[Congressional Record Volume 146, Number 145 (Monday, November 13, 2000)]
[House]
[Pages H11866-H11867]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        ECONOMIC PROBLEMS AHEAD

  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 financial markets are now nervously 
watching the impasse now reached in the Presidential election. Many 
commentators have already claimed the most recent drop in the market is 
a consequence of the uncertainty about the outcome of the election. 
Although it would be a mistake to totally dismiss the influence of the 
election uncertainty as a factor in the economy, it must be made clear 
that the markets and the economy are driven by something much more 
basic. We know that the markets have been off significantly for the 
past several months, and this drop was not related in any way to the 
Presidential election.
  Confidence is an important factor in the way markets work, and 
certainly the confusion in the Presidential election does not convey 
confidence to investors and to the rest of the world.
  Mises, the great 20th century economist, predicted decades before the 
fall of the Soviet system that socialism was unworkable and would 
collapse upon itself. Although he did not live to see it, he would not 
have been surprised to witness the events of 1989 with the collapse of 
the entire Communist-Soviet system. Likewise, the interventionist-
welfare system endorsed by the West, including the United States, is 
unworkable. Even without the current problems in the Presidential 
election, signs of an impasse within our system were evident.
  Inevitably, a system that decides almost everything through pure 
democracy will sharply alienate two groups, the producers and the 
recipients of the goods distributed by the popularly elected 
congresses. Our system is not only unfairly designed to take care of 
those who do not work, it also rewards the powerful and influential who 
can gain control of the government apparatus. Control over government 
contracts, the military industrial complex and the use of our military 
to protect financial interests overseas is worth great sums of money to 
the special interests in power.
  Even though it is argued that there are huge budget surpluses in 
Washington, instead of budget compromise, a stalemate results. Each 
side wants even a greater share of the loot being distributed by the 
politicians. Even with the windfall revenues, no serious suggestion is 
made in Washington for cuts in spending.
  Instead of moving toward a market economy and less dependency on the 
Federal Government in the midst of this so-called ``prosperity,'' we 
continue to go in the other direction by internationalizing the 
interventionist-welfare system. Planning-by-government has gone 
international as the political power is delivered to organizations like 
the United Nations, the World Trade Organization, the International 
Monetary Fund and the World Bank. Although in the early stages of 
interventionism and government planning, especially when a great deal 
of wealth is available for redistribution, it seems to enhance 
prosperity while prolonging the financial bubble on which the economy 
is dependent. The monetary system, both our domestic system as well as 
the international fiat system, plays a key role in the artificial 
prosperity based on inflated currencies as well as debt and 
speculation.
  The pretended goal of the economic planners has been economic 
fairness

[[Page H11867]]

through redistribution of wealth, politically correct social 
consciousness, and an all-intrusive government which becomes a 
responsibility for personal safety, health and education while personal 
responsibility is diminished.
  The goal of liberty has long been forgotten. The concentrated effort 
has been to gain power through the control of wealth with a scheme that 
pretends to treat everybody fairly. An impasse was destined to come, 
and already signs are present in our system of welfarism. This election 
in many ways politically demonstrates this economic reality. The 
political stalemate reflects the stalemate that is developing in the 
economy. Both will eventually cause deep division and hardship. The 
real problem, the preserving of the free market and private property 
rights, if ignored, will only make things worse, because the only 
solution that will be offered in Washington will be more government 
intervention, increased spending, increase in monetary inflation, more 
debt, greater military activity throughout the world, and priming the 
economic pump with more expenditures for weapons we do not need.
  We have already seen signs of economic troubles ahead. Although the 
Fed plans for only a slight slow down and a so-called ``soft landing,'' 
the correction from the monetary mischief of the last 10 years has 
already been determined. Although the dollar currently remains strong, 
because other currencies are so weak, there is a limitation on how long 
we can create new dollars without them being devalued. A weaker dollar 
will surely come in our not too distant future. Our huge current 
account deficit and trade imbalances warn us of that day.
  Government statistics continue to tell us that price inflation is not 
a problem, and when an inflation statistic comes out it does not like, 
it drops out food and energy and claims the number is totally benign. 
Ask any housewife, and they will tell you that the cost of living is 
going up steadily and much more rapidly than the government will admit.
  We in the Congress should be prepared for lower revenues in the 
future since the revenues received in the last couple of years were 
artificially created by a stock market that had skyrocketed due to the 
credit expansion by the Federal Reserve. These capital gains tax 
revenues will soon disappear.
  The savings rates of the American people are now negative. Without 
savings, true capital investment cannot be maintained. Creation of 
credit out of thin air by the Fed was the original problem so it surely 
can't be the solution.
  Even in the midst of our great imaginary budgetary surpluses, there 
has been no effort to cut. Once the economy tends to slow and more 
problems are apparent, expenditures are going to soar not only because 
of future problems but because of the new programs recently initiated.
  A huge financial bubble has been created by the GSEs, such as Fannie 
Mae and Freddie Mac. The $33 billion of shareholder equities in these 
two organizations has been leveraged into $1.07 trillion worth of 
assets--a bubble waiting to be pricked.
  The Congress has reacted to all these events irresponsibly by 
increasing spending, increasing spending, increasing tax revenues, 
doing nothing to reduce regulations and being totally apathetic toward 
the dollar and monetary policy. We in the Congress have a moral and 
constitutional obligation to protect the value of the dollar and to 
understand why it is so important to the economy that a central bank 
not be given the unbelievable power of inflating a currency at will and 
pretending that it knows how to find tune an economy through this 
counterfeit system of money.
  Rising interest rates in the high yield bond market is giving us an 
indication that a serious problem is just around the bend. Commercial 
debt was but $50 billion in 1994 and is now ten times higher now at 
$551 billion. The money supply is now growing at greater than a 10% 
rate and the derivatives market, although difficult to calculate, 
probably exceeds $75 trillion. We also have consumer debt, which is at 
record highs and has not yet shown signs of slowing. The Dow Jones 
Industrial Average stocks are now 5 times book value, the highest in 
over a hundred years. There will come a day when most people come to 
realize the fraud associated with Social Security and the inability for 
it to continue as currently managed. Rising oil and natural gas prices, 
it is argued, are not inflationary, yet they are playing havoc with the 
pocketbooks of most Americans. The economies of Asia, and in particular 
Japan, will not offer any assistance in dealing with the approaching 
storm in this country. Our foreign policy, which continues to obligate 
our support around the world, shows no signs of changing and will 
contribute to the crisis and possibly our bankruptcy.
  What must we do? We should develop more sensible priorities. We must 
restore confidence in freedom and recognize how free markets can solve 
our problems. We must have more respect for the Rule of Law and demand 
that Congress, the Courts, and the President live within the Rule of 
Law and stop arbitrarily flaunting the Constitution. If the 
Constitution is to be changed, it should be changed slowly and 
deliberately as is permitted, but never by fiat. We must eventually 
reconsider the notion of the original constitutional Republic as 
designed by our Founders. The monolithic centralized state was not the 
design nor is it supported by the Constitution. We were meant to have 
loose knit individual states with the states themselves managing their 
own affairs.
  The political impasse we now see with the election process along with 
the divisions in the House and Senate is surely related to the economic 
and budgetary impasse that plagues Washington. Since interventionism 
(the planned welfare state) is unworkable and will fail, the surprising 
developments in this presidential election will accelerate its demise. 
The two are obviously related.

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