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Ticket Replay: Two years into Obama's reign, Ron Paul's loopy ideas now making sense

Republican representative Ron Paul of Texas speaking as usual against more federal spending

During the holiday season, as in years past, The Ticket is republishing some of our favorite items from the previous political year. This story was originally published on Jan. 4, 2010:

Loyal Ticket readers from the 2007-08 presidential primary months will remember our many items about the amazing long-shot political campaign of Republican Rep. Ron Paul, Dr. No or Dr. Know-Nothing, depending on your viewpoint. (In fact, over in the right margin here under Categories, you can find an entire Ron Paul story archive to reminisce through.)

The now 11-term Texas congressman raised more money in the final quarter of 2007 than any other GOP candidate, including all the far bigger names.

Fueled by funds from millions of fervent supporters, many new to politics spontaneously roaming the Internet as chanting patrols of talking-point enforcers, his campaign haul totaled some $35 million. A remarkable feat that in many ways presaged the later tea party protest movement against federal spending.

Paul's campaign millions were way more than what's-his-name-the-ex-Arkansas-governor who lost so much weight, surprisingly won the Iowa caucuses and went on to do not really much else except get a commentating job on Fox News, the company that banned Paul from its New Hampshire Republican debate.

Shame, shame.

A former losing Libertarian presidential candidate (aren't they all?) and a retired ob-gyn who delivered 4,000 babies, Paul is even older than the old guy the Republicans eventually chose as their standard-bearer against the $750-million campaign of the hopey-changey guy from Illinois. That Democratic candidate was, btw, only 11 years old when his VP, Joe Biden, entered the U.S. Senate.

Here's one typically outrageous and ridiculous thing that Ron Paul did: He ran his....

...hopelessly outgunned presidential campaign as if it was a business, not even spending more money than he had in hand. C'mon now, how laughable is that in this day and age in modern America that someone who wants to run the federal government should live within his own campaign means? Just like normal people who live on a real budget with no ability to vote themselves a pay raise and a higher debt ceiling when no one is watching C-SPAN!

When the ultimate Democratic winner, in league with the extraordinary gentleman Harry Reid and the tough-talking San Francisco grandma who's House speaker, has decided to spend a gazillion more dollars than any non-federal calculator has digits to display.

These people, for Nancy's sake, are already spending the income taxes of the unborn grandchildren of those 4,000 babies that Paul delivered. A shocking realization that may be helping to fuel the recent re-examination of Ron Paul, who never met a federal dollar that needed spending -- unless it was going back to his district near Houston.

Ron Paul came within something like 1,000 delegates of catching John McCain for the Republican nomination in St. Paul. But when he finally gave up, Paul still had about $5 million left over. He's been investing it traveling around the country to speak and helping like-minded RFR's (Republicans For Real) organize all over. And, who knows, maybe sell a few books.

But now, just as his fierce supporters fearlessly predicted all along, many in American politics are coming around to think that maybe RP's crazy ideas, for example, of auditing and controlling the Federal Reserve, are maybe not quite so crazy.

Our news colleague in Washington, Don Lee, details the sea-change in opinion in a comprehensive look at the old guy's rebirth for weekend print editions, which we're sharing here this morning as a distinguished guest post for Ticket readers around the world.

And for any surviving Ron Paulites, who won't dare leave their typically snippy comments below because that would require them acknowledging that their favorite fiction about a MSM conspiracy to ignore the old guy is fiction.

-- Andrew Malcolm

Because no federal funds are involved, Ron Paul would want you to click here for Twitter alerts of each new Ticket item. Or follow us @latimestot. Or join us over here on The Ticket's new Facebook FAN page.

Here's Lee's reported news item:

For three decades, Texas congressman and former presidential candidate Ron Paul's extreme brand of libertarian economics consigned him to the far fringes even among conservatives. Not a few times, his views put him on the losing end of 434-1 votes on Capitol Hill.

No longer. With the economy still struggling and political divisions deepening, Paul's ideas not only are gaining a wider audience but also are helping to shape a potentially historic battle over economic policy -- a struggle that will affect everything including jobs, growth and the nation's place in the global economy.

Already, Paul's long-derided proposal to give Congress supervisory power over the traditionally independent Federal Reserve appears to be on its way to becoming law.

His warnings on deficits and inflation are now Republican mantras.

And with this year's congressional election campaign looming, the Texas congressman's deep-seated distrust of activist government has helped fuel protests such as the tea-party movement, harden partisan divisions in Washington and stoke public fears about federal spending and the deficit.

"People are wondering what went wrong. And they're not happy with what the....

Ron Paul campaign banner from 2008

....government is offering up," said James Grant, editor of Grant's Interest Rate Observer, offering an explanation for why seemingly wonkish arguments over interest rate policy and the money supply are spilling over onto ordinary Americans.

Some of Paul's most extreme views are still beyond the pale for most economists. Despite the eroding value of the dollar, no one expects the U.S. to return to the gold standard, as Paul advocates; most economists think that could wreck the economy.

In their less drastic forms, however, Paul's ideas are being welcomed by conservatives and viewed with foreboding by liberals. For conservatives, runaway inflation constitutes the biggest potential threat to the nation's future. Liberals worry that cutting back stimulus efforts too soon could slow or even halt the current recovery.

The debate over that question -- what the basic thrust of U.S. economic policy should be -- is likely to dominate the coming elections and Washington policymaking.

And so far, Paul and his fellow conservatives are on the offensive. President Obama and congressional Democrats are repeatedly pledging not to increase the deficit and to begin cutting back soon.

"I think we're going to be in for more revival of fiscal responsibility," said William Niskanen of the Cato Institute, who headed the Council of Economic Advisors under President Reagan.

Niskanen sees the Texas Republican's increasing influence as stemming from the continued economic weakness. "To this extent, Ron Paul gains voice," he said.

Paul would go a lot further in cutting back the government's role than even free-marketers like Niskanen support. If Paul had it his way, for instance, he would do away with the Fed entirely. In his bestselling book "End the Fed," he lambasted the central bank as an "immoral, unconstitutional . . . tool of tyrannical government."
Republican representative Ron Paul still speaking about government spending
Such rhetoric might once have been dismissed as extremism.

But Paul's anti-Fed message has drawn broad support because of the central bank's failure to restrain the flood of cheap money and excessive risk-taking in the years leading up to the financial crisis.

It has stirred rallies on college campuses and supportive commentaries from Wall Street pundits. More than 300 representatives in Congress have embraced Paul's ideas for reining in the Fed.

The response "is even more than I ever dreamed," Paul said in an interview, reminiscing about one evening during his 2008 White House run when University of Michigan students chanted "End the Fed" and burned dollar bills.

Paul, a skinny 74-year-old with a hangdog expression, understands that historical circumstances have thrust his ideas to the fore. "An intellectual fight is going on," he said.

Paul traces his economic views to his frugal upbringing in Pittsburgh at the tail end of the Depression. He saved pennies from delivering newspapers and helping out his father's small dairy business.

And his first economics class at Gettysburg College was an eye-opener, Paul said. When a professor explained how banks keep only a tiny part of their deposits on hand and earn money by lending out the rest, Paul discovered one of the "tricks" of the financial system.

Beyond that, Paul's ideas are grounded in the work of economic thinkers from an earlier era who focused on problems similar to those besetting the U.S. today.

In particular, Paul is a disciple of Ludwig von Mises, an Austrian theorist born at the end of the 19th century who contended that government intervention in an economy would fail because free markets were better at allocating resources and fueling growth.

Having lived through Germany's devastating hyperinflation in the early 1920s, which helped pave the way for Hitler, Mises wrote long before the Great Depression that over-generous credit policies would encourage excessive borrowing, creating a boom and then a bust.

Mises' ideas became central to what is known as the Austrian School of economics, which emphasized tight controls on credit and money supply, a strategy that discouraged financial ups and downs but tended to slow growth.
Republicans Ron Paul and Mike Huckabee argue in a GIOP primary debate for the 2008 election
By 1940, when Mises arrived in America, most Western economists had embraced the competing theories of Britain's John Maynard Keynes, who called for government to stimulate the economy by spending on infrastructure and cutting interest rates.

Obama has largely followed the Keynesian script, as President George W. Bush did when the economic crisis broke.

Paul's once-lonely espousal of the Austrian School's ideas has gotten new impetus from conservative economists and Republican political strategists.

"A lot of good ideas were shoved aside because of the Depression and the rise of the Keynesian view of the world," said George Selgin, an economics professor at the University of Georgia.

Paul contends that Austrian economics explains the most recent financial meltdown: "It says if you inflate too much, if you have no restraint on monetary authorities, you're going to bring on a crisis." Now, Paul says, administration policies are leading the country toward disaster.

Selgin and many mainstream economists agree that pumping too much money into the economy can lead to trouble, but they say Paul goes too far.

In the 1930s, say Selgin and many other economists, including Fed Chairman Ben Bernanke, the U.S. economy began pulling out of the Depression thanks to federal easing of monetary policy.

The economy tipped back into depression after the reins were tightened too soon.

"In this aspect of the monetary system, he's just blown it," Selgin said of Paul.

However, like Mises, whose portrait hangs on his Washington office wall, Paul is intransigent, and that has earned him an ardent following.

"His views are strong and hardheaded, but you've got to stand firm or you'll get blown over in this world," said Mark Skousen, editor of the newsletter Forecasts & Strategies and a former economics professor at Columbia University.

-- Don Lee

Photo: Larry Downing / Reuters; Orlin Wagner / Associated Press; Associated Press (Paul argues with Mike Huckabee in a GOP primary debate).


Comments () | Archives (13)

The comments to this entry are closed.

Not knowing whether the author is being sarcastic, or if he is simply stating examples of the 2008 mindset and leaving it up to the reader to decide, I will refrain from casting any judgement on his lengthy essay on Ron Paul.
Now that I have said that, I will state the obvious for everyone who has the wisdom to see what is currently transpiring, and what will continue to transpire all the way to the 2012 Primary. Once Ron Paul makes his intention to run for President official (and he will), the neocon clowns such as Romney, Huckleberry, Gingrich, "Jeb"Bush, or anyone hand-picked by the Republican establishment will have their butt handed to them on a platter! Ron Paul is the only candidate who will be acceptable to the voters in 2012! Obama has already proven himself to be the most unqualified President of all time, and playing along with the Republicans will not save him. He went into this office with no plan for the economy, and not even a clue as to what drives it and what it will take to fix it. Only Ron Paul has that plan, has the willingness to put it into action, and has the principles to be a truly great President. Just watch what happens when Ron Paul makes his announcement. All of these leftover neocons from the "old" Republican Party will be left in the dust, while Obama scrambles to re-invent himself as a Libertarian. The only problem for Obama is that the people are smart enough to not be duped twice!

Ron Paul does not advocate a gold standard. He favors it, but he doesn't want to force it. All he wants is to legalize competing currencies where gold and silver can compete with the dollar and let the market decide which it want's to use.

Hard for a reasonable man to tell who's weirder -- the author, Ron Paul, or Bob V. First off, Austrian School wannabes are crazily off course to say that easy money did the deed, altho Greenspan should have had a better foot on the brakes. No question QE2 raises lots of questions, but it is exactly what Milton Friedman (the other false god of the whackos) said to do in 2001 recession.

2nd, real cause of crash was private greed, etc. (32:1 leverage ratios!!: Canada had no financial crisis: their gov't caps banks at 9:1).

3rd, after L Bros collapsed (due to no gov't help), the wheels really came off and didn't get put back on until TARP (actually a Bush program).

4th, TARP, stim actually worked, just not fast: unemployment would be North of 20M without it and GDP negative. In spite of their chronic lying, even responsible and sane GOP just passed tax bill that trades recovery for short-term ^ deficit.

5th -- Obama's done a good job. Indies up 5% to 60% approval in last 1 1/2 months. Only terminally spacey GOPigs don't get it and didn't register a + jump.

6th -- unless the sickos like Bob V and GOPigs go totally unAmerican and follow Paul's now thoroughly disproved madness in order to intentionally sink the economy just to win in '12, Obama's good job and cool head will prevail -- for the good of the country (well, at least one party has to stay patriotic).

7th -- the real issue -- 1-4 above are the facts and the really weird thing is why the crazies like Paul, the author and Bob V and his fellow T(raitor) Partiers can't just simply look what happened the last 2 1/2 years, see what worked, and get a small whiff of reality.

"Paul, a skinny 74-year-old with a hangdog expression..." Hmmm. Try describing the expression of the current skinny commander in chief without getting in trouble.

" one expects the U.S. to return to the gold standard..." Ahem! The gold standard is still enshrined in the U. S. Constitution (Article I. Section 10). But then, who really expects politicians to abide by their own rules.

Wow, talk about being dragged kicking and screaming to the realization that Ron Paul is right. And, that those of us who support him are pretty darn smart.

"First, they ignore you. Then they laugh at you. Then they fight you. Then you win."
Gandhi said that. He could have been speaking about Ron Paul.

I've always liked RP, more or less, but unfortunately he has attracted a cadre of TRUE nut cases. His son not the least among them. Ardent, yes. Sane? Questionable.

Good post. One thing, though. Paul can also appeal to principled liberals, as he is against empire-building and undeclared wars of aggression. He was one of few in Congress who opposed the invasion of Iraq. He also firmly stands for our rights under the 4th amendment and is a true civil libertarian. They may disagree with him on economic issues, but many people voted Democrat in the last election because they were against the wars (that Obama is continuing) and the relentless assault on our civil liberties (which Obama is continuing as well.)

Nice article, on the Keynesian view you left out an important bit of information, fed Chairman Ben Bernanke stated Himself that the Federal reserve caused the Great Depression.

As Americans we need to tighten our belt's both on our War fare, and our Welfare ideal's. Conservatives love their war it makes them feel safe, and the liberals love their welfare it makes them feel secure; at this time in our country's history I do belive it is time both sides reconcider their stand points, Ron Paul represents a strong change in ideals.
Also Our President stated the stimulus would prevent unemployment from going above 8.2 %. What is the current unemployment rate... do your home work.
Also our President's Campaign promise was to bring our Troop's home in 6 months, Has it been 6 months yet?

also the war in Afganistan Troop numbers under Bush 30,000 now almost 100,000 Troops are in afganistan, our own CIA states in a report the number of Troops in Afganistan is over Kill, also note all of you tax payers reading this We the People pay $400.00 per gallon of gas for our Troops in Afganistan, do your home work.

Wow, what a guy that "inugomontoya" above! Another idiot Liberal with too much pride to admit that he was a fool in voting for Obama. As for his total lack of understanding relating to economics, he already gave us a sample of it above! Poor cry-baby "inugo".....his commemorative 2008 "Yes We Can" pacifier soon to be yanked from his quivering mouth.
Four years from now, "inugo" will be thanking Ron Paul for making him a responsible adult and educating him on Austrian economics!

Ron Paul is great. Whether you agree with his policies or not; At least you know where he stands on issues. He sticks to his convictions and it is proven by his voting record for the last couple of decades. Unlike the supposed top dogs of the 2012 election who will say one thing and do another. However, the establishment will do everything in its power to stop Ron Paul and regrettably a lot of voters will believe the 'crazy' title and end up electing a douche like Romney, who by the way has flip-flopped on just about every single policy he has ever stood for. I do look forward to Romney and Paul in a debate. Paul will school him in economics; hopefully the American people are smart enough to decipher through the establishments BS. Doubt it though, the people elected GWB twice and Obama once so I don't put too much faith in the American peoples voting habits. They love BS, our liberal friend just proved it by his post above.

Oh we're still here Andrew, a little less snippy though. We've learned to focus our energy a little more and not lash out quite as much.....that's the job of the Tea party members now. Us Paulites have absorbed the knowledge that Dr Paul has suggested, we've studied the enemies of our Republic, we've watched the political games and most importantly we've learned the truth in economics. We've prepared ourselves and many of us have stepped into leadership roles. I am already prepared to max out my campaign contribution to Dr. Paul or whomever he endorses. We're much more prepared now but still facing an ocean of opposition, I wish I could be more optimistic but sometimes I feel that our country is beyond saving. We've fully embraced the systems of coercion, collectivism, inflationism, interventionism and eventually collapse and violence leading to despotic rule. Can we educate them in time?

(AM responds: I hear you. But the point in US politics, unlike some places, is to affect change not always win. some places, you lose, you die. You have to admit Dr. Paul's crowd has had an effect on US politics, Tea Party, etc. So hang in there.)

The real reason for this strangely timed commentary/hitpiece is because Dr. Paul is the incoming Chairman of the House Domestic Monetary Policy Subcommitte. This position will give the congressman a much greater forum to expose the Federal Reserve for the private banking cartel it is as well as expose all the media toadies who cover for them and keep the American people distracted with meaningless tripe.

Unlike most other politicians and policy-makers Ron Paul understands fundamental economic rules. With markets, profits and losses will direct people toward productive actions and away from unproductive and counterproductive ones. If a business is going to succeed in a market economy, it must bid resources away from others and use them to supply goods that people value enough to pay prices sufficient to cover their costs. Profits and losses also provide people with a strong incentive to innovate and discover production methods with lower costs and new products that people value highly relative to cost. This incentive to use resources productively and discover better ways of doing things is the driving force underlying economic growth and progress.

The incentive structure of the political process is vastly different. There is nothing comparable to profits and losses that will consistently direct resources into productive projects and away from those that are counterproductive. Politicians will allocate resources toward the politically powerful—those who can provide them with the most votes, campaign funds, high-paying jobs for political allies and, yes, even bribes. There is no reason to expect that this incentive structure will channel resources into productive projects and away from counterproductive ones. Innovators and entrepreneurs will be disadvantaged by this system because it will not be enough to make products that consumers value highly relative to cost; one will also have to compete for political favoritism and cater to the views of the political class. The result: More resources will be used to obtain political favors—economists call this rent-seeking—and fewer channeled into productive activities.

Paul knows all of the above. Most newspaper writers are uneducated in economics and do not understand the above principles. This is why we have such bad economic analysis in most of the mainstream press and it's why charlatans like Obama and the rest of the crop of poseurs are given carte blanche to lie and confuse the American people with nonsense. The reporters don't know enough to know what questions they should be asking!


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About the Columnist
A veteran foreign and national correspondent, Andrew Malcolm has served on the L.A. Times Editorial Board and was a Pulitzer finalist in 2004. He is the author of 10 nonfiction books and father of four. Read more.
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