Tea Party Presidential Election Primer: Paul v. Cain on Economics

With the recent decline in the polls of the candidacies of Rick Perry and Michele Bachmann, Tea Party members have two top tier candidates to consider as an alternative to the liberal Massachusetts Republican Mitt Romney: Herman Cain and Ron Paul.

But how do these two Tea Party favorites stack up on economic issues? Here's a quick survey on their differences:

TARP Bailout

One of the biggest issues leading to the formation of the Tea Party movement was – after the burgeoning deficit – reaction against the $700 billion Troubled Asset Relief Program (TARP) law. Many Americans joined the Tea Party to stop what was obviously political favoritism being sold by fear-mongering government leaders, and it resulted in a number of pro-TARP Republican veterans losing their primaries and anti-TARP Republicans winning the day on the November 2010 general election.

During the housing bubble, profits were privatized. But once "too big to fail" Wall Street banks saw major losses on risky bets made in the real estate market, they came crying to Washington and demanded taxpayers pick up the shortfall. Establishment politicians in Washington obliged, selling the bailout package with a heaping helping of fear. Mitt Romney said "all the jobs" in America would be gone if the trust funds of the super-rich were not bailed out using the tips of cab drivers and waitresses.

Herman Cain: Cain called TARP a "win-win for the taxpayer" in an October 20, 2008 column. "Unprecedented problems require unprecedented solutions. The actions by the Treasury are a win-win for the taxpayer." After Congress passed the TARP bailout, Cain complained about how the money was doled out, but not about the principle of crony-capitalism where profits are privatized and losses are socialized. Cain said in the October 11 Bloomberg/Washington Post debate that "They were discretionary in which institutions they were going to save, rather than apply it equitably, which is what most of us thought was going to be done. The implementation of it is where they got off-track." Cain has never made it clear who he believes should have gotten a bailout that didn't, or even if he believed that every failing institution should have been bailed out by taxpayers, but it's clear from that statement that he believed that the taxpayer bailouts didn't go far enough.

Ron Paul: Congressman Paul publicly opposed the TARP bailout and voted against the bill as congressman, charging that the bailout was the antithesis of the free market and instead "what we've had is cronyism, it's interventionism and inflationism, and corporatism. That's what is wrong. What we need is more freedom, not more government."

Federal Reserve audit/$16 trillion secret bailout

If the TARP bailout using taxpayer dollars was bad, the Federal Reserve bailout was much worse. The Federal Reserve secretly lent at least $16 trillion in funds funneled through various Federal Reserve emergency facilities  – more than the entire size of the U.S. economy, and 22 times the size of the TARP bailout – to favored banks and corporations from 2008 through 2010. And the Federal Reserve Bank steadfastly refused to release the bailout information even to the U.S. Government Accountability Office (GAO) until Bloomberg won a Freedom of Information lawsuit in December 2010.

After Bloomberg won partial access to the bailout information, the GAO was able to come up with the $16 trillion figure as the bailout total. What came out of the GAO partial audit was that the Federal Reserve highly favored elite Wall Street banks with the following funds: $2.5 trillion for Citigroup, $2.0 trillion for Morgan Stanley, $1.9 trillion for Merrill Lynch and $1.3 trillion for Bank of America.

Cain: Herman Cain – a former chairman of the Kansas City branch of the Federal Reserve Bank – was an opponent of a GAO audit of the Fed until 2011, telling Neil Boortz's radio audience in December 2010 that "There's no hidden secrets going on in the Federal Reserve to my knowledge. And I tell people, we've got 12 Federal Reserve Banks. Find out which district you are in, call them up and go from there. We don't need to waste money with another commission or an audit." Cain now says (in the Bloomberg debate) that he never opposed an audit, but that he doesn't care if one is done. "I have also said, to be precise, I do not object to the Federal Reserve being audited. I simply said, if someone wants to initiate that action, go right ahead. It doesn't bother me. So  you – I've been misrepresented in that regard. I don't have a problem with the Federal Reserve being audited. It's simply not my top priority."

Paul: Ron Paul has been a longtime critic of the Federal Reserve, and has for years sponsored a bill called "The Federal Reserve Transparency Act" which calls for a full GAO audit of the Fed. Paul's bill won the support of every House Republican and a third of the Democrats in the last Congress, and a watered-down version of it was passed into law in 2010. As the Chairman of the House Financial Services Subcommittee that oversees the Fed, Paul has held frequent hearings on the Fed and called for more transparency in its operations.

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October 15, 2011

Thomas R. Eddlem [send him mail] is a high school history teacher in Southeastern Massachusetts and a freelance writer who contributes to The New American, Examiner.com, AntiWar.com and – of course – LewRockwell.com.

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