S&P Bombshell Signals More Economic Woes for Obama White House

This is a rush transcript from "Hannity," April 18, 2011. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: Today's Tax Day as Americans make sure to have mailed all of their information to the IRS, they are facing more dire economic news. Not only is the White House having a hard time selling President Obama's deficit reduction plan, but now, the credit rating agency, Standard & Poor's is now lowering its long term outlook for America's sovereign debt from stable to negative.

Now the agency has little hope that lawmakers will come together and agree on a plan to reduce the deficit before the 2012 election. And it's not surprising that the White House is already trying to spin this blistering news.

(BEGIN VIDEO CLIP)

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: The S&P affirmed the AAA bond rating of the United States but emphasized the importance of timely bipartisan cooperation and national fiscal reform. The same emphasis that the president made when he gave his speech last Wednesday. As for its political analysis, we simply believe that the prospects are better, we think that the political process will outperform S&P expectations.

The president is committed, as he made clear in his speech on Wednesday, to moving forward in a bipartisan way to reach common ground on this important issue of fiscal reform.

(END VIDEO CLIP)

HANNITY: And joining me now with reaction, nationally syndicated radio talk show host, the author of the number one New York Times bestselling book, "The Fair Tax," my good friend Neal Boortz. How are you, buddy?

NEAL BOORTZ, RADIO TALK SHOW HOST: How are you?

HANNITY: How are you?

BOORTZ: I'm fine.

HANNITY: You're doing well. All right. This is, the fact that this spending is amazing to me. This is what they say, this reduction if in fact they did this, a long term outlook from stable to negative, meaning there is a 33 percent chance that they will downgrade this country's long term credit rating. And they say the reason is the very large budget deficits and rising government indebtedness for the reason for their decision.

BOORTZ: Didn't you love him saying that the political will outperform the private expectations? In this -- look, what happens if your credit number, whatever that thing is.

HANNITY: Credit rating.

BOORTZ: If it goes down and you go out to buy a car? The interest rate is going to go up. You are going to pay more for the car.

HANNITY: A lot more.

BOORTZ: A lot more. So, if our credit rating goes down as S&P suggests it might if we don't get a grip on this soon, we are going to pay a lot more for everything. Interest already eats up a huge part of our annual budget. Can you imagine how much more that will be? It is going to drive us further into indebtedness in the deficit, the news is bad, and we need to get a grip on it right now.

HANNITY: All right. In two hours and 45 minutes on the East Coast.

BOORTZ: Right.

HANNITY: People have to file their taxes, five hours and 45 minutes on the West Coast. So, people right now, hopefully watching the show, they're trying to figure out this incredible tax code. It is amazing that you wrote a book that for weeks and weeks was a number one best seller that is about taxes. Because on the surface -- you even said to me we you wrote it, you think this will go anywhere? And number one on The New York Times, because you would eliminate the IRS.

BOORTZ: Right.

HANNITY: We'd get rid of the income tax.

BOORTZ: Right.

HANNITY: Explain it.

BOORTZ: Well, basically, just to give you the Reader's Digest version which you need, it gets rid of all personal, and all corporate and business taxes payable to the federal government, OK, all of them.

HANNITY: Right.

BOORTZ: And payroll taxes included, death tax included. And it replaces them with a consumption tax. It protects every family. Nobody pays any of this until they've taken care of the basic necessities of life for their family. The price of consumer goods do not go up. If you sign up for a job and they say we are going to pay you $2,000, a week...

HANNITY: You get $2,000 a week.

BOORTZ: You get $2,000 a week. If you spend it, you are taxed on it. If you save it, you're not. And the question, it just boils down to this. Which would you rather do? Pay 23 percent of everything you spend or 25 or more percent of everything that you earn?

HANNITY: But you read the papers every day, this was the front page of USA Today, Feds pounce on tax evaders, prosecutions up 25 percent from 2001. This would eliminate the IRS.

All right. How, so the people say, well this is great. What would the percentage be? So, if you buy a car, you pay what? Twenty percent more? Eighteen percent more?

BOORTZ: No, you won't pay any more. Because there's an embedded tax in the price of an automobile right now. It is running about 25, 26 percent in automobiles.

HANNITY: Right.

BOORTZ: It is the total tax burden of everybody involved with bringing that car to the dealer show room. That disappears under the fair tax. It's gone. It is replaced by --

HANNITY: How is this revenue neutral for the government? Because they're going to say, we only took in $2 trillion last year, or 2.2.

BOORTZ: Well, when they research they scored it, when they researched the fair tax, they scored it. This is what the revenue would -- the government is getting now, this is the size of our economy. Here's what the sales tax would have to be the match this revenue. But the thing to remember is, everything you buy has an embedded tax in it. Those taxes disappear. They are replaced by the fair tax. So, you don't pay any more for consumer goods under the fair tax than you do now.

HANNITY: All right. As we listen to the president, the president now has a record.

BOORTZ: Right.

HANNITY: Last week, he said that old people, kids with autism, Down syndrome would be fending for themselves. The week before, we had Louise Slaughter suggesting that Republicans want to kill women. We had other incendiary remarks from Nancy Pelosi, the 6,000 seniors -- 6 millions seniors won't have meals. Harry Reid suggesting women won't get mammograms.

It seems to be the plan they are laying out for 2012. Will class warfare work?

BOORTZ: I hope not. It has for all of human history. I hope that --

HANNITY: Forty seven percent of Americans will not pay any federal income taxes.

BOORTZ: But they will still pay payroll taxes, a lot of them. But when you engage in hysterical rhetoric like that, it means you don't have a plan. And one thing to remember about Barack Obama, and that is, he is on record about we need tax increases, whether or not it is going to bring extra revenue to the federal government, because it's about fairness. It is just not right that those people are making that money, it must be taken.

HANNITY: Spreading the wealth.

BOORTZ: Yes.

HANNITY: It is your patriotic duty Joe Biden said.

BOORTZ: Absolutely. I wonder how much he's going to pay over and above what he owns in his income tax.

HANNITY: Well, he still is a cheapskate when it comes to donating in the charity. I mean, it's unbelievable.

BOORTZ: And he can't stay awake either.

HANNITY: No, did you say that?

(LAUGHTER)

BOORTZ: I loved it.

HANNITY: All right. So, they are going to lay all this fear-mongering out. When you have 47 percent of Americans that don't pay any federal income tax, when one percent pays 40 percent of the bill. And then they get clubbed saying you are not generous enough. What does this mean for the country, if half the country says that I'm not paying, I think the system is fair.

BOORTZ: Well, and that's exactly the polls they run, 43 percent of the people say, they are paying just about the right amount of income.

HANNITY: They are not paying.

BOORTZ: Yes. They're not paying any. Duh! But it is time for --

HANNITY: Winning!

BOORTZ: Yes. But maybe they would like better jobs. Maybe they would like to have a better life for their children than they had. Maybe they'd better start thinking about getting economic growth in the private sector back into this country. And not so much about some left-wingers as utopic dreams of the wealth, seizure and redistribution. We are not owned by the government, we own ourselves, we are not tools for the government, to redistribute wealth and make some sort of egalitarian society.

HANNITY: I think you made the best case, it is not a surprise to me that the fair tax became number for weeks on The New York Times, and on this Tax Day, Neal Boortz, it's great to see you.

BOORTZ: Thank you. Tell your people Fairtax.org, they can find out everything they want to know.

HANNITY: All right. You got it.

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