The people's choice

Thomas V. DiBacco

February 23, 1993|By Thomas V. DiBacco

THE CURRENT discussion of President Clinton's economic package reveals the Achilles heel of American democracy -- namely, that the economic wisdom of voters can result in collective nonsense rather than prudent decision making. Polls reveal that voters, for example, overwhelmingly support the president's package. No matter that package, it should be recalled, includes the president fighting a war in which one enemy (red ink) turns out to be an ally (spending).

But citizens feel that (1) the economy and government are really in a mess tantamount to a war; ergo, it's their patriotic duty to support their leader; or (2) the sacrifices called for will be borne by someone else -- by the rich, who got fat and sassy during a dozen years of Republican rule.

The nation's history reveals that voters are ill-equipped to deal with complex economic matters. When the first secretary of the Treasury, Alexander Hamilton, got Congress to do the economic right thing, namely, establish a private Bank of the United States, little folk soon rebelled against the notion. Why? Because a fiscally viable bank could not engage in economic democracy, that is, treat all citizens equally irrespective of their creditworthiness. First come, first served operated in political democracy, but not in economic affairs. So the bank had to go.

It did, during Andrew Jackson's administration -- and from that time until almost the passage of the Federal Reserve Act in 1913, the federal government -- so as not to offend vocal voters -- put its money not in banks but in huge vaults built at several locations throughout the nation. When it had to pay bills, two federal agents carried the loot to the creditor, and the government earned not one penny of interest.

Also in the nineteenth century, certain voters argued that America's high tariffs adversely affected them. The most outspoken among the tariff foes were Southerners who argued that the agricultural goods they sold in a world market were unprotected by such favorable legislation, while the industrial goods that they bought were protected -- hence their high prices.

The fallacy in the argument was that Southerners didn't buy many industrial goods. Moreover, the nation's high tariffs at this formative juncture gave American business the support to build a solid industrial foundation.

No matter, vice president John C. Calhoun of South Carolina, representing Southern interests, resigned his post in 1832 over the matter and then devoted his efforts to making war on the tariff.

If there is a classic illustration of the folly of the American voters' knowledge about economic matters, it is with regard to railroads. This nation now sports the worst passenger system in the industrial world, largely because Americans in the 1800s vented their spleen against the rails -- the industry killed farmers' livestock, ripped off passengers because short-distance trips were proportionately higher than long ones (no matter that the railroads' fixed costs bore more heavily on short trips than the long ones); the housewife moaned the railroads' soot, the sleeping American the noise and horns.

So the railroad, beginning in 1887 with the passage of the Interstate Commerce Act, was so punitively regulated that a decent rail system, especially for passengers, could not begin to arise again until almost 75 years later. By then, the rails were left to fend for themselves.

Like so many of his predecessors, President Clinton is committing the cardinal sin of taking his economic program to the people for approval, the theory being that popular support will result in pressure on Congress to enact the package. In his admiration for Franklin D. Roosevelt, President Clinton should take his package to "brains trusters" who are more expert in the field and leave the fine points to them. Then he might take his more scrutinized final product to the people.

Otherwise, we face the risk of popular -- some might say populist -- nonsense, a heavenly city in which the proverbial free lunch becomes a sine qua non and taxes are borne by somebody else.

Thomas V. DiBacco is a historian at the American University in Washington, D.C.

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