MSNBC "Morning Joe" - Transcript


By:  Ron Paul
Date: Jan. 27, 2009
Location: Washington, DC

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MS. BRZEZINSKI: Texas Republican Representative Ron Paul, who is a member of the House Financial Services Committee, joins us now.

Thank you very much for being with us, sir. Good morning.

REP. PAUL: Thank you. Good morning.

MS. BRZEZINSKI: All right. Educate, please, this panel of experts here -- and I say that with quotes around it --

MR. BARNICLE: Loosely.

MS. BRZEZINSKI: -- about why this sort of throwing money at the issue, bailing, bailing, bailing out, may be potentially reckless and damaging for the future of this nation's economy.

REP. PAUL: Well, in order to understand that, you have to understand how we got into this mess. We got into this mess by spending too much, borrowing too much, and inflating too much.

Government was too big and we had too many regulations. We had rejected the market economy, for decades now. We have rejected the notion of sound money for decades. And we got into a mess this way.

So what is the proposal? Spend more money, borrow more money, print more money, regulate more so. So it makes no sense whatsoever.

So we're going to make the problems much worse. We're doing exactly what we did in the 1930s. We are determined to take a serious recession and turn it into a depression, if we don't change our ways.

When governments spend money, they spend it in a non-productive manner. And every penny the government spends, they have to take it out of a productive source of money; the money has to come from somewhere.

Everybody talks about the money that's going to be spent and how many wonderful things will happen, but they never say where does the $825 billion come from? That's the question they have to ask, and they have to find an answer to that to fully understand why what we're doing is absolutely wrong.


MR. BARNICLE: All right. Congressman, let me ask you. I understand where you're coming from here, I think, sort of. But the house is already on fire, and I think --

REP. PAUL: Right.

MS. BRZEZINSKI: Yeah, I mean, look at these headlines.

MR. BARNICLE: -- no matter what we think how the fire began, the house is on fire. Our house is on fire.

So let's take one industry specifically. Let's take the automotive industry in this country. Are you saying spend no money on the automobile industry in this country? That American automobile manufacturing, let it disappear?

REP. PAUL: Well, I think you're correct, the house is on fire, and you think you're putting water on it and I think you're putting kerosene on it.


REP. PAUL: And that's the big argument.

No, you take the car industry, yes, I think we should put more money into the car industry, but it should come from private sources. It shouldn't come from government, because government will divvy out the money politically.

But there are private sources of money. If there's anything of value, it'll be bought up. But you don't -- you can't value anything when the government buys up assets that aren't sellable; you buy up worthless assets.

So there are some worthless assets in these car companies. So if you want good money to go into car companies, you have to allow real capital to flow into it.

So you -- yes, you do what that; you just don't want the government to do it.

MR. RATIGAN: So what systemic changes -- if you look at tax policy, which alters flow of capital, as you know well, if you look at -- whether it's spending or any other aspect of the use of money -- interest rates, monetary supply, et cetera --

REP. PAUL: Well, systemic change --

MR. RATIGAN: What systemic change would you put in? Would you exploit this opportunity to change the system of capitalism in America for the better? How would you change it?

REP. PAUL: Get rid of the income tax.

REP. PAUL: I agree with that.

REP. PAUL: Get rid of corporate taxes, and really lower taxes. But you have to lower spending. You can't lower --

MR. RATIGAN: Would you add a consumption tax to make up for that? Would you put a consumption tax in?

REP. PAUL: Oh, no.

MR. RATIGAN: How would you make up for the lost revenue on income --

I agree with you on income and business tax. I just don't know where you get the revenue elsewhere, and I would argue consumption..

REP. PAUL: Well, I'm not interested in getting the revenues. I want to cut spending.

But the problem is nobody wants to cut the American empire. Even Obama's administration wants to increase spending overseas and increase military spending.

As long as you want to run the world empire at a trillion dollars a year, believe me, you cannot solve this problem.

And that is where the crux of the matter is. So yes, you have to cut spending, along with cutting taxes.

So to say, well, let's have a consumption tax, that's just transferring the penalty to new victims. But you want to get taxes down; you want to get rid of regulation.

You don't want to do what we did after the Enron failure -- pass Sarbanes-Oxley, you know, by the conservative Republicans. That's the fault; it's in the thinking that we need so much government.

MS. BRZEZINSKI: Carlos Watson.

MR. WATSON: Congressman, are you really saying that given the meltdown on Wall Street and some of the craziness that we saw at Citigroup and Merrill and other places, that there should be less regulation, not more, in some cases?

REP. PAUL: Yeah, we should have more on the Federal Reserve so that we know that we're doing -- they're exempt from regulation, as is Treasury.

We give Treasury $350 billion and we don't even know where they spent it. That's the type of regulation you want.

MR. WATSON: But what about on Wall Street, Congressman? But on Wall Street, do you not want to see, on some of these derivative products, do you not want to see there be some kind of regulation in terms of what the base can do?

REP. PAUL: Sure. Sure. Anybody who commits fraud goes to jail, just as they did in Enron.

We didn't need Sarbanes-Oxley to prosecute everybody in Enron through the laws of fraud. If they commit fraud, they go to prison. Just like Madoff; you know, we had all those regulations -- SEC and everything else -- and he got by.

It proves SEC didn't work.

MR. WATSON: But Congressman, it's not just fraud in some cases. In some cases, people had very little equity put down and were leveraging things up tremendously.

Should there not be regulation about how much equity you effectively have to put in the deal or how much capital you have to have on your balance sheet?

REP. PAUL: Yeah. Sure, and if you understand leveraging-up equity and debt, you have to look at fractional reserve banking. That's where you pyramid debt.

So they're doing exactly what the Federal Reserve does, is they create money out of thin air and they pyramid debt. That's where the bubble comes from. That's why you have to look at monetary policy.

But you're looking at the symptoms, rather than the cause.

MR. BARNICLE: Congressman, hang with me for a couple of seconds here. I am extremely limited, and 90 percent of this conversation that you've been having with Dylan and Carlos has gone way above my head.

But your basic theory, let's get government out of nearly everything, let's swing back to what I do nearly every morning.

I drive to work on roads filled with potholes, beneath bridges that are crumbling. What's the answer here? Do I go out and try and find six carpenters and some bricklayers and some masons to fix those bridges and -- roads and bridges? Government's got to do it. What's the deal here?

What is your point of view about stuff like that -- basic reconstruction of this country?

REP. PAUL: Okay, I know I can't have my perfect society quickly, but what I would do is quit bombing bridges in Iraq and then paying to rebuild them, and then wasting the money in the rebuilding over there.

I would take that money, save it on the deficit, cut the deficit, and spend some on our infrastructure. That's what I would do, and we could do that. But as long as you do it through debt financing, it's impossible.

Ideally, roads and bridges should have been taken care of by our states. It wasn't designed in the Constitution that the federal government would take care of every bridge and every road.

But that isn't the worst type of spending, and I think in the interim we certainly could. We could cut this spending overseas. But we're going to bring ourselves to our knees.

We're going to have a dollar crisis. We're doing exactly what Obama -- Osama bin Laden wanted to do, what he did to the Soviets. He's bringing about financial chaos to this country, and we've got to realize it's excessive spending that is a problem. It's not that we need more government spending. That, to me, is foolish.

MR. RATIGAN: So I'm going to ask -- I want to ask you the same question I've been asking myself, everybody on the set. I asked Tucker, I asked Pat, I'll ask you.

In reality -- and forget the perfect -- your perfect society, mine or anybody else's. In reality, we're going to lose millions of jobs over the next year or two. In reality, our banks have been mismanaged horribly as a result of both the bankers and the politicians, in my opinion. And we're now dealing with that.

What would you do? In other words, saying what you don't think should happen has a value, to a point, but in reality today, what do you think the American politicians and bankers ought be doing?

REP. PAUL: I wouldn't pretend that pouring kerosene on our fire is working.

MR. RATIGAN: But you started with -- I'm sorry to interrupt you, but I wanted you to start it with "I would."

REP. PAUL: Okay. What I would do is allow the liquidation of debt to occur. You want the people to spend more money in buying up assets. You want these assets priced in the marketplace so we know what their values are.

That's why that first package of the --

MR. RATIGAN: But no one in the market will do that, as you know. I want that, too.

REP. PAUL: Then there's no value there. That's a -- good information, then. There's no value. Why should you dump that on the American taxpayers? That's a strong message that if it's worthless, you don't dump it on the taxpayer's back. That's why our slump is getting worse.

MR. RATIGAN: Agreed. But -- (cross talk) -- how do you get this country healthily to your perfect society, where there's limited taxes and free markets and innovation reigns supreme and me and Willie are on the beach, you know, getting drinks served to us from robots. But that's not where we are today.

How do you get that? How do you get deal with the reality of the problems of this country?

REP. PAUL: Well, the reality is you have to liquidate debt and get rid of the mal-investment. If you don't do that, you can't do it.

But what you're doing now is you're working on the destruction of the dollar. There's a pretense that you're going to improve things, but you're really going to destroy the dollar. And a financial crisis that we have today is going to be a dollar crisis.

MR. RATIGAN: I know the -- I'm sorry. (Inaudible.)


MR. RATIGAN: I know the risks.

MS. BRZEZINSKI: Real quick. Real quick.

MR. WATSON: Congressman, a quick question. Would you be willing to accept unemployment in the double digits -- 14 (percent) to 15 percent for several years if, in your mind, that's what it took to fix our fiscal house?

REP. PAUL: Well, it's better than 20 (percent). But I wouldn't be responsible. The people who created the bubble would be responsible.

Go talk to Greenspan and ask him if he is accepting the responsibility for the 14 percent.

So you can't blame the people who are trying to correct the problems on the unemployment. You've got to blame the people who created the bubble, the people who were delighted with all the billions of dollars they were making in the last decade or two.

MS. BRZEZINSKI: I'm just not sure we're ready to accept that.

MR. RATIGAN: I guess my frustration is I agree with -- well, I agree with a lot of what he says. The frustrating part of this is try to figure out the constructive way forward, identifying the problems.


MR. RATIGAN: We can -- but how --

MS. BRZEZINSKI: The conversation keeps going to -- everybody, throughout the show, it keeps going backwards.

MR. RATIGAN: Back. And to Obama's credit, he's trying to move forward, and it's going to be an interesting conversation.

MS. BRZEZINSKI: Congressman Ron Paul, thank you so much. We appreciate your coming on the show.

REP. PAUL: Thank you. Appreciate it.