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Fiscal stimulus or fiscal foolishness?

By Michael J. Geanoulis Sr. - Guest Columnist | Dec 31, 2020

On Dec. 20, 2020, the United States Congress, hopelessly addicted to deficits and the printing press as important sources of permanent economic health and wellness, submitted to the president for his approval, a 5,593-page stimulus spending bill. Also known as The Consolidated Appropriations Act of 2020, it passed both houses with broad support, clearing the Senate with a margin of 92 to 6. Provisions of the bill will cost the better part of a trillion dollars; propel our inflation potential and debt further beyond what’s already near impossible to repair; and bring us closer to the day when debt service costs will exceed one trillion dollars – annually.

As it is difficult, even impossible, for many to shun death-threatening addictions to opiates like crack or cocaine, so also is it with Washington’s addiction to deficit spending. Just one or two more shots of whatever to survive the day; just 3 or 4 more billion in IOUs issued to the unborn in order to survive the year. So it goes, ad infinitum.

It wasn’t always this way. The siren of deficits and debt that attracts many of our financial problems was fairly well controlled in former times in spite of communist influence to facilitate wealth redistribution – at least until May 31, 1913, the effective date of Amendment Seventeen, better described as the date that saw the election of senators transferred from state legislatures to the people. Prior to that date, deficits and spending were tightly controlled, in the main, by a Senate designed to cool burning passions with sober second thought. Madison, who had a morbid fear of pure democracy and would not be happy with A17, best expressed the founder’s intentions for Senate governance in his Federalist #63:

“So, there are particular moments in public affairs, when the people, stimulated by some irregular passion, or some illicit advantage, or misled by artful misrepresentation of interested men, may call for measures which they themselves will afterwards be the most ready to lament and condemn.” (James Madison, Federalist #63)

It’s important to note in this pleading for fiscal sanity that prior to 1913, under the tutelage of a more deliberative Senate prescribed for us by clear thinking founders, debt and deficits were kept well below the radar with inflation rates averaging only one percent or so for the entire 19 th century.

Consider this forgotten but important historical lesson to help me make the case: the depression of 1893, caused by what modern economic thinkers would describe as a concentration of “irrational exuberance,” and the ensuing march on Washington by Coxey’s Army of distressed unemployed workers the following year.

It seems counterintuitive and oxymoronic, but that economic downdraft righted itself with natural downward adjustments in wages and prices without government intervention. And it happened during a period of unprecedented growth. Average wages doubled in the decade of 1890 in spite of that downdraft. And inflation hovered around zero with little or no impact on the debt. Dinner at an ordinary restaurant could be enjoyed for 13 cents; 15 if you included a glass of beer, but I digress to rub it in.

Coxey’s Army (laced with a few communist agitators) pressured Congress to create jobs, provide unemployment benefits, dispense “free silver” (a populist effort engineered by William Jennings Bryan) and such other forms of relief deemed necessary and proper. Washington’s response in 1894 was quite different than what might have occurred with today’s Senate; maybe even harsh and cruel – which only increased the fervor to change the way senators were elected. “Your economic woes are beyond our responsibility,” was the equivalent of what they were told. “We’re maxed out financially and, in any event, we can’t be practicing divisive selective benevolence. You’re on your own. And stop ruining the grass or it’s off to the big house with you.” [Not their exact words]

Every so often a financial disaster rears its ugly head to test our mettle: Depressions, hurricanes, and now the deadly stranglehold of Covid-19. Is it necessary, though, to compensate by cheating the unborn and the natural forces of economics; to devolve into the ” spectacle of turbulence and contention” feared by founders who had a morbid fear of pure democracy? (Quote from Federalist #10)

Wouldn’t we do better to understand the difference in the way the Senate operated before and after 1913? The former demanded that we live within our means and was less addicted to green ink. The former governed by sober second thought; the latter, not so much. The distinction begs further investigation.

Mr. Geanoulis is author of “Amendment Seventeen: A Blessing? Or a Curse?” He resides in New Castle with his wife Norma.

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