Melissa Lee: If you want honest talk about what Washington needs to do to get its fiscal house in order, there is no better person to talk to than our next guest, the always outspoken and insightful former Congressman, Ron Paul joins us now on the phone. Dr. Paul, it’s great to have you back on Money in Motion.
Ron Paul: Thank you, it’s nice to be with you.
Melissa Lee: We are market watchers, and this is what the market is telling us: the S&P 500 and the DOW were marching up towards new highs, and the U.S. dollar is also getting stronger. At the end of the day, could this sequester actually be a good thing for the U.S. economy?
Ron Paul: Well, if they really had some cuts in there, it would be a good thing, but there aren’t any cuts, so I wouldn’t give that any credit. But income is going down, it was a bad month in January, and it had to do with the fact that taxes went up. But the President is laying the groundwork for saying that if there’s any problem within the next year, it’s all because of the sequester. But the whole thing is, the sequester isn’t there, it’s just a fear tactic in order to raise taxes, that’s what they’re doing. If there’s a crisis, believe me, the Congress will spend the money. If it’s a financial or a war crisis, they’ll spend the money and there’ll be no hesitation. The Fed spends 85 billion dollars a month, and they’re questioning this whole thing about this nickel and dime. The proposed increase in spending in the next 10 years is 2.5 trillion dollars, and if the sequester goes through, they’re only going to spend 2.4 trillion dollars in additional funds, it means nothing.
The budget is going up automatically at about 7% per year, if the sequester goes through, it will go up at 6.9% per year. I’d like to challenge the people who think this is a big deal by saying, “Okay, you don’t want any cuts? I won’t cut anything, let’s just freeze the budget and give everybody what they had last year”, and see what they say then, because they wouldn’t accept that. But I say just have the budget the way you had it one year ago, and then you can’t complain that you had any cuts.
Andy Busch: Dr. Paul, it’s Andy Busch here, we missed you this week with Bernanke testifying at Capitol Hill, we would have loved to have had your insights then. But isn’t this really a tempest in the teapot? I think, at the end of the month, the big battle is with the continuing resolution. What’s your view on the potential shutdown of the U.S. government over that spending fight?
Ron Paul: I don’t think so, I think they’re afraid of it. A big argument goes on and there’s the pretence that one party wants to cut and the other one doesn’t. But both parties are against having anything in the military budget, so they’re not going to shut down the government, that would be my opinion. And they’re not going to really ever cut anything. As long as this world and the people accept dollars, which they continue to accept, they’re going to keep printing the money, Bernanke is going to keep printing 85 billion dollars a month. And that’s what they’re going to do until the confidence is lost, there are going to be no cuts, there’s not going to be any move towards cutting any budget or balancing the budget, there will be no move in that direction. So I don’t believe for a minute they’re going to close the government down for anytime at all.
Brian Kelly: Dr. Paul, it’s Brian Kelly. I guess what we’re seeing is just this massive disconnect between Wall Street and Washington about what’s the rational path forward. As somebody who was in Washington, is Washington’s definition of ‘rational path’ different than Wall Street’s and Main Street’s? Are we just seeing huge disconnects?
Ron Paul: Oh, there is, and I don’t want to say too much against Wall Street, but I think Main Street has a pretty good feel about this. Wall Street certainly, from my opinion, has a good feel about it on the short run, they know what markets do on the short run, and they know that this is not a calamity. I think at the grassroots, though, Main Street knows that on the long run, this is a disaster. And I think this is why a lot of young people are interested in what I’m saying, because they’re inheriting this mess, and they know what it means on the long run. But the people in Wall Street are pretty good at figuring this out in the short term, and I think they have it correct: this is not a financial disaster. But I think the long term process of spending, huge deficits, not cutting anything, and printing up money, is a disaster, and there are a lot of people who are starting to understand that.
Melissa Lee: Dr. Paul, it’s always great to speak with you, thank you for your time.
Ron Paul: Thanks for having me.