The cold, hard truth about the Obama economy

This is a rush transcript from "Hannity," January 30, 2013. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: There is breaking news on the U.S. economy as the Commerce Department announced earlier today that our economy shrank at a rate of .1 percent in the last quarter of 2012. Now, that is the first time a contraction has happened in more than three years. And with the unemployment rate still high at 7.8 percent and consumer confidence now in decline, there was only one way for the Democrats to react, as usual predictably blaming Republicans.

Now, it all started with Jay Carney during the White House press briefing when he said the economy was facing a major headwind and that headwind being the Republicans in Congress. Moments later, House Minority Leader Nancy Pelosi released the statement saying, quote, "Today's disappointing GDP report is a direct result of the economic uncertainty created by the House Republicans' strategy of obstruction and manufactured crises."

When will they ever going to take blame? When will Nancy Pelosi, Jay Carney wake up and realize Obama now has been in office for more than four years? Unbelievable. Here with the reaction, GOPAC President David Avella and the former Clinton economist at the Harvard Kennedy School, Professor Jeffrey Frankel.

Mr. Frankel, sir, how are you?

JEFFREY FRANKEL, FORMER CLINTON ECONOMIST: Very good, how are you?

HANNITY: You know -- it's Bush's fault, Bush's fault, Bush's fault for four years. Both houses of Congress, two of those years, the president got everything he wants passed. Isn't it time for him to put his pants on like a man, sit at the table, and accept responsibility. Six trillion dollars later in debt, 50 million Americans in poverty, I'm sorry on food stamps. One in six in poverty. One in four kids in this country, needing food stamps. Is that Bush's fault or is that Obama's fault?

FRANKEL: Well, he certainly hasn't got everything he wanted passed under the most recent Congress. But first, in the today's news, let's talk about this number, 0.1 percent negative per annum. That is -- I don't know how much you wanted emphasize one number but that is today's news. We all thought during the last couple of months of 2012 that there would be a lot of uncertainty because of this "fiscal cliff" that was going to hit us January 1st. It turned out that the biggest effect was the defense equipment purchases fell by 22 percent in the last quarter. That is the big negative number that's in this morning's news. It's the biggest fall in defense purchases --

HANNITY: And we still have $6 trillion in debt and trillion deficits as far as the eye can see, so it's not a big cut in government spending now, is it?

FRANKEL: Well, it continues the pattern of the last two years which is that government sector has been contracting and the private sector has been expanding. I was actually surprised in this morning's number that household consumption was up pretty strongly, business-fixed investment was up, especially equipment. I thought there would be adversely impacted by the uncertainty. But what happened was --

HANNITY: Professor, the economy sucks, the economy is not growing. People aren't getting jobs and you are trying to tell, this really isn't that bad. Six trillion in debt. No new jobs. Fifty million Americans on food stamps. And liberals are telling us it's really not that bad.

DAVID AVELLA, GOPAC PRESIDENT: Well, Sean, nobody is advocating that we return to the final years of President Bush's economy. But we can't remain in the Obama economy which is let's manage every piece of the economy, because it's not working. We have fewer jobs now than when this president took office. And let's be clear about who really is being hurt by this economy.

FRANKEL: That's not true.

HANNITY: Wait a minute. Well, it is true, 8.3.

FRANKEL: Go ahead. Go ahead.

HANNITY: Excuse me, the labor participation rate, we have 8.3 fewer million Americans in that labor force.

AVELLA: And let's be clear about who is being hurt. Who's being hurt? It's the working poor who are trying to work their way up in the economy. There are no jobs for them to move up to. The long term unemployed, that there are no jobs for them to go to. For the young person who just graduated from college and wants to find a job, they can't. So they get to stay at their parents' house for a bit little longer.

HANNITY: Let me ask you a question. It seems, definition of insanity is repeating the same thing over and over again and expecting a different result. So, we are following Europe's model. We're following Japan's model. Stimulus debt deficits. Why would we expect a different result following their failed model?

(TALKING OVER EACH OTHER)

AVELLA: Well, what's unfortunate -- look at what Republican governors across the country are doing. Nine of the 11 states have actually created a net positive on jobs are Republican governors. And why won't this president actually invite Republican governors and say, look, what policies are you putting in place to create jobs? He won't because ultimately, his ideology believes that everything government can do, it should do and it should control and it ultimately hampers our economy.

HANNITY: You know professor, you know, this historically, the worst the recession the stronger the recovery. Four years, Obama's policies, pretty much got what he wanted, it hasn't happened, why?

FRANKEL: OK, four years ago when Obama was inaugurated, the economy was in free fall. The rate of contraction of GDP was over nine percent annualized in the last quarter under Bush. We didn't know at the time it was that bad but it was. The jobs loss was 600,000 per month. The financial markets were completely seized up in a way that hasn't happened since the great depression, interbank spreads and so on.

The freefall leveled off within a few months and within five months the recession was over. All that means that things were not getting bad anymore but it's been a long, slow climb out of that. What we have had for the last few years is growth which is not fast enough but it's a lot better that what it was when Obama came in. And the average growth rate for the year 2012 was 2.2 percent. And we've had -- enough to bring down unemployment very slowly, not rapidly enough but slowly.

HANNITY: Professor, Obama said the economic recovery has begun. He told us in 2010, it was the summer of recovery. We haven't seen jobs created. We've seen record debt and record deficits. We have seen dependency go to all time record highs. The worse quote recovery since the great depression and you are defending this. Do you think it is good that we have 18 million more Americans on food stamps. Do you think it's good that we have one in six Americans on poverty? Do you think it's good the president has told us again and again, that this is getting better and it's not? Tell me where it's getting better. This is not good news for anybody, sir.

FRANKEL: So, the unemployment rate is coming down gradually. The growth rate has been positive, GOP is going up. That you keep mentioning the budget deficit. That has been down as a percentage of GDP.

HANNITY: It's anemic growth, Professor, you know better than that. You have studied history. This is one of the worst recoveries if you can even call it that. It looks like we may be headed for a double-dip.

FRANKEL: Well, I doubt that. And by the way, this number is essentially zero.

HANNITY: Zero point one. That's what it is.

FRANKEL: Yes, at an annualize rate --

HANNITY: No growth.

FRANKEL: -- on the average between the initial estimate which this is, advanced estimate, and the final numbers, the revision is plus or minus, 1.3 percent. So, there is a 50 percent chance that the number is going to turn out to be minus 1.3 percent and 50 percent chance that it is going to be positive.

HANNITY: Fifty-50, let's flip that coin. Hope for the best.

(TALKING OVER EACH OTHER)

We'll flip that coin. And for the people that are out of work and unemployed and we don't even count anymore and the people getting crumbs in terms of food stamps, good luck to them.

(TALKING OVER EACH OTHER)

FRANKEL: And if Obama's jobs bill hasn't been passed in 2011...

HANNITY: I know. It's Bush's fault. Republicans fault. This president is blameless. That is pretty pathetic.

All right. Good to see you both. Thank you.

AVELLA: Thank you.

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