A Short History of US Government
by Stephen Lendman
Global economies are withering while Washington
conceives "Financial Recovery Plan(s) from Hell," according
to economist Michael Hudson in his latest February 11 article.
Bankers demand more trillions, "or (they'll) plunge the economy
into financial crisis." What they want they'll get, and here's
where things now stand.
On February 10, Bloomberg.com reported
that Treasury Secretary Geithner "pledged government financing
for as much as $2 trillionto spur new lending and address banks'
toxic assets, seeking to end the credit crunch hobbling the economy."
Hudson calls it "Stage One of a two-stage plan," so
far unannounced, to transfer trillions more to corrupt bankers
who caused the problem in the first place, yet taxpayers will
get little more back than the bill.
On February 11, the New York Times reported
that "House and Senate leadersstruck a deal on a $789 billion
economic stimulus bill after little more than 24 hours of rapid-fire
negotiationsclearing the way for final Congressional action later
this week (so) Obama (can) sign the bill on" February 16
in a prime time TV spectacular.
In America today, they're called bailouts,
but throughout history they were handouts. Some quite generous
(though nothing like today's) and always for the privileged. Never
for the public interest or greater good.
Last October, Howard Zinn wrote about
them in his Nation magazine article titled "Bailout - A Great
Let's face a historical truth: we have
never had a "free market," we have always had government
intervention in the economy, and indeed that intervention has
been welcomed by the captains of finance and industry. These titans
of wealth hypocritically warned against "big government"
but only when (it) threatened to regulate their activities, or
when it contemplated passing some of the nation's wealth on to
the neediest people.
"They had no quarrel with 'big government'
when it served their needs, (and it) started way back" in
1787 when the Constitution was drafted. The year before farmers
from Western Massachusetts and elsewhere rebelled to protect their
properties from being seized for nonpayment of taxes. The Founders
took note and "created 'big government' powerful enough"
to deter them in future incidents. To return runaway slaves to
their owners, and to massacre Indians to make way for new settlers.
They established the idea of handouts
as well. The first one to pay full value for near-worthless bonds
held by speculators - an earlier version of buying today's toxic
It was bad enough, then compounded by
taxing the public to pay for them each time, and having a standing
army ready in case of resistance. What precisely happened in 1794
when Pennsylvania farmers stood up against unfair tax laws.
"In the first sessions of the first
Congress," markets were manipulated with tariffs "to
subsidize manufacturers." Government also partnered with
private banks to establish a national one. These practices were
commonplace from that time to now. Only the amounts get bigger.
The more concentrated business gets, the greater its appetite
and more power it has to satisfy it. It's now insatiable enough
to demand trillions more in handouts before the current crisis
ends, looted from the Treasury with taxpayers getting the bill.
Zinn notes how in the 19th century government
subsidized canals, the merchant marine, and before and during
the Civil War gave about 100 million free acres of land to the
railroad barons "along with considerable loans to keep"
them in business. It was the largest ever giveaway until Paulson's-engineered
Wall Street one, and as stated above, lots more is coming, and
much of it still ahead.
Democrats back it more than Republicans.
Another long-standing tradition from the republic's beginning,
as Zinn again noted. He cited Democrat Grover Cleveland vetoing
"a bill to give (a mere) $100,000 to Texas farmers to help
them buy seed grain during a drought, saying (dismissively): "Federal
aid in such cases encourages the expectation of paternal care
on the part of the government and weakens the sturdiness of our
national character." However, in the same year he gave wealthy
bondholders $5 million by pricing them $28 above market value.
"Rugged individualism" he called it to make it on our
own with a little government intervention for assistance. Only
for business. Never the public.
After WW II, military Keynesianism became
dogma. Aircraft and other defense industries had to be saved and
another Depression avoided. The oil industry got its depletion
allowance. Chrysler was resurrected from the dead. Continental
Illinois Bank was taken over until sold to Bank of America. Business
was shored up overall by the 1971 Emergency Loan Guarantee Act.
Post-9/11, the Air Transportation Safety and Stabilization Act
was for the airlines. Today it's rescuing Wall Street and major
banks, Fannie, Freddie, AIG, the auto giants, and any other "too
big to fail" company. Generous government handouts to revive
America's business, or at least that's the hope behind them.
Historian Charles Beard's Documented History
In December 1931, noted historian Charles
Beard wrote about them for Harper's Monthly in an article titled:
"The Myth of Rugged American Individualism." He documented
15 examples of government handouts/subsidies to business when
the country was sinking into Depression.
(1) Government Regulation of Railways
Beard asked: "How did the Government
get into this business?" At the "insistence of business
men, shippers, who were harassed and sometimes ruined by railway
tactics." Through rebates, pools, stock watering, bankruptcy-juggling,
savage rate slashing, merciless competition, and much more by
some of the most cutthroad of all robber barons. They caused disastrous
railway bankruptcies involving bloodshed and arson during the
Panic of 1873, the result of financier Jim Fisk and railroad baron
Jay Gould trying to corner the gold market. Ulysses S. Grant deterred
them. A panic ensued and depression followed - two years after
the great Chicago fire destroyed four square miles of the city,
including close to where this writer lives.
Since the nation's founding, the government
has spent hundreds of millions of dollars funding the development
of rivers, harbors, canals, and other infrastructure, and continues
to do it for business. "Who (was) back of all this,"
Beard asked? "Business men and farmers who want lower freight
rates. There is not a chamber of commerce on any Buck Creek in
America that will not cheer until tonsils are cracked for any
proposal to make the said creek navigable." Dredging companies
also backed it and companies making their machinery.
Beyond Beard's timeline, the Eisenhower
administration began building the Interstate Highway System at
the behest of the auto industry, but its origin way pre-dated
him with the Federal-Aid Highway Act of 1938. Then another Federal-Aid
Highway Act of 1944. Still another in 1952 and under Eisenhower
one more plus the Highway Revenue Act of 1956 that created the
Highway Trust Fund to pay for the proposed 41,000 miles of roads
(up to almost 47,000 by 2004).
(3) The United States Barge Corporation
Again Beard asked: "Who got the Government
into the job of running barges on some of its improved waterways?"
Not socialists. Good Republicans and Democrats representing the
country's business interests.
(4) The Shipping Business
WW I was the proximate cause. For over
half a century government stayed out of subsidizing ship builders
and allied industries. "Under the cover of war necessities,"
it went into the business with much joy from the industry. It
backed huge merchant marine expenditures in the form of cheap
or subsidized funding, and did it by spending money "like
water educating politicians." What today we call lobbying.
Beard asked: "Who wants navy officers
on half pay to serve on privately owned ships? Business men. Who
wants the Government to keep on operating ships on 'pioneer' lines
that do not pay? Business men. And when the United States Senate
gets around to investigating this branch of business, it will
find more entertainment than the Trade Commission has found in
the utility inquest." In other words, if Congress ever has
second thoughts, it'll be too late. Business will have pocketed
their money and used it.
Government was already in this business
by providing costly airway services free of charge and by subsidizing
air mail. Once again, private enterprise was behind the whole
scheme, or as Beard put it: "Gentlemen engaged in aviation
and the manufacture of planes and dirigibles." Government
merely helped out by buying planes "for national defense"
or whatever other reason it chose.
Consider the Panama Canal, for example.
East and West coast shippers backed it because of costly railroad
rates. Others with a financial interest in the Cape Cod Canal
found that one unprofitable. "They rejoiced to see (that)
burden placed on the broad back of our dear Uncle Sam" to
bail them out.
(7) Highway Building
Even in Beard's day, "business men
engaged in the manufacture and sale of automobiles and trucks"
wanted the government to spend hundreds of millions on roads and
tax railroads to help pay for them. With a touch of humor, Beard
asked: "Who proposes to cut off every cent of that outlay?
Echoes do not answer."
(8) The Department of Commerce
Its very name defines its purpose. To
promote what Calvin Coolidge called "the business of America."
A process Beard described going on in its "magnificent mansion
near the Treasury Department, and its army of hustlers scouting
for business at the uttermost ends of the earth. Who is responsible
for loading on the Government the job of big drummer at large
for business? Why shouldn't these rugged individualists do their
own drumming instead of asking taxpayers to do it for them?"
Herbert Hoover headed the department at the time and outdid all
his predecessors in dispensing public money. The same president
Herbert Hoover we blame for his public stinginess after the country
headed into Depression on his watch.
(9) The Big Pork Barrel
It's been around for ages and entered
into the vocabulary after the Civil War. It was named after a
container to store pig meat in brine, and in 1801 a farmer's almanac
urged readers to "mind our pork and cider barrels."
Its need went out with refrigeration but got new life in reference
to political bills bringing home the bacon for constituents. For
all sorts of things like post offices, rivers, harbors, buildings,
and a whole array of boondoggle projects and giveaways. Beard
cited public buildings, navy yards and army posts with business
interests every time the beneficiaries.
(10) The Bureau of Standards (NBS)
It's now called the National Institute
for Standards and Technology (NIST), and was originally established
in 1901 as a measurement standards lab under the Department of
Commerce to promote US innovation and industrial competitiveness.
Given its purpose was to help business, Beard asked: "Why
shouldn't they do their own (promoting) at their own expense,
instead of turning to the Government?"
(11) The Federal Trade Commission
In 1914, it was established as an independent
US government agency. While claiming its principle mission is
to promote "consumer protection," it exists solely for
business and in Beard's day for "business men who do not
like to be outwitted or cheated by their competitors." Why
so for "rugged individualists," he asked? Why not let
them all do as they please "without invoking government intervention
at public expense" and no public benefit.
(12) The Anti-trust Acts
Beard refers to the 1890 Sherman Antitrust
Act and 1914 Clayton Antitrust Act - trustbusting legislation
of their day to defuse anti-competititive practices. Today they're
mere artifacts at a time business oligopolies and de facto monopolies
dominate all major industry groups and are practically omnipotent.
It's why Chomsky calls them "private tryannies."
Earlier, businesses complained that these
laws constrained them and their ability to do large-scale planning
without risking prosecution. Yet farmers and small business wanted
them. The former for lower prices. The latter so as not to be
undersold, "beaten by clever tricks, or crushed to the wall
by competitors with immense capital."
Individualism inspired both acts, what
Woodrow Wilson called "The New Freedom. Break up the trusts,"
he said, "and let each tub stand on its own bottom."
That's how small businessmen felt. Lawyers representing them put
it differently: "The natural person's personal liberty should
not be destroyed by artificial persons known as corporations created
under the auspices of the State."
(13) The Tariff
They go back to the 18th century and were
the government's largest source of revenue from the 1790s until
WW I. Once income taxes became law in 1913, that changed although
taxing income was used during the Civil War and again in the 1890s.
Beard referred to tariffs as the kind
of "interference" business men demanded to protect their
interests while at the same time wanting "the right of capital
to find its most lucrative course, industry and intelligence their
natural reward, and commodities their fair price." The idea
of "free trade" then was about the way it is now. One
way with government protecting business against foreign competition,
heavily by tariffs back then. More today by the WTO, NAFTA and
the like. Beard's response: "If competition is good, why
not stand up and take it?"
(14) The Federal Farm Board
It was created in 1929 so was quite new
when Beard wrote about it. He called it a "collectivist institution"
and a product of "agrarian agitation on the part of our most
stalwart individualists, the free and independent farmers."
Hoover sponsored it and signed it into law, but under him its
measures were modest at best. It primarily and fundamentally stabilized
prices and production through cooperative methods. It financed
associations to limit production. The alternative was to let farmers
produce what they wish, as much as they could, and sell it at
whatever the market would bear. It's slogan was "Grow Less
- Get More," cooperate under government leadership or hang
(15) The Moratorium and Frozen Assets
It was a Herbert Hoover plan for a one-year
moratorium on payments due the US from foreign powers at a time
of growing economic duress as well as a "proposal to give
public support to 'frozen assets.' " Its "inspiration"
was the jam American investment bankers were in. They made easy
money in the 1920s, were now in trouble, and wanted government
In 1927, a distinguished German economist
told Beard that "the great game in his country, as in other
parts of Europe, was to borrow billions from private bankers in
the US, so that it would ultimately be impossible to pay reparations,
the debts due the Federal Government, and then the debts owed
to private parties." As a result, they believed bankers would
force their government to forego its claims for the benefit of
private operators. It worked, and according to Beard: "American
taxpayers (were) to be soaked and American bankers (were) to collect
What then is a "frozen asset?"
A piece of paper representing a transaction expecting to yield
a larger return than possible on a prudent investment. For example,
a 7% Western farm mortgage at the time was frozen tight and its
holder with it. But why should government have to intervene to
save them from "their folly and greed? No reason, except
that (investors) want the Government to bring home their cake
so they can eat it."
Beard stressed that "the Federal
government does not operate in a vacuum, but under impulsion from
without." From "rugged individualists - business men
or farmers or bothThe Government operates continually in the midst
of the most powerful assembly of lobbyists the world has ever
seen." Representing every business interest "above the
level of a corner grocery. For forty years or more there has not
been a President, Republican or Democrat, who has not talked against
government interference and then supported measures adding more
interference to the huge collection already accumulated."
Woodrow Wilson, for example. He based
his 1912 campaign on individualism. A new freedom against corporate
wealth controlling government. As a Jeffersonianism heir, "he
decried paternalism of every kind." But look at the laws
enacted under him: the Federal Reserve Act subverting the Constitution
by giving a private banking cartel the right to print money, control
its supply and price, and charge government interest on what it
would not have to pay if it printed its own;the Federal income
tax to service the federal debt owed to bankers; the trainmen's
law virtually fixing wages on interstate railways for certain
classes of employees; the shipping board law that put the government
in the shipping business and let it regulate rates; the Farm Loan
Act that established 12 regional Farm Loan Banks to serve members
of Farm Loan Associations; federal aid for highway construction;
the Alaskan railway; the Water Power Act that created a Federal
Power Commission with extensive authority over waterways and the
construction and use of water power projects; and various other
acts belying the notion of "the less government the better"
so increasingly more of it for business became the law of the
Republicans regained power in the early
1920s on a slogan of returning to normalcy and getting government
out of business. In fact, they repealed none of Wilson's laws.
They and their ideological forebears "came honestly by subsidies,
bounties, internal improvements, tariffs, and other aids to business."
It was their kind of normalcy. Individualism, with no interference,
lots of handouts, and nothing changed under Republican and Democrat
administrations through today.
Handouts to Business: the American Way
American business is defined by Socialized
costs and privatized profits - more than ever today with trillions
in handouts plus all sorts of other generous benefits: subsidies
and other direct grants; tax breaks, reductions, deductions, exclusions,
write-offs, exemptions, credits, loopholes, shelters, and rebates
even for profitable companies; the bigger they are, the more they
get; letting corporations be headquartered off-shore and pay no
federal income taxes; allowed to repatriate foreign earnings on
the same basis; export jobs and erode the nation's industrial
base; financialize the economy; make it a casino, and loot the
Treasury to cover their bad bets; large government contracts of
every imaginable kind; some on a cost-plus basis with every incentive
to cheat and get more; discounted user fees or subsidized use
of public resources; free government-funded R & D; various
other government direct payments; every cabinet department as
a conduit for government funding to private business; every program
from the Department of Commerce, Agriculture and others underwrites
it; the FDA for Big Pharma; the FCC for media and telecommunications
firms; the FAA for the airlines, the Treasury and Fed for Wall
Street, and so forth; the most active "peoples" agency
is the IRS; other subsidies like accelerated depreciation; the
cost of advertising; direct aid for companies that advertise abroad;
and much more with Democrats as pro-business as Republicans while
at the same time curtailing essential social benefits; individual
tax breaks for the rich; winking and nodding about billions offshored
to tax havens; letting corporate fraud and abuse become the national
pastime; privatizing more of what government should do and/or
does best - schools, highways, bridges, airports, prisons, public
lands, utilities, the running of elections, foreign policy, parts
of the military, war through the use of mercenaries, outer space,
and thus far a failed attempt to take away the most important
poverty reduction program for seniors and the disabled - Social
Security; privatizing wealth and socializing debt; abolishing
welfare and other social benefits; rendering organized labor impotent
in a "Walmartized" society; ruling by the doctrine of
rewarding the privileged at the expense of beneficial social change;
the greater good; government for the people; human need; and the
democratic ideal that government should serve all its people,
not just its preferential few.
Beard's "rugged individualism"
is pure myth for them. But, rugged or otherwise, it's the consigned
fate for the rest of us - sink or swim at a time a lot of us are
Stephen Lendman lives in Chicago. Contact
him at: email@example.com