After a strong second-place showing in the New Hampshire primary, Ron Paul stood before a young and giddy crowd of supporters. In a near giggle, he spoke of the many detractors who had called his campaign “dangerous.” Paul reveled in their fear. To cheers, he exclaimed, “We are dangerous to the status quo in this country.” The candidate was right about that, if not necessarily in the way he most wanted.

What is it about Paul’s success that frightens his opponents? Not fear that Paul will win the presidency, though polls show him running strongly against Obama. Unlike his rivals, Paul hardly pretends the White House is a goal. On the stump he emphasizes the goal of building the cause of liberty. Libertarian ideas in domestic policy have had a secure place in the GOP for more than a generation, though Paul has widened the channels for their discussion. Yet when Paul began to rise in the pre-caucus Iowa polls—by mid-December, it seemed possible he would win the state—a shudder of panic ran through the neoconservative commentariat. What drove it? The answer had little to do with the cause dearest to Ron Paul.

A week before New Hampshire, after placing third in Iowa, Paul thanked his backers and referred to Nixon’s famous “We are all Keynesians now” statement. He asked whether people would soon be saying, “We are all Austrians now.” What tiny fraction of the national television audience, some seeing Ron Paul for the first time, had any idea what he was talking about?

Ron Paul was a student at Duke University’s medical school when he first read Friedrich Hayek’s The Road to Serfdom, a classic argument for laissez-faire capitalism. The book propelled Paul into study of “the Austrians,” especially the work of Hayek’s mentor Ludwig von Mises. In 1971, after serving as an Air Force surgeon, Paul was practicing obstetrics outside Houston when he drove to hear a lecture by the 80-year-old Mises, who had found refuge here from Nazism in 1940. Shortly thereafter, Richard Nixon closed the gold window and imposed wage and price controls, and Ron Paul decided that someone—himself, actually—needed to bring Mises’s understanding of sound money and free markets to a larger American audience. In his first congressional campaign, a 1974 losing effort, he ran on a platform of “Freedom, Honesty, and Sound Money”; Paul thereafter began his secondary career as an author and publisher of economic newsletters spreading the Austrian message.

Once elected to Congress in 1976, Paul gained renown as an uncompromising “Dr. No” who refused to vote for any federal program not explicitly sanctioned by the Constitution. Admired for his integrity—and in recent years, for his antiwar stands—his passion for sound money was more respected than influential. But the bursting of the housing bubble in 2008 multiplied the audience for systematic critiques of the financial system. Since 2002, Paul had given repeated warnings that Freddie Mac and Fannie Mae, by soaking up unsound money injected into the economy by the Federal Reserve, were preparing an economic calamity that would strip homeowners of their savings and ruin banks. His warnings proved prophetic, and as they were replayed on cable news, Paul gained new stature within the GOP. In 2009, The Atlantic called him the Tea Party’s “Marx and Madison,” an exaggeration but far from a falsehood.

Important as Paul’s bubble warnings were, sound-money doctrine by itself would not have enabled him to build the movement he now leads. Virtually alone among prominent Republicans, Paul opposed the Iraq War, and alone among the current presidential candidates, he stands against sanctions and military threats against Iran. He has long opposed all foreign aid, a position with important implications for the special relationship with Israel, in per capita terms by far the most favored recipient of Washington’s largesse.

Paul’s foreign-affairs perspective is completely different from the prevailing Republican norm. The Texas congressman avoids heavy breathing about American exceptionalism and expresses little interest in giving orders to the rest of the world. He frequently seeks to understand global issues from other nations’ points of view. He has noted that Iran is surrounded by hostile powers, some of them armed with nuclear weapons, and has seen Iraq invaded and destroyed in the name of democracy. He finds Iran’s quest for nuclear weapons, under such circumstances, natural. A Paul-associated PAC has produced a viscerally heart-pounding ad asking how Texans would respond to Russian and Chinese troops occupying their territory—a question that informs Paul’s perspective on Iraq and Afghanistan.

He is simply different from the others. As Andrew Sullivan wrote before the Iowa caucuses: “Paul is the only candidate we can be sure will not take us into a third war with a Muslim country in a decade. And he seems to believe this is a strength. No wonder Washington is still scratching its collective head.”

How marginal are such positions within the Republican Party? A mid-December Washington Post-ABC poll reported that 29 percent of Republicans and GOP-leaning independents considered Paul’s noninterventionism a good reason to support him. That is smaller than the 45 percent who for whom Paul’s dovishness was a turnoff, but it is hardly negligible—nearly a third of the right-most half of the electorate, a group of millions that can claim no prominent leaders in Congress, no regular newspaper columnists to shape and focus its thinking, no significant representation on the cable news shows to validate and amplify its ideas.

What might happen if this group found a political voice? More than any other factor, this question accounts for the vehemence of the attacks on Ron Paul. His opponents were not afraid that the 76-year-old maverick would storm his way to the nomination, nor that Paulism would restore the gold standard or end the Federal Reserve. But they quite rightly feared that Paul’s foreign-policy ideas could find fertile ground in the electorate and lay the seeds for more forceful and majoritarian representation within the GOP and the larger conservative movement.

When December polls showed Paul moving into the lead in Iowa, the knives came out. The fear, as the American Spectator’s Phil Klein put it, was that a good Paul showing would “help mainstream his noxious foreign policy views—particularly on Israel.” Republicans, added Commentary’s Alana Goodman, needed to be wary of the idea that Paul’s “unforgivable flaws—the bigotry-laced newsletters he published for years, his dangerous foreign policy positions—are somehow more acceptable than Gingrich’s and Romney’s faults.”

Here the reprise of the story of the newsletters published under Ron Paul’s name 20 years ago proved critical. The New Republic had made a national story of them early in the 2008 campaign. James Kirchick reported that numerous issues of the “Ron Paul Political Report” and the “Ron Paul Survival Report” contained passages that could be fairly characterized as race-baiting or paranoid conspiracy-mongering. (Few in Texas had cared very much when one of Paul’s congressional opponents tried to make an issue of the newsletters in 1996.). With Paul rising in the polls, the Weekly Standard essentially republished Kirchik’s 2008 piece.

I’ve seen no serious challenge to the reporting done four years ago by David Weigel and Julian Sanchez for Reason: the newsletters were the project of the late Murray Rothbard and Paul’s longtime aide Lew Rockwell, who has denied authorship. Rothbard, who died in 1995, was a brilliant libertarian author and activist, William F. Buckley’s tutor for the economics passages of Up From Liberalism, and a man who pursued a lifelong mission to spread libertarian ideas beyond a quirky quadrant of the intelligentsia. He had led libertarian overtures to the New Left in the 1960s. In 1990, he argued for outreach to the redneck right, and the Ron Paul newsletters became the chosen vehicle. For his part, Rockwell has moved on from this kind of thing.

Intellectual honesty requires acknowledging that much of the racism in the newsletters would have appeared less over the top in mainstream conservative circles at the time than it does now. No one at the New York Post editorial page (where I worked) would have been offended by the newsletters’ use of welfare stereotypes to mock the Los Angeles rioters, or by their taking note that a gang of black teenagers were sticking white women with needles or pins in the streets of Manhattan. (Contrary to the fears of the time, the pins used in these assaults were not HIV-infected.) But racial tensions and fissures in the early 1990s were far more raw than today. The Rockwell-Rothbard team were, in effect, trying to play Lee Atwater for the libertarians. A generation later, their efforts look pretty ugly.

The resurfacing of the newsletter story in December froze Paul’s upward movement in the polls. For the critical week before the Iowa caucuses, no Ron Paul national TV interview was complete without newsletter questions, deemed more important than the candidate’s opposition to indefinite detention, the Fed, or a new war in Iran. On stage in the New Hampshire debate, Paul forcefully disavowed writing the newsletters or agreeing with their sentiments, as he had on dozens of prior occasions, and changed the subject to a spirited denunciation of the drug laws for their implicit racism. This of course did not explain the newsletters, but the response rang true on an emotional level, if only because no one who had observed Ron Paul in public life over the past 15 years could perceive him as any kind of racist.

If the Weekly Standard editors hoped the flap would stir an anti-Paul storm in the black community, they were sorely disappointed. In one telling Bloggingheads.tv dialogue, two important black intellectuals, Glenn Loury and John McWhorter, showed far more interest in Paul’s foreign-policy ideas, and the attempts to stamp them out, than they did in the old documents. Atlantic blogger Ta-Nehisi Coates likened Paul to Louis Farrakhan. He didn’t mean it as a compliment, but the portrait fell well short of total scorn. It was difficult to ignore that the main promoters of the newsletters story, The New Republic and the Weekly Standard, had historically devoted exponentially more energy to promoting neoconservative policies in the Middle East than they had to chastising politicians for racism.

Thus the newsletters could only serve as a kind of prelude; the main insults would be on the grounds of foreign policy. The Republican Jewish Coalition excluded Paul from its Dec. 7 debate because he was “so far outside the mainstream of the Republican Party.” Paul made the Washington Post’s Richard Cohen (a liberal, except where the Mideast is concerned) think of Hitler’s conquest of Europe. Washington Post columnist Marc Thiessen called Paul’s positions not conservative, not libertarian, but “nutty.” Also at the Post, blogger Jennifer Rubin asked Iowa’s governor to make an “Anybody but Ron Paul” endorsement, and columnist Michael Gerson accused Paul of seeking to “erase 158 years of Republican Party history.”

The barrage continued across the neocon blogosphere. Michael Medved labeled Paul “Dr. Demento” with “eccentric and detestable views.” David Frum smeared Paul with a photo of David Duke, whom he depicted as representing Ron Paul’s “base.” Gary Bauer, an evangelical accessory to Bill Kristol’s war-promoting Project for a New American Century efforts, cut a commercial for use in South Carolina attacking Paul as “hostile to our ally Israel” and “not a Reagan Republican.” (An interesting sidelight to Paul’s career is that he was one of a handful of Texas officials to endorse Ronald Reagan in 1976 and headed the Texas for Reagan delegation at the ’76 convention. When in the 1980s he faced a right-wing primary challenge for being insufficiently hawkish, Reagan taped a rousing Ron Paul endorsement.)

Yet the insults were never directed at the issues at the heart of Paul’s career: support for sound money, opposition to the Federal Reserve, objection to the growth of the federal government on constitutional grounds. This reflected a reasonable assessment of where Ron Paul might make the greatest difference. Whether or not eliminating the Federal Reserve is a good idea, it is considered far-fetched among economists left, right, and center and is unlikely to be on the national agenda very soon.

Foreign policy is a different matter. Paul’s skepticism about American military interventionism—the Iraq War, the Afghan War, the war Israel and the neocons are trying get America to fight with Iran—resonates far more among foreign-affairs specialists, the military, the intelligence community, and the Republican rank and file. Paul’s campaign has the potential to begin bringing that skepticism into the inner reaches of the GOP—where the interlocking web of big donors and neoconservative-run think tanks and media have managed to keep the doves, realists, and other skeptics at bay.

This may be recorded as neoconservatism’s most singular achievement: to have their disastrous strategies enacted in Iraq, see them thoroughly discredited, and yet nonetheless retain their spots as the Beltway arbiters of “responsible” conservative opinion, with the power to exclude those who dissent. But the neoconservatives understand better than anyone how tenuous is this hold on the Washington discourse, how necessary it is to crush dissident movements before they can grow beyond the cradle. Thus a septuagenarian congressman who is an outlier in his own party must be treated as a mortal threat, his ideas not debated or refuted, but obliterated, presented as so far beyond the pale that no sane person could entertain them.

By the night of the New Hampshire primary, it was clear that Ron Paul had torn a hole in the matrix. On top of his third place in Iowa, where he doubled his 2008 vote percentage, Paul had finished a strong second in New Hampshire, tripling his share from four years earlier. In both contests, Paul won the under-30 vote going away and scored better with independents than any of his rivals. The congressman was the only Republican connecting with young people and bringing new voters into the GOP. While it is surely too soon to speak authoritatively about “Ron Paul Republicans,” as we do about Reagan Democrats or evangelicals, such a voting bloc appears to exist. Whether they become part of the GOP coalition is critical to the party’s future. If, as the Economist suggested, they came for the anti-imperialism and civil liberties and grew interested in the fiscal and monetary package, that would be telling as well. When in Iowa and New Hampshire a young crowd cheered a liberty-based campaign with chants of “Bring them home,” it was hard to imagine more full frontal repudiation of the Bush/Cheney vision of the party.

After New Hampshire one could see the wheels of the establishment begin to recalibrate. Paul now seemed likely stay in the race for the duration and might arrive at the Tampa convention with a horde of delegates. GOP politicos began to muse over about how he might be accommodated. It was possible to imagine a Paul prime-time convention speech, but only, said David Frum, if it was subject to Romney pre-approval. (Frum might hope it focuses on Paul’s gold coin collection.) Commentary’s James Tobin, dipping into the favorite neocon trope, warned that Ron Paul could not be “appeased.” Paul has denied any interest in a third-party bid. But while the Republican Party could easily find a way to make rhetorical and platform concessions to the economic parts of Paul’s agenda, a potent “bring them home” foreign-policy movement cannot long coexist alongside the GOP’s regnant neoconservatism. What Paul’s enemies fear is that his early success may herald the beginning of the end of their own dominance. About this, at least, they are entirely correct.

Scott McConnell is a TAC founding editor.