This is a rush transcript from "On the Record," December 22, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Sleazy? Senator Graham says Senator Ben Nelson cut a sleazy deal. But that is not all of what Senator Graham has to say. Senator Graham goes "On the Record."


VAN SUSTEREN: Senator, nice to see you, sir.

SEN. LINDSEY GRAHAM, R - S.C.: Thank you.

VAN SUSTEREN: Well, you called for an investigation of...


VAN SUSTEREN: ... the vote that Senator Nelson made.

GRAHAM: Right.

VAN SUSTEREN: Why? And what happened?

GRAHAM: Well, number one, Senator Nelson -- I really like him. We've worked together. But what happened here I think is just what's wrong with Washington. It doesn't pass the smell test.

VAN SUSTEREN: You used the "sleazy" word. You used the "S" word.

GRAHAM: Yes, I think it is. I think it is sleazy in this regard. You're one vote short. So the guy that's holding out, you get him in a room, not negotiating on C-Span, like a promise was made during the campaign, but a back room deal. And once the deal was announced to the public, you learn that Nebraska is the only state in the union that will be exempted from a mandate that the federal government is imposing on all other states.

Medicaid expands under this bill to 133 percent above poverty. In South Carolina terms, that's 500,000 new people going on to Medicaid. It will cost my state $1 billion to make the state match. Nebraska, all new enrollees will be covered by the federal government forever, a deal that no one else gets.

And I think there's a constitutional requirement to have some basic uniformity when it comes to taxation. Every state's tax bill is going to go up because of this mandate except Nebraska. And I hope Senator Nelson will disavow this deal. And I wish he would vote no.

VAN SUSTEREN: Well, I -- I mean -- I mean, the people -- this is a great -- this is a great deal for the people of Nebraska.

GRAHAM: The governor of Nebraska doesn't think it's a great deal. Senator Johanns, his colleague from Nebraska, took the floor and said that Nebraskans don't want this. This is not the way we want to be seen by our fellow citizens. He asked that this not be done on behalf of the people of Nebraska, and I really admire that.

And, again, Senator Nelson, we have been friends. This is what makes people so disgusted with politics.

VAN SUSTEREN: Why did he do it, then? Why did he agree with it?

GRAHAM: I just think they're rushing this bill through. We're going to pass it on Christmas Eve. We could have waited and come back next year. We could have understood what's in it more. We could have let some heads cool and tempers calm down. It's a rush to judgment. He felt a need to be a team player here.

VAN SUSTEREN: I mean, he's got offered a lot of cash, let's face it, for his state, not for himself, but for his state.

GRAHAM: At the end of the day, he was the vote that would make this go through the Senate. And what did he do for the country as a whole? He increased everybody else's obligations under Medicaid. He legitimized $470 billion cuts in Medicare that will hurt Medicare patients throughout the country, and he legitimized $518 billion of new taxes. So this is not a good deal for Nebraska.

VAN SUSTEREN: So who's grumbling? I imagine the Republican senators are grumbling. Have you heard any grumbling from the Democratic senators that he got a sweetheart deal?

GRAHAM: My attorney general is grumbling, because he feels like he needs to speak out and say that what was done for Nebraska at South Carolina's expense should not stand.

Everybody on my side is grumbling, because this is not the way you change Washington. This is not change we can believe in. This is the worst of politics.

And I hope the American people will grumble and the senator from Nebraska, the other senator's grumbling, the governor of Nebraska is grumbling.

And how can a colleague of Senator Nelson's go back, say to Virginia, and say, you know what I did? I increased the cost for Virginians in the Medicaid program, but I gave a pass to Nebraska because we needed to pass the bill.

VAN SUSTEREN: Well, let's take some other examples then. There's $100 million that may ends up in the state of Connecticut.

GRAHAM: Right, for a hospital.

VAN SUSTEREN: For a hospital for Senator Chris Dodd, who's in trouble at home politically. I imagine you've got hospitals in South Carolina that you could have used.

GRAHAM: I've got 12 percent unemployment.

VAN SUSTEREN: Why isn't South Carolina getting it? And does that make you mad?

GRAHAM: I think what it makes me is disappointed. Yes, I'm angry at the process.

VAN SUSTEREN: Disappointed? We're beyond that. We have a 10 percent unemployment.

GRAHAM: When I call it sleazy, what more can I say?

VAN SUSTEREN: Why did Senator Harry Reid give this deal to Senator Ben Nelson? Just to get the bill passed?

GRAHAM: You don't have to be Sherlock Holmes here. He did a deal for Nebraska to get Ben's vote and it's blown up in his face.

And I think there will be a backlash in the country. I think Senator Nelson will change this deal because it's unconscionable, won't stand scrutiny, and I think it will change over time.

And this may be the straw that broke the camel's back regarding the fate of this bill when it goes to the House. How would you like to be a House member having to vote on this package? How would you like to be a House member saying I'm going to support federally funded abortion, which is in this bill?

VAN SUSTEREN: How would you like to be President Obama? He's going to sign it. Your thoughts on that?

GRAHAM: You know, I would -- I hate it for the country that this bright young man who captured our imagination during 2008 said "I'm going to change Washington. Health care will be negotiated on C-Span. You will know the deals. There will be no more back room deals. We're going to clang the culture in Washington. Change you can believe in."

And here he is embracing what I think is Chicago-style politics. Get them in a room, give them what they need, punish your enemies, and reward your friends.

I think this is going to change the public's view of the Obama administration. If you bless this kind of politics, which is the worst of the old system, then how can you look the American people in the eye and say that you're an agent of change?

I think he's lost a lot. Senator Nelson has lost some standing in terms of trust among the pro-life community because his effort to negotiate a prevention of your dollars being used to fund abortion was rejected by all who followed this. So it's going to hurt the administration, I believe.

VAN SUSTEREN: And so you say "sleazy."

GRAHAM: Disappointing, sleazy, unconstitutional, everything you hate about Washington has come together at one moment in time two days before Christmas, and I hope there's some backlash. If you think the tea party folks are mad now, wait till this becomes law.

VAN SUSTEREN: Senator, thank you, sir.

GRAHAM: Thank you.


Content and Programming Copyright 2009 FOX News Network, LLC. ALL RIGHTS RESERVED. Transcription Copyright 2009 CQ Transcriptions, LLC, which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon FOX News Network, LLC'S and CQ Transcriptions, LLC's copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.