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Senator Rand Paul on the Fiscal Cliff bill, and the coming Debt Crisis

Thursday, January 3, 2013
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HH: Joining me now from the great state of Kentucky, Rand Paul. Senator Paul, welcome, Happy New Year to you.

RP: Happy New Year. Good to be with you, Hugh.

HH: Gosh, I hope every one of my shows is as significant as Paul Ryan and Rand Paul after a major vote this year. That would be a good 2013 for me. Can you tell us why and how you voted no on H.R. 8?

RP: Well you know, I think the biggest problem we face as a country is this debt crisis. The fiscal crisis was sort of a created concoction by the President, because he said he wanted taxes to go up. So he forced the taxes up on some folks, but it did nothing to address the real problem, which is the debt crisis, and in fact, I think made it worse, because this bill had $330 billion dollars worth of new spending in. So I just can’t vote for more spending, taxes going up. It really was going the wrong direction, as far as I’m concerned.

HH: Many of your colleagues, I think only Marco Rubio, was the only…actually, Chuck Grassley and Marco Rubio joined you, and that’s pretty significant.

RP: Oh, and my buddy, Mike Lee as well.

HH: Oh, Mike Lee. You’re right. I’m sorry. I don’t want to get the great Senator from Utah upset with me. So you had four Republicans with you, and forty against you. To those other forty, they’re concerned about spending. What do you think was going on in their rationale?

RP: I think it was 2:00 in the morning, and everybody kind of wanted to go home. And so I think nobody had a chance really to read the bill. I’m not sure the bill really was even around for anybody to read at 2:00 in the morning. It certainly defied all of the rules that we have in the Senate. We have one specific rule that says bills have to be online for 48 hours. So when things get thrown together hurriedly in the night, people have no idea what’s in these bills. And so I really just can’t, really on the face of it, vote for something that’s thrown together in such a hurry. I think it shows poor planning. I think the American people are disappointed with Congress, because we lurch from one deadline to the next. So I really just don’t think it’s the way you ought to run your government, and I won’t vote for anything that I don’t have time to sit down and read.

HH: Now Senator Paul, I’m a big fan of getting out of the box canyon that we were in yesterday, because the President had all the chips. But I’d like to focus on what the President’s style was approaching this. Do you believe it is possible to negotiate with this president? Or does he do everything with a political end in mind?

RP: Everything is done with a political end in mind. Everything is done, and everything has been done for the last several years based on envy, fear, jealousy, all things that I think aren’t really what typify what’s made our country great. And so no, I object to the way he’s characterized these things. And really, I tell people over and over again, the facts of the matter are that the rich pay most of the taxes in our country as it is now. And the other fact is that when you take money out of the private economy, whether it’s rich people’s money, middle class or poor, when you take it out of the private sector, you’re taking it out of the efficient sector, and you’re giving it to government. And there’s no objective evidence that government spends it wisely.

HH: Now looking ahead to the debt ceiling, are you afraid of a default on our obligations, not on our debt. We will not default on our sovereign debt. We might default on our obligations, and that would mean some people who are owed money won’t get paid, but they won’t be the sovereign debt owners. Are you afraid of that happening?

RP: One of the things that’s been lost on people, and we tried to get the word out last time, is there’s no reason every to default. We bring in enough tax revenue every month to pay our obligations, to pay the interest on our debt. We also bring in enough to pay our soldiers. We also bring in enough tax revenue, probably, to pay for Social Security and Medicare. We might have to do some means testing. We bring in enough tax revenue every month to pay for 70% of our expenditures. So what I’d probably do is say the moment the debt ceiling comes, if we haven’t agreed to something good like a balanced budget amendment, and that’s the only thing that’ll allow me to vote for it, is just spend what you have. Go ahead and pay for your obligations, pay your interest on your debt, and spend it on the absolute necessities of government. Maybe we won’t have $3 million dollars to study monkeys on methamphetamine, $300,000 dollars to build robotic squirrels to see what rattlesnakes do with a robotic squirrel. There’s an endless amount of waste in our government throughout, from top to bottom. So I would say let that part of government stop, keep funding what’s essential, but I’d blow right through it and say this is when we have a real discussion about reforming spending.

HH: You know, Senator, those robotic squirrels might have some cross-purpose use in radio production. We might learn some things about radio from robotic squirrels. Let’s talk a little about, though, you just said a balanced budget amendment is the only thing that would get you to vote for raising the debt ceiling. What about systemic entitlement reform, because balanced budget amendment doesn’t actually change anything, because the states would have to agree, and it would take years. But systemic entitlements could take effect tomorrow.

RP: Yeah, and here’s the thing, and the reason why I don’t is I don’t believe these people. They always put the spending cuts ten years from now when there’s a new Congress. All these budgets, they say, will balance, take 28, 30 years to balance. So I think you have to have an amendment. But as far as the entitlements, what I don’t like about what the Democrats do is they say oh, if you give us this, if you trade us this, we’ll agree to fix entitlements. Well, entitlements affect all Americans, Republicans or Democrats. They’re not broken because of either party’s fault. They’re broken because we’re living longer, and because the Baby Boomers are retiring. So I think as an obligation as a good legislator, you should just agree to fix them. But they always want to trade something. They want to see that they’ll raise taxes on some more people, give them some more spending for earned income tax credit or what have you, but they want something in exchange for doing what is the right thing, and that’s to fix entitlements so we can save them.

– – – –

HH: Senator Paul, when we went to break, we were talking about entitlements. And I know that your position that we ought to do the right thing on them, do you think we need to chain the CPI for Social Security and Medicare?

RP: Well you know, I think a lot of people don’t understand exactly what that means. I have a bill that would do two things. It would raise the age gradually, a couple of months a year over about 20 years, and then I would means test the benefits. I think means testing is a little more acceptable than slowing down the cost of living increases for everyone. What you do with means testing is that the richest among you will actually get a cut in their Social Security, and then you work your way down to the poorest among us, who won’t have any cut. And so then something like a chained CPI and all these other complicated formulas won’t hurt the people on the lowest end of the totem pole. And so I think that’s the better way to approach it.

HH: Let me ask you about that, because a lot of people instantly say Social Security, at least, was always about a savings program. If you begin to means test it, you break faith with people who have for decades been paying in on the expectation they would get back.

RP: It’s been a fiction, though, for a few decades now. And now for the first time in the last two years, Social Security pays out more than comes in. In fact, with Medicare, it’s dramatic. You pay a dollar in Medicare taxes, and you get three dollars in return receipts, so really, these things are so broken and have to be changed. I think means testing is a way of doing it that’s acceptable to people. And what people need to understand is if you were, if you made over a $100,000 dollars a year, that’s basically the top bracket for Social Security. You get about $2,200 dollars a month. My plan that means test takes about $300 dollars a month from those who made more than $100,000 dollars a year. So they would actually get less, but it would actually start having savings immediately. If you do not do that, you have to do all these manipulations to CPI that really, you know, there are a lot of poor people in our country who are having trouble living on the Social Security check they have. And you slow that down, I just think it’s harder to get through Congress, it’s harder to make work. I’ve told the President, Biden, I’ve told all the Democrats, why don’t you work with us on this, because you keep saying you want the rich to pay more. This is a way that the rich receive a little bit less in benefits. It doesn’t, it helps to make the system solvent, and I think it’s the best way to go.

HH: Now I want to go back to the debt ceiling, since that looms on March 1. Are you afraid, now we will hear, and we’ve already begun to hear, that if we do not raise the debt ceiling in time to borrow more, that the bond vigilantes will arrive, they’ll attack our bond rating, they will attack our credit rating, and everyone will suffer. What’s your response to that, Senator Paul?

RP: The best way is to affirmatively pass legislation, and Senator Toomey had this last time, and I was a co-sponsor, affirmatively pass legislation that says the tax receipts will go to pay for the interest on the debt. The first one in line will be interest on the debt. And then we also designated, I think, a few other people – Social Security soldiers’ salaries, the military, things like that. We prioritize our spending, and we go ahead and pay tax receipts. So that way, we let the world know we will not default. So when they play this game, they are always saying that we will default. They want to scare both Congress into voting for more spending and more debt. But they also want to scare the marketplace, and I think it’s a bad idea to scare the marketplace. I would preemptively go ahead and put out there that we will never default on our debt, that it is an obligation, something that’s a Constitutional obligation that we have to pay the interest on our debt. So I would let the world know we would do that, and I think that would give a great deal of confidence. You know, we bring in billions of dollars of tax revenue every month. And there’s actually plenty of it to pay interest, Social Security, soldiers’ salaries. Eventually, you get down to a lot of the discretionary spending, but I think you could delay discretionary spending and have none of it for about three months. People might discover that we don’t need most of the discretionary spending.

HH: Now Senator, that might be interesting, but I know Senator Reid will not bring that forward. And so if we’re up against the wall in late February, and it appears that we are going to run up against the limit, and there has not been any sort of prioritization of payment beginning with sovereign debt and then down through the Soldiers, Sailors, Airmen, Marines, et cetera, are you afraid of what will happen if we get to that limit and we have not established that prioritization, and we can’t borrow?

RP: Well, that’s why our job is to talk about prioritizing, how we would pay for it. Our other job is that what we ought to do is what we did last time, is the House passed in advance a bill that says we will agree to raise the debt ceiling. Actually, we had over $2 trillion dollars we were going to agree to, if you’ll pass a balanced budget amendment. So the only way to get the leverage of the debt ceiling to work is you have to be willing to go through the deadline. If you’re willing to go through the deadline, and have the Treasury keep taking tax receipts, and continue to pay the interest on the debt, and pay for the primary functions of government, if you’re willing to do that, which would be saying that part of the government wouldn’t get funding until we got a solution, I think you would finally get to a point of leverage where Congress would say you know what? We should have a balanced budget amendment to the Constitution, and I think we could pass it. I know we can pass it in the House. We just have to get some Democrats to agree that there’s a fiscal problem in our country.

HH: If we are at this point, find majorities of Republicans willing to go through the deadline, enough to stop any kind of debt relief bill, how long will they stay strong on that, do you think, Rand Paul? Will they fold up when the media begins to barrage them with criticism?

RP: Well, here’s the problem. And this is it in a nutshell. We give up before we ever get started, usually. So we give in and we have absolutely no leverage, because we know that many have the spine of an invertebrate. And so, like for example, we gave up the whole fight over whether or not we were going to pay for the Sandy emergency funding before it got started, $60 billion dollars, you know, not offset at all. The Republican alternative in the Senate was $24 billion now, and they’d give you more later, but not offset, either. I said let’s give them the $9 billion that they need to spend in the next year. That’s all they’re estimating they’re going to spend. But I offset mine with real cuts.

HH: And so obviously that did not work, because your colleagues in the House and in the Senate decided they weren’t going to play hardball. And I agree with that, by the way. I think Mitch McConnell did a fine job. But I want them to play hardball on the debt ceiling. How long will they play for when every single Beltway reporter is hitting them with a hammer?

RP: Well you know, I think we’ll have to see what happens. There’s quite a few people, you may know a few people on talk radio, that are pretty conservative. And I think if everybody’s out there talking about it, you’ll find that the grassroots folks in Kentucky or anywhere else, I get nothing but people coming up to me and saying stick by it, stick by our guns, we’ve got to do something about the spending. And so I think the majority of Republicans and the majority of Americans out across the country agree with us, and we need to draw a line in the sand. We need to do something about spending. And people just need to listen to the folks at home and not listen to reporters inside the Beltway.

HH: Senator Rand Paul, thank you for joining me, Happy New Year, come back early and often in 2013.

RP: Thanks, Hugh.

End of interview.

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