December 16, 2010--Paul the Elder

While we are wondering if soon-to-be Kentucky senator Rand Paul in early January will filibuster legislation required to raise the national debt limit and thereby plunge the U.S. economy into technical default and render our treasury bills impossible to sell to China and others, there is no doubt at all about what his father, Ron, will do when he takes over the chairmanship of the previously sleepy House subcommittee on domestic monetary policy which oversees the Federal Reserve, the currency supply, and the value of the dollar.

We know because he has just published a book boldly named, End the Fed. He means to move to eliminate the Federal Reserve. Yes, get rid of it altogether.

In the book he expounds views that are derived from the Austrian School of economic theory.

Austrian School economists generally hold that human behavior is so complex as to make any mathematical modeling of a market extremely difficult. In other words, they toss out all current economic theory, of the left or right, because all contemporary theory is at its heart quantitative.

Since we cannot understand how markets behave, Austrian School followers advocate a laissez faire approach to the economy. They argue for the strict enforcement of voluntary contractual agreements between economic agents and hold that commercial transactions should be subject to the least possible imposition of coercive force. In particular, they argue for an extremely limited role for government and the smallest possible amount of government intervention in the economy.

For Ron Paul this means the effective end to all regulation of the economy because if left entirely to itself it will always self-correct and things in the long run will be fine. Just fine. For evidence from reality of just how fine look at the debris from the last decade of deregulation.

Further, he argues that a government should not have a central bank (no Fed) or dictate economic or monetary policy. And he of course calls for us to return to the gold standard. Never mind that economists on the left (Paul Krugman) as well as on the right (Milton Friedman) consider Austrian School thought to not only be outside the mainstream but, well, crackpot.

Crackpot or not, Paul is now in a commanding congressional position to influence the debate about the role of government in the economy. Up until the recent midterm election he had been kept far away from any leadership role by his Republican colleagues since they too considered him to be too far out. But now with 40 or so new members of Congress entering with the essential political support of the Tea Party (son Rand very much included), they have thrown him this bone--this subcommittee chairmanship.

I can guarantee that he will make the most of it, in large part since he self-confessedly admits that he still has presidential ambitions. (He says it is 50-50 that he will run, which in politician-speak makes it a certainty.) Among other things we can look forward to endless oversight hearings of the Fed and shrill demands for a forensic audit of its past actions. Coming from someone else, this would be fair game, maybe even wise; but coming from Ron Paul, who already has his mind made up about the future of the Fed (and as a consequence of our economy), it is a cable-news-C-Span disaster in waiting. Good theater but dangerous policy making.

The New York Times reports that when son Rand comes to Washington he will be rooming with his father. (Linked below.) Congressman Ron says this is fine with him as long as Rand doesn't expect him to do the cooking, though there is already thought among Tea Party folks that a good team in 2012 to run against Obama and Biden would be Paul-Paul. I hope that Ron will squelch these rumors, come to his senses, and make dinner for his son, who looks to me like he could use a good meal.