Yesterday, Senator Rand Paul (R-KY) engaged in a discussion with CNN’s Erin Burnett about debt and taxes. I was very impressed with the Senator’s comments, and after writing a post on the subject contacted his Washington office to set up an interview. His press staff was very responsive, and so this morning I sat down with the Senator for a phone interview. Our discussion is below.
Dustin Siggins: Thank you for your time. I really enjoyed your interview with Erin Burnett, and how you outlined your positions on spending and taxes. I posted on it yesterday, and was hoping you could expound upon what you said about not jumping up and down when it comes to entitlement reform, and how you instead simply believe it’s fiscal reality.
Sen. Rand Paul: Sure. This is what the “grand bargain” idea was all about. Democrats think working with us on Social Security will bring a compromise. They think we want changes to Social Security and we will agree to bring taxes up. This is wrong-headed. We are not jumping up and down to reform entitlements; we want to fix them because they are broken. The Deficit Commission wanted a “grand bargain,” but the whole concept misses the point.
DS: You also told Burnett that you don’t mind if some wealthy people pay more taxes once loopholes are cut out, etc. Can you explain that a little, please?
Sen. Rand Paul: If you flatten and simplify the code, some will pay more taxes. But in the aggregate, when it comes to the two large pies of the private sector and the government sector, you want the government sector to shrink. So some people will pay more in taxes, but you won’t need as much revenue to come into Washington. With a flatter system with fewer loopholes you won’t have as much money coming into Washington, but with a smaller government people will pay less overall.
Also, the President saying something that is borderline dishonest – that his spending is going down. [DS: The President has been citing a Market Watch analysis by Rex Nutting showing the President's spending has gone up slowly and is coming down. I debunked Nutting's analysis in a post soon after it came out.] This is just not true. His spending is up near 23%, 24% of GDP, and spending has grown significantly since he entered office.
Related, contrary to what the President says, the Bush tax cuts didn’t slow revenues. From 2003 to 2007 tax revenues matched their long-time average of 18% of GDP. Once the recession hit revenues went below 15% of GDP, but that was not because of the Bush tax cuts. That was because of the recession.
DS: I looked at tax revenue numbers by JustFacts.com, and they show the same thing.
Sen. Rand Paul: Even Bill Clinton, who looks at things from a Keynesian perspective, says we shouldn’t have a massive tax increase by eliminating the Bush tax cuts. If Obama wants re-election, we should make the Bush tax cuts permanent. He is not likely to do that, but (and it’s too late) he could come to us and say “You guys have some good ideas on Social Security, why don’t we sit down together to reform Social Security?” About a year ago he sat down with all of the Republican Senators and the question I got to ask him was related to that: why we don’t gradually raise the age and means-test? Just these changes could save the program for 75 years, or probably forever.
My bill looks to make these kinds of changes, and includes an index linking retirement to longevity. Medicare will have to change the same way as Social Security, but it’s so broken it needs other reforms. My plan institutes some of the same market forces as Paul Ryan’s plans, and gives Americans the Congressional health care plan. I think this latter point is very important, as it’s hard for people to say we are trying to gyp seniors when we are giving them the same health care system Congress has. Everyone already believes Congressmen have such a great system for themselves, and so this take advantage of that.
One thing Ryan does is say his plan gives health care plans like those Congress has. I specifically say in my plan that seniors will get the same plans as Congress.
Means-testing, raising the retirement age, and instituting the other changes in my plan may not fix Medicare. However, it does save $1 trillion over ten years.
DS: How many years do you think we have left before we face a fiscal crisis? I reviewed Senator Tom Coburn’s book “The Debt Bomb,” and he says we have about two years.
Sen. Rand Paul: I said when I ran in 2010 there is a day of reckoning coming, but I don’t know when. If I knew that I’d be a hedge fund manager instead of a government employee. It’s hard to predict things like that. There is an inevitability to it, however, and we can’t run trillion-dollar deficits for a long period of time. In the past, inflation was the threat, and we’ve printed up so much money in the last couple of years I think the reason we don’t see price inflation is that printed money flows overseas. 50% of our money goes overseas, especially because we import more than we export, and it will come home to roost. When Europe was uncertain, people flocked to the dollar because it’s stable. I think that as uncertainty grows here people will be going elsewhere, perhaps to gold. Gold has done well for quite a while.
The Chinese and Indians are skittish about holding our debt, and when gold goes down they buy more of our debt. But at some point the day of reckoning will come. I am generally on the same page as Senator Coburn.
DS: There’s been talk about you being asked to be VP by Mitt Romney, especially in light of the meeting between the two of you in late May. What are the top three specific policy solutions you would like to see the GOP’s presumptive nominee and whomever he picks to be VP to focus on in the general election and subsequently sign into law if elected?
Sen. Rand Paul: I believe the number one threat to the nation is our debt. We have to balance the budget in a finite period of time, and it probably won’t happen until we get a Balanced Budget Amendment. Now, a President doesn’t sign a constitutional amendment, so I don’t know how much of a difference support from a President will make. But it will take a difference in governing. When we were in charge with Bush and in charge of both Houses, we doubled the size of Department of Education and expanded Medicare. Bush I expanded the wetlands nonsense. Will we do a better job with a GOP Administration and Congress in 2012? I hope so, and I’ve tried to get actively involved, including endorsing endorsed Ted Cruz in Texas and Mark Neumann in Wisconsin.