Monday, August 16, 2010

Daily Kos: The free market is anti-American

Daily Kos: The free market is anti-American

The pair of words at the top of the conserva-dictionary these days has to be those Bobbsey Twins of political attack: anti-American and un-American. Michelle Bachman has called on the press to investigate "anti-American" members of Congress. Rand Paul called the president "un-American" for trying to hold BP accountable for the damage to the Gulf region. Oliver North says that President Obama has a "core-philosophy of being anti-American." The appropriately named Dick Morris says that Obama is the "first anti-American president."


Washington and Hamilton might have emulated the nation they had just defeated on the battlefield, but that wasn't the path they chose. Instead, steep tariffs were imposed on imported goods. These inflated the price of products from European factories and allowed American makers to both capture more of the market and turn a higher profit. With that money, American factories were enlarged and became more numerous.


To address this, Hamilton proposed that the federal government bail-out the states and regulate the financial markets. There was only one problem with this idea -- the federal government was also in debt, and banks were unlikely to loan them money that would be used to regulate those same institutions. Hamilton had an answer for that. He proposed that the US government become the largest stockholder in a bank. Not an existing bank, a new bank. The government would create this bank as a private company, but the government would own the majority of stock. The government would also lay down the rules for the bank, including limits on who could buy stock and what type of investments the bank could make. From this new bank, the government would borrow the money to pay off the states and address federal needs.

The first and largest federal need? The $2 million it would take to buy stock in the new bank. The solution? The new bank loaned it to us. Got that? We made the bank, the bank then loaned us the money to buy the bank. Even paying back the loan was more than we could afford, so Hamilton made a proposal popular with politicians in any age, a "sin tax." In this case, it was a tax on imported and domestic spirits (to see how well that went, just look up the Whiskey Rebellion).

With the money from the new government-owned bank, the US could take care of its own debts and those of the states. The government could regulate currency and set rules on trading. It also started in on a series of large infrastructure projects -- roads, canals, and public buildings.

That, brothers and sisters, was the American economic system. Those who worry that we've wandered too far from the vision of the founding fathers might want to remember that in George Washington's first term, the government was involved in:

* selectively restricting imports
* bailing out debts of states
* being the majority owner of a private company
* clamping down on fiscal speculation
* executing a "stimulus plan" of infrastructure projects

And all of this goodness was paid for by new taxes.