Building Back Better Forever: The National Reconstruction and Continuous Development Act Of 2021
For the past 50 years at least, many American economists and policymakers have erred in their implicit understanding of ‘economic development.’ Instead of the perpetual process of technological advance and responsive macroeconomic adjustment that it is, development has been conceived as a one-off achievement through which ‘underdeveloped’ countries become ‘developed’ countries, then coast on their technical laurels.
Likely stemming as it does from Cold War competition for influence over ‘underdeveloped’ countries up till the 1990s, this ‘takeoff’ conception and strategy of economic development, first associated with U.S. National Security Council economist Walt Rostow, is ripe for replacement. The present author’s InvestAmerica Plan is one such prospective replacement. Now a proposed bill would institute the InvestAmerica Plan.
Like the Plan itself, the Bill accordingly aims to work ‘big,’ transformative changes by levering four surprisingly minimal ‘tweaks’ to existing federal instrumentalities. These are as follows.
First, the heads of all cabinet-level executive agencies of the United States with jurisdiction over primary infrastructures and industries are organized into a strategic development planning body – the National Reconstruction & Development Council (‘NRDC’). The Council is charged with developing, regularly updating, and overseeing the implementation of a National Development Strategy (‘NDS’) analogous to the nation’s regularly updated National Defense Strategy and Defense Posture Statements formulated by its defense and security agencies. This task includes, among other things, the functions of (a) identifying sectors and Congressional Districts in need of concerted startup assistance, and (b) approving responsive projects, entities, and investment securities as Eligible targets of development investment.
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Second, the Federal Financing Bank (‘FFB’) through which Treasury already funds federal agencies is upgraded with respect to fund inflows and outflows. Inflows will continue to include Congressional appropriations and proceeds of Treasury Securities sales, as presently, but will also include additional public and private sector capital raised through Special Purpose Trusts funding diversified portfolios of Eligible NRDC-designated national development projects. Outflows for their part will continue to include credit-extension and –support afforded to federal agencies, again as at present, but will now also include debt, equity, and hybrid investments in both (a) sub-federal units of government, and (b) private sector firms and consortia of private sector or mixed public-private sector firms designated as Eligible by the NRDC.
Third, the Federal Reserve System is restored to its original role as a network of regional development finance institutions (the Federal Reserve District Banks) overseen and coordinated by an independent executive agency (the Federal Reserve Board of Governors). The Act does this by requiring the Fed to employ its Federal Reserve Act Section 10B, 13, and 14 discounting powers to seek out and afford short- to medium- term liquidity assistance to small businesses designated as Eligible by the NRDC. This form of proactive productive lending, mandated by the text of the Federal Reserve Act itself since 1913 but in recent decades ‘honored only in the breach’ by the Federal Reserve System, is to replace, where allocative trade-offs have to be made, the speculative lending to secondary and tertiary financial market institutions that the Fed presently favors. Complementary adjustments to the Comptroller of the Currency’s bank-chartering and portfolio-regulatory mandates, and to the Federal Deposit Insurance Corporation’s capital-regulatory mandate, round out this ‘Spread the Fed’ pillar of the Plan.
Finally, the Act requires the Department of Treasury to upgrade its present TreasuryDirect system of citizen-accessible Treasury Securities accounts in two ways. First, U.S Digital Service is instructed to upgrade TreasuryDirect Accounts into universally available peer-to-peer (‘P2P’) digital wallets through which Treasury, all citizens, and all approved businesses and guests can transact with each other. And second, the resultant wallets are enabled to receive, hold, and pay out digital Federal Reserve Notes (‘dollar bills’) in addition to the Treasury Notes, Bills, and Bonds presently authorized to be held. The upshot is a universally accessible digital savings and payments platform that will not only eliminate the problems of commercial and financial exclusion and ‘leaky’ monetary policy, but also facilitate the efficient and high-velocity operation of those new functions established by the first three pillars of the Plan elaborated above.
We have proceeded for far too long on a mistaken view of national development – a view deeply at odds with our own Hamiltonian developmental tradition. It is high time we restored our Hamiltonian vision. Happily this is quite easy to do, for the simple reason that our primary federal instrumentalities where finance is concerned – our Fed and our Treasury – were originally founded precisely to act on the Hamiltonian vision. All we need do is recover their mandates. And that’s what the National Reconstruction and Continuous Development Act does.