This is a rush transcript from "Hannity," July 20, 2011. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: The group of senators known as the "Gang of Six" are trumpeting a so-called compromise that aims to end the deficit debate in Washington. But for that to happen, conservative Republicans in both the House and Senate must sign onto the trillion dollar tax increase that is contained in this compromise. Now they also have to abandon "Cut, Cap and Balance," that's the bill that passed the House yesterday.

So, is there any possibility that that's going to happen?

Here to answer that is the one and only Republican senator who's signed on to "Cut, Cap and Balance." Kentucky Senator Rand Paul. Senator, welcome back, good to see you.

SEN. RAND PAUL, R-KY: Good to be with you, Sean.

HANNITY: All right. As I was saying to Karl Rove, I am angry that on the day this bill the country ought to be focused on the answer or the best answer out there to our problems and preventing more long-term damage. You know, we've got senators announcing, giving to the president an opportunity to divert the country's attention. I'm pretty angry about it, with the bill with no specifics that seemingly is going to raise taxes and go against the very things that Republicans were elected to not have happen. Your reaction.

PAUL: Well, the interesting thing is, there is not any legislation, there will not be any legislation from the "Gang of Six" before the debt ceiling. So, it's completely a distraction. We have something out there, pass the House last night, "Cap, Cut and Balance." Our plan says, we'll allow the debt ceiling go up if we pass a balance budget amendment. The "Gang of Six" plan never balances. So, I told people, I figure it's a compromise to wait seven or eight years to balance the budget. I can't support any plan that never balances.

HANNITY: Yes, exactly. Well, first of all, there's no legislation, there's not going to be any written legislation. There will be no CBO scoring of this, and even the broad outlines that I have read say that these cuts will come from, well, from this department and that department but they are unnamed. So, in other words, we're going to raise the debt ceiling and we'll going to play the old Washington game that the actual spending cuts come later. Why would we be suckered into that?

PAUL: And here's the problem. The whole terminology of saying they're going to be cuts is absolutely false. It's cuts against a baseline. The baseline is going up $9 trillion in debt over the next 10 years. If they cut $3 trillion, that means they are still going to add $6 trillion in debt over the next 10 years. It is not a balanced budget. It is not something that I think our country can live with. We cannot add $6 trillion more over the next 10 years and sustain that kind of debt.

HANNITY: Well, on that trajectory, we are at 100 percent of GDP at that particular point. You know, but the political point here is this, you know the House did its job now twice. And they have taken a lot of political heat for House Republicans. I think they deserve a lot of credit. Because I think their bill is responsible. It deals with the short term problem, seniors will get taken care of, the debt ceiling is taken care of, the debt is paid -- we begin with the process of dealing fundamentally with the problems. And then on the very day they are voting we've got, you know, the undermining by some of your colleagues. And I'm frustrated, why are we negotiating against ourselves or conservatives be, you know, undermined as well.

PAUL: Well, here's the interesting thing is, we are actually proposing to raise the debt ceiling. We hate that fact. We don't want the government to borrow more money. The only reason we have come to this is because it is a compromise if we get a balanced budget. But here's the president on the other side. I think he's acting irresponsibly because he says, he's going to default, he's going to not pay Social Security checks, he won't pay our soldiers. We have $200 billion a month that comes in. We have plenty of money to pay our interests, to pay our soldiers, to pay our Social Security checks. So, if those don't go out or if we default it's all on the president's shoulders because we actually have legislation that would say, you have to by law, you have to send out Social Security checks.


HANNITY: Is that the law now of the land?

PAUL: Well, some people argue that it is already is the law that the Social Security has a valid obligation and it has some assets that they should always pay their checks. And that really he would be breaking the law. But we want to go one step further. We want to pass more legislation that says explicit to him, pay the debt, pay the interest on the debt, pay the Social Security checks and pay for the soldier's salaries. Because we don't want him using that as a political football to emotionally charge people. He's the one that wants to fault because he wants to continue an unlimited borrowing without significant budgetary reform.

HANNITY: See, I contend that if the president didn't get this chance yesterday to, you know, divert the country's attention from "Cut, Cap and Balance" because Republicans are negotiating their own little private deals, and then he says, we even have a super fallback position, the McConnell plan, it seems to me that the shoe would be on the other foot. You know, Donald Trump says, the Republicans have to learn to play better chess. I agree with him. So, in other words, if they pass "Cut, Cap and Balance" like they did yesterday, handed off you guys in the Senate, why don't we just sit back and wait? The money is there. Congress did its job. Now let this fall on the president's shoulders.

PAUL: Exactly. And what I am proposing is no matter what happens on Saturday, I would love to see the House next week pass the bill that directs him to pay interest, pay Social Security and pay the soldier's salary. Direct him to do that and then say, look we want to compromise with you but we want a balanced budget, 75 percent of the American people want a balanced budget amendment. He needs to compromise on this because the people are with us and they are not with him.

HANNITY: Yes, I agree.

Now, one last question, if in fact, they don't take it up in the Senate, would you support maybe a short term dollar for dollar raising the debt ceiling, short term dollar for dollar with a cut just so the Republicans quote, "wouldn't get the blame" even though they don't deserve it?

PAUL: No, I won't support a short term increase in the debt ceiling. The only debt ceiling increase I will support -- and it's be grudging to tell you the truth -- but the only debt ceiling I will report is with the balanced budget amendment. But what I will support is I will continue telling people that the president has a choice here and he's choosing not to send your Social Security checks out. He's the one using your check and your livelihood as a political football and he should be ashamed frankly.

HANNITY: Yes. That's the thing. The president is the one that won't move here. The president, you know, he's standing firm and if the Republicans got in a room and said, we are standing firm, then it's all on his shoulders. I agree with you.

PAUL: Absolutely.

HANNITY: All right. Senator, good to see you. Thanks for being with us.

PAUL: Thank you, Sean.

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