Economic: How would a Ron Paul presidency have prevented the recession?

[Lindsey]

I was asked today, "If Ron Paul had occupied the White House, from say 2004 on, how would that have prevented the recession? Not ideologically, but in what could have actually occurred."

This is exactly how the question was posed to me. How would you have responded to this question?

 

[rpwi]

The big thing is that a Ron Paul administration would be against financial sector bailouts...and the financial sector would know this. 'Investors' would take less risk and this would create less malinvestment. Malinvestment is how we get our bubbles and recessions.

The other key is that Ron would significantly cut back on military spending. This helps the economy a lot...it's guns or butter. You can't eat cruise missiles...so if you're making more of these you're making less real wealth. Reuters estimates the cost of Iraq and Afghanistan at 3.7 trillion (which is probably low). To give an idea of how large of an amount that is...the public debt in 2000 was just over 4 trillion dollars. Or put another way, there are about 115m households in the US...if the government had issued this money as a payout/dividend instead each househould would have got 3.7 trillion / 115m = $32 thousand

 

[narrowphoenix]

In 2004 it would've been to late to prevent the recession but his polices would have make it over more quickly. Remember recession is just a fancy way of saying "recovery", which, by bailing out the banks, delays the recovery

 

[Zippyjuan]

Recessions are a normal event in business cycles so no matter who is in charge, we will still have them.

 

[Enforcer]

I cannot tell you what Ron Paul would do, but if I were the president, I could change things in a myriad of ways:

1) I would let Congress know that I would not sign any bill (even ones I may agree with) if my own proposals don't get on the table

2) Rescind Executive Orders that were not in line with the Constitution

3) Change policies (i.e. not using the CIA for domestic law enforcement or allowing BATFE to ban firearms on a whim)

4) A good president would do what Gerald Ford did. When Congress would not act on Ford's requests, he called a news conference and let the American people know what was going on (it was too bad that Ford was a globalist)

5) I don't know if Ron Paul would do it, but going before Congress and asking to cut the corporate tax rate AND giving Americans a tax amnesty to bring the billions - maybe TRILLIONS in overseas banks and businesses back to the states, that would stimulate our economy

6) Ron Paul could ask for far less to run bureaucracies, encouraging the people in charge to begin eliminating some regulations and not harassing the citizenry with petty B.S. stuff that serves no purpose.

There is a ton of things that Ron Paul could have done or could do.

 

[Assassinrentao]

The big thing is that a Ron Paul administration would be against financial sector bailouts...and the financial sector would know this. 'Investors' would take less risk and this would create less malinvestment. Malinvestment is how we get our bubbles and recessions.

The other key is that Ron would significantly cut back on military spending. This helps the economy a lot...it's guns or butter. You can't eat cruise missiles...so if you're making more of these you're making less real wealth. Reuters estimates the cost of Iraq and Afghanistan at 3.7 trillion (which is probably low). To give an idea of how large of an amount that is...the public debt in 2000 was just over 4 trillion dollars. Or put another way, there are about 115m households in the US...if the government had issued this money as a payout/dividend instead each househould would have got 3.7 trillion / 115m = $32 thousand

So, even if these investors owned private citizens' insurance, like AIG, they should go bankrupted and everyone who had insured with AIG loses their life savings?

 

[XTreat]

So, even if these investors owned private citizens' insurance, like AIG, they should go bankrupted and everyone who had insured with AIG loses their life savings?

They would have not gone bankrupt because they would have known no bailout was coming and would not have made such high risk investments.

 

[Assassinrentao]

They would have not gone bankrupt because they would have known no bailout was coming and would not have made such high risk investments.

But, they DID go bankrupted. So, answer the question.

 

[presence]

So, even if these investors owned private citizens' insurance, like AIG, they should go bankrupted and everyone who had insured with AIG loses their life savings?

That's the kind of stuff that gets hammered out by the Judge during bankruptcy filing. It might be more likely that everyone loses "half" or some part, but one would expect equitable distribution to those with claims following liquidation. Bankruptcy is more often a matter of solvency than one of being completely without assets; a company may not be able to move forward, but what is left can always be divided up and fed to the claimants.

 

[Occam's Banana]

I was asked today, "If Ron Paul had occupied the White House, from say 2004 on, how would that have prevented the recession? Not ideologically, but in what could have actually occurred."

This is exactly how the question was posed to me. How would you have responded to this question?

A good part of the problem here is the implicit assumption that US presidents are some sort of "god-kings" who have the power to do things like "prevent recessions" or "fix natural disasters" or what-have-you. This is a serious problem which has been dealt with thoroughly elsewhere (such as Gene Healy's excellent & highly recommended "The Cult of the Presidency").

But putting that aside, the simple fact is that recessions are a necessary & unavoidable thing. They clear the market of malinvestments, over-speculation, etc. You don't *want* to prevent them. You want to get out of the way and let them run their course as quickly as possible so the economy can get back on track sooner rather than later.

Trying to prevent recessions just makes things worse by putting off the inevitable. They tried to fend off the recessionary consequences of the "dot com" bubble-burst with artificially low interest rates, "stimulus" packages and so forth - and we got the "housing" bubble as our reward. When *that* bubble burst, the consequences were much worse than what would have happened if they had just let the "dot com" recession run its course.

So I guess the ultimate answer to your question is something like this: "Ron Paul being president from 2004 would not have done anything to prevent the current recession. By 2004, the die was already cast - it was too late to do anything. What a Ron Paul administration could (and would) have done was to enact policies that would have allowed the current recession to run its course as quickly as possible - policies such as allowing interest rates to rise, or cutting capital gains taxes, or other things that amount to getting the government out of the way of the recovery. The *last* thing we need is the government doing more of the same things that caused the recession in the first place!"

 

[XTreat]

But, they DID go bankrupted. So, answer the question.

You are failing to see the point. They went went bankrupt because they made poor investing decisions based on the fact that they knew they would be bailed out. If they had not known they would be bailed out they would not have made high risk investments.

Therefore your question is immaterial.

 

[Republicanguy]

Gerald Ford went on television in 1975 concerning the congress not doing anything about the energy problems at the time ripping out past months of the calendar. Couldn't imagine President Obama doing that, not that everything he has stood for people don't support.

 

[HigherVision]

I was asked today, "If Ron Paul had occupied the White House, from say 2004 on, how would that have prevented the recession? Not ideologically, but in what could have actually occurred."

This is exactly how the question was posed to me. How would you have responded to this question?

Recessions are caused by distortions in the business cycle caused by the artificially low interest rates set by the Fed. Ron Paul would abolish the fed which would put an end to these boom and bust cycles, the latter of which is what you're referring to. But the artificial boom caused by the unnaturally low rates forced upon us by the Fed is what you really need to be looking at. Prices send signals to entrepreneurs and low interest rates send the signal that savings are abundant and not scarce or else the value of credit would be set higher. So businesses make malinvestments based off of the false signals set by the low rates and it generates an unsustainable boom for a while that everyone thinks is a great thing. Like the housing boom in the early to mid 2000's. But people are deceived because this boom is actually the problem of the economy, malinvestments mean that scarce resources and labor are being misdirected into areas that are not actually in society's interest. The bust or recession, though painful, is actually the cure because it puts a halt to this misallocation of valuable resources and the process begins of restructuring of the economy into actually productive and beneficial avenues and not wasted like the glut of depreciating houses we have now that are vacant. However the only way for the economy to restructure properly after a bust is for the government and central bank to not intervene and allow the needed recession, which is actually a needed restructuring of the economy to occur. But because it is difficult in the short run politicians never want to allow that to happen so they pursue centrally planned 'stimulus packages' like the bank bailout and the Obama stimulus bill. And so the process of malinvestment begins again, only we also have a huge amount of debt that has now amassed to finance all this stimulus and we're not even experiencing a boom as we did before so there is likely a worse recession or depression than the last one that is impending. So really the question you should ask is, what are we going to do to restore sound fundamentals to the economy before our country is completely destroyed by the government's Keynesian inspired economic programs.

 

[Ivash]

Recessions are a normal event in business cycles so no matter who is in charge, we will still have them.

I completely agree. A period of 'creative destruction' is essential for a functioning economy, as it helps weed out less competitive businesses and frees up capital that would otherwise be tied down.

 

[FreedomFighter1776]

Paul wouldn't have stopped the recession from happening.

If the principles Paul espouses were enacted, it would have been over by now.

 

[opal]

Paul wouldn't have stopped the recession from happening.

If the principles Paul espouses were enacted, it would have been over by now.

And there would be a whole lot less government overall.