Ron Paul on Budget & Economy
Republican Representative (TX-14); previously Libertarian for President
PAUL: That subject really doesn't interest me a whole lot. But the question is, what are we going to do about Fannie Mae and Freddie Mac. It should have been auctioned off right after the crash came. It would have been cleansed by now. It should have been sold. We know how the bubble came about. It was excessive credit, interest rates held too low, too long, the Federal Reserve responsible for that. The Community Reinvestment Act, which is Affirmative Action telling banks they have to make these risky loans. And at the same time, there was a line of credit which allowed Fannie Mae and Freddie Mac to, you know, make more money. And it was assumed that they would always be protected. I've talked a long time about cutting off that credit from the Fed. I was trying to prevent this stuff.
PAUL: That demonstrates how much out of touch the US Congress is with the American people because I'm supporting things that help the American people. But as far as working with other groups, I think my record's about as good as anybody's because I work on the principle that freedom and the Constitution bring people together.
SANTORUM: One of the reasons people like Rep. Paul is his economic plan. But he's never been able to accomplish any of that.
PAUL: It's not exactly a simple task to repeal approximately 100 years of us sliding away from our republic. What about change in monetary policy? We've had that for 100 years. And right now we're winning that battle. The American people now agree. About 75% of the American people now say we ought to audit the Federal Reserve, find out what they're doing and who are their friends that they're bailing out constantly.
PAUL: No, you have to let it liquidate. We've took 40 years to build up this worldwide debt. We're in a debt crisis never seen before in our history. The sovereign debt of this world is equal to the GDP, as ours is in this country. If you prop it up, you'll do exactly what we did in the depression, prolong the agony. If you do prop it up, you do what Japan has done for 20 years. So, yes, you want to liquidate the debt. The debt is unsustainable. And this bubble was predictable, because 40 years ago we had no restraints whatsoever on the monetary authorities, we had no restraints on the spending. And if you keep bailing people out and prop it up, you just prolong the agony, as we're doing in the housing bubble. We don't allow the market to determine what these mortgages are worth. If you don't liquidate this and clear the market, you're going to perpetuate this for a decade or two more.
A: If you want to get the economy going again, you have to get rid of price-fixing. And the most significant price-fixing that goes on, that gave us the bubble, destroyed the economy, and is preventing us fro coming out [of the recession], is the price-fixing of the Federal Reserve, manipulating interest rates way below market rates. You have to have the market determine interest rates if you want a healthy, viable economy.
Q: So you think the economy would be stronger if interest rates were higher right now?
A: You would have more incentive. You would take care of the elderly. They get cheated. They get nothing for their CDs. Why cheat them and give the banks loans at zero percent? And then they loan it back to the government at 3%. They are ripping us off at the expense of those on fixed incomes.
Q: Even though higher interest rates would make it much more expensive to borrow, mortgages.
A: What you want is the market to determine this.
PAUL: I haven't analyzed it enough to call him a crony or not. But there is a lot of crony capitalism going on in this country. And that has to be distinguished from real capitalism, because this "Occupation" stuff on Wall Street, if you're going after crony capitalism, I'm all for it. Those are the people who benefit from contracts from government, benefits from all of the bailouts. They don't deserve compassion, they deserve taxation, or they deserve to have all their benefits removed. But crony capitalism isn't when somebody makes money and they produce a product. That is very important. We have to distinguish the two. And unfortunately, I think some people mix that. But this, to me, is so vital, that we recognize what capitalism is versus crony capitalism. When you have crony capitalism, and that's why we're facing this crisis today.
A: Right. We had a fat Uncle Sam, put big government on a diet.
Q: That was in 1976. Things not only haven't changed, they have gotten dramatically worse. You've come up with a plan to cut $1 trillion. How fast can you do it & where would that money come from?
A: Of course, it all depends on the people's understanding and the Congress willing to go with this. But you could do it at one time. People say, well, it's impossible to do this. But we had a pretty good history of slashing spending after World War II. We brought 10 million people home and we slashed spending by more than 50% in cut taxes and the economy was revived. I was concerned in the '70s because I thought the situation was set-up because of the change of the monetary system, that it would lead to endless spending and endless debt and that's where we are.
CAIN: Yes, I do still say that. They might be frustrated with Wall Street and the bankers, but they're directing their anger at the wrong place. They ought to be over in front of the White House taking out their frustration.
PAUL: I think Mr. Cain has blamed the victims. There's a lot of people that are victims of this business cycle. We can't blame the victims. I'd go to Washington as well as Wall Street, but I'd go over to the Federal Reserve. The bailouts came from both parties. The banks were involved, and the Federal Reserve was involved. But who got stuck? The middle class got stuck. They got stuck. They lost their jobs, and they lost their houses. If you had to give money out, you should have given it to people who were losing their mortgages, not to the banks.
BACHMANN: It was the federal government that pushed the subprime loans. They pushed the banks to meet these rules. We had artificially low interest rates. We had lending standards lowered for the first time in American history.
PAUL: We have made some inroads on the Federal Reserve. Last year, we got a partial audit of the Fed. We've learned a whole lot. They were dealing with $15 trillion, [of which] $5 trillion went overseas to bail out foreign banks. But we're getting to the bottom of it. If you want to understand why we have a problem, you have to understand the Fed, because the cause comes from the business cycle. We shouldn't be asking what to do exactly with the recession--obviously we have to deal with that--but you can't cure the disease if you don't know the cause of it. And the cause is the booms. When there are booms, and they're artificial, , they burst.
PAUL: Absolutely. I mean, there's no need to.
Q: No Freddie Mac, no Fannie Mae, nothing?
PAUL: No, that's where the distortions come. That's where the moral hazard & mal-investment come from. It was predictable. Unfortunately we've been living with Keynesian economics for many, many decades, and everybody who was right about predicting the bubbles were the Austrian economists. They said they were coming. And yet they're also saying--and I agree with them--that everything that we're doing right now is wrong. So what we did with the housing bubble, yes, we had too many houses. It was glaring in our face. The bubble was doomed to burst, and it came because of Fannie Mae, Freddie Mac, easy credit, and also the Community Reinvestment Act. So who got into trouble? Wall Street got the bailout. The middle class lost their jobs. They lost their houses. This whole system is all messed up.
PAUL: Well, we shouldn't have ever started it. I voted against it. But that sure wouldn't be high on my list. I would find a lot of cuts a lot of other places. We spend $1.5 trillion overseas in wars that we don't need to be in and we need to cut there, and then put this money back into our economy here. And that is the only way to achieve it. Then it still wouldn't be enough in order to get some people out. What we need to do is cut the Department of Education, the Department of Energy, and all these departments, and get rid of them. Then we can do it.
PAUL: I strongly supported Ronald Reagan. I was one of four members of Congress from Texas that supported Reagan in '76. And I supported him all along, and I supported all his issues and all his programs. But in the 1980s, we spent too much, we taxed too much, we built up our deficits, and it was a bad scene. Therefore, I support the message of Ronald Reagan. The message was great. But the consequence, we have to be honest with ourselves. It was not all that great. Huge deficits during the 1980s, and that is what my criticism was for, not for Ronald Reagan's message. His message is a great message.
PAUL: Well, S&P didn't downgrade it because [Congress] couldn't come to a conclusion. They couldn't come to a conclusion because they didn't know what was going on. The country's bankrupt, and nobody wanted to admit it. And when you're bankrupt, you can't keep spending. And all these proposed cuts weren't cuts at all. What you have to do is restore sound money. You have to understand why you have a business cycle, why you have booms and busts. If you don't do that, there's no way you can solve these problems. And the booms and busts comes from a failed monetary system that--the interest rates that are way lower than--than they should be encourages malinvestment and debt. And to get out of that, all this other tinkering, you cannot do that unless you liquidate debt. You don't bail out the people that are bankrupt and dump the debt on the people. That is what's happened.
In bailing out failing companies, they are confiscating money from productive members of the economy and giving it to failing ones. By sustaining companies with obsolete or unsustainable business models, the government prevents their resources from being liquidated and made available to other companies that can put them to better, more productive use. An essential element of a healthy free market is that both success and failure must be permitted to happen when they are earned. But instead with a bailout, the rewards are reversed--the proceeds from successful entities are given to failing ones. It is obvious to most Americans that we need to reject corporate cronyism, and allow the natural regulations and incentives of the free market to pick the winners and losers in our economy, not the whims of bureaucrats and politicians.
We are talking about an awesome power. It is the power to weave illusions that appear real as long as they last. That is the very core of the Fed's power.
Of course not everyone is instinctively against this illusion-weaving power, and many even welcome it. Tragically, the innocent who understand little about the complexity of the monetary system suffer the most, while those who are in the know reap great profit whether the market is going up or down.
Even with a government guarantee, the system is always vulnerable to collapse at the right moments, namely, when all depositors come asking for their money. Banking legislation can be seen as an elaborate attempt to patch th holes in this leaking boat. Thus have we created deposit insurance, established the "too big to fail" doctrine, created schemes for emergency injections, and all the rest, so as to keep afloat a system that is inherently unstable.
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: 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.
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: 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.
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.
GINGRICH: Well, I think that having some kind of central bank is an important part of how you deal with monetary policy in the modern world. I think that it is a scandal that the Federal Reserve is secret. And I think, frankly, their monetary policy since the late 90s has been a major factor in the economic pain we're now going through.
Q: [to Paul]: Is Speaker Gingrich wrong to want to save the Fed? PAUL: Not exactly. Because my position isn't that I'd closed the door down immediately, you can phase it out. But there are some other things that we could do in a transition phase. For instance, and I'm delighted that mainstream is catching up with this, these days, for auditing the Fed. This is great.
Volcker assured me he would never lower reserve requirements to that degree or buy up worthless assets; just the authority to have free rein in raising reserve requirements at will. I said that, although I didn't expect that he would use these extreme powers, who knew if in the future we might just have someone who would. The future is now here.
The fact is that not only has this come to pass with Bernanke, but a great deal more authority has been usurped by Fed, while Congress says little about it. The Fed today has ominous powers that Congress barely understands. There is essentially no oversight, no audit, and no control. And the Federal Reserve chairman has no obligations to answer questions. Trillions of dollars can be created and injected into the economy with no obligation by the Fed to reveal who benefits.
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.
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.
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.
But even this amount of inflation inevitably introduces malinvestment as those getting the new money put it to uses that only later recessions show to have been unproductive. The Friedman approach may produce milder booms and recessions, but it nevertheless is inflationary and a product of the old discredited idea that government, rather than the market, should be planning the economy.
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.
The Constitution is clear about no paper money. Only gold and silver were to be legal tender. Since the states caused themselves harm whe they issued their own paper money, the states were prohibited as well from issuing paper currency in Article I, Section 10. So there you have it, plain and simple: paper money is unconstitutional, period.
The Constitution is silent on the issue of a central bank, but the Tenth Amendment is quite clear: if a power is not "delegated to the United States," it doesn't exist. There is no mention whatsoever of a central bank being authorized. Even is a central bank were permissible, it could not legally repeal the legal tender mandate for gold and silver coins.
Because of the runaway inflation of the continental dollar in the 1780s and the Founders' disdain for paper, no paper money was officially issued by the US government until the Civil War.
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: 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: 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.
The first thing stabilizing attempts was the Common Market "snake," so-called because all the currencies moving up or down within predetermined limits called to mind the undulations of a moving snake. Begun in 1972, it was over by 1976, simply because several different governments, each with its own inflation rate, from the start moved away from each other, flinging accusations of bad faith at each other while they did.
The market has not been fooled by any of this. It knows how to value currencies--in terms of gold. And that valuation has been since 1971 embarrassing for every currency. One-tenth of an ounce of gold will today buy as many dollars as one ounce did 10 years ago.
He same conclusion is true if we consider price stability.
Bimetallism doesn't work either, as America learned painfully from a century's experience.
The dollar must be redefined as a unit of gold again, and gold coins should be encouraged to actually circulate among the public, to be used not simply as long-range investment but as a medium of exchange functioning as money.
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 for voting Yes:
[Rep. Biggert, R-IL]: The HAMP Termination Act would put an end to the poster child for failed Federal foreclosure programs. The program has languished for 2 years, hurt hundreds of thousands of homeowners, and must come to an end. This bill would save $1.4 billion over 10 years. To date, the HAMP program has already consumed $840 million of the more than $30 billion of TARP funds that were set aside for the program. For this extraordinary investment, the administration predicted that 3 to 4 million homeowners would receive help. HAMP has hurt more homeowners than it has helped. The program has completed about 540,000 mortgage modifications. Another 740,000 unlucky homeowners had their modifications cancelled.
Opponent's Argument for voting No:
[Rep. Capuano, D-MA]: This is a program that I'm the first to admit has not lived up to what our hopes were. This program we had hoped would help several million people. Thus far we've only helped about 550,000 people. But to simply repeal all of these programs is to walk away from individual homeowners, walk away from neighborhoods. I'm not going to defend every single aspect of this program, and I am happy to work with anyone to make it better, to help more people to keep their homes, & keep their families together. To simply walk away without offering an alternative means we don't care; this Congress doesn't care if you lose your home, period. Now, I understand if that makes me a bleeding-heart liberal according to some people, so be it.
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.
Opponents argument for voting NAY: Rep. BARTON of Texas: [My first issue the bill is that by the bill's own definition], we don't have price gouging in the US today. We do have high prices. But the reason we have that price is not because of price gouging at retail. I am not aware of any pending State action on price gouging, and almost every State has State law to go after price gougers.
The second issue with the bill, it requires the declaration of a Presidential energy emergency. The bill doesn't give any definition as to why the President should declare an energy emergency; it doesn't define "unconscionably excessive"; it doesn't define when a "seller is taking unfair advantage."
I know there is a lot of pressure on the Congress doing something. I would state we would be better served to look at the underlying fundamentals that address the supply situation.
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.
The House Committee on Financial Services (also referred to as the House Banking Committee) is the committee of the House of Representatives that oversees the entire financial services industry, including the securities, insurance, banking, and housing industries. The Committee also oversees the work of the Federal Reserve, the United States Department of the Treasury, the U.S. Securities and Exchange Commission, and other financial services regulators.
[The Cut-Cap-and-Balance Pledge is sponsored by a coalition of several hundred Tea Party, limited-government, and conservative organizations].
Despite our nation's staggering $14.4 trillion debt, there are many Members of the U.S. House and Senate who want to raise our nation's debt limit without making permanent reforms in our fiscal policies. We believe that this is a fiscally irresponsible position that would place America on the Road to Ruin. At the same time, we believe that the current debate over raising the debt limit provides a historic opportunity to focus public attention, and then public policy, on a path to a balanced budget and paying down our debt.
We believe that the "Cut, Cap, Balance" plan for substantial spending cuts in FY 2012, a statutory spending cap, and Congressional passage of a Balanced Budget Amendment to the Constitution is the minimum necessary precondition to raising the debt limit. The ultimate goal is to get us back to a point where increases in the debt limit are no longer necessary. If you agree, take the Cut, Cap, Balance Pledge!
I pledge to urge my Senators and Member of the House of Representatives to oppose any debt limit increase unless all three of the following conditions have been met:
- Cut: Substantial cuts in spending that will reduce the deficit next year and thereafter.
- Cap: Enforceable spending caps that will put federal spending on a path to a balanced budget.
- Balance: Congressional passage of a Balanced Budget Amendment to the U.S. Constitution -- but only if it includes both a spending limitation and a super-majority for raising taxes, in addition to balancing revenues and expenses.
Source: Cut-Cap-and-Balance Pledge 12-CCB on Jan 1, 2012
Paul co-sponsored Joint Resolution on Debt Limit
Disapprove of increasing the debt limit.
Congressional Summary:JOINT RESOLUTION: Resolved by the Senate and House of Representatives: That Congress disapproves of the President's exercise of authority to increase the debt limit, as submitted on Jan. 12, 2012.
Congressional Vote:Vote #4 in the House: 239 Yeas; 176 Nays; Senate declined to vote on the Resolution.
OnTheIssues Explanation: On Jan. 12, 2012, Pres. Obama notified Congress of his intent to raise the nation's debt ceiling by $1.2 trillion, two weeks after he had postponed the request to give lawmakers more time to consider the action. Congress then had 15 days to say no before the debt ceiling is automatically raised from $15.2 trillion to $16.4 trillion. Hence the debt ceiling was increased.
In Aug. 2011, the US government was nearly shut down by an impasse over raising the debt ceiling; under an agreement reached then, the President could raise the debt limit in three increments while also implementing $2.4 trillion in budget cuts. The agreement also gave Congress the option of voting to block each of the debt-ceiling increases by passing a "resolution of disapproval." The House disapproved; the Senate, by declining to vote in the 15-day window, killed the Resolution. Even if the resolution were passed, Pres. Obama could veto it; which could be overridden by a 2/3 majority in the House and Senate. The House vote only had 57% approval, not enough for the 67% override requirement, so the Senate vote became moot. The same set of actions occurred in Sept. 2011 for the first debt ceiling increase.
Source: HJRes.98/SJRes34 12-HJR98 on Jan 13, 2012
Paul signed Small Business Growth Act
Raise small business depreciation to $125,000.
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.
Source: H.R.3178 2009-H3178 on Jul 10, 2009
Paul signed 2010 Congressional endorsement list
Liberty Candidate: End the Federal Reserve.
A Liberty Candidate will Defend the Great American Principles of Sound Money and Constitutional Government, [such as the views of] Peter Schiff, Senate 2010 candidate from Connecticut, on the Economy: "Strong fiscally conservative principles and beliefs that our economic recovery should be left to the free market through businesses and individuals--not the federal government."
And [such as the views of] R.J. Harris, Congress 2010 candidate from Oklahoma on Ending the Federal Reserve: "What goes on at the Fed is a clear example of the infringement upon our liberty and national sovereignty through Congressional delegation of its authority. Now, the Fed refuses to even let us see how much and to whom our money has been loaned or how much they have indebted the American People. They do so by rightly asserting that they are a private entity and therefore do not have to comply with orders to open their books. Our Congress has completely lost control over the creation of money and credit and now we are all going to pay the price of that abrogation of their duty."
Source: 2010 Congressional endorsement list 2010-LC-BE on Sep 1, 2010
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