A Pacific Railroad Act for the 21st Century
“BY its legislation to finance the war, emancipate the slave, and invest public land in future growth,” wrote Civil War historian James McPherson, “the 37th Congress did more than any other in history to change the course of national life.” The legislation conceived from 1861 – 1863 was of vast scope and great variety. Within months of Fort Sumner, the Union Congress had acted swiftly to put the country on firm financial footing by introducing the first federal income tax in American history. Over the course of the war, Congress passed the National Banking Act, the Legal Tender Act, and the Internal Revenue Act to maneuver the dire fiscal straits of a war strained nation. Looking beyond the immediacy of the conflict and into the future, the 37th Congress added the Homestead Act, the Morill Act, and the Pacific Railroad Act to the statute books, laying the foundation for half a century of post-war growth.
Political flexibility and foresight were painfully lacking in the Confederacy. The South, incapable of concentrating political power in Richmond, manifested a deficient political response to the realities of total war. Highly disastrous legislation such as the Conscription Act, gubernatorial subordination, and a mismanagement of finances all hamstrung the rebellion. In the face of annihilation, the Confederacy’s political class demonstrated a reoccurring reluctance to ruffle the feathers of a peacetime philosophy that favored small government. The Confederacy may have produced better generals. The Union, however, produced better politicians.
The 112th Session of Congress that occupies the Capitol today can learn much from the Union politicians who scurried those halls during the Civil War years. The United States today finds itself entangled in three wars, bankrupt with broken schools and broken roads. The recession is over, yet millions remain unemployed and no better off. The government has done little, meanwhile, to invest in industries of the future. Where is the Pacific Railroad Act for 21st century industry and infrastructure? Where is the Morill Act to revamp the country’s education system? The Frank-Dodd Law, with barely a few dozen provisions written or implemented, pales in comparison to the Congressional financial handlings of 160 years ago. The obstacles facing America today demand a strong, smart government. The Congressional class of 1863 with its stellar legislative record proved the success of an active government of Hamiltonian design and the triumph of the public – private sector partnership. The Confederacy, on the other hand, had sacrificed the bold government of Hamilton for the limited government of Jefferson, placing her bet on the wrong Founding Father. Washington would be wise today not to make that same mistake.
Of course, Republicans and Tea Party activists are anathema to government flexing its muscles. Forever committed to the “government is the problem” mantra, the right points to the Solyndra bankruptcy as the most recent example of government incompetence. A $528 million gamble with taxpayer dollars on a company that produced panels for $7 and sold them for $3 was a rather unwise venture for sure. The irony! The federal government, by investing in solar panels, was punished for its hubris like the mythological Icarus. This incident, the GOP gleans, goes to show that one should not fly too close t0 the sun and that “that government is best which governs least.”
Yet, Solyndra-gate neither dispels the necessity nor profitability of alternative energy nor the role government can play in the development of this next market revolution. According to Garvin Jabusch, chief investment officer at Green Alpha Advisers, which focuses on environmentally sustainable investments, the Solyndra bankruptcy is not symptomatic of the solar industry at large. Quite the reverse is true. The solar market nearly doubled from 2009 to 2010 and is anticipated to add about 24,000 jobs, a 26 percent increase, over the next year, reported the Solar Energy Industries Association. The laws of capitalism dictate that some companies die and others thrive. Solyndra was one company’s failure and not the failure of an industry.
Nor has the Solyndra mess succeeded in showing the federal government’s green energy push a flop. The loan defaults of Solyndra and Beacon Power, a battery company in upstate New York that borrowed $39 million, represent a mere 1.3% of the $37.6 billion dispensed thus far to green technologies. Turning a molehill into a mountain belies the fact that the federal government is actually quite a good investor, not that the bankers on Wall Street have provided much competition in recent years. Remember Obama’s $50 billion bet on General Motors? The car manufacturer has posted its first annual profits in over 6 years and emerged from its Chapter XI bankruptcy with a $20 billion IPO, the largest in US history. Most importantly, hundreds of thousands of workers still have their jobs. Remember TARP, the $700 billion government gamble? It paid off, saving the financial sector and preventing an out all depression.
Some may try to scare Americans of big government choosing market winners and losers. In their hate of government, they resort to some hazy arguments. Columnist Charles Hurt in a recent article in the Washington Times explained how the federal government, in its infinite wisdom, chose the blackberry, slow and halting, over the iPhone, brilliant and sleek, as the standard operating devise. Hurt forgot that half of America chose the tracking ball over the touch screen. He also must not have heard that United States federal agencies are ditching BlackBerry devices in favor of those powered by iOS.
To return to the Civil War era when Congress had to reckon with a Solyndra of its own. The Credit Mobilier scandal of 1872 shed light on the fraudulent transactions between the Union Pacific Railroad and the financial institution, Credit Mobilier of America, in the construction of the first transcontinental railroad. The scandal’s origins date back to the Lincoln presidency with the formation of the Credit Mobilier in 1864 and would forever tarnish the Grant administration and the former general’s presidential legacy. The ongoing investigation into the failure of Solyndra is unlikely to uncover duplicity to rival the 1872 scandal with the bribing of a congressman. But what if, in the aftermath of this wrongdoing, the federal government had withdrawn completely from the development and building of railroads, as Republicans call for Obama to do with green energy today? The Pacific Railroad Act of 1862 that issued government bonds and grants of land to railroad companies changed the landscape of the American economy. Railroads opened up remote regions, cut the cost of passenger travel and freight transportation, and sparked development and innovation in steel, construction, oil, and finance industries. Who today would have heard of the Robber Barons had it not been for the federal government’s role in the development of the transcontinental railroads? The Pacific Railroad Act laid the foundations for a 19th century infrastructure and 20th century American economic dominance.
The task that lies before Congress today is to duplicate these past efforts for the 21st century. History has vindicated big government and the benefits it can deliver. The 37th Session of Congress is a testament to this liberal vision, and so are more recent figures like New Deal official Harry Hopkins, who in two months found jobs for 4 million people. His performance as head of the Civil Works Administration and the Works Program Administration makes the Roosevelt confidant – “bleeding-heart, government-loving, unelected super-bureaucrat Harry Hopkins” – arguably the greatest job creator in American history. These historical examples demonstrate, not evidence of a national courtship with communism, but the success of government and free market coordination. As the 21st century unfolds and the necessity for green energy becomes more apparent, America and her politicians must dispense with the fairy dust and magic wand of the libertarian. Atlas Shrugged is a work of fiction. The history book tells a different story.
Josef Goodman is a sophomore in Morse College.