Wednesday, March 30, 2011

Constitutional Problems with the Libyan War

Ron Paul
March 30, 2011

Last week the Obama Administration took the United States to war against
Libya without bothering to notify Congress, much less obtain a
Constitutionally-mandated declaration of war. In the midst of our severe
economic downturn, this misadventure has already cost us hundreds of millions of
dollars and we can be sure the final price tag will be several times higher.

Why did the US intervene in a civil war in a country that has neither
attacked us nor poses a threat? We are told this was another humanitarian
intervention, like Clinton’s 1999 war against Serbia. But as civilian victims of
the US-led coalition bombing continue to add up, it is getting difficult to
determine whether the problem we are creating on the ground is worse than the
one we were trying to solve.
Though the administration seems to be playing with semantics, calling this a
“kinetic military action,” let’s be clear: this is a US act of war on Libya.
Imposing a no-fly zone over the air space of a sovereign nation is an act of
war, as Secretary of Defense Robert Gates pointed out before the bombing began.
That the administration hesitates to call this war, possibly due to the
troubling Constitutional implications, does not mean that it is not one. Article
1 Section 8 of the Constitution could not be clearer: the power and obligation
to declare war resides solely in the US Congress.

There was ample time and opportunity for the administration to consult the
UN, NATO and the Arab League before going to war, but not the US Congress.

Aside from the manner in which the administration took us to war, it is also
troubling that our government has taken a decisive stand for one side of an
internal conflict in another sovereign country. The administration speaks out of
both sides of its mouth on this, claiming that the US is not attempting to
overthrow the Gaddafi regime while clearly benefitting the rebels and stating
that Gaddafi must leave. Does this make any sense? Gaddafi may well be every bit
the “bad guy” we are told he is, but who are the rebels we are assisting? Do we
have any clue? Will they bring freedom and prosperity to Libya if they are
victorious? We might like to hope so, but the fact is, we don’t know. Michael
Scheuer, former head of the CIA’s Bin Laden unit, explained in a recent article
that there is plausible reason to believe the rebels are current or former
Islamist mujahedin, eager to engage in jihad. Indeed, Gaddafi has fought against
Libyan Islamists for years and is seen by them as a bitter enemy. Astoundingly,
it may well be that we are assisting al Qaeda in this new war!

The costs of this terrible mistake cannot be ignored. Congress has been
locked in battles over budget cuts and agonizing over ways to save money. Recent
proposed spending cuts have by now been completely wiped out with this new war!
Will we be rebuilding Libya ten years from now? Will Congress simply roll over
and rubber stamp more emergency spending bills for this new war as they have
done in the past? We must end our participation in any attack on Libya
immediately and I have signed on to legislation that would do exactly that.
Congress must assert its Constitutional authority and rein in an administration
clearly out of control.

Tuesday, March 29, 2011

Ron Paul criticizes Obama during Raleigh speech

Alina Machado


Congressman Ron Paul spoke to a packed auditorium on the North Carolina State
University campus Monday evening and spoke out about the U.S. action in Libya.
About 1,000 packed the McKimmon Center to hear Paul talk about his campaign
for liberty.

"We're getting into too many wars, we're getting into them carelessly and
we're not doing them in the proper manner," Paul said.

He was especially critical of President Barack Obama's decision to join other
allies and intervene in Libya, saying the action is unconstitutional since the
President did not seek permission from Congress.

"Where did our President get permission this time?" Paul asked. "[The] same
place Harry Truman did in order to go into Korea. They didn't come to the US
Congress. They went to the United Nations to get the permission to put us to

But President Obama reassured the country Monday night that the U.S. is not
at war.

"The United States has not acted alone," the President said during his
speech. "Instead, we have been joined by a strong and growing coalition."
A coalition of countries whose purpose, according to the President, is to
protect the Libyan people, but Paul says the U.S. should return to basics and
focus instead on domestic issues.

"Don't get involved in alliances, don't get involved in the internal affairs
of other nations," Paul said. "Don't go into nation building. Mind our business
and take care of our own country first."

It's worth noting that there were many people in the audience with signs
saying Ron Paul for President in 2012. Paul says he still hasn't decided if
he'll be running.

Thursday, March 17, 2011

No-Fly Won't Fly Constitutionally

Congressman Ron Paul

Last week we once again heard numerous voices calling for intervention in Libya. Most say the US should establish a “no-fly” zone over Libya, pretending that it is a benign, virtually cost-free action, and the least we could do to assist those trying to oust the Gaddaffi regime. Let us be clear about one thing: for the US to establish a “no fly” zone over all or part of Libya would constitute an act of war against Libya. Establishing any kind of military presence in the sovereign territory of Libya will require committing troops to engage in combat against the Libyan air force, as well as anti-aircraft systems. The administration has stated that nothing is off the table as they discuss US responses to the unrest. This sort of talk is alarming on so many levels. Does this mean a nuclear strike is on the table? Apparently so.
In this case, I would like to make sure we actually follow the black letter of the law provided in the Constitution that explicitly grants Congress the sole authority to declare war. This week I will introduce a concurrent resolution in the House to remind my colleagues and the administration that Congress alone, not the president, decides when to go to war. It is alarming how casually the administration talks about initiating acts of war, as though Article 1 Section 8 of the Constitution does not exist. Frankly, it is not up to the President whether or not we intervene in Libya, or set up “no-fly” zones, or send troops. At least, it is not if we follow the Constitution. Even by the loose standards of the War Powers Resolution, which cedes far too much power to the president, he would have no authority to engage in hostilities because we have not been attacked – not by Gaddafi, and not by the rebels. This is not our fight. If the administration wants to make it our fight, let them make their case before Congress and put it to a vote. I would strongly oppose such a measure, but that is the proper way to proceed.

Constitutional questions aside, Congress also needs to consider the interests of the American people. Again, we have not been attacked. Whatever we may think about the Gaddafi regime, we must recognize that the current turmoil in Libya represents an attempted coup d’etat in a foreign country. Neither the coup leaders nor the regime pose an imminent threat to the United States and therefore, as much as we abhor violence and loss of life, this is simply none of our business. How can we commit our men and women in uniform to a dangerous military operation in Libya when they swore an oath to protect and defend the Constitution? We must also understand that our intervention will undermine the legitimacy of whatever government prevails in Libya. Especially if it is a bad government, it will be seen as our puppet and further radicalize people in the region against us. These are terrible reasons to put our soldiers’ lives at risk.

Finally we need to consider the economic cost. We don’t have the money for more military interventions overseas. We don’t have the money for our current military interventions overseas. We have to rely on the Fed’s printing presses and our ability to borrow from China to fund these wars. That alone should put an end to any discussion about getting involved in Libya’s civil war.

Another Ron Paul Critic at the Fed: 'I Know Some Powerful People'
Wednesday, March 16, 2011

Stephen Williamson another Fed economist from the same Fed branch, the St Louis branch where another economist, David Andolfatto, called Congressman Ron Paul a pinhead is out with a clarifying rant.

He starts his rant by telling us that:

I have worked full-time at the Minneapolis Fed (2 years), and have been a visiting academic at the Federal Reserve Banks of Richmond, Cleveland, Philadelphia, Kansas City, Atlanta, and New York. I currently spend an average of something less than one day per week at the St. Louis Fed, in my hometown, where my full-time job is at Washington University in St. Louis. My title at the St. Louis Fed is "Research Fellow," and I have an office over there (no window unfortunately) with my name on the door. I also know some powerful people. I went to graduate school with 2 Fed Presidents, know 4 Fed Presidents well (Narayana Kocherlakota is a rather aggressive poker player; Dean Corbae is not), and am an acquaintance of Ben Bernanke's from back in the day (e.g. we both belonged to Glenn Hubbard's NBER group for a time).

I am not trying to boast here.

He then goes on to attack some of Ron Paul's specific points:

1. The Fed is immoral. The idea here has to do with what Paul calls "printing money out of thin air." We have a government, and the government is a tyrant. The tyrant must confiscate resources in order to keep itself alive....Is the Fed immoral? Ron Paul wants you to think that what the Fed is doing is mysterious, secretive, and underhanded. We have all been hoodwinked but, according to him, he has figured it out, and will proceed to enlighten us. You can forgive Paul somewhat for the "printing money out of thin air" idea, as this is part of what is conveyed in conventional money and banking undergraduate courses. Indeed, Paul's exposure to formal economics training appears to be confined to a single undergraduate course, in which he seems to have been exposed to the
money multiplier, probably the most misleading idea propagated in monetary economics

He then argues:

As discussed here, a central bank is best viewed as just another financial intermediary, the unique characteristic of which is that it has a monopoly on the issue of some class of liabilities. The Fed creates liabilities out of "thin air" to purchase the assets in its portfolio. A bank creates deposit liabilities out of thin air to purchase the assets in its portfolio. General Motors can create equity claims out of thin air to finance the purchase of new plant and equipment. Further, the fact that the liabilities of the Fed do not represent specific claims to anything in the future is neither here nor there. In private markets, in which Paul puts much trust, we have developed arrangements by which private firms issue claims (stock) which are not specific promises to pay anything specific in the future (dividends are discretionary). Further, private firms make no commitments about their future plans to issue more stock, or to buy back stocks, decisions which will affect the value of stock held by existing shareholders, just as decisions by the Fed affect the value of the existing stock of money outstanding. Nothing mysterious here at all

This is typical Fed bait and switch talk. By calling money "a liability", Williamson is removing it from a special class and arguing a point about Fed money because it falls into a larger class, also. It's like calling Sports Illustrated cover girl Irina Shayk, a homo sapien. Well, yeah, she is a homos sapien, but being a homo sapien is not sufficient to get you on the Swim Suit issue cover of SI. Or maybe Williamson thinks this is going to happen.

Paper money as issued by the Fed can be, I guess, considered a liability, given their crazed Fed bookkeeping (which Ron Paul wants to audit). But the essence of money is that it is a medium of exchange. Gold, for example, has been used during various periods as money, but it is certainly not a liability. Debt issued by General Motors is a liability of GM, but it is not a medium of exchange. By confusing all these classes, of liabilities and mediums of exchange, it truly is worse than Williamson arguing that homo sapien is the only requirement to get on the cover of SI. But judging from his "powerful people" rant, I would not be surprised if he thinks Bernanke should be on the cover of SI.

Next, Williamson goes into a bizarre calculation of the impact of inflation, without once mentioning prices! Nothing about the price of food, energy or, even the iPad2. Don't spend too much time on this crazed paragraph, but just know he reaches a conclusion on inflation based on this thinking:

Now, Paul seems very focused on inflation, and the resources extracted from the private sector by way of the inflation tax. It would help here to do some back-of-the-envelope calculations to get an idea of the magnitude of resource extraction. From fourth-quarter 2010 NIPA numbers, GDP was about $14.9 trillion, and total expenditures (by all levels of government) were about $3 trillion, at annual rates (seasonally adjusted), so the tyrant was extracting about 20.1% of GDP (this is all levels of government). Now, inflation has been hovering around 1% per year recently, but suppose it were 2%, which is the Fed's stated inflation target (not officially, but Bernanke says as much in public). What is seignorageNIPA numbers, GDP was about $14.9 trillion, and total expenditures (by all levels of government) were about $3 trillion, at annual rates (seasonally adjusted), so the tyrant was extracting about 20.1% of GDP (this is all levels of government). Now, inflation has been hovering around 1% per year recently, but suppose it were 2%, which is the Fed's stated inflation target (not officially, but Bernanke says as much in public). What is seignorage, i.e. the implicit revenue the government collects, through the Fed, from the inflation tax? To calculate this, we need to know what the tax base is. Let's think of the current stock of reserves as essentially T-bills, which the Fed plans to retire in good time (to take it at its word). Then, the remainder of outstanding Fed liabilities is essentially currency (which certainly corresponds to Paul's language) which is just short of $1 trillion, so let's call it $1 trillion just for argument's sake. Then, with 2% inflation, the revenue from the inflation tax is about $20 billion per year, or 0.7% of government spending, or 0.14% of GDP. Small potatoes, and certainly not enough to justify an armed mob outside the Fed in Washington screaming "end the fed," as Paul seems to envision.

No not small potatoes, high priced potatoes!

As Lew Rockwell
pointed out just today:

Not Hyperinflation Yet

But the 3.9% increase in food prices last month—the most since Nixon—is an alarming indicator.

Yet, in Williamson's mind, and his equations, there is no problem. He ignores what people have to pay for food at the grocery store or for gasoline. As long as his equations tell him, inflation is under the Fed "target", there is nothing to worry about:

...with 2% inflation, the revenue from the inflation tax is about $20 billion per year, or 0.7% of government spending, or 0.14% of GDP. Small potatoes, and certainly not enough to justify an armed mob outside the Fed in Washington screaming "end the fed," as Paul seems to envision.

He then finally admits what the Fed is about, secretive taxation, but of course this secretive, underhanded tax, is superior in his mind to the "primitive" concept of honest, upfront taxation. I kid you not:

There is then a whole branch of economics - public finance - that deals with the issue of how those contributions can and should be made, and the consequences of alternative means of resource extraction for the government. In primitive economies, where the costs of collecting taxes are high and financial markets undeveloped, it can be economically efficient for the government to generate much of its revenue with the inflation tax. In modern economies, we think not.

He then bizarrely tells us that the Fed isn't doing any significant inflation taxation:

We recognize that inflation is costly, and modern disciplined central banks keep inflation rates low.

He says this despite the trillion in assets that the Fed has bought since the crisis and the continued buying of assets (now Treasury securities via QE2). A lot has ended up as excess reserves not in the system, but the increase in prices to date makes one shudder, if like a Japanese nuclear reactor, significant amounts of funds start to leak from excess reserves into the system.

The former-Canadian, Williamson, then tells us he is not an expert on the United States Constitution, but brushes aside this admitted lack of knowledge about the constitution to tell us that, as far as he is concerned, the Fed is constitutional, since the income tax is constitutional:

I'm not a constitutional expert, by any means, but this argument seems to be coming from the same place as
this, which does not quite say that the income tax is unconstitutional, but comes close. I know the idea is floating around. Get serious.

Williamson then goes on to state that Ron Paul wants price "stability" which indicates that Williamson hasn't even read all of Ron Paul's book,
End the Fed, or doesn't understand what he read:

Paul seems to think that the Fed is the wrong tool for getting the job done. What's the job that we want done? Apparently we want price stability, so let's take that as given.

Congressman Paul would most assuredly want falling prices (like we now have on computers, cell phone and televisions) not "stable" prices---which is just cover for Fed created inflation.

Williamson then goes on to defend "New Keynesian Economics" because, among other things, some of its adherents won the Nobel Prize. Aside from this being an appeal to authority and an incorrect way to argue, the clueless Williamson apparently doesn't realize that the Nobel Prize in economics was also awarded to Friedrich Hayek specifically for his work on business cycle theory, which proved that it was central banks like the Fed, which cause business cycles.

Williamson goes on:

Currently, there is first-rate research being done at all of the Federal Reserve Banks in the system, and at the Board of Governors in D.C., and some of those research groups would easily rank among the top 20 among working groups of macroeconomists in the world. Bad economics! What an insult!

Yet, none of these "first-rate" researchers warned of the housing bust. Indeed, New York Fed economists, McCarthy and Peach, just before the housing bubble burst,
issued a paper denying there was a housing bubble.

At the same time,
Austrian School economists from across the spectrum, (which is the School of thought that Ron Paul follows), warned about the developing housing bubble.

Williamson then goes on to quote Dr. Paul writing:

Remember that the people who run the Fed are just regular people, as flawed as anyone else. The only difference is that they have massive power to break civilization. Any institution that can do this is by nature tyrannical and is specifically what the Constitution was trying to prevent.

Williamson's reply to Congressman Paul's comment:

I'm sure that Ben Bernanke does not look in the mirror in the morning and think of the guy he sees as being capable of breaking civilization. Central bankers may be powerful, but there's no need to go overboard here.

I remind you that Williamson writes this as millions have lost their homes and millions are out of work because of Federal Reserve manipulation of the money supply and interest rates. That Williamson can cast off so flippantly the power to inflate and destroy a currency and an economy is utterly remarkable and sobering.

With such a flippant attitude, no wonder Williamson is annoyed at the warnings of Dr. Paul. It busts his world view of Fed as God.

In Williamson's attack on Congressman Paul, we truly see how those at the Fed think. Their equations tell them there is no significant inflation, so they don't care what people have to really pay for food and gasoline. They believe they are the "first rate" researchers, even though they argue incorrectly and have missed every major call in the economy.

After this attack from Williamson, it should be more clear that Ron Paul is correct and that we should End the Fed!

Tuesday, March 15, 2011

Earmark Ban a Huge Victory for Obama

Human Events
by Sen. Jim Inhofe and Rep. Ron Paul

The current ban on congressional earmarks gives the Obama administration and federal bureaucrats even greater power and authority over the expenditure of taxpayer funds. It’s no surprise then, that President Obama was quick to endorse the ban on congressional earmarks—it grants his administration more power to pursue its agenda by exercising a power that properly resides with Congress. The President even endorsed the ban with his veto threat during this year’s State of the Union Address and in subsequent speeches.

With this greater power, the Obama administration (and future administrations) will embark on its own bureaucratic earmarks through a process that will mean less transparency and little accountability for the American people. The infamous $787 billion stimulus bill, which both of us vigorously opposed and voted against, did not contain a single congressional earmark. Instead, millions in bureaucratic earmarks were spent for programs to determine the effects of intoxication on mice, the protection of insects from other insects, the mating habits of bugs and rodents, and walkways for turtles.

We were the only two conservatives to be outspoken against the current ban, because it was the right thing to do—politically unpopular, but the right thing. With the current earmark ban in place, Congress becomes nothing more than a rubber stamp for President Obama's spending requests, and our opposition to the ban is based on the fact that this is not how our Founding Fathers envisioned our government. When writing the U.S. Constitution, they gave Congress, not the executive branch, the power of the purse.

According to James Madison’s view outlined in the Federalist Papers, Congress holds this power for the very reason that it is closer to the people. Supreme Court Justice Joseph Story noted in 1833 that if this authority were given to the President, "the executive would possess an unbounded power over the public purse of the nation, and might apply all its monied resources at his pleasure."

That constitutional power has been ceded to the President.

What’s worse is the fact that banning congressional earmarks won't save a single taxpayer dime. Instead of saving taxpayer money, the spending authority is shifted from Congress to the Executive Branch. In this case, the money is put into the hands of President Obama, to spend how he sees fit.

Unfortunately, the years of demagoguing earmarks have distracted the American people from the real fiscal problems that face our nation. Is it any wonder that Obama supported the big push behind the ban on congressional earmarks? With Congress out of the way, he is the now the king of earmarks.

Sen. Jim Inhofe serves as the senior senator from Oklahoma. Rep. Ron Paul serves as the congressman from the 14th district of Texas.