This is a rush transcript from "Hannity," February 28, 2011. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: Less than 24 hours from right now, pink slips may be handed out to hundreds of state employees in Wisconsin. Now that was the firm warning issued by Governor Scott Walker over the weekend. Now laying the blame at the feet of the 14 missing Democratic senators, Walker made it very clear that the time for playing games is over and the time to vote on his budget is right now.


GOV. SCOTT WALKER, R-WIS.: It's real simple, those 14 State senators need to come back and do what they're elected to do. Come back here. They don't have to vote for it. They don't have to support it, but they need to come back and do their job.

DAVID GREGORY, HOST: If they don't governor, how does this end?

WALKER: Oh, I'm an optimist. I'm an internal optimist, as much as I understand, there's passion and that's, you know, in America that's great. We can have passion and be civil about it but in the end, I believe that those, at least some of those state senators will come back. If we fail to pass this bill by Tuesday, we lose $165 million worth of savings. If we continue down that path, we start seeing lay-offs.


HANNITY: And tomorrow the governor plans to layout his ground breaking budget proposal. Before the Wisconsin's state assembly, however, as officials begin to prep the capitol for this highly anticipated address, protesters are refusing to leave the building.

But as those on the left continue to obstruct the democratic process, a new narrative is emerging out of Wisconsin. And it is a bold well for the labor movement. Now, even the Washington Post is now acknowledging that this is not about unions versus Scott Walker. Now take a look at this headline. Now, the paper makes it very clear that this is now about government workers versus American taxpayers. And to be sure, this is a battle that unions simply cannot win.

And here with analysis, the author along with his wife Eileen McGann of the brand new book which hits bookstores tomorrow, and it is called "Revolt!: How to Defeat Obama and Repeal His Socialist Programs," Dick Morris is back with us.

So, I'm going to get -- by the way, I think the best book you have written. We'll get to that in a minute. Here's the showdown, here it continues to go on and now even the liberal media, and it gets it right.


HANNITY: It's about the taxpayers who paid and put the bill for these benefits versus the unions.

MORRIS: Right. Well, it's even worse than that, it's the school children versus the unions.

HANNITY: Good point.

MORRIS: Because the -- when Walker speaks about restricting collective bargaining to wages and benefits, what he's really saying is, let's not have it include teacher tenure and merit pay and school choice. Let's permit us to do that stuff, even within the context of the collective bargaining agreements. And after all, he's already exempted cops and firemen, so, this is basically about collective bargaining with teachers.


MORRIS: And I think that he's going to increasingly change this debate from the unions against the taxpayers, which is great, to the unions against the school children because that's really what it is about.

HANNITY: Well, there may even become a Reagan moment here, we may have to lay these guys off. Say, get back to work in 48 hours, and if you don't get back to work, you are going to lose your job. And guess what, I think Scott Walker would hold firm and those teachers would lose their jobs.

MORRIS: I'm more interested in the state senators losing their jobs.

HANNITY: Yes. Well, look, there's talk of recalling a lot of these guys. I mean, they're out there, you know, at ritzy resorts having themselves a good old time and then, not doing the people's business.

MORRIS: And look down to the table of this. None of them here.

HANNITY: Yes, no, no. They're not here. What we know, in Illinois, I think the last time we heard at a resort. All right. Here's the broader picture though. We've got Indiana, we've got New Jersey, we've got Ohio, we've got all of these states and all these battles with the unions emerging here. On top of this is the week where on Friday, and we'll talk to Paul Ryan about this, we may have a shutdown of the government. Not likely to happen for these Democrats appear to be capitulating.

MORRIS: Right.

HANNITY: But the point is, the governors that are most popular are the ones that are willing to cut and make hard decisions.

MORRIS: Right.

HANNITY: It seems just like a paradigm shift here.

MORRIS: It is a huge shift. We'll talk about the book in the next segment. But I say, we may at long last have a way to liberate our nation from the domination of those who should be our public servants. But instead are frequently our union masters and free our politics from their financial power.

HANNITY: And you finished that four months ago.


HANNITY: This book.

MORRIS: Yes -- you could predict that a perfect storm was emerging. The House wasn't going to pay any more bailouts. The tax revenues weren't coming in. You had new Republican governors, new Republican state legislators and something had to give.

But what is at stake here really is freeing our schools, so that we can keep good teachers and fire bad ones. Freeing our state governments so we don't have high local taxes. And obliterating the financial power base of the Democratic Party.

HANNITY: All right. So, let's look at Washington now. Because we talked a lot about the states, we talked a lot about Wisconsin. As Washington now deals with massive deficits, and Democrats want to raise the debt ceiling. Republicans are saying, all right, we'll give you two weeks.


HANNITY: But we want four billion in cuts.

MORRIS: Exactly.

HANNITY: Which is a great strategy because they can't be blamed for a government shutdown. But there was a Rasmussen poll that even said, the public wants the shutdown they blame the Democrats for.

MORRIS: Look, the goal here politically -- substantively it's to cut its spending. But politically, it's to keep Obama from moving to the center. And if every two weeks, you are confronting him with spending cuts and we say to him, well, OK, 4 billion, you get two weeks. You want another two weeks, give us another 4 billion. You want a month, give us 8 billion. And then we go the debt limit. You want a trillion dollar debt limit, defund Obamacare. You're only willing to do half of that, all right, you've got six months. All right you get two weeks. And the idea is, you are not kicking the can down the road, you are making progress at each point. But between this and the state demonstrations, how is the president to move to the center?

HANNITY: But, you know, that's a great political point that I've heard nobody make up to now. But here's something that is interesting to me, is the Republicans, they are dealing with last year's budget.


HANNITY: The real budget battle, they say they are going to take on entitlement reform.


HANNITY: That's always been viewed as the third rail of American politics. You can't deal with Social Security, Medicare. They say politically, they've got to do it or else we can never balance the budget and our kids will inherit the country full of debt. Is that going to politically be viable at this time?

MORRIS: The short term focus for this year has to be on entitlements like Medicaid and food stamps. Those have increased by 54 percent in two years.


MORRIS: And on the rest of government.

HANNITY: That's unemployment a large part too.

MORRIS: That's gone up 41 percent.


MORRIS: You got to be able to rein that stuff in. Social Security and Medicare really hit you 10 years from now when the baby boomers are retiring. And I think it's possible in the budget that they will deal with how we'll cope with that in a decade. But right now, there is no need to do anything for current retirees or for those 55 to 65. But the key thing to focus on in here, is Obama says, I don't want to refight the battles of '09 and '10.

HANNITY: There's no choice.

MORRIS: We do because we know how the election comes out when we do it. And for example, when the budget comes up what I say in here, is defund the IRS. Say, either you cancel the hiring of 13,500 employees to enforce the individual mandate or we're not voting an IRS budget.

HANNITY: All right.

MORRIS: And if you want to repeal the carbon tax, we'll defund the EPA. You don't want to repeal the FCC assault on talk radio, fine, no FCC budget.

HANNITY: Great example. I like all of that.

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