To what extent should the federal government be involved in economic issues?

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Lorraine Caplan eNotes educator| Certified Educator

This is one of those questions that is always laden with political overtones, but the fact is that the federal government is constitutionally mandated to be "involved" in economic issues.  If it were not involved, it would not be fulfilling its constitutional duties. We can look at a few examples of this.

First, in Article I, Section 8, Congress is given the power to tax, and the responsibility to pay debt, pay for a military, and to provide for the "general welfare" of the United States. These are economic functions.  It is up to Congress to determine what is borrowed and how to pay it back.  Even the military is an economic function.  How much money is spent or borrowed to provide military forces has major economic consequences, in employment and manufacturing, just to name two.   And while the United States went for a very long time without a federal income tax, in 1913, when the 16th Amendment was passed, this was the beginning of a deeper involvement in economics, since tax policy is economic policy.  An example of this is the deductions for mortgage interest and property taxes.  If you want to have a nation of homeowners, which has been a goal of American economic policy, you can encourage this with tax policy. The United States government has no choice but to have an involvement in all of this.

Also in Section 8 of Article III, the Congress is charged with regulating commerce with other nations and amongst all the states.  This means Congress must approve all trade treaties with other nations, with major economic consequences, as they are, as we speak, considering whether or not to approve a treaty with a group of Asian nations and Australia.  It is this part of the Constitution that requires that Congress attend to commerce within the country that goes beyond state borders, and so, they have no choice but to be involved in this economic function.

Congress is also in charge of our money, as provided in Section 8 of Article III. They must "coin" money and set its value as against the value of other nations' currencies.  This has great economic consequence, as anyone who trades in the currency market can testify.

Another area of economic responsibility is bankruptcy law. This is an enumerated duty in Section 8, Article III, too.  How the Bankruptcy Code is crafted affects economic activities powerfully. There was a time, for example, when people whose mortgages were "underwater," i.e., their homes were worth less than their mortgages, were allowed to be free from the excess liability and still keep their homes.  A change in the Code created a nation of foreclosures, with reverberations throughout the entire economy.  Student loans are another area of the Code that has a very strong impact on the American economy. These cannot be discharged in a bankruptcy at all, leaving millions of young people saddled with debt they do not have well enough paying jobs to pay back, keeping them from buying cars, houses, or marrying and having children. This has stalled the economy for years. 

No matter what one's position is on the extent to which government should be involved in economics, it has no choice but to be involved to at least the extent the Constitution requires. It cannot decline to do so, unless and until the Constitution is amended to eliminate all of the mandates discussed above, and actually, many more.  And if that were to happen, all of the people who are now complaining that the government is too involved economically would not be very pleased with the consequences.