The Economy Under President Ron Paul

Ron Paul's chances of becoming president are not great.  He could beat Obama, but he will have difficulty getting the Republican nomination because of the pro-war mentality of a majority of Republicans.  However, Paul's chances are a lot better than they were the last two times he ran for president.

I was having a discussion with a libertarian friend of mine the other day.  He is fairly radical, like I am.  Our topic of discussion was the economy and a Ron Paul presidency.  Hypothetically speaking, if Ron Paul were elected president and served for 4 years, what would happen?

My friend is afraid that the Republican establishment would immediately surround him and try to influence his cabinet picks and his policy.  I have no doubt they would try, but that is one of the reasons that I support Ron Paul and almost never support anyone else.  He has proven himself time and time again to ignore lobbyists and the establishment.  He has kept his principles.  Reagan could not do this.  You can see this by his pick for vice president and his cabinet picks.

If Ron Paul were to get the Republican nomination, it is imperative that he pick a vice presidential candidate who is at least as radical as he is.  If the CIA knocked Kennedy off, then I cannot imagine they would be happy about a true anti-establishment candidate.

My first thoughts were, that we might not actually want Ron Paul elected.  Perhaps it would be better if he came really close, but lost.  This way, when the depression hits, he would not get blamed for it.

But I was talking and thinking through this with my friend.  If we have a President Paul, it would mean that public opinion had changed significantly.  It means that the economic depression was probably already in full force.  It means that, for those who supported him, they would be forgiving of an economic depression because they would realize that he didn't cause it.

Ronald Reagan took office in 1981.  The country went through deep recessions in his first couple of years in office.  Then the economy started to recover.  Reagan won re-election by a landslide.  The situation we are in now is a lot worse than when Reagan took office.  Price inflation is not as bad yet, but the level of malinvestment is probably worse and the debt and so-called obligations are much worse.  Regardless of what the government does, there will have to be a severe correction to flush out all of the previous malinvestment.

In my discussion with my libertarian friend, he pointed out that the economy could recover in 6 months if dramatic changes were made.  He is usually a pessimist.  I am not sure I agree with 6 months.  It could be longer because of the huge debt and the huge misallocation of resources that has already taken place because of the government and Fed policy.

So let's say that Ron Paul becomes president.  If he governs like Reagan, then the economy will continue to struggle.  But what happens if a President Paul makes significant changes?  Some things he can do just because he is president.  He can stop the wars.  He can pardon all non-violent drug offenders convicted in federal courts.  Essentially, he could end the federal war on drugs, at least while he's president.

The president is not a dictator, even though the last several presidents have acted like it at times.  A President Paul could not simply eliminate all unnecessary spending.  Congress could override his vetoes. But if Paul were elected president, we have to believe that there had been a major shift in popular opinion.  He would have a mandate to cut government.  He could use his platform to influence Americans, who would in turn influence their congressman and senators.

If a President Paul could make significant cuts, the economy really would recover fairly quickly, even with all of the debt and malinvestment.  Let's say that he ended all of the wars and ended all foreign aid.  Let's say he ends several departments that are unconstitutional.  Let's say he can get rid of the departments of education, labor, energy, housing, and agriculture.  Let's say that he can balance the budget and still reduce taxes.

The economy is starving.  The economy needs savings and investment.  This is how an economy grows.  The government is sucking up resources with its huge spending and borrowing.  Since the fall of 2008, Americans have saved more and paid down debt.  Unfortunately, the federal government has done the opposite, which has negated the benefits of what a lot of Americans have done.  The government is using resources that should be used as savings and investment to increase our future standard of living.

If a President Paul, or any other president, were able to get spending way down, the economy would recover.  If the budget were cut from $4 trillion to $2 trillion, this extra $2 trillion a year would be used to increase capital investment.  It would lead to an increase in our standard of living.

I like to use the example of Germany and Japan after World War II.  These countries were devastated by the war.  After the war, the two countries adopted relatively free market policies.  Miraculously, because the governments did not interfere with their economies, the two countries saw tremendous growth and eventually became two of the richest countries on earth.

This whole discussion is not a prediction of any kind.  I am simply pointing out that, given a dramatic decrease in the size and scope of government, the economy could recover quite quickly and we could once again see a strong rise in our standard of living.