On October 28th, just days before the November general elections I wrote about four gubernatorial candidates to watch as unconventional politicians. Those included New Mexico’s Susana Martinez, Nevada’s Brian Sandoval, Oregon’s Chris Dudley and Wisconsin’s Scott Walker. Dudley, a terrific man lost but hopefully will be back to fight again. The other three won and are already showing results. I wrote how Scott Walker “demonstrated how to balance a budget consistently without raising taxes.” And he is showing that right now as Governor of Wisconsin.
This nation is faced with frightening deficits and unfunded liabilities. Federal spending is double what it was ten years ago, and this year’s deficit is projected at $1.6 trillion. States add another $130 billion of shortfalls this year, and almost all states have large unfunded pension and health care liabilities.
I for one am thankful that governors like Scott Walker are showing how to deal with this looming crisis.
Wisconsin itself is facing a $3.6 billion budget shortfall over the next two years and Governor Walker has proposed real solutions that would decrease the state’s structural deficit by 90 percent. As part of Walker’s plan to tackle Wisconsin’s looming budget crisis, he has made the courageous and crucial decision - like Chris Christie in New Jersey - to bring public employees’ benefit packages down to a more comparable level with those in the private sector.
Robert Costrell writes in the Wall Street Journal that Milwaukee teachers receive 74.2 cents on the dollar in health and retirement benefits. An employee in the private sector receives just 24.3 cents on the dollar. In some cases, the benefits package is equal to half of the total employment package. Costrell found that “the average Milwaukee public-school teacher salary is $56,500, but with benefits the total package is $100,005, according to the manager of financial planning for Milwaukee public schools.”
The reason for these nice gold-plated benefits packages are that in the past politicians never had the courage to stand up to unions and insist that benefits be tied to market realities. Quite simply it was too easy to kick that political can down the road and let the next Governor or the next generation of taxpayers deal with the mess. That is not only radically irresponsible; it is a recipe for our country’s ruin.
Charles Krauthammer writes in the Washington Post that “in the public sector, the politicians who approve any deal have none of their own money at stake. On the contrary, the more favorably they dispose of union demands, the more likely they are to be the beneficiary of union largess in the next election. It’s the perfect cozy setup.”
In light of this, Scott Walker has decided to tackle his state’s budget deficit not by raising taxes on hard working Wisconsonites in the midst of an economic downturn but by making desperately needed changes to the state’s benefit and entitlement system. The rising cost of retirement packages and insurance has been identified as a threat to not only states like Wisconsin, but also the United States as a whole.
The response to Scott Walker’s budget from Wisconsin Democrats has been to flee the state and shut down the Senate, halting all floor debate and discussion – one of the hallmarks of our American democracy. In another courageous step, I am pleased to say the The Republican Governor’s Association has wisely decided to support Scott. For years, the RGA has been a hot bed of ideas and action for practical, conservative governance. While it has showcased some of the great laboratories of our American democracy, its main function was to get Republican governors elected – and it’s done that quite well over the years. In an unprecedented step, after seeing millions of union dollars and thousands of outsiders pour into Wisconsin to fight Governor Walker’s good governance, The Republican Governors Association decided that is was time to show the country and the union bosses that we have Scott Walker’s back by launching a an advertising campaign in support of his efforts on TV and online. This is one of the most important fights of our time and it will impact the lives for generations of Wisconsinites and American to come. Our leaders must show courage and conviction to take on the tough fights and make the right decisions – and when they do, we must show them our strong and unwavering support.
By William Hogeland, the author of the narrative histories Declaration and The Whiskey Rebellion and a collection of essays, Inventing American History who blogs at http://www.williamhogeland.com. Cross posted from New Deal 2.0.
Ordinary 18th-century Americans fought for fair access to small-scale credit and usable currencies. Big finance fought back.
Calling modern banking “a widespread fraud,” Rob Burns wants to push the finance industry out of everyday lending. A candidate for Congress in the fourth district of Illinois, Burns proposes using federally insured savings as a public fund for mortgages, student loans, consumer credit, business bridge loans — the kind of borrowing engaged in by ordinary Americans, not entrepreneurs. On a different finance reform front, the technology pioneer and culture critic Douglas Rushkoff has been exploring complementary currencies. Rushkoff envisions new monetary units, exchanged via handheld devices, helping to break what he calls “the money monopoly.”
Far-reaching ideas for getting money, currency, and credit to flow more democratically through the American economy would probably draw all-purpose condemnations like “socialism!” from the rightists led by Sarah Palin and Michele Bachmann. Liberal high finance experts too might find such proposals dangerously chaotic. But regardless of practicalities and politics, it’s useful to recognize that ideas like Burns’ and Rushkoff’s have deep roots in the American founding period. The Tea Party has done such a successful job of associating anti-government, free-market politics with essential American values — and historians have been so eager to ignore the economic activism of ordinary, founding-era Americans in favor of assessing and re-assessing the elite founders’ republican philosophies — that it can be startling to confront the democratic theories about popular finance that prevailed in 18th-century America.
And “theories” is the right word. People of the founding period put forth their economic ideas in resolutions, petitions, and actions. In an earlier post in this series, I discussed traditional rioting in the context of struggles between American debtors and creditors. Long before the Stamp Act riots of Revolutionary fame, crowd action — rowdy, creepy, theatrical, sometimes violent — played an important role in American social life. Crowds dismissed by the upscale as “the mob” called their movements “regulations.” From the North Carolina Regulation of the 1760’s to Shays’ Rebellion of the 1780’s and beyond, American debtors, barred from fair representation in politics, engaged in obstruction, boycott, court closing, jury nullification, building teardown, and physical intimidation. They wanted their legislatures to restrain the power of wealth.
Just like Rushkoff and Burns today, 18th-century popular regulators focused on small-scale credit and readily negotiable currencies. Scarcities of cash gave merchants a monopoly on gold and silver coin, enabling them to dominate small farmers, artisans, and laborers through loan shark-style lending terms: debtors, in constant danger of foreclosure, could effectively become merchants’ laborers. Hoping to elude the money monopoly’s clutches, people looked to their colonial governments to create “land banks,” where small operators could take small loans on reasonable terms. Spent by holders on purchases, land bank notes found their way into circulation, becoming a kind of currency that at times came even into the hands of the landless.
Another thing governments could do: issue paper currency. Government notes represented amounts in metal; their value depended on people’s belief that they’d be worth roughly what was printed on them. A commonplace of American history has it that early paper currencies depreciated disastrously, but the reality is far more varied. New England had difficulty making paper finance work, but Pennsylvania successfully alleviated economic crunches using both land banks and its own paper. The trick to encouraging confidence and controlling depreciation was to issue limited amounts of the paper and then to retire it through scheduled taxes, payable in the notes themselves. Depreciation did occur, as it does today. But popular finance activists saw mild depreciation as a natural and democratic effect, benefiting debtors.
Improvised popular currencies existed, too, complementary in Rushkoff’s sense. A craft commodity like whiskey — not a mere instrument of barter but always exchangeable for gold somewhere down the line — held value well.
Merchant lenders, however, wanted to be paid in coin. They wanted the gold that, they believed, held perfect value in imperial trade and which ordinary people could rarely come up with. The people countered by pressuring governments to make paper currencies legal tender, forcing merchants to accept paper at face value for payments and principal — a kind of government program to prevent foreclosure and debt peonage. Lenders forced to take payments worth less, against gold, than when loans were made disdained paper currencies as confiscatory, rotten, mobbish, and vile, “the curse of pulp.”
Lenders may actually have contributed to financial crises by recoiling so violently from any hint of depreciation. Yet their philosophy had a certain consistency. American merchants were already calling the English government tyrannical for violating ancient rights to security in property. Now merchants feared that American governments, vulnerable to what they saw as another kind of tyranny, that of the mob, would take property in another way, through legal tender legislation and state enforced devaluation. The debtor class, for its part, had little interest in what merchants defined as the big picture.
So even as the country moved toward climactic conflict with England, a great social battle raged between American merchants and American working people over credit and currency. We’ve been distracted from that battle’s significance by historians’ relentless focus on merchants’ frustration over Parliament’s trade acts. Those acts included currency laws, which restricted paper emissions in the colonies: sometimes American merchants too had advocated issuing paper. But merchants came to hate paper’s democratizing, socially equalizing tendencies in American society. By the time American elites began relying on ordinary people for help in opposing England — especially on the people’s facility with organized protest! — working Americans’ desire for economic, social, and political equality was driving the merchants’ anxiety to a nearly hysterical pitch.
Our current financial crisis reflects those deep-seated American economic disagreements, wired into events and philosophies that gave birth to our country, were never resolved during that period, and glossed over in certified stories of our origins for more than two centuries. Many people today, of various political persuasions, will want to dismiss thinking like Rushkoff’s and Burns’, which goes far beyond finance reform and asks fundamental questions about how, and for whose benefit, we want credit and money to work in American society. To our little known 18th-century ancestors, the founding activists for democratic finance, those questions would be among the most important we could be asking.
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