Would the Founders Apply the TARP?

Forgotten Founding Father Nathanial Macon of North Carolina once chided his Federalist colleagues in Congress for asking to borrow large sums of money for a potential war with France. He said, “Some people think borrowing five or six millions a trifling thing. We may leave it for our children to pay. This is unjust. If we contract a debt we ought to pay it, and not leave it to our children. What should we think of a father who would run in debt and leave it for his children to pay?”

When Macon made these comments, the federal debt was approximately 100 million 2008 dollars. Had the federal government required every American citizen to pay “his share” of the debt, they would have been forced to ante-up about 17 bucks. To Macon, that was an unjust sum. What would he say today in the midst of several large — and unconstitutional — federal expenditures and commitments that will lead to greater debt?

Let’s start with TARP, the program passed in the waning months of the Bush administration to “save” the banking system. On 20 July, the Inspector General in charge of TARP oversight, Neil Barofsky, suggested that the program could cost the American taxpayer “23.7 trillion dollars.”

As the TOTUS (teleprompter of the United States) would read, “think about that.” 23 trillion is 23,000 billion or 230,000 million. Those are astronomical numbers, far greater than the $700 billion price tag the original program promised, and to make matters worse, it isn’t working and won’t work. In comparison, the total federal budget in 1792 was $270 million current 2008 dollars, and in Founding Father James Monroe’s last year as president in 1825, the federal budget barely topped $1 billion current 2008 dollars. There was growth in the government, but not the exponential variety we currently experience.

To put this in perspective, in 1792 the federal government spent about $65 per person and around $92 per person by 1825. At that pace, the federal government would only spend about $637 per person today, but the actual number is closer to $45,000 per person. That is almost a 50,000 percent increase in federal spending in a 184 year period (1825-2008). And, of course, things will only continue to balloon with TARP, the Obama “stimulus,” and other federal proposals on the table, such as national healthcare and “cap and trade,” should they pass.

Not only does this spending far outclass any budgetary constraints in American history, it will greatly impact the federal debt and the hidden, negative tax of inflation. There are currently around 2 trillion dollars in circulation. The United States does not have the money to pay for any of the Obama/Democrat programs. The Treasury would need to print, borrow, or tax to pay for the difference, and with Americans on the hook for nearly $34,000 per person to pay the $10 trillion debt as of 2008, what would our posterity be faced with ten or twenty years from now and when the debt skyrockets to meet the costs of greater government involvement in the economy and society at large? This is precisely the situation men in the founding generation, such as Macon, warned against.

Alexander Hamilton wrote in 1781 that “a national debt, if it is not excessive, will be to us a national blessing.” The key to this phrase, of course, is “if it is not excessive.” Hamilton is rightly considered the architect of the modern United States economy, but he would be appalled by the amount of money that is spent and borrowed by the current federal government. Thomas Jefferson said in 1816 that, "I sincerely believe… that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale." And in a 1789 letter to James Madison, Jefferson stated that “the earth belongs to each of these generations during its course, fully and in its own right.

“The second generation receives it clear of the debts and incumbrances [SIC] of the first, the third of the second, and so on. For if the first could charge it with a debt, then the earth would belong to the dead and not to the living generation. Then, no generation can contract debts greater than may be paid during the course of its own existence."

If the government continues to pile up debt through out of control spending, then Jefferson was right; not only would we be “swindling futurity,” but the earth would belong to the dead, not the living.

The founding generation differed from ours in one major way. They were a hardy, independent group. One historian called them a “sweaty people.” They waged war with the best army in the world to secure independence, understood that government was often the enemy of liberty, not the savior, blazed a trail west through mountains and forests on the own hook, blood, and sweat, established a thriving commercial economy, wrote two federal governing documents and a host of state constitutions, and did all of this without the “benefit” of federal serfdom. They didn’t need $45,000 per person to save society, and when things went bad, they didn’t have the “benefit” of TARP money or federal “stimulus” packages to bail them out. They wouldn’t have accepted it or voted for it anyway.

Macon once voted against a statue in honor of George Washington because he thought that was too much money to spend on a frivolous project. The cost: around $100,000 2008 dollars. When Congress can spend millions of dollars on cheese, pork, redecorating, and other “stimulus” projects, and possibly $23.7 trillion for a “bailout” of a banking industry that will not work, Americans have obviously lost their contact with the founding principles of frugal and wise government.

Patrick Henry said that his only guide was the “lamp of experience.” The Founders knew from experience that excessive government spending and debt would kill an economy. Because the United States is already bankrupt we should heed their warning by cutting spending and borrowing immediately. This is the only way to avoid a financial collapse.