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Economy in Crisis: Lehman Brothers Files Bankruptcy; More Nastiness on the Campaign Trail
Aired September 15, 2008 - 19:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
GLENN BECK, HOST (voice-over): Tonight, crisis on Wall Street as Lehman Brothers files for the largest bankruptcy in history. And Merrill Lynch is bought by the Bank of America. This is great, right?
Plus, Obama continues to concentrate his fire on Sarah Palin, while new polls show independent voters are leaning towards McCain and people trust her experience over his.
And a special Glenn Beck series, "Exposed: America`s Broke." We`ll talk bailouts, bankruptcy and our addiction to debt.
All this and more, tonight.
BECK: Well, hello, America.
It`s quite a day. Hasn`t it? Today everybody on TV is talking about the banking industry and the financials. Most of the media is using financial language that I don`t know about you, but I don`t understand most it. And as usual, when I do understand what they`re talking about, they`re missing the real story along the way.
Let`s -- let`s talk about, quite frankly, screw the people on Wall Street. How about on your street? Let me see if this rodeo clown can take a crack at translating all of this to English.
Here`s "The Point" tonight. If you really want to understand the financial health of our country and financial the health of your business and your house, the falling price of oil should tell you everything you need to know. And here`s how I got there.
First of all, the facts. Literally overnight, two more pillars of the financial industry crumbled. Lehman Brothers, which went through the Civil War, filed for bankruptcy, Chapter 11. This is the largest bankruptcy of all time. Merrill Lynch was bought by the Bank of America.
Well, now when most people heard this news over the weekend, they were like, "Who cares? Who cares about these clowns on Wall Street? I mean, they got -- they got, really, what was coming to them, right?" Well, yes, they did, but you also got something you didn`t deserve this weekend. And more on that in just a second.
But first let me start here. To understand the true health of our economy, do not look at the financial industry. Look at the oil industry. It`s a leading indicator, in my book. Today, the price of oil continued dropping down to the mid-90s per barrel. Months ago I told on this program, watch out for that. When the price of oil starts dropping for no apparent reason, that is the time to worry.
Events like hurricanes over the weekend and rebel uprisings in Nigeria, which is the fourth largest U.S. supplier of oil, that happened over the weekend, too. When that`s not causing oil to go up in price, just causing it to fall more slowly, you should worry.
Now, how is it that oil costing less is a bad thing? Simple. It is the law of supply and demand. The supply of oil is higher because the demand is lower. For the better part of the last year, the price at the pump has kept your car in the driveway, as has a lot of Americans.
So you have less money to spend. Why drive to the mall? Why go on vacation? Why go out to eat? More supply when you stop driving. That means there`s more supply. That leads to lower prices. That usually drives up demand. People are like, "Oh, well, I can afford to go out now." But that`s not happening this time. Consistently cheaper oil highlights how much less you really have.
So tonight, America, here`s what you need to know. Remember when I said overleveraged bankers are getting what they deserved ends up hurting you. Never forget this one simple fact. When the government gets called in to bail out banks, the government is and always has been you. Your taxes, in a way, went up this weekend, because they`re printing money. How do you feel about saving the butt of a guy who got more in bonuses last year than most people will make in their whole working life? Yes, kind of pisses me off, as well.
Stephen Moore writes editorials about economics for the "Wall Street Journal" and is author of "The End of Prosperity." What happened to your sunny attitude, Stephen? And another equally happy guy is Peter Schiff. Peter is the president of Euro PAC and author of "Crash Proof."
OK. Peter, I`m going to play good cop and bad cop with you guys. Because, believe it or not, Stephen is more optimistic than you. You say that Bank of America, the only reason they went after Merrill Lynch is because they`re fattening the calf. You believe that?
PETER SCHIFF, AUTHOR, "CRASH PROOF": I think they got nervous when they saw Lehman go under without a bailout. I think they realize that the same fate awaits them, and they figure, you know, "Why not just buy Merrill. We`ll get so big, they`ll have to bail us out."
And I think Merrill probably saw the same writing on the wall. They know they`re going to go under. And they figured, "Why not agree to get acquired by Bank of America? At least this way, we`ll be so enormous, that maybe they`ll bail us out."
BECK: All right. Let me go to -- let me go to the good cop, Stephen Moore.
Stephen, you told me when we saw each other earlier today, I said, "How are you doing today?"
And you said, "It`s been a wild 24 hours." You`re seeing actual -- would you describe it as actual panic?
STEPHEN MOORE, AUTHOR, "THE END OF PROSPERITY": It has been panic. You know, and I remember, Glenn, when I first met you, what, nine months ago. I started calling you the -- one of the four horses of the apocalypse.
BECK: Right. That`s right.
MOORE: Because you were so dour on the economy. And I was the opposite. But I think, as I`ve looked at what`s happened over the last nine months, we`ve just seen bailout after bailout. The federal budget deficit is now over a half a trillion dollars, I think headed to a trillion.
There`s one raw of good news in this story. At least, Glenn, I don`t know if Hank Paulson is watching your show, but they did not bail out Lehman Brothers. And that`s, you know -- we should stand up and cheer that, because this is the first time the federal government has said, "Stop, we`re not -- we`re not going to bail out any more of these banks." I guess that`s progress.
BECK: OK. But Peter, you`re saying -- what you`re saying about Bank of America is true, I mean, they`re going to be too big to fail.
SCHIFF: Look, all the lenders are in trouble. Because the bottom line, you mentioned in the intro, Main Street is in trouble. Remember, the problems in the financial sector reflect the problems on Main Street. They`re in trouble because we can`t pay back the money we borrowed from them.
Our houses don`t have enough value to make good on all the mortgages. That`s the problem. America is broke and our creditors are feeling it first.
MOORE: So not only is America broke. I mean, here`s the irony of this whole situation, Glenn. What`s the most broke institution in America? Uncle Sam. I mean, we`ve got -- and so this idea that somehow Uncle Sam has the money to bail out banks and to bail out Freddie Mac and to bail out airlines and auto companies, that makes no sense.
BECK: So let me take it there. Because again, I think people see America as this -- you know, this country that is just -- it`s always going to be like this. It`s always going to be fine and we`re going to weather this, et cetera, et cetera. We`re wrecking our credit rating.
We are wrecking problems of us spending too much money on the credit card by having Uncle Sam pull out his credit card, which is worse than any of ours, and just racking these things up. So Peter, what does it mean? What is coming?
SCHIFF: Well, what`s coming is the world is going to figure this out. We`ve had this gigantic explosion in this country, and right now, everybody is running towards the blast. Once they figure it out, they`re going to turn around and run in the opposite direction, and the dollar`s not going to be going up; it`s going to be falling through the floor.
They interest rates aren`t going to be falling; they`re going to be skyrocketing. And then we`re going to have a real financial crisis. Because we`re going to see higher consumer prices, higher interest rates. And every American on Main Street is going to feel it as a standard of living.
BECK: OK. Good cop, please. Give me some good news.
MOORE: Again, the only good news today -- I do feel...
BECK: Wait, wait, wait, Stephen. You`ve got -- you`ve got to answer that. Do you agree or disagree with that?
MOORE: I`m not quite as dire on the situation. I mean, what I was going to say was the fact that we didn`t do this bail out, and Wall Street wanted -- they wanted the free money. The fact that we finally said no, I think, is a significant development. It means that we`re not going to allow every bankrupt company that knocks on Uncle Sam`s door to get free money.
SCHIFF: What else did the Fed do? The Fed now expanded, and we`ll take it to discount with us. So who are we kidding?
MOORE: That`s true, and that is a form of a subsidy to the bank. But it`s not...
BECK: I will tell you, Stephen, you are so -- you -- you -- when we first sat down for dinner and we talked about this, you said, "Yes, but Glenn, this has to happen, and this has to happen, and this has to happen, and this has to happen." It`s the government. Of course, those things will happen.
MOORE: What`s sad about this, you listen to both presidential campaigns. They`re not talking about it. They`re not talking about reducing the government spending and bringing the bank out. That`s out. I`m hearing more spending.
BECK: OK. Peter, let me go to you on this, because I saw some pictures of -- you know, at the Federal Reserve bank which is not a government institution. They have nothing to do with the federal government. It`s a separate global banking system.
When everybody was meeting this weekend with our secretary of treasury, I thought to myself, who the hell is in that room representing the United States of America? Everybody seems to be looking out for these banks, but who`s out there looking out for the little guy?
SCHIFF: The Fed got us into this mess. It drives me crazy when I see Alan Greenspan on television...
SCHIFF: ... talking about this 100-year flood, like the events that are taking place today are random and they have nothing to do with his monetary policy. He blew up the bubble, and now it`s burst. He created the bubble and helped (ph) the bubble with easy money.
And why -- why did we do that? We didn`t want to suffer through the recession we should have had after the bursting of the dot-com bubble after 9/11. We should have taken our lumps then. We wouldn`t have this problem today.
MOORE: By the way, who elected Ben Bernanke and who elected Alan Greenspan? Nobody elected them.
BECK: I was just going to say, anybody notice they`re not talking about who is in that room representing you, America. Thanks, guys.
Coming up, a poll shows that more people trust Palin`s experience than Barack Obama`s. Experience? Really?
Plus, the latest round of campaign ads turns nasty. Our political panel will weigh in, in just a second.
And we`ll kickoff our weeklong series, "Exposed: America`s Broke." Tonight, we focus on America`s addiction to debt, our quickly rising deficit and the deceit which lies beneath all of us. Don`t miss it. It`s coming up.
BECK: Coming up, more on our economic crisis I`ve been telling you is coming for the last year and a half. Here it is, gang. Our financial institutions seem to be crashing weekly. The national debt is headed for all-time highs. Our federal government just continues to write checks that it can`t cash. So what does this mean to you? Find out as we debut our weeklong series, "Exposed: America`s Broke." It`s coming up at the bottom of the hour.
First I want to get into some politics. It was a crazy weekend where people were saying, "Oh, well, he`s too out of touch to even use a computer." To Sarah Palin and she just wants to, you know, I guess dress in hoods and have us all worship her God.
Here with me to talk about all this is Jonah Goldberg, author of "Liberal Fascism," editor for the "National Review" online.; Amy Holmes, a CNN political contributor; and Kevin Madden, a Republican strategist and former senior advisor to Mitt Romney.
Kevin, I want to start with you. Let me -- let me take this. There`s three little clips I want to show you. The first one is from Charlie Gibson to Sarah Palin. Listen carefully to what the question is.
(BEGIN VIDEO CLIP)
CHARLIE GIBSON, ABC NEWS: You said recently in your old church, "Our national leaders are sending U.S. soldiers on a task that is from God."
(END VIDEO CLIP)
BECK: OK. Now, he takes off his glasses. She says, "I don`t think I said that." And he said, "That`s an exact quote." Well, let me let the record speak for itself. Here is the video that he took that from. You tell me if that`s an exact quote.
(BEGIN VIDEO CLIP)
GOV. SARAH PALIN (R-AK), VICE-PRESIDENTIAL NOMINEE: Pray for our military men and women, who are striving to do what is right, also, for this country, that our leaders, our national leaders are sending them out on a task that is from God.
GIBSON: You went on and said, "There is a plan and it is God`s plan."
(END VIDEO CLIP)
BECK: Again, he had to change some of the language. This is what she actually said.
(BEGIN VIDEO CLIP)
PALIN: That`s what we have to make sure that we`re praying for, that there is a plan and that that plan is God`s plan.
(END VIDEO CLIP)
BECK: That`s -- Kevin, intentional distortion or just sloppy journalism?
KEVIN MADDEN, REPUBLICAN STRATEGIST: Well, I think it`s the later. I think it`s sloppy journalism, but it`s also emblematic of a -- you know, a national media that always kind of holds any -- any politician, any public leader who uses faith in the public square with a certain level of disdain.
You know, the power structures that be in the media, whether it`s Los Angeles or New York, they tend to hold views that -- that faith should not be in the public square, that we ought to have gun control, that we ought to have unfettered rights to abortion.
And any time that they have a politician in front of them that seems to hold views that are counter to those, they tend to really go after that politician and hold them to a higher level of scrutiny. And I think that`s -- I think that`s really what happened there during that interview.
BECK: Amy, do you think that that`s true? Because you know what? There`s a lot of people that are against abortion and their religious extremists of the Islamic nature. I mean, the extreme part of Islam, apparently, the people in the media and Hollywood, they don`t ever seem to want to point out those people.
AMY HOLMES, CNN POLITICAL CONTRIBUTOR: Well, the religion they seem to mind is pro-life evangelicals. And it`s when politicians from the right side of the aisle profess their religious faith that all of a sudden, the media decides that they`re trying to usher in a theocracy.
Let`s remember, Glenn, this last spring when those tapes came to light about Jeremiah Wright, we saw for weeks the media trying to say, "Oh, this needs to be put in context. You have to understand the black church." Even when black voters themselves, when they ere asked their approval rating of Jeremiah, it was only 15 percent.
But here we have an instance of the media actually stripping context of Sarah Palin`s remarks and telling you that`s what it is.
BECK: OK. Jonah, let me go to you. I want to play an ad here. This is from Obama about John McCain not being -- he`s being so out of touch, he can`t even -- he doesn`t even know how to use e-mail. Watch this.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: 1982, John McCain goes to Washington. Things have changed in the last 26 years. He admits he still doesn`t know how to use a computer, can`t send an e-mail. After one president who was out of touch, we just can`t afford more of the same.
SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: I`m Barack Obama, and I approve this message.
(END VIDEO CLIP)
BECK: He admits he doesn`t know how to use a computer and can`t send an e-mail. Jonah, and this you can find -- they did a story in the New York Times about a year and a half ago on this. Why can`t he send an e- mail?
JONAH GOLDBERG, "NATIONAL REVIEW" ONLINE: Because those gosh darn North Vietnamese shattered all his fingers and broke both of his arms. And, you know, it`s worth pointing out, also, that this would be a somewhat fair, although beyond-the-pale ad, if in fact, McCain were out of touch on computer stuff.
GOLDBERG: What the reality is, is that Slate magazine, "Forbes," lots of mainstream liberal publications have touted McCain as -- in the year 2000 Slate called him the Senate`s leading technologist. He took the lead on Internet issues, was more savvy about these things than Al Gore, you know, the inventor of the Internet.
So they`re trying to do it -- first of all, they`re being really disrespectful to a wounded veteran. And second of all, they`re actually distorting the truth because he`s actually not out of touch with these things. He just physically can`t do e-mail for long periods of time.
BECK: He actually -- and this is reported in several newspapers. Months and months and months ago. He has to lay in bed at night. His wife reads it to him. She types on the computer, on the e-mails, because he physically can`t do it because of the pain.
GOLDBERG: He can do it a little bit. He just can`t do it over long periods of time, and he doesn`t have to. He doesn`t have to.
HOLMES: Glenn, this would -- this would be like telling the New York governor that he can`t see the writing on the wall. I mean, this is so tasteless and ill-conceived. I think that they should be dropping this ad, frankly.
And you know what? I think they need to stop being cute and start being smart and talk about the issues the American voters really care about.
BECK: Doesn`t that kind of go to -- because I`ve been saying for a while now. It`s not experience; it`s judgment. The man`s judgment is so wrong every single time.
MADDEN: Well, I think that`s exactly the point. I mean, I look at this ad. It smacks of ageism, too. And I think, quite frankly, that the Obama campaign is probably going to endure some sort of backlash on this.
I mean, at the end of the day, The American public is not hiring somebody based on how many words per minute they can type on a computer. They`re hiring somebody who has the right judgment, the right experience on the big issues that they care about.
So look, I mean, this has clearly devolved into a little bit of silliness here with these ads back and forth, and the American public is going to tune out sooner or later.
GOLDBERG: There`s another problem that`s really important to point out. You know, Barack Obama, when he was trying to defend himself against Sarah Palin, McCain`s VP pick, he was saying, "Well, I`ve run this big campaign. This shows what a good executive I am."
GOLDBERG: This ad is incredibly stupid, just as a matter of politics. Because the only people, the only demographic that really find this ad persuasive already are voting for Barack Obama. The young vote is 30 points in Obama`s camp already. The sort of hipster, doofus, latte-sipping laptop crowd is even more in Obama`s camp.
The oldsters, working-class people, all that crowd, they don`t give a rat`s patoot about this.
BECK: OK. All right. Hang on. Hang on a second.
MADDEN: I can`t stand my BlackBerry anymore.
BECK: Hang on just a second. We`ll take a break. We`ll come back and finish the conversation in just a minute. Hang on.
BECK: I ain`t a politician, but I am a conservative, and I am a thinker. Tonight, we have a panel of political thinkers. Jonah Goldberg, author of "Liberal Fascism," editor of the "National Review" online; Amy Holmes, CNN political contributor; and Kevin Madden, Republican strategist and former senior advisor to Mitt Romney.
Amy, there was a new poll out from the AP that shows that the lack of experience is a problem for Obama. Obama lacks the experience needed to be the president of the United States. Forty-seven percent say that, as opposed to Palin`s 36 percent. Where does that come from?
HOLMES: Well, I think it comes from two weeks of highlighting experience as the big issue in this campaign by the Obama team. And I might point out that the Obama team, you know, the master manipulator that the Democrats and liberals are constantly attacking, Karl Rove said do not try to underline what is your own vulnerabilities. So by putting this on the table and having the voters examine the experience issue, Obama was the candidate who came up short.
BECK: You know, Kevin, I think Sarah Palin is -- I think people -- the reason why they`re connecting with her, is they`ll say experience, experience, experience. I see Sarah Palin as -- I don`t have a problem with a hockey mom being in the White House. I wouldn`t mind somebody that`s in the White House that turns around and looks at Congress and says, "If I have to stop this car, I will." Or, "You know, I`m going to count to three. You don`t want me to get to three."
MADDEN: Well, look, I think ultimately it comes down to experience on one side, but also accomplishment. I mean, at the end of the day, campaigns are essentially contests of whether or not -- on what you`ve done. And Barack Obama has a tissue-thin resume of accomplishments. He`s never really accomplished anything.
But Sarah Palin can go to the American public and make the case that she`s done a lot on energy issues. She`s actually put together a budget. She`s been a chief executive. And at the end of the day, you compare that with Barack Obama, she comes out ahead.
BECK: You know, Tony, don`t you think, though -- for instance, the financial issue. What the changes that America wants, the only one out of the three that are running now is Palin that has the change that people want. And that is, tell your own party to sit down and shut up and clean up their act before -- before you tell the other party.
You`ve got Barack Obama trying to talk about the failed policies, financial policies of the Bush administration. Yet, you have Charlie Rangel not paying his income tax, not reporting the sale of a home. I mean, all kinds of stuff on his -- in this investigation that`s going on right now. And he wrote the income tax law.
GOLDBERG: And look, the Democratic Party itself has been in bed with Fannie Mae to an incredible degree. The guy that Obama wanted to put as the head of his VP search committee was actually, you know, one of the lead executives of Fannie Mae.
Joe Biden is the senator from the credit card companies in Delaware. So they`re up to their hips in all of this stuff. And unlike Palin and McCain, they have no interest whatsoever to actually police their own house. They just talk bipartisanship.
BECK: So then Amy, why is nobody -- why isn`t the McCain campaign using this? Are they just as deep into it, as well?
HOLMES: Well, the McCain campaign is very much using the reform message and touting John McCain`s opposition to earmarks throughout his...
BECK: This is not earmarks. This is financial system.
HOLMES: Certainly, I think that this is something that actually is an opportunity for John McCain to differentiate himself from George Bush in the last eight years of policy. But again, this raises another problem with the Obama campaign. That they`re attacking John McCain for being an inside the beltway guy when he picked Joe Biden.
BECK: OK. Amy, Jonah, Kevin, thank you very much.
Coming up, we continue on the economy bailouts and bankruptcy and our never-ending addiction to debt. Find out what it all means to you as we kick off our weeklong series, "Exposed: America`s Broke." Don`t go anywhere. It is up next.
BECK: Welcome to the first installment of our weeklong special, "Exposed: America`s Broke." There two things that I believe are enslaving us and keeping us from being able to control our own destiny as Americans: debt and energy. The next two weeks, we`re going to cover both of those.
No one is telling you the truth on either of them. You`re hearing parts of the truth. By now today you heard all about the Lehman bankruptcy and Merrill Lynch and the sale that went on. But something else happened this weekend, something you probably haven`t heard much about.
The Congressional Budget Office decided to allow President Bush to keep all of the debt from the Fannie and Freddie bailouts, over $5 trillion worth, off the federal books. Now we`ve got a fourth set of books. Imagine your wife letting you do that in your own household. She`d kick my butt.
As our entire financial system continues to change in ways that everybody said, "Oh, you`re crazy," just a few months ago had you suggested it, which some of us had, I want to take a second here and take -- take a step back and look at the bigger picture.
Bailouts to greedy companies that made bad decisions is important and, yes, making the taxpayers responsible for the trillions in debt from Fannie Mae and Freddie Mac, it is important, as well. But quite honestly, those are the trees. You want to see the forest? Step back just a bit.
Look at the commitments we`re making right now, and look at the commitments we`ve already made. In less than 20 years, every single dollar of federal revenue -- that is every single dollar that you, me, Exxon- Mobil, everybody, pays will have to be used to pay for our commitments that we`ve already made to Social Security, Medicare and Medicaid, along with all of the interest on that debt that we`ve already racked up.
To put it another way, in less than 20 years, we won`t have one red cent left to fund our department of homeland security, agriculture, commerce, education, energy, housing, justice, labor, state, transportation -- and this one`s kind of important -- defense. If you have a child today, by the time they make it to college, we`ll be dead broke.
That is why this issue needs to be talked out right now. It`s not just a matter of how much debt we`re saddling our children with. It is a matter of national security. Countries that cannot fund their own defense lose their standing in the world. Just research the fall of the Soviet Union if you need any proof.
Today`s installment of our "Exposed" series is called "Debts, Deficits and Deceit, The America We`re Leaving Behind."
And I want to introduce you to our guest for today. It`s Stephen Moore. He`s the economics editorial writer for the "Wall Street Journal" and co-author of the upcoming book, "The End of Prosperity."
MOORE: Cheery, isn`t it?
BECK: And Paul Hodge is the founding chair of Global Generations Policy Institute and director of the Harvard Generations Policy Program.
Paul, let me start -- let me start with you. The budget if you look at the polls today -- we`re getting ready to elect a president -- nobody is saying anything about the budget. They don`t think the budget is a big problem. It`s not high on anybody`s priority list.
Yet, at the same time, everybody wants something done with health care. How do you put these two together?
PAUL HODGE, DIRECTOR, HARVARD GENERATIONS POLICY PROGRAM: Well, I think that`s the pink elephant in the campaign, so to speak. If you`re taking a look at the two candidates for office, no one seems to be dealing with these particular issues. It becomes more evident as you view the whole country from abroad.
I`ve just returned from an eight-month round-the-world fact-finding trip to visit about 27 countries to find out about how they`re handling their global economies and their aging populations and their health-care policies.
And it`s evident from looking at the United States from abroad and these different countries, that there`s a big problem ahead.
BECK: Yes. We`re -- we`re running towards socialism. They`re running away from it. True or false?
BECK: OK. Yes.
HODGE: And it varies.
MOORE: You know, Glenn, they`ve seen the financial havoc...
MOORE: ... that it`s caused. It`s almost like we`re looking at the Argentina/Bolivia model. It`s like, yes, let`s meet...
BECK: I saw something -- I saw something this weekend on the worst countries in the world to start a small business, like 174 out of 176 was Venezuela, and it looked like the policies of some of the candidates.
MOORE: Here`s the problem. When you`re talking about this massive debt and a lot of these are these unfunded liabilities. The mentality in Washington, I`m there almost every day. The politicians think that they can give everybody everything. It`s this entitlement mentality.
MOORE: The you and I and Paul and everybody is entitled to the taxpayer money. We can`t continue to do this.
BECK: So Steve, let me show you. This is a full screen of the federal spending revenues. If you look at these two lines -- where, OK, the yellow line. It`s spending. But I want to ask both of you guys one question. I notice the revenue line is damn near flat. That line encompasses the 90 percent tax that happened on the wealthiest 1 percent, and the lowest tax, the wealthiest one percent.
That line doesn`t really even move.
MOORE: That`s right. In fact, that`s the reason you have -- you want to have the lowest tax rates possible to generate the strong economy. But as that chart is showing people, he spending is going through the roof, and the scary thing is, Glenn, it starts to really catapult when the baby boomers start to retire. And guess what -- when happens. Within the next two or three or four years.
BECK: OK. So...
HODGE: I might emphasize that that`s a big issue. The Baby Boomers, which we hear the question about.
BECK: OK. So let me -- Paul, let me -- the next one is major categories of federal -- of federal spending. This is just what we`re talking about. This chart, you see the -- I think it`s a blue line. That is the -- that is the discretionary spending. And you see that going down. And the entitlement and mandatory spending is the red line, and that`s going through the roof.
This is not -- what the politicians keep talking to us about is earmarks. Earmarks are part of the discretionary spending. Correct?
HODGE: And what those figures show -- excuse me, Glenn.
BECK: No, go ahead. That`s what I was -- that`s what I was going to ask you. What does it...
HODGE: What those figures show is that -- just what you`ve been saying, that it`s going to be pretty much locked in to a budget, about 20 years from now. But it`s even going to happen earlier. One of my -- and our research has shown is that, when they talk in terms -- or people talk in terms of what are we going to do for our grandchildren or children, I think we start -- start looking at what are we going to do for ourselves, because a lot of this stuff is going to happen when we`re alive. People are living younger longer, and therefore they`re going to be around for what -- we now, the Baby Boomers, are going to be around for when the difficulties occur.
It`s not going to be on the children or the grandchildren.
MOORE: Here`s the problem in a nutshell. If we stay on the path we`re on right now, if in 20 or 30 years every federal tax dollar that we collect will go for two purposes: one to send retirement checks to Grandma and Grandpa. And that will be you and me.
MOORE: And the other, to provide health care for people. And there will be no money left over, as you said, for national defense, for education...
MOORE: ... for the court system, for all the rest of the things government`s supposed to do.
BECK: So I`d like to hear this from both of you, because I think the reason why this doesn`t get play is because people will -- you`re watching at home, and you`re like, "Well, that`s never going to happen. I mean, it`s just not going to happen. We`ll find a way out of it."
But what -- people don`t believe...
BECK: ... that we could actually be, as a country, a Lehman Brothers. And yet, we`re using the same accounting practices.
MOORE: No, worse, worse. Much worse than -- we don`t account for Social Security debt. We don`t count that. And as Paul knows, we don`t county this Medicare debt in the budget. That`s not counted in the deficit right now. But every year that goes along, these unfunded deficits get bigger and bigger.
BECK: So Paul, help me out, and how do you make -- how do you make the case to people that, yes, this does matter?
HODGE: I think the first thing to do is start dealing with real numbers and not phony numbers.
HODGE: Is that, you know, if you`re going to have good policy, and you`re going to have informed population in the electorate, you have to be able to generate numbers which are honest. The inflation -- what`s the true inflation rate?
BECK: Wait a minute.
HODGE: How much is this really going to cost? All these questions have to be -- you know, we have to start dealing with reality, as opposed to clouding it the way we do.
BECK: But nobody is doing that. Stephen, you`ve got -- you`ve got the budget. You`ve got the president this week.
BECK: This weekend, saying create another set of books for another $5 trillion.
MOORE: Right. You want to talk about phony bologna budgeting, what they did this weekend? It was crazy.
BECK: There is no jail for that.
MOORE: Well, if there were CEOs, they...
BECK: They would.
MOORE: They probably would. We just created new -- two new federal government agencies, and we`re going to say that their debt and their spending doesn`t count?
I mean, any company -- if Lehman Brothers could -- could just push all of that debts off budget, they would look healthy today. But here`s why this is happening, because politicians have about a two-year political horizon. They look as far as the next election.
So Paul is talking about problems that are five, ten, 15, 20 years away. Do you think politicians care about what`s going to happen in 20 years?
MOORE: Absolutely not.
BECK: Because they`ve don`t -- they`ve can`t get -- they`ve got to get elected again.
BECK: OK, Paul...
HODGE: And that goes to the concept of debt. Debt has been a great thing for politicians, because instead of taxing, increasing taxes, or decreasing services, they`ve gone out and borrowed money. And that`s been easy for them.
BECK: But, again, I -- if I could leave with something, that chart that we showed earlier, it`s not taxes.
MOORE: Yes, you cannot tax your way out.
BECK: Because taxes -- why does it stay flat no matter what your rate is? Because it hurts the GDP?
MOORE: Yes, because when tax rates get too high, you just don`t generate any revenue. I wish Barack Obama understood that, because he wants to raise the rates. You can`t tax your way out of this crisis.
HODGE: And to be perfectly honest -- and to be perfectly honest, for certain groups, this -- they do not have disposable income to pay more taxes.
BECK: OK, guys, thank you very much. Appreciate it.
Our "Exposed" series continues all week. Tomorrow night, we`re going to follow the yellow brick road to Washington and take a disturbing peek behind the curtain of Social Security and Medicare with an installment called, "How Bad Is It: A Look Under the Hood." Get your vomit bags ready, because you`re going to need them.
And then on Wednesday, I`ll introduce you to some of the politicians from both sides of the aisle who are not afraid to touch the third rail of American politics and explain how America can avoid going the way of Lehman Brothers.
And finally, Thursday, we take a look at some realistic tough-love solutions with a guy who believes that nothing less than the future of our country is at stake, David Walker, former comptroller general of the United States.
That`s all this week, right here. Don`t miss it. And next week, it`s all on energy.
Coming up next, hard work, struggle, and sometimes failure. Dare I say it? How do you get people to realize that all those things go hand-in- hand? Self-made millionaire, Chris Gardner, a man who knows a little bit about all three of those, joins me after a quick break. Stick around.
(BEGIN VIDEO CLIP)
BECK: Did you see the Lindsay Lohan story, too?
UNIDENTIFIED MALE: It`s devastating, the McCain campaign.
BECK: I was on the fence, and then I read Lindsay Lohan. She`s concerned with who we`re voting for, and Sarah Palin is really bothering her. Because she says, who is she to say what sin is? So did you read the Sarah Palin list of sins?
UNIDENTIFIED MALE: Yes, that was her only policy directive in Alaska.
(END VIDEO CLIP)
BECK: I wasn`t aware of that.
I don`t know if you`ve been watching TV the last couple of days, but everybody is talking about, you know, the financial markets. And now it`s turning into politics. I don`t even know what half of it really all about. And I do this for a living. And then they turn it into politics, and it just becomes blah, blah, blah, blah, blah.
It is interesting that two areas affect all of us in a way that doesn`t make sense to most of us: politics and financial. That`s why I try to keep things at the gut level, and that`s why I wanted to talk to my next guest, an extraordinary guy with an extraordinary story that you know. He says it like it is. CEO of Gardner Rich and Company, is the author of "The Pursuit of Happyness," Chris Gardner.
Chris, as always, good to see you.
CHRIS GARDNER, CEO, GARDNER RICH AND COMPANY: Always, brother. Good to see you.
BECK: So I`ve wanted to talk to you now for a while, because I think we are moving into this area in this country where nobody really understands pull yourself up by the boot straps anymore. You know, everybody is -- is expecting something to be done for them.
When you look at the financial markets being bailed out by the U.S. government, what comes to mind?
GARDNER: The small business people in this country, they would like to be bailed out, too.
GARDNER: OK. And how are we going to decide who gets a bailout and who doesn`t, right?
And let`s add one thing to that. The investors and the shareholders and the employees, Glenn, who lost billions of dollars, at no point have they felt like they`ve been bailed out.
GARDNER: OK? So I wish there were another word we could use besides "bailout."
GARDNER: Well, OK, screw. Descriptive, right.
BECK: I mean, come on, it`s true.
GARDNER: But again, there are a lot of small business people right now who would love to have the government come in and say, "You`ve got a home or job (ph). You lost your franchise. And by the way, here`s a check for a few billion dollars to go about your own."
BECK: You know, it`s amazing, because I just said this on the radio today: 70 percent of business in America is small business.
BECK: And nobody is trying to bail out or talking about bailing out.
GARDNER: It`s not going to...
BECK: I haven`t heard a single politician say, "Well, you`re too small to fail." It`s all too big to fail.
These guys, when I looked at the way some of these companies were making loans, you know, and mortgages, you didn`t even have to fill out all the paperwork.
BECK: You deserved to fail.
GARDNER: And you know what? You know what`s going to happen here? Hopefully. This could be the last wake-up call for Wall Street. Company X was making all this money during these subprime mortgages.
GARDNER: So all the other guys feel like if we don`t get into that business, they`re going to take the market share. They`re going to make more money than us, and we`re going to be in a less than desirable position. So let`s do it, too.
The companies who did not go that way, Glenn, some of your community banks, some of your more focused financial services opportunities, they could be very interested in investment opportunities right now.
BECK: So let me -- let me change gears and go to Hurricane Ike. I saw a story over the weekend. You know, I`ve never heard the government ever warn anyone, "Leave or you are facing certain death. And we will not come back to rescue you."
Two thousand people, 40,000 didn`t leave their homes after that. Two thousand that didn`t leave their homes, needed to be rescued this weekend.
Meanwhile, the rest of the city needs to be rebuilt and trees cut and power lines relaid.
BECK: And the government is spending the time rescuing those people. Do you think it`s callous to say, if you got that warning, and you could have left, and you didn`t leave, it`s not my responsibility?
GARDNER: I will tell you something and it`s probably going to get me in some trouble.
GARDNER: There`s something called tough, and there`s something called Texas tough. OK? And those folks, honestly, in that part of the country, they`ve seen some of these storms. They can name every name you could ever come up with.
GARDNER: They`ve seen so many storms, and they probably felt like, well, we can weather this storm. But in this case, look, I think your point. When the government says, "You`re facing almost certain death, and we ain`t coming back," there is a point that you realize, the cavalry ain`t coming.
BECK: Yes. But they did come. So now -- so now does it mean anything anymore? The reason why they came is because they`re like, well, we can`t let these people suffer. We can`t let -- look, you`ve got the rest of the city suffering now. You told these people to leave.
I mean, is there such a thing as the American that doesn`t -- that says, "You know what? I want to do it myself. There`s something to be gained from saving myself"?
GARDNER: It is probably what some of those people thought, Glenn, that "I could weather this storm also."
GARDNER: But in this case, they were wrong. They were wrong.
BECK: OK. All right. Back in just a minute. As always, Chris, thank you, very much.
GARDNER: Thank you, Glenn.
BECK: Chris Gardner. Back in a minute.
BECK: Shocking news today. Someone in the media has it out for John McCain. Yes, this time, it`s not the usual suspects like mainstream anchors, analysts, you know, the director of your child`s middle school newspaper. This time, it`s a photographer named Jill Greenburg.
She has hired to do a photo shoot of John McCain for the magazine "The Atlantic." Being a hard-core Democrat, she decided to intentionally make her pictures look bad. She said, quote, "I left his eyes red and his skin looking bad," end quote.
This is the picture they wound up using for the cover of the magazine, apparently before realizing what a nut job they had taking it. The editor of "The Atlantic," James Bennett said, "We feel totally blindsided. Her behavior is outrageous and incredibly unprofessional." You think?
It doesn`t stop there, though. She actually took him over to the other side of the room and then rigged up her lighting so it would appear normal, but actually, she`d be shooting him from a terrible angle with the intent of making him look evil. Here`s that picture. Yes.
Then she even altered some of the picks, like this one, and posted them on her Web site. Don`t you just love photography humor?
And then she described her oh, so clever trick. She said, "He had no idea he was being lit from below. And his handlers didn`t seem to notice it, either. I guess they`re not very sophisticated, end quote.
She`s right on that. They thought she was a professional. So they can`t be that sophisticated, I guess.
"The Atlantic" is sending a letter of apology to McCain. They will not be paying her, and they`re considering a lawsuit. Good, they should.
Greenburg said that, since some of her artwork was anti-Bush, quote, "Maybe it was somewhat irresponsible for them to hire me."
Wait a minute. Let me see if I have this right. She does a horrible job and then she blames her employer? That`s right, I forgot. She`s a liberal.
By the way, this isn`t the first time this photographer has been in the middle of controversy. In 2004, to describe her political helplessness, she took a series of supposedly artsy photos of toddlers crying. How did she get this shot? Well, she gave the kids candy, and then she snatched it away from them. They`d cry uncontrollably, and she`d just click away. Isn`t it just fantastic art? Nothing more beautiful than a child being terrorized.
And, as a guy that would kill you if you take away my candy, I feel their pain.
Don`t forget: sign up for my free daily newsletter, only at GlennBeck.com. From New York, good night, America.