Former US Comptroller General Dave Walker says the US debt is actually three times more than the $18 trillion we see in the media, yet the NYT’s favorite economist Paul Krugman still believes the real problem is not enough spending! How much is enough?
Ron Paul: Hello everybody and thank you for tuning in to the Liberty Report. With me today is Daniel McAdams and it’s good to see you today Daniel.
Daniel McAdams: Good morning Dr. Paul.
Ron Paul: Just recently Dave Walker who was the Comptroller under Clinton and George W. Bush has spoken out, as he has been over the years and he keeps writing about it. He’s one that has the reputation of being very concerned about the debt. I don’t consider him in the Austrian school, but he has a good handle on the danger of debt, so he made some comments on a program and somebody wrote an article about this that gave us a few statistics for us to think about.
I would say that his approach to debt is somewhat different than Paul Krugman’s approach to debt, but he was saying that the national debt now, we owe, everybody recognizes 18 trillion dollars and it’s going to 20 trillion and it’s horrible. What Walker has always done over the years and I visited with him when I was in Congress and he’s been determined for a long time, because actually I think he resigned as a comptroller and went into fighting the debt.
He said if you add up all these things it’s going to be a lot bigger. There’s pension funds, there’s Social Security and Medicare and all kinds of contingencies and he said that would be 65 trillion dollars and I don’t know whether that will wake up anybody, I don’t think it will persuade Krugman and that crowd, but evidently it’s a significant amount.
Daniel McAdams: And people are in panic over 20 trillion, because it’s hard to even conceptualize that much money and I think people have a natural aversion to the idea of debt, I think it’s something ingrained in us, but we were saying before the show that you are wondering if that 65 even calculates everything. How do you put these numbers together?
Ron Paul: As hard as he works at this in giving us a number I think he’s just minimum, under today’s conditions and he doesn’t postulate of what kind of conditions we might have. I think it could be a lot more, I think it could be over a hundred, but I wouldn’t know that as a fact, but just the way things have gone and will continue to go, the debt is going to go.
Take for instance if interest rates and they are creeping up right now and someday the Fed will lose control of this and the interest rates will go up and can you imagine the difference between paying 1 percent for debt versus 5, 6 or 7 percent? One time they were paying 15 percent on reasury bills when all confidence was being lost in ’79 and 1980. That’s unknown. But the other thing is the income is unknown. How can they know how many people are going to be employed? How do we know what their income is going to be? How about the inflation, what if they recognize and admit their is an inflation and they boost the benefits. The benefits generally over the lifetime of Social Security has always gone up.
How many times have they been corrected estimating the cost of medical care, prescription drug programs and they are always wrong, it always costs more. There is every reason to believe that is going to be a lot more. I think one of the important things is that we are dealing with a Ponzi scheme and Ponzi schemes are very unpredictable, the beneficiaries are dependable on the people who are supposed to be producing. It’s a mixed bag because the beneficiaries get some money just purely out of cash, by debt and the Fed printing the money, but that eventually translates into a cost to the middle class, which are suffering right now.
Then, if you have a smaller working group you are not going to have the money and the income won’t come in and the labor participation rate is very low right now and there is a lot of people who want to continue to spend of welfare and warfare state and I don’t know, I don’t think we will ever educate them to think that those individuals running today on slashing the military budget and we can’t do that and they are not slashing anything, it’s all a bunch of lies.
Daniel McAdams: Mark Walker makes a good point on that topic which is that it makes the point that we are not going to be able to be strong internationally with regard to our foreign and military policy with this kind of debt piling on and I don’t know where it comes down on whether we should have this kind of Empire, but I think he rightly makes a point that maybe some people will start paying attention to.
Ron Paul: Yeah and I think that’s a reality and of course you can see it two different ways, I’ve made the point that I think the Empire will end and that’s the way it’s going to end and those individuals that are gung-ho over running the Empire ought to be very good fiscal conservatives, but they aren’t. They don’t worry about the debt and they make deals with liberals and they continue to go up. I don’t think the warfare state and the Empire can continue and most Empires come down because they can’t afford them and it’s too much of a drain on the economy.
There is a fallacy out there that is still around, even though it is ridiculous and that is that war makes a country more prosperous and they always use World War II. I remember a little bit about that and people weren’t exactly prosperous at the end of the depression during the World War II, the depression didn’t end until after that and then there had to be payments for it and then there is inflation. No, I don’t think there is a free lunch on that, I think you always have to pay for it.
Daniel McAdams: It’s interesting we look at the Walker article and you sent me earlier today an article by Paul Krugman, he has a very different view, he says the whole problem started in 2010 when people started getting worried about government debt instead of more spending.
Ron Paul: Yeah and he said that the austerity was a grim legacy and that if few people wanted to cut back and hadn’t done this, we’d still have this prosperity. There was no cutting back, it totally endless, it’s sort of like some people think what we had, like Republicans and Democrats, we had to get rid of sequestration, because it was just too much cuts and they buy into the Krugman argument, though they would never admit it, but they buy into this argument, but there was never any cuts, even the pretense of cutting the increases was a fallacy too, because they knew how to circumvent the rules, not only can they circumvent the rules with foreign aid packages and different budgets, but what about the ability of the Fed to facilitate things overseas when we are not allowed to see their books and find out who’s getting this credit, who are they propping up and what companies are benefiting by this and what central bank is getting assistance.
They play these games so that is something we can’t accept, we have to point out the fact about what real debt is and I believe real debt is very serious. One thing Krugman doesn’t do, he talks about the federal debt, why we should not worry about it. Frequently on our program, we talk about a comparison, if an individual goes into too much debt, there’s a limit, there’s an endpoint, they don;t earn enough to even pay the interest, let alone the principal and the bankers close out and somebody has to go bankrupt.
He doesn’t talk in those terms, but I think he principal is even though governments that can tax and inflate, they can meet that bankruptcy in a different way by counterfeiting the money and defaulting on value, but it’s still the same principle. If you and I run up a debt and all of a sudden nobody would lend us money, but we felt like we had to pay the debt off, I mean working hard and paying the debt off and living beneath our means would be one thing, but governments never do that. They say, the Krugmanites just want to print more money and that will deal with it and that will stimulate the economy and increase revenues and you’d think that they would have a little bit of a concern that maybe their policies aren’t quite right.
Daniel McAdams: It’s interesting because just today Krugman’s article talks about everything you said, printing the money he said, job growth is at rates not seen since the 90s, a record number of Americans have health insurance, college aid is there, but he doesn’t understand that all of a sudden there is this doom and gloom everywhere and he doesn’t get it and he ends by saying throwing up his hands, I guess it’s just existential despair. Surely, I am sure you have a better answer than Krugman for this.
Ron Paul: I think it’s part of the correction, it isn’t what our current policy didn’t create our current conditions. policies of quite a few decades created this condition and they especially became magnified and have been manifested since that day when I had an enlightenment about the monetary system back in 1971 where there would be no restraints on printing of money and no restraints on spending and no restraints on debt and that is when we delinked the dollar from gold. That meant there would be a lot of bubbles, a lot of distortions and eventually one would have expected if you understood Austrian economics, that there would be a total weakening of the economy and that’s where we are.
What about the productivity, we don’t have the productivity out there to pay the bills and the Ponzi scheme is that way. There is not enough new people to pay the bills for the people on the receiving end. The people on the receiving end are under the cloud of government, even though they never really keep up and they always get more stuff, whether it’s more medical benefits, now it’s free medicine with Obamacare, it’s not working. There is not enough young people earning enough, so they have to realize that the only thing Krugman can do is print more money and run up more debt and think maybe the economy will produce again.
He doesn’t understand that there has to be a correction, when there is a malinvestment, over-investment and too many jobs that weren’t based on the proper rate of interest, when you have excesses in the economy, then you have to eliminate that’s what the planners don’t want, they don’t want it, so what they do is they just perpetuate the problems, which keeps things maybe not crashing which will come later and they keep getting worse and the problems get worse and debt keeps growing. Debt is a very good symbol of what is happening even if zero interest, you still have to pay off the principle and that is a major problem.
Daniel McAdams: He seems to just throw his hands and say it’s our fault for having this despair.
Ron Paul: Productivity is a very valuable tool for keeping the economy healthy and paying the bills as an individual and should be with a country. It’s also important, I have a certain philosophy about productivity and people’s mental health. People thrive on the feeling like they did a good job, no matter what level it is and if they do it and think yes, it’s good to have rewards and everybody should work enough for the rewards to take care of themselves, but I don’t think it’s the key to it. I think it’s the satisfaction of earning enough and taking care of oneself and taking care of one’s family and when you do not have the satisfaction you become very, very unhappy.
This could be in cases of, you read a lot of stories of very wealthy athletes and movie stars that don’t seem to handle their wealth very well and become despondent and commit suicide. I would be willing to bet that people who produce something and made an honest living and didn’t feel the guilt about it, that they are going to be less likely to be involved. But, today, even Krugman is recognizing this, there is something weird going on, but he doesn’t understand the business cycle and this is going to get a lot worse.
The middle class is getting wiped out, he says that is true because we are not giving them enough money. That is an old argument and is going to go on and on. This is the first time I think I saw anything that Krugman said that sort of granted the fact that he can’t quite figure this out and they’ve put all this money in these programs and there is a white man’s middle class despair and they are committing suicide and basically I think we have created a generation that has, not no satisfaction, but little and a lot less satisfaction from being able to take care of themselves, because I think basically that’s what most people want, even though there’s a class we have created that believe that entitlement is right and of course the entitlement mentality also creates a lot of hostility, because they see this as a right and there is no satisfaction out there when people are totally dependent on entitlements and that goes for both rich and poor, because that’s when you get the aggressive nature of using government to benefit certain special interest groups.
I want to thank everybody for tuning in today to the Liberty Report and please come back soon.