Ron Paul Releases His Economic Plan

Rep. Ron Paul released his economic plan yesterday and it proposes to slash $1 trillion from the federal budget in his first term.

Not a bad start.

Titled the "Plan to Restore America," Paul proposes to slash federal spending immediately and intends to return the nation to budget surpluses by 2015.

“I am absolutely convinced this is the only way to prosperity,” Paul said in a recent ABC News article. “If we want jobs we have to get the government out of our way.”

Several prominent conservative economists would agree emphatically.

On the budget side, the plan calls to cut funding from nearly every government agency, while eliminating at least five departments altogether including the departments of Energy, Education, Housing and Urban Development, Commerce and Interior (which would cut about $179 billion from the federal budget).

These departments have been targeted by the Texas politician because he has deemed many of the jobs involved to be  “nonproductive.”

“They’re not productive jobs, because governments aren’t smart enough” to spend tax dollars “diligently,” Paul said yesterday on CNN’s "The Situation Room."

However, Paul said his plan would not simply fire thousands of federal workers, although that is the oft-repeated claim, but that it would "instead transfer them to other departments until they retire," according to ABC News.

When it comes to Social Security, Medicare and other entitlement programs, Paul wants a system that “honors our promise to our seniors and veterans, while allowing young workers to opt out,” writes the Wall Street Journal.

He also wants to run Medicaid, the state-federal health care program, and “other welfare programs” through block grants to states, the Journal reports.

On the revenue side, Paul would lower the corporate tax rate and eliminate the capital gains and estate taxes, reports Business Insider. The corporate tax rate would fall under Paul's plan, to 15 percent from the current 35 percent, and corporations would be allowed to repatriate capital without paying additional U.S. taxes, writes FOX News.

The congressman also pledged to limit his presidential salary to $39,336, which his campaign says is "approximately equal to the median personal income of the American worker," according to FOX.

Currently, the president of the United States makes an estimated $400,000 a year. That means that Ron Paul has willingly pledged to accept $360,664 less than what he could earn should he become president. Wow.

Watch the CNN Interview:

Here are some of the cuts, as compiled neatly into bullet points by Business Insider, and how much they would save in Fiscal Year 2013 compared to the Congressional Budget Office baseline:

• Cut over $600 billion from mandatory spending programs including cuts to unemployment insurance
• Department of Defense: End the wars, freeze other spending. $196,695,000,000
• Department of Transportation: Privatize the FAA, $39,936,000,000
• Department of Health and Human Services: Cut funding for FDA and CDC, eliminate Low Income Home Energy Assistance Program. $16,972,000,000
• Department of Homeland Security: Privatize the TSA. $13,788,000,000
• Department of State: Eliminate foreign aid and dues for international organizations. $19,412,000,000
• Environmental Protection Agency: 30 percent cut from 2006 levels. $4,281,000,000
• Eliminate the Departments of Energy, Housing and Urban Development, Commerce, Interior and Education. $173,677,000,000
• Cut Medicaid spending by $95,000,000,000 (34 percent cut)
• Cut Food Stamps program by $50,000,000,000 (62 percent cut)
• Cut Child Nutrition programs by $7,000,000,000 (33 percent cut)
• The plan does not reduce Social Security, Medicare, or retirement program spending

What is most notable about Ron Paul’s plan is that, unlike some of the other economic plans put forward by GOP candidates, Paul’s plan focuses almost entirely on reducing the size of government and the federal budget. There is not as much focus on “job creation.” But that would go hand in hand with Paul’s claim that government needs to “get out of the way.”

“I would say it’s an economic growth plan and an avoiding of disaster plan,” said Chris Edwards, the editor of the libertarian Cato Institute’s DownsizingGovernment.org in a recent ABC News article. “I don’t think the government is very good at creating jobs, so I don’t think that should be the focus of federal policy.”

Since releasing his plan, it has been met with some praise and some criticism.

“The ideas that Congressman Paul espouses are not unique to him,” said Richard Parker, a lecturer in public policy at Harvard University’s Kennedy School of Government in an ABC News report. “They are kind of standard fare for libertarians.”

“His agenda right now is to get that political philosophy [libertarianism]floated,” Parker said,  ”whereas Romney is cobbling together what needs to be cobbled together to create policies that will assure his election as president of the United States.”

Whereas Zeke Miller of Business Insider had this to say in an article titled Here's Ron Paul's Crazy Plan That Will Destroy The US Economy:

. . . the plan does not include an analysis of the economic effects of Paul's proposed budget — though cutting $1 trillion from the federal budget would be an instantaneous 7 percent cut to GDP, nearly equivalent to the slowdown seen during the "Great Recession."

And Henry Blodget of Business Insider clarified the above claims:

When you suddenly cut $1 trillion of spending out of a $14 trillion economy, what do you think will happen to the economy?

That's right!

The economy will shrink by 7 percent, to $13 trillion.

And the folks whose salaries are paid by that $1 trillion--let's call it 1.5 million of the 4.4 million people employed by the federal government--will instantly be unemployed.

So, yes, we think it's fair to say that this would "destroy" the economy, at least in the short term.

Now, Ron Paul absolutely deserves credit for saying what expenses he would cut, unlike his lame-ass GOP candidate colleagues, who talk a big game about runaway spending but are too wimpy to actually cut anything.

And, it's possible that, down the road, the 1 million or so government workers that Ron Paul fired would get motivated and get great jobs and start businesses and stuff and that, eventually, this would begin to close the $1 trillion GDP gap Ron Paul created when he fired them.

But this would take time.

And given that there are already 14 million unemployed people in this country, it will probably take a lot of time.

So be honest, Ron Paul fans: Ron Paul's economic plan would, at least initially, destroy the economy. If you still support it because you think we need to "take our medicine" and because this medicine will make us stronger in the long run, great. But don't pretend it's going to be all sunshine and roses.

Whether the praise or criticism for Paul's plan is accurate, one thing is certain: America's fiscal predicament is dire and it might be naive to think that anything short of drastic action will remedy the situation.

But exactly how drastic?

Read the Full Plan Here