• This is a rush transcript from "On the Record," April 15, 2011. This copy may not be in its final form and may be updated.


    GRETA VAN SUSTEREN, FOX NEWS HOST: Did you hear what President Obama said at his fundraiser? Now, he didn't mean it for public dissemination, but he got caught by a "hot mic" and it was taped. Now, here's what he said.


    BARACK OBAMA, PRESIDENT OF THE UNITED STATES: You want to repeal health care? Go at it. We'll have that debate. But you're not going to be able to do that by nickel-and-diming me in the budget. You think we're stupid?

    When Paul Ryan says his priority is to make sure that we're -- you know, he's just being America's accountant, and you know, trying to, you know, be responsible. This is the same guy who voted for two wars that were unpaid for, voted for the Bush tax cuts that were unpaid for, voted for the prescription drug bill that cost as much as my health care bill but wasn't paid for.


    VAN SUSTEREN: So what do you think about that? Earlier today, we asked Karl Rove, former senior adviser to President George W. Bush and author of the book "Courage and Consequence."


    VAN SUSTEREN: Karl, nice to see you.


    VAN SUSTEREN: All right, the president got caught on that pesky little thing called a recording machine. CBS Radio has a recording of him at a fund-raiser last night, and he made some reference to Paul Ryan, the congressman from Wisconsin. But overall, the president step over the line get himself into some political trouble with that or just reaching out to the base?

    ROVE: Well, he's just trash-talking the Republicans in front of a Democrat crowd, and you know, I suspect exaggerating a little bit about the tone that he took in White House meetings. I don't think he probably said to the Republicans, You think we are stupid.

    But you know, it was not an attractive tone. Look, we're 18 months before the presidential election. He doesn't have a Democrat opponent. You think that he would be interested in being the Commander-in-Chief, the President of the United States, rather than being the "Campaigner-in-Chief," you know, a speech pol out there trying to get the vote.

    And that's exactly -- you know, this is just demeaning. We ought to - - the president ought to be saving time for getting good things done for the country and not be so intent upon trash-talking the Republican opposition and making it difficult to work with him.

    VAN SUSTEREN: What I thought was unusual -- and I suspect everybody does a little trash talking in private, just not everybody gets caught on tape -- and that wasn't the worst trash-talking I've ever heard in my entire life, by any means.

    ROVE: Right.

    VAN SUSTEREN: But I thought it was interesting he mentions Congressman Paul Ryan. It almost seemed a little bit to me like he -- there's been an awful lot of Congressman Paul Ryan on his mind, whether it was at the speech at GW or even last night, when he was amongst his friends. And I wondered if -- obviously, Paul Ryan has the budget out for the Republicans, but I wondered if Paul Ryan's getting a little bit under his skin.

    ROVE: I think Paul Ryan's right in his brain. In fact, remember, this started at the Blair House, which is where they had their first occasion to be in contact with each other in 2010. And that's where the president had his lunch eaten by Ryan, who took apart the bill and demonstrated that it was not going to reduce the deficit, it was going to add to the deficit.

    Ryan is a meticulous, thoughtful, articulate, deeply informed and passionate advocate, and President Obama has clearly not been in touch with -- you know, in January, he said, Oh, I've read Paul Ryan's proposal and it's serious. And then in the speech that he invited Paul Ryan to, he went out of his way to say it's not serious.

    Now, I suspect that what's happened is, is that the president's got a little jealous of the attention that Ryan's gotten and realizes the danger represented to the Democrats by Ryan's thoughtful approach. He's taken ideas like premium support, which used to be wildly supported by some Democrats, and has made it part of a conservative reform package. And I think it unnerves the president.

    VAN SUSTEREN: In your recent op-ed piece, you said that the Republicans won the debate over the 2011 fiscal budget that went down Friday night. Frankly, I thought the Republicans got rolled. They wanted $100 billion, at least some of the freshmen. It went down to $38 billion. Then I read the CBO report and I find out with all this murky math that it's really only about $351 million...

    ROVE: No.

    VAN SUSTEREN: ... in cuts, so...

    ROVE: No, it's not.

    VAN SUSTEREN: ... how do the Republicans win?

    ROVE: No, it's not.


    ROVE: First of all, you need to distinguish between budget authority, permission to go spend money, and outlays. Before you can go spend a dime, you got to get budget authority. And what that bill did is it cut out $38 billion in budget authority. And what the CBO said is, is that, We think about -- you know, the money that you increase defense by is going to get spent and the money that you cut is going to -- is going to only reduce outlays by $352 billion by the end of the fiscal year because most of that money that you've cut would have been spent in the future or you're retracting it from the past, so it doesn't affect the baseline.

    VAN SUSTEREN: But, well, let me just...


    VAN SUSTEREN: Let me ask you a question about that because I -- the intricacies because I dug into it and I understand what you're saying, but this is what the American people hear, $38 billion being cut from spending, whether it's, you know, promises and IOUs in the future, whatever. And now they see the actual spending reduction, the actual is $350 million is what...

    ROVE: No. No.

    VAN SUSTEREN: ... they're reading.

    ROVE: No.

    VAN SUSTEREN: And -- and they're hearing that it's non-partisan. That's what they're hearing.

    ROVE: No, no, no, no, no. What they're hearing is the CBO saying outlays. Now, there's -- everybody agrees. Even the CBO report yesterday said, Look, outlays are going to cut by $38 billion. The government is not -- not going to spend $38 billion.

    However, by September 30th, there will be only $352 billion -- million in cut from the baseline spending of the budget. The rest of it will be cut later. And then they go on to have a very odd paragraph. They say, We can't tell you how much this is going to mean over the long term because we've not redone our annual multi-year forecast of the baseline of the budget. What that means is they said, Look, you cut $38 billion out of the budget. It's going to take us a while to figure out how much of that is cuts this year that will be -- that will show up next year and in subsequent years.

    Let me give you one example. They made no effort whatsoever -- that $352 million number is discretionary spending only. It includes none of the mandatory. In a separate report, CBO says, We acknowledge that you're cutting $500 million in this year's expenditures for a mandatory program under Pell grant, and over the next 10 years, that'll save $8 billion additional above and beyond the $38 billion that we're cutting out of this years's budget authority.