oil report. have a great night. we will see you ononday.ome bacs is it here, see you tomorrow >> where is it? winning streak owall street goes on, and where is the austerity? let's bring economist frifdrich hey yeck back inhe mix. >> what is austerity anyway? i do not know. >> i have no iiea.

the fight over austerity. that is o show. tonight. >> now john stossel. john: the word austetyeans self-denial, when applied to government it means cutting spending. i put the word in quotes here, because, despite media whaling about it -- wailing about austerity there have been few real cuts here or in europe. ere are books out like off ofausterity kills. he said this cic strip explains it all, portrays. aliens who want to destroy ear earth. aliens shoot him for reveals the

truth. >> i proud to be an off the an austarian . unfortunately, only a few people in congress actlly take my side and want to cut spending. i am happy toave one of them here with us, senator rand paul. proposed specifific cuts, but senator, i'm told if he cut now, when the economy is not great, this will make unemmloyment worse. >> well here is the amazing thing about pple saying that we are living in an age of off the austerity, we have not cut any spending in washington. spending still is growing, in washington. when they say if you tutt spending -- if you cut spending at will cause lack of ecomy growth. people spend money, just w ends it,riedman had this he put it well, he said nobody spends some one else's money as wiselyly as they spend their ow.

john: you talk with your colleagues about there have been no real cuts, do they lk at you like you are wrong? >> no, think a lot of people up here understand it. people like krugman take it and demagogue an issue they know full well we're not cting our ending we're slowing the rate of growth at best. butteven that rate of growth, you saw they went crazy, the sequesr, the sky is falling, the same week they do, that they sent extra $250 million to egypt. they have enough mey to around the world but not enough for white house tours, that does not pass the smell test. john: have you alan, you would eliminate commerce, education, energy, housing and urban development. you say that to people that frightens tm, i asse? >> well, i tello people is that really what is extreme is

what is going on up here. balancing our budget, if you talk to a family about balancing their budget, not spend morgue than comes in -- spending more than ces in, itnds like a reasonable notion, i can take money from the economy i it build a bright shiny building say this is what i did with your money. but weon'tee what entrepreneurs and individuals would have de with that extra money in the economy that goes back to fm friedman says, who end money moreisely when it is your own or government. government are waste irs of money they have no clue has to how to makingny, i want to live more money in the prprodtiveve economy. john: creates thousands of jobs, we don't kno what they might have done. >> right. but really who can make things better? the pvate world orhe government. we have a great dial of evidence that government wastes money,

misdects it, i can give you example after example of millions of dlar spent on roll up beef jerky, 5 milion-dollars spent on studying colive action of fish. there has been no austerity here in the united states we he struggled t slowdown the rate of growth of government, a they fought us on the sequester that slows the rate of growth, i ink that american people are not buying it they see there is a plate of gamesmanship. >> president saying no more level-guided white house tours, no more air traffic ctrollers, most people believeou could move money around. and cover some of the things. one example. how, if the president wou have behavinger rationally, if you don't rehire the people who are retiring from government, that is 6 blion a year. so the sequesteras passed a

year and a half ago. he did nothig. for a year and aalf, if he would have instituted that, it would have been $9 billion, a urth of wha we needed to cut. john: ank you senator paul. now, america has big financial problem in europe, they are worse. this riot was in greece. greece had theost riots, there ha been big fights in spain effort gal, portugalleportugal and england. >> there has just been cuts, cults. john: many sayure'e's troubles provehat the free marke argument is w wrong. the europe troubles gave he

pause. couldt be true? cato economist dan mitchell. why haven't the budget cuts worked? >> because there have not been any that woman from england. th cut, cut, government ending has gone up in the united kingdom every single year. for at least a couple decades, and even since their so-called nservative government took over, and it is r rising faster than inflation, you look at france, governmenttspending going u >> we have a graph. france, italy, united kingdom, spain. >> they are increasing government spending at a rapid rate. all of a sudden, fiscal financial crisisis hit, we haveo do austerity, it was not prune back the size, they said let's raise taxes, they are raising taxe, driving private sectors into the dirt, that dii not work, now finally, in greec

we're seeingga tiny bit of spending cuts, only because they have reached end of the rope, they cannot get more bailouts they raised taxes to a point where the imf said you get less revenue, so, amazingly, like,al the grks made a tiny spending cut. >> why all of the publicity about draconian cuts,eople there experieing it believ it. >> the fight in europe is between so-called austerity crowd and growt crowd, but the growth crowd arr paul krugman, keynesiangnd g and big spendeerd austerity people want higher taxes, there is nobody in europe that's advancing the positn

that sator rand paul was talking about. we have a big expensive inefcient government. ife' me growth we have to shrink burden of government spending. theransfer of resources from private sector to the government that is what hurts your economy. hn: the government has no money of its own. >> and all likelihood they will not spend the money as efficieny. >>nd the coverage is so insane. the atlantic, a respectable magazine, editor matthew o'brian, the more country has cut, the more unemployment it has, a recovery is worth the deficit. >> i bit he agrees with paul krugman and thinks that more gornment spending will help an economy even though is did not workor hoover and roose in the 30s, not for jap in 90s not for bush in 2008, not

for obama in 2009, it never worked anywhere. john: people believe it. >> politicians love the theory. it tells them their adve have is a virtue. hey like to spend. yeah, i am with you, i wilill be first i line. line. >> any good examples? any country that has done it right. >> i just go the back fro europe, got off the plane today, came here because this show is the best place to be, the baltic countries. estonia, they have done t righ thing, they cut government spending, i say cut, i am not talkin about washington thing, we increase spending at 6% instead of%. no, intle tick countries -- battle ticbaltic county its was. >> thoseconomies are growing?

>> they are growing they recovered, jobs areoming back, ey haveositive gtp, economy growth, while the country tt have gone with the tax increase approach, like italy, spain, gree, portugal,nd et cetera, et cetera, they are in recessi recession. moral of the story, you have figure out ways to reduce burden of ggvernment spending and taxes and most country in europe have nottdone that. the baltics are a tiny glimmer of good new john: back onhis continent. years back in 90s canada maae big real cuts, and prospered. e canyon dollar wasorth 70 something cent athe time, now parody with our dollar it works. >> amazing most of those cuts, actual genuine real spending cuts in canada hpened und a labor party governmen john: a liberal government. >> new zland did the same thing in 1990s, and actual to

be fair, bill cnton was much better than a lot of republicans. at leaste restrained the growth in spending. republican in congress made a big role in it too. evidence shows if you restrain the growth ofovernment or better actually cut government spending, you are freei up resources for productive sector of the economy that is where you get growth. we havave to focus on taking government, which figurin out, how to at least restrict it so it is growing slower than privacy sector. john: well good luck with that, dan mchell. coming up. two economists will argue about austerity. >> if you first, a man who said that must tert off the turty is like debtor's pson.

john: i say, bring on what the punditting calling austerity. let's cut stuff.

government spendg $3.8 trillions now. and sorry that is just theefeds, states and local government spends more, it is too much, everylar they spend is a dollar the private sector does not have. free individualspend cutter that is why cutting government spenng is good. but bob kuttner said that austerity is like prison his new book. "debtors prison: the politics of austeritversus posibility." and he wants to cut. so bob i start with you, we haves there are assistant s there ar the national debt. as we age, the baby boomers, are you saying we don't need to cut? >> this is a question about deficits in the context of a depressed economy. time to cut deficits is when the econy is inecery as bill

clinton did in 1990ss clinton got economy to surplus in context of high growth, you have a soft economy that is a time to have defkit sit spending becae you need stimulus. john: mark, respond? >> what we're suffering from today is imprudent fiscal policy, what the government is doin with their irresponsible welfare payments with interfering with business and so forth. is keeping the private sector, which is the majority stakeholder that should be the focu here, with employment and so forth, they are the key. we have to really encourage. john: what abou don'to point --o point? there are many examples in private sector where banks, companies i was a consultant for ibm they went 3 a difficult down size -- through a difficult down

sidingn 1990s they fired a quarter of their workers. a hundred thousand workers, like at ibm today, united states, same situation. if we adopt austerity, prudent austerity we can turn our couny and blossom like we've never done before. john: bob, when you say now is not the time, when is the time? >> t time when the economy is healthy and the clinton era, and late 1990s, one time in recent history the budget was in surplus we were onrack to have no national debt. and 2000, economists worried about how the fed will conduct monetary policy, when have paid off national debt, i am nothe sort of guy who says we should always have a deficit, this is not a time to tighten your bblt. you may agreee i don't think we

should raise taxes. i don't think we should cut spending. john: we have a national debt nowhat is 100% about of gdp does that scare you. >> about 70. jon: interest rates go up it will be horrible. >> everyoneas been warning for 5 years that interest rates re going up, the economy is so dea inhe water, that intere rates are not going up. after the war, debt ratio was 120% of gdpigher than today. john: it came sharply down, it wa a war, the war ended. r welfare spending is not going to end. >>hat gets to my point, i think really important, we are an ovey generous welfare program, secd -- section 8 hoing, and food stamps, the americans on welfare, they want to work but we have a sim that systemhat does not incentivize them to go

back to work, we need to be like ben franklin. he faced financial crisisll his life, he lived below his means, where is the federal rainy day fund. >>here is nothing wrong with debt, per se, but it has to be done pdencely, in my own life i put 20% down when i bought a home, i payoffy credit card every month, called prudence moneyanagement in governmt we don't have any evidence of prudence money manager. john: bob last word. >> as recently as 2001, government pjected anndless surplus. and it was bush tax cut, bush wars then deregation of finance tha created the he decits. >> we agree to disagree thank youob and mark, mark has organized what we callsorld's largest gathering ofree mines.

freedom fest in lasegas, theme this year is, are we re? i'll take this show to the road to be in freedom ft in july. and tape a show. night, what if you manage your budget like the politics manag their? >> this is a famil budget,hat do you think about that? they make 24, an spend 35, they lost 10,000 this year. they are already in debt. >> what type of people would do that. >> federal budget, i just too some zeros o. >> that a big number.

john: think about this family buet. really ugly. income last year $24,000, but a

spent 35,000. incurringal left 11,000 i new debt, they had a l of old detz. i would say they are highly irresponsible. buthis is actually theederal government's budget, i just too f 8 zeros, people on the street hadn appropriate reacon to that. >> what? that is a lot. >> formula for disasr, our future is dismal no doubt. john: you pay for this, does it scare you? >> a little bit. >> i'm broke, i don't know how i'm going to do this john: and radio host dave ramsey helps themselves get out of debt. what you think about my time squared gimmick? is it fair to the government budget? >> is absolutely fair because of a zero is a zeroo and a mass is math when you spend more than you me you go into debt.

is not rocket scienceand. john: comparing politicians use se similarities i their psychology? >> there is. one definition of maturity is learning to delay pleasure, putting it off. when you are a child youare thwing a fit in the gup three -- serial i/o is a maturity. we all have that little kid but as a grop weearn to delay pleasure and back away from the table we cannot eat too much food or spend too much money we learn these things it is called self conol but when you are imager oin the immature culture you elect imager people to represent you then you continue to spen more than you make. that is a problem with the politicians. john: there has been interesting psychological studies putting a cuake front of a kid to save you don't have one and and and

now you can have a bunch leader but then they follow them 20 years later and thehe kids who we best able got to grab t extra treats d better in life consists of 87 exactly. any of us havehe ability to start making those choices to take on pain or maturity to in later. but we have to believe if we're going to do that we will winater. in other words, the care it has to be real. john: talking to people on this tree i was happy they were horrified but i was surprised when i asked them this question. what would you cut? >> i would cut come i don't know to tell you the truth. >> not education. john: no education? >> that is atough question where tout. john: don't cut this or that

item know what to cut. but do the people that called of a radio show don't know wt cut out of their personal budget? >> people do know but it is the immaturity factor i don't not want to go out to eat or i don't want to not go on vacation but i have $110,000 of student loan debt that has been around so long i think it is a pet. i have to mke chces because it will not go away if i don't change my behavior. johnthe ople that listen to after word they say i am happier now? spending less? >> what is weird is they are happier imdiately because when you have a sense of being a grownup to put on your big boy pants to say i will controly destiny, i will control my life and i will not live from impulse to iulse and i write it out even though i am not out of debt but what i am writing alex is a recipe for chstmas and i have to

deliver pizza to give up my income is a tough plan but i get a sense of dignity because i am being a grownup and king control of my future. there is a power in that that is unbelievable it is caed a whole. john: thing to do ramsey i wish i had moreope for our fedel politicians. , the frederick highjack the economists comes back from the dead in support of austerity. ♪

john: [applause] the serious debate of austerity stimulus began 80

years ago with the economist john maynard keynes and say we can spend their way back to prosperity and friedrich hayek said it no way. not those exact words b i would like to tnk if friedrich hayek heard about the obama stimulus plan he would have said something like this. ♪ the party is over ♪ ♪ are you kidding? conoco it wks perfectly fine knockout there was a recession back in 2009 no. things could have been worse john: that is what i hear the recession would have been much rse without stimulus spending and when unemployment is stl hayek that is the time to spend and mp-start the economy. ♪ john: it isn ennine that needs a spark andhis makes sense to people so let's

turn to the producers of that rap video that has received millions of views on new tube ross roberts and former mtv producer, keynes argued the economic slowdown is prime the pump like a car? >> it sounds good and3 politicians like it but doesn't actually work? >> when the stimulus plan rkedsing the keesian model theyaid if we did t pass it unemploynt could reach eight point* 5 we did and it went over tens of the model was wrong so there is a historical example for more than a fancy statistical models and i argue the evans is a mixed john: plenty of people say unemployment would be backed up if it was a bigger if you had keyneses' say it. >> if we would have de

better if we spent more than a happens if there is a world war. >> they argue world war ii ended the great depression. buto stimulate private consumption it is a time of austerity in the real sense of the word. john: they were making tankk >> it is a measure economy if you are ithe munitions business you did great but the average person if you want to buy the refrigerator or c you could not because the steel was ud for t other stuff. that is reality government spending crowds out private activity. john: afterwards government's spending went down we went into a horrible recession. >> that iswh t keynesian is predicted -- predicted a fell 4 as truman pointed out in h discussion afterwards and plan it was high despite that there were 10 million

soldiers coming bac some nt to school and a lot of them found new work somehow the economy thrid without the government's stimulus. >>hat is strange about the keynesian approach is they don't seem to cre whether value is created by economic activity or not. as a producer i have to create value for my adience and make something people want to see but in a keynesian world it doesn't matter how you spend the money you could build the bomms are the tanks or also have projects to build appear in it or have alienations. john: speaking of that we don't have a world war but on cnn paul krugman suggested itould be goo if we had something like a war. >> if we discovered space aliens needed a massive buildup and inflation and

budget deficits took condary aces, this would be over in 18 months. >> in a way that speaks for itself, doesn't it? john: a lot of back -- economic activity. >> i could sell you my sock and you could sell bk to me and if we kept doing that in a ircular flow to measure it as gdp then we would be amingly wealthy and the enomy would grow. john: i don't want your socks. [laughter] >> in a keynesian world eld is all stimulus it doesn't matter. every fight the aliens we get richer and it ignores the resources where they come from to build the anti-alien space weapons. john: lk about austerity. we have tried it and it doesn't work? >> where have we tried it? we hear about the united states for the united states government over the last four years has not grown as dramatically aas in the

pastgovernment spending actually went down a little bit that was the all-time high. john: now it is predicted a little more because of the sequester. >> can we run a dicit over $1 trillion the easing could be pretty keynesian peace. john: but it is n enough. >> evintly. that is what friedrich hayek made the point* very well that it is complex world of what is going on at once but is easy to say would have been worse if we had not done it. it is hard to prove that then it is a religion of both sides. >> something i find offensive is we talk about austerity in the richest nations of the world and the largest governments the world has ever seen that when you talk about cutting 3 percent is austerity. with the rest of the planet that means your kids and belly is crumbling because

they are hungry and the culture of calling what 're doing austerity is propulsive when yo think about itn the broader scope of the global community an the people who really have to figure ut wh they will do next. john: with the critics call us as the austerity a it sounds like austrian economics which some of you kn, about and i assume most don't know is there a connection? it is a play on words to make fun of the austrian economist like friedrich hayekhat was skeptical of the keynesian prescription. it is a little jab. i wear itroudly. john: thank u. coming up, i will saul's our deficit problem. but first you and the audience get that quiz -- get to quiz our guest.

[applause]

[applause] john: we're back with your questions f o case no economist and ross roberts

and john head made the rap video. so first from the facebook page has a. bill: defined the end game principles when ding what programs to fund or cut? >> for public goods like property rights are good for an economy that type of spending is helpful and some type of physical and human capital spending grows education and can be good if done efficiently. but the bulk of the bget today whether europer th u.s. this transfer or consumption spending and the evans is that diverts resources from far more productive resources and if you do cost-benefi test and the transfer consumption spending looking at that types about lay. john: the port and the helpless? that is what the transfer

payments are supposed to be. >> if you get th private sector growing the four will be better off than he would much rather be pour in hong kong or singapore because you have a better future than france for the best you can hope for is the politicians will for ever catch you on the head to keep you dependent ward of the state. >> people now more than ever are graduating from universi into a terrible job market usually having a degree in something that will not help them. deal think this for job marketis reflective ofust a bad the economy or is there a fundamental problem with the educational system how we educate our students? >> it is a personal choice with a major and if it is not profitable that is your choice. but there's nothing wrong with tt i don't think that knowing about poetry could help you to get a job that

makes you a bautiful father butit should not be subsidized as much as it is we subsidize people ttking things that are not practical tha means the people making tho choices are not using their own money. that is a mistake. >> nobody has brought up entlements. i don't see ho they can be sustained withovernment, a city, the employees that get lifetime health insurance and pension, where doesthe money come from? >> witthe federal government level it is about medicare andedicd a social securi it is about health care entitlement but normally i of bill was gloom and doom but the house of representatives in 20112012 voted for entitlement reform medicaid and medicare with a fairly substantive way and they got reelected in 2012 and that and think they are suffering at all

ha sobered up and realize looking at the calami in europe we have toddress the longun fiscal problems and unrestrained entitlements for once in my li i will sound optimistic those setter, the syrians a lot of times they not talk that we believe civil society should be larger looking back to history you can find there is a rich civil society that took care of our brother. >> natalie did they do the benefits that they did it in such a way that is local and help people to account becauseou look your brother in the face because if he haa plasma screen t while nmployed it is harder to dothat when you know, the people that are supporting you. there is more to this than just what we will cut t whea allowed to merge after th. john: to counter your optimism from twitter file

clerk says is untrue this austerity will only go on to hurt the pork? >> we like to think it does that most government spending go to the rich and no cla people. john: food smps and medicaid. >> that i a tiny portio there's a lot of things to cut before we get to the poor corporate welfare or in me of programs that go to rich peoplehy should everybody contribu to social securit and every by the get some money back? reserve for thepeople who are poured it is not to pay for health care and retirement w are able. >> but they said it encourages people to not to say if we don't need to save the government saves for us then we get more spending. john: katchis sarcasm. [laughter] >> if the government is

deemed irresponsible because of rampant spending what is your solution to that same government to decide responsibly what to cut and what not to? [llughter] >> that is a great questio we often talk about the government as if it is the person who decides of course, there is no ngle the cider and it is the emerging progress of the members of congress and it is not a logical but we do better than other countries out like to see the constitution. john: thank you. coming up my austerity program. will show you how to cut

government.

my mother made the best toffee in the world. it's delicious. so now we've turned her toffee into a business. my goal was to takan idea and make it happen. i'm janet ng and i formed my toffee company through legalzoom. never really thought i would make money doing whai love. [ robert ] we created legalzoom to help people start their business and launch thereams. go to legalzoom.com today and make your business dream a reality. at legalzoom.com we put the l on your side. john: if you just tune did earlier i was in times square showing people this family budget. >> what you think of these people making 24,000 in spending 35,000 alst $11,000 in debt.

>> facias stop spending their money. >> they should get their priorities bennett -- straight fom what they need spend their money. john: this is the federal budget actually i took off the zeros. >> battle think there is any way we can make that up. >> crazy. john: what would you cut? >> that is a tough question. hn: what would you cut? >> mke different choices i guess. >> web when i cut? john: you are cory know the government. >> i would cut i don't know to tell you the truth. john: they don't know? we spend almost $4 trillion and most peopleave no clue about what to cut? i know. i was struck by falling grand falls plan by cuing

entire cabinet departments like a bloated education department. it has long been paid for by states t fed spending $100 -- $100 billion per year is not better just more bureaucratic. who needs a commerce department? got just happens the politicians ge power to help the cronies. so does the energy department they take your money to fund cpani like solyndra, a solar trust, all ofhem went bkrupt. we don't need an energy department. america already has won it is called the free market. if you invent a better feel you will get rich. with those departments on i would go beyond senator paul's planned to cut re and close the labor department it is done by worker a does not need a department for also the agriculture department it is done by farmers and bureaucrats mostly

subsidized the big bususiness. there is so much more that could be cut. in that book just outin per book we cut all the way to serve less. itsn't har it and it wod create psperity that most politians are eager to spend more. check out there website at benefits .gov they suggest i am eligible for 55 of tm dibility, environmental sustainability give me a break. ending handouts to people like me is not austerity it is common sense and right now we're on the road to greece but if we could cut government to sell limited government the founders had in mind poverty would be so where - where our kids uld have to learn about in history books that is our show we will have another show him

thursday night. thank you for watching. [applause] . remember all those dire predictions about those scary mandatory spending cuts? democrats told us they'd send the economy crashing and burning. well, those cuts kicked in, and look what's kicking uu, home sales, home prices, consumer confidence, stocks and even jobs in the d.c. area where those cuts were supposed to hit hardest. so is this all proof we should keep the cuts coming? hi, everybody. i'm brenda butner. this is bulls and bears. welcome, everybody. john, bring on more cuts? >> yes! absolutely.