McCain Foresees Two-Year Extension of All Tax Cuts

This is a rush transcript from "Hannity," November 30, 2010. This copy may not be in its final form and may be updated.

SEAN HANNITY HOST: Today, for the very first time since the electoral landslide earlier this month, President Obama sat down with congressional leaders from both parties.

House Speaker-to-be John Boehner and his team were in attendance as well as outgoing speaker, soon to be minority leader, Nancy Pelosi, and her colleagues. Now the meeting lasted nearly two hours and afterwards each side spoke to reporters.

Let's take a look.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: The American people did not vote for gridlock. They didn't vote for unyielding partisanship. They are demanding cooperation and they're demanding progress. And they'll hold us all of us -- and I mean all of us -- accountable for it.

REP. JOHN BOEHNER, R-OHIO, HOUSE SPEAKER-DESIGNATE: Stopping all the looming tax hikes and cutting spending, would in fact, create jobs and get the economy moving again. And so we're looking forward to the conversation with the White House over extending all of the current rates. And I remain optimistic.

(END OF VIDEO CLIP)

HANNITY: And as you can see, the Bush tax cuts were at the top of the agenda today. As of now they are slated to expire at the end of the year and both parties have drastically different views on how to proceed.

Democrats want to raise taxes on small business and so-called wealthy Americans. Republicans are calling for all of the tax cuts to be extended, particularly during this time of economic uncertainty.

Now President Obama announced today that Treasury Secretary Tim Geithner and Budget Director Jack Lew will be his point man throughout this debate. But what happens if the stalemate continues and how will the Republicans approach the negotiating table?

Here to talk about that and much more is Arizona Senator John McCain.

Senator, welcome back. Good to see you.

SEN. JOHN MCCAIN, R-ARIZ.: Thank you, Sean.

HANNITY: All right, it seems simple. It's an economic downturn. We really have not had economic recovery. Raising taxes at this time to me seems, you know, counterproductive in terms of creating jobs.

Will the Republicans stay firm that all the tax cuts need to be extended?

MCCAIN: Yes. And I'm confident of that. And 41 Republican senators signed a letter that was given to the president, I believe, saying that we want the tax cuts addressed. Keeping the government in operation. And whatever other taxes or other -- you know, such as the estate tax is taken care of.

And then if there is time, we would be willing to take up the START treaty. But we need to take up tax extenders. And I predict to you that we will have a two-year extension of all of the tax cuts. All of them without exception. That will be I think our final position.

A lot of us would like to make it longer but I think that that would be satisfactory. By the way, could I just comment? The president said the American people didn't vote for gridlock. I agree with him. But they didn't -- they voted against the spending. They voted against Obamacare. They voted against the government takeover of automobile companies and TARP and all of those things that characterize the first two years of their administration.

HANNITY: Well, the president has a very different view. He thinks he has a communications problem. That he just didn't communicate well enough with American people. So obviously you disagree with that.

What if the president -- what if the Democrats take the position that will make the so-called middle-class tax cuts permanent but the taxes on small business and so-called wealthy Americans will only extend that temporarily?

Is that something Republicans would go for?

MCCAIN: Republicans won't go for it. The one thing that we know from being home is that there is such uncertainty out there, about their future, that people are sitting on money. They're not investing. They're not hiring. Whether they be big businesses or small. Because they have no idea of what their financial picture will be in the coming year.

And we did a terrible thing by going out of session before the election and not extending these tax cuts. So I'm confident that at least 41 Republicans will hold fast in the United States Senate.

HANNITY: Do you know that for sure? I mean are you -- have you spoken to your colleagues? Are you sure you're --

MCCAIN: Oh, yes.

HANNITY: All right. So you -- all right. What if there is a stalemate? What if you can't come to a compromise? Do you wait until the next Congress? In other words, those Bush tax cuts expire? Is that a possibility? Could that happen?

MCCAIN: Well, I hope not. I think it would be devastating to the economy. I think that we'd be raising taxes on everybody. We'd be having a terrible impact on savings and investment and employment.

And I really believe that the -- on this issue that the Democrats at the end of the day will come around to at least a two-year extension of all of them. And that's going to be our position. That is our fall-back position.

HANNITY: All right. What if -- well, first of all, we had the earmark ban vote in the Senate today.

MCCAIN: Yes.

HANNITY: And -- what about the Republicans? I was a little bit surprised. First of all, I've got to give Mitch McConnell, who in previous years had supported earmarks, but said that he heard the American people and he changed his position.

What about the Republicans that didn't support that today? I was surprised by a couple of them.

MCCAIN: I don't think they got the message from November 2nd. I don't think they got the message from the Tea Partiers. I don't think they got the message that earmarking is corruption. I've seen it. I can tell you that from my own experience.

And that -- when they argue that well, it takes power away from the Congress or that it is only to get money from a much-needed project. It is not. We authorize projects and then you appropriate the money for it.

That's the way the system worked for a long, long time. A couple of hundred years until the time all this earmarking and pork barreling and corruption took place. So I think that those Republicans and Democrats who voted against the earmark ban today are going to pay for it.

HANNITY: If states like California and Illinois and New York end up going bankrupt, would you vote for bailout of those states?

MCCAIN: No. I would not. I would -- I would extend my deep sympathy to them. But I would -- I'm expressing my sympathy to them now. The unions, the pensions, the out-of-control spending.

I look at the state of California and I grieve for them. You know businesses are moving out of the state of California just about as fast as they can find some place else to go. It's a sad thing to see. A great state. The fifth -- the largest state in America with all of the potential and all the past greatness is now mired in debt which I don't know how they get out of it.

HANNITY: Yes. Senator, I noticed in almost every interview you do you are asked about Governor Sarah Palin. And you were asked this weekend about her. It seems that the media is just dying to get you to say something negative about her. You refuse to do it. You called her an incredible force.

How big a contender do you think she'd be if she gets in this race for 2012?

MCCAIN: I think she's very, very, very competitive. Obviously it all depends on how we conduct our campaigns.

She is an incredible force in the Republican Party. I am proud of her. I am proud of the entire family. I'm glad Bristol did so well on "Dancing with the Stars."

HANNITY: Senator, I hear that you're going to be invited next year on that show. Would you accept?

MCCAIN: I don't think so. But the point is -- the major point is that Sarah Palin has energized people to be involved in this last election and I'm sure she will in the next election in a way that is responsible for a lot of the victories that we won.

I didn't agree with every one of her selections and she didn't agree with mine. I'm sure.

HANNITY: Yes.

MCCAIN: But the fact is overall it was an incredibly positive impact on the last election and she does inspire people and I'm proud of her.

HANNITY: All right. Last question.

MCCAIN: Sure.

HANNITY: How bad is this WikiLeaks, you know, document dump? And what do you think could have been done when we first knew that this person had gotten all this information?

MCCAIN: Well, first of all, I do not believe that one person could get all that information. Second of all, we would need to find out who's responsible. Somebody was responsible besides a private first class.

So far, well, you know, it just sort of happened like a natural disaster. People are responsible for it. We have got to get -- to fix it. We've got to make sure that it doesn't happen again.

And unfortunately, there is a lot more to come. And it put the lives of people who cooperated with us in Iraq and Afghanistan in danger. And I don't see a strong enough reaction from this administration or the president of the United States.

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

MCCAIN: Thanks.

Content and Programming Copyright 2010 Fox News Network, LLC. ALL RIGHTS RESERVED. Copyright 2010 CQ-Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of CQ-Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.