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December 14, 2010 3:19 pm

AMEND CORNER: Patriots can solve the debt crisis

Written by Don Amend

The big issue these days is the national debt.

Pretty much everyone agrees that this is a serious problem for the U.S., and they should. The idea of the nation going bankrupt should give everyone pause. Some even claim our very freedom is at stake if we don’t solve the crisis, and they may be right.

Personally, I think the nation can weather the storm, but I think it will require a change in our thinking about what patriotism really is.

It’s not as though we haven’t faced these problems before. This nation was in debt when it was born, thanks to the cost of fighting the Revolution, and it took on a huge debt with the Louisiana Purchase. The government had no cash on hand and no credit rating internationally, so they took out the equivalent of a sub-prime loan from foreign investors. Bonds were issued through a bank in England and sold mostly to buyers in France and the Netherlands.

In this case, of course, the nation received a tremendous asset — millions of acres of land — which, fortunately, appreciated in value by the time the bonds were due in 1818, and the government was able to refinance the debt, but nobody was sure that would happen in 1803.

A few years later, with the Louisiana debt still hanging over our heads, we went to war with England again, and in 1813, the government was on the edge of bankruptcy. The secretary of the treasury had to raise $16 million dollars from the public, and he had to turn to rich people to provide it.

The richest man in America at the time, Stephan Girard, helped him do it, kicking in $2.5 million of his own money, which incidentally, he never got back, and found enough patriots to raise the rest and save the nation from insolvency.

The U.S. also faced bankruptcy in 1895. The nation was in recession, and Europeans nervous about the U.S. economy began buying up gold. This drained America’s gold reserves down to about $9 million. At the time, there was a check for $12 million out, and, if it had presented for payment, the nation would have been insolvent.

So President Grover Cleveland went begging for help from banker J.P. Morgan, who proposed a government bond issue of $65 million. Morgan would sell the bonds and use the money to buy back gold for the treasury. The action saved the U.S. from bankruptcy, and Morgan made money on the deal, although he never said how much.

Interestingly, that debt crisis arose even though the government had carried surpluses ever since the Civil War had ended. Like today, though, the federal budget wasn’t always what it seemed. During that period the government gave away millions of acres of land and sold millions more at below-market prices. The budget never reflected the value of the assets the government was losing in the process.

Now it isn’t likely that, say, the Bank of America is going to bail out the federal government today. That might seem like a reasonable thing to do right now, since the government bailed the big banks out a couple of years ago, but they are too busy right now foreclosing on people’s houses.

Neither is it likely that the government will unload, say, all the national parks in a fire sale to make ends meet.

But that’s OK, because either one of those solutions would be temporary at best.

What is required is patriotism, especially if, as the real alarmists are saying, our freedom is at stake. We need to start thinking as Americans again, and that’s essentially what Alan Simpson and Erskine Bowles said when the commission they chaired reported on what is needed to solve our debt crisis, recommending both cuts in spending and increases in taxes.

Those of us who benefit from what the government does — which is all of us, by the way — need to reassess what we demand of the government and what we are willing to pay for it. It is unrealistic to believe that we can solve the problem by simply cutting spending, and equally unrealistic to believe we can do it without cutting spending. On the other hand, we need to realize that taxes have their limits, while also realizing that taxes are needed to provide government services that are vital to the well-being of Americans.

All of us must face the fact that, as patriotic Americans, one way or another we will have to make sacrifices to resolve the problem. The question is, will we sacrifice by cutting back on what we receive from government or by increasing what we pay for government, or a combination of both?

We often ask men and women to sacrifice their lives in war to protect our freedom. If, as some are saying, the current economic crisis threatens our freedom, the least we can do is be willing to sacrifice to resolve it.

Freedom, after all, isn’t free.

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