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Glenn Beck
The Big Bailout: Will It Work?
Aired September 29, 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 this special edition of THE Glenn Beck PROGRAM as Congress votes on the bailout bill. This is the same people who caused this problem, now are trying to convince us that they`re the ones that can fix it. That`s interesting.
Everybody on television has been talking about this, and the one thing I have yet to hear is that this bailout would be the fix, that it would work. They don`t believe that. And they also -- nobody`s talking about what you can do. Well, tonight I`m going to have two things that I think will help you survive in an economy in crisis.
Hello, America. Last week, I told you that our economy was like a plane, getting ready to crash right into the side of a mountain. I was hoping for a sensible bailout that would just delay it a bit, bring that thing down in the trees instead of the side of the mountain. That is a first for me. I am a conservative, and I am a capitalist, but this crisis is so serious I thought a reasonable bailout might prevent a crash and bring the plane down, you know, in the trees where we just lop off the wings. No such luck.
The bailout that Congress has hammered out only makes a mountain in our path, just gigantic. So here`s "The Point" tonight.
You cannot cure capitalism with socialism and political favors, and here`s how I got there. If you`re a parent, you`re going to understand my thinking on this one. I just -- I believe and always have been, that you`re just a lousy, crappy parent if you`re trying to change your kid`s behavior by running to them every time there`s a problem, "Oh, Johnny, no, that wasn`t your fault." They call that being a helicopter parent, always landing just in time to save your kids from one thing or another. You`re crippling your kids if do you that.
Well, our government is taking the time doomed approach to rescuing the economy. This bill is a huge mistake, and God help us, it could get worse. I don`t want to crash any more than you do, and I`m going to tell you right straight up, I think it`s worse than anybody is telling you. I believe I know what`s coming, with or without this bailout, and it is bad. I don`t want to live through that, but you know what? I also don`t think I`m the only one in this country willing to do the hard things.
You know, I looked at my children this weekend. You spend time with your children. Do you want to leave them with a country in this shape or do you want to do the hard things that actually heal the country, not just prolong the system that we`re in right now? I want to do what I have to do to give my children a chance at success.
The government has been stealing their opportunities for far too long. This bloated giveaway is putting our children`s future in chains. You cannot cure capitalism with socialism. You kill it with socialism. There goes the country. And Washington just needs to realize that we`re a little smarter than what they think we are.
Tonight, America, here`s what you need to know. No one is telling you the truth on this one, and I pray that I`m wrong, but I think we`re teetering on the brink of another devastating Great Depression, or worse. We cannot lose capitalism. That capitalism is what`s going to bring us back.
If we`re going to save ourselves, we need to ask ourselves, who are we? What is it we believe in? Do we believe in capitalism? Do we believe that greedy capitalism doesn`t work? And then let`s just get the greedy guys and put them in jail.
The government thinks that they can run everything. I mean, they can manage the DMV in such great shape. Why not? Let`s take on the world`s financial industries. I believe, unfortunately, this is just the beginning. Today, it`s Fannie and Freddie, and tomorrow it`s going to be energy and the airlines, God knows. We`re going to be France in the blink of an eye.
Our future and the future of our children is in jeopardy, and it is time to be the Americans that we promised ourselves we would be back on 9/12. Once we can return to being the Americans who can do the hard thing and say, "No, you know what? I can`t afford this at this time." Once we become the Americans who can do business or get a loan and have a handshake and our word mean something, that is the time when our economy will not only thrive and survive, but grow beyond your wildest imagination.
Representative Scott Garrett is a Republican from New Jersey.
Congressman, you are not for this bailout, right?
REP. SCOTT GARRETT (R), NEW JERSEY: No, I was -- from the very beginning, I said this was the wrong direction to take.
BECK: OK, for the same basic reasons that I just outlined or different?
GARRETT: No, essentially that. If you`re going to come up with a solution for a problem, let`s decide first that we`re not going to go back to the very same people who gave us the problem in the first place and this...
BECK: Thank you. I appreciate that. So what -- so what happened? Everybody was saying, "Oh, we`ve got the votes." They didn`t have the votes.
GARRETT: No, they didn`t, and I could sort of tell that as the time went on, because our offices, quite honestly, were being inundated with phone calls across the country, literally, and also some overseas, as well, saying this is just not the way to go. This is not the right way to put the American taxpayer on the hook for excesses, both at Wall Street but also mistakes that Washington made in the past. And...
BECK: You know, I haven`t heard anybody talk about the mistakes that Washington -- if I see Barney frank, a guy whose spouse, I think he called him, but his whatever, his boyfriend, was -- was actually running, was the director of part of Fannie or Freddie, that was into the low interest mortgages and getting people into mortgages that were insane, who`s now running a pottery business.
Why -- I can`t take it anymore. Why is no one asking any of the people on Capitol Hill hard questions like, how much of this are you responsible for?
GARRETT: Well, one of the things in Washington you can always do is the old saying, follow the money and, if you`re looking at follow the money in the case of the GOCs and Fannie and Freddie Mac, you can see there`s a lot of indications of why we don`t have the reform, why we didn`t get the world class regulator that a lot of us were pushing for.
Let just see who those industries -- who those lobbyists sent money to. And it`s funny. Just before I came on someone sent me a YouTube that`s called "Burning Down the House" that put the whole thing to music, and it sets out exactly what happened. You had the Democrats come in, and they put in something called CRA, Community Reinvestment Act.
BECK: Thank you.
GARRETT: Encouraging the Fed, not encouraging, almost forcing banks to...
BECK: Blackmailing.
GARRETT: Well, yes, there you go.
BECK: It was.
GARRETT: And then when the banks didn`t do it, and the GSEs got upset about it, and the regulators stepped in and said, "Well, you know, something should occur here." Look at some of the hearings where Barney Franks and other Democrats chided, lambasted the regulator and saying, "You shouldn`t be going after Fannie and Freddie. Fannie and Freddie should be getting bigger and larger. And there`s no systemic risk."
There was a systemic risk; there was a problem. They got way too large and that was what, in part, created a bubble.
BECK: Do the Republicans do a deal tomorrow?
GARRETT: No, because tomorrow, as I sit here, most of the members are fleeing Washington, getting on trains and planes to go home. The Jewish holiday is here, of course.
BECK: You`ve got to be kidding me. I don`t care if it was Christmas, man. You work. The country -- this is the quintessential -- this is the definition of Rome is burning. I think everyone should send fiddles to the people in Congress.
Thank you so much, Congressman.
GARRETT: I appreciate it.
BECK: Thanks for being on the program.
Now let`s turn to Jonah Goldberg. He`s the author of "Liberal Fascism," editor for the "National Review" online.
You can`t tell me, Jonah, that you were for this bailout. The guy who wrote "Liberal Fascists."
JONAH GOLDBERG, AUTHOR, "LIBERAL FASCISM": Look, I think John Boehner, not normally known for poetic wisdom, had it exactly right when he called this thing a crap sandwich. And in science we call this copraphasia, eating our own waste, and I think there`s a bout of copraphasia running through Washington.
And the only place I really disagree with you is the idea that this is, you know, Fannie Mae and Freddie Mac were government-sponsored entities. Right? That`s what GSE stands for. And we -- there was an implied notion that they were going to get the government backing. So the idea that all of a sudden, we`re facing the prospect of that kind of socialism, that ship sailed a long time ago
BECK: No, no, no. But you know what? You know what? Let me play this back. This is what I said in January of `08, this year, January, watch this.
(BEGIN VIDEO CLIP)
BECK: I guess we can only hope that Mark Twain was wrong when he said, history doesn`t repeat itself, but it does rhyme, because this rhyme ends in a second Great Depression and perhaps even worse, another New Deal. Oh, wouldn`t the new progressives just love that.
(END VIDEO CLIP)
BECK: Jonah, here`s my point of playing that. You don`t think a new New Deal is coming around the corner? We have a new, new president. It`s a new, New Deal. You bet.
GOLDBERG: I absolutely agree with you that this has been the burning desire, burning passion for progressives and leftists for a really long time. Katrina Vanden Heuvel just had an op-ed in the "Washington Journal" calling for -- guess what -- a new, New Deal. It is undeniably on their agenda.
That said, we`ve got to -- we`ve got to unstick the credit markets. I mean, I think it`s just -- at this point, it is such a mess, and you know, I sort of -- either I sort of take the position, cheer up, for the worst is yet to come.
BECK: That`s not -- no, that`s not helpful. I was with a guy -- I was with a guy this weekend, been a capitalist his whole life, been on the "Forbes" 400 list for the last, what, 20 years. Done business, he is a very bright man and an optimist, and one of the most honest guys I`ve ever met.
And he said, "You know what, Glenn? I think we`re in real, real trouble." He was tentatively for a bailout, but he said this is destroying capitalism. We are going to be France. We are losing our place in the world. You never close this door again.
GOLDBERG: Look, I agree with all of that. It is a terrible, terrible situation that we`re in, but so much of this has to do with psychology at this point. The Fed and the Treasury Department are going to keep bailing people out. They`re just going to do it ad hoc, the way we`ve been doing it.
BECK: No, no, you can`t -- I mean, Jonah...
GOLDBERG: I`m not saying they should.
BECK: I know that.
GOLDBERG: But in reality that`s what`s going to happen.
BECK: Were you -- I remember when I was naive. You didn`t actually think that they were going to stop at this bailout, did you?
GOLDBERG: Look, what I think is that, at least, if you start getting political accountability for this, at least if you start getting a process by which unaccountable bureaucrats have someone to answer to, and someone to...
BECK: By what? By putting in this bailout the treasury had -- the treasury could bail out...
GOLDBERG: What is your alternative?
BECK: My alternative is to cut the capital gains tax, is to cut corporate taxes. I mean, jeez, if the Irish, if the Russians, if the people in Georgia can pay 12 percent if capital, you want money infused in this country? That`s the way do you it.
GOLDBERG: I agree with you entirely. I think our power plants should be powered by unicorns. The problem is, is we don`t live in a political climate right now where any of that is possible. I love Newt Gingrich. My wife works for the guy but, you know, when he started talking about cutting capital gains taxes as part of his bailout package, that was a nonstarter politically. It`s just a mess. We are down a really bad fork in the road, and it`s going to take awhile to turn around.
BECK: We got to go. Jonah, thanks very much.
We got to keep track on our country, man, because we`re about to lose it.
Now, could the bailout, could this single-handedly change the founding principles of this country? You bet. End of capitalism? We`ll see.
Plus it went from three pages to 110. A bailout plan t crowded with election-year politics, and special interests to even work. Details coming up.
(COMMERCIAL BREAK)
BECK: You know, it took a week of negotiations to get this bailout bill -- I`m sorry, what did she say? The buy-in bill -- to the table here in Washington. It looks like people in Washington see the political consequences to their actions, and that`s why the flames started just to burn this thing up this afternoon.
With all the talking, all the press conferences, all the grandstanding, at least this weekend, did anybody actually hear anyone with any authority say this would fix the problem? To me, all weekend, in watching these people, it looked like politicians were covering their butts, not our butt.
John Fund is an editorial writer for "The Wall Street Journal" and author of "Stealing Elections: How Voter Fraud Threatens our Democracy." And Stephen Moore also writes editorials for "The Wall Street Journal" and is the author of "The End of Prosperity," which is a spooky title and looks like it`s coming -- it`s going that direction here, Stephen.
Stephen, last -- I think we spoke early last week. You said that you were for this bill, if I was not mistaken, right? Were you for it in the...
STEPHEN MOORE, EDITORIAL WRITER, "WALL STREET JOURNAL": I`m a reluctant supporter.
BECK: OK, all right.
MOORE: I don`t like this bill at all, but I think it probably needs to get done.
BECK: OK, is -- the big went down in flames today. They`re going to reset tomorrow, stock market at one point went -- just plummeted when they were voting to 695 -- went -- lost 695 points. You still think this should be passed?
MOORE: I think we need something and the fact that the stock market really plunged after this both suggested it`s really probably very necessary to rescue these banks.
But you know a couple of things went wrong, Glenn. One was, you know, this is a 120-page bill, and it was only released late yesterday. I would bet that less than ten of the people who voted on that on the House floor today even read the bill.
BECK: Can I tell you something? Stephen, that`s a crying shame. I got home last night from a trip at 8 p.m. at night. By the time I went to work at 9 a.m. in the morning, which was hours before they went to vote on it, I had read the bill.
MOORE: You read it?
BECK: It`s absolutely. -- that`s absolutely inexcusable if this is the most important thing you`ve ever voted on. Let me ask you this one last question and I`m going to move on to John, but will you say -- you`re for this. Will you then tell me that this will, A, either fix this problem, or B, it will be the last dime coming from the federal government?
MOORE: Well, I think that if this doesn`t work, we`re in a boatload of trouble, Glenn, because these banks really are gridlocked right now.
BECK: That`s not the question. I want -- I don`t want a political answer from you.
MOORE: All right.
BECK: I want to know IT -- will it work AND if it doesn`t, will you then be for yet another bailout?
Moore: Well, I don`t know if it`s going to work. I think it`s our last -- I hope right now. I mean these markets are in a real state of crisis, Glenn. And you know, banks are just not making loans to businesses, and that`s caused, you know, a gridlock. I hate this. I`m against big government, but I don`t see any alternative.
BECK: John, I think Steve just became a politician. Did you hear an answer in that at all?
FUND: I did, and I think Steve is trying to make the best of a bad situation.
BECK: Right.
FUND: Look, Glenn, I think we need some kind of injection of funds into the economy to free up the credit markets, but I think that right now is the time for presidential leadership. I think the president can do two things.
One is an idea that Steve Moore has been talking about for a long time, which is the president should issue an executive order tomorrow, and it should say if you sell a capital gains, if you sell a stock, you know, much of that is an inflationary gain and you`re not really making any money on it, yet you pay tax on it.
The president should simply say, "I`m redefining capital gains. You don`t pay tax on the inflationary part of any sale you make from stock." That would immediately inspire confidence, unfree some assets and get the stock market moving. It would be a jolt of energy.
Secondly, I think the president could, through the Securities Exchange Commission, change the mark-to-market accounting rules which are forcing a lot of these companies into insolvency and bankruptcy. Suspend it for a while so that they can carry some of these bad assets on their books for a longer period of time without having to go under. Plan B is what we need.
MOORE: John, one other thing they should do, you know, why not cut some spending somewhere else, Glenn? One of the things I`d like to see, if we`re going to do this $600 billion bailout, we could raise $600 billion through royalties on the oil that we have, and the math works out. We could pay for the bailout by drilling.
BECK: First of all, it`s -- wouldn`t that be nice. First of all, it`s $700 billion. And I just want to give you guys a quote from -- from "Forbes" magazine. Are you ready for this one? This was actually from a treasury spokesperson on how did you arrive at this $700 billion number.
Are you ready? Here`s the quote. Quote, "It`s not based on any particular data point. We just wanted to choose a really large number."
MOORE: That`s right.
BECK: End quote. How much confidence does that give either one of you guys that these clowns have any idea what they`re doing?
MOORE: Well, I think they tried to bully this through Congress. I think John and I agree on this. You know, that`s not the way Congress works. They want to be part of the process. And trying to bully them and make them afraid that, if they don`t vote for it, the world`s going to collapse, I don`t think that strategy worked. Do you, John?
FUND: No. Glenn, one of the problems here is, remember, starting ten days ago, members of Congress were told, "If you don`t vote for this tomorrow, the world will end."
BECK: Right.
FUND: And the world didn`t end. And then they were told the world is going to end tomorrow, but it didn`t end. Look, the stock market went down, but I think that`s natural because this was a surprise.
BECK: Sure.
FUND: I think we have some time to actually read the bill, have a smaller bailout, have some pro-growth measures in here and have something that will inspire confidence in the American people.
Hank Paulson clearly decided to ignore the American people. Nancy Pelosi decided to ignore the American people. They rushed this bill to the floor, knowing that it was a turkey and knowing the American people didn`t support it.
BECK: OK. I want to ask you -- I`m going to take a quick break. And when I come back I want to ask you, because I have evidence that the world may end tomorrow. They keep saying -- they keep saying, "Oh, it`s Rosh Hashanah," that everybody is breaking for. I don`t think so. I`ll explain here in just a second. We`ll be back in just a minute.
It could end tomorrow. You don`t know. It could.
(COMMERCIAL BREAK)
BECK: Talking about the big picture, financial indications of the bailout and everything else that`s going on with it with John Fund, editorial writer for "The Wall Street Journal" and author of "Stealing Elections: How Voter Fraud Threatens our Democracy", and Stephen Moore, who also writes editorials for "The Wall Street Journal" and is the author of "The End of Prosperity."
OK, Guys, both of you, tomorrow everybody was saying it`s Rosh Hashanah. They`re in a hurry to get home. And I don`t care what -- I don`t care if the lord himself comes down for birthday cake. We got some business to take care of here.
I don`t think it`s Rosh Hashanah that they`re worried about. Tomorrow the hedge funds release their profits and losses, if I`m not mistaken. And aren`t people a little concerned of what might happen if these hedge funds start to show that they`re losing money?
FUND: What I`m concerned about, Glenn, is that, if we get more bad news tomorrow, there will be an enormous pressure on the Bush administration to go negotiate with the Democrats for an even worse bill to try to get Democratic votes to pass this.
This happened in 1990, when the first President Bush lost his tax increase vote, Dick Darman, who was then the Hank Paulson of his day, he went to the Democrats and said, "Whatever you want we`ll give it to you. We just got to pass something."
I think that`s a horrible say to make sausage. In fact, even sausage isn`t made that messily. And I think we have to avoid that at all costs
BECK: Stephen, I mean, how much worse could it get? There were already -- seriously, there was already -- there was already in here an absolute gigantic giveaway to the unions, where if you got the extension...
MOORE: They took that out.
BECK: No, no, no, for the cities...
MOORE: I think they did.
BECK: It was there this morning, for the cities...
MOORE: All right.
BECK: For the cities and the towns, they could have these...
FUND: That`s the problem with these bill. We don`t know what`s in it.
BECK: It is. It is. How much worse could it get, Steven?
MOORE: Well, it could get worse, as John Fund knows. One of the things they tried to sneak into the bill the other day was that 20 percent of the money from the resale of these assets would go to a slush fund to fund liberal interest groups, which is a total non-starter.
BECK: ACORN. Yes.
MOORE: Yesterday this morning, John Boehner, who`s a man I respect, a Republican, he said you know, taxpayer money is not being put at risk here, and that`s just not credible, Glenn. Everybody knows that taxpayer money is being put at risk here. I think that the White House and the Republicans and Nancy Pelosi oversold their case for this bill. I really do.
BECK: You know, here`s the -- here`s the problem. They`re talking about these golden parachutes are going to be gone, blah, blah, blah. They`re talking about putting caps on CEOs` salaries.
Look, if your company goes under, you should get jack, man. Stand in line with the rest of the people who are trying to get their money. Nobody is against that.
But if you -- if you off-load, I think it was $300 million and try to give to that the government and say, "Get this off of my books," if you have somebody like Citibank, what is it, $2 trillion that they have sitting around, $300 million is nothing. You`re now going to cap these CEOs and say, "I`m sorry. You guys can only make `X` number of dollars?"
MOORE: Yes.
BECK: Wouldn`t that encourage the best and the brightest to say, you know what? I ain`t dealing with any of this.
MOORE: Yes. That`s right. They`ll pitch in the major leagues, where you can get a bigger salary than that. I mean, pro athletes get more money now than CEOs of major corporations that are employing tens of thousands of workers. I`m against -- you know, CEO pay, Glenn, is a matter for the shareholders of the company, not for the Congress.
BECK: Not for the government. Not for the government.
So what happens tomorrow, guys? What is going to happen? What comes tomorrow?
FUND: I think the Republicans have to sit down with President Bush and say, "Mr. President, we need a bill we can sell to our voters." And the Democrats have to ask themselves, is Nancy Pelosi really a competent speaker of the House? A competent speaker doesn`t bring a bill to the floor like this and lose it.
BECK: OK. "The Real Story" coming up in just a second. What it means to your everyday real life, coming up.
(COMMERCIAL BREAK)
BECK: Coming up, how do you, the average investor, protect what you`ve got in these uncertain economic times. Stay tuned; we`ll take a look at smart, practical steps that you can do to minimize the damage to your life savings.
Now tonight I think you can turn on out 100 different news channels and everybody`s talking about the politics. I swear to you if I hear one person, well, you know what "Where is John McCain, where is Barack Obama on this? This is the country they are supposed to dead. Where the hell are they on this? Why aren`t they out there and leading and pushing for what they believe is the right thing?"
I`ll tell you where they are - nowhere, because they don`t want to be on the record. Everybody is talking about the politics and the bailout and the golden parachutes and the losses in the stock market and blah, blah, blah, blah.
Can I ask you an honest question? Is anybody talking to you? Have you related to anybody on television? Is anybody saying and talking about the things that you`re concerned about? I`ve got four kids; I`ve got two of them that are going to be in college next year.
Are you going to be able to get a loan for your kids to go to college? I mean, are you going to even be able to afford the stupid books that they`re charging $7,000 for?
How safe is your job? How about the ability to pay for your family, to be able to support them? You know, we`ve all seen pictures of the Great Depression, you know, in the books. Oh, look, there`s the guys in the bread line. We saw that in school.
But what we`re staring down at now is real life. They say a depression could come? Great, what does that mean? I mean because it`s not a textbook. This is actually happening.
So don`t talk to me about a price of a barrel of oil. Talk to me about the price of a gallon of gasoline. Don`t talk to me about wheat futures. Talk to me about what a price for a loaf of bread is going to be next year. Forget about the housing market. Am I going to be able to keep a roof over my family`s head? If I lose my job, am I going to even be able to sell my house?
What will America look like in the next 12 to 24 months? I think that`s what America wants to know.
Peter Schiff, is the President of Euro Pack and author of "Crash Proof, How to Profit from the coming Economic Collapse" and Bob O`Brien is the stocks editor for Barons online.
Bob, let me start with you. 1929 Depression, I know again what it looks like in the textbooks. If that would happen, what does that mean?
BOB O`BRIEN, STOCKS EDITOR FOR BARONS ONLINE: Well, you know, Glenn, contrary to any popular belief out there, I didn`t personally experience the 1929 Depression.
BECK: Right.
O`BRIEN: I`m doing this from the textbooks as well as you are. You know, the one thing that strikes me is, honestly, we`re so far away from those 1929 levels right now, that the comparisons with the Depression really perhaps overstated.
However, we`re clearly on some kind of a slippery slope here, where the credit markets have completely tightened up. You`re not able to refinance your home. It`s going to become increasingly difficult to do things with credit card. It`s going to become increasingly difficult to get those student loans you want that put your two kids through college next year as well as things like an auto loan if you want a new one and this is a function of what Wall Street has done to get us into this disastrous condition.
And what it means is that credit has completely dried up. There`s simply no lending. Banks aren`t lending to banks. Banks aren`t lending to businesses and banks aren`t lending to you and me.
BECK: All right.
O`BRIEN: And credit is the lifeblood of this economy.
BECK: All right, Peter, I have had a conversation with a guy who has spent time working on, you know, some of the deals that are going on and trying to save some of these things. He has been in the room with Hank, as he calls him. He says in the next 12 to 15 months, he sees the GDP falling 10 percent to 15 percent.
I asked a billionaire friend of mine this weekend, I was at a charity thing, I said, "What does that mean? What does that even look like?" He said, "I have no -- I don`t think that`s ever happened before." What is 10 percent to 15 percent drop in the GDP, what would that mean?
PETER SCHIFF, AUTHOR, "CRASH PROOF": It`s huge but it`s exactly what I wrote would happen in my book. I mean with the problems that we have now, you know, Paulson is saying it`s all these bad mortgages on the books of al the banks. That`s not the problem.
The problem is why are they bad? They`re bad because Americans are broke. We`ve simply borrowed too much money and we can`t pay it back. And that`s because of years of horrific monetary policy and a government that championed us every step of the way, every time we bought a car, we`ve borrowed money, bought a house, every time we used our credit cards and spent money, they were applauding us.
And every time we tried to save a little bit they tried to stimulate us some more. So that`s the problem, the reason the credit markets are shutting down is because we`ve blown all the money. We can`t borrow money to buy new cars. We can`t even afford to pay back the money for the cars we`ve already brought.
As far as college tuitions, one of the benefits of this is the fact that since we can`t borrow money to send our kids to school, college tuitions are going to be the one thing that`s going to plunge in this country. And you won`t need to borrow money because it will be cheap to send your kids to college.
BECK: Ok, what I want to know though Peter and/or Bob, either one or I`d like to hear from both of you, work this out together here on the fly. What does it mean, if it was a 15 percent drop in -- let`s say 10 percent drop in GDP, what is the unemployment rate like? What is GE or GM still in business? What does that mean?
SCHIFF: This is all going to mean a reduction in our standard of living. Remember our phony GDP was made up of consumption; 72 percent of our GNP was Americans borrowing money from the Chinese, and the Japanese and the Saudis and buying imported products that we can`t afford.
So all that is going to go away and Americans are going to have to get used to a lower standard of living, where we don`t consume as much or we don`t borrow as much. We work a lot harder and we save our money.
The problem is the government is trying to interfere with this process. The government is trying to pretend that they can just print up some money and make these problems go away. They can`t. They can certainly make them a lot worse, though.
BECK: Bob, can you help me. What happens to -- what happens to the Defense Department? What happens to, you know, its one thing to say, oh, you`re going to have a drop in GDP. What happens to what we know?
O`BRIEN: Well, basically, we become Japan in the 1980s. Effectively, an economy with zero percent growth where you have to take interest rates down to zero percent and we still can`t get a loan for anything. The big difference between -- and that was a decade-long decline in their economy; it reduced the standard of living in Japan. It reduced the effectiveness of just about everything they were able to do as a global presence.
The difference between Japan and them, which goes to one of the points that Peter is making, Japan and ourselves which goes some one of the points Peter is making is that Asians typically and I`m try not -- you I`m not doing this as some sort of a racial stereotype. This is a fact on, on the books -- Asian societies have more of a tradition of saving, where they typically put 20 percent or 25 percent of their net worth in plain old vanilla bank accounts. We used to do that.
SCHIFF: We used to have that tradition ourselves. But that was screwed up by monetary policy by Alan Greenspan and by the government but we`re not going to be Japan. We`re going to be Argentina; we`re going to be Zimbabwe. We`re not going to be as lucky as Japan.
BECK: Let me say something, I`ll make a racial stereotype and I don`t think it has nothing to do with the race. Asians also are kicking our ass and you know why they`re kicking our ass? Because they never play the victim card. They come, they work hard, they study hard, they do the right thing, they save their money, they take care of their family. That is a stereotype, you bet you, has nothing to do with their race. It has something to do with their values and that`s what we`ve lost in this country.
SCHIFF: Glenn it has to do with government. You know we used to kick their asses; when we had small government, sound money and less intervention. The reason they`re beating us, is because we have more government than they do. We have bigger obstacles to overcome.
BECK: But we have a bigger government because we don`t have values anymore. Our values are stuff. I want stuff. I want it now. You got to help me; I got to live like that guy. How come that guy is doing better than me?
SCHIFF: There`s nothing wrong with wanting stuff. Unfortunately the government made it very easy for us to borrow money and get stuff instead of work hard and save our money so that we can buy things we can actually afford. And that`s what we have to get back to in this country. We have to have a real economy. We just can`t keep borrowing money from the rest of the world.
And you`re talking about our military, yes, our entire empire is going to come collapsing around us. We can`t afford to keep these troops all around the world if our money isn`t worth anything. How are we going to pay to sustain the troops to supply them?
O`BRIEN: And even more pernicious Glenn, what the government is doing with this initiative, with this bailout plan which has apparently failed under its current form but they`re going to go back there and try again.
You know for years the Fed tried to simply conflate the money supply issue, pump more money out there to try and keep things artificially supported. They ran out of, that tactic stopped working some time in the last several months. So now, instead of simply trying to affect the quantity of money that`s out there, they`re trying to engineer the price of that money.
This bailout package is a completely different tack. This isn`t simply the Fed just pumping money into the system. This is the Fed doing something; this is the federal government doing something much more pernicious, much more untested, and perhaps a lot more debilitating.
BECK: And I have to tell you both, if you read Amity Shlaes` book "The Forgotten Man," that is exactly why the Depression lasted as long as it did is because they were trying new things out.
Guys, thanks a lot. We`ll talk again.
O`BRIEN: Thanks very much Glenn.
SCHIFF: Thanks.
BECK: Coming up, how does the average investor protect their savings and retirement through these kinds of economic times? We`ll look at some practical steps to minimize the damage to your bottom line, next.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
BECK: Talking about the bailout with Congressman Ron Paul.
Congressman, what favors are being done? How are people muscling people into it?
REP. RON PAUL, (R) TEXAS: Well, what they do is they`ll come and say, well, you could lose your position on your committee, or you`re not going to be getting this or maybe there`s something buried in this bill.
A lot of times what they`ll do is they`ll come and say "Are you going to be a team player or not?" you know, team player is the clincher.
BECK: Have you seen anything to compare what`s happening with the phones and the emails and everything else, have you ever seen this kind of reaction from the American people before?
PAUL: I haven`t. Our phones are ringing a lot. They`re not clogged up because I think everybody knows where I stand but yes, other members are telling me they have never had so many calls and nobody indicates they`re getting any favorable calls.
So they`ve really put an average member into a predicament on what he`s going to do, especially if they`re being challenged, you know, in their Congressional race one month from now.
(END VIDEO CLIP)
BECK: That`s one reason why this thing failed today, and it`s going to be reintroduced; it looks like it`ll be reintroduced tomorrow.
On this program, I try to concentrate on telling you the truth, because I don`t think you`re getting it very often. Good or bad, I`m going to tell you like it really is or at least the way I perceive it and one of the things that we have a problem with in this country is too many of us are victims.
That`s not who we are, that`s who we`ve allowed ourselves to become. We`re Americans. We`re survivors. You know, we have big problems right now to overcome but let me tell you something, as a recovering alcoholic, the first step towards solving a problem is admitting that you have one. And we have a big problem.
It`s easy to play the blame game where everybody`s pointing fingers, but you know what the real deal is? A lot of people are involved in this one; a lot of people have a lot of blame on their shoulders.
The deal is nobody trusts each other anymore. We don`t trust our government, and we`re the ones who gave them power. We`ve got to stop. We`ve got to stop this nonsense that oh, well, they`re all doing it. It doesn`t matter anyway. Yes, it does.
We need to remind ourselves who is really in charge and reconnect with honesty and integrity and American values. We need to be more like the grandparents that helped raise us.
And while you may still have less, there is something about the value. We have to make the most what have we do have. Even if you don`t have much, there are smarter ways to grow your savings. There are smarter things that you can do to make sure that you`re not in just a terrible, terrible mess.
Joining me now with practical plain spoken advice for the average investor or the average person that doesn`t have any money to invest, is Brett Arends, he is personal finance columnist for "The Wall Street Journal" and Steve Cordasco the host of "The Big Money" show on 1210 AM in Philadelphia.
Guys let me start, first of all, both of you, the average person just got a 401(k), I hear this all the time, well, it`s too late for me to do anything. Is it too late for somebody to do something when their 401(k)? Let me start with Brett.
BRETT ARENDS, WALL STREET JOURNAL COLUMNIST: No, it`s never too late. You`ve got to -- one of the mistakes people make is they -- when things are up they say well, I`ll deal with it at some point later and when things are down we`ll say, well I`ll wait until things recover.
You`ve got to take steps to rebalance your portfolio and make sure it`s the right portfolio. And you can`t wait for things to "recover," because if you`re in the wrong position you may not be part of that recovery.
BECK: Right.
ARENDS: So no, you`ve got to take steps now. Don`t wait.
BECK: So what is part of the recovery? Steve?
STEVE CORDASCO, HOST, THE BIG MONEY SHOW: Well, Glenn let me go back. Our 401(k) system in this country is a very broken system. I`ll pause for a minute and let that sink in.
Today the American people show that we have a spine and if you want to do something for yourself, you need to go in to your employer tomorrow and say my 401(k) system is broken, because people can`t do anything within their 401(k) right now, because if you look at it, your investment selections are minimal. You basically have open-ended mutual funds your only choice there.
And if you try to break open your mutual fund inside of your 401(k) you`re looking at outdated data. You can`t find today`s information. You cannot know whether or not your company today owns a company that`s bad.
BECK: Ok, I mean, honestly, gee, Steve, I`m going to hang myself. Give me some good news. Brett, what can you do?
CORDASCO: Glenn do you want me to do what is doing and sugar coat it?
BECK: No, I want you to give me something that I can do.
CORDASCO: Here`s what the people need to do.
If you want to go into your 401(k) and hope that you`re getting current information which you`re not, it`ll be three months delayed by the way, but if you want to break open your 401(k), here`s what you want to make sure that your mutual fund is investing in. Real assets, real assets like metals and mining, real assets like infrastructure, real assets that pay cash flow like water.
And you don`t need me a financial adviser, another talking head from Wall Street to come on and tell you. Just take a look at what General Electric is doing for all the millions of dollars it`s spending on consultants to try to help that company get righted, they are spending money so that they have their business model in infrastructure, water and real assets.
BECK: Ok.
CORDASCO: The problem right now is they taught us too much financials.
BECK: Brett, go ahead.
ARENDS: This is the kind of CNBC route. I wouldn`t advise people. Listen, you`re not going to --
CORDASCO: It is not.
BECK: Hang on, hang on Steve, Steve.
ARENDS: We`re telling people to stampede into gold and stuff like this, this is terrible advice. Most people are either going to be too late, they`re going to be the last ones into it, they`re going to pick the wrong stocks.
There`s no question, Steve makes good points about the 401(k) system. It`s not what it should be, we should have total control over our 401(k)s. They shouldn`t be sort of captive of our employers.
Nonetheless in so far as you can make asset allocation changes, when you`re younger you should be in stocks and have some bonds. When you`re older you should mostly in bonds and have fewer stocks.
Right now --
BECK: Ok, let me hey could I no, wait, let me both you guys, both you guys, stop.
Most people are worried about, I don`t -- is my job going to be around? Most people look at their 401(k)s, I know I did for most of my life, and like hey, you know what? I don`t even know what the hell is even in that damned thing.
What do you guys think about the advice of hedging against inflation for the average person? My advice for the average person is, you know what? I got four kids. I know what my four kids -- I know what sizes they`re going to be next year. I know, you know, I know they`re going to need this, this, and this.
My dollars has some purchasing power right now. Inflation is going to shoot through the roof. Why not -- can I beat inflation if I go and I buy shoes in size that I know they`re going to use in the next year?
CORDASCO: Here`s how you do that. Let`s say you have an education plan for your kids. You don`t put it in the 401(k) style approach in a 529, where it goes into mutual funds. You buy the guaranteed accounts that go up with the rate of inflation.
BECK: You`re not answering my question. Brett you give it a try.
ARENDS: Listen, there`s a couple of things you can do right now that are actually pretty good deals, actually were surprisingly good. The first are municipal bonds and the second are inflation protected government bonds.
Right now, given the panic going on you should be --
BECK: Do you guys hear me? Do you guys hear me? Do either of you guys hear me? I`m sorry, is the microphone working? Do any of you guys hear me? I just said, most people do not -- they`re not -- well, should I buy a T-bill?
They`re thinking, how do I afford food? If this is 1929 --
ARENDS: Are you talking about saving money?
CORDASCO: Glenn, you`re asking about investments. If you want to go into somebody`s job and how do they protect their job, we go into a deep recession. Here is how you protect it.
You be the best TV guy or radio guy out there. There is going to be a wringing out of excesses in this country. There is too much of too much stuff. Those that are the best at what they do will survive. For the average guy out there who is saying, hey, am I going to be able to afford shoes for my kids, you need to take a look at how much money, how much cash you`re sitting on.
If you`ve got a lot of debt, no, you`re not going to be able to afford it you got to get yourself out of the debt and get rid of the excess.
BECK: Ok, stop. Hang on just a second. Brett, we`ll get your response after the break. Back in a minute.
(COMMERCIAL BREAK)
BECK: Guys -- we`re back with the financial crisis and what it means to you with Brett Arends, a personal finance columnist for "The Wall Street Journal" and Steve Cordasco, and he`s the host of the "Big Money" show on 1210 AM in Philadelphia.
Look guys here is the thing, I know in my family, I have people who are living paycheck to paycheck. None of them -- a lot of people are, but you can get that at CNBC. A lot of people are thinking, hey, we got to get into T bills, et cetera, et cetera.
My family -- and I know I`ve got a lot of viewers -- they are just there at the edge. So what I`m asking you is, Brett, is there something those people who don`t have an investment banker, they don`t have, and you know, mutual fund -- they don`t have anything.
ARENDS: Sure.
BECK: What do they do?
ARENDS: Well, if people are in credit card debt and talking about investments is pointless. The first thing so many people in America have to do is take an absolute axe to their spending. We spend, as a nation, far more than we`re earning. People are living beyond their means, they`re on credit cards.
BECK: Ok.
ARENDS: People have got to take the absolute ruthless axe to their spending. And, you know, so the first responsibility, people, I know it`s not an easy solution. But that is where it starts.
BECK: This is what I`m looking for, because I said on the radio, like last week. Zero discretionary spending until you have a handle on what`s going on.
ARENDS: Yes.
BECK: If you were close to zero, nothing, don`t spend anything.
ARENDS: No kidding, no kidding, get rid of the T-bills, get rid of the cable, I mean, all of this stuff. You know the stuff that we take for granted that our grandparents would have never recognized.
You know, if you`re on credit card debt, you`re basically trying to run up a down escalator. You have got to just put your head down and run to the top of the escalator, otherwise you`re just going to be running and running and running and keep going downhill.
BECK: Ok, Steve, you`ve got about 40 seconds.
CORDASCO: Glenn I`ve got to go back, look at your checkbook over the last six months. And see where you`re spending money, I know there`s a lot people say they are living paycheck to paycheck. And you`ll be surprised, a lot of folks have somebody else cut their lawn, and a lot of folks are still going out to eat. Try to get into a restaurant on a Thursday or Friday evening, it`s every day is a holiday in America.
ARENDS: Great point.
BECK: Ok, good. Guys, thank you very much. I appreciate it.
We`ll have more -- we`ll be following this all week, and in the coming weeks. And we`ll also try to keep our eye on those weasels in Washington. Because I know you`re a little busy running up the down escalator.
From New York, America, good night.
END
