This is a rush transcript from "Hannity & Colmes," October 23, 2008. This copy may not be in its final form and may be updated.

SEAN HANNITY, CO-HOST: And welcome to this special edition of "Hannity & Colmes." I'm Sean Hannity. We're just outside Pittsburgh, Pennsylvania, in Beaver, Pennsylvania. And Governor Palin joins us. She just finished a big rally outside in the cold.

PALIN: That was so much fun.

HANNITY: Well, Alaska is cold, so you're used to the cold.

PALIN: You get used to the cold. It's crisp, refreshing.

HANNITY: It is crisp and refreshing. All right. We've got 12 days to go. Nervous, excited? You want this — you want to get to election day?

PALIN: Very excited. Wishing there were more hours in the day, though, still. Wanting to get out there and speak with more Americans and hear from more of them also. Letting them know, too. You know, there's such a clear choice on November 4. So wishing that there were more hours in the day but very, very excited and anxious for the 4th.

HANNITY: All right. Let's — first of all, did you enjoy "Saturday Night Live"? By the way, they had the highest ratings in 14 years on that program. Did you know that?

PALIN: Whatever I can do to help, yes. It was fun. It was a lot of fun.

HANNITY: Yes. And by the way, you gave "Hannity & Colmes" one of our highest ratings, too, for the year, so — in our first interview together. So we appreciate that.

Look, the polls are all over the place. For example, we've got the battleground poll has it a 2-point race today. The A.P. poll has it even. "Investors Business Daily" has it now a 1.1 race.

Then you've got these other polls, double-digit lead for Obama. Where do you think the race is right now? And how do you interpret the polls? And are you following all of this?

PALIN: I think it's extremely close. And I think it's going to come right down to the wire on election day, also. I don't know what to make of the polls that are showing the double-digit lead for our opponent. You know, I don't know what to attribute that to, but no, I have that sense out there that it is very close and the choice, though, is getting clearer and clearer. I think that message is getting out there in that regard, so it's going to come down to the wire.

HANNITY: So you expect a long night on election night?

PALIN: Perhaps so. Perhaps so. But I do expect that, at the end of the day, all will be well. I don't underestimate the wisdom of the people, but Americans understand we must reform government. We've got to get our economy back on the right track. We have to have the right commander in chief understanding how important it is that we win the war against terrorists. The choice there very, very clear. And in these next 12 days, I think that more and more Americans are going to come on board with us.

HANNITY: Well, let me ask. We keep hearing about this group ACORN is in every single swing state now. There are allegations of voter fraud. You had even said — you used the term stealing the election.

PALIN: Um-huh.

HANNITY: Are you concerned that that might be happening in this election?

PALIN: I join many Americans in sharing that concern that that voter registration fraud could be resulting in some questionable ballots being cast. And that is not fair. That is not right. That is un-American.

You know, we have our young men and women fighting in war zones for us today, trying to protect our rights to free and fair elections. And how dare anyone take that away from our electorate? And how dare anyone not disavow a group that has engaged in that voter registration?

HANNITY: Meaning you want Barack Obama and Joe Biden to do that?

PALIN: Heck yes. I wish that they would. I think that that — that would bode well for them, if they...

HANNITY: But wait a minute. They funded them. Look, Barack Obama has represented them as a lawyer. Barack Obama has organized with them and helped train some of their so-called get-out-the-vote efforts. And the campaign has given over $800,000. So why would he disavow a group that obviously is working on his behalf?

PALIN: Well, obviously, we would like to see him disavow this group so that at least that message would be sent to Americans that he, too, cares about free and fair elections.

And, you know, we won't tolerate that abuse or that exploitation of an opportunity to have an unfair election. And, again, it would bode well for Barack Obama if he would stand strong on this one, have a backbone and disavow that group.

HANNITY: All right. Let's talk about the state of Pennsylvania where you've been spending a lot of time. I know Senator McCain is going to be coming back here.

We had Governor Rendell on "Hannity & Colmes" last night. And we got into the issue of the comments that were made by both John Murtha and by Barack Obama. Barack Obama speaking in San Francisco. You've talked about this on the campaign trail. Barack Obama said about people in Pennsylvania, this state, as a matter of fact this part of the state, that they're bitter Americans clinging to their guns and religion, with antipathy towards those that aren't like them.

PALIN: Yes.

HANNITY: What does that comment tell you about Barack Obama?

PALIN: I think he is so misjudging and prejudging. Of course, a part of America that is, especially here, so patriotic, so hard-working, middle- class American families here. Just desiring of their government to be government of the people, by the people, for the people, doing their best in securing jobs in their own hometowns, raising their families. There is nothing redneck or backwoods about any of this. This is true America.

And you know, we love Pennsylvania. We love this area of the country. And just honored and privileged to get to be here tonight.

HANNITY: It's sort of surprising, because now we've had two weeks in a row of comments by Congressman John Murtha. He's called his own constituents racist. And then when asked to expand on it, he referred to them as rednecks. You said in a recent — I guess, you know, I'm one of those bitter American rednecks.

PALIN: I guess. I guess so. You know, if what I represent is what these people here in Pennsylvania stand for, too, again, love of country and a desire for that strong work ethic that is instilled in them to be rewarded, and not expecting government to be the be-all, end-all to answer all the questions for them. Then I represent what they represent. And proud to do this.

HANNITY: All right. We had Joe the plumber on "Hannity & Colmes" the other night. We spent a lot of time on him. He was on my radio show. We talked about that. There's something that seems to have shifted in terms of the narrative in the debate on economics, because Barack Obama's answer was, "Well, I don't want to punish your success but, you know, I want to spread the wealth around."

PALIN: Yes.

HANNITY: Joe Biden said it's patriotic for people to pay more taxes. Time to jump in; time to be patriotic. Do you think that the narrative on the economy has changed? And do you view those comments by Biden and Obama as socialist?

PALIN: I believe that the narrative has finally changed. There's been more revelation there about what Barack Obama's true intentions will be. He spoke plainly, finally, to Joe the plumber. He said yes, he wants to spread the wealth. And to Joe the plumber that sounded like socialism.

And Joe speaks for a lot of Americans, who hear some suggestion in there that taking more from our small businesses and from our individual families and then spreading their hard-working money around, according to a politician's priorities, that certainly would kill the entrepreneurial spirit that helped build this country, made it the greatest country on earth.

I've got a problem with it, and a lot of Americans are gravely concerned about that plan that Barack Obama has with his tax cut, he calls it. Really, it's a tax credit. Really, it is, just spreading the wealth. There's a problem with that.

HANNITY: We've got to take a break here. But I want to get into whether or not this is welfare. Because this has now come up in terms of the way people are interpreting it and analyzing the Obama economic plan.

Also I want to ask you about Joe Biden's comments, about if Barack Obama is elected we're going to have an international crisis within six years, and by the way, Americans may not be happy with how they resolve it.

So, we're going to take a break, come back. More from Governor Palin and more analysis right here on "Hannity & Colmes."

(COMMERCIAL BREAK)

HANNITY: And welcome back to "Hannity & Colmes." I'm Sean Hannity. We continue our interview with Governor Sarah Palin.

All right. I want to get back to, more specifically, because Barack Obama in every one of the debates, and Joe Biden in your debate with him, they keep repeating a mantra: 95 percent of Americans won't pay taxes. There has now been one analysis after another that 40 percent of Americans that don't pay will actually get a check under their plan. Do you think that's welfare?

PALIN: Well, what I think, it is the absolute wrong thing to do, especially in this economically woeful time in America. Now is not the time to be taking more from our families and more from our small businesses.

We need to see jobs created. We need small businesses to be able to keep more of what they're earning and producing so they can hire more people. That's how jobs are created. That's how the economy gets back on line. So no, his idea to take more at this time, especially is the complete opposite of where we should be going. It's a complete opposite of John McCain, his plan for economic recovery.

HANNITY: We've had tough economic times. Barack Obama has been saying this is the worst economy since the Great Depression. I would argue it's probably the worst economy since Jimmy Carter, because Ronald Reagan inherited a loss of, what, 10 million jobs. Inflation was 12.4 percent. Interest rates in America, if you can believe it, 21.5 percent.

He dropped the top marginal rates from 70 to 28 percent; created 20 million new jobs; doubled revenues to the government; and gave us, at the time, the longest period of peacetime economic growth in history. Compare the two models.

PALIN: Well, and thankfully, you know, hindsight being 20-20, we can look back and see what Reagan did, and we can repeat some of those solutions. We have that luxury now of seeing what works.

What doesn't work is any hint of socialism, again, at a time like this where we would think that it helps our small businesses and helps our families for government to take more of what they earn and produce and then to dole out those dollars to others according to a politician's priorities or desires. That is not what will help.

HANNITY: If we raise, as he's proposed, capital gains taxes, tax rates. If we raise windfall profits tax on companies and some of the other tax, and spend a trillion new dollars in spending...

PALIN: Right.

HANNITY: ... compare your plan to his plan.

PALIN: Well, take everything and turn that upside-down on its head. Now, we need to reign in the rate of government growth. We need a spending freeze so that we can get this 10 trillion-dollar debt under control. We've got to quit digging ourselves in a hole there.

Now is certainly not the time to propose a nearly trillion-dollar new expenditure, as Barack Obama has decided that he wants to do, and he hasn't explained yet where those dollars will come from. The only place that they can come from is increased taxes.

So, no, cutting capital gains tax, allowing doubling of the child deduction in each family, again, lowering income taxes also. Letting entrepreneurs, letting the small businesses and the families keep more of what they earn and recycle those dollars according to our own priorities. That's the solution. Government isn't the solution in this.

HANNITY: What would it mean to you: Barack Obama won the presidency, Nancy Pelosi had 250 Democrats in the House...

PALIN: Yes.

HANNITY: ... Harry Reid hit the magic number of 60 in the U.S. Senate. What do you think that would mean for America?

PALIN: See, now this is part of the debate that I think you will see elevated, and more voters are going to start talking about this in the next few days. That idea of a Democrat stronghold in House, Senate and, heaven forbid, the White House.

HANNITY: Super majority.

PALIN: Super majority. Veto-proof majority potentially here, yes. That should certainly be a concern because of the checks and balances issues, of course, that really have not been discussed to the degree, I think, that they should be.

But more and more Americans are starting to ask these questions also. Is that consideration of how it would effect war strategy and how it would effect, of course, the huge growth of government that we would see under a Democrat-controlled House/Senate and White House. Because they've already promised to do so, Sean.

HANNITY: Let me ask you this. And you've talked at length. You've been very poignant on the campaign trail. They've waived the white flag of surrender.

PALIN: Right.

HANNITY: This is redistribution of the wealth.

PALIN: Right.

HANNITY: And some other comments. You angered a lot of Democrats when you said pal around with terrorists, for example. But that's what you believe?

PALIN: That's what I believe. And I am not one to have the, you know, the flowery speech talking around issues. I'm going to tell you, like, what I believe in, and I take a stand on issues that I so believe in. And that ruffled a lot of feathers obviously along the way.

HANNITY: Well, let's talk about some the attacks. For example, people have attacked — all right. The RNC spent $150,000 on clothes. That's been an issue that's come up lately, and another issue, as well, the travel account for your family has been, I guess, billed to the state of Alaska.

PALIN: I'm glad that you brought up both of those. First, the RNC spending money on clothes. Those clothes are not my property. We had three days of using clothes that the RNC purchased.

If people knew how Todd and I and our kids shop so frugally. My favorite shop is a consignment shop in Anchorage, Alaska, called Out of the Closet. And my shoe store is called Shoe Fly in Juneau, Alaska.

HANNITY: Yes.

PALIN: It's not — you know, it's not Fifth Avenue type of shopping. But RNC purchasing some clothes that are all going — they are either returned or they're going to charity. It's not my property.

HANNITY: I heard they might be put up for auction, too.

PALIN: I think that they should be. And I think charitable organizations should be the recipients.

HANNITY: The way I look at it you're the only person in this race that's not a millionaire.

PALIN: That's true, too. You know, that's true, too. Just average, middle class American family. But now, you asked the other issue, too, though about the....

HANNITY: Travel with your family.

PALIN: About the travel with the family. Every Governor has traveled with family when it's — when it's a first family function. And it's always been charged to the state. That's part of the job.

What I did was sell the Governor's jet so that we could fly commercial and save the state a heck of a lot of money, which we have. We've cut the state's travel budget by about $400,000 by flying commercial. And it's nothing that's — it's not unprecedented.

HANNITY: There was a new poll that came out about the media coverage. And the negative — negative coverage of Senator McCain is 57 percent. And there's more favorable coverage of Senator Obama.

PALIN: Well, imagine that. Gee, yes.

HANNITY: What does that tell you, though, about journalism in America? I mean, you've lived through some of this now — in the short time we have in this segment.

PALIN: I don't know what to say about it. I don't know. But I know that it sure seems to me out there in our rallies and discussing issues with everyday working-class, good American families, that they are very enthused about our ticket and wanting the change in government that we are promising and that we've committed to and that we can follow through on.

HANNITY: Governor, when we come back we're going to talk about Joe Biden's comments that if Barack Obama were elected president...

PALIN: Good.

HANNITY: ... we'd have, mark my words, an international crisis in the first six months.

We'll continue from just outside of Pittsburgh with Governor Sarah Palin exclusively here on "Hannity & Colmes."

(COMMERCIAL BREAK)

HANNITY: And welcome back to "Hannity & Colmes." I'm Sean Hannity, and we're just outside of Pittsburgh in Beaver, Pennsylvania, with Governor Sarah Palin.

Governor, thanks again for being with us. Huge crowd out there. You like that?

PALIN: That was so much fun.

HANNITY: Joe Biden said, in fact, mark my words...

PALIN: Yes.

HANNITY: ... there will be an international crisis that Senator Obama would be tested. And that was one of the more interesting things. "You remember, one thing that I'm going to say. We're going to have an international crisis to test the mettle of this man. And, by the way, we are going to need your help because it's not going to be apparent initially that he made the right decision." What do you think of that?

PALIN: And it wasn't just Biden making that comment. That was confirmed by former secretary Madeleine Albright, where she said yes, she believes that Biden was just stating fact.

Now I don't want a president who invites that kind of testing. We cannot afford that on the homeland. So, that's a very discouraging to hear, Barack Obama's only running mate proclaiming that, that Barack Obama would be inviting an international crisis that would adversely effect this country, is what he was saying there.

What that statement did was confirm what Barack Obama had been referred to by Joe Biden throughout the primaries and in their debates. Remember, that he was untested and wasn't ready for the presidency. Joe Biden has said he would be honored to run with John McCain as his running mate on his ticket and that way the country would be better off.

HANNITY: Also said that the presidency doesn't lend itself to on-the- job training. Biden said about Obama.

PALIN: Right.

HANNITY: He said talking points doesn't get you there on foreign policy. And then he said when he voted against funding the troops, and you wrote this up in your debate, that the lives of soldiers would be lost.

PALIN: Right.

HANNITY: And Obama once accused our troops of air-raiding villages and killing civilians.

PALIN: Right. Now — now Biden, you remember, he had called Obama on that, on his vote to cut off funding for our troops, our young men and women over there in the war zone. And Biden said, "Obama, you know, this is political and you're going to cost lives if you do this."

And Obama had said that he wouldn't do it. And, yet, under political pressure — and this goes back to somebody's judgment and trustworthiness - - instead Barack Obama did exactly what he said he wouldn't do, and he voted to cut off funding for our troops.

HANNITY: Let me ask you about honesty and judgment.

PALIN: Yes.

HANNITY: On the issue of Jeremiah Wright, Bill Ayers.

PALIN: Yes.

HANNITY: On ACORN, on Pfleger, on Rezko, you know, we always hear these relationships are minimized. Then we find out they're a lot deeper. Do you have we have issues involving the honesty of Barack Obama? And then, secondarily, the judgment of Senator Barack Obama?

PALIN: Absolutely on that judgment. And the candidness. It's so tough for you guys to get a straight answer out of him about...

HANNITY: He won't talk to me. I've invited him, by the way, and Joe Biden. He won't accept my invitation.

PALIN: You're fun. You're a fun guy.

HANNITY: Tell him.

PALIN: I enjoy talking to you.

You know, the other part of that, Sean, is to ask the question what did those characters see in Barack Obama? Why would they have wanted to be associated with him? Why would Ayers have wanted to kick off Barack Obama's political campaign in his condominium?

HANNITY: These are 20 — these are 20-year relationships.

PALIN: Yes. So that's the other part of this issue, is what did those characters see in this presidential candidate?

HANNITY: And any time you bring it up it, it's "I was 8 years old." But you were 30 and 40...

PALIN: Yes.

HANNITY: ... when you were meeting with him, blurbing his book, going to — sitting on boards and giving speeches with him.

PALIN: Right.

HANNITY: Now this is an issue I've brought up many times, including the black value system in Jeremiah Wright. And nobody else in the media seems to care about it as much as I do. Where are you on this? How strongly do you feel about it.

PALIN: I don't know. I feel strongly about these associations, that it's fair game to discuss them. In fact, even Barack Obama had to admit that it was fair game. He challenged John McCain to speak on the issue of Ayers in the debate. And McCain took him up on it, thankfully.

But the issue, too, about the judgment and the trustworthiness also and the candidness, it's fair game. And you see what I go through and what John McCain goes through when we do bring up the associations.

HANNITY: I can't imagine that if you said about John McCain that he was going to be tested in the first six months, because people want to test him. He doesn't have enough experience, that I think that would be a big deal.

PALIN: Can you imagine?

HANNITY: It would be funny.

PALIN: You know, we would be held accountable for comments like that. And here again, Biden gets to take a pass after saying something like that. I haven't heard the follow-up yet.

HANNITY: He's not doing many interviews now. And you'd been accused of not doing any, and I see you everywhere now.

PALIN: Yes.

HANNITY: You're doing a lot of interviews. All right. Let me ask you this. Construction begins for Obama's big election celebration: 2-million-dollar price tag for an election night Obamafest. Obama is talking about his transition plans, his post-election win. "I feel like we've got a righteous wind at our backs," he went on to say.

Seems to me that there's a little overconfidence that they're coasting. They're in a defense mode. Do you think they're just making an assumption that they won this election? And do you think there's a danger to that?

PALIN: You know, I think he's out there already measuring the drapes and working with Nancy Pelosi and Reid, also, to start talking about calling everybody back in right after the election and doing whatever they want to do to this country: to raise taxes, to waive that white flag of surrender in our wars. I think that's some overconfidence.

And for John McCain, for me, for those who support this reform ticket, this team of mavericks, that's OK with us that they are over confident, because I have been, and I know John McCain have been in the underdog position before, not taking anybody or anything for granted. That's a healthy place to be.

It makes us work that much harder. It makes us get out there with our message very, very clear about where we intend to take this country to get the economy back on track. A pro-growth pro-private sector agenda that is needed in this country. Our promise of protecting our constitutional rights and the victory in the wars that we want to see. That's our message and that's our mission.

HANNITY: Governor Palin, thank you for being so generous with your time.

PALIN: Thank you.

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