Dick Morris: Obama's Economic Policy Will Be 'Abject Failure'

This is a rush transcript from "On the Record ," March 20, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Tonight: How many zeros in a trillion? We confess we had to Google it, but now we know and we are about to tell you. Some of you may cry and some of you may start throwing things. But before we tell you, here's the news. In a new non-partisan report released today, the Congressional Budget Office estimates that President Obama's budget will grow the deficit by $1 trillion a year for the next decade. That is $2.3 trillion more than the president predicted just last month.

This is what $1,000 looks like. Here's $1 million. Now, this is $1 billion. And finally -- get ready -- here it is! This is the number $1 trillion -- 12 zeros. Can you believe it? Twelve zeros! So what can you get for $1 trillion? Well, here's one way to look at it. With $1 trillion, you could buy a $100,000 home for 10 million people in America. Each one gets one. That's a home for every single person in Los Angeles, Chicago, Atlanta, Houston and even Milwaukee. Bottom line, it's a whole lot of dough.

Joining us live is Dick Morris, author of the book "Fleeced," which with a title like that, may just be the grim biography of the American people, "Fleeced." What a perfect name for what's happening to us, isn't it, Dick?

DICK MORRIS, AUTHOR, "FLEECED": Absolutely, unfortunately. My new book that's coming out...

VAN SUSTEREN: Dick, what about this...

MORRIS: ... in June is named "Catastrophe." That's even better.


VAN SUSTEREN: I don't dare ask -- I don't dare ask what's even farther down the line. All right, what does this mean for us? I mean, I learned 12 zeros today, I confess, but I've already admitted I got a D in algebra in high school one semester, so it's no surprise I didn't even know there were 12 zeros in a trillion. What does this mean, this deficit?

MORRIS: What it means is that a huge amount of money is going to be parked. Think of a parking garage, where cars are all stacked up and they're sitting there in the parking garage, not driving, not on the roads, because it's a snowy day, it's a bad day to drive, and they stay in the garage. Then when the economy gets better, they all come out at once and they crowd the throughways and the turnpikes, and you have unbelievable traffic, which means inflation.

What Obama is trying to do is to pump money into the system, but the problem is that the system isn't spending the money. The people on who are on these public works projects, these stimulus projects, they get their paycheck and then they pay down their credit cards. They don't go out and buy a new car. The people that are getting tax breaks, they put it right in the bank. They pay off their student loans or their credit cards.

In this environment of anxiety, nobody is spending it. And the result is that all he's doing is -- in the bail-out package, in this package and in the TARP package, all he's doing is pumping money into the system that stays there, doesn't get spent but comes out with the economy gets better and we get socked with huge inflation.

VAN SUSTEREN: All right, now, tell me this. If you're sitting, you know, in a town in Ohio tonight and you're watching this show, and let's say you make $125,000 a year and you've got three children, what does this mean for you?

MORRIS: Well, it means that you certainly are going to have to face a year or year-and-a-half more of this horrible depression- recession. This is not going to cure that. But what it does mean is at the end of 2010, early 2011, you're going to get hit with humongous inflation. And if I were you, I'd do things like invest in gold, in real estate and stuff like that because the -- all of this money is going to come into play at once.

VAN SUSTEREN: Wait a second. Stop, Dick. I don't -- I'm telling you, making $125,000 a year with three children in Ohio...

MORRIS: Can't invest in anything.

VAN SUSTEREN: ... I don't have a lot of -- yes, I'm not investing in anything. I mean, realistically, what's my day-to-day life going to be like? I'm not even -- I only wish that I were thinking about investing.


VAN SUSTEREN: I'm thinking about, you know, now.

MORRIS: Well, the economy, I'm afraid, is going to get worse. I think we're going to go well above 10 percent unemployment. I think that the economy will contract dramatically this year. I don't think that -- this cure of running a deficit, which basically says, I'm going to take the money away from any business that might want to invest and I'm going to give it to the government instead -- because there's only a static pool of capital -- is like the old medieval days, where they used to bleed patients that are sick -- you know, put leeches on them to get the blood out because it was an evil spirit. Now we realize that was almost killing these patients. They needed a transfusion, not to be bled.

And yet what Obama is doing is elbowing aside all of the private businesses that might be able to get capital, and the government is coming first in line to borrowing. And it's a very dangerous situation, very dangerous.

VAN SUSTEREN: All right -- all right, let me ask you, at the end of the road, let's say at the end of four years, the three things will have -- one of three things will have happened. Either he would be a roaring success and the economy really roaring or he's going to be an abject failure or we're going to be OK, and just OK.

Watch Greta's interview with Dick Morris

MORRIS: No. Abject failure.

VAN SUSTEREN: Why -- and -- right, OK. You say abject failure. But let's assume that we're just -- that, you know, we're just OK. What does this mean for him politically?

MORRIS: Well, I don't think that's going to happen, Greta. I think what's going to happen is two years of recession, one year of inflation, and then one year of recession to recover from it. And this country is going to gratefully see the end of him in 2012. I think the country will probably restore a Republican Congress in 2010. It's unbelievable how quickly his ratings have fallen.

VAN SUSTEREN: What about Secretary of Treasury Geithner. Is he going to get the boot, do you think, by this president, or is he going to resign? If you're a betting man, where are you going to put -- where's your bet?

MORRIS: I mean, at some point, he'll have to resign. But it's a shame because, I mean, it'll hurt Obama because he's put so much credibility into Geithner.

I want to say this about the AIG bonuses. And I know that this is not necessarily a popular thing to say. If you go after those guys for getting those bonuses, which they shouldn't have gotten, every other institution in this country that pays bonuses is going to be scared to death and they're not going to participate in any bail-out program. They're not going to participate in any lending program. They're not going to cooperate with the Fed in generating auto loans and car loans because they're going to be scared to touch that stuff because they're going to worried that they'll read about themselves on the front page of the newspaper. And it's a very...

VAN SUSTEREN: Well, I think if you...

MORRIS: ... dangerous situation...

VAN SUSTEREN: Couple of things. If you tie bonus to success, that's not so much a problem. I think the problem is when you tie bonus to failure, which is the situation we've got because I don't think many Americans begrudge anyone getting a bonus because he or she has been successful. That's the first problem.

The second problem here is that I think that the tax that they just -- that they passed by the House -- my guess, you can't predict what judges are going to say -- but that it's going to be declared unconstitutional. (INAUDIBLE) we're going to spend a fortune of government resources on lawyers battling it in court, so it's going to end up costing us more.


VAN SUSTEREN: I think it'll be unconstitutional. And frankly, I think it's just a cover-up because Congress didn't do its job last fall and read it. So actually, this 90 percent bonus is simply a cover-up for the abject failure of Congress in handling it last fall when it could have.

But let me give you this example. Obama set up a thing called the TALF program, Term Asset Limited -- whatever it stands for. The idea behind it is that the federal government lends money to a hedge fund, and the hedge fund says to GMAC or some car loan or student loan company, Make all the loans you want, we'll buy those loans with the money that we're getting from the Fed, and then we'll sell them on Wall Street. Sounds like a pretty decent idea to get the credit moving again.

The reports are that those hedge funds are not participating in the program. They expected 30 to sign up and they've gotten 3 so far. They have $200 billion they want the program to be. It's stuck at $5 billion. Why? Because these hedge funds are worried that if they touch government money and they pay any of their executives more than $250,000 a year, some congressman is going to tax them at 90 percent.

I think, though, if you tie it to success -- that's the big -- I think, you know...

MORRIS: Well, but again, Greta, the...


MORRIS: The issue of success is...

VAN SUSTEREN: Look, I think that -- I think that 90 percent thing -- I don't think that 90 percent thing is going to last. I don't think that's going to make it. I mean, I -- I don't think that's going to stick.

MORRIS: I agree with you on that.

VAN SUSTEREN: And I understand why -- and I understand why they wouldn't have confidence in it. But I -- you know, if -- if it's tied to success...

MORRIS: But again, the issue there is...

VAN SUSTEREN: ... that's what -- we all want success.

MORRIS: The success of the company or the success of the individual and what he did? Those AIG people getting those bonuses is unjust, but going after them the way the administration is doing, it's like "Candide" and Voltaire. They (INAUDIBLE) the officers shoot every tenth man in the Romanian army. Why? To encourage the others.

VAN SUSTEREN: Well, I think the other reference from "Candide," (INAUDIBLE) is that all is for the best, which is sort of the idea that Congress has, all is for the best, and essentially, if we don't get caught, we don't have to even read the statute -- read the laws we pass as long as we don't get caught. But anyway...

MORRIS: That's right.

VAN SUSTEREN: Dick, thank you.

MORRIS: Thank you, Greta.

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