When Ron Paul was elected to Congress in 1976, he immediately established a reputation among his colleagues as a man who would not "deal" in pork-barrel issues. For him, there is a clear distinction between right and wrong in public affairs—and taxing, spending, and regulating are wrong.
During four terms in Congress, Paul attracted national attention several times on issues related to monetary policy, the Federal Reserve, and the International Monetary Fund. He was a member of the US Gold Commission in 1981–82 and was responsible for its single affirmative recommendation: a US bullion coinage to compete against the paper system that he believes ultimately will collapse.
Although no longer a congressman, he is still very active in politics as chairman of the Washington-based Citizens for a Sound Economy, a public-interest lobbying organization working for free trade and deregulation. He is also publisher of the Ron Paul Investment Letter, a monthly source of news and commentary about misbehavior on Capitol Hill and its economic consequences. His favorite project, however, remains his Foundation for Rational Economics and Education, which sponsors educational programs each year for congressional interns and publishes educational materials directed toward the basic distinction between right and wrong in government.
Paul still participates to a small degree in the medical partnership he helped to found before he ran for Congress, but the prohibitive cost of medical liability insurance is a disincentive to resumption of that career, he says.
Contributing Editor Joe Cobb interviewed Paul during one of the former congressman's frequent visits to Washington from Lake Jackson, Texas, where he lives with his family.
Reason: How does it feel not to be in Congress any more?
Paul: It feels like I have been let out of prison. I'm delighted not to have the restrictions and restraints that public office puts on an individual. I feel much freer to voice my opinion and to run a schedule more on my own. I can still be politically active, but at the same time I can now do things like practice medicine and do some writing.
Reason: You've launched a new venture, The Ron Paul Investment Letter. How is that going?
Paul: Very well. It's a Washington-insider approach to investments, and it doesn't pretend to tell people how to make a million bucks on trading stocks. I started it the end of last year when I was leaving Congress. Other newsletter writers said, "Hold off. This is the worst time to start something new. Nobody's getting good responses. Direct mail for hard-money newsletters is just disastrous." But in spite of a negative market, the letter has done exceptionally well so far.
Reason: Now that you're out of Congress, haven't your inside sources sort of dried up?
Paul: What I have found, which is interesting, is that if you're a congressman, some very useful information is withheld from you because you're an official. Now that I'm out, there are individuals who know what's going on and are calling me to say, "Look, don't tell anybody where you got this information," and they're anxious to get some useful information out to promote their own particular cause. So in some ways, it's easier to get information that I wasn't able to have before—but it's also a challenge to keep getting the right information.
Reason: How much of your time do you spend traveling around the country talking, and how much in Washington?
Paul: I spend probably half of my time in Lake Jackson, Texas—that's where my family is—and the other half is on the road and in Washington. A lot of my traveling is to make speeches on the hard-money issue. I was closely associated with that issue when I was in Congress and a member of the Banking Committee. Promoting a sound monetary system is really one of my first loves.
Reason: When was the last time that you had a real close sit-down session with Paul Volcker [chairman of the Federal Reserve]?
Paul: It's been a while now. But toward the end of the congressional session last year, he appeared before the Banking Committee. Over the years, I and other Banking members would go to the Fed and have breakfast with him, and he was always very accommodating in our discussions.
Reason: He's looked upon by so many people as being a brilliant figure who saved the American dollar and solved the inflation problem. What do you think is really his secret?
Paul: Well, I think his first secret is that he's six-feet-seven and he's very intimidating! He scares everybody to death because of his size. But, more seriously, I think it's because he's a good monetary technician and understands government manipulation of money. He was called in to do a job at a time when the dollar was being rejected as a sound currency, and in a technical fashion, I think he's been able to achieve a lot.
I know a lot of hard-money people think that he doesn't have a lick of sense, but I don't believe that's true at all. I think he's very capable. It's the monetary system that he endorses and advocates that is unworkable.
Reason: If you had the chance to give advice to an international conference of central bankers—Volcker and his counterparts in other countries—what kind of reform or changes would you propose?
Paul: Well, in the first place, I'd probably be very hesitant to go to any type of international conference like Bretton Woods [where 45 nations, led by British economist John Maynard Keynes, drafted an agreement in 1944 to establish a new international monetary system no longer based on the gold standard]. I think it would give too much credibility to the idea of politicians getting together and contriving a political system of money. But it would be a different story if it were a conference organized to move toward sound money based on a free market, which would mean you eventually wouldn't have any regulations at all—if you have an international currency such as a gold ounce, you really don't have to have any exchange rates. So I would only go to a conference where they would be thinking about positive changes like abolishing central banking and instituting a monetary system where a monetary unit is defined as a precise weight of a precious metal.
Reason: The whole idea of abolishing central banks sounds terribly radical and irresponsible. Most people who hear that sort of line can't take it seriously. How do you answer them?
Paul: There are two answers. One is to throw it right back in their laps and ask, "Could abolishing the Fed be any more chaotic than the Great Depression of the '30s," which the Fed brought on? Could it be any worse than the repeated recessions and the worsening conditions that we have now? Every time we have a recovery, the base unemployment rate keeps going up. Every time we have a reacceleration of price inflation, it's always higher than before. In every new cycle we have, both the peaks and the bottoms of interest rates are worse than before. So at the rate we're going, our next recession, which is going to come in another year or so, is going to be much worse than the devastating recession of 1982–83. So to anyone who thinks that getting rid of the Fed is a radical and a dangerous idea, I would say it's radical, dangerous, unconstitutional, and immoral to allow the Fed to continue to exist. But this isn't enough of an answer to really satisfy everybody. You also have to come up with practical transitions.
Reason: Like what?
Paul: Take mail service, for example. You could abolish the Post Office in one day, and it would probably take a week or two for the private sector to begin to take over. But you wouldn't need to abolish the Post Office in one day. You could just legalize its competition, and it would be a matter of time until the Post Office would probably be out of business. You could then close it down without any disruption at all. I think you can do some things like this in other areas. For instance, the Social Security system could be phased out with voluntary retirement programs. And in money you can do this too—you can develop competition in money. A few years ago, that sounded strange to a lot of people, but economists like F.A. Hayek and others have given it intellectual credibility. These days, we're getting a fair number of people in Washington to agree that you can legalize competition. That would mean altering the legal-tender laws, allowing people to settle contracts with gold or silver or whatever their contracts might be drawn up in, and moving toward a gold-bullion coin.
Reason: Ever since the Gold Commission of 1982, you've been a major advocate of a United States gold-bullion coin. What's currently happening with that?
Paul: Things are moving along. There are well over 100 congressional cosponsors of the gold-coin bill, and there are some good coalitions that have developed. Liberals as well as conservatives now are in favor of the gold coin—not always for the same reasons, but in politics, you take your supporters wherever you can get them. Some liberals support the gold coin mainly because they want competition with the South African Krugerrand. The competition argument also has appeal for the free-market people who aren't anxious to impose economic sanctions against South Africa or ban the Krugerrand, but who are quite willing to give South Africa competition.
And remember, putting out gold coins would be legalizing something that the American people want. They are buying hundreds of millions of dollars' worth of foreign coins every year. Some people point out that US gold coins could contribute to a positive balance of payments for us, since many of the dollars that are used to buy these coins would stay here.
To me, a gold-bullion coin made here would be another positive step toward competition among currencies. If gold is an alternative currency—and if we do have a breakdown of banking and currency transactions in this decade—then the more people who hold gold, the better off we're going to be.
Reason: So you think gold coinage is a long-term alternative to the Federal Reserve?
Paul: I think it truly is. I'm willing to let gold compete with paper. You know, I don't think we have to beat people over the head to use the gold if they don't want to—let them use Federal Reserve notes forever. But I think gold is going to win out.
There's one project I've been working on for a long time—it should jell this year—and that's bringing together all the factions that are concerned about the Fed's policies. There are a lot of different people who are unhappy with the Fed—liberals and conservatives, populists and libertarians. I would like to bring them together under a banner called the Committee to Abolish the Fed. The reason I like this idea is that you state very clearly that the enemy is the Federal Reserve System. It's the Fed that accommodates Congress's wild spending on welfare and warfare by printing money. The Fed is very necessary for the politician, but the Fed is itself a big part of the problem, because it creates the money and the business cycle. What we need is to abolish the Fed, not just to reform it.
Reason: Do you think this can take hold politically?
Paul: We already have a broad-based coalition in support of the gold coin. I think we can get a lot of groups to come together. For instance, farmers are suffering right now, and they're sophisticated enough to realize that monetary policy has a lot to do with their problems. They are not very anxious to admit that farm subsidies also have something to do with their problems, but they do understand that part of the blame belongs with the system of money that brings interest rates of as much as 21 percent.
Reason: When you were in the House, how did you get along with other members of Congress? For example, what about Henry Gonzalez, who's a strong advocate of abolishing the Federal Reserve and wants to replace it with an inflationary greenback agency that's run by the Treasury?
Paul: We never got into a debate on alternatives to the Fed, but Henry Gonzalez might be a supporter of the Committee to Abolish the Fed. In a way, he and I make strange political bedfellows. Gonzalez is from a military town—San Antonio—and he's a liberal welfarist, one of the biggest spenders in Congress. On the other hand, I don't believe we should be arming the world and running an interventionist foreign policy, and I'm in favor of individual freedom and only minimal spending by government. And so, of course, we're on completely opposite ends of the spectrum. Yet Gonzalez was a very good friend of mine. We served on the Banking Committee, and we frequently worked on legislation together. He was a cosponsor with me of a bill to audit the Fed, and we worked together on gold issues. We were also together in our opposition to some of the shenanigans going on with the IMF (International Monetary Fund). So even though Gonzalez is a liberal, he saw many things from a liberal view the same way I saw them from the more libertarian view. He understands the large banks and their control of the monetary system, and that distinguishes him from some other liberals in Congress. You can build a coalition with people like Gonzalez.
Reason: When you were in Congress, how much direct contact did you have with Tip O'Neill?
Paul: Essentially none. I didn't trade votes, so I didn't deal in the legislative process.
Reason: Was it an easy thing for you to be as independent as you were?
Paul: It was never easy to stand alone, from the first week I was in Congress to the last. It was never easy to stand out and imply, with my solitary vote, that 434 of my colleagues were wrong, even when I didn't actually say one word. I was virtually pointing my finger at them, saying, "I know what's right, and I'm voting by myself."
Reason: When these guys are spending billions and billions of dollars, does it really ever occur to them that they're spending other people's money or doing anything wrong?
Paul: No, no, they think only that it's the government's money. Their attitude is that if you cut taxes, it's a loss to the government. They don't see that it's returning something that belongs to the taxpayer.
One example that I saw was in 1980. In order to punish the Soviets for invading Afghanistan, President Carter said the Olympic athletes couldn't go to Moscow. And in true American fashion—again, not recognizing who the government really is—Congress decided that, in order to make the athletes feel better, the government would give each athlete a gold coin to compensate for the lost trip. A vote came up on the House floor, and during the debate, I thought about the Davy Crockett quote that tax money isn't theirs to give. I was sitting beside a congressman from New York who was one of the wealthiest members of Congress. I leaned over to him and asked, "What right do we have to do this? If each member of Congress gave $100, we'd have enough money to reward these athletes if we feel it's so important." He casually looked at me and said very nonchalantly, "It really isn't worth it." I think that tells you a lot. It wasn't worth it for this multi-millionaire to give a hundred bucks, but it was worth it for the taxpayer to sacrifice.
Reason: You're chairman of the board of directors of a group called Citizens for a Sound Economy. Tell me a little bit about this group.
Paul: It's a group based in Washington aiming to counteract one of the anti-market ideas that Common Cause and Ralph Nader have promoted over the years, which is that government regulations are the protectors of consumers. We're convinced instead that the free market is there to serve the consumer, not primarily business people or labor. It's really the best consumer protection around.
Right now, Citizens for a Sound Economy is concentrating on three free-market issues: tax reform, Individual Retirement Accounts, and free trade. We have 32,000–33,000 individuals who have put their name on the line and identified with us, and that's a very good start. But it's going to take at least a couple of years to be as effective as the liberals have been, and it really does depend on how well we do the job.
Liberals have a knack—and it's a very positive political knack—for coming across as the ones who are concerned about people and their welfare. But the plain truth is that liberal programs don't protect people's welfare. Many people suffer as the result of an inflationary intervention philosophy. So I don't think that liberals' approach is humanitarian, nor do they really take care of people. Meanwhile, one of our shortcomings is that although we talk a lot about profits and accumulating wealth, we fail to point out that letting the market work is also a very practical, humanitarian approach to society.
Reason: Do you ever let your imagination wander? On all these airline flights that you take, do you ever fantasize about how you'd like to see Washington or the country change?
Paul: Yes, I have two fantasies. The more ambitious one is in a picture I have hanging in my office and had in my congressional office all along. It shows the Capitol, but there are no buildings around it—just a pasture with cows grazing. I think that would be a far better use of the land than all of those buildings filled with tens of thousands of bureaucrats. That's one fantasy, but since I'm not a destructive individual and I don't want to blow up the buildings, I don't want to go quite that far.
My fantasy short of that is to auction off the government buildings to private enterprise, with me as the auctioneer. I'd go down in front of Health and Human Services, then over to the Labor Department building, then down the street, and all of a sudden, we would have disposed of all the buildings and reduced government by 80 percent at least.
You know, in my little farewell speech on the House floor, I confessed that I am not an anarchist, but during my seven years in Congress, my disdain for big government grew considerably. I went from a National Taxpayers Union rating of 82 percent to 99 percent, which meant that I was disapproving of nearly all the expenditures that came before Congress.
But, quite frankly, I am satisfied in my fantasy to be auctioning off 80 percent of all the government buildings. I think that if I could do even that much, I would do the country a great service.
This article originally appeared in print under the headline "Interview with Ron Paul".
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