Executive Orders – A Threat to Liberty?

What is an executive order?

There is no express constitutional provision for executive orders (EOs).  The power to issue executive orders or proclamations is implied by the first sentence of Article 2, Section 1, "The executive Power shall be vested in a President of the United States of America."  Former US Attorney General Michael Mukasey recently stated:

Not "some" or "most" or even "all but a teeny-weeny bit" of the executive power. The President is vested with all of it.  This is particularly noteworthy when compared with the enumerated legislative powers vested in Congress:  "All legislative Powers herein granted."  The Founders understood, based in part on their unfortunate experience under the Articles of Confederation, that the branch of government most likely to be in need of the ability to act quickly and decisively is the executive."[1]

The limit of executive orders/proclamations (there is no practical difference, so we'll call both EOs for now) is another matter.  The most common description was issued by the House of Representatives in 1957:

Executive orders and proclamations are directives or actions by the President.  When they are founded on the authority of the President derived from the Constitution or statute, they may have the force and effect of law . . . Executive orders are generally directed to, and govern actions by, Government officials and agencies.  They usually affect private individuals only indirectly.  Proclamations in most instances affect primarily the activities of private individuals.  Since the President has no power or authority over individual citizens and their rights . . . [t]he President's proclamations are not legally binding . . . The difference between Executive orders and proclamations is more one of form than of substance . . .[2]

So, sometimes they have the force of law and sometimes they don't?  My, that's confusing.

Okay, as orders to the executive branch or other government officials/employees, I have no problem with EOs – the president can issue orders just as any chief executive can issue orders to his employees.

It's much harder for me to see that a president can write laws or that the Constitution grants him power that allows him to write laws.

That isn't actually the focus of this post, that's the preface. My point in this preface is:

EOs exist, and we have to deal with them.

Many actually are innocuous; a few are very worthy of our attention. For example, Flag Day is not an official federal holiday; Title 36 of the United States Code states that the President has the discretion to officially proclaim the observance.  It's part of the way we honor the flag that we formally renew the celebration every single year.  This is a good thing.

What kinds of problems to EOs cause?

Some EOs are not harmless:  Have you heard of the Grand Staircase-Escalante National Monument?  In 1906, Congress passed the Antiquities Act (16 USC 431-433), authorizing the President to restrict the use of particular public land owned by the federal government via an EO.  Bill Clinton used the authority of Antiquities Act (itself questionable constitutionally) to create the Grand Staircase-Escalante National Monument in September 1996 – the height of his re-election campaign.  A ceremony was held at Grand Canyon National Park in Arizona.  The Governor of Utah and Utah's members of Congress were told about the action the day before the ceremony.  Many believe this was a political ploy by Clinton to win votes in Arizona.  If true, it worked.  Clinton won Arizona's 8 electoral votes by 2.2% (he never had any chance to win in Utah).

The Monument is a popular tourist venue and it makes money – both for the State and for the local communities – and the feds paid Utah $13 million for Utah-owned land within the Monument.  However, it is almost 3,000 square miles in area and contains a large part of the estimated $1 trillion dollars of natural resources that are locked away under federal lands in Utah designated as wilderness.  Money and jobs have been denied to Utah by the action of one person – the president – and natural resources have been denied to every American by the action of one person – the president.

Worse than the activity is the principle behind it – land within the State of Utah was taken by the federal government without the permission of (or even the courtesy of notification to) the State of Utah, and in clear violation of the 5th Article of Amendment to the Constitution.

It gets still worse:

Also issued by Pres. Clinton on June 3, 1994, Executive Order 12919 states:

"The United States must have an industrial and technology base capable of meeting national defense requirements, and capable of contributing to the technological superiority of its defense equipment in peacetime and in times of national emergency.  The domestic industrial and technological base is the foundation for national defense preparedness.  The authorities provided in the [Defense Production Act of 1950] shall be used to strengthen this base and to ensure it is capable of responding to all threats to the national security of the United States."

We are all for national defense, right?  Well, not so fast.  This isn't the only EO on the subject.[3]

EO 10995:  "In carrying out functions under this order, the Director of Telecommunications Management shall consider the following objectives: (a) Full and efficient employment of telecommunications resources in carrying out national policies . . . (c) Utilization of the radio spectrum by the Federal Government in a manner which permits and encourages the most beneficial use thereof in the public interest . . . "  That sounds like a federal takeover of the US telecommunications industry – television, radio, maybe even the Internet?
 

EO 10997:    "With respect to the resources defined above [coal, natural gas, oil, etc.], the Secretary shall . . . Prepare plans to claim materials, manpower, equipment, supplies and services needed in support of assigned responsibilities and other essential functions of the Department before the appropriate agency . . ."  That sounds like a federal takeover of the US energy industry.

EO 10998:  "With respect to food resources, food resource facilities, farm equipment, and fertilizer the Secretary shall . . . Develop priorities, allocations and distribution control systems and related plans to insure that available food resources are properly apportioned among and distributed to civilian, military and foreign claimants in an emergency and develop priorities, allocations and distribution control systems and related plans for the domestic distribution of farm equipment and fertilizer." That sounds like a federal takeover of the US agriculture industry and our food supply.

EO 10999:  "The Secretary shall develop long range programs designed to integrate the mobilization [a military term] requirements for movement of all forms of commerce with all forms of national and international transportation systems including air, ground, water, and pipelines, in an emergency . . ." That sounds like a federal takeover of the US transportation industry.

EO 11000:  "The Secretary shall . . . Develop plans and issue guidance designed to utilize to the maximum extent civilian manpower resources . . . Such plans shall include, but not necessarily be limited to . . . Procedures for translating survival and production urgencies into manpower priorities to be used as guides for allocating available workers . . . Technical guidance to States for the utilization of the nationwide system of public employment offices . . . for screening, recruiting, and referring workers, and for other appropriate activities to meet mobilization and civil defense needs in each community . . . Programs for more effective utilization of limited manpower resources, and in cooperation with other appropriate agencies, programs for recruitment, training, allocation, and utilization of persons possessing specialized competence or aptitude in acquiring such competence."  That sounds like a federal plan to conscript US civilian citizens for any job the federal government deems essential to natural security.

EO 11001:  "With respect to emergency health services . . . the Secretary shall . . . Develop plans and issue guidance designed to utilize to the maximum extent the existing civilian health resources of the Federal Government, and with their active participation, assistance, and consent, the health resources of the States and local political subdivisions thereof, and of other civilian organizations and agencies concerned with the health of the population, under all conditions of national emergency. Maintain relations with health professions and institutions to foster mutual understanding of Federal emergency plans which affect health activities."  That sounds like a federal takeover of the US healthcare industry, although it does specifically mention "their active participation, assistance, and consent," I have to wonder, in light of things like Obamacare and the other EOs, if the feds would actually ask for such consent.

EO 11003:  "The Administrator shall . . . Formulate plans for the development, utilization, expansion and emergency management of the Nation's civil airports, civil aviation ground facilities and equipment required for essential civil air operations, except manufacturing facilities, but including the development of orders for insuring the continued operation of essential civil airports, civil aviation operating facilities, and civil aviation. equipment." That sounds like a federal takeover of the US aviation industry.

EO 11004:  "The Secretary . . . shall incorporate billeting plans in the general welfare guidance program for States . . . Participate in the preparation of plans for determining which areas are to be restored and in the development and coordination of plans for the movement of people on a temporary basis from areas to be abandoned to areas where housing is available or can be made available."  That sounds like soviet-style forced relocations of US citizens. (And didn't that work out so well for the Hurricane Katrina victims?)

EO 11051:  FEMA is authorized to put these (and other) orders into effect during national crises.  Specifically, "In carrying out his responsibilities under this order, the Director is authorized to issue such rules and regulations, and directives, consonant with law and Executive order, as he deems necessary and appropriate to the functions involved."  Whoa, Nelly!  That's an amazing amount of power to put in the hands of a person nobody voted for.

The bottom line:

Reluctantly, I agree that the President should be allowed to issue executive orders and proclamations.  I fear, as I always fear with government, that they have been and will continue to be misused.  If these are good ideas, then Congress should take them up in formal, public debate. These matters should not be decided in the Oval Office, where they get little, if any, media attention.

We have see administrations manufacture crises.  Who is to say that such a created crisis will never be used to strip Americans of their liberties?  Certainly, not I.
 

Thanks for listening, tune in next week for another rant.
 

[1] © 2011 Hillsdale College. Reprinted by permission from Imprimis, a publication of Hillsdale College.
[2] Executive Orders and Proclamations: A Study of a Use of Presidential Powers, a staff report by the House Committee on Government Operations (85th Congress, 1st Session, 1957).
[3] The complete texts of these EOs (and others) have been collected at DisasterCenter.com.  Each EO can be viewed at <http://www.disastercenter.com/laworder/XXXXX.htm> ("XXXXX" being the specific EO number.)  The site appears to be privately owned and operated, but has no "about" page.

Change by the Numbers — A 100-year History

Statistics compiled by Ben Reng, a recent convert to political activism:

Year	Population (millions)	Budget (billions)	Debt (billions)	Balance (billions)
1900	76.2	$20.5	$2	+$0.041
1935	127.0	$73.3	$28	-$3.0
1957	170.0	$81.8	$270	+$2.2
2000	280.0	$1,700	$5,600	-$17.9
2010	310.0	$3,500	$14,000	-$1,400
Increase	4x	170x	7,000x	1,400x

Also noteworthy

1900	No federal income tax; it was considered unconstitutional.
1935	Congress passed the Social Security Act.
1957	Most of the national debt is leftover from World War II and was $2 billion lower than 1956; the last year the total US debt DECREASED.
2000	The Clinton administration fiscal policies brought an end to Reaganomics, the longest sustained period of growth in US history, according to the Heritage Foundation.
2010	The Obama administration's first year budget deficit was four times that of the 2008 deficit, the last Bush budget.

Commentary by Ben Reng:

With a few thoughts of my own.
 

I've spent my life watching from the cheap seats.  I participated in one of the worst entitlement mentalities available:  That I shouldn't have to contribute my effort to my nation's governance.

Our nation wasn't built to work like this.  It wasn't built for passive citizenship.

Like Ben, I spent most of my life barely involved in politics.  Until I was past 40, I never did anything political, except vote.
 

We have a misnomer in this country.  Our nation doesn't elect leaders.  In this country, we have leaders in our churches, in our military, in our businesses and, most of all, in our homes.  In America, we elect representatives.
 

It was not always so:  Remember your high school history classes?  Do the names Daniel Webster, Henry Clay and John C. Calhoun mean anything to you?  If not, they should.  This was the Great Triumvirate of the US Senate in the 1830s and '40s, the greatest statesmen that chamber ever knew.

For a generation now, conservatives have been content to be Nixon's "Silent Majority."  We've bought into the foolish concept that it's unacceptable to talk about religion, politics, or money in polite company.  We've allowed the media to become dominated by people who do not share our values.
 

We've hesitated to talk to teenagers, in their most intellectually formative years, about our traditional values, for fear of being "uncool."  We've allowed our children to be taught in a system that doesn't reflect our values.  We've lost the ability to understand the math of our economy, and as such have become uncomfortable trying to even teach it to our children.
 

Are we actually afraid to discuss religion, politics or money in "polite company"?  I'm not, anymore.  Of course, it's easy for me because most of the people I hang out with today are also interested in saving this country from oblivion.  It does cause some silent moments at holidays, since I am the only conservative in my family, and one of the few things more important than politics is family harmony.
 

The idea behind this mad pyramid scheme is simple:

Spending money is addicting.  If you translate that to government speak, it runs something like this:  "If we don't spend our whole budget this year, we can't justify asking for more money next year."  Politicians really think this way, and it doesn't matter to them that the American electorate doesn't want it.  Polls bear this out:

Rasmussen Reports – 22 October 2008 – No more stimulus

58% of U.S. voters say more tax cuts will better stimulate the economy than new spending.
32% agree the government should pass another economic stimulus package; 43% disagree.
Men favor new tax cuts over spending 64% to 22%; Women favor tax cuts 54% to 23%.
 

Rasmussen Reports – 19 November 2010 – Cut spending

58% of likely voters say they’d prefer for a candidate who'll work to cut federal spending.
54% think a member of Congress who works to get as much federal money as possible is more interested in improving his reelection chances than in what’s best for his constituents.
67% of mainstream America prefer a candidate who cuts spending.
55% of the political class likes one who goes after it.
 

Pat Toomey, The Wall Street Journal – 24 July 2008 – America Wants Less Pork

54% of general election voters chose the frugal candidate.
29% chose the profligate [spend-thrift] candidate.
 

Dennis Jacobe, Gallup, Inc. – 27 June 2008 – No Income Redistribution

84% of Americans prefer that the government focus on improving overall economic conditions.
13% support taking steps to distribute wealth more evenly among Americans.
50% of Americans more likely to believe government is doing too much.
43% believe government should do more to solve the country's problems.
 

The bottom line:
 

American's aren't stupid, despite what professional politicians think.  But we have a growing portion of our society that is addicted to government spending.  That portion is loud and well organized and they support politicians who'll sell us out for a few votes.  Sadly, many voters also listen to those voices.

Let's make 2012 a watershed year by drowning out the voices of the few who lie, cheat and steal for political power.  Let us support and elect men and women of character and backbone who will cut the unnecessary and unconstitutional budget items and bring America's fiscal policy back to sanity.

Thanks for listening, tune in next week for another rant.

Illegal Immigration — My Solution

A couple of days ago, I got into a Facebook discussion with someone about illegal immigration.  We found ourselves on opposite sides of a debate.  The person asked for my solution.  I offered my thoughts, to which he responded, and I counter-responded.  I have blended this debate into what I hope is a comprehensive summary of my views.  By the way, he began the discussion by specifically asking for a constitutional solution.

My solution is entirely constitutional – I would never consider any other response to this problem – and it is so simple I don't know why it isn't obvious to everyone.  All immigrants – which include my father, who emigrated from the Netherlands in the early 1950s, and my mother's parents, who immigrated in the 1910s – came to the USA for a better life.  Mostly, that means better economic opportunities.  If we deny illegal immigrants the benefits of the American dream, I think you'll see an exodus across the Rio Grande the like of which has not been seen since Moses led the Israelites across the Red Sea.

That's the grand sweep, here are the details:

(1) The federal government has the authority to deny the States permission to give a driver license to an illegal alien. The feds can also deny the states and any business the privilege of to accepting any IDs for foreign nationals other than a US-issued green card. In short, deny illegals any form of ID.

(2) Require proof of citizenship or legal residency (a) for a driver license or other state-issued ID, (b) when registering children for school (incl. colleges), (c) when applying for a job or unemployment or welfare benefits.  In short, install E-Verify as a system (run by the States or a private foundation owned and operated by the States – not by the feds!).

Response: Where is this authority in the Constitution? Where does the federal government have any power to regulate state drivers' licenses or intrastate commerce or education?

I do not believe the federal government can regulate state driver licenses, education, or anything else. They can regulate foreigners – what foreigners do, what documents foreign nationals use, anything! Everything a foreign national does with respect to federal, state or local governments is, by definition, a foreign relations or diplomatic function and, therefore, under the authority of the federal government — review Holmes v. Jennison 14 Pet (39 US) 540 (1840) for details.  Such a law could be very short:

"No person who is not a citizen of these United States shall use any document for identification purposes except (a) a passport issued by a government recognized by the government of these United States that bears a valid visa issued by the Department of State or (b) a resident alien identification card (commonly known as a 'green card') issued by the Department of State."

No visa?  No green card?  No way!

(3) Build the damn fence. Put a brigade of soldiers or marines on the border. If a Mexican Army unit crosses the border, blow them to hell.

Response: Do you want to keep good hardworking people out of this country?
 
If they want to start their American experience by breaking our laws, yes! (Why is this so hard to understand?)

(4) The whole "anchor-baby" concept is a lie foisted on us by one footnote written by one liberal Supreme Court justice, William J. Brennan, in 1982.  [Ann Coulter has a brilliant, definitive article on this.]  When a child is born, the hospital or attending gives them a certificate of live birth on the spot.  When the citizen parent presents him/herself at the County Clerk with that COLB and proof of parental citizenship, the Clerk then issues a Certificate of Birth and Citizenship.

[There was no response, so I assume we are in agreement on this point.  By the way, I understand this is an added hassle for the parents.  Don't blame me; blame the illegal aliens – if it wasn't for them, we wouldn't even be having this discussion. It's their fault!]

(5) When a business is found to be employing illegals, that business gets shut down for 1 day for each illegal that worked during any given pay period. In other words, if you're on a two-week pay cycle and employ 7 illegals for 1 day, you're out of business for a week – shop, office, sales force, website, everything.  Businesses employ illegals because they cost less money, so, we raise the price.

Response: Why do businesses need to enforce the law?

Businesses do not need to enforce the law; they do need to comply with the law, and the law says you cannot employ a person who is not a US citizen or a legal resident alien with a work visa.

(6) When state or municipal officials violate federal law by creating sanctuary cities, yank their federal funding and arrest the officials for conspiracy to violate federal law.

Response: Interesting, but I disagree.

You agree then, that cities and states should choose which federal laws they obey?  Should I conclude that you think the constitutionally-mandated oath to support the Constitution be made voluntary? You think the Founders wrote the "supremacy clause" of the Constitution as a joke?

(7) When an illegal is caught committing a crime, take ID (including DNA) then deport them. When they return, deport them.  When they return again, lock them up for life.  Three strikes and you're not out, you're in! (And no pampering! Lifers don't need taxpayer-funded college degrees or big-screen HDTVs.)

Response: "Caught" committing a crime or convicted?

I'll give you half of this one: IDed when caught, deported when convicted.

Final thoughts:

Harsh?  Hardly.  I want every illegal alien to be looking over their shoulder every single day.  It's what American citizens are paying their government to do.  If illegals think that the USA isn't a better place than their homelands, they won't come.

Response: I would rather welcome my brothers and sisters into this country with open arms so they can have a better life. Our current policies that limit those coming into our country are ridiculous.

No, they are not ridiculous.  The USA is a sovereign nation – we have the right to admit or refuse to admit anyone, at any time, for any reason.  Uncontrolled immigration would mean a flood of immigrants looking for their piece of American dream.  I don't blame them for wanting to come here, I blame the bureaucrats.  The system is sound, it's based on good principles but, like so much of government, it is regulated and run by people, and a lot of those people really are the stereotypical government employee we have all come to know and hate.

By the way, for expressing these opinions, I was labeled a Fascist.  I was accused of wanting a police state.  I was accused of supporting the PATRIOT Act and other, similar things.  I respond by noting that there are two sides to this debate.  I also note, with deep sadness, that so many people, even many who claim to be conservative, have come down on the side of the illegal aliens and against the citizens of these United States.

Thanks for listening, tune in next week for another rant.

Church and State

In our continuing occasional series of presenting talking points, we note that the new leaders of Libya have declared Shari'a to be the law of the new Libya (which we predict will be scarcely better – and very possibly far worse than – the old Libya).  It brings to mind the ongoing debate over religion and politics in the United States.
 

Some people, liberals mostly, keep proclaiming (very loudly and often obnoxiously) "separation of Church and state" as if that phrase was the sum total of Constitutional law on the subject, a total which cannot be argued or refuted and ought not even be discussed.  In fact, as most of you well know, this phrase – frequently repeated and, with equal frequency, misunderstood – is not found in the US Constitution.  It was a private opinion put forth by Thomas Jefferson, expressed to certain members of the Danbury Baptist Association in Connecticut, written shortly after becoming president:

I contemplate with sovereign reverence that act of the whole American people which declared that their legislature should make no law respecting an establishment of religion, or prohibiting the free exercise thereof, thus building a wall of separation between church and state.

In sharp contrast, the 1st Article of Amendment states, "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof .  .  ." That means Congress is prohibited from: (1) Passing a law declaring any specific church or sect or belief system to be the official state church or sect or belief system of the United States.  (2) Congress cannot pass laws prohibiting religious belief or practice – with the obvious exception of those acts which are declared to be dangerous to the public safety.
 

So, when confronted with those who adamantly declare that the Founders were atheists or enemies of churches or some other nonsense, here are a few thoughts, from the Founders and other worthies, to puncture their overinflated self-images.  One should start, of course, with Jefferson's own words, as expressed in a letter to Benjamin Rush, written a few months after the Danbury letter:

My views .  .  .  are the result of a life of inquiry and reflection, an very different from the anti-Christian system imputed to me by those who know nothing of my opinions.  To the corruptions of Christianity I am, indeed, opposed; but not to the genuine precepts of Jesus Himself.  I am a Christian in the only sense in which he wished any one to be; sincerely attached to his doctrines in preference to all others .  .  .

Benjamin Franklin (1706-90):

Whoever shall introduce into public affairs the principles of primitive Christianity will change the face of the world.

Franklin, by the way, is known to have contributed to the construction of almost every church in Philadelphia during his later lifetime.

George Washington (1732-99):

In tendering this homage to the Great Author of every public and private good, I assure myself that it expresses your sentiments not less than my own; nor those of my fellow citizens at large, less than either.  [1st Inaugural Address, 1789.]

Of all the dispositions and habits which lead to political prosperity, religion and morality are indispensable supports.  In vain would that man claim the tribute of Patriotism, who should labor to subvert these great pillars of human happiness, these firmest props of the duties of Men and Citizens.  [Farewell Address, 1796, emphasis added.]

John Adams (1735-1826):

Our Constitution was made for a moral and religious people.  It is wholly inadequate for the government of any other.

Patrick Henry (1736-99):

It cannot be emphasized too strongly or too often that this great nation was founded, not by religionists, but by Christians; not on religions, but on the Gospel of Jesus Christ.  For this very reason peoples of other faiths have been afforded asylum, prosperity, and freedom of worship here. [Emphasis added.]

James Madison, Jr.  (1751-1836):

We have staked the whole future of American civilization, not upon the power of government, far from it.  We have staked the future of all of our political institutions . . . upon the capacity of each and all of us to govern ourselves, to control ourselves, to sustain ourselves according to the Ten Commandments of God.

John Jay (1745-1829):

Providence has given to our people the choice of their rulers, and it is the duty, as well as the privilege and interest of our Christian nation to select and prefer Christians for their rulers. 

Noah Webster (1758-1843):

In my view, the Christian religion is the most important and one of the first things in which all children, under a free government ought to be instructed . . . No truth is more evident to my mind than that the Christian religion must be the basis of any government intended to secure the rights and privileges of a free people.  [American Dictionary of the English Language, 1832]

The moral principles and precepts contained in the Scriptures ought to form the basis of all of our civil constitutions and laws . . . All the miseries and evils which men suffer from vice, crime, ambition, injustice, oppression, slavery and war, proceed from their despising or neglecting the precepts contained in the Bible.  [History of the United States, 1832]

Senator Mark Hatfield (R-OR) (1922-2011):

For the Christian man to reason that God does not want him involved in politics because there are too many evil men in government is as insensitive as for a Christian doctor to turn his back on an epidemic because there are too many germs there.

And, if you really want to screw with their little minds, you should reference two opinions of the United States Supreme Court:

David Josiah Brewer, Associate Justice (1837–1910):

If we pass beyond these matters to a view of American life, as expressed by its laws, its business, its customs, and its society, we find everywhere a clear recognition of the same truth.  Among other matters note the following: The form of oath universally prevailing, concluding with an appeal to the Almighty; the custom of opening sessions of all deliberative bodies and most conventions with prayer; the prefatory words of all wills, "In the name of God, amen;" the laws respecting the observance of the Sabbath, with the general cessation of all secular business,   and the closing of courts, legislatures, and other similar public assemblies on that day; the churches and church organizations which abound in every city, town, and hamlet; the multitude of charitable organizations existing everywhere under Christian auspices; the gigantic missionary associations, with general support, and aiming to establish Christian missions in every quarter of the globe.  These and many other matters which might be noticed, add a volume of unofficial declarations to the mass of organic utterances that this is a Christian nation.  [Writing for the Court in Church of the Holy Trinity v. United States, 143 US 457 (1892), emphasis added.]

Warren Burger, 15th Chief Justice (1907-95):

The concept of a "wall" of separation between church and state is a useful metaphor but is not an accurate description of the practical aspects of the relationship that in fact exists.   The Constitution does not require complete separation of church and state; it affirmatively mandates accommodation, not merely tolerance, of all religions, and forbids hostility toward any.   Anything less would require the "callous indifference," (Zorach v. Clauson, 343 US 306,314 [1952]), that was never intended by the Establishment Clause.  .  .  .  Our history is pervaded by official acknowledgment of the role of religion in American life, and equally pervasive is evidence of accommodation of all faiths and all forms of religious expression and hostility toward none.  [Writing for the Court in Lynch v. Donnelly, 465 US 668 (1984) , emphasis added.]

Thanks for listening, tune in next week for another rant.

The Bank of North Dakota – An Idea for the Other 49?

I first heard about the Bank of North Dakota (BND) about a month ago.  It was called 'the only state-owned bank in the USA.'  That intrigued me, and I decided to look into it.  What I saw impressed me enough that I am sharing it, with a question to state lawmakers:  Is this something that could profit your state?

Bear in mind, North Dakota is not exactly like North Carolina or Utah or anywhere else (not even South Dakota).  As Mother Jones says, "To be sure, it (BND) owes some of its unusual success to North Dakota’s well-insulated economy, which is heavy on agricultural staples and light on housing speculation."  Very true, and we recognize that what plays in Bismarck probably won't play in Boston.  But Boston asked the question anyway and so have many others from Washington to Florida.

So, what is it and why is it so great?

What is it?

Media outlets like the Huffington Post and Newsweek/The Daily Beast frequently call it "socialist," however, a study by the Federal Reserve Bank of Boston found, "BND is perceived as conservative and well managed."

BND's founder, A. C. Townley, was a member of the Socialist Party and headed a short-lived movement called the National Non-Partisan League (NPL), a farmers' organization.  North Dakota Farmers were having a lot of trouble getting credit at a reasonable cost back in the teens, so this grassroots movement stepped up to the challenge, got political control of North Dakota and founded BND in 1919.  (They had other agenda items, but the movement didn't last long enough to get most of them rolling.)

The State of North Dakota deposits all the taxes and fees it collects into BND; these collections form its capital base.  BND actually pays the state treasurer interest on those deposits.  (Other state governments deposit their collections in private banks, which also pay interest to the State.)  Those deposits are used to pay the State's expenses and loan money to farmers, students (before that was outlawed by the Obama administration) and local businesses, mostly through partnering with private banks.

Eric Hardmeyer, current BND president, told the Huffington Post, "[W]e have specifically designed programs to spur certain elements of the economy.  Whether it’s agriculture or economic development programs that are deemed necessary in the state or energy, which now seems to be a huge play in the state.  And education – we do a lot of student loan financing.  So that’s our model.  We have a specific mission that was given to us when we were created 90 years ago and it guides us throughout our history."

That mission was designated, in part, to avoid competing directly with private banks.  Hardmeyer continues, "[W]e understand that we walk a fine line between competing and partnering with the private sector . . . So most of the lending that we do is participatory in nature.  [A loan is] originated by a local bank and we come in and participate in [fund a part of] the loan and use some of our programs to share risk . . . [we also] provide services to banks, whether it’s check clearing, liquidity, or bond accounting safekeeping."

Some have termed this "a banker's bank," meaning a bank that services other banks – 104, all in-state – instead of individuals and companies.  (BND does have a few private accounts – about 2% of total deposits.)  There are about 20 such banks nationwide.

Why is it so great?

BND works.  BND currently has $4 billion in assets, with $2.8 billion in loans outstanding.  BND has been consistently profitable – $62 million in profits in 2010.

A portion of profits have always gone to the state's general fund, lowering the tax burden to taxpayers.  Since 2000, those profit returns have totaled over one-half-billion dollars.  That's hundreds of millions in taxes and fees that North Dakotans didn't have to pay.  By the way, 2010 is the seventh straight year the bank set a record for profits earned, up from $13 million in 1990.

 
You might have noticed most of the quotes in this post are from liberal news sources – Mother Jones, Huffington Post, Newsweek/The Daily Beast and Political Affairs.  I heartily recommend reading the source articles at the links appended.  You'll see the many references to a "socialist bank."  These liberal media outlets flaunt BND's success as if it was a success for socialism.  (I may have to add this to my post liberal hypocrisy.)

I laugh because BND isn't a socialist success, it is a conservative, free market success.  Marxist rag Political Affairs admits, "North Dakota citizens are a fairly conservative and didn't do any subprime lending.  Nor was there a powerful incentive to get into the derivatives markets and put on swaps and callers and caps and credit default swaps.  Their philosophy was 'if we don't understand it, we're not going to jump into it.' Thus they avoided those pitfalls."

That is a conservative business model and it has resulted, among other things, in a 1.46% return on assets (ROA) in 2010 – 0.61% is the national average.  In 2006, BND earned a 1.99% ROA, compared to a 1.00% national median.  No bailout money went to BND, while trillions were given to Wall Street to prop up their failed economic strategies.

BND has also piloted a local, private ownership program. The New Rules Project writes, "Part of BND's mission is to expand local ownership of banks and increase their capitalization.  To this end, the bank has a bank stock loan program, which provides loans to finance the purchase of bank stock by North Dakota residents."  Local government can open accounts with BND, but the bank actually discourages this practice, recommending towns use local banks instead, and "facilitates this by providing local banks with letters of credit for public funds.  In other states, banks must meet fairly onerous collateral requirements in order to accept public deposits, which can make taking public funds more costly than it's worth.  But in North Dakota, those collateral requirements are waived by a letter of credit from BND."

Socialists draw power to themselves; conservative capitalists realize that competition is healthy for businesses and customers.  This, too, has benefits:  Over the last decade, North Dakota community banks averaged more than quadruple the lending to small businesses than the national average.  Yes, politics could skew BND off its conservative path, but BND publishes quarterly and yearly reports, meaning the people can actually see what the Bank is doing and can take it out on the politicians if they don't like what they see.  How long have we been arguing about an audit of the Federal Reserve Bank?

The Bottom Line:
I'm not suggesting that the Bank of North Dakota model is the solution for America's economic problems, but it might be a part of the solution for your State.  BND's activities over the last nine decades demonstrate that a publicly-owned bank that does business with local banks and businesses through a solid, conservative business model has clear benefits to the state.

Thanks for listening, tune in next week for another rant.

For more info, visit:

Bank of North Dakota	Washington Public Bank Project
Mother Jones	Huffington Post
InForum	The Daily Beast
Political Affairs	Dissident Voice
New Rules Project	Federal Reserve Bank of Boston
IPS News	Great Plains Examiner