This is a rush transcript from "Hannity & Colmes," July 3, 2008. This copy may not be in its final form and may be updated.

ALAN COLMES, CO-HOST: Welcome to "Hannity & Colmes." I'm Alan Colmes. And Rich Lowery in for Sean.

Nice seeing you once again, Rich.

RICH LOWERY, GUEST HOST: Hey, Alan. How's it going?

COLMES: Going well. Good to see you.

We get right to our top story.

Barack Obama has shattered fundraising records over the last year and a half, collecting nearly $300 million. If fact, if Obama keeps up his current fundraising pace, he's expected to exceed the money raised by both John McCain and the RNC combined.

How important will campaign cash ultimately be in winning the White House?

Joining us now FOX News contributor, Karl Rove.

Welcome back, Karl. Do you agree with that headline? I know that you have people who write the op-eds don't always write the headlines.

KARL ROVE, FORMER BUSH ADVISOR: Yes.

COLMES: The headline on the Wall Street Journal about him possibly buying the election. Is that yours?

ROVE: Well — no, it's not mine. And Alan, I not only disagree with the headline but I disagree with the statement that you made.

Barack Obama has been raising money at a prodigious pace, but he has not been matched by the Democratic National Committee, and I think it is unlikely that by the end of the contest that he alone is going to be able to raise more money than both the Republican National Committee and McCain, which is, you know, I think a slight overstatement of his fundraising ability.

COLMES: Well, you may be right because the RNC has raised a lot more money than the DNC as of now.

ROVE: Right.

COLMES: Is it — does it matter? Is this about who raises the most money or are there other factors more at play?

ROVE: No, in fact, that's a very good point. It's not just about money. I mean we need to look at the money picture to get a sense of how the two candidates are doing, but at the end of the day, history is replete with examples of candidates who raised and spent more money and who lost.

One of the best most recent examples is in 2004, if you add up what the Democratic National Committee, Kerry, Edwards, and the Democratic 527's raised and spent and compare it to what the Republican National Committee, Bush, Cheney, and Republican ardent 527's raised and spent, the Democrats outspent the Republicans in 2004 by about $119 million.

COLMES: Let me ask you another story at the New York Times, of course, writing about the shake-up in the McCain campaign. It talks about Steve Schmidt and talks about Nicole Wallace, as Karl Rove protégés.

Does this mean that Karl Rove is having an influence in who McCain is hiring? And is this your way of influencing this campaign?

ROVE: No. Look, I've been around this business for a number of years, and it's hard to find a lot of people who don't have some connection with me.

Alan, if you went to work in the Obama campaign, you could count on the New York Times saying that a Rove protégé, was in the Obama campaign.

COLMES: Karl, no one's going to call me a Rove protégé. Believe me.

ROVE: Well, but that's — we have been associated now, so you'd be surprised what the New York Times will do so.

COLMES: I will distance myself from you. Don't worry about it.

ROVE: Exactly. Don't worry. That will be a mutual thing, Alan. And that'll be a mutual thing.

COLMES: No, I'm sure. I'm sure. I'm speaking for you when I said that — no, I'm kidding.

But look, the fact is that the Times’ position this as, you know, Rove's legacy needs to be helped by McCain win and that you.

ROVE: Yes.

COLMES: You're vested in this win.

ROVE: Well, again.

COLMES: ... for your own legacy's sake.

ROVE: Yes, well, again, look, Charlie Black and I have been friends for a great many years. In fact, he was part of a secret group we had in the 2000 campaign called the G-6, and so Charlie Black who's in the leadership of the McCain campaign — again, I go back to my point.

My point is, I've been around this for a long time. I know a lot of people. I've been associated with a lot of people. I wouldn't put too much into some of those people rising to the tops of various campaigns.

In fact, if you looked at it earlier this year, and in virtually every one of the Republican presidential campaigns, I had a close associate or friend, everything from Chip Saltsman running the Huckabee campaign, to Mike DuHaime running the Giuliani campaign, to my friends Mike — Mark McKinnon and Charlie Black inside the McCain campaign, to the campaign manager for Mitt Romney.

I mean all of these people were people that I've been involved with and knew and were friends and associates over many, many years.

LOWERY: Hey, Karl, it's Rich. Thanks so much for being with us tonight.

ROVE: You bet.

LOWERY: Karl, I'm sure you noticed that Barack Obama held two press conferences on Iraq today. The first one he talked about refining his position. It created a lot of coverage about Obama making another flip- flop on a big issue. Then he came out in the afternoon and said oh that's all misinformation from the McCain campaign.

Where do you read Barack Obama on this issue right now?

ROVE: Look, I read Barack Obama as untethered and unanchored, and in the primary he ran hard to the left, and now he's running — trying to run hard to the center on a variety of issues, and the problem is that he thinks the people weren't paying attention during the primary.

Look, this is a guy who said I want to get out by March of 2007, I believe, it was. This is a guy who said we wanted — I want to get out.

LOWERY: March 2008.

ROVE: 2008, right. And a guy who said all we need is 16 months to get out, and now we're seeing both from his advisors on the inside of the campaign and his advisors on the outside of the campaign said, well, you know what? Before he said we're going to get out without regard to the conditions on the ground, now we're going to be listening to the commanders.

And, you know — the problem is it he may end up in the right place which is to say, you know what, I was too precipitous when I said let's get the heck out without regard to.

LOWERY: Yes.

ROVE: … the consequences, but at the end of the day, this may be corrosive of one of the most important things he needs which is a belief that he has core convictions and values and is not political.

I mean.

LOWERY: Yes.

ROVE: He's built this thing on being I'm a different kind of a politician, and he's proven himself to be a very able, typical Chicago politician.

LOWERY: Well, Karl, as you know, if he and the other Democrats had gotten their way and pulled out all our combat troops by March 2008 we would have lost the war and al Qaeda would have had a huge.

ROVE: Absolutely.

LOWERY: ... victory at our expense.

But if you were advising him — because there are two equities here. One, we don't elect liberal Democrats. You know we elect to president people who are southern governors and centrists. He's not from the south, he's not a governor, but he can move to the center, but, as you point out, it's at the expense of, you know, being this grand transformational figure he sold himself as in the primaries.

What would you advise him to do?

ROVE: Well, look, I would have advised him to be true to himself at the beginning of this campaign and not to try and position himself one way in the primary for political reasons and then position himself in a different place for the general election.

But let's assume for a minute that he really — inside Barack Obama there is a centrist waiting to, you know, spring out, I'd say be where you are. Say what you want to do, because, you're right, you cannot be on the far left fringe of American politics and win.

And you'll notice in the last several weeks, on a wide variety of issues, he's attempted to move himself deliberately to the center. You know?

LOWERY: Nearly everything, it seems.

ROVE: Well — and this week I thought it was really interesting because it shows the difficulty in this. He said, I will continue the — President Bush's faith-based initiative, which a lot of Democrats don't like.

Now, of course, he then went on to say I will reform the office, and I will insist that religious charities no longer be able to set their own standards as to who they hire.

Since 1964 religious organizations have had — under the Civil Rights Act of 1964 — the ability to hire whomever they want. He wants to take away that ability for religious organizations to make decisions like that.

LOWERY: All right, Karl, don't go anywhere.

Coming up we'll have more with Karl Rove on the other side of the break, plus John McCain loses his lead in one very important state. Dick Morris will be here with a reaction to the latest polls.

And later Barack Obama is coming under fire from his own party. See why many liberals are outraged with some of the senator's recent remarks.

Stick with us.

(COMMERCIAL BREAK)

LOWERY: In a FOX News interview earlier today, President Bush expressed disappointment over the Supreme Court decision giving Gitmo detainees the right to due process.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I am very disappointed by the decision of the Supreme Court, but nevertheless we'll — you know, it's the law of the land.

This is a far-reaching decision where, you know, people taken off the battlefield, foreign fighters, you know, are now given the same rights as American citizens, which is an extraordinary decision.

(END VIDEO CLIP)

LOWERY: The question remains whether Bush will close the facility all together, which currently holds 300 terror suspects. White House officials confirmed today that the president has made no decisions, but is deeply engaged in trying to find a solution.

We continue now with Karl Rove.

Karl, the Supreme Court has thrown an unholy mess on to the laps of the administration with this decision. How do you read the state of play within the administration, because apparently there's very intense debate about how to take this thing going forward?

ROVE: Yes. Well, look, you're right. This is a terrible decision by the Supreme Court, and I thought it was a little bit precipitous today when the media got all ginned up about the president wanting to close Gitmo. He literally said that at a G8 meeting a year ago, I believe it was, and signaled before that point that he'd like to find a way to close Gitmo.

The question is, what do you do? One of the reasons that the administration did not close Gitmo earlier was because this court case was winding its way through the lower courts and on to the Supreme Court, and the question was, if you brought a enemy detainee, a —somebody you picked up in Afghanistan or Iraq or elsewhere around the world and brought them to the U.S. shores, would they have habeas corpus rights?

And by keeping them at Gitmo, not on U.S. soil, it was thought that we'd avoid that problem. But now the Supreme Court says no matter where you have them, they get the right — you know right to an attorney and right to habeas corpus which is really extraordinary.

I mean, for example, what happens — we've 260 people in Gitmo. What happens if a court says well, you know what, we don't find that you've got any evidence.

LOWERY: Yes.

ROVE: ... a certain amount of evidence that can guarantee that you can keep that person there? Well, what do we do? Do we release them?

LOWERY: Yes, it's a very real possibility.

ROVE: Yes, sure.

LOWERY: … that people haven't focused on that we're going to bring them to the United States and a judge could order some of these guys released into the United States.

ROVE: And they could do this by simply saying, you know what, we're going to take the standard that we use in an American criminal court for.

LOWERY: You're right.

ROVE: ... that you would apply for a guy who is, say, picked up for burglary, and we're going to then apply that to a guy that we picked up with a weapon or an explosive device in Afghanistan or Iraq, and you've got to prove.

LOWERY: Right.

ROVE: … with the same degree of evidence to the same — in the same manner the sane chain of custody and the evidence that that person is guilty.

LOWERY: Right.

ROVE: We've got plenty of judges particularly on the West Coast in the Ninth Circuit who'd be happy to find for the detainee in that instance.

LOWERY: And that's — it's just impossible to meet the evidentiary standard that you would need in a civilian court.

ROVE: Sure.

LOWERY: ... on the battlefield, and another thing that's just terrible about this decision, Karl, besides the fact that it's not mandated by the constitution, which was, basically, made up by those five justices, is this is going to make it really hard going forward to hold, for any length of time, people we capture on the battlefield in the war on terror.

ROVE: Yes. Now remember, we've already gone through and tried to make a determination as to who these people are and do they represent a continuing danger. And we've made decisions about shipping some of these people back home. And we've had 37 of them come back and commit additional acts of terror or are suspected of committing acts of terror including people who have left U.S. facilities at Gitmo, gone home, and then turned themselves.

COLMES: Hey, Karl, this is a great decision that dates back to the Magna Carta which is habeas corpus and refers back to Yick Wo versus Hopkins which ruled on the 14th amendment.

ROVE: Alan.

COLMES: … a couple of hundred years ago.

ROVE: Alan, Alan.

COLMES: ... which mean that the constitution — let me get this out and I'll give you a chance to reply. The constitution applies to persons, not just citizens, and that is in keeping with what the constitution says.

ROVE: Alan, never in the history of the United States in any conflict have we granted enemy combatants habeas corpus rights.

We are now setting up so that if we're involved — can you imagine fighting World War II where we'd have to have an attorney present for every Nazi whom we had in an Arizona, in Nevada or Utah prison camp.

COLMES: You can't just hold people without telling them a right to an attorney and.

(CROSSTALK)

ROVE: With all due respect.

COLMES: (INAUDIBLE) criminal justice.

ROVE: This is not criminal justice. This is a war. With all due respect, Alan.

COLMES: When was war declared?

ROVE: ... these people are people picked up on a battlefield.

COLMES: Did Congress declare war?

ROVE: Yes, the United States Congress authorized the use of force.

COLMES: When?

ROVE: ... in October of — excuse me, 2002.

COLMES: No, it said the president — once he used up all other options would have the.

ROVE: They authorized the use of force.

COLMES: There was no declaration of war by the U.S. Congress.

ROVE: With all due respect, Alan, read it, it authorized the use of force.

COLMES: Was there a declaration.

ROVE: And we're using that force.

COLMES: ... of war by the U.S. Congress?

ROVE: It is the authorization of the president to use military force. We're involved in a military conflict.

COLMES: That's not a war declaration.

ROVE: We're involved in a military conflict.

COLMES: But the U.S. Congress, which by the — if you want to go by the constitution, don't they get to declare war and they haven't done that.

ROVE: I go by the constitution, Alan. If you feel strongly about this go get yourself an ACLU attorney and file a.

COLMES: I fell very strong about it.

ROVE: File a declaration in a court saying that this is an unconstitutional war, spend the money, fight it through the courts, and you will go nowhere with it.

COLMES: Well, t may well be the case except that if you're going to go by the constitution, you're going to go by the constitution. Leftist conservatives.

ROVE: It is the constitution, Alan.

COLMES: Strict constructionist.

ROVE: Alan, it is the constitution.

COLMES: But so habeas corpus is key to our constitution.

ROVE: Alan, the — this is the first time in the history of America in which enemy combatants have been grated the right to habeas corpus.

COLMES: Do you think the president.

ROVE: Now you can.

COLMES: Can the president by himself declare an individual enemy combatant? Is that — isn't that the first time that one individual can determine.

ROVE: No.

COLMES: … anybody's an enemy combatant?

ROVE: No. No, no, it isn't, in World War II and World War I, presidents of the United States held people to be enemy combatants.

COLMES: We had declarations of war.

ROVE: We have — we have had — Alan, this is an authorization of the use of force. You may not think that the Congress by passing a resolution authorizing the use of force really did authorize the use of force, but it did.

And when you authorize the use of force as we did in this instance, we're confronting enemies of the United States, combatants, and we ought to treat them as we have treated combatants.

COLMES: Did Congress declare war?

ROVE: ... and POWs in every other conflict.

COLMES: Amazingly, Karl and I disagree. But I hope you have a very happy Fourth of July, Karl.

ROVE: But you're still an associate.

LOWERY: Have a great Fourth.

COLMES: No, I don't know if he'll still associate with me.

All right, Karl, thanks very much.

ROVE: Alan, I love you. I hate — even when you're as wrong as you are tonight.

COLMES: Thanks for your kind words.

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