"Economics is the method: the object is to change the soul."
— Margaret Thatcher
". . . deficit hawks do not give a damn about reducing deficits and balancing the budget. They want to cut the programs that the poor and middle class depend upon — programs like Social Security, Medicare, and Medicaid — so that the rich can have more money in their pockets."
— Dean Baker, co-director of the Center for Economic and Policy Research
Can we as Americans focus on the threat facing us as the rest of the world’s economies continue to be clobbered nation-by-nation by the IMF and the central banks? The latter include our Federal Reserve (the Fed) and the European Central bank.
The people of Iceland, Ireland, Latvia, the U.K., Portugal and now Greece are being ordered to tighten their belts to satisfy the bondholders and bankers responsible for the crises in their economies. Can we afford to wait until every public asset that isn’t nailed down gets privatized? The results of privatization world-wide have been uniformly dismaying.
Following is a description of three paths I think might be taken to keep our state and local governments adequately funded. In ascending order of time to take effect these are:
1. Change the Fed’s charter so that it can directly come to the aid of the states. Fed Chair Ben Bernanke claims correctly that according to the Fed’s charter, his "hands are tied" in this regard. It turns out that the only obstacle is one paragraph in the Fed’s charter that could be amended appropriately. This would only require a bill to be introduced and cosponsored, say, by House member Dennis Kucinich, D-Ohio, and Sen. Claire McCaskill, D-Mo.
2. The Fed could "buy" our $180 billion fiscal shortfall and have Treasury print up paper wealth in this amount, which could then be sent directly to those who need it most, like the umpteen millions of us without jobs or homes. Disbursement would be through government agencies. The Fed’s injections of liquidity thus far have been sent to the banks, not Main Street, to build up their reserves. As the only entity in the world allowed to print money, the Fed’s balance sheet shouldn’t be affected. Nor would this add to the national debt, since no government spending would be involved. Finally, the amount of $180 billion is only 1.4 percent of the $13.2 trillion already thrown at or committed to the banks and would amount to little more than a drop in the bucket as far as the Fed is concerned.
3. We should form our own state/public bank along the lines of the Bank of North Dakota. As the only state consistently in the black throughout this financial crisis, North Dakota can also claim the nation’s lowest unemployment rate (3.3 percent vs 8.9 percent for Missouri). A state bank would enable other banks to avoid the current credit freeze, serving as Missouri’s “Mini Fed,” providing liquidity and clearing checks for most of the private banks around the state. Missouri's 1875 constitution, however, explicitly banned the establishment of a state bank (Article XI Section 13).
John McFarland is a member GRO-Grassroots Organizing.