Let us briefly review some of the more notorious behavior of the federal
government in recent years that has spawned the current economic crisis.
First, every law and government agency having anything to do with housing
policy, from HUD to the Fed, FDIC, Comptroller of the Currency, Office of
Thrift Supervision, enforcers of equal-lending laws, Fannie Mae and Freddie
Mac, the Community Reinvestment Act, Congress, and more, did everything
possible to force or bribe mortgage lenders into making trillions of dollars
of bad loans to unqualified "subprime" borrowers. Among the various
rationales that were given for this monumentally stupid policy were
"discrimination," which the Fed admitted there was no evidence of
when confronted by Forbes journalists Peter Brimelow and Leslie
Spencer in the 1990s. Banks and mortgage lenders made trillions of dollars of
bad loans as the Fed assured them that the risk could be swept away when
Fannie and Freddie "securitized" the loans and sold them. And there
was always an implicit (wink, wink) promise of a bailout if worse came to
worse (as it did).
HUD announced in the early 1990s that its top policy priority was to
sharply increase the percentage of Americans who owned their own homes,
whether they could afford to own a home or not. The home building and
mortgage finance industries applauded and supported this brand of
egalitarianism run amok. The real culprit, however, was the Greenspan Fed,
which flooded the markets with cheap credit, creating the housing market
bubble which of course has now burst. Has anyone seen or heard from Alan
Greenspan in the past eighteen months, by the way?
Wall Street bankers simply made the most of the incentives created for
them by government. There was no sudden outburst of "greed" on Wall
Street, as some of the dumber academics and pundits claim to be the cause of
the current economic depression.
Having created an economic depression, the same government then threatened
the end of the world as we know it unless we all acquiesced in giving trillions
of dollars to the financiers of the Democratic and Republican parties, the
big Wall Street banks. More than 70 percent of the public opposed this
according to opinion polls which, during the presidential campaign, were
treated as Holy Gospel by the media and Washington elite. When billionaire
New York City Mayor Michael Bloomberg sued the Fed to learn who, exactly, the
money was given to, the federal courts essentially gave him a great big
middle finger and told him to get lost.
During the 1970s many American pundits ridiculed the British practice of
bailing out failing industries because it caused "the British
Disease," i.e., a grossly inefficient and uncompetitive economy.
Subsidizing business failure breeds more failure. We are now doing the same
thing, but many orders of magnitude greater. The most egregious example of
this disastrous policy is the billions of tax dollars promised General Motors
and Chrysler and their productivity-destroying unions.
Economists used to fear inflation when the monetary base grew any faster
than say, 5 percent per year; today it grows faster than 100 percent, or
higher, as the federal government attempts to print and spend money like it's
growing on trees. Ordinary citizens instinctively understand that this is
insane, but the government has about as much respect for them and their
opinions as the federal courts had for Mayor Bloomberg.
Economists also used to warn about the accumulation of too much government
debt. Some still do, but the federal government pays no attention at all to
them as it accumulated over a trillion dollars in debt in the past year
alone. Every baby born in America who becomes a productive, taxpaying citizen
will automatically owe hundreds of thousands of dollars to the IRS as his or
her share of the national debt.
The Obama administration has proceeded to impose extremely burdensome
environmental regulations which will deepen the depression, and lusts to take
at least another trillion dollars out of the private sector (for starters) in
order to buy votes with it and guarantee Obama's reelection. Most Americans
are very easily duped by simply calling this economically-devastating
political scam a "stimulus package." It, too, will only deepen the
depression. The money has to be taken from the private sector one way or
another. It will only depress the private economy even further while
ballooning government even more.
How Did This Happen?
How did America in the twenty-first century end up with a government that
is so highly centralized that the president alone can order the expenditure
of hundreds of billions of dollars without the consent of Congress, let alone
the public? How did we end up with a government that creates severe economic
hardship for average citizens while showering big, politically-connected
businesses with literally trillions of dollars in "bailout" money?
Is this the real purpose of the Fed, as opposed to all of its happy talk
about its supposed duty to "stabilize" the economy? And why is it
that the Constitution is completely ignored, if not ridiculed, by the same
Washington politicians who all that take an oath to defend the Constitution?
How did the federal judiciary become mere accomplices in our
government-for-the-privileged-only "democracy" that routinely tells
citizens to get lost whenever they inquire about how their tax dollars are
being spent? And is it really desirable to have over half of the entire adult
population "on the government dole" in one form or another so that
they never oppose an expansion of the state for fear of losing their own
subsidies? How and when was this system created?
The answer to all of these questions is that ideas do matter, and that the
vast majority of Americans long ago abandoned the Jeffersonian ideas that
"that government is best which governs least"; that if we are to
have a central government, it must be "bound by the chains of the
Constitution"; that the only possible way of controlling the federal
Leviathan state is by empowering the citizens through political communities
organized at the state and local level ("states' rights"); that
citizens, if left to their own devices, will prosper by pursuing their own
self-interests under a rule of law; and that the only legitimate purpose of
government is the protection of our God-given rights to life, liberty, and
the pursuit of happiness.
Americans are fond of quoting Jefferson, George Will once wrote, but
"we live in Hamilton's country." George Will was right. The great
debate between Jefferson and Hamilton over the nature of government in
America was decisively won by the Hamiltonian nationalists by the end of the
nineteenth century (Grover Cleveland was the last president who had genuine
Jeffersonian sympathies). Hamiltonian nationalism has festered ever since and
has become the reigning American political philosophy, leaving us with the
current economic debacle. Hamilton himself condemned Jefferson's political
philosophy shortly after President Jefferson delivered his first inaugural
address by calling it "the symptom of a pygmy mind."
What is Hamiltonian nationalism? Hamilton himself argued at the
constitutional convention for a "permanent president" who would
appoint all the governors of the states, who would in turn have veto power
over all state legislation. States' rights would have been destroyed, and
America would have essentially become a monarchy. That's where America stands
today, for all practical purposes. Especially since the advent of the federal
income tax in 1913, the states are mere appendages of the central state who
can be easily bribed into doing whatever the federal executive wants them to
do. All it takes is a threat to withdraw a few million dollars in highway grants.
Consequently, Americans have long been servants rather than masters of their
own central government as their presidents wield dictatorial powers.
American presidents have far more dictatorial powers than any European
monarchs of Hamilton's time had. Today an American president can, on his own,
order the bombing of any country in the world without offering an explanation
to anyone; eavesdrop on any phone conversation or email; and imprison
citizens without due process by calling them "enemy combatants."
The "imperial presidency" was a part of Hamilton's grand plan, and
that is exactly what we have today.
Hamilton was a foreign policy imperialist who wanted to go to war with
France (for starters) in order to pursue "imperial glory" (and
"glory" for himself as well). Jefferson, on the other hand,
understood that war was always and everywhere the great destroyer of wealth
and liberty. Hamilton was the original neo-con when it comes to foreign
policy.
Hamilton was the founding father of central banking, according to a Fed
publication entitled "A History of Central Banking in America." He
wanted a bank run by politicians out of the nation's capital and partly
capitalized with tax dollars as a vehicle for financing his other main
objective: corporate welfare. As the founder of America's first central bank,
the Bank of the United States, he wanted to use the bank to subsidize his
(and his political party's) political power base, which was primarily
Northern merchants and bankers, such as his political mentor Robert Morris.
It was Morris who urged President George Washington to appoint Hamilton as
the first treasury secretary despite the fact that he had little knowledge
and no experience in finance (apart from being a clerk for slave-owning
molasses exporters in the Caribbean as a teenager) when the Revolutionary War
ended. The Fed's trillion-dollar bailout of irresponsible bankers is Hamilton
nationalism par excellence.
Hamilton was also the founding father of "crony capitalism" in
America with all of his schemes for subsidizing businesses and his advocacy
of protectionism, as outlined in his famous Report
on Manufactures. He coined the phrase "The American System"
to describe this Americanized version of British mercantilism
(corporate welfare, protectionism, and central banking).
America's national debt now stands at about $10 trillion; $70 trillion and
counting if one includes the unfunded liabilities of Social Security,
Medicare, government pensions, and Lord knows whatever other promises will be
made during the current crisis. This too is pure Hamiltonianism, for it was
Hamilton who called the public debt "a public blessing." It was a
blessing, he said, because it would help to grow the state by attaching the
wealthier people of the country to the state. As government bondholders they
would always be relied upon to support higher taxes and a bigger government,
reasoned America's Machiavelli, a man whom his nemesis Jefferson once called
"a political colossus." "We need a government of more
energy," Hamilton once complained to George Washington.
Hamilton succeeded beyond his wildest dreams in this regard. It is not
only the bondholders but also the investment bankers who market the bonds for
the government who have long been a powerful political force for bigger
government. That's why the Treasury Secretary is almost always the CEO of
Goldman Sachs or some other Wall Street financial institution such as the New
York Fed. Ever since the New Deal, politicians have realized, in fine
Hamiltonian tradition, that the poor as well as the rich can be bribed into
becoming reliable lobbyists for statism, all at the expense of the middle
class taxpayers.
Hamilton did caution against "excessive debt," but then he spent
the rest of his life recklessly advancing the cause of excessive and
unconstitutional government, excessive debt and all. It was Hamilton who
first invented the notion of "implied powers" of the Constitution,
and taught generations of lawyers how to subvert the General Welfare and
Commerce Clauses of the Constitution to render its restrictions on federal
power meaningless. As constitutional historian Clinton Rossiter wrote in Alexander
Hamilton and the Constitution, ever since the 1930s "the
principles of nationalism and broad construction [of the Constitution]
expounded by Hamilton and his disciples" monopolized "discussion of
constitutional law." The "formula" for unlimited government,
Rossiter approvingly proclaimed, was invented by Hamilton and refined by his
political disciples: "the commerce power + the war powers + the power to
tax and spend for the general welfare x the loosest possible reading of the
words necessary and proper.'"
Just as the ideas of Karl Marx provided the ideological rationale for
socialism during the twentieth century, Hamilton's
mercantilist/nationalist/monarchist ideas comprise the essential ideological
underpinnings of the American empire. In his book, Hamilton's
Republic, Michael Lind assembled essays and excerpts from essays and
speeches from a pantheon of Hamiltonian-minded politicians, pundits, and
intellectuals throughout history. Among Hamilton's ideological disciples who
contributed to America becoming "Hamilton's country," writes Lind,
are: Ralph Waldo Emerson, Herman Melville, Theodore Roosevelt, Herbert Croly
(founding editor of The New Republic), historian Samuel Beer, James
Wilson, John Jay, George Washington, John Marshall, Daniel Webster, Edward
Everett, Francis Lieber, Abraham Lincoln, Samuel Huntington, Henry Cabot
Lodge, Walter Lippmann, George C. Marshall, Dean Acheson, John Quincy Adams,
Friedrich List, Henry Carey, FDR, and Lyndon Johnson.
Lind is correct when he writes that "however powerful Jeffersonian
rhetoric remains in American public discourse, it is the Hamiltonians who
have won the major struggles to determine what kind of country the United
States would be." The above-mentioned men may have relied mostly on
persuasion and propaganda, but force, coercion, and the waging of total war
on American civilians as well as combatants was also necessary. "Lincoln
and Grant settled the question of whether the United States was a
nation-state [the Hamiltonian view] or a loose alliance among sovereign
states [the Jeffersonian view]," writes Lind. In the eyes of Hamiltonian
nationalists the legitimacy of the powers of the central government always
come down to this argument — that might makes right.
Lind
also celebrates the Hamiltonian "victory" during and after the New
Deal when "The New Deal of Franklin Delano Roosevelt and the Great
Society of Lyndon Baines Johnson made a majority of American citizens direct
beneficiaries of federal entitlement programs — to the horror of
Jeffersonians, who beheld a virtuous population being corrupted by dependence
on the state."
The only way out of this mess for America — or at least part of America
— is to re-embrace the Jeffersonian vision and abandon the dangerous statist
superstitions of Hamilton and his followers, from the notion of a
"living constitution" to the necessity of a monopolistic,
nationalized money supply, to the "blessings" of unlimited public
debt, and the absurd notion that one man, Alexander Hamilton, was the sole
"architect" of the entire U.S. economy (Pat Buchanan's favorite
Hamiltonian superstition).
Accepting the Jeffersonian philosophy would also include taking
seriously the right to peaceful secession, as Jefferson himself did. In his
latter years the author of America's declaration of secession from the
British empire predicted that America would probably become several different
republics through acts of peaceful secession. He further said that he would
wish them all well, since they would all be "our children." The
last thing to have entered his mind would have been to wage war on any
seceding region, killing its citizens by the hundreds of thousands, burning
its towns, and plundering its wealth. He would have thought of such actions as
being more barbaric than anything any European despot had ever done. He
certainly would not have celebrated such barbaric actions in the name of
"national unity," a "new birth of freedom," or "the
glory of the coming of the Lord" as generations of Hamiltonians have done.
