This is a rush transcript from "Hannity," February 2, 2010. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: The president unveiled his budget yesterday. And today he dispatched his money men to Capitol Hill to sell it to America's lawmakers.

Now, although the Anointed One likes to talk about fiscal restraint, this budget tells a very different story. Now, government spending as a percentage of GDP, will skyrocket to 25.4 percent in 2010. Now, that is the highest it has been since the middle of World War II.

But get this: in the middle of the Great Depression, when Roosevelt was spending money on every federal program imaginable, spending as a percentage of GDP only hit 10.5 percent at its height, and that was in 1936.

And those shocking numbers don't even touch on the issue of taxes. Now, this budget, according to the Wall Street Journal, contains $2 trillion worth of tax hikes. Now, they include a repeal of the Bush income tax cuts on singles making over $200,000 a year and couples over $250,000. Now, also a capital gains tax hike. It goes to 20 percent from 15 percent. A tax on banks in the form of, quote, "a responsibility fee." New taxes on oil and gas.

And the administration is also pledging to reform the international tax system. And according to the Wall Street Journal, well, that's code for a tax increase on U.S. companies that operate overseas.

So there you have it. Record-setting deficits, a slew of new tax increases. Doesn't exactly sound like a recipe for economic growth.

And joining me now with analysis from the Fox Business Network is the host of "Varney and Company," the one-and-only Stuart Varney, and the former White House press secretary — I don't know how she ever did it dealing with the liberal press — Fox News contributor Dana Perino.

How are you? Good to see you guys.

DANA PERINO, FOX NEWS CONTRIBUTOR: Thank you. Thanks for having us.

HANNITY: All right. So the president gives a speech last week, says he's going to be fiscally responsible, gives a budget this week which is bigger than last year's with a bigger deficit than last year, which was almost quadruple President Bush's last budget.

STUART VARNEY, FOX BUSINESS NETWORK: You're shaking your head. This budget is a financial disaster. It is income and wealth redistribution writ large all over a sea of red ink. Worse, it is misleading at very best.

It assumes we're going to have strong economic growth, low unemployment and low inflation. Only if we get that, then we'll maybe get the deficit below a trillion after a few years. Those are wild assumptions. It's likely to be much worse, much bigger deficits than even they are saying.

HANNITY: We have a lot of economists, Rabini (ph) among them, who predicted this economic downturn saying exactly what Stuart is saying. It's going to get really bad.

PERINO: And not only is it a recipe in disaster, as you said; it is an exercise in futility. Budgets, they get all of this fanfare, and the president gets to set out his priorities. And that's instructive, because that helps us understand where he wants to drive things.

But then Congress doesn't do anything with it. And they'll do what they want. And at the end of the day, we won't get the major spending cuts that we need. Even if they have the bipartisan commission that they want to put forward, I'm personally not a fan of it. I think Congress should be able to just do its job — on both sides of the aisle they need to come to the table on it.

HANNITY: Let's be honest. That's cover for proposed tax increase.

PERINO: I'm not a fan of it. I know. I know. I'm not a fan of it. I think it's a bad idea. I also think that there's an instructive piece in the Wall Street Journal today, where every taxpayer, every year from here on out, will spend $800 of its tax dollars just paying for the interest on the debt.

HANNITY: It's amazing. Go ahead.

VARNEY: I just want to raise the issue of fairness. That's always thrown in the face of conservatives. Capitalism isn't fair.

Well, is it fair that everybody, after this budget, is it fair that everybody who makes more than $200,000 should have half, at least, of their income seized from them and taken by the government? Is it fair that one percent of income earners should pay 40, 45 percent of revenue?

HANNITY: Ten percent (INAUDIBLE) 70.

VARNEY: Is it fair that half the people who work should pay no federal income tax whatsoever? That everything should be squeezed out of a very small minority of workers? Is that fair? It's not fair.

PERINO: The key —

HANNITY: It's a great question. But everybody thinks the rich don't pay their fair share. The top 10 percent 70 percent of the bill. The bottom 50 percent pay 2 percent.

PERINO: What we should be focusing on is a way to figure out a way to let everybody have an increase in their own wealth. OK? So what you really want is a stronger economy so that people are back to work. They're able to save. They're able to send their kids to school. And they're able to spend money on things like opening new businesses and hiring new workers.

HANNITY: Now here is the question. What is the political impact? Because we head into this very important midterm election. Russ Feingold is trailing Tommy Thompson, if he gets into the race in Wisconsin. Chuck Schumer has the lowest numbers he's ever had. Barbara Boxer has the lowest numbers she's had. Patty Murray is in trouble in Washington State. I mean...

PERINO: I think incumbents across the board should be concerned. And that's Republicans and Democrats.

HANNITY: Republicans? Blanche Lincoln is down 23 points in the current poll.

PERINO: Right. But Republicans shouldn't rest on their laurels. I think that any incumbent is in danger. And so I think that they have to all take a look at that. Republicans are obviously favored. I think they have a better record on these things, but they're going to have to put forward some proactive pieces.

HANNITY: Yes, I agree. It can't just be anti-Obama, which is what you're saying. They have to have a positive agenda, which by the way, I'm working on.

VARNEY: I can't remember a time when the level of the national debt was such a big concern to so many voters. Surely, that came out of Massachusetts.

PERINO: Let's give an example.

VARNEY: The public does not like this. And yet, that's what this budget is all about.

HANNITY: Well, then here's the question: why hasn't Obama learned anything?

PERINO: Well, let's give an example. There's an example —

HANNITY: He changed his language, but he didn't change the reality.

PERINO: No. There's one thing that's different. Just go back with me in time...

HANNITY: OK.

PERINO: ... to last fall when the Democrats were floating the number of a possible second stimulus for a jobs bill of $600 to $700 billion.

This budget that was put out yesterday has a stimulus bill for $100 million. I do think that Washington has heard, a little bit, they're starting to hear a little bit from people.

HANNITY: Let me challenge you on this, because last year's deficit was what, $1.43 trillion. This year's projected deficit, $1.56 trillion.

PERINO: And it gets worse as you get to 2012, 2013 and 2014. I meant, there's a small — that is a small example of the Democrats hearing that there might be some unrest in the country.

HANNITY: If they heard that, I think they would have gone in the other direction.

PERINO: But they did. But I'm talking about the stimulus package for the jobs bill, going from 600, 700.

HANNITY: Down to 100.

PERINO: Down to 100. And I think that this constructive.

VARNEY: Redistribution was always at the heart of this presidency. This crisis has allowed income redistribution to come right in, with this budget. That's what this budget is all about. Redistributing income and wealth. How can you get deficits? He doesn't care.

PERINO: In 1994 — in 1994, when Bill Clinton shook up his team, they came in, and they took out references to class warfare. And I think it would be a smart thing to do for this president, as well.

HANNITY: It would be a smart thing, but he's proven himself to be a rigid ideologue. I don't see — I don't see the moderation.

VARNEY: He's not —

HANNITY: And this budget, I think, confirms that he's not getting it yet.

PERINO: Which is why it's an exercise in futility to do this budget, because Congress will do what they are going to do.

HANNITY: OK. Blanche Lincoln down 23 percent.

VARNEY: In the last six weeks, the national debt has gone up a quarter trillion dollars.

HANNITY: Thanks, Stuart. My kids are broke

VARNEY: Yes.

HANNITY: All right, guys. Good to see you, as always. Thanks for being with us.

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