we've got a society ofelites that not only don'think this is a bad thing, they're raising ds in schools to b workers, not citizens. >> well said. gentlemen, thank you.ome back, s is it here, see you tomorrow >> wheres it? winning streak on wall street goes on, and where is the austerity? let's bring economist frifdrich hey yeck back in the mix. >> what is austerity anyway? >> i do not know. >> i have no iiea.

th fight over austerity. that is our show. tonight. >> now john stossel. john: the word austerity means se-denial, when applied to government it means cutti 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 eure. there are books out like off austerity kills. he said this cic strip explains it all, porays. aliens who want to destroy ear earth. aliens shoot him for reveals the

truth. >> i'mud to be an off the an austarian . unfortunately, only a few people in congress actually take my side and want to cut spending. i am happy to have one of them here with us, senator rand paul. proposed specific cuts, but senator, i'm told if he cut now, when the economy is not great, this will make unemmloyment rse. >> well here is the amazing thing about people saying that we are living in an age of off the austeri, we have not cut any spending in washington. spendingtill is growing, in washington. when they say if you tutt spending -- if you cut snding that will cause lack of economy growth. people spend money, just who spends it, friedn had this he put it well, he said nody spends some one else's money as wisely as they spend their own.

john: you talk with you colleagues about there have been no real cuts, do they look at you like you are wrong? >> no, i 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 cutting our spending we're slowing the rate of growth at best. butteven thatate of growth, you saw they went crazy, the seester, the sky is falling, the sameeek they do, that they sent extra $250 million to egypt. they have enough money to send aroundhe world but not enough for white house tours, that does not pass t smell test. john: have you a plan, you would eliminate commerce, education, energy housing and urban development. you say that to people that frightens them, i assume? >> well, i telllto peopl is that reall what is extreme is

what is going on up here. balancing our budget, ifou talk to a family about balancing their budget, not spend morgue than comes in -- spending more than comes in, itounds like a reasonable notion, i can take money from the economy i it build a bght shiny building say this is what i did with your money. but we don't see what entrepreneurs and individuals would have done with that extra money in the economy that goes back to from friedman says, who spends money more wisely when it is your own or government. govement are waste irsf money they hav no clue has to how to making any, i want to ve more money in the prproductiveconomy. john: createshousands of jobs, we don't know what they might haveone. >> right. but really who can make things better? the private world or the government. we have a great dial of evidence that government wastes money,

misdirts it, i can give you example after example of millions of dollar spent on roll up beef jerky, 5 million-dollars spent on studying colleive action of fish. there has been nousterity here in the united states we have struggled to slowdown the rate of growth of government, and they fought us on the sequester that slows the rate of growth, i think that american people are not buying it the see there is a plate of gamesmanship. >> president sayingo more leveguided white house tou, no more air traffic controllers, most people believe you could move mon aroround. and cover some of the things. one example. how, if the president would have behavinger rationally, if you don't rehire the people who are retiring from government,hat is 6 billion a yea so the sequester was passed a

ar and a half ago. he did nothing. for a year and a half, if he would have instituted that, it would have been $9 billion, a fourth of what we needed to cut. john: thank you senatoraul. now, america has big financial problem in europe, they are worse. this riot was in greece. grce had the most rio, there have been big figs in spain effort gal, portugalleportugal and england. >> there has just been cuts, cults. john: many say europe's troubles prove that the free market arguments wng. the europe tubles gave he

pause. could it be true? cato economist dan mitchell. why haven't the budget cuts worked? >> because tre have not been any that woman from england. the cut, cut, government spending has gone up in the united kingdom every single year. for a least a couple decades, and even since their so-called conservative government took over, and it is rising faster than inflation, you look a frce, governmenttspeing going up. >> we have a graph. france, italy, united kingdom, spain. >> they are increing government spending at a rapid rate. all of a sudden, fiscal financial crisis hit, we have to do austerity, it was not prune back the size, they said let's rae taxes, they are raising taxes, driving private sectors to the dirt, that dii not work, now finally, in greece,

we're seeingga tiny bit of spending cuts, only because they have reached end of the rope, they cannot get m bailouts they raised taxes to a point where the imf said you get less revenue, so, amazingly, like,al the greeks made a tiny spending cut. >> why all of the publicity about draconian cuts, people there experiencing it beliee it. >> the fight in europe is between so-caed austerity crowd and growth crowd but the grth crowd arr paul krugman, keynesianing aning and big speed austerity people want highe taxes, there is nobody in europe that's advancing the position

that senator rand paul was talking about. we have a b expensive ineffit government. if we' more growthe have to shrink burden of government spending. the transfer of resources from private stor to t government that is what hurts your economy. john: the government has no money of its own. >> and all likelihood they will not spend the money as efficiently. >> and the coverage is so insane. the atlantic, a respectable mazine, editor matthew o'brian, the more country has cut, the me unemploent it has, a recovery is worth the deficit. >> i bit he agrees with paul krugman and thinks that more govement spending will help an economy even though i did not work for hoover and roosevelt in the 30s, not for japan 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 advice have is a viue. >> they like to spend. yeah, am with you, will be first in line. ine. >> any good examples? right.untry that has done it >> just go the back from europe, got off the plane today, came here because this show is the best place to be, thealtic countries. estonia, they have done the right thing, they cut government ending, i say cut, i am not talking aut washington thing, we increase spending at% instead of 8%. no, in battle tick countries -- battle ticbaltic county its was. >> those economieses are growin?

>>hey are growing, they recovered, jobs are coming back, they have positive gtp, enomy growth, while the country that have gone wi the tax increasase approach, like italy, spain, greece, portugal, and e cetera, et cetera, they are in recessi recession. moral of the story, you have figure out ways toeduce burde of ggvernment spending and taxes and most country in europe have ttdone that. the bticsre a tiny glimmer of good news. john: back on this continent. years back i 90s canada maae big rea cuts, and prospered. the canyon dolla was worth 70 something cent at theime, now parody with our dollar it works. >> amazing most of thoseuts, actual genuine real spending cuts in canada happened under a labor party governmt. john: a liberal government. >> new zealand did the same thing in 1990s, and actual to

be fair, bill clinton was much better than a lot of reblicans. at least he restrained the growth in spending. republican in congress made a big role in it too. evidence shows if you rtrain the growth of government or better actuay cut government spending, you are freeing up resources for productive sector of the economy that is where you get growth. we have to focus on taking government, which figuring out, how to at lest restrict it so it is growing slower than privacy sector. john: well good luck with that, dancoming up. two economists will argue about austerity. >> if you first, aan who said that must tert o the turty is like debtor's priso

we nt out and asked people a simple question: how old is the oldest person you've known? we gave people aticker and hathem show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living lger, one thing that hasn changed much is the official retirement age. ♪ the questiois how do you make sure you have the money you need to enjoy all of these years.

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

government spending $3.8 trillions now. and sorry that is just theefeds, states and local government spends more, it is too much, every dollar ty spend is a dollar the private sector does not he. free individuals spend cutter that is why cutting governmt spendi is good. but bob kuttner said that austerity is like prison his new book. "debtors prison: the polics of austitrsus posibility." and he wants to cut. so bob i sta with you, we haves there are assistant s the are the national debt as we age, the babyoomers, are you saying we d't need to cut? >> this is a question about deficits in the context of a depressed economy. time to cut deficits is when t economy is in recovery 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 spendin because you need stimulus. jo: mark, respond? >> what we're sfering from today is imprunt fiscal policy, wh the gernment is doing with their irresponsible welfare paymes with interfering with busines and so forth. is kping the private sector, which is the majority stakeholder that should be the focus her 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 dn size - through a difficult down

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

i don't think w should cut spending. john: we hav a national debt now that is 100% about of gdp does that scare you. >> about 70. john: interest rates go up it will be horrible. >> everyone has been wning for 5 years that interest rates are going up, the economy is so dead in tater, that interest rates are not going up. after the war, debt ratioas 0% of gdp higher than today. john: itame sharply down, i was a war, the war ended. our welfare spending is not going to end. >> that gets to my point, i think really important, we are an overl genous welfare program, second -- section 8 hoing, and food stamps, the americans on wfare, they want to wk but we have a sim that system that does not incentivize them to go

back to work, we need to be like ben frankn. he faced financi crisis all his life, he lived bow his means, where is the feder rainy day fund. >> there is nothing wrong with debt, per se, but it has to be done prudencely, in my own life i put 20% down when i bout a home, i payoff my credit card every month, called prudence ney management in governmen we don't have any evidence of prudenceoney mager. john: bob last word. >> as recently as 2001, government pjected an endless surplus. and it was bush tax c, bush rs then deregulation of finance that cated the huge deficits. >> we agree to disagree thank you bob and mark, mark has organized what we calls world's largest gatheng of free min.

freedom fest in las vegas, theme this year is, are we rome? i'll take this show to the road to be in freedom fest in july. and tape a show. tonight, what if you manage your budg like the politics manage their? >> this is a family budget, what do you think about that? they me 24, an snd 35, they lost 10,000 this year. they are already in debt. >> what type of people would do that. >> federal budget, just took some zeros off. >> that a big number. clients are always learning more

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john: think about this family budget. really ugly. income last yea $2400, but a

spent 35,000. incurringal left 11,000 in new debt, they had a lot of old tz. i would say they are highly irresponsible. but this is actually the federal government's budget, i just took off 8 zeros, people on the street had an approprte reactiono that. >> what? that is a lot. >> formula for disaster, our future isismal 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 hostave ramsey helps themselves get out of debt. what youhink about my time squared gimmick? is it fair to the government budget? >> is absolutely fair beuse of a zero is a zero and a mass is math when you spend more than you make you go into debt.

is not rocket science and. john: comparing politicians use sees similarities in their psychology? >> there is. one definitionof maturity is learning to delay pleasure, putting it off. when you are a child you are throwing a fit in the group three -- serial i/o is a maturity. we all have that little kid but as a grown-up we learn to delay pleasure and back away from the table we cannot eat toouch food or spend too much money we learthese things it is calledelf control but when you are imager or in the immature culture yo elect ager people to represent you then y ctinue to spend more than you make. that is a problem with the politicians. john: there has been interesting pshological studies putting a cupcake in front of a kid to save you don't ha one and and and

now you can have a bunch leader but then they follow them 20ears later and the kids who were best ale got to grab the extra treats did better in life consists of 87 exactly. any of us have the 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: talkingto people on th 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. hn: not education? >> that ia tough question whe to cut. john: don't cut this or tha

em know what to cut. but do the people that call of a radio show don't know what to cut out of eir 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 maake choices because it will not go away if i don't change my behavior. john: the people that listen after word they say i am happier now? spending less? >> what is weird is they are happier immediately becse when you have a sense of being a grownup to put on your big boy pants to say i will control my desny, i will control my fe and i and i wte it from impulse out even though i am not out of debt but what i am writing alex is a recipe for christmas 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 taking contr of my future. there is a power in that that is unbelievable it is called a whole. john: thing to do ramsey i wish i had more hope for our federal poticians. , the frederick highjack the economists ces back from the in support of austerity. ♪ [ jack ] its just so frustrating... ♪ the middle of thispecial moment and i need to run off to the bathroom. ♪ i'm fed up with always having to put my bladder's needs ahead of my dauger. ♪ stoda i finally talking to my doctor

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john [applause] the seris debate of austerity stimulusegan 80

yes 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 wos but i would like to think if friedrich hayek heard about the obama stimulus plan he wod have said somethin like this. ♪ the party is over ♪ ♪ are you kiddin conoco it works perfectly fine knockout there was a recession back in 200 no. things could have been worse john: that is what i hear the recession would have been much worse witho stimus spending and when unemployment is still hayek that is the time to spen and jump-start the economy. ♪ john it is an ennine that needs a spark a this makes sense to people so let's

turn to the producers of that rap video that has received millions of views on new tube rs roberts a former mtv producer, keyn argued the economic slowdown is pre th pump like a car? >> it sounds good and3 liticians like it but doesn't actually work? >> when the stimulus plan worked using the keynesian model they said if we did not pass it unemployment could reach eight point* 5% we did and it went overtens of the del was wrong s there is hisrical 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 >> i we would have done

better if we spent me than a happens if the is a world war. >> they argue world war i ended the great pression. but to stimulate private consumptiont is a time of austerit in the real sense of the word. john: they were making tankk >> it a measure economy if you are in the munitions business you did great but the average person if you want to buy the reigerator or car you could not because the steel was used for t other stuff. that is reality government spending crowds out private activity. john: afterrds government's spending went down we went io a horrible recession. >> that i what the keynesian is predicted- predicted a fel 4 as truman pointed out in his discussion aftwards and plan it was high despite that there wre 10 million

soldiers coming back some went to school and a lot of them found new work somehow the economy thririved withou the government's stimulu. >> what is strange about the keynesian approach is they don't sm to care whether value is created by economic activity or not. as a producer i have to eate value for my audience and make somethi pele want to see but in a keynesian world it doesn't matt how you spend the money you could build the bomms are the tanks or al have projects to build appear in it or have alienations. john: ki of that we don't ha a world war but on cnn paul krugman suggested it would be good if we had something like wa >> if we discovered space aliens needed a massive buildup andnflation and budget defits took

secondary places, this would be over in 18 months. >> in a way that speaks for itself, doesn't it? john: lot of back -- economic activity. >> i could sell you my sock and you coulsell back to me and if we kept doing that in a ircular flow to measure it as gdp then we would be amazingly wealthy and t economy would grow. hn: i don't want your socks. [laughter] >> in a keynesian world field is all stimulus it doest 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: talk about austerity. we have tried it and it esn't work? >> where have we ted it? we hear about the united states for the united states gornment over the last four years has not grown as dramatically as as in the past government spending

actually went down a little bit that w at the all-time high. john: now it is predicted a little more because of the sequester. >> can we run a deficit over $1 triion e easing could be pretty keynesian peace. john: but it is n enough. >> evidently. that ishat friedrich hayek made the pot* very well at it is a complex wor 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 a religion of both ses. >> something i fnd offensive is we talk about austerityn the richest nations of the world and the largest governments the world has ever seen that when you talk out 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 we're doing austerity is propulve when you think about it in the broader scope of the global community and the people who really have to figure ut what they will do next. john: with the critics call us as the austerity and it sounds lik austrian economics which some of you know, about and i assume most don't know is there a nnection? it is a play on words to makeunf e aurian economist like friedrich hayek that was skeptical of the keynesian prescription. it is a little jab. i wear it proudly. john: thank you. coming up, i will saul's our deficit problem. but first you and th audience get that quiz -- get to quiz our guest.

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[applause] john: we're bk with your questions f our case no onomist d ross roberts

and john head made the r video. so first from the facebook page has a. bill: defined the end game principles wn deciding what programs to fund or cut? >>or public gos like property rights are good for an economy that type of spending is helpful and some type of physicalnd human capital spending grows education and can be good if done efficiently. but the bulk of the budget today whether europer the u.s. this transferr consumption spending and the evans is that diverts resources om far more producti resources and if you do cost-benefit test and the transfer consumption ending lookg at that types about lay. john: the port and the helpless? that is what the transfer

payments are sposed to be. if you get the private sector growinghe four will be better off than he would much rather be pour in hong kong or singapore because you ha a better future th france for the best y can hope for is the politicians ll for ever catch u on the head to keep you dependentarof the state. >> peopleow more than ever are graduating from university into a terrible job market usually having a degree in something that will not help them. deal think this for job market is reflectitive of just a bad the economy is there a fundamental problem with the educational system how we educate our students? >> it is a personal choice with major and if it is not profitable that i your choi bubut there's nothing wrong with that i don't think that knowg about poetry could lp you to get a job that

makes you a beautiful father but it should not be subsidized as much as is we subsidize people ttking things that are not practical that means the people making those oices are not using their own money. that is a mistake. >> nobody has brought up entitltlements i don't see how they cabe sustained with government, a city, the employees at ge lifetime health insurance and pension, where does the monecome fr? >> with the federal government level it is about medicare and medicaid and social security i is about health care entitlement but normally i of bill was gloom and doom but the house of representatives in 20112012 voted forntitlement reform of medicaid and medicare with a fairly substantive way and they got reelected they are suffering at ak

have sobered up and realize looking at the calamity in europe we have to address the long run fiscal problems and unresained entitlements for once in my life i will sound optimist >> 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 because you lok your brother in the face because if he had a plasma screenv while unnmployed it is harder tdo that when you know, the people that are supporting you. there is mo to this than just what we will cut the wheat allowed to merge after that.. john: to counter your optimism from twitter a file

clerk says is untrue this austerity will only go oto hurt the pork? >> we like to think it does that most government spending goes to the rich and no ceople. john: food stamps and medicaid. >>hat is a tiny portion there's a lot of things to cut before we get to the poor corporate welfare or in time of programs that go to rich people why should everybody contribute to social securit and every by the get someoney back? reserve for the people who are poured it is not to pay for health care and retiment whore able. >> but theyaid it enurages pople to not to say 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 governmentto decide responsibly what to cut and what not to? [llughter] >> that is a great question. we often talk about the government as if it is the person who decides of course, there is no single the cider and it is the erging 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. i will show you how to cut

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johnif 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 almost

$11,000 in debt. >> facias stop spending their money. >> ty should get their priorities bennett -- straight from what they need to spend their money. john: this is the federal budget actually i took off the zeros. >> battle think there is an way we can make thatp. >> crazy. john: what would you cut? >> that is a tough question. john: what would you cut? >> make different choes i guess. >> web when i cut? john: you are cory knowhe government. >> i would cut i don't know to tell you the truth. john: they don't know? we spend almost $4 illion and most people have no clue about what to cut? i know. i was strucky falling grand falls plan by cuing

entire cabinet departments like a bloated education departme. it has long been paid for by states the fed spendg $100 -- $100 billion per ye is not better just more bureaucratic. who n needs a commerce department? got just happens the politicians get power to help the cronies. so does the energy department they take your money to fund companies like solyndra, a solar trust, all of them went bankrupt. we don't need an energy department. amera 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 plaed to cut mo and close the labor department it is done by workers a does not need a department for also the agriculture department it is done by farmers and bureaucrats mostly

subsidized theig business. there is so much more that could be cut. in that book just out in paper book we cut all the way to serve less. it isn't hard it and it woulcreate prosperit that most politicians are eager to spend more. check out the website at benefits .gov they suggest i am eligible for 55 of them disability, environmental sustainability give me a break. ending handouts to people like me i not austerity it is common sense and right now we're on the road to greece but if we could cut government to sellimited gornment the founders had in mind poverty would be so where -- where our kids would have to learn about in history books. that is our show we will have another show him

thursday night. thank you for watching. [applause] weekend. >> hello, everybody, i am gerri wiis. tonight on "the willis report dennis: how safe are these life-saving drugs? also, the ugly fight over a family forte. and in fashion from the must-have accessies of summer. >> this is gorgeous. we are watching out for you tonit on "the willis report."3 ♪ ♪ ♪ gerri: we have all of thatn