This is a rush transcript from "Hannity," July 26, 2011. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: They set out to find middle ground on the great debt debate and responded by a bipartisan solution that could reduce deficits by nearly $4 trillion. But did the "Gang of Six" proposal actually cause more problems that it offered to solve?

According to Washington Times blogger Kerry Picket, it is likely that when the president caught wind of the "Gang's" plan last week in which three GOP senators agreed to higher tax increases than what Obama himself had presented to John Boehner, "The Anointed One" decided to ask for $400 billion more in tax hikes.

So, did the "Gang's" plan cause the breakdown in negotiations with Speaker Boehner? And now that it looks like no plan currently on the table is likely to pass. What does the "Gang" plan to do next? Joining me now with reaction are two of the three GOP members of the "Gang of Six," Oklahoma Senator Tom Coburn and Georgia Senator Saxby Chambliss.

Guys, welcome back to the program, thanks for being with us.

SEN. SAXBY CHAMBLISS, R-GA.: Thanks Sean, it's always good to be with you.

SEN. TOM COBURN, R-OKLA.: Good to be with you.

HANNITY: All right. Senator Coburn, let's start with you now. I was mad at both of you last week but this regard more than any other. Is that the day that they were voting on "Cut, Cap and Balance," which both of you support in the House of Representatives, the president races to the White House briefing room. Hang on, stop the presses, we've got this new deal. And in that sense, I felt that this was diverting attention, the country away from what I think was a really sound, good solution. Did the president purposely use your plan, in your view to distract the country?

COBURN: You know, I don't know what people's motivations are, it obviously did. The sad situation is the House passed "Cut, Cap and Balance." And the leadership of the Senate instructed all of his members to table it, so we couldn't even have a vote on it. So, you know, I don't know what the motivations are. But the fact is, you're right that's the one thing that could have solved our problems.

HANNITY: Yes. Then, why Senator Coburn were you supporting this instead of everybody uniting? It seems strategically or tactically that the Republicans seem to, you know, with the president having three Republican plans out there no plan by himself, that we were negotiating, that conservatives, Republicans were negotiating against themselves.

COBURN: Well, remember when we started this, there wasn't any intention to tie what we were doing to the debt limit, Sean. You know, the events overtook that, it was delayed for a long period of time. But there still isn't any intention to tie it to the debt limit. The debt limit is a symptom of the bigger problem which was what we were trying to address. How do we get almost $4 trillion -- which is the only thing that is going to satisfy the rating agencies and the international finance community -- how do we get $4 trillion on the table and start working that? And we're going to have to come together. We don't control the Senate and we don't control the White House. So, if you can make a move that would make that, that would actually get the country out of a problem, solve a problem, why would we not want to try to do that.

HANNITY: Senator Chambliss, as I spoke to you and you told me that this, just like Senator Coburn is saying, that this was not a group that was trying to solve the debt limit crisis that we are currently in. But the day this was announced, the day the vote "Cut, Cap and Balance" was taking place, that's the way the president presented it to the country.

CHAMBLISS: Well, Sean, as I told you before. It just so happened that the day the six of us made a report back to the bipartisan group of 50 senators that showed up at a meeting that morning, we were just telling them what we had concluded. And we really had not even reached a final agreement at that point in time. And there was a lot of euphoria in the room. A lot of folks were agreeing with the direction in which we were moving, they left the room that day, went outside to a horde of press. And next thing we knnew, it just snowballed. There was never any intention to take any action that morning that would interfere with the "Cut, Cap and Balance" debate on the House side. As you said, Tom and I both support that. I still support it. I think that balanced budget amendment is by far the best enforcement mechanism that we can have when it comes to making meaningful discretionary cuts. These two proposals are, you know, they're mutually exclusive to the standpoint point that they both will work.


CHAMBLISS: And they both have good assets that hopefully could be melded together at some time, at some point. But, you know, even after --


HANNITY: Senator Chambliss, I got to ask you. Did the president then, when he ran into that briefing room, did he misrepresent what you were working on to the American people? I think this is very important.

CHAMBLISS: Yes. You know, he's had a total lack of leadership on this issue. He pounds the table, he gets angry at press conferences and think he's making an impact and showing leadership. And he's doing everything but that, unfortunately. And I think he was doing anything he could at that point in time to deflect away from the fact that this is falling apart on his watch. And it truly is. He owns this economy. The economy is not doing well. And now he owns this issue. And even when we get by the debt ceiling, Sean, we are still going to owe 14-and-a-half trillion dollars and it is going up every single day. That's why the group that Tom and I were working with was focused on the long term solution, not the short term.

HANNITY: Let me ask both of you support this idea. I've been in contact with Congressman Connie Mack and Senator Rand Paul, your colleague. I'll ask both of you starting with you Senator Coburn, the idea of cutting one percent, in other words, changing the baseline.

Because we have all these cash all these CBO scored budgets into the future that all project out seven percent growth a year, but if we could reduce spending one percent a year, every year for six years they contend starting where the budget is right now and getting rid of all those projected increases, we could balance the budget in six years. Is that something that could get traction do you think in the Senate?

COBURN: Yes, again that would do it. But that's a political answer rather than a policy answer. Let me tell you why, Sean. We have so much waste. You know, I put out $9 trillion of potential cuts.

When you do a one percent solution where you cut everything one percent, there are some things that the government has a responsibility to do. And what you do is you don't reform them, you don't improve them, you don't make them more effective, you just cut one percent. So the stuff that is wasting you cut one percent instead of 100 percent. The stuff that might be what we want to do, you cut it too. So it is the chicken's way out.

The fact is, is that members of the Congress need to study and know and you can find nine trillion reasons to cut the budget if you just look at back in the black.

HANNITY: What they are saying if you wanted to cut say education by 10 percent, and you can come to consensus, then it is an across the board cut. So Congress has the option to act as long as they reach that dollar figure.

COBURN: I wouldn't have any problems supporting that as long as you make members of Congress make tough decisions. What this has all been about, the reason you are seeing this battle is too many people don't want to own up and go home and explain, I'm not for this and here's why.

Here's why we need to fix it. It is like Medicare. You can say all you want, the president can say all he wants we are not going to touch Medicare. The fact is in 2016, Medicare part a goes belly up.

HANNITY: Senator Chambliss, last word.

CHAMBLISS: That's a problem with the one percent solution too, which frankly I think it is another good idea that's on the table that the Democrats are not going to let us consider. But Bruce Cook of Atlanta is the author of that proposal, a good guy, smart guy.

If you do it for seven years in a row, you get spending down to 18 percent of GDP that's where we need to be. But you don't reform entitlements by cutting everything one percent a year. We've got to reform entitlements if we are going to make this work.

HANNITY: All right, thank you both for being with us. Appreciate your time, Senators.

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