 Welcome to now. If you're thinking about money, bills, the job in your pension, and not just the war, you belong to the largest party in America, the party of angst. The economy's sputtering. The Dow is down. Oil prices and health costs are soaring, and over 8 million people are unemployed. The other day, The Wall Street Journal ran a page one story on a worker who had sent out over 700 resumes without landing a job. What's clear is that all the talk about tax breaks stimulating the economy is only stimulating fear about deficits. Even the White House now estimates the budget deficit will hit a record $304 billion this year, and that's without figuring in a war whose cost the government refuses to reveal. With me now to talk about all this is Lou Rockwell. Mr. Rockwell is a libertarian, free market conservative and president of the Ludwig von Mises Institute. It's the organization he founded to advocate and promote the philosophy that the solution to our fiscal and social woes begins with smaller government. Mr. Rockwell has been a congressional aide, a book editor, a magazine editor, and is now the editor of his own website. Welcome to now. It's great to be with you. Business pundits and the government have been saying for 20 months that this is not really a recession, it's just a kind of a stumbling a bit, the economy's stumbling a bit. Is it a recession? I remember back when Alfred Kahn, very funny economist who referred to Jimmy Carter and he referred to depression and was taken to the woodshed by Carter over this and when he talked to the reporters afterwards he said, I'm never going to say that word again, I'm only going to say the word banana, but you know we're in a banana. So are we in a banana? Sure we're in a banana. We're in a very serious recession. And what does that mean to people? Banana means that the economy is shrinking. If we look at the government's own statistics and we have to subtract the increase in government spending, which is bad for the economy, not good, we're getting poorer as an economy. That's what a recession means. For us regular people it means we're getting poorer and we're going to continue to get poorer and I think we can all feel it, even aside from the statistics. We all feel the fear for retirements and our savings. We're worried about our jobs. We see businesses closing. We're getting poorer and if the Bush administration set out to do everything possible to make the recession longer and deeper and maybe turn it into a depression, they'd be doing exactly what they're doing now. What's keeping you awake at night? Well first of all you mentioned the 304 billion dollar deficit figure, but that's actually a fib because what we always need to pay attention to is how much the national debt is going up by, which is always much more significant than the official deficit because the government spends money, so-called off budget and it doesn't count in the official budget deficit. So if we look at the actual deficit that's going on right now, it's over 400 billion. That is the difference between income and out go for the federal government and again that's without the war and the economy is heading downhill. So I think it's very, very worrisome. Who knows what the deficit could actually be in the next fiscal year, 600 billion, 700 billion? One of my associates just handed me this story from the New York Times. The budget President Bush submitted last month should have come with a warning there back. Deficits are re-emerging as a major problem. Goldman Sachs recently raised its estimate of the federal budget deficit to 375 billion dollars. You're saying it could be more than that? Oh sure, it's already a lot more than that and these figures are all available on the treasuries although they don't have a nice chart to make it easy on you. But these figures are all available, it's already more than 400 billion, the actual deficit. Just to take the example of the foreign aid that Bush has promised to Turkey if they come along with him on the war, that money would come out of the exchange stabilization fund as a loan. But that would not count in the official budget deficit even though it's a debt of the federal government. So it's again the increase in the national debt and it's very, very worrisome. What does this mean to ordinary people? The words like deficits and recession come and go among economists and newspaper headline but what does it mean to ordinary working people? Well it means trouble because sometimes Republicans and for the Democrats for that matter I like to pretend that there's some way to fund the government other than the two ways of taxation and inflation. Those are the only two ways they can postpone it through borrowing but all those have negative economic effects and when we have deficits this size, first of all it means that everybody's worried that these are going to be monetized, i.e. that the Federal Reserve will in effect print money to pay them and that has all kinds of bad effects but besides rising prices. It's what brings on the business cycle for example. It's what the Fed did in the 1990s or the reason that we now are in the longest, deepest recession since the Cold War. You worked in Washington four years as a congressional aide. Do you think everyone in Washington is in denial over the shipwreck that's coming on this issue of deficits or is there a conspiracy to look the other way when the emperor passes with no clothes on? Well there's both of them but I also think the fact that these are not necessarily bad for the government. It's bad for the people but I think the government in these things has a very different interest usually in fact the opposite of what the people's interest is. So however they can expand government spending and they switch between the various methods of borrowing, taxing and inflating depending on the political climate they are benefited. They and the interest groups who received the dough. Is this however what free market libertarian conservatives have been wanting to put the government so much in debt that it can't possibly raise more money to support more government spending? I mean the conservative activist Grover Norquist was here where you're sitting not long ago and he says he wants to shrink the government until it can be drowned in the bathtub and the best way to do that is just to strangle the source of money. Well you know I think this is a Republican fib as great a guy as Grover Norquist is because of course the government keeps growing. President Bush has expanded the federal budget by 30 percent. I mean this is the biggest spending administration since Mr. Johnson's and it may be... I do wrote somewhere that Lyndon Johnson and George W. Bush have a lot in common. They like to spend money. Yeah they do. If we look at the facts and not the rhetoric Republicans expand the government much more than Democrats do. If you look at the Reagan administration, the Nixon administration, the both Bush administrations are all big government operations. The smallest government guy in recent times, Jimmy Carter. Even Clinton was a smaller government guy than George Bush. You advocate low taxes. Do you support Bush's tax cuts? Well you know I'm all for tax cuts and I think taxes I mean a shorthand for taxes is wealth destruction so certainly the fewer taxes we have the better. On the other hand the government spending has to be paid for somehow so if he's expanding the government at the rate that he is at a huge rate to talk about tax cuts it seems to me is irresponsible probably the most destructive way to fund the federal government is through inflation through the Federal Reserve. So actually I hate to say taxes are better than that but yes taxes are less economically destructive than inflation. So for him to be I think it's I think it's highly irresponsible. I think it's just a trick. To fool people after all his previous so-called tax cuts have yet to come into effect. They don't even come into effect until next year and my prediction is they won't come into effect. There'll be some sort of you know war emergency and then we'll be able to bring them into effect. There is some talk in Washington that the huge expenditures on a war against Iraq would actually boost the economy by circulating all that spending on defense. What about that? Well I mean I know that's the claim of the French economist the 19th century Frederick Bastiat talked about the broken window fallacy a boy tosses a bad boy tosses rock through a baker's window and everybody's very sad for the poor baker and then a guy in the maybe an economist in the crowd says I don't worry you know this is gonna be great it's gonna be money for the glacier then he'll buy a new suit and everything you know will multiply and will be all better off. But that you know first of all leaving aside property rights and morality questions it ignores what that money would have been spent on otherwise. So to take vast sums out of the the private productive economy and spend it on things that are that are anti-productive weapons of mass destruction and so forth that have no economic purpose far from being a help is a is a disaster I mean you can think of the U.S. military as that little boy with a rock. But didn't World War II actually pull the country out of the depression? Didn't the spending on that vast military effort stimulate the economy give people jobs and enable us to get over the the depression in a way that FDR's New Deal programs never did? Well sure the New Deal didn't work and really we didn't get out of the depression until probably 1948 or 1949. What the war did do was help the unemployment statistics by killing a lot of the unemployed. It did do that. In fact you know he drafted twenty percent of the workforce at one point or another into the military. So when you had when you started out with a twelve percent unemployment rate yes I mean there was much less unemployment but the vast expenditures on non-productive goods the erection of a command and control economy not that dissimilar from the Soviet economy price and wage controls no that was not economically good it was economically bad. What do you think this war will do to the economy? Well it's very bad for the economy. I mean it's a vast transfer of wealth from the productive economy into the government sector into what after all is a socialist enterprise the U.S. military and therefore economically disastrous so you have all kinds of money taken out of productive private savings and investment to build bombs and missiles that it's economically dangerous and then it of course like every single war in our history it empowers the government to suppress dissent to abolish civil liberties to grow it's one of the reasons government love war because it it does enable them to grow and to brand anybody who disagrees with them as unpatriotic. But the fact that it's a socialist institution the military doesn't make it a disposable institution I mean you wouldn't want to live in a country that didn't have a strong military to defend you would you? No of course you have to have soldiers and you have to you want defense absolutely whether this particular arrangement in this vast centralized you know the biggest of course the biggest military empire in the history of the world the U.S. I mean far surpassing I mean our budget is bigger than the next twenty seven countries. You feel safer because of that? No I don't feel safe at all I mean that none of it is spent on defense for example it's all spent on offense and there's very little defense it's all you know involved in running other people's lives running other people's countries. You oppose the war in Vietnam. Yes. And you oppose this war? Well I oppose any war that's not absolutely necessary and absolutely moral and defensive so that for example killing we don't know how many three four thousand people in Afghanistan to go after the Taliban who are after all the descendants of the exact same guys that Ronald Reagan was funding during as Mujahideen when they went up against the Soviet Union you know I know I don't think that's good I don't think there's you know any proof that they had anything to do with nine eleven I think it was just striking out and I think it's very unfortunate I think it's it's just killing. This morning I heard a chilling report on national public radio about how Saddam Hussein tortures people and he's clearly a demonic man himself couldn't you concede that Bush really does believe he's own a moral mission to rid the world of a monster? I'm sure Saddam Hussein is not a good guy after all he's a politician but it is the most liberal regime in the Arab world in many senses you can get a drink in Baghdad unlike in Saudi Arabia women don't have to wear any particular kind of clothing Christianity is tolerated they're high officials of the Iraqi government who are Christians unlike in any Arab government that were pals with so you can there was a very interesting story on Morning Edition the other day about a gunshot. Yeah a gunshot in Baghdad and how there was a run on everybody buying guns and the fact that you can buy a gun in downtown Baghdad which of course you can't do in Manhattan is uh... you know also an unusual peek into this regime I mean we only know what the government is telling us. But doesn't a Saddam Hussein who is obviously himself a megalomaniac doesn't a Saddam Hussein armed with biological and chemical weapons potentially nuclear weapons doesn't that scare the hell out of you? Yeah I mean I don't like the fact that George Bush has all those things too and of course we know there's only one government in the world that's ever dropped atomic bombs on civilians and it's not Iraq uh... so you know there are a lot of governments that are run by bad guys I mean look at the people who were in Rwanda and killed millions of people by machete I mean hard to conceive of anything much worse than that so yes I don't like the idea of any government like this having having those kinds of weapons you know is it really the job of the US government to run the world I mean a lot of my what would a libertarian actually say about what the president should do about Saddam Hussein I think read a book um... think about helping the American people think about taking the burden off us think about what he could do to lessen this recession that Mr. Greenspan has brought on us that is by cutting government not expanding government cutting the military cutting the welfare budget cutting the regulations he's of course vastly increased regulations on business do you really believe there's nothing the government can do to improve our lot but to get out of the way yeah that's about it certainly that's true in the economy I mean now that we're in this recession uh... that's all it could do and certainly that's what Mr. Bush ought to be doing that is cutting spending cutting taxes cutting regulations get the heck out of the way but what about such things as unemployment benefits all those eight million people that guy who wrote the seven hundred letters and can't find a job I mean though we have some doesn't the moral imperative in all of us collectively want to try to help people like that while they're in distress you know this illustrates the the the basic uh... fallacy at the heart of the welfare state that it seeks to that subsidizes what it seeks to prevent or pretends to cure so it subsidizes unemployment uh... i remember when uh... mister bush senior uh... when he was running for reelection and uh... there was concerns about the in the unemployment rate and so he passed a vast expansion of unemployment benefits and g just amazingly enough the unemployment rate when way up when people could get more money uh... for a longer period of time staying unemployed so the government is subsidizing unemployment i do not think that's a good thing i think it's very socially destructive light obviously as you know disagree with so much of what you're saying although i learned from people with whom i disagree more than i learned from people with whom i i agree i just cannot imagine what kind of society it would be if it is every man for himself well but it's not i mean that's you know that's what the market brings about social cooperation we we work together in company didn't bring it in the thirties no the thirties was of course a terrible time brought about as a result of federal reserve inflation during the nineteen twenties and the rotten hoover administration which actually was the first the first first part of the new deal uh... so we had again exactly like in the nineties we had a boom during the twenties artificially generated by the federal reserve and yes it caused immense human suffering and again the roosevelt administration and the hoover administration did everything wrong uh... it's almost that was not their intention but it's almost as if they set out to uh... lengthen and prolong the depression and again that we have uh... herbert hoover bush doing exactly the same thing now you are consistently against the warfare state and the welfare state right yes sir but in this discussion you've been so critical of the republicans that am i to assume you're going to enroll as a democrat next year well you know there's a as a professor at harvard jeffrey frankle who's written a paper on uh... arguing that the two parties have switched positions ideologically and the republican party is despite rhetoric is today the party of the government and the democrats are the party of lesser government so very interesting i i was raised a republican uh... i suppose it bothers me more because they use some of them the rhetoric that i believe in uh... to cover up the opposite of what i believe in so it's uh... you know we'll have to see i mean is it possible that the democrats are smart uh... they would indeed come out on a more pro piece smaller government uh... side and that of course is the is the the history of the democrat party in the nineteenth century it was the good party and the republican party the party of lincoln the party of militarism of aggressive war of inflation of big business big government partnership of suppression of civil liberties and all the other things were all too familiar with there are people who would disagree with you that in the nineteen seventy the democratic party which upheld slavery and segregation in the south was the good party well i think you know i'm not i'm not uh... saying that any political party is all good obviously that uh... there were bad things about the democrats and uh... i wish george washington had known slaves either we've had this unfortunate business in our country for a very long time but with all the respect you didn't answer my question are you going to enroll as a democrat well no cuz i i must say i i'm i'm not partisan i don't like any of the parties so i also don't think politics electoral politics is our salvation i don't know where do people go who want to be who are morally and politically agents well i think i think uh... you know if people were want to be in politics you know that's their own business is just for me it's not uh... not the right thing and i think that uh... we have to educate ourselves and educate others about uh... our own history our real history about what's actually going on these days about real economics and uh... uh... the principles of liberty and i think that that is if we have any salvation it's through that and certainly in secular terms people want to know more about your ideas in your work what can they do well they can look at the mesis institute website and that's m-i-s-e-s dot o-r-g uh... and i have my own uh... daily news site too it's lou rockwell dot com l-e-w rockwell dot com thank you very much the rockwell i don't think i saw now