Show: American Morning
Kiran Chetry: Well, if you’re feeling better about the economy, you’re in good company. More than 90 percent of leading economist say they see the recession ending this year. They were surveyed by the National Association for Business Economics. These expert forecasters say they expect a moderate recovery, but unemployment, often known as a lagging indicator, continuing to rise.
In a recent C-SPAN interview, President Obama was asked about the $1.7 trillion debt the government has racked up along with an $11 trillion deficit and he had this sobering response, “We’re out of money.”
One member of Congress has been sounding the alarm on out of control spending. He is Texas Republican Ron Paul and he joins us this morning from Clute, Texas. Congressman, as always, it’s good to talk to you this morning.
Ron Paul: Good morning. It’s nice to be with you.
Kiran Chetry: So President Obama says that in the short term, the government needs to spend this money to salvage the overall system. Do you agree that the short-term spending is okay, so long as it’s not protracted and the end goal is to reduce our debt and deficit?
Ron Paul: But he contradicts himself. He wants to spend more money, but he admits we don’t have any money. So the question is where does he get the money. Well, we can’t tax the people anymore. They’re overtaxed and the economy is weak. The commonsensical to do is to cut spending, but nobody wants to cut spending. Everybody gets everything that they want in Washington, whether it’s overseas spending or any welfare spending. It’s endless.
Just this week, the President promised $100 billion to the IMF and he says we don’t have any money? I mean, it makes no sense. It’s just absurd. The people are outraged over this. They can’t figure out what we’re doing in Washington and I go there on a regular basis. I can’t figure out what they’re doing. They seem to live in a different world. They’re not living with reality.
To get out of bankruptcy, when you don’t have any money, the goal is “to spend more money, run up more debt”? And it makes no sense whatsoever.
Kiran Chetry: Does Congress have the ability and the will to try to put some strings on that as you guys talk about these budgets? Are there timelines in place, so that it’s not just rhetoric, but that there is actual process of showing how we’re going to eventually try to make sure that we pay this money back?
Ron Paul: Yes, they have the absolute responsibility, but they also ought to realize what history shows that once you get a certain amount of debt run up by a government, it’s never paid back and we’re past that point.
Debt is always liquidated. The only question is how you liquidate debt. Now, General Motors is going through a liquidation of debt. That’s the way you should do it. Governments don’t do it that way. They liquidate debt by devaluing the currency and paying back their debt with money that has no value. That’s what they’re working on.
They want inflation. They want to be able to take this huge amount of debt, and if we owe $11 trillion and you have a 50 percent inflation rate, you know, you’re down to $5 and 1/2 trillion. That’s what they’re working on. They’re begging and pleading for inflation.
Kiran Chetry: Well, the interesting thing. I mean, you’ve talked a lot about your concerns over the value of the dollar and in the fact that the Fed just can print money and you called that whole notion absurd. Yesterday, we saw a little bit of a bounce in the dollar. People still want our debt across world.
Ron Paul: You know, that is true because everybody else has a fiat currency too, so when the dollar goes down, it doesn’t necessarily mean the Yen and the Euro is going to do well. It means that prices may go up and will likely go up in all currencies.
But once they panic and get out of the dollar, so far they’re going to the dollar, and that’s right. The financial system has collapsed. The house of cards has come unglued and that’s why we’re in such trouble. So the dollar fiat standard has broken down, but the dollar, people will hold dollars. They will buy Treasury bills. Even China is buying them.
Kiran Chetry: Right.
Ron Paul: But they’re between a rock and a hard place because they don’t want to destroy the dollar. But eventually, it has to happen because you can’t create $2 trillion in one year and run a deficits of that magnitude and not expect the value of the dollar to go down and it’s coming. It’s coming soon, maybe within a year or two or three, but it will come and it will be a lot worse than what we’ve just gone through. So this reprieve that we’re having…
Kiran Chetry: Now, I know what you’re saying, but what about some of these assessments that we are seeing some signs of life in the economy as we’ve just talked about before we brought you on. Some of the leading economists say that they see the end of this recession coming sometime in 2009. Perhaps, does that support the notion that maybe some of this spending to get the economy back on track has been working?
Ron Paul: Well, I think a lot of people believe that, but I think they’re totally dreaming about it. I mean, if you can look at spurts in the 1930s, but usually it just led to bigger trouble down the road. By 1939, unemployment was like 18 percent, so it never improved with all this interference in the 1930s and we’re doing the same thing again, only I think it’s a much bigger problem that we’ll have this time.
So because you have these blips, people are always hopeful, but the conditions have not changed. We have not liquidated the debt. We have not liquidated the malinvestment. We still have 19 million uninhabited houses, houses up for sale and we’re trying to prop up housing prices and we’re trying to get people to build more houses, so it makes no sense.
Even the bankruptcies, General Motors should have been bankrupt a year ago and it would have been cleaned up, but now, we’re involved in the bankruptcy. It has become politicized. Our government is dictating what the law should state. The court should deal with this. We shouldn’t decide who or which bondholders get the benefits. So it is a mess that we’ve created and we believe it’s the [more] regulations that we need.
But believe me, free enterprise and sound money did not bring on this problem. It was interventionism, corporatism, and crony capitalism. This is what gave us our problem. So we’re going to remain in this mess until we realize what we need is more freedom, sounder money, and get the government out of the way and let the debt be liquidated and get rid of the malinvestment.
We don’t need more of the same that created our problem.
Kiran Chetry: All right. Well, Congressman Ron Paul it’s great to get your point of view and your take on things. Thanks for being with us this morning.
Ron Paul: Thank you.
News Anchor: Well, you always know where he stands when he wrapped up an interview.