Rand Paul on the government living within its means

You’ll likely enjoy the following excerpt from a Bloomberg Businessweek interview with U.S. Sen. Rand Paul, R-Ky., if for no other reason than the fact that the interviewer does not seem entirely clear about the ideas of leading Austrian school economists.

A recent article in the New Republic said your budget would eviscerate the departments of Energy, State, Commerce, EPA, FDA, Education, and many others. Would Americans support that?
My budget is similar to the Penny Plan, which cuts 1 percent a year for five or six years and balances the budget. Many Americans who have suffered during a recession have had to cut their spending 1 percent, and they didn’t like doing it, but they were able to do it to get their family’s finances back in order. I see no reason why government can’t cut 1 percent of its spending.

Any political consultant who saw that list would tear out his hair and say the American people would never accept it. You disagree with that conventional wisdom?
You know, the thing is, people want to say it’s extreme. But what I would say is extreme is a trillion-dollar deficit every year. I mean, that’s an extremely bad situation. I would say it’s a very reasonable proposition to say that we would only spend what comes in.

You’re a big reader of Austrian economists such as Friedrich Hayek and Ludwig von Mises, who don’t believe in stimulus and say the economy can return to health only through austerity.
You can stimulate prosperity by leaving more money in the hands of those who earn it. If you want to stimulate the economy in Louisville, leave more money in Louisville and send less to Washington. My plan has a 17 percent flat tax with very few deductions, and it would leave $600 billion in the economy. But it would work better than a government stimulus because of the Milton Friedman proposition that nobody spends somebody else’s money as wisely as they spend their own. I think you’d have a boom like you’ve never seen in this country.

Who would your ideal Fed chairman be?
Hayek would be good, but he’s deceased.