11A132 Ron's Revolutionary Reductions by Jim Davies, 10/25/2011    

Ron Paul is head, shoulders and torso above all his present rivals for President, so let nobody misunderstand the following; if it were possible to obtain a free society by voting for it, he'd be the one to choose. (It's not; for if freedom is granted, it remains at the disposal of the grantor and so is not freedom at all. It has to be taken, by the method I showed in The Fix.)

His web site says of the vital subject of "Restoring America Now" that his plan "slams on the brakes and puts America on a return to constitutional government."

So I dove into some of its detail. My "gold standard" or baseline in this context is the 1996 Presidential program of Harry Browne, who unfortunately didn't win; his campaign book detailed how he would bring "Huge Tax Cuts Now! Huge Spending Cuts Now! A Balanced Budget Now!" Notice, that's a good deal more than Ron Paul is even offering, 15 years later.

On its page 178 comes a table detailing how FedGov spending would have been slashed under Browne's Presidency - from $1,540 billion in 1996 to $100 billion at the end of his second term. That's a serious beginning! It removes 93.5% of the Federal problem. His secret was to sell off FedGov assets, to enable him to wind it down gradually, avoiding catastrophic suddenness. It's well worth examining that table, but this chart sketches out the picture. Just imagine what goodness would have flowed, had voters not been so culpably stupid as not to elect him! By now, D.C. would be a ghost town. No foreign policy would have aggravated the Muslim world after 1996, so 9/11 would never have taken place and so there would have been neither Patriot Act nor TSA. The Federal Reserve would have been abolished, so house prices would have stabilized by about 2000 and there would have been no bubble to burst in 2008, nor any economic crisis ever since. Prosperity would by today be reaching unprecedented heights. But all that's a "might have been." Now, back to Ron's Revolution.

The "Executive Summary" of the Paul Plan is clear, businesslike and honest. He promises, if elected, to balance the Federal budget in 3 years, slash $1 trillion of spending in the first year, repeal several of the worst programs, audit the Fed, allow opting out of "Social Security", lower corporate tax rates, slash a third off "defense" spending, etc. - all supported by detailed figures. Then charts show the effect - and that's where I began to worry. This "total outlay" example is typical.

Notice how there's a splendid, 23% reduction in one year. But then the line rises again! - at almost the same rate as the current CBO plan! Why?

Perhaps Ron Paul doesn't actually want to wind down the Federal Government very far. Maybe he just wants to reign in its recent bloated excesses, to reduce its scope to what he says the Constitution allows, to set its spending rate at three quarters of what one of his charts calls the "historical average" of 19.5% of GDP - ie, 15% - then stay there. That's bad enough even if 19.5% were a true "historical average" - but it's true only for the last half century. Prior to the Terrible Tens, in which the money-printing Fed was set up by Congress, the FedGov spent only 4% or 5% of GDP - except during the War to Prevent Secession. So Dr Paul's planned 15% is actually at least three times the real "historical average."

Surprisingly, the Constitution doesn't actually limit what %age the Feds can spend, and it's a huge shortcoming. It doesn't even mandate that the Feds balance their budgets - another major defect - so to bring spending and taxing to the same, lower level is an improvement that owes nothing to the Constitution. So it's a puzzle that Ron Paul should say his Plan conforms to Constitutional limitations.

The same page of the Paul-2012 web site promises that if elected, Ron Paul will take only an average-worker salary - and I've never seen a candidate make that offer even though most of them could very well afford to do so. It's very much to his credit, and underscores his honesty and sincerity. It ends with a summary, that he is "the only candidate with a plan to cut spending and truly balance the budget. This is the only plan that will deliver... major regulatory relief, large spending cuts, sound monetary policy, and a balanced budget." That too is correct - but it's far, far too little. Even if a free society could be obtained by voting for it - and it can't - the Paul Plan would not come close to delivering one. Whereas Browne said that since government doesn't work he would dismantle it, Paul's Plan seems to suggest that with a big one-time corrective tweak, maybe it can be made to work after all. If so, he's wrong.

Future Editions of this Blog will examine other aspects of Paul's Presidential Platform, and I expect to find a good deal of merit as well as some shortfalls. But this important element, his overall financial summary, is a disappointment.

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