Blue Collar Conservatives: Recommitting to an America That Works (18 page)

Next should be regulatory reform. I have had small manufacturers from Missouri Valley, Iowa, to Tampa, Florida, tell me that the burden has gotten dramatically worse during the Obama years. The attitude of state and federal regulators is “We know best how to run your business.” The burden is particularly heavy for small businesses, which create the most manufacturing jobs. Large corporations have compliance departments that can handle these regulations, but many small businesses find it nearly impossible. Many actually shut down because they can’t bear the cost of compliance. In America, you shouldn’t need an army of lawyers just so you can run a small manufacturing business. But that’s what happens when we surrender power to the government and let it expand beyond its justifiable duty to set up and referee the ground rules that protect customers, employees, shareholders, and competition.

In its first two years, the Obama administration imposed seventy-five major regulations that cost businesses more than $38 billion. To that cost is added the additional taxpayer cost of paying for the ever-increasing army of regulators. It’s time that regulations were subject to a serious cost-benefit analysis. For example, a new regulation from the Environmental Protection Agency on emissions from commercial boilers is estimated
to add $1.8 billion in new annual compliance costs to companies and a one-time implementation fee of $5.2 billion—with negligible benefits.
⁹
Tell me: What’s the point of that, except to use the power of regulation to destroy private business?

This is not an uncommon situation. In pursuit of minuscule health benefits, the Obama administration has heaped enormous costs on manufacturers. Everyone loses. American plants can’t comply with all these new standards and still make a profit, so they close. We lose jobs and tax revenue, and government will likely have to pay unemployment and other benefits to laid-off workers, whose communities and families will suffer. And as for the environmental benefit—there is none. Because these products are now being made in countries with lax environmental laws and the goods will have to be transported long distances back to the United States, there will actually be more harmful pollutants released. This is insanity! We need to analyze
real
costs and
real
benefits, tailoring the regulations to minimize costs for the maximum achievable benefits.

Over the years, American manufacturers have opened up factories all over the world for a variety of different reasons. Some factories were opened to serve markets in that country that couldn’t be competitively served from here. Some companies outsourced only certain parts or assemblies to keep the rest of the domestic manufacturing competitive and therefore keep some jobs here. Other companies have packed up completely.

Whatever the motivation, American companies have made billions of dollars in profits overseas. Those profits are taxed by the country where they are made. The remainder is sitting in the companies’ foreign subsidiaries instead of being repatriated to America. The reason? Taxes, of course. There is a 35 percent tax on all money brought back to America. The argument for the tax is that it is both an incentive and a punishment. It’s an incentive to keep manufacturing here, and a punishment if the company doesn’t keep it here. But who is getting hurt? There are legitimate reasons for companies to move production to other countries. Some countries, for example, require certain products sold in their country to be made there; others impose tariffs that make it impossible to manufacture a product in the United States and ship to those countries. In fact, most of the offshore manufacturing is not a result of making a bigger profit for the company, it is about survival. Our tax laws shouldn’t be punishing American companies, because it ends up hurting America and our workers.

Apple keeps over a billion dollars of foreign profits in a fund that invests that money overseas. What if Apple had an incentive to repatriate that money to the United States and invest it in domestic manufacturing? Taxation of manufacturers’ overseas profits should not encourage them to keep the money in foreign bank accounts or invested in overseas competitors. It should encourage them to bring those profits back home, where they can be invested in new plants and equipment or pay dividends to shareholders.

Although we should move to a flat corporate income tax, there is one corporate tax credit that I would keep in place. That’s the research and development tax credit, which is necessary to keep American manufacturing ahead of the curve. I would double it and make it permanent. Our tax laws should encourage companies to invest in the future. Burdensome regulation and tax laws do just the reverse, encouraging short-term thinking about profits to cover the costs of the regulations and taxes.

Finally, we need to examine our trade policies. I am a free trader, but we have to look at the effect of free trade on the average person. Importing lower-cost goods can benefit lower-income people and the average consumer. Just about everybody loves the prices at Walmart, for example. But as with regulations, we need to assess that benefit in light of its costs. Are importers following the same rules that govern domestic manufacturers? Are existing trade laws fair and properly enforced? When we make policy, we should always think about the people it affects, like, for instance, the people I met in Bemidji, Minnesota, during the 2012 presidential campaign.

Bemidji is a town of about fourteen thousand of the friendliest and hardest-working people you could ever hope to meet. It’s the home of the famous oversized statues of Paul Bunyan and his faithful blue ox, Babe. Built in 1937 for the
local winter carnival and designed only to last a year or two, the statues achieved national prominence after they were featured in
Life
magazine.

When I visited Bemidji, it was abundantly clear to me that it is a special place. Places like Bemidji may be small, seemingly inconsequential dots on a map. But when you add them all up, their influence on our economy and culture is enormous. These towns make our country exceptional. What brought me to Bemidji were sweater vests.

In politics, many of the things done by candidates are staged for a purpose. Candidates can get pretty calculating about everything from their hairstyle to the shoes they wear. My sweater vests, however, were not part of any premeditated strategy. It just so happened that on a cold December night in Iowa, I wore a sweater vest under my sport coat to keep warm. I don’t like wearing overcoats, and I like to pack light (vests are less bulky than sweaters or heavy coats). I was the last of the presidential candidates to speak at an event hosted by Mike Huckabee, and by the time it was my turn, the auditorium in Des Moines had gotten a little warm. My speech, to an audience of committed conservatives, was a big success. Some reporter happened to joke on Twitter that it must have been the sweater vest. The rest, as the saying goes, is history!

At a time when voters were looking for a down-to-earth, sensible alternative to President Obama—someone who reflected their values and perspective—the sweater vest became a symbol of “Middle America” in contrast to the
muddle-headed elitism of the Obama administration. Obama is famously “cool”—so cool that you can’t imagine him in a sweater vest. But a lot of Americans were fed up with his indifference to them, and the lowly sweater vest became their symbol.

After that speech in Iowa, people started asking our campaign for a Santorum sweater vest. With my focus on reviving manufacturing, I decided that if we were going to offer sweater vests, they better be made in America. Easier said than done. It proved remarkably difficult to find a manufacturer that could supply a sweater vest that was truly and completely “made in the USA” in the quantities demanded. Eventually we found a manufacturer in Bemidji, Minnesota, and that’s where Bill Batchelder comes into our story.

Bemidji Woolen Mills started when Bill’s great-grandfather was sawing railroad ties for underground mines. In his hardscrabble life, he managed to pull together enough money to start a potato warehouse. Later, realizing that every town needed a woolen mill to make clothing and that Bemidji, where winters are as harsh as anywhere in the continental United States, didn’t have one, he turned his potato warehouse into a woolen mill. When the Chevy factory closed down in 1929, at the onset of the Great Depression, Bill’s great-grandfather purchased the factory, despite everybody’s warning that it was a bad idea. He wanted to move the woolen mill into a larger space, and the factory seemed perfect. At the start of World War II, he won a contract to produce army blankets.
When the postwar baby boom reached its peak, family station wagons crisscrossed the country, stopping to see Paul Bunyan and Babe. That’s when the woolen mill hit its stride. Kids and families wanted clothes that reminded them of America’s pioneers and lumberjacks, clothes made by Bemidji Woolen Mills.

One of the highlights of the campaign was visiting the workers at Bemidji Woolen Mills, where they turned out our sweater vests by the hundreds. I then walked two blocks down the street to the embroidery shop to see the campaign logo stitched on.

Bill told me policy makers just don’t understand how Main Street works, what creates jobs and sustains communities. He mentioned a Democrat in the Minnesota senate who had proposed a tax on clothing priced over a hundred dollars. Presumably the point was to soak the people who can afford such clothing. But in fact it punishes the worker who makes that clothing. Taxes like that make it harder for small businesses to survive and create jobs.

It’s not being sentimental to say that Bemidji is the kind of “sweater vest” town that is the heart and soul of America. It’s a scandal that the concerns of people who live in places like Bemidji—their hopes and dreams, their jobs, their families—get short shrift from politicians of both parties. Towns like Bemidji just don’t fit into their plans or their vision for the future. We should stand up for places like Bemidji and for the blue collar conservative values they represent.

CHAPTER TEN

RAISING HOPE INSTEAD OF TAXES

W
e can argue about the proper breadth and strength of the safety net that the federal government stretches beneath its citizens—whether to extend unemployment benefits or guarantee health insurance, for instance. But two components of the safety net, Social Security and Medicare, are so well established and relied on by so many that the debate is only about
how
, not
whether
, to fund them. That’s a debate we’ve got to settle soon, because both programs are headed for a financial cliff, and that’s when the seniors who are just making ends meet get hurt—badly.

Apart from entitlements, the federal government most directly affects Americans’ household finances through the tax system. Here too the status quo is a mess. The tax code is a mix of needless complexity and perverse incentives. We need a system that is simple and logical. It should promote behavior that builds strong families, businesses, and communities.

It has been years, unfortunately, since Democrats and Republicans had a productive discussion about reforming Social Security, Medicare, and the tax code. Washington’s paralysis is imperiling the American Dream, and a lot of voters are ready to reach for their pitchforks.

Social Security is often called the “third rail” of American politics. In other words, “Touch it and you die politically.”
¹
Politician after politician has run from the problems that appear when you shine light on the Social Security program. And it’s no secret why. Americans cherish the program. We’ve all paid into it. Many see it as a safety net for their retirement—if they can ever afford to retire. And many older Americans count on it. But the hard reality is that Social Security pays out more in benefits than it receives in taxes. Social Security had been a pay-as-you-go system, with current taxpayers contributing at least enough to meet current benefits. But that ended in 2011.
²

Some politicians have convinced a willing public that a Social Security “trust fund” finances their benefits. That is true in theory but false in practice. The trust fund is a drawer full
of IOUs requiring the federal government to pay back the money it borrowed over the years when Social Security taxes exceeded the amount needed to pay benefits. Of course, the federal government already spends more money than it takes in, not counting Social Security, so when the Social Security Administration submits an IOU, the federal government simply borrows more money and issues a new IOU to pay Social Security benefits.

In 2013, Social Security was projected to spend $75 billion more on benefits than it received in taxes.
³
With the baby boom generation becoming eligible for benefits, that number is expected to more than double in ten years. We can’t continue to do what Washington’s pathetic political class has done for twenty years and leave this problem to the next generation of politicians to handle. The longer we wait, the more sudden and painful the changes will be and the more those who can’t afford it will get hurt. For example, according to estimates, Social Security IOUs will be paid off in nineteen years. If no action is taken, the law requires an automatic 25 percent cut in benefits for every senior to keep the program solvent. I understand that Social Security is not like other entitlements—its recipients, unlike people on welfare, have been paying taxes into the system for years. They feel, quite understandably, that Social Security is simply paying them
their
money. But make no mistake, changes will have to be made and fairly soon. We need to have a rational discussion so we
all understand the scale of the problem and the options to solve it. We must make the right choices and make them before the program hits the wall.