Paul's warning was in the context of the Bush administration's interventionist foreign policy, particularly the war in Iraq. Indeed, the year before, the Democrats captured majority control of both the House and Senate based largely on the growing public opposition to the Iraq War, which was associated not just with President Bush but with Republicans in general.
The economy is now far and away the most pressing issue on the minds of the American people, and Ron Paul warned too about the economic meltdown that would occur if we continued borrowing money for programs we could not afford — very much including the war in Iraq — and creating money out of thin air to finance the borrowing.
With a Republican president in the White House, the faltering economy, like the war in Iraq, was also associated in the public mind with Republican administration. And that association contributed to the defeat of John McCain by Barack Obama. It also contributed to the strengthening of Democratic control of both houses of Congress. Of course, Senator McCain and his fellow Republicans tried to distance themselves from the increasingly unpopular George W. Bush, who was nowhere to be found on the campaign trail.
During the closing weeks of the campaign, McCain tried to show that Obama would harm the economic well being of Americans by repeatedly referring to a telling comment Obama had made to the now-famous "Joe the Plumber." "When you spread the wealth around, it's good for everybody," Obama had told Joe (the plumber) Wurzelbacher while campaigning in Wurzelbacher's neighborhood. By repeatedly citing this statement, McCain hoped to cast Obama as a socialist who would, unlike McCain, tax and tax, spend and spend.
In truth, McCain, like Obama, is a socialist. Both McCain and Obama voted for the bank bailout bill, and both lobbied other lawmakers to vote for it as well. The bill authorized the government to spend up to $700 billion (not exactly pocket change, even in Washington D.C.) to purchase mortgage-related securities as well as stock in major financial institutions, partially nationalizing them. This bill represented a huge transfer of money from the American people to the wealthy.
By lobbying and voting for that bill, Senator McCain denied himself an opportunity to clearly differentiate his economic agenda with that of Obama's, based on an actual policy position not just campaign rhetoric. But not only did McCain join Obama in supporting the bailout bill, he actually sounded even more socialistic than Obama by offering his "Homeownership Resurgence Plan," wherein the government would (in the words of McCain's campaign website) "purchase mortgages directly from homeowners and mortgage servicers, and replace them with manageable, fixed-rate mortgages," with the government "relieving homeowners of 'negative equity' in some homes." And in general, McCain (and many of his fellow Republicans for that matter) have joined Democrats in supporting big-spending, socialistic programs, making his rhetorical opposition to "spread[ing] the wealth around" sound empty.
Therein lies the problem: though McCain and Obama package their messages to appeal to different constituencies, when the packaging is stripped away the core messages of the two supposedly disparate candidates are actually very much the same.
Moreover, the similarity in the core messages of Obama and McCain apply not only to economic policy but to foreign policy as well. Barack Obama may say he opposes the war in Iraq, but he chose the pro-Iraq War Senator Joe Biden for his running-mate, he supports sending more troops to Afghanistan (effectively moving the Iraq War to a different theater), and he supports NATO, which commits us to treating an attack on any NATO country as if it's an attack on ourselves.
But Obama successfully packaged himself as the "candidate of change," while McCain failed to convincingly disassociate himself from the failed policies of the past, particularly policies associated with the unpopular Republican president. Consequently, the Democrats have now added control of the White House to their (strengthened) control of both houses of Congress.
The Republicans have gone down this election year, just as Ron Paul warned. But if the Republicans — including in particular the Republican standard-bearer in this year's presidential race — had backed away from the socialism and foreign interventionism that had dug a hole for the party, and had instead repositioned the Republican Party as the party of limited government and noninterventionism once again, the election results could have been very different.