This is a rush transcript from "Glenn Beck," December 28, 2009. This copy may not be in its final form and may be updated.

CHARLES PAYNE, GUEST HOST: Hello, America.

Do any of these sentences sound familiar: We're trying to bail out the people or we're trying to restore the hope and confidence that they had. And, we're trying to keep kids in school. And, of course, we're trying to put food on their tables.

These sentences tell us why Americans have to be afraid of this administration and government as an extension of the notion that they know better than we do, so they're obligated to shepherd us like little children running across the street in Lower Manhattan.

You know, in Lower Manhattan, some of the schools recently came under fire for using leashes to control large classes of kids, particularly pre-K kids. Now, I'm not sure how that issue was resolved. I've got to be honest, it looked a little inhuman to see these tots bouncing around, chained together, even though they might have been safer. But those are pre-K kids, not adults.

The rules, regulations and endless field trips combine with limited opportunities and higher taxes, serve to keep adult Americans on a leash. In the process, our dreams are yanked back and, eventually, recede so far into the back of our minds we forget we have them anymore.

You don't restore confidence by giving someone a welfare check. People that have worked all their lives don't become giddy over extensions of unemployment benefits. The extension of such benefits sends several messages, including things aren't getting better. Oh, but let the government put food on your table and you can pay us back later by keeping us in office.

For example, Charlie Rangel is an old-time New York liberal who still hasn't seen the destructive nature of big government replacing the innate skills and desire that God blessed us all with at conception.

No, Representative Rangel, we do not want the government to put food on our table.

Paying teachers more money has nothing to do with keeping kids into schools. It's the cities with the largest percentage of welfare recipients that are actually witnessing the biggest spikes of student dropouts. When is the message going to sink through?

People make things happen because they have this funny little quirk commonly known as survival instincts. We're born with it. The spirit of this nation actually takes those instincts to a different level. While a lot of people are sitting around their kitchen tables right now wondering how they will pay their bills, many are trying to figure out how to make a better mousetrap. It is Americans to think about being extraordinary.

As for confidence, well, that's going to come back with trust and that's only going to happen with all the gimmicks, the sales jobs and the shams are dumped. We are being coddled in such a way that it's actually stifling our ability to reap rewards as a country.

You know, we show our children confidence when we take the training wheels off. If we can get — keep Charlie Rangel and company from taking our tax dollars and feathering the beds of union members, trust will begin to ease back. If we can stop pledging billions of dollars to the rest of the world to push ideas Americans don't even agree with, trust will ease back.

If the president puts his skin into the game and he understands that he can't really give himself a B-minus when the economy is skimming along at an F-minus.

The government needs to shut up, get out of the way and stop taking our hard-earned money. More importantly, stop selling the notion we can't do it on our own. The country must resist attempts to be this culture that's being created right now of defeat and dependency. We need to believe that within our greatest fears lies our greatest opportunities.

Now, we don't want to be sold on the idea that a paved road of government handouts is a better option than that scary, uncharted road that is surely fraught with dangers and failures, highs and lows, but also an empowerment that makes life wonderful.

A line from one of my favorite poems goes: " I shall be telling this with a sigh/Somewhere ages and ages hence:/Two roads diverged in a wood, and I — /I took the one less traveled by,/And that has made all the difference." Robert Frost.

Will the government get out of the way and let private industry work in 2010?

Here to discuss, John Tamny, editor of Real Clear Markets; Stephen Spruiell, staff writer for the National Review; and my old friend, Peter Schiff, president of Euro Pacific Capital and author of "Crash Proof 2.0: How to Profit from the Economic Collapse."

Peter, is the government going to get out the way and let the free markets work?

PETER SCHIFF, PRESIDENT, EURO PACIFIC CAPITAL: I sure hope they would, but it doesn't look like they will. You know, the problem is we're in a serious economic, you know, ditch here. And we're not going to get out of it if the government keeps digging it deeper. We need the government to get out of the economy, to get out of the way and stop just diverting resources.

The government doesn't have any resources. It has to take them from the private sector in order to give them back to us. And when it does that, it undermines our economy. It makes us less productive and less competitive.

PAYNE: But, you know, John, the interesting thing about all of this is that we keep hearing the president taking these victory laps, right? You know, the GDP is up, unemployment is down, everything we're doing is working, it's working, so let's do more.

How do we fight that? How do we resist that? Do we resist that? Or should we?

JOHN TAMNY, EDITOR, REALCLEARMARKETS.COM: I think we should definitely resist it. We need to get back to first principles. There's nothing in the Constitution that empowers the federal government to oversee economic growth. And so, and so in that sense, I very much agree with Peter here, the government has no resources of its own, and so, we need to stop empowering it to take — by virtue of it taking money from the private sector in order to give it back.

Economic depressions are a misnomer. They cannot occur if government is doing very little and if the government would just get out of the way, the economy would be fine.

PAYNE: But let's get Stephen in here, though.

Stephen, where do you — where do you see all of this going? Because, you know, I hear a lot of people who know better, particularly professionals on Wall Street and other places, but it still seems to be falling on a deaf ear in Washington.

STEPHEN SPRUIELL, STAFF WRITER, NATIONAL REVIEW: It absolutely is. To get back to what you said in your opening monologue, nothing better embodies that "we know better than you do what's best for you" than the individual mandate in the health care bill that Congress, unfortunately, looks at the past. I mean, this is going around and telling everyone American citizen that regardless of whether or not, according to their own cost benefit analysis, it makes sense for them to have health insurance — which, by the way is going to be more expensive, thanks to the regulations in this bill — you have to have it. You have to have it or pay a fine.

The IRS will be determining whether or not your health insurance plan is up to the government standard. And so, yes, they're basically telling you, "We know better what's good for you than you do, and we say that you have to have a health insurance."

PAYNE: Well, you know, Peter, the thing is, though, every time someone in the administration speaks, they speak from the same hymn sheet. And the first thing they say, "Hey, in January, we were losing over 700,000 jobs a month. Now, we're on the cusp of creating jobs. We created the jobs," as if the government did that.

SCHIFF: Yes. Plus, you know, you also have to look at the difference between productive jobs and make work. I mean, just because we have more jobs in the government or more jobs in the service sector right now, it doesn't mean that our company is better off. We're still losing the most productive jobs we have. We're shedding manufacturing jobs at an alarming rate.

And, you know, just because the GDP is going up, it doesn't mean the economy is getting better. You have to look at why it's going up. Right now, GDP is rising because consumers are spending borrowed money and the government is spending borrowed money.

And all we're doing is digging ourselves into a deeper hole. We're in more debt now than we were before the crisis began.

PAYNE: What's the danger of that?

SCHIFF: Well, the danger — in order to get out of this mess, we don't have enough savings in this country. We don't have enough production, enough manufacturing and enough investment. That's what we need to do.

We can't spend our way out of this crisis. We can't borrow our way out of this crisis. We have to produce and work our way out of it. And we can't do that with the government interfering in the economy.

PAYNE: So, what you're saying, though, Peter, is we have to go through a certain amount of pain as a nation. We have to suck it up as a nation before we can really come out of this the right way.

SCHIFF: Absolutely. But, unfortunately, based on what we're doing now, we're going to have to suck up a lot more pain over a much longer period of time because the government refuses to allow the free market to function.

PAYNE: You know, John, I read where you actually wrote, that you thought a lower GDP was actually a better sign for the economy. Explain that to me.

TAMNY: Well, the reason for that is, is what drove down the revised GDP number was a higher, quote, "trade deficit." Now, to me, a trade deficit is a misnomer. They don't exist. But what they do signify in economic terms is that foreigners are complementing us with imports, not to mention that they're complementing us with increased foreign investment in U.S. companies. And so, the higher trade deficit drove down GDP.

And I would just add one other thing to this. I have a problem with this notion that we need to experience pain to get back on track. Implicit there is that the government propping up things that were bad for the economy which are somehow helping us. I think it would be very cleansing and good for the economy to let failed businesses fail, to get rid of Fannie and Freddie, and a lot of these things bringing down the economy.

PAYNE: But, John, you would agree also that the people who worked at those failed businesses would experience a certain amount of pain. I mean, I understand where you're coming from. I know Ronald Reagan and Paul Volcker took that route and initially, their popularity went down the tubes, and America did experience a whole lot of pain before things got better.

TAMNY: I see what you're saying there, but I think we all agree here to stimulate any company, to profit up is to depress other aspects of the economy. So, by virtue of propping up the Fannies and Freddies, the GMs, the Chryslers, we're, by definition, depressing other more productive sectors in the economy. So, I don't buy the pain argument even there.

What we're seeing is propping up failed concepts that are destroying capital. The unseen here is what businesses would sprout up out of nowhere — the Microsofts, the Googles — that would sprout up if the government were not propping up failed entities that are making us weaker, not stronger, and unhappier, not happier.

PAYNE: Peter?

SCHIFF: Yes. You know, a lot of the pain that was going to be for politicians who were going to have to level with the American people and tell them the truth. Politicians are afraid that they might not get re-elected if they have to deal with these issues.

But, sure, everybody is not going to share equally in the pain. Some people will immediately benefit if we stop artificially stimulating the economy.

You know, the politicians, it's easy for them to claim credit for saving a job, but what they don't see is the jobs they destroy in the process, the more productive jobs they destroy. Sure, a lot of people are going to be upset if the government gets out of the way and lets housing prices come down, and lets certain businesses fail that need to fail. But in the long run, that's the best thing that can happen to the economy and it's not going to take that long.

Free markets work pretty quickly to purge these imbalances from the economy. It might only take six months or a year and then we'll have real growth. Right now, we're creating the next Great Depression, only this is going to be an inflationary depression.

PAYNE: Stephen, do you agree with that? Do you that we're just right now in a direction that we can't — well, it's obvious that we're not going to turn away from this. But if we don't, we can actually create the next Great Depression?

SPRUIELL: Oh, sure. I mean, look, you know, it's not just — it's not just a theoretical thing with seen versus unseen consequences either. I mean, we can actually look at what's happening with small businesses right now. They're starved for capital. On survey after survey, they list their number one fear is the threat of more and, more importantly, uncertain regulations. They don't know what regulations are coming down the pike now.

And the reason that capital has dried up for them is because we're propping up the Fannies and the Freddies and essentially, the financial institutions that failed before.

PAYNE: So, Stephen, you're saying that there's a limited pool of money out there. And with the government going after so much money, it's crowding out money available for other free market enterprises.

SPRUIELL: Well, a lot of capital is locked up in some very unproductive financial giants, right? Which are getting themselves healthy again by pretending that their bad assets don't exist, borrowing from the Fed at near zero rates and then lending to the government at 2 percent or 3 percent.

I mean, let's start a bank, me and you. We can make a fortune doing that, you know? And so, this is why — why would you lend to a risky startup company when you could just make money risk-free all day?

When the president called the CEOs of these major banks to chew their ear a couple of weeks ago, you know, all he wanted to do was try to lecture them about how they need to go out and lend to small businesses. And you know what? All they wanted to talk about was: Underwriting more Build America bonds; helping the U.S. government to borrow more. It's a safe bet for them and, you know — so that's why small businesses can't grow and can't create jobs.

SCHIFF: Yes. In order for business to grow, they need capital. And capital comes from savings. And there are no savings in this country. They're being diverted to the government. They're being diverted to the financial entities and with the Fed keeping interest rates at practically zero, who's going to save? There is no return to savings.

And so, everyone is just going into debt. There is no capital for small businesses because it simply is being taxed out of existence.

PAYNE: So, Peter, you think that — you think the Federal Reserve needs to start raising interest rates?

SCHIFF: Absolutely. They are too low. We got into this trouble with low interest rates. We're not going to get out of it unless we let them rise.

Now, certain overleveraged financial institutions are not going to be able to survive in a higher interest rate environment. The government is going to have to deal with its massive liabilities and the short-term nature of the national debt. But we can't have a capitalistic economy without capital. We can't have capital without savings, and no one is going to save if they don't get paid to save.

PAYNE: John, do you agree with that? What's your formula for turning us around? Does it include Fed — the Fed actually raising rates?

TAMNY: Slightly. My view is, I think the Fed should float the Fed funds rate. The interest rate is what intersects supply and demand for capital and it offends me that a central bank would try to set this rate. And so, the ideal thing would be for the Fed to say, "We're no longer going to set the rate. Let the market set it." It would probably rise higher, in which case as Peter points out, we would get higher savings as a result.

But I think the biggest factor here, and this has to come from the U.S. Treasury, is if you want job creation, you need investment, and a stable dollar is what drives investment. The U.S. Treasury must get serious about defining a dollar in terms of a value that will be the same today, tomorrow, as it will be 10 years from now. That is the number one thing in my mind.

If you want to get the economy started again — stabilize the dollar's value.

PAYNE: But, Stephen, how can we do that, with the Fed monetizing debt and some of these programs out there? I mean, it's really a shock, in my opinion, that the dollar is not even lower.

SPRUIELL: Well, you hit the nail on the head — monetizing the debt. I mean, what the Fed is doing, it's buying — it's buying mortgage-backed securities at an astonishing pace from the agencies, Fannie and Freddie.

And so, what's going to happen then is when they try to — that's putting liquidity into the economy — when they try to soak that back up, they're going — the only way they can do that is to sell the mortgage-backed securities that they purchased. But it's very unlikely that they're going to be able to get full value for those. There's going to be a lot of liquidity out there that the Fed can't soak up. That's a recipe for inflation, to say nothing of the deficits we're running. A trillion dollars a year ...

PAYNE: Right.

SPRUIELL: ... stretching it to 10 years.

SCHIFF: That's the trade-off that the government is making. That you can't have a strong dollar and stimulus programs simultaneously. They are mutually exclusive.

The way the government is trying to prop up the economy is by debasing the dollar. And they can't do both.

So, the only way we can defend our currency and it would be great if we could define it in terms of gold, the way we used to do, but that's going to immediately impose discipline on the government. They won't be able to you run these huge deficits because they can't be financed. And they're going to have to back out of the financial market because that's the — that's the only way they can keep the currency sound.

PAYNE: So, where are you then, Peter, with respect to inflation? Do you think this is going to be the big story of 2010?

SCHIFF: You know, look, I know inflation is going to get worse in 2010. Whether it's going to run out of control or it's going to take until 2011 or 2012, but I know we're going to have a major currency crisis coming soon. It's going to dwarf the financial crisis and it's going to send consumer prices absolutely ballistic, as well as interest rates and unemployment.

PAYNE: And what does that mean? For people watching this show, what does that mean for the average American?

SCHIFF: It means their life is going to get a lot more difficult. It means things that they need to buy, things like food and energy, are going to be much more expensive. Ultimately, interest rates are going to rise and their entire standard of living is going to plunge.

And I'm hoping the government doesn't respond to this inflation with price controls because that's going to make it even worse. Now, you're going to be waiting in long lines to get basic food items or to get energy because there's going to be shortages. People might be going to the black market.

PAYNE: You're talking you're talking Zimbabwe, Weimar, Germany — I mean, you're really talking about something like that actually happening in this country.

SCHIFF: It will happen if we don't change policies. There is still time to change.

PAYNE: Right.

SCHIFF: I mean, I'm running for the United States Senate, so I can try to change that myself. But if we don't reverse course, if we continue to stimulate, then we will end up with hyperinflation and it will be like Zimbabwe.

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