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Mar 12 2014

Rand Paul, the Worldnetdaily and Irony

The Worldnetdaily was at CPAC, in the person of Gina Loudon, and she got the chance to interview Rand Paul while she was there. The result was an article so full of irony that they could not have ducked into the punch any harder if they’d done so purposely to make themselves look ridiculous.

What is wrong with the people who don’t understand why conservatism works, and why liberty is so important?

Even with a doctorate in human development, WND’s Gina Loudon was puzzled.

Sen. Rand Paul, R-Ky., had the answer to her question.

“I tell people it’s the ‘big heart, small brain syndrome.’ Liberals have big hearts, but they’re not using all their brain capacity,” explained the senator in his exclusive interview with WND at CPAC, the annual convention for conservatives, just outside of Washington.

Paul indirectly referred to the famous definition of insanity as trying something again and again while expecting a different result.

“I don’t know,” he said. “Liberals don’t seem to get the point that if you’re trying something and the objective evidence shows that it’s not working, why not try something different?”

The Kentuckian used the example of “what we’ve done for the people of Appalachia in my state. For 40 years, we’ve been sending money there but it’s still very poor.

“So, what I’ve been saying is, ‘Why don’t we do something different? Why don’t we dramatically cut the taxes in Eastern Kentucky, in Detroit and other places that are suffering?”

Paul explained how tax deductions are particularly effective in helping people “because they go directly to people who have businesses and create jobs.”

Ah yes, cut taxes and unleash the economic boom, aka the only economic plan Republicans ever have. He could not have picked a better example of trying the same thing over and over again even when the evidence shows that it doesn’t work. The Congressional Research Service studied this question going all the way back to 1945 and guess what they found? Cutting taxes does not spur more economic growth, but it does increase income inequality, reduce government revenue and increase deficits.

When Ronald Reagan cut taxes on the wealthy in 1981, it did not boost growth. In fact, we soon were in what was then the deepest recession since the Great Depression (a record we unfortunately broke in 2008 and 2009). But it did drop government revenue and dramatically increase the deficit. When Bill Clinton raised tax rates in 1993, it did not slow down growth. In fact, we had the longest period of sustained economic growth since the 1950s. It also boosted federal revenue and eliminated the deficit. When George W. Bush cut tax rates against in 2001, we had sluggish growth for the next few years followed by a near-depression, along with flagging revenue and a huge increase in the deficit. Still wanna stick with that definition of insanity, Sen. Paul?

30 comments

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  1. 1
    Larry

    Ummmm, 50 votes by the House to repeal Obamacare. Mr. Pot, meet Mr. Kettle.

  2. 2
    Randomfactor

    Interesting speech. I wonder who he plagiarized it from.

  3. 3
    Chiroptera

    “Liberals have big hearts, but they’re not using all their brain capacity,” explained the senator….

    Ever notice how liberterandians all seem to think that they are the only smart people in the room?

  4. 4
    D. C. Sessions

    I may be missing something, but …

    1) How does cutting taxes help in an area where everyone is too poor to pay taxes anyway?
    2) Isn’t cutting taxes just another way of sending money to an area?

  5. 5
    busterggi

    “So, what I’ve been saying is, ‘Why don’t we do something different? Why don’t we dramatically cut the taxes in Eastern Kentucky”

    As if the hillbillies are actually paying taxes? Red states are financial sinkholes for blue state money – wanna cut taxes to the blue states maybe? ‘course not, except for corporations & the rich in those.

  6. 6
    Reginald Selkirk

    “… Why don’t we dramatically cut the taxes in Eastern Kentucky, in Detroit and other places that are suffering?”

    Cutting taxes would reduce revenue. How then woud Detroit pay for the services that it already can’t afford?

  7. 7
    sigurd jorsalfar

    The Clinton economic boom wasn’t caused by higher tax rates. It was caused by loosening of lending standards and a massive increase in private consumer debt, combined with the blowing of bubbles by the fed. We saw how that strategy plays out in the long run, i.e. multiple bubble crashes eventually tanking the economy. Democrats got lucky that the big crash happened under Bush, but the reality is it could have happened under any president, as they all pursue these same policies now, regardless of party.

    D.C. Sessions, you are correct. Cutting taxes is just another way to send money to an area, in that tax cuts allow money to stay in an area rather than draining it off. But if there isn’t enough money there to begin with, cutting taxes isn’t going to create an economic boom.

    I completely take issue with Ed’s implication that reducing the deficit and increasing government revenue is good for the economy. Where’s your study that proves this, Ed? The CRS study does prove it, it merely assumes it without evidence.

    I advocate tax cuts as a way to boost the economy, but with two main distinctions from what conservatives always recommend – 1. I recommend tax cuts for average and low earners, not for the rich. 2. Tax cuts alone won’t do enough. There needs to be more government spending too, i.e. an increase in the deficit.

  8. 8
    sigurd jorsalfar

    Corr: The CRS study does NOT prove it.

  9. 9
    Area Man

    The very definition of conservatism is, “let’s keep doing what we’ve always done, because that’s how we’ve always done it”. They have to be dragged kicking and screaming into any new way of doing things.

  10. 10
    Area Man

    The Clinton economic boom wasn’t caused by higher tax rates. It was caused by loosening of lending standards and a massive increase in private consumer debt, combined with the blowing of bubbles by the fed.

    This just isn’t true. The 1990s saw a large increase in worker productivity and real wage growth. That’s genuine wealth creation, not just a temporary asset bubble.

    Whether Clinton’s tax increases helped cause it (by stabilizing the deficit and lowering interest rates) is debatable, but the fact is that they didn’t stop it, which puts the lie to the facile Republican claim that tax increases are always and everywhere job killers, and that tax cuts are a cure-all.

  11. 11
    somnus

    Reginald – “Cutting taxes would reduce revenue. How then woud Detroit pay for the services that it already can’t afford?”

    Paul wouldn’t see this as a bug, since he also doesn’t think the government should provide services.

  12. 12
    dingojack

    So Rand (corp.) – explain that whole ‘Paradox of Thrift’ thing again?
    Dingo

  13. 13
    tubi

    These two statements are contradictory:

    “‘Why don’t we do something different? Why don’t we dramatically cut the taxes in Eastern Kentucky, in Detroit and other places that are suffering?”

    But then:

    “[tax cuts help people] because they go directly to people who have businesses and create jobs.”

    The implication of the first statement is that taxes for the suffering people in Eastern Kentucky/Detroit should be cut. The second implies that taxes cuts for the elites would be beneficial.

    Not that Rand Paul cares, although I’m sure he understands. He wants to cut taxes for the rich job creators, but can’t just come out and say it. And no WND reader is well-enough equipped mentally to discern any inconsistency.

  14. 14
    sigurd jorsalfar

    Area Man – First of all, the real wage growth is all gone. Wages since the 1970s have in fact stagnated in real terms. The 90s really were just a bubble. Secondly, increased worker productivity is hardly a metric for prosperity when the gains of that productivity have been allotted almost entirely to the top 1%.

    It’s not debatable that Clinton’s tax hikes helped cause the growth of the 1990s. They did not. Massive consumer lending was the big driver at the time, not wage growth. That ended because the consumer was leveraged out and couldn’t borrow any more, leaving us in our current economic doldrums.

    Federal tax increases are everywhere and always job killers. There is no conceivable way in which a federal tax increase can ever create a job (except perhaps for the IRS). The GOP lie is that the solution is always to reduce taxes on corporations and the rich, and to hell with everyone else, combined with the lie (shared by both parties) that a ‘stable deficit’ has any economic benefit. A growing economy needs a growing money supply.

  15. 15
    Area Man

    First of all, the real wage growth is all gone. Wages since the 1970s have in fact stagnated in real terms.

    This is a popular but wrong belief. Total compensation has increased, and it increased fastest in the ’90s. It’s just that most of those gains have been in the form of benefits rather than wages.

    The 90s really were just a bubble.

    You keep saying this and it’s wrong. If it were just a bubble, worker productivity and per capita GDP would have gone back to their pre-boom levels. They did not.

    Secondly, increased worker productivity is hardly a metric for prosperity when the gains of that productivity have been allotted almost entirely to the top 1%.

    The distribution of increased wealth is a separate issue. The fact that worker productivity went up means that real wealth creation went up. It was not a case of asset prices going up and falling down again.

    It’s not debatable that Clinton’s tax hikes helped cause the growth of the 1990s. They did not. Massive consumer lending was the big driver at the time, not wage growth.

    Consumer lending per se cannot cause productivity growth. You need capital investments for that. The ’90s was a time of major capital investment in new technologies that boosted productivity. Lower long-term interest rates caused by a stabilized deficit helped.

    Federal tax increases are everywhere and always job killers.

    Utter absurdity. We had full employment for much of the Clinton years. There was no evidence of a disemployment effect at all.

    There is no conceivable way in which a federal tax increase can ever create a job (except perhaps for the IRS).

    Sure they can. As long as the dollar taxed is put to more productive use than a dollar untaxed, it causes economic growth. You can argue that this usually doesn’t happen, but to call it “inconceivable” is ignorant. You yourself said that we needed more federal spending; if that spending didn’t create jobs, what would the point be? (And remember, if you spend you tax — every dollar spent by the government must eventually be matched by a dollar of taxation.)

  16. 16
    freehand

    Sigurd – How would you explain Sweden, Norway, and Denmark? IIUC, they have high tax rates, universal health care, low income disparity, good education, and generally prosperous society.
    .
    Also, you said “There is no conceivable way in which a federal tax increase can ever create a job”. Ahem. The US Army. Civilian Conservation Corps (bring it back!). Extended unemployment benefits. Various government help with education (school loan guarantees, scholarships, etc.). Scientific research. Weather satellites. National Park Service. Enforcing government standards. All of these not only help people directly, but the money they spend fans out in a wave of income.

  17. 17
    a_ray_in_dilbert_space

    You know, I used to teach physics in Eastern KY. It just might be worth following Senator Paul around next time he has to make a campaign stop in Pikeville, KY.

  18. 18
    sigurd jorsalfar

    Area Man – I don’t think we are disagreeing as much as it seems. I’m not saying that absolutely no net gains occurred during the Clinton years, though I completely disagree with your view on net wages. They went up for a time during the 90s, but have decreased overall in real terms since the 1970s. This isn’t a complete stagnation however in that many products have improved dramatically in that time period, i.e. I can buy a better TV today for the money than I could hope to buy in 1970, so there have been wealth gains. I’m saying that overall, however, it went to the top 1% earners. The rest of us gained very little. And Clinton tax hikes had NOTHING to do with it. That’s the key point I am trying to make.

    Consumer spending can indeed per se cause economic growth. All economists acknowledge that consumer spending was the engine of economic growth in the US for decades, until recently. All growth in a capitalist system requires spending. Are you trying to argue that tax increases can per se cause economic growth? I find it borders on the bizarre to argue that consumer spending cannot have this effect while a federal tax increase can.

    No, every dollar spent by the federal government can never be matched by a dollar of taxation without ending the money economy as we know it. This is the key mistake in modern economic thinking since the end of the gold standard. The federal government creates dollars via spending and destroys dollars via taxation. If these two things matched up ‘eventually’ then there must come a day where all money is finally taxed out of circulation to account for all money that was spent into circulation in the first place. There is no requirement that this MUST happen, and surely you can see the foolishness in trying to force it to happen. This is because government deficit spending creates a net increase in the money supply each year, that never needs to be paid back. The belief that it must be paid back is a perniciously false one that dooms our economy to years and even decades of weak growth.

  19. 19
    sigurd jorsalfar

    freehand, seriously? The US army and all those things you mention exist due to government spending, not due to tax increases. Taxes and spending are opposites of one another. Do not confuse them and think they are the same thing. It’s also a mistake, albeit a supremely common one, to think that taxes are necessary for there to be government spending. The reality is it’s the other way around in a fiat currency system. How else would there even exist fiat money for the government to tax if it hadn’t first spent it? Where does fiat money come from?

    I explain Sweden, Denmark and Norway because they consistently run government spending deficits. You can have high taxes and still have high deficits, since the deficit is simply the amount spend minus the amount taxed. They have good health care because they choose to spend money on good health care. What on earth do you think I would explain it on? As I said above, I do not advocate lowering taxes on the wealthy. I advocate lowering them on the middle and the poor.

  20. 20
    pocketnerd

    The Kentuckian used the example of “what we’ve done for the people of Appalachia in my state. For 40 years, we’ve been sending money there but it’s still very poor.”

    Sweet. Merciless. Cthulhu.

    This may be one of the most dishonest sound bites I’ve ever heard. Let’s put aside, for the moment, that we’ve been cutting taxes nationwide for 40 years and the promised permanent economic boom has never materialized. In Appalachia specifically, we’ve been cutting taxes and slicing regulations for the coal companies, chemical plants, and other robber baronies… but somehow their increased profits never translate into less poverty or a better standard of living for the peons. It’s not a character flaw that progressives want to provide subsidies so the working poor don’t suffer quite so much while their labor makes the staggeringly rich even richer… but the real problem is the system itself, and even modern Democrats don’t want to touch that. We haven’t had a genuinely liberal president in almost 35 years.

  21. 21
    Area Man

    I don’t think we are disagreeing as much as it seems.

    If you keep insisting that the ’90s was a just a bubble, then we disagree on something pretty major. You could plausibly argue that the ’00s were a bubble, but not the ’90s. We would, in fact, love to recreate the ’90s.

    …though I completely disagree with your view on net wages. They went up for a time during the 90s, but have decreased overall in real terms since the 1970s.

    I linked to a chart from the Labor Department showing that they have in fact gone up. What they have done is stagnate for people at the bottom end of the income distribution. That’s a bad thing, but it doesn’t mean the economy hasn’t grown.

    The best way to get the gains of productivity growth more equitably distributed is to have full employment, which we had in the ’90s.

    Are you trying to argue that tax increases can per se cause economic growth?

    No, it’s what the tax dollars get used for. If the money is wasted, it doesn’t do any good. If it’s spent on necessary services and infrastructure, it arguably does far more good than any private investment could.

    Instead of taxing you can of course just borrow, but there are limits to that. People have to believe that you’ll pay them back, otherwise they won’t lend. In the early ’90s, interest rates were high because it looked like the government was going to become insolvent from too much borrowing and not enough taxing. Clinton changed that.

    No, every dollar spent by the federal government can never be matched by a dollar of taxation without ending the money economy as we know it.

    Huh? Every time there’s a balanced budget, spending and taxation are matched. The economy did not suddenly cease to exist in the late ’90s, or in any number of countries that have balanced budgets.

    The federal government creates dollars via spending and destroys dollars via taxation.

    That’s not how it works.

  22. 22
    sigurd jorsalfar

    I don’t keep insisting the 90s was just a bubble, Area Man. That was hasty on my part. It was, however, largely a bubble. My main point, which I do keep insisting on, is that high taxation in the 1990s had nothing to do with the economic growth of that decade, such as it was. I think together we’ve identified the actual causes.

    I agree that we need to replicate some aspects of the 1990s. They were certainly better than today. The problem is that we can’t do it through massive consumer borrowing combined with low deficits and surpluses any more. That was a strategy that never had long term viability because eventually consumers became loaded up with all the debt they could handle, and then found they couldn’t pay it off due to the insufficient money creation of the low deficits. So what do you propose? Higher taxation? That’s a non-starter as it was never the cause of the 90s economy in the first place. It’s the net spending that matters, i.e. we need a larger deficit.

    When I say taxation is a job killer I mean in the sense that it is insufficient deficit spending
    that is the job killer. Increased taxation means lower deficit spending or even a surplus, all else being equal. Hence it is a job killer all else being equal. If deficit spending is still sufficient in spite of high taxation then the economy can function well. But that’s not what we are seeing, and it’s not what we saw during the Clinton years.

    Initially you didn’t say spending and taxation must match ‘every time there is a balanced budget’, you said ‘eventually’ spending and taxation must match. I took that to mean ‘in the long run’. You’ve just changed the wording now. So, huh? I don’t disagree that when there is a balanced budget in a given year, spending and taxation must match, by definition. That’s a thoroughly banal point and I can’t believe that’s all you meant to say with the word ‘eventually’. It’s too banal a point for you to have bothered with.

    My point is that in the long run, spending and taxation cannot match otherwise all money would end up withdrawn from circulation. In order to have a functioning, growing fiat money economy in the long run, total spending must exceed total taxation in the long run and even in the short run, i.e. at any given point in time.

    Your understanding of ‘how it works’ is thoroughly conventional but thoroughly inapplicable to the fiat currency system. Under our system the government spends money into existence, taxes money out of existence, and does not borrow at all. The so-called ‘national debt’ is just the sum total of savings deposits in the federal reserve bank. It never has to be paid back with tax revenues because it’s money that already exists and is merely on deposit. No future taxation or grand-children are involved in paying it back. Interest rates are in fact irrelevant to federal spending, and are indeed entirely controlled by the federal reserve bank. The bank sets a target rate, then buys and sells financial assets in order to keep bank rates within an acceptable tolerance of the target rate. It did that under Clinton as well. Rates were higher then because that’s what the Fed wanted, pure and simple. Many people have lost a fortune not realizing that this is true for Japan as much as for the USA. Japan has the highest debt to GDP ratio in the world, yet has run persistently low interest rates for over 20 years. Why? Because ‘national debt’ and interest rates have nothing to do with one another. Interest rates are what the central bank says they are.

    Conservatives are correct, as hard as it may be for us to admit, that lower taxes stimulate the economy. Where they go astray is they only advocate for lower taxes on the rich – people who are most likely just to bank the savings and spend only a fraction of it into the economy, or pour it into an investment bubble. They don’t give a shit about the rest of us. And they never advocate for increased deficits, although the reality of deficit spending and how it functions in the economy means that no GOP president has ever run a balanced budget or a surplus since the system went full-fiat in 1971. Only Democrats are stupid enough to take deficit hysteria seriously. We are getting played.

    Tax breaks for poor and middle class families, however, are likely to result in immediate spending that will be more stimulative of the economy per dollar of tax decrease. But as I said above, tax breaks alone won’t be enough given the state of the economy. If we grant tax breaks then offset them with increased revenue elsewhere as Democrats want, or with reduced spending as Republicans want, we accomplish nothing either way. We need a net increase in the annual deficit until full employment is reached.

    You haven’t answered my question, btw. Where do you think money comes from?

  23. 23
    sigurd jorsalfar

    Ok I see now that it was freehand I asked ‘where does money come from?’ But I pose the same question to you, Area Man, since you say my explanation is ‘not how it work’.

    One thing that also just occurred to me is I think we have different conceptions about the term ‘bubble’. I am not using the term ‘bubble’ as though it means ‘imaginary’ or ‘illusory’ economic growth. I use it to mean growth that was rapid but unsustainable, such that it collapsed because it could not be sustained. I submit that that is largely what happened over the Clinton years. But I will concede that much of the growth of that time period was real and that it would be wonderful to have it back, if only this time we could do it in a more sustainable, and hence less bubbly, fashion. I am not saying that the 1990s were all just smoke and mirrors. I realize that people, mostly conservatives, do try to make that claim, so I can understand why you would think I am making it as well.

  24. 24
    Modusoperandi

    sigurd jorsalfar ”1. I recommend tax cuts for average and low earners, not for the rich.”
    Taxing the Job Creators®? Madness! Tax the poor, they’re the only ones left who can afford America’s Punitive Tax Rates™. Besides, they’re all lazy moochers. Heck, they’re such moochers that the GOP is going after the working poor now.
     
    “2. Tax cuts alone won’t do enough. There needs to be more government spending too, i.e. an increase in the deficit.”
    Oh, please! When has doing something done anything?!

     
    freehand ”Sigurd – How would you explain Sweden, Norway, and Denmark? IIUC, they have high tax rates, universal health care, low income disparity, good education, and generally prosperous society.”
    Sure, but as it was explained to me, roughly, “America has black people”. Which, even if that odd dogwhistle is right, it’s still wrong, since the Swedians are the biggest moochers of all. That’s why SAAB had so many vowel; they stole the extra one from the Job Creators (also, Lego and Volvo).

  25. 25
    Area Man

    Where do you think money comes from?

    From fractional reserve banking. It does not come from government spending. The government runs an account just like any other entity. When it levies taxes or borrows, it takes money out of the economy, and when it spends, it puts it back in. It doesn’t magically create or destroy it in the process.

    The central bank controls the interest rate for interbank lending, it does not control the interest rate at which people are willing to lend money to the government or to each other (though the former has an impact on the latter). If people are worried that the government might not pay them back, they demand far higher interest rates. And ultimately, the only way people can be paid back is with tax revenues. It’s impossible to run the government off of nothing but credit; attempting to do so would cause interest rates to spiral out of control and lead to eventual default (as has happened any number of times throughout the world).

    Beyond clearing up those misconceptions, it’s not worth spending more time on this.

  26. 26
    sigurd jorsalfar

    “When it levies taxes or borrows, it takes money out of the economy, and when it spends, it puts it back in.” You’ve made some progress here, but not enough.

    You are only pointing to where bank-lent money comes from when you cite fractional reserve lending. But for a bank to lend, it must first have reserves. Therefore it is impossible for all money in existence to be created by bank lending as there must be reserves in existence first. This is why banks seek depositors. Reserves are the only way for banks to settle accounts between each other at the end of the day. In the days of the gold standard, reserves comprised gold. Today they comprise government issued fiat held in a bank’s reserve account at the federal reserve bank. Federal deficit spending creates reserves, federal surpluses drain reserves.

    Nobody said the government ‘magically’ creates money. I said it simply creates it when it spends it. That’s what ‘fiat’ means. This is low and dishonest on your part, since the process of fractional reserve banking could be described as ‘magically’ creating money just as easily. When Lincoln issued greenbacks was that magic too?

    Your point about people demanding higher interest rates if they are worried about the government not paying them back is thoroughly debunked by the experience of Japan, and by the fact that interest rates in the US are lower today than they were in the booming 1990s, even though conservatives claim federal bankruptcy is just around the corner and even though the national debt is higher today than ever. Remember the debt ceiling? It only goes up, it never goes down, but interest rates go up and down, exactly as the federal reserve sets them.

    As for clearing up your misconceptions, it’s not worth any more of my time, since you cling to them like a drowning man clings to a life preserver.

  27. 27
    democommie

    I think Sigurd may be onto something.

    Instead of taxing people we could just have the government sell its various services. And the U.S. does one service WAAAAAAAAAAAAAAAAAAAAAAAAAAAY betterer than anybody else–military service.

    Hey, stay with me here. We could help to free some third world shithole (s’long’s it got some ol’ for the ol’ bidneth folks) and just let THEM pay for it. I know it sounds like a crazy idea but I think that it could work if we do it right.

    Wait, what, Iraq? Oh, um, nevermind.

  28. 28
    smrnda

    If taxes go to pay government workers who do work, that’s more consumer spending right there. If that revenue comes from increased taxes on the wealthy who spend the lowest % of their income on consumer spending then taxing them to pay government workers with comfortably middle class wages is going to increase consumer spending. There are potholes everywhere government workers could be filling, and if we took money from wealthy people (who use their income mostly to consolidate ownership and then squeeze workers) we’d be doing a good thing.

  29. 29
    sigurd jorsalfar

    You are on the right track, smrnda, but I am saying that federal taxes don’t go to pay for anything. Federal taxes are simply money taken out of existence. Federal spending puts money into existence. So the workers you want to hire can be paid for without taxing anyone, i.e. via deficit spending, which is what I advocate. I’m not saying taxing the rich serves no purpose, as I advocate for taxing them (for reasons I haven’t raised here, although you allude to some of them when you mention that the rich use their income mostly to consolidate ownership and squeeze the workers). But taxes are not required for federal spending.

    democommie, you might be the one who’s on something. Oh, um, you said ‘onto’ something. Nevermind.

  30. 30
    freehand

    “My point is that in the long run, spending and taxation cannot match otherwise all money would end up withdrawn from circulation.”
    .
    Only if the government burned their bills and wiped their hard drives. We’ve had to cut government budgets at all levels in the US in the last few years because the government income was cut because of reduced taxes (both lower rates and less income to tax).
    .
    Like so:
    Monday, a billion dollars collected in taxes, a billion dollars spent by the government.
    Tuesday, ditto.
    .
    If the amount of money taxed equals the amount spent by the government, then the money in circulation stays the same. I know that it’s more complicated than this, but if
    money in = money out
    then that process is doing nothing to change the money in circulation.

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