Ron Paul and Rand Paul on the Debt Negotiations

Neil Cavuto: Reaction now. We’ve got Rand Paul with us. Senator, you’ve been looking at this very, very closely, you were saying that neither this plan nor the Reid plan (because the cuts weren’t big enough or even substantive enough) would be passable in your eyes, right?

Rand Paul: The interesting thing about this vote is, it is not as popular as Cut, Cap and Balance, which we passed about a week ago. We had 234 votes, including Democrats and most of the Republicans.

Neil Cavuto: But not in the Senate, the Senate could never get the opportunity, right?

Rand Paul: This isn’t in the Senate either.

Neil Cavuto: Will it ever be given a shot in the Senate, or is it this Kumbaya kind of feeling, go ahead and try.

Rand Paul: Here’s what I don’t understand; they said Cut, Cap and Balance, which we passed 2 weeks ago, was dead on arrival. They’re saying this one is dead on arrival, why are we passing a second piece of legislation that’s dead on arrival?

Neil Cavuto: Why, why?

Rand Paul: I don’t know, we modified our first position before we had a chance to find out what they’re position was. The only thing we know in the Senate is that the President’s budget was introduced, all the Republicans voted against it, and all the Democrats voted against it. So what are they for?

Neil Cavuto: You’re right here, but I’m telling you my read, Senator. I know you’re a freshman Senator, but I can’t fathom how you guys operate.

Rand Paul: Yea, I don’t know either. One thing the President got right the other night is it’s dysfunctional. But what he gets wrong is, we’re not doing the people’s business, because we’re not listening.

Neil Cavuto: What do you think the people are saying?

Rand Paul: 75% of the people say that we should balance our budget, and he wants a balanced approach, but he sure doesn’t want to balance the budget.

Neil Cavuto: But he’s turning it around by saying, “indeed shutting down the government or risk default”, and they don’t what that. What do you say?

Rand Paul: Neither do we, I don’t want default, I don’t want the government to shut down, but I want the other side to behave responsibly. They haven’t passed a budget in two years, they don’t pass appropriations bills, they aren’t doing their job. They’re not even showing up for work and doing their job up here.

Neil Cavuto: Is it going to be tough to go back to Kentucky, Senator, in the event that, let’s say, the deadline isn’t met. And Tuesday we’re looking at at least a partial government shutdown. Obviously, a 172 million dollars a month in tax revenue still comes in, you can still pay some things. Obviously, bond holders Social Security and Medicare recipients would be among the premier names, I guess. But how is that going to go down.

Rand Paul: Well, for one I think they will raise the debt ceiling before then. But if they didn’t, I think the President really ought to be ashamed of scaring people over the last couple of months. I mean, scaring senior citizens and telling them they might not get their checks, that’s just irresponsible. We, in fact, have a legislation that directs him and tells him by law he has to pay the senior citizens.

Neil Cavuto: Don’t you think he knows that? And by the way, we’re looking at what appears to be getting close to a final vote here in the House for the Boehner measure. It’s sort of a two step, I think that’s the way you can explain it, Senator. But it’s going nowhere fast, it does cut spending but not nearly enough to your liking.

Rand Paul: Well, it cuts the rate of increase in spending. It doesn’t cut spending, it’s going to add 7 to 8 trillion dollars of debt over the next 10 years. It doesn’t slow spending. A freeze in spending would actually cut some spending, or a 1% cut. This is an increase in debt and an increase in spending every year, and it’s not going to help the country.

Neil Cavuto: I always suspect something is going on behind the scenes that I don’t know about, and that a secret deal was being done? What do you think?

Rand Paul: I have the same suspicion, I think they are working on some kind of agreement. And many people say there was an agreement hatched out on Sunday and the President penchantly walked away, but they already have a deal. I think there’s no chance the debt ceiling doesn’t go up, and I think the market place knows that.

Neil Cavuto: But does it…

Rand Paul: Yea, I think it does, it goes up before then. But the interesting thing is that by saying, “Oh, the marketplace went down 500 points in the last week”. Well, yea, we’re growing at 1%, do you think that was good news that the economy is not growing? Yea, it’s all about the economy, I don’t think Dow Jones is at all reacting to this. They’re assuming that the debt ceiling will be raised.

Neil Cavuto: Okay, the fellow next to you, what’s he saying? I don’t believe a word he’s saying. He’s your dad, Ron Paul, the Texas Congressman and presidential candidate joining us right now. A father-son team; I’m honored to have both of you here with us.

Ron Paul: Thank you.

Neil Cavuto: Congressman, the Senator, your son, was saying pretty much what I’ve heard you say, and that is this is probably going nowhere fast. But bottom-line is, both of these measures that are being contemplated, the Harry Reid measure and this measure, don’t cut spending enough or take it serious enough, and therein lies the problem. What do you say?

Rand Paul: Yea, matter of fact, it doesn’t really cut anything. I’ve just seen another report out that actually says spending next year is going to go up a trillion dollars. That made me suggest maybe we ought to just freeze the budget, that would be a good way to shrink the budget, too. So no, this doesn’t touch the problem. And my argument has been that it’s not a budgetary problem, per say, it’s a government philosophy problem. As long as we think that we can run this entitlement system as we have, and as long as we think we can police the world, this budget doesn’t mean anything.

Neil Cavuto: But this barely touches entitlement itself. And Democrats were complaining more that it was actually (?) and Nancy Pelosi saying that it could compromise life on this planet, as we know. So that notwithstanding, if just little minor adjustments in the growth of the entitlement scheme could incite this kind of wrath, are we ever going to make progress?

Rand Paul: It’s reasonably pessimistic. I tend to use a word for people who talk that way, and I think it’s demagoguery.

Neil Cavuto: You think Nancy Pelosi has done demagoging?

Ron Paul: I think it’s on both sides extremely, because it’s power in politics, and it’s partisanship that I don’t enjoy it at all, because I want to deal with the philosophy of government; what the role of government ought to be and what the role of the money should be. That’s where the real issue is, and it’s not tinkering with the budget. We should do everything we can and emphasis this cutting. But just like you say, you cut a little, just think of how Paul Ryan got beed out. I didn’t support it because it wasn’t enough, but he got beed up.

Neil Cavuto: As the Senator pointed out, it’s actually about cutting the growth of spending, not cutting the spending. But does it concern either of you right now that whatever deal we do get, obviously the key to success to get passage or to get both sides on board, is , “Don’t touch those entitlements, don’t look at revenues increases right now”, which I guess the two of you might like, but almost make it vanilla.

Ron Paul: Well, that’s what they’re doing, but what they don’t realize and they don’t admit is the country’s bankrupt, there will be a default, but not the kind that they’re pretending they’re worried about.

Neil Cavuto: So you think the default is happening?

Ron Paul: The default is current because people are getting less for their money, and that’s how big governments in big countries default.

Neil Cavuto: The result of the default is not making good on the payments. Do you think that’s inevitable?

Ron Paul: Oh yea, it’s morally the same thing and economically it can be much more damaging.

Neil Cavuto: No doubt, no doubt. By the way, this has officially passed the House. I think I intermediated as much, but it has officially passed the House. Do you think then that the credit agencies downgrade regardless of whatever happens?

Ron Paul: I think they’re irrelevant. Yes, it might be for a day or two, but they didn’t warn us about Fannie Mae and Freddie Mac.

Neil Cavuto: Well, that’s a good point, they didn’t.

Ron Paul: I think the markets are more powerful than the rating agencies. Matter of fact, the bonds have been doing pretty good.

Neil Cavuto: I want to get to you again, Senator, you might have thought on this: why is it treasury markets have been relatively stable? The yield is lower today on 2, 5, 10 and 30 year notes and bonds than it was yesterday.

Rand Paul: I think they’ve discounted what’s going to happen. But the other thing is we had a banker recently this week who said all of the institutions that hold treasury bills are going to change the rules. They can hold AAA or government bonds.

Neil Cavuto: Oh, so you got some legal room.

Rand Paul: So what they’re saying is when government bonds are junk, you’ll still be able to hold them.

Neil Cavuto: Yea, that’s a big (?) though, because right now technically you can’t.

Rand Paul: Yea, that’s what they’ve been worried about, so they’re changing the rules. But I love the way they’re putting it: “AAA or government bonds”.

Neil Cavuto: Congressman, the presidential candidates, you notwithstanding, haven’t made too big a deal of this drama, saying, “Oh, we got to get our books in order”. You’ve actually put pen to paper with ideas and all that, and it’s actually advanced your popularity. But I mean in one-on-one matches with the President, you don’t do too badly. Actually you’re darn near even. So, in a sense, were you just early on this and people are waking up to it, or will this scare people into thinking we don’t want to hear anything that Ron Paul is advocating and his son is advocating, we don’t want to hear it.

Ron Paul: The longer it lasts, the more supporters we get. The real boost in the support came with the collapse because I talked about it for 10 or 15 years about what was coming. And, therefore, the growth is coming, and this is just the beginning.

Neil Cavuto: When you say it’s the beginning – I’ve always heard that – what do you mean? Lay that out.

Ron Paul: Because all this debt has to be liquidated for us to get growth again, and they don’t want to liquidate debt like you or I might have to declare bankruptcy; no we don’t do that with a country. You liquidate debt by paying it off with junk money. You just print the money and that is liquidation.

Neil Cavuto: Something, for example, Greece can’t do.

Rand Paul: And you have runaway inflation and that’s a price increase and that’s a tax on people; it literally is an indirect tax. And that’s what’s coming, it’s already presently here. I think by next summer, the big talk will be price inflation, and it’s already big talk in a lot of households.

Neil Cavuto: So at the Republican convention, when you’re being nominated as the Republican candidate for president, that will be …

Ron Paul: We’ll be in tough times then and people will be much more attuned to the monetary system because monetary reform has to come for the resolution of this crisis that we’re facing.

Neil Cavuto: Rand Paul, do you agree with that?

Rand Paul: Well, I think monetary policy and debt go hand in hand. You need to monetize your debt because you can’t get enough people to borrow it. So really, the inflation comes as a consequence of debt. They’re all interrelated: debt, monetization, inflation, prices; it’s all coming, though.

Neil Cavuto: If he becomes a Republican nominee for president, would you vote for him?

Rand Paul: Obviously.

Neil Cavuto: Are you guys sharing an apartment or a house?

Ron Paul: We did for a while, but then we had some disagreements and we had to break up. He wouldn’t pay his rent in silver.