Moody's warns Congress must do more to save credit rating

This is a rush transcript from "Hannity," January 3, 2013. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: As the 113th Congress convenes, the spotlight is now squarely on Washington's out of control spending. In case you think Republicans are blowing the matter out of proportion, Moody's Investor Services is blaring the alarm, saying Congress needs to act right now. Now, the credit rating agency is blasting the awful "fiscal cliff" deal saying it does zero to solve the debt crisis in this country, and does nothing to protect our fragile credit rating, which at this point is very much facing a looming downgrade.

Now, a downgrade of our AAA rating would be catastrophic for the country. So when will Congress, when will President Obama going to admit we have a serious spending addiction.

Here to tell us if there's anybody in Washington listening to the warnings and what they plan to do in the 113th Congress is Kentucky Senator Rand Paul.

Senator, welcome back to "Hannity,": good to see you. Sir, Happy New Year.

SEN. RAND PAUL, R-KY.: Happy New Year to you, Sean.

HANNITY: All right. Well, first of all, let me --

PAUL: Well, you know the --

HANNITY: Go ahead.

PAUL: The way I look at it, Sean, you know, this whole debacle is just an argument for term limits as far as I'm concerned. You know, we had 10 year's notice on this fiscal deadline, 10 years. And you know when they decided to address it? Ten years, one hour and 36 minutes is when they finally decided to come up with a bill. They bring the bill to the floor, which I never saw the bill. I'm not sure there was ever a bill printed, but I was told it was somewhere online at 1:36 a.m. and we voted at 1:39 a.m.

This is no way to run a government.

HANNITY: It's about as dysfunctional as I've ever seen. Look, Senator, if it wasn't so serious, it will be funny. You can't even make this up.

The question here is -- and I give you a lot of credit. You were one of a few that voted against this. Where were the rest of the Republicans? Where are the conservatives?

PAUL: Well, see, the argument they accepted -- and there is some point to this argument -- is they saved 99 percent from a tax increase, they didn't affirmatively vote to raise taxes, they did save and make permanent the tax increase. So, part of me says, well, that's better than letting Obama raise all the taxes. However, instead of cutting some spending, we actually increased spending in the bill and I think we're also prolonging the recession. The longer you have unemployment insurance out there, the longer your recession will be.

So, I don't think we did anything good for the country. We did some patch work, but I don't think in the end, it's going to help us. We still have a spending problem and we have a debt crisis on our hands.

HANNITY: What do you make of what Moody's is saying about a potential downgrade? And remember, also, they predicted there would be 600,000 fewer jobs. What does that mean for the economy?

PAUL: Well, people need to listen closely to that because a downgrade of our debt doesn't have to do with us debating. A year and a half ago when we debated raising the debt ceiling, people were saying, oh, you conservatives caused the downgrade by being too vocal in your debate. No, that has nothing to do with it. We get downgraded because we have a $16 trillion debt and we're borrowing $4 billion every day. We borrow $50,000 every second. That's why we're going to get downgraded and we've done nothing. We took entitlements off the table. Entitlements is where two- thirds of the spending is. If you're not going to look at entitlements, you're not even a serious person and shouldn't show up or be paid for work.

HANNITY: All right. So it's a manufactured deal as they said last night. It does nothing to solve the fundamental fiscal problems we have as a country. So, the Senate didn't pass a bill for three and a half years, their constitutional duty. Where do we go with the debt ceiling? Are Republicans going to take the stand that I don't see any Democrats taking? Do you see that? Are they going to be willing to shut the government down, really take a stand and demand that Washington be responsible?

PAUL: There is a way to do it without scaring the markets, and we tried to do this last time and we're going to try again. And what we do is we need to pass legislation that says, the tax revenue that comes in will go to pay for the interest on the debt, pay for Social Security, pay for the soldiers' salaries, but it won't fund all of government. So we will continue to pay our bills, but we may be able to extend that deadline then. The longer we extend it the more pressure we would put on the president to say he would come to the table with us and help us fix entitlements.

But the only way he'll ever do it is if we actually go through the deadline but give him instructions that he takes tax receipts and he doesn't default on the debt. Then we wouldn't scare the markets and I think then we would increase our leverage with every day we went beyond the deadline.

HANNITY: But for that to happen, Senator, that means every Republican in the House and every Republican senator is going to need to be united, and I would argue to save the country, to-- I think it's immoral to borrow 46 cents of every dollar, you said $50,000 a second. I mean, that's insanity. So, will--

PAUL: It is, and it's coming.

HANNITY: Will the Republicans do it?

PAUL: Well, they're going -- there's going to be repercussion if we don't do anything and I hope we will wake up and come to our senses and do something. I, for one, will stand firm. I will not vote to raise the debt ceiling unless we get a balanced budget amendment to the Constitution because so far I've seen no objective evidence to trust these people. They blow through all of their caps, they set spending limits and they go beyond them. They're not trustworthy with money or very good with it. So, we shouldn't give them more money. We should cut spending and make government smaller.

HANNITY: All right. Well, Senator, I'm with you. Hold strong, if we're going to save America and save this country and stop robbing from our kids, that's the only way to do it. So, we're going to need people that are leaders like yourself. So keep up the good work.

PAUL: Absolutely.

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