This is a rush transcript from "On the Record," July 13, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Take a real deep breath! Don't hold it but count to a trillion. According to the Treasury Department, the federal deficit has topped $1 trillion for the very first time. Now, what does that mean for you?

Let's ask Alexis Glick, vice president of business news for the FOX Business Network. Alexis, $1 trillion -- what does it mean to everybody out there? I mean, it's got so many zeros and so many big numbers, it seems almost unreal. But as a practical matter, what does it mean to us?

ALEXIS GLICK, FOX BUSINESS: You know what? The bottom line is, unfortunately, it means that every single tax that you could imagine you will see a hike in. I hate to tell you, but to be the bearer of bad news this evening, but the likelihood is in order to fund a federal budget deficit that is now north of a trillion dollars, some project could hit $2 trillion in this fiscal year alone, you're going to see taxes go up across the board -- soda, tobacco.

Now, this president, this administration, could suggest that they will not raise taxes on the middle class. The bottom line is, Greta, 44 states are facing $165 billion in state deficits. They will raise taxes, whether we like it or not. And if you do health care and climate change, as well, you're going to see it across the board.

VAN SUSTEREN: Alexis, this didn't exactly sneak up on us, so why is everyone so scandalized by it? Is it just that we hit the $1 trillion? I mean, everyone's -- I mean, we pretty much saw this coming.

GLICK: Yes. Absolutely. I mean, look, Greta, this is -- unfortunately, this is not a shocker. It's not a big surprise. But the reality is when you look at the numbers and you break them down specifically, that's when you see some of the shock and awe. Corporate taxes at this point, year to date, down 57 percent. Personal income taxes, at this point thus far, down 22 percent.

And big programs -- keep in mind, things like unemployment benefits, over 6.8 million people are filing for claims right now. Well, that's cost us thus far almost $80 billion. And interest payments alone, $150 billion. Greta, you add it all up, and what it says is this economy is in dire straits. We've got to do something to pay down this debt. And if we continue at this rate, things could get very sticky, particularly with the Chinese.

VAN SUSTEREN: And that means that the Chinese won't want to pay our debt because they know that we can't -- I mean, they won't want to buy our debt because they know we can't pay it off. But let me ask you this, is that, why did the Dow go up 186 points with this horrible news today?

GLICK: Great point. Some very bullish calls came out today on the financial sector. We saw a lot of calls ahead of Goldman Sachs, which is due to report earnings tomorrow morning. They are expected to report one of the best quarters of any financial company in the business. They're considered the gold standard.

Now, clearly, there's some controversy surrounding this. They paid back their TARP funds, by they've been able to get access to cheap money that's been backed by the U.S. government. The reality is, tomorrow is the beginning of the earnings front, and there's a little bit of excitement and euphoria leading into it. We'll see companies like CitiGroup, Bank of America, Intel, Google and some huge pieces of economic data come out this week. So people are getting a little fueled (ph) up ahead of that, but I wouldn't get too optimistic yet. Tomorrow we'll see the health of the retail sales numbers for the consumers and whether or not they're holding up too well in this economy. But look, right now, things are somewhat stable -- somewhat.

VAN SUSTEREN: All right, well somewhat stable, but then I got tipped off that you said there's likely to be -- there's some discussion about another big bail-out. Who's getting the big bail-out?

GLICK: Yes.

VAN SUSTEREN: Maybe.

GLICK: Huge story today. CIT, which is the largest lender to small businesses -- the Small Business Administration, which funds so many small businesses out there -- they have been the number one lender for nine years. They are on the cusp of bankruptcy. We've leant them $2.3 billion. There's word that the administration is working out a deal with CIT this evening, could be crucial for over a million small business owners across this country.

And guess what? The TARP repayments that we're getting back from the financial institutions -- it could be headed to small business owners very, very soon. Details not worked out yet.

One other point, Greta. Keep in mind, quietly under the surface today, Treasury announces that Secretary Clinton and Geithner are meeting with top -- two top Chinese officials in the end of July. Just happens to be before perhaps a health care passage (ph) bill. I'm sure the Chinese want to make sure we can pay for it.

VAN SUSTEREN: I don't know what we're going to tell them to convince them to do it. But anyway, Alexis, thank you.

GLICK: Thanks, Greta. Great seeing you.

VAN SUSTEREN: Senator Lindsey Graham joins us live here in Washington. That last one, meeting with the Chinese -- I mean, what kind of song and dance do we tell them to convince that this is -- this is a good deal? I mean, that they should buy more of our debt, unless we raise the interest rate through the sky and...

SEN. LINDSEY GRAHAM, R - S.C.: Well, that's the point. That was a very good report, by the way. The point is that who do we borrow money from? We sell Treasury notes, and who buys? The Chinese and other countries. And they're eventually going to stop buying our Treasury notes and...

VAN SUSTEREN: Unless we really jack up the -- the...

GRAHAM: If you raise interest rates...

VAN SUSTEREN: But then we're cooked!

GRAHAM: Then we're cooked...

VAN SUSTEREN: Worse than we are.

GRAHAM: ... because that creates inflation. We're all going to be California. You want to know where America's going to go, look at California. And here's what I would say to your audience. Some people suggest that democracies are doomed to fail because we, the people, will never say no to ourselves. In California, they had a proposal to cut spending and raise taxes. It was disapproved. So what do we need to do? We don't need to raise taxes now. We need to keep taxes low and control spending. But a trillion-dollar deficit is unbelievable. I never thought I would live to see my nation, our nation, be a trillion dollars in debt for a single year.

VAN SUSTEREN: Do you think, though -- I mean, as we hear these numbers -- and you know, you see the president out and he acts so confident and he says we're on the way -- I'm thinking to myself, when he sees these numbers, is he freaked?

GRAHAM: Well, I...

VAN SUSTEREN: I mean -- I mean, like, where does he -- where does he think we're going to get the money to pay for this? Because if he's got a solution, I'd love to hear it.

GRAHAM: Well, let me -- you know, where do we pay for it and how do we fix it by creating a health care system run by the government that has a trillion dollars more debt?

VAN SUSTEREN: But that's another issue! I mean, even if we didn't have that, we got a big problem! Forget health care. We still -- we still got a trillion-dollar deficit and -- and we've got personal income down, corporate income down, and we're doing these bail-outs, and the economy is sluggish, at best.

GRAHAM: I think the big difference between me and the president is he believes that Washington can generate job creation by spending money. I believe the way you create jobs is you empower people to hire folks in the private sector. And this stimulus package is the root of all evil here. The $787 billion that we talked about on your show that no one read has come back to haunt this country. It's put us in a deep hole. It hasn't created jobs and it never will because it's mostly about government, not job creation. That started it. Throw health care on top, a cap and tax (SIC) system that would cost the average American $800 a year in additional in additional energy costs and bankrupt manufacturing -- what he is doing is breathtaking, quite frankly.

VAN SUSTEREN: Do you think he is convinced he's on the right track?

GRAHAM: Absolutely. Absolutely.

VAN SUSTEREN: OK. So I mean -- so he's not sitting there, thinking, like, Oh, I wish I hadn't done that.

GRAHAM: No, absolutely not.

VAN SUSTEREN: So he's not having any buyer's remorse on this.

GRAHAM: You know, I wish people would listen during the campaign. When he said, We need to redistribute the wealth, he wasn't kidding. He is not kidding. He really does believe the government can only provide health care, and if the government doesn't -- is not involved in the health care business, the private sector won't be honest. He believes that.

VAN SUSTEREN: Yes, but come on. I mean, like, let's -- let's look at...

GRAHAM: He believes that.

VAN SUSTEREN: Yes, but except the private sector -- I mean, let's talk about the insurance companies. They've been up to their eyeballs in making this a bigger problem.

GRAHAM: Well...

VAN SUSTEREN: I mean, the private sector.

GRAHAM: ... wait a second...

VAN SUSTEREN: I mean, the private sector -- I'm not saying that the public sector's the answer, but the private sector hasn't exactly...

GRAHAM: Sure.

VAN SUSTEREN: I mean, you've got insurance agencies telling people how to get health care. There's something fundamentally wrong with that.

GRAHAM: Well, the third party payment is the fundamental problem here, but competition regulates quality and price better than government control.

VAN SUSTEREN: But even before we get to the question of health care, we have such a huge financial problem.

GRAHAM: Absolutely.

VAN SUSTEREN: I mean, that's August, or that's July.

GRAHAM: Right.

VAN SUSTEREN: I mean, right now, we've got a trillion-dollar deficit.

GRAHAM: It'll be...

VAN SUSTEREN: And no way to pay for it.

GRAHAM: It'll be $1.8 by the end of the year, and we're spending $450 billion on interest payments on the debt. We're spending almost on -- the amount of interest equals the defense budget. This is historic. No one's ever seen this in American history, and it has a bad ending if we don't change it.

VAN SUSTEREN: Well, but there's the other thing, is how do you reverse it? That's -- you know, if it is...

GRAHAM: Well, how do you...

VAN SUSTEREN: That's the -- that's

(CROSSTALK)

GRAHAM: Here's a wild idea. Don't spend any more than you take in.

VAN SUSTEREN: Well, not a...

GRAHAM: It works at home!

VAN SUSTEREN: But...

GRAHAM: It works at home, and it will work up here.

VAN SUSTEREN: Except we have a 9.5 percent unemployment, so a lot of people who by nature of the fact that have no income, have to spend more.

GRAHAM: But let me tell you, Greta, people at home are tightening their belts. We're not. We're exploding the deficit. It's going to affect people at home and it's going to prevent people from creating jobs. So we need to control spending but also have programs that will create jobs. I don't mind spending money to help jump start the economy. We're not spending money to jump start the economy, we're growing the government.

VAN SUSTEREN: Senator, if you'll stand by, we're back in two minutes.

GRAHAM: I'll be here.

VAN SUSTEREN: All right. Good, sir.


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