Moody's puts pressure on Congress for debt deal in the 'most predictable crisis' you'll ever see

This is a rush transcript from "On the Record," September 11, 2012. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: An urgent warning, and it is about our nation's debt. As if the threat of going over the fiscal cliff isn't bad enough, it now gets worse. Moody's is threatening to downgrade the U.S. debt rating if Congress does not reach a budget deal. Moody's says it will likely cut its triple-A on U.S. government debt by one notch. So Congress -- well, so can Congress strike a deal and avoid this downgrade?

Senator John Thune is on the Budget Finance Committee and he joins us. Nice to see you, sir.

SEN. JOHN THUNE, R-S.D.: Nice to see you, Greta.

VAN SUSTEREN: So Moody's says they're going to do this unless you do something.

THUNE: Right. Well, it's the latest warning that we've gotten. Obviously, this is not the first time that we've been warned. This is the most predictable crisis that we've ever had. We know exactly how serious the situation is. The debt just crossed the $16 trillion mark. And we are facing this fiscal cliff come the first of next year, less than four months from now, at which time, the Congressional Budget Office has said if Congress doesn't act, that it could plunge us into a recession, likely will plunge us into a recession, and could have unemployment above 9 percent before the end of next year.

VAN SUSTEREN: How the president and Congress -- how can you all let this happen? Last year, when the S&P downgraded us, what it meant is it became more expensive for us to borrow money to pay for our debt. And each -- each day, it gets -- it gets worse.

And yet everybody remains out there campaigning, or doing anything but dealing with this very immediate problem. I don't get it! I do I my job. I show up here every night at 10:00 o'clock. Where is everybody?

THUNE: Well, look, I think that there's -- you know, this has to be addressed. And we've been saying for some time that we need a plan. Now, obviously, the Republicans in Congress, particularly the House of Representatives, have passed legislation that would avert the sequestration that would cut so dramatically our military spending. They've also -- and so has the Senate, Republicans, voted on legislation that would extend the tax rates, which is the other element in the fiscal cliff.

So there are steps that are being taken by those of us at least who see this as a very, very serious issue to try and avert what could be a bad crisis starting next year. But I think it's going to take presidential leadership. This is something where the president of the United States has got to step forward and put forward a plan. His budget last year was so disregarded by Congress that it got defeated 97 to 0 in the United States Senate. It wasn't a serious, meaningful attempt to get at this problem. And the problem worsens by the day. I mean, it...

VAN SUSTEREN: Well, but for the life of me, it's, like, where is he? I mean, if he's got to show leadership -- I mean, like, I realize there's a logjam on Capitol Hill. I realize the Senate's run by the Democrats and the House by the Republicans. But there is -- there is a logjam. It's costing all of us, you know, money every single day.

You know, why -- why do you think -- he won't come here and talk to me, but why isn't he here in Washington, pounding the heads in the Senate and pounding the heads in the House?

THUNE: Well, a couple things. One is I think the president wants to use the threat of defense cuts as leverage to get tax increases. And for example, this Sequestration Transparency Act, which was signed into law by the president on August 7th, required him to submit to Congress by September the 6th a plan for how he's going to implement it.

VAN SUSTEREN: That didn't happen.

THUNE: It hasn't happened yet. And I think what they're doing is trying to run out the clock. I think they're trying to get as far into the year as they can...

VAN SUSTEREN: I -- I -- that's the political -- I mean -- I mean, I guess that -- you know, I mean, that's what I find troubling. That's the political answer. I mean, right now, as we sit, because we got downgraded by S&P, it's probably a little bit more expensive to borrow money. If Moody's does downgrade us just by a notch, it make us less credit-worthy to people who want to -- you know, might buy our bonds. I mean -- I mean, every single day -- I mean, there must be -- I mean, somebody's got to care about this.

THUNE: Well, they do. And there are a lot of people in the Congress who should care about this. I mean, we're the ones who are entrusted with the responsibility to be stewards of the American people's tax dollars.

But you know, the United States Senate for three consecutive years now -- and I have to say run by Democrats -- has not produced a budget. It's now 1,231 days since the United States Senate passed a budget.

VAN SUSTEREN: It's as though Senator Harry -- Senate Majority Leader Reid has a pocket veto. He put in his pocket, he stops it so that even -- I don't know if the -- if the -- what's proposed in the House is a good idea or not. But by his failure to bring it up on the floor and at least debate something in the Senate, it stops everything. So he's got a pocket veto on our -- he's got -- he's got -- he's got his foot on the throat of our economy!

THUNE: Well, at least when it comes to getting anything through the Senate, and the budget being, you know, point number one. It starts there. If you don't start -- that's the foundation. If you don't have a budget, you don't have a blueprint for how you're going to do anything else.

And to their credit, the House Republicans have led. They have now two consecutive years since they got the majority passed a budget which lays out a plan to reform entitlements, to reform the tax code, to address the issues of spending and debt in a way that will help grow the economy and create jobs for people in this country.

We have not had that leadership in the Senate, nor have we had it from the president of the United States, who has to be at some point engaged. I mean, this is a very serious issue, a fiscal crisis for the American people, for our country...

VAN SUSTEREN: I don't think...

THUNE: ... for our debt rating.

VAN SUSTEREN: I honestly don't think they care! This would keep me up at night! If this were my job and if I were Senator Harry Reid and I was preventing the chance to have a debate to have this resolved and send it up to Capitol Hill, you know -- I just -- for the life of me, I can't understand why he doesn't -- you know, why he -- why he doesn't care.

THUNE: Well, I do think that there -- and I'll come back to this point -- is a fundamental difference about how to solve this. And I think the Democrats just -- they instinctively believe that the way that we get out of this crisis is to raise taxes. And I think that (INAUDIBLE) going to do a lame duck session after the election, and there's a lot of leverage because you're going to have these defense cuts that take effect on the first of next year, they can use that to get tax increases.

Now, those of us who happen to believe that the problem isn't that we tax, you know, too little, it's that we spend too much -- and those of us who are in that school believe that we've got to get spending under control. And I -- but I think a lot of it comes down to that basically fundamental difference of opinion about how to solve this problem.

VAN SUSTEREN: Senator, thank you, sir.

THUNE: Thanks, Greta.