Ron Paul on the Evil Fed, the IRS, and Saving the Buck

By Maria Bartiromo

At 72, Ron Paul is a Web phenomenon. His campaign says that some 80% of the $17 million raised in the past four quarters—including about $4.3 million in one October day—has come from online supporters. And according to a mid-November poll, the Republican Presidential hopeful is gaining ground in New Hampshire, though he's still in single digits. Like maverick candidates such as Howard Dean in 2004 and Ross Perot in 1992, Paul seems to connect with voters hungry for unvarnished positions. Paul, an obstetrician and 10-term congressman from the Texas Gulf Coast, voted against the war in Iraq and wants the troops home fast, but it's his economic ideas that are the most radical: He detests the Fed and would abolish the IRS. Paul was about to climb on a plane for a campaign trip to South Carolina when I caught up with him.

MARIA BARTIROMO

As President, how would you strengthen the economy?

RON PAUL

The most important thing is to get control of the budget, because the more we spend and the higher the deficit, the more we have to tax and borrow and inflate the currency—literally create new credit to buy Treasury bills. We need to restore confidence in the dollar before [its decline] gets out of control. The easiest place to cut spending is overseas because it's doing so much harm to us, undermining our national defense and ruining our budget. I would start saving hundreds of billions of dollars by giving up on defending the American empire. I'd start bringing our troops home, not only from the Middle East but from Korea, Japan, and Europe, and save enough money to slash the deficit. We can actually pay down the national debt and still take care of people here at home. That would restore a lot of confidence.

What is the most important change you would make?

Aim for the federal government to immediately live within its means, to take the pressure off the Fed to create money.

And that means what?

Means no more inflation. If the Fed doesn't create money out of thin air—and they do it mostly to accommodate the deficits—that would restore the soundness of the dollar and give us our purchasing power back.

But as President, you're supposed to be independent from the Fed. You would encourage the Fed to stop printing money?

You know this idea that we can create a secret bank and they manage things and rarely tell us—or Congress or the Executive Branch—what they're really doing, there's a problem there. I can't even go to a monetary policy board meeting of the Federal Reserve, and I'm on the Banking Committee of the U.S. Congress. I want open government, and certainly the Fed ought to be open. But it's an institution that really shouldn't exist. [Its financing] allows Big Government to get bigger without being responsible. And that's why we have runaway spending for both warfare and welfare.

Hasn't the Fed been effective in providing liquidity in the current credit crisis?

You're right, but it's sort of like a drug addict. The drug addict demands more or he's going to have convulsions. The economy would have a convulsion if the Fed didn't inject more credit. But if you continue to do that, the problem gets worse. You can't solve the problem of monetary inflation with monetary inflation. These circumstances have all been created by our government and the Fed.

How was the recent crisis caused by our government?

It was astounding that you could get a mortgage at 4%, and this was all due to the Fed creating money and artificially lowering rates, which gets people to do the wrong thing. Builders do the wrong thing, and people borrow money and buy houses they can't afford.

How would you change tax policy?

Ideally, get rid of the income tax. In the meantime, I'd give huge tax credits to anybody who wanted to take care of their own medical care. I'd give tax credits for all educational benefits. I'd get the government out of managing education and medicine. And do it by changing the tax code.