Pennies from Heaven, Trillions from DC

The 1936 song, Pennies from Heaven, has been classic popular song for nearly 75 years. Three years earlier, at the beginning of FDR’s first administration, a “mega pot of pennies” began to flow from Washington DC in an attempt to lift the US economy out of the worst economic downturn in American history. The Hoover-FDR New Deal effectively ended the Founding Father’s vision of a limited government republic. Some of the Founders, especially Alexander Hamilton, argued that a muscular central government was necessary to build a prosperous country. In reality, Hamilton wanted to use the federal government to help his “cronies” become rich at the expense of the public, making him one of the founders of crony capitalism.

For more than 200 years the Hamiltonians in and out of the federal government have supported a strong central state. Supporting them were influential opinion molders in society– academics, editorial writers, pundits and business leaders. This powerful coalition of Hamiltonians transformed America and in doing so have been fleecing the people to support the big government agenda of the politically connected. Big government was sold to the masses on many occasions as reining in the “greed” of the railroad owners, the captains of industry and other so-called malefactors of the public trust. During the Progressive Era, according to economist and historian Murray Rothbard, was when the coalition of political and financial elites cemented their vision of a “new” America on the masses.

Despite the election of Republican presidents–Eisenhower, Nixon, Reagan, Bush I and Bush II since the New Deal–who paid lip service to limited government, Hamiltonism was never repealed let alone tempered, but has prevailed, and, in fact, as Georg W. Bush left office last month after eight years, crony capitalism is at its summit. And President Obama, who promised “change,” will not eliminate or reduce crony capitalism. In fact, cronyism is about to take another leap forward as the masses are going to be conned again into thinking the feds are about to rein in “greed” in the 21st century, using the power of the federal government to “stimulate” the economy and in usher in a “new era of responsibility.”

America’s economic crisis is the inevitable consequence of the policies that have triumphed since the birth of the republic-fractional reserve banking, monetary socialism, the military-industrial complex, runaway public debt, widespread entitlement spending, overbearing economic regulations, and oppressive taxation. In short, laissez faire capitalism has never been tried in America. Free enterprise built America, while crony capitalism redistributed some of the income and wealth of “market entrepreneurs” -and the general public–to “political entrepreneurs.” (See Burt Folsom’s The Myth of the Robber Barons.)

The “economic stimulus” bill that is weaving its way through Congress and the passage of the multi-trillion bailouts of Wall Street, the banks, AIG and the auto industry, is about maintaining the fractional reserve banking, paper money, and the welfare state, and propping up the firms run by political entrepreneurs. No self respecting market entrepreneur would ask let alone beg for a taxpayer funded bailout.

Just as FDR “rescued” both the fractional reserve banking system with federal deposit insurance and the paper money system by nationalizing the people’s gold in 1933, Bush and Obama also have set in motion a massive effort to rescue our unsustainable financial and monetary systems, and now President Obama is charged with the responsibility of rescuing the collapsing welfare state.

The federal government is on an unprecedented spending spree and money creation binge that will lead to runaway inflation in the not too distant future. In New Jersey Governor Corzine and the Trenton political establishment are salivating at the prospect of receiving about $4.3 billion in federal aid over the next 12 to 24 months. Isn’t it a remarkable coincidence that is the same amount as next year’s projected state budget shortfall?

While the State of New Jersey cannot legally borrow to plug a budget deficit, the federal government can borrow as long as foreigners continue to buy U. S. Treasury securities to cover Washington’s annual shortfalls. At the World Economic Forum in Switzerland last week former and current heads of state questioned the wisdom of foreigners continuing to subsidize America’s profligate federal spending and excessive private consumption. How long will the federal government’s unlimited appetite for borrowing continue? As long as Obama and the Congress want to maintain the welfare-warfare state, or the credit dries up for the U.S. government in the money and capital markets.

If the American people want a welfare-warfare state they should pay for it with their tax dollars and not push the costs on unborn generations. Massive borrowing and printing money to maintain a failed social-economic-military model will ruin what’s left of our declining prosperity.

As economist Ludwig von Mises observed decades ago:

The government pretends to be endowed with the mystical power to accord favors out of an inexhaustible horn of plenty. It is both omniscient and omnipotent. It can by a magic wand create happiness and abundance… Economic progress is the work of the savers, who accumulate capital, and of the entrepreneurs, who turn capital to new uses. The other members of society, of course, enjoy the advantages of progress, but they not only do not contribute anything to it; they even place obstacles in its way. (Emphasis added.)

There are no vaults of unlimited pennies for Obama, the Congress, Corzine and the state legislature in Trenton to spend. The federal government does not create wealth, nor can it stimulate an economy, but it can destroy a nation’s currency, redistribute income and kill untold innocents overseas in the name of national security. In Trenton and other state capitals, the political establishment wants to spend other people’s money and call it compassion and philanthropy. The welfare-warfare state is a fraud. Unfortunately, the snake oil salesmen in both Trenton and Washington DC are immune from prosecution.

Pennies from Heaven, Trillions from DC