Alexander Hamilton, the architect of America’s First National Bank, proved that a national debt, if not excessive, is a great advantage to a modern nation. A sustained economic recovery requires a source of credit which can be neither zombie banks nor the federal budget.
Federal lending, not Federal spendingPaul 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, but with a recognition of the difference between the operating debts represented by the annual Federal budget, and the long-term capital debts used historically to finance economic growth and development.
If applied today, Keynesian methods 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 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 in production, with high capital investment, high energy intensity, high value added, and high technology.