End the Fed? Actually, Maybe Not.
Now that Ron Paul actually has some power over the Fed, what is he going to do with it?
Rep. Ron Paul's feelings about America's central bank are a matter of public record. An extensive public record: In dozens of congressional hearings over the past four decades, he has ribbed, cajoled, harassed, or annoyed any representative or defender of the Federal Reserve brave or unlucky enough to appear before him.
Normally, his interrogations concern America's profligate money printing, Congress' unnecessary spending, the Fed's secrecy, and, especially, gold, which he believes should underpin the currency to render it sound. But his distrust runs wide and deep. Consider this comment from a 2007 hearing: "This whole notion that a central bank somehow has the wisdom to know what interest rates should be is, to me, rather bizarre. And also the source of so much mischief."
That first sentence is a neat encapsulation of his economic worldview. And the second could well apply to Paul himself. His career in and out of public office has been devoted to two propositions: 1) The Fed is bad. 2) The gold standard is good. His consistency has been impressive—which is not to say he has been influential. He rarely gets satisfactory answers in hearings, and he'll probably never get satisfaction in his long, lonely crusade to radically alter America's monetary policy.
But if you tilt at windmills long enough, sometimes you hit. And on Wednesday, Paul did: He held his first-ever hearing as chairman of the House Financial Services Committee's subcommittee on monetary policy, inviting two Austrian-school economists and one lonely representative from the left-leaning Economic Policy Institute to debate how Fed policy affects the unemployment rate.
This may be Ron Paul's moment. The question now is what he does with it.
It was on Aug. 15, 1971, that Paul had his monetary-policy epiphany. That day, the Federal Reserve shut its "gold window," meaning foreign governments could no longer trade gold for dollars at the fixed rate of $35 an ounce. The Bretton Woods system officially ended and the dollar became fully "fiat currency," backed by nothing but the promise of the federal government. It shocked Paul, then a successful Texas obstetrician. "That's why I ran for Congress," Paul told me. He was first elected to the House in 1976, running as a Republican on a limited-government platform.
Paul has since bounced in and out of Washington, serving from 1976 to 1977, 1979 to 1985, and 1997 to the present. During that time, he has supported cutting defense spending, ending the Department of Education, stopping welfare, and slashing taxes. But he's best known for his unrelenting—and unchanging—skepticism of the Fed. Paul believes it stokes inflation and will harm the U.S. economy as long as it persists. Gold, he thinks, is the answer.
His monetary policy quest has been quixotic. The closest Paul came to getting the gold standard reconsidered—let alone reinstated—came in 1981. At the beginning of the Reagan administration, Paul sat on a commission appointed to debate whether the United States might benefit from returning to commodity-backed money. Reagan had a "slight bias toward gold and its disciplines," Treasury Secretary Donald Regan told reporters at the time. But in a final report, released March 31, 1982, the panel rejected the idea.
Despite the rejection, the next day's papers described Paul as jubilant. "For the first time in 50 years they seriously considered it," he said, releasing a dissent. "I do think that in due time, possibly even in this decade, there will be another serious discussion of gold as a monetary standard. I still do believe that gold is the money."
That serious discussion never really happened, though not for a lack of trying on Paul's part. "I think for 20 years or so, they just wished I would go away," Paul explains, referring to the Fed officials he repeatedly took to task on the Hill. "They thought I was a nuisance." But he kept bothering them. He promoted his ideas on monetary policy through his Foundation for Rational Economics and Education (acronym: FREE), his Ron Paul Investment Letter, and other publications. He brought national, if fleeting, attention to them during his failed 1988 presidential campaign. But for the most part, he and his ideas became something of a sideshow—he became seen as a crank, a radical, so far outside the mainstream he could be safely ignored.
That changed in 2008, when he ran for president again. This time, the run brought him cult-icon status. The very phrase "end the Fed"—the title of his most recent book—comes from his campaign. In it, he describes visiting a University of Michigan campus after an October 2007 Republican primary debate. To his surprise, when he "mentioned monetary policy, the kids started cheering. Then a small group chanted, 'End the Fed! End the Fed!' The whole crowd took up the call. Many held up burning dollar bills, as if to say to the central bank, you have done enough damage to the American people."
He remains an iconoclast even within his own party, and his actual legislative proposals tend to go nowhere. Since 1997, he has acted as the primary sponsor of 422 bills. Just four of those have ever made it to the floor of the House for a vote: a bill withdrawing the United States' support for the World Trade Organization, a bill recognizing the Hispanic Chamber of Commerce, another commending a NASA mission, and one granting some property to the Galveston Historical Foundation. Only the last became law.
Annie Lowrey, formerly Slate’s Moneybox columnist, is economic policy reporter for the New York Times.
Photograph of Ron Paul by Jason Merritt/Getty Images.