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Treasury Secretary Henry M. Paulson, Jr. unveiled on March 31 the Bush Administration's extensive plan to expand the regulatory agencies that oversee our nation's financial system. Though the plan got a lukewarm response from some members of Congress, part of it — to expand the reach of the President's Working Group on Financial Markets — may be implemented by presidential executive order.

On March 31, Treasury Secretary Henry Paulson released a 218-page plan that would greatly expand the role of both the federal government and the non-governmental Federal Reserve in regulating our nation’s economy. An AP summary of the plan said it would:

The reaction in Congress, particularly from Democrat Senate leaders Christopher Dodd of Connecticut, Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, and Senate Majority Leader Harry Reid of Nevada, tended to criticize the mechanics of the administration proposal, but not the overall concept of having a regulated economy.

"To talk about overhauling the regulatory system is a wonderful idea. But frankly it doesn't relate to the issues we're grappling with," Senator Dodd told the press in a conference call. He also noted: "In time, we will hold hearings on reorganizing the regulatory structure."

Absent from the dialogue was any discussion about whether our economy needs to be regulated in the first place, and exactly where the authority to regulate it is found in the Constitution, aside from the power given to Congress "to coin Money," and "regulate the value thereof."

However, over the past two centuries, Congress has not only authorized the creation of fiat "money" that is printed, rather than coined, but when it passed the Federal Reserve Act in 1913, it placed the control of our money supply (such as it is) in the hands of a private entity not answerable to the voters.

In his weekly Texas Straight Talk column title “On Money, Inflation and Government” for March 30, Rep. Ron Paul made some excellent points concerning the current economic crisis that prompted the Treasury Secretary's recent announcement. Perhaps the most important point of all is:

The Federal Reserve, a quasi-government entity, should not be creating money or determining interest rates, as this causes malinvestment and excessive debt to accumulate. Centrally planned, government manipulated economies always fail eventually…. In free markets, both success and failure are options. If government interventions prevent businesses, like Bear Stearns, from failing, then it is not truly a free market. As painful as it might be for Wall Street, banks, even big ones, must be allowed to fail.

Once in awhile, a statesman such as Ron Paul comes along willing to say plainly that the Federal Reserve and big banking emperors are wearing no clothes. For the most part, however, we receive the meaningless debate characterized by the differences of opinion between Democrats and the Bush administration over exactly how best to regulate our economy.

If our elected officials insist on being politicians rather than statesmen, the best the voters can do is to make it politically expedient to favor a free market economy. But that will require a massive, decades-long educational effort at the grass roots level. Among the organizations performing that function are the Ludwig von Mises Institute, the Foundation for Economic Education, and, of course, The John Birch Society

 

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