Senator Rand Paul is invested in a fund that would skyrocket in value if the United States economy were to default. He’d also like your vote for president.
According to personal financial disclosure forms, as of November 14, 2014, the Kentucky senator had between $1,001 and $15,000 invested in ProFunds’ Rising Rates Opportunity Fund Investor Class, or RRPIX for short. According to the fund’s website, RRPIX allows investors to “seek potential profits from Treasury price declines when interest rates increase.”
In other words, if the value of Treasury bonds were to drastically decrease, owners of RRPIX could reap significant profits. This maneuver of essentially betting against the US economy is known as “shorting T-bills.”
In most cases this is a relatively banal investment, designed to hedge some risk in the event of economic turmoil. But one thing complicates Paul’s investment: his leading role in efforts to not raise the debt ceiling. A default would cause his holdings to skyrocket; even the threat of default has the potential to roil markets and boost Paul’s RRPIX investment.
Prior to 2011, Congress had always increased the ceiling when the national debt approached the limit, rarely demanding legislative concessions in return. After all, holding the United States economy hostage is a high-risk venture; if an agreement isn’t reached, the resulting default would, according to fellow GOP presidential contender Senator Lindsey Graham, result in “financial collapse and calamity throughout the world.”
But after Tea Party–aligned Republicans like Paul entered Congress in 2011, they didn’t see holding the debt ceiling hostage as a risk but rather an opportunity. When the debt approached the national limit that year, Paul was among the GOP leaders advocating that Congress only raise the debt ceiling if the raise came attached to a balanced budget amendment. Assuming Congress didn’t raise taxes, which Paul opposes, a balanced budget amendment would have resulted in 44 percent cuts to every government program, from Social Security and Medicare to highways and national defense.
After the GOP ultimately agreed to raise the debt ceiling without securing such draconian cuts, Paul was furious. He lambasted House Republicans for having “retreated” after they passed a short-term debt ceiling extension in 2013. When the matter came up again later that year, Paul dabbled in debt ceiling trutherism, insisting that United States wouldn’t actually default if the debt limit were breached. He instead accused President Obama of trying “to scare people” about the economic impacts of a default.