This is a partial transcript from "The O'Reilly Factor," July 20, 2006, that has been edited for clarity.

Watch "The O'Reilly Factor" weeknights at 8 p.m. and 11 p.m. ET and listen to the "Radio Factor!"

BILL O'REILLY, HOST: "Personal story" segment tonight, for the first time in his tenure as president, Mr. Bush addressed the NAACP.

(BEGIN VIDEO CLIP)

BUSH: Now we'll work together. And as we do so, you must understand, and I understand, that racism still lingers in America.

(APPLAUSE)

It's a lot easier to change a law than to change a human heart. And I understand that many African-Americans distrust my political party.

(END VIDEO CLIP)

O'REILLY: Joining us now from Atlanta is Reverend Al Sharpton. It was a conciliatory speech by the president. It was respectful, I thought, to the NAACP and its audience. Am I wrong?

AL SHARPTON, REV., CIVIL RIGHTS ACTIVIST: I think it may have been conciliatory in tone, but I didn't hear him really address policies that really would have shown that he wanted to address civil rights issues of the day. He never mentioned affirmative action. He said racism lingers. Not even a mention of affirmative action or how we're going to catch up.

He talked about education, but he said that we would push no child left behind, a program he didn't fund. And dealing with schools. So it was strong on rhetoric, short on real policy and substance.

O'REILLY: All right. Maybe you can explain this to me. Because you know, I'm not as smart as you are.

SHARPTON: Oh, right.

O'REILLY: There's no question about that, Reverend. You're much smarter than I am. Under the Bush administration, more money is being given to inner city public schools in the history of the country. In fact more money is being given to public education in the USA than anywhere else in the world.

And now you come on "The Factor," you a no-spin guy, and say Bush is not funding No Child Left Behind. I'm saying, here's the money. It's going out. So where am I wrong?

SHARPTON: To give more money is not to give what you committed in terms of your own funding mandate. I'm saying he didn't fund what he mandated.

O'REILLY: More money, it's historically high.

SHARPTON: It's historically high compared to others. It's not what he said and he's even saying that he wants to deal with charter schools and public education charters.

But what happens to the majority of students that cannot deal with public education charter schools? The job of American presidents is to give quality education to everybody. Not select few that can choose their way out of a bad school.

O'REILLY: You know as well as I do that money doesn't mean you're going to get a quality education. I mean, I had 60 kids in my class at Saint Bridget's School, 60, 6-0. Look how I turned out. I did not have any money. Nobody had any money. Come on.

SHARPTON: Bill, you raised the question of money how he increased the budget. What I'm saying is his policy of public education choice and charters does not address all of the students. It addresses those that can escape. You don't need an education policy based on who can get out of bad schools.

O'REILLY: If you allow vouchers to all the poor kids, no matter what color, would you solve the problem right away. But you don't want to do that.

SHARPTON: But all kids can't get a voucher.

O'REILLY: Well, it would if you would allow it.

SHARPTON: Vouchers at best only for those who can get them. You cannot finance a voucher system that's for everybody. The voucher for everybody is called public education.

O'REILLY: Florida does. If Florida can do it, anybody can do it. And it was struck down by the left, who didn't want vouchers. What else? What else? Were you insulted by anything the president said?

SHARPTON: Well, first of all, I think that you've got to say that many of us are still insulted it took five years to get there and then you discover that there's still racism there. When you get there you really don't say anything you're going to do about it.

He finally said he wants to see the Voter Rights Act renewed who no amendments. He did not say how he's going to have the Justice Department enforce that enforcement. Without enforcement the Voter Rights Act...

O'REILLY: I don't know what you're talking about now. But OK.

SHARPTON: Never mentioned anything about enforcement.

O'REILLY: Is there anything the president — is there anything the president said today that impressed you, one thing?

SHARPTON: I think the fact that he said what many people will not say around the right and even on this station that there's still racism in America. It's going to make it hard for a lot of people that said that's in the past. Even George Bush admits that.

O'REILLY: OK. You think there's racism on both sides?

SHARPTON: There is racism on both sides of what?

O'REILLY: Both sides. There's racism in the white community and in the black community. Is that fair?

SHARPTON: I think that what he was addressing today...

O'REILLY: I know what he was addressing. I'm asking you.

SHARPTON: I think that there may be bias on all sides. But racism takes power. And he addressed that today. I wish he'd given it a remedy.

O'REILLY: All right, Reverend. Always a pleasure to have you on the show. We appreciate it.

Copy: Content and Programming Copyright 2006 FOX News Network, LLC. ALL RIGHTS RESERVED. Transcription Copyright 2006 Voxant, Inc. (www.voxant.com), which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon FOX News Network, LLC'S and Voxant, Inc.'s copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.