Sen. Rand Paul, R-Ky., says tax hikes will stifle growth but tax and entitlement reforms and major spending cuts could go a long way to putting our fiscal house back in order.

Paul says both parties need to give up some “sacred cows” to make progress on reform. In the short term, however, he fears the Republicans will give in on raising taxes on wealthy Americans and small businesses to avoid the so-called fiscal cliff.

“The disconcerting thing is you’re now hearing Republicans who are saying, and even conservatives saying, ‘Well, if taxes are going to go up two trillion at the end of the year if we do nothing, anything less than two trillion is really a tax increase. It’s a tax reduction,'” Paul told WND.

“We had someone at one of our caucus meetings just the other day say, ‘Why don’t we raise $750 billion in taxes but we’ll call it a tax cut because if we do nothing and all the tax cuts expire, taxes go up by two trillion.’ Now only in Washington can you come up with math that says, ‘We’re going to raise taxes by a trillion dollars over what they are now but we’re going to call it a trillion-dollar tax cut.'”

In addition to the fuzzy math, Paul says the exchange shows that Republicans are already acting like the tax cuts the Obama administration wants are all but a done deal.

“My fear is the dam is cracking and that many people, once they accept the idea that any kind of tax increase short of the tax increase that will occur when the Bush-era rates expire is not really a tax increase — that sort of convoluted logic is going to lead us to a really bad outcome.”

Paul is a staunch opponent of raising marginal tax rates on anyone.

“I don’t think it’s good for the economy to squeeze more revenue out of it and send it to Washington,” he said. “I think the best way to stimulate the economy is to leave more money in Kentucky, Ohio, Florida. Leave more money with the people who earned it. They will spend it more wisely.”

The senator says this debate boils down to simple economic truths.

“(Milton) Friedman often said that nobody spends somebody else’s money as wisely as they spend their own, or as frugally,” said Paul. “The private economy is the productive economy. That’s where jobs come from.”

Paul takes a pretty aggressive path towards balancing the budget. His recent plan calls for the books to balance within five years, compared to a 28-40 year span in the House budget authored by Paul Ryan.

As for the current standoff, Paul is not optimistic things will end in a way that benefits the country. In fact, he thinks it will be resolved the way most things are as a major deadline approaches – through a massive bill.

“I fully predict that some big, huge package, stuffed full with everything you can imagine that’s coming to the end,” he said. “It’s not just this. There’s probably ten other items. I believe they’ll all be stuffed into a very unsightly package and that it’ll pass.”

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