Return to Transcripts main page
Glenn Beck
Making Sense of the Economy Meltdown; Candidates Offers Plans for Economy
Aired September 16, 2008 - 19:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
GLENN BECK, HOST (voice-over): Tonight, the U.S. financial system shaken to the core. Now investors are looking to see what happens to the insurance giant AIG. Will you, the taxpayer, have to bail them out, as well? And what happens if they don`t?
Plus, McCain and Obama jockey for position to see who can score more points on the financial crisis. Let`s see if either one of these clowns has a real answer.
And we continue our series, "Exposed: America`s Broke." Today we`ll look and see how Social Security and Medicare got into the mess they`re now in, and we`ll see if there`s any way to save it, coming up, tonight.
(END VIDEOTAPE)
BECK: Hello, America.
I`m going to try to call them as we see them tonight. I mean, I know you have a hard time -- at least I do -- knowing who to trust when you see some of these politicians or some of these bankers on, so we`re going to try to cut through all of the B.S. and get right to it.
There`s a couple of phrases that have been sticking out this week. One is, "It`s a once-in-a-century event." That`s former reserve chairman Alan Greenspan, how he was describing the meltdown on Wall Street.
The other one was from Treasury Secretary Henry Paulson. He said we the people can remain confident in, quote, "the soundness and resilience of the American financial system." Here`s "The Point" tonight.
Bull crap, Hank. This whole mess is nothing but greedy politicians and bankers. That`s who`s caused this. They were looking out for themselves, and the average American is getting the shaft.
I`m going to try to explain how we got there in a second. But first, let`s find out where we stand today. Sean Tully is the editor-at-large of "Fortune" magazine.
Shawn, the Fed didn`t cut the rate today. A lot of people -- Wall Street was actually expecting that. Wouldn`t that be like pouring gasoline on this fire?
SHAWN TULLY, EDITOR, "FORTUNE" MAGAZINE: Absolutely. The Fed did the right thing. The market sold off initially and then actually was up when I looked a few minutes ago. This is really a good thing for investors, and for America. We are facing a major inflationary problem now. The Fed eventually is going to have to raise rates a lot, sometime next year to head off inflation. This was the right thing.
BECK: OK. Let`s try to boil this down, because you know, we talk about Fed rate cuts and everything else. And the average person doesn`t really -- I don`t they care about any of those clowns there on the floor there. Or the Fed rate cut. They want to know about themselves.
Washington Mutual, reduced the junk bonds status. There are a lot of people, they have money in Washington Mutual. Should you be worried about that?
TULLY: No, because those deposits are insured. And people are not going to lose the money they have on deposit in a bank like Washington Mutual. Those deposits will then be shifted, just like Lehman`s deposits are now being shifted by the SEC to other sound banks. There`s no danger that people are going to lose their deposit.
BECK: Hang on just a second. Because the FDIC always sounds like a good deal, if you believe in magic money, you know, that grows on magic trees. But if the FDIC is insuring it, doesn`t it mean those deposits would have to be covered by the federal government again?
TULLY: Oh, absolutely. Indeed. If these banks have a negative net worth that`s big enough, absolutely. But this is one of the reasons why people should always have their deposits under $100,000 in a lot of different accounts. Because over $100,000 you`re not insured.
BECK: Yes. I don`t know if a lot of people have several accounts with $100,000 in them. I mean, I don`t know -- honestly, I don`t know what world people are living in sometimes.
OK. So but doesn`t that now cause the money -- the value of our -- we`re getting hidden taxes here.
TULLY: Yes.
BECK: All of these bailouts, I guess is what I`m trying to get to, all of these bailouts, whether it is the Fed just stepping in and the treasury stepping in and saying, "Hey, we`re going to bail you out," that`s costing us money because it`s deflating the value of our dollar. Yes or no?
TULLY: Absolutely. And when we look at the Fannie Mae and Freddie Mac bailouts, first of all, they`re very expensive for taxpayers. But worse than that, they perpetuate this system of government-subsidized mortgages, which reduces mortgage rates.
But it really throws the risk of the defaults on those mortgages back on the taxpayer, which is not fair. So what we`re going to face in the future is the mortgage industry and all new mortgages, pretty much being guaranteed by the government. Everything has gone FHA and conforming.
BECK: Oh, my gosh.
TULLY: So what we`re going to find is -- now, Paulson has a good plan, which is essentially to dial back and decrease the power of Fannie and Freddie. But the Democrats aren`t going to go for that.
BECK: They should shut them down.
TULLY: They should shut them down, absolutely. But they`re not going to get shut down. In fact, the limits have been expanded tremendously of Fannie and Freddie. So the performing (ph) mortgages have gone from around $300,000 plus to over $600,000 in some areas of the country. So the entire mortgage market is now essentially government guaranteed.
BECK: OK.
TULLY: The pricing is too low, and they`re going to default, a lot of them.
BECK: Shawn, you`re making my eyes bleed. Thank you very much.
See, this is why I said at the beginning of the show, America, this is all about politicians and greedy banks. That`s all it`s about. Somebody wants power. And it ain`t you, and it ain`t me. And they`re going to do whatever it takes.
Now, we started talking about these problems, even watching this show, because I`ve been made fun of for almost two years now. Look at little Chicken Little, you know, screaming that the sky is falling. Well, the sky has fallen now. Yet, the last piece hasn`t hit us.
It wasn`t popular to call attention to the trouble way back when. But this program has made a commitment to bring you some of the leading experts who are willing to say the tough stuff that every weasel will say now. Here`s a look at how Peter Schiff saw it coming.
(BEGIN VIDEO CLIP)
PETER SCHIFF, AUTHOR, "CRASH PROOF": Look, I think it`s happening right now. I think you`re seeing it right now in these mortgage-backed securities that are blowing up. I think foreigners are getting the message that we can`t pay them back.
And what you`re going to see is a big movement by sovereign wealth funds and private individuals around the world out of our debt and into our stuff. And when that happens, you`re going to see asset prices in the United States, you know, really drop. And the dollar is going to collapse.
I think that the dollar is in for another decline, similar to the one we had in the 1970s, only this time it could be worse, because the monetary policies are worse. The fiscal problems are worse. We`re in much worse shape economically than we were in the 1970s.
(END VIDEO CLIP)
BECK: Peter Schiff is with us now. He`s the president of Euro PAC and author of "Crash Proof: How to Profit from the Coming Economic Collapse."
Peter, I have to tell you -- well, first of all, let me go here. Right or wrong, it is the Fed and the politicians and these banks that have caused this mess, and now they`re trying to explain to us how to fix it. They don`t know how to fix it. They caused it.
SCHIFF: Of course. You know, whenever the government creates a problem, their solution only makes the problem worse.
BECK: Right.
SCHIFF: But, you know, it goes to the very core, the very foundation of our economy. It`s not simply a financial crisis. The problem goes to the fact that our economy is based on borrowing money to consume. We have to go deeper and deeper into debt so that we can keep consuming.
But the problem is, we have no means of paying back the money. And now that creditors are figuring this out, because they`re going bankrupt left and right, this whole phony economy is going to come toppling down.
BECK: OK. This is what -- this is what frightens me here, Peter, that I don`t know how to get out of this little box. What we`re going to end up with are these gigantic global banks. They`re going to be gigantic global banks. Anything that`s left standing will have gobbled everything else up.
And it will be in bed with the Fed. It will be in bed with the highest level of government. Stop me if you think I`m wrong.
And how do you get out of that? Then you are -- we are absolutely controlled by these gigantic global corporations that are running the financial system with the help of the government and the Fed.
SCHIFF: Well, you know, they can -- they can print the money, but ultimately, they can`t force anybody to accept it. And I think the free market is going to win at some point. And these currencies are going to implode. We cannot force the rest of the world to subsidize our standard of living. And at some point they will figure it out.
They haven`t figured it out yet. I mean, the dollar has actually gained strength in the last few months. Commodity prices have fallen. Instead of foreigners shunning our assets, they`ve embraced them. But I think this is temporary. They`re going to figure this out. And that`s when the real crisis begins, because then, when interest rates are rising and consumer prices are rising even faster, it exposes the impetus of the Fed.
BECK: All right. Let me ask you this, Peter. Why is Wall Street still -- I mean, it`s like nothing happened. Back in 1987, you had some problems, but you didn`t have anything like this. And Wall Street, the Dow fell 20 points. We`re down, what, four points?
SCHIFF: Yes, I don`t know. You know, it`s amazing. The only thing that`s resilient is not our actual economy, but the markets have remained resilient in the face of horrific economic news.
BECK: Why? Why?
SCHIFF: Look, people don`t understand. Look, for a long time people were buying these subprime mortgages. They thought they had value. And now they don`t have any.
BECK: Peter, do you remember -- do you remember, who was it? Was it Warren Buffett said, "Never buy something that you don`t understand"? He said this during the tech bubble, I think. Never buy something you don`t understand. And if you can`t understand what it is, then don`t buy it. And people were out buying Pets.com.
I can`t make sense or heads or tails of what the market is doing. Why are people buying this?
SCHIFF: It`s irrational. Why did people buy those tech stocks? But, you know, it`s not going to last. In the long run the fundamentals are going to win out. Anybody who`s buying U.S. assets is going to lose a lot of wealth. They`re either going to lose their dollars, or their dollars aren`t going to have much value. But if you want to be rational, you`ll take advantage of this opportunity and get rid of the dollar while you can.
BECK: OK, Peter, thanks an awful lot. Let me tell you something. After September 11, the president said, "You know what you can do for your country? Go shopping."
Let me tell you something that none of these people will tell you: you know what you can do for your country? Save your money. Make sure you are as prepared and as safe as you can, because somebody next door to you is going to need -- you know, can I borrow a box of food? It`s coming. Just be prepared.
Coming up, John McCain and Obama hit the airwaves today, putting their hard sell on their plans to save the economy. Oh, please. We`ll take a look at the economic track records of both of these guys, coming up.
Plus, we`ll continue our weeklong series: "Exposed: America is Broke." Tonight, we`ll examine our rapidly-growing deficit federally. And we`ll -- we`ll find out how we got ourselves into this position and how we get out. That`s a little later on in the program.
And second lady Lynn Cheney stopped by to discuss her new boo, "We the People." That sounds familiar. Also, we`re going to talk to her a little bit about Sarah Palin. Stick around.
(COMMERCIAL BREAK)
BECK: Coming up, our country`s debt is rapidly approaching the point where it just chokes all of us to death. Federal entitlement programs like Social Security and Medicare are to blame. Should we save them? Are they too big to fail? How the heck do we get ourselves into this mess and back out again?
Our continued look in our weeklong series, "Exposed: America`s Broke," coming up in just a second.
But first, Barack Obama and John McCain took a break from the negative campaigning in general to play the negative campaigning specifically. Each one today saying the other is responsible: "they`re the ones who caused it. You should listen to me now." Oh, please, would you both just shut up? Please?
Do either of these clowns have qualifications to fix the things in Washington, D.C.? Do they even know what the problem is?
Barack Obama faulted John McCain`s economic philosophy and blamed President Bush and his push towards deregulation. McCain fired back, saying he favors an update to the alphabet soup of regulatory agencies and promised he wouldn`t use taxpayer money to solve the problem. Well, there`s one idea I like.
I really -- if you`re like me, I don`t care about the parties. I don`t care about the infighting. I just want somebody to get the job done. That`s the -- that`s the hope that I have for the change that`s right around the corner.
Eamon Javers is the financial correspondent for the Politico. And Jonathan Allen is a reporter for "Congressional Daily."
Eamon, Let me -- let me start with you. I want to play -- I want to play two things here. This one first is Barack Obama today.
(BEGIN VIDEO CLIP)
SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: What Senator McCain said yesterday fits with the same economic philosophy that he`s had for the last 26 years. It`s the philosophy that says we should give more and more to those with the most and hope that prosperity trickles down.
(END VIDEO CLIP)
BECK: Wow. I think you`ve got to keep what you have, give more and more to those who have most. Now, that`s what he said. However, John McCain stated his policies a little differently. Here`s what he said today.
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN (R-AK), PRESIDENTIAL NOMINEE: Two years ago I`ve warned the administration and the Congress that Fannie Mae and Freddie Mac needed to be fixed. And it turns out the problem was even bigger. They waited too long. And now we have a housing crisis. Three bailouts with taxpayers` money, and a financial crisis.
(END VIDEO CLIP)
BECK: OK. When I heard this one, I thought, hmm. I wonder if that`s even true? Because I don`t believe anybody anymore. He was the co-sponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, quoting from it. This is John McCain. "If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole."
That was from the reform act of 2005. I don`t know. Maybe that failed policy should have been enacted.
EAMON JAVERS, FINANCIAL CORRESPONDENT, POLITICO: Yes. Look, there were a lot of voices in Washington that have been talking about Freddie and Fannie for a long time. But they`ve been so entrenched in Washington, because they give a lot of campaign cash to candidates, and they had enormous lobbying muscle in the capital. That`s why nothing ever got done.
And I hate to disappoint you, but you are going to hear a lot more of this blame game stuff between now and November. I mean, it`s an election season. They`ve got to blame the other guy. And that`s what they`re going to do.
BECK: Yes. Well, that`s not what America wants to hear. That`s not what -- that`s why America is so frustrated. See, that`s why America`s going to grab a pitchfork soon, because they`re...
JAVERS: They`re tired of it, but it works. Why does it work if voters are so tired of it?
BECK: Well, let me go to -- let me go to Jonathan. Obama`s record, he actually -- did he -- this can`t be true. I must have misread this. Did he actually say he`d like more power to go to the Federal Reserve?
JONATHAN ALLEN, "CONGRESSIONAL DAILY": That`s right. Earlier this year he was talking about how he wanted to see a little more supervisory authority from the Federal Reserve to the institutions that it lends money to.
BECK: Jonathan, do me a favor. The Federal Reserve, not a government agency. Has nothing to do with the United States government. Right?
ALLEN: Well, no, it`s not that it has nothing to do with the United States government. I mean, obviously, Congress has authority over the Federal Reserve. And of course...
BECK: Oh, do they?
ALLEN: ... and some authority over the...
BECK: Really?
ALLEN: Over the people that it lends to. And what Senator Obama is saying is it needs more authority.
Look, I mean, Glenn, there are certain examples on both sides of things that have been going out of control. But there is a definite philosophical difference between Barack Obama and John McCain here in terms of regulation and regulatory authority.
John McCain wants less of it for government. He wants a smaller government. And Barack Obama wants more regulatory authority for the Federal government: in this case, the executive branch and also in Congress.
BECK: OK. Let me -- let me ask you both this. I don`t know if you saw this on "The Today Show." Here`s a clip that made blood shoot out of my eyes today. This is Joe Biden on "The Today Show." Watch this.
(BEGIN VIDEO CLIP)
MEREDITH VIEIRA, NBC`S "THE TODAY SHOW": Senator, you and Senator Obama are calling for tax increases on the wealthy. And there are many economists who say that that would hurt the economy even more. So what`s...
SEN. JOE BIDEN (D-DE), VICE-PRESIDENTIAL NOMINEE: I don`t know any economists saying that.
(END VIDEO CLIP)
BECK: He said, I don`t know any economists who -- the reason why this made blood shoot out of my eyes today. If I may quote -- and I think he`s an economist, I`m not sure. This is George Stephanopoulos -- wait a minute, "You`ll go with the tax cuts, but not the increases?"
Quote, the economist called Barack Obama said, "I think we have to take a look and see where the economy is. I mean, the economy is weak right now."
Well, you don`t need an economist if you have your own candidate saying that you won`t increase taxes if the -- if the economy is weak. Which is it?
JAVERS: Well, look, Joe Biden doesn`t talk to those economists who disagree with him all that much. I guess that`s the answer there.
But look, you know, the Republicans are going to try to turn this economics issue onto solid ground for them. And that`s always been taxes, taxes, taxes. We`re the party that`s going to lower your taxes. They`re the party that`s going to raise your taxes. That has worked at the ballot box for years. They`re going to count on it to work again this year.
What Barack Obama is really counting on is that this is a different kind of year where you can go out and call for more regulation on Wall Street banks and say, "We`ve got to rein in these crazy leaders on Wall Street who have driven the economy into a ditch."
I mean, you see Lehman Brothers, a huge brand name, collapsing. Merrill Lynch getting sold on fire sale prices. Bear Stearns same thing. These are scary headlines. And Obama`s campaign is betting that voters are willing to go -- take a long shot here on a new guy, a new face, with some new ideas.
BECK: You know what? I have to tell you guys, and you know it. You`ve watched these weasels all the time. These weasels in Washington have been along with the weasels on Wall Street the whole time. Every step of the way they have been there. Yes or no?
JAVERS: I never call a politician a weasel because I like to get an interview at some point in my career.
ALLEN: I`m with him on that.
BECK: I`ll tell you...
ALLEN: I`m staying away from animal references in politics.
BECK: You leave -- you leave it to me. Tomorrow I`ll tell you the truth, America. I`ll tell you where this whole thing started.
Now, we still can`t find the floor of the continuing collapse of the financial system. Yet, no one is screaming for accountability, however. Why is that? Where is the outrage? I think I found it. It`s coming up next.
(COMMERCIAL BREAK)
BECK: I want you to consider for a second, instead of, say we`re having not a financial crisis, but an aviation crisis. Imagine if some company, Airbus, for example, was so reckless and irresponsible, that planes just started dropping out of the sky.
Do you think we`d have any special hearings, or, you know, congressional inquiries? Heads would roll. You know it, and I know it. People would go to jail. But there doesn`t seem to be any interest in that right now.
My next guest says we need the same kind of accountability on Wall Street. Steve Cordasco hosts the "Big Money" show on 1210 AM in Philadelphia.
Steve, there`s no real outrage in this country on what`s going on on Wall Street, because I don`t think people understand what`s even going on. And I blame, quite honestly, I blame the financial institutions themselves, the Fed, the treasury, the administration, Congress.
STEVE CORDASCO, RADIO TALK SHOW HOST: Absolutely. You`re right on, Glenn. You`ve been on this for a long time.
This is a story, and I want everybody to listen closely to this. If you want to get to the root of what the problem is, it`s the truth. And nobody is telling the truth.
It starts with liar loans and people who got mortgages because money was cheap. It worked its way up through Congress, and our politicians, into corporate America. It goes back to your analogy of Airbus and airplanes falling out of the sky.
Add on top of that the CEOs saying, "Hey, there`s nothing wrong with this product," as they`re falling out of the sky and people are passing away. Bottom line is, we need a congressional hearing to find out where the problem is.
BECK: OK. You know, Steve, we don`t need a congressional hearing, because those weasels won`t do anything about it. I`m starting next week on this program, I`m starting the "We the People" court. Because I`m going to name names.
On tomorrow`s broadcast, I`m going to give you names and a date of when it started. It started in 1992, and you will not believe how this started. And you`ll know exactly who to vote for after tomorrow. Because you`ll see how this whole thing started.
Who in Congress wasn`t involved, Steve?
CORDASCO: You know, it starts, I mean, Schumer`s not going to come out. His state`s got too much money invested in here in taxpayer dollars. You can go to Watson, California, who wanted her constituents all to be in a home, whether they can afford it or not. It resonates throughout the system. We`ve been lied to.
And what`s making it even worse, Glenn, last time I was on your show, we talked about Goldman Sachs and Wall Streeters, infiltrating our government. It goes back to what I said the last time. Eisenhower said we can`t bring our generals into corporate America.
BECK: Yes.
CORDASCO: Who ever said Hank Paulson can do weekend deals? By the way...
BECK: Thank you for saying that. I was watching the news and I`m seeing the treasury secretary in the basement of the Fed, which is not a government organization, spending government money trying to bail banks out. And I thought, who the hell is representing the American people here?
CORDASCO: By the way, let`s just -- let`s get Merrill Lynch sold real quick this weekend, because we know we`re going to let Lehman blow up. And what happens, Merrill could do next.
And oh, by the way, CEO of Merrill Lynch who you and I used to work at Goldman Sachs together, I know you put money into the deal but you have a parachute here of 50 million bucks if this -- if you get sold.
That on top of -- I don`t know if anybody`s picking this up, but two weeks ago, Warren Buffett after the Fannie Mae and Freddie Mac deal went down on a Monday, mentioned that he got a call from Hank Paulson on Sunday, asking if his -- if his structure passes the smell test.
Well, guess what: Warren Buffett runs a publicly traded company. He shouldn`t have access to inside information.
BECK: Thank you for having some passion. For somebody who actually cares about the story and the middle class and what it all means.
All right. Coming up, our "Real Story" next.
(COMMERCIAL BREAK)
BECK: Welcome to day number two of our week-long series "Exposed: America`s Broke."
This is where we`re trying to get past the noise on Wall Street and instead look at the real crisis that we`re facing. This was huge. $53 trillion worth of promises, the politicians have made to you, and we can`t afford to keep.
I told you yesterday, I believe that our massive debt, along with energy, which is our focus next week, are the two issues that are going to keep America from controlling its own destiny. If you can`t make decisions, you know, if you don`t want to offend some oil sheikh on the other side of the world because you need the energy, or you don`t want to offend some communist country because you need their money. We`re not free to choose anything unless we get out of this situation.
Our politicians continue to talk about new promises to the people for universal health care, universal education. You know what, gang? Let`s have an honest talk, a realistic nonpartisan, non-bull crap look under the hood, of the two promises that we`ve already made -- Social Security and Medicare. Entitlement programs that without change, and change now, will entitle us all to free lessons in Mandarin Chinese.
My next guest is going to take us through a whole bunch of dire figures here in just a second.
But what you really need to know was said by Treasury Secretary Hank Paulson. This is last year before he was bailing everybody out, when the Social Security and Medicare Trustees` report was released, this is what he said, "Rising costs will drive government spending to unprecedented levels, consume nearly all projected federal revenues, and threaten America`s future prosperity."
Pretty dire, don`t you think? How is this?
I don`t think Secretary Paulson went far enough. These obligations we`ve made don`t just threaten America`s future prosperity, they threaten America`s future, period.
Glenn Hubbard is the Dean of Columbia Business School. He`s a guy at Columbia I know and like. And John Shoven is the professor of economics at Stanford Institute for Economic Policy Research.
Glenn, let me start with you. This all started Glenn, did it not with politicians making promises and then just dog piling and snow balling through the years?
GLENN HUBBARD, DEAN, COLUMBIA BUSINESS SCHOOL: Well, that`s certainly a big part of it. Another part is simply that the society has aged. Health care costs have risen much faster than prices generally now for some time. But it`s very clear that we have to reform these programs or we won`t be able to do anything else as a country.
BECK: Ok, everybody talks, John, about Social Security. And says, we`ve got to fix Social Security. The real problem here, Social Security is on a back burner in many respects. Medicare is the real problem, is it not? Or the immediate problem?
JOHN SHOVEN, STANFORD INSTITUTE FOR ECONOMIC POLICY RESEARCH: Medicare is the bigger problem, by far. On the other hand, Social Security is still a large problem. Well, everybody in Washington says that Social Security is easily fixed. So why not fix it?
We`ve known that it had a problem for 20 years. And it`s not fixed. If it`s so easy to fix, the next administration should fix it in the first 100 days.
BECK: Ok, Medicare, H.I., which is the Hospital Insurance part, that`s already running in the red. How did we ever get to Medicare "D," which is prescription drugs, which out of the $53 trillion of debt, Medicare "D" accounts for $8.4 trillion? How did a so-called conservative, George Bush, and this Congress that is always claiming that they understand the problem, push through $8.4 trillion of additional debt?
SHOVEN: Well, they did it without raising anybody`s taxes. So it looked like it was free. As the average person who noticed their income tax didn`t go up, their payroll tax didn`t go up, and they`ve suddenly got Medicare part "D." What a great thing to run for re-election on.
HUBBARD: Yes, John is actually right. They simply piled up big future obligations and the whole existence of part "D" points out the big flaw in Medicare that it wasn`t really keeping up with private insurance.
BECK: Ok well hang on just a second. Glenn, let me talk to you about taxes.
HUBBARD: I showed a chart --
BECK: Do we have the chart from yesterday about the expenditures and revenues? Yesterday I put this chart up, and it showed -- there it is -- the yellow line is spending, the other line is revenues. The revenue line, as I pointed out last night, relatively flat.
Well, after the program, I did some research on it, and apparently it is like 8.3 percent, no matter what you charge. You could charge 90 percent on the top five percent, you could charge 30 percent. Revenues remain relatively the same.
You can`t dig yourself out of this hole with revenues. It`s always the same. No matter what you charge. Can you?
HUBBARD: No, I mean the revenue share is between 18 and 19 percent of GDP. If we were to try to fix our entitlement problem with tax increases, after a generation we`d have to raise every tax in the country by 60 percent.
It`s simply not possible. The growth effects of that would be devastating. We would crowd out everything else in the Federal Budget.
BECK: Ok. John, you say, I read an article that you were talking about age inflation. What`s age inflation?
SHOVEN: Well, 65, which is the age where you start Medicare, is not what it used to be. When Medicare was introduced in 1965, at age of 65, the mortality of those people were three percent, something like that.
The equivalent mortality today is for people of roughly 70, 71 years old. A year of life is, you know, people at any given age are younger than they used to be. For instance, let`s go back to Social Security; 65 in 1935, it`s about equivalent to 75 today.
BECK: Ok, so this is the thing that always drives me crazy. Everybody calls it Social Security. I remember my grandparents used to call it SSI. SSI, Social Security Insurance. Only the government would understand insurance as a guaranteed payout. It was never intended to guarantee a payout for 10, sometimes 15, 20 years.
SHOVEN: You could go on, 20 maybe 30 years.
BECK: Ok, so why don`t we -- we`ve indexed everything else, why don`t we index age? Why can`t we take Social Security and Medicare and index Age?
SHOVEN: I`m with you. I`ve written on that. It would be a great thing. We went from dollars to real dollars we need to go from age to real age.
BECK: And Glenn, you`re shaking your head now.
HUBBARD: Yes, no, no, that`s absolutely right. I mean I think that that`s -- its part of a family of changes that we could make that would slow down benefit growth. I think that adjusting for age makes sense; reducing the benefits of high-income people. There are lots of ways to do this.
BECK: Ok, let me show you guys something here. I`m going to put it up on the screen. It`s called the menu of pain. The story on this is, this is why Secretary O`Neill was -- what was it, left to go spend some time with his family. Others say he was fired by the White House because he wanted to put this in the presidential budget of 2003.
It never showed up until it was in the Social Security budget, but they buried it in the index. What it is, if you don`t -- this is the night in 2003 -- if you do these things right now, this is what we`ll have to do, increase federal income taxes by 69 percent. Increase payroll taxes, 95 percent. Cut federal purchases by 106 and cut Social Security and Medicare by 45.
If you see those of the 2003, we`re now at 2008. And it`s -- what it`s saying is, it`s only going to get worse from here. There is no way, guys, any of these things will be done.
HUBBARD: Well, the fact is, they have to. Arithmetic and budget constraints balance for the government, too, we have a choice of reconfiguring programs on the benefits side, raising taxes or both.
BECK: Wait a minute.
HUBBARD: But that of course, is not their choice.
BECK: Wait a minute, both of you guys, help me out on this. They`re both still talking about -- both parties are talking about even more spending and more programs and more bailouts and universal health care and universal everything. How do you stop this?
SHOVEN: You`re absolutely right. Neither candidate is taking the position of fiscal responsibility. They`re both competing for tax cuts. And at least Obama has got a whole menu of new spending plans. Neither one of them is sort of running on a platform of fiscal responsibility.
BECK: Right, should the argument -- forget. Tax cuts and earmarks are such a small part of this thing; shouldn`t we just be talking about massive spending cuts at this point? I mean, shouldn`t that be the priority?
HUBBARD: Well, it`s not so much spending cuts in the here and now as in the future of these entitlement programs, giving people time to adjust. And yes, it should be the priority. But we need to change the budget rules of the Congress so that the Congress really has to understand that it will cut other spending, or raise taxes every time it changes an entitlement program.
BECK: Ok, guys, thanks a lot.
Just a reminder, our special here "Exposed: America`s Broke" continues all week, tomorrow.
We`re going to take the issues straight to the top of the ranking Republican on the Senate Budget Committee, Judd Greg. He`s from New Hampshire. And Democratic Congressman, Jim Cooper who is on the House Budget Committee.
These are the two people, that the leader on this issue, former Comptroller General of the United States, David Walker says we can actually trust as a people. He`ll be here with me to help me hold their feet to the fire.
And on Thursday we focus on the most important deficit of all, the deficit of trust that all of us have now in our leaders. Until we close that gap, everything else is just talk.
Coming up next, Second Lady Lynne Cheney will join me in the studio for a frank conversation about Sarah Palin and so much more.
(COMMERCIAL BREAK)
BECK: Very few people know what it`s really like inside the White House. Second Lady Lynne Cheney is one of them. For the last eight years she`s had a unique perspective on some of the most turbulent times in our country`s history.
Her latest project is a book that helps children learn about the founding fathers and the document that finds us as a nation. It`s entitled "We the People, the Story of our Constitution."
Mrs. Cheney, I thank you so much for being on the program. And you are a remarkable individual, because of the books that you write, I think you are so needed. Is this a follow-up kind of the Washington book? I mean it`s kind of the next in the story line.
LYNNE CHENEY, WIFE OF VICE PRESIDENT DICK CHENEY: That`s true. It`s been a passion of mine for a very long time. In 1987 I served on the Bicentennial of the Constitution Commission to celebrate the 200th anniversary.
It`s just a story that we don`t know enough about. We don`t teach our kids enough about it. And so this seemed to me to be a way to get at them, what would interest children, and young people.
BECK: Yes.
CHENEY: The story of how the constitution was created.
BECK: I tell you, my daughter is -- she was talking about going to college, which college she was going to go to, and she wants to study history. And I said American history? And she said, can`t do it.
I mean this is the most devastating day of my life. She said, I can`t do it. And I said why? And she said, because, dad, all the things I`ve learned in school, it`s -- we`re just such bad -- we just keep doing bad things.
It broke my heart. I actually wept and I thought, in my house, if my children don`t know what a great country we are, how does everybody else`s family make it?
CHENEY: No, I think that`s a really good point. We often teach the story of our past as though we were full of failings and faults.
BECK: Right.
CHENEY: And we weren`t perfect.
BECK: Yes.
CHENEY: But the story -- this story, like so many stories in our national life, is an uplifting one. We were in trouble after the revolution. We didn`t have a government that was strong enough to keep the country together. And so there were very bright people, especially the foresight in James Madison, came together to create a government as strong as we needed.
BECK: Do you think there was ever been a group of people like this? Washington was a phenomenal man.
Cheney: I know and you had Ben Franklin there, the wise old man.
BECK: Sure.
CHENEY: And what I love to do in books like this is tell the stories that make these people human. Franklin was old. He couldn`t walk. And so every day, four convicts from the Walnut Street jail would show up at his house with a sedan chair. He`d climb in and they would put the sedan chair on their shoulders and walk across to the State House where the Constitution was being written.
BECK: It wasn`t really that he was just old, he was in such pain from --
CHENEY: Exactly.
BECK: -- kidney stones, right?
CHENEY: Kidney stones, gout, he had a little bit of everything. But it hadn`t affected his mind.
BECK: Right.
CHENEY: He was one of the great moderating forces there, passions ran high; which is part of what makes this such a dramatic story. People were at complete loggerheads.
BECK: Do you think that we`re -- I mean I love the snake story.
CHENEY: The snake story, exactly.
BECK: Yes.
CHENEY: Well, people were at loggerheads over -- whether there should be proportional representation. That seemed only fair to the big states. They should get more delegates in the Congress in the small states because they had more people.
It was an idea that drove Madison. We, the people, should be the basis of our government. But this big fight going on and Franklin was sent by a scientific friend of his a snake in a vial. It was preserved. It had two heads.
Every visitor who came to his garden and the artist that I worked with did such a good job of portraying these. Every visitor who came to his garden was shown the snake in the vial. And Franklin would say, what would happen if this snake if one head decided to go around the bush one way and the other head the other way and they couldn`t reconcile themselves, they couldn`t compromise on a third way?
Well, the point was obvious. And it was Franklin`s point at the convention; we can`t all have everything we want. The document won`t be what you or I might absolutely will it to be. But it`ll be a fine start for the country.
BECK: Do you think that we`ve -- I mean, do you think we`ve just lost that entirely? I mean, I remember Ronald Reagan, he and Tip O`Neill would get together afterwards and they`d have fun. They`d fight, but they`d finish the job.
It doesn`t seem to me like anybody in Washington has that spirit anymore. They want to win. Their side`s got to win.
And so it seems to me that they`ll flip sides of things. One will get power and they`ll say, oh that`s a great idea, but then if they lose power, they say, oh no that`s a bad idea. Have we lost that?
CHENEY: Now, you`ve got a really good point. There`s less friendship across the aisle, less comedy than there used to be. I am struck however, when I read about the founding period about how vicious politics were.
BECK: Oh yes.
CHENEY: So that part of it hasn`t changed. People were still reeling against one another. Starting newspapers to tell their side of the story, but it was all part of this healthy debate. And that`s what we do in a democracy, we don`t go after one another with forks and tongs, we go after --
BECK: I don`t know. I`ve got pitchforks right here. People are ready to come to Washington. They really are.
CHENEY: What are you pitch-forking?
BECK: Just a reminder to everybody in Washington who runs the country, it`s we the people.
CHENEY: Oh I love it, I love it, we`ve taken up the pitchforks.
BECK: Yes, somebody should -- people in Washington need to know that they can`t hijack the country. They can`t just jam it down our throat without listening to the people.
CHENEY: Don`t you think that what we`ve seen recently shows that folks out there know this, that the attack on Sarah Palin was so vicious and so over the top, that really kind of insulated her against further attack.
BECK: Let me ask you this. I remember a day when your husband was loved. I mean, he was -- by the way, I took a vote of my audience. They`d vote for your husband over any of these people.
CHENEY: I`m where I belong.
BECK: People used to love your president. Now he`s Darth Vader. How does -- how do you deal with that?
CHENEY: Well, you know, it`s not so hard to deal with it if you have the long perspective. What this President and this Vice President have done is so historically significant, keeping us safe for seven and a half years against attack.
There are lots of folks out there for whom this is a very emotional issue. There`s a whole cottage industry of journalists trying to make a buck off somehow making these policies seem nefarious. But in the long run, the people know.
BECK: I stood in the Oval Office with George Bush, and he said, I`m willing to be -- I`m going to tear up just saying this -- I`m willing to be the most hated man for the next 50 years.
And I thought to myself, who says that? Who in today`s world? It`s this kind of person. Agree or disagree with his policies, but only this kind of person is willing to say, you know what? Do with me what you will. I believe I`m right.
CHENEY: I`m going to do the right thing.
BECK: Yes.
CHENEY: No, and it`s been the motivating force to the Vice President, as well. And I really appreciate your understanding of that.
BECK: Hold on a second, we will spend a couple more minutes with Lynne Cheney when we come back.
(COMMERCIAL BREAK)
BECK: Back with Second Lady, Lynne Cheney. Didn`t even know there was an actual title.
CHENEY: Well, it isn`t.
BECK: It isn`t? We looked it up.
CHENEY: It`s sort of traditional. Oh, my gosh, wow. It`s just kind of a tradition. I sort of smile at it, it`s kind of funny.
BECK: Well, Mrs. Cheney, I want to go back to Sarah Palin. Do you think she`s -- because she is getting totally hammered by feminists now. I think she`s the new feminist. I think she is the ultimate feminist.
CHENEY: It has occurred to me. And I have felt alienated from the feminist movement for such a long time. And in the beginning, I was quite glad to see it, but I felt alienated because it`s really not about whether you`re looking to advance the cause of women anymore.
It`s about whether you`re looking to advance certain policies. And most of them are not Republican policies. Most of them are Democratic policies.
So I think, you know, people that I know, people, young people who`ve worked for me, so glad to see someone like Sarah Palin step forward, who is just herself. You know, she`s not agenda-driven by feminism.
BECK: Well, she`s not. But she`s not the typical --
CHENEY: I mean around the moose and the --
BECK: Oh, yes. She is -- there`s pictures with blood all over the snow with the moose. And you`re thinking, you know what? Hello, that`s part of life. And she has chosen to do this. She can be smart, she can be successful, she can be a mom.
CHENEY: Oh, I love her.
BECK: She could be soft. I mean, I`m no -- she can be sexy. I don`t know if you have ever said that laying next to Dick saying, do you think she is hot?
CHENEY: No.
BECK: And he would say honey, I don`t know what you`re talking about, trust me.
CHENEY: Think about it, when the constitution was written, women couldn`t vote.
BECK: Yes.
CHENEY: They couldn`t own property. Most African-Americans were enslaved. But this document was so marvelously constructed that it contained a mechanism for writing itself so that we could abolish slavery after the Civil War and we could extend to recognize women`s right to vote.
I think if Thomas Jefferson or James Madison or Benjamin Franklin woke up today and saw this election, saw that we have an African-American man running for president, we have a woman on the Vice Presidential ticket, they would be stunned and surprised. But ultimately gratified to see what had occurred.
BECK: Yes, I think they would -- I don`t think that they would have a problem with any of that. I think they would probably be a little shocked that we seemed to still make it into such a big deal.
CHENEY: That is interesting. Will there come a day, and we`ve certainly all hope so, when -- it won`t matter?
BECK: It doesn`t matter, because I think it does to most people it doesn`t matter.
Lynne Cheney, the name of the book is --
CHENEY: It`s great to be with you.
BECK: It`s good to be with you, the name of the book is "We the People, The Story of the Constitution," please get it for your kids.
From New York, good night, America.
END
