This is a rush transcript from "Glenn Beck," June 29, 2009. This copy may not be in its final form and may be updated.
GLENN BECK, HOST: The state of California is broke. I know that comes as a complete — what? Where is that? That came right out of the blue! There is only one man who can save California. Barney Frank to the rescue!
You got to be kidding me! Barney Frank wants to use TARP money to bail out the Golden State. Frank says, quote, "Banks are starting to pay back money from the TARP sooner than anticipated. There is some economic justice — I love it — economic justice in taking money used to help banks to fix problems the banks had, themselves created."
Former Reagan economic advisor Art Laffer joins me now.
Art — he just, Art, and so you know, he just asked me during the break, "Glenn, what would you do if it wasn't for all of these problems," and I said, "I'd sleep at night and my eye would stop twitching."
BECK: I mean, holy cow. They're going to bail out California, aren't they?
ART LAFFER, FMR. REAGAN ECONOMIC ADVISER: I hope so. I mean, it would really be amazing if they did. I mean, it would just — it would just — it would just accelerate their demise.
BECK: You know — but Art, isn't their demise our demise?
LAFFER: No, it is not.
BECK: OK, that makes me feel good.
LAFFER: No, it makes you free.
LAFFER: Oh, it should make you feel good. If the — if the government of California went bankrupt, that would really free the citizens of California to prosper. It's exactly what happened with Proposition 13 in 1978. You know, California was in the tank, and it was really Prop 13 that brought us out. Without something like that, California will never come back.
LAFFER: They'll just grab ever and ever larger amounts.
BECK: OK. But hang on just a second.
BECK: If we bail out California, then aren't all of California's problems just shifted to us and nobody's really learned a lesson here?
LAFFER: Oh, I think we have to wait until we have the problem as well before we can get them under control in Washington. You know, this is not something that's going to last forever, Glenn. And the faster these people get into trouble, the sooner we'll have a return.
I used to tease the real president, if you'll forgive me, Ronald Reagan. I used to say that without Jimmy Carter, there would be no Ronald Reagan.
BECK: That's true. That's true. That's true.
Let me — I've got so many lines, but I'm not — this is called self- restraint. That's what this is. Children, learn from this moment — self- restraint. Some things should remain unspoken.
They're talking about declaring California an economic disaster area. In fact, Barney Frank said that the — that quote that I just gave you was a response to the Katrina-like conditions in California. A little insulting?
LAFFER: More than a little insulting. It's just terrible. I mean, these are problems that California brought upon itself. If you look at Steve Moore, and I know you know Steve Moore really well.
LAFFER: He's a wonderful economist. He and I did a book together on the states. In fact, we've done two of them. And all the zero income tax states are nowhere to be found in the catastrophe areas. All the highest tax states, the worst-run states are the ones that Barney Frank wants to bail out.
These people brought this problem on themselves and we really shouldn't bail them out, to be honest with you.
BECK: OK. But I just want to look at all — I just want to look at all of the states here that are having problems. They are now borrowing from the treasury.
Can we put this up?
These are all of the states that are now borrowing money from the treasury because they just can't meet their unemployment. You know, Art, I trust you to make me feel better because your last name is Laffer.
LAFFER: Oh, my goodness.
BECK: But, I mean, China and all the BRIC countries are all saying, we can't — we got to get out of the dollar because there is no end in sight .
LAFFER: That's true.
BECK: . In America's fiscal insanity. So, I again ask you: how are their not — how are their problems not ours? I mean, how long can it last before the rest of the world says "enough"?
LAFFER: Well, you know, if you were Chinese or you were one of these BRIC nations, Glenn, that's the first thing you'd say, too.
BECK: It is.
LAFFER: I mean, why should China want — why should China want to take our debt when you know what's going to happen?
BECK: But, by the way, Art .
LAFFER: I know what's going to happen.
BECK: Art, just go — help me. I'm really — I'm struggling here. I'm a self-educated guy. Help me out.
BECK: I'm just trying to figure it out, because I had a conversation with a friend of mine this weekend about this. And I said, "Look, if I'm China, I say — just thinking about it if I'm just the country of China and I'm an investor, I have bought a lot of American stuff, and I've got a lot of their debt and I would say — my advisor would come in and say, `I don't think they're good for the money.'" And I'd say, "OK, listen, just start divesting yourself, slowly though. Don't panic anybody. Just slowly get out of it."
BECK: "Buy other things when we get out of those things." At some point, I'd just say, "I'm out." When that happens, what does that mean for us?
LAFFER: Well, China can't get out in a moment. I mean, it's got way too much debt to be able to sell it all in a weekend, even a month or a year. What they've got to do is work at negotiating and getting guarantees from us, moving into other instruments like SDRs or other like country's debts or whatever, converting it into real producing assets.
I mean, they've got to work slowly to get out of this huge problem of owning too much of the United States when we have very serious unfunded liabilities. I think "USA Today" put it at $65 trillion, our unfunded liabilities. That compared to our tax receipts (VIDEO BREAK) per year. These are problems that China understands.
BECK: You know .
LAFFER: And they've got to get out of this debt. If I were Chinese, I'd want to be out of it.
BECK: Art, have you picked up my book "Common Sense" yet?
LAFFER: I have.
BECK: You have? You've read it?
LAFFER: I haven't read it yet, though. No, I have not.
BECK: Because that number $65 trillion is wrong. It's $99 trillion. Read it.
LAFFER: The federal government .
LAFFER: I was trying to be conservative.
BECK: No, I know. No, I know. I'm just trying to be a realist. It's actually $99 billion. It used to be $65 trillion.
BECK: Now, it's $99 trillion. And if you look at .
LAFFER: That's amazing.
BECK: . Just one chapter just on — there's no way to get out. There's no way .
LAFFER: There is no way.
BECK: . To get out. So — all right.
LAFFER: There is no way to get, you're right.
BECK: Well, that's not.
LAFFER: And California can't get out unless Barney Frank postpones it for a week or two.
BECK: All right. OK. Thank you very much, Art. I appreciate it.
LAFFER: Thank you, Glenn.
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