A quick history lesson: in the early days of the Republic, the Congress mostly concerned itself with transportation issues like highways, canals, railroads,ports etc. Congress would do this by announcing a project (say, a highway from Washington DC to Savannah, GA), then it would create a structure to empower a corporation (or series of corporations) to do the project and when the project was completed, the company would dissolve; if there was money left over, then the investors would divvy up the profits and if there wasn't money left over....oh well. Either way, the company was born to perform a specific task and when the task was done, the company would cease to exist.
This changes after the Civil War, when the American economy evolves on the axis of fixed and variable costs. Before the War if you made shoes, for example, and times were good and you had lots of customers, then your variable costs would pay from themselves and you'd work hard and make money; but if times were bad and you had no customers, your variable costs would keep you from performing any work at all and you'd have to cover your fixed costs in some other way, which is why companies in those days were mostly cottage industries of people who made their living probably by farming or bartering.
But after the Civil War, with the expansion of the trans-Pacific railroad, the invention of the telegraph, the introduction of unified national currency and the cessation of slave labor, companies could be formed that could create and move massive amounts of product where the variable costs fell so low that production never ceases even if the economy is bad. We went from an economy where money was tight and producers literally shut down when there were no customers to an economy that was based on non-stop production regardless of whether buyers for the products would materialize because production itself became so cheap.
Gov'ts think on the level of Gross Domestic Product, the overall tally of all the stuff and services that a population produces. This encompasses hundreds of millions of people across millions of acres of land in thousands of different industries making an incalculable number of products. Basically this is what we call 'big picture' stuff, indeed the biggest picture possible really. So expecting the gov't to sensitively act in regards to this industry or that location or these people over here, is just not realistic. It doesn't think that way, it doesn't move that way, it doesn't have the capacity to think or move that way.
The bigger industries have a better chance of reaching the ear of the politicians and a better chance of creating an impact that politicians feel like they have to react to. In the 2007-08 crisis, for example, the gov't bailed out the mortgage holders, not the homeowners; that is, it bailed out the larger institutions not the individual citizens. Why? Because it's easier to do and clearer to see what needs to happen. (*) In the case of the thousands of people who lost (or could have) their homes, adjudicating each claim would take the courts and mediators several years at least to react to and the distribution of funds will undoubtedly be half-assed, piecemeal, lumpy (and most likely doled out to the nearest politician's donors and cronies, regardless of where the money should go). When a crisis arises, the gov't's levers of action tend to be really huge ones and when the gov't needs to put money into the system, for example, it's gonna go to the big money places (not the small ones). So the federal gov't in general is too big, too slow and too insensitive to ever really get anything useful done because all it can do is farm money out to other entities to do it all anyway and in an emergency the gov't will prize speed over justice so the fat cats get first shot at the buffet while everyone else begs for a refill of Pepsi. (**)
But, as in the history lesson above, Congress has the power to create entities, corporations, to perform specific tasks--indeed, that's the way it is supposed to work and we totally lost that during the Reconstruction. I would suggest creating a series of such entities to continually funnel capital into the industries that are inescapable in the daily life of the citizenry: housing, healthcare, education and transportation. These entities would likely be financial in nature and serve the purpose of backstopping these markets to ensure their liquidity in the face of potential crisis and to safeguard gov't and business from each other. These entities could form a thin gray line where business and gov't intersect. And the good news is we already have some of them.
For example, Fannie Mae (FNM) was created to backstop America's housing and real estate market. The idea was to make sure that real estate markets had enough liquidity to encourage the constant development of property, especially for housing. It is market-based in that it responds to customers rather than following a predetermined gov't plan of production. It is a private company, it sells stocks and bonds and pays dividends to its investors.
Why does the gov't need a backstop? Think of it this way: Congress's dominion is not over the people of the United States of America but it's land. All the states and territories that the American gov't claims is the responsibility of Congress and it is Congress's most basic desire to make money off this property or for this property to be productive. Every single acre has a certain value to Congress and it seeks to yield as much in the form of economic growth and income through taxation. Say, there is a wool hat factory on one of those acres; it is a building filled with equipment, it employs workers to make hats, it transports hats, sells hats, makes profits from hats. In a good year the effect on the macro-economy will be positive (***) and the taxable income to Congress will bring money in to public coffers. Hurray! But if the factory burns down then the party's over. The value of that land has gone from all that fine ass wool hat money to nothing--indeed, perhaps less than nothing! Perhaps the burned down shell of a factory is actually a cost rather than a source of revenue.
Now Congress could come back to the factory owner and say you owe us the same amount of tax this year and we don't care that your factory burned down. The factory owner is likely to say, I ain't got no money...whachu want from me? Congress could get all badass and throw the guy in jail but what good is that? Now that's even more money out from what used to be a steady source of mad wool hat scrill. At the end of the day the Treasury is going to feel the loss of that factory. A chunk of land that used to be positive is now negative, that's no good.
In real estate, though, since the basis of purchase tends to be in long range bonds (or potentially extended contracts), Fannie Mae can step in and purchase the note on that chunk of land from the bank that sold the land to the factory owner. Now Fannie Mae owns the note, the factory owner owns the land and the bank is out of the picture but hasn't lost a dime; the gov't still isn't making any money off this dilapidated property but the private sector is incurring less of a loss because the pain is now transferred to a secondary holding company (this could be referred to as a 'toxic asset') that is backstopped by the gov't. The money moving around in this scenario is what is referred to as "economy" and keeping the liquid sloshing around is really all the gov't wants to do. It wants to make sure that people can still buy land, make money, build houses, whatever, and Fannie Mae is a part of keeping the market moving without the gov't really being involved, maximizing the profit of the good places while minimizing the cost of the bad places.
If Fannie Mae goes bust will the gov't bail it out? Yes. You know it, I know it, the American people know it. The other side of Fannie Mae's existence is that it is there to be bankrupted if things go wrong and to keep the gov't from having to bail out a million little people, instead it just has one big secondary company to re-liquify. Why would it do this? Because the gov't is going to feel the loss anyway, it can't avoid the loss. As in the example above, when the factory burned down the gov't felt the loss. If Fannie Mae absorbs the loss, then the gov't still feels that loss, but the citizens at least have a better chance to avoid the damage and still participate in a liquid real estate market. The bad times, as in 2008 when Fannie Mae got punched in the face, are gonna be bad for the gov't whether Fannie Mae exists or not. But Fannie Mae gives the gov't a chance to liquefy the market and liquefy it again if need be. So Fannie Mae is better in the good times and convenient in the bad times and that's pretty much all it does.
Do you see the effect? The libertarians will tell you this is creeping Marxism. I'd say it's the opposite: it's creating a separation between gov't and markets (****) that would be better for both. It would give the markets more autonomy and independence while better serving the citizenry and gets the gov't even further away from the grubby spending side (where all the politics come from (*****)) and allow the people themselves to dictate the spending.
Why not create a whole series of these entities to make sure that healthcare, education, and transportation are also permanently funded and driven to meet the needs of the citizenry in ways that decrease gov't participation and increase economic growth? And in terms of public health or economic meltdown, it could serve as a blockchain of industries that in times of emergency that could signal and empower each other in the service of public needs, rather than waiting for President Snail to get something done (or better yet: we need to stop pretending like he's the guy that gets stuff done!).
In terms of healthcare, rather than creating a single backstop Fannie Mae-like company, I would suggest a model based on the Federal Reserve. All the banks of the US are linked in an autonomous (autonomous-ish) hierarchy that has a governing board at the top that makes the rules for how all the other banks do their business. The banks themselves are still independent entities but they are linked in a structure that determines their opportunities and responsibilities. Likewise, what if all the hospitals and other healthcare-related entities joined in a Federal Reserve that could smooth standards and practices and even create price efficiencies?
In the current pandemic, much was made over the President's use of the Defense Production Act. But with a Federal Health Reserve, all that stuff would've happened without ever calling the White House. (******) An influx of new cases would signal throughout the healthcare system triggering its own reactions rather than pretending like the White House is empowered to solve this problem. Indeed, wouldn't you rather have a board of public health go to the White House with suggestions of what to do next, rather than the President's own team of political hacks trying to figure it all out from a distance?
Education, on the other hand, would be more like a Fannie Mae-like entity, because it wouldn't actually control any schools themselves, rather it would be a finance mechanism open to the American people to find ways to pay for their schooling. (First off, I'd expand what we refer to as 'education' by first trying to minimize 'schools', which I think mostly stand in the way of a meaningful realization of what it means to be alive; but that's probably a topic for another blog post in the future) In the case of this pandemic, the schools would still be determining their own standards for relating to actual students and a Fannie Mae for education (something like Sally Mae, but not exactly, as I would fund it entirely differently) would be of little impact on public health but could very useful in getting to the heart of the economic impacts of getting everyone back to school.
But a transportation entity may well have been at the forefront in this crisis. As social distancing is the key to slowing down the impact of the virus, a Federal structure that seeks to find the most efficient ways to transport Americans might have been integral to determining how to close and then re-open the society to interaction. When interacting with the Health Reserve, a transportation reserve could've yielded valuable data for vectors of disease and for economy activity.
A housing reserve, similar to Fannie Mae but connected to the citizenry at a granular level rather than a gov't level, would probably play little part in a crisis such as this. Perhaps it could create schedules for rent/mortgage payment that are realistic to the population of people suddenly out of work, but otherwise probably would've had little do with any health concerns.
Yes, we already some of these things. So what I'm proposing would start with restructuring rather than inventing from whole cloth. A housing agency that is open to each and every citizen (rather than just giant mortgage companies), an education structure that works with individuals and families to find the right educational options (rather than trying to stick prospective students with onerous debt repayment as a means of funding the whole system), a transportation structure that prizes efficiency within the need to keep Americans moving and a healthcare system (obviously more complex) that creates efficiencies and opportunities for the citizenry.
How would we pay for it? Congress could create these entities as the repositories of tax dollars. Your taxes would literally go straight into these four entities (which would be a series of regional entities that would be separate and distinct from each other, but interact totally), which would also be free (where possible) to sell stocks and bonds and find other forms of revenue in addition to tax dollars, which are simply there to keep secondary markets liquid (and keep Congress from arguing about details of shit we don't need them arguing over). It could be done--I think it's what the Founding Fathers actually intended! Congress would retain oversight (making the Congress a make backward-looking as opposed to forward-looking body, which would be a huge improvement, I think) and the system adheres as long as Congress keeps re-affirming its own action to do this. Congress can deconstruct it at any time and go back to the old way (of wasting money while fighting over nothing) whenever it feels like this has gone off the rails.
With negative taxation, the work of the American citizenry will continually pump capital back into these structures in the form of subsidies for education, transportation, healthcare and housing that derives from our tax dollars. The American gov't's job is to pour the tax dollars of Americans back into the structures that form our culture and economy and those tax dollars are increased by negative taxation, which allows Americans to redeem their charitable contributions into infrastructure subsidies. Ideally Congress gives up a lot of its empty posturing and focuses instead on finding the practices that best serve the people and the economy. By funneling tax dollars (and investment dollars) into these structures, it makes use of the dynamism within those economies of scale to stay liquid and efficient. We're already doing most of this stuff, perhaps what we need is a cessation of all the other stuff to create a simplified organized system that each citizen can understand and participate with.
Any system the creates price and energy efficiencies while making sure that Americans have access to systems that provide what they all want and need would pay for itself. Hell, I would suggest that's the only way we'll serve the needs of growing citizens in an economically efficient manner. We're remaking everything in the wake of this quarantine, let's keep the stuff that works and discard the bloated waste.
(*) And because the gov't giving money to a financial entity (like Goldman Sachs, for example) is an investment that may yield more funds in the future (or maybe not), whereas giving money to individual citizens is a cost that is likely just money out. Do you see how that works? "Investment" brings the potential for further economic growth, while "cost" is just money that the gov't no longer has and probably never will again. The trick at the basis of all I'm suggesting is giving the gov't opportunities to invest in the population rather than haphazardly picking up the costs when it all goes wrong.
(**) The obvious exception being our bi-partisan massive military that is funded to the gills and has never failed to find support for whatever it dreams up in the halls of Congress. One difference, though, is that the Military is by its very nature solely controlled by the gov't, whereas not much else in our society is. The problem with all I'm suggesting is that the military and intelligence get way more of the tax dollars than anything else does and unless the Military likes what I have to say, none of this will matter because the military basically has veto power over a massive chunk of public expenditure.
(***) Probably won't be very big. I mean...shit, dude, they're making wool hats.
(****) I've been reading up on the American Revolution lately and I'm newly struck at the significance of the separation of church and state and why the Founders were so resolute to make it happen: because the church is where all the revolution was coming from and after the Revolution, the gov't wanted that shit to stop pronto. And the way to stop it was to marginalize the churches by giving them so much freedom that they'd drown in it. I'd like to see Wall Street, too, get watered down considerably by codifying the basic interactions between gov't and business.
(*****) The politics wouldn't go away but perhaps the arguments would be better directed and less general. People with kids, for example, would be all into Education moves, which would now be made by a separate entity, whereas people without kids no longer have to be bothered/empowered. So those people that maintain these concerns, rather than complaining to/about their Congressman, they can direct their energies toward the economic entities that are actually building that structure rather than the politicians who would have steadily less control over it.
(******) Indeed, I would suggest that's how it happened anyway, Trump never actually needed to do anything--and I don't think he actually did. This story is a function of a media structure that wants to paint the world in its own way to please its listeners/followers/readers/etc, rather than an actual appraisal of the gov't in action.
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