This is a rush transcript from "On the Record," May 28, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: But first, the shocking plunge. Federal tax revenue plummeted 34 percent in April compared to one year ago. That comes out to about $138 billion. So where did all the money go? And how is the federal government going to pay its bills, fund the stimulus spending?

Peter Barnes joins us live, senior Washington correspondent with the FOX Business Network. Where's the dough? Where's the cash?

PETER BARNES, FOX BUSINESS NETWORK: Well, listen, we've lost six million jobs in the economy in the last 12 months, and as a result, there are fewer people paying their income taxes and payroll taxes. Individual income taxes were down $107 billion year-over-year, down 44 percent. And we have this kind of unemployment, you get fewer people paying into the government.

VAN SUSTEREN: But 34 percent -- I mean, that's a touch more than a third. I mean, we got two thirds of what we had last time and we've got this huge spending bill, the stimulus bill.


VAN SUSTEREN: You know, this...

BARNES: That's the spending side.

VAN SUSTEREN: Right. (INAUDIBLE) but we're spending -- I mean, presumably -- I mean, when you spend...

BARNES: A $2 trillion deficit.

VAN SUSTEREN: You usually bring money in when you want to spend. I mean, the whole idea is that you make money so that you can then spend it.

BARNES: Right, but this is -- as you know, there's an economic emergency, and so the president and Congress approved the president's proposal to, you know, stimulate the economy with the $780 billion stimulus plan. And then, of course, all of the bank bail-out money is still going out the door. So we're going to run about a $2 trillion deficit this year, probably about a trillion next year.

VAN SUSTEREN: All right, with the spending...

BARNES: And they're borrowing it.

VAN SUSTEREN: Right. OK. But with the stimulus bill -- with the stimulus bill, are they stimulating the economy so that they are creating jobs so that at least we're not going to have 30 percent down next year, or is there any way we can sort of, you know, pick up what we've lost?

BARNES: Well, they are predicting that, eventually, the economy will come back and jobs will come back and that the stimulus will, in fact, start increasing revenues in 2011. But for 2009 and 2010, it's going to like this pretty much every month.

VAN SUSTEREN: So "eventually" is 2011.

BARNES: Yes, that's what they're saying.

VAN SUSTEREN: And that's assuming nothing else rather catastrophic...

BARNES: Well, remember also, the president's proposed at the end of 2010 to repeal the Bush tax cuts on the highest -- wealthiest families. And so that will increase revenue alone, by itself.

VAN SUSTEREN: Are there any -- I mean, we've had this spending bill now for a couple months, and I realize that we -- you know, there -- we have to have some sort of markers of whether it's succeeding or not. Are there any markers, having now started the stimulus, that show that the -- that it's actually working or not working?

BARNES: Well, they are...

VAN SUSTEREN: Or is it too soon?

BARNES: The reporting on this has shown that the stimulus is just starting to get to these shovel-ready projects to help to start to create jobs that the administration talked about. But it's probably still a little bit early. As you know, the president says that the first month or so of the stimulus helped to save or create 150,000 jobs. That was just economic hocus-pocus from his team of economists.

VAN SUSTEREN: Well, when you say save jobs, I mean, I don't know how you measure that.

BARNES: Well, right. You can't.

VAN SUSTEREN: I mean, that -- that you can't measure.

BARNES: No, there's no...

VAN SUSTEREN: It's creating jobs.

BARNES: Right.

VAN SUSTEREN: So at what point should we start seeing employment and people getting more jobs?

BARNES: Well, everybody -- the administration, private economists -- are predicting a bottoming out here of the recession in the next few months here, with economic growth resuming at the second half of the year or by the fourth quarter, maybe at the beginning of early next year. But employment is a lagging indicator, so even though we might see some economic indicators turning up, like we are now, some bottoming and perhaps some turning up -- the green shoots they're talking about -- companies aren't going to start hiring jobs right away, so it's going to be a while. We could continue to see bad economic numbers, bad unemployment numbers, layoff numbers, cuts through the summer, easily.

VAN SUSTEREN: Well, but I mean, the other problem is that (INAUDIBLE) decreased revenue.

BARNES: That's right.

VAN SUSTEREN: Because people aren't spending. There's no -- I mean, there are no -- people aren't spending things.

BARNES: No, this year, month to month, you're going to continue to see these very bad numbers on the revenue side that the government's taking in until we start to see employment bottom out and payroll start to grow again.

VAN SUSTEREN: What is the level of certainty that this is actually going to happen? I mean, I -- I take it that now you say the fourth quarter, so I guess by December 31, I should have you sitting right here...


VAN SUSTEREN: ... and you tell me, like, OK, this is what you told me last -- at the end of May. Is -- by December 31st, should we know whether this has been a...


VAN SUSTEREN: ... you know, huge success or an abject failure?

BARNES: No, absolutely, I think by December 31st. That's an absolutely fair date to look at. But what we are seeing is -- you know, we aren't seeing the month-to-month job losses increasing significantly, like we did at the beginning of the recession.

VAN SUSTEREN: So it's slowed -- we've slowed down.

BARNES: Well, we're still losing about a half a million jobs, 600,000 jobs a month, but it hasn't gone to 800,000 or a million jobs a month. So that is a typical sign of a bottoming of a recession.

VAN SUSTEREN: Except for one thing.

BARNES: It's painful.

VAN SUSTEREN: Except for one thing -- yes, it's very painful for those who lose jobs. Plus the fact is if you get discouraged and you stop looking, you aren't counted. So if things are so dismal that these huge numbers of people have just given up, you know, it falsely suggests that employment is not decreasing -- or unemployment is not rising at a faster level.

BARNES: That's true. That's true.

VAN SUSTEREN: It's how they count it.

BARNES: The number of discouraged workers -- absolutely right. These are the bean counters of the Department of Labor. You're absolutely right, there are more discouraged workers out there. And part of the problem here is there are a lot of people who had full-time work who now have part-time work. So they also...


VAN SUSTEREN: And they're considered employed.


VAN SUSTEREN: (INAUDIBLE) so that -- they don't figure in. Peter, thank you.

BARNES: OK, Greta. Thanks.

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