Credit for Productive Projects Can and Should Replace ‘Relief’ and ‘Stimulus’
Oct. 12, 2020 (EIRNS)—When Speaker Nancy Pelosi ordered Democrats to reject the White House’s $1.8 trillion “stimulus” offer, and a large passel of Senate and House Republicans told media they won’t support it, Pelosi’s strategy of preventing a bill from passing before Election Day appeared to hold. But with 25 million Americans receiving unemployment benefits and tens of thousands of businesses closed or on greatly reduced operations, such “relief” or “stimulus,” if passed, would no more facilitate economic recovery and progress than did Barack Obama’s “Stimulus Act” of 2009. They are similar: hundreds of billions to states and cities to rehire laid-off public workers and fix potholes, etc.; relief bonus checks to households, the majority of which will save every dollar they don’t absolutely have to spend; more or less generous unemployment benefits; and if Pelosi’s demands were to prevail, superfluous categories of spending (much like Obama’s 2009 “green technologies” spending) which will not affect productive employment at all.
But $1.8 trillion is the amount of the Treasury’s cash on hand to spend, waiting for such a bill to pass! It has been waiting months. Economists Pam and Russ Martens publicized one aspect of this in their Oct. 9 “Wall Street on Parade” column: The Treasury, under the CARES Act, put up roughly $350 billion to “back up” the Federal Reserve’s so-called “Main Street Lending Facilities,” supposed to buy state and city infrastructure bonds, lend to businesses to hire and retain workers. But the Fed didn’t CARE to do any of that; it was concerned only to throw trillions in money-printing at Wall Street markets and Wall Street banks’ reserves.
Add to this, that the U.S. Treasury was able to issue huge amounts of bonds since March, and has been collecting more Federal taxes through the Spring and Summer than it expected to receive.
Thus this nearly $1.8 trillion is held at the Federal Reserve—the Treasury’s bank. To wait for a Congress to agree to throw it into “relief” spending is to throw away credit for recovery and rebuilding a productive, high-technology industrial economy. If the Federal Reserve were made to function as a national bank—or more exactly a Reconstruction Finance Corporation—it would be lending a large part of this credit to agencies with productive and scientific projects, to the Ex-Im Bank and other international project agencies of the United States, etc. Treasury would be lengthening the maturities of the funds it has borrowed this year, by replacing bills with new notes, notes with new bonds.
President Abraham Lincoln said in an 1840 speech about America’s national banks, “The [National] Bank was permitted to, and did actually loan [public revenues] out to individuals, and hence the large amount of money annually collected for revenue purposes, which by any other plan would have been idle a great portion of time, was kept almost constantly in circulation.” Lincoln was only hinting at a Hamiltonian National Bank’s larger capacity—to use the Treasury’s ability successfully to issue debt to the public, to create larger volumes of credit for productivity and productive employment.
This shows the essential, leading contribution of U.S. dollar credit in launching a New Bretton Woods credit and monetary system by agreement with major powers China, Russia and India—the leading American role constantly stressed by Lyndon LaRouche in his calls for such a New Bretton Woods. This change in mandate of the Federal Reserve could be made on an emergency basis by the President and Treasury, and followed up with Congressional legislation spelling out that mandate.
It will have been a terrible waste of the U.S. and world economy if such capacity to issue new Federal debt is not used to invest in high-productivity infrastructure and scientific-frontier projects, both in the United States and in developing nations.