Is government the solution or the problem?

This is a rush transcript from "Hannity," July 31, 2012. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: First, we examine the critical question facing voters this election season. That being is government the solution or is it the problem? Because that is one very clear area where President Barack Obama and Governor Mitt Romney could not disagree more.

Now, as we've seen over the last three and a half years, the Obama philosophy says that bigger government, higher taxes, more regulation, make the best formula for creating jobs and getting the economy back on track. But sadly, we've all seen firsthand the painful results of that type of thinking. Watch.


SCOTT PELLEY, CBS NEWS ANCHOR: Good evening. This is the worst economic recovery America has ever had.

UNIDENTIFIED FEMALE: Forty-one straight months of unemployment over eight percent. Almost 4 million fewer jobs than President Obama predicted. Twenty-three million Americans without full-time work. The results of President Obama's failed stimulus policies.

PELLEY: The worst economic recovery America has ever had.

UNIDENTIFIED FEMALE: Tell him, for real job growth, stop spending and cut the death. Support the New Majority Agenda at


HANNITY: Now thankfully for voters, there's an alternative view to the Obama philosophy, and that's the one being held by Governor Romney. Now, unlike the president, Governor Romney believes that less government, lower taxes, smart regulation are the driving forces behind a healthy and prosperous economy. And above anything else, this is the choice facing voters in just 98 days, and the stakes of the selection could not be higher for this country.

Joining me once again with the latest from the campaign trail, former New Hampshire governor and Romney adviser, one-man Romney supporting wrecking crew, John Sununu, and the author of "Muzzled: The Assault on Honest Debate," which is now available in paperback, Fox News political analyst Juan Williams.

You know, Juan, two things -- three things I want to point out as we start this. The president made declarations as he's running, cut the deficit in half during his first term. He said he was running in the worst economy since the Great Depression, so he knew it was the economy, the economic situation he was running in, and he had Nancy Pelosi and Harry Reid. He got everything he wanted passed. He got his stimulus, he got his budget bills passed, he got his healthcare bill passed. So at this point, is this not the Obama economy? Is this his or not?

JUAN WILLIAMS, FOX NEWS: Well, it certainly is, Sean. I don't think there's any question. But, of course, what you didn't say there was that even last week, when the government was looking at the economic conditions, they said retroactively looking back, that the situation the president inherited was even worse than they thought.

HANNITY: Worse than the worst economy since the Great Depression? It was worse than the worst economy since the Great Depression?

WILLIAMS: Yes. But here's what I like about your introduction. You laid out the parameters for this election I think exactly right. This is what it's about. And if you just go by what Sean Hannity said tonight, you would have to say, well, Barack Obama did a great job, because, guess what? --

HANNITY: Granted. I will -- let me concede a point.


WILLIAMS: -- he has reduced taxes. He has cut the rate of growth of government, right?

HANNITY: Wait a minute.

WILLIAMS: And this is a guy -- OK, go ahead.

HANNITY: No new jobs. We have--

WILLIAMS: What? No new jobs? Twenty-eight straight months of job growth, 4.4 million more jobs since he took office.

HANNITY: Juan, we have just under a million fewer people working today than when he took office, so we have no net new jobs. Sorry, you can't spin it. Fewer Americans working and $5 trillion in debt.

Governor Sununu.

JOHN SUNUNU, FORMER NEW HAMPSHIRE GOVERNOR: Look, this has been four years of disaster for America. The president laid out his own goal of 5.5, 5.6 percent unemployment after three or four years, we are at 8.2. We have 24 million people suffering, either unemployed or underemployed. We have kids graduating from college with less than half of them being able to enter jobs even slightly related to what they studied for. One-and-a-half percent growth rate last week, the worst growth rate you could possibly imagine at this stage coming out in the fourth year of coming out of a problem. The growth rate should be around six to eight percent, and this president is a failure in that. He spent $5 trillion, and he has nothing to show for it. He thought there were going to be shovel-ready jobs, and he admitted he was blowing smoke when he said that.

We have an economic disaster. And when you ask the president what's going on, he says it worked. Why can't he be honest and acknowledge the fact that it failed, not that it worked?

WILLIAMS: Wow, John Sununu, the sky is falling, the sky is falling, I'm Chicken Little. John, that's not you. This is not you to be so negative and pessimistic about America. I have lectured Sean Hannity about this. You have got to believe in the country. And the thing to understand here is the government is smaller today than when President Obama took office. We came in at a very difficult, difficult time. He's cut taxes for small business.

SUNUNU: Juan, that's not true. Juan, first of all, that's not true.


SUNUNU: There are more public employees today than when he took office.

WILLIAMS: No. What we have is smaller government. If you are asking about the size of government, government expenditures, the rate of growth in terms of spending is the smallest it's been since going back to the Eisenhower administration.

HANNITY: Juan, Juan.


SUNUNU: Juan, that statistic that you and the president tried to pawn off on the American public has been debunked even by the most liberal of analysts that say he is cheating with those numbers.

WILLIAMS: Oh, yes.

SUNUNU: He put $5 trillion extra spending into the game, and he laid that debt on the back of the young people of today, tomorrow and my grandkids.

WILLIAMS: It's not cheating. It's not cheating, it's transparency.

SUNUNU: It's cheating.

WILLIAMS: Because remember, as I said before, in the last administration, the cost of the wars, the cost of Bush tax cuts, that wasn't considered. But if I look at just hard facts, like, gee, how is the Nasdaq doing, oh, it's more than doubled since he took office. How is the DO doing? Up 10 percent since he took office. How is corporate American profits doing? Highest ever. Highest in history. I'd say, "Wow, what a president!"


SUNUNU: And how are the people of America doing in terms of jobs? They are not working. This president has kept people in the poorhouse.


HANNITY: Let me add, Governor, and I will throw it right back to you. We have the highest number of people dependent on government in American history. We have 15 million more people on food stamps. We have 26 million, 27 million in underemployed Americans. He said he would cut the deficit in half. He's given us the largest deficits. The very thing he called George Bush unpatriotic for and irresponsible about. Governor Sununu, he's given us $5-plus trillion in debt in 3.5 years. George Bush gave us $4 trillion in eight years.

SUNUNU: Juan, I can't believe you are mimicking that statistic that the president himself has stopped talking about. He is the biggest spender in American history. He has increased the size of government at the federal level. He has sent money to the states and municipalities and had them increase the size of government. He's increased debt, and we have people that are still looking for jobs after four years.

WILLIAMS: John, well you know that in fact, what we are seeing in state and local government is a terrific error of retrenchment. And there's a big drag on the economy right now. The private sector is adding jobs. What we are seeing is cuts in terms of people who are firefighters, teachers, the policemen, food safety. That's where the cuts are coming.

And so when you talk about added spending, I think what you are referring to is the stimulus. Remember, Americans got tax cuts under the stimulus, and I know you are a tax cut guy. So why would you be badmouthing the stimulus?

SUNUNU: Because it didn't work, and this president runs around--

WILLIAMS: It sure did.

SUNUNU: And this president runs around lying to America, saying it worked. It has not worked, and we have problems. And when you ask him why it didn't work, he says it is Europe's fault, it's because we are using ATMs, we had a tsunami, we had more rain, we had less rain, we have drought. Everything is an excuse for this president.

Stand up and be counted for, Mr. President. We have to decide what America is going to do. Mitt Romney has put together a package and a plan that will move this country forward.

Juan, I mentioned it the other day. Bob Karrow's (ph) book on Lyndon Johnson, his fourth book, has a huge section in there talking about the months before Kennedy was assassinated and after Lyndon Johnson took office, and both Kennedy and Johnson were desperately trying to get Congress to pass a tax cut package across the board so that they could get growth again going into the 1964 election.

This isn't just Republican dogma, this is something that is real. And for some reason, the hard leftists that have taken this president's mind over have convinced him that tax cuts for those that make investments is a good political position to fight, and to denigrate the rich and the successful in America.

HANNITY: Hang on--


HANNITY: Juan, I know you want to respond. I'm not trying to cut you off, but we do have time restraints.

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