You are here

Political Report to the United Front Against Austerity: Page 8 of 9

Restore Food Stamp Benefits

The 50 million Americans who currently survive on food stamps (SNAP) generally have no jobs, no unemployment benefits, no healthcare, and no Welfare payments, and are entirely dependent on this program. With increases in food prices due to financial speculation, the food stamp benefits have been increasingly eroded. The food stamp program must include a cost-of-living escalator to allow these payments to offset the effects of price inflation. In addition, the food stamp benefits must be increased to a level adequate for the well-being of recipients, as determined by the most modern nutritional science.

The measures detailed so far represent the urgent defense of our greatest national resource, the qualified labor power of the US workforce. Beyond this, we must demand policies which can set in motion an economic recovery with the creation of at least 30 million new productive jobs.

Seize and Nationalize the Federal Reserve System

How can the necessary economic recovery be financed? It is clear that the zombie bankers cannot do this, since these banks are derelicts, bankrupted by the masses of kited derivatives they hold. The zombie banks absorb the resources, drive up the price of food and gasoline through speculation, collect exorbitant fees, and otherwise parasitize the economy. The zombie banks need to be put through Chapter 7 bankruptcy proceedings, with all of their derivatives wiped out in the process.

Paul Krugman and other Keynesians propose an economic recovery financed exclusively through the federal budget. Our objection to this method has nothing to do with the reactionary Republican demagogy about deficits and debt. Alexander Hamilton pointed out that a funded national debt, provided it is not excessive, is actually an advantage to a modern nation. But the measures we have already proposed, even with the help of the Wall Street sales tax, will represent a significant expansion in federal spending. A sustained economic recovery requires a source of credit which cannot be the zombie banks and which should not be the federal budget, given the urgent competing claims on the resources of the US Treasury.

The obvious source of financing for the US economic recovery is the Federal Reserve System. In the 2008 financial panic, the Federal Reserve made available approximately $27 trillion in credit. But only financial institutions were eligible for these loans. To get a 0% loan from the Fed, you had to be a bank, a money market fund, a credit card company, or some other kind of financial service. Some loans were made available as monetary stimulus, such as QE I, II, and III. Other loans were made as a credit stimulus, including the Term Auction Facility (TAF), Term Asset-Backed Securities Loan Facility (TALF), Primary Dealer Credit Facility (PDCF), Term Securities Lending Facility (TSLF), and others.

These policies have failed to create a recovery. It is now time for the Fed to stop serving the banks, and to start serving the needs of the US economy as a whole. This would take the form of a Main Street Credit Facility and a Rebuild America’s Infrastructure Facility.

Either through law or political pressure, the Federal Reserve must be forced to put out a tender offer to states and regional authorities like the New York-New Jersey Port Authority stating the Fed’s willingness to buy an initial $1 trillion of state bonds with the proceeds devoted exclusively to rebuilding the infrastructure of the United States. These must be century bonds, with 100 year maturities and the coupon rate must be set at 0%. Once the first tranche of $1 trillion is expended, another tranche should be offered, until the point at which full employment is reached. The states issuing the bonds can offer solid collateral of the infrastructure improvements that are being created.

These state and authority bonds will make possible the long overdue rebuilding of the entire US Interstate Highway System, including its bridges; the national passenger, freight, and commuter rail using the technology of the 21st century; the national electricity production and transmission grid; canals, ports, sewage and water systems; telecommunications; public housing; schools, hospitals, libraries, public buildings, etc.

0% Federal Credit for Production

At the same time, the Main Street Credit Facility will offer 0% federal credit to automobile manufacturers, Silicon Valley, biotech and pharmaceuticals, farmers, and any and all companies active in manufacturing, construction, mining, scientific research, energy production, and other forms of tangible, physical, commodity production. Cheap credit for productive activity must be available all the way down to the local auto repair shop, dry cleaner, plumber, electrician, or restaurant, since all of these represent tangible physical production. Financial services will no longer be eligible to be subsidized by cheap federal credit.

This policy of federal lending, as distinct from federal spending, can be used to break the current political impasse. The cost of capital can be radically lowered, and a competitive advantage of the United States in world markets can be secured. The overriding goal is the creation of 30 million new jobs, with high capital investment, high energy intensity, high value added, and high technology.

A president of the caliber of Franklin D. Roosevelt could implement this policy with a single phone call to the Federal Reserve, informing Bernanke of what the national interest requires in the current emergency. The ultimate goal must be the nationalization of the Federal Reserve, meaning that its policies must no longer be set by secret cliques of bankers meeting in the paneled boardrooms, but rather by public laws approved by the House and Senate and signed by the president – the only conceivable method under the current system. These laws must determine the amount of credit to be made available, the interest rates to be applied, and the approved categories of lending.

Cheap federal credit can and must be used for the vast program of biomedical research already mentioned, for research and development in the field of high-energy physics, and for the revival of the space program. These represent the first three of multiple science drivers that can be used for technological modernization and the increasing the productivity of labor.

If applied today, the Keynesian methods suggested by Krugman and others would result in excessive burden on the federal budget, thus creating a vulnerability to speculative attack on the Greek model. The Keynesians also do not understand that it is impossible to defeat a depression without a recovery in the capital goods industry. The consumer-led recovery was implicit in the Obama stimulus of 2009, which had positive effects, but which has failed to produce a sustained broad-based recovery. The theoretical basis for the program advanced here is the traditional American System of Alexander Hamilton, Friedrich List, Henry Carey, Henry Clay, Abraham Lincoln, the populists, and the New Deal. The method of transforming the central bank into a national bank to finance a recovery derives from the work of Woytinsky and Lautenbach, interpreted in the light of the experience of the US Lend-Lease Program.

Related Download(s):