Ron Paul: Economics 101 Is Not Rocket Science!

by Ron Paul

Last week the Congressional Budget Office (CBO) issued its annual long-term budget outlook report, and the 2012 numbers are not promising. In fact, the CBO estimates that federal debt will rise to 70% of GDP by the end of the year– the highest percentage since World War II. The report also paints a stark picture of entitlement spending, as retiring Baby Boomers will cause government spending on health care, Social Security, and Medicare to explode as a percentage of GDP in coming years.

While the mainstream media correctly characterized the CBO report as highly pessimistic, they also ignored longstanding errors of methodology in CBO estimates. And those errors tend to support arguments for higher taxes and government spending, when in fact America needs exactly the opposite.

As Paul Roderick Gregory explained in a recent Forbes column, CBO has always applied wrongheaded assumptions inherent in Keynesian economics when forecasting future deficits – no matter how many times both history and economic theory have proven such assumptions incorrect. In particular, CBO seems wedded to two enduring Keynesian myths: First, that higher taxes necessarily increase federal revenue and have no negative effect on the economy; and second, that lower government spending hurts the economy. Neither is true, of course.

CBO also fails to factor in unexpected wars and expensive foreign entanglements, and we should not assign too much validity to predictive models based on peace. Judging from the actions and rhetoric coming from both parties in Washington, new military entanglements in Syria and Iran may well spike military spending in coming years.

Despite these sobering budget realities, the CBO report suggests that a solution is possible with merely a few minor adjustments in the way Congress handles economic issues. But what we need are not minor adjustments, but rather a fundamental shift in our philosophy of government. If we could come to our senses about the proper role of government in America, and what level of government interference is appropriate in a free economy, we would quickly find that there is no reason for government to spend so much, borrow so much, and tax so much.

If we simply allowed markets to work free of governmental or Federal Reserve interference, bad debt would be liquidated relatively quickly and malinvestment would be curtailed. Scaled-back regulations would encourage businesses to expand. Lower taxes would jump start investment and spur job creation.

This is not rocket science, it is Economics 101. All it would take is for government to get out of the way. There would be some short term pain, of course, but only by allowing the bubble to burst and bad debt to liquidate can we ever hope to begin building a real economy again.

The CBO report was alarming to most simply because they know neither party will take the steps necessary to avoid eventual fiscal calamity. Instead, despite their rhetoric, both parties want to maintain the fantasy that “deficits don’t matter.” But the CBO report, combined with what is happening in Greece and the European Union, should finally make the undeniable case that economic realities apply even to industrialized first world economies. We must take concrete steps today to avoid having America become the next Greece.

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153 Comments:

  1. Politics 101

    Ron Paul, you need to inform your supporters on your position regarding Mitt Romney

    &

    your future plans in the US Presidential elections.

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  2. Believe me I’m sick to my stomach over it. I just want to hear it from Ron Paul himself.

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  3. Hey Ron, we are waiting for you to make a statement. It ain’t business as usual for me.

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  4. Hey Ron, how about giving us our campaign donation money back!!?
    We supported you, funded you, spend countless hours for the cause of liberty only to have you and your so play politics. Not on.
    Either go all out like a bull in a china shop and cause havoc in Tampa or you will be remembered as the great one who sold us out!
    The reason we liked you was cos you never compromised, but now you have, everything has changed.

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  5. Hey Ron, how about giving us our campaign donation money back!!?
    We supported you, funded you, spend countless hours for the cause of liberty only to have you and your so play politics. Not on.
    Either go all out like a bull in a china shop and cause havoc in Tampa or you will be remembered as the great one who sold us out!
    The reason we liked you was cos you never compromised, but now you have, everything has changed.

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  6. Well, Rand Paul’s political career is just starting, he’s young for a politician and has ways to go. His supporting of Romney is anything scandalous, more like a political strategic move. I’m more or less neutral on him, although he’s more appealing than most politicians (even of his generation), so he’s bound to have an interesting track record in the long run. Some Ron Paul will always exist in him, even if he does things quite different.

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  7. If it is anything like the offer given to Hillary, I wouldn’t have refused it either.

    I’d be found in a shady motel, officially dead of a Marijuana overdose… and the media wouldn’t question it =P

    I still don’t know if I like/trust Rand. They say the fruit doesn’t fall far from the tree… but I don’t think the RandFruit is ripe, yet.

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  8. Rand wants to change the system from the inside. Ron is more transparent. Rand just doesn’t understand that he is powerless against the machine without us.

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  9. Rand wants to change the system from the inside. Ron is more transparent. Rand just doesn’t understand that he is powerless against the machine without us.

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  10. Romney made an offer Rand couldn’t refuse. Whatever the offer was is anyone’s guess, and even though Rand deserves the benefit of the doubt, the move to support Romney has tarnished his image and reputation.

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  11. Maybe someone threatened Rand’s family. Maybe they paid him off. Maybe they surrounded him with “smart” people who give him “strategy” advice. Maybe he’s pure evil.

    If I knew these things, I might start throwing around accusations and jumping to conclusions… Until I know, that would make me an ass.

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  12. “You can’t trust anybody.” I whispered it over and over to him. “That is all Timmy had to hear. Never again would he trust another human being, and that is the leash I keep him on. I showed him betrayal after betrayal, and he surmised, ‘Everyone betrays you.'”

    He has no hope, because he thinks no one will help him.

    “He thinks he is the last honest soul on the planet, and though he will walk by a thousand people who would aid him, he will not ask a single one for help. He is mine forever.”

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  13. Our weekly campaign for liberty group was 10 a couple months ago… yesterday, it was about 20. Sooo….

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  14. Im appalled by Paul supporters that are flipping out over an endorsement that Ron didn’t even make; but lets say he did make an endorsement, is our memory that SHORT? So Ron’s last 35 years of standing up for us and consistency just doesn’t matter. It’s amazing how rare a man like Ron is, and yet we’re so quick to demonize him over nothing. The message doesnt die with him, and he’s stated that several times. He is merely the torch bearer that paved the way, now its our job to continue his work

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  15. Rand sold out, Ron didn’t. Rand voted for the sanctions on Iran, you think Ron supported that? Rand says he thinks Guantanamo should stay open, you think Ron supports that? Rand has been evasive of his stance on the drug war, we all know where Ron stands on that issue. I could go on, but the fact remains that the apple (Rand) has fallen far from the tree on several issues, so to equate Rand’s tentative endorsement of Romney with Ron Paul is not only fallacious, but a stupid assumption.

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  16. wRONg Paul sucks donkey dick! Just wait and see, wRONg Paul will back ROMNEY so his kid will become the nominee for “Vice” President, just like I’ve been telling you all along!!!!
    And you saps fell for it, “hook, line and sinker”.
    YOU CAN’T TRUST ANYBODY!

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  17. im voting gary johnson in the libertarian party if ron doesnt get the nomination, i encourage others to do the same

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  18. he is probably under a lot of stress from rand’s political turn around.

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  19. WTF? He must have tens of thousand of abusive emails and not one mention. This is a sick joke.

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  20. Very good to try to understand about Dr.Paul

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