The various liberties of Ron Paul

This article appeared in the Patriot News, Jan 11, 2012.

At a recent GOP debate, the presidential candidates were asked what they would be doing on a Saturday night if they weren’t running for president. The responses were typically safe and predictable, mostly having to do with watching sports, but one brave soul said he would be reading an economics textbook.

That brave soul? Ron Paul.

As the standard bearer for libertarianism in the Republican Party, Paul has staked out positions that are not entirely palatable to conservatives. For urging Americans to be cautious about getting entangled abroad in wars, he gets pilloried for being an isolationist.

Unlike candidates such as Rick Santorum, who advocate immediate and uncompromising bellicosity against Iran for its pursuit of nuclear weapons and truculence toward Israel, Paul says that the U.S. should think twice about sending its sons and daughters to war, that it should avail of all diplomatic avenues, and that, anyway, Israel is capable of taking care of itself.

Paul’s position on the military-industrial complex does not sit well with belligerents in his party. Paul favors cutting defense spending, inviting charges that he will undermine national security.

Mitt Romney professes fiscal conservatism, yet wishes to increase and maintain military expenditures at 4 percent of gross domestic product. In an era of budgetary austerity, $600 billion is a significant commitment and will come at the expense of sharply reduced spending on health, education and other domestic programs.

Paul’s stance on civil liberties also puts him at odds with many in his party. True to his libertarian position, Paul seeks to minimize the role of the state in individual affairs.

He insists doggedly that the Fourth Amendment on unreasonable searches and seizures be respected. He warns against expanding the provisions of the Patriot Act, claiming that they threaten the liberty of American citizens. In advocating this position, he not only dismisses GOP orthodoxy, he also parts ways with most Democrats (whose greatest fear seems to be that they will appear weak on national security.)

But Paul’s jaundiced view of the government leads him to recommend the abolition of important economic institutions such as the Federal Reserve. Ending the Fed, as he puts it, will prevent the dollar from becoming debased. The actions of the central bank, in Paul’s view, are responsible for unleashing inflation and lowering the value of the dollar in foreign-exchange markets.

The evidence on both counts is flimsy. In recent months, the dollar has risen against the euro, pound and Swiss franc. The turmoil in Europe has played a role in currency movements, but this only highlights the perils of exchange-rate prognostications. Inflation in the U.S. has remained quiescent, and there are no indications from financial indicators (such as the interest rate on 10-year Treasury notes) that investors expect inflation to rise any time soon.

But Paul ignores the stewardship provided by an independent central bank in times of crisis. The advent of the Great Recession led the Fed and its chairman, Ben Bernanke, to tackle plunging employment and shrinking GDP by carrying out monetary policy on a breathtaking scale.

The Fed bought vast quantities of assets, often straying far from its traditional focus on government securities to include unorthodox securities such as mortgage-backed assets. It drove short-term interest rates down to zero and even managed to bring mortgage rates down to historic lows, all in an effort to prevent the recession from getting worse.

Has all this worked? To a large extent, yes. Unemployment, now at 8.5 percent, has fallen in recent months as increasingly confident firms hire more workers. The economy is growing, and consumers are (slowly) becoming more upbeat about their immediate prospects.

But we are not out of the woods yet. The housing market continues to be an albatross around the neck of the economy. A glut of foreclosed homes and falling home prices continue to depress the real estate market and prevent a more robust recovery from taking place.

So where does that leave our libertarian friend? Paul displays admirable courage in taking on the sacrosanct shibboleths of our time — how easy would it have been for him in this GOP primary season to adopt the orthodoxy on defense, national security and foreign wars?

But Paul has shown his independent streak by stressing the importance of guarding individual freedoms as enshrined in the Constitution, and he might yet pay a price for it.

In the meantime, Paul’s preference for reading economics textbooks on Saturday nights displays a marvelous desire to learn more about the workings of the economy. One hopes that he will pay close attention to the section on the role of an independent Fed in managing the economic affairs of the country. It makes for some exciting reading.

In the fifth century, St. Genevieve's prayers were credited with diverting Attila's Huns from attacking Paris. Appeals to a higher power saved the city (although carping voices would note that the Huns chose to attack Orleans instead.)

More recently, with Harrisburg facing a threat of its own, Mayor Linda Thompson called for prayer. The massive incinerator debt, the mismanagement of the city’s finances, the crushing terms of Act 47, unhelpful state legislators restricting the options available to the city — surely, only divine inspiration could offer a way out of the morass.

Constitutional niceties such as the separation of church and state would have to wait. The fate of a commuter tax hung in the balance, not to mention the tender interests of bondholders.

But before Ms. Thompson, there was Rick Perry, governor of Texas and recent GOP contender for the presidency. In April, Perry designated three days as “Days of prayer for rain in the state of Texas.” The proclamation, listed on the governor’s website, cites the “combination of higher than normal temperatures, low precipitation and low relative humidity” as causing an “exceptional” drought in the state. The proclamation ends with the “Seal of state to be affixed at my office,” thereby removing any doubt in anyone’s mind (mortal or otherwise) about the official nature of the appeal.

Alas, the governor’s proclamation has not yet had the intended effects. Across the state, and even in the state capital of Austin, the sun beats down mercilessly. Temperatures during the day hover obstinately above 100 degrees, and rainfall remains conspicuous by its absence. (I know, I was there recently.)

But Mr. Perry is undeterred. A few weeks ago, he organized a national prayer to seek divine guidance to solve the country’s myriad woes. Instead of issuing a proclamation on a website, however, this time Perry conducted the event at Reliant Stadium in Houston. Some 30,000 people showed up to listen to Perry’s call for humility and forgiveness.

Unfortunately, the temper of that occasion did not last long. In a recent broadside at the Federal Reserve chairman, Perry warned Ben Bernanke that if he increased the money supply before the 2012 election, things would get “pretty ugly” for him in Texas. Not exactly a Christian sentiment.

Late in 2008, when the economic crisis looked dire and threats of a second Great Depression loomed large, Bernanke deployed the full powers of the Federal Reserve to prevent a catastrophe. Almost three years later, with the levers of fiscal policy (government spending, taxes) essentially inoperable, only the Fed is in a position to battle the slowing economy.

And now Perry has warned Bernanke not to do it. Even if economic conditions were to worsen, even if unemployment were to rise sharply, even if millions of Americans were to be laid off, Bernanke must not use monetary policy before the elections. Doing so would be “treasonous.” (Or could it be that Perry fears that such policies might benefit the economy, and thereby boost President Obama’s chances of re-election?)

In any event, such an egregious attack on the Fed bodes ill for American politics and policy-making. As an institution that is largely immune from political pressures and the importunings of special-interest groups, the Fed plays a vital role in managing the economic affairs of the country.

Pugnacious demands from politicians, especially leading contenders for the presidency, threaten the Fed’s independence and raise the possibility that its actions will be seen as politicized. During his remarks in Reliant Stadium, Perry asked for prayers for President Obama. Rather than threatening him, Perry might have done the same for Bernanke.

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