This is a rush transcript from "The O'Reilly Factor," November 11, 2008. This copy may not be in its final form and may be updated.

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BILL O'REILLY, HOST: In the "Impact" segment tonight: Sarah Palin continues to defend herself against charges from some Republicans, and she has been eloquent in doing that. But the big question remains: Will the governor emerge as a power within the Republican Party in the future? Joining us now from Dallas, FOX News analyst Karl Rove.

OK, the Rasmussen poll shows that most Republicans like Sarah Palin, and they'd like to see her run again. The general polls show that most Americans don't believe she has the gravitas. So is this a problem for the GOP right now?

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KARL ROVE, FOX NEWS CONTRIBUTOR: Yes. Look, people don't really care. The polls right now don't matter. They really don't. They don't really — people really don't care. They're just answering off the top of their minds. She was on the losing Republican ticket, so the broader electorate is going to say no. She enthused a lot of Republicans, so they're going to say yes.

But what really matters is not today, but what happens over the next two years. And not over the next four years, but the next two years. Republicans are going to look at Palin, Romney, Jindal, Pawlenty, Huckabee, Gingrich, you name it, all these people who want to run for president. And over the next two years, they're going to look at all of them and say how much do you do in a constructive fashion to do two things: help our party get up off of the mat and back into the game and then help us make gains in the 2010 election. And how they perform in that is going to have more to do...

O'REILLY: But what's the arena of performance? I mean, people aren't going to be able to see what Sarah Palin does in Alaska.

ROVE: That's right.

O'REILLY: Governor Romney doesn't have a job. Newt Gingrich works for us.

ROVE: Yes.

O'REILLY: So what's the performance arena? How are they going to be evaluated?

ROVE: All of them have to have a job, which is to go out and help Republicans. So it's go places, speak out on behalf of the party.

O'REILLY: So do that Hillary Clinton thing, try to call in all the chits you can and go give speeches and all of that.

ROVE: Well, you know, you create the chits. No, create the chits. You know, they don't have any chits right now. Everybody's got to now go out there and earn credit…

O'REILLY: OK, but here's…

ROVE: ...with the old Republican bank. And she's got to be one of them.

O'REILLY: Can we just strip it all away here, Karl, and get into the no spin? Here's the problem. Sarah Palin is a star, all right? Star power, no doubt. No question. She is not going away. She is ambitious. However, there are serious questions by serious Republicans, as you know…

ROVE: Right.

O'REILLY: ...about her knowledge of the world, her ability to deal with very complicated problems, both foreign and domestic. That's the tension. The tension is between an obvious star and what she knows…

ROVE: Right.

O'REILLY: ...how experienced she is. You can run Alaska effectively. Can you deal with Putin? That is the question.

ROVE: Right. And look, over the next two years, she has a chance to go out and demonstrate to people that she has the depth, the heft and the gravitas to take on a bigger task. And she either does that, or she doesn't do that.

Now some people have come to a conclusion today, but most people have not within the Republican Party. But look, she was on the stage for nine weeks between the time of her nomination, her announcement, and the election. And she performed well.

The question is over the next two years, is she going to take it up to the next level? Because people looked at her and said, look, you're fresh and new and on the stage, so you don't need to know where South Ossetia is. And I don't care if you know what the CMS says about the Part D prescription drug benefit under Medicare in this latest annual report. But they will care more about things of substance and weight over the next two years because they'll be looking at her through a different frame.

O'REILLY: All right. So she's got to get a Ph.D. in the world in the next two years and let everybody know about it. I think that's a fair analysis. I do. I think…

ROVE: And each candidate has, you picked it up right. There is a strength and a tension. There's a strength and a weakness that every one of these candidates have. You described hers. But each one of the other prospective candidates has a similar test that they need to pass in the next two years.

O'REILLY: Right. But Palin has an advantage because the base already loves her and she's a star.

Now let's go to Obama. As you heard in my "Talking Points Memo," the far left, and that includes The New York Times, in a week — it's been seven days since he won, OK — are now already pushing the man to go to the left.

ROVE: Right.

O'REILLY: What are the three big mistakes, in your opinion, that Obama could make in the first few months of his administration?

ROVE: Well, you touch on the biggest one, which is overreach. And there are several variations, several ways you can overreach. One is to go way left. I mean, he campaigned as a centrist, as a moderate liberal, or a moderate centrist. If he goes too far to the left, that's a problem. If he spends too much money, that's a problem. The biggest overreach problem though is to try to do too much. Think about this. He's talking about doing a stimulus package, doing something on health care, a tax cut, the education and energy. That's a big, robust agenda. And what may happen is if you're trying to do too much, you don't get anything done.

O'REILLY: Well, he's also…

ROVE: You lose the focus.

O'REILLY: ...talking about bailing out GM, the car companies. I mean, my God.

ROVE: Well, I put that under the economy, but you're right. You need, particularly a new president needs to do a couple of things in sequential order and not be raise…

O'REILLY: But he's going to throw — he has to throw the far left a bone. He's got to close Guantanamo or do some symbolic gesture for them.

ROVE: Well, this is the other challenge he faces. I think from a practical perspective, you may be right. But the second biggest challenge is don't look like something you didn't — that you didn't describe yourself as. Don't look like you didn't mean it.

During the campaign, there were two things that he went out of his way to say. One is I'm going to be bipartisan. It's going to be Republicans and Democrats together. And second of all, he tried to make it appear that he was a moderate, in the middle centrist, conventional, Midwestern values. How many times did we hear about his Kansas values? He was not a "culture warrior," to use a phrase you're familiar with.

O'REILLY: No, not at all.

ROVE: But what happens…

O'REILLY: But he did say he would close Guantanamo. So I think that's what he's going to give them.

ROVE: Right. Well, but you know what? He said one or two of those things. Like he said once, he said I'm going to be for the Freedom of Choice Act, which does away with any restriction about abortion.

O'REILLY: That would be suicide if he does that.

ROVE: Suicide. He went to the AFL-CIO and said I'm in favor of card check, taking away the working man's right to a secret ballot. But he did make that part and parcel of…

O'REILLY: No. If he does any of that stuff where the talk radio and cable axis gets him…

ROVE: Right.

O'REILLY: ...he's dead. Real quick.

ROVE: Right.

O'REILLY: On Drudge today there was a report that President Bush is angry. That the meeting he had with Barack Obama yesterday, which was all smiles and nice, was leaked to the press. You buying that?

ROVE: I would buy that. I don't have any personal knowledge of that. But I noticed in the reports immediately afterwards that somebody said here's what the president said: We'll do a stimulus bill, but you need to do Colombia free trade. I don't know if that ever took place or not, but walking out of your first meeting with the president of the United States, the president-elect should not be having his people go leak it to the press. That is not very presidential, and not a good way to get started.

O'REILLY: All right. And that's interesting because you know Bush wouldn't have done that.

ROVE: No, he wouldn't have.

O'REILLY: So if it is true, and again Mr. Rove and I do not know if it is, it had to come from the other side.

OK, always fascinated to talk to you, Karl.

ROVE: Great.

O'REILLY: Thanks very much.

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