Ron Paul's economic Rx: a Southern secessionist

By Dana Milbank
Wednesday, February 9, 2011; 8:00 PM

The Republican takeover of the House put a chairman's gavel in the hands of Rep. Ron Paul of Texas, the gadfly GOP presidential candidate with a cult following. On Wednesday, he used that gavel for the first time - to remarkable effect.

The hearing itself was lively - based on Paul's desire to abolish the Federal Reserve and bring back the gold standard - but what really stood out was Chairman Paul's leadoff witness: a Southern secessionist.

The "short bio" the witness provided with his testimony omitted salient pieces of his resume, including his 2006 book, "Lincoln Unmasked: What You're Not Supposed to Know About Dishonest Abe." But the subcommittee's ranking Democrat, William Lacy Clay (Mo.) did some homework and learned more about the witness, Thomas DiLorenzo of Loyola University Maryland.

DiLorenzo, the congressman told the committee, had called Lincoln "the first dictator" and a "mass murderer" and decreed that "Hitler was a Lincolnite." Worse, Clay charged, "you worked for a Southern nationalist organization." "The League of the South is a neo-Confederate group that advocates for a second southern secession and a society dominated by European Americans."

At the witness table, DiLorenzo scoffed and waved his hand dismissively at Clay. But neither he nor Paul attempted to refute Clay's allegations.

Approached after the hearing, the witness said: "I gave a couple of a lectures to a group of college students 15 years ago that are associated with this thing called League of the South."

As it turns out, "this thing" called the League of the South Institute was listing DiLorenzo on its Web site as recently as 2008 as an "affiliated scholar." A secessionist Web site, DumpDC, identified DiLorenzo the same way last year when it published an interview with DiLorenzo in which he is quoted as saying "secession is not only possible but necessary if any part of America is ever to be considered 'the land of the free' in any meaningful sense."

DiLorenzo, a self-proclaimed historical revisionist, is entitled to say whatever he likes. But it raises doubts about Ron Paul and his causes if this is the best he can come up with for his first act as chairman of the Financial Services Committee's monetary policy subcommittee.

Paul appeared to be winging it as he sat behind the nameplate labeled "Mr. Paul, chairman." When it came time to give his opening statement, he took off his reading glasses and ad-libbed. "We probably have pumped in $4 trillion" to the economy, he complained. "I imagine we could've given everybody 60-, 70-, maybe $100,000 - I haven't done the calculations - just give 'em the money and we would've been better off."

The "calculations" using Paul's figures work out to $13,000, but who's counting?

Certainly not Paul's two witnesses, both from the Austrian School, a branch of economic thought associated with Friedrich Hayek, which holds that government intervention in the economy is futile or harmful.

An alternative was proposed by the second witness, Richard Vedder of Ohio University: "Our economy achieved economic supremacy in the world from 1871 to 1914 - a period of the gold standard, stable prices and no central bank." The current system, he argued, creates bubbles, although he declined to speculate about what sort of bubble would come next.

"I think economists who make predictions are foolish," he said.

A few minutes later, Rep. Al Green (D-Tex.) asked what would happen if we returned to the gold standard. "I think we'd be in a better place," Vedder predicted.

"Now what did you say about people who make predictions?" Green reminded him.

"I said, 'Some economists make bad predictions, some of them make good predictions,'" Vedder answered.

"You said they were foolish," Green informed him.

"Foolish?" Vedder replied.

Neither witnesses nor questioners were in top form. Rep. David Schweikert (R-Ariz.) asked whether monetary policy could "exasperate" economic swings, while both Vedder and DiLorenzo called for repeal of the Humphrey-Hawkins Full Employment Act - apparently unaware that it lapsed years ago.

DiLorenzo went so far as to say there is no need for the government to guarantee bank deposits. "I'm not sure before we had an FDIC you could make a case bank runs were worse," he argued.

"We had the Great Depression," Green pointed out.

"Well, yes, for a few short periods," the witness allowed.

It was peculiar to portray the Depression as "short." Then again, it was peculiar of DiLorenzo to say last year that "I saw it as my duty to spread the truth about what a horrific tyrant Lincoln was." And it was peculiar of DiLorenzo to write in 2005 that "the League of the South advocates peace and prosperity in the tradition of a George Washington or a Thomas Jefferson."

Most peculiar of all is Ron Paul's choice to make DiLorenzo his leadoff witness at his first hearing. After the session, Paul attempted a defense. "The witnesses," he said, "should be evaluated by what they say and what they believe in."

That's just the problem, Mr. Chairman.

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