Senator Rand Paul’s speech opposing the latest emergency spending bill started going viral, we gather, even before it was over. It echoed the warnings of his famous father and will go down as a Paulian classic. It’s a challenge to Modern Monetary Theory, which reckons the government can keep creating fiat dollars out of thin air. We’d like to think it will mark one of the debates as Americans work their way to 2024.
The measure Dr. Paul was opposing is a vast, $2.3 trillion spending measure. It includes a not only $900 billion Covid relief bill but a $1.4 trillion spending bill that was unveiled at the 11th hour to tide the government over for a bit. It reminds us of Senator Everett Dirksen’s line about how a billion here and a billion there starts to add up to real money. Except now it’s trillions.
The government doesn’t have trillions lying around. Not buried in some lot at Ft. Knox. Nor on the deposit at the bank, in its case, the Fed. On December 16, it had on deposit at the Fed about $1.5 trillion, unusually high. Even so, Congress’s spending means that one part of the government, the Treasury, will have to borrow. Nowadays that requires hand-in-glove assistance from the Federal Reserve, which might have to create the money to lend to itself.
One of the beads the Senator Paul drew was on the $600 dollar checks that the government will send to most Amerians. “If money really did grow on trees,” Senator Paul rasped at one point, “why not give more free money? Why not give it out all the time? Why stop at $600 a person? Why not $1,000? Why not $2,000? Maybe these new Free-Money Republicans should join the Everybody-Gets-A-Guaranteed-Income Caucus?”
We understand that perfection, which Mr. Paul is pursuing, can be the enemy of the good, for which Senator McConnell, and nearly all of the Republican caucus he leads would say they’ve settled. There were many heroic efforts by the GOP to bring down the size of the outlays anticipated under this legislation. The most important compromise is over efforts to curb the Federal Reserve’s emergency lending.
Senator Toomey, who was leading the effort against a runaway Fed, had wanted, according to the report in the Times, language banning programs “similar” to that already used by the Fed for certain emergency lending. The final compromise narrowed the language to ban programs that are “same” as what the Federal Reserve had previously set up to advance credit to cities, states, and companies.
That may seem like a “minor difference,” the Times notes, Democrats will read it as “leave the door open to future municipal bond buying or direct business lending.” The Gray Lady reported that Mr. Toomey, in an email on Sunday, reckoned, as the Times paraphrased him, “that the Fed and the Treasury Department would need to consult Congress before funneling credit directly to such borrowers again.”
We favor that focus on the Fed. We understand the whole measure passed the senate with overwhelming support; the vote was 92 to six. Yet the dissenters were a fine group, all Republicans, including, in addition to Dr. Paul, Senators Marsha Blackburn, of Tennessee, Ted Cruz of Texas, Ron Johnson of Wisconsin, Mike Lee of Utah, and Rick Scott of Florida.
The approach to the current crisis favored by the dissenters, as it was put by Senator Paul, is not to flood the economy with increased spending of newly created dollars without any kind of backing in specie but a strategic campaign to open the economy. It would be inaccurate to suggest that any Republican opposes opening the economy, but we like the way Dr. Paul put it. The only way forward is real growth.
In our view, the biggest failure of the Trump years was the failure to address the need for monetary reform and the role of fiat money in enabling policy errors. Just since President George W. Bush was sworn, Congress, which holds the constitutional grant of power to regulate the value of our money, has run down the value of the dollar by more than 85% from the 265th of an ounce of gold a one-dollar Federal Reserve note fetched in January 2001. We wish the GOP dissenters luck in pressing this issue as the GOP looks for a champion in 2024.