This is a rush transcript from "On the Record ," February 4, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Tonight, there is breaking news out of Washington. Another cabinet nominee is under fire. The Wall Street Journal is reporting that Leon Panetta, President Obama's nominee for CIA director nominee, earned $700,000 in speaking and consulting fees since the beginning of 2008. Now, some of that money coming from failing banks that have since been taken over, like Merrill Lynch and Wachovia. And Panetta received money from businesses that do business with national security agencies of the United States government. We're going to have much more on this coming up.

But first: Americans are hitting the roof over the economy. Washington is scrambling to figure out how to fix things, and Senator John McCain is right here in the middle of it. He is going "On the Record."

Here is what you think, though. A new Rasmussen poll finds 43 percent of Americans are against the massive economic stimulus package being debated right now. Only 37 percent support it. Meanwhile, President Obama is putting his foot down with those high-flying corporate executives who are begging for bail-outs but want to keep their multi-million-dollar salaries. Last year, some of these salaries were more than $70 million. According to President Obama, that is going to end. He announced a plan to limit executive salaries to $500,000 to those companies that receive bail- out money.

Moments ago, Senator John McCain went "On the Record."

(BEGIN VIDEOTAPE)

VAN SUSTEREN: Nice to see you.

SEN. JOHN MCCAIN (R-AZ), FORMER PRESIDENTIAL CANDIDATE: Nice to see you again, Greta.

VAN SUSTEREN: Senator, this spending or stimulus bill, whatever we're going to call it right now -- I'm very practical. If it passes, essentially what the House and the Senate is looking at right now, what is the worst case scenario? Because I want to know the worst that's likely to happen.

MCCAIN: That another trillion -- more than a trillion dollars of debt is laid on future generations of Americans and it does not create jobs, certainly not in keeping with the amount of money that's being spent, and we don't stimulate the economy and it continues to decline. That's the worst case scenario.

VAN SUSTEREN: But see, I don't have any sense that a trillion dollars in debt -- like, what does that really mean, though? I mean, we hear these horrible numbers.

MCCAIN: Staggering.

VAN SUSTEREN: But I mean, what is it -- I mean, as a practical matter, like, what's the economy going to look like 20 years from now if we now create that?

MCCAIN: Well, we spend $700 billion on TARP. We've spend over a trillion dollars on this. They say there's another TARP coming down the road. There's an omnibus appropriations bill of a half a trillion dollars. I mean, it's just -- you know, we used to talk about millions of dollars, then we talked about billions, now we're talking about trillions.

VAN SUSTEREN: Well, that's why I said I didn't know what that was. Now...

MCCAIN: Yes.

VAN SUSTEREN: ... Best case scenario -- if this is, like -- because I read the Congressional Budget Office letter that they wrote today to Senator Grassley, and it admits that economists -- and frankly, I have a degree in economics, which is why I switched to law because you can never figure out what it means -- is that they really don't know what will happen. But best case scenario, if this works, what do you see happening?

MCCAIN: Well, I don't see this legislation doing anything good, to be honest with you. But if it were good, then you would see a decline in -- you would see an increase in jobs and you would see housing prices stabilize. But this package, in my view, does not achieve that goal.

VAN SUSTEREN: Is it -- is it ideology, though, in the sense that, typically, Democrats think that the way to stimulate the economy is by spending more and getting more projects and getting more money into the economy that way, whereas, from an ideology standpoint, Republicans think that you tax less and let people put their own money in? Is it an ideology issue or not?

MCCAIN: I think that's part of it. But also part of it, they have put in programs that they otherwise could not get put in, in the regular legislative process. Remember, this bill was written by the Democrats, brought to the floor of the House without amendment and passed. And over here, it was done by the Democrats, which is why it's good to hear from the president, but there hasn't been serious negotiations between Republicans and Democrats.

Watch Greta's interview with Sen. McCain

VAN SUSTEREN: Well, how does this happen? Because, you know, you talk to Democrats and they're all good Americans and everybody wants the best for the economy. I mean, how does this happen that these pork things or whatever it is gets put in these bills that scandalize people? Is it just sort of one congressman who sort of thinks, like, Gee, this is a good idea for my little group? I mean, how does this happen?

MCCAIN: I think it's a combination of parochial interests, but also - - and I'm not saying this in a critical fashion -- a view that government can do a better job, whatever some many of these programs, where government takes over the role of private enterprise. And so I think it's a combination of all those things, and when there's really an unlimited ceiling on what you spend -- you know, it's gone from $800-some billion to $900 billion here in the Senate just in the last 24 hours.

VAN SUSTEREN: Well, it seems to me where the Republicans have a leg up on trying to explain this to the American people -- because it's enormously complicated and everybody has totally flipped out about the economy, for good reason -- is that with -- there are mechanisms in the tax code where you can cut it quickly and you can use cash quickly, whereas spending projects, they have to get rolled out. So that speed is a little bit on your side.

MCCAIN: Well, yes, tax cuts, particularly in the payroll tax, would be very stimulative right away -- I think that, certainly that, and some other tax cuts that would directly affect business, including the business taxes, which keeps jobs overseas, but also, in my view, we have to have a mechanism that once we have stimulated the economy, we have to start eliminating this deficit.

In my proposal, our proposal, it says once the economy recovers, then we will enact spending cuts to bring the deficit under control and balance the budget. That's what we owe future generations. None of us are opposed to stimulating the economy and creating jobs. It just has to be done right and provide for the future, as well.

VAN SUSTEREN: Today, the president announced that he wants to put a cap, a $500,000 salary cap on those executives who are getting a bail-out, obviously because we've gotten a little bit burned when we see some of these numbers of -- you know, extraordinarily -- numbers that these executives have often who've already gotten bailouts. You have any problem with the $500,000 cap?

MCCAIN: I don't have a problem with it. I didn't have a problem with it when we capped the income for farmers and they found (INAUDIBLE) as far as subsidies are concerned and we found ways around it. I think a more effective way would say that shareholders have to vote any compensation for executives of those corporations. The shareholders have a real interest in making sure that excessive pay and benefits are not granted to CEOs. So I don't have a problem with the $500,000 deal. I think it would be more effective to say shareholders are the ones that decide.

VAN SUSTEREN: Well, you know what's sort of surprising to me -- and maybe I'm more radical on this topic and others -- is that -- how we can give extraordinary sums of money to companies and not change the management who's running them, who maybe for good reason, but whatever it happens, is that the companies have failed. Whether it's the economy, they didn't have the vision to change their product or -- I mean, like, why are we keeping the same management in place? It just seems like a dumb idea. I mean -- do you have any problem...

MCCAIN: It's a dumb idea to me, too.

VAN SUSTEREN: OK. Good.

MCCAIN: I do not understand it.

(LAUGHTER)

VAN SUSTEREN: All right. Well, you and I are on the same page. I can't figure that one out at all. And the $500,000 cap at least seems like...

MCCAIN: It's fine. But again, they'll find ways around it with bonuses and other compensation and stuff. I think shareholders have a responsibility and they want to make sure that their CEOs function effectively.

VAN SUSTEREN: Well, I don't even have a problem with...

MCCAIN: So I'd like to have them decide what the compensation for CEOs is. Right now, most corporations, as you know, with the notable exception I think of Aflac and maybe Hewlett-Packard, a couple others, the shareholders have no say in the compensation packages for the CEOs. Only the board does, which tends to be a very close-knit group.

VAN SUSTEREN: Well, my favorite, of course, are the CEOs who have flat-out failed and get pushed out of the companies, and then the board sits around and creates these compensation packages for their buddies, which is scandalous, the numbers. Scandalous.

MCCAIN: Disgraceful. It's an absolute disgrace. And what it does, the real impact of it is it erodes Americans' confidence in the best system in the world, and that's the free enterprise system. Teddy Roosevelt once said unfettered capitalism leads to corruption. He was right.

VAN SUSTEREN: Well, why aren't shareholders more aggressive? You know, why aren't they raising hell about these boards creating these incredible packages? What's happened?

MCCAIN: I don't know the answer to that.

VAN SUSTEREN: It's extraordinary, though, the -- but everyone just sits there and lets it happen.

MCCAIN: It's disgraceful.

VAN SUSTEREN: You voted against confirmation of Treasury Secretary Geithner. Why?

MCCAIN: I felt that his tax problems were significant. But I also thought very significant was the fact that he was involved in many of the decisions that were made in TARP and the $350 billion bail-out, and those decisions were bad. We all know that now.

VAN SUSTEREN: Well, the thing that sort of -- (INAUDIBLE) American people were e-mailing me cannot understand is that a guy who apparently doesn't understand the tax code -- and I understand -- I -- I'm -- tax code's complicated. We're putting him in charge of the IRS. That's dumb!

MCCAIN: That's dumb. I voted against his confirmation.

VAN SUSTEREN: What about -- I mean, like, what do you say to your colleagues in the lunchroom, like, you know -- I mean, like -- because most American people don't get that. Like, why not put someone in charge who understands it?

MCCAIN: I think that's an excellent point and one of the reasons why I voted against his confirmation. Maybe, frankly, you should ask people who voted for him.

VAN SUSTEREN: Maybe he'd be better at HHS or something. I mean, but -- I mean, the guy in charge of the tax code ought to know it better than the rest of us.

MCCAIN: One would think, particularly after being notified that -- that the individual owes back taxes.

VAN SUSTEREN: All right. Let me ask you about Senator Daschle. I'm sure he's a friend of yours. I mean, he was a colleague, but the other party. He's withdrawn his name. In light of what you know now -- and maybe there's more to know either for him or against him -- would you have voted for him?

MCCAIN: I would have probably leaned against it. I'm not on the committee. My colleague in the Senate, Jon Kyl, was heavily involved in all the details. But let me just say I think that Senator Daschle did the right thing.

VAN SUSTEREN: You know, it's very hard for...

MCCAIN: By withdrawing.

VAN SUSTEREN: Well, no, I know, but -- it's very hard for Americans to understand how someone can be notified last summer, in his position, and then six months later, find out that now he's getting vetted and suddenly decides to pay up.

MCCAIN: It's very difficult to understand. One of the morals to this story is you should go outside of Washington and this kind of circle of people, out to the Meg Whitmans and the Carly Fiorinas and the John Chamberses and the Fred Smiths, the executives and CEOs with the managerial talents and qualities to come to Washington and bring change about.

VAN SUSTEREN: Change!

MCCAIN: Well, you know, obviously, Americans are very unhappy with our performance and they're very dissatisfied. They think the country's in the wrong direction -- headed in the wrong direction, very correctly. So let's bring people on from the outside who have succeed in whatever walk of life and bring them into this town, rather than picking people who have basically made their living here for a long time.

VAN SUSTEREN: Well, it looks a little bit like to the American people sort of like the corporate boards who set the compensation for their buddies, especially the fired ones, and now we have the U.S. Senate with something like Senator Daschle, who's a fine man in many ways, but you have so many senators who came out saying it was, quote, "just a mistake," when the -- when the American people think that the rest of us wouldn't make that mistake, we end up in the slammer or we lose our house or our business. Not good.

MCCAIN: Again, you'll have to ask them because -- because, you know, again, I think the process of selection of people should go outside of this kind of circle that exists here inside the Beltway and find people who've succeeded in every walk of life outside and have them come and serve. They are willing to serve.

VAN SUSTEREN: Thank you, sir. I hope you'll come back "On the Record" again.

MCCAIN: Thank you, Greta.

VAN SUSTEREN: Thank you for letting us drop in on you.

MCCAIN: Thank you. It's always a pleasure.

(END VIDEOTAPE)

VAN SUSTEREN: Senator McCain sent out a letter against the stimulus bill through his Country First PAC. So far, the petition has almost 250,000 signatures.




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