Last week, in a party-line vote, the Republican House of Representatives killed an effort to repeal tax incentives for multinational corporations to export jobs. The heart of the problem is that for decades the tax code permits firms to avoid paying taxes on the earnings of their foreign plants until those funds are brought back into the United States.
A secondary problem is that there are all sorts of accounting tricks for moving that money around in a way that it is not subjected to taxation. It is a little akin how Japanese car makers overprice the parts they send to Alabama and other states so they do not have to pay much in U.S. taxes.
President John F. Kennedy asked Congress to stop permitting multinationals to defer taxation on foreign earnings. He got nowhere. In 1974, Congress passed legislation offered by Senator Vance Hartke of Indiana to accomplish this. Congress vetoed it. In recent years, John Kerry has championed this legislation designed to help working people. In the last Congress, it was blocked by a Republican filibuster, but there were 53 Democratic senators willing to support it.
The tax code helps corporations export jobs in other ways. A corporation can claim the cost of moving jobs out of the country as a deductible business expense, and sometimes foreign operating costs can be deducted.
American workers are also hurt by abuses of H1 B visas, which are used to bring in foreign workers to take American jobs. I notice that it has been used by some local banks and drug stores to tellers and clerks. I doubt if this was the intent of the legislation. These visas have been abused, and their use should be restricted to highly technical jobs that cannot be filled in any other way.
While attacking these abuses, the Democrats should propose separate legislation that limits the access of multinationals to government contracts to loans, subsidies, credits, and loan guarantees. This legislation would be difficult to craft, but the principle is important. Over time, it would gain public support.
States that award contracts to multinationals that export large numbers of jobs should be penalized with smaller grants in aid.
Senator Dick Durbin has suggested tax breaks for firms who hire American workers to replace foreign workers in their foreign subsidiaries.
Some have talked about penalties for moving jobs overseas when little notice was given and too little time was taken to carry out an ordeerly process. The penalties would be used for extended unemployment benefits and retraining. While this proposal is morally sound, it is unlikely it would survive a court test.
It is not too wide of the mark to compare the American economy to an automobile battery. The economy, like the battery, is difficult recharge when there is one weak cell-- the manufacturing sector.
It will not do to just say that most of the lost jobs will not come back. We need to begin the slow process of rebuilding the manufacturing sectors. Down the road, we may even have to look at some of the suggestions offered by former Senator Ernest Hollings, but people are not ready for that much exposure to reality just now.
Sigmund Freud once said that people do not want to look at what they do not want to see or understand.
At this moment in our history, many of our people are in a state of panic brought on by the terrorist threat, the dim prospects for the middle class, the perception of declining US power in the world, and—above all-- by the near collapse of our financial system and economy. It is natural to seek emotional comfort by clinging to familiar ideas that has been sold as the essence of the American tradition. Voters have repaired to a desperate clinging to the very economic ideas that produced near disaster just two years ago. In foreign affairs, they seem to be subscribing to the version of "exceptionalism" that brought the defeat in Vietnam and landed us in the two very costly and pointless wars. Sensing this, Republican columnists are now demanding that Barack Obama start using the rhetoric of George W. Bush and proclaiming a version of American exceptionalism that justifies doing whatever we want on the world state.
For the moment—perhaps much longer- we can expect a continued flight from reality. People want to believe that sharps cuts in government spending will create many more jobs. The only time that might
work is in fighting stagflation, which we do not have now. Another irrational belief is that borrowing billions to award the top earners with huge tax cuts will create jobs and far more tax revenue than was borrowed. Some even insist that nothing is being borrowed to finance the tax cuts. The latest lunacy is the idea of taking nearly eight hundred billion from the Social Security Trust Fund to pay off the Chinese. This idea came from a US Senator who had worked on Wall Street and had once been busy moving US jobs to the Pacific Rim. The money is not there in the Trust Fund to use. What is there are Treasury Bonds no one wants to make good on. Why would the Chinese accept one set of bonds for the ones they hold. Moreover, we would be giving them bonds that pay less in interest. Look for a lot of other silly ideas that conform to the prevalent ideology but defy reason and reality.
Obama gained some points recently because he sang parts of the Republican song and compromised some. Compromising is good and necessary, but there is no way he can out-Republican the Republicans. Moreover, they always have the advantage of campaigning against feared "Others"--Hispanic migrants, liberals, African-Americans, the poor and marginalized, and even a chief executive who is supposed to be a Muslim Socialist born in Africa. This kind of appeal works when the people are afraid and the progressives offer no compelling narrative. The time has come to start the slow process of building a progressive version of the American story. Begin it around this aspect of the jobs issue. It is pointless to talk about federal spending to create jobs now; the masses have been spooked on that approach.
The Democrats need to start communicating with the American people again and drawing their attention to bread and butter issues that they cannot understand. People could not understand the ins and outs of health care reform, but everyone knows that good middle class jobs are disappearing.
The Democrats should harp on this one theme until people begin to understand. Everyone has children and nieces and nephews they work about because the manufacturing jobs are disappearing.
This is the best concrete theme the Democrats can use to reeducate fellow citizens and some of their wayward colleagues—especially New Democrats, who bought into some Republican economics in the past.
Once people see how much damage the tax code has done by encouraging off-shoring, they will see that just fearing "big government" will not do the trick. They will grasp that government only hurts when it is serving big, powerful special interests. There are still people alive who remember the Great Depression or heard a lot about it from their parents. In the late 1940s and 1950s, there emerged an amended version our master narrative that was influenced by the lessons of the depression. It was a time when people valued community and expected responsible corporate citizens. Many of these older people forgot these lessons and, in panic, flocked to the Tea Party. If the Democrats work at reactivating those memories, some of those voters will come back to the party of Franklin D. Roosevelt.
George Will recently wrote that our revolutionary ancestors feared big government—pure and simple. No, they feared abuse of power and the use of power to take care of the rich, privileged few. If the masses ever begin to grasp this, the Democrats will be able to get their act together.