The following is a partial transcript of the May 18, 2008, edition of "FOX News Sunday With Chris Wallace":

"FOX NEWS SUNDAY" HOST CHRIS WALLACE: Well, the news for congressional Republicans couldn't be much worse. In the past couple of months, three House seats thought to be safe for the GOP have been lost to Democrats in special elections.

So what can Republicans do to avoid a drubbing in November? For answers, we turn to master GOP strategist Karl Rove.

And, Karl, welcome back to "FOX News Sunday."

FORMER WHITE HOUSE DEPUTY CHIEF OF STAFF KARL ROVE: Good to be here.

WALLACE: Let's start with some numbers, because I know how you like numbers. Take a look at a recent New York Times poll which found that in a generic ballot question — which party do you intend to vote for in November's House election? — 50 percent chose the Democrat. Thirty-two percent said the Republican.

And Congressman Tom Davis sent a 20-page memo to his GOP colleagues in which he said the political atmosphere facing House Republicans this November is the worst since Watergate.

Is the situation that bad?

ROVE: Well, it's bad. I would remind you the so-called ballot was 13 points in 2006, so it's actually one point better than it was in a bad election.

But, no, the Republicans have got...

WALLACE: Well, in the Times poll, it was 18 points, so...

ROVE: Oh. I thought it was 50-38, but...

WALLACE: Fifty-32.

ROVE: Oh, oh, you're right. Eighteen, even worse.

WALLACE: Yeah, it's even worse.

ROVE: But look. The Republicans have got three things they need to do strategically and three things they need to do tactically.

Strategically, they better get their act together with an aggressive agenda of reform here at home about the things people are talking around the kitchen table.

What are the Republicans going to do about health care? What are they going to do about providing reliable and affordable energy? What are they going to do about jobs and keeping our economy innovative and competitive, encouraging exports? What are we going to do about helping people grapple with the cost of college education?

We've got great answers, Republicans do, on this, but they better get their act together in laying this out in a comprehensive way.

Now, leader Boehner understands this. He began several weeks ago — several months ago, actually — working with Adam Putnam and Eric Cantor, two of his lieutenants, particularly Adam Putnam, to get buy-in to such an agenda. But they need to lay it out.

In addition, they have to be very clear about there are consequences of victory and defeat in Iraq.

And finally, they've got to show sharp contrast with the Democrats. They've got to find ways during the course of legislative debate to say, "Here's where we stand, and here's where the Democrats stand."

WALLACE: Well, you talk about showing contrasts with Democrats. The primary tactic in some of these election races seemed to be put up a picture of Barack Obama and say the local candidate is a liberal.

ROVE: Yeah. No, look. There are three tactical changes they need to make, and the biggest one is they need to treat the arguments of the Democrats as substantive and get away from labels.

Example: In the Mississippi special election — look, the Democrats in these races are running pro-life, pro-gun, anti-tax conservatives, pro-prayer-in-school conservatives.

You can't stand up and say, "That conservative Democrat over there is a liberal." You need to treat them — you know, running an ad that says "liberal, liberal, liberal" is just not going to work. You need to treat their arguments substantively and engage on the merits.

WALLACE: Well, you talk about — you identified the problems where you say they need a reform agenda — tax reform, earmarks, energy.

Give me one example in just one area of where you think that there's a dramatic solution they could offer that would really contrast and say to the voter, "Hey, I'm going to go for the Republican, not the Democrat."

ROVE: Let me give you two. Taxes. We ought to keep taxes low. And no earmarks at all. Moratorium on earmarks. None.

To health care, Republicans are in favor of saying you ought to be able to save tax-free for your out-of-pocket health care expenses.

If you get health care regardless of whether you get it from your employer or out of your own pocket, you ought to get a big deduction on your income taxes. Small businesses ought to be able to band together to pool their risks to get lower rates like the big companies do.

And we ought to stop the junk and frivolous lawsuits that are driving up the cost of health care.

I could give you a few more things on health care like that, but my point is the Republicans have got a plan. They need to go out there and be talking about it.

WALLACE: All right. Let's talk about an issue that you haven't mentioned and a lot of Republicans think is a big problem, and that's President Bush.

Take a look at these numbers. A recent Gallup poll found 69 percent of Americans now disapprove of the job he's doing. That's the highest disapproval for any president in the poll's history.

And in his memo, Tom Davis said, "A congressional GOP brand tied to George Bush is struggling." Question: Should House Republicans break with the president?

ROVE: Well, not even Davis, who's a very smart guy, whom I like — he's got an interesting mind. Even he doesn't suggest breaking with the president.

In fact, he suggests that the Republicans in Congress and the Republicans in — and the Republican president find ways to both emphasize these sharp contrasts with Democrats.

Look, there's one thing — the president's job approval is not the lowest in history. His disapproval is the highest, but his approval is not the lowest. The lowest was at least three presidents below him.

And even below him today by a considerable margin is the Democrat Congress. Their approval ratings are worse. And what we need to do is sharpen the contrasts with the failed promises of the Democratic Congress.

They started up here, went down here very rapidly, and it's because they failed to deliver. And Republicans in Congress need to make certain that they are accentuating the reasons why the Democrats have failed.

WALLACE: Well, you talk about not breaking with President Bush, but in recent days we've seen John McCain seem to distance himself pretty aggressively from President Bush on climate change, on the response to Hurricane Katrina. Are you saying that's a mistake?

ROVE: Look, what's a mistake is to triangulate, to pick out something that's phony and false and deliberately try and find an excuse to distance yourself.

What is important is to be who you are. Both the Republicans in Congress and McCain need to say, "Here's who we are." And in some instances that's going to be different than where the president is. That's normal.

That's what happens when you run for office and say, "Here's what I believe in, and here's what I want to do, and here's what my priorities are."

That's what they ought to do, rather than following the Clintonian model of triangulation, which is a deliberate effort to pick out something and say, "You know what? It really doesn't matter where I am on this. I just want to be someplace different than the president."

WALLACE: Let me bring up another issue that rose on the horizon this week. The California State Supreme Court ruled that gays have a constitutional right to marry.

That issue is now likely to be on the ballot in California, in Florida, possibly in Arizona. Do you think same-sex marriage will be as strong a mobilizing tool for conservatives in 2008 as it was when you were in the White House in 2004?

ROVE: Not as significant, and simply because there aren't as many battle fronts on which it's being fought.

In 2004, there were, you know, a large number of states in which this was on the ballot. As you say, it will be on the ballots of three important states — Arizona, Florida and California — in all likelihood, but not on the — I can't remember the number, but...

WALLACE: Eleven.

ROVE: Yeah, 11. I was going to say over a dozen, but — and they were geographically dispersed around the country.

But look. You don't know how this issue is going to play out. In 2004, the issue had a lot of life on its own, and it will — we got five months here for this issue to develop.

WALLACE: All right. Let's talk about — turn to the presidential election. We saw this firefight this week between Obama and McCain after the president made his remarks comparing negotiating with radicals or terrorists to Nazi appeasers.

And Obama, whether it was directly meant or not by the president, and the president's being pretty coy about whether or not he meant — I just saw an interview he did today in the Middle East. Obama certainly took the ball and ran with it.

ROVE: Right.

WALLACE: Smart politics for Obama?

ROVE: Well, look at it in two frames, short term and long term. Short term, very smart politics. Short term...

WALLACE: For Obama.

ROVE: For Obama — meaning next Tuesday. Look, he faces Oregon and Kentucky. Last week he went into the West Virginia primary and the headlines were all being driven by Clinton. And I think he wisely said, "Look, if I pick a fight with Bush and McCain on this issue, even if it's a stretch, I'll be able to dominate the headlines going into the Oregon and Kentucky primaries. Clinton can't afford to buy T.V. I'm going to push her off the front page." So it was very smart.

Broader frame, going up to November, I'm not certain it's a smart move. If the argument is who's a better commander in chief, who's going to be tougher on foreign policy, then the answer is going to be John McCain.

And I also think — look, this also focuses on his original statement which was that he would, in his first year, without precondition, sit down with the leaders of various rogue nations — Iran, Syria, North Korea, Cuba and Venezuela — and work things out with them.

The question is what can he personally say or offer in those meetings that's going to cause those leaders to change their behavior? And between now and November, he's going to have to answer that question.

WALLACE: We've only got about 30 seconds left. Let me ask you the follow up. And we saw this with Chris Dodd in our, quote, debate in the first segment.

They feel any time they can say McCain and George Bush in the same sentence, that's good for them.

ROVE: Well, you know, that's simplistic. The American people are going to make a judgment about John McCain, and nobody is going to sit out there and confuse John McCain and George Bush.

They were rivals at one point. They've run against each other. They have different opinions and different ideas, different life experiences.

It is a mistake for the Democrats to count on simply saying, "McCain, Bush, Bush, McCain," and expect to win this fall.

WALLACE: Thank you so much for coming in. We'll see if the House Republicans up there on the Hill listen to you.

ROVE: There we go.

WALLACE: All right.