Bad federal fiscal policy dictates urgent need for state action

Special to the Packet and GazetteSeptember 21, 2012 

For the past few months I have been speaking to citizen groups throughout the state about why it is vital, in the 2013 legislative session, to make South Carolina the freest state in the nation -- in particular, for state government to pay down its debt, fund its long-term liabilities, cut spending, curb entitlements, reform a tax code that discourages entrepreneurs and capital investment, and operate in a way that is more transparent and accountable to the people.

And when I speak to these groups, I do so with a sense of urgency, for I have lost faith in the ability of elected officials in Washington, D.C. -- on both sides of the political aisle -- to get our nation's fiscal house in order. Yes, I hope Americans decide to make President Barack Obama a one-term president. A continuation and expansion of Obama's agenda would result in even more erosions to individual liberty and further destruction of our free-market economy.

But I also believe the culture of corruption in our nation's capital is so ingrained that, regardless of who occupies the White House next January, the 50 sovereign states will eventually be required to do much more for their citizens with much less assistance from the federal government. States that take the right steps and become as competitive as possible now will be the places where people want to raise families and start businesses, and I want South Carolina to be one of those places.

The challenge, and the necessary precursor to enacting the type of legislative change that I believe is necessary, is to convince people just how bad things actually are at the federal level. By now most are familiar with at least some of the damning facts; e.g., $16 trillion in national debt and more than $70 trillion in unfunded obligations. But many do not realize how these problems have been made even worse by the ruinous actions of the Federal Reserve.

Elected officials are criticized, often correctly, for being panderers, but Fed chairmen and other technocrats usually get passes. It is vaguely reassuring to assume that someone, above the political fray, is independently making wise decisions that benefit society. But such an assumption is very dangerous, for Lord Acton's observation that "power corrupts, and absolute power corrupts absolutely," does not exempt governors of the Fed.

In the past three years alone, the Fed has tripled our nation's monetary base, printing money to prop up excessive federal spending and allowing a profligate Congress to avoid (for now) painful budget decisions. And Fed Chairman Ben Bernanke announced just last week it will keep printing new money at a clip of $40 billion a month for at least three more years, adding yet another trillion dollars to the monetary base.

That's bad enough; the Fed's actions under Bernanke, however, have been much more insidious: Trillions of dollars have been created out of thin air to purchase toxic mortgage assets, at par, from well-connected and specially-selected Wall Street banks. Such "quantitative easing" benefits a small universe of insiders while everyone else takes a hit, either through devaluation of their savings or paying higher prices for staples like gas and food. Such actions are corrupt, pure and simple.

In the near term, however, it is doubtful that Congress will pass a bill to audit the Fed and fully expose its corrupt activities. Too many powerful people benefit from business being conducted just as it is and, to put it bluntly, the politicians have been bought. And, at least for the foreseeable future, it is unlikely that Congress will get a spine and finally control skyrocketing entitlements or learn to spend within its means. The people realize this; after all, there is a reason why Congress has an approval rating of only 10 percent.

All of this dramatically underscores the need for reforms at the state level. As a state senator, there isn't much I can do about the mess in Washington, other than make people aware of it, and to not mince words when describing it and identifying who is responsible for it. But I can and will introduce and work to pass legislation in Columbia that makes South Carolina the freest state in the nation.

The path to becoming the freest state is clear. In short, it begins and ends with limiting state government to core functions, putting faith in individuals and expanding their liberty, and creating a business environment where entrepreneurs and capital investment are welcomed and rewarded. All we need now is the will to get the job done.

Tom Davis represents Beaufort County in the state Senate. His e-mail address is tom@senatortomdavis.com.

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