Monday, January 7, 2008

What If Ron Paul Were President?

Ron Paul has some of the most extreme views out of all the presidential candidates. Because of these views, Paul has gained many loyal followers; however, they also make him potentially vulnerable. Though he is not the frontrunner in the race to win the Republican nomination--he came in fifth in last week's Republican caucus in Iowa, garnering 10 percent of the vote--let's look at how things might turn out if Paul is able to win the Republican nomination and become president.

Paul is heavily in favor of free market ideas and he strongly opposes taxes. His campaign website touts the fact that he has never voted for tax increases during his term as a congressman in Texas. In fact, most of his proposed polices call for cuts in taxes. According to those who believe in Reaganomics, these tax cuts would likely spur the economy further and end up benefiting everyone. However, there are those who would argue that such policies would only lead to an increase in the deficit--the exact opposite of Paul’s monetary policy stance.

Paul’s monetary policy stance is that we as a nation need to halt our spiral of debt, hold the Fed accountable for their actions, curb inflation and save the value of our currency. While these are worthwhile goals for the country to aspire to, the pain this process could create during the transition period would not be looked upon fondly by the general public. As Americans, we tend to favor instant gratification.

Fixing America’s monetary problems will involve some serious belt tightening on the spending side for an extended amount of time, considering our deficit. In order to curb inflation, the Fed would need to raise interest rates and stop dumping money into the system. This would likely send the financial markets into a tailspin. Based on the negative uproar from investors when Ben Bernanke dropped interest rates by only 0.25 percent at the last Fed meeting, it is unlikely that raising rates would gain popular support.

Unfortunately, most Americans prefer the easy way out and would rather have us continue to lower rates and deflate our currency, thus allowing us to pay back our debt more cheaply, while artificially increasing the markets.

Ron Paul has built his campaign on the premise that we must stop paying our economic problems forward. Paul has impressive grass roots support which, regardless of whether he wins the nomination, could indicate that financial responsibility is becoming an important issue for an increasing number of Americans.

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27 comments:

January 7, 2008 at 11:57 AM Mehul said...

Your analysis seem rather short-sighted and do not take into account the entire picture of Ron Paul's proposal. I would encourage you to educate yourself on the history and legacy of the federal reserver and how it operates. Then view some videos on Google e.g. Zeitgest, Where money comes from etc.
Ron Paul is proposing a complete dissolution of the Federal Reserve which is not sa drastic as it sounds. No Fed = No deficit.
All major economists, market analysts (Jim Cramer for example) love what Ron Paul is proposing.

January 7, 2008 at 12:01 PM TrybalRage said...

I think one of the things that would make this change a little less painless on the American people is that the first things cut would be FOREIGN spending.

He has said before that he realizes we can not just 'cut the cord', so to speak, and that it would take years of shifting responsibility.

But if we cut the billions sent in aid, billions spent in bombing and rebuilding, and billions in maintaining bases around the world, we can cut debt and spending without changing a thing here at first.

January 7, 2008 at 12:10 PM Anonymous said...

The news is abuzz about how so many people are voting for "change".

But it seems that they are only voting for "a little bit of change that won't change the status quo".

January 7, 2008 at 12:13 PM Anonymous said...

Nice write up on Ron Paul, but I think you missed a few points worth mentioning.

"Reaganomics" was about tax cuts to the highest tax brackets that would trickle down. Ron Paul will get rid of the federal income tax for all.

I doubt anyone will notice a federal belt tightening that includes getting rid of the federal department of education. They're the ones that brought us No Child Left Behind. Ask a teacher what they think of the program...they won't miss it.

Also, how does 30,000 troops in S. Korea effect our daily lives? How about our troops in Europe? Ron Paul will stop subsidizing these rich countries with our tax dollars.

No more aide to Israel and certainly no more sending 3X Israel's aide amount to surrounding Muslim countries. We're funding the crisis in the Middle East and it's time to stop.

I completely agree with your assessment of the pending financial crisis. However, analysing Ron Paul's financial policy in isolation to his tax policy doesn't provide the right picture. I could afford market rates for credit if I wasn't paying a 35% tax on income.

January 7, 2008 at 12:17 PM Anonymous said...

"Extreme views"?!?

Yea, his views kind of remind me of those extremists who founded our country - Thomas Jefferson, James Madison, George Washington - what a bunch of radical lunatics those guys were.

January 7, 2008 at 12:22 PM Anonymous said...

In order to curb inflation, the Federal Reserve would need to be abolished! This is our third failed attempt at creating a central bank, and it's proving once again that centralized banking along with government influence DO NOT WORK.

January 7, 2008 at 12:22 PM Anonymous said...

Such policies would not increase the deficit if the foreign spending were to stop.

It's a simple accounting equation - when you spend more than you make, you have a deficit. If we cut our multi-billion dollar foreign "aid", we would safely be able to cut taxes and spur the economy into a harmonious and prosperous state.

January 7, 2008 at 12:22 PM charles ranalli said...

the author conveniently (or ignorantly) neglected to mention that Ron Paul intends to massively cut government spending by withdrawing American troops from the four corners of the globe.
charles ranalli

January 7, 2008 at 12:27 PM Anonymous said...

Uh, I think he states that bringing all our troops home "from everywhere" around the world would save us a trillion or more which we could use to help those who have become dependent on the system.

January 7, 2008 at 12:27 PM Sprinkles said...

Nice article, for someone who obviously knows NOTHING about the economy or our monetary system.

January 7, 2008 at 12:29 PM P said...

Dr. Paul is very familiar with the works of Bastiat, Rothbard, Hayek, and Mises. I doubt any of the other candidates have barely any concept of who these individuals are, because if they did they would be arguing for the same points that Dr. Paul is.

It is impossible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder.
Frederic Bastiat

January 7, 2008 at 12:33 PM Anonymous said...

The pain suffered from this transition will be well worth the benefits tomorrow. We cannot allow the peoples impatience to dictate how and when somehting should be done regarding fiscal policy. Reverting to the principle that you shouldn't own what you cannot afford would be a good thing!

January 7, 2008 at 1:09 PM Isaac said...

You seem to only understand half of Ron Paul's positions. You point out the problem that cutting taxes would create a deficit situation but fail to point out that Paul's priority is to greatly cut spending first, and taxes later, making sure to keep things balanced. If you look closely Paul wants to greatly reduce or in some cases completely abolish whole wings of the federal government which would free up millions if not billions of federal funds creating a lot of room for tax cuts.

Also, you mention Reaganomics. Reaganomics rests on supply side economics and concludes that tax cuts for the rich will encourage the rich to spend and thus drive the economy. Paul proposes tax cuts across the board and esp. the poor and middle classes so they would have more actual wealth. This isn't Reaganomics.

You also mention the transitional pains. Paul has outlined a number of times that he would do his best to ensure a smooth transition. For example he would continue to fund the people who have become dependent on social security, but would allow younger people to opt out. Those on ss would be tithed over with the budget excesses created by his large spending cuts.

Lastly, I think you have deflation and inflation backwards. We are currently in an inflationary period. Paul wants to circumvent the whole problem of money-supply related inflation by allowing for trade in alternative currencies (i.e. gold, etc) and effectively phasing out the Federal Reserve.

I hope this clears up some of your concerns, and I appreciate your otherwise fair assessment of Paul.

January 7, 2008 at 1:10 PM Steven said...

If you really believe that we all prefer to keep the system going as it is, maybe you should ask those Americans who are retired and living on a fixed income like my father. They know that inflation is closer to 8-10%/year, when their social Security only gets a 2% increase. Ask them what they want! They want their lifetime savings to have the same buying power next year as this year, but that will not happen. The Fed keeps inflating the currency with each dollar they print, thereby reducing the money my father has to just get by. He is not alone with this problem. I, as well, have a savings for retirement that is loosing value each year. Why should I save? It makes more common sense to spend it now, before it is worthless. I believe that all Americans (those middle class and lower) want the same as my father and me. We want our money to have the same value next year as this year. Is it so much to ask of our government? Ah, but then again, the FED is NOT part of our government. It is a group of private bankers who have control of our money supply. What a boondoggle! This group of bankers are in business to make themselves richer, no matter that it is at the citizens expense. Wake up America, the Federal Reserve Act wasn't even ratified properly. The big bankers can buy what they want, even politicians, and we know how easy that is. They spend a few hunderd thousand on campaign contributions, then reap millions (or more) by being the first to loan out the newly printed greenbacks while it still has value. Then the rest of the world finds out that there are billions of new dollars in the marketplace and raises their prices...why? Because now they know that each dollar is worth less because we flooded the market with extra dollars. Each dollar they print, without taking the same amount out of circulation makes each dollar we hold worth less. The gold standard is bad you say? Why did the price of oil versus gold stay relatively the same over the past few years? Only the dollar is worth less. The Europeans know it, as their currency shows. When GWB was elected the first time, you could buy one Euro for about 80 cents, now it trades at $1.60, and the Canadian dollar has surpassed the US dollar for the first time in history. When will you guys wake up, when the Mexican Peso trades higher than the dollar?

January 7, 2008 at 1:11 PM lpvper said...

very good synopsis of Dr. Paul's economic positions. Thanks

Vote for Ron, please!

January 7, 2008 at 1:14 PM Temporalist said...

Why is it that asking American citizens to give the lives of their children is not a problem but asking them to suffer a little bit economically is a huge deal?

I think the premise that you didn't discuss is that removing our military from the 700 bases around the world is a legitimate way to Save money and protect our borders simultaneously.

Our military budget is greater than almost all other nations combined, the war cost $1 trillion already and more each day in lives of Americans as well as Iraqis, Afghanis and anywhere else we hold people to the gun in the name of "democracy" and "freedom."

I would imagine if some police came to my door and held me at gun point to go along with their ideas of freedom I might have a problem with that.

January 7, 2008 at 1:30 PM PainfullyAware said...

You may want to look at current events in the Economy in America and Globally.

Ron Paul's economic stand will be vindicated in 2008. There is a high probability that America will suffer the same collapse as Russia did unless drastic measures are taken.

Ron Paul is the only candidate that understands the scope of the economic situation.

If Americans vote to ignore the danger then we will get what we deserve.

Fools And Their Rights Are Soon Parted.

I vote for virtue; I vote for Ron Paul.

January 7, 2008 at 1:32 PM Anonymous said...

Ron Paul is the only candidate that has Root Cause And Corrective Action Ability.

Ron Paul Has My Vote.

January 7, 2008 at 1:37 PM Tannim said...

Better some pain now than a lot more later. But you forgot the key point of Dr. Pauls' Austrian economics that Reaganomics forgot and ultimately failed from: cutitng government spending.

Speaking for myself, as one who has endured the recession of 2000-present (it never ended down on Main Street, but Wall Street and their Old Media don't seem to get that!), I'd rather bite the bullet now while it's possible to do so. Eliminating the income tax and cutting federal spending to match or better means a 20-30% immediate and ongoing net pay raise every paycheck. That's some serious scratch that I can use to pay off my own debt, invest in the economy, and make ends meet. Others in the lower and middle class will see the same relief. That's big, and that's important, and it's the only way to stave off turning this ongoing recession into a depression.

We can cut spending, reduce the debt, cut taxes, and reuild America IF we end the war and foriegn entanglements first. Then the rest has to ALL be put into play. If a piece is missing, it will fail, as Reaganomics proved when spending soared and the debt with it.

The truly radical approach is not what Dr. Paul proposes (cut spending, balance the budget, wage peace, eliminate the income tax, and competing currencies), but to simply declare a full debt amnesty--write off all public and private debt in the country and give everyone a clean slate--all credit cards, loans, mortgages paid in full, national debt wiped out. The economic impacts (at least $15 trillion in debt would disappear) would screw Big Banking and the Fed (big deal, they deserve it!) but provide huge breaks for the rest of us and just illustrate how badly centralized our money economy has become. It would also cause the dollar to go stratospheric and actualyl make it a worthy currency and return us to being a creditor nation like we used to be. But none of that would happen since it's effectively the largest default in history.

January 7, 2008 at 1:40 PM Anonymous said...

So, Are you advocating self defeating ideal's? or just preparing the "WORLD" for a belt tightening?
By stopping the bribes and payouts to foriegn countries and bringing our military home to protect us here at home---- and spending their hard earned money here domestically (as opposed to the economies abroad) --- it creates a win win situation---

Do you pick at the scab and continue to let the problem bleed? or do you put a bandage over it and allow it to fix itself?

Sending money over seas (Pakistan 10 billion in the last 8 years) is bleeding our country dry....

stop the bleeding people..

January 7, 2008 at 1:47 PM Azzuth said...

We Americans need to be willing to buckle down and take one for the team if we want to have a team.

The economy is going to crash if we allow our government to continue to spend like it spends.

Sacrifices will have to be made by you and me, but if we do this right and face our problems like adults; our children will have a much better country to live in.

If we don't our children might find themselves living in another country completely... we do owe China a lot of money...

January 7, 2008 at 2:01 PM Anonymous said...

You are not doing your homework Ron Paul has told us over and over again how it can be done without the pain you are talking about. Just another uninformed American who needs to wake up! Too scared to be free. How some so dearly love a cage.
Louis Tash

January 7, 2008 at 2:34 PM Aaron Winkler said...

I heard something interesting about Reaganomics, in which Reagan admitted to be a mistake.

The theory was, if we cut personal income taxes, and give consumers more money, they will buy more goods. Some of those goods have federal taxes/tariffs applied to them. The extra taxes gained from those goods would help offset the loss in revenue from income taxes. The second thought was that there would be more money invested which would cause markets to grow, which would provide more tax revenue through capital gains and other taxes on investments.

Anyway, it's a theory, and not a fact, because the govt cannot control what ppl do with the money they are left with.

Now where Reagan took this theory was that he thought these actions were going to provide the governtment a surplus, so HE WENT OUT AND SPENT MORE. The surplus didn't materialize and the debt got quickly out of control.

Now Ron Paul is not a Reaganomic. He does not have the plan to cut income taxes, boost the economy, project a huge increase in tax revenue, and spend accordingly. He recommends spending a whole lot less. I would love for him to come out with a fact sheet so that we can see the numbers, but apparently losing the income tax would return our federal revenue to about what it was in the year 2000. So what he's saying is that George Bush increased Revenue by $1 Trillion in his term even with a tax cut, but went on to spend even more than that. That's crazy.

Anyway, he's not a reaganomist (sp), but he's a realist. How much and what he would cut is important to know as a voter, but what he wants to do is not an impossibility. The other big issues is our debt payment. We pay something around $500 Billion a year in debt payments. Now, hearing that, I wonder how he could get rid of this debt, but if the 16th amendment didn't exist, politicians would not have had the audacity to incur that debt.

The other thought provoking statement is his believe that washington incurred that debt, not the ppl, and he doesn't believe we should force the ppl to pay that debt back.

I would like to see more details from him.

January 7, 2008 at 6:35 PM Anonymous said...

It only leads to deficits if spending is not cut as well. Taxation is negatively correlated with economic growth, so the lower it goes, the higher the growth potential. You must possess the balls, however, to cut spending as well. And that is where most tax cutting pols fail.

January 8, 2008 at 5:45 AM Anonymous said...

The extreme views are the neocon ideas of premptive nuclear war and torture.

January 11, 2008 at 6:28 PM moe said...

What is EXTREME about OUR CONSTITUTION??????????????????????????????????????????????????????????????????????????????????????????????

March 9, 2008 at 12:47 PM Anonymous said...

I don't understand why people view his ideas extreme. Think about this, Ron Paul is a conservative so he wants what works to stay and understands the issues of overspending. He is also on the opposite of that (I guess liberal?) because he wants to get rid of things that dont work. I think thats a pretty 'moderate' candidate. So his ideas shouldnt be extreme. They should and are appealing to both sides of the political spectrum. People who simply think "oh its so extreme to get rid of the Federal Reserve" really dont know thier history.

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