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Exchequer

NRO’s eye on debt and deficits . . . by Kevin D. Williamson.

How a Republic Becomes a Bank



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Pres. Barack Obama has proposed another half-trillion-dollar stimulus bill, although the word “stimulus” currently is in bad odor. He promised that it would be “paid for,” by which he apparently means that he will demand that Congress figure out a way to “pay for” all of the additional special-interest spending and special-interest tax-cutting he wants to do. That Supercommittee had indeed better have a very large red S on its collective chest.

The president’s speech, as a technical rhetorical performance, was, unsurprisingly, superb. As a matter of public policy his program is, unsurprisingly, wretched.

The most despair-inducing aspect of his proposal is the further transformation of the United States of America from a republic into a bank. He promised that the infrastructure bank he proposes would, of course, be managed by angels:

The American Jobs Act will repair and modernize at least 35,000 schools. It will put people to work right now fixing roofs and windows; installing science labs and high-speed internet in classrooms all across this country. It will rehabilitate homes and businesses in communities hit hardest by foreclosures. It will jumpstart thousands of transportation projects all across the country. And to make sure the money is properly spent, we’re building on reforms we’ve already put in place. No more earmarks. No more boondoggles. No more bridges to nowhere. We’re cutting the red tape that prevents some of these projects from getting started as quickly as possible. And we’ll set up an independent fund to attract private dollars and issue loans based on two criteria: how badly a construction project is needed and how much good it would do for the economy.

Those criteria aren’t criteria; they are aspirations. Deciding “how badly a project is needed” and “how much good it would do for the economy” through the political process is a guarantee that we will be building bridges to nowhere and that the process will entail boondoggles and earmarks. This is a certainty, and the president knows as much, but he believes that Americans are in the main rubes; they fell for this shtick before, and they may well fall for it again. But who precisely will be empowered to make those decisions about benefit and necessity? Given the president’s personnel choices, which range from union radicals to bilious anti-capitalists to Marxist crackpots, there is little reason to expect an independent advisory board to make intelligent decisions. To believe that it would make apolitical decisions is to indulge in fantasy of the most childish kind.

Is our national infrastructure crumbling? If it is, somebody should face a firing squad: We appropriate hundreds of billions of dollars for highway and transportation maintenance. Under the Recovery Act, we spent about $200 billion on infrastructure projects through the tax-subsidized Build America Bonds program alone. There were many other initiatives, as you may recall. Bond debt owed by states, cities, school districts, and the like is at very high levels — around $3 trillion — and much of that money has been used for infrastructure projects. In Texas, for instance, practically all of the growth in statewide bond debt in the past decade has come from highway spending.

Federally, the Department of Transportation was given $73 billion to spend in 2010. That is not an insignificant amount of money. But such direct appropriations are in many ways preferable to the “infrastructure bank” idea, because appropriations are relatively transparent, and because they are reflected on the national ledger. Loan guarantees, which is what the infrastructure bank is about, are a way to keep federal spending off the books — it isn’t spending, and it isn’t even really a loan, just a loan “guarantee.” But sometimes things work out poorly: We had a half a billion dollars in loan guarantees on a single politically favored firm, the solar-equipment company Solyndra, which famously went bankrupt last week. Fannie Mae and Freddie Mac are in the loan-guarantee business, and their toxic assets have become ours. If we are to spend money on federal boondoggles, we should at the very least demand that Congress go on record with a vote, instead of hiding our exposure behind a phony financial construct.

Practically every tentacle of the federal government is now involved in the loan-guarantee business — for politically favored farmers, for politically favored business owners, for politically favored classes of citizens, etc. Andrew Jackson nearly blew a head gasket fighting against the arrogations of a government bank; Barack Obama is giving us a bank government, which is a far worse thing, and to be resisted.

 

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, published by Regnery. You can buy an autographed copy through National Review Online here.


Tags: Barack Obama


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