This is a rush transcript from "On the Record ," September 19, 2008. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN FOX NEWS HOST: Rush Limbaugh is angry at Senator Obama. I guess that's no surprise. But what has Rush so fired up that he says Senator Obama is stoking racial antagonism? Earlier, Rush Limbaugh went "On the Record."

(BEGIN VIDEOTAPE)

VAN SUSTEREN: Rush, it's nice to have you join us. And I caught The Wall Street Journal article today in which you said that Senator Obama's campaign is trafficking in prejudice. What do you mean by that?

RUSH LIMBAUGH, RADIO TALK SHOW HOST: What I mean is -- Greta, by the way, great to be with you. Thanks for having me back again. What I mean by that is specifically that Obama is stoking racism himself via his campaign ads. Spanish-language-only ads in four states, including Florida, where I live, and three Southwestern states, he is purposely lying about Senator McCain's position. He is taking statements I've made entirely out of context. He knows they're out of context, using them anyway to create division between people, in this case racial division. He's talking to Hispanics. He needs the Hispanic vote.

And what's happened, the wheels have come off the Obama campaign! The mask, the disguise is gone. The messiah, the one we've all been waiting for, all of that is now history, and he's just been reduced to what he always has been, a street agitator, a typical liberal Democrat hack politician campaigning the same way they always do, divide people, pit people in groups against each other, try to create racial division, and so forth, and then present themselves as the great healers.

I find it interesting Obama cannot talk about himself. He cannot explain his own virtues, why it's worth us electing him president. He has to rip other people apart, lie about them. Just this afternoon, Greta, Bill Burton, the spokes hack for Obama, was interviewed on National Journal Radio by Tammy Haddad, and Bill Burton actually said two things. He said, that, Well, of course we're going to keep talking about Limbaugh because that helps us identify McCain.

Well, John McCain and I are not that close, particularly on immigration, on a host of issues. We're very tight on Sarah Palin, obviously. It was a great decision. But they're running against me. They think that they can tar and feather McCain by linking him to me. But of course, we can't link Obama to Jeremiah Wright. We can't link Obama to Bill Ayers.

The other thing he said is the purpose of my radio show is to defeat Obama. And it's, like, yes, I've been in this business 35, 40 years, and I've been waiting for this moment. I have been preparing for all these years to beat Obama.

I mean, this is just -- I find it all amazing and I'm flattered by it all, but you've got to respond rapidly when they start lying about you and taking you out of context, especially in foreign language ads, where they're trying to create racism. I really think these are the tactics of the old segregationists, and I think anybody who would employ these kind of tactics is unworthy of the presidency, and that's Obama. I think he's a disgrace!

VAN SUSTEREN: All right. Explain to me -- I know that you -- what you've said is that you are different from -- or you take different positions on some things from Senator McCain. But can you tell me specifically in this ad where it is that he's trafficking in prejudice?

LIMBAUGH: Where he's trafficking in prejudice?

VAN SUSTEREN: Yes. What was it that was in the ad?

LIMBAUGH: What's in the ad is that he claims that I said Mexican illegal immigrants are dumb and stupid, which I didn't say. And he also takes an excerpt from a commentary I did in which I was parodying Mexican law, Mexican immigration law, in which I said, while going through Mexican immigrant law, immigrants to Mexico have to shut up, you can't participate in the political process, or get out.

He portrays both those comments as about illegal immigrant. One of the comments was made to a caller 1993. The other was from a "Morning Update" commentary I did in 2006. So the prejudice is trying to make these Hispanic audience members watching this ad think I hate them, think I dislike them, think I want nothing to do with them. I've never said that. I have never in any way, shape, matter or form said illegal immigrants are dumb and stupid. I have never told them to shut up and get out, not once!

Now, I don't know what you call that, if you want to just call it lies, but it's certainly prejudice because he's trying to gin up anti- American sentiment, anti-Republican sentiment with lies to people who are - - may be illegal in the country, may be legal or what have you -- but he's pitting groups of people against each other left and right here, and that's -- I mean, I don't know what you'd call it. It's not even just prejudice, it's bigotry. It's flat-out racism.

VAN SUSTEREN: Well, what the campaign -- at least from what you tell me about the interview with Tammy Haddad is that they are trying to align you and Senator McCain together and use your statements and take your statements out of context to poison against Senator McCain. Now, you don't agree with Senator McCain on immigration. Are there other issues that separate the two of you?

Watch Greta's interview with Rush: Pt 1 | Pt 2 | Pt 3

LIMBAUGH: Yes, but let's -- let me focus on this one because you just nailed one of the biggest fraudulent aspects of the ad. They're trying to compare -- they're trying to -- they lie about what I said, take it totally out of context, and then say that this represents McCain's view. Now, one thing that the Hispanics of this world know is that McCain was for total amnesty. He was for comprehensive reform. He does not share one opinion of mine, other than now he's come around on closing the borders first. And that's an -- he's insulting the intelligence of these people.

(END VIDEOTAPE)

VAN SUSTEREN: Coming up, more of your interview with Rush Limbaugh. Immigration isn't the only thing Rush disagrees with Senator McCain about. Rush tells you where else he and Senator McCain part waters. That's next.

(COMMERCIAL BREAK)

GRETA VAN SUSTEREN, FOX NEWS HOST: We continue now with Rush Limbaugh. Earlier you heard some of what Rush disagrees with Senator John McCain about. But their disagreements don't end there.

(BEGIN VIDEOTAPE)

RUSH LIMBAUGH, RADIO TALK SHOW HOST: And there's other things that I disagree with on Senator McCain. I'll give you one right now, and it's a minor one. We are going through this Fannie Mae and Freddie Mac thing. We are going through the Wall Street problems and the accountability, and so forth. And senator McCain gave a speech in Green Bay today, and a couple of days ago he said the same thing. And I understand the populist tendency here, because people are upset, to bash Wall Street and to join the chorus that Wall Street is corrupt and full of a bunch of people, but that's not the case. I don't think that bashing Wall Street when the Democrats are already doing that is a way for Senator McCain to separate himself.

What he ought to do is what he did in Green Bay this morning, which is to attack the people responsible for the Fannie Mae disaster, and that's all Democrats. It's Chris Dodd, it's Barney Frank, it is Barack Obama, it is Franklin Rains, in is Jim Johnson, people associated with the Obama campaign. I understand the temptation to start ripping into Wall Street because people instinctively fall into that so-called "class envy" susceptibility to this. But I think that it's a mistake. I think can distinguish himself better by attacking the people who are really- He is running against Democrats, he's running against Obama. He's not running against Wall Street. Wall Street, I don't know what we're going to close out today, but Wall Street is probably going to finish the week higher than where it started. Imagine that. It's a lesson to staying calm and cool. I also wish he hadn't thrown Chris Cox under the bus, the Securities Exchange Commission guy, saying he would have fired him. Cox had nothing to do with this. This is a tendency of Senator McCain's to look at himself as Teddy Roosevelt and take on anybody he things is a robber baron. And I wish he would take some of that back and just focus on who he's really running against, the people trying to destroy him.

VAN SUSTEREN: Rush, are you paying any attention to what is going on with Russia and Venezuela right now, because nobody is talking about that in the context of this election. I'm a little bit surprised at that.

LIMBAUGH: I'm a powerful, influential member of the media, and I'm paying attention not only to that, I'm paying attention to the Russians sending an antimissile defense to the Iranians to guard against any kind of tack that might be mounted against them.

I had a sound byte from Joe Biden from last year in 2007 when he was campaigning, and he said this issue of national security, we cannot afford to have somebody who cannot throw down on the table an unmistakable list of qualifications. The reason you're not hearing about it, Greta, is because the drive-by media driving the news doesn't want to bring all this stuff up because Obama is not qualified for this. Obama has said the wrong things about dealing with these enemies. He wants to bring them to the Oval Office without any preconditions, and so forth.

So it's not in the drive-by news, and I'm excluding FOX on that, it's not in the mainstream media because they're shielding any controversy that can redound negativity to Obama.

VAN SUSTEREN: You mentioned experience. I don't think that anyone would disagree that both Senator Biden and Senator McCain have experience. There's been criticism of Senator Obama and Governor Palin on the experience.

How do we as voters look at the experience question as it relates to Governor Palin and Senator Obama?

LIMBAUGH: Well here's how I would look at even the so called experience of Senator Biden--what god is experience if you're wrong all the time?

Senator Biden was wrong about the surge, Senator Biden was the Gulf War in the early 1990's, Senator Biden was wrong about the Iraq war now. So many times Senator Biden has gotten it wrong.

Obama, we can judge his experience by his tendency to be critical of his own country. In Berlin, look what this guy--Greta, do you know that he went when his little intern trip this past summer, he went to Baghdad and he begged the Iraqi foreign ministry to delay any agreement to withdrawal U.S. troops until after the presidential election.

He was interfering in U.S. military diplomatic policy in violation of the law. McCain ought to be on this like white on rice. And here is Obama telling his supporters we will get out of Iraq, we can't win there. We're going to get out. It's the first thing I'm going we'll do, and he didn't want them out until 2011, 2012, now.

The dirty little secret reason why is he wants to be able to claim victory, he wants to be able to claim it from George W. Bush.

But this, and to run to Berlin and say my country has lost some of its luster, or whatever he said, we're not as great as we once used to be-- that's enough to tell me that he has a negative enough opinion of this country, doesn't have enough faith in it as it exists, that he's not qualified.

And Biden's experience, he's wrong so much, what good is his experience?

VAN SUSTEREN: What about Governor Palin, because we have to look at that as well.

LIMBAUGH: I did not mean to leave her out.

I have ultimate confidence in Governor Palin and her ability to deal with things. But she'll be surrounded by a sea of advisors should McCain win. She'll brought up to speed on this stuff very quickly for obvious reasons.

But I look at her and I see what she says on other issues. And she understands the greatness of this country, she understands American exceptionalism, she understands the threats that we face.

You know, she gave more intelligent answers about what to do in Pakistan than Obama has. She has answered those questions that Charlie Gibson asked her about foreign policy in a far more competent and sensible way than Obama did when he was asked about these questions earlier about these various places in the country.

So I'm not - I really have -- I think that there's a straw dog, the lack of experience of Sarah Palin. They just have to attack her on something.

They're attacking her for giving birth to a Down syndrome child. It's amazing to watch people who supposedly have all the compassion in the world and love women, women's rights and all this, try to destroy her. It's like they tried to destroy Clarence Thomas. It ain't going to work but they are trying it. That's who they really are.

She and McCain have brought out who the liberals really are. They are no longer disguised, no longer wearing the mask because they're so frustrated, and nor are their media associates and accomplices.

So this is great thing for the America people to see. We now know who is on which side with total clarity about it.

(END VIDEOTAPE)

VAN SUSTEREN: Coming up, more with Rush Limbaugh. Why does Rush believe Senator Clinton could still end up on the Democratic ticket for the White House? Could that be possible? That's next.

And, later, you will go back live to Alaska and you will meet a man who knows senator governor Palin very well. These two worked together early in the governor's political career. Can she handle the job if she needs to step in for Senator McCain if he's elected?

(COMMERCIAL BREAK)

(NEWS BREAK)

VAN SUSTEREN: Now more of your interview with Rush Limbaugh.

(BEGIN VIDEOTAPE)

VAN SUSTEREN: You said earlier that you thought Governor Palin, I don't want to take your words, but a good choice, or what are your thoughts on Governor Palin?

LIMBAUGH: I think that the more I see her and the more I hear her, the more impressed I am.

You ever asked, Greta, of your average, run-of-the-mill politician, why do you want to be president or why do you want to be a member of congress? "Well, I want to make a difference. I've seen suffering and I want to make it right for the people of the country, and I want to make sure that the dogs and cats of the world have equal treatment at the ASPC," and all this flowery lingo.

Sarah Palin, why did you want to get into politics? Because my school was screwed up and I needed to get in the PTA to help my kids.

She takes the complex, she makes it understandable. She' is likeable and she's infectious.

And she's, you know, I think that she threatens Washington because those people like for us to think their jobs are very complicated, very complex, and we ask them questions how they do what they do and they come back with answers that are hard to decipher.

She just flat out can tell people why she is doing what she is doing, why she wants to do what she wants to do, why she's done what she did.

I think that--you've heard the cliche "a breath of fresh air." She is enthusiastic, she is infectious, and she is conservative, and she's unapologetic for it. And she's taking it right to Biden. She's not backing down from any of these scandalous, scurrilous attempts to destroy her. There's just much to admire about her.

VAN SUSTEREN: What do you make of all the attacks? This election seems to have gotten dirtier than any other one that I have covered. Maybe it's my imagination, but this one is really dirty.

LIMBAUGH: People say that, but I remember Reagan. They hated Reagan. It was vicious during the Reagan years, especially with Iran-contra, the Bolden amendment. They hated Nixon, they despised Richard Nixon.

I agree with you that this is down and dirty, but I'm not surprised. It's American politics. I think they're going after Sarah Palin because they're scared to death of her.

VAN SUSTEREN: What about Senator Clinton. Do you think that Senator Obama regrets not putting her on the ticket?

LIMBAUGH: Yes, I do. And I don't think that it's still out of the woods yet that she's not going to be on the ticket. I think it's entirely possible--I told you last time that I was allowed to grace the presence of your show that I think that it's not out of the realm of possibility that she'll end up on the ticket.

You know this thing that's happening Monday, this protest of Iran-- this is a classic illustration I want to make it here for you. Senator Clinton was invited and Senator Palin, or Governor Palin. When governor Palin accepted, Hillary canceled, she backed out because-"I don't think that I should appear with Governor Palin, she's nowhere near my stature."

So Palin is the only elected official left, and so a bunch of George Soros-types demanded that she be thrown off that no politicians be there, and the conference of presidents and Jewish organizations, they say, OK, we don't want the hassle, and they threw Sarah Palin off.

Now what do we have here? We have an issue of a nuclear Iran and a rally put on by Jewish organizations in New York Monday afternoon to oppose it, and we can't even unify around that, Greta.

Obama will not send anybody to that rally. Instead he has to force Sarah Palin off of it.

Now, Greta, if we can't unify as a nation, Democrats, Republicans, around the whole concept of opposing and standing in solidarity against a nuclear Iran, then why worry about what a dirty campaign it is?

My reaction is, OK, if you guys are not willing to stand with us on the Democrat side opposing a nuclear Iran, then tell me what in the world is it worth for me to walk across the aisle and meet you halfway on anything? Where do I compromise with you guys when you defeat in Iraq? Where do I compromise with you guys when you want higher taxes?

Where's the compromise? I don't look at it as necessary to compromise with these people. Politically they need to be defeated, and soundly.

VAN SUSTEREN: And so I guess to end this, there's no secret how you're going to vote, right, Rush?

LIMBAUGH: Of course, I keep the vote very secret. No, there's no question how I'm going to vote.

Greta you know, I know that I come across to your Democrat and moderate viewers as a partisan. I'm just passionate. I have my beliefs, and I'm very confident in them, and I'm not afraid to tell people what they are.

And I don't think--I can't afford Obama, I can't afford what he's going to do to the economy with his mindless tax policy--I can't afford what he might do internationally with foreign policy. I just don't think that we can afford him.

VAN SUSTEREN: Rush, it's always fascinating to talk to you. Thank you very much.

LIMBAUGH: Thank you, Greta, very much. It's always nice to be with you.

And, again, I apologize for the diarrhea of the mouth here, but you let it happen, and I appreciate it.

VAN SUSTEREN: You're passionate and you're certainly not afraid. There is no question about it. Thank you, Rush.

LIMBAUGH: You bet.


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