Troubled States Too Big to Fail?

This is a rush transcript from "Glenn Beck," May 18, 2009. This copy may not be in its final form and may be updated.

GLENN BECK, HOST: Jonathan Williams is here. He's the director of the tax policy of the American Legislative Exchange Council — nonpartisan organization of free market state legislators.

Here's the thing what I want to talk to you about, Jonathan. I think this is — it's only a matter of time before the federal government says, "We can't allow California to fail." And Massachusetts and New Jersey and New York — they're right behind, and we can't let that happen. And before you know it, we've got Barack Obama and the progressive movement running all of these out-of-control states.

Am I wrong?

? Video: Watch Beck's interview

JONATHAN WILLIAMS, AMERICAN LEGISLATIVE EXCHANGE COUNCIL: Well, if you — you're not wrong — and if you think that it is bad that Barack Obama is now taking over the auto companies, and being a Michigan — former Michigan resident, I can tell you that's deeply disturbing to me in deciding their advertising budget. If you think that's bad, you know, if the state are, you know, held hostage by the federal government after being bailed out time and time again, I could absolutely see the federal government coming out to the states and dictating a whole lot of things.

BECK: Oh, I mean, I have to tell you — I can't imagine — I mean, you're not — I don't believe that you're in trouble when you only cut your sea otter budget in half.

(LAUGHTER)

BECK: I mean, that goes to zero.

If you're — if you have to release prisoners and you still have money floating into the sea otter project, I got no sympathy for you — no sympathy whatsoever!

So, what is it that the average person can do, Jonathan, to get their own state to say, "We're not sending any tax dollars to California or Massachusetts or anyplace else. We are not going to guarantee their bonds. They're not too big to fail"?

WILLIAMS: That's right. Well, one of the things I have been watching is, as you've been having, some of our elected officials from the various states have been leading the 10th Amendment state sovereignty issues in their states and supporting resolutions saying, you know, those things not given to the federal government, you know, ought to be reserved to the states and the people, and the federal government has gone way beyond its authority. And it's about time that, you know, we stand up and say enough is enough.

BECK: OK. Tell me what these states have in common: New York, Illinois, New Jersey, Michigan — these are the states in trouble. New York, Illinois, New Jersey, Michigan, Oregon, Vermont, Massachusetts.

WILLIAMS: Well, these are...

BECK: They are all the most progressive. They're the one — they're the ones with the biggest state governments. How come we're not taking...

WILLIAMS: That's right. Yes.

BECK: Why are we — why are we looking at sick states and saying we should be more like that, instead of looking at good states like Texas, that created more jobs last year than all 49 states, other states combined?

Why are we looking at them?

WILLIAMS: That's a very good point. And I think there's a clear choice between following the path of California and following the path of Texas — like you mentioned — how successful they have been. The things that those states have in common, all the high tax states that you mentioned, they are progressive, they're high tax and they've been lagging the nation in economic growth.

There is an old saying that, you know, people will vote with their feet and high taxes will redistribute people. People will go to low cost areas of doing business and living.

I think that the statistics are out there. We just released a report, rich states/poor states, at ALEC with my friends Art Laffer and Steve Moore. And we've found the evidence to be so compelling and the states that have the highest tax burden — you're looking at New York, California, you just go down that list that you just talked about — those are the states facing the biggest budget problems. Those are the — those are the states that most successful people in businesses are moving away from.

The problem for states is you can't build "Berlin walls" around your state lines.

BECK: No.

WILLIAMS: Most successful people are going to move away. And that's what we see happening.

BECK: But you know what you can do? I mean, Stephen Moore is a good friend of mine and he's been talking about this for a very long time.

And let me tell you — run this by your think tank there with Art Laffer and Stephen Moore, because I would really like to hear the answer to this one: I think that's why they want to go in and bail out these states, because they can't build a "Berlin wall."

But if they can get rid of all states' rights, they can say, "You know what, we're just going to do one income tax, forget about the states and we'll send the money from the federal government." Then you have no place to go, because they've got to stop states like Texas, because Texas is hurting, as they would view it, the other states.

It's like a — it's like a car company saying, "You know what, we're just going to punish the good car dealers and we're going to take the money from the good car dealers and just give it to the bad car dealers."

That would never happen — except in America.

WILLIAMS: I think that's a pretty legitimate concern, and, you know, thank God we have some sane governors like Governor Mark Sanford of South Carolina and Rick Perry of Texas.

And, you know, Governor Sanford wanted to do a pretty — a great thing in that he wanted to use federal stimulus dollars, instead of increasing spending with them, he wanted to pay down education debt.

But according to the Obama administration and Peter Orszag, they said, "Well, thanks, but no thanks. We're not going to let you do that." And I think the more that you see the federal government going and giving money to the states or guaranteeing loans or bailing out them, you're going to see more and more of these federal restrictions. You know, you're going to see liberals being exported from Washington, D.C. out to the states.

BECK: Oh, yes, you are. OK, thank you very much. I appreciate it.

Content and Programming Copyright 2009 FOX News Network, LLC. ALL RIGHTS RESERVED. Transcription Copyright 2009 CQ Transcriptions, LLC, which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon FOX News Network, LLC'S and CQ Transcriptions, LLC's copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.