This is a partial transcript from On the Record with Greta Van Susteren, January 21, 2004.

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GRETA VAN SUSTEREN, HOST:  And today Senator John McCain took the Senate floor and detailed what he thinks are some of the more outrageous examples of government spending.


SEN. JOHN MCCAIN (R), ARIZONA:  Please join me as we walk through this shopping mall.  On the right, we have $1.8 million for exotic pet disease research in California.  On your left, you'll find $50 million for an indoor rain forest in Iowa.  Mr. President, $50 million for an indoor rain forest in Iowa?  Give me a break!


VAN SUSTEREN:  Just hours ago, I spoke with Senator John McCain about the numerous programs President Bush proposed in the State of the Union.  I asked Senator McCain if he thinks we have the money for the proposals.


SENATOR JOHN MCCAIN:  No.  We don't have the money.  And I thought he gave a great speech about Iraq and what we need to do and the benefits of democracy in the Middle East, but he should have said, You got a pork-barrel spending bill before you now, called the omnibus bill.  Take $11 billion out of -- pork out of it, or I'm vetoing it.  That's what he should have said.

VAN SUSTEREN:  What was the purpose, then, of, you know, listing the programs, some of them enormously expensive, double funding of some programs, abstinence programs, drug programs, I mean, millions, and in some cases, they are billions of dollars?

MCCAIN:  I don't know the answer to that.  Most of them were relatively minor programs.  And also, it was interesting that he left out any reference to the Mars -- or Moon colonization, followed by a trip to Mars, which was the subject of major speech just a few days ago.  But look, we're mortgaging our children's futures.  We Republicans are the party of the balanced budget amendment to the Constitution.  His comment is that at some undetermined time, we're going to cut the deficit in half.  Half of a half-a-trillion-dollar debt on an annual basis?  We've become totally fiscally irresponsible, and it's disgraceful.

VAN SUSTEREN:  What are we going to do?

MCCAIN:  We're mortgaging our children's futures.  Medicare and Social Security are going to go broke, and we're doing terrible things to our kids and grandkids.  Fortunately, I'm old enough that it probably won't bother me.  But I do have children and grandchildren.  And by God, I'm very angry that we just do this egregious, outrageous spending.  I mean, it makes you laugh and it makes you cry.  But we've got to get back to fiscal conservatives because we don't make any choices, Greta.  There was not a mention in the president's speech domestically, We'll have to cut back on this program, we'll have to sacrifice this program for the sake of -- whatever it is.  None of that.

VAN SUSTEREN:  Why do you think he didn't mention his Mars program?  I mean, is he aware of the fact that he's -- his programs are and we don't have the cash?

MCCAIN:  That could be it.  Obviously, the White House doesn't share their thinking with me in composing the State of the Union speech.  But every space program has one thing in common: tremendous cost overruns, huge cost overruns.  Look, when Jack Kennedy said we were going to the moon, and he said we're going to spend whatever it takes.  With this proposal by the administration, we're going to increase spending by $1 billion.  You know what a billion dollars is in a space program?  It's peanuts.

VAN SUSTEREN:  But if you look at the No Child Left Behind -- underfunded, right?  We never spent the money for it.  Is it in some ways -- can you say -- is it harsh to say it's a fraud on our American children and their education if we say we have this program, and it really doesn't exist?

MCCAIN:  Well, we're spending a lot more on education than we were in past, and maybe in the negotiations the president had with Ted Kennedy, there was -- it was over-promised.  But how can we justify spending $11 billion on an omnibus appropriations bill which is completely wasteful, completely unnecessary?

VAN SUSTEREN:  How do we -- how do we justify it?

MCCAIN:  I guess they justify it by saying, I brought home this pork to my state.  But it's outrageous.  It's disgraceful.  We've gone from multi-trillion-dollar surpluses to multi-trillion-dollar deficits in a very short period of type.  And no economist, whether it be Krugman or Samuelson or anybody else, will tell you that you can run deficits forever without driving up interest rates and driving up inflation.  It's just like no family can live in debt forever without paying the fiddler.

VAN SUSTEREN:  Then how do you sort of reconcile the fact that the administration wants -- doesn't want the tax credits to expire?

MCCAIN:  I think that they have a very good political issue because anybody that doesn't want to make the tax cuts permanent, even though it was a shell game when we did it, is going to say, Look, you're for a tax increase then.  So no Democrat -- hardly any Democrats and hardly any Republicans will say, No, I don't want to make these permanent.  What does it do to the deficit?  The Congressional Budget Office is a non-partisan -- the head of it is appointed by Republicans because the Republicans are the majority.  The Congressional Budget Office says that we're just doing terrible things, that Social Security and Medicare are not going to be sustainable.

VAN SUSTEREN:  Are you suggesting that the Republican Party is now the big spenders?

MCCAIN:  Yes.  I am suggesting that the party that -- in the 1994 campaign, on the "Contract With America," one of the first items was a balanced budget amendment to the Constitution.  I say all that has disappeared, and I deeply regret it.

VAN SUSTEREN:  So what can you as a -- I mean, I assume many of your other Republican colleagues feel like you do, right?

MCCAIN:  Not enough, obviously.  The pork-barrel spending, the unnecessary and wasteful spending used to be the embroidery around a piece of legislation.  It's what the energy bill was all about.  The energy bill was just a series of giveaways to various special interests, buying votes in various parts of the country.  And we barely beat it by two votes.

VAN SUSTEREN:  Which Republican senators are staying with you on this?

MCCAIN:  I think that Senator Lindsey Graham is concerned.  I was glad see Senator Snowe vote against the omnibus bill.  I was glad to see Senator Hagel.  There's some.  They're beginning to hear from their constituents.  I'm beginning to hear from mine in Arizona.  They know what deficit spending is.  They know what multi-trillion-dollar deficits mean.  They're not -- and respected organizations, whether it's the Concord Coalition or the Citizens Against Government Waste or a number of others, are all sounding the same theme.  Our basic -- one of our basic think thanks we rely on is the Heritage Foundation.  The Heritage Foundation has been super-critical of these spending practices.

VAN SUSTEREN:  So what grade to you give the president last night on his domestic policy part of the State of the Union?

MCCAIN:  Not a very good one because the president...


MCCAIN:  Oh, I don't know.  I mean, I would say C or something like that.  But what I -- but the crucial point that the president missed was to say, You've got to stop the wasteful spending.  The American people deserve better, and I'm going to veto one of these and demand -- you know, the president's never vetoed a spending bill.  I mean, I'm going to demand that you remove this unnecessary spending.  We've got to show some fiscal restraint.  That's what the Republican Party is supposed to be all about.


VAN SUSTEREN:  When we come back: What does Senator McCain think about Governor Dean's speech on caucus night?  And what does he think about the New Hampshire primary, which he won in 2000?  And later, Pakistan's top secret mission to Iran and Libya.  Why were they there, and what did the Pakistanis discover?  And should we be alarmed?



SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE:  George W. Bush wants national security to be the central issue of this campaign.  I have three words for him that I know he understands: Bring it on!  That's a debate that we need to have in our nation and one we can win.  And I ask you to stand with me.


VAN SUSTEREN:  Back with more with my interview with Republican senator John McCain of Arizona.  I asked the senator what he thinks of the Democratic Party after watching the contest in Iowa.


MCCAIN:  I think it's -- to state the obvious, the conventional wisdom is always wrong.  If I -- when I was on your program a few weeks ago, I think you and I both agreed Dean's the nominee, it's pretty much history.  Gore, all these other people have endorsed him.  Now it's clearly wide open.  And from what I'm seeing, Mr. Dean may have hurt himself very, very badly, Governor Dean may have, with that performance the night of the caucuses.

VAN SUSTEREN:  That was very strange, his (UNINTELLIGIBLE)  It even looked that way on TV, didn't it.

MCCAIN:  I think his rationale for it has some legitimacy.  He was trying to talk to his 3,500 young people, volunteers and all that.  But we're professionals.  This is the big leagues, and he should have -- obviously, he should have recognized that whatever you do on television is exaggerated, but -- and to go into that kind of a routine I  was a little bit, shall I say scary?


VAN SUSTEREN:  Four years ago in New Hampshire, you were the big winner.  And then it turned out differently.  I mean, how important is New Hampshire, do you think, for the -- to win New Hampshire for the candidates?

MCCAIN:  I think, at this point, it's very critical for them because they've winnowed it down to four -- or five, if you count Joe Lieberman.  I happen to have a lot of affection for Joe Lieberman, as I do for Kerry and Edwards.  And so I hope he's not completely out of it.  But let's say four or five.  One of them or two of them are going to be -- are going to be taken out by New Hampshire.  So it goes through the process.

And I think the other thing about New Hampshire is people really get to know the candidates.  You know.  You've been up there.  You know how seriously people take their responsibilities.  You know, Morris Udall's old joke, when he ran in 1976?  One says to the other, What do you think about Morris Udall for president?  He says, I don't know.  I only met him twice.


MCCAIN:  You know, I mean, so that -- that's an important factor.  I think even though it wouldn't mean the end of it, I think whoever wins New Hampshire is going to go into the other primaries with a definite leg up, particularly if it's Kerry, if he gets two in a row.

VAN SUSTEREN:  You've tried so hard to rein in politicians on campaign finance.  Governor Dean has opted out.  Senator Kerry has opted out.  President Bush, I don't know if has opted out, he's certainly going to opt out.  I mean, they've all sort of passed campaign finance.  What do you think about that?

MCCAIN:  Well, remember that the presidential financing is unique because it has public financing.  No other federal election does.  We're gong to have to change that.  It worked well from 1976 until about 1990-something.  We'll probably have to increase the amount of matching funds.  But I would like to say, if I hadn't run for president of the United States, we would never have passed campaign finance reform.  And of course, I'm still gratified that the United States Supreme Court upheld it as constitutional.

VAN SUSTEREN:  But haven't they sort of, for lack of a better words, the richer candidates right now, whether it's rich because they got it on the Internet or for whatever reason -- haven't they sort of found a way to get around the campaign finance?

MCCAIN:  No.  First of all, again, the presidential it's matching funds, and our legislation did not address the presidential primaries.  But second of all, I think it's wonderful that Howard Dean was able to use the Internet, $50, $75, $100 contributions.  That's what we want it to be all about.  We want average citizens to contribute small amounts of money, and that's a commitment to a campaign.  So I'm for that.  I think it's a great thing.  I think the Internet is going to change American politics for the better.

VAN SUSTEREN:  Did you raise anything on the Internet four years ago?

MCCAIN:  Huge.  After we won New Hampshire, it was millions in just a period of a few days, which we would never have otherwise been able to do.  The Internet is the new tool not only for raising money but communications.  Look at these meet-ins, or whatever it was that the Dean people had.  That was very effective.  People would meet all over the country and use the Internet in order to do that.  One thing -- win or lose, you got to give Governor Dean great credit for incredibly astute and effective use of the Internet.

VAN SUSTEREN:  Who do you think of the Democratic candidates -- it's very early.  It's -- you know, we haven't even had New Hampshire yet.  Who's the biggest threat to the Bush administration in November?

MCCAIN:  Well, that's hard for me to say because you don't know how people are going to perform.  Again, a month ago, John Kerry was dead.  He was finished.  Now people are remembering that he did very well against Governor Weld when they were -- when he was up for reelection to his Senate seat.  John Edwards is a very attractive young man, as you know.  General Clark brings the military credentials, and he's a quick study.  He's learning fast.  Joe Lieberman is standing fast to his principles that he believes in.  So I don't know who's going to be best, but I think that there's a certain advantage to whoever the candidate emerges as because he will have been through a tremendously important trial by fire, be a heck of a lot better candidate against President Bush than he was back a year ago.


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