• With: Rick Klein, ABC News Political Director

    This is a rush transcript from "On the Record," March 19, 2013. This copy may not be in its final form and may be updated.

    GRETA VAN SUSTEREN, FOX NEWS HOST: Now to the sequester, the scourge caused by politicians not doing their jobs. Did you know politicians not doing their job has a direct impact on young people and children in this country? Well, sequester is now causing cuts to scholarships for the children of U.S. troops killed in Iraq and Afghanistan. Each new college scholarship will be reduced by almost 40 percent.

    ABC News political director Rick Klein joins us. And I should add that ABC News has really been leading nationally on this story. What -- what's -- what's going on here?

    RICK KLEIN, ABC NEWS POLITICAL DIRECTOR: So this is a program called the Iraq and Afghanistan War Grants, and this is a special scholarship program created for the children of servicemen and women who died in one of the wars, in Iraq or Afghanistan. It isn't a lot of money, about $5,000 is the top scholarship that's available.

    VAN SUSTEREN: A lot to them.

    KLEIN: A lot to them, and if you're trying to piece together a college education, not large in terms of the big picture. But because of the sequester, the Department of Education has sent word that these grants have to be cut. New grants are going to be cut by about 38 percent across the board. So any time you're going to get a new grant, if it was $5,000 before, it's going to be about $2,000 less than that.

    VAN SUSTEREN: All right, here's what I don't get, though. This is almost 40 percent cut, right, about 38 percent cut?

    KLEIN: Right.

    VAN SUSTEREN: Explain to me, if the sequester was 2.4 percent cut across the board, why are the young people taking it at 38 percent, this cut? I mean, how -- how -- I would think that they would have 2.4 percent.

    KLEIN: Well, there's things going on. One is that it's spread over a shorter period of time. We're halfway into the fiscal year, so that 2.4 percent cut has to actually go into effect over a shorter period of time, just over the next six months or so.

    VAN SUSTEREN: So make it 4.8.

    KLEIN: Well, that's one piece. The other thing...

    VAN SUSTEREN: Make it 4.8 then.

    KLEIN: ... is that there are things in the sequester that are actually walled off, making sure that the men and women in Afghanistan and Iraq themselves aren't in harm's way, the vast majority of military spending not cut. So when there are programs that are targeted, they take a disproportionate chunk of the hit.

    And that's the point that both Democrats and Republicans have been making about this, is that even at 2.4 percent that we're talking about, that's actually a misleading figure because in individual areas, because those are the areas that have to shoulder all of the burden, it can be a lot more of a sting.

    VAN SUSTEREN: Is this a selected area? Did anyone make this choice that we were going to do this to these young people?

    KLEIN: It's actually the opposite. They made the choice -- congress made the choice to do this across the board to as many programs as could be hit with discretionary spending.

    VAN SUSTEREN: But I think we're back to 2.4 percent.

    KLEIN: Well, yes, but this was one of the areas that they didn't wall off. There were certain areas, including Pell grants, for instance, that were walled off and wouldn't be impacted. This, however, was not touched. So the Department of Education, from their perspective, their hands are tied because of this law.

    And get this, Greta. The upshot of all this -- there are 37 students -- yes, 37 students who actually are a part of this program last year. So this is a grand total of about $165,000 in federal spending. So you're going to go ding about three dozen students and save about $60,000.

    VAN SUSTEREN: I -- you know what? I -- if you gave me about eight hours, I could go to the Department of Education and find enough waste to pay for these in the next -- you know, I could easily do that. I mean, there's so much waste that goes on in every one of these governmental organizations, to sort of do this, to ding, as you say, the students is -- is appalling!

    KLEIN: That's right. There's an illogic to it. There's maybe an insanity to it. But keep in mind the way the sequester designed by Congress and signed into law by the president was to create a series of things that would be so terrible, so awful that there's no way that Congress would let it happen.

    VAN SUSTEREN: But it's not so terrible because different areas got walled off! That's special treatment! And it really isn't -- I mean, it isn't sort an equal across the board.

    KLEIN: Right.

    VAN SUSTEREN: I mean, someone made some decisions about this group is going to get hit and this group is not.

    KLEIN: That's right. And look, the Education Department, the Obama administration has said that we'd love to have the flexibility to be able to go in and slice this funding as we see fit, as it should be managed. We don't have that flexibility because of the way the law is written.

    So there's some talk in Congress about providing that, particularly in military areas. But an area like this, it's hard to see, unless there's a big groundswell of support for it, for a short-term solution that's going to restore this money for people.

    VAN SUSTEREN: I -- I thought that the -- and correct me if I'm wrong -- the Republicans offered that flexibility to the White House and the White House declined it.

    KLEIN: They offered it on the defense side. And it may still happen. They have said they don't want it because they want it to be part of a broader package over the sequester. But we're getting to the point where - - look, the sequester is the law. It's happened. These cuts are being implemented. I think there's going to be more pressure to say, Wait a second, let's back this up and at least try to find the flexibility in areas. So where we find something that we know...

    VAN SUSTEREN: Or...

    KLEIN: ... we shouldn't be cutting, we don't cut it.

    VAN SUSTEREN: Or you can find $137,000, or whatever the number is, in waste and fraud in the Department of Education. You could find that, you know, by tomorrow at noon, so they could do that to pay for it. But anyway, they won't. Anyway, Rick, thank you.

    KLEIN: Thanks, Greta.