On the one hand are those who believe that the future of our economy is best served by a larger role for government in the economy. On the other side are those, like myself, who maintain that while the role of government is to create the conditions for prosperity, the citizens and taxpayers are the best judge of how to spend their own money, not the government. One view necessitates higher taxes, a more expansive role for government, and more government spending. The other holds that low tax rates, a reduced role for government and a vibrant private sector is the best path to prosperity for all Americans. Recently the former view was exemplified in a presentation in Washington by a number of past officials of the previous Administration. They styled their undertaking the so-called “Hamilton Project,” drawing on the name of the first U.S. Treasury Secretary. Based on what was said, it appears that Hamilton’s name may have been misappropriated. Hamilton after all was foremost among the founding fathers in seeing that the new republic’s future depended upon the vitality of commerce and the private sector while the authors of the Hamilton Project argue for a larger government role. The stated goal of this group was to put policy for our economy on a course “diametrically opposed to the current policy regime,” calling the current path “on the wrong track on almost every front.” They argued for a deceptively simple approach as an alternative, calling for both “fiscal discipline, and for increased public investment in key growth-enhancing areas.” Well, if you do the math, growing the public sector–that is, making government bigger–and achieving fiscal discipline, can only lead to one thing: higher taxes. And higher taxes always mean a larger role for government and a smaller role for the private sector. Is that the way we want to go? I don’t think so. They also claim to want economic growth to be “broad based.” But, they intend a recipe of more government and higher taxes that is antithetical to growth itself. In that scenario, the only way for some to have more, is for others to do with less. That sounds to me like nothing more than the same old “class warfare.” Hamilton on the other hand saw the boundless opportunity for all to benefit from an expanding economy.
Snow continues with the usual propaganda about how great the economy is doing. Brad DeLong starts his reply to this garbage from the “worst Treasury Secretary in living memory” with a history lesson:
Does John Snow really have no clue that Hamilton believed that a big, activist government–regulating the financial system, supporting science and industry, encouraging manufactures, assuming the national debt–was essential for the health of the American economy? Is it really the case that nobody in John Snow’s entourage knows that Hamilton was always on the “big government” side in his fights with Jefferson? That Jefferson believed that a big government was a threat to liberty, but that Hamilton did no–Hamilton was not interested in either big government or small government per se but rather in effective government?
Let’s also recall what Sec. Hamilton said in the First Report on the Public Credit, 1790:
Persuaded, as the Secretary is, that the proper funding of the present debt will render it a national blessing, yet he is so far from acceding to the position, in the latitude in which it is sometimes laid down, that “public debts are public benefits” – a position inviting to prodigality and liable to dangerous abuse – that he ardently wishes to see it incorporated as a fundamental maxim in the system of public credit of the United States, that the creation of debt should always be accompanied with the means of extinguishment. This he regards as the true secret /or rendering public credit immortal.
Sec. Robert Rubin understood this fundamental maxim, but Sec. Snow seems to have forgotten it – alas! Sec. Snow also seems to not understand two facts. The share of GDP going to government spending is higher today than it was in 2000 and the share of GDP captured by investment spending is lower than it was in 2000. The lack of fiscal responsibility embedded in the Bush Administration’s phony claim that they are “giving us our money back” clearly has something to do with the reduction in national savings. It is too bad that our current Treasury Secretary fails to understand what Secretary Hamilton and Secretary Rubin realized.