Ron Paul on Budget & Economy
Republican Representative (TX-14); previously Libertarian for President
A: That’s a mistake because we don’t have the money. But that doesn’t mean you have to do nothing I mean, we could reform the system. We could return to sound money. We could balance our budget. There’s a lot of things that we can do. But the worst thing that we can do is perpetuate the bad policies that gave us this trouble in the first place. And that is that we no longer, over the last quite a few decades, believed in free-market capitalism.
Q: But what the Treasury secretary, the chairman of the Federal Reserve, the president--what they’re saying is, this is no longer simply a bailout of these huge Wall Street firms. This is a bailout of Main Street, because people’s life savings.
A: No, you could look at it the other way. This is Wall Street in big trouble and sucking in Main Street, now, and dumping all the bills on Main Street.
A: Hardly. I mean, it’s just more of the same, more government, more programs, more spending, more regulations, trying to prop up a system that has been undermined. The market is saying it’s nonviable, and everything they’re doing is trying to patch it up. The bubble has been blown up. It needs to deflate, and they won’t allow it. So it’s a contest between deflation and inflation. Everybody in Washington wants to inflate because it’s painful to get off this dependency on perpetual deficit spending and inflation. So, no -- this is sticking it to Main Street and sticking it to the taxpayer.
A: No, no, we’re not better off. We’re worse off, but it’s partially this administration’s fault and it’s the Congress. But it also involves an economic system that we’ve had for a long time and a monetary system that we’ve had and a foreign policy that’s coming to an end and we have to admit this. The Republicans were elected in 1994 to change direction of the country, because people sensed there was something wrong, we were going the wrong direction, but we didn’t do anything. We were elected in the year 2000 to have a humble foreign policy and not police the world, and yet what are we doing now? We’re bogged down in another war. We’re bankrupting our country and we have an empire that we’re trying to defend which costs us $1 trillion a year. And the standard of living is going down today. It’s going down and the middle class is hurting because of the monetary policy. When you destroy a currency, the middle class gets wiped out.
A: I supported Reagan in 1976, and there were only four members of Congress that did. And also in 1980. Reagan came and campaigned for me in 1978. I’m not sure exactly what he would do right now, but I do know that he was very sympathetic to the gold standard, and he told me personally that no great nation that went off the gold standard ever remained great. And he was very, very serious about that So he had a sound understanding about monetary policy. And for that reason, I would say look to Reagan’s ideas on money because he, too, was concerned about runaway inflation and what it does to a country when you ruin the currency. That’s what’s happening today. The dollar is going down and our country is going to be on the ropes if we don’t reverse that trend.
A: Yes, by lower taxes and less regulation. They could do a whole lot by having sound money, where we don’t print the money out of thin air. That causes the business cycle. That causes your bubbles. We’re always dealing with the symptoms of the disease & never saying, “how did this come about?” It comes about because we have a Federal Reserve that creates money & prints it out of thin air. There is a lot of malinvestment. That’s the most important thing to understand about the inflation of the monetary system, is the malinvestment. Then, later on, people suffer. You wipe out the middle class. But the evil of it all is the vehicle for financing wars that we shouldn’t be in and a welfare state that we shouldn’t be doing. So, yes, we have a role to play, but it’s a negative role. We want the people to be free. We don’t want to manage the people and tell them how to live.
A: Well, sure, indirectly. They shouldn’t stimulate it by interfering in the market rate of interest. That’s where our basic problem comes from. And when you do that, you get into these problems, and then everybody wants to solve the problem by printing more money and spending more money and asking the Federal Reserve to, you know, lower interest rates. And that just makes the problem that much worse. The government does have a responsibility: to lower taxes, get rid of regulations, and devise a monetary policy that makes some sense. But to continue to say that we just appropriate more money, which is more deficit, and then expect us either to borrow it or expect the Federal Reserve to monetize it, it makes our problems worse.
And then there’s never been a war fought without inflation and destruction and devaluation of a currency. And this is what we’re doing today to ourselves, is we’re literally spending ourselves into oblivion.
But nobody here is willing to even suggest that we cut something overseas. But we have to. We don’t need to cut anything here at home. I’d like to see things frozen. I’d like to see massive tax cuts. But we need deregulation.
So this is the kind of thing we need. We need the government out of the way, but it should have sound money, low taxes, less regulations, and a sensible policy where we’re not wasting our money overseas.
And what is being offered? Lower interest rates. Well, lower interest rates is the problem. Artificially low interest rates is the artificial stimulus which causes the bubble, which allows the inevitable recession to come.
We need to deal with monetary policy and not pretend that artificial stimulus by more spending is going to help.
The recession has been predictable. We just don’t know exactly when it will come. If you do the wrong thing, it’s going to last for a long time. The boom period comes when they just pour out easy credit and it teaches people to do the wrong things. There’s a lot of malinvestment, debt that goes in the wrong direction, consumers who do the wrong things, and businessmen who do the wrong thing.
So we have to attack this and understand the importance of Austrian theory of the business cycle. If you don’t, we’re going to continue to do this and the longer you delay the recession, the worse the recession is, and we’ve delayed a serious recession for a long time.
A: I think it’s absolutely unnecessary to sacrifice. It’s unnecessary. We can cut by looking at our foreign policy. We maintain an empire which we can’t afford. We have 700 bases overseas. We are in 130 countries. We cut there, and then we have a better defense of this country, and the people get that money and they get to spend it here at home. There’s no need to sacrifice.
A: It’s absolutely a threat to our national security because we’ve spent too much, we tax too much, we borrow too much, and we print too much. When a country spends way beyond its means, eventually it will destroy the currency, and we’re in the midst of a currency crisis. Our dollar is going down rapidly as we speak. It’s because we have lived beyond our means. We can’t afford the foreign policy that we have. We have to cut back. We have to live within our means. If we’re going to spend money, we ought to spend it at home, and that is why we have to change this foreign policy. We can’t afford it to do what we’re doing today because it will destroy our dollar.
A: You know, if anybody votes for the Republican Party, they’re voting for conservative values. They’re voting for less government, not more government. In the last seven years, we’ve gotten a lot more government. You know, in the year 2000, we ran on a pro-peace policy. We were condemning Clinton for warmongering, for nation-building and policing the world. And we did exactly the opposite. Now we’re mired down in the Middle East. America should be pro-peace, not pro-war. The war has created so much expenditures. We’re spending our money overseas instead of here. We’re neglecting our needs here. We’re bombing and building bridges overseas and we’re neglecting our bridges here at home. We’re supposed to be the fiscal conservatives. We’re not. This is why we lost the election last year, is because we didn’t stand by our principles of pro-peace and pro-liberty and pro-America.
A: We have to realize where the resentment comes from. I believe it’s related to our economy. When the economy is weakening and there’s resentment because of our welfare system; jobs are going overseas; pay is going down. There’s a lot of resentments because the welfare system is based on mandates from the federal government to put pressure on states like Florida and Texas to provide services which the local taxpayers resent. Some of our hospitals are closing. So it’s an economic issue, too. If we deal with the welfare state and a healthy economy and sound money and all this wasteful spending overseas, we would have a healthy economy; I think this problem would be greatly reduced.
That’s where the crisis [in Social Security] is coming. You’re going to go up with all these cost of living increases but you’ll never keep up with the cost of living because the dollar’s going down, the cost of living is going up.
Our dollar today is worth 4 cents compared to the dollar of 1913, when the Federal Reserve took charge of it. And if you don’t deal with the dollar there will be no retirement for anybody. We’re going to have chaos.
And that is why you have to cut spending. That’s why we need a new foreign policy. We need to tie it to people over here in this country. That’s the only way we can solve the problem.
A: Yes. I think this is not a consequence of free markets. What’s happening is there’s transfer of wealth from the poor and the middle class to the wealthy. This comes about because of the monetary system that we have. When you inflate a currency or destroy a currency, the middle class gets wiped out, so the money gravitates to the banks and to Wall Street. See, that’s why you have more billionaires than ever before. Today this country is in the middle of a recession for a lot of people. Poor people know about it. The middle class knows about it. Wall Street doesn’t know about it. Washington, D.C., doesn’t know about it. We’re depending on the creation of money out of thin air, which is nothing more than debasement of the currency. It’s counterfeit. And it is a natural, predictable consequence that you’re going to have people benefit from it and other people suffer.
So, we need to decide what we’re gonna do. Are we going to live within the law, or are we going to pretend the government can take care of everything possible? We are now nine trillion dollars in debt, we have a dollar that’s crashing, and we keep financing this by taxing, borrowing, and then, what do we resort to? We resort to printing the money!
We should look to the Constitution. We should make sure that we get rid of our central bank, the Federal Reserve, and have only gold and silver as legal tender. This is the reason our government gets so big, because we give them license to steal, license to inflate, license to tax, and license to borrow, and politicians will always do it.
In addition, the Federal Reserve, our central bank, fosters runaway debt by increasing the money supply-- making each dollar in your pocket worth less. The Fed is a private bank run by unelected officials who are not required to be open or accountable to “we the people.”
We cannot continue to allow private banks, wasteful agencies, lobbyists, corporations on welfare, and governments collecting foreign aid to dictate the size of our ballooning budget. We need a new method to prioritize our spending. It’s called the Constitution of the United States.
That’s when the true wealth of the country will become self-evident and we will no longer be able to afford the extravagant expense of pursuing an American empire. No nation has ever been able to finance excessive foreign entanglements and domestic entitlements through printing press money and borrowing from abroad.
Sadly, we rarely hear serious proposals for limiting the role of government to that of protecting liberty.
In the 20th century we have come to accept demands and needs as rights at the expense of someone else’s rights. Responsibility for our own acts and livelihood has been replaced by lawsuits demanding unrealistic settlements.
Government has come to mean something entirely different than what was intended by the writers of the Constitution. It is an entity capable of confiscating and distributing wealth ad infinitum. Government no longer serves the people by guaranteeing equal rights to all. Government is now expected to provide profits, medical care, jobs, homes, and food whenever the people demand these benefits as a right.
The politicians and many bankers, union leaders, businessmen, and bureaucrats who profit from inflation are glad, of course, to have the intellectuals justify their fraud.
All aspects of the interventionist system threaten freedom and social peace, but money is the major issue, since it is the life-blood of all economic transitions. If we are to reverse the trends of the past six or seven decades, honest money and monetary debasement must become top concerns of ordinary Americans.
Fifty years of systematic monetary destruction now threaten the existence of our constitutional republic. The American people are frightened by what they see, and they are demanding that the inflation stop. More citizens are realizing that Congress and the Federal Reserve have generated a flood of paper money with no intrinsic value.
It is rare to find anyone today who believes that wealth can come out of a printing press. The corporate bailouts, guaranteed loans, government contracts, and welfare gimmicks all have failed, and the people can no longer be duped.
Although many Americans today see sound money as the exception, and paper as the rule, the opposite is true. Even the American dollar had a connection with gold up until 1971. Since the severing of that tie, the debasement of the dollar has accelerated, with the money supply doubling. Prices have more than doubled in the last ten years, not to mention the economic distortions that accompanied this inflation.
There is no law of economics stating that only gold can be used as money in a free society. But gold has served as the principal medium of exchange throughout history because its value does not depend on a government fulfilling its promises, especially in times of crisis.
The dollar died on August 15, 1971; after that date, it had no independent value for anyone. The new rules, with the dollar now simply a managed fiat currency, ushered in even greater inflation, economic turmoil, and set the stage for total loss of confidence in the dollar This will happen eventually, and perhaps in the near future, though no one knows exactly when.
Proponent's argument to vote Yes:Rep. LEWIS (D, GA-5): This bipartisan bill will provide the necessary funds to keep important transportation projects operating in States around the country. The Highway Trust Fund will run out of funding by September. We must act, and we must act now.
Opponent's argument to vote No:Rep. CAMP (R, MI-4): [This interim spending is] needed because the Democrats' economic policy has resulted in record job loss, record deficits, and none of the job creation they promised. Democrats predicted unemployment would top out at 8% if the stimulus passed; instead, it's 9.5% and rising. In Michigan, it's above 15%. The Nation's public debt and unemployment, combined, has risen by a shocking 40% [because of] literally trillions of dollars in additional spending under the Democrats' stimulus, energy, and health plans.
We had a choice when it came to the stimulus last February. We could have chosen a better policy of stimulating private-sector growth creating twice the jobs at half the price. That was the Republican plan. Instead, Democrats insisted on their government focus plan, which has produced no jobs and a mountain of debt.
Proponent's argument to vote Yes:Rep. PETER WELCH (D, VT-0): Citigroup supports this bill. Why? They're a huge lender. They understand that we have to stabilize home values in order to begin the recovery, and they need a tool to accomplish it. Mortgages that have been sliced and diced into 50 different sections make it impossible even for a mortgage company and a borrower to come together to resolve the problem that they share together.
Sen. DICK DURBIN (D, IL): 8.1 million homes face foreclosure in America today. Last year, I offered this amendment to change the bankruptcy law, and the banking community said: Totally unnecessary. In fact, the estimates were of only 2 million homes in foreclosure last year. America is facing a crisis.
Opponent's argument to vote No:
Sen. JON KYL (R, AZ): This amendment would allow bankruptcy judges to modify home mortgages by lowering the principal and interest rate on the loan or extending the term of the loan. The concept in the trade is known as cram-down. It would apply to all borrowers who are 60 days or more delinquent. Many experts believe the cram-down provision would result in higher interest rates for all home mortgages. We could end up exacerbating this situation for all the people who would want to refinance or to take out loans in the future.
Rep. MICHELE BACHMANN (R, MN-6): Of the foundational policies of American exceptionalism, the concepts that have inspired our great Nation are the sanctity of private contracts and upholding the rule of law. This cramdown bill crassly undercuts both of these pillars of American exceptionalism. Why would a lender make a 30-year loan if they fear the powers of the Federal Government will violate the very terms of that loan?
Proponent's argument to vote Yes:Rep. DAVID OBEY (D, WI-7): This country is facing what most economists consider to be the most serious and the most dangerous economic situation in our lifetimes. This package today is an $825 billion package that does a variety of things to try to reinflate the economy:
Opponent's argument to vote No:
Rep. JERRY LEWIS (R, CA-51): Most of us would agree that the recent $700 billion Troubled Asset Relief Program (TARP) is an illustration of how good intentions don't always deliver desired results. When Congress spends too much too quickly, it doesn't think through the details and oversight becomes more difficult. The lesson learned from TARP was this: we cannot manage what we do not measure. We cannot afford to make the same mistake again.
Sen. THAD COCHRAN (R, MS): We are giving the executive branch immense latitude in the disbursement of the spending this bill contains. We are doing so without any documentation of how this spending will stimulate the economy. Normally, this kind of information would be contained in an administration budget. For items that have a short-term stimulative effect, most of us will feel comfortable debating their merits as an emergency measure. But there is a great deal of spending that is not immediately stimulative.
Proponent's argument to vote Yes:Rep. BARNEY FRANK (D, MA-4): Last year, after we responded to the urgent pleas of the Bush administration to authorize the $700 billion deployment of Federal funds to unstick the credit markets, many of us became very unhappy, [because Bush] repudiated commitments to use a significant part of the fund to diminish foreclosures. If we do not pass this bill today, we will make no progress in what is the single biggest economic problem we've been facing, namely, the foreclosure crisis.
Opponent's argument to vote No:Rep. RON PAUL (R, TX-14): There has been a lot of money spent to try to bail out the financial industry, and nothing seems to be working. I think it's mainly because we haven't admitted that excessive spending can cause financial problems, & excessive debt and inflation can cause problems.
Actually, the recession is therapy for all of the mistakes, but the mistakes come, basically, from a Federal Reserve system that's causing too many people to make mistakes. Interest rates are lower than they should be, so they don't save. That contributes to what we call "moral hazard" as well as the system of the Fannie Mae and Freddie Mac system. With the assumption that we're all going to be bailed out, people say, "Well, no sweat because, if there is a mistake, the government will come to our rescue." A private FDIC would never permit this massive malinvestment. There would be regulations done in the marketplace, and there would not be this distortion that we've ended up with.
Proponent's argument to vote Yes:Rep. BARNEY FRANK (D, MA-4): This economy is in the worst shape that it has been in since the Great Depression. This Congress voted 2 months ago to advance $25 billion to the auto industry to promote innovation. This $15 billion is an additional "bridge loan."
Opponent's argument to vote No:Rep. SPENCER BACHUS (R, AL-6): We all understand that the bankruptcy of either GM or Chrysler would have a cascading effect on other manufacturers. But I cannot support this plan because it spends taxpayer money without any real promise to return the industry to profitability. I see several glaring flaws. We are creating a new car czar to manage these companies from Washington; not a CEO, but a car czar. Second, this legislation actually imposes new and expensive mandates on our automobile companies. Third, this legislation imposes Federal Government management on the Big Three, the wisdom of Washington. It is clear that the management of these companies have made mistakes, many mistakes, but to set up a command and control Federal bureaucrat is exactly the wrong solution.
Rep. RON PAUL (R, TX-14): The problems that we are facing today date back to 1971. But we don't seem to want to go back and find out how financial bubbles form and why they burst. Instead, we just carry on doing the same old thing and never look back. We spend more money, we run up more debt, we print more money, and we think that is going to solve the problem that was created by spending too much money, running up debt, printing too much money. Today, we are talking about tinkering on the edges without dealing with the big problem.
Proponent's argument to vote Yes:Rep. DAVID OBEY (D, WI-7): Congress has tried to do a number of things that would alleviate the squeeze on the middle class. Meanwhile, this economy is sagging. Jobs, income, sales, and industrial production have all gone down. We have lost 600,000 jobs. We are trying to provide a major increase in investments to modernize our infrastructure and to provide well-paying construction jobs at the same time.
Opponent's argument to vote No:Rep. JERRY LEWIS (R, CA-41): Just 2 days ago we were debating an $800 billion continuing resolution. Now in addition to being asked to pay for a bailout for Wall Street, taxpayers are being asked to swallow an additional $60 billion on a laundry list of items I saw for the first time just a few hours ago. The Democratic majority is describing this legislation as a "stimulus package" to help our national economy. But let's not fool ourselves. This is a political document pure and simple. If these priorities are so important, why hasn't this bill gone through the normal legislative process? We should have debated each of the items included in this package.
It doesn't take an economist to tell you that the economy needs our help. But what does this Congress do? It proposes to spend billions more without any offsets in spending. The failure to adhere to PAYGO means that this new spending will be financed through additional borrowing, which will prove a further drag on our struggling economy.
OFFICIAL CONGRESSIONAL SUMMARY: Amends the Internal Revenue Code to permit an individual to designate three dollars on his or her income tax return (six dollars on a joint return) to be used to reduce the public debt of the United States.
SPONSOR'S INTRODUCTORY STATEMENT: Pres. Eisenhower apparently once said that he believed that there could be no surplus as long as our Nation was in debt. I come from that school of thought, and yet that is not exactly where we are right now in Washington.
Where we are right now is debating whether or not 90 percent or 50 percent, or some number in between, of these projected future surpluses should be allocated to the debt. What struck me is the fact that really more than just the Congress should be involved in that debate. It is for that reason that I introduce today the Taxpayers' Choice Debt Reduction Act.
What this bill would do would be to simply take the 1040, the tax return as we now know it. And right now, we can send $3 to the presidential campaign. This would create another box wherein we could send 3 bucks to debt reduction. That is not enough money to change our national debt, but it is enough money to make a small step in an important debate that we all ought to be a part of.
LEGISLATIVE OUTCOME: Referred to the House Committee on Ways and Means; never called for a House vote.
Requires the Board of Governors of the Federal Reserve System to continue, after March 22, 2006, to compile and publish on a weekly basis the measure of the M3 monetary aggregate and components of the M3 that are not included in the measure of the M2 monetary aggregate.
Introductory statement by Sponsor:
Rep. PAUL: The monetary measure known as M3 consists of M1 (currency in circulation plus travelers' checks, demand deposits, and similar interest-earning checking account balances) plus M2 (M1 plus household holdings of savings deposits, small time deposits, and retail money market mutual funds balances except for balances held in IRA and Keogh accounts) plus institutional money market mutual fund balances and managed liabilities of deposits consisting of large time deposits, repurchase agreements, and Eurodollars.
The Federal Reserve Board has recently announced it will stop reporting M3, thus depriving Congress and the American people of the most comprehensive measure of the money supply. The cessation of Federal Reserve's weekly M3 report will make it more difficult for policymakers, economists, investors, and the general public to learn the true rate of inflation.
The Federal Reserve Board has claimed neither policymakers nor the Federal Reserve staff closely track M3. Even if M3 is not used by Federal Reserve Board economists or legislators, many financial services professionals whose livelihoods depend on their ability to obtain accurate information about the money supply rely on M3.
Knowledge of the money supply is one of the keys to understanding the state of the economy. The least the American people should expect from the Federal Reserve Board is complete and accurate information regarding the money supply. I urge my colleagues to ensure that the American people can obtain that information.
Bill to amend the Internal Revenue Code of 1986 to allow the expensing of certain real property. Amends the Internal Revenue Code to allow small business taxpayers with gross receipts of $5 million or less to elect to expense certain depreciable real property in the year such property is placed in service. Limits the amount of such expensing allowance to $125,000, adjusted for inflation after 2009.
|Other candidates on Budget & Economy:||Ron Paul on other issues:|
GOP: Sen.John McCain
GOP V.P.: Gov.Sarah Palin
Democrat: Sen.Barack Obama
Dem.V.P.: Sen.Joe Biden
Constitution: Chuck Baldwin
Libertarian: Rep.Bob Barr
Constitution: Amb.Alan Keyes
Liberation: Gloria La Riva
Green: Rep.Cynthia McKinney
Socialist: Brian Moore
Independent: Ralph Nader