Neil Cavuto: Well whether the President strikes a deal or strikes out, one of the folks who wants to take his job says, “You know what? Just default right now because it’s eventually going to happen and later things will be a lot worse.” Republican presidential candidate, Texas Congressman Ron Paul with us right now. Congressman, a default has all these horrific images and fears attached to it, overdone or what?
Ron Paul: Well I think there are a lot of big problems and we can’t ignore it, but I see the biggest problem is not admitting that the country is bankrupt, and if you don’t admit that is the true problem, then you’re not going to have it, you’re going to have this bickering back and forth and you won’t come up with an answer.
But when a country the size of ours gets to the point of bankruptcy, the debt is always defaulted on, there’s no doubt about it, and this has been known long ago as Adam Smith who would argue this case. But there’s only two ways you can default, one is through the deflationary process where debt is liquidated and the other is by debasing the currency, and politically it’s always easier to debase the currency and have the debt liquidated in real terms, than it is to allow the bankruptcies to come. I mean, we didn’t permit the bankruptcies four years ago, and the problems got worse, our debt exploded. So they’re terrible choices, but the worse choice is pretending that the bankruptcy isn’t before us and we don’t have to admit the seriousness of the problem and address it.
Neil Cavuto: You know, that’s a brilliant point because, you know what I’ve always been amazed by Congressman, how did we sustain the AAA rating we have for so many years?
Ron Paul: Well you have to remember who gave us the AAA rating, they’re the ones who gave pretty good ratings to Fannie Mae and Freddie Mac…
Neil Cavuto: Very good point.
Ron Paul: Did they warn us about the disaster coming? No. You have to look to the free market economists to get the real rating.
Neil Cavuto: Yeah that would be like me offering dietary advice, not a good idea. So let’s move on, Congressman and get your sense of what happens August 2nd assuming there’s no agreement here. To hear the President tell that we default, but technically that’s not true is it?
Ron Paul: No, it isn’t true, I mean you pay your bills with your cash flow and you pick and choose what you have to pay, so you don’t default on the debt. You might have to default on some of the agencies of government, but you could pay your Social Security and you could pay the necessary things that have to be done, but there’s a lot of bureaucrats that aren’t all that necessary, so there’s a lot that you could do. But it would be facing up to the facts that you have to deal with it, you have to end up spending money, but August 2nd I think is a fictitious date, there’re already many billions, maybe $75 billion over the debt limit already. And so I think the August 2nd date is more related to the individuals who have trips planned in August and want to clean up this mess. And for that reason, if they don’t come up with an agreement pretty soon, I think they’ll have a temporary agreement that the President says he doesn’t want, but when push comes to shove just like on the CR, they kept having agreements, agreements, agreements when they met the deadline. So I think that will happen because they scared enough people but…
Neil Cavuto: Oh absolutely, you were referring to a continuing resolution and this is the game [inaudible] but you know, you’re interestingly pointing out something I’ve long suspected that obviously the demagoging this whole issue of the debt limit and the horrendous things that happened in the event we don’t increase it, never mind the fact that dozens of times in the past we have and we only revisit the same problems that had brought us to this abyss.
And there must be a growing chorus of folks who are beginning to see things that way, Congressman, or else you wouldn’t be doing as well as you are in the polls. I saw one that has you almost tied with Barack Obama. So there might be a sense here that you’re on to something and not on something.
Ron Paul: Obviously we are onto something, something called the American tradition, so it’s not that I have anything brand new, but I’m trying to revive the American tradition of individual liberty and self-reliance and sound money and a sensible foreign policy and balancing the budget and living within our means, so that is not too strange. But because the country is in such bad shape, they are looking toward us.
But I think the reason I do well with Independents and Democrats is because I work with Independents and Democrats on issues like transparency of the Fed, a foreign policy that is different, monetary policy where we just don’t print money when we need it, and actually seriously talking about a balanced budget, so that has an appeal, as well as on civil liberties. Most Conservatives give lip service to it and Liberals do as well. But people have had their liberties violated when you think of what the Patriot Act is doing and what we put up with…
Neil Cavuto: No, I agree, I don’t want to go to those issues if you don’t mind sir, but I do want to raise one with you concerning this budget impasse, the President’s performance last night that I kind of like into sort of a Rod Serling moment, it was bizarre and we were covering it live on Fox Business which, Congressman, if you don’t get, you really should demand, but I digress, and one of the themes that kept coming up was how angry and disappointed he was at Republicans for bringing us to the brink. If there was a demand on the part of the President as he essentially said “Get in here right now, I want to talk to all of you guys and settle this,” would you go?
Ron Paul: No, I would be pretty annoyed; I was annoyed at him instructing Boehner and the Congressional leaders, “You get up here at 11:00 o’clock.” So it’ll be interesting to see if they weren’t there at 11:00 o’clock, and sometimes you could make the case that since the Congress is in charge of the purse, maybe the President if he was really a leader and wanted to bring people together, maybe he would say, “Mr. Boehner, could I come over and visit with you, I’d like to talk this over with you.” I think that would be a gracious way of dealing with this problem rather than shouting at each other and blaming each other and instructing the leaders of Congress. See, I don’t like a very powerful presidency, I’m not in this campaign for that purpose, because I think the Congress should express themselves more, and more responsibilities on the Congress, so I would treat this quite differently than the attitude of the
President is currently doing.
Neil Cavuto: all right, Congressman it’s always a pleasure, thank you, sir.