Offshoring the Economy by Former U.S. Senator Ernest F. Hollings
Offshoring the Economy
By Former U.S. Senator Ernest F. Hollings
Nigel Hamilton’s book The Mantle of Command tells of President Roosevelt’s reaction to the Pearl Harbor attack on the United States on December 7, 1941. Three nights later, in a fireside chat Roosevelt said, “I have been working today on the subject of production,”… and explaining his agenda “to speed up all existing production by working on a seven-day-week basis in every war industry, including the production of essential raw materials.” That’s exactly what we need – a President working on production, making it profitable for Corporate America to produce in America. Instead, the President and Congress do nothing as Corporate America offshores its research, innovation, technology, production, jobs – our economy.
In December 2006, the Princeton economist Alan Blinder estimated that in ten years the U.S. would offshore thirty to forty million jobs. For every $1 billion in trade deficit, economists estimate that it costs the economy 9,000 jobs. Our $471 billion deficit in the balance of trade costs the U.S. economy 4,239,000 jobs. This dovetails with Blinder’s estimate. As offshoring jobs continues, the economists blame the lagging economy on the Great Recession. The recession has been over five years. The economy lags not because of the consumption or a lack of confidence in the economy. It’s lack of money – offshoring payrolls.
The best of writers, Rana Foroohar, Michael Gruenwald, and Joe Klein in Time Magazine (10/6/14) cover the economy and politics but never mention offshoring. They mention gridlock, gun control, the Affordable Care Act, consumption, immigration, terrorism, etc., but never mention the deficit in the balance of trade; the failure to enforce trade laws; the devastating corporate tax; and attracting industry. Every governor works to attract industry. New York advertises on television free taxes for ten years for industry to invest and produce in New York. But in response to the contributions, the President and Congress do nothing. Wall Street, the big banks, and Corporate America want to keep the offshore profits flowing and contribute to the President and Congress to do nothing to make it attractive for Corporate America to invest and produce in America; to do nothing about China’s predatory practices or devaluing its currency – to stop building China’s economy and start building the U.S. economy.
After World War II, Japan closed its market, subsidized its manufacturers, and sold its export at cost, making up the profit in the closed market. In the U.S. Senate in 1968, I passed a Textile Amendment to a House-passed trade bill against Japan’s predatory practices by 68 votes. President Johnson had Wilbur Mills “deep-six” the bill in the Ways and Means Committee. The measure was never voted on. Then we passed four textile bills through both Houses, only to be vetoed: one by President Carter, two by President Reagan, and one by President George H. W. Bush. When Clinton was elected president in 1992, I knew we had hit pay dirt – Arkansas had the same textile problems as South Carolina. But President Clinton went for the money. He put the white tent out on the White House lawn, and the Fortune 500 came. He went for NAFTA with Mexico, China’s entry into the World Trade Organization, and gave China “most favored nation” trade status in 2000. Corporate America abandoned attempts to pass trade bills and started offshoring. Between 2001 and 2010, the United States lost a third of its manufacture.
If President Obama would protect vital productions in steel, motor vehicles, computers, and machine tools, as President Reagan in 1984, it would create millions of jobs. If President Obama would enforce our trade laws like President Nixon in 1971, when our deficit in the balance of trade was a minuscule of today’s deficit, it would create millions of jobs. If President Obama would enforce the Defense Production Act of 1950 like President Kennedy in 1961, we wouldn’t be begging Russia for helicopters and importing uniforms for our G.I.s. If Congress would replace the 35% corporate tax with a 7% Value Added Tax, closing all loopholes, it would immediately release $2 trillion in offshore profits for Corporate America to repatriate tax-free, create millions of jobs, and jumpstart the economy. This tax cut also produces billions for Congress to balance the budget in two years rather than ten.
We need another Pearl Harbor to wake the people to the offshoring of our economy.