A Review of Part IX of Ron Paul’s “Pillars of Prosperity”
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Dr. Ron Paul has published a new book this year, entitled “Pillars of Prosperity: Free Markets, Honest Money, Private Property,” which contains an extensive compilation of his thoughts on economics and presents an excellent opportunity for a special book review. This the ninth and final installment of a longer review of the entire book, the full review of which will examine each individual part of the book and present a summary of the positions and arguments presented, which have been woefully underrepresented to most Americans. “Part 9 – Spending, Taxes, and Regulations” is discussed here.
In the final section of the book, Ron Paul has collected a number of miscellaneous writings on various topics relating to the free market and government intervention. The main themes which have also been examined throughout the book are prominent in these discussions, including government overspending, intervention in the economy in an effort to help the poor, and the discriminatory practices of Congress in handing out benefits.
The government’s willingness to spend every penny and more that it can tax and borrow has been a frequent issue Paul has raised throughout his speeches. When the politicians can not tax or borrow further, they go to the Federal Reserve, which prints up the money to cover the shortfall. But this new money causes inflation, and the banking system contributes to the problem. Paul states that, due to the fractional reserve system, money is multiplied six times. A $1.5 billion creation of new money will eventually result in a $9 billion increase in the total supply of dollars.
Paul argues that the issue of the federal debt limit is essentially a joke. Designed to keep a lid on Congress’ spending, the politicians have frequently voted to increase the limit, rather than reign in the size of government. This is like a compulsive shopper giving himself a higher credit limit care of his lenders, which is exactly like not having a limit at all. Paul also likens the practice to “making minimum payments on a credit card. Notice that the principal never goes down. In fact, it is rising steadily.” Nothing can stop the government from ever increased spending, as it reaches one self-imposed limit after another with only higher limits and more spending.
The growth of government, though, is not just a problem with either side of the aisle. Paul has long argued that the Republican Party has lost its way, giving up positions that got them elected in the first place, such as cutting spending, no deficit spending, and eliminating waste in government. The GOP, though, has instead sold out to the entitlements crowd. But this has not even helped them gain more power or respect from the special interest groups, as the Democrats offer to spend even more than the Republicans on every issue.
A good example of this trend toward growing government is the issue of nondiscretionary funding. If the money must be spent and control is out of the hands of Congress, then these programs are out of the control of the people. Nondiscretionary entitlement spending, according to Paul, is a statist’s dream, encouraging the welfare state at home and the American Empire spread across the world.
This government intervention and willingness to spend more money than it has is the true cause of the growing gap between rich and poor. Congress, though, only proposes more welfare and intervention, rather than examining the source of the problems. But increasing federal welfare funds also increases federal control and fosters dependency. The recipients are dependent on government for their money, and the bureaucrats are dependent on more people being on welfare to provide job security.
Paul’s solution to the welfare problem is for government to end the huge tax burden on individuals so that they have more money to donate to charities to help the poor. Whereas government destroys culture and creates dependency, charity encourages self-reliance. Paul writes that, “The history of the failed experiments with welfarism and socialism shows that government can only destroy a culture; when a government tries to build a culture, it only further erodes the people’s liberty.” People who are able to keep only small amounts of their paychecks can not afford to contribute to solving some of these social problems.
Another problem that could be solved with fewer regulations and lower taxes is that of minimum wage. Imposing wage controls on the economy drives a wedge between the supply of labor and demand for labor. This actually increases unemployment, the one problem that the minimum wage was designed to fix. Paul proposes lower taxes and deregulation which he argues would promote job growth.
But the spending, inflating, and government intervention is not just a problem itself, according to Paul. Another more serious issue is the discriminatory means by which Congress hands out its benefits. While it has passed laws to make it more difficult on the average person to discharge their debts through bankruptcy, Congress has bailed out several high-profile institutions using taxpayer money. Lockheed Corporation, the City of New York, Chrysler Corporation, and the Long Term Capital Management hedge fund are just a few of the companies or governments that Congress has considered taking money away from poor and middle class individuals and giving it to the fiscally-incompetent wealthy.
Even before these private corporations or governments get into enough trouble to consider bankruptcy, they can receive billions of dollars of the people’s money in corporate welfare benefits. For example, the two largest beneficiaries of aid from the Export-Import Bank are Boeing Corporation and the nation of China. It is inconceivable that the poor and middle class of America should be subsidizing corporations and competitors in foreign nations.
Before Enron collapsed in late 2001, it was also the recipient of billions of dollars in welfare. The company was one of the largest beneficiaries of the Eximbank, receiving nearly $600 million courtesy of the average American. The Overseas Private Investment Corporation also provided the company with nearly $1 billion to pursue twelve projects in foreign countries, many of which turned out to be complete wastes (the power plant Enron financed and built in India remains unused to this day). The funding provided to the company in the form of loans will not be repaid, and the bill will end up being paid by the average American.
Companies like Enron also benefit from indirect government intervention in the market. The fact that the company met all of the regulations and rules required by the Securities and Exchange Commission gave investors, trusting in government institutions, a false sense of security because their financial statements were not in question by the SEC. The easy credit provided by the Federal Reserve also allowed Enron to receive uncollateralized loans from large banks. These loans also will most likely never be repaid now.
Of course, no government intervention would be complete without a contradictory intervention to complete the cycle of irony. On one hand, Congress passed the Sarbanes-Oxley regulations (which Paul would get ride of) in the wake of Enron’s and Worldcom’s collapse, which were designed to provide more openness in financial reporting. On the other hand, they continued waging a war against the financial privacy of individuals with more attacks on personal liberties after 9/11 under the banner of the open-ended War on Terror. Concealing their own intentions to attack financial privacy rights of the people, these previously rejected proposals were resurrected, colored with the broad brush of “fighting terrorism,” and thrust on a fearful public.
Throughout this book, Ron Paul’s consistent message has been that of limiting the power and size of government and increasing the liberties and power of the people. The enormous tax burden on the people, along with thousands of regulations interfering in the free market, and the unaccountability of an overspending, inflation-creating government have significantly eroded the people’s awareness of their own power to control the government that has supposedly been created to protect their life, liberty, and property. Paul has always stated that it was his intention to leave a record of his beliefs on the proper role of government and practice the principles he holds regarding government intervention into welfare spending and the free market. This book, Pillars of Prosperity: Free Markets, Honest Money, Private Property, is a valuable part of that record and shows that the Congressman is one of the few politicians who believes that the principles of liberty are what make this country great, rather than the politics of special interests.
