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Seeking Bottom

“The business of America is business” (Calvin Coolidge)

“Experience should teach us to be most on our guard to protect liberty when the Government's purposes are beneficent. Men born to freedom are naturally alert to repel invasion of their liberty by evil-minded rulers. The greatest dangers to liberty lurk in insidious encroachment by men of zeal, well meaning but without understanding.” (Olmstead v. U.S, 277 U.S. 479 [1928])

Sleeves rolled to mid forearm and eye to the future, it is time to get to work remaking America. Republican or Democrat we know this, and there is some agreement on what must be done, but at least to this observer, foreboding remains on the cost to our liberty of the Obama plan for the shape of this new America. Many who voted for the winner in our recent election desire to remake us into an America of socially conscious “better Americans.” I am satisfied with my fellow Americans the way they are, but where my differences really arise with this self appointed intellectual elite is in taking issue with their view that the country be managed to produce equal outcomes not just equal opportunity.

Inspired by a philosophy of collectivist welfare they refer to as “the common good,” this group is determined that with such a sweeping victory in November, time not be wasted and opportunity lost by seeking accommodation with forces of individualism and self realization. They are pressuring media and government alike to crush the acceptability of such thinking once and for all. As we rush to the bottom of this economic cycle, they believe fear, hope and enthusiasm for our new leader, must be used to create steel hoops on the wheels of this new America to thwart the feared counterattack by those who prize liberty and the opportunity that it brings with it to fashion a better future for themselves and their families. Forgetting that it is those who are conspicuously successful who are the heart of the 308 billion dollars given to U.S. based charities in 2007, their particular ally is envy for anyone who has achieved success and consumed conspicuously in any respect.

I am with those who feel that an unfocused public works Christmas tree is not the way to go, but I fear those who share this view had better return to the ramparts soon or the danger depicted in Mr. Justice Brandeis’ dissenting opinion set out above in Olmstead v. U.S. may become a startling reality. At present the forces of individualism and free enterprise seem cowed by the anger of the new majority who cast their stones at capitalism, but they are in agreement with the new administration regarding the country’s infrastructure needs and are willing to share in the cost of programs tightly focused to unleash the forces of free enterprise to remake our electric grid, our highways, and railways. They are also part of that great majority that has long championed transparency and accountability in the financial sector, and they are angered by the misdeeds that have cast us into the pit where we must together fashion a rescue. These forces of rationality fear not that economic recovery won’t emerge so much as they fear the damage of an overwhelming public debt from the pork that has overwhelmed the initial thrust of the TARP and the damage to individual liberty that accompanies the majority’s views on the nature of “The Common Good.”

I have previously written regarding the oversight lapse for the financial sector that was created by both congressional indifference and executive branch managerial and policy lapses. It appears the new Administration and Congress have learned the wrong lesson from our experience. Current proposals to spend almost another trillion dollars on programs that will do little to pull us out of the recession are proceeding mindlessly through Congress without consideration of the damage we are doing to our creditworthiness and the impact on our children who must devise a way to pay back the trillions we are committing to spend. Any government restrictions on the engines of productivity that accompany this rescue will end up uniting us only in a shared misery.

In the rush to spend us into oblivion, no one is minding the store while the public purse is being looted. In the fall when TARP was first debated, a small group of congressmen looked to some of us at The Citadel School of Business to provide analysis and advice regarding their consideration of the bill. The qualified advice given at the time was to support the effort so long as the major use intended for the funds was to buy toxic assets and thereby establish a floor for the return of private capital. It was on that basis that TARP was approved by Congress. We along with the rest of the public were hornswoggled. Almost four months later, none of the toxic assets other than the banks themselves have been “purchased,” no floor has been established, and no private capital has returned; loans are still not being made in amounts to make a difference, and the hundreds of billions lavished on the banks have evaporated in the collapse of their capitalization. Neither the banks nor the economy will recover until we face up to establishing the bottom for the toxic mortgages held by American banks.

While Congressmen continue to look for marginal return in their districts not national impact, the Administration has called for speed and focus. Whether through a “Bad Bank” or by direct Treasury purchase, setting a value for the toxic real estate must be the first item of business. The multiplier effect of that on the economy cannot be exaggerated. I suggested 50 percent last fall as a then realistic level that allotted the pain in a fashion the banking industry could adjust to. That might still be the best way to go, but whatever it is, it should be done quickly so that private capital, now on the sidelines, can act accordingly to get the channels of financial commerce flowing and with it money for downstream users. Concentrating on this will provide the time for the so called “construction ready” projects to get into the pipeline and start to throw off the substantial sums required to repair our infrastructure and provide efficient avenues for future commerce.

The small district level projects should await the rollout of major projects like high speed rail, freight rail reconstruction, major highways extension and upgrade, electric grid improvements including pathways for solar, thermal, tidal and wind power to be distributed efficiently. In a bow to sanity to pay for the substantial highway projects, I would suggest raising petroleum derivative fuel taxes by at least a dollar a gallon over a period of years to encourage the use of alternative fueled vehicles. If the cost of its continued use won’t support that decision, it is not enough to jawbone us into using battery power. While I will lapse from my free market economic preferences to that extent, President Coolidge was right that America is a country of free market economics, of risk, reward and individual initiative. If the new majority forgets that, we will truly be on the road to serfdom.

Copyright © 2009 by Robert E. Freer, Jr. All rights reserved

About the author: Robert E. Freer, Jr. is President of The Free Enterprise Foundation. He is a Visiting Professor, at The Citadel and elected in 2005 to be their first John S. Grinalds Leader in Residence. A regular contributor to the Mercury, He can be reached by E-mail at The Citadel . Copies of his earlier columns can be found The Free Enterprise Foundation.

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