The Republican reaction to bitcoin has been mixed. Some lawmakers have enthusiastically supported it, while others have unequivocally opposed it. Interestingly, many mainstream Republican positions make amiable bedfellows with bitcoin. In this article, each section begins with a quote taken directly from the 2012 Republican Party Platform, followed by a discussion of how bitcoin can address the issue in question.
Small Business and Entrepreneurship
America’s small businesses are the backbone of the U.S. economy, employing tens of millions of workers. Small businesses create the vast majority of jobs [and] are the leaders in the world’s advances in technology and innovation, and we pledge to strengthen that role and foster small business entrepreneurship.
In a world where resources are preposterously precious and margins are extraordinarily thin, every cent counts. An entrepreneur’s livelihood depends upon his or her ability to squeeze out every last proverbial drop. Credit card acceptance, a necessary addition to any modern business model, is accompanied by processing fees averaging 2-3 percent (and up to 5 percent). In addition, merchants bear the cost of chargebacks, which can range from $25 to $100 each.
In addressing these two issues, bitcoin is a dream come true for entrepreneurs and small business owners. Bitcoin processing fees are significantly lower (0-1 percent); this reduces operating costs and allows merchants to pass the lower prices onto consumers, thereby becoming more competitive. Furthermore, since bitcoin obviates the need for third-party confirmation, merchants don’t have to worry about chargebacks.
Homeownership expands personal liberty, builds communities, and helps Americans create wealth…We must establish a mortgage finance system based on competition and free enterprise that is transparent, encourages the private sector to return to housing, and promotes personal responsibility on the part of borrowers.
An increase in homeownership correlates positively with a single word: access. Under the current state of affairs, lack of credit and underwhelming credit scores prevent many people (especially minorities, the young, and those who have simply made mistakes) from realizing the “American dream.” It’s not the banks’ fault, though: they’re just using the best tool available for assessing risk.
Smart property—property contracts enforced by the blockchain—holds promise for moving us away from trust-based systems. It reduces risk for lenders and eliminates the need for anachronistic credit history reports. For example, imagine a house that locks out its “owner” if mortgage payments go consistently unpaid. Nothing would “promote personal responsibility” more than that. Let’s hope smart property becomes a reality sooner rather than later.
Sound Money and Central Banking
A sound monetary policy is critical for maintaining a strong economy. Inflation diminishes the purchasing power of the dollar at home and abroad and is a hidden tax on the American people. Moreover, the inflation tax is regressive, punishes those who save, transfers wealth from Main Street to Wall Street, and has grave implications for seniors living on fixed incomes.
The Republican Party accurately characterizes the disastrous effects of inflation. At some point, however, it must be understood that “sound money” and “central banking” cannot co-exist either in theory or as policy. So long as control of the currency rests with a central authority, manipulations of interest rates and money supply are meaningless. Inflation and its corollaries will always be present.
On the other hand, bitcoin upends the existing monetary paradigm. For starters, it is a decentralized, peer-to-peer currency, meaning that no central figure (other than mathematics itself) has control over its value or supply. What’s more, bitcoin is inherently deflationary. By design, additional bitcoins introduced into the ecosystem will gradually taper off and be capped in the year 2140. Thanks to a static supply, bitcoin will never be afflicted by inflation.
[O]ur foundations, educational institutions, faith-based groups, and committed men and women of charity devote billions of dollars and volunteer hours every year to help the poor and needy around the world. Limiting [government-to-government] foreign aid spending helps keep taxes lower, which frees more resources in the private and charitable sectors, whose giving tends to be more effective and efficient.
Republicans tend to understand the beneficence of private charity better than other political groups. They correctly point out how state aid often fails to help its intended recipients. Unfortunately, this also occurs with private charity. Horror stories abound of institutional organizations bamboozling well-meaning contributors (remember Kony 2012?). It’s commonplace for only a small percentage of your donation to reach the children of Africa (or wherever it was originally destined).
With bitcoin, monetary resources can be sent wholly and directly to the individuals who need it, regardless of location. Money doesn’t need to travel through thickets of bureaucracy–banks, governments, transmitters, intermediaries of all kinds–to arrive at its destination. With the click of a button on a smartphone or computer, I can send my wealth instantly and directly to a tsunami victim in East Asia. Moreover, in the broader sense of third-world empowerment, bitcoin can enable more robust global exchange by reducing the cost of international remittance, aiding the unbanked, and making the worldwide division of labor ever more complex.
The government and private sector must work together to address the cyberthreats posed to the United States, help the free flow of information between network managers, and encourage innovation and investment in cybersecurity…[W]e acknowledge that the most effective way of combating potential cybersecurity threats is…protecting the free flow of information within the private sector.
Everyday, the private sector spends inordinate amounts of time and money combating cyberthreats. Merchants pay $2.79 on every dollar lost to fraudulence.
Identity theft and security breaches related to commercial transactions are not possible in a bitcoin world. Investor Marc Andreessen writes at The New York Times that, in addition to addressing online security issues, “Bitcoin’s antifraud properties even extend into the physical world of retail stores and shoppers. For example, with Bitcoin, the huge hack that recently stole 70 million consumers’ credit card information from the Target department store chain would not have been possible.”
The professed aims of the Republican Party discussed above—enabling small businesses, increasing homeownership, promoting sound money, improving foreign aid, and enhancing cybersecurity—are things that people of all political leanings care about. Bitcoin is in a unique position to address each and every one of these issues in a positive way.
Watch for my upcoming article “Why Democrats Should Love Bitcoin.”
Joseph S. Diedrich is a Young Voices Advocate and a law student at the University of Wisconsin. His written work has appeared at The Washington Times, the Foundation for Economic Education (FEE), Townhall, the Future of Freedom Foundation, PanAm Post, and elsewhere. He also holds a degree in music composition.