Monthly Archives: January 2010

Government as Creditor

President Obama recently announced that he desires more robust regulation of banks, particularly as it relates to their size and the types of investments they can make.  As reported, he is embracing Depression-era policies.

Be careful what you ask for.

Be careful what you ask for.

This story highlights the problem we encounter when we decide as a society to bail out private corporations.  As has been discussed here before, bailouts are inconsistent with founding principles.  The irony is that, in a way, the Administration has a point.  Once a private corporation accepts public money, the public becomes a constituent with an interest in how the company operates.  Since the “government” acted as the public’s investment advisor (willingly or not on behalf of the public), these companies have the challenge of either paying the money back, and quickly, or answering to another master.

More problematic than the bailout itself is the fact that we have large imbalanced government making these decisions; the government in Washington D.C. was never intended to be a creditor to private companies.  The proper thing to do is to let good managers and owners succeed and bad managers and owners fail.  As we have said before: it is bad business supporting bad businesses.  Yet, if a private business was so critical as to merit a bailout, the employees and communities most effected should be the parties to make that determination.

Billions Spent; Millions Underserved

President Obama asked Congress yesterday for $1.35 billion of additional funding for education, extending a grant program to the States.  Taken from the Washington Times:

The $787 billion economic stimulus program Obama signed into law soon after taking office included $4.3 billion in competitive grants for states, nicknamed the “Race to the Top” fund. States must amend education laws and policies to compete for a share of the money.

The Education Department is expected to announce its first of two rounds of awards in April. More than 30 states were expected to apply by Tuesday’s deadline.

Obama will ask lawmakers for another $1.35 billion so that states not chosen in either award round will have a chance to compete for money, according to the officials, who spoke anonymously Monday because the president had not announced his plans.

This all sounds rather innocent, on a superficial level.  States merely improve their education and get money from Washington.  An artful spin on this might even be that Washington is encouraging competition among the States; who could object to that?  There are a couple problems with this view, however: one problem is the effects of such policies and one problem is the sustainability of such policies.

The Department of Education’s budget for 2009 is a remarkable $64.9 billion.  I won’t make the argument in this space that the education system in the United States is a complete failure.  While a whole host of data could be drawn upon to make that argument (such as college completion rates remaining essentially unchanged, an indication of how  well-prepared students are upon graduation), that’s not the issue for now.  The question we have to ask is this: should the federal government be in the business of education?

The Federalist Papers

The Federalist Papers

I generally consult James Madison when questions of propriety and responsibilities among the spheres of government come up.  Not surprisingly, in the entirety of the Federalist Papers, not a word is made about what level of government should be responsible for education.  Which is not to say that Madison didn’t have an opinion on the matter, as he notes in Fed #39:

In this relation, then, the proposed government [contemplated by the new Constitution] cannot be deemed a national one; since its jurisdiction extends to certain enumerated objects only, and leaves to the several States a residuary and inviolable sovereignty over all other objects.

It’s a recurring theme in the Federalist Papers, if you’ve taken the time to read them.  The Constitution that was to be ratified required explanation about what it authorized the federal government to do, and just as importantly, what it didn’t authorize the federal government to do.  Of course, Fed #45 also notes:

The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people; and the internal order, improvement, and prosperity of the state.

Perhaps another time we could recount the reasons for our arrival at this point. Certainly there are multiple causes for our ailment. One can point to the progressive left agenda dating back to the New Deal as one such cause. A general apathy about the purpose of government is another. Given time, a book could probably be written detailing each step along the way to today’s environment in which the most distant spheres of government are the most “important” and intrusive.

What we can conclude is that an entire re-ordering of the roles and responsibilities of each sphere of government is necessary.  Our current trajectory – ever more centralized, ever more intrusive, ever more unresponsive – is fiscally unsustainable and has the seeds of future failure sown in it.  The operative question we must ask in relation to government actions or programs is this: whose responsibility is it?  Just as we must do for ourselves that which only we can rightly do, so too should States do for themselves that which only what they rightly should be doing.  Abdicating our responsibility and allowing the larger sphere of government to do for us what reason and experience dictate we must do for ourselves may seem innocent enough, but it ever shall be the first chapter in the story of tyranny.