Paul, like Mitt Romney, ran for president in 2008. Paul was largely ignored then, and he failed to win even a single state. Paul was considered a "kook" and was savagely attacked for blaming the 9/11 attacks on American foreign policy. However, Paul managed to raise a lot of money thanks to his enthusiastic libertarian base. Paul's views on American foreign policy also likely made him attractive to foreign contributors, though accepting such contributions would be illegal under U.S. law.
This time around, Paul's foreign policy views have not hurt him as much. Many Republican voters view the wars in Iraq and Afghanistan as either concluded, irrelevant, or unwise. Not only do they consider the economy to be more important, they are more receptive to candidates who wish to avoid future wars. A sizable contingent would rather take a pass on the issue of Iranian nukes.
As for Paul's rise in Iowa, it follows a familiar pattern. Paul is another Anti-Romney, has not been vetted, and is one of only three candidates to be able to spend a lot of money in the state (Romney and Rick Perry being the other two). One might object to the characterization of Paul as an "unvetted" candidate given the fact that he already ran in 2008 and has been used as a punching bag in both primary seasons. However, Paul is unique in that he has only been attacked on his foreign policy views. Paul's long history of unconventional, racist, and bizarre statements and beliefs has been entirely unexplored by the media and the other candidates, because no one thought he could win anything.
If Paul were to win Iowa, the beneficiary would be Mitt Romney. The Republican primary voters would panic, fearing the strange and unelectable Paul would guarantee Barack Obama's reelection. They would rally behind Romney in New Hampshire. Newt Gingrich and the other Iowa candidates would be crushed by losing both Iowa and New Hampshire, but one of them might still win South Carolina, where Paul remains weak. The Anti-Romney would not be in nearly as strong a position as he would have been, had he won in both Iowa and South Carolina.
The biggest loser would the Iowa Caucus. The Republican establishment was already perturbed by Michele Bachmann's strong numbers in the state during the summer. The establishment has suggested that Iowa may lose its privileged status as the first voting state if Iowa allows a fringe candidate to win. In reality, the perception of Iowa as an unruly state is unfair: As we saw in our review of the past winners of the Iowa Caucus, fringe candidates have not won there. Since the modern primary system began in 1980, the winners of Iowa have been Bush 41, Bob Dole (twice), Bush 43, and Mike Huckabee.
Paul's inherent weaknesses make a Paul win in Iowa unlikely, regardless of the current poll numbers. Should Paul manage to win in Iowa, however, it would be a black mark from which the state's reputation would not easily recover.