This is a rush transcript from "Your World," September 17, 2013. This copy may not be in its final form and may be updated.
NEIL CAVUTO, HOST: All right, I have told you many, many times on this show that we're not conservative or liberal. We're not red or blue. We're green. We're following the green.
And we were following this under a Republican administration whose intentions might have been deemed good and valid at the time. I disagreed. I strongly disagreed with some of the powerful financial minds of the time.
But they were not all in lockstep with the thinking back then, including this next gentleman, former Reagan economic adviser Art Laffer.
The danger, as we discussed then, Art, was be careful what you wish for, you just might get it.
ART LAFFER, FORMER WHITE HOUSE ECONOMIC ADVISER: It's silly.
CAVUTO: And now, when you feed one, they all want from the same trough.
LAFFER: Yes. Well, thank you for showing me in that little clip there earlier, because I think I probably was the only one in the world who agreed with you, or you with me, whichever it was.
CAVUTO: You were. But you never did the fashion faux pas of wearing a black shirt here, as I did.
LAFFER: No, I didn't. No, no, I didn't.
CAVUTO: I didn't know what that "Soprano" moment meant, but it could have been reflective of a down day in the market.
CAVUTO: I apologize for that, but little else.
But go ahead.
LAFFER: Well, what can I -- but, you know, Neil, it's such common sense what you and I were saying back then and what the -- all of them were saying in the opposite direction.
And these were Republicans and right-wingers and all the other people, too. We were saying that the last thing you want to do is suppress a body's immune system when you're sick. It's just stupid. And the one time we should rely on the economy's immune system, called free markets, is exactly when we are in the midst of a crisis.
And these guys just can't believe it. They were just screaming and hollering and yelling, and, you know, Neil, whenever people make decisions when they are panicked or drunk, the consequences are rarely attractive. And so it is with all of the stimulus, bailout, taking over auto companies. It would have been over in six months if they had done nothing.
CAVUTO: All right, we don't know that.
CAVUTO: And they always argue -- and you can never refute a negative because you will never know -- that...
LAFFER: Of course.
CAVUTO: ... everything was locking up, we faced a depression if we didn't do this. George Bush, a free marketeer, said didn't want to do this. Treasury Secretary Hank Paulson -- I was talking to all of them at this time.
LAFFER: I know.
CAVUTO: And they all said to a man or woman, including Sheila Bair at the FDIC at the time, "Look, you know, you don't know what we're facing."
CAVUTO: "Everything is locking up. Credit is drying up. "
CAVUTO: "No one can get their hands on any money anywhere any time."
And the danger with what we did -- I'm going to talk to a gentleman who had to police the relief we provided -- is that it set up a precedent for being a backstop. And that's when the good intentions got very expensive and very bad.
LAFFER: But good intentions always pour out when a crowd mentality panics.
And that's exactly what you saw. My dear friend and great person, Great Congressman Jack Kemp, he was for it.
CAVUTO: Sure. Absolutely.
CAVUTO: I remember he and I had a dust-up over it, yes.
LAFFER: Oh, yes, well, because he said I was in favor of it, too, and you corrected him.
LAFFER: Thank you, thank you, thank you.
But, you know, all these people do. And they have this crowd mentality. And once you get 50 of them on the one side, they start screaming and hollering and yelling, and how could you not do it?
I understand all of these people being so scared that they just wanted us to do anything. Just do something.
LAFFER: But the truth of the matter is, Neil, we should have undone something.
We should have taken thinks away, just the way Reagan did when we came into office. We undid tax rates. We undid regulations. We undid spending. We opened up free trade. We undid the restrictions.
LAFFER: That what you have got to do when you want to get a good economy.
CAVUTO: Don't -- don't cede to the panic of the moment.
LAFFER: Never do it.
CAVUTO: Art Laffer, always good having you, always.
LAFFER: Neil, it's really lovely being with you.
And congratulations, by the way, on one of the very few people who really stood up to the critics during this period and held on to the truth, beauty, and the American way. I really love it.
CAVUTO: Well, that was great because I have had nothing but IRS audits since then. But, seriously...
LAFFER: I understand.
CAVUTO: ... always good having you, Art. Thank you.
LAFFER: Lovely to be with you, Neil.
Content and Programming Copyright 2013 Fox News Network, LLC. ALL RIGHTS RESERVED. Copyright 2013 CQ-Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of CQ-Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.