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It wasn't about Medicare: Jack Davis' message for the Republican Party

By Jesse Richman, Howard Richman and Raymond Richman
web posted June 6, 2011

In the May 24 special election of the NY 26th Congressional District, Democratic Kathy Hochul, with 47% of the vote, won a seat in an area that has consistently voted Republican.  Democrats think the story of this election is that by hammering Republicans for proposing cuts in Medicare they were able to turn the electoral tides.  However, the election marks an important turning point of a different kind.  As trade continues to rise as a national issue, it has now reached sufficient prominence that a third party candidate running on the issue can garner a potentially decisive block (nine percent) of voters drawn from both parties.  This is a wake-up call Republicans must heed if they are to win in 2012.

Tea Party candidate Jack Davis, a 78-year-old self-made manufacturer like the ones celebrated in Atlas Shrugged, focused the campaign on American manufacturing.  In his speech at a Wyoming County rally on May 15, Davis briefly outlined his career:

I served in the Marine Corp and as an officer in the United States Coast Guard. In 1964, I founded the I Squared R Element Company which I own and manage.  I started the company in my garage.  Our United States competitors were two large multinational corporations, Carborundum and Norton.  Everyone said I would not survive. Well I proved them wrong.  Those multinational corporations no longer exist and my company is thriving. I Squared R is the world-leader and now the only United States manufacturer of silicon carbide heating elements.

Davis also made clear that he was running on a platform of balanced budgets and balanced trade, saying "This election is about the debt and poverty we are leaving our children." Regarding balanced budgets, he criticized the House Republicans' Ryan budget proposal saying that it "does not reduce spending enough." Regarding balanced trade he said:

American companies will not hire American workers until they have a level playing field. Manufacturing companies need trade balancing tariffs to be competitive with the predatory trade policies of foreign countries, like China…. The White House and Congress are controlled by the money from multinational corporations and by Wall Street. They will not control me.  I cannot be bought.

Democrat Hochul won as her campaign succeeded in peeling away Davis supporters.  And she did this partly by emphasizing Davis' issues.  The main page of her campaign website says nothing directly about Medicare.  But she does say "that's what I want to make this campaign about – helping Western New York businesses grow and create good paying jobs right here."  In her thank you message to supporters posted after she won Hochul mentions "closing corporate loopholes for companies that ship jobs overseas," ahead of Medicare.  Unlike her Republican counterpart, Hochul attempted to address the trade issue, albeit with ineffective policies.  Hochul won.

Today, most polls put balancing the budget as the second highest priority of the American public after addressing the economy and jobs.  The months since November 2010 have not been kind to Republicans' reputation on either issue.  A May 5-9 AP-GfK Poll found more respondents trusted Democrats than Republicans on "managing the federal budget deficit."  Republicans have also failed to persuade the public that they are better at creating jobs.  Although more respondents trusted Republicans than Democrats last October, Democrats now hold a sixteen point lead in public trust on "creating jobs."

Whichever party (Republican, Democrat, or third) advocates policies that will balance trade can gain credibility on both the budget and jobs.  A WTO-legal Scaled Tariff  to balance trade would raise revenue while encouraging investment in U.S. manufacturing, helping to create jobs. Its duty rate would go up when our trade deficit with a country would go up, down when our trade deficit with that country goes down, and disappear when trade approaches balance or goes into surplus. Balancing trade is popular, with more than two thirds of respondents supporting policies that would increase U.S. manufacturing "even if that means higher prices for their products" in a December 2010 National Review/Allstate poll.

A scaled tariff would also help address the issue of China's unfair trade practices.  Currently, the Chinese government only lets its people import 30¢ of American products for every $1 we import from them. If trade balance were required, China would likely take down many of its barriers to products produced in the United States. As a result, multinational companies would build new highly efficient factories in the United States, instead of in China where the government loots them of their proprietary technology.  In a January 2011 Pew poll 85 percent of respondents thought that it was very important or somewhat important for the United States to "Get tougher with China on economic and trade issues."  The Obama administration's continuing unwillingness to label China as a "currency manipulator" helps keep this issue in play between the parties, and makes it readily available for third-party candidates as well. 

There is still time for Republicans to become the party of balanced budgets and balanced trade – 17 months until the 2012 election – but only if party leaders change course quickly.  We recommend adding the Scaled Tariff Bill that we have proposed to Ryan's budget. It would collect about $250 billion in government revenue while balancing trade and encouraging job creation.  This could be one component of a 2012 budget proposal that moves the budget to balance while promoting domestic job creation, leaving the Democrats to explain why they oppose balanced budgets and balanced trade.

In the rust-belt battle-grounds where the 2012 election will be won or lost, the trade issue must be addressed.  Free trade is not a winning response to the mercantilism of some major U.S. trading partners, and it won't win elections.  Balanced trade is.  In his election night speech, Jack Davis said:

Tonight, the people of Western New York have sent a message to Washington.  We've had enough of politics as usual.  We won't be fooled by labels.  We are dedicated to America … to an America where we are manufacturers, not just consumers of foreign products.

Candidates that fail to heed this message do so at their own peril. ESR

Jesse Richman, Howard Richman, and Raymond Richman maintain a blog at www.idealtaxes.com, and co-authored the 2008 book, Trading Away Our Future: How to Fix Our Government-Driven Trade Deficits and Faulty Tax System Before it's Too Late, published by Ideal Taxes Association.


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