This is a rush transcript from "Glenn Beck," February 5, 2010. This copy may not be in its final form and may be updated.

GLENN BECK, HOST: California is a mess. We're going to be out in California all next week, looking at some of problems, some of the solutions, meeting some of the people there. It's a mess!

And when that thing comes crashing down, correct me if I'm wrong — well, let me introduce our guests.

Troy Senik, he is in California. He's a contributing editor for the Center for Individual Freedom. Scott Hodge, president of the Tax Foundation. It is a non-partisan tax research organization based in Washington, D.C. And Josh Barro, he is a fellow of the Manhattan Institute, which focuses on tax and budget issues.

Here's what — here's what concerns me. And I want to look at California and compare it to the federal government. Before we go there, California, everybody agree that it's going to be the first state to collapse?

SCOTT HODGE, PRESIDENT, TAX FOUNDATION: It's already collapsed.

BECK: Yes, right. But it's just going to — it's just going to keep coming unhinged until we might as well take a star off the flag because the federal government will be running it, right?

The — when we throw a rope around California, and then the rest of these states start to decay and we have to throw a rope around them, how much — how many of these can collapse before we got nothing left? You understand what I'm — you don't understand what I'm saying?

They're going to — we're not — we're not saying "States shore yourself up," what we're saying is: we'll come in and rescue all of you. We can't do that.

How long before the whole thing sinks down in the ground?

JOSH BARRO, FELLOW, MANHATTAN INSTITUTE: Well, I think it's like the economist Herb Stein said. It's, you know, if something is unsustainable, it will stop. And California can't continue like it has been forever. I think legislators—

BECK: It won't stop because of the federal government. So, what they're doing is, what our federal government is doing is just — everything's being kicked up to the federal government and said, "We'll rescue you." Well, that's — we all know that's unsustainable too. So.

HODGE: But we've seen the outrage over the bailouts of AIG and General Motors and Chrysler, ad on down the road, all the banks. Can you imagine if we actually go out and bail out a state? I think Americans — the tea party movement would go nuts over this.

BECK: But, I mean, aren't we — aren't we already doing that? Troy, are not we not already bailing California out?

TROY SENIK, CENTER FOR INDIVIDUAL FREEDOM: Well, it's getting a certain amount of federal assistance. It hasn't gotten as much as it would like and hopefully it won't. But I think that — I think that it would inspire a popular backlash, not only because we've been on display for the entire nation as an example of failed government, but also, California has that cultural thing about it that, you know, we have always given off this vibe that we're just going to do whatever we want. And in this case, we've done it to complete excess. And I think the rest of the nation rightly thinks "You guys need to sober up."

BECK: Oh, I think the rest of the nation looks at California as the rest of the world looks at the United States and says: "You know what, you got problems? Drill for oil. I mean, you got resources there."

SENIK: Absolutely.

BECK: Drill for oil. Stop telling the rest of the world how we're supposed to live. You know, you're complaining — California complains about, you know, the price of gasoline, et cetera, et cetera — well, of course, you're complaining about gasoline. The way you're having to refine it and everything else there, it's an insane practice.

And, I mean, you know, you're never going to be able to fix a problem until you admit that they have a problem. And I don't see them doing that. And I don't see the federal government saying California has a problem — because let's now compare California with the federal government.

Scott, let me start with you.

HODGE: At the federal level, the U.S. government has the most progressive income tax system among all industrialized nations according to the OECD in Paris. We rely more heavily on the top 10 percent of taxpayers than any other industrialized nation.

BECK: Say that again. We always try to be more like France.

HODGE: Yes.

BECK: We rely more on the top, the wealthy in our country, than even France.

HODGE: Than even France, Sweden, Germany — you name the socialist country. We rely more heavily on our wealthy Americans than any. Now, California is even more extreme. Eighty-four cents out of every dollar of income tax collected in California comes from households earning over $100,000 a year. Families earning under $50,000 a year pay 2 percent of the state's income taxes.

You can basically say, if you earn up to $50,000 a year in California, you will pay no state incomes taxes — which means that they have this vast class of people in that state that are essentially disconnected from the cost of government. As a result, they will demand ever more services and spending from government ‘cause they will never ever feel the cost of that, because they have passed it up to someone else higher up the food chain.

BARRO: Yeah, I think this is, you know, California is supposed to be the land where anything is possible. And I think people in California have convinced themselves that they can have a big government like in New Jersey or New York without having to pay for it. And that's why they repeatedly haven't balanced budgets; that's why they keep growing spending so fast.

But it's not going to be sustainable in the current recession without
— with this idea that you just rely on the top 1 percent to pay for everything.

BECK: Troy, Troy, how much — how much trouble is the state in? Or — let me — let me rephrase this: how happy were the state officials when they thought universal health care was coming? So they could take all of the illegal immigrants off of any kind of, you know, they get all the hospitals and everything paid for by the federal government. That's going to be an enormous burden on the state.

SENIK: Oh, sure. I mean, anytime that we can get the federal government to pay for anything in California, we're delighted to do it because we do spend to such excess.

BECK: Well, they're doing—

SENIK: And, you know, part of our problem—

BECK: Didn't they — didn't they just pick up the prison system in California, too? Didn't the federal government come in and pick up at least a good portion of the prison system this week?

SENIK: Well, yes, we've had an ongoing court fight over the years with the federal government over the prisons in California. And we try to shift as many of those costs as possible. And it's just one of the ways to get around real reform.

And one of the reasons that real reform is so difficult is that the way our budget is structured — and this has a lot to do with ballot initiatives over the years — somewhere between 65 percent to 80 percent of our entire state budget is totally outside of the responsibility of the legislature. It's mandated through initiatives and it's written into the California Constitution.

BECK: Unbelievable.

SENIK: So, you're talking — I mean, try balancing your family budget with 15 cents on every $1.

BECK: It can't be done. It can't be done.

SENIK: Right.

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