We Did It to Ourselves

Pat Buchanan

8/24/2007 12:01:00 AM - Pat Buchanan

"After 34 years with LTV Steel, I was forced to retire because of a disability. Two years later, LTV filed bankruptcy. I lost a third of my pension, and my family lost their health care. Every day of my life, I sit at the kitchen table across from the woman who devoted 36 years of her life to my family, and I can't afford to pay for her health care. What's wrong with America, and what will you do to change it?"

It was the most compelling moment of the Democratic debate at Soldier Field. The speaker was retired steelworker Steve Skvara. He stood on crutches, voice breaking, as he spoke.

There are millions of Steve Skvaras out there, and what they do not know, in their anger and frustration, is that their government did this to them. They are the victims of an ideology that gripped both parties and is destroying the middle-class country they grew up in.

Before World War II, the United State sheltered, nurtured and aided U.S. industry -- until, by 1928, we produced 40 percent of the world's manufactures. The companies we created, U.S. Steel and Jones and Laughlin, GM, Chrysler and Ford, Boeing, McDonnell and Lockheed, IBM and GE, were marvels of the modern age.

We were the most self-sufficient nation in history, and American industrial workers the best-paid on earth. The companies they worked for had begun to guarantee lifetime job security, generous pensions for retirees and health insurance for all workers.

Came then the free-trade fanatics with their Faustian bargain. If we just throw open our borders to imports from Europe, Japan, Asia and China, we can buy all our goods cheaper, and we will all be richer. For free trade is a free lunch.

What was wrong with this theory?

Every ton of steel produced by LTV, every Chevy built by GM carried in its price tag the cost of the Social Security, Medicare, and federal and state taxes the company and its employees paid, plus the cost of the company's compliance with civil rights, health and safety, and environmental laws the U.S. government had enacted and, most important for Steve Skvara, the "legacy costs" of the pensions and health insurance the companies had agreed to provide.

Every time any company, foreign or domestic, bought a ton of U.S.-made steel, every time anyone bought a U.S.-built Ford or Chevy, maybe 50 percent of that sticker price went for Social Security, Medicare, defense, cops, teachers, parks -- and into the pot from which Steve Skvara's pension and health insurance premiums were being drawn.

The Fortune 500 were the greatest welfare states in history. They were the geese that laid the golden eggs for America's middle class. And the free-traders killed them, because their ideology told them what's best for consumers here and now is best for America.

So foreigners dumped their steel, and we gobbled it up. And their steel mills survived, and ours went under. And they flooded our market with Volkswagens, Hondas and Toyotas, and one by one took down our auto companies, so that the U.S. auto industry, which had 98 percent of the U.S. market in the 1950s, have less than 50 percent today.

Mexico now exports more cars to the United States than we export to the world. Chrysler is on the ropes. Ford lost a record $12 billion last year. GM is losing market share. Toyota is No. 1 in the world because Tokyo set out to make itself No. 1. Anybody think the Japanese care two hoots about Adam Smith or David Ricardo?

As one after another of the big companies go down, they head into bankruptcy court and ask for relief from creditors. What are the largest of the liabilities they shed? "Legacy costs" -- the cost of the pension and health insurance of Steve Skvara and his wife.

As we all buy up those TVs and radios and motorcycles and cars and clothes made in Japan and made in China, we kill factories all over America and push America's companies into chapter 11.

"But isn't that the free market?" comes the retort. Should we have to pay more for the goods we buy?

Answer: No and no. Europeans and Asians are skinning us alive. We impose corporate taxes that average 40 percent, state and federal. Europe imposes corporate taxes averaging 24 percent. Advantage Europe.

Europe imposes an average Value Added Tax of 19 percent on all they produce.

But they rebate that VAT tax on exports to the United States and stick a 19 percent VAT equivalent on all imports from America. Without calling it a tariff and a subsidy, it is a tariff and a subsidy.

For decades our trade wimps have put up with this.

What needs to be done is simple. Impose a 20 percent entry fee on all imported goods and services, and use the $500 billion to cut taxes on U.S. producers. Steve Skvara is a casualty of globalism, but maybe we can save the next generation from the same fate.