Fmr. Senators George Allen & Bob Graham

HANNITY: And here with more reaction to Senator Joe Biden's "Obama will be tested comment" is former Virginia senator, George Allen, and former Florida senator, Bob Graham.

Guys, good to see you both. You're both great Americans.

GEORGE ALLEN (R), FMR. VIRGINIA SENATOR: (INAUDIBLE)

BOB GRAHAM (D), FMR. FLORIDA SENATOR: Thank you.

ALLEN: Thank you.

HANNITY: All right, now, Senator Graham, look, instill confidence in me. Because if Joe Biden is saying, look, mark my words, it's going to be six months, the world is going to test him. We're going to have an international crisis, and by the way, they're going to test this guy, and by the way, we're going to need your influence because it's not going to be apparent, initially, that we get it right.

Now Obama doesn't really have that much experience to begin with. Why should that instill confidence in me, and why should -- how do you make the case that he's prepared to be president?

GRAHAM: Well, first, I'd say that the series of judgments that we've seen Barack Obama make, his opposition to the Iraq war, the coolness with which he's handled this financial crisis are indicative of a very solid, intellect and good judgment.

Number two, it may well be that there'll be a test. Remember there was a test early in the Bush administration when the Chinese forced down a U.S. surveillance plane and took the crew into detention. That was a form of an early threat.

Number three, I think, actually, the biggest danger point we're going to have.

HANNITY: Yes.

GRAHAM: . is going to be during the transition when the old administration is starting to pack it in, and the new.

HANNITY: Well -- well, not.

GRAHAM: . has not taken responsibility.

HANNITY: Not if it's Senator McCain.

GRAHAM: That's where, I need, we need to be very careful.

HANNITY: I think everybody knows Senator McCain's credentials.

Senator Allen, let me ask you this. Well, first -- and this is a myth, because Barack Obama has been telling the world, well, I oppose the Iraq war. He was a state senator in a liberal district. He didn't make a vote in the United States Senate like Hillary Clinton. He was wrong on the surge.

And on the financial, quote, crisis he said if you need me, call me, I'll be there in a hurry, no matter where you are, no matter how far.

COLMES: Can you sing that?

HANNITY: No.

ALLEN: Yes.

(LAUGHTER)

ALLEN: Yes, Sean, you're correct. And most importantly, when he's in the Senate, and in the last year or so when John McCain was advocating for a change of strategy, and the surge, which has worked, and has been a success, and the people in Iraq are recognizing it, Barack Obama was opposed to funding our troops, and he's opposed the surge, and actually just wants to retreat unilaterally.

The key as far as the financial situation and the meltdown and so forth, really, I think, on the minds of people like Joe, the plumber, and Ken, the carpenter, and Patty, the small business owner, is what can we do to rejuvenate our economy.

And when you look at Barack Obama's proposals, Joe the Plumber, and all the rest of these other small business owners and taxplayers -- payers don't like the idea of them paying taxes and then redistributing it to someone else.

COLMES: Hey, Senator, we're going to get into the tax thing.

ALLEN: We want -- I think they want lower -- OK.

COLMES: I want to ask you about what Joe Biden.

ALLEN: Well, I do think lower taxes and energy security are really important for jobs in our country's prosperity.

COLMES: That would be great, except.

(CROSSTALK)

GRAHAM: Excuse me, Sean, but let me remind George that it was John McCain who called these tax cuts of 2001 irresponsible. He labeled them for what they were.

HANNITY: Because of earmarks.

GRAHAM: They were a give-away to wealthy Americans and a failure to deal with the needs of the middle class. That was John McCain's position in 2001.

ALLEN: Also, Bob.

GRAHAM: It happens to be Barack Obama's position. I heard him just three hours ago at a massive rally here in south Florida state exactly what his position was on taxes.

COLMES: Senator.

GRAHAM: And it was very.

(CROSSTALK)

ALLEN: He wants to increase taxes on capital gains, he wants to increase taxes -- on working people and many of which are small business owners.

COLMES: He's going to increase only taxes of people making.

(CROSSTALK)

COLMES: Senator Allen, let me ask you -- I want to go back to what you said about Joe Biden.

(CROSSTALK)

GRAHAM: Excuse me, am I wrong that John McCain voted against the tax cuts in 2001?

ALLEN: You're wrong in his reasoning. Bob, I voted for them, and I think tax cuts are good.

GRAHAM: No, but John McCain.

ALLEN: John McCain's concerns were there needed to be curtailment of spending, and John McCain said he wasn't going to allow any wasteful spending.

GRAHAM: George, George, the word he used was that the tax cuts were "irresponsible." Now that was his stated position in 2001.

ALLEN: And now for the present challenges.

GRAHAM: If I'm in error, tell me.

COLMES: Senator, hold on, guys, we've got to take a quick break here.

(CROSSTALK)

COLMES: Gentlemen, we're going to take a break. We're going to come right back.

ALLEN: Moving forward.

GRAHAM: I know.

COLMES: I do want to talk about the Biden thing as well and the tax plan for both candidates, and some of the misrepresentations, but Joe Lieberman said the same thing Biden said. No one's going after Lieberman.

Coming up, Congressman Barney Frank. He says there are a lot of very rich people we can tax but is this tax and spend policy fair to those Americans who work hard for their money? More with our panel.

Also coming, new tapes of Bill Ayers revealed. He openly considered himself an anarchist and Marxist while serving on the board of the Woods Foundation. Barack Obama was also on that board at the same time. We'll play you the tapes coming up on HANNITY & COLMES.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: I want to provide a tax cut for 95 percent of working Americans -- 95 percent.

(END VIDEO CLIP)

COLMES: That was Senator Obama touting his tax cut plan, but according to an op-ed in today's "Wall Street Journal" Obama's tax proposal would include giving tax relief to people who don't actually pay federal income taxes.

Obama's economic advisors defend his plan reasoning that even people who don't pay payroll taxes pay taxes for Social Security, so credits would be based on what people are paying into Social Security.

And now House Financial Services Committee chairman Barney Frank is echoing Obama's idea of wealth distribution.

(BEGIN VIDEO CLIP)

REP. BARNEY FRANK (D), MASSACHUSETTS: This is a time when deficit fear has to take a second seat. I do think this is a time for a very important kind of dose of (INAUDIBLE). Yes, I believe later on there should be tax increases.

Speaking personally, I think there are a lot of very rich people out there whom we can tax at a point down the road and recover some of this money.

(END VIDEO CLIP)

COLMES: We now continue with senators George Allen and Bob Graham.

Senator Allen, you know, we have Palin and McCain on the campaign trail talking about socialism, Obama's going to bring socialism, these tax credits are give-aways, and yet John McCain gives a $5,000 -- offering $5,000 tax credit on a health care plan. And he's going to raise taxes and tax people on the health care plans they get from their employers.

So how is that any different? And he wants to buy people's bad mortgages. Wouldn't that be socialism? Isn't he guilty of the very things he's accusing his opponents of being?

ALLEN: All right, you're thrown a lot out there, Alan. Number one, John McCain's for lower taxes on businesses, on lower taxes on capital gains, which will help investors, help our economy get going.

Barack Obama has voted nearly a hundred times against reducing taxes.

COLMES: That's not true.

ALLEN: . on way or the other and is promising to raise taxes.

Now, insofar as taxing people to redistribute it to those who don't pay income taxes, a lot of folks take exception to that. Now John McCain's idea, which had been demagogued insofar as healthcare is concerned, is to make sure that folks can afford to have their own health insurance policy.

And actually is promoting the concept of personal responsibility, and, indeed, individuals get to decide for themselves and their families what insurance they have opposed to having.

COLMES: But Senator.

ALLEN: Hold it. This is very key. As opposed to Barack Obama's approach which is the government takeover and have dependency on government and employers. We think individuals and families ought to make those decisions.

COLMES: He would tax people on healthcare plans. But this idea that.

ALLEN: No, they wouldn't, the people would have a tax reduction.

(CROSSTALK)

COLMES: Explain to me he would tax healthcare plans.

ALLEN: No. The point is that if you get a $5,000 tax credit, if you look at the impact of that, it is a tax cut. Every analysis that is objective, nonpartisan, it's a reduction of taxes, and it puts families and individuals in charge of their health insurance plans.

HANNITY: Let me go to Senator Graham.

ALLEN: . as opposed to the government or employers.

HANNITY: Senator Graham, here's the words that Joe the Plumber, who's on the program last night with us, and what Senator Obama said to him was, look, I don't want to punish your hard work here, but the bottom line is, you know, the people that are working their way up, you know, we need to spread the wealth around.

Joe Biden said it's our patriotic duty to pay more in taxes. Now, I read something -- one guy once said to each according to his need, from each according to his ability. That sounds to me like socialism and redistribution of wealth.

Convince me I'm wrong.

GRAHAM: Yes, let me tell you, using these words like "socialism" is ridiculous.

HANNITY: Well, that's what it is. It is socialism.

GRAHAM: It is not -- excuse me, can I answer your question?

HANNITY: Yes, but -- it is socialism.

GRAHAM: It is -- it is not socialism, and the issue is what is fair tax policy? How should we distribute the burden of government in this society? The fact is that, in the last eight years, the burden has shifted dramatically from the wealthiest of Americans to the middle class.

HANNITY: Wait a minute, Senator.

(CROSSTALK)

HANNITY: Wait a minute. Wait, whoa, whoa right there.

GRAHAM: And if.

HANNITY: The bottom 50 percent of wage earners in America.

GRAHAM: Excuse me.

HANNITY: This is important. The bottom 50 percent of wage earners pay 2.9 percent of the federal bill. The top 10 percent pay 70 percent. That's redistribution.

GRAHAM: Yes. Excuse me. Yes, excuse. Can I -- if I can answer your question.

HANNITY: Yes, but I'm educating our audience.

GRAHAM: The fact is -- the fact is that most Americans pay more money in payroll tax, which is just as much out of your wallet as income tax.

HANNITY: Wait a minute, that's supposed to be our retirement fund, except you guys in Washington when you were there, you guys spent that money, you'd never ended up in that lockbox you all told us about.

GRAHAM: That was the Republican lockbox, Mr. Hannity.

HANNITY: Hannity.

GRAHAM: And let me say that the large number of working Americans pay more in payroll tax than they do in income tax.

HANNITY: All right, Senator Allen.

GRAHAM: . but it's just as real a tax.

HANNITY: Hang on. Senator.

GRAHAM: . and it's a very regressive tax.

ALLEN: Yes, Sean.

GRAHAM: .. because it's only the first approximately $95,000 of your income is subject to tax.

HANNITY: All right. Let me get to Senator Allen. We're running out of time.

Senator Allen, we're going broke, and Barack Obama -- if you're going to include that, we won't have any money for retirement for anybody, and on top of this, he's proposed $1 trillion in new spending, Senator Obama.

How does that add up?

ALLEN: Exactly. Well, it doesn't add up, it adds to the deficit spending and Barney Frank, if we had a President Obama with a liberal House and a liberal Senate, you'd know they're going to ram right through more spending, higher taxes, taking away private ballots and unionization efforts.

HANNITY: Good point.

ALLEN: . greater dependency on foreign oil.

John McCain wants to rejuvenate our economy with energy independence.

HANNITY: All right.

ALLEN: . lower taxes, and also strong national defense.

HANNITY: Guys, good so see you. Thank you.