I.O.U.S.A. (41 page)

Ron Paul

Rep. Ron Paul (R - TX) has been shaking up the political arena since 1976, when he fi rst ran for Congress as a proponent of free market economics and started railing against the Federal Reserve system. In 2007, Dr. Paul turned heads once again with his grassroots presidential campaign by breaking two fund - raising records: one for the largest single - day donation total among Republican candidates, and twice receiving the most money received via the Internet in a single day by any presidential candidate in history.

Q:
How did a very well - liked doctor fi nd his way to Washington?

Ron Paul :
In the early ‘ 70s, the breakdown of the monetary system excited me enough to want to speak out because I had been studying Austrian economics for a good many years, and there were a lot of predictions made about the inevitability of the breakdown of the Bretton Woods Agreement. When that happened in 1971, it confi rmed my beliefs in what I had been reading, and in 1974, on a lark, I ran for Congress — and the following year I was elected in a special election. My main motivation in the early 1970s was to talk about economic policy from an Austrian viewpoint, and from the viewpoint of sound money and a Constitution that rejects the whole notion of the paper money system and the Federal Reserve System that we have today.

Q:
In a nutshell, what is the Austrian school of thought?

Ron Paul:
Well, an easier term to use is the
free market score.
A lot of people in this country are for free enterprise and they talk about it, but they don ’ t really understand it or believe it. It ’ s called Austrian economics because some of the founders of that school of thought came from Austria; in particular, [Ludwig von] Mises and [Friedrich A.] Hayek. They are the ones who in the twentieth 147

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century kept alive classical liberalism when it came to free market economics and sound money. So we refer to it as Austrian economics but the best way to refer to it is
free market economics,
in contrast to Keynesian economics or socialism.

Austrian economics is different than the economics courses you would take in college because it takes into account the action of each and every individual. And of course the great book of Mises was called
Human Action
[1949; 4th rev. ed. Laissez Faires Books, 2008], so there ’ s a subjective element to economics so it ’ s really fascinating and much easier to understand. The reason why everybody has to be interested in this subject is out of their own self - interest, because if it ’ s monetary policy or economic policy it affects us. If you have socialism and it produces poverty then you don ’ t want it. If paper money eventually leads to runaway infl ation and destruction of the fi nancial system as well as the political system, you have to know about that. But a lot of people duck economic interest because what is taught in our colleges is so often very boring — and, quite frankly, often wrong. But free market economics explains how freedom and liberty generates free markets and free choices and essentially the only way you can have prosperity. So everybody, out of their own self - interest, should investigate and understand why free market economics is so important.

Q:
Why is it that a family or a company has to stay on budget?

They can ’ t run defi cits forever, otherwise they ’ re going to end
up in jail or living at home with their parents or something.

Why is it that the government gets away with running defi cits?

Ron Paul:
Well, they do it because they have power, more power than they should have and certainly more power than the Constitution gives them. Our country was supposed to be designed not to have this type of authority, and we didn ’ t have the authority to tax before 1913. But they spend too much because they have taxing authority, and it seems to be part of human nature that politicians like more authority. And a lot of them c11.indd 148

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are motivated by good intentions; they always want to take care of people and manage their lives. Most politicians enjoy being somebody important, and the best way to do that is promise people something for nothing and not have to worry about really paying for it. Today, if we had to pay for fi ghting this war and fi nancing our welfare state, there would be a tax revolt in this country because it would cost so much.

But they can delay this by borrowing, by infl ating. That is literally just creating money out of thin air to pay the bills and delaying the payment. So the whole idea of these defi cits we run up and the fact that we have a fi nancial monetary system that helps encourage politicians to do exactly the wrong thing instead of working to limit the size of government and maximize individual liberty and maximize the marketplace . . . Politicians end up doing the opposite because they get rewarded. Most incumbents win by being errand boys, coming to Washington and delivering the goods. But my point over the years has been that eventually that system breaks down, and it ’ s very, very dangerous and very harmful to everybody concerned.

Q:
Have you ever met a parent or grandparent who has admitted
to you that they wanted a better life for themselves than they
wanted for their children? If not, then why are we doing that?

Ron Paul :
Well, the children are starting to recognize that there ’ s a tremendous burden placed on them and they will be taking care of those in retirement years. The old saying used to be that we always wanted a better life for our children, yet literally in the last 60, 70 years it ’ s been reversed: that the young people fi nance those in retirement. And it ’ s a mixed bag because a lot of people have paid into Social Security, and they make token payments for their medical care and they think that they ’ re getting their own money back, but their money has already been spent. I ’ ve been fi nding out lately that a lot of young people are coming to the realization that they ’ re getting stuck with the bill.

Q:
Can you characterize what happened in the last six or seven
years here in Washington? What would be the grade that you
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would give our current administration and current group of
leaders in Washington?

Ron Paul :
Financially, we ’ re doing a lot worse than we were in 1999 or 2000. The defi cits have exploded and we got involved in a war that has drained us because we ’ re spending so much, and although Republican conservatives were in power, they never held back on passing more entitlements — whether they were education or medical entitlements.

But quite frankly, there was a lot of deception in 1999 and in the 1990s. Yes, the defi cit during that decade was lower; we were never in the black, as they said, because we kept borrowing from our trust funds. So, although it looked a lot better, it really didn ’ t solve the problem because government kept growing. It was almost deceptive in the sense that “ uh - oh we ’ re managing this, maybe the supply siders are right, maybe cutting taxes raises revenues and if we hold back a little bit, everything is gonna be okay. ” But I don ’ t like that approach because even if you could make a tax rate at 10 percent and it increased the revenues to the government because the economy blossomed, I wouldn ’ t be happy with that because I don ’ t want the government to grow. Because eventually it ’ ll get out of control, and when government gets big, individuals get minimized — they have less freedom. So I don ’ t want to make it look easy for the government to spend money.

In those years where it looked like the defi cit wasn ’ t so big, it more or less lulled us to sleep and we said “ Oh yeah, we can do these things. ” But it is true in the ‘ 90s we weren ’ t quite as abusive with the budget because we didn ’ t have a major war going on and the number of entitlements weren ’ t being passed as they have been in this past six or seven years.

Q:
Has it been hard to be here in Washington and watch what ’ s
happened fi nancially to our country?

Ron Paul :
Well I don ’ t know whether
hard
is the right word, but it is aggravating. I never consider myself frustrated, because I came to Washington with full knowledge of how the system works. I know the system is bad, and I vote a certain way, I try to make the c11.indd 150

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points on what ’ s wrong. Everything that is happening, I ’ ve sort of expected, but it ’ s still pretty annoying to fi nd out that people don ’ t respond to common sense, but hopefully they do before we have a tragic outcome like a fi nancial or a dollar crisis. After that, the conditions are much tougher to come back with reforms, which we need, and we also need a different attitude about the role of government. We need an attitude that ’ s different about what we are supposed to be doing overseas, as well as how we run this welfare state. And if we don ’ t change our attitude then we ’ re going to have an economic crisis, which surely could lead to a political crisis.

Q:
Explain to me, what is infl ation and why is that something that
should be avoided at all costs?

Ron Paul :
Well, infl ation is very simple. When government arbitrarily, out of thin air, prints money — creates money and credit out of thin air. When I talk to many teenagers and grade schoolers, they seem to have no problem comprehending the fact that if you just create a lot of money it ’ ll be like Monopoly money and it won ’ t have value. Governments do that for all kinds of reasons, especially to enhance political power to fi ght wars we shouldn ’ t be fi ghting or to be passing welfare programs that aren ’ t deserved. When you print that money, the value of that dollar has to go down and then one of the consequences of infl ating the money will be higher prices. But there are a lot of other problems, too, with infl ating. It causes a business cycle, it causes fi nancial bubbles, and it causes a lot of economic distortions and unemployment. But, in a nutshell, infl ation is very simple. When governments create new money out of thin air you have infl ation.

Q:
I ’ ve heard other people say infl ation is immoral. Do you feel
that way?

Ron Paul :
Infl ation is immoral because it ’ s theft. Think about it this way: If you or I had a printing press and we could print the money just like the government does, we would be arrested and put in jail for a long, long time because we ’ ve stolen value — we ’ re pretending these pieces of paper are worth something. The c11.indd 151

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founders understood this very clearly and that ’ s why they said in the Constitution that you can ’ t emit mills of credit, which is paper money, because they knew what runaway infl ation is like.

Infl ating is immoral in the sense because it steals value. If you double the money supply and your prices go up twice as much, it ’ s an invisible hidden tax. But the real immorality here is that some people pay higher prices than others. So if you ’ re in a middle class, or especially in low middle income, your prices might be going up 15 percent a year. Somebody on Wall Street might be working leveraged buyouts and making billions of dollars and they don ’ t have to worry about the rising costs of living. This to me is an immoral act that is prohibited by the Constitution, and the outcome is always tragic.