What Should Republicans Demand in Return for Debt Limit?

This is a rush transcript from "Hannity," April 21, 2011. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: With each passing day an estimated $4 billion is added to America's debt. And now there is a concern that this country will hit its $14 trillion debt ceiling before Congress is able to vote on raising that limit. Now, the White House has warned that a failure to vote would lead to a worldwide economic Armageddon. However, they are confident that Republicans ultimately will agree to a raise.

(BEGIN VIDEO CLIP)

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: What is reassuring and important is that the leaders of both parties in Congress as well as the president of course, agree that the debt ceiling will be raised. Because we cannot play chicken with our economy, we cannot play chicken with the full faith and credit of the United States government.

(END VIDEO CLIP)

HANNITY: Well, the House Majority Leader Eric Cantor says, that is not so. According to Cantor, quote, "If the president and our Democratic colleagues refuse to accept serious reforms that immediately reduce federal spending and end the culture of debt in Washington, we will not grant their request for a debt limit increase."

But this White House is oblivious to America's fiscal crisis. In fact, they now publicly acknowledging that this is by no means the last time such an increase will be needed. Let's look at this.

(BEGIN VIDEO CLIP FROM FOX BUSINESS NETWORK)

PETER BARNES, FOX BUSINESS NETWORK: How much does the administration want Congress to raise the debt ceiling this time around?

TIM GEITHNER, SECRETARY OF THE TREASURY: That's a judgment Congress has to make. And it's just about how often they want to vote for this.

So, there's no reason that Congress won't raise it. They always raise it. They have to decide how often they want to raise it.

(END VIDEO CLIP)

HANNITY: So, now it is not a question of if the limit will be raised, it is a matter of how many times it's going to be raised.

Joining me with analysis is columnist Fox News contributor Charles Krauthammer is back with us. Charles, welcome back.

CHARLES KRAUTHAMMER, FOX NEWS CONTRIBUTOR: Pleasure to be with you Sean.

HANNITY: All right. Look, there are a lot of conservatives in the country that were disappointed over the 2011 budget deal. They thought the Republicans should have fought harder for the $61 billion that they wanted. We what that deal is, now those same conservatives are saying, hey, we want you guys in Congress, we voted to put you in power, we want you to fight on the debt limit. How far should they go?

KRAUTHAMMER: Well, look, they voted to put the Republicans in power, but only in the House of Representatives. They did not succeed in taking the Senate. And under the Constitution, the White House remains in the other party's hands until the end of next year.

So, you only control one House. And that means that you have to understand you are not going to control what is going to happen. You can influence it, but you can't control it. In the end, at the end of the day, the debt ceiling limit has to be raised. At the end of the day, it does not to be next week. You know, there are ways where you can move the money around. Interest on the debt is only six percent of the budget, it's only 10 percent of tax revenues.

So, in principle, you could take from other accounts and continue to payoff interest on the debt and not default for a while. But at the end of the day, you've got to raise it. The only question is, what can the Republicans extract now before the real decision is rendered by Americans in November of next year, and that's when the debt issue will be decided.

HANNITY: Yes. I might argue a little bit with you on this point, by having control of the House, they can't pass a spending bill without the house's approval. And I think there's a lot of leverage there, similarly with the report on the Standard & Poor's, what they said this week about our debt and the threat to our AAA rating, credit rating, I think that gives them enormous leverage that they could hold out for a very strong deal with the White House. I think they have the upper hand.

KRAUTHAMMER: I'm with you on trying to get a very strong deal. But here's what you got to remember Sean and this applies to the shutting of the government as well. When you make these leveraged negotiations, you got to make a case. You have to make an offer that Americans, ordinary Americans not just conservatives, will see as reasonable.

If you for example, ask for the abolition of Obamacare, the majority of Americans are going to say that is not reasonable demand because Obama dedicated a year and a half to that. He's not going to undo his nature achievement.

So, you've got to frame this in a way where you are not asking for something that is so extreme that Americans are going to say, you know, this is not reasonable and if there is trouble, as there will be, in the markets, if the debt ceiling is not ultimately lifted, they will say the Republicans are at fault. You have to play this smart. Not just -- you know, in a bullish way.

And you got to remember one other thing. In the end, the issue will be decided in November of 2012. That's what you have to keep your eye on. This is all maneuvering, this is all positioning. In the end, we are not going to control the budget by only controlling one house. For a Republican or a conservative, you are going to get control of this only if you with win the presidency.

HANNITY: You know, I agree that politics has got to be considered. But, you know, when we were watching the 2011 budget debate Charles, and we've got a $3.6 trillion budget, $3.7 trillion budget, 1.65 deficit, 61 billion, of 3.7 trillion, is nothing. And I felt that that was reasonable. And I thought there was an accommodation there because that was a prorated figure of their promise of 100 billion. But the time the CBO was done, we end up with 385 million. It's not even a day's worth of debt in the end. And I feel that's why people that follow this are disappointed.

KRAUTHAMMER: Look, I don't want to go into details on that. That was only the amount that will not be spent between now and October 1. In the end it is a huge amount. Thirty eight billion is real money, and that is going to be saved over time. But let's not argue about that.

The real issue here is this, what should the Republicans demand in return for the debt limit? And what I think the Republicans ought to be doing right now, the House and the Senate leadership in the week or two between now and decision day, or at least when they'll going to have to come back and talk about it, is to find one proposal, a single one, not eight or 10, range here to there, that everybody agrees on and says, here's what we want in return for the debt limit. And I think it should be something really strong like a spending cap that could require a super majority to overturn, something like that. You are not going to get something revolutionary. But you have to start with that.

HANNITY: I don't know what is worse though in my mind. I'm getting so concerned about these numbers. You know, is it worse that we default now and get our budget balanced or that America keeps continually taking on trillion in debts? It is a dangerous scenario evidenced by the S&P this week. And I just don't have the great fear that others do that this is going to be a calamity.

KRAUTHAMMER: No, I think in the end, if you don't raise it, it will be a calamity. We are the number one currency, the reserve currency in the world. It gives us tremendous advantages. If there's any default even for an hour that will undo 100 years of reliability. You don't want to do that.

And politically, again, if you are seen as responsibility, you have to look at it from the ordinary American, the centrist American, the independent who's in the middle of the road. If the Republicans are seen as responsible, they are going to lose in 2012 and you are going to have six years of this and we are really going over a cliff. You have to keep your eye on the prize.

HANNITY: That's a frightening scenario.

Let me ask you, were you very critical of Donald Trump. I know -- I spoke with you earlier. And you had an opportunity, he called you today. And tell us how that went?

KRAUTHAMMER: Well, I mentioned this on "Special Report" earlier tonight. He called me, and, you know, I was prepared for, you know, a gale of abuse because I've been really tough on him. And he would have been within his rights to do it. Actually, he was rather gracious and courteous. And he wanted to talk about his candidacy. He wanted to make me see in his view how he was a serious candidate, and serious man. And then he was discussing serious issues.

So, we actually had a substantive discussion that lasted a while over some of the ideas he raised which I found unserious, like the birth issue or the seizing of Iraqi oil wells. And we talked about that. And we had, you know, a point that counter point discussion about it. But extremely civil. He talked about China and how he would be the one who could negotiate a deal with China.

In the end, I had to tell him that I actually had written a column which was about to go out, which is even tougher on him than what I said on television. And then he handled that rather well. So, I give him credit for graciousness and restraint. But he convinced me that he's running. And this is not just a faint.

HANNITY: Do you have a different opinion of him?

KRAUTHAMMER: I have no different -- I have not changed my opinion on the unseriousness of his candidacy.

But as a person, he, I thought more highly of him. I had never spoken with him in the past, because of the gracious way and the calm and courteous way in which he discussed the issues, which I found surprising and gratifying.

HANNITY: All right. Charles Krauthammer, always good to see you. Thanks for being with us.

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