create millions of jobs in the United States. Since there are no loopholes in a VAT, we have instant tax reform. Since the VAT is self-enforcing, we can eliminate much of the Internal Revenue Service or cut the size of government. Since the average corporate tax is 23%, replacing it with a 6% VAT cuts taxes. So this tax cut stops the hemorrhaging of our economy off-shore, provides billions to pay down the debt, creates millions of jobs, and cuts the size of government.

But the President ignores the off-shoring of our economy. He campaigns around the country calling for stimulation and government "make-work," proving himself inconsequential on jobs.

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).

© 2011, Ernest F. Hollings. All rights reserved. Contact us for republication permission.

About Fritz Hollings

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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