Hamiltonian Banking: Key to Infrastructure Funding

By Nancy Spannaus

May 2, 2019—If Congress and the President are serious about funding a long overdue national infrastructure program, Hamiltonian banking must be the subject of their discussions over the coming weeks. A model proposal for a Hamiltonian National Infrastructure Bank has been proposed by this blog for nearly two years now, and is included in my recently published book, Hamilton Versus Wall Street. Hamiltonian banking is the key to successful infrastructure funding.

Unlike other National Infrastructure Bank proposals, this Hamiltonian version immediately solves the problem of “where will the money come from,” by basing its capitalization on already-existing Treasury debt. Treasury Secretary Alexander Hamilton provided the capital for the first Bank of the United States by offering stock in exchange for U.S. government bonds, thus turning an unmanageable burden into a source of credit for building a productive economy. There is ample reason why the United States today, saddled with more than $22 trillion dollars of equally unpayable debt, should follow in his footsteps.

Hamiltonian Banking: Key to Infrastructure Funding
Hamilton statue outside the U.S. Treasury building

To put it succinctly: It is not necessary for the United States to add trillions of dollars to that debt in order to fund the necessary rail, water, and energy projects which are needed to bring our nation’s infrastructure up to the level required for a prosperous future. As one of the Memorials in favor of this National Infrastructure Bank put it, we need to “repurpose” that debt, to begin to meet the needs of the U.S. population.

You can find extensive discussions about how such a Hamiltonian Bank will work on this blog.

The Projects Required

There is another crucial aspect to Hamilton’s model, in addition to his method of funding, which sets it apart from other proposals for a national infrastructure bank. As he outlines in his Report on Manufactures, Hamilton sees the key to economic prosperity as increasing the productive powers of labor, through investment in labor-saving technology (“mechanization”) in manufacturing and agriculture, improved infrastructure, and scientific research. He saw it as a Federal government obligation to promote that investment, and protect labor and industry, not only by tariffs, but also direct government subsidies (bounties). And all this must be done with the view to enhancing national unity, spreading the prosperity harmoniously to every area of the nation to create “a more perfect union.”

Those principles, which have been proven effective in the four periods of stellar U.S. economic growth, provide a useful guide to what a new Hamiltonian Infrastructure Bank must invest in today. The next generation of high-speed rail, expansion of nuclear energy (the cleanest and most efficient form of electric power), extensive flood protection projects along coasts (including rivers) vulnerable to hurricanes, broadband, and crash research programs into developing nuclear fusion power and space technologies all meet Hamiltonian criteria, and will create the tens of millions of high-paying jobs which the nation requires.

The U.S. Treasury Department itself has compiled a list of some of such urgently required projects, noting that they will increase the productivity of the economy so that they pay back the investment required up to the ratio of seven, or even ten, to one. Conversely, of course, the refusal to build these projects (such as the New York-New Jersey Gateway plan which the Trump Administration is currently sabotaging) can result in a devastating calamity in terms of life and sustenance.

Hamiltonian Banking: Key to Infrastructure Funding
The Portal Bridge, a key link on the Northeast rail corridor, and over 100 years old.

There is room for projects of lesser technology, of course, such as the new Conservation Corps which Rep. Marcy Kaptur has proposed. Like the original CCC, those must be combined with educational programs for the youth involved, in order to prepare them for more knowledge-intensive work in the years ahead.

The touchstone is the productivity of labor, most effectively measured in terms of Total Factor Productivity. TFP measures the increases of productivity created by innovations of new technologies, infrastructure upgrades, and increased knowledge in the workforce. It was at its greatest during FDR era, when the vast expansion of electricity and technological revolutions swept through the nation, dramatically increasing incomes and living standards, and tax revenues.

The Support Is There

Much is being made of the fact that the launching of a huge infrastructure program is one of the few areas of broad agreement within the intensely divided U.S. electorate. This broad support is reflected in the composition of the #BuildForTomorrow coalition which sponsors Infrastructure Week every spring. The coalition spans the gamut, from the AFL-CIO to the U.S. Chamber of Commerce and National Association of Manufacturers.

Even without the existence of a bill in Congress, it is evident that support for a Hamiltonian Infrastructure Bank has the potential for equally broad or greater backing. A version of the model Infrastructure Bank on this blog has been endorsed by Democratic Municipal Officials (DMO, 40,000 elected Democratic council persons and mayors); the Democratic National Committee (a modified version of the DMO resolution); Our Revolution Northern Virginia; Loudoun County Progressive Democrats; National Federation of Federal Employees (110,000 members); the National Latino Farmers and Ranchers Trade Association; and the National Congress of Black Women.

Hamiltonian Banking: Key to Infrastructure Funding
Bridges like this one over the Potomac River desperately need capital investment.

Also, sixteen State Legislatures introduced resolutions in support of the proposed NIB in 2018; memorials are currently pending in 18 state legislatures.  They have passed the General Assembly in Illinois (dominated by Democrats) and the State Legislature in South Carolina (dominated by Republicans). Dozens of regional labor unions, mayors, state legislators, and city councils across America have written to their Congressmen in support of the proposed legislation.

Hamilton’s economic approach as always been the key to U.S. national unity and progress.

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