This is a rush transcript from "On the Record," February 16, 2011. This copy may not be in its final form and may be updated.
GRETA VAN SUSTEREN, FOX NEWS HOST: If you pay taxes, this is really going to hurt! Senator Jim DeMint says you, the American people, are getting scammed, scammed out of $39 million -- that's right, $39 million dollars. But guess what? Everyone saw this one coming. It didn't have to happen.
Earlier today, South Carolina Senator Jim DeMint went "On the Record."
VAN SUSTEREN: Senator, nice to see you, sir.
SEN. JIM DEMINT, R-S.C.: Hey, Greta. Good to be back.
VAN SUSTEREN: OK, well, I came up here to talk about the budget proposal, and I'm going to ask you about those. But en route coming up here, I saw the USA Today, in which it says that these very gruesome numbers that inmates has scammed the IRS out of $39 million in 2009. So I'm a bit curious, like, why don't you all figure where the money is before you ask all of us for money in the budget?
DEMINT: Well, it does...
VAN SUSTEREN: $39 million scammed!
DEMINT: Honest -- honest people get ripped off. They send in their taxes every year. But we have a whole group of people, and I didn't know it would be prisoners, but of course, prisoners do amazing things of trading or dealing in drugs and everything behind bars. I don't know how they...
VAN SUSTEREN: Well, it's incredible, $39 million! I mean, who is policing -- this is our money! But I mean, like, we hear all of you talking about the budget, but, like, the fraud is just -- it is skyrocketing! And I mean, I don't understand why in the world there isn't more aggressive search for this money.
DEMINT: Well, we're starting up the oversight in the House, where the Republicans are in charge. And as Tom Coburn has done over here with several investigations he's -- there is so much fraud and waste at the federal level. We just need to learn that we can't do it here. We can't do as much as we're doing. We've got to devolve these things to the states. The IRS is a federal function, and we've got to clean it up. But frankly, they are dysfunctional, like most other federal agencies. And it doesn't may make sense to raise taxes, as the president's budget does, at the same time we see millions of dollars going out the door by fraud.
VAN SUSTEREN: Well, this -- what is particularly appalling about this is that in 2005, the fraud with the inmates on the IRS was $13.4 million. I mean, since 2005, it's gone up $25.6 million a year in 2009. So a couple things. One is that it is sky -- it's getting much worse.
But number -- but there's something that's more appalling, is that in the year 2008, according to USA Today, Washington, recognizing that we were -- the IRS was getting scammed by prisons' inmates, Washington enacted legislation in 2008 to crack down on fraudulent tax returns claimed by inmates. And since then, it has skyrocketed! So what's the American taxpayer -- I mean, what are we to think?
DEMINT: Well, take...
VAN SUSTEREN: (INAUDIBLE) you knew about it...
DEMINT: We just did this big financial reform package, and apparently, it's made "Too big to fail" worse. All the things we're trying to do, Greta, is this government-centric top-down approach is dysfunctional. We see it -- that's just the tip of an iceberg. And frankly, we've got so much work to do here, it makes no sense to increase taxes on law-abiding citizens when there's so much waste and fraud that we could find...
VAN SUSTEREN: But this is a double scam. First of all, we get scammed because the IRS gets scammed out of this money, $39 million. That's scam number one.
VAN SUSTEREN: Scam number two is that the Congress knows about it as early as 2005, passes legislation in 2008. And it gets worse so that when everyone goes out and says, Hey, we passed some legislation...
VAN SUSTEREN: (INAUDIBLE) we're going to -- we're going to...
DEMINT: Well, we...
VAN SUSTEREN: This is going to happen again! It gets worse! So we get scammed twice!
DEMINT: We're spending millions, probably, to get scammed twice. I'm cynical about federal functions. That's why it's so important to devolve things out of Washington that we don't have to do here. We have to do the IRS unless we pass something like the Fair Tax. But that's just the tip of an iceberg. Everywhere we look here, there are absurdities at the federal level. There's waste. There's fraud. We just need to find it and root it out, rather than adding new programs. There are hundreds of new programs. The president's trying to add another job training program. We've already got hundreds that duplicate each other. But the politicians seem to want to add programs so they can take credit for them.
VAN SUSTEREN: Coming up: Is it a set-up? Senator DeMint says he and the rest of the GOP are being set up. But who is Senator DeMint being set up by and why? Well, he's going to tell you himself. That's next.
VAN SUSTEREN: Here's more of our Capitol Hill interview with South Carolina Senator Jim DeMint.
VAN SUSTEREN: There are two budget issues right now. There's a continuing resolution...
VAN SUSTEREN: ... which expires March 4th to fund the government until September, which means that Congress didn't do its job or the president didn't do his job to have a budget that should have started six months ago. That's number two. That's number one. Number two is you've got the -- for the budget for the fiscal year 2012. Meanwhile, you're looking to figure out where to get money, who to get it from, who doesn't get cut. And we've got all this waste and everybody promises they're going to redo the IRS. You've got the budget commission, the debt commission saying in December that there are 3,300 earmarks or special interests in the tax code, and that's rejected. Nobody's done anything! And then you come asking us for money!
DEMINT: Yes. That's -- well, the president's budget increases taxes I think it's, like, $1.6 trillion while we're increasing spending over $8 trillion. It just doesn't make any sense. Now, the president's going around the country now, talking about this budget that increases the deficit by trillions of dollars that it balances the deficit. I don't know how he's looking people in the eye and talking about it.
VAN SUSTEREN: Well, The Washington Post calls it a gimmick!
DEMINT: It is a gimmick, and I can't believe that he has shown so little leadership at a time when all people -- liberals, progressives -- everyone agrees we're on a financial cliff with our debt. The world is losing confidence in our ability to pay it back. The president presents a budget that does nothing significant, shows no leadership and actually increases spending and taxes.
It's very frustrating right now. But you look at what the IRS is doing. Think of what "Obamacare" is going to do once it expands the fraud and the waste. We've seen the fraud and waste in Medicare already, the whole financial reorganization plan to put the government in control of our bank. We've got to turn this around.
VAN SUSTEREN: A lot of these problems with the waste and fraud, they go back decades. They span multiple administrations, many men and women coming, serving in the Congress and the Senate. It's just that, you know, we just keep -- you know, as they say, it keeps getting kicked down the road. That's what everyone's saying now about...
VAN SUSTEREN: ... issues having to do with Medicare, Medicaid and Social Security. But even issues with fraud and waste -- maybe we don't need nearly as much money as everyone's talking about if we just look to see what we have and where we're just simply throwing it away, squandering it.
DEMINT: Yes. Well, there's no question about it. We are taking more taxes than we need. We're borrowing a whole lot of money to fund programs that aren't working. The General Accounting Office evaluates our programs. A number of them are not working are wasteful. Yet we don't have the political courage to change it.
And that's what we have to do. I think that's what the last election was about. But Greta, frankly, it's going to take another president. This president has failed to lead. He's not telling Americans the truth. He's actually misleading people about what he's doing and what he's done. We need a new president, and until then, we've got to minimize the damage.
VAN SUSTEREN: And on March 4th, the continuing resolution terminates. And if there isn't another one, the government shuts down. Now, it shuts down for non-essential government employees, right? The essential ones still stay on the job.
VAN SUSTEREN: OK.
DEMINT: Medicare, Social Security...
VAN SUSTEREN: All right...
DEMINT: ... continue to get paid.
VAN SUSTEREN: Are you willing to have a showdown with the president on spending? You meaning you personally and you -- and Republican members of Congress, to have a showdown on this issue of spending, or are you going make sure that the government doesn't shut down?
DEMINT: Well, we don't -- we don't want a showdown. What we're doing in the Senate side is pledging our support for whatever the Republicans on the House side send over here. If the Democrats decide to kill the funding bill that keeps the government open, then the monkey's going to be on their back because they're not leading. They're not suggesting what this should be. They didn't even have a budget last year when they were in charge.
So we're going to -- all the Republicans, I think, Greta, will vote for the House resolution to keep the government funded. They pushed it up against a wall. Next week, we'll be bringing this up. So hopefully, the Democrats won't try to create a crisis, but that's what they've been talking about in the press. But it's not something the Republicans want.
VAN SUSTEREN: Well, both sides say they don't want it. Both sides say they don't want it. Both sides say, you know, We've got a great budget. This is really going to fix things. And both sides throw lots of numbers at us. But frankly, it is a little bit confusing. I pore over these numbers all time. I feel a little bit sort of scammed by the numbers.
VAN SUSTEREN: I mean, I know one thing is that when you over-live your means, you got financial problems.
VAN SUSTEREN: That's basic. I think most Americans get that. But what -- what I don't get it sort of a willingness, first of all, really to work together, and two, to really make the tough decisions because a lot of the tough decisions mean a lot of you won't get reelected come next election because people love Social Security. They love Medicare. They love Medicaid. And those (INAUDIBLE) make tough decisions may not be with us.
DEMINT: Well, I don't think we need to cut the benefits to seniors for Social Security and Medicare. I've developed my own proposals. I've presented them over the years. So have people like Paul Ryan in the House. We can give younger workers better choices, cut the cost of these programs and make them work better. It's not a matter of cutting seniors out of programs or even the other cuts...
VAN SUSTEREN: So how would you fund them? What -- I mean, what -- and why -- why don't -- why don't the Democrats like your idea?
DEMINT: Well, they're not willing to lead. They're trying to set us up to suggest how we're going to change programs so they can criticize it. But that's the president's job is to lead on these issues. And for him to just abdicate his responsibility and leave it in the hands of Congress makes no sense at all. But I'm proud of Republicans who've made a lot of great proposals of what we need to do, what Rand Paul has done here in the Senate to show how we can devolve things out of Washington. And Republicans have been very bold about it. But the fact is, we're not going to get anything done unless the president is willing to join us.