This is a partial transcript from "The Beltway Boys", Jan. 22, 2005, that has been edited for clarity.

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MORT KONDRACKE, CO-HOST: Several states are seeing red as we go “Beyond the Beltway.” Red not because they voted for Bush, but red because of skyrocketing deficits, mostly due to rising Medicaid (search) costs. States are in much better shape than they were four years ago in the midst of a national recession, but as budget-riding season begins, many states face billion-dollar shortfalls.

Take a look at the states with the biggest deficits. California (search), as expected, faces the biggest shortfall of all at $9 billion.

FRED BARNES, CO-HOST: When I said Medicare, you know, before the break, Medicare was the problem. It’s obviously a federal program. But it’s Medicaid that is driving up state deficits, or at least in some of these states.

Now, why are these states in trouble, Mort? You know why? They spend too much money. It’s as simple as that. They spend money when the economy’s good; they spend money when the economy’s bad. They’re not turning in as much and producing as much revenue. Raising taxes will only encourage them to spend more money.

Now, the good news is, Arnold Schwarzenegger (search), with that $9 billion deficit, has proposed a budget that doesn’t raise taxes at all. Look, he’s going to save California from the spenders at this rate, which is great. And good for him.

I live in Virginia, where last year, the Democratic governor, Mark Warner (search), with some Republican help, passed a huge tax increase. It turns out Virginia now has a $900 billion surplus. Does Governor Warner want to return that to the people who paid these new taxes unnecessarily? No, he wants to spend the money. And I don’t want to single him out because I know about it. But most of the other governors are like that too, including a lot of Republicans.

KONDRACKE: He probably wants to improve education.


BARNES: No, he just doesn’t want to give people their money back because he’s got his mitts on it.

KONDRACKE: Yes, he wants to improve education.

BARNES: And he’s a politician.

KONDRACKE: Look, what’s happening here is that the states, faced with these deficits, most of them face with a bad balanced budget requirement, are going to do what? They’re going to cut Medicaid, which is, which is the program for poor people and for the indigent, in indigent old people.

Now, what does that mean? That means that there are going to be more people without health insurance. And you constantly tell me that there’s no health care crisis in this country because we have Medicaid.

BARNES: Yes.

KONDRACKE: President Bush is going to cut, well, yes, well,
they’re cutting it back.

BARNES: Indigent old people get Medicare.

KONDRACKE: And no, they get for their, for their long-term care, for nursing homes and stuff like that they get Medicaid. And President Bush is going to cut it too. That’s going to swell the ranks of the uninsured and it’s going to ultimately raise health care costs because those people go to get their basic health insurance then health care in emergency rooms. It’s inefficient.

BARNES: If they truly restricted Medicare to the poor and expended Medicaid again for the poor, you wouldn’t have this problem. But anyway, let’s hope there isn’t an, an information deficit in this week’s tip sheet.

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