NEIL CAVUTO, HOST: Well, to a senator who has had enough with all of this talking. Let's just get to slashing.
My next guest is calling for up to a 20 percent across-the-board cut from federal agencies, Wisconsin Republican Senator Ron Johnson.
What is the reaction you have gotten?
SEN. RON JOHNSON, R - WI: Well, calling for -- what I was talking about is kind of putting myself back in business mode, where if you have departments that are not functioning, don't necessarily go and reform them. You say, well, your budget is cut 10 or 20 percent.
That is how you actually make things more efficient. It forces efficiencies. And I think our agencies could probably -- that would be the way to do it. I have sat through all kinds of hearings on how to improve the performance of the federal government and you hear a bunch of bureaucrat gobbledygook. And in the end, I think the only way to really get these agencies far more efficient is cut their budget.
CAVUTO: What about making you guys, Republicans, more efficient, or just - - what happened to you? You lost an election. It seems like you lost your backbone.
JOHNSON: I don't believe so.
CAVUTO: What happened?
JOHNSON: I certainly haven't.
If you are talking about the "fiscal cliff," what happened is that back in 2001, 2003, they made tax cuts temporary. And then they extended that temporary nature for two years. But come January 1, every Americans' income tax was going to go up. And so what the vote was about was at least protecting 99 percent of Americans, which was better than -- we all -- Republicans wanted to protect every American.
We didn't want to see taxes increased on anybody. But we didn't have that option. About all we could do -- because President Obama demanded the taxes were going up for some Americans. It was just a matter of who and by how much.
CAVUTO: Well, you knew he was going to do that. So, this whole Kabuki theater of taking it to the last minute was silly.
JOHNSON: The House passed an extension of all current tax rates back in August.
JOHNSON: Harry Reid refused to bring them up, like he refuses to pass a budget.
That is not the only law that is being flaunted, by the way. The president owes Congress a report because Medicare is spending out of the general fund more than 45 percent of what it is paying out in benefits. That is required by law. Then, 15 days after he submits a budget, he is supposed to submit a report on what to do to fix that.
Four years, he hasn't done that. That's another thing that we should be demanding of this president to follow the law on.
CAVUTO: You voted for this "cliff" deal in the Senate. Do you think there will be any hell to pay for that?
JOHNSON: Well, there already has been. But in the end, my evaluation -- by the way...
CAVUTO: What do you mean there already has been?
CAVUTO: Wait a minute. Are people saying there might be a party challenge to you when you're up?
JOHNSON: No. But, obviously, there are some conservatives not particularly happy with me. But...
CAVUTO: Are they saying you disappointed them?
CAVUTO: But what do you say back?
JOHNSON: Well, what I say is, what I was doing was voting to protect 99 percent of Americans from getting their income taxes increased.
I denied the federal government $4 trillion of hard-earned taxpayer money flowing to federal coffers, where it was going to be misspent and where it was basically going to be used to increase spending, to increase the size of government, to increase government's control and influence over our lives.
I think the root cause of our problem is the size of government. It's not the perfect way of limiting the size of government. But starving the beast is certainly one of the strategies. And I just didn't want to see $4 trillion flow into this federal government.
CAVUTO: Do you think that the beast will be more beastly, though, that because you didn't address reining in -- and not you specifically, Senator -- but because Republicans didn't and ended up with 40-1 ratio of tax hikes over spending cuts, that -- that -- that the president and Democrats when they look at that say, oh we got their number and we're not going to cede a point?
JOHNSON: Neil, it takes two to tango. Again, this president refused.
CAVUTO: What if he keeps refusing?
JOHNSON: We're going to have to educate the American public.
CAVUTO: What if we're at that debt ceiling deadline, Senator? Would you go through that? Would you risk bumping against that, shutting the government down to make that point?
JOHNSON: We don't have to do that. We shouldn't be playing this brinksmanship.
CAVUTO: I know you don't have to, but if it comes to that, what would you do?
JOHNSON: Again, that is a hypothetical situation. What we need to do --
CAVUTO: I had a congressman on here yesterday who said, well, devil be damned, then we will shut the government down.
JOHNSON: What we need to do is we need create the conditions that you are not threatening a full government shutdown. You can actually pass...
CAVUTO: What are you threatening?
JOHNSON: What you can do -- what we need to be doing is using these moments to educate the American public so they actually understand how severe the financial situation is and, by the way, that President Obama does not have the other side of his balanced approach.
CAVUTO: Well, you might, but they seem to like the president more than you. So how do you get them to like you?
JOHNSON: Well, we obviously didn't win the election. It's about informing America.
It's about letting people understand that what Pat Caddell was just talking about, that what we are doing to our children and grandchildren is utterly immoral and that it can't go on. And anything that can't go on won't.
CAVUTO: But do you fear that you're banging against the wall and no one is listening?
CAVUTO: And that it's coming to the brink -- and let's say you do push this to the brink, they are going to say it's -- Republicans have pushed it to the brink.
JOHNSON: Listen, there are thing things we can do.
CAVUTO: Like what?
We can pass legislation in the House that prioritizes spending, so that if we bump up against that debt ceiling and we don't raise it, we make sure that we don't default on our debt, we make sure that military gets paid, that Social Security checks are sent out to everybody.
It's one thing we can use the trust fund for. If you take a look at $2.5 trillion is what we get in revenue, you tack on top with $775 billion in Social Security payments that can be made out of the trust fund, you are basically operating the government at about 95 percent level.
It doesn't have to be painful. Now you cut the rest of the people, the rest of the agencies. It's one strategy. But another one is there are all kinds of plans out there, Neil, for reducing spending. Here, the CBO has one. Here's a list, two pages, $4.9 trillion of spending reductions, deficit reductions over 10 years.
JOHNSON: What we should be demanding of the president is, listen, if you want a dollar -- for dollar increase in the debt ceiling, give us a dollar worth of cuts. And here's a menu.
CAVUTO: Well, he told you that last time and he ignored you.
JOHNSON: I understand that. That is the difficulty we have is we only control the House.
Harry Reid is in control of the Senate. He's not passing budgets and they are not preparing the reports on Medicare. You got a president who denies that we have a spending problem, when we all know that that is our problem.
CAVUTO: Senator, thank very much. Good seeing you in the flesh.
JOHNSON: Good seeing you.
CAVUTO: Ron Johnson, all right.