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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 Currrency, 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.
Thomas DiLorenzo
Also
by Thomas DiLorenzo
Thomas
J. DiLorenzo is professor of economics at Loyola College in Maryland and the
author of The Real Lincoln; Lincoln Unmasked: What You’re Not Supposed To Know about
Dishonest Abe and How Capitalism Saved America. His
latest book is Hamilton’s Curse: How Jefferson’s Archenemy Betrayed
the American Revolution – And What It Means for America Today.
Copyright
© 2009 by LewRockwell.com
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