This is a partial transcript from Hannity & Colmes, August, 6 2003  that has been edited for clarity. Click here to order a transcript of the entire show.

ALAN COLMES, CO-HOST: Breaking news tonight, Arnold Schwarzenegger (search), as you are seeing, has announced he will run for governor of California. Joining us now is FOX News political analyst, Susan Estrich. Joining us here in New York, the author of the new book, Treason, Ann Coulter, to talk about this.

Let me begin with Susan. As a California person, what is your reaction to this, and is this really, really bad for Gray Davis (search)?

SUSAN ESTRICH, FOX NEWS POLITICAL ANALYST: Oh, I think it's probably really, really bad for Gray Davis.

COLMES: You can hear the cackling in the happiness for Sean Hannity.

ESTRICH: Sean knows I am always honest.

SEAN HANNITY, CO-HOST: You are always honest, no doubt about it.

COLMES: Tell us what you foresee happening here.

ESTRICH: Well, Gray Davis is now going to go down on his hands and knees to the California Supreme Court and say, ‘Please, let us not let this go forward.’ He's got a couple of arguments slated in the California Supreme Court. Putting my law professor hat on, I don't think the Gray Davis arguments in the court hold a lot of arguments. His silliest argument, I have to say, is that he should be allowed to succeed himself if he's recalled. In other words, the argument is, you can vote to recall him, but you should also be allowed to be on the ballot. I can't say that one with a straight face.

COLMES: His best argument is about the process and whether or not this is good democratically for the state of California.

ESTRICH: It's terrible. What's going on in California right now is awful, democratically speaking. I have to say that. And I also have to add that since when do we announce candidacies on The Tonight Show. I mean, the notion that we are all on the lawn in Burbank waiting to hear the news from the The Tonight Show.

And we've got the battle of the accents now with Arianna and the Greek accent and Arnold…I mean, the jokes are going. And Angelyne with big breasts. We have a lot of Looney tunes candidates, but let's be honest. Arnold is a serious candidate here, and he becomes the punitive frontrunner. The question is, will Maria be the next Hillary?

HANNITY: No, I don't think that's possible.

ESTRICH: Oh, I don't know.

HANNITY: He was very inspiring. Now we are going to get to Ann Coulter in just a second. We also have…Matt Drudge is going to be joining us any minute, and we will talk about this. But first, we are going to check in with FOX News correspondent Adam Housley. He is right where Arnold just held his press conference. Big news in California today, Adam.

ADAM HOUSLEY, FOX NEWS CORRESPONDENT: Sean, there's no other way of putting it than to call it a political bombshell. Susan and I were talking about this today, about the different political candidate that's might get on the Democrat side. Most people thought as of two o’clock this afternoon Pacific Time, Arnold was out. It's been the word for a couple of weeks here.

I was told basically about two minutes before my FOX report earlier today, we get a phone call saying he had pulled back a press release that he written and had not given to the press, that explained why he would not run for governor. He had basically pulled that back, and his political advisers who were saying, he's out, were saying, hey, we have a chance of him getting back in, maybe 50/50.

Well, on The Tonight Show he sat down, he talked with Jay Leno (search). Jay Leno asked him, are you going to get in? And they played a little joke. They actually threw up color bars and tones. For those in television, it's that sound you hear like when the emergency broadcast system comes on. Then he came back to him to him, and he says, ‘That's what I think about that.’ And, of course, the audience roared. He played it up. He was very Reagan-esque in that respect, that he played it up. And then, they asked him again, what do you think? And he went into an attack on Governor Davis, saying that he and other politicians here in California have a disconnect from the populous and that he thinks he can bring them back, and that's why he decided to run for governor.

When he called some of his advisers who were close to him, they were as shocked…either than or they were darned good actors and should be in his next movie because they were unbelievably shocked on the phone when I spoke with them. They said, hey, we don't have the papers yet, which is not too hard to do, but they have to get the papers now. They have to get 65 signatures. They have to get $3,500, which again, neither is going to be a problem for him. And this campaign has already begun. Guys?

HANNITY: FOX News correspondent Adam Housley where Arnold just held his press conference. Adam will be checking in throughout the night. Thank you so much for being with us.

Let me turn now to a best-selling author. Her latest book called Treason. Ann Coulter is with us. I am listening to him, the way he handled himself was inspiring. The way he addressed the question of, are you a Republican or are you a Democrat? I am for the people. We have serious problems in this state. I tell you, I thought he was…I thought he…right out of the box, a fantastic start for him.

ANN COULTER, AUTHOR: Yes, don't get too excited. He's not that conservative, but he's probably the best they can do in California. And this is big news because the odds are overwhelming that he will be the governor if he runs. That's why this is such big news right now. You can imagine some odd twists and turns or who else might get on the ballot, but it's really hard to see anybody beating Arnold Schwarzenegger. That could be just what the state needs.

HANNITY: Susan, you mentioned earlier that Gray Davis' only hope right now was probably to go to the Supreme Court of California, and I guess we will probably anticipate that challenge. They have already, from a legal maneuvering standpoint, have signaled that they're going to try to push this vote back into some time next year.

One of the things the Democrats have been saying is they have been very critical of the idea of, ‘Republicans are trying to undo an election.’ We all know that's not the case. Recall is part of California law. And they followed the process, and they did it legally. Correct?

ESTRICH: Well, it is part of California law, Sean. And every governor or every recent governor…they talked about recall. This is the only time it's gotten this far. There are challenges to the…they have a couple of challenges to the recall. One is that what's happened in this state now is it's become a business. You import people from out of state. You pay them a lot of money. They stand at the market, and they collect signatures. The going rate is about $1 a signature.

I think when this is all over, we in California have got to take a hard look at the system. I happen…I am no Gray Davis fan, believe me, you know that. But he has not committed high crimes and misdemeanors. I think the real question is to what he has done that is so wrong that justifies this.

COLMES: Let me bring in right now from Miami Matt Drudge. I wonder if, Matt, you knew this before Arnold did, since given what you do on The Drudge Report.

MATT DRUDGE, COLUMNIST: To the contrary, we're only as good as our sources, Alan Colmes. Our imagination if you're The New York Times. But I was totally thrown by this. Everybody going right into this was saying, no, it's a no. No means no. But it turns out no means yes in Hollywood (search).

Gentlemen and ladies, Ann Coulter and Susan Estrich, the biggest blockbuster this summer is not playing on the silver screen. We've got ourselves a hell of a campaign.

But what is an Arnold Schwarzenegger, beyond the sound byte of hasta la vista, baby? What is his policy? What is going to be happening here in the next two months? We need a brush up course on what...

COLMES: Gray Davis is going to try to move this to March, isn't he Adam?. He wants to move it. The longer time he has to campaign, the better it is for Gray Davis. He doesn't want a quick election.

COULTER: Right, that's absolutely right. I do think the recall is…seems to be working fine. It's been on the books since 1911, and this is the first time....

COLMES: But no governor…only once has a governor ever actually been recalled in the history of the state.

COULTER: Right, although there have been gazillion petitions filed. They were filed against Governor Reagan, against Governor Brown. It's nonpartisan

COLMES: Susan Estrich, I think this is the key here. Is this the kind of government we want? If this becomes precedent, we are going to see a lot more of this, aren't we, and perhaps other states wanting to jump into the fray. And anytime anybody in elected office does something…maybe we will wind up with a Parliamentary form of government in the United States.

ESTRICH: Well, I'm real troubled by it, and I am also real troubled…I mean, putting aside the Gray Davis bit, I think it is troubling that you can put enough money behind somebody, anybody, and get this kind of thing on the ballot.

Also, you've got to look at the list of candidates we have out here. And I am not putting Arnold down here, in particular, although Matt's right. Arnold is a big movie star, but he has no experience in politics. He has no experience in government. What would he do? I haven't a clue. They like him, but running a state budget is not that easy, guys.

DRUDGE: But I would rather have Jay Leno run for governor at this point. I don't know…you know, the first call I got is, you know, Drudge, we have pictures Maria doesn't know about. This is going to be the dirtiest campaign in the history of California.

HANNITY: Did the call come from Larry Flynt, Matt?

DRUDGE: I'm not going to tell you who the caller is, but it is going to be ugly. There's going to be accusations of steroid use, there's going to be accusations of adultery, there's going to be accusations of anything in between. And California's got to be ready for a roller coaster ride like it has not seen in the next two months.

HANNITY: I want go back to this issue of legality for just a second. I want you to expand on this because you have this legal background, you're a constitutional attorney. Recall is part of California law. There's nothing immoral. There's nothing unethical. When we in fact follow the law, which they did in this case, and holding a politician accountable for a terrible track record, as Arnold articulated tonight.

COULTER: Right. And there's nothing surprising that this is the first one that's gotten this far either. It really is outrageous. The governor is visibly corrupt, buying off state employees with absurd pensions, 90 percent of their pensions…of their salaries they will get as pensions…this is what has bankrupted the state. They now have a deficit larger that is larger than the state budgets of all 50 states but California and New York.

It's…at some point the voters rise up and start slitting throats. That's what's happening. Unfortunately, it doesn't end with the governor. They need to throw out their state legislators as well.

ESTRICH: I live here, guys. Stop.

HANNITY: Susan.

ESTRICH: I live in this state. This is not the voters rising up. The initiative for the recall...

HANNITY: Why hasn't it happened then? It has been in place since 1911.

ESTRICH: Because we now have a business of signature collecting. That's what's going on now. Whether the recall will pass is a different issue.

HANNITY: Susan, the people of California are going to elect this man governor.

ESTRICH: They may or may not.

HANNITY: You want to take a bet on that?

ESTRICH: They are troubled by a system which somebody could win with 30 percent or 20 percent. Look at the candidates on the ballot. Some of these candidates are loons.

HANNITY: Matt Drudge, the way he handled himself tonight, throughout the rest of this campaign, he is the most electable candidate that is out there. And every once in a while, California throws the country a political…the equivalent of a political earthquake, Proposition 13 being one of them. And this happening here being another.

DRUDGE: But, Sean Hannity, when Ronald Reagan (search) ran for governor, we knew what he stood for. We knew his policies. We knew he was on a mission. This is coming from a promotional campaign tour for something called Terminator. If you take California seriously, I don't know how you can say Arnold Schwarzenegger is a shoe in. I think it's a long way between now and...

HANNITY: I will tell you, though…I will tell you why, Matt, because I think we do know his politics. He's been pretty outspoken in the past. We have had him on this program in the past. Arnold is a moderate…he's not a conservative.

COULTER: He is a liberal Republican.

HANNITY: He is a liberal Republican. Ann, I think, has it right now. I thought he was spending too much money on this after-school program that he was out there promoting and which he was on this program promoting.

But I think by and large, when you look at the economic crisis, the energy crisis, and the feeling among many Californians that Gray Davis was dishonest, Matt, in this election, he knew the economic problems, but he was not forthcoming about it, they want some honesty and accountability.

DRUDGE: But I am not sure go to Jay Leno to get our candidates. Karl Rove had met with Schwarzenegger. This is a sign…the White House checked and approved this. They believe that Schwarzenegger can go all the way with this, as apparently you and Ann Coulter do also.

COLMES: I find…and as Sean just said, he is probably a moderate to liberal Republican. But I find it fascinating that conservatives like you are going to get all excited about this liberal Republican, a guy if positions were held by a Democrat, and many Democrats do hold Arnold's positions, you would go crazy and would never support. But because he has the Arnold label next to him, you are going to support him, right?

COULTER: No, I promise you when he is governor, I will be denouncing him. I think he will...I do anticipate that. But I have to say, up until I heard he was running, I was all for giving California back to Mexico. This is a step up from that.

COLMES: But the fact is you are not going to support him on a whole bunch of things.

COULTER: California is a mess. It is a disaster, that state.

COLMES: What political experience does Arnold Schwarzenegger have to fix that?

COULTER: He can get press attention, and I think that makes a difference because they need someone who can stand up to the legislature and say, we can't have these absurd pensions. I am not going to buy your votes with pensions, and that is what Gray Davis has done.

COLMES: You are a political person. You are also a California person. Does it matter that he has no political experience?

ESTRICH: Yes! I got into an elevator with Gary South, about two weeks ago, who is Gray Davis' chief political guy, and he looked at me and he said, do these people understand what it takes to actually run the state of California? I mean, this is not a Terminator tour.

I really…I agree with Matt Drudge, who used to live out here, this is a tough state to run. You don't just stand up to a legislature. You have to work with them. Arnold Schwarzenegger is going to go through a very tough campaign. Gray Davis, like him or hate him, is a mean SOB when it comes to campaigning.

COLMES: But are people, Susan, going to give Arnold the benefit of the doubt? Isn't the star power, in many respects, going to trump lack of political experience on the part of the voter?

ESTRICH: It may until you start reading…seeing those pictures that people are going to send to Drudge.

COLMES: But they are going to view that as dirty campaigning. That's dirty politics.

ESTRICH: Dirty politics works, unfortunately, I am here to tell you.

COLMES: I hope the Democrats don't do that. I hope that's not the base on which this campaign is run. I don't want to see Democrats do that.

ESTRICH: What else will it be?

HANNITY: Matt Drudge, it's going to be less than 70 days. What's very interesting, Drudge…and I love your very unique perspective on the way Gray Davis has been handling this since it has happened. Obviously he's going to court, trying to extend the time period before this election takes place. But more importantly, he has reversed himself on a key, contentious point among Californians, and that is granting driver's licenses to illegal aliens, something that he has vowed not to do in the past. Clearly now, appealing to the Latino vote. I think it is going to be a big issue in this campaign.

DRUDGE: Well, he is going to be fighting for survival. You're correct, Susan Estrich. It is going to be so dirty. I would buy stock in the National Enquirer, The Star, The Globe, Weekly World News. We are going to a tabloid…move over Kobe, the Terminator's in town.

HANNITY: What do you think about the pandering, though, he's been involved in? That and the transsexual bill that he just signed onto as well?

DRUDGE: I am glad you think this is going to be run on issues, Sean, because it certainly isn't.

COULTER: That's why Arnold Schwarzenegger is at an advantage. It's a very short campaign. You only have so much time to get dirty. Also the fact that I think he is going to be a liberal Republican…you see that is a good thing in my book because I think California is virtually ungovernable. It is going to be a disaster, and I don't want to have this laid at the feet of a conservative Republicans.

HANNITY: I think, Matt, you're right in one sense. I am hearing, and I heard up to this point, all of the things that you're alluding to, that we're going to hear in the days, in the weeks to come, and Larry Flynt is in the race, and we know what he's capable of. And obviously, the Democrats have a lot at stake here. From Terry McCauliffe to Bill Clinton to Hillary, all vowing to go and shore up Gray Davis, this is going to be probably as ugly as it gets.

DRUDGE: Well, but also Estrich's point is post-Clinton, does it work? She thinks dirty politics still does work. I am not sure we are going to see chaos. Again, I go back to what is an Arnold Schwarzenegger? What is a hasta la vista, baby? Beyond that, what does he stand for?

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