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CBO's shocking report on government borrowing

This is a rush transcript from "Hannity," December 10, 2012. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: While the president is busy packing his tropical shirts for his Hawaiian holiday vacation that you'll be paying for, his so-called "fiscal cliff" plan is drawing a sharp rebuke from an unlikely source.

Erskine Bowles, President Bill Clinton's former chief of staff, co-chair of Obama's very own debt commission, is now publicly stating that the White House's proposal simply will not work. Ouch. Take a look.

(BEGIN VIDEO CLIP)

ERSKINE BOWLES, CO-CHAIR, SIMPSON-BOWLES COMMISSION: Spending is the biggest part of this problem. Even if you raise the top rates back to the Clinton rates, you know, that only creates about $400 billion over 10 years. That's $40 billion a year.

We got a trillion dollar a year deficit. That alone won't solve the problem. We have to cut spending. We're going to have to do more. You know, we may not like it. You know, we may wish we didn't. We simply made promises we can't keep. We've got to face up to it and we've got to have a bold decision in order to make sure we put our fiscal house in order.

(END VIDEO CLIP)

HANNITY: Now sadly we know all too well that cutting spending has become a foreign concept in America. In fact, a new Congressional Budget Office report revealed that the federal government borrowed 46 cents of every dollar it spent this fiscal year.

However that staggering number is not likely to sit well with an overwhelming majority of Americans. According to a brand-new George Washington University poll 76 percent of those surveyed across America support across the board spending cuts.

Here with the very latest on the "fiscal cliff" showdown and America's fragile economy is the former New York City Mayor Rudy Giuliani. How are you?

RUDY GIULIANI, FORMER NEW YORK CITY MAYOR: How are you, Sean? Good to see you.

HANNITY: You know, I just like to learn from people that have done very successful things. You took how many people off of welfare when you were mayor?

GIULIANI: About 600,000.

HANNITY: What was the deficit when you became mayor?

GIULIANI: About $2.3 billion.

HANNITY: And the debt?

GIULIANI: The debt was staggering. It was about 12 percent of our entire budget.

HANNITY: So 600,000 off welfare, that massive debt and deficits and you turned that into a surplus.

GIULIANI: Yes, we did it by my taking a report that asked me to raise taxes and throw in the garbage. I was given a report. The report said you have to raise taxes across the board, said nothing about reducing spending. I said to myself -- I wasn't an economic expert then. I became one after being mayor of New York. I said this doesn't make sense. If I raise taxes now, I have to do it again in two years, then four years, because I'm losing the tax base. People will leave. We're taxing them too much already.

I'll try something different. I'll try to lower taxes, lower spending. I can't lower taxes too much at the beginning, but just a little bit, lower spending a lot. Then two or three years from now I'll lower taxes a lot. I lowered taxes -- actually I think, Sean, I lowered taxes than all the mayors in New York City combined by about $3 billion.

Three years into it we had a $3 billion surplus. Unemployment dropped from 10.5 percent to about six percent. We had a city that was humming. It wasn't all that, but that had a lot to do with it.

Erskine Bowles is absolutely right.This is a spending problem. It's not a revenue problem. It's not a spending problem, it's out of control, totally insane spending problem. The president's failure to put real spending reductions on the table, even if he wants a few tax hikes, maybe somebody should negotiate with him, but only negotiate with him if you get real spending cuts.

Here's the way I would do it. I would say, OK, if we're going to cave in at all on higher taxes, let it happen at the same time. We pass a bill, higher taxes, a lot more spending reduction, and it goes in effect in June when the spending reductions are done. We're not going to take it on the come. We're going to get it when it happens together.

HANNITY: If they do that, you know and I know the spending cuts aren't coming. What's frustrating to me, Speaker Boehner kind of co-opted Obama's language with raising revenues, quote, "taxes on the rich." Bob Corker is now ready to capitulate and some other Republicans, Tom Cole among them.

I'm saying, wait a minute, there are things you can do. I thought there was a good piece in the Washington Post today, laying out five steps. Stand your ground, go on offense, and pass your plans.

GIULIANI: Yes. I think that one of the things we don't do is, we don't make the point that if we are going to do revenue enhancements, they must be in exchange for spending cuts and should happen together. We can no longer do spending cuts with promised reductions in spending that never happen.

HANNITY: Why aren't we talking about the moral imperative? I think this is a moral imperative. We're borrowing 46 cents of every dollar. That means we're robbing our children and grandchildren.

GIULIANI: Right.

HANNITY: Why isn't that the debate that's front and center? Everyone says we ought to raise taxes on the rich. That lasts 8-1/2 days a year.

GIULIANI: Obama has co-opted the message by doing this, you know, let's raise taxes on the rich, which actually brings very little money, does not solve the problem. It's a symbolic gesture rather a real gesture, the real gesture to be getting into Medicaid and Medicare. Erskine Bowles went further than that. It's even simpler. He said it isn't spending in general, it's health care spending. That's the key.

HANNITY: Entitlements.

GIULIANI: A real program to reduce health care spending in exchange for some revenue increases, when you do both together, that would be something that would really help.

HANNITY: I'd like to save Social Security for further generations. They raided the lockbox. Let me go back to the time you were mayor. I was on the radio in New York. You got hammered. You were Satan in the minds of the New York Times, right?

GIULIANI: Right.

HANNITY: All right, but you stuck to your principles and you knew you were right. You knew it could be better, but they beat you up every day. You'd go into every neighborhood, whether people voted for you or not, you'd meet the press in New York. You have fights with them every day. You were Chris Christie before he was Chris Christie. You took your message out and never backed down.

GIULIANI: The message was, I want to move you out of poverty. They've been trying for 30 or 40 years, and all they've been doing is locking you in dependency programs. Give me a chance to try to get you out of poverty. Let me put you on work fare programs. I took all the people on welfare, instead of giving them welfare checks, I said if you want your welfare check, you have to come and work for me for 20 hours a week. I want to get you back in the workforce. I want to revive the work ethics. I want you to help yourself rather than making you dependent. These people have locked you into poverty, and they want to keep you there.

HANNITY: It worked.

GIULIANI: I want to give you a ladder out of poverty. I want to give you a way out.

HANNITY: How did people respond? Do you remember those meetings, those town halls?

GIULIANI: I do, I do. Boy, first couple years, responded terribly. Yelling, screaming, people locking themselves with handcuffs to the seats -- we had to drag them out. Three or four years later, when they were working, we took 600,000 people off welfare, 500,000 had jobs.

We just didn't take them off welfare. I turned my welfare agency into an employment agency. I said my welfare workers, first thing I want you to do when somebody comes in for welfare, find them a job. Explain to them why. It isn't that we want to be mean or difficult, we want to help you. If you've fallen into dependency, this is a bad thing for you.

HANNITY: Isn't this then a lesson for the Republican leadership? I don't hear what you're saying from them. They won the election, too.

GIULIANI: Right.

HANNITY: Basically America voted for the status quo.

GUILIANI: Right.

HANNITY: Obama's president, Republicans have the House. I'd like to see them take that type of message and say --

GIULIANI: Americans voted for a compromise, but the compromise is we may have to concede that the compromise is -- and part of it is some tax increases. I hate that, but that may be part of it. The most important part of the compromise, they voted for spending reductions. What we're only getting right now from Obama are tax increase. If you could have a balance of spending decreases of 2-1, 3-1, we could have a healthy economy.

HANNITY: All right, Mr. Mayor, always good to see you. Merry Christmas, by the way. Appreciate it.

GIULIANI: Merry Christmas.

HANNITY: You'll be filling in on my radio show.

GIULIANI: I look forward to it.

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Hannity, hosted by Sean Hannity, airs on Weekdays at 10PM ET on Fox News Channel.