European Parliament Member Disagrees With Spending to Get Out of a Recession

This is a rush transcript from "Your World With Neil Cavuto," March 25, 2009. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

DANIEL HANNAN, MEMBER OF BRITISH PARLIAMENT: The truth, prime minister, is that you have run out of our money.

(END VIDEO CLIP)

NEIL CAVUTO, HOST: Get to know this fellow, and get to know him fast.

They are already calling him the shout heard round the world, so jolting, so jarring, so stunning, that, within minutes of delivering cryptic comments so stinging, he was becoming viral, so quoted so fast that this 37-year-old rising conservative member of Parliament who decided to take on his country's prime minister on spending had become something else: A global YouTube phenomenon, and, to hear some tell it, maybe a future prime minister.

And it all started with this.

(BEGIN VIDEO CLIP)

HANNAN: It's that you're carrying on willfully, worsening our situation, wantonly spending what little we have left. Last year, in the last 12 months, 100,000 private sector jobs have been lost, and yet you've created 30,000 public sector jobs.

Prime minister, you cannot carry on forever squeezing the productive bit of the economy in order to fund an unprecedented engorgement of the unproductive bit.

You cannot spend your way out of recession or borrow your way out of debt.

(END VIDEO CLIP)

CAVUTO: Thirty-seven years old. With us now, the man who rocked the world, now on "Your World." Daniel Hannan joins me exclusively from Strasbourg, France. Mr. Hannan, very good to have you.

HANNAN: Good evening, Neil. It is great to be here.

CAVUTO: Did you expect this would get the sort of viral reaction that it did?

(LAUGHTER)

HANNAN: No, certainly not.

I suppose what it was is that a lot of people had wanted to say something like that to the guy. You have lots of elections in the U.S. It's one of the things I really like about your system. You know, you vote for the guy who collects the rubbish. You vote for the school board. You vote for the sheriff.

Nobody has elected Gordon Brown. He came in after a kind of party deal. There wasn't even an internal Labor Party election to make him prime minister. And he has never faced the electorate.

So, I guess a lot of people had pent-up feelings, so they wanted to tell him what they thought. And, you know, you don't really get chance to do it. So, I guess the next best thing is, is, you watch some other guy doing it for you. And that is maybe what — what people liked.

CAVUTO: Well, you know, others have been enraged about spending, not only in your country, Mr. Hannan, but in our country, and, globally, this unrest about maybe we're going a little crazy with all this spending.

But you seemed to articulate in few-minute speech what others have been spending days, weeks and months whining about. And I guess they're likening it to sort of a Davy Jones moment for the world. And I'm wondering whether that was your intention, or you just hit a nerve at the right time.

HANNAN: Yes, you know, it's the funniest thing.

In the immediate aftermath of the — the banking collapse, there was an almost immediate consensus among all the media, among the politicians, that something had to be done, all right?

And it is the hardest thing in politics, so why — you know, there is not very much we can do about this. But the do-nothing option, if you like, which barely got a look-in — I mean, it sure got a look-in on FOX News, but it didn't get a look-in, in many other places, now turns out to be a pretty majoritarian position among the people who are paying for the whole thing.

So, you had this kind of rift between the political parties on one side, and, their voters everywhere — you know, around the world, not just in Britain and the U.S. And in those early days of the — of the financial crisis, it was a brave politician who would stand up and say, listen, you know, interest rates were held too low for too long. There's not much we can do to stop this. Maybe we can rescue victims, but we can't actually legislate against recession.

And, so, we kind of — we talked ourselves into this ridiculous auction of, something must be done. OK, that is something. I will do that. Yes, that is something even bigger, so let's do that.

And, of course, we have now got to the stage where we're — we're hugely worsening the situation. The recession is happening anyway, but taxpayers are going into it with a much bigger burden.

CAVUTO: And not only in your country, but — but in all countries.

And, if my memory serves me right, in looking a little bit, researching you, as I did, in the middle of this whole financial freefall, there was a sort of global consensus that you alluded to Mr. Hannan, where the government has to do something.

And I think you had coined phrase, well, why? Why does the government automatically have to do something? But it is a point that our own president, Barack Obama, is bringing with him when he travels to Great Britain next month for the G-20 conference, along with your prime minister, to coordinate this global action, this sort of a global spending plan, to — to fix what globally ails us.

Are you saying, that is a bad idea? We will make a bad thing worse? What?

HANNAN: Definitely.

You know, all the guys watching this program will know people who are in debt. You know, they have got five credit cards. They have overspent on them. And what would be the advice that you would give to somebody in that situation? You would say, curtail your spending. You know, try and live within your means. Keep your budget down.

But, when it is a government, the advice is, no, spend more. There's this brilliant magic wands called Keynes. And it means that, the more you spend, the more you borrow, the better you're going to actually make the economy.

Well, you have to be either a banker or a politician to think that way.

(LAUGHTER)

HANNAN: Fortunately, ordinary people are kind of brighter than that. You know, they have seen through it. And they can apply the lessons that they see in their own lives to national governments.

The trouble, as I see it, Neil, is this. When something like this happens, a big crisis comes out of the blue, nobody was expecting it, and you have got two — two sides of the argument. You have got one politician who says, I know, I have got the answer. And then you have got another one who says, well, listen, I'm sorry about this, but there is — there's not much we can do.

In that atmosphere, your instinct is to let the first guy try.

CAVUTO: Right. Right.

HANNAN: You know, give him a chance.

But what is — what is the outcome that? The outcome that is that we are — you know, the United Kingdom is now more indebted than any country in South America. You know, we have a — we have a bigger deficit — to find a debt of the level that we have now got, you have got to go back to the end of the Second World War, right?

And to put it another way, Gordon Brown has just spent as much as Winston Churchill spent to beat the Nazis with, with a rather obvious difference that we haven't just been fighting the Second World War.

CAVUTO: Well, we can actually beat you on the government spending, even on the per capita front. So, we have you beat there.

But here's where — where there is an interesting question, because I know your reputation, as being a sort of this young rising maverick, such a maverick, even among conservatives, that, if memory serves me right, sir, you had supported Barack Obama to be president, not that you could vote in the election.

But what was your argument for Barack Obama over John McCain, if you now know that — and he didn't exactly hide this — that he would be quite a big spender?

HANNAN: Yes, you're making sure I'm never going to be asked back on to FOX News.

(LAUGHTER)

HANNAN: I'll tell you what the — I'll tell you what the argument was.

The argument was — and I kind of still think this. And this may be something that you see a bit more clearly from abroad. It is really a unfair thing that this should be so, but the fact of the matter is that the election of a mixed-race candidate who had opposed the Iraq war from the beginning was going to make your country a lot more trusted and popular and, therefore, authoritative around the world.

And you know that that has happened. But you're right. We have paid a price for that. You have paid a price for it.

Let me — let me — the only thing I would kind of say in his defense is, I think the Republican Party didn't exactly have a brilliant record on this. And one of the reasons why I wasn't wild about the McCain campaign, even though I'm a — you know, more loyal generally to the Republican Party, more uncomplicatedly loyal, shall we say, than I am to my own, is that I think GOP had drifted away in the Bush years from what ought to have been its core principles.

It had become the party of federal deficits. It had become party of big spending. It had become the party of trampling over states' rights, particularly on the gay marriage amendment. And it had become the party of external protectionism with — with the steel tariffs.

And, then, of course, laterally, it became the party of nationalizations and bailouts with the first of the bailout packages.

Now, OK, here is an argument for Obama that maybe will go down a little bit better with some of your viewers. He has already united the Republicans around a more sensible economic policy.

CAVUTO: Well, let me ask you about his policy. Let me ask you then about...

(CROSSTALK)

HANNAN: ... Republican congressmen voted for the Bush bailout, but they opposed his.

CAVUTO: Right. Very good point.

But let me ask you now about his policies. He is going to be going to your country. I know you're in France right now. But he is going to be going to your country to say, we, together, have to address what is this global crisis.

And it is pitching your prime minister against the likes of Angela Merkel in Germany, who does not share that. In fact, she has said that, if governments spend willy-nilly, it can lead to hyperinflation, and, if her memory serves her right, the last time that happened in Germany, a guy with a mustache took over. And — and she doesn't want to go back there.

HANNAN: Yes.

CAVUTO: But — but that is the great divide. And I'm wondering whether it's going to be a real tense meeting next week? What do you suspect?

HANNAN: I mean, you're right.

Obama and Brown are pushing for an especially bad policy. Let's not let others off the hook. I mean, all the governments have been doing this stimulus, bailout...

CAVUTO: Right. Right.

HANNAN: ... spend your way out of a recession. So, again, they are at an extreme end of the bad policy, but they're not alone in it.

And the French and the German governments have their own bad solution, which is more regulation of the markets, which is going to make it even harder to kind of crawl our way out of this place.

You would be amazed how much potency the name Obama still has abroad. The — the big argument that Brown is using, look, I can't be making a terrible mistake here, because Obama is doing same thing. And that's like a — like a kind of magic amulet that wards off any criticism. But, of course, the policy is going to get catch up with him and with us.

(CROSSTALK)

CAVUTO: And you think that the cure is going — the cure is going to be worse than the disease.

And what you articulate, if we can show some of your remarks back in this country — we want to just show you addressing this group.

HANNAN: Sure.

CAVUTO: What galvanized people's attention from this meeting is that a lot of them said, Mr. Hannan, fairly or not, a star was born. And they said that you had spoken for a movement that has been sort of blindsided.

Now, whether that is fair or not, I don't know. I don't want to puff your ego up. You seem like a pretty stable, rational, level-headed guy, but that they said, we're — we are looking at the next prime minister.

What did you think of that — that buzz, that YouTube sensation your remarks created?

HANNAN: It's really flattering.

(LAUGHTER)

HANNAN: I don't think I'm ever going to be a prime minister.

And one of the reasons why is basically I — basically, I think that governments shouldn't do things.

You know, I will tell you, you said I supported Obama.

(CROSSTALK)

CAVUTO: You have got to whisper that. See, Mr. Hannan, you have got to whisper that.

(CROSSTALK)

CAVUTO: I mean, very few politicians say government shouldn't do things. That gets to be dangerous.

HANNAN: Right.

(LAUGHTER)

HANNAN: The guy I would have really voted for, had he been a candidate, the guy I would have really voted for in your election is Ron Paul.

CAVUTO: Interesting.

HANNAN: I like his interpretation of the Constitution. I like his — his — his view on fiscal policy. McCain had done a number of things that annoyed me, not least his support for closer European integration.

But, you know, hey, I don't have a vote in your country. It is not for me to say these things. But, you know, it is so hard for a politician to say, I don't know, that, you know, there's no answer to this. Over to you guys.

And that is a — and that is kind of partly a media thing. It's partly a modern expectation thing.

But I heard a really interesting story from a guy who was a minister in New Zealand when they had a banking crisis. It was when they had taken away the subsidies from their farmers. The land prices collapsed. Farmers were in negative equity. The bankers came to the government and said, we need a bailout. If we don't get a bailout, there's going to be a meltdown.

And the New Zealand government said, you know what, guys? That is your problem.

And you know what happened? The banks went away and said, yes, this is our problem. We had better sort this out.

And, so, they — they rescheduled the mortgage payments. They gave people interest-only options and this kind of thing. Within three years, land prices had recovered, no crisis.

Now, here's the real point. If the government had given in and had the bailout that the banks were asking for, it would have almost certainly triggered precisely the kind of crisis that they were aiming to avoid.

And, so, it is a tough argument to make.

(CROSSTALK)

CAVUTO: Well, you know, we say in this country, Mr. Hannan...

(CROSSTALK)

HANNAN: ... nothing at all.

CAVUTO: All right, I apologize. I know there is this delay here, and I apologize for that.

But there's an argument in this country that New York is not New Zealand, that when a U.S. bank is on the verge of collapsing or folding, we have to do something. That has been the argument of both the last Republican administration and this one.

If you were a leader either there or here in the same situation, would you have said, let 'em rip?

HANNAN: Yes, I would.

I mean, the trouble is that both of your parties, like both of ours, were allowing their policy to be written by bankers, who are not disinterested in this.

And don't make the mistake that a lot of people on the left make of thinking that financiers are kind of for free trade. They're really not. All financiers are monopolists. All financiers will grab a subsidy if they can.

Every big businessman, left to himself, is a corporatist. And the beauty of the capitalist system is, it doesn't let them indulge that instinct. Or, at least, it didn't until the last six months, when we have suddenly turned the clock back to this kind of — this economic consensus that prevailed between the 1930s and the 1970s, with disastrous consequences.

(CROSSTALK)

CAVUTO: Mr. Hannan, thank you very, very much. We're all going to be watching you a lot more closely than we have in the past. I don't know if that is good or bad.

But, sir, very good to have you. Thank you very much.

HANNAN: Thank you, Neil. It's a pleasure.

CAVUTO: Daniel Hannan, watch him closely. All right.

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