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All-In · · 68 min

Senator Rand Paul: Tariffs, Debt, China, and a Warning for America

David FriedbergRand Paul

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TL;DR
  • Rand Paul’s central market call is that tariffs are an additional tax on voluntary trade, not a credible cure for a roughly $2 trillion annual deficit. He estimates this year’s incremental tariff revenue at only $100–150 billion and perhaps $1.5–2 trillion over a decade, versus roughly $15 trillion of projected borrowing. His Walmart test: every shopper preferred the Chinese TV to keeping $600, so drawing a national border around mutually beneficial transactions does not transform them into being “ripped off.”
  • Paul opposed the “big beautiful bill” because it raised the debt ceiling by $5 trillion while its own authors expected finances to deteriorate during the first five years. He offered to accept a $500 billion ceiling increase, spoke with Trump for 58 minutes and 45 seconds, and rejected the bill after supporters projected an initial $500 billion loss followed by an uncertain $1 trillion improvement. The package also contained roughly $500 billion of new spending, including $150 billion each for the military and border.
  • The debt risk is less a forecastable deadline than a discontinuous loss of confidence in Treasury debt and the dollar. Federal interest costs have reached roughly $1 trillion and might reach $2 trillion as the effective debt rate rises from the prior decade’s roughly 1.5% toward 3.5%. Paul’s warning is that Social Security and Medicare checks will always arrive, but “it just may not be worth anything”; he favors gradually raising Social Security eligibility to 70 and means-testing benefits.
  • Fiscal retrenchment must overcome an electorate increasingly dependent on government income and benefits. Friedberg estimates that 40–50% of working-age Americans receive income from government, contractors, or government checks, while Paul cites workforce nonparticipation around 38–42% depending on the state. With spending at roughly 23–24% of GDP, tariff-financed government resembling the 19th century would require shrinking toward 3% of GDP, not merely changing the tax instrument.
  • Paul expects technology to keep expanding human prosperity, but he thinks AI enthusiasm can still produce an overbuilt investment cycle. AI is currently “much faster” at research adjacent to human work, not necessarily smarter, and could weaken Google’s search dominance while freeing labor for higher-value ideas. Yet he predicts “too many data centers at one point,” separating a durable productivity thesis from the risk of excess capacity.
  • Paul alleges that COVID’s scientific response became a conflict-of-interest coverup, with private uncertainty suppressed in public. He says officials privately assigned a substantial probability—including a cited 50/50 assessment—to a laboratory origin while publicly treating the hypothesis as disinformation, and argues that directed gain-of-function work can make pathogens more transmissible or lethal. His broader warning is that dishonest, one-size-fits-all vaccine claims manufacture the very “vaccine hesitancy” institutions deplore.
  • On China, Paul says American primacy matters but war is not inevitable—and protectionism could produce the strategic outcome Washington fears. He argues that trade enriched both countries after 1975, while tariffs weaken competitive discipline and could push China, Russia, and others toward alternatives to the dollar. His preferred diplomacy pairs a credible “stick” with transactional relief from sanctions: “There has to be a reward.”
Digest · the substance, structured for research

1. Paul’s “Leave Me the Hell Alone” politics puts principle above party

  • Paul traces his individualism to Ron Paul and to reading Ayn Rand at 15, with an explicit warning to take “the good with the bad.” What endured was her celebration of ingenuity and heroic achievement—the same American instinct he sees in public fascination with Elon Musk catching rockets.

  • After roughly 20–25 years in medicine, Paul began giving substantive speeches during his father’s 2007–08 presidential campaign. A speculative call to an AP reporter unexpectedly produced statewide and national coverage; the growing Tea Party movement then supplied an audience for his anti-debt message and propelled him toward the Senate.

  • His political home is the “Leave Me Alone coalition”—or “Leave Me the Hell Alone coalition”—combining free markets, personal autonomy, constitutional restraint, and a small-state view of government. He also places himself in Frank Meyer’s fusionist tradition, between traditional conservatism and libertarianism. Paul’s present worry is that Republicans are replacing that philosophy with loyalty to one person: he supports perhaps 80% of Trump’s program but rejects the idea that disagreement on trade constitutes betrayal.

2. Free trade is the mechanism, not a side issue, in Paul’s capitalism

  • Paul’s Adam Smith framing: specialization makes people richer because they no longer spend their time manufacturing their own shoes, clothing, and household necessities. Prosperity grows with the geographic reach of that division of labor, making trade “not an incidental issue” but a foundational component of capitalism.

  • Friedberg’s pushback—worth keeping—is that globalism can mean outsourced jobs and economically stranded communities. Paul distinguishes sprawling treaties containing labor, environmental, and regulatory rules from genuine free trade, while conceding that broad national gains do not mean every individual or displaced industry prospers.

  • His rebuttal to the “hollowed-out middle class” uses household-income shares: the middle class fell from roughly 54% to 51%, but the lower-income share also fell, from about 37% to 33%, because the upper-income group expanded. Cheaper clothing, longer lives, and the prosperity curve’s sharp rise after roughly 1820 are his evidence that industrial specialization raised living standards.

  • The Walmart analogy carries his trade-balance argument: a million customers voluntarily exchange $600 for Chinese televisions because each values the TV more than the cash. “Every voluntary trade ever made” is mutually beneficial, Paul says; aggregating those purchases by nationality creates accounting that obscures the individual gains. Nationalism sells the opposite story by giving struggling voters someone foreign to blame.

3. Tariffs barely touch the deficit while expanding presidential power

  • Paul starts with approximately $7 trillion of federal spending, $5 trillion of revenue, and a $2 trillion gap. He says 75–80% of Republicans now favor tariffs, but incremental tariff receipts of roughly $100–150 billion this year—or perhaps $1.5–2 trillion over 10 years—remain a “pittance” beside approximately $15 trillion of expected borrowing.

  • He would consider a 20% tariff if it actually replaced the income tax, preferring a sales-style levy to taxes on earnings. That is not the offer before Congress: “The tariffs are in addition,” making Republican enthusiasm for them inconsistent with the Tea Party’s “taxed enough already” premise.

  • Although the burden may be divided among foreign suppliers, importers, and consumers, Paul insists that tariffs collected domestically remain taxes. Because the Constitution assigns tax origination to the House, he objects to a president imposing them by declaring an emergency without House or Senate approval.

  • His institutional warning reaches beyond Trump: a future President AOC could cite the precedent to declare gasoline cars or lawnmowers an emergency. Paul previously joined roughly two dozen Republicans seeking to make emergencies expire after 30 days unless Congress affirmed them; under Trump, most withdrew, leaving him among only four Republicans voting to end the Canadian tariff emergency.

4. The debt bill traded conservative discipline for a $5 trillion ceiling

  • Paul calls the bill’s $5 trillion debt-ceiling increase “extraordinary” and “unheard of,” noting Republicans would have rejected it under Biden. His vote remained negotiable: he offered a $500 billion increase—still “like sticking a dagger in my heart”—and discussed the issue with Trump for precisely 58 minutes and 45 seconds.

  • Accepting the bill authors’ preferred policy baseline rather than CBO’s roughly $3 trillion cost estimate, Paul still found deterioration. Supporters projected a $500 billion loss during the first five years, followed by a $1 trillion improvement in the second five, for a net $500 billion positive result; he believes the initial loss and doubts the distant improvement.

  • The package also added roughly $500 billion of spending, including $150 billion for the military and $150 billion for the border. Paul supports border control but argues perhaps $20 billion would have sufficed, while defense had already received an increase: “Nobody’s conservative when it comes to this.”

5. Entitlement promises endure nominally even if the currency fails

  • Friedberg relays Ray Dalio’s target of reducing the deficit from roughly 6% to 3% of GDP. Paul’s version of gradual reform is raising Social Security eligibility three months annually until it reaches 70, then potentially adjusting further for longevity and means-testing benefits rather than raising the Social Security tax cap toward $10 million.

  • Modern monetary theory looked ridiculous, Paul says, “except that it kind of worked for 10 or 15 years”: Bush doubled debt from $5 trillion to $10 trillion while rates halved, leaving interest expense similar. The effective federal borrowing cost averaged about 1.5% for years but is now roughly 3.5%, putting interest near $1 trillion with a plausible path to $2 trillion. Paul stresses that market corrections need not be gradual; he recalls being told that roughly 95% of century-long stock-market losses occurred in about seven days.

  • His sharpest entitlement warning is nominal rather than legal: “You will always get your Social Security check,” but it may buy little. In Germany’s early-1920s inflation, workers sought payment at noon because money was reportedly losing 30% per hour; annual cost-of-living adjustments fail once prices require monthly or faster resets.

  • Friedberg cites dollar reserves falling from 60% to 40% of central-bank holdings, gold rising from 10% to 20%, and gold near $3,600 an ounce. Paul’s tail scenario is a Treasury auction with no private buyers, forcing the Fed to absorb everything and markets to react Monday; fractional-reserve banking is another “house of cards” stabilized by liquidity only while confidence survives.

6. Fiscal reform collides with constituencies built around spending

  • Paul asked Treasury Secretary Scott Bessent for the simplest scorecard: will next year’s deficit be larger or smaller? Bessent answered that it would be smaller as a share of GDP; Paul disputed even that, projecting roughly $1.9 trillion for the current year, $150–160 billion worse than the prior year, with the deficit rising from around 6% to 6.2% of GDP.

  • Federal spending is currently about 23–24% of GDP, versus a roughly 26% average over five years. Paul welcomes the argument that 19th-century America financed itself through tariffs only if its advocates also accept 19th-century government spending of approximately 3% of GDP.

  • Friedberg estimates that 40–50% of working-age Americans earn income from government, a contractor, or a government check. Paul adds that 38–42% of eligible people are not working in some states; deporting perhaps 20 million immigrants while continuing to pay Americans not to work would leave labor-intensive industries without enough workers.

  • DOGE remains alive in Paul’s account, staffed by businesspeople who understand profit and loss, but blocked by bipartisan appropriators. His aircraft-carrier test: if an entrepreneur fulfills a $1 billion appropriation for $800 million, government should return the $200 million to Treasury—not spend it merely because Congress authorized it while running a $2 trillion deficit.

7. AI should compound human ingenuity, though capital can overbuild it

  • Paul invokes Julian Simon’s winning commodity bet against Paul Ehrlich: scarcity forecasts missed adaptation because “the real ultimate resource is the mind.” Population and trade correlate with wealth in his framework because more people and broader exchange produce more experiments, specialization, and invention.

  • Even after a billionaire told him that second-generation robots might manufacture subsequent robots, Paul remained unwilling to “smash the computers.” Work is a reward rather than punishment; even in a world without necessary jobs, he jokes that people would form underground secret societies simply to experience productive effort.

  • The time-price of light is his best productivity specimen: illumination that once required perhaps 1,000 hours of labor can now be purchased with roughly 10 seconds of work. Friedberg extends the point—AI raises returns on human capital, encouraging businesses to hire and invest rather than mechanically eliminating all labor.

  • Paul nevertheless thinks AI’s promise is “overstated” and expects too many data centers eventually. Its current strength is fast answers on questions adjacent to existing knowledge—such as explaining Federal Reserve reverse repos—not intelligence beyond humanity. That leverage may still erode Google’s search dominance and free people to pursue new ideas, perhaps even reaching Mars.

8. Paul frames the COVID dispute as incentives corrupting disclosure

  • Borrowing George Carlin’s formulation, Paul says conspiracy requires no secret cabal, only a “convergence of interest.” His alleged convergence was that officials who funded risky research in China, partly to escape stricter oversight, faced an immediate incentive to conceal any possibility that the work contributed to the outbreak.

  • Paul’s book reconstructs late-night calls and emails, including Jeremy Farrar discussing a burner phone and involving his brother in case something happened. Paul contrasts that alarm with later public dismissals, alleging Anthony Fauci privately described the origin as 50/50 laboratory versus animal while publicly dismissing laboratory-origin advocates as conspiracy theorists.

  • The through-line is “the business of science”: grants, royalties, and institutional self-protection. Friedberg cites Pfizer paying $800 million and Moderna $400 million, then says an NIH foundation holds “$1.2 trillion.” Paul also alleges officials pressured Facebook to suppress discussion and targeted dissenters including Jay Bhattacharya.

9. Risky pathogen engineering and overbroad vaccine claims erode trust

  • Paul distinguishes observing natural viral evolution from directing it. His gain-of-function example repeatedly passes a virus through humanized rodents, selecting the sickest specimen until it binds human receptors efficiently; increasing aerosolization, transmissibility, or lethality creates civilization-level accident risk. He alleges the definition on Fauci’s website changed immediately before testimony to exclude the disputed work.

  • Even virus collection needs limits: Paul questions extracting organisms from bat caves 300 feet underground and transporting them to a major city when they might never otherwise reach humans. He proposes an independent presidential commission without current NIH grantees, covering both civilian research and classified programs justified merely because “the Chinese are doing it.”

  • On hepatitis B, Paul says a two-day-old needs immediate vaccination and immunoglobulin only when the mother tests positive. Otherwise, he argues routine newborn dosing prioritizes compliance over medical need, especially because protection may fade after 10–12 years—before the period when sexual activity or intravenous drug use makes exposure more likely.

  • His COVID position is deliberately nonbinary: after infection in March 2020, he declined vaccination, though at age 62 he says he otherwise “probably would have taken it.” He says he would not give the vaccine to his five-year-old now; he also would not have done so in March 2020, when the early evidence suggested children were not becoming seriously ill. Institutions create hesitancy, he argues, when they flatten such distinctions and “tell people things that aren’t true.”

10. Trade and transactional diplomacy offer an alternative to war with China

  • Asked whether American primacy remains necessary, Paul’s short answer is yes; his longer answer rejects inevitable conflict. A senior Pacific commander told him, “Make sure they know that war with China is not inevitable.” Paul argues both countries grew richer despite continuous U.S. trade deficits since 1975.

  • Steel is his warning against strategic protection: antitrust first reduced U.S. Steel’s scale, then recurring protection weakened competitive discipline. If tariffs let a producer charge $100 for a chair previously sold at $50, Paul asks, why would that producer become more efficient?

  • Sanctions need an off-ramp. Rather than publicly berating China over dual-use exports to Russia, Paul would quietly offer to remove a sanction he estimates costs China $50 billion in exchange for stopping the sales. “There has to be a reward”; waiting for sanctions to overthrow China’s Communist Party is not a workable strategy, while permitted capitalism has already driven major gains.

  • The alternative risk is that pressure unites China, Russia, and others strongly enough to bypass the dollar. Paul may seek a larger political role if no Republican voice defends free trade: tariffs might be too small initially to stop a vibrant economy, but that resilience could validate more protectionism, state ownership such as owning Intel, and another protectionist populist president.

David Friedberg

Senator, thanks for being here. Thanks for having me in your office for the conversation today. I'm really excited for this.

You grew up in Texas with a well-known father, 12-term Congressman and 3-time presidential candidate Ron Paul. However, you became a doctor after residency at Duke Medical Center. I'd love to hear a little bit about how you chose that path instead of politics at the beginning of your career.

Rand Paul

That was following my father, too. My dad is a physician, so I went to medical school. In fact, I went to the same medical school as my dad. My dad is an OB-GYN; he's retired now. We have a family of several doctors.

My little sister is an OB-GYN, my brother's a family doctor, and I have 3 nieces who are doctors. So, a lot of doctors.

As a kid, I have distinct memories of lying on the shag carpet—we had shag carpet in the '70s—and listening to him in, I don't know, Missoula, Montana, on the radio. I'd hear one end of him answering questions. I went to lots and lots of his speeches, and I was interested in the books he recommended for other people to read. I read many of those.

He gave me a full set of Ayn Rand's novels when I was 15 and said, "There's a lot of good stuff in here, but there's some stuff we don't agree with, either." I learned to be open-minded, to take the good with the bad, and to be able to filter through it. But there was something there about individualism, and I still believe that to this day.

All the critics hate Ayn Rand. They say, "She's so simplistic," and this and that. But there is something that connected to the American spirit—the spirit of ingenuity, the spirit of being heroes. It's the idea that people were fascinated with Elon Musk capturing those rockets from space. It's like, wow, we can have somebody who really does cool things once again in our country.

David Friedberg

Yeah. Ayn Rand's writing seemed to be coming more prescient than I think we realized early on.

Rand Paul

I think that's why people thought it was simplistic: because the characters were character types. Nobody believed they could ever exist—that there would be middle management, that there would be an Ellsworth Toohey or a Peter Keating in the middle of these corporations, and that their whole purpose would be mediocrity. Nobody believed that people would purposely try to choose others based on the color of their skin or their ethnicity over their merit.

Nobody believed that could ever happen. That was such a dystopian sort of “Harrison Bergeron.” That was all farce, a dystopian farce, until now. You're right; it looks a lot like reality.

David Friedberg

Here we are. Why did you make the career shift into politics after being a doctor for some time?

Rand Paul

I practiced in private practice for about 20 years and was a physician for 20–25 years. In your life, it's a lot of work. You go through an internship, medical school, and residency. I was about 30 when I finished.

When my dad ran in 2008—the campaigns really start a year in advance—he ran from 2007 into 2008 for the Republican nomination. I thought I'd go and help. I volunteered and said, "Dad, I'll give some speeches." I went out and gave a lot of speeches on my own—not really introductory speeches, but actually my own thing—and felt, wow, this is great, to be able to express yourself and have an opinion. I always had an opinion, but now I could find somebody to listen.

So I did that in 2008, got the bug, and then some of it was being in the right place at the right time. Jim Bunning had been in the Senate for 2 terms. He was a Hall of Fame pitcher, but he wasn't raising any money, and it looked like he might not run.

One day, I was at the office, and this guy I knew from a property-rights group—a group focused on lower property taxes and keeping the government off our land—called me up. He said, "Hey, I know this AP reporter, and we think he leans kind of conservative and he's from the Republican area of the state. Why don't you just call him up and tell him you're interested?"

I hadn't even talked to my wife about it or anything. I said, "What the hell?" So I called him up and said, "Yeah, I'm thinking about running." I got a statewide story, then I got a national story. I thought, wow, this is not that hard.

Then I had a sort of come-to-Jesus moment. I had to talk to my wife about this. She wasn't very happy that we'd been married 20-some years and I hadn't bothered to mention it to her.

I said, "Look, there's no way I can get elected. I'm just going to be honest. I'm going to tell them we're out of money. I'm not going to offer them something for nothing." I said, "I'm never bringing home any bacon. We don't have any bacon. Nobody will ever vote for that." She gradually got over it.

Now she's my biggest champion. We've written a couple of books together, and we work together well. Some of it was being in the right place at the right time, maybe having something to say.

The Tea Party movement, which I think my dad is responsible, at least partly, for getting started, was burgeoning in 2010. The big radio talk hosts were Limbaugh and Hannity, and Hannity's still big on the radio. These hosts were out there hosting rallies. They were talking about the Constitution and the debt, and it was an exciting time.

I don't know if I had announced yet. I was thinking about it. My town was fairly small—50,000 at the time—and we had an old square built in the 19th century. I went down to the square. Somebody was having a Tea Party rally. I didn't know what it was. It was an open mic. I wasn't even invited to speak, really, but I spoke, and there were 800 people there.

I'd never been to a political rally in my town, Republican or otherwise, with 800 people. There was a real movement. That's why it makes me sad now: it was a movement that came, conquered, and nothing happened, because some of the people left and some of the people decided that debts were okay if you had a Republican in charge and were bad if a Democrat was.

David Friedberg

Did it go?

Rand Paul

It came, conquered, and nothing happened, because some of the people left and some of the people decided that debts were okay if you had a Republican in charge and were bad if a Democrat was.

David Friedberg

That's really interesting, because I wanted to get to your core philosophy and identity. On Wikipedia, it says libertarian, constitutional conservative, Tea Party movement, Republican. How do you describe yourself and your identity, Senator?

Rand Paul

All of those things are true to a certain extent. I like to say that I'm part of the Leave Me Alone Coalition. Sometimes I'll say that I'm really part of the Leave Me the Hell Alone Coalition.

That means in all sorts of aspects—personal, private, my contracts, my business, what I do, my family—just leave me alone. That encompasses a bigger group than just conservatives, a bigger group than just libertarians.

A long time ago, there was a guy named Frank Meyer. They called him a fusionist. He was a guy who was going to be somewhere in between Buckley and Murray Rothbard. Murray Rothbard wasn't as well known, but he was a student of Ludwig von Mises and a libertarian writer. Buckley—everybody knows who Buckley is.

That became the more traditional conservative movement. The libertarians sort of said, "We like all that capitalism, everything, but we're worried that if so much money goes into the military, maybe the military will become the state also." They were really against the state in all facets.

They wanted a small state. They were for defending the country—don't get us wrong—but some of the libertarians would have no military, and some of them would have open borders. Then there were the conservatives. Somewhere in the middle was a fusion.

Frank Meyer was part of that. One of the cool things when I first came up here was that they invited me to the Frank Meyer Society—8 guys who were 80 and 90 years old. It was such a great dinner club.

David Friedberg

Does that make it hard to operate in D.C. as a fusionist? The mechanism, the operating model in D.C., seems to be policy by party.

Leadership sets the agenda, and everyone falls in line.

Rand Paul

You have to be a member of a party, and then leadership sets the agenda and everyone falls in line.

Yeah. I think that's really disappointing about it. A lot of the public doesn't necessarily like that, and that's why a lot of the public says they don't like either party.

I'm of the belief that, right now, there's a great danger in our country of losing a movement that represents the free market, trade, capitalism, and all of those things. I think we're moving toward a movement that backs a person.

I feel the wrath all the time because I don't back Donald Trump enough. I get along with Donald Trump, actually, on a personal level better than some of his supporters who've gone crazy. They don't seem to remember that I've supported a lot of his nominees. I voted against his impeachments. I was one of the loudest voices against them, and yet they can't stand it if I oppose him on one thing. That's not good.

Also, trade is not an incidental issue. Trade is a fundamental aspect of capitalism, and Adam Smith wrote about it. In fact, one of Adam Smith's great nuggets that he gave to the world was the idea that the division of labor makes us richer. If you don't have to sit around making your shoes, your clothes, or your tie, you can do something else. You have time to think, and your innovation is going to create more great things.

He also said that the division of labor and the prosperity that it creates is only limited by how far it extends. I think what he meant by that is trade. I'm richer in my town because I don't make my shoes. Maybe somebody else in the town makes them. Then I'm even richer when somebody in another state makes them. But guess what? I got even richer when they were made in Vietnam. We all did.

That fallacy is now being promoted: that trade is bad, which essentially means capitalism is bad. Then we've got people promoting the idea that we should own the companies and the government should be involved with ownership of the companies. All that stuff worries me. I'm worried that people are going to forget what we once were for and what really is important to be for, what made America great—and that is capitalism.

David Friedberg

Some would argue that this idea of what they call the globalist agenda—which is to outsource our jobs instead of reducing our costs and increasing the availability of goods and services that we can benefit from—has hollowed out America and caused a great economic depression for many Americans. They can't seem to find their way out of it unless we create a more protectionist trade environment.

Rand Paul

There's a lot to dislike about globalism and what that represents. To many people, and even to many libertarians, if it means big, huge treaty organizations that have labor rules, environmental rules, and all these anticapitalist rules in them, that's not really free trade or a free market.

But I will say that there is a fallacy, and it's repeated ad nauseam. It is absolutely untrue, and the facts will bear this out. Most people who argue for protectionism say the middle class is being hollowed out and we're being ripped off. Both claims are absolutely and unequivocally untrue.

If you look at household income—and there's a good website that does this, HumanProgress.org—you can look at this over the last 70 or 80 years. Steve Lindsey at KO is great on this. Look at what percentage is middle class, lower class, and upper class. The middle class was about 54% of the people 50 years ago, and now it's 51%. Everybody says, "Aha, the middle class is shrinking." Well, the lower class was about 37%, and it's now 33%. Where did they go? They're being hollowed out? Yes, they're becoming rich. They're in the upper class. The upper class has grown; it's the one segment that has grown.

You have to use constant dollars and call the upper class anything above $100,000, and the middle class $50,000 to $100,000. But really, there's been a great increase in wealth. If you look at things like clothing, people say, "Oh, hey, we lost the textile industry." I think that's sad in a way, but you can get 10 times as many clothes as a person in 1900 could. We live twice as long.

By historical standards, one of the best charts is prosperity per unit of GDP or something. You look at it, and Jonathan Haidt called it, I think, the greatest graph in the history of the world.

David Friedberg

Steven Pinker highlights this well.

Rand Paul

Pinker does it as well, and he's great. His book Enlightenment Now is an amazing book.

But anyway, this chart is for all of human history. If this is prosperity and this is time, for all of human history we lived on the x-axis. It's just an amazing chart. In about 1820, when the division of labor allowed the Industrial Revolution and people to think about doing other things, you just had this curve. It really is extraordinary. That's the history.

Nobody wants to hear this. They say, "We're being hollowed out, and trade is bad." But then the second fallacy is that we're being ripped off on trade. This one, I think, is pretty easy to debunk.

A million people go to Walmart last week and next week, and they all buy TVs. At the end of the year, you say, "They all bought Chinese TVs." Let's put a circle around all of these trades and the country they came from. The Chinese didn't buy anything from us. We bought all these TVs.

But a million people went in and made a voluntary trade where, when they left with their $600, they wanted the TV more than the $600, and Walmart wanted their $600. Every voluntary trade ever made in humanity, every second of the day, is mutually beneficial, or it doesn't occur. It's not even an equal trade; it's mutually beneficial. We both think we got a great deal.

So how can a million people all think they got a great deal and make a trade, and then I draw a circle around them and have this false accounting that says, "Oh, we all got ripped off by China"? It's just not true.

David Friedberg

So what is the origin of the fallacy? Is it a political tactic to drive votes?

Rand Paul

It's pride, and that's why I have such difficulty counteracting this. What amazes me is that, for 100 years, economists right, left, and center all decided that trade was making everybody wealthy.

It's more visible if you look at the trade of people who are poor. Poor people got astronomically richer; their multiple is much bigger because they were much poorer to start with. If you look at China and the United States from 1975 onward, we both got richer. But China was so poor that their improvement in wealth is more apparent. They didn't rip us off.

This isn't a love of China. I wrote a book called The Case Against Socialism. I hate socialism. I hate communism. I wish the people there didn't have to live under that authoritarianism. But they didn't rip us off.

It's easy to sell because nationalism is easy to sell. Patriotism is easy to sell. We hate the other country; we're good, and they're bad. Also, anybody down on their luck—and I'm not saying that, while the historical trend is great for society, middle, lower, and upper, it's great for everybody. There are always people who aren't doing well.

Those people are attracted by nationalism, and they're protected by blaming somebody. Don't blame yourself or anybody else; it's somebody else's fault.

David Friedberg

So walk me through the consequences of tariffs. Where do they take us? Where do they take the economy? Where do they take us from an inflation perspective, from a job-creation perspective, and with onshoring, which has been argued as another piece? What's your view on where this is going?

Rand Paul

One of my favorite things is that people complain to me a lot right now about the tariffs because they love the president and don't love my position so much. Seventy-five to 80% of Republicans are sold on the idea that tariffs are good.

I guess I'd start at the macro level. We have $7 trillion in spending for our federal government and $5 trillion in revenue, so we're $2 trillion short.

David Friedberg

$2 trillion. It used to differentiate conservatives and Republicans from Democrats. We as Republicans would say, "Yeah, deficits are bad, and let's close the gap by lowering spending." Democrats would say, "We'll just tax rich people. Rich people don't pay enough in taxes," which is also untrue. But then we'd do it that way. That was what differentiated us.

Rand Paul

But now everybody's saying, "Oh, gosh, tariffs are so good. We're going to balance the budget; we're bringing in revenue." One, it's really a pittance. I think it's about $100 billion to $150 billion more than last year, which is what's going to come in this year. Over 10 years, that might be $1.5 trillion to $2 trillion, but we're going to borrow about $15 trillion over the next 10 years.

When you look at it from a global point of view, is it good to raise taxes? Most Republicans always said we didn't like more taxes. We were taxed enough already. That was part of the Tea Party acronym: "Taxed Enough Already." We didn't want more taxes. Now everybody wants more taxes. It's inconsistent with who we are.

But the other one I love is, "We're going to do it, and we're going to eliminate the income tax." I say, "Come to me with that." I don't like tariffs very much, but I'll vote for a 20% tariff. I take a sales tax over an income tax. This is being presented in addition, so everybody needs to forget what they think they're saying and understand that tariffs are in addition.

There's also an argument about the separation of powers. One of the things our founders really struggled with was that they worried about the tyranny of one person and the tyranny of the majority. The way our government is structured is to try to, as Madison said, pit ambition against ambition.

I think they never imagined that we'd have a Congress without any ambition. We basically said, “Oh, did President Trump go ahead? Just do what you want.” And there's a problem with that.

He's declared an emergency to raise taxes. I don't pay the taxes; we pay the taxes. But there are people who analyze it as a little bit borne by foreigners, a little bit borne by the importer, a little bit—yes, but it is a tax. It's a fee, and we collect it here in our country. It is a tax.

The Constitution says taxes originate in the House. This one just originated with the president, with not even a confirmation by the House or the Senate. When we get an AOC as president—which I hope never happens—she's going to declare an emergency and say, “No more gasoline-powered cars or lawnmowers,” or whatever else, and they'll send police to your house. She'll say, “I'm just declaring an emergency, just like your president did.” So there is the danger, and people need to think about it.

David Friedberg

The president—

Rand Paul

Well, this is the problem with only being tribal and only being for your tribe when your tribe is in power. You have to think beyond this.

For example, when Biden was in power, there were 2 dozen Republicans, and I was one of them, who had proposed a reform of the emergency power that said when a president declares an emergency, it expires in 30 days unless affirmed. Right now, it's the opposite. The president has declared an emergency on tariffs. If we wanted to stop him, we could vote by simple majority. He would then veto it, and then it would take 2/3. So right now, the way the law is set up, presidential emergencies can only be stopped by 2/3 of Congress.

That's so dramatic it almost never happens. We'd like to reverse it, but all those Republicans who supported reform of the emergency powers under Biden have all bailed on me. When we recently had a vote directly on whether or not there was an emergency with Canada, I was 1 of 4 Republicans who voted against it. Most of the people who had signed on to emergency reform all of a sudden didn't care that there was an emergency under a Republican president.

None of this is to say I dislike Donald Trump. I actually like him very much as a person. I play golf with him and support probably 80% of what he's doing. Do I think he's better than Harris? Oh, gosh, a million times better. I'm going to do anything to stop socialism and the redistributionists, but that doesn't mean I should just roll over and no longer have a thought.

David Friedberg

Have you tried to align with the Democrats to try and get this emergency overturned?

Rand Paul

It's not about trying to align with them. When they're right, I vote with them. They had a vote to overturn the emergency, and I voted with them.

It's a privileged vote, and very rarely can people who object to the majority will of either party get votes. The only way you get votes is by using special procedures. The emergency vote to overturn an emergency has privilege, meaning that it has to come to the floor. I voted with them, and there were 4 of us—4 Republicans—who voted with them.

David Friedberg

You were also pretty well known recently for being 1 of 3 Republicans to vote against the Big Beautiful Bill—

Rand Paul

Right?

David Friedberg

Maybe you can just share the parts of the bill that you were opposed to.

Rand Paul

Increasing the debt ceiling by $5 trillion. This is not only extraordinary but unheard of. No conservative in their right mind would ever vote for this under Biden. In fact, when Biden did propose stuff like this, all the conservatives voted no. So we sort of lose who we are if we don't keep the same standard under the same presidents.

But a lot of people don't know this: Up until the last moment, my vote was still in play because I told them, “I don't like a lot about it. It's also going to add to the debt, and I think that is true. We can go through that in a minute.” Up until that morning, my vote was still in play. That morning, I met with Vance. Lisa Murkowski was demanding more stuff for Alaska.

I didn't want anything for me or for my state in a parochial way. I wanted something for the country: not to add so much debt. So I said, “I'll vote to increase it by $500 billion.” Even that's like sticking a dagger in my heart. $500 billion used to be a year or 2 years. Now that's 3 months.

They said they didn't want it. I had long conversations with the president. I spoke with him for 59 minutes the week before. I looked at my phone, with my wife standing in the kitchen, and he spoke for 58 minutes and 45 seconds. He just didn't want to talk about the debt ceiling.

The Democrats will never vote for it. I don't want to do it again. It's inconvenient. I don't want to talk about the debt ceiling, but I will talk about it. I'd vote on it every 3 months—not because I want us to default, but because every 3 months we need to talk about how we're out of whack. We need to talk about why these credit agencies are downgrading the dollar and what happens if there is a dramatic flight from the dollar.

The thing about economics is that I don't claim to know even 1/10 of what smart people know, but things don't always happen gradually. If you think in your lifetime or my lifetime of the different corrections in the market, they came in 1 or 2 days. The 2007–2008 correction came in a day or 2. There was 1 in the '90s, and there was 1929.

I think somebody told me that almost all the losses in the stock market—if you take, like, 7 days of the last century—it's like 95% of all the losses are in about 7 days.

But it could be worse. If there's ever a flight from the dollar—and people are talking about that—when they have bond sales, they talk about how many people show up. There's some kind of ratio, and usually it's about 2.5:1 or something. It was in the low 2s, 2:1, with not many people showing up. Interest rates are still pretty high.

What has always fascinated me is that people say, “Well, the interest rates are so high.” But I was always taught historically that interest rates are inflation, or expectations of inflation, plus the historic rate, which is about 2 or 3 points. If I take money from you for 30 years, you're not giving it to me for less than 2 or 3 points. But you also want inflation, too. So you want 3 points for inflation and 2. Well, that's about what interest rates are.

I don't think anybody knows whether interest rates are too high or too low. I think that's a silly question. But if you looked at it in historical terms, the market is judging them to be expected inflation plus about 3 points.

David Friedberg

But just going back to the Big Beautiful Bill and your vote against it—

Rand Paul

Right?

David Friedberg

I just want to understand how we got here, or your view on how we got here. You've read a lot of history and a lot of philosophy. I've interviewed Ray Dalio twice.

Rand Paul

I've met him.

David Friedberg

He's a fascinating guy, talking about his cycle of empires. His kind of thesis is we're in 1 of 6 cycles—

Rand Paul

Right.

David Friedberg

—over the last 500 years, and we're kind of at the tipping point here. There's a set of trends that are very common, he says.

Rand Paul

You know, different characters, same act. It happens over and over again.

David Friedberg

We take on too much debt. When the country gets wealthy, it grows, the economy expands—

Rand Paul

We start to get offered free money, we take it, we spend it, and all of a sudden—

And 1 of the things—we had a bipartisan dinner with him recently—and 1 of the things he's saying is the way to get out of this is that we have to get—and his isn't even, I think, draconian—we have to get our annual deficit to 3% of GDP. Well, it's 6% now, so it would have to be cut in half.

I think it's very reasonable, and a lot of people are nodding their heads, but it takes a tough vote. I voted to raise the age of Social Security, and people say, “God, do you hate old people?” I say, “No, I aspire to be an old person. I want my Social Security, and I want the system to be around for ordinary people, but it's not going to be around unless you raise the age to 70.” That's the only way it sticks around.

David Friedberg

Is it that, in order to get reelected, you have to offer your voters something that they don't have today? Therefore, every election cycle, you have to show up with something else. No one ever gets elected by saying, “I'm going to cut back half, or cut back a quarter, or cut back 10% of what you're getting today.” You might, but is that the dynamic, or is this—

Rand Paul

I'm pretty positive that you don't have to say, “I'm going to bring home the bacon.” I'm going to bring you your freedom. I'm going to keep the government out of your lives, and I'm going to allow you to become richer, because freedom and capitalism make us all richer. I'm going to allow you to do that, and it's going to be mostly on merit, which is better than the government deciding that.

I think you can say that, and I've said it explicitly. I will never go home with a check saying, “We brought you this to your community,” because we don't have it. It has to be borrowed, and that makes us all poorer through inflation.

It is that fear, though, and the president has bought into this. The president says Social Security—we can't talk about it. Medicare—we can't talk about it. And really, on Medicaid, he severely limited what could be talked about. Food stamps—they nibbled at it. They talked about some good things, but most of it is in the distant future.

Here's the bottom line: I voted against the Big Beautiful Bill because of the debt ceiling. But also, here are the projections. The CBO had a projection that it was going to add $3 trillion. All the Republicans said, “Oh, the CBO has too low a growth rate. We can't believe the CBO.” The authors of the bill did something I agreed with.

They said, “We’re doing it based on policy, and this is what we project: that the taxes will go on and that they aren’t really—we’re not giving a tax cut. Most of that is just keeping the same policy.”

I said, “I accept that. So, what are your numbers?” The authors of the bill, the Republican supporters of it, said, “Well, the first 10 years—no, the first 5 years—it’s going to lose $500 billion, so we’ll be $500 billion more in the hole. The second 5 years, we’ll make that up, and we’ll go $1 trillion positive, so we’ll be plus $500 billion.”

I believe the first 5 years. I don’t believe the second 5 years. This is from the authors admitting it, and the reason you know it’s going to lose $500 billion is these tax cuts will pay for themselves over time, but almost all of them have a little bit of a dip in revenue in the beginning.

It’s not a reason to be opposed to tax cuts. It’s a reason to at least be wary. Even if you don’t count the tax cuts that we already had and continued, and you count the new ones, there’s going to be a little dip in revenue. Maybe some of these weren’t that growth-related. Tips and things like that may not be that growth-related, to reduce tax on tips. So, that’s going to be a dip down.

But the other reason why you know the deficit’s getting better is they put $500 billion of new spending. From the very beginning, this was Lindsey Graham and the military-industrial complex. They wanted more money for the military. They already got an increase in the military last time. This is $150 billion for the military and $150 billion for the border, which I’m for controlling. I applaud the president for controlling the border. He didn’t need the $150 billion. Maybe $20 billion would have probably been enough to secure the border, but nobody’s conservative when it comes to this.

David Friedberg

I saw your hearing where I think you challenged the amount of the bill.

Rand Paul

Yeah, the wall, because you went through the numbers, and it was—

David Friedberg

Pretty striking that—

Rand Paul

It was on their website. The next week, they changed their website because they didn’t like me reciting their website back to them.

David Friedberg

Right. So, where are we headed? $37 trillion of debt. If the debt gets financed at 5% or 6%, which is where interest rates are trending, we’re talking about an incremental $1 trillion a year of interest expense. Interest expense will probably become $2 trillion a year, right?

We don’t seem to be cutting the budget much. Everyone wants more. Everyone wants more budget for their particular interests and their states and whatnot. What’s your view on where we’re headed over the next 10 years, barring a lot of Rand Pauls getting elected to—

Rand Paul

Yeah, the left has this modern monetary theory, and it sounds ridiculous, and it is, except that it kind of worked for 10 or 15 years. Bush doubled the debt from $5 trillion to $10 trillion, but the interest rates went in half, so his interest payments were the same. We went from $5 trillion to $10 trillion with the same interest rate. We played a lot of games to do something similar.

For the last 10 years or so, or maybe 8 years, our average payment was like 1.5% for the debt. That’s what we were paying. Now it’s 3.5%. That’s a pretty significant jump. But I think if they stay where they are, it’s going to be even more. So, we’re at $1 trillion in interest now. Could we go to $2 trillion? And what happens?

All of these things are fixable. America is a great place because of capitalism. We just need to start fixing them, and it’s not even draconian—just a little bit at a time. For 12 years, I’ve been saying, just raise the age 3 months a year for the next 20 years, and you’ll be at 70. You may eventually have to go higher, depending on longevity.

The other thing you have to do is, the age doesn’t fix Social Security anymore. You’ve got to means-test it. The only difference we have with the Democrats on means-testing—well, on all of it, if they would agree to any reform—is they just want to tax rich people in the beginning.

There’s a limit. Your Social Security taxes go up to about $160,000, and they’re indexed to keep creeping up a little bit, which I can live with. But if there’s a choice whether rich people get less Social Security in the end or we tax them up to $10 million, I’d rather do it in the end, because somebody making $10 million is investing in and creating a lot of jobs, and I’d rather not stop that.

But I don’t care if rich people, including me—and I’m not that rich, but I’m upper-middle-class—get less Social Security also. You can fix the system that way. I think we are so dependent on it that it’s hard to go back to a pure system where it would be all charity and private pensions.

We’ve got to get started on it. The longer you wait, the more difficult it is to fix.

David Friedberg

Is there a point of no return that you view? Is there a year or a debt-to-GDP ratio that becomes irreversible?

Rand Paul

There’s never—well, there is a point of no return for a catastrophe, and I don’t know that. If I did, I’d be predicting the day, and then I’d be fine and everybody else would get killed by the calamity. I don’t know. You’ve got to be really smart or lucky to predict those calamities.

The people who saw the housing crisis were really smart, and they figured that was happening. I don’t know that it is going to happen. But I think what’s important, and I tell people this all the time, is you will always get your Social Security check. You will always get your Medicare. It will never end. But it just may not be worth anything.

There will be a point in time when we cut you your check, and there are COLAs. But what happens if you’re in 1923 in Germany and you get annual COLAs? It didn’t work so well because the money was losing 30% an hour. There were times when the German workers—it was in 1922 or 1923—they wanted to be paid at noon because they didn’t want to wait until the end of the day, because it was depreciating so fast.

COLAs, or cost-of-living increases, work for a while, but they are somewhat of a game. You have a problem: you’re creating this inflation. You hate to punish people, so you give them a COLA. But the COLA comes once a year. Part of the breaking point for all this stuff that has COLAs on it is when you need to do it every month. So, that’s much higher inflation.

We’ve been extraordinarily lucky. I’ve never really seen anybody write this as accurately and as detailed as that could be. I think we’ve exported our inflation. I think we’ve created so much more inflation than we have, but because we import more than we export, we pay them in dollars.

Some of those dollars find their way back into our stock market, putting our stock market up. But you can go to 2 dozen countries around the world, and they’re trading in your dollars. So, the actual physical dollar never comes back on some of these trades.

I think if you took the increase in M1 and the increase in the money supply and looked at it, some of it disappeared. Then they play the games with paying interest to keep it in the Fed, which I’ve got a bill to eliminate right now. That bill is cosponsored by Bernie Sanders.

The Fed paid $188 billion in interest to banks—not to loan money. Most of it went to 5 banks in New York, the big 5, but 40% of it went to foreign banks. So, the Fed’s buying our debt with fake money. The taxpayer still has to pay the interest back to the Fed.

The Fed used to use it as profit and give it back to the Treasury, and it’s a weird game. But now, instead of at least playing the weird game, they’re giving it to rich people. So, this is something reminiscent of the Occupy Wall Street movement, where you’ve got right and left coming together.

David Friedberg

The free market is not blind to this, it seems, right? The global foreign-exchange dollar reserves, according to the IMF report on central bank holdings, have declined in the last decade. The dollar reserves have declined from 60% to 40% in the last 10 years. Meanwhile, gold has doubled from 10% to 20% of central bank holdings.

As a result, we’re seeing gold prices—I think $3,600 an ounce as of yesterday. What do you think is the path here for the dollar? Maybe we can talk to the average person listening. Where’s this taking us?

The market wakes up to this, and they’re saying these dollars aren’t really what they used to be.

Rand Paul

I think there are 2 scenarios. One is the one we’re used to, and that’s the gradual scenario. Then the Fed tries to intervene to try to control inflation. I think they can, but I’ve always asked this question to very smart bankers and others: is there a point in time at which the Fed doesn’t control interest rates?

Many times they’ll say, “Well, the Fed doesn’t really control the long-term interest rates. After the daily stuff, they’re really controlled by the marketplace.” But when is there a time in which it just becomes out of control?

The government shows up and says they want to sell $20 billion of the debt. Nobody shows up, and the Fed has to buy all of it. I think right now, of our $36 trillion debt, the Fed has about a third of it, foreign governments have about a third, and the marketplace has about a third.

What happens when the private marketplace doesn’t show up? Is there a time in which you have a Friday—they do this on Fridays, I think—you do a Friday sale and nobody shows up? The Fed buys the whole thing. What do you think happens that Monday?

Do you think you’d be trying to prepare to sell some stock overnight before Monday opens? Then I think you could have a calamity, and some of it can be fixed. Some of it—we live on a house of cards because—

Will this scare your audience if I tell too much?

David Friedberg

It's great. It's going to get clicks and views.

Rand Paul

Yeah. This is very scary. You have $1,000 in your checking account, and you go to the bank and want all of it. That only works if a few of you go, because the bank, I think, only holds 10% of your checking account.

Now, I want the bank to loan money. So I give them $1,000 in a CD. They pay me 2%, and they loan it out for 3%. That's how banks traditionally make money. But they have a game—I call it a racket. It's called the fractional-reserve system.

And it works until it doesn't work. Once a bunch of people go crazy, you have a bank run. We've had bank runs, even back in the 19th century.

David Friedberg

We nearly had one with Silicon Valley Bank 2 years ago.

Rand Paul

Exactly. But it's really based on that, and I haven't been as involved exactly with what the rate should be. But I think loaning out 90% of your checking account is a recipe for a bank run.

We don't have it because we just print more and flood the system with liquidity when people get skittish. But there's a time at which they can't control that, and it's coming. I try to get back to simple things because I don't know when that's going to happen. Maybe it's not going to happen.

The simple thing is, you spend what comes in. Most people do. You borrow if you have an asset that the bank can hold, like your house or something. This is what normal people do: They spend what comes in.

Your government should behave that way. In the same way there are ramifications to you personally if you overspend, you'll ultimately be punished. It's going to happen to us.

And so the first thing we do—we don't even need to think about the $36 trillion—we need to think about the $2 trillion we're borrowing next. That number needs to be smaller.

But I can tell you, people aren't getting it. I went and asked Treasury Secretary Bessent about this. I said, “You guys are spouting all these numbers: The big, beautiful bill is going to be great, there'll be no more debt, and all the Saudis are going to invest $20 trillion in our country, and we'll all be rich.”

I said, “But the number I'm concerned about is, will the deficit be bigger or smaller next year?” And he said, “Well, in terms of GDP, it will.”

But even that's not going to be true. The deficit this year—the one we're in, which is going to end in about 3 weeks—is going to be about $1.9-something trillion, and that's going to be about $150–160 billion worse than last year. As a percentage of GDP, I think it's going from 6% to about 6.2%.

So we are getting worse. I don't say this because I want to be mean or get the wrath of Donald Trump. I say this because, as Republicans, we need to be for balanced budgets and less spending, no matter who's in the White House. It's going to take some back-and-forth with the president to get there.

David Friedberg

Well, I want to introduce another kind of frightening metric and statistic. By my estimate—and this is not reported by anyone; this is just me doing some addition in an Excel spreadsheet—somewhere around 40–50% of the American working-age population earns its income directly from a government or a government contractor.

If 40–50% of Americans are employed directly or indirectly by a federal, state, or local government or government contractor—

Rand Paul

—or earn their income from a government check—

David Friedberg

Can we actually reduce spending?

Rand Paul

And this is a real problem when you look at our spending as a percentage of GDP. The spending part—the $7 trillion—the average over the last 5 years is about 26%. Right now we're at 23–24% of GDP.

And I love it because people say, “Well, we'll just have tariffs and we'll run the government off tariffs.” And I say, “Well, when they did that in the 19th century, government was 3% of GDP.”

I'm for that. You bring me spending bills, and I'll vote for all of them to make us a 19th-century government of 3% of GDP, and I'll vote for all your tariffs. But that's a big change, and it is a problem. It's sort of a twofold problem.

The people actually working for government—you've got to make government smaller so we don't have as many government jobs. But the other segment is worrisome, if not more, and that is the people not participating in the workforce. They're getting money, but they're not participating, and it's like 38%, 40%, or 42%, depending on the state.

So, 40% of the people eligible to work, able to work, are not working. Libertarians have had this debate: What do you do? Some of them don't want any border controls.

And they say—and my dad used to say this, and I kind of agree with this part—“You need to build a wall around the welfare state, and don't give any people coming into the country illegally any access to your welfare state.”

I still agree with that part. I think you still have to have border security, too, and you have to push back on millions of people coming all at once.

But there is a problem. If you had, for example—and people will tell you this in states that have tomatoes or anything else—the things that require hand-picking, you won't have enough people. But you would have enough people if Americans worked. A whole chunk—40% of them—aren't working who should.

If you want to expel 20 million people from the country and do that, you have to simultaneously quit paying the people not to work, or you won't have enough workers.

There's also this argument. There was an economist by the name of Julian Simon who was a big promoter of this. Population is actually proportional to wealth.

David Friedberg

So is trade. You look at big, large charts over decades and decades. The more trade you have, the wealthier you are. The more people you have, the wealthier you are.

And there was a famous bet between Paul Ehrlich and Julian Simon about 5 different commodities and whether they'd be more rare after a 10-year period. Julian Simon, the libertarian economist, wins his bet because, basically, the real resource—the real ultimate resource—is the mind. It's ingenuity.

Nobody would have imagined, even in my lifetime, the whole concept of AI. We didn't imagine smartphones or cell phones. We didn't imagine all of these things.

And we're going to have these big debates—maybe bigger than everything we've discussed—about whether or not we're going to succumb to the Luddite philosophy or whether we're going to believe that we will not only overcome, but that through technology we will succeed.

It doesn't mean you can just sit there and do nothing. You have to adapt with the times and move forward. The people breaking the looms were wrong.

David Friedberg

You think this transition with AI in our economy and our society will actually create such significant productivity gains that jobs will proliferate, that we can get people off of welfare, off of government jobs, and into the private workforce?

Rand Paul

I don't know if it fixes that problem, but I am of the opinion that I don't fear technology in general. I was having this conversation with one of the world's richest men, and he told me, “Yeah, that's fine.”

I've been with you, and I'm not for the Luddites, except for—and I said, “Well, humans—you've got to have humans to make the robots.” He says, “The first generation, the second generation of robots will be made by the robots.”

I guess it doesn't resonate with me because I have such a profound belief in the ingenuity of mankind that I think it is limitless. I don't think that we need to smash the computers. I don't think we have to somehow shut down the chip companies and say we're all going to be out of work.

I do think, though, there'll be a time that we will have such great leisure that we will actually choose to work. I always tell people this anyway: I want everybody in America to work, not as punishment but as reward. There is a reward to working.

And I think even if all jobs were eliminated, you'd have sort of secret societies where you can go someplace—it'll be underground, and you have to do it under threat of death—but you can go and work.

Rand Paul

Yeah. Even if we have no work, there will be wants that people have.

David Friedberg

People used to have yoga classes, Pilates classes, and massage therapists, along with many of the luxuries that we take for granted today that simply didn't exist 100 years ago, when the Second Industrial Revolution was underway.

Rand Paul

And as we fast-forward the next few decades, I think our life—and this is one of Pinker's points—shows that labor per capita, like labor hours, has gone down steadily. We've given ourselves more free time with the leverage we've created on human time.

David Friedberg

He does this, and so does Marian Tupy at Human Progress. They talk about time-hours, and so did William Nordhaus, the famous example—maybe one of the first—from Yale. He was the economist who wrote about how many hours of work it takes to get light for a year to read by.

And it was like, in the 19th century, because you had to have candles, it was like 10,000 hours of work—or no, maybe it's 1,000 hours of work—to have nighttime light to read by.

Rand Paul

It's 10 seconds of work that gives you an entire year's worth of light. That productivity increase, nobody could fathom.

David Friedberg

And all the Luddites hate that kind of stuff, and it's like, “It's not going to happen, and we need to take the pitchfork and the axe to the computers.” No, we'll figure it out.

I do think, though, that the AI people—and, once again, I'm not a genius on AI. I don't write code. I don't know any of that—but I think it's overstated how great AI is going to be. I think it's going to be a lot of cool things, and I think some people are going to get caught.

Rand Paul

We're going to have too many data centers at one point. I don't care how much electricity they're sucking. At the same time, I think we're going to have too many of them because people will say, "What?" The one thing I see they do really well now is they're great at adjacent things.

I've looked up political questions even today, like what happens if we unwind the reverse repos at the Federal Reserve, and it gives a pretty good explanation. It's faster; it isn't smarter than humans. It's much faster at doing the search that I could have done manually by using the Google search engine. These things just kill, and I wonder whether that's why everybody says, "Oh, we've got to break up Google because they have a monopoly on search engines." I wonder how long it will take—maybe it's already happening—until AI makes Google less of a dominant search engine.

David Friedberg

This was actually in the court ruling yesterday—the judge who decided not to break up Google. There was a write-up on the rise of AI showing a point.

Rand Paul

And that I'm in favor of on multiple levels, but I think it's also cool. Nobody would have predicted, "Oh, Google's going to have everything, and they'll own the whole world market." All of a sudden, something new comes in.

David Friedberg

Right? AI, like any other technology prior, provides leverage on human time and therefore leverage on human capital. When you get a higher ROI on capital, you generally have more capital flow in, not less. So people will invest more in people. They will pay more to people. They will hire more people as AI tools are utilized. They're just going to increase productivity for every person.

Rand Paul

That's a great way of putting it. I hadn't thought of that because that fits with my sort of Adam Smith model: The extent of our prosperity is the extent of the division of labor. If AI gives me 4 more hours of free time, then I'm going to be smarter, and I'm going to think of other ideas. Maybe we will get to Mars.

David Friedberg

I want to ask your point of view on DOGE. There were a lot of proclamations at the start of this administration about the importance of DOGE and Elon Musk's role in the administration. The president and others in the administration declared DOGE such an important part of the effort, and all the cabinet members were incorporating DOGE team members into their work. Today, is DOGE dead?

Rand Paul

No. I still meet with people in government who I think are part of DOGE, probably colleagues and friends of Elon Musk who were brought into the situation. I think they've been a great addition because, for one, they're people who know about profit and loss, and they're people who have been successful in business. The fact that they've been selected by the marketplace as successful people means they're good people to have in government.

Is it everything I wished for? No. But that's not the DOGE people's fault. That's people resisting DOGE and resisting the cuts. I like the fact that the president pushed on with another round of the foreign-aid cuts, and he's doing this pocket rescission. I am a stickler for the rules and for the Constitution. The Constitution is very explicit on how you spend it, but it's pretty silent on not spending it.

I think the best way for people who have their doubts about whether they should do it is to imagine that we need an aircraft carrier, and we hire somebody who looks at every nut and bolt like Elon Musk does with his rockets. We hire Elon Musk and give him $1 billion, and he says, "This is crazy. I can do this for $800 million." He probably can, and that's probably true of every aircraft carrier we have. So he does it for $800 million.

David Friedberg

Should we be forced to spend the $200 million that this person found in savings? Should we go to Las Vegas and have a big convention for all the GSA people with champagne and everything? No. It's ridiculous. The money should go back to the Treasury.

The appropriators on both sides of the aisle say, "No, it's been appropriated. It should be spent," but that sort of ignores the fact that we're $2 trillion over budget. If you had a balanced budget, you could argue, "Well, we want it to be spent." If you have $2 trillion in the hole, if you don't spend it, we should be applauding the savings, and the money should go back to the Treasury.

I'm with them on the rescission stuff. I want more of the DOGE cuts. I'm all for it. But the pushback—and it's bipartisan—the pushback is from the spenders, the big spenders in both parties, who have pushed back on DOGE. I still wish them success and still am for them.

I was struck by how many Senate confirmation hearings I watched where senators blatantly spoke on camera about the need to keep dollars flowing to their state, and that was the motivation. It just drove me nuts. Anyway, we'll move on. I want to talk about your new book, Deception: The Great COVID Cover-Up. What was at the heart of the cover-up from your point of view?

Rand Paul

Some people get nervous when you talk about a cover-up or conspiracy. They're like, "Oh, you're one of those crazy people." I think the best way to think of a conspiracy is the way George Carlin put it. George Carlin said that it's not necessary to have a cabal of people who are all evil get together in a room to have a conspiracy. All that's necessary is to have a convergence of interests.

The convergence of interests in COVID was, "Holy crap, we funded this." If you are Anthony Fauci and you know that you've made a deal to do very dangerous research in China—partly because there's less oversight in China and because complaints are beginning to circulate in America—what's your first thought? "Let's outsource this to China." We have to cover this up. That's exactly what he was doing.

The phone calls go on in my book. My wife helped me write it. We go on in vivid detail, minute by minute, of him going on until 3 in the morning that first night. Emails went back and forth and back and forth. Jeremy Farrar is his counterpart at the Wellcome Trust in England. He said, "I didn't know what a burner phone was. I had to buy a burner phone. My wife said I should talk to my brother, bring him in in case something happens to me."

Then he goes on to say, "It was no big deal. It turns out it just came from animals." It's like, well, do you think the animals are going to kill you? Why are you getting a burner phone? Why are you giving your last rites to your brother? These people were very concerned, maybe not that they were going to be killed by foreign agents, but that the public was going to find out that they had been funding this very dangerous research and that millions of people would die because of a lack of oversight.

I go through the emails. There's never been a more extraordinary cover-up in the sense that these people were saying in public the opposite of what they were saying in private. Freedom of Information became the tool that uncovered a lot of this, and thousands of people helped to get this done.

In private, Anthony Fauci was saying, "I'm 50/50 whether this came from the lab or animals." In public, he was saying, "You're a conspiracy theorist and should be treated as crazy. We should expose you. We should bring you down." He and Francis Collins were talking back and forth about bringing down Jay Bhattacharya and all of the others who were exposing this stuff. This is just extraordinary. We have the proof.

David Friedberg

You're saying they knew that their funded research, which was done in China because there was less oversight, is what ultimately led to the development of SARS-CoV-2, and that it escaped from the lab?

Rand Paul

They knew there was a high chance it was from the lab. Everything's a proportion. Everything is a percentage. They knew there was a high chance it was from the lab, and they chose to cover it up because, in the book, I say this is about the business of science. This isn't about science. It's about the business of science.

People have to realize there are some good people in this world. There are good scientists who want to cure cancer. But there are many people getting millions of dollars, and there's nothing against money. I'm all for money, and good people should be paid for important discoveries. But they shouldn't be paid not to tell us the truth, and that should be exposed. I think all the scientists should have to reveal their royalties. Not one scientist in government reveals their royalties.

David Friedberg

Some of them are now getting millions of dollars in this stuff. Pfizer paid $800 million, and Moderna paid $400 million. They've taken that money and put it in a foundation that I have no oversight in government over. The government has no oversight of it. There's an NIH foundation that has $1.2 trillion in it, given by big pharma for their share of the COVID vaccine.

Rand Paul

So, no, it's an extraordinary thing. In private, they were very open to the fact—leaning toward and in favor of the fact—that the virus came from a lab. In public, they were disdainful. They got Facebook to take all our crap down. They got Facebook to take down the discussion of it as a conspiracy.

That's an evil thing to do, and it's dishonest. It's not just that you're a bad person. If you were in the government and you were leading people astray as to the cause of something because you funded it, you deserve to be punished, really in a criminal way.

David Friedberg

I saw your heated exchange with Fauci. There was a video; it's about 9 minutes long, and it went viral. You questioned Fauci about gain-of-function research, and I want to talk about the origin of gain-of-function research because it's a term of art that has different definitions depending on whom you ask. Fauci obviously disagreed with the definition.

What's your view, as a doctor, as someone who's worked in science, and as a political leader, about the role that government should play in researching ahead of the curve and understanding what may come next? I think that's part of the argument for some of this research: We need to understand how viruses can evolve so that we can prepare for the next pandemic. If we don't, there will be a congressional hearing saying, "Why didn't you prepare enough?"

Rand Paul

There are different aspects to this. Should we know how viruses evolve? Absolutely. Should we test viruses and infections from different natural sources? Yes. Gain-of-function research is different from that. Gain-of-function research is forcing evolution in a direction. So gain-of-function research is: I take a rat and I put human lungs in it.

Not literally human lungs, but I have a rat with cells that express receptors that make the virus think it’s invading a human. So I give it a virus and run it through, and 99 rats survive and 1 is sick. What I do is take the really sick one, culture the virus out, and do it again. Every time, I keep culturing it until I get a virus that really attaches to human cells.

We believe COVID is that, because most animal viruses—the avian flu right now, for example—can infect a human, but they don’t go human to human. They have trouble. That’s the way animal viruses are. When COVID started, it hit humans and went everywhere. There was just nothing stopping it, which made us think it was pre-adapted. There are many other reasons why we think this happened.

But as far as gain of function, what should be regulated and what shouldn’t? First, it’s very dangerous. Viruses are more dangerous than bacteria if they’re aerosolized. Something that can spread through the air can be incredibly dangerous.

Lethality: should you increase the lethality of it? Some of these viruses start with 50% lethality. If you want to know what that’s like, read Barbara Tuchman’s A Distant Mirror: The Calamitous 14th Century. When a third of Europe died, we’re talking about setting back civilization hundreds of years. We’re talking about entering the Stone Age. Some people think we could lose 10% of our population and we wouldn’t get chlorine in the water. We’d no longer have potable water, and we would have riots like you’ve never seen—just a disaster.

So aerosolization, increasing the lethality, and increasing the transmissibility are all dangerous things. They did all of that, and yet he argued, “Oh, well, you can’t have gain of function unless it was intentional.” It’s like, well, if you’re running it through humanized mice or rats, you’re pushing its evolution to be infectious in humans. He basically lied. One day he came, and they had actually changed the definition on his website the day before. They knew I’d been arguing that it was gain of function. They literally changed the definition on the website to say it didn’t match the definition.

David Friedberg

You would still support research into where viruses are headed, protecting the population, and doing this research, but not in this directed, engineered way?

Rand Paul

Right. There’s a big difference, and even many of the people who support Fauci actually support me on this. Identifying viruses is mostly a good idea, but you still have to think about it. A lot of these viruses are 300 feet underground in these enormous bat caves in South China. Should you go down 300 feet underground, randomly get as many as you can, and take them back to a lab in Wuhan? There’s the danger that the one you got is the one that’s going to kill all of mankind. Maybe it was never getting up, and other viruses would dominate it; it never would have gotten up to the surface.

You should check the humans who live around the cave. You should check viruses that get up into our world. I’m not sure you should bring viruses from very remote areas to big cities. But then it’s worse than that. The big virus identification, which sounds benign, involved taking coronaviruses, taking a backbone of one, taking the S protein off a new one they found in a cave, and sticking it on the backbone. The backbone is infectious, and they’re wanting to know whether it makes it more or less infectious. That’s really a recipe for discovering something that maybe is a disaster.

It isn’t helping, and most of the people who follow this and oppose gain-of-function research say no gain-of-function research has developed any vaccines. But here’s a further compromise and moderation of this: I don’t want to ban it. I want to set up a presidential commission of scientists who are not currently employed by NIH and who don’t have grants that I can make bigger if they agree with me. I want them to evaluate this.

But they not only need to evaluate the civilian side of this; they need to evaluate the classified side, because here’s what happens in our government—and I only know this much because they won’t tell me, either. They say, “Well, the Chinese are doing this.” Then we need to do it. “Oh, the Chinese are doing this. They’re working with norovirus.” I’m just making up which virus they’re dealing with—this very dangerous virus. “Well, we should, too.” That is basically the logic, and that’s what it takes to get a research grant in the classified area: the Chinese are doing it.

We might have an accident doing something the Chinese are doing, something the Chinese shouldn’t be doing and we should be trying to stop them from doing. But we could kill the world through an accident, too. Even the safest labs in our country have dozens of accidents every year.

David Friedberg

Fair enough. Do you feel like there’s been an erosion of public trust in science and scientific institutions in this country? Importantly, when people lose faith in science—which is meant to be the source for objective truth, a process by which we discover the truth through testing and experimentation, hypothesizing, testing and experimentation, and looking at the results objectively—does it not create space for people to come in with untruths and convince the public that untruths are true?

Rand Paul

Right, absolutely. The biggest one they’re talking about now is vaccine hesitancy. People say, “Oh, it’s all the right wing. It’s people crazy on the right wing that are creating this vaccine hesitancy.” I say, “Well, if you tell people things that aren’t true, they become distrustful of all science.”

I’ll tell you one right now. I’ve had this back-and-forth with Bill Cassidy, the senator from Louisiana, and with other members of the establishment medical community. Does your 2-day-old need a hepatitis B vaccine? I just went through this personally.

David Friedberg

Yeah. We opted not to, and we have to deal with it in the schools. We’ve been having this debate.

Rand Paul

We did the same thing. We did it later on in school. But here’s the thing: does your 2-day-old need it? There’s 1 indication for your 2-day-old to get it: Mom has hepatitis B, and you have to, within 12 hours, give them the vaccine. You also have to give them immunoglobulin, which is like a monoclonal antibody against hepatitis. But they test the mother already. So if the mom does not have hepatitis B, is there any indication for hepatitis B? No.

In fact, do you know what the honest people will tell you? They’ll say, “Oh, no, but we have you there, and we can get much better compliance by forcing it and pushing it in the hospital.” The other problem is this: the hepatitis B vaccine wears off. When does it wear off? About 10 to 12 years. When might you want to inoculate your kid for hepatitis B if you’re worried about your teenager getting involved in sex, drugs, and rock and roll, and IV drugs? That’s when it’s going to happen. You might consider the hepatitis B vaccine then. Plus, he’s 12 years old at that point, much bigger, stronger, and able to take whatever you give him.

But they are creating vaccine hesitancy because they’re lying to us. They’re absolutely lying to us. The COVID vaccine is the same. People think I’m antivaccine. At my age—I’m 62—I probably would have taken it. I’m still a little iffy on some of the details, but the reason I didn’t take it is that I got infected in March 2020. I had it, and I didn’t take the vaccine.

Would I give it to my 5-year-old right now? Hell no, I wouldn’t. Would I have given it to him in March 2020? No, because all of the initial evidence out of China was that they weren’t even sure whether children were getting sick. But when they started doing the testing, they found out they were all getting it, and they weren’t getting sick.

David Friedberg

It’s like a lot of social discourse and politics: it’s become so binary. There’s no nuance and there’s no gray area for conversation about some of these. Some make sense; some of them do not. Why can’t we agree that we can each have a different point of view on that?

Rand Paul

Most of Europe doesn’t do the COVID vaccine or push it on kids. So I think I blame them, and I actually do want people to believe in science. I come from a scientific background. I’ve had papers published in scientific journals. I come from that background. But you have to be honest with people. I also believe people are smarter. You don’t have to have a PhD to know people are lying to you about the hepatitis B vaccine.

David Friedberg

Just today, Putin, Xi, and Kim Jong-un stood together in Beijing—a very dramatic show of strength and unity as a group. What does it mean for America to be in competition with China? Is this going to evolve into a conflict, from your point of view? Or is there a way to carry the world forward where we all have prosperity, where we all progress, where all societies succeed, where they cooperate, and we have a multipolar world that doesn’t dictate a winner and a loser? Do we really need American primacy?

Rand Paul

The shorter answer is yes. The longer answer is more complicated. Graham Allison wrote a book, The Thucydides Trap.

David Friedberg

We interviewed him on our show last night.

Rand Paul

He’s an amazing guy, a really, really bright guy, and a guy I’m fond of. He talks about up-and-coming powers and whether war is inevitable. I don’t know if this is common, but I met with one of the Pacific Fleet commanders. I don’t want to name him, but he said, “When you go back to Washington, make sure they know that war with China is not inevitable.”

I thought that was a profound statement from a guy who’s going to be in charge of the war and out there fighting on the front lines. I think it is very possible, but it gets back to fallacies. Can you trade with China where you both get rich and they’re not ripping us off?

I think, yes, and I think that is the truth of the matter. Since 1975, we’ve had a trade deficit every year, and we got richer, and so did they. Are there problems and dislocations in industry? Yeah. But I would actually argue that what killed or hurt the steel industry the most in this country was protectionism.

Antitrust killed them first when they broke up U.S. Steel, and that made them less competitive with foreigners because they were smaller. But then the second thing that went after them was that we did try to protect them. This isn’t the first time we tried to protect steel. We’ve been trying to protect steel. As we protected steel, what did it do? Did it breed better and more profound market decisions, or worse decisions?

If you’re selling me chairs and I tell you, “You sell them for $50,” I can say, “Well, we’ll put a tariff on you. Sell them for $100.” Are you going to be more efficient or less? You won’t make as wise a decision because you’re being protected from the competition. And so all of that happened with the steel industry.

But I think we have to get through the fallacy part, and we also have to understand that we’re pushing in the wrong direction. There’s a possibility people think we’re going to defeat them and come out on top because we’re so great, and protectionism is going to show how great we are. But them all meeting together, to me, shows one other possibility.

I don’t know what will happen. Nobody does. But there’s one possibility that finally unites them enough that they do everything in their power not to use the dollar, and maybe they can displace the dollar. They already try to do that in their transactions. And so I think we use the stick in foreign policy, and you have to have it, but we should have a carrot offered as well.

I just met with some Syrian Americans today, physicians mostly, and intellectuals and engineers and things, and they want to get rid of the sanctions on Syria. And I say, “Finally.” I think this group liked the sanctions before, but they want to get rid of them. Finally, somebody wants to get rid of sanctions, because there has to be a reward. And so even with countries we find distasteful, and that often are distasteful—Iran—there has to be an offer somehow to get rid of the sanctions.

I would send my diplomats to China. I’ll give you a great example: Blinken and Yellen went to China, and they were screaming, pitching a fit, and telling the Chinese how bad they were. That’s not very good diplomacy, but they wanted them to stop selling dual-use parts to Russia in the war in Ukraine. I said, “Well, it’s a reasonable goal.” But had I been in charge, I would have sent my diplomats to China and said, “Look, the Chinese don’t like to lose face. They don’t like you insulting them in their own country. Quietly say, ‘You know, this sanction, I think, is costing you about $50 billion worth of wealth. We’ll remove it, but you’ve got to quit selling them the dual-use parts.’”

They would never admit that we pushed them into doing it. It’s a trade, and it’s transactional, and diplomacy sometimes needs to be that. We have a lot of people both in Congress and involved in administrations who are much more black-and-white, that there are good and bad people in the world, and the bad people need to die and we need to defeat them utterly. I wish they would die and go away, but I can’t have that kind of attitude. We’re going to be waiting a long time if we think sanctions are going to get rid of the Communist Party in China.

Capitalism might someday. Everybody complained, “Well, Deng Xiaoping opened it up, and they still have repression and capitalism.” It’s true. But I think you might argue—and this isn’t a great argument for current China—that China may be a better place than it was under Mao. People who’ve been there tell me that it definitely is a 10-times improvement in GDP per capita.

David Friedberg

You visit a modern Chinese city, and it’s like living in the future, right?

Rand Paul

People are very happy, it seems, despite the—

David Friedberg

But that’s not an argument for socialism. It’s an argument that most of that is actually due to the amount of capitalism they’ve allowed to come in. There was an interview with the guys from, I think, the Hoover Institution, that said it was actually the entrepreneurism in the country. Political future for you, Senator? Are you thinking maybe you could run for president again in the future?

Rand Paul

You know, it depends on what happens in the next year or two. I think there needs to be a voice within our party that is more libertarian and free-market. I think we have populism and protectionism covered, and I think there will be many people competing to be heirs of Donald Trump on the protectionist front. I don’t think it’s good for our country, and I think it will make us less wealthy and ultimately could really lead to a calamity.

If things are rosy in 3 or 4 years and the economy’s percolating along, it is a possibility. It is a possibility that the tariffs, as bad as I think they are, are not a big enough percentage of the overall GDP to slow things down, and that capitalism is still vibrant enough to overcome the tariffs. There’s a distinct possibility that, if that’s true, we’ll get more tariffs and we’ll get another protectionist populist president.

I want to be that voice, whether it’s in the Senate or running for the presidency. I don’t know. I think right now, all things given, free markets and free trade aren’t very popular. People are all making excuses for why we should own Intel. Howard Lutnick thinks that’s part of capitalism, and that tariffs are lowering taxes, and all this gobbledygook that makes no sense. If the economy still percolates along, people may still accept that nonsense as truth.

David Friedberg

I’ve been to D.C. a number of times in the last year or two. I always tell people I’m disappointed when I meet with members of Congress, because when I come back from D.C., I hear the same thing over and over, and I don’t see a progressive voice that actually speaks to where this nation needs to go. I often consider myself a libertarian.

So I want to thank you for your service, for your leadership, and for your voice. Thank you for being here today.

Rand Paul

Thank you.

Senator Rand Paul: Tariffs, Debt, China, and a Warning for America | BidClub