• With: Karl Rove

    This is a rush transcript from "On the Record," November 21, 2011. This copy may not be in its final form and may be updated.

    SHANNON BREAM, FOX NEWS GUEST HOST: Tonight, breaking news. The Super Committee says no deal. The bipartisan panel fails to come up with a plan to cut $1.2 trillion from the federal deficit. The impasse now triggers automatic across-the-board spending cuts starting in 2013. So who is going to take the blame?

    Let's check in with Karl Rove to see how it all breaks down. Karl, good evening to you. I want to start with a poll that has just come out, Quinnipiac, assigning blame here, basically, how voters feel about who's going to pay the price here. Who do you think's going to be to blame if the committee and the president can't come with a deal? President Obama and the Democrats 38 percent, the GOP 44 percent. The rest are unsure.

    But Karl, what does the GOP do with that number?

    KARL ROVE, FOX NEWS CONTRIBUTOR/FORMER BUSH SENIOR ADVISER: Well, they have to engage and say -- point out that the president failed to lead on this issue. And look, it's not going to advantage the president, even if these numbers stay where they are today, because at the end of the day, people are going to say, "You're the guy in charge. Why didn't you get something done?"

    And Keith Hennessey, a colleague of mine from the White House, had a very interesting blog post this evening in which he pointed out the administration at the news conference -- the press secretary said that the Obama administration was, quote, "very engaged," end quote, with the Europeans on settling their debt issue, and yet was completely unengaged with the super-committee effort here in the United States.

    BREAM: Well, you've heard this president say that if he has to, he will run against a do-nothing Congress. So not to be cynical, but you know, was there some motivation all along for some on one side of the ticket or both for this thing to fail?

    ROVE: Well, the president has not been invested in this at all. I mean, Keith Hennessey's blog post pointed out that there are five opportunities the president had to tackle entitlements and the deficit, and he woofed on every one of them. They had Democrat super-majorities in '09 and '10. They did nothing on entitlements or reducing the debt. Simpson-Bowles came out in the fall of 2010. The president stiff-armed it.

    The president earlier this year attacked Paul Ryan, Congressman Paul Ryan of Wisconsin, for suggesting entitlement reform after a couple of months earlier saying it was a serious effort. The summer, when we got close to a big deal, the sort of "grand bargain," the president at the last minute backtracked and said he wanted $400 billion more in tax increases before he'd agree to anything.

    And then, of course, we've had the Super Committee, where the president -- even a spokesman today said at the beginning of the process, we laid out a proposal, and that was the closest they got to being engaged.

    I'd add a sixth one that was not included in Keith Hennessey's list. The president did not address this except for less than one paragraph in his State of the Union speech this year. You would have thought that if this was a big, pressing issue, that the State of the Union would have been devoted to it or substantial parts of it rather than its principal topics, which were high-speed rail, high-speed Internet and, quote, "countless green" jobs, which doesn't look particularly good in the aftermath of the bankruptcy of Solyndra.

    BREAM: Karl, you mentioned the Bowles-Simpson commission. That was a commission created by this president to find solutions to these massive problems that everyone agrees are coming. They're happening. They're playing out right now here in the U.S. There have been senators from both sides of the aisle who have spoken up today after the committee announced it had failed, saying, Let's get a vote on Bowles-Simpson. Do you think this president would endorse that idea? Would Harry Reid, who controls the Senate, do that?

    ROVE: Well, President Obama had a chance to endorse it when it came out, and as I say, he stiff-armed it. He had a very polite, Thank you for issuing your report. Don't expect me to say anything in favor of it, and disappeared from the scene. So I don't think he's going to change now.

    But you've touched on an interesting point here. If we could step back just for a minute. We're attempting to get a grand bargain, like Simpson-Bowles, which has lots of complex items in it and lots of controversial provisions. Even the grand bargain this summer, which we came this close to getting, had lots of big, controversial items jammed into one gigantic package.

    Maybe our problem is to be found in how big the package is and how comprehensive we're attempting to make it. You may remember from your history lessons the compromise of 1850. Henry Clay attempted to stave off the threat of civil war or disunion by having five measures that he thinks will knit together the North and the South forever, though it turned out to be 10 years.

    He proposed it as one big package of five items, and it went down to defeat. And yet following that, Stephen Douglas stepped forward and took each element of those -- of grand bargain of 1850, the compromise of 1850, and passed them as individual pieces of legislation. Now, a different majority voted to admit California as a free state, thereby guaranteeing the North's control of the United States Senate forever, then voted for the Fugitive Slave Act, which the South wanted. But nonetheless, all five passed.

    I wonder if there weren't elements of what the super-committee was talking about or in Simpson-Bowles that people could agree on and move together but not try and get it all done at once, but move items that there's some agreement on, and at the end of the day, end up with a majority who vote for, you know, different majorities who vote for virtually all the items to be found in Simpson-Bowles or to be found in the near deal that appeared to happen on the super-committee.

    BREAM: And we will talk with one of the members of the super- committee, Pat Toomey, coming up in just a minute. And we'll try to get a little bit more detail from him. Now that they have called an impasse, maybe he can give us a little bit more scoop.

    But publicly, we know that some of the sticking points for the Republicans -- it was about -- they wanted are to see entitlement reform, the Democrats were adamant that that was something they wouldn't talk about, although some say they did ultimately put it on the table. The Democrats, though, of course, blaming the Republicans, saying they were not willing to get rid of the Bush tax cuts, and in their language, they were protecting their millionaire and billionaire friends.

    So with those two big issues...

    ROVE: Yes. Well, see...

    BREAM: ... blocking everything else, could they find some common ground?

    ROVE: Well, look, the Democrats -- look at the heart of that. The Democrats say, We won't cut a dollar in future spending unless you give us big tax increases on the tune of trillions of dollars. The Republicans came up with revenue -- with tax reforms that generated additional revenue -- Senator Toomey can tell you about those -- that were in the hundreds of billions of dollars. But the Democrats literally said, We'll not cut a dime in spending unless you give us billions of dollars in tax increases.

    And look, here's what's going to happen as a result of the intransigence of the Democrats, unwilling to make any deal whatsoever. The automatic cuts fall on defense, $456 billion. That's the smallest part of the budget that we're going to talk about and the biggest cuts go there -- $294 billion from non-defense discretionary. Most of the budget is to be found in mandatory spending, and yet a minority of the cuts, the automatic cuts that start in 2013, come in the mandatory programs, $123 billion for Medicare and $47 billion from other mandatory.

    And the Medicare cuts are disproportionately reductions in the amount of money we pay doctors and hospitals for providing these services, which means we're going to have fewer doctors and fewer hospitals available to do these things for Medicare patients.

    BREAM: And you mentioned the things that will kick in with sequestration. Of course, that's what happens if they didn't reach a deal. so we heard the president say today if there is any congressional effort to go around sequestration, to get rid of these painful automatic cuts that kick in, he's not going to go for it. He said there are no easy off-ramps here. So what do you think? Do you think that effort will ramp up on Capitol Hill?

    ROVE: I think there's going to be -- they're going to examine all their possibilities. And again, let's go back to if we want to try and to get to $1.2 trillion, there are two ways to get there. One is to cut 1.$2 trillion all at once in a package that neither the -- you know, that the -- that Republicans are -- they have offered one, but the Democrats won't go for because it doesn't have enough tax increases, which means more future spending.

    Or you can go at it a bill at a time, and I think that's what's going to happen. The House Republicans are going to start taking elements of Simpson-Bowles and of the proposal that Senator Toomey others laid out in the super-committee meetings, and start to move it through the House and send it to the Senate, so that if there's no progress on this, it's on Harry Reid and the Democrats.

    But look, let's be honest. Where it really belongs is on President Obama. He is the president of the United States. He should be leading this process. He should be -- he says he's very engaged in helping settle Europe's debt problem. Maybe he ought to be engaged even a little bit in trying to solve the debt problem in the United States!

    BREAM: All right, So Karl, moving ahead to the 2012 race, how does the GOP, whoever the eventual nominee, take on this issue? Because if the language from the president and the Democrats continues (INAUDIBLE) and we know they're going to say this is the Republicans' fault because of protecting their rich friends.

    ROVE: Well, look, what you do is you go back to what the president said in the 2008 campaign. There's lots of campaign footage of him talking about how he's going to stop the deficits and how he's going to bring spending under control and how he's going to right the political -- excuse me, the financial house of the United States. And those are on camera and it's his voice and his words.

    And what I think the Republican presidential nominee ought to say is, Here's what he promised you, and aren't you disappointed? Don't you have some regret? He spoke beautifully, but he didn't deliver on what he said he would do. And look, that -- that's the point. This president has failed to lead. He's been absent without leave on this issue. He criticized the deficits of the Bush years but has run up more debt in three years than happened in the previous eight years combined.

    I mean, we are on a fiscal path that is unsustainable. And the president seems -- while he said the right things in 2008, seems completely unconcerned or unable to act today.

    BREAM: Karl, I want to ask you very quickly before we let you go, what do you make of the new polls that show that Newt Gingrich over the last week or two has really risen up to challenge Mitt Romney at the top of the race?

    ROVE: Well, we've had a series of candidates rise, and most of them fall. And Newt is the latest one. And you can understand why. In these debates, he's been the most informed person on the stage. And he is -- you know, got -- got -- taken an opportunity to rise up as others have fallen.

    Now we'll see how well he takes, how well he does in building this in the early states into something that will matter on January 3rd, when they start going to vote in Iowa, and shortly after that, when they vote in New Hampshire and South Carolina.

    And we'll also see how he survives the media scrutiny. One of the reasons that these others have fallen is they've gotten the bright light on them, and they aren't used to it and they've -- and they've -- they've wilted under it. We'll see how well the speaker does.

    BREAM: Karl, a treat to see you tonight, and the whiteboard. We're very excited that it made an appearance tonight. Thank you, Karl.

    ROVE: Well, not only that, but I've also got my -- oops, no, I don't have my iPad with the new scribble function on it to be an automatic whiteboard. I've now gone high-tech, as well.