TAX REFORM IS USELESS WITHOUT SPENDING REFORM by RON PAUL

Recently, Republican leaders in Congress unveiled a “tax reform” plan that they claimed would provide the American people with a simpler, fairer, and more efficient tax system. While this plan does lower some tax rates and contains some other changes that may make next April a little less painful for Americans, there is little in it to excite supporters of liberty.

Taxes may even increase under this plan for some Americans, as it eliminates some of those tax deductions labeled “loopholes.” When I served in Congress I opposed bills that “closed loopholes” because closing loopholes is just a fancy way of saying raising taxes. Anything that leaves more money in the hands of the people is beneficial to both liberty and economic efficiency. As economist Thomas DiLorenzo put it, “…private individuals always spend their own money more efficiently than government bureaucrats do,” therefore sound economics, as well as a concern for liberty, requires opposition to any proposal to “let government bureaucrats spend more of the people’s hard-earned money.”

Tax reformers also stray from sound economics when they endorse a tax system that is designed to direct consumption and savings. I share the concern that the current tax system distorts people’s behavior by discouraging savings. However, the solution is not for the government to create a tax code that punishes consumption in order to encourage savings. A truly efficient market is one where individuals are completely free to determine how to allocate their incomes between consumption and savings. No politician or bureaucrat can know the proper allocation of savings and investment that meets the needs of every individual, and government policies designed to cause individuals to devote more of their income to savings than they otherwise would distorts the market just as much as policies that encourage excess consumption.

The Republican tax plan adopts what is called “dynamic scoring.” Dynamic scoring is designed to recognize that tax cuts, by incentivizing work and investment, can increase revenue to the government. This is the argument of the famous Laffer curve. It has always seemed odd to me that a supposed free-market economist would argue for tax cuts on the grounds that it would enrich the state’s coffers. After all, the more money the state has the greater its ability to violate our liberties. Does this mean that those concerned with liberty should vote against tax cuts? Of course not; the solution is to make sure tax cuts are big enough that they cost the government revenue.

Sadly, politicians in Washington refuse to consider any tax plan that would decrease government revenue. This is because the prevalent attitude in DC favors protecting the welfare-warfare state over protecting our liberties. As the obsession with the Laffer curve shows, even many alleged supporters of the free market only pretend to support liberty as a means to enhance the well-being of the welfare-warfare state.

Many politicians in Washington also forget that deficit spending is itself a tax. When the government runs deficits it uses money that could be more efficiently used by the private sector. Deficit spending also leads the Federal Reserve to monetize debt, thus burdening people with the inflation tax.

Instead of worrying over the latest plan to enable the government to more efficiently take our money, people who want to advance liberty must focus on breaking the intellectual and political consensus in support of the welfare-warfare state. Only then can we radically reduce all taxes, including the most insidious and regressive of taxes — the inflation tax.

WHAT I THINK........NATHAN LEWIS

Ron Paul is now retired from professional politics, leaving a need for at least one Congressperson who you feel isn’t fundamentally BS-ing you. Oddly, he found a lot of political support for his unfashionably libertarian plain-speaking. People apparently found it more appealing than the usual favors-for-votes propositions upon which most politicians base their careers. In the end, he basically had to fire himself, declining another run for office at age 77.

Much of his extraordinary term in office revolved around the topic of money, which itself is remarkable. As Paul recounts in his 2009 book End the Fed:

“I have for years sensed a total disinterest in monetary policy by members of Congress as well as members of the Financial Services Committee. … What the Fed and paper money have done for Congress is lead legislators to believe that there are no limits on what they can spend, on what they can propose, and what they can accomplish. They really do behave like college students on spring break who are using their parents’ credit cards with no limit. They don’t think about the money. they don’t think about who or what is paying the bills. The ability to do what they want is just taken for granted. They aren’t even interested in looking into the accounting books. But they would hit the roof if the card were ever declined.”

This attitude is reflected in statistics: with the advent of floating fiat currencies in 1971, not only the U.S. but most developed world governments started running deficits in peacetime for the first time. At some basic level, politicians figured that the “central bank would bail them out” with some kind of money-printing. It was all funny-money in the end. It took a while, but Paul says the era of reckoning is upon us now, and indeed the Fed and other central banks are quite busy today either propping up sovereign bond markets that freely-acting investors had abandoned (Europe), or rather forthrightly engaging in printing-press finance (U.S. and especially Japan).

Paul even traces this trend back to World War I, which followed soon after the introduction of the Federal Reserve in 1913 and similar central banks worldwide patterned on the Bank of England. The centralization and monopolization of currency issuance in the late 19th century allowed governments to finance the war at least in part via the printing press, with this process led by Britain, the U.S., Germany, France and others. Paul thinks that fact was one cause of World War I to begin with. Governments thought that, with the printing press on their side, they could attempt another round of Imperial land-grabs.

End the Fed is a personal account, with chapters on “My Intellectual Influences,” “The Gold Commission” (which Paul participated in during 1981-1982), “My Conversations with Greenspan,” and “My Conversations with Bernanke.” His daily exposure to the sausage-factory of Congressional policymaking has given him some insights that I think are particularly interesting.

Despite the difficulty of many of these topics, Paul found that popular support was high.

“[After a Republican primary debate in 2007,] I was able to speak to more than 4,000 students in the quad at Ann Arbor. …

When I mentioned monetary policy, the kids started cheering. Then a small group chanted, ‘End the Fed! End the Fed!’ The whole crowd took up the call. Many held up burning dollar bills, as if to say to the central bank, you have done enough damage to the American people, our future, and to the world: your time is up.”

People know. Even people aged 18-21. But, they need someone to put it into words.

I’ve talked about the need for a “shelf of books,” that are contemporary and correct, and which can serve as the conceptual foundation for whatever monetary system may eventually replace our present arrangements. No old books and no books that are so full of fallacy as to be unusable, no matter how well-meaning the authors may have been. People actually understand these things significantly better today than was the case in the 1960s and 1970s, although unfortunately that improvement has not been well documented in print.

One reason why we still have floating currencies today is that people just didn’t understand these things at all in the 1970s. You would think that after twenty years of extraordinary prosperity during the 1950s and 1960s with the Bretton Woods gold standard arrangement, and a decade of inflationary disaster in the 1970s with floating fiat currencies, that people in the U.S. might have been a little favorable toward the Classical (gold-based) monetary approach that the U.S. had pursued for the previous 182 years. Nope. Paul recounts his experience at the 1981 Congressional Gold Commission:

“Henry Reuss, chairman of the House Banking Committee, attended one meeting and left in a rage. He couldn’t stand one minute of serious consideration of the importance of gold.”

That was a typical response from other supposedly knowledgeable people at that time. The ignorance of that era is breathtaking — especially considering that the U.S.’s gold standard era had ended only ten years previous.

I’ve added End the Fed to my personal “shelf.” I might quibble with some of the details and historical interpretations — particularly regarding some of the nitty-gritty procedures of how to set up and run gold-based currencies, my personal area of focus — but that is not particularly important. End the Fedprovides a big-picture view, of how rotten money leads to rottenness throughout government and society as a whole. And, it does so in an accessible way, from someone who has seen it happen first-hand over decades.

Paul argues that the present system may disintegrate before too long — indeed, he doesn’t expect much positive progress in monetary affairs until then. The understanding in this book helps insure that the next phase of the long evolution of humans and money won’t suffer from the failings of the post-1971 floating-currency system, or, for that matter, the flawed Bretton Woods gold standard arrangement that preceded it. The stupidity of Henry Reuss in 1981 would seem … as stupid as it actually was.

When the time again comes to discuss the topic of Classical and Mercantilist approaches to money (in practice, gold-based or floating fiat money), it would be nice if people at least understood what they are talking about.

RON PAUL AND RUSSIA TODAY

Involvement in other states doesn’t benefit the US or help national security, and in the case of Ukraine it doesn’t assist the Ukrainian people, so it would be best if the US stays out, former US congressman Ron Paul said in RT’s Boom Bust show.

The US has neither the authority, nor the right to determine what is best for other people, Ron Paul told Boom Bust host, Erin Ade. Once American people were supposed to know what the government was doing, but now all the efforts in Washington seem to be to make government very secretive, and the fact is that the US is not improving its influence in the word, but causing more harm to the American people, Paul said.

RT: What concerns do you have about American involvement in Ukraine?

Ron Paul: There are several. First, I don’t like our government getting involved into affairs of other people and leading only to trouble. I would have followed the admonition of the early founders of our country that we should not be involved into the entangling alliances throughout the world, nor into internal affairs of other nations. Whether it is the Middle East, Northern Africa or Ukraine, I apply that principle. So I do not believe it is to our benefit, I do not think it helps our national security, I think it hurts our national security. I do not think it helps in this particular instance the Ukrainian people. I think it would be best for everybody for us to just stay out. Besides, we do not have the money. We have to go borrow the money if we decide. And we are already spending money on this effort in Ukraine and I do not think we should be doing it.

RT: I take it you believe the money spent by the US abroad would be better used to shore up our finances here. In your view what role does the US have in terms of projection of power or as a global supercop.

RP: It’s mainly to develop friendly relations with as many people who are open to it. I was delighted with the collapse of the Soviet system and I was delighted with our efforts to end it. A lot of trade is going on not only with former communist nation China, but also with Russia. We have invested 500 billion dollars in Russia and they have invested 400 billion dollars outside. So there is a lot of trade going on.

So it sort of defies this idea that a few people are stirring up enough trouble where they want to ruin all that. So my effort in the world is to promote trade and promote friendship, promote travel, at the same time not be involved in trying to determine what is best for the other people. I do not want to do that in individual lives and I don’t want to do that for other governments and other peoples. In spite of many problems out there, it is just impossible for us to do this and we do not have the authority and we are not going to be welcomed, and we do not have a reason to do that. If things should be done to help people in trouble overseas, it should be done from our viewpoint of liberty, it should be done voluntarily and American people have been very generous in helping people when they are in trouble, but I want our government, our people to stay out of affairs especially when they come to violence and militarism.

RT: Some people believe that US political and military involvement in places like Iraq, Afghanistan, Libya and Ukraine is a bid to maintain US global wealth by maintaining US global domination. What is your view on the subject?

RP: I think there is a lot to that. There are interested countries, whether it is Russia or China, when they invest overseas they go maybe the same, and America goes or used to be there. We are much more likely to have global presence by trading and investments, and having friendly relations. But now we have fallen into the trap of saying “Well, that was not the whole reason we went to the Middle East. Oil was the issue, there were other issues as well.” But China and other countries that are investing overseas, they are investing in oil and different things, and right now we are giving Russia a tremendous incentive to go and do more deals with China, India and other countries where, if the market was working, we might be able to better provide these trade agreements than when we make trouble and people resist what we do. That is why I do not think it is in our best interest.

RT: Inside the US we have a policy whereby the NSA collects data on US citizens en masse allegedly to mine data in order to deter future terrorist attacks. Are you concerned about this data collection and its impact on US citizens and businesses?

RP: There are some whom I don’t understand in our Congress, who say “Oh no, we must do it and this is the way we have safety.” This is more a principle of an authoritarian dictatorship. I am a strong advocate of privacy, I complain so much because our own government is very secretive in a free society. Once we were supposed to know what the government was doing but now all the efforts in Washington seem to be to make government very secretive and we are not allowed to know what is going on. If somebody tells us the truth they are charged with treason. Instead of looking to our Constitution, the 4th amendment protecting our privacy, actually the NSA are doing exactly the opposite. So our government is not acting in the way it was intended to, and some of us are concerned about it. I am very optimistic with a lot of young people, and there are still a lot of Americans who have been complacent, but they do not think, “Oh, I want to give up my freedom because government is going to take care of me.” Quite frankly, right now they are starting to realize that all governments, the more authoritarian they are the more inept they are. And that’s why you see collapses of so many empires around the world. I think right now we are not improving our influence in the word but actually we are causing more harm to the American people.

RT: The US has about 5 percent of the global population, but 35 percent of the global wealth. And this discrepancy seems to be contracting. What should the US do about that contraction?

RP: If you mean the 35 percent is going down, I wouldn’t measure the statistics, I would measure the measurement of freedom. A free society that is productive and has property rights and trade is going to have more wealth because that’s what a free country does. So if there is a discrepancy between the US and a country in Africa which has no property rights and no freedom and no industrialization, what they need is the concept of liberty, free markets and sound money, what the property rights mean and contract rights mean. So you do not want to say, “Well, if there is an imbalance in wealth we have to redistribute wealth” – that is not the answer to the problem. The answer to the problem is how the wealth gets created. We used to know how to do this. Today we think the wealth is created by the Federal Reserve. We are not producing wealth. And foolishly, foreign countries are still taking our dollars. As long as foreigners take our dollars we are going to be doing this, but this is going to diminish our wealth. Statistically, the freer a country is the more wealth it is going to have and they should never be held down for that. They should not be criticized for having wealth if they have earned that wealth.

WHAT DOES THE U.S. GOVERNMENT WANT IN UKRAINE? by RON PAUL

In several eastern Ukrainian towns over the past week, the military opened fire on its own citizens. Dozens may have been killed in the violence. Although the US government generally condemns a country’s use of military force against its own population, especially if they are unarmed protesters, this time the US administration blamed the victims. After as many as 20 unarmed protesters were killed on the May 9th holiday in Ukraine, the State Department spokesman said “we condemn the outbreak of violence caused by pro-Russia separatists.”

Why are people protesting in eastern Ukraine? Because they do not believe the government that came to power after the US-backed uprising in February is legitimate. They do not recognize the authority of an unelected president and prime minister. The US sees this as a Russian-sponsored destabilization effort, but is it so hard to understand that the people in Ukraine may be annoyed with the US and EU for their involvement in regime change in their country? Would we be so willing to accept an unelected government in Washington put in place with the backing of the Chinese and Iranians?
 
The US State Department provided much assistance earlier this year to those involved in the effort to overthrow the Ukrainian government. The US warned the Ukrainian government at the time not to take any action against those in the streets, even as they engaged in violence and occupied government buildings. But now that those former protesters have come to power, the US takes a different view of protest. Now they give full support to the bloody crackdown against protesters in the east. The State Department spokesperson said last week: “We continue to call for groups who have jeopardized public order by taking up arms and seizing public buildings in violation of Ukrainian law to disarm and leave the buildings they have seized.” This is the opposite of what they said in February. Do they think the rest of the world does not see this hypocrisy?
 
The residents of eastern Ukraine have long been closer to Russia than to the US and EU. In fact, that part of Ukraine had been a part of Russia. After February’s regime change, officials in the east announced that they would hold referenda to see whether the population wanted autonomy from the US-backed government in Kiev. The US demanded that Russian President Putin stop eastern Ukraine from voting on autonomy, and last week the Russian president did just that: he said that the vote should not be held as scheduled. The eastern Ukrainians ignored him and said they would hold the vote anyway. So much for the US claims that Russia controls the opposition in Ukraine.
 
Even though the Russian president followed US demands and urged the eastern Ukrainians to hold off on the vote, the US State Department announced that the US would apply additional sanctions on Russia if the vote is held! Does this make any sense?
 
The real question is why the US government is involved in Ukraine in the first place. We are broke. We cannot even afford to fix our own economy. Yet we want to run Ukraine? Does it really matter who Ukrainians elect to represent them? Is it really a national security matter worth risking a nuclear war with Russia whether Ukraine votes for more regional autonomy and a weaker central government? Isn’t that how the United States was originally conceived? 
 
Has the arrogance of the US administration, thinking they should run the world, driven us to the brink of another major war in Europe? Let us hope they will stop this dangerous game and come to their senses. I say let’s have no war for Ukraine!

WHY WE'RE NO LONGER NUMBER ONE by RON PAUL

Last week World Bank economists predicted that China would soon displace the United States as the world’s largest economy. The fact that this one-time economic basket case is now positioned to surpass the US is one more sign of the damage done to American prosperity by welfare, warfare, corporatism, and fiat money.  

Some commentators have predicted that China’s reign as the world’s largest economy would not last long. This may be true. While China has made great strides since adopting free-market reforms in the 1970s, China is still run by an authoritarian government whose economic policies distort the market in order to benefit state-favored industries. These state-favored businesses are often controlled by politically-powerful individuals.  
 
What many of these commentators fail to notice is that the American government pursues many of the same flawed policies as the Chinese. For example, because of the increase in regulations, subsidies, and bailouts, many American businesses are putting more resources into manipulating the political process than producing goods and services desired by consumers. Many big businesses even lobby Congress and the federal bureaucracy for new regulations on their industries. They do this because big business can more easily absorb the costs of complying with the new regulations that force their smaller competitors out of business.
 
China is regularly criticized by American protectionists for subsidizing its export industries. However, the US government does the same thing via programs such as the Export-Import Bank. China is also criticized for manipulating the value of its currency to make its exports more attractive to foreign consumers. This may well be true, but China is hardly unique in this respect. Throughout its history, the Federal Reserve has manipulated both the domestic and international economy, often working in partnership with foreign central banks. 
 
The Federal Reserve’s inflationary policies benefit big banks, politically-connected businesses, and big-spending politicians at the expense of the American people. Anyone interested in helping improve the American people’s economic situation should focus on changing America’s monetary policy, not China’s.
 
Ironically, many of the same politicians who denounce China’s monetary policy benefit from Chinese purchases of America’s debt. If China stopped making large purchases of US debt, the Federal Reserve would be forced to monetize even more debt, thus risking hyperinflation. So the best thing Congress could do to make it more difficult for China to manipulate the global economy is cut federal spending.
 
One advantage China has over the US is that the Chinese government does not waste money on a hyper-interventionist foreign policy. The United States government spent approximately $752 billion on the military in fiscal year 2013. In contrast, China spent approximately $188 billion. While China may be increasing its military spending, it has a long way to go to catch up to the United States. 
 
It is difficult to see how the American people, other than those who run or work for the military-industrial complex, benefit from this spending. Military spending, like all government spending, hampers private sector growth by taking resources away from investors, entrepreneurs, and consumers while contributing significantly to the national debt. In contrast, a return to the policy of peace and free trade would allow those resources to be used by entrepreneurs to create new businesses and new jobs. 
 
News that China is soon to surpass the United States as the largest economy in the world is a stark reminder of how the American people are harmed by the welfare-warfare state, crony capitalism, and fiat currency. The only way to avoid continuing collapse is to finally reject an interventionist foreign policy, stop bailing out and subsidizing politically powerful industries, and restore a free market in money.

RON PAUL ON CHANNEL 4 NEWS

When you block the trade of goods and services with a particular country, it may not be quite as bad as dropping bombs, but it is a “symbol of a war,” Paul told Britain’s Channel 4 News on Monday.

The American people want no part of a conflict with Russia, just as they wanted no part in a war against Syria last summer, but the US administration is still “playing games” by threatening Russia and adding sanctions, Paul added.

“We’ve been involved too much and I take a non-interventionist foreign policy position. It’s not our business, it doesn’t serve anybody’s interest, it’s part of the same thing that led us into the disaster in the Middle East, a lot people die, a lot of money spent and we’re still suffering the consequences of the war in Iraq and Afghanistan and there’s the threat of war in Syria. We don’t need another threat. The American tax-payers don’t want it and our government thinks they can get away with it,” he said.

“There’s are a lot American citizens who’ve joined with me in saying we have had enough of this, we’ve had enough of this intervention, we’ve had enough of this wars and we’ve had enough of this debt and the American people are getting sick and tired of it,” said Paul, who sought the presidency of the US on three occasions: as the Libertarian Party nominee in 1988 and as a candidate in the Republican primaries of 2008 and 2012.

The US and Russia are at loggerheads over the worsening crisis in Ukraine.

The Autonomous Republic of Crimea declared independence from Ukraine on March 17 and formally applied to become part of Russia following a referendum a day earlier, in which nearly 97 percent of the participants voted in favor of the move.

On March 21, Russian President Vladimir Putin signed into law the documents officially making Crimea part of the Russian territory. He said the move was carried out based on international law.

On April 17, Russia, Ukraine, the US and the European Union agreed over steps to “de-escalate” the crisis in eastern Ukraine, where anti-Kiev protesters seized buildings in several towns and cities.

But, Ukrainian authorities have ordered a military offensive against the protesters, claiming that Russian special forces are fueling unrest in the country.

Last week, Russia began military exercises close to the border with Ukraine, saying the drills are in response to Kiev’s intensified crackdown on pro-Russia protesters in the east and south.

Moscow called on the US to force Kiev to halt its operation in Ukraine’s eastern and southern regions. But, interim authorities in Kiev said they are ready to fight Russia.

On Monday, 150 US troops landed at the Amari airbase in western Estonia as part of a contingent of 600 to participate in a series of military drills throughout the year.

At least 450 US soldiers already arrived in Latvia, Lithuania and Poland over the last week for joint war games, according to the US Department of Defense.

The US military build-up at Russia’s doorstep has raised concerns of a direct confrontation between Washington and Moscow over Ukraine.