VAN SUSTEREN: Senator Lindsey Graham joins us live here in Washington. That last one, meeting with the Chinese -- I mean, what kind of song and dance do we tell them to convince that this is -- this is a good deal? I mean, that they should buy more of our debt, unless we raise the interest rate through the sky and...

SEN. LINDSEY GRAHAM, R - S.C.: Well, that's the point. That was a very good report, by the way. The point is that who do we borrow money from? We sell Treasury notes, and who buys? The Chinese and other countries. And they're eventually going to stop buying our Treasury notes and...

VAN SUSTEREN: Unless we really jack up the -- the...

GRAHAM: If you raise interest rates...

VAN SUSTEREN: But then we're cooked!

GRAHAM: Then we're cooked...

VAN SUSTEREN: Worse than we are.

GRAHAM: ... because that creates inflation. We're all going to be California. You want to know where America's going to go, look at California. And here's what I would say to your audience. Some people suggest that democracies are doomed to fail because we, the people, will never say no to ourselves. In California, they had a proposal to cut spending and raise taxes. It was disapproved. So what do we need to do? We don't need to raise taxes now. We need to keep taxes low and control spending. But a trillion-dollar deficit is unbelievable. I never thought I would live to see my nation, our nation, be a trillion dollars in debt for a single year.

VAN SUSTEREN: Do you think, though -- I mean, as we hear these numbers -- and you know, you see the president out and he acts so confident and he says we're on the way -- I'm thinking to myself, when he sees these numbers, is he freaked?

GRAHAM: Well, I...

VAN SUSTEREN: I mean -- I mean, like, where does he -- where does he think we're going to get the money to pay for this? Because if he's got a solution, I'd love to hear it.

GRAHAM: Well, let me -- you know, where do we pay for it and how do we fix it by creating a health care system run by the government that has a trillion dollars more debt?

VAN SUSTEREN: But that's another issue! I mean, even if we didn't have that, we got a big problem! Forget health care. We still -- we still got a trillion-dollar deficit and -- and we've got personal income down, corporate income down, and we're doing these bail-outs, and the economy is sluggish, at best.

GRAHAM: I think the big difference between me and the president is he believes that Washington can generate job creation by spending money. I believe the way you create jobs is you empower people to hire folks in the private sector. And this stimulus package is the root of all evil here. The $787 billion that we talked about on your show that no one read has come back to haunt this country. It's put us in a deep hole. It hasn't created jobs and it never will because it's mostly about government, not job creation. That started it. Throw health care on top, a cap and tax (SIC) system that would cost the average American $800 a year in additional in additional energy costs and bankrupt manufacturing -- what he is doing is breathtaking, quite frankly.

VAN SUSTEREN: Do you think he is convinced he's on the right track?

GRAHAM: Absolutely. Absolutely.

VAN SUSTEREN: OK. So I mean -- so he's not sitting there, thinking, like, Oh, I wish I hadn't done that.

GRAHAM: No, absolutely not.

VAN SUSTEREN: So he's not having any buyer's remorse on this.

GRAHAM: You know, I wish people would listen during the campaign. When he said, We need to redistribute the wealth, he wasn't kidding. He is not kidding. He really does believe the government can only provide health care, and if the government doesn't -- is not involved in the health care business, the private sector won't be honest. He believes that.

VAN SUSTEREN: Yes, but come on. I mean, like, let's -- let's look at...

GRAHAM: He believes that.

VAN SUSTEREN: Yes, but except the private sector -- I mean, let's talk about the insurance companies. They've been up to their eyeballs in making this a bigger problem.

GRAHAM: Well...

VAN SUSTEREN: I mean, the private sector.

GRAHAM: ... wait a second...

VAN SUSTEREN: I mean, the private sector -- I'm not saying that the public sector's the answer, but the private sector hasn't exactly...

GRAHAM: Sure.

VAN SUSTEREN: I mean, you've got insurance agencies telling people how to get health care. There's something fundamentally wrong with that.

GRAHAM: Well, the third party payment is the fundamental problem here, but competition regulates quality and price better than government control.

VAN SUSTEREN: But even before we get to the question of health care, we have such a huge financial problem.

GRAHAM: Absolutely.

VAN SUSTEREN: I mean, that's August, or that's July.

GRAHAM: Right.

VAN SUSTEREN: I mean, right now, we've got a trillion-dollar deficit.

GRAHAM: It'll be...

VAN SUSTEREN: And no way to pay for it.

GRAHAM: It'll be $1.8 by the end of the year, and we're spending $450 billion on interest payments on the debt. We're spending almost on -- the amount of interest equals the defense budget. This is historic. No one's ever seen this in American history, and it has a bad ending if we don't change it.

VAN SUSTEREN: Well, but there's the other thing, is how do you reverse it? That's -- you know, if it is...

GRAHAM: Well, how do you...

VAN SUSTEREN: That's the -- that's

(CROSSTALK)

GRAHAM: Here's a wild idea. Don't spend any more than you take in.

VAN SUSTEREN: Well, not a...

GRAHAM: It works at home!

VAN SUSTEREN: But...

GRAHAM: It works at home, and it will work up here.

VAN SUSTEREN: Except we have a 9.5 percent unemployment, so a lot of people who by nature of the fact that have no income, have to spend more.

GRAHAM: But let me tell you, Greta, people at home are tightening their belts. We're not. We're exploding the deficit. It's going to affect people at home and it's going to prevent people from creating jobs. So we need to control spending but also have programs that will create jobs. I don't mind spending money to help jump start the economy. We're not spending money to jump start the economy, we're growing the government.

VAN SUSTEREN: Senator, if you'll stand by, we're back in two minutes.

GRAHAM: I'll be here.

VAN SUSTEREN: All right. Good, sir.