Monday, 06 February 2012 22:26 GFP Columnist - Jack Random
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Largely omitted from the Republican debates, largely ignored by media pundits, and largely neglected by the incumbent president, the China problem looms as the single most critical issue that should decide the 2012 election.

China is the primary owner of American debt. Imbalance of trade with China is the primary reason for that debt. And China is the primary beneficiary of the demise of American industry.

For the last thirty years, since the onset of the Free Trade era, whenever a union plant was shuttered in Pennsylvania, Michigan, Illinois or Missouri, a ceremony was held in Beijing. What remains of American industry is a shell of its former self. America became a retailer nation, a nation that no longer produced goods, and the working middle class, the backbone of America’s rise, slowly faded into obscurity. 


It may not be fair (for we were the primary architects of this global economic scheme) but China is widely perceived as the symbol of all that is wrong with America today.

Against this backdrop of economic urgency, you would think that the China problem would be the hot topic of American politics. That is not the case.

While analysts universally attributed the temporary rise of former Senator Rick Santorum to social issues and the large proportion of evangelical Christians in Ohio, it struck me that only Santorum and frontrunner Mitt Romney had any answer to the China problem. Romney has argued for a currency manipulation approach, a strategy fully consistent with the Obama administration.

Santorum has a different idea. He proposed a zero tax rate for any business venture in America that engages in manufacturing.

I am no fan of Rick Santorum but this idea has merit. Though it functions as a subsidy, by taking the form of a tax break it avoids the wrath of Free Trade advocates and the sanctions of the World Trade Organization. Moreover, it is difficult to imagine that China would object because they directly subsidize their own industry.

By contrast, Romney’s approach would require a punishing tariff, violating the mandates of Free Trade and exposing the nation to a reciprocal charge of currency manipulation. Like so many of Romney’s policies, it is without substance. It is designed for show and would never find its way to fruition.

Assume that Romney could make good on his promise to punish China for currency manipulation. Aside from the trade war that would surely follow, we would soon discover that the China problem is not confined to China. Industries would not automatically set up shop in America but rather in other nations that offer all the advantages of cheap labor without the burden of currency manipulation sanctions.

Santorum’s zero tax-rate for manufacturing transcends China. It would effectively counter-balance cheap labor in all nations. Of course, it would not address the root cause of the problem: labor rights and living wages. Santorum remains adamantly anti-union and anti-labor. But his answer to the China problem is far more promising than anything his Republican rivals or the Obama administration have proposed.

The problem with Santorum’s approach is that it is not sufficient. Even if were to spur a growth in American manufacturing, cheap labor competitors could up the ante by increasing subsidies or reducing labor costs even more. Since Santorum’s tax rate is already at zero there is nowhere to go and no way to respond. Moreover, the zero-tax on manufacturing is unfunded and would likely increase the deficit.

With the exception of Buddy Roemer, former governor of Louisiana, no one currently running for the White House has chosen to stand for Fair Trade, an approach that would fundamentally change the nature of global economics by giving labor a place at the bargaining table. In that absence, Santorum alone has forwarded a proposal that could give rebirth to American industry.

Curiously, Santorum’s populist appeal to the working class seemed to have disappeared when he left evangelical Ohio for independent New Hampshire and it only resurfaced late in South Carolina where it should have found a receptive audience. One wonders if the original party of Free Trade quashed the idea just as they did the attacks on Mitt Romney for being a ruthless, vulture capitalist. Indeed, some rightwing analysts have attacked the proposal as “industrial planning”, suggesting that even a corporate tax break can be defined as a violation of the free market if it benefits the working class. [1]

We can probably be sure that Santorum’s proposal will not survive the vetting process just as his candidacy will likely stumble and fall in South Carolina and Florida. Just as likely, neither party will offer any effective answer to the China problem.

There is another player in the game. Like Romney to Republicans, no one seems to like it and no one seems to know where it stands beneath the surface but an organization called Americans Elect has secured sufficient funding and organization to get on the presidential ballot in fifty states. They have collected over two million signatures and claim 450,000 supporters. They claim to accept no corporate or special interests funds, although the organization’s financial backers are anonymous. They promise a fair and open process of nominating a presidential and vice presidential candidate in on-line voting. A candidate must meet certain qualifications and the eventual nominees must be from differing parties and contrasting ideologies.

No one believes they have a chance in hell of winning the White House and, therefore, virtually everyone outside the organization believes they must have an ulterior motive [2, 3]. Associates of Americans Elect have been linked to George W. Bush, Barrack Obama, Mitt Romney, Ralph Nader and the Council on Foreign Relations. If there’s a pattern there it is as muddled as a Romney policy statement.

Many have objected to the organization’s lack of financial transparency. What concerns me more is the lack of process clarity. If the process is truly open and fair, then it provides a vehicle by which an independent candidacy could thrive. If it is not, it is a fraud and will ultimately be exposed. Such exposure would tarnish the reputations of everyone involved and could lead to costly legal retaliation.

Why would these individuals take that risk?

It is entirely possible that Americans Elect is exactly what it claims to be: an organization designed to challenge the two-party monopoly of power. That it advocates moderation is almost irrelevant. It is a model for all of us who have been advocating independence from the two-party system for many years.

It is a concept that at least deserves consideration.

At this time in history, with a struggling economy and a radical disparity between the elite and the rest of us, the road to electoral success in 2012 is wide open to any candidate that has an effective answer to the China problem. Americans know by raw instinct that education and innovation are not the answers. Americans sense that accusations of currency manipulation are just political fodder without substance. 

An honest Fair Trade candidate would have a popular appeal that could shake the major parties to the core. Is there such a candidate? Would Senator Sherrod Brown break ranks with the Democrats and run for Americans Elect? Doubtful to be sure. Rare is the politician who would sacrifice his party standing by running against an incumbent president.

There is the curious candidacy of Buddy Roemer, whose own Republican Party has banished him from the debates. The party establishment knows a threat when it sees one. Roemer is a powerful critic of corporate money in politics. He opposes corporate personhood and most importantly he is an unabashed advocate of Fair Trade. He is exactly the kind of candidate that would shake up the system and at the very least force both major parties to deal with the China problem.

It seems far more likely that Americans Elect will draft another disgruntled Republican, most notably Ron Paul, or an independently wealthy independent like New York City mayor Michael Bloomberg. That would be unfortunate as neither has an answer to the China problem and both are ideological supporters of Free Trade.

Nevertheless, I will be watching this process with a great deal of interest for therein may be found the key to future independent campaigns. Among the lessons and information to be gathered: What is the cost of getting a candidate on the ballot in fifty states? Can an on-line ballot be secure? Can a process open to all the people attract support and produce a candidate with widespread appeal? Can an effective campaign be mounted without corporate funding?

Most critically: Is it possible to combine the machinery of Americans Elect with the concept of direct democracy?

1. “Analysis: Santorum tax plan cuts rates, keeps goodies” by Kim Dixon, Reuters, January 9, 2012.

2. “Americans Elect and the Emerging Oligarchy: Update” by Joseph M. Firestone, Global Economic Intersection, December 13, 2011.

3. “New Americans Elect Handbook asks Presidential Campaigns to Build AE Personal Information Database. Why?” by Jim Cook, Irregular Times, January 15, 2012.

Image Courtesy of DayLife - China's Premier Wen Jiabao (R) answers a question as he and new Vice Premier Li Keqiang attend a news conference in Beijing in this March 18, 2008 file photo. China has begun work on an 18-month reshuffle of its top economic and regulatory policy officials as part of a leadership transition that will see President Hu Jintao and Premier Wen Jiabao hand their posts to a younger generation. Li is expected to replace Wen as premier and head of the State Council, China's cabinet, at the 18th Congress sometime next fall. To match Insight CHINA-POLITICS. - Reuters Pictures


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