• With: Karl Rove

    This is a rush transcript from "On the Record," October 15, 2013. This copy may not be in its final form and may be updated.

    GRETA VAN SUSTEREN, FOX NEWS HOST: The clock is ticking to the debt ceiling deadline and Senate leaders now are renewing talks to prevent default. Also, the House announcing it will not vote on any fiscal legislation tonight. Karl Rove joins us. Karl, nice to see you and the news is breaking every second. We thought the House was going to vote and now that is out for the night. Your thoughts?

    KARL ROVE, FOX NEWS CONTRIBUTOR/FORMER SENIOR ADVISOR TO PRESIDENT GEORGE W. BUSH: Earlier today, senior White House -- excuse me, senior House leadership aides thought they had a consensus that could bring a plan forward. The plan was not dissimilar in the large aspects from the Senate plan, January 15th, fund the government through January 15th. Raise the debt ceiling through February 7th, have a provision with the medical device tax, have a provision on requiring income verification as is written in the affordable care act.

    But it did have two other items to it, removal of the congressional waiver at least from members of Congress and the president, and it removed the provision that's been talked about in the Senate bill that is a $63 a month give away, remove it to special tax on union members for reinsurance. They removed that.

    But, look, as of tonight, the House Republicans have announced they can't come together. They haven't found an agreement on that package. It means that the momentum is going to shift back to the Senate, which itself couldn't come up with a package that would get enough votes to pass.

    And so, you know, I don't know if you have ever seen the movie "The Campaign," starring Will Farrell and Nick Galfanakas, Nick plays the Republican candidate for Congress in the fourth district of North Carolina. His slogan is it is a mess and it is a real mess right now in Washington.

    VAN SUSTEREN: It's a mess and sometimes it seems rather clinical to me. I get sort of used to this mess. Sometimes it seems real and we just had Lynn Petrazzuolo on our air who is a small business person and it's very real to her. Just sitting like five or six inches from her. I felt the pain. Everybody in the studio felt the pain.

    These members of Congress, House and Senate and the president knew in August that September 30th was going to roll around. They knew in May the debt ceiling problem was going to roll around in mid October and now they have made this mess.

    Apparently what stopped any sort of progress tonight is Heritage Action, which is a conservative group, who apparently sent some memo around that to Republicans in the House saying it doesn't do anything to ObamaCare. And that suddenly was putting, you know, a stink bomb into any possible vote tonight. So, yes, it is a real mess, but it's a very painful one.

    ROVE: Look, it doesn't do much to ObamaCare. It does something. It removes that congressional waiver, which is a big thing for the American people. If it did have something on income verification, that would save a lot of money. President Obama is ignoring the part of his own law by not requiring income verification. This would require it.

    And it did something about the medical device tax. But, look, here is the big deal. We have 233 Republicans in the House. If you have 17 of them defect then you can't pass something on Republican votes only. The ironic thing is by insisting on a bill that meets the needs of those 17 to 20 to 25 members of Congress, who are going to be driven by Heritage Action's pronouncement on this.

    We are going to end up being in a place where we have a bill that is voted on by a majority of Democrats and probably a majority of Republicans and passes the House and is satisfactory to what -- it's not going to be anything close to what Republicans would get today. We cannot let the government go into default. Frankly, you know, you mentioned May. May was when we actually ran up against the debt ceiling.

    Government has been using extraordinary measures since then and runs out of those essentially in two or three weeks. It can't -- I have talked to budget experts both inside Congress and outside the Congress, who say that these extraordinary measures, these sort of gimmicks that any administration gets to use to sort of delay the debt ceiling we are have run out of them here in essence the first week of November.

    And real pain then begins to bite. We have enough money to pay the interest on our debt but then we have to stop paying other people, whether it is companies like the company that Lynn has or bigger contractors or stop paying some of the government's bills to people who are due a payment, you know, whether it's Medicaid payment or a Medicare payment or a veteran's benefit or so forth.

    VAN SUSTEREN: You know, I have hard time understanding apparently this income verification taken out of the last sort of -- last edition of this GOP bill that they were working on. But, for the life of me, I don't understand why wouldn't anyone want income verification to make sure if someone gets subsidies he or she is entitled to it? I don't get why is that such a -- what's wrong with that? Either you are entitled to it we will give it to you under the law or you are not. We should verify that. What's wrong with that?

    ROVE: Nothing. But here's the deal. The president did not -- he had three and a half years to prepare for this moment, and the Department of Health and Human Services did not have the computer systems in place to check your income. As part of a seamless project and also in order to keep the number of people who thought they had coverage, but really didn't, you know, in order to keep that number from realizing what they didn't have coverage, the president said well I'm going to give you a gimme.

    You get a gimme for the first year. We are not going to verify it. It's the honor system. We will worry about that in 2015 after the election. The president did that just like he did the employer mandate, the president waived both of these requirements because he was not prepared to enforce the law and wanted to avoid the political consequences in 2014 in the mid terms.

    VAN SUSTEREN: Well, that right wing conservative newspaper known as the "New York Times" said on Sunday that the reason why they are so late in fixing the computer system is because they waited until the Obama administration waited until after 2012 to issue the rules so that they could begin this. So, you know, it even goes deeper than that in terms of like playing with these dates to avoid having the American people have a shot at considering things and voting accordingly.

    ROVE: Right, exactly. Look, this is the most political administration I have ever seen. It's also one of the more incompetent ones. I love this. This is just a minor glitch like Apple or any major tech company has. Look, every major tech company would have had the software written two and a half years ago and subjecting it to all kinds of tests, including the tests necessary to make certain they had scalability. To say they could handle the volume.

    We went through this in -- before the introduction of the Medicare part D. Now, admittedly, it was a much smaller program, but we made -- the Bush administration there were lots of discussions about testing it and making certain it was ready to go. In fact, at the end, in the scalability test, they indicated a certain volume he they thought was likely, 20,000 a day.

    So they designed the system so it could handle 150,000 applications a day. This system, which is designed to get 38, you any, their goal is to get about 38,000 people a day to sign up, couldn't even handle the initial day's traffic.

    VAN SUSTEREN: I hope the viewers heard that remark about the "New York Times" right wing conservative. Know I was being sarcastic.

    ROVE: Irony doesn't go well on television.

    VAN SUSTEREN: I will get a billion emails about that. Let me ask you one final thing. Those 17 defectors -- can Speaker Boehner basically clobber them, threaten committee assignments and everything else to try to sort of get them back in the fold?

    ROVE: Well, lack, Speaker Boehner has not used the techniques that have been used by his predecessors, Democrat and Republican alike. He has tried to persuade them. The question is whether these men and women are going to put the best interest of their party in the conservative cause above their own personal prejudices. They have already driven the Republicans in the House to vote for a bill that had no chance of ever passing in the Senate. The so-called defund bill.

    The day they passed it, the architect of the idea, Senator Ted Cruz said I don't have the votes to pass this in the Senate. I hope the House will keep fighting. At some point you have to focus on, as Ronald Reagan said, getting as much of the pie as you can possibly get. Get 80 percent you wanted to get and come back and try to get more later.

    They aren't going to be able to get 80 percent of what they want today because they have been weakened over the past two months by fighting for something that was impossible to get. The longer this goes on the less leverage they have.

    That's one of the reasons why Harry Reid threw the ball to them and said we are going to stop the Senate discussions and look to the House to do something because he wanted to weaken them further. He was hoping that they wouldn't be able to coalesce behind a plan like Boehner laid out this morning with the leadership and they haven't.

    VAN SUSTEREN: Karl, thank you, always nice to talk to you.

    ROVE: You bet. Thank you.