It is serendipitous that, as we head into a period of economic uncertainty, our children have, for the last five years, been singing along — loudly — to “Hamilton,” a musical that, in part, discusses the creation of the federal bank and the principles that are the cornerstone of U.S. economic policy.
As the first treasurer, Alexander Hamilton’s work gave our country the ability to print money, lend the government money, and promote business and industry by extending credit. Just this week, Massachusetts passed a bond bill to borrow money to make up for the shortfall in revenue collection incurred by moving the tax filing deadline to July 15 instead of April 15; we can thank Hamilton for laying the groundwork to make that possible.
While he may not have been as hip as Lin-Manuel Miranda makes him sound, and probably didn’t have rap battles with Thomas Jefferson about whether to pay off war debts, he is arguably one of the most important figures in the economic history of the United States.
What the musical forgets to mention, however, is that Hamilton wasn’t exactly trying to create financial institutions that served the best interest of the people. Prolific a writer as he might have been, there is nothing in his work that talks about living wages, access to health care, paid sick time, affordable child care, or retirement.
It’s no wonder then that when the country hits an economic downturn, we all too often (and with rare exception) work hardest to shore up the institutions that Hamilton told us were important: large banks, international commerce and big business. We need look no further than the composition of Gov. Charlie Baker’s “Reopening” Advisory Board for evidence of this, or even the name of the board itself.
Yes, many businesses are closed right now, but “reopening” implies that no one is working. Our teachers, our nurses, our firefighters, our grocery store workers, our delivery drivers, and many, many others are. The economy is not “closed;” it has been slowed down on purpose, to save human lives, and when we start relaxing measures intended to protect people, we should do so judiciously to protect both their health, but also their economic well-being.
That means that we will have to buck the trend of austerity budgeting, and it will not be easy. Already revenue shortfalls are projected to be anywhere from $500 million to $5 billion for fiscal year 2020 and $4-8 billion for fiscal 21, and those numbers may be conservative. Since Hamilton won the argument about having a strong centralized government that has the ability to borrow and print money, we will have to turn to the federal government for help as Massachusetts is required to have a balanced budget.
We cannot spend more than we take in, even though right now, we must invest to support our social safety nets and to get people back on their feet. The hard fact is that even though our state budget is limited to spending only a combination of what revenue we generate and what monies come in from the federal government, the bulk of safety net programs are state-run. This means that while we advocate for the most federal money possible, we must also be creative in how we leverage available dollars and take a serious look at how we can generate revenue to bring us out of a recession.
The temptation to offer bare-bones budgets as a solution must be rejected as we have seen the long-term, negative repercussions of such funding. Public education, affordable housing, and higher education are good examples of what happens when you put off delaying necessary investments. To use the tried and true example, if you have a hole in your roof, you fix it today. If you don’t, you’ll find that you are going to pay a lot more later and likely need a whole new roof.
So how do we do this? History, and a few good progressive economists, offers us lots of examples and ideas. After all, the first time the U.S. introduced an income tax was during the Civil War, a moment of extreme economic turmoil (and, unlike Massachusetts’ current income tax, it was a graduated, progressive tax, not a flat, regressive one).
Right now, we could close over a dozen corporate tax loopholes in Massachusetts. We could impose a windfall tax, or an added tax on businesses that profit off of the COVID-19 pandemic. We could increase the capital gains taxes. We could get creative with bonding.
Hamilton’s economic theory was a product of his times. He wanted the United States to thrive as an independent nation, and he worked to give it the tools to do so. Now too, our economic policies must be a product of our times. The options are plentiful; finding the political will to invest in our people and our community will, oddly, be the hard part.
Lindsay Sabadosa is a Northampton resident and the state representative for the 1st Hampshire District.