This is a rush transcript from "On the Record," March 5, 2010. This copy may not be in its final form and may be updated.
GRETA VAN SUSTEREN, FOX NEWS HOST: Tonight, Senator McCain right now! Senator McCain, nice to see you, sir.
SEN. JOHN MCCAIN, R - ARIZ.: Thank you, Greta. It's nice to be back with you.
VAN SUSTEREN: Senator, I know you're in Arizona tonight, and I understand you had company today on the campaign trail. Who's -- who's your -- I don't want to use the word sidekick, but who's -- who's helping you today?
MCCAIN: Scott Brown, and it's amazing. It's amazing. We got off the plane this morning, and people all over the airport recognized him, said hi, came up and asked for his autograph. I can tell you, I have not ever seen a new senator with such rock star status as Scott Brown has.
VAN SUSTEREN: Well, I understand you're going to get some help later in the month from Governor Palin. So you're bringing in sort of a lot of the crowd -- or people who can draw the crowds.
MCCAIN: Yes, and I'm very happy to do that. And of course, I've got to a lot of support here in the state. Thirty-two mayors have endorsed me and eight sheriffs and a lot of others, so we're trying -- kind of balancing bringing in some really -- people that Arizonans would like to meet. They'd like to see more of Scott Brown and more of Sarah Palin, so I'm glad they're coming.
VAN SUSTEREN: One of your colleagues in the Senate, your co-Arizonan, Senator Kyle, and you have asked for an apology from your opponent, J.D. Hayworth, for an ad that he has put out. What's the ad and what's your objection?
MCCAIN: Well, it's really childish and tasteless. It has a picture of me. Later, they darkened in my face, but the original one was my face with blue paint on it, with, like, war paint. And I don't know what the attempt at humor was. But that is not the way Senate races should be conducted. And it was also insulting to native Americans, as well. He should retract and apologize. But you know, it's -- it's just unfortunate.
VAN SUSTEREN: So, so far, no apology.
VAN SUSTEREN: All right, let me bring your attention to Washington, D.C., which I know you've had a lot of attention on the health care bill. Is there any chance, as far as you can see, that the House -- or that the Senate Republicans and the Senate Democrats would agree to the Stupak language, which is a little bit tougher language on the abortion funding issue?
MCCAIN: I don't think that the Senate would agree. Otherwise, I think they would have passed that earlier. And I'm very happy to see Congressman Stupak apparently being very firm on this. This really would be the first time since the Hyde Amendment many years ago that federal funding would be involved in performing of abortions. And most Americans I think resoundingly reject that.
You know, it's interesting, Greta. America has become more and more pro-life over time, and part of that is that younger and younger -- or earlier newborns are be able to save -- be saved thanks to technology.
VAN SUSTEREN: So does -- what does this mean, then? We spoke to Congressman Stupak yesterday, and he confirmed that he's not -- he's not budging, although he did give us eight bills with language in it that he could live with, which he said was rejected by the Senate and by others. But so if -- if the Senate doesn't want the Stupak language and if Senator -- and if Congressman Stupak and his 11 others -- does that mean no health care reform?
MCCAIN: You know, I don't know. I know that these members have been brought down to the White House. I know they're being subjected to intense pressure. But I predict to you that if the House of Representatives passes this legislation and we pass this so-called reconciliation, it'll have devastating consequences for the Democratic Party. We've never passed major reforms by -- strictly on party-line vote. It's always been overwhelmingly bipartisan. The American people have said, Start over and stop. And they'll be using parliamentary tactics to fly in the face of overwhelming opposition on the part of the American people.
VAN SUSTEREN: Which sort of raises an interesting issue because, if you think about it, if the American people don't want this -- I guess the number's about 55 percent are now opposed and would like to go back and start over. They're not opposed to health care reform, but at least as it is now -- is that the only -- if it does pass by reconciliation, then the American voters are in the position of being punishers rather than perhaps voting for, you know, people to represent what they want.
MCCAIN: And I think that the White House and the Democrats are miscalculating. They think that if they just pass something, that the American people will not be too aware or concerned about the methodology that they use. I think the American people are very aware. Every place I go in Arizona, people are extremely aware. And they used to think that reconciliation was something that settles differences between spouses. Now they know what reconciliation means, and they don't like it. And they don't like one sixth of our gross national product being addressed by 51 votes in the U.S. Senate.
VAN SUSTEREN: So what is the job of a senator or a congressman or congresswoman? Is it to represent what the voters, your constituents, want, or is it to vote your conscience if you think it's a better idea?
MCCAIN: I think that your job is to vote your conscience but be able to explain it to your constituents. Otherwise, you will pay the penalty at the next election. And I think you can do both. I think you could cast a vote out of good conscience and go back and explain it to your constituents.
When I stood up for the surge in Iraq and fought for it, the majority of my constituents probably wanted out of Iraq. But I came home and I had town hall meeting after town hall meeting here and across the country, and I explained why I supported the surge. And I think you can do that. To me, the surge was a matter of conscience because I didn't think we could affair to lose a war.
VAN SUSTEREN: Well, it's sort of interesting how this health care thing, though, is now unfolding because you've got the Republicans saying every chance they get, Oh, you Democrats, you better look out, you're not going to get elected if this passes. And then you have the sort of wining and dining of the Democrats, Come on down to the White House, you know, and let's sit around and talk. I mean, so it's sort of an interesting operation to watch it, but it has a profound effect on us. And I'm trying to think, like, where -- where do you predict, as things are now, we're going to be two months from now on this?
MCCAIN: You know, I can't predict, Greta. I always believe that at the end of the day, the will of the American people is realized in a democracy or a republic, which we technically are. But the fact is that the will of the people is reflected in the actions of the government or the government is changed.
So I'm not sure whether they will ram this through and pay a very heavy price in November, or whether they will realize that the American people are saying, Stop, start over. And by the way, my -- some of the polls I've seen, Fox poll is higher numbers than 55. They're as high as 70, either stop or start over. But it doesn't matter. It's still a significant majority of the American people don't want this passed. They want health care fixed, but they also want to keep their health care, at least 85 percent of them do.
VAN SUSTEREN: Of course, the one thing the American people also have their eyes on are jobs, and we got the report today that jobless -- we've lost 36,000 jobs in the month of February. President Obama said that's better news than expected. Senator Harry Reid had the misfortune of saying that was good news. I know he's going to get hammered for that, and I assume what it means is that he feared it was going to be worse, so he was relieved. But you know, we're going to grab that sound bite, every -- ever news organization.
But your thought on this jobs bill that was just passed and these numbers?
MCCAIN: Well, I didn't like it, again because we're not paying for these things. And Senator Bunning was much maligned, but he did have a very legitimate point that we keep passing these things, calling them emergencies and increasing the debt and generational theft that we're committing on future generations of Americans.
So I think that it's very clear that the president and his economists' predictions of a high of 8 percent unemployment turned out to be totally false. So you can claim that the stimulus was a success, and of course, it created some jobs. You can't throw a trillion dollars at anything without creating some jobs. But the penalty that we are paying for this $1.1 trillion of debt we have added on I think is really something that the American people have grown to be extremely cynical about. And again, if 9.7 percent is good news, I sure hate to see what bad news is.
VAN SUSTEREN: What would you do right now? In light of the fact that we do have this stimulus bill. It was passed last February. I mean, we do have that. If you were now making the decisions -- because we are bleeding jobs, even if it's better than expected for many people. What would you do right now? How would you change the course?
MCCAIN: You know one of the things I'd do? I would pass what Scott Brown tried to get passed through the Senate just this last week, and that is payroll tax cuts, payroll tax cuts for small businesses, paying for it out of unused stimulus money. I'd cut the corporate tax rate from at least 35 to 25. I would ratify free trade agreements. I would say that we're going to start over on health care so there's not that uncertainty out there. I would say that the tax cuts are going to be permanent so that business has a predictable environment for investment in the future. And I would say I'm not going to raise your taxes, just for openers.
VAN SUSTEREN: Just for openers. OK. Now, in terms of when you go out and talk to the people you campaign in Arizona, do you see that you're running into more people who align themselves with the tea party movement? Are there more people showing up? You know, the nation's sort of, like, been intrigued with this tea party movement.
MCCAIN: I see more and more Americans, including those who have never been involved in the political arena before. They're fervent. They're involved. I admire them and respect them, and I think it's having a profound effect and certainly did in Scott Brown's race, and I think they're having a significant effect. I don't know exactly which direction they're going, who will emerge as their leaders and how they will be channeled. But right now, I think they're having a significant beneficial effect on American politics.
VAN SUSTEREN: So what was the switch that was flipped, though? Like, what was it that all of a sudden got some people motivated who were not otherwise motivated to get involved in protests, or even going to town hall meetings and speaking with passion about particular issues?
MCCAIN: You know, I think there's a tipping point in every kind of political change, sea change that takes place, and I think it was probably health care, but not health care alone. I think it was the debt, the deficit, the unemployment, the disconnect, the corruption in Washington just finally reached a boiling point and then spilled over. And people are just -- they are extremely angry in a way that I have never seen in my political life, and I think they have every reason to be.
My home state here of Arizona, Greta, we have 48 percent of the houses are underwater. In other words, they're less -- worth less than the payments. We have 17 percent real unemployment. We see small businesses closing up all over our state. We see people not able to get a line of credit. And then they see us in Washington bailing out the financial -- Wall Street financial people, who are doing fine, and on Main Street, we're really in serious trouble still.
VAN SUSTEREN: In terms of the bailout, though, the thinking was that, you know, even though these people may not deserve it, but I think the thinking of the Obama administration is if we don't, we'll be so destabilized that if you think you're underwater now, we're really going to be underwater. So I think at least that was their thinking. I guess that you don't agree with that method, though, or that strategy.
MCCAIN: Well, here's what happened that's so reprehensible, in my view, is that they sold the TARP on the basis they would go after, quote, "troubled assets," TA, Targeted Assets Recovery Program. So that was the housing market. That was to stabilize the housing market, which was the catalyst that started this huge global financial crisis. And so now it's been well chronicled after selling it as addressing the housing issue, they immediately flipped and went to the financial institutions -- Goldman Sachs, Morgan, et cetera, et cetera, and bailed them out, in somehow hopes that that would trickle down to the commercial banks and to the housing market. It didn't.
VAN SUSTEREN: One last quick question.
VAN SUSTEREN: What -- I mean, how do you feel about the fact that during the campaign, you suggested there had to be a tax on these health care plans, these high-end health care plans, and you were resoundingly criticized by your opponent. Now that's, you know, an important part of this bill. I think it's a little bizarre that it doesn't go into effect until 2018, but that's another issue. But tell me your thoughts on this. Does it rub you the wrong way at this point?
MCCAIN: Well, what I really -- what I advocated was that we remove that tax treatment for employer-provided tax benefits and then give a $5,000 refundable tax credit to every family in America so that they could go out wherever they wanted and get the health insurance that suited them best. So it was a replacement for the tax treatment of employer-provided benefits. You see what I mean? Do away with that, and then give people a $5,000 refundable tax credit, say, Go find the insurance policy you like best.
And we have found that when people are responsible for their own money, they make much better and mature choices, the old Ronald Reagan line that nobody ever washed a rental car. They go out -- when it's free. But when it's their money in the form of a refundable tax credit, they're very, very serious about how they spend their money and what kind of insurance they acquire.
VAN SUSTEREN: So you were not -- am I wrong saying that you were looking for a tax on the high end of insurance policies? That was (INAUDIBLE)
MCCAIN: I was looking for elimination -- yes. Yes. I was looking for elimination of the tax treatment. In other words, employees get tax- free health benefits. Take that and replace it with a $5,000 refundable tax credit. You see what I mean? And so that way...
VAN SUSTEREN: Yes, I understand now.
MCCAIN: There you go. That's what we wanted to do.
VAN SUSTEREN: All right.
MCCAIN: And we know how severely that was attacked.
VAN SUSTEREN: Politics is -- it's a contact sport, isn't it.
MCCAIN: It's a collision sport.
VAN SUSTEREN: A collision sport! Thank you very much, Senator.
MCCAIN: Thank you.Content and Programming Copyright 2010 Fox News Network, Inc. Copyright 2010 Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.