This is a rush transcript from "Hannity," February 3, 2009. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: And in just a few hours today, the house of cards on Pennsylvania Avenue came tumbling down with two Obama appointees withdrawing their names because of problems paying their taxes. Now the American public who was promised changed is now left wondering what happened to those pledges of the most ethical administration in history.

And that is our headline on this Tuesday night, day number 15 of the new Obama administration, "Ethical Shortcomings." Now the new administration is beginning to have all these scandals of a Chicago City's alderman's office.

Now imagine that. Now first the new government efficiency czar, Nancy Killefer, withdrew her name after it was revealed that she had failed to pay taxes on her household help. Now considering that she was charged with keeping tabs on the public's money, well, that's pretty embarrassing.

But then came the big blow. Tom Daschle dropped out as secretary of Health and Human Services after similar problems paying Medicaid taxes for his driver. Now that's pretty bad for the man that's charged with leading health care reform.

And remember, this is all against the background of Treasury Secretary Tim Geithner, who the administration bullied the Senate into confirming, even after it was revealed that he, too, had failed to pay taxes in the past.

But perhaps the worst part of this whole sordid affair is the president's empty promise of a higher standard of ethics. He promised to keep lobbyists out of the White House and then he hired them anyway. And when faced with the embarrassing truth that the administration had nominated individuals with problems to the Cabinet, well, they did nothing. Even yesterday, the president said he still stood behind Tom Daschle's nomination.

Ethical behavior cannot be coerced. It can't be merely politically expedient. But that appears to be the case with Daschle. It was only after the press and your public pressure, well, turned on another nominee shortcomings that he finally stepped down. That is not ethical behavior. That is called self-preservation.

But Daschle's behavior proved too much even for the ethically challenged to defend. By his own admission, his mistake was an embarrassment and it was made worse this morning by the discovery of this old campaign ad that he once ran.

Now, remember, as you watch this, remember that Daschle's tax problems all stemmed from his failure to pay taxes on his chauffeur.


UNIDENTIFIED MALE: Among Washington's BMWs and limos is this. Since 1971 the old Pontiac has served its owner well. Sure, it's rusted, and it burns a little oil, but after 15 years and 238,000 miles, Tom Daschle still drives his old car to work every day.

Maybe he's sentimental. Or just cheap. Whatever the case, isn't it too bad the rest of Washington doesn't understand that a penny saved is a penny earned?


HANNITY: All right, so I wonder what Al Gore thinks about all that exhaust? Now we're going to have an update on the debate over the stimulus bill and whether or not Daschle's withdrawal will impact it. That's coming up a little later in the show. We'll be joined by Senator John McCain.

But first, joining me tonight with more on this political implosion for the White House is columnist, you often see him on National Review Online, Mark Steyn.

Video: Watch Sean's interview with Mark Steyn

How are you?

MARK STEYN, SYNDICATED COLUMNIST: Hey, it's great to be with you, Sean.

HANNITY: By the way, I heard you were filling in for Rush today. Good job.

STEYN: Yes, no, I'm just the warm-up act for your. Thanks but.


HANNITY: I don't know about that. I wouldn't say that.

Well, first of all, this is the first time ever, really, that Barack Obama is facing some criticism.


HANNITY: He's got his back against the wall. Robert Gibbs is a way out of his league.

STEYN: Yes, absolutely.

HANNITY: How do you think they're handling it, first of all?

STEYN: Well, I think it actually has been a pretty disastrous first two weeks for them if you compare it to the Bush administration in 2000 which came in very hurriedly, if you compare it even to Clinton, or even going back to Jimmy Carter. I mean this — the Tom Daschle thing, I think, was a bridge too far because he is so, obviously, business as usual, that everything he stands for is also the hole of (INAUDIBLE).

HANNITY: What do you make of this fact, and this really hasn't been discussed. We're just going to examine this from the political vantage point. This whole Daschle thing, this is not the Republicans.


HANNITY: These are the Democrats.

STEYN: Right.

HANNITY: Now they pushed through Geithner.


HANNITY: Nobody stopped him.


HANNITY: But the Democrats, they're the one — you know, putting the pressure on the Obama administration. What do you make of that that it's really not Republicans here?

STEYN: No, I — I think they understand. The Republicans, in fact, have been content to sit back. The Democrats understand that this is deeply damaging because — you know Democrat friends, liberal friends have said to me the Clinton sex thing was so weird back in the `90s that that was in a sort of class of its own.

But everybody pays taxes. You know the old line about the Clinton thing was everybody does it. Well, in fact, everybody didn't do what the Bill Clinton did. But everybody does pay taxes. This is tax season. And this was, that the Daschle thing was shameless, because if you look at the timing of it, he didn't actually wait until he — he was nominated until he — until he actually cut the check.


STEYN: I mean that is not just avoidance, but even it goes beyond that to, like — almost public contempt for the treasury.

HANNITY: But it's interesting, because it was almost public contempt with Geithner.


HANNITY: But this thing about this, Geithner was informed by the IRS he missed two years, but he knew he missed four years and he had signed an agreement for the compliance, knowing when he was working with the monetary fund.

STEYN: Yes. And you know, you know why? I'm actually with these guys because at heart both Geithner and Daschle are saying I don't want to give my money to the United States Treasury because I know better what to do with it. And I feel sorry for Tom Daschle. He's chucked to six-figure sum down the grade, sucking more of the federal treasury there will be no use whatsoever, and Tom Daschle, a liberal Democrat.


STEYN: ... who voted for tax cuts again and again — for tax increases again and again.


STEYN: ... he — even he understands that his six-figure sum is just going to be wasted if you give it to the United States government.

HANNITY: But there's one senator yesterday, and that was a great line, actually said the reason the Democrats don't mind raising taxes because they don't pay them.

STEYN: That's right.

HANNITY: So what's the difference, right?

STEYN: Yes, that's right. Right.

HANNITY: All right. But it raises an important point, because we're battling this stimulus bill, when you add the interest that we're going to put on our kids and grandkids, we're talking about $1.3 or $1.2 trillion.

STEYN: Yes, $1.7 trillion.

HANNITY: Depending on high this goes.

STEYN: Yes, yes.

HANNITY: All of this pork-barrel spending, it's all repayment to all every left-wing wish listing constituency.

STEYN: Right. Right.

HANNITY: So the question is how does this gets stopped? The Democrats have the votes to pass it.

STEYN: Well, I think, I think you have to use fellows like Daschle and Geithner, because the only way the government gets money is from tax, so it can be honest and tax us today, or it can run up $1.7 trillion deficit and tax us tomorrow. There's no other way.

I mean they can sell off the office furniture, and they can sell of Tom Daschle's limousine, but that is not actually going to get — that is, if he can do all that, it's still not going to cover the $1.7 trillion.


STEYN: So at some point, they're going to have to tax us for these vast sums of money they're spending.

HANNITY: I heard you at the end of Rush's show today. And you were making the point, and I made it on my own way, but I want to, I want you to make it the way you made it today because I thought it was, it was profound in how you made it. And that is, when has socialism ever worked?


HANNITY: And this, this is no longer big government, limited government in terms of the debate. This is now a debate over European socialism.

STEYN: Right.

HANNITY: ... and free-market capitalism.


HANNITY: But socialism has always failed.


HANNITY: What's your point?

STEYN: And this, this is European-sized government if this goes through, with all the problems. I mean, basically, if you're broke and unemployed now, you're going to be broke and unemployed in a year's time. This so-called phony stimulus bill is going to do nothing for you.

France and Germany essentially lived wit permanent double-digit unemployment, but Americans would be shocked if it was day after day.

HANNITY: Great Britain is going bankrupt.

STEYN: Yes. Britain is going bankrupt, and one reason it is going bankrupt is because it's got a big government. In Wales, the government accounts for 71 percent of the economy. In northern Ireland, it's 77 percent.

Big government is where successful nations go to die. It's as simple as that.

HANNITY: But — it is interesting, because when Ireland cut their business taxes, the economy rebounded, because they're withdrawing all the business to Ireland.

STEYN: Yes, exactly. And you know I'd be in favor of that. If they want to stimulate the economy, they'd cut the — the corporate income tax rate in the United States is 35 percent. It's — in Ireland it's 12 percent. If — you're an American business, if you're Sean Hannity Enterprises, U.S., Inc., you might want to think about becoming Sean Hannity Enterprises Ireland, Ltd., because that — you'll get a 2/3 cut in taxes right there.

HANNITY: It's right there and it wouldn't bring revenue. Obviously it's bringing it to the government. It's creating jobs and opportunity, but yes, we're going to the opposite direction.

STEYN: Yes, way.

HANNITY: So you're back in for Rush Limbaugh tomorrow. Now I want you to know, the first time I filled in for Rush.


HANNITY: Rush has a golden EIB mic.

STEYN: Right.

HANNITY: Five minutes into the filling in, I just got past the initial anxiety, the microphone fell.


HANNITY: I hope that never happens to you.

STEYN: Now, that's — that his comment on your performance.


HANNITY: I don't know about that. I'm like picking it up, ah, back — it was good to see you.

STEYN: Yes, great to see you.

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