This is a rush transcript from "Hannity," July 27, 2011. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: And tonight in the great debt debate, it is House Speaker John Boehner versus Senate Majority Leader Harry Reid who are pushing dueling plans to solve the deficit crisis as the clock ticks towards zero.

Now, Prince Harry Reid's plan of course, increases the debt ceiling through 2012, ensuring that this thorny issue will not interfere with the president's campaign for reelection. How convenient.

Now, Speaker Boehner's plan slashes almost $1 trillion from the federal budget, and this morning, he warned fellow Republicans to quote, "Get your ass in line and rally behind this bill."

In typical fashion, the president threatened the Boehner bill with a veto and Senate Democrats have sent a letter to the Speaker of the House informing him that no Senate Democrats will vote in favor of his plan.

But the greatest threat to the Boehner bill may not come from Democrats, but from the Tea Party, which is refusing to back it. Now my next guest, Arizona Senator John McCain, he came out swinging earlier today against the Tea Party stance reading from a Wall Street Journal editorial on the Senate floor. Take a look at this.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, R-ARIZ.: The idea seems to be that if the House GOP refuses to raise the debt ceiling, a default crisis or gradual government shutdown will ensue and the public will turn en masse against Barack Obama. Republican House had failed to raise the debt ceiling which somehow escape all the blame. Then Democrats would have to choice but to pass a balanced budget amendment and reform entitlements and the Tea Party hobbits could return to middle earth having defeated Mordor. This is the kind of crack political thinking that turned Sharron Angle and Christine O'Donnell into GOP Senate nominees.

(END VIDEO CLIP)

HANNITY: Joining me now is Arizona Senator John McCain.

Senator, you know, I read the Journal editorial. And I'm against the editorial. I read the Weekly Standard today, I'm angry at them. The Tea Party didn't cause the death crisis we have. The Democrats and Obama did. They didn't spend all this money to bring us on the brink of default losing our credit rating, the Democrats, the president brought us to this point. Why are you attacking the Tea Party?

MCCAIN: Well, first of all, I was reading from a Wall Street Journal editorial and not exactly --

HANNITY: Well, one that was attack in the Tea Party.

MCCAIN: No, it was basically attacking the idea that somehow if we shutdown the government that then Obama would get the blame and Republicans would triumph. I disagree. I think that the fact is, that if we don't act in the Republican House, and I believe by the way, that they will, at least I certainly hope though that they will, then the ball will be in President Obama's court and Harry Reid who has, as you pointed out, one of the most flimsy, transparent, phony spending cut things -- proposals that I've ever seen. So, I wasn't attacking the Tea Partiers or anybody. What I was trying to point out as the Wall Street Journal was, that we need to act with our own spending cuts, with our own legitimate spending cuts, in that way, then all the pressure will be on the president and the Democrats under Harry Reid.

HANNITY: You know, I take a different position, I see the Republicans, you know, literally were competing against themselves which infuriates me a little bit. This president has not put forward a plan. The Tea Party saying, wait a minute, this is why we hired you guys. And they're just saying, we wanted "Cut, Cap and Balance," a reasonable, responsible bill and they are asking for, you know, the Republicans to stand firm on it.

So, look, I found this as an attack on the Tea Party. And if you are agreeing with it, and mentioning Christine O'Donnell or Sharron Angle, it sounds like an attack on the Tea Party.

MCCAIN: No, primarily if you read the whole editorial which an attack on President Obama in the way that they are trying to shift the blame on to Republicans. And that's also what I said on the floor of the Senate. The president has not come forward with a plan, that is unconscionable. That's the worst aspect of leading from behind. But that doesn't mean that Republicans are relieved of their responsibilities.

Look, I've got to tell you this, Sean, there is no way that there are 67 votes in the United States Senate to pass a balanced budget amendment to the Constitution. Now, I'll put my conservative fiscal record up against anyone, Tea Party, non-Tea Party, anybody's. I fought against the Bush spending proposals. I voted against my own party, time after time. I'm proud of my record. That's why I was designated the taxpayers' hero.

HANNITY: Alright, I got that. I agree with you.

MCCAIN: OK, you got it.

HANNITY: I believe you, I agree with you.

MCCAIN: I don't want us to see a 1995 return to, we Republicans can come up with -- I'm all for the balanced budget amendment. I would love to see it be the major issue in the 2012 election --

HANNITY: Here's the problem.

MCCAIN: I voted for it 13 times. So --

HANNITY: I know, I understand that.

MCCAIN: I don't want to shut down the government. I think Boehner has a good proposal, and I think that we ought to support it. And if the Democrats and President Obama don't want to support it, then it is their problem of shutting down the government.

HANNITY: Wait a minute. The House Republicans voted to repeal Obamacare. They voted for the Ryan plan, which was a great start and I think a responsible budget.

MCCAIN: Yes, absolutely.

HANNITY: They voted for "Cut, Cap and Balance." Now 53, every Democratic senator is against the Boehner plan. The president said he would veto plan. The Democrats have not put forward a plan and the one Harry Reid is talking about is phony accounting and gutting our Defense Department. So, I don't like that either.

Here's my problem. We have fallen into the president's trap in this way, in my opinion. He set an artificial deadline and that catastrophe, crisis, the same rhetoric he used to pass the stimulus, same rhetoric they used to bail out banks, insurance companies and Wall Street. Same rhetoric that he used for Obamacare and we are buying into this. And I don't think we need to go so fast. I think, first, we take in $200 billion a month. And I think, we, Republicans in the House and Senate need to regroup, lock themselves in a room, support one plan and then put it on the president's desk and if he doesn't want it, then any default will be on his shoulders. Tell me why I'm wrong.

MCCAIN: First of all, the reason why you're wrong is because if we don't act within a few days, then anyone -- including the person with the Treasury Department under the Bush administration came over today -- that the markets will react. That the lack of confidence throughout the world will be reflected in very severe repercussions, not to just mention downgrades. But you saw the stock market went down nearly 200 points today. And to somehow think that we won't have to pay 40 percent of our bills is just wrong.

HANNITY: Senator, I am not buying this.

MCCAIN: It's just wrong. You may agree with that. I respectfully disagree with the fact that we are going to say, we are not going to pay 40 percent of our bills, no matter how we prioritize the money we have remaining.

HANNITY: Well, first of all, Social Security recipients will be paid, veterans will be paid, the military will be paid, the interest on the debt will be paid, Medicare, Medicaid is paid. Here's my problem though.

MCCAIN: That is not true. They are not all paid.

HANNITY: Yes, it is true. We take in $200 billion a month.

MCCAIN: I would be glad to send you the information. But then, who doesn't get paid? And what government services are shut down? Sean, I saw this movie before in 1995. They are not going to pass a bill that prioritizes who gets paid. The one who will be making the decision will be the president of the United States.

HANNITY: OK. I agree. It is not enough money. But here's -- for example, I talked to Connie Mack and Rand Paul in the last two days. If we would just lock in this year's spending and then cut one percent, this is the Mack-Penny plan, lock in one percent decrease every year for six years, and then two years, keep it at 18 percent of GDP, we have a balanced budget. Does that sound unreasonable? We couldn't put that together in six days?

MCCAIN: Frankly, it doesn't sound to me like it's a lot of courage. Because we have to make tough decisions, there are some programs that we should save.