us this hour on "at risk: the cyber threat". i'm connell mcshane, reporting from new york. ome bacs is it here, see you tomorrow >> where is it? wiing 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. the fight over austerity.

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

truth. >> i'm proud to be an off the an austarian . unfortunately, only a few people in congress actually take my side and wt 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 worse. >> well here is the amazing thing about people saying that we are living in an age of off the austerity, we he not cut any spending in washington. spending still is growing, in washington. when they say if youutt spending -- if you cut spending that will cause lack of economy growth. people spend money, just who spends it, friedman had this he put it well, he said nobody spends some one else's money as wisely as they spend their own. john: you talk with your

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 growth at best. butteven that rate of growth, you saw they went crazy, the seester, the sky is falling, the same week they do, that they sent extra $250 million to egypt. they have enough money to send around the world but not enough for white house tours, that does not pass the smell test. john: have you a plan, you would eliminate commerce, education, energy, housing and urban devepment. you say that to people that frightens them, i asse? >> well, i telllto 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 budge not spend morgue than comes in -- spending more than comes in, it sounds 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 we don't see what entrepreneurs and individua would have done with that extra ney in the economy that goes back to from friedman says, who spends money more wisely when it is your own or government. government are waste irs of money they have no clue has to how to making any, i want to live more money in the prproductive economy. john creates thousands of jobs, we don't know what they might have done. >> right. but really who can make things better? the private world or the government. we have great dial of evidence that government wastes money,

misdirects it, i can give you example after example of millions of dollar spent on roll up beef jerky, 5 mllion-dollars spent on studying clective action of fish. there h been no austerity 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 they s there is a p plate of gamesmanship. >> president saying no more level-guided white house tours, no more air traffic controllers, most people believe you could move money around. 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, that is 6 billion a year. so the sequester was passed a

year 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 senator paul. now, america has big financial problem in europe, they are worse. this riot was in greece. greece had the most riots, there have been big fights in sin effort gal, portugalleportugal and england. >> there has just been cuts, cult john: many say europe's troubles prove that the free market argument is wrong. the europe troubles gave he pause.

could it be true? cato economist dan mitchell. why haven't the budget cuts worked? >> because there have not been any that woman from england. the cut, cut, government spendi has gone up in the united kingdom every single year. for at least a couple decades, and even since their so-called conservative government took over, and it is rising faster than inflation, you look at france, governmenttspending going up. >> we have a graph. france, italy, united kingdom, spain. >> they are increasing government spending at a rapid rate. all of a sudden, fisl financial crisis hit, we have to do austerity, was not prune back the se, they said let's raise taxes, they are raising taxes, dving private sectors into 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 more bailouts they raised taxes to a point where the imf said you get less revenue, so, azingly, like,al the greeks made a tiny spending cut. >> why all of the publicity about draconian cuts, people there experiencing it belve it. >> the fight in europe is between so-called austerity crowd and growth crowd, but the growth crowd arr paul krugman, keynesianing and ing and big sed austerity people want higher taxes, there is nobody in europe that's advancing the position

that senator rand paul was talking about. we have a big expensive inefficient government. if we' more growth we have to shrink burden of government spending. the transfer of resources from private sector to the 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 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 government spending will help an economy even though is did not work for hoove and roosevelt in the 30s, not for japan in 90s not for bush in 2008, not

fo oba in 2009, it never worked anywhere. john: people believe it. >> politicians love the theory. it tells them their advice hav is a virtue. >> they like to spend. yeah, i am with you, i wil be first in line. line. >> any good examples? any coury that has done it right. >> i just go the back from europe, got off the plane today, came here because this show is the best place to be, the baltic countries. estonia, they have done the righ thing, they cut government spending i say cut, i am not talking about washington thing, we increase spending at 6% instead of 8%. no, in battle tick countries -- battle ticbaltic county its was. >> those economies are growing?

>> t are growing, they recovered, jobs are coming back, they have positive gtp, economy growth, while the country that have gone with the tax increase approach, like italy, spain, eece, portugal, and et cetera, et cetera, they are in recessi recessn. moral of the story, you have figure out ways to ruce burden of ggvernment spending and taxes and most country in europe have nottdone that. the baltics are a tiny glimmer of good news. john: back on this continent. years back in 90s canada maae big real cuts, and prospered. the canyon dollar was worth 70 something cent at the time, now parody with our dollar it works. >> amazing most of those cuts, actual genuine real spending cuts in canada happened under a labor party government. 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 republicans. at least he restrained the growth in spending. republican in congress made a big role in it too. evidence shows if you restrain the growth of government or better actually cut government spending, you are freeing up reurces 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 least restrict it so it is growing slower than privacy sector. john: well good luck with that, dan mitchell. coming up. two economists will argue about austerity. >> if you first, a man who said that must tert off the turty is like debtor' prison.

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john: iay, bring on what the punditting calling austerity. let'sut 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 they spend is a dollar the private sector does not have. free individuals spend cutter that is why cutting government spending 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 are the national debt. as we age, t 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 dicits is when the 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 spending becae you need stimulus. john: mark, respond? >> what we're suffering from today is imprudent fiscal policy, what the government is doing 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 focus here, with employment and so forth, they are the key. we have to really encourage. john: what abou don'to poi -- bo point? >> tre 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

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, prudent 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? >> the time is whenhe 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, economists worried about how the fed will conduct monetary policy, when have paid off national debt, i am not the sort of guy who says we should always have a deficit, this is not a time to tighten your bbl you may agreee i don't think we should rse taxes.

i don't think we should cut spending. john: we have aational debt now that is 100% about of gdp does that scare you. >> about 70. john: interest rates go up it wl be horrible. >> everyone has been warning for 5 years that interest rates are going up, the economy is so dead in the water, that interest rates are not going up. after the war,ebt ratio was 120% of gdp higher tha today. john: it came sharply down, it was a war, the war ended. our welfare spending is not going to end. >>hat gets to my point, i think really important, we are an overly generous welfare program, second -- section 8 housing, and food stamps, the americans on welfare, they want to work but we have a sim that system that does not incentivize them to go

back to work, we need to be like ben franklin. he faced financial crisis all his life, he lived below his means, whe is the federal rainy day fund. >> there is nothing wrong wh debt, pere, but it has to be done prudencely, in my own life i put 20% down when i bought a home, i payoff my credit card every month, called prudence money management in government we don't have any evidence of prudence money manager. john: bobob last word. >> as recently as 2001, government projected an endless surplus. and it was bush tax cut, bush wars then deregulation of finance that created the huge deficits. >> we agree to disagree thank you bob and mark, mark has ornized what we calls world's largest gathering 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 yr budget like the politics manage their? >> this is a family budget, what do you think about that? they make 24, anpend 35, they lost 10,000 this year. they are already in debt. >> what type of people would do that. >> federal budget, i just took some zeros off. >> that a big number. @í0x;ñt

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

spent 35,000. incurringal left 11,000 in new debt, they had a lot of old detz. 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 anppropriate reaction to that. >> what? that is a lot. >> formula for disaster, 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 t the government budget? >> is absoluty fair because 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 definition of 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 maturi. we all have thatittle kid but as a grown-up we learn to delay pleasure and back away from the table we cannot eat too much foodor spend too much money we learn these things it is called self control but when you are imager or in the immature culture you elect imager people to represent you then you continue 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 have one and and and

now you can have a bunch leader but then they follow them 20 years later and the kidsho were best able got to grab the etra 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 w will win later. in other words, the care it has toe real. john: talng 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: not education? >> that is a tough question where to cut. john: don't cut th or that

item know what to cut. but do the people that called of a radio show don't know what to 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 vation but i have $110,000 of student loan debt that has been around so long i think it is a pet. i have to make choices because it will not go away if i don't change my behavior. john: the people that listen to after word they say i happier now? spending ls? >> what is weird is they are happier immediately because when you have a sense of being a grownup to put on your big boy pants to say i will control my destiny, i will control my life and i will not live from impulse to impulse and i write it out even though i am not out of debt but what i am writing alex is a recipe for christmas and i haveo

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

[heart beating] [heartbeat continues] [heartbeat, musi playing louder] ♪ i'm feeling better since you know me... ♪ announcer: this song was eated with heartbeats of children in need. find out how it can help frontline health workers bring hope to millions of children everybeatmatters.org. music i want some more. what's he doing? t he can't. look at him! it's just not done.

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

years ago with the economist john maynard keys and say we can spend the wayack to prosperity and friedrich hayek said it no way. not those exact words but i would like to think 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 works 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 worse without stimulus spending and when unemploynt is still hayek that is the time to spend and jump-start the economy. ♪ john: it is an ennine that needs a spark and 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 ross roberts a rmer 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 worked using the keynesian model they said if we did not pass it unemployment 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 fancytatistical 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 done

better if we spentore than a happens if there is a world war. >> they argue world war ii ended the great deession. but to stimulate private consumptio 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 in thmunitions business you did great but the average person if you want to buy the refrigerator or car you could not because the steel was used for the other stuff. that is reality government spending crowds out private activity. hn: afterwards government's spending went down we went into a horrible recession. >> that is what the keynesian is predicted -- predicted a fell 40% as truman pointed out in his discussion afterwards ad plan it was high despite that there were 10 million

soldiers coming back some went to school and a lot of them found new work somehow the economy thrived without the government's stimulus. >>t is strange about the keynesian approach is they don't seem to care whether value isreated by economic activity or not. as a producer i have to create value for my audience 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 dot have a world war but on cnn paul krugman suggested it would be good if we had something like a war. >> if we discovered space aliens needed a massive buildup and inflation and budget deficits took

secondary places, this would be over in 18 months. >> in a way thatpeaks for itself, doesn't it? john: a lot of ba -- economic activity. >> i could sell you my sock and you could sell 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 the economy would grow. john: i don't want your socks. [laughter] >> in a keynesian world field 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: talk 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 as as in the past government spending

actually went down a little bit that was at the all-time high. john: now it is predicted a ttle more because of the sequester. >> can we run a deficit over $1 trillion the easing could be pretty keynesian peace. hn: but it is not enough. >> evidently. that is what friedrich hayek made the point* very well that iis a 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 nation 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 lly is crumbling because

they are hungry and the culture of calling what we're doing austerity is propulsive when you think about it in the broader scope ofhe global mmunity andhe people who rely have to figure ut what they will do next. john: with the critics call us as the austerity andit sounds like austrian economics which some of you know, about and i assume most don'tknow is there a connection? it is a play on words to make fun of the austrian economist like friedric 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 the audience get that quiz -- get to qz our guest.

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

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

payments are supposed to be. >> if you get the prite 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 fure than france for theest you can hope for is the politicians will f ever catch you on the head to keep you dependent ward of the state. >> people now 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 reflectivef just 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 th is your choice. but there's nothing wrong with that i don't think that knowing about poetry could help you toet a job that

makes you a beautiful father but it should not be subsidized as much as it is we subsidize people ttking things that are not practical that means the people makg those choices are not using their own money. that is a mistake. nobody has brought up entitlements. i don't see how they can be sustained with government, a city, the employees that get lifetime health insurance and pension, where does the money come from? >> with the federal government level it is about medire and medicaid and social security 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 of medicaid andedicare with a fairly bstantive way and they got reelected in 2012 and that and think they are suffering at all

have sobered up and realize looking at the calamity in europe we have to address the long run fiscal problems and unrestrained entitlements for once in my life i will sound optimistic >> those setter, the syrians a lot of times they not talk that we belie cvil society should be larger looking back to history y can find there is a rich civil society that took care of our brother. >> natalie did they do the benefits that th did it in such a way that is local and help people to account because you look your brother in the face because if he had a plasma screen tv while unnmployed it is harder to do that when you know, teople that are supporting you. there is more to this than just what we ll 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 on to hurt the pork? >> we like to think it does that most government spending goes to the rich and nolass people. john: food stamps and medicaid. >> that 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 whyhould everybody contribute to social security and everyy the get some money back? reserve for the people who are poured it is not to pay for health care and retirement who 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 dcide 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 emerging progress of the members of congress and it isot 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

government. government. [applause]

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$11,000 in debt. >> facias stop spending their money. >> they 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 any way we can make that up. >> crazy. john: what would you cut? >> that is a tough question. john: what would you cut? >> make 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 people have no clue about what to cut? i know. i was struck by falling grand falls plan by cutting

entire cabinet departments like a bloated education department. it has long been paid for by states the fed spending $100 -- $100 billion per year is not better jt more bureaucratic. who 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. 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 more 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

subsided the big 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 would createrosperity that most politicians are eager to spend more check out there website at benefits .gov they suggest i am eligible for 55 of them disability, environmental sustainability gve me a break. ending handouts to people like me is not austerity it is common sense and right now we're the road to greece but i we could cut government to sell limited government the founders had in mind poverty would be so where -- where our ks would have to learn about in history books. that is our show we will ha another show him

thursday night. thank you for watching. pplause] melissa: i'm melissa francis, and here's what's "money" tonight. we're honing in on the power of money. >> meredith whitney breaks out her crystal ball. from unemployment to the housing to the fed. she will give us a forecast you only get right here. a former trader memoir most the roof off wall street. drugs insiderred trading you name it. how is that driving scandals at laces like sac capital? the author gives us juicy details. it has been a wild few months for some of the country's biggest ceos. are they still the best guys for the job. our power panel tells us if they're a buy, sell or hold. even when they say it's not, it is always about