Liddick: A simple plan to reduce debt
The confluence of opinion is remarkable: Timothy Geithner, Jamie Dimon and Harold Camping have all announced the Apocalypse is at hand. If you’re reading this, Mr. Camping’s calculations were a little … off.As for the other two, both the Secretary of the Treasury and the CEO of JPMorgan, Chase & Co. warn of an impending crash if we do not immediately raise the limit on the national credit card. But since the first seems to have difficulty doing his taxes and the second runs a financial institution the Democrat party regards as an unindicted co-conspirator in the late economic unpleasantness, I’m not certain why they are given such credence.Perhaps because their hand-wringing fits a political agenda? Because that agenda is being set by the Washington, DC equivalent of a shopaholic who, no matter how high the theoretical “limit” on their debt is, immediately spends the entire amount and cries for more? Call me mean, but if a person had this problem, they’d be a prime candidate for the afternoon television freak shows: “My boyfriend dumped me because my spending is out of control!”I mean, really …We’re making this national debt thing far more complicated than it really needs to be. Like many quandaries, the solution lies in our past; if we use our history wisely, it can show us the way.In 1790, Alexander Hamilton was appointed to an empty federal treasury. The national economy was in the doldrums, and debt from the Revolutionary War threatened to strangle the young republic. In a series of brilliant moves, the new treasury secretary solved the “debt crisis,” re-started the moribund economy and set the new nation on the road to becoming a world power. Two of Hamilton’s moves have particular relevance to us today.To quell the disquiet of creditors, he announced that all Revolutionary War bonds would be redeemed at face value. Although this indebted the new federal government to a greater degree, it also assured a continued flow of credit. He also proposed, and Congress passed, a new tax.Let’s pause here to deal with those readers who are whistling and stomping their feet in joy over the prospect of higher taxes – on the undeserving rich, naturally. This was not the case.Hamilton’s tax was on consumption; in this case, of liquor. And it was directed exclusively at lowering the national debt. The federal budget was reduced to the level of income, and was directed primarily toward defense, foreign relations and subsidies to new manufacturers, which Hamilton correctly saw as the eventual powerhouse of the national economy.Hamilton’s plans were opposed by Jefferson and James Madison, both of whom feared a powerful central government and saw in Hamilton’s plans to encourage manufacturing a nation not of independent yeoman farmers, but of slavish wage workers, susceptible to economic and political manipulation. We may chuckle at their naivet today, but considering the wreckage labor unions have made of former industrial centers like Flint or Detroit, and their connivance with the current administration to cripple the Boeing Company, one of America’s largest surviving manufacturers, we oughtn’t judge them too harshly. Perhaps they saw more clearly than we thought.None of which should subtract from the brilliance of Hamilton’s plan for the debt, which offers us a blueprint for action today. If the debt limit is to be raised, let it be done in a very modest manner, with the explicit statement that this is done only to reassure our creditors. And let it be coupled with actions to immediately and sharply reduce Federal spending to the level of current revenues – say, within six to 10 years. Yes, I know – but it took awhile to get into this hole; it’ll take awhile to get out. The important thing is that we begin, and begin well.If there are new taxes as a price of the bargain, they should be, as they were with Hamilton, levied to reduce the debt. Period. And there should be a mandated decrease in federal borrowing annually. That includes borrowing from the Social Security “trust fund” as well. No more of that game; remember, even IOUs to family members have to be redeemed eventually.If this seems a Spartan plan, it is. If it looks as though it demands frugality, it does. Will it be hard? Yes. Will it require sacrifice? Yes. But it could be done, and it would have a profoundly beneficial effect. The only question is, are we still a people who do things, to quote a much later president, “… not because they are easy, but because they are hard?” Who “…ask not what your country can do for you; ask what you can do for your country?” Or are those days irredeemably behind us?We shall see.Summit County resident Morgan Liddick pens a Tuesday column. E-mail him at firstname.lastname@example.org. Also, comment on this column at http://www.summitdaily.com.
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