This is a rush transcript from "Hannity," June 23, 2011. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: And there was a major shake-up on Capitol Hill today when the budget negotiations being led by Vice President Joe Biden lost two key Republicans.

Now, both the House Majority Leader Eric Cantor and the Senate Republican Whip Jon Kyl, they walked out of the discussions saying they simply cannot continue if tax hikes remain on that table.

Now, this significant development caused the vice president to call off today's meeting. And it also renewed concerns over whether or not a deal can or should be reached to raise this country's debt limit. As it stands now, the ceiling is at a staggering $14.3 trillion. And if Congress does not act by August 2nd, well, the U.S. could default on its debt.

Earlier, Speaker of the House John Boehner weighed in on today's dramatic turn of events.


REP. JOHN BOEHNER, R-OHIO, SPEAKER OF THE HOUSE: I think Mr. Cantor has made it clear that these conversations could continue if they take the tax hikes out of the conversation.

Secondly, I would point out, what I said several weeks ago. After we were all down to the White House or entire conference, when I said that if we are going to meet the president's timetable to come to an agreement by the end of this month, that he needs to engage.


HANNITY: Now, the only thing the president is engaging in tonight is raising money for his reelection, campaigning -- get this -- three separate DNC events in New York City.

And joining me with reaction to today's developments is South Carolina Senator Jim DeMint. Senator, welcome back, glad to see you.

SEN. JIM DEMINT, R-S.C.: Sean, thanks. This is the fight of our generation. I really believe this is a make or break time. So, I appreciate you giving us a chance to talk about it a little tonight.

HANNITY: I think it is make or break too.

Look, I know you have proposed -- you along with Senator Orrin Hatch -- cut cap and balance. Very simple. But, you know, and I like the fact that both Cantor and Kyl walked away from the table. Why don't you explain why this is significant? I can't even believe Democrats are still talking about more stimulus, more tax increases, what is your proposal?

DEMINT: Well, it really is pretty simple. It recognizes that the only way that we are ever going to stop this spending addiction in Washington is if we are forced to by the Constitution. So, the key part of this is passing a balanced budget amendment to the Constitution and sending it to states to ratify. Sean, they say they can be done. But those who say that are going to keep telling us we've got to spend more than we are bringing in indefinitely.

So, there are three parts to this. We are going to oppose any increase in the debt limit unless we cut spending immediately unless we have caps on spending over the out years to bring us to a balanced budget and unless we pass a constitutional amendment to the -- an amendment to the Constitution to force us to stop the spending.

So, we are asking people all over the country to sign up. If you allow me, the web site is cutcapbalancepledge.com. We've got thousands of Americans who signed up. Several senators and congressmen have signed up. Presidential candidates are signing up. And frankly, if anyone who doesn't sign up, really doesn't belong in Washington right now. We can't afford anyone else who doesn't understand, we need to balance our budget.

HANNITY: All right. As of this year, 70 percent -- our public debt will be 70 percent of GDP. The CBO projects out that in a few short years, less than a decade, it is going to be over 100 percent. Then we're on track to be over 200 percent. In other words, that would be twice the amount that we take in. And Tim Geithner suggested last week that spending cuts alone are irresponsible. We need quote, "revenue increases." Code word, a tax increase. And this week, the Democrats said, they want another stimulus plan.

I mean, how many times do you have to bang your head on the wall before you reach that definition of insanity? Why would they continue to double down on these policies?

DEMINT: Well, Sean, it is amazing. If you look at a graph with the revenues, I mean, we are bringing in about as much money as we ever have. But the spending line goes straight up and continues out over 10 years. We don't have a revenue problem, we've got a spending problem. But if we cut the spending, you would see the revenue begin to grow as we take the pressure off the private sector.

So, Republicans owe it to Americans, Sean, to tell them where we stand and what we are willing to fight for. That's what this pledge is about. And I would encourage all your viewers to go to cutcapbalancepledge.com, sign up and when they put in their zip code, it will tell you who your congressmen and senators are. Hopefully, people will call them, e-mail them, make sure they sign this pledge. I think we need to go to the math. If we can get 41 senators to sign it, we can force them to pass a balanced budget before they get any increase in the debt limit.

HANNITY: The president has a 60 percent disapproval, Bloomberg poll in terms of his handling of the deficit. There's only 23 percent of Americans now saying that they are certain that they will vote for Obama's reelection. Fifty five percent say that our children are destined for lower standard of living. Two-thirds say the country is on the wrong track economically. And, you know, you would think politically, that they would at least be pragmatic like Bill Clinton and change course. Do you see them just digging into this rigid ideology? Is there anybody in the Democratic Party that sees the danger politically for them?

DEMINT: Well, Sean, if you think about it. The Democrats are not able to cut spending. Their whole political base is created by giving money away. Redistributing wealth. New government programs. The idea of a balanced budget to them, essentially puts them out of business.

So, the Republicans have to be prepared to fight to stop this reckless spending. So, those who say it can't be done need to get out of the way. Because, there are a lot of us who feel like this is at the time, I frankly think the 2012 election is going to be this August. If Republicans fail and if we cave in on this one, I don't think the country is going to have any room for us in the next election.

HANNITY: The Republicans did fail on the 2011 budget, I hate to tell you, Senator. And it disappointed a lot of conservatives, including myself. This is a very key moment that they hold the line. And I think walking out of this meeting today was pivotal.

We see what's happening in Europe. We see what is happening in Greece, what's about to happen in Spain. I mean, really, all throughout the European -- all throughout Europe, all European countries now are suffering under debt. Do you foresee -- what is the worst-case scenario you see for America?

DEMINT: Well, Sean. The worst-case is that we already have a debt level that if interest rates return to their historical averages, we can't even pay our debts now. And they are talking about taxing the economy more, which means bringing more money to Washington, taking it out of the private sector, this president doesn't know how the American economy works. We've got to do everything we can to stop him, to elect someone who understands American exceptionalism.

But frankly, we can't wait a year and a half to stop the spending. If we pass a balanced budget amendment now, it will change the whole paradigm in Washington. Next year's election will be all about a debate for 50 states, ratifying this constitutional amendment.

HANNITY: Absolutely.

DEMINT: That's why we need to take this debate.

HANNITY: I don't think Congress or future Congresses can control themselves, this is the insurance policy we need. I fully support it. I think it's a good idea to make it a big campaign issue and let the Democrats take the right side or wrong side at their own peril. Senator, good to see you.

DEMINT: Thanks, Sean.

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