• This is a rush transcript from "On the Record," July 26, 2011. This copy may not be in its final form and may be updated.

    GRETA VAN SUSTEREN, FOX NEWS HOST: Bad news for Speaker Boehner tonight. Speaker Boehner sure didn't need this one! The CBO just scored his plan and says it only racks up $850 billion dollars in new savings. He thought it was $1.2 trillion. And that's not enough for his party. And right now, the Speaker's team is preparing to burn the midnight oil, tweaking the Boehner bill to get more savings.

    But there's more tonight. To make matters worse for Speaker Boehner, President Obama is threatening to veto that bill if it ever passes the House and then the Senate and ends up in the Oval Office on the president's desk. That puts us even farther away from agreement. And the deadline to raise our debt ceiling -- well, it's only one week away. So now what?

    Former governor of Alaska, Sarah Palin, joins us. Good evening, Governor. And Governor, that would be your hypothetical if you were in law school. Now what? We've got everybody warring. We've got wrong numbers. We got the president says he's going to veto it. The Republicans hate the Democrats and Democrats hate the Republicans. And we're one week away.

    SARAH PALIN, FOX NEWS CONTRIBUTOR/FORMER ALASKA GOVERNOR: Well, I think this is more Obama drama that's being created, this -- first this August 2nd deadline that he's insisting that America must act on, incurring more debt, raising that debt ceiling, otherwise, we will default. Well, we will not default. In fact, Geithner had said Sunday or Sunday before this -- this recent Sunday, he said that we will not default.

    And this August 2nd deadline is looming, but it's not Armageddon. It's not life or death. So Boehner and the Republicans have got to make sure that they have a good plan in front of those who will be voting on this plan. Otherwise, more of this Obama drama is going to continue and we're going to be continuing down this path of bankruptcy. And the American public -- we're sick and tired of it! We're tired of the games. We're tired of the deals that are made in Washington when all we want is a solution.

    VAN SUSTEREN: All right, you say it's not life or death. And there are 80-plus million checks that are supposed to go out by the federal government, give or take, after August 2nd. And as far as we know -- I mean, there's that -- you know, somebody's -- if we go into this situation where we can't borrow more money, is that it's possible that some people won't get their checks. So it does become life or death.

    I mean, I hope the government has a contingency plan. But how do you unscare the American people if you say this isn't life or death?

    PALIN: Well, scaring the American people is exactly what President Obama is doing. And that bizarre speech that he gave last night, it reminded me of when he insisted that TARP had to be passed, that you know, it was life or death at that time also. We had to increase spending in the federal government or people would be starving on the streets. And I mean, then look at what TARP resulted in.

    No, the president's getting pretty good at this fear-mongering and trying to cram down the public's throat this idea of bigger government, more spending, not necessarily having a plan on what the spending will be on or how we will be able to live within our means with the growing spend that he wants to see.

    But he's getting pretty good at this fear-mongering, and that's why the American public and our congressmen and women have got to take a step back and be reasonable and be rational, and we need to insist that our president present to us -- the leader of the free world, the leader of our nation, present to us a plan in how he is going to address the looming problem of bankruptcy, which is down the line if we don't get a handle on our overspend.

    VAN SUSTEREN: Now, the Republicans say and then you say that he doesn't have a plan. And I think maybe the CBO has sort of joined in on that because they said that he said that a plan was given at a speech at George Washington University, and they certainly -- they said they don't score a speech. So they -- so that he doesn't have a plan.

    The White House says, well, they have some sort of outline. I'm not sure what that is. But over in the House, with Speaker Boehner, he says he does have a plan, but he's got two problems. Number one is that he was apparently overly optimistic about the cuts. That's a big problem. And number two, he's got about 100 new -- 90-something new freshmen Republicans who don't want to go along with him unless there's a balanced budget amendment in it. So he's got a -- he's got a problem internally, so it's not even just sort of the problem vis-a-vis the two parties but even internally. So now what?

    PALIN: Well, he's got a problem internally because he didn't have to go try to reinvent any wheel here. And I do respect Speaker Boehner's efforts in trying to "negotiate with Jell-O," as he characterizes trying to negotiate with President Obama. But the internal problem that he has is reinventing the wheel here in the 11th hour when we already had "cut, cap and balance" that passed the House.

    And we don't need to retreat now and wave a white flag and say, oh, because the Senate is saying that they won't allow a vote on "cut, cap and balance," well, now we have to go out there and think up another plan. No, we didn't have to do that.

    The "cut, cap and balance" plan is the right plan because, evidently, there are enough members of Congress who are insisting that the debt ceiling will be raised. I don't want to see it raised, but they're saying it will be raised. So if it's going to be raised, we better get something out of it.

    What we want out of it, common sense conservative, fiscal conservative Americans -- what we want out of it is cutting the overspends then, cutting the overreach of government, and capping for spending levels that make sense in order to provide services that are accepted and expected by the public, and then balancing the budget via an amendment to our Constitution. Those are the things we want out of this deal that has to be struck with President Obama.

    VAN SUSTEREN: Well, you know, I think if I -- I mean, the sort of interesting intrigue of this -- and I don't know if this -- you know, where this is going to come into it, but when it gets over to the United States Senate, the question of the balanced budget amendment or not, there are some sort of interesting little tidbits, historic tidbits.

    For instance, Senator Harry Reid, Democrat of Nevada, the Senate majority leader, is quoted as saying in The Congressional Record in 1997 -- he says, "I believe we should have a constitutional amendment to balance the budget. I'm willing to go for that." In 1997, I don't know why he's - - what's change.

    Senator Dick Durbin, Illinois, in 1995 -- again, it's quite a -- it's almost 20 years ago -- he said, "We need to move towards a balanced budget amendment."

    And there are many other Democrats, some who have run even more recently, like Senator Sherrod Brown of Ohio, where he says, "Before asking for your vote, I owe it to you to tell you where I stand, and that's for a balanced budget amendment."

    So there are -- there are lots of instances where even Democrats have -- senators have called for a balanced budget amendment. Yet even though we have this sort of political intrigue, nobody seems to be willing to sort of sit down and actually resolve it. And we have, as you say, a drama, but it's not getting Any prettier here. So now what?

    PALIN: Well, You know, that's the hypocrisy that I guess is inherent in this politics as usual from these Washington, D.C., characters. They say one thing as candidates. And they get elected and they do their little flip-flop there, with Harry Reid, as you just mentioned, saying that he was for a balanced budget amendment.

    Well, look at President Obama. When he was a senator, he said he didn't think that raising taxes during a bad economy was a good idea. Now he thinks it's a good idea. He said, too, that raising the debt ceiling back then was a bad idea and it was a reflection of poor leadership. Well, now he wants to raise the debt ceiling and incur more debt, Greta.

    And this is the problem. Let me go back to President Obama and what his problem is. He doesn't understand that we have a spending problem in this country. And you know, back in the day, we used to hear that, "Hey, it's the economy stupid." Well, now, simply put, it's the spending, stupid! What's going on now with our bloated, overreaching, fat, nauseating spending from federal government, taking more state and individual control from Americans and trying to do it all on a federal level, which is creating this bankrupt situation that we're facing now!

    It's immoral. It's unethical. It doesn't make any sense economically, or as I say, morally, because we're handing these bills to our children and our grandchildren.

    President Obama does not know what he is doing when we asked him to lead us out of this situation that we're facing with bankruptcy! He's exacerbating the problem! He's making it worse by wanting to incur more debt, grow government and not presenting any kind of plan to the American people to show us what he really believes the solution is!

    VAN SUSTEREN: Governor, thank you.

    PALIN: Thank you.