January 23, 2008 – 12:54 ET
GLENN: I thought I would get Ron Paul on the phone and find out where he stands on the economy, what the problems are with the economy, what he thinks is coming in our future and how he would correct it if he was President of the United States, and he’s on with us now, hello, Ron Paul.
PAUL: Hello, nice to be with you.
GLENN: Nice to be with you, sir. First of all, tell me what’s happening with the economy.
PAUL: Well, it’s making the correction that was inevitable due to the malinvestment and the unbelievable debt accumulated due to a federal reserve policy. Once they create credit out of thin air, they cause business people, savers to do the wrong thing and you always have to have a correction. So dealing with the recession is very difficult because the cars with a few years ago and we have to work our way out of this, which means there has to be a correction.
GLENN: Okay. If you were President of the United States, what would you do?
PAUL: Well, the advice would be return to the market economy. First we would have to deregulate. We had a crisis a few years ago, at least a supposed crisis with Enron and they superregulated. So I would repeal certainly major portions of the Sarbanes-Oxley. So we would argue for deregulation. Then, of course, there should be major, major tax reform and —
GLENN: Hang on. Before we go into tax reform, let me just start with Sarbanes-Oxley. I don’t want to get all — that’s way deep. So let’s kind of surface skim here so we don’t make people’s heads spin off their shoulders. The deregulation, some people will say that part of the problems, for instance, with the bonds is that these insurance companies, they had no regulation. So they just kept insuring people even though they didn’t have the money.
PAUL: Yeah, but that was all government, you know. When you have the FDIC or the FHA or whatever ones. The main problem is that we don’t save money. That’s where capital’s supposed to come from. Instead we print money. We create money. We call it capital and then interest rates may be 1 or 2 or 3% and business people think, well, there’s a lot of savings going on out there. So they do the wrong things. If interest rates were very high, they would be more cautious but instead we create the bubbles. People start building houses to extreme and then they overbuild and then you have to rest in order for the markets to catch up. And that’s when the bubble collapses, and we’re in the midst of that. But government does it in both ways, excessive credit and also pushing money into certain areas such as housing or the financial markets and they overprice. Then the prices have to come down. So it’s a very difficult situation, but the main goal should be the restoration of the market economy.
GLENN: Okay. So now, you mentioned tax cuts. Congress, both sides of the aisle are talking now about $800 tax rebates to the poorest people in America. I don’t know about you, but I’ve never seen a job created by a guy who’s at the bottom of the ladder. This seems just like a plan to get people to spend which to me is what got us here in the first place.
PAUL: Yeah, you are right. And all you do is you encourage consumption and we’re overdoing consumption right now. It’s not a tax rebate if you send somebody a check for $800 for not paying taxes. That’s a welfare check.
GLENN: Thank you.
PAUL: And that money really doesn’t go to producing jobs. What you have to do is restore the savings and encourage capital investment. You have to eliminate taxes on capital gains and we have to do whatever we can, get rid of the taxes, the death tax and eliminate taxes on dividends and savings. All these things would encourage savings and then have a market rate for interest rates to give us the signal on whether we should be investing or saving or spending. But that doesn’t exist anymore and that’s why we have these perpetual bubbles. I think this bubble right now that has been kept together for quite a few years is a major problem and the unwinding of this problem is very critical. The biggest bubble’s in the dollar bubble and now the dollar is coming under attack. And what are they proposing? Excessive spending, you know, deficit spending which, where are they going to get the money? They don’t have any money in Washington. They either have to borrow from China or print it, which means there’s more inflation. Or the Federal Reserve comes in and said, like yesterday, drastically lowering interest rates? How do they lower interest rates? They print a lot more money. Yesterday when they announced that, the dollar immediately reversed itself and sharply went down and it’s the weakening of the dollar that is the crisis that we face because everybody suffers from that. You and I suffer because all of a sudden the dollar in that wallet buys 80 cents worth of goods instead of a dollar’s worth. So we all get poor and we have to stop that cycle.
GLENN: Nobody understands that, well, they say let me give $800 to the poorest, they are really not doing that much because the dollar is worth so little. The poorest are being hit by inflation harder than anybody else.
PAUL: That is exactly right. The do-good liberal who said we have to take care of everybody — and they are well intentioned. The more debt they run up to give to the poor, the poorer the people get because they cannot keep up. Take, for instance, even Social Security recipients. Their inflation rate might be 10 or 12% and we give them a cost of living increase of 2%. So they’re losing. And you just can’t keep that cycle going. You have to balance the budget, you have to live within our means and then we have to restore confidence to the dollar. So it’s a major, major undertaking. But we have to reverse it.
I think the most immediate thing is to cut back on spending, not increase spending, and get the money back into the hands of the market of savers and investors and people who are spending. But government economic planning does not work and that’s what we’re coming to the realization.
GLENN: Well, when you say government economic planning, the Fed is not the government and the Fed just made the largest cut that they have made since 1984. It is the first emergency cut since right after September 11th. There’s talk now that they may cut another quarter, which is insanity. There’s just no more that you can cut unless you destroy the dollar. What are your thoughts on the Fed?
PAUL: Well, they are the culprit. They caused it. They caused it by keeping interest rates artificially low. How are they trying to solve the problem? Keeping interest rates low. For an hour or to the markets rebounded because they’re conditioned to listen to that and they figure, oh, the market’s going to go up because interest rates are coming down but today I predict the market’s going to go down again because that was only temporary. You cannot change the long-term trend of the market. You can temporarily tinker with it. You can artificially make them go up. But eventually the market is more powerful than the Fed and the government and the rejection of the dollar is the crisis that we face and we face that because we create too much money and we do that because we spend too much, both overseas and domestically and we have to deal with this. We have to live within our means. If we could just freeze all spending domestically and I know we disagree on the overseas expenditures but why do we pay for the defense of Europe and Japan and Korea? We could save hundreds of billions of dollars. So this is my argument and it’s well received. Yeah, why do we pay for defense of Europe?
PAUL: If we could save that money, why don’t we spend that money here? Just think of all the money that would float back to this country if all those military personnel were stationed here spending the money in this country. We wouldn’t be less safe. I think we would be more safe.
GLENN: I’m not necessarily, I’m not necessarily opposed to pulling troops out of some parts of the world but I don’t want to get into that today.
PAUL: Yeah, with he don’t need to get into that today.
GLENN: We can get into that some other time. I really want to focus on the economy and the gold standard. You are one of the only people that is talking about the return of the gold standard. It was — I mean, honestly, I mean, Ron, you know, jeez. I don’t want to sound like a conspiracy theorist but you know what, at times I believe I am a conspiracy theorist because there’s a lot of stuff that just, if you read history and you go back all the way to Woodrow Wilson, you can see that the foundation was laid for one-world government, the foundation was laid for socialism, and I really, truly believe that these — you know, Hillary Clinton says she’s not a liberal, she’s, quote, a modern day Progressive. Anybody who knows what a Progressive is, that is a nightmare. It is the road to socialism.
Do you believe that there is any intentional intent to take us down these roads and bankrupt us because anybody with a clue would know what’s coming around the corner with Social Security, Medicare, Medicaid and I don’t know how you can say I want to do universal healthcare as well.
PAUL: You know, I guess there’s a lot of evidence for that. It’s awfully tempting. I always try to say, well, they are doing it out of ignorance and lack of understanding of how the market economy works rather than saying, oh, I’d like to bring on a Depression. I think they actually believe that they are good managers. Alan Greenspan once told me — because he used to be a gold standard person and he’s written very well about that in his early years. But he says, no, he says, we central bankers have learned to make paper money act as if it’s gold. You know, they come to believe in themselves that there is good and they can manage as well as the market, and I told him after that, I said, you know, if you do that, this will be the first time in all of history that anybody could do that, you know, to make paper money act like gold money.
You know, you should never be embarrassed about the gold standard because one of our most favorite Presidents, Ronald Reagan, told me personally once, he says, you know, he says, I’m interested in gold because, he says, if you study history, you find out any great nation that has gotten off the gold standard will no longer remain great. And we just got off the gold standard totally in 1971 and if you look at the statistics, in ’71 when it comes to spending and deficits and inflation and the value of the dollar, I mean, they’re dramatic. And I just want to make sure we wake up before the dollar totally collapses because that is a real tragedy if we let that happen.
GLENN: How come Ronald Reagan didn’t put us on the gold standard? I mean, if anybody had the clout to do it, how come he didn’t do it? And if you were President, how would you propose we would do that?
PAUL: Well, it’s not easy but what I would do is not want to close down the Federal Reserve because that is dramatic and it wouldn’t happen. It would be chaotic, too. All I want to do is legalize the Constitution, let you and me use gold if we want, which means you have to remove sales taxes and capital gains tax off gold and let it circulate just like currency circulated around the world. So if you want to save for your kids’ education, you can put them in gold bonds and if the dollar, if you’ve got, the dollar’s going down more rapidly than the price of education goes up, you could save in gold. You could get paid in gold and if we —
GLENN: Hang on.
PAUL: Then paper will not be used anymore.
GLENN: Wait a minute. But what you’re proposing, you’re this close to being arrested if you — I mean, if you went and actually did that, they already have. The liberty dollar guys. They have tried to arrest the guy and say, you are trying to compete with the currency of the United States of America. What you’re talking about now, you can be arrested for.
PAUL: Yeah. So the Constitution is being violated by law and it’s supposed to be the other way around. And this is why I used to term this legalize the Constitution, this legalize gold and silver which is in the Constitution. So you would have to change the tax code. You’d have to persuade the congress to do this, but it would be less chaotic. This is exactly what I proposed in the early 1980s when I was on the gold commission, competing currencies. Economists think you can have competing currencies easier today than in the past because the world’s always have competing currencies. Just allow gold and silver to do the same thing.
GLENN: When you were on my program on television, you said something that I didn’t correct because I didn’t — I mean, it sounded so outlandish but I let it go because I didn’t have the facts and you sounded so convinced of it that I thought, hmmm, I’ve got to check into that and I’ll correct it the next time he’s on or I’ll correct it the next day. What you said was, if we got rid of the income tax, the Government would still take about the same amount of money in as they had ten years ago.
GLENN: We looked into it and it’s accurate. Can you explain that and how do we get that message out to people?
PAUL: Well, it’s just that the growth of spending is so rapid that people don’t realize that freezing budgets would be a tremendous benefit and that’s one of my proposals in my economic reforms is just, freeze nondefense and nonentitlement spending which would go a long way to coming to the balance. I think $1 trillion less 10 years ago, I think government was adequate size 10 years ago. But we have this notion that everything that is to have perpetual growth. Just think of our friends in the Republican party that used to run against the Department of Education. What did we do when we finally got in charge? We doubled the size of the Department of Education. We create new departments. We never slow up. Do we do anything to unwind the dependency of the farmers on centralized planning for farmers which pushes cost of food up? You know, it just doesn’t make any sense. The people demand change, or they did in ’94 and the year 2000, no wonder they’re aggravated with us.
GLENN: Wait, wait.
PAUL: We need to at least freeze things without cutting anything.
GLENN: Hang on just a second. The people demand change. Well, the people are demanding change now so much that the voice of the people is so clear that everybody has as their slogan or on their little yard signs either “Change” or in your case “Revolution.” And it is — I mean, it’s everywhere. Everybody knows we want change and yet the people are going to the polls and they are voting for Hillary Clinton or John McCain. How do you explain that?
PAUL: Well, it’s not easily explained but I think there’s a lot of information lacking from these people. A lot of people, you know, you and I and others talk about, you know, the issues and the politics of it but, you know, probably 80 or 90% of the people feel like it’s their patriotic duty to vote but they only think about voting about two or three days before the election. We think everybody’s interested. You know, we get on a stage and have a debate. We think, boy, everybody’s paying attention to us. 80 or 90% of the people are looking at football games but they still feel like they have to vote. It will be very vague information. But all I can see is the people that support me do a lot of reading and they know what’s going on and they know what they’re supporting and they know about the economic issues and they know about the gold standard and they know they don’t like the income tax. So that’s a little bit different. And the other thing is they always know I’ve voted the way I’ve talked and right now there’s a lot of disenchantment with people saying one thing and doing something else.
GLENN: Will you run as a third candidate if you done get the nomination?
PAUL: No, I don’t want to do that. I have no plans of doing that. This is a tough enough job right now.
GLENN: Really? Well, why is that? You don’t think — I mean, if it was McCain and Clinton, you don’t think there would be a lot of people going, well, jeez, I can’t vote for either of them?
PAUL: I think it’s the system that bothers me the most. You know, the job of getting on the ballot, I probably spend millions of dollars and half of my effort just wondering if I could even get on the ballot. Then the debates wouldn’t be available to me and you probably wouldn’t have me on your program or something.
GLENN: Yes, I would.
PAUL: I wouldn’t be a major party.
GLENN: Yes, I would. Yes, I would. You know what, I’m very offended by some of your supporters because they always say that, you know, I won’t listen to you or I won’t have you. I’m probably the guy on talk radio, mainstream talk radio that will at least say I agree with you on a lot of things. I just disagree with you vehemently on others.
PAUL: And I appreciate that.
GLENN: I mean, you know, we just — I just happen to disagree with you, but I respect you, sir, for your opinion. I have said this, you know, behind your back. So let me say it to your face. I think you are the closest we have running to a founding father. You seem to be the only guy who has actually read the federalist papers. So I appreciate your efforts, sir.
PAUL: Well, thank you very much.
GLENN: You bet. We will talk to you again.
PAUL: Thanks for having me.
GLENN: You bet. Bye-bye.