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GLENN: From Radio City in Midtown Manhattan, third most listened to show in all of America and we're strangely proud of that. Hello, you sick twisted freak. My name is Glenn Beck. And Mr. Karl Rove is on the phone with us. Karl, are you there?
ROVE: I'm here. We're number 3, we're number 3
GLENN: Do you know anybody who's proud of that? Karl, let me
ROVE: There's a lot to be proud in that
GLENN: Number 2 works harder, is always looking behind him saying who's going to knock me off. I figure nobody ever gets up in the morning and says, man, I'm going to beat number 3 today.
ROVE: You'd be surprised. There are lots of people that would love to be number 3, and moving up rapidly.
GLENN: Okay. So Karl, do you mind if I share what my recollection is of a conversation that we had off the air about, I don't know, a month or so ago?
ROVE: Sure, go ahead. Clean it up, though. No profane language.
GLENN: My recollection is that we were talking and I said to you, Karl, how much more can we take? How many more body blows to our economy can we take, especially with these out of control deficits? And you said, Glenn, my real concern if I remember right is if we check in July and we see that our deficit is at or above $1 trillion, we are really in trouble.
ROVE: That's close, yes. The trillion dollar mark, if you are projecting the deficit of $1.8 trillion for the fiscal year as the administration is, you are going to hit a trillion sometime; the question's when. What I was worried about is July 15th's what's called the MSR, Mid Session Review. If we had hit a trillion significantly before that, the middle of July, then we're in trouble. And the latest deficit projection is that we crossed the trillion mark, you know, a week or so ago.
GLENN: And we were $1.1.
ROVE: Which means that I would not be surprised that in essence tomorrow or the day after that the Mid Session Review comes out with a number that bumps up that $1.8 trillion deficit number. And the reason
GLENN: To what?
ROVE: The reason that we crossed the trillion dollar mark is the pace of government spending and then a decline in revenues through less economic growth. And what I'm worried about is that the spending is not simply the stimulus. The stimulus has yet to kick in, a lot of it. What it has to do, the normal and ordinary function of government, remember congress passed an expansion of the Children's Health Insurance Program, SCHIP and it passed the so called omnibus. Last year Bush said, look, I'm going to limit spending to this amount of money. We had a $391 billion discretionary budget in the previous fiscal year. For FY '09 congress said we're going to limb it to 393. Congress said we want more than that. So what we'll do is pass a half year budget, hope we elect a Democrat and add spending onto it which is exactly what they did in January. All of those things point to chronic increases in discretionary domestic spending not just this year but in future years which means the deficits are going to stay high.
GLENN: Okay. So how much are we now projecting that our deficit will be, do you think? If they were projecting $1.8, we're halfway through and we're at $1.1, we should have been under a trillion dollars. So are we looking over $2 trillion now?
ROVE: Well, that's why we need to rely on the propeller heads and the in other words who calculate these things but my back of the envelope scratchings that we're going to end of significantly to $1.9 trillion and I would not be surprised to see us close in on $2 trillion
GLENN: All right. There's a Morgan Stanley report out that says our deficits will likely average as much as 6% of GDP through 2019. The debt will be 82% of GDP by then, by 2019, a doubling over the next decade. They say that because of what the government is doing now, deficits and debt will rise even sharply, more sharply after 2019 because of, we all know that Medicare and Medicaid and everything else is I mean, is just not workable and we've always known that 2019, 2018 area is when that thing collapses and goes into the red. So they are saying that we're going to have 82% of our GDP will be debt and then it gets bad.
ROVE: Well, and look. This is a rosy projection. Remember the administration's own projections call for the deficit to be, I think it's about 86% the national debt to be 86% of GDP by 2019. The administration's own projections, which are even you know, which are rosy, not as rosy as the ones you just mentioned say we will double the size of the national debt in the first five years of the Obama administration and a second term if he gets one and triple it, nearly triple it in 10 years. And that's their plan. That's not their you know, that's not the, "Oh, we're fearful of this, therefore we're taking steps to stop it." That's as a result of them increasing spending. And I frankly think it's going to be even worse than that. Let me give you one example. The budget, the federal education budget for elementary and secondary education for the Department of Education was last year roughly $40 billion. The stimulus plan doubled it. It gave $41 billion as part of the educational department in one year which means the budge goes from $40 billion roughly to $81 billion. Now, who next January when they start voting on the budget for FY '11, who is going to sit down and say, you know what, I voted for the budget and the stimulus and that left our education department budget at $81 billion. Oh, and that $41 billion we gave for stimulus, oh, that was a one time thing. So I'm going to vote for budget and go home and have my opponent be able to say he voted to cut the education budget in half. And that's going to be repeated ad nauseam throughout the government. My back of the envelope scratching showed that FY '08 Bush budget discretionary spending was $391 billion. Bush proposed $393 billion for FY '09. The Democrats omnibus kicks it actually up somewhere north of $408 billion. I think by next year we should not be surprised to see a discretionary domestic baseline for the budget of in the high 500s or the low 600s. It could be as high as $700 billion. Depends on how the budgeteers write it.
ROVE: You're stunned.
GLENN: You know what, because it absolutely makes sense. You are exactly right. I never even thought of why they were putting this one year stimulus money into these programs, but you're absolutely right. No politician is going to be able to say, "I cut the budget by 50%" and get away with it unless this country is on such fire that and everybody is awake and says, "You're damn right, and you should have cut it by 80%."
GLENN: But I don't know if that's going to happen. So Karl, two questions. The first one, I know you are an optimistic guy and believe it or not, I am, too, as long as we allow entrepreneurs, as long as we allow Americans to solve their own damn problems. But we're coming closer and closer to erasing the entrepreneurial spirit. We are becoming closer. We're moving rapidly to the same kind of entrepreneurship that is in Europe, which doesn't exist in Europe! So how do we, A, solve this quickly enough before the people in Washington absolutely snuff out everything that made America strong?
ROVE: Well, unfortunately in the short run our only option is to fight and stop. Stop cap and trade tax and energy tax. It would absolutely devastate our economy. Stop the healthcare reform with a public option. You know, if we were to pass a government run health plan that would compete with private industry, government can set prices, undercut the private plans, collapse the private insurance market, they would have a willing partner in a lot of big business. If you are a big business, you want to have be able to shift that cost off to the you know, so what, you know. Pass it on to the individual. Big businesses. Big businesses understand that the cost of any kind of healthcare reform involves a public plan and a government takeover of healthcare is going to be largely paid by increased income taxes paid by individuals, not by increased business taxes. So if you are a General Electric or some big enterprise, you know, your CEO may have his Chief Financial Officer in there saying this is a good deal because it shifts the cost from us to the American taxpayer and we businesses won't be tagged as hard as the individual American taxpayer; this will improve our balance sheet. Now, small businesses understand better, particularly since so many small businesses pay on the individual tax rates, that this is going to devastate small business. We've got to stop things. That's not enough
GLENN: That gets hang on. But that gets to my second question. Karl, I don't know if you have the ability anymore, because you're Karl Rove, to actually talk to regular people, but regular people are tired. They don't know what to do.
I was giving a speech on Saturday. I was at a fundraiser and I said, you have got to stand up; our very existence is at stake here. You've got to stand up. And a guy up in a balcony, he shouted down, he said, "We call; they don't listen to us! What do we do!" How would you answer that?
ROVE: Well, they do. First of all, call and be respectful but call. Find out the district director's name of your congressman or senator in your area and call them by name. Write a letter to the member of congress. Show up when they come to your area.
I got an e mail the area day from an old friend of mine, lives down in Panama City, Florida. Congressman Allen Boyd, a so called blue dog who voted for the cap and trade energy check showed up you the Gulf Coast Community College and 300 people showed up to protest him and they were so vociferous in their comments I hope they were respectful but they were so pointed in their opposition to the energy tax that he did not take questions at his so called open house town hall meeting and he left through the back door. And I mean, he got the message. And look, I still believe in the power of the American people.
GLENN: So do I.
ROVE: I believe that if the American people stand up as they did at the tea parties, that was a powerful signal. And if you don't think members of congress heard about that, then you cannot explain why 40 some odd Democrats voted against the energy taxes because guys who were in vulnerable districts remember, there are 60 let's see. There are 63 members of the House whose districts were carried by George Bush twice. There are 49 members of the House who are Democrats whose seat was carried by John McCain. You've got to be damn nervous if you are one of those 70 some odd total people who are sitting there saying, you know what, my district was carried by the Republicans in the presidential race, I'm a Democrat and I'm voting for this silly stuff that's going to get me beat. So I believe in the power of the American people.
Now, am I a little bit more scared than I was two weeks ago and a heck of a lot more scared than I was five months ago? You bet I am. As I go around the country and guess what. I do run into ordinary people as I do. I'm going today to Iowa and then I'm going to be in Missouri and then I'm going to be in Texas and then this weekend I'm going to be out in West Texas. Wherever I go people come up to me and say I'm frightened for my country. And I try and reassure them because I do have confidence in America, but I've got to tell you the radicalness of this agenda and sort of the arrogance about what they are doing to us
GLENN: Wait, wait. I don't what was that?
ROVE: A little badly pronounced French. Parlez vous francais?
GLENN: No, and proud of it.
ROVE: No, no, remember there's a conservative who's the president of France.
GLENN: Right. Yeah, I love him, too. Okay, so Karl, look. I have the same belief in America because I believe in the American people. And maybe this stuff does matter because I just said to Karl Rove and 8 million people what one guy stood up and yelled at me, you know, from a balcony. So I guess it does make a difference, but I really think that we're approaching a point that I warned against two years ago, that if the people in Washington don't stop injuring the people and start listening to the people, we're entering a dangerous time. And it really frightens me because that will spiral out of control like crazy. It will push these control freaks in Washington, I mean it will move their agenda, you know, at hyperspeed. You disagree?
ROVE: I don't well, I might disagree on the edges, but the bottom, the fundamental point is this: If what you're saying, and I think this is what you're saying: If they pass certain kinds of policies, it tips us over. If they pass a government run takeover of the healthcare plan, of our healthcare in America, it's going to be hard to undo that. There's a lot that we can do. They raise taxes, we can lower taxes. They put in place regulations, we can change regulations. But if they put in place some of these fundamental game changes that make us look like a European social democracy, it's very hard to undo it.
GLENN: Are you one of the guys that believes that this talk about a global dollar or a new reserve currency or Al Gore last week saying, you know, this cap and trade is great because it's going to give us the infrastructure of a global government, are you one of these guys that thinks that this is all just hype or that some of these countries mean dump the dollar maybe not today, but we need to get out of the dollar because these guys are trashing it?
ROVE: I don't think we look, I believe in a strong American currency. I think it's, you know, look, the ordinary person's not capable of sort of making great judgments about what currency to invest in. So I'd like to stay focused on getting the right kind of policy to keep the American dollar strong. But you are right, whoever controls the money controls the policy and if we surrender control of America's currency to an international agency or to an international alliance, it's a problem. You know, we led the world in setting rules for international trade and finance in the aftermath of World War II, and it served the world well and it was based around the U.S. dollar. I think that
GLENN: How about surrendering the control of the dollar to the Fed which, should the Fed, should the bill on transparency for the Fed pass?
ROVE: Well, look, we made that decision in 1912. Frankly it was to our advantage to have a strong central bank. If you look at the history of the American currency during the 19th century, there were erratic swings in its value. We had because we did not have a strong central bank that could sort of iron out the wild swings we had, you know, boom and bust where we didn't need to have it.
GLENN: But that's not the question. I disagree with that, but that's not the question. The question is should there be transparency?
ROVE: Absolutely. There should be more transparency. I mean, I do want the bankers to be able to move rapidly with some opaqueness for a period of time. But over the long haul the actions of the bank have to be transparent, and I'm troubled frankly about the dramatic expansion of the balance sheet of the Fed, the things that they have done in order to stabilize the economic system, the banking system are going to have to be paid for at some point. If you are keeping interest rates as low as they are, at some point interest rates are going to need to rise. If you have the balance sheet of the Fed Ex up and downed and balloon so rapidly, at some point you are going to have to begin to pull in and to deleverage and, you know, leveraging up may help but deleveraging is going to hurt.
GLENN: Yeah, okay. Karl Rove, thank you very much, I appreciate it, sir.
ROVE: You bet.
GLENN: And safe travels.
ROVE: Thank you, sir.