This is a rush transcript from "Hannity," February 14, 2011. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: Three point seven trillion dollars, that is the staggering bottom line of President Barack Obama's 2012 budget. Now, the White House's economic blueprint for the next fiscal year was unveiled this morning and was almost immediately blasted by both the left and the right. Republicans are angry that the budget does little to address the growing federal deficit which will hit a record high of $1.65 trillion this year.


REP. PAUL RYAN, R-WISC., HOUSE BUDGET COMMITTEE CHAIRMAN: Our problem is, we are running out of road to keep kicking this can down. And so, what did we just get today? We got a punt. The president punted on the budget. And he punted on the deficit and on the debt. That's not leadership. That's an abdication of leadership.


HANNITY: And even some Democrats are voicing concerns. The chairman of the Senate Budget Committee Kent Conrad said more needs to be done on debt reduction. He also pointed out the president all but ignored the recommendation of his very own deficit commission headed by Alan Simpson and Erskine Bowles.

But despite all of that, members of the administration are actually calling the budget fiscally responsible, claiming it will help reduce the deficit by $1.1 trillion over the next decade. What you won't hear from the White House is that at least the third of that reduction will come from massive tax increases.

Now here with analysis of the Obama budget, what it could mean for 2012 and the election is the author along with his wife Eileen McGann of a brand new book, it's coming out in two weeks. And it's due out in March, and it is called "Revolt!" Dick Morris is back with us. Welcome back. Good to see you.

DICK MORRIS, FORMER CLINTON ADVISOR: By the way, people can order, preorder an autographed copy from DickMorris.com or Amazon or Barnes and Noble.

HANNITY: Listen, I just get --

MORRIS: I signed 13,000.

HANNITY: Thirteen -- all right. Well, I want one of them because I didn't get the autograph, I only got the chapters. All right. Listen, let's start with -- first he raises spending, you know, by 24 percent. Then he said, no, no, no, we'll lock this in.


HANNITY: These numbers are the rosiest projections that anybody -- he's projecting five percent growth, every year out. We'll be lucky if we hit two percent this year.

MORRIS: Well, when Obama took office, federal, state and local spending combined was 35 percent of our economy and had been for decades. Now it is 44 percent. So, he wants to lock in 44 which put us above Germany, above Greece and above Britain in the percent of our economy that goes to government.

HANNITY: This is a cowardly budget. I'm going to tell you why because he didn't -- and I think there's a set-up going on here. He didn't deal with all the entitlements. And here's what I think he thinks he's going to do. He thinks he can pull off a Clinton. That he's not going to deal with entitlement reform which is where the real savings would be. He's going to let the Republicans do it. And then he'll, you know, send all the Democrats out there to say Republicans want old people in this country to die and eat dog food.

MORRIS: Well, that's what he probably wants to do. In our book "Revolt!" we kind of layout what we have to make him do. And that is, there are certain bills that have to pass the continuing resolution that expires on March 4th that doesn't pass the government shuts down for lack of money. The debt limits expansion that has to pass somewhere around April, May or June depending on how the government manages its borrowing. And then the budget itself that starts October 1st.

What the Republicans need to do is to take each of these bills, laden them with spending cuts, defunding of Obamacare, of EPA, of cap-and-trade, of card check and of all that stuff, censorship of talk radio, put it all in there. And then take a certain amount from Obama, he will give you maybe a third of it and say, OK, we'll give you a continuing resolution for two more weeks. We'll give you 100 billion more of debt extension. We'll be back in three weeks fighting the same fight. And each time you fight it, push for more cuts take half a loaf, push for more. Take another half loaf, push for more.

HANNITY: All right. These numbers are staggering. This year's budget alone 3.8 trillion, that's 25.3 percent of GDP, the highest since World War II. The new deficit this year is going to be 1.6 trillion, that is an all time record. So, in three years since he's been president, he has nearly five trillion in Obama debt. If we project 10 years out, we have $14 trillion in debt, he will add based on his own projections with the rosy case scenario, and I don't believe they are going to hit the numbers they are projecting. He will double the 14 trillion we currently have.

MORRIS: From the time George Washington was inaugurated to the time Obama was inaugurated, we borrowed 10 trillion. We've since borrowed five more in two years.

HANNITY: In two years.

MORRIS: Two years. Now, the thing though that people are over looking here, and it's really important to understand that it in cutting the budget. There's a chart that we have that maybe we'll look at.

HANNITY: We can put up on the screen if you want.

MORRIS: Yes. And you can see from the chart that the biggest increase has been in welfare benefits. That includes Medicaid, and welfare, and food stamps and so on. This chart is actually part of one that is from "Revolt!" our book. And the increases is in Social Security are relatively minor. Now, we have pensions here, having increased at 54 percent. But only 14 percent of that is Social Security. The rest are veterans, government employees and other pension benefits. And when you look at domestic spending, that is education, transportation, highways, government agencies, put together, it has gone up 41 percent in two years and welfare spending has gone up 58 percent in two years. That's what is causing this deficit. Not social security, not Medicare.

HANNITY: Social Security is in the red this year.


HANNITY: Medicare is in the red. And we have fewer people paying for each recipient.

MORRIS: Yes. That is going to be critical in eight or 10 years when baby boomers really start to retire. We are not retired yet.

HANNITY: You're a baby boomer?

MORRIS: Yes, I'm a baby boomer, born in '47.

HANNITY: Wow. How about the end of the baby boomers?

MORRIS: But the point is, that the stuff that's causing the deaf it is now is good, old-fashioned spending. Welfare and government bureaucracy. He's added 80,000 new government workers in two years. Eleven million food stamp recipients in two years. He's taken the Education Department budget and doubled it.

HANNITY: All right. For all those who argue, well Obama is moving to the center, this kind of blows a big hole. He's still a big spending --

MORRIS: Exactly.

HANNITY: -- redistribution of the wealth liberal.

MORRIS: And you are putting your finger right on it, right there. That is what the Republicans need to keep front and center. And by pushing for the budget cuts and Obama pushing back against them, we are going to show the country what a liberal big spender he is and stop him from doing what Clinton did, move to the center.

HANNITY: Dick, this is going to bankrupt the country.


HANNITY: He gets another four years.


HANNITY: The damage is -- I don't know.

MORRIS: Literally, it would be over.

HANNITY: What do you mean by over?

MORRIS: Well, what I mean is the United States will be at a level of debt it can't possibly sustain and the bulk of our budget will have to go to pay the debt service on that.

HANNITY: True. And look, that total --

MORRIS: But we are not going to let it get that far --

HANNITY: I have some numbers by the way. Let me just threw this out quick. Our gross debt by the end of the decade with his new spending as projected even with the rosy scenarios in terms of the amount we're going to pay interest is $26.3 trillion. The annual interest payments by the end of the decade, it's going to be 844 billion total interest payment on the debt that he's accumulating is 5.7 trillion.

MORRIS: And that assumes only a four percent interest rate.

HANNITY: That's correct.

MORRIS: And to put that on perspective, the total of the personal income tax collections combined is a trillion. So, it will be like the family that has to take their paycheck and pay the mortgage.

HANNITY: All right. Does this -- what he's doing today, is there any chance Republicans fall into this trap, this web he's trying to create for them?

MORRIS: No. The Republicans I believe are going to be aggressive in cutting spending. They are going to keep coming back, keep coming back. And this budget and his big spending plans will dominate the agenda of the next two years and will defeat him in 2012. In "Revolt!" we have a list of the specific cuts that need to be made. It is not that hard to cut. You take a three year moratorium on new highway construction. But -- we don't need new roads. Repair the existing ones, maintenance, safety, the whole but that saves $90 billion right there.

HANNITY: All right. I still think entitlement reform has got to be dealt with sooner or later.

MORRIS: What we have to do right now is Medicaid reform.


MORRIS: Because that's what increase in like crazing. Medicare rose by only 16 percent in two years. Medicaid rose by 30 percent in two years.

HANNITY: All right. Dick Morris, we look forward to your book when it comes out.

MORRIS: We'll be launching it on your show on March 1st.

HANNITY: All right. We'll look forward to it. That's about two weeks.

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