This is a rush transcript from "Hannity & Colmes," August 11, 2008. This copy may not be in its final form and may be updated.

SEAN HANNITY, CO-HOST: Once again Senator Barack Obama is taking shots at the fox news channel. It seems he just can't seem to stop talking about us. This is what he said to Marie Claire magazine about the way Michelle Obama has been covered by the press.

Quote, "I think that if you've been watching Fox News then probably she's been misunderstood because I do think there's been a fairly systematic attempt by the conservative press to paint her in a completely false way. Michelle is very comfortable in her own skin and I like that skin, of course. So I don't want her changing and I don't think she's looking to change. Michelle's not somebody who wants to be deeply involved in policy development."

Video: Watch Part 1 of Sean and Alan's interview | Part 2

Well, senator, here's a way for you to make sure these so-called falsehoods about your wife can get cleared up. Sit right here next to me, come on the program, and you can set the record straight. Don't hide behind campaign hacks or surrogates who repeat your talking points like trained parrots. The leader of the free world, well, he shouldn't have to do that.

You have an open invitation, senator. It certainly sounds like you're watching and watching often.

Joining us now with reaction, FOX News contributor Karl Rove. Karl, every time you're on we've got Ayers attacking me, in the last three weeks Obama's attacking me, we're going to show tape of Father Pfleger attacking me over the weekend, and I'm thinking — you're smiling. I'm looking at you're smiling. Why are they going after — I guess it's the one media outlet that's not fawning over them, so I guess they feel very defensive

KARL ROVE, FOX NEWS ANALYST: Well, Sean, you're being attacked by all the right people. Let me just say that. First, on Obama, let's put this in just a little bit of context. This interview was done in mid-July. I hope this is a reflection of the earlier hyperventilation he had and he's gotten over al of this and realizes Fox was reporting on inappropriate comments by his wife, and that the best way to deal with this is not have her make more of them.

HANNITY: Well, let me ask you. There's two things that came out over the weekend, one is in the Washington Times, one in the Politico. Washington Times, centrist voters are drifting away from Obama, and then there was a pretty interesting analysis, Mike Allen, our friend, in the Politico today. "Obama backers are panicking at his sagging poll numbers, especially as he's heading into vacation and then to the convention. Do you anticipate he gets the usual big bounce come the convention?"

ROVE: Well, I think he will get a bounce, though, here's the deal. There's a larger number of undecided or swing voters in this election than we've seen, Gallup says, since 1992, and I suspect the real number might be even larger than Gallup projects. And as a result I'm not certain if either candidate, either McCain the Republican or Obama the Democrat is going to get a long-term, durable bounce out of their convention.

That is to say I think people are going to be waiting and watching right up until the end trying to make a decision on who they're going to vote for.

HANNITY: There was an interesting analysis, "The Atlantic" is doing this piece about the internal memos, I don't know if you've been following this story, about the Clinton campaign, and Mark Penn, I don't always agree with him, I don't like the tactics, I don't like some of the things he was suggesting but he does think that there is a scenario that could unfold that would result in a McCain landslide. Do you see any possibility of that?

ROVE: I don't think there will be a landslide for either side but I thought what was really interesting was advice that was good that was not taken, and that was Hillary Clinton needed to accentuate her middle class, middle America values and shape a contrast with Obama's — early on, we forget now, early on he was going out of his way to accentuate that he'd grown up in Indonesia, that he had grown up in Hawaii, that he had grown up in a more diverse society than the rest of America had enjoyed and as a result he was better able to understand the world, and Penn, I think wisely seized on it early on and said we ought to make an issue of things like refusing to wear a flag lapel pin and doing some of these other things that he was doing early on and has now stepped back and doing as he's won the nomination.

HANNITY: In many ways as I was reading this I felt that John McCain has been far more aggressive and far more willing to take the advice that Clinton's own campaign people were offering her, and it seems to be paying off. No?

ROVE: Yeah. Absolutely. Look, it's paid off in that Obama has been coming down, drifting down. Part of that is McCain, but also part of that is Obama. Part of it McCain for example on energy, opening a front on the issue of he was a celebrity who's believing his own press notices, but it's also been Obama. Obama has inflicted a lot of these wounds on himself by being arrogant, by being somebody who looks like he's running for president for the United States of Europe, not the United States of America.

So it's been both things and they've worked both of them to McCain's advantage.

ALAN COLMES, CO-HOST: Hey, Karl, you keep talking about how poorly Obama is doing. It's Alan. Welcome back to the show, by the way.

In the daily tracking poll he's up by six points, he continues to pretty much be consistent. He has not fallen in the polls. He had a few days that were not consistent, but generally there's been about a three to six-point spread. He's not suffering like you're suggesting.

ROVE: Look. Over the last eight days, this is the first day in eight days where it has been as wide as it is. If you take the last eight days, it's like a 2.1 percent average in the Gallup tracking poll, and Alan, I think he has dropped. If you go back and look at where he was in the immediate aftermath of securing the nomination, he was popping up over 50 percent, 50, 51, 52. He's now dropped both candidates are sort of in the mid to high 40s. So this is a race that should not be as close as it is, and the fact that it is close speaks more to people's concerns about Obama than it does anything else.

COLMES: Let's talk about the Georgia-Russia conflict for a second. A top foreign policy advisor, Randy Scheuneman was a lobbyist for the country of Georgia and paid hundreds of thousands of dollars. Is that a conflict of interest?

ROVE: I don't think so. I know Randy Scheuneman, he's one of the — a bright young guy who's one of the leading experts in the former Soviet Bloc, he understands Central Europe and Eastern Europe quite well. I don't see it as a conflict at all. No. Not at all.

In fact, if you want to get into that, let's go take a look at the people involved in both camps and find out what their ideological preferences are and what their policy preferences are. Randy Scheuneman has been over the course of the 1990s working in a bipartisan effort for NATO expansion. During the Clinton years he was part of a group that led an effort by Republican and Democrat together for NATO expansion, and one of the reasons why he had such strong relations.

COLMES: You have John McCain coming out hard against Russia, his top policy advisor got lobbyist money, John McCain has talked about not taking lobbyist money and being a different kind of candidate back when he was a maverick, and now he's got all these lobbyists working for him.

ROVE: Well, let's not get into who's got the most lobbyists working for him because remember, this was Barack Obama's head of his vice presidential selection committee was in essence an influence peddler in Washington, Jim Johnson.

Both campaigns are surrounded by lobbyists. You may not like that but that's the reality of it. Look at the views. Does Randy Scheuneman's views represent the views of John McCain? You bet. John McCain has been for the 15 years an ardent proponent of NATO expansion and a visible skeptic of Russia.

COLMES: We're going to pick it up right there. More to come and why a top Clinton advisor thinks the Edwards' affair cover-up cost Hillary Clinton the Democratic nomination. We'll ask Karl Rove if he agrees with that.

Plus, Sean gets blasted again. It's not even me doing it. Remember Father Pfleger? The pastor who attacked Hillary Clinton .

HANNITY: Are you going to defend me?

COLMES: We'll see. That's a good tease.

He's the guy who attacked Hillary Clinton from the pulpit. He sets his sights now on Sean Hannity. We'll play you the tape.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

HOWARD WOLFSON, FOX NEWS ANALYST: Well, my gut tells me that had Senator Edwards dropped out of the race or had this become public prior to Iowa that we would have done better in Iowa. The exit polling tells something different. I think the Obama campaign would argue differently, but at the end of the day you can play the what if game endlessly.

And you can play it both ways. If Senator Clinton hadn't gotten teary eyed in New Hampshire, Senator Obama would have won New Hampshire and he would have been the nominee in January. There are a thousand different ways you could play the what-if game but I do believe the result would have been different had this been public a year ago.

(END VIDEO CLIP)

COLMES: That was Hillary Clinton's communications director Howard Wolfson arguing if Edwards had admitted his affair Clinton would have been able to win the nomination. We'll continue now with Karl Rove. I'm not sure I see it that way. I thought there was more similarities between Edwards supporters and the Obama supporters and Edwards and Clinton. What do you say about it?

ROVE: Well, I went and looked at some of the returns by county, and I do think there's an argument to be made that Obama tended to do better in the college counties and Edwards tended to do better in the sort of blue collar urban counties, he did a little better for example in Cedar Rapids and Waterloo for example and Obama did terrifically in Johnson County which is where the University of Iowa is.

I'm not certain I buy that if Edwards were not in the race Clinton would have won but I do think - because that would require two out of every three Edwards supporters to have supported her, but I do think you could make the argument and make it a credible one that the race would have been much closer, it wouldn't have been a 39-25 .

COLMES: It was 39-29-29 actually.

ROVE: Well, 29 for Edwards and 25 for Clinton. It would not have been a — she would not have been in third place, she would have been in second, and rather than by being separated by 15, she would have been separated by something significantly less. It is what it is, and there's no way to rewind it, but I do think there is some plausible basis to the argument that the blue collar supporters who were backing Edwards might have been more likely to support her than Obama, at least on the margin.

COLMES: I want to get to the issue of lobbyists because I know this keeps coming up in the campaign. John McCain wanted to do campaign finance reform. I mentioned his lobbyist on Georgia. He's got Randy Altschuler (ph), founder of Office Tiger that gets companies to go and do business overseas like in India. You've got Rick Davis, a lobbyist for DHL who made a deal with Airborne Express to bring DHL in Ohio and it lost 8,200 jobs. This has got to hurt John McCain in the general election.

ROVE: First of all, Rick Davis, I'm not holding a brief for lobbyists. If I ever get to be a lobbyist, do something to me. But the fact of the matter is — let's put it in perspective. Rick Davis' job was to encourage a merger between a U.S. company and a German company and an expansion of their facilities inside the United States. The issue in Ohio is that they expanded the facility and now they're thinking of closing the facility. I'm not certain that I see it as sort of outsourcing jobs. There are people on both sides of the campaign, on both parties, who are lobbyists. That's the way a lot of politics happens. I wish it were different, but it is the way that it is. So I wouldn't get in there and start throwing mud without then realizing what kind of lobby associations there are among Democrats, particularly congressional Democrats. For God's sake, Senator Harry Reid's own son is a lobbyist.

COLMES: He's not running for president.

HANNITY: Karl, two weeks from tonight you will be my security guard as we walk through Denver together at the Democratic .

ROVE: Exactly.

HANNITY: You didn't know that, did you?

ROVE: City of my birth, incidentally. City of my birth.

HANNITY: But — Monday starts out the Democratic convention, one nation, keynote speaker is going to be Michelle Obama, Tuesday it's Hillary Clinton, Wednesday it's Bill Clinton and the vice presidential candidate, and then Thursday at Invesco field at Mile High, 70,000 people, it's going to be Barack Obama. How would you if you were putting this together — how would you lay out the agenda for them and what they would want to have coming out of that?

ROVE: Actually, I think it's a pretty good — it's a pretty good agenda. The question is who's going to be the keynoter, and I thought it was very interesting that Governor Sebelius, when she announced the vice presidential nominee would speak on Wednesday night, which incidentally is the night vice presidential nominees always speak, how it got to be a big news item I don't know.

But I thought it was interesting that she said the vice presidential nominee of the Democrats would take about security. I don't know if that's an indication of the nature of who the vice presidential nominee might be or not. But I have to look. I think they're doing a good job of shaping it up. You never know until the execution itself. I think it's going to be a very interesting thing to have this big rally at the end in Invesco Field.

They've done a very interesting thing in terms of volunteer recruitment. I think it will have some very practical input for him. Let's see wait and see how they execute it and what the content of the message is.

HANNITY: We've only got about 30 seconds. If you had to guess today, who would the VP choice is going to be?

ROVE: I think he's going to make a very political choice. I think he's going to pick somebody from a red state Democrat, Evan Bayh or Tim Kaine with the idea not that they necessarily will do a great job governing the country or look presidential, but they'll help him in one state to win those electoral votes.

HANNITY: All right. The architect, Karl Rove, on "Hannity & Colmes." Thanks for being with us, my friend.

ROVE: Thanks for having me.

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