Now
that Congress and the White House are talking about public works aka
"infrastructure", it would be good to take another look at how we pay
for it. Here's an approach we proposed over 20 years ago.
Sam Smith - An alternative to Congress borrowing money to pay off its
debt would have been using Congress's constitutional power to "coin money
and regulate the value thereof." Instead Congress began a long tradition
of borrowing the money that many believe we can neither bear nor relieve
ourselves from.
In the early 19th century, the little British Channel island of Guernsey faced
a smaller but similar problem. Its sea walls were crumbling. its roads were too
narrow, and it was already heavily in debt. There was little employment and
people were leaving for elsewhere.
Instead of going still further into debt, the island government simply issued
4,000 pounds in state notes to start repairs on the sea walls as well as for
other needed public works. More issues followed and twenty years later the
island had, in effect, printed nearly 50,000 pounds. Guernsey had more than
doubled its money supply without inflation.
A report of the island's States Office in June 1946 notes that island leaders
frequently commented that these public works could not have been carried out
without the issues, that they had been accomplished without interest costs, and
that as a result "the influx of visitors was increased, commerce was
stimulated, and the prosperity of the Island vastly improved." By 1943,
nearly a half million pounds worth of notes belonged to the public and was so
valued that much of it was being hoarded in people's homes, awaiting the
island's liberation from the Germans.
About the same time that Guernsey started to fix its sea walls the town of
Glasgow, Scotland, borrowed 60,000 pounds to build a fruit market. The Guernsey
sea walls were repaid in ten years, the fruit market loan took 139. In the first
part of the the 20th century, Glasgow paid over a quarter million pounds in
interest alone on this ancient project
