Ron Paul by the Numbers

Criminyjicket does it again:

I have come to the conclusion that people really don’t wish to support a candidate without understanding what effect the candidates platform will have on them economically. That being the case, I thought I’d share with you The fiscal impact Ron Paul’s vision will have on you. First, I’ll give it to you scientifically.

1. uh, I dunno.

That takes care of the scientifically derived at numbers for Ron Paul’s issues. Now we shall move on to the rhetorical.

1. uh, I dunno.

You see, Ron Paul isn’t giving us any numbers. There is nothing substantive in what he says. He will save us money by ending the war, but then he will spend it defending our borders. There is no economic model designed to tell us what his constitutional form of government will cost/benefit us, but rather merely the assurances of the good Dr. and his merry men.

He goes on to ask for some — nay, any — specific guidance as to how a Ron Paul presidency would affect our economic lives. All good questions — so good, in fact, that I plagiarized CJ’s title for this blog post just for continuity at the risk of incurring his wrath and disdain.

While one can draw inferences from Rep. Paul’s policy statements and record as a legislator, I must say that I’m less concerned with the lack of specific budget projections from Rep. Paul’s campaign than the current numbers that shape our present reality:

Current National Debt: $8.9 trillion ($5.0 trillion held by public, $3.9 trillion by government)

National Debt in 2006: $8.5 trillion ($4.9 trillion held by public, $3.6 trillion by government)

Interest Expense on National Debt in 2006: $406 billion ($222 billion on debt held by public)

Largest departments by expenditure in our federal government (2006):

Department of Defense: $633.9 billion
Health and Human Services: $627.4 billion
Social Security: $593.1 billion
Department of Veterans Affairs: $113.8 billion

Note that since Social Security should be paid out of a completely separate, and sacrosanct, trust fund, it should not compete for tax receipts. Therefore, the interest payment on the national debt (at $406 billion) is effectively the third largest “department” in the federal government!

How does this compare with the size of the economy?
GDP (2006 current dollars): $13.2 trillion

Our debt, which is being used to fund operations, is 67% of our national “income”. It’s one thing to borrow money to invest in an asset you expect to appreciate in value, or to generate income. That’s called leverage. But consistently borrowing money just because you can’t balance your operating budget — well, that’s called stupidity. Unless you’re the federal government, that is.

Where do we get the money that we spend (2006)?
Individual Income Taxes: $1.0 trillion ($1.8 trillion including earmarked deductions)
Corporate Income Taxes: $350 billion
Additional Deficit: $247.7 billion

Tax payments by AGI and percentages (2004):
Top 1%, with AGI >= 328k, pay 37% of taxes
Top 5%, with AGI >= 137k, pay 57% of taxes
Top 10%, with AGI >= 100k, pay 68% of taxes

Sources:
http://www.treasurydirect.gov/NP/BPDLogin?application=np
http://fms.treas.gov/fr/index.html
http://www.ntu.org/main/page.php?PageID=6
http://www.bea.gov/national/index.htm#gdp

As Ron Paul has said, we can’t begin to address our fiscal crisis unless we question the role of government. That questioning can’t stop at the federal level, although I think it needs to start there. Since states can’t create money (they HAVE to balance their budgets), they have a built-in limit on their ability to grow. But the federal government, with its unique ability to monetize its debt, has shown itself unable to exercise even the smallest shred of self-restraint.

But hey — maybe I shouldn’t be so concerned with these figures. In fact, since the national debt doesn’t really matter, why don’t we just do away with the income tax entirely and fund our government ENTIRELY with borrowing? What does it matter if we add to the deficit by $250 billion with tax receipts of $1 trillion, or just borrow $1.25 trillion? That way we can have our cake and eat it too.

On the other hand, there’s someone else who doesn’t see it that way. His name is David Walker, and he’s our Comptroller General in charge of the Government Accountability Office. His recent report, which provides a none-too-sanguine perspective, was written up last week in the Financial Times. I’d encourage anyone who isn’t yet concerned with our government’s profligacy to the point of insanity to read these two articles. And you should also learn to speak, read, and write Chinese.

CJ’s other assertion is that a Constitutionally-restrained federal government would be more expensive than the “single state” alternative driven by an all-powerful federal government. His rationale is that supporting fifty state bureaucracies is more expensive than a single national bureaucracy for any issue or department in question.

I strongly disagree. History has shown that a Constitutionally-limited federal government and state governments operating in the context of the 10th Amendment are vastly more cost-effective. Why am I so sure? Four reasons:

1) We survived the first 140 years as a nation without a federal income tax, and state taxes during that time were far less than the 30-35% (at least) federal tax burden we shoulder today. Historically, the burden has not been “shifted” from states to the federal government — it’s just been increased at every level to the point of threatening our economic viability as a nation.

2) Every time the federal government picks up a new area to regulate or fund, it typically steps on the toes of, or competes with, existing state regulations and agencies. Education, transportation, and energy are perfect examples. But if a state hasn’t seen fit to regulate something, why is relying on a newly-omniscient Guardian of the Public Good in Washington a good thing? And when the Feds *do* show up at the party, it’s not like the state bureaucrats just give up and retire. You still have Departments of Education and Departments of Transportation in every state. Can you show me an example of a federal department, that if eliminated, would require creation of new bureaucracies at the state level? I’ve racked my brain and come up empty.

3) The federal government’s other favorite trick is the “unfunded mandate”. That involves passing a federal law that requires the states do something, but doesn’t provide funding to do it. The RealID act is a perfect example — how are the states going to fund this national ID card? Well, that’s your state’s problem. Maybe they can just reduce Medicaid benefits so we can all afford to smile and show our papers. Oh and did I mention Medicaid? The federal government has decreed that your state has to provide that to illegal aliens, as well. There’s irony in there somewhere, if only I could find it.

4) Most importantly, the federal government ALONE has the power to run an unbalanced budget funded by borrowing and printing new dollars in a fiat currency. Sure, state and local governments can float bonds for capital expenditures like schools and roads, but they can’t just “borrow” money like the feds through the Federal Reserve System to finance an operating deficit. Like I said, try that technique yourself at home. You won’t like the results!

A final note — there is one detail in Ron Paul’s statements that requires further clarification. Basic research shows that one widely-quoted Ron Paul statistic, namely that income taxes only account for 1/3 of federal revenue, is not in agreement with top-line numbers from standard sources. In fact, the $1.8 trillion collected from income taxes is 3/4 of the $2.4 trillion in overall federal revenue in 2006.

If you pull out earmarked deductions, the remaining $1 trillion collected in “general” income taxes is approximately 1/3 of the $3 trillion in 2006 federal expenditures. But that’s a big difference from his assertion that income taxes comprise 1/3 of all federal revenue. (These numbers are straight from the Treasury Department’s annual report.) Other than that one talking point, however, I’ve found his other specific claims articulated in speeches and writings to be reliable and verifiable.

In my final analysis, any candidate who understands the consequences of our federal government’s reckless expansion and articulates a clear plan to restrain it based upon Constitutional principles deserves to participate, and win, this campaign. Unfortunately, such an “extremist” criterion currently leaves only one viable candidate, and therefore no real possibility for debate.

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