This is a rush transcript from "Your World With Neil Cavuto," December, 15 2009. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: Meanwhile, my next guest worried about where all of this spending is leading. He`s just one of three Democrats to vote against a $1.1 trillion spending bill that is now sitting on the president`s desk. He is urging the president to veto it.

I wonder whether Indiana Senator Evan Bayh is getting in the Joe Lieberman camp of being a pain in the neck to Democrats. But, anyway, he joins me right now.

Senator, always good to have you.

SEN. EVAN BAYH (D), INDIANA: Neil, good to be with you. I am looking forward to your SpongeBob interview later.

CAVUTO: As I am.

But, in all seriousness, Senator, what do you make of this fear that this is just a preview of inflation coming attractions? Do you buy that.

BAYH: I think there`s some real merit to that, Neil. If you look at how other countries have handled massive debt in the past, very often, they believe the path of least resistance is to try and inflate their way out of the problem, which eventually leads to higher interest rates, lower growth, and a lower standard of living, both for and us and for our children.

So, one of the hardest jobs in Washington is going to be the Federal Reserve deciding when to start, you know, cutting back a little bit on the liquidity that they have provided on the monetary side.

But Congress has got to do a better job. And this — this spending bill that was just passed was four times the rate of inflation. That is on the heels of a previous spending bill another four times the rate of inflation. At a time when the economy is struggling, we just — we can`t afford this, Neil. And the debt, you know, keeps going up and up. It is it`s a legitimate concern.

CAVUTO: So, let me ask you this, Senator. Is this a tipoff to how you might vote on health care? If budget busting kind of issues remain a big issue with you, is that health care and that trillion-dollar price tag going to be a big issue with you?

BAYH: Well, they`re — they`re somewhat related and somewhat different. So, let me explain that.

The Congressional Budget Office, which is the scorekeeper, is going to reporting back on the bill of that is going to be put before us for a vote. And if it indicates, Neil, that it raises the deficit, I`m not going to vote it.

CAVUTO: Really?

BAYH: I`m hopeful that it will...


CAVUTO: If CBO comes out with a score that says so, you`re all right?

BAYH: It raises the deficit. And I won`t be alone. I think there are several other, Senator McCaskill and some others, who feel that way. I believe it will probably say it modestly reduces the deficit over the next 10 years, but here`s the point, Neil.

CAVUTO: And, in that case, in that case, Senator?

BAYH: Well, modestly reducing the deficit is better than just letting it go and not improving at all.

But here`s the point. Modestly reducing the deficit is not going to get us there. We`ve got to substantially reduce the deficit. So, in some ways, when it comes to dealing with our nation`s financial problems, this is a missed opportunity.

CAVUTO: What is it with both Democrats and Republicans, because I chastised Republicans on this very show, rail against pork and yet, you know, slip in all sorts of things into the sum of the spending bill, that they can`t help themselves. And now here you are rejecting it in whole fashion.

BAYH: Neil, we have got...

CAVUTO: But what happens. Why does it continue, when we know we`re digging a deep hole for ourselves, and you have got everyone screaming about this new storm coming?

BAYH: Neil, it shows the dysfunction that we have had in Washington. The deficits went up when the Republicans were under control. Now the Democrats need to do a better job of getting it under control.

But, Neil, look at the 5,000 earmarks. They were spread across the board. Everybody had a little something in there, except for me and maybe a couple of others, that they were looking at. Some people don`t focus on the economics of it. They should watch your report here.

And they think that, well, the path of least resistance is just — they like cutting taxes. They like spending. And the path of least resistance is to borrow.

But there`s an end to that road. You probably noticed this. And I hope your viewers did, too. Moody`s came out here just in the last day or two and said that the — the United States might have our debt downgraded. Now, that sounds kind of esoteric and wonky, but the result of that would be us paying higher — higher interest rates, more of our money going to pay our foreign creditors...

CAVUTO: That`s right.

BAYH: ... rather to a build America. And that`s what we`re looking at if we don`t get this under control.

It is a bipartisan problem. And we have got to just — we have got — Congress needs serious reform if we`re going to make this better. And I have got a proposal out with Senator Gregg and Senator Conrad to do that, to basically take it out of the hands of the order ordinary congressional process.

CAVUTO: Well, there`s a concept.

But, also, to alert folks back at home as you`re speaking there, on the right side of your screen, watching the 787, this so-called Dreamliner of Boeing`s, returning a little bit earlier than expected.

We`re not told exactly why the flight will land ahead of schedule, just that it will. But this has been apparently a successful flight. In fact, we`re not entirely this is the plane in question. So, we will just keep an eye. We`re told that it is.

And we will keep you posted. But, Senator, there is an issue with, let`s say, an aerospace company like Boeing spending a lot of money on a Dreamliner, and Washington spending a lot of money on a dream things are going to get better.

Now, when a company does it, it`s own money. It`s its shareholders` money. But this is the government doing it with our money. Are you worried that this process is now out of control?

BAYH: Yes, I am worried, Neil. It`s been out of control for a long time. And we have got to — Congress needs to be restrained, and it — on both sides of the aisle.

And you know who really picks up the bills? It`s our kids. This is deeply irresponsible, for us to just borrow and spend, borrow and spend, and expect our children and grandchildren to pick up the tab in the form of a lower standard of living.

So, we need to bring a sense of emergency to this, Neil, because, ultimately, if we wait for the markets to force a more responsible path, the steps that will need to be taken then will be much more severe than they are today.

You have probably followed the situation in Greece. Greece came in with a new socialist government promising all kinds of new spending across the border on all sorts of social programs. The markets rebelled, and this new socialist government is now in the position of having to cut across the board and put into place some pretty tough measures. That`s what happens when people lose confidence in your ability to behave responsibly.

And if we keep going like this, before long, the people who are lending letting us this money are going to feel that way.

CAVUTO: All right, Senator, thank you very, very much.

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