The following is a rush transcript of the December 13, 2009, edition of "FOX News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

CHRIS WALLACE, HOST: Tough issues are stacking up here on Capitol Hill like planes over a busy airport — health care reform, a new jobs plan, raising the debt limit and regulating Wall Street.

Here to discuss it are two Senate leaders, Democrat Claire McCaskill, who was one of the president's point people on many issues, and Judd Gregg, the top Republican on the Senate Budget Committee.

And, Senators, welcome back to "Fox News Sunday."

SEN. CLAIRE MCCASKILL, D-MO.: Thank you. Thanks.

SEN. JUDD GREGG, R-N.H.: Thanks, Chris. Thanks for having us.

WALLACE: Let's start with health care. Right now the key to passing this — the bill in the Senate is the compromise being offered by Senate Majority Leader harry Reid as a — as an alternative for the public option, and let's put it up on the screen.

The Reid plan would offer two choices to those without employer- provided insurance. Starting at age 55 you could buy into Medicare. Otherwise, you could buy a private plan negotiated by the government similar to what workers get.

Senator McCaskill, do you know enough about the Reid compromise to say whether you'll support it?

MCCASKILL: Well, the whole reason we're doing this bill is to bring down cost, first for the American people in health care, and secondly for the deficit. So until we get the numbers back from the Congressional Budget Office, we're all on hold.

Until — I have to be assured that this is going to bring down the deficit and it's going to bring down health care costs for most Missouri families.

WALLACE: And if it doesn't?

MCCASKILL: Well, then we are going to have to go back to the drawing board. I'm optimistic we're going to get a bill. There's a lot of good stuff in this bill. There's a lot of misinformation out there about this bill. So I'm optimistic we're going to get a good piece of legislation passed.

But all of us are focused on those two very important ingredients, bringing down the deficit and bringing down health care costs for most American families.

WALLACE: Senator Gregg, do you know enough about the Reid compromise to be able to say whether or not you'll support it?

GREGG: I don't think anybody's seen it. Basically, it's being drafted in camera, behind closed doors, by Senator Reid and a few folks. We've seen the outlines of it, which are very, very suspicious relative to their effects on cost, which Claire has outlined is one of the primary concerns.

We just got an actuarial summary of the present bill, the present Reid bill, which was done by the president's actuary, CMS. They said that the cost curve goes up under the Reid bill by $235 billion.

In addition, we know that if you let people buy into Medicare at age 55 instead of going on Medicare when they qualify for it in the 60s that you're going to definitely get the people who are the sickest buying in, and therefore the cost of Medicare is clearly going to go up.

Now, Medicare is already a bankrupt program. It's got $38 trillion of unfunded liability out there. And I think putting more people into Medicare is going to simply aggravate the bankruptcy of the program which is coming at us.

WALLACE: Senator McCaskill, those were two of the points I was going to raise with you. I mean, the Reid plan would expand Medicare, which is already in serious financial trouble, and no one knows how much this plan will cost.

Isn't it crazy to talk about passing a plan that affects a sixth of the economy in the next couple of weeks?

MCCASKILL: No, it's not. We've been working on this for months and months. There's...

WALLACE: But not this part of it.

MCCASKILL: Well, there have been all kinds of things in this bill that the Republicans — in fact, there's a lot of Republican amendments in this bill that we're debating right now.

And here's the thing. We've got two different analysis of this bill, and the bill's not complete yet. Both of them say that this bill is going to extend the life of Medicare. Both of these — both CMS and CBO say we're going to extend the life of Medicare.

And both of them say we're going to reduce the deficit long term.

And both of them say for most Americans it's going to stabilize the cost of health care over time and begin to bend that cost curve.

So we've got to stay focused on the positive things in this bill. You know, there's a lot of politics around this thing. This is the time of year not only do the planes stack up in terms of legislation we're considering, but it's also the time of year that we drift away from policy and start playing bare-knuckled politics.

WALLACE: All right. But let me ask you — and Senator Gregg brought it up, and I know this gets very complicated, but let's put it up on the screen.

The chief actuary for Medicare, a non-political government official, issued a report on Friday that said the Senate Democratic bill, instead of cutting overall health care spending, would increase it by $234 billion this decade.

And even without the new Medicare buy-in at age 55, that would put 20 percent of all hospitals and nursing homes treating Medicare patients in the red.

Senator McCaskill, you say bending the cost curve, overall spending, is your primary thing. And you sent a letter to Senator Baucus in September that said, "If we don't do that, we will have failed." By this non-partisan analysis, it doesn't bend the cost curve. In fact, it goes up by a quarter trillion dollars.

MCCASKILL: Well, first of all, the analysis of the bill they did does not include everything that we're considering now. There's a package of amendments that I'm very strongly in support of that the freshman senators are offering about the kinds of things like shouldn't you know what you're paying when you buy health care.

I mean, we know where every cup holder is in a car we buy. We have no idea what we're paying for our health care services in this country — that transparency, the bundling of payments in a way that we are paying for outcomes instead of just for how many procedures we can do.

So the actuarial analysis was incomplete. Overall, it did say we're going to bring down taxes and costs for middle America. It did say we're going to extend the life of Medicare. But this is all a work in progress. We are up to our elbows in sausage-making right now.

WALLACE: Senator Gregg?

GREGG: Well, as a very simple fact, what the actuary said — and remember, this is the president's actuary. This is not our actuary. It's not a Republican statement. This is the — done by the president's actuary, the CMS actuary, works for HHS, who works for the president. And they said the bill is going to cost more. It's not going to bend the health care price down.

It's going to push more people out of private insurance and into whatever public plan ends up being the vehicle.

It's going to make Medicare very much a tentative program in the out years because people aren't going to be able to get to see providers because 20 percent of the providers are going to be under water, as your note said.

It's going to cut Medicare by $500 billion, approximately, in the first 10 years, $3 trillion over the next 20 years. That money's not going to be used to stabilize Medicare. That money's going to be taken to create a brand-new major entitlement.

We already have entitlements that are insolvent, like Medicare and Social Security, as we move into the out years. Why would we want to create a massive new entitlement using Medicare monies to essentially fund it?

And if it does not extend the life expectancy of the Medicare trust funds, if you presume — if you presume that you're going to create this brand-new entitlement and fund it with Medicare money. They basically said it only extends it if you don't do that.

So as a very practical matter, this bill at its core has some huge problems. It expands the size of government by $2.5 trillion. I think American common sense is kicking in here. That's why 60 percent of Americans...

WALLACE: Senator...

GREGG: ... are opposed to this bill.

WALLACE: ... McCaskill, just to — just to button this up, if you get the report on the Reid compromise and the whole bill, as you say, and it — and it indicates that the cost curve of health care — overall health care spending goes up, not down, you'll vote against it.

MCCASKILL: Absolutely. And here's the other thing.

WALLACE: And what happens then?

MCCASKILL: Well, we'll go back and look at other proposals. Here's the thing. Doing nothing is not an option. You know...

GREGG: Nobody's proposing...

MCCASKILL: ... Judd Gregg...

GREGG: ... doing nothing.

MCCASKILL: ... Judge Gregg knows that Medicare Advantage — he voted no, one of the few Republicans around that voted no — huge new entitlement.

GREGG: No, Part D. Part D, Medicare Advantage.

MCCASKILL: On Part D, Medicare Advantage.

GREGG: That's different.

MCCASKILL: On Part D, huge new entitlement program, on the credit card. He was one of the few that voted no, but...

GREGG: Right.

MCCASKILL: ... most of his colleagues that are against this bill said fine, new $400 billion entitlement program, put it on the credit card. Medicare Advantage — pads the profit of insurance companies, tens of billions of dollars.

WALLACE: All right. But wait, wait.

MCCASKILL: We're just pulling that money back.

WALLACE: But I want to...

MCCASKILL: We're more worried about...

WALLACE: But — but just to button this up...

MCCASKILL: ... the people on Medicare...

WALLACE: ... you're — you're — you're saying...

MCCASKILL: ... than we are the insurance companies.

WALLACE: No, you're saying if this doesn't bend the cost curve, you go back to the drawing board, start all over?

MCCASKILL: My statement all along is it has to slow down the increase of health care costs over time, and that is bending the cost curve, and secondly, that it has to be deficit neutral.

We have to be saving more money for our government than we're spending. And if we're not saving more money for our government than we're spending, then not only will I not support it, the president said he won't support it.

GREGG: But I think on two of those four...

MCCASKILL: I thought we were buttoning it up.

GREGG: ... it doesn't meet those tests. Well, but I — I would like to get a chance to participate.

MCCASKILL: No, we did.

GREGG: I know you guys want to filibuster our amendments, but at least let me participate in the program. MCCASKILL: I was short, you were long.

WALLACE: Go ahead, Senator.

GREGG: Well, basically, what the president said — he wanted to do three things. He wanted to make sure everybody was covered. Under the actuary — under the actuary's statements, 24 million people are still not covered.

He said he wanted to bend the cost curve down. It doesn't. It goes up. It costs $235 billion more than what we have now.

And third, he said he wanted to make sure if you had your insurance, you get to keep it. But the actuary tells us that's not true. A lot of people are going to be pushed out of their insurance into the public plans.

WALLACE: OK. Let's turn to the economy.

Senator Gregg, the president came out this week with a plan on the economy that he said would do the following — let's put it up — give small business tax credits to hire, cut capital gains on small business investment to zero, and spur lending to small business.

Now, all of that, I think you'd agree, is right out of the Republican play book, but you and your colleagues are against it because the president says he's willing — or wants to use TARP, the financial bailout money, to fund some of that.

You helped write TARP. If you're willing to bail out Wall Street, why not help Main Street?

GREGG: Well, that, of course, is the thematic political statement. But there is no TARP money to TARP with or to spend on small business.

What he's talking about is there was — there was $550 billion of TARP that's been spent. There's $150 billion that hasn't been spent. But to spend the next $150 billion, you have to borrow the money. You have to borrow it from, basically, China and then our kids have to pay it back.

So our position on the stimulus package is if you want to go forward with a stimulus package, let's pay for it. Let's not borrow it from our kids. Let's not create more debt.

We already have a massive debt coming at us. We're a country that can't afford the debt we have, and we certainly can't afford the debt we're about to put in place, especially if we pass this health care bill, in my opinion.

So we should pay for this, and we should pay for it with real dollars, not some phony statement that we're going to use TARP money that doesn't exist.

WALLACE: Senator McCaskill, TARP is borrowed money. You, in the course of the next couple of weeks — the Senate is apparently going to have to vote to raise the debt limit perhaps to $14 trillion. Do we keep going deeper and deeper in the red?

MCCASKILL: Well, first of all, job creation and reducing the deficit are compatible goals. They're not mutually exclusive goals. Back in the '90s when we had a responsible fiscal picture in this country, it was because we were creating jobs.

WALLACE: But let's get to the...

MCCASKILL: And so we...

WALLACE: ... let's get to the issue. If you spend 100 or $200 billion of TARP money, you're adding to the debt.

MCCASKILL: Well, almost everything we're doing right now and have been doing for the last nine years in Washington has added to the debt. This fiscally responsible...

WALLACE: So why not stop it?

MCCASKILL: Well, frankly, Judd and I agree on something. We both are working on something to say we're not going to vote to increase the debt unless and until we begin to deal in a serious manner, outside of regular order, with our deficit entitlement problem.

And I think there are...

WALLACE: You're talking about the idea of the debt commission?

MCCASKILL: Exactly, and I think...

GREGG: Conrad-Gregg.

MCCASKILL: ... I think — Conrad-Gregg — and I think we have 31 sponsors, including 12 Democrats, a lot of new Democrats on the Hill. I think there is a rising recognition.

But make no mistake about it, Chris. If we're going to grow this economy the way we should, not with government employees but with small business growth, we've got to get loans out there to small businesses.

I think the most important thing we have to focus on right now is credit to small businesses so they can begin adding employees, which is a healthy way back...

WALLACE: Let — let me...

MCCASKILL: ... to a more sound fiscal picture.

WALLACE: ... let me quickly pivot on this particular issue to Senator Gregg.

As you say, it is the Conrad-Gregg — the two leaders of the Budget Committee...

GREGG: In New Hampshire, it's Gregg-Conrad.

WALLACE: You like Gregg-Conrad better?

GREGG: No, I'm just kidding.

MCCASKILL: What's wrong with Gregg-Conrad?

WALLACE: No, I think — I think it has a ring to it. But there are two issues that a lot of conservatives have. One, they say you're going to let the Democrats off the hook on deficit and debt because you're going to be able to say, "Well, OK, till the 2010 election, the commission is handling that."

And two, they say it will necessarily mean tax increases, because there are going to be spending cuts, and the Democrats are going to say, "Well, there have got to be tax increases to balance the spending cuts."

GREGG: Well, listen. This nation's on an unsustainable path. We're running up debt at a level that we can never possibly repay it. We're going to pass on to our kids a country which is less prosperous than we received from our parents, which is totally inexcusable.

And it's very obvious that the regular order isn't going to handle this. I mean, we're already seeing this in the health care bill. This expansion of the government is simply not a way to address the issue of out-year debt and deficit.

So we've concluded that you have to set up a special process to do this. And yes, it is going to insulate some people by taking a vote which says that they can say, "Well, I did this vote, so therefore I was responsible." OK.

But if it reduces the out-year debt, we'll have accomplished the goal of putting us on a reasonable path toward solvency. And if we don't do this, we'll be passing on to our kids an insolvent country, which basically means they're going to confront massive inflation or massive tax increases.

WALLACE: Well, we are going to end in this holiday season on that rare note of bipartisan cooperation.

MCCASKILL: We agree.

WALLACE: Conrad-Gregg, Gregg-Conrad. Senator Gregg, Senator McCaskill, we want to thank you both so much for coming in today.

GREGG: Thank you, Chris.

WALLACE: You have a couple of very busy weeks ahead of you.

MCCASKILL: Yes, we do.


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