Politics for a day: The prudence and constitutionality of the bailout
In bad times we grasp at straws. The question is – is this one of them? I would like to consider from both a constitutional perspective and a moral perspective what rights and obligations our national government has during this financial crisis.
Constitutional Arguments.
I think there has been a whole lot of hullabaloo over the differences between conservatives and liberals over spending. The former claims to be “fiscally conservative”, where the later claims – well, they actually make no claims that I am aware of.
Historically the last time we had a fiscally conservative president was Eisenhower. He did not believe in going to war without raising taxes and did a fairly good job keeping the government reigned in during his administration. Since that time we have let the federal budget balloon out of control. Both parties are guilty of that.
But that is not what this is about really. That is a spending policy and I think that both parties are wacked – to put it nicely. I really do not care about their spending interests per se, at least not in this scenario. I want to talk about whether it should even be an option or not given the laws of our land.
For all the talk about fiscal conservatism vs. spending programs that we have I think that there is a general feeling created that spending programs are somehow unconstitutional. That is a concern that needs to be addressed before we move forward to whether it is necessary or not let a lone if it is moral or not.
It may be instructive to go over the specific powers of congress. I will emphasis the ones that I believe are most important for this discussion.
| Section 8 – Powers of Congress
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States; To borrow money on the credit of the United States; To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes; To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States; To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures; To provide for the Punishment of counterfeiting the Securities and current Coin of the United States; To establish Post Offices and Post Roads; To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries; |
To constitute Tribunals inferior to the supreme Court;
To define and punish Piracies and Felonies committed on the high Seas, and Offenses against the Law of Nations; To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water; To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years; To provide and maintain a Navy; To make Rules for the Government and Regulation of the land and naval Forces; To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions; To provide for organizing, arming, and disciplining the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress; To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings; And To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof. |
Now, before going forward, I want to be clear that I’m not talking about taxes here. I know that there is a fair amount of concern of the proper means of taxing. We can deal with that another day. I know some of you other political junkies like me will want to cite section 9 and will want to discuss the tax system. Let’s just leave that for now, and let it be sufficient to agree that the United States government does have authority to tax.
So, now into the meat of the discussion.
The main points for me are “general Welfare of the United States”…. “regulate the Value thereof” [money]….” promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors”
In these three areas I find that congress certainly has the authority look out for the welfare of the nation and those citizens who comprise our nation, to follow polices that will stabilize our monetary system and enhance our economy, and to even at times pay for/invest in technology and science in general.
Free commerce promoters may find that a little distressing that the constitution gives the government power to do these things. It is true that it could be quite invasive into the free market system. On the investment side, if there were not a “limited time” clause it might even look like the government was nationalizing resources and turning communist.
I personally do not see that happening, but you could probably make an argument to the affirmative and I think that would be good honestly. It is the very fact that there are those who voice their worries that will prevent it from happening to a large extent.
I am certainly not an expert on all the jurisprudence that has been established in the ensuing years, but the point is that I believe the government is well within it’s constitutional rights and even within it obligation to intervene in the economy at this time.
Now the question is should they, and if so in what way.
I personally believe that the government should intervene. To not intervene in a time of depression economics would be even more disastrous.
Yes, this will increase the national debt.
No it will not be possible to balance the budget for the next several years.
Yes, taxes will need to be raised.
No one really like any of these effects, but if you look at the bubble bust cycles of the past there are good things that can come from this. But right now we are not shaping up to well.
In past bubble busts we ended with more roads than we needed, more dams than we needed, more telephone lines, more internet infrastructure etc. These booms created a litany of resources that would not have been built as quickly in regular investment cycles and even though some companies do not survive they do leave a healthy legacy that future generations can build on.
This bust is not the same.
What is left behind is overvalued homes, empty lots, and excessive personal debt. None of which is particular useful to build a new economy from. This is where intervention can be critically important.
Let’s look at the auto industry. Yes, the Big 3 have made monumentally disastrous decisions. In my opinion they have been wholly unfit for their office. But to let the companies completely fail at this point would be prodigiously more catastrophic.
It is estimated that there are over a million jobs connected to the auto industry. Now, it would take a larger crisis than we see now to make them all go away – but to risk it would be very foolish.
To let the auto industry remain as it is would be equally foolhardy. One of the major reasons the we are in the mess we are in now is because of the power of the auto industry lobby that has ensured their crack addiction continued to be supplied.
The US congress should act now to break that addiction and move into new technologies. This would be both a constitutionally legal investment to make and a very prudent investment on our behalf.
There will be layoffs during this retooling. Make no mistake, moving to “green” technology is going to be a major shock to the system. But if the government will then also use its authority to invest in good infrastructure projects then we can move any of the displaced into other projects of national importance. By investing in this industry for a time the government will help create an asset where little to none existed before.
Also by taking this step the government will ensure that it is not just keeping people off the dole. To make no moves into the economy will ensure that tens of thousands, if not into the hundreds of thousands, will be unemployed. Through no fault of their own the economy in the short term will not be able to absorb them. They did not set the policies. They did not have a voice in the lobby. They are stuck in many many ways. Yes, over time they can get a new education. They could have chosen a different path to begin with, but it is not their fault that the companies are failing now. Morally I feel we are obligated to assist in a way that will give them an opportunity to contribute meaningfully to the economy. To use their skills which do have value still. And to help protect these families from the glut that has been the American auto industry.
All of this these moves in my opinion are both constitutionally legal, financially viable, and morally responsible.
Be Healthy – Enjoy life
Matthew Stearmer
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Comments
Now if hte bailout included some serious restrictions on the CEO level compensations, so they aren't taking huge bonuses and vacations and maintaining the grossly exhorbitant salaries they have been getting . . . .
My understanding is that those who do take the money will be caped at the same salary as the president of the United States. I'm not sure if that is in the works for all of them, but on the banks I know there were restrictions imposed.
Matthew Stearmer
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