This is a rush transcript from "Hannity," October 24, 2011. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: We're inching closer and closer to the Republican presidential caucuses in Iowa which are now set to take place on January the third. And the rest of the primary calendar is now beginning to take shape as New Hampshire is expected to announce that voting will take place on January the 10th. The South Carolina primary will follow on the 21st and Florida at the end of the month.

And as the clock ticks, the candidates are jockeying for position. Now, among them is Texas Congressman Ron Paul whose support remains as fierce as ever. And he appeared yesterday morning on "Meet the Press" and floated some very provocative ideas on how to save money. Let's take a look.


DAVID GREGORY, HOST: As you will know, you have a lot of support among young people.

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    REP. RON PAUL, R-TEXAS: That's right.

    GREGORY: They're borrowing to pay for college at record levels. Would you abolish all federal student aid?

    PAUL: Eventually, but my program doesn't do it. There's a transition in this.

    GREGORY: But that's your ultimate aim.

    PAUL: Yes, because there's no authority to do this. And just think of all this willingness to want to help every student get a college education. So they're a trillion dollars in debt. We don't have any jobs for them. The quality of education has gone down. So it's a failed program. I went to school when we had none of those.


    HANNITY: And joining me now to layout his strategy for victory is the man himself, presidential candidate, Texas Congressman Ron Paul. Dr. Paul, good to see you, sir.

    PAUL: Thank you, Sean. Good to be with you.

    HANNITY: All right. When you laid out your plan, I mean, here we've got, you know, at the end of this last budget deal it's going to be $16.7 billion in debt. We are robbing from our kids and grandkids. You have said this from the very beginning, Cal Thomas was telling me, you actually had a billboard back years ago about the government and it said, let's put big government on a diet or something to that effect.

    PAUL: Right. We had a fat Uncle Sam, put big government on a diet.

    HANNITY: Yes, exactly. All right. That was in '76. Things not only haven't changed, they have gotten dramatically worse. You've come up with a plan I actually support. You want to cut $1 trillion. How fast can you do it, where would that money come from?

    PAUL: Of course, it all depends on the people's understanding and the Congress willing to go with this. But you could do it at one time. People say, well, it's impossible to do this. But we had a pretty good history of slashing spending after World War II. We brought 10 million people home and we slash the spending by more than 50 percent in cut taxes and the economy was revived.

    So, you don't have to wait. But my program is designed to do it, like I said in that little clip there, that yes, student loans should be phased out. And doesn't close them down right away and there is a fund that will tie some people over. But it is a failed program. And my argument is that it's unconstitutional. And so much what we do now, not only is it, not only is it unconstitutional, we don't have the money.

    So, I think the question is how serious do the other candidates and the people of this country think this debt is? I happen to think it is very serious. Like Cal pointed out, I was concerned in the '70s because I thought the situation was set-up because of the change of the monetary system, that it would lead to endless spending and endless debt and that's where we are. So, I think we have to take this very seriously.

    HANNITY: Do you think you can knock a trillion off the top? Do you think you can do it within year one or within two years? How long do you think it would take you to say, wait a minute? Because right now we borrow 40 cents of every dollar. We take in 2.2. We spend 3.7. It's unsustainable. So, how quickly do you think you can knock off $1 trillion in spending?

    PAUL: Well, my program says in one year but you have to be willing do it obviously and you have to think that cutting is less painful than runaway inflation and having another downgrade on our credit, which is about to come soon. So, yes, but you know, I list five departments to cut out, too. So, no, I'm not bashful about cutting spending. But it's just that I see this sovereign debt crisis worldwide is much more serious than anybody wants to admit. The other candidates aren't offering really any cuts. I don't think anybody in Washington is offering an actual cut. It's always the cut and the proposed increases and so far, the markets haven't been reassured and people haven't gone back to work and thought we have things under control. So, that's why I think it's so serious.

    HANNITY: All right. I have one question of a personal nature for you. You know, I have said for years that I think you have been somebody that has been, you know, out there warning of the dangers of big government and the fed. I'm not a fan of Bernanke, I'm not a fan of Tim Geithner, I'm not a fan of monetary policy in this country. I think we can do a lot better. I've said these for years. I'm a supporter of the Mack Penny Plan which will freeze spending at 2011 levels, cut it one percent a year for six years and then for the next two years, keep it 18 percent of GDP. You told me the other day, you think that's probably a good idea, right?

    PAUL: Yes. It doesn't make the point quite as dramatically as I make it because I think it's so serious. But if I couldn't get my plan passed, that would be certainly a lot better than what we are doing. It would reassure the markets to some degree and it would be worthwhile. And I think that --

    HANNITY: Listen, I would rather go with you. I would say, we have to balance the budget, we have to live within our means immediately.

    All right. But then you went out, and you were asked a question by a reporter, do you think people like me and Rush and Mark Levin fear that you are making us obsolete because your views reveal them as status -- and I have been called a lot of things Dr. Paul, I have never been called a status before. And your answer was, "I think if I gain influence it's an embarrassment to them because they aren't really limited government people, yet they make their livelihood fooling people into thinking that they are the real leaders of limited government." And I'm thinking I agree with you on cutting $1 trillion. I agree with the Mack Penny Plan. I thought Republicans spent too much money and this president is four times worse. Where did that statement come from?

    PAUL: Well, I think somebody put those words in my mouth and I didn't deny it. Because I think in many ways, what I've talked about for 40 years now is now becoming pretty conventional. You know, with the monetary policy and the Fed and really cutting. So, I do think that indirectly, I do put a lot of pressure on them. But if you look at it, I didn't go out and volunteer this, but I do think that there hasn't been anybody really leading the charge and saying, look, this is serious. We need to cut. So, sometimes I think there are a lot of -- and I deal with a lot of so-called conservatives in Washington. And Sean, you know they are not as conservatives as they pretend to be or we wouldn't be in this mess.

    HANNITY: All right. But ever since I was on radio and TV, I have used government waste, the citizens against government waste, I've talked about money that's been mismanaged and misappropriated. I didn't even support prescription drug plans when Republicans were spending too much money. In the latter years of the Bush years when 2006, '07 and '08 came along, I said they are spending too much money, as did a lot of conservatives like Mark and Rush. So, I thought that charge was unfair.

    Here's my one area disagreement with you. We'll move on from me. I look at what's happened in Libya, and I look at -- I don't think this president thinks through what he's doing. I never thought the Arab Spring was going to be the democracy movement that it is, that they claimed it would be, rather. I'm worried about Islamic extremism. What is your answer? I mean, I know you want to cut defense, I know you want to pull the United States back from a lot of these areas, but don't we need to be proactive in going at them? You seem to believe that we are causing it by being involved in any way. Wouldn't that be putting our head in the sand in terms of extremists that already have had a desire to kill us and have shown so?

    PAUL: No. I think it always backfires on us. Tunisia just had an election, they're going to have radicals Islamists in. Libya is probably going to end up with them. Look at all this buying of friendship with Egypt. Now we're going to have a government there that's less friendly to Israel. We have the Kurds under attack now by both the Turks and the Iranians. And we are driving these people into the arms of the Chinese. So, I think this hurts Israel. I think it hurts our national defense.

    Besides Sean, we are broke. And I want to cut this military. You said I want to cut defense. I don't. I want to cut military. Even with my cuts, we're going to have five times as much as China spends on their military. Nobody is arming themselves to invade this country, and I do not believe that we should be in nation building and we should not be involved in the entangling alliances and internal affairs of other nations. It's not part of our Constitution. And it was also strongly advised by our founders, and Eisenhower warned us to stay out of this entangling alliances. Robert Taft, the famous Mr. Republican. He says, don't even get in NATO.

    But, Sean, this policy now, they get the authority from NATO and United Nations. They don't even.

    HANNITY: We are NATO. But we are NATO.

    PAUL: I know, but --

    HANNITY: I agree with you.

    PAUL: But Congress, don't you care about the Congress?

    HANNITY: I agree. I'm with you.

    PAUL: OK. We don't need --my point is that we don't need the entangling alliances. I don't want the president to defer and get his authority from NATO and the United States. If we need a war, it should come to the Congress, we should declare it and you and I declare shouldn't have any bait whatsoever, we should say, let's go in. That was my acceptance, you know when I was drafted.

    HANNITY: Well, Congress can defund any war. Congress can -- and the president is the commander in chief, so they are very strong constitutional distinctions.

    But all right, Congressman, we will have you back. You are welcome anytime.

    PAUL: You know why they don't do that because if you do fund it, you say you are unpatriotic and you're opposed to the troops. So, once the war starts, it never has happened where they defund it.

    HANNITY: All right. Good to see you, Congressman. We'll be watching and we appreciate you being on the show with us. Thank you.

    PAUL: OK.

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