• This is a rush transcript from "Your World With Neil Cavuto," January 30, 2009. This copy may not be in its final form and may be updated.

    NEIL CAVUTO, HOST: Now, some states already banking on a ton of stimulus cash coming in for those items and what have you, not Pennsylvania, though. Governor Ed Rendell is not taking any chances right now. He has given the state's labor unions notice that layoffs will be coming. And that's been ticking off state workers.

    The governor joins me right now.

    By the way, I am pretty sure he is going to be at the Super Bowl tomorrow, because those Steelers are going to be there.

    (LAUGHTER)

    CAVUTO: Governor, always good to have you.

    Video: Watch Cavuto's interview

    GOV. ED RENDELL, D-PA.: Nice just to talk to you, Neil.

    CAVUTO: You know, the more we talk about this stimulus plan and the stuff that Eric just got into, the more you wonder whether it is going to stimulate anyone but the limited interest groups to which it seems to be intended.

    RENDELL: Well, I take a broader view of it.

    First, let me say I believe the states have an absolute responsibility to take care of our budget problems first. And I am proposing a billion dollars of cuts in our budget in my budget speech next Wednesday.

    I am trying to avoid layoffs for our state workers. But their union leaders have to give back on — on some of the wage increases, at least take a temporary wage freeze, or do something to restructure benefits, to help us save that money. It's absolutely essential.

    I would like to avoid layoffs, if I can. But I can't change the contract. And, if they leave me with no other out, we're going to have to have layoffs. And I would rather not do that.

    CAVUTO: Well, you are about the only, then, prominent Democrat who has taken a tough position with unions, because, given some of the friendly signings at the White House today the president had that helped unions, and now say some say greasing the skids for maybe ending the secret ballot, you have got to wonder whether you are out of step with your own party.

    RENDELL: Well, I don't think so.

    I think everyone has to contribute. And if I was a union member, I would listen to what the governor is saying, and I would say, geez, I want my leaders to protect my jobs. If we have to give up our wage hike for six months, delay it, or we have to restructure some benefits, that is OK. In this economy, keep my job, keep my benefits that I have.

    CAVUTO: Well, the members are saying that. The members are saying that, Governor, but their chieftains are not. And that has been a problem for you in Pennsylvania, and it has been a problem for a lot of your counterparts, right?

    (CROSSTALK)

    RENDELL: Well, it's regrettable.

    But I think organized labor has to understand that everyone has to feel some pain if we are going to get out of this. The stimulus money is good. It will produce significant jobs. And it certainly gives help to state governments, so we don't have to raise taxes.

    CAVUTO: How do you know — how do you know it is going to present significant jobs?

    RENDELL: Well, because, between the school construction money and the other infrastructure money, it is over $1.50 billion.

    I know, from my experience with infrastructure — and you will grant me that I have experience with infrastructure — that will produce tens and tens of thousands of new jobs and orders for American factories, and hopefully Pennsylvania factories, for concrete, and steel, and asphalt, and lumber, and factories like that, who desperately need work and desperately need orders.

    So, I think there's a lot of good in the stimulus package. But I think states make a huge mistake if we take the stimulus, paper over the budget deficits that we're facing this year and next, because, then the stimulus goes away, and we will be in worse trouble for not having taken the steps necessary.

    CAVUTO: Well, I have got to tell you, Governor, I have talked to so many of your counterparts. And they are not hearing that or saying that. They are being very slow to make any cuts or budgetary restrictions, feeling that they have got manna from heaven coming in this stimulus package, and it's easy street.

    (CROSSTALK)

    RENDELL: Well, they will pay the price down the road.

    And when you think about it, Neil, Pennsylvania is getting about $7.5 billion. But $4 billion of it must be used to meet our Medicaid — our increases in Medicaid spending. Another $2 billion has to go to the — goes to the school districts directly themselves.

    So, we get only about $1.5 billion that we can draw. And most of that can't go to our budget. It goes for infrastructure spending. So, the states who are relying on this to get them out of the problem and don't make the structural changes that we need, they're states that are going to reap the downside of this two, three years from now.

    And what I am trying to do — and I don't picture myself as a hero — you know that — but what I'm trying to do is, I am out of office two years from now. It would be very tempting for me to use all this money to plug the holes and not make any cuts that make you unpopular in the short run.

    But I am trying to make sure that Pennsylvania is in decent shape three years down the road, when the stimulus money goes away.

    CAVUTO: But, in your heart of hearts, don't you see this as sort of like, nationally, a quick nicotine fix, and nothing more, that, with all the waste that is in there and money for honeybees and water parks, and temporary projects, that this is not going to be long term...

    (CROSSTALK)

    RENDELL: Right.

    Neil, if you're asking — if you're asking if this is a perfect bill, it certainly isn't. Are there things in there that shouldn't be in a stimulus bill? Absolutely.

    But is there stuff that will increase spending right away? You bet there is, the increase in food stamps, the increase in unemployment compensation, all of the infrastructure spending. Those things will — will put money into the economy right away.

    CAVUTO: All right.

    RENDELL: I wish those things were more predominant, but it's still, on balance, something that I think we need to do. Hopefully, the Senate will clean some of this up.

    CAVUTO: All right, we shall see.

    Governor, good luck at the Super Bowl. And have fun this weekend.