|
Today, the opposite of Jefferson’s vision prevails: a
government that inserts itself into virtually all economic
and non-economic areas, whose accelerating debt exceeds 10
trillion dollars, and whose 2006 spending was a colossal
36.1 percent of the Gross Domestic Product.(6)
In his “Opinion on the Constitutionality of a National
Bank,” Jefferson argued that “[t]o take a single step beyond
the boundaries thus specially drawn around the powers of
Congress [by the Tenth Amendment], is to take possession of
a boundless field of power, not longer susceptible of any
definition.”(7)
James Madison likewise warned that “If Congress can do
whatever in their discretion can be done by money, and will
promote the General Welfare, the Government is no longer a
limited one, possessing enumerated powers, but an indefinite
one, subject to particular exceptions.”(8)
Today, we see the culmination of the dangerous trend that
Franklin, Jefferson, and Madison fought. The
constitutionally unauthorized First Bank of the United
States set the first of many precedents for the 1913
formation of the Federal Reserve. Since then, the dollar
lost over 95 percent of its value and continues to be
debased by enormous money supply augmentations.(9)
Meanwhile, the Fed and a myriad of costly, wasteful
government subsidies, prohibitions, and controls
precipitated eight recessions and one depression.(10)
Indeed, illustrious economists have shown that government
intervention is the cause, not the cure, of economic crises.
In a free market, there will always be some businesses that
flourish and others that fail. This is the natural dynamic
of competition, by which competent firms that serve
consumers most effectively gain an increased share of
resources, while incompetent firms lose market share and
must reform or perish. But the systemic booms and
busts of the twentieth and early twenty-first centuries –
where virtually all businesses either prosper or
suffer in unison – were due to government meddling. In the
1930s, economists Ludwig von Mises and Friedrich Hayek
formulated the Austrian Business Cycle Theory, which
explains how artificial credit expansion by government
central banks results in an unsustainable boom due to
capital malinvestment.(11)
To illustrate this insight, Mises used the analogy of a
master builder, who has a stock of bricks at his disposal.
However, false signals lead the master builder to believe
that he has more bricks than actually exist. In real
economies, the central bank sends such false signals by
artificially lowering the rate of interest below what it
would have been on the free market – as Alan Greenspan did
prior to the high-tech bubble of the 1990s and the housing
bubble of the 2000s, and as Ben Bernanke is doing today.(12)
So what will our master builder do? He will try to construct
a much larger and more ambitious building than his resources
allow. The sooner he discovers the misinformation, the more
effectively he can revise his plans and correct his errors.
This is the function of a recession. Far from an evil,
recessions are highly desirable corrections of a systemic
depletion and misallocation of the economy’s capital stock.
But in staving off the recession through even more easy
credit, the central bank perpetuates the illusion that
materials exist for many more projects than are sustainable,
while fueling increasingly rampant inflation. Eventually,
the master builder simply runs out of bricks, and one cannot
construct a building from paper. Then we pay a severe price
for delaying the inevitable; all the bailouts, credit
expansions, and government interventions pave the way for
economic collapse of unprecedented proportions.
The Founders and Grover Cleveland were right to counsel the
U.S. government to stay strictly within the letter of the
Constitution. The Constitution, they understood, is no mere
set of arbitrary constraints. Absolute, immutable economic
law – subject to no whims of politicians or majorities –
justifies these constraints, as the later work of the
Austrian economists confirms. The Constitution should be
followed because, under a strict interpretation, it enables
tremendous, uninterrupted liberty, prosperity, and progress.
Today, the recommendation of the Constitution, the Founders,
and sound economics cannot be clearer; it is
laissez-faire. Enough of bailouts, redistribution,
inflation, and onerous economic controls! To paraphrase
Jefferson, “Let no more be heard of confidence in [Paulson,
Geithner, and Bernanke], but bind [them] down from mischief
by the chains of the Constitution!”(13)
|
Constitution
did not authorize a comparatively tiny appropriation, it cannot justify one of
unprecedented enormity. It is unambiguously unconstitutional for the U.S.
government to attempt to remedy economic crises. Moreover, the American Founders
overwhelmingly opposed such intervention. Indeed, government meddling is the
cause of virtually all economic crises, and politicians can only exacerbate
the present crisis by offering more of the same. 
