[Congressional Record Volume 143, Number 41 (Wednesday, April 9, 1997)]
[House]
[Page H1369]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              OUR SOARING TRADE DEFICIT CANNOT BE IGNORED

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Texas [Mr. Paul] is recognized for 5 minutes.
  Mr. PAUL. Mr. Speaker, the business cycle has not yet been repealed, 
but if we did the right thing in the Congress, I believe we could do a 
lot to alleviate the great harm done by the business cycle.
  Mr. Speaker, artificially low interest rates are the culprit in the 
Government created boom bust cycle. Federal regulated low rates cause 
bad business decisions, confuse consumers and encourage debt. These 
distortions prompt market corrections which bring on our slumps.
  In recent years the artificially low interest rates that banks pay on 
savings have served to reduce savings. In the 1970's savings were low 
because it was perceived that the money was rapidly losing its 
purchasing power. It was better to spend than to save. As money leaves 
savings accounts it frequently goes into stocks and bonds adding fuel 
to the financial bubble which has been developing now for over 15 
years. Domestic and foreign central bank purchases of our treasury debt 
further serves to distort and drive interest rates below the market 
level.
  Our soaring trade deficit is something that cannot be ignored. In 
January there was a negative trade deficit in goods of more than $19 
billion, the highest in our history. Our deficit has now been running 
over $100 billion for several years, and the artificially strong dollar 
has encouraged this imbalance. Temporarily a negative trade balance is 
a benefit to American consumers by holding down price inflation here at 
home and allowing foreigners to finance our extravagance. These trends 
will end once confidence is shattered and the dollar starts to lose 
value on the international exchange markets.
  The tragedy is that there are very few in Congress interested in this 
issue. Even on the Committee on Banking and Financial Services I hear 
very little concern expressed about the long term weakness of the 
dollar, yet economic law dictates that persistent negative trade 
imbalances eventually have to be corrected; it is only a matter of 
time.
  I suspect in the next several years Congress will be truly 
challenged. The high level of frustration in this body comes from the 
fact that the large majority are not yet willing to give up the 
principles upon which the welfare state exists. Eventually an economic 
crisis will force all Americans, including Congress, to face up to the 
serious problems that we have generated for ourselves over the past 50 
years.
  I expect deficits to explode and not come down. I suspect the economy 
is much weaker than is currently claimed. In the not too distant future 
we will be in a serious recession. Under these circumstances the demand 
for spending will override all other concerns. In spite of current 
dollar euphoria, dollar weakness will become the economic event of the 
late 1990's. Consumers and entitlement recipients will face the problem 
of stagflation, probably worse than we saw in the 1970's. I expect very 
few in Congress to see the monetary side of this problem.
  The welfare state will be threatened, and yet the consensus will 
remain that what is needed is more revenues to help alleviate the 
suffering, more Federal Reserve monetary stimulus to the economy, more 
price controls, which we already have in medicine, higher taxes and 
protectionism.
  Soon it will be realized that NAFTA and GATT were not free trade 
treaties, but only an international effort at trade management for the 
benefit of special interests. Ask any home builder how protectionist 
sentiment adds several thousands of dollars to the cost of a home by 
keeping out cheaper Canadian lumber in spite of NAFTA's pretense at 
free trade.
  The solution to this mess is not complex. It is however politically 
difficult to overcome the status quo and the conventional wisdom of our 
intellectual leaders and the media. What we need is a limited 
government designed for the protection of liberty. We need minimal 
control over our Nation's wealth, not the more than 50-percent of 
government control that we currently have. Regulatory control in 
minutia, as we have today, must end. Voluntary contracts need to be 
honored once again. None of this will work unless we have a currency 
that cannot be debased and a tax system that does not tax income, 
savings, capital gains estates or success.
  Although it will be difficult to go from one form of government to 
another, there will be much less suffering if we go rapidly in the 
direction of more freedom rather than a protracted effort to save the 
welfare state. Perestroika and glasnost did not save communism. Block 
grants, a line item veto and a balanced budget amendment will not save 
the welfare state.

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