The following is a rush transcript of the September 12, 2010, edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

CHRIS WALLACE, ANCHOR: Joining us now to talk about the economy, the campaign and growing anti-Islamic feeling in this country is former Republican speaker Newt Gingrich.

And, Mr. Speaker, welcome back to "Fox News Sunday."

NEWT GINGRICH, FORMER SPEAKER OF THE HOUSE: Good to be with you.

WALLACE: This week, the president tried to set the terms of the economic debate for the fall. Here's what he had to say about the GOP.

(BEGIN VIDEO CLIP)

PRESIDENT OBAMA: They would have us borrow $700 billion over the next 10 years to give a tax cut of about $100,000 each to folks who are already millionaires.

(END VIDEO CLIP)

WALLACE: Question: If congressional Democrats try to extend the Bush tax cuts for the middle class, can Republicans afford to block that until they also get the tax cut for the so-called wealthy?

GINGRICH: No. In fact, I think the Republicans will probably surprise the president by offering to pass whatever tax cut he'll sign, as long as it isn't offset by tax increases.

I mean, every time the president says, "I'll cut taxes over here," he then says, "Oh, by the way, I'll raise taxes over here." And you end up with a net destruction of jobs.

The big problem the president has -- the whole theory of the elephant in the room -- is jobs. And raising taxes on the people who create jobs kills jobs. And the American people know it, even if the president doesn't.

WALLACE: So you're saying, in effect, that when the president tried to set up this as a choice, they're trying to hold the tax cuts for the middle class hostage, Republicans are going to say, "Not us. We'll take whatever we can get."

GINGRICH: Yeah. I think Republicans ought to say, "We're going to pass any tax cut that you'll sign that has no increases. And we'll come back in January as a majority and we'll see if we can pass the rest."

WALLACE: But you're, in effect, saying that at least until you -- if and when you gain control of Congress, you're giving up on the tax cut for the wealthy.

GINGRICH: No, you -- you're saying that the president of the United States is determined to stop the tax increases on people who create jobs. He is the president. It's better to at least help the middle class even if that doesn't create jobs.

You know, and I think the Republicans would be very wise to say, "We will pass any tax cut this president will sign as long as it doesn't have a poison pill of a tax increase."

WALLACE: OK. Let's talk, though, about -- because you still want to continue...

(CROSSTALK)

WALLACE: ... the Bush tax cut for the so-called wealthy, people making over a quarter million dollars a year. Let me just follow up on that.

The nonpartisan Congressional Budget Office...

GINGRICH: Yeah.

WALLACE: ... analyzed 11 different policy options on how to boost the economy, and they found that tax cuts for high earners would have the lowest what they call bang for the buck...

GINGRICH: Right.

WALLACE: ... of any of them to boost economy, because they say high earners are more likely to save the money than to spend it.

GINGRICH: Well, first of all, I mean, the -- first of all, the bureaucrats at the Congressional Budget Office, who don't create jobs and aren't entrepreneurs, gave you their bureaucratic interpretation of reality.

The thing that the president doesn't understand and the thing that Keynesian economics get wrong is real simple. Do you want people to have enough money to invest to create jobs? If they have a surplus of income so they can create jobs, that's somehow bad and the president wants to take away the income. That means he's leaving them with no money to create jobs.

You look around this country today, virtually every entrepreneur in this country today says -- and they say it to me day after day -- "I'm not creating any jobs while this guy's president because he simply wants to take away the money. So why would I go out and risk my capital to create a job so he could increase taxes, increase the cost of health care, increase government control, increase regulations?" The result is this is the longest recession since the Great Depression and the longest period of really severe unemployment. And he has no answer for the unemployment.

WALLACE: Let me ask you another aspect of this, though. If you extend, as you want, as Republicans want, all the Bush tax cuts, that is going to blow a $3 trillion...

GINGRICH: Right.

WALLACE: ... hole in the deficit. I thought your party was so concerned about debt and the deficits.

GINGRICH: Look, when you have a -- when you have a 16-year-old with a credit card who doesn't think the bills come due, you can never get caught up, because they'll just charge more.

The president of the United States has radically increased the size of the federal government since Bush left office. John Boehner has correctly proposed -- the Republican leader in the House -- let's go back to Bush's 2008 budget and you can save like -- something like a trillion, 300 billion dollars just by not spending the money.

So when we balanced the federal budget in the 1990s, which we did for four years, we controlled spending and we cut taxes simultaneously, and we reformed government. There's no reason...

WALLACE: But taxes were higher in the 1990s than they are now because you've got the Bush tax cuts of 2001 and '03. What about the argument -- I mean, John Boehner -- the House Republican leader's idea was go back to the last Bush budget and keep all the Bush tax cuts.

Isn't he making the Democratic argument that your party's idea is let's go back to Bush?

GINGRICH: Well, first of all, if you want to go back to the world before Pelosi and Reid of December of 2006, there was a lot higher employment, a lot higher income. The middle class was much better off. That would not -- I think most Americans would...

WALLACE: Well, you can't blame the whole financial crisis...

GINGRICH: No.