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O'REILLY: In the "Unresolved Problem" segment tonight, as I said in the "Talking Points" memo, we are in a recession and it's up to the Bush administration to get us out of it. Can they do it? Joining us now from Chicago is Congresswoman Janice Schakowsky. 

REP. JANICE SCHAKOWSKY (D), ILLINOIS: Hi, Bill. 

O'REILLY: A Democrat. Nice to have you here, congresswoman. You know, I don't want to do the -- you know, on all of the other news programs tonight, they're all going, "Oh, he's taken money from Social Security. He's taking money from Medicaid, doing the books." Look, in six months we'll know if they did that or not. All right? So I don't want to do that. It's boring. We can't prove it. We can't unprove it. 

Bush says he's not. You guys say he is. In six months we'll know for sure. What should we do to get out of this recession? 

SCHAKOWSKY: Well, Bush inherited the greatest economic prosperity of a generation, actually an era of fiscal responsibility where we were paying down the debt. We were managing to fund our priorities. And in six months, that's pretty much gone. 

It seems to me that the main culprit here is that we have a $2 trillion tax cut that prevents even the President from fulfilling his promises of a prescription drug benefit for seniors, of funding the bipartisan education bill, of protecting Social Security and Medicare. The economy was doing just fine is my point. 

O'REILLY: All right, it was doing just fine until about midway through President Clinton's last year, as you remember. In March of 1999, there was a jitter. And then last Labor Day, the market started to go south and hasn't recovered. And the reason was that Alan Greenspan kept interest rates artificially high, strangled the money. Corporate reinvestment in R&D dried up. That had nothing to do with President Bush. It had everything to do with Alan Greenspan. 

SCHAKOWSKY: Well, I would -- you know, we're going to agree here, Bill, miracle of miracles. I mean, I think that Alan Greenspan's keeping the interest rates high was in fact... 

O'REILLY: Insane. It was insane. And it looks now to be one of the biggest blunders in economic history in the 20th century. 

But you... 

SCHAKOWSKY: I think it's been compounded though. 

O'REILLY: What? 

SCHAKOWSKY: I think it's been compounded now. 

O'REILLY: Well, maybe... 

SCHAKOWSKY: By the... 

O'REILLY: ...you're right. But again, we'll know that in six months. We'll see. 

SCHAKOWSKY: Actually, we're going to know it sooner, because we're not going to have the dollars. In fact, the Bush administration had to borrow money just to pay for these tax refunds, which I think most Americans don't know is really an advance on their refund for 2001. 

O'REILLY: But congresswoman, most Americans are overtaxed. Would you not agree? 

SCHAKOWSKY: No, I would not agree with that. 

O'REILLY: Really? You think that forking over 50 to 60 percent of your income in state, local and other tariffs is our obligation to the government? 

SCHAKOWSKY: You know what don't see, Bill. If you say to Americans, "are you overtaxed," they're going to say "yes." 

O'REILLY: Of course. 

SCHAKOWSKY: If you say, wait, if you say to them though, "Would you rather have your taxes cut or protect Social Security and Medicare or have a prescription drug benefit or fund a..." 

O'REILLY: But you can do both. 

SCHAKOWSKY: Wait a minute. 

O'REILLY: If you stop wasting money. You see? You waste, and by you, I mean, the government, an enormous amount of money. 

SCHAKOWSKY: I'm on the government reform committee that my -- I'm the ranking Democrat on the committee that did the hearing on the Pentagon credit card issue. I agree with you. 

O'REILLY: Yes. It's insane. 

SCHAKOWSKY: I think that there's plenty of waste. But if we're talking about enough money to fund our priorities, like a prescription drug benefit, and protecting Social Security, we were doing just fine and people were making money. 

O'REILLY: Well, you weren't doing just fine because you were wasting billions of dollars. 

SCHAKOWSKY: Oh, I don't disagree with that. 

O'REILLY: And people like me, congresswoman, are paying between 50 and 60 percent of our money to you. Come on. 

SCHAKOWSKY: No, I don't disagree with that. If you think, however, that cleaning up the waste would result in a $2 trillion tax cut, Bill, I'm sorry, that is really crossed the map. 

O'REILLY: I will tell you, congresswoman, if you streamlined the federal government and cleaned up the massive amount of fraud and waste, 25 percent in Medicare. Come on, you know, you would be way up there and the surplus would be greater. 

I want to continue, because you're the ranking member. 

SCHAKOWSKY: OK. 

O'REILLY: I want to bring you back. And we're going to continue this in a more micro way. And we'll go through all the waste and we'll add it up. Congresswoman, thanks, a pleasure talking to you. 

SCHAKOWSKY: Thank you, appreciate it. 

O'REILLY: Plenty more ahead as THE FACTOR moves along this evening. What is going on down in Florida with all the shark attacks? We'll talk to a man who had a chunk taken out of him. And then, Michael Kinsley says I'm a poser and distorter of the truth. We'll confront him as THE FACTOR continues.