The following is a rush transcript of the March 8, 2009, edition of "FOX News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

CHRIS WALLACE, HOST: President Obama's standing in the polls is still strong, but his agenda is coming under increasing fire. Joining us now from his state capital in Richmond, the new chairman of the Democratic National Committee, Virginia governor Tim Kaine.

And, Governor, welcome back to "FOX News Sunday."

GOV. TIM KAINE, D-VA., DEMOCRATIC NATIONAL COMMITTEE CHAIRMAN: Great to be back with you, Chris.

WALLACE: Governor, let's put some numbers up on the screen. The Dow Jones closed before the inauguration at 8,281. Now it's at 6,626. That's a 20 percent drop, which is the definition of a bear market.

Governor, how much responsibility does the president bear for the tumble in the stock market since he took office?

KAINE: Well, Chris, I think you have to look at where it was before it got to 8,200. I mean, it had slid dramatically in the months before the inauguration, and that — and that decline is continuing.

But the president and his team are working very hard to put steps in place so that we can start to grow the economy again — not going to happen overnight, but I think the — the right elements are being put in place so that we can start to stabilize and then grow the economy.

WALLACE: Well, let's talk about the right elements, because the markets clearly have not been reassured by what messages the president has sent so far.

And I think it's fair to say that they're looking particularly to the issue of a financial rescue plan. Why is it that almost seven weeks...

KAINE: Right.

WALLACE: ... after the president took the oath of office he still has not come forward with a plan to deal with the banks and their toxic assets?

KAINE: Well, Chris, there are — there are a couple of elements of the plan that have been put out, sort of three elements and then there's a fourth that's coming this week.

First, you had to create a capital cushion for some of these banks to make sure that they have adequate capital.

Second — very important — the president's laid out a plan Senator McCain was speaking about, to try to mitigate the foreclosures. That's very important.

We have to get securitization going again, the ability of banks to have big chunks of assets securitized. That's been frozen up since October, and Secretary Geithner has laid out a plan on that.

And then the fourth element, and this is very important, is one that he'll be talking about soon, a plan that will use private investment to start to purchase bad assets, clear them off bank balance sheets, so that they can then go forward in a more healthy way.

This is complex stuff, and it's — it's — unlike, say, the stimulus plan, where we control it just on our own shores, this financial crisis is a worldwide financial crisis — that we have to try to coordinate our actions in some degree with what's happening with financial regulation elsewhere.

Prime Minister Brown came from England this week to talk about that. So you just have to try to coordinate it with, you know, the effort to get this system going back on a worldwide basis.

WALLACE: But I think you would agree, Governor, that the key part of that, and the part that we've been talking about ever since September — and the original financial rescue plan by the Bush administration was a way to get these banks not to be zombie banks, as Senator McCain said...

KAINE: Right.

WALLACE: ... but get these bad assets off the books to figure some way to deal with the billions and trillions of dollars of toxic assets.

I want to put some numbers up on the screen with the — when it comes to appointments. There are 800 jobs in — that the president has that need Senate confirmation. So far this president has nominated 44, and of those, only 28 — 28 of 800 — have been confirmed.

Now, in the case of Treasury, Treasury Secretary Geithner is the only Obama nominee to win Senate confirmation. There's not a deputy secretary. There are no undersecretaries. There are no assistant secretaries.

Isn't that a serious failure in the middle of a financial crisis?

KAINE: Well, it's certainly tough, but let's just look at past history as an indication. If you look at history of earlier administrations, when folks were confirmed, it often takes a little bit of time, and there are a whole series of appointments that are not Senate confirmable.

There's about 50 political appointees that have been appointed, that are at work with Secretary Geithner in the Treasury. But again, this is, acknowledged, a very, very difficult situation.

We're dealing with a financial problem on our own shores and a decline in the stock market that started long ago. And we are trying to coordinate it with what's happening in the worldwide financial community.

There's going to be a G-20 summit, as you know, in April where the — in November, President Bush had one saying, "We've got to come back in an international way to set up the framework."

And what we're trying to do is get our pieces in order so that we can walk into that summit with a leadership position and help other nations do the same.

WALLACE: Governor, you're exactly right, it is a very serious situation, but with the markets tumbling, with unemployment rising, the president is proposing this huge agenda, with health care reform, and carbon cap and trade, and increase in taxes on the wealthy.

Why not — shouldn't he keep the focus almost exclusively to the degree possible at this point on what a lot of people think is job one, the economic crisis and the financial situation?

KAINE: Chris, I think that the reason the president is doing this is these problems are connected to our economic crisis.

So just to use one example, Senator McCain talked, for example, about we need to focus on controlling health care costs. G.M. — we were — we've been talking about G.M.

What is probably the most cited reason for G.M.'s difficulties — or one of the most cited is the legacy costs on health care and retiree health care that G.M. has to carry that other automobile companies, particularly those in foreign companies, don't.

You hear people talk about federal spending going up dramatically in Medicaid and Medicare. These entitlement programs that are health- care- related are part of our economic challenge.

So the president was elected to try to deal with this health care challenge, which is — can be a choker on the economy. And the ability to bring legislators together of both parties in the summit — and discussions they had this week I think were kind of refreshingly bipartisan and included representatives from a lot of stakeholders.

If we can start to get that right, that can be part of growing out of these economic doldrums. And you can say the same thing about looking at our energy future going forward. There's not kind of the economy on one track and then getting energy right on a different track. They really are related.

WALLACE: Governor, part of the Obama budget that he has put forward is to reduce the tax deductions in the top tax brackets.

And even some Democrats are saying this is not the right time to create new disincentives for people trying to buy homes or to donate to charities.

I mean, is that reduction in — the reduction in the deduction for top income owners — are you really going to stand on that one?

KAINE: Well, Chris, the president has laid out a basic budget, and the goal is — you know, it's trying to accomplish something very challenging right now, which is — and he's very serious about it.

We want to get on a path to reduce the deficit, and reduce it in half by the end of the administration. And so there are a number of aspects to the budget that are basically geared to try to do that.

And that includes what he campaigned on and promised to do, which is let certain tax cuts from the Bush administration expire, but also this adjustment of the deduction, which is not an elimination of the deduction. It's just an adjustment slightly downward. As part of this...

WALLACE: But you don't have any problem with the idea of reducing the tax break that people get for buying a home when we're in the middle of a housing collapse?

KAINE: Look, I mean, I think you can — you can argue about pieces of it, but the goal is if we're going to reduce the deficit in half, we're going to have to eat some spinach to do so.

And so he has laid out a plan that will get us there, which is what Americans — you know, Senator McCain is a big proponent of deficit reduction, and in order to get there, there's going to have to be some painful choices, choices that, you know, if we weren't worrying about deficits, you know, we wouldn't worry about, but we're going to have to do a number of things to get to that — get that deficit down.

WALLACE: Well, you talked about eating spinach. Let's talk about how much spinach you're eating in this $410 billion spending bill before the Senate which has...

KAINE: Sure.

WALLACE: ... 8,500 earmarks and an increase of 8 percent of spending.

Even one of the top Democratic senators, Evan Bayh, opposes it, and he wrote this in the Wall Street Journal. "The economic downturn requires new policies, not more of the same."

Why in this case is a reform president supporting business as usual?

KAINE: Well, I would — I would say it's not exactly business as usual, and I agree that the earmark reform has to happen. Let's just put it in context again. Earmarks were at their high in 2005.

The number of earmarks, the amount of dollars in earmarks in this budget, are 25 percent of what they were in the '05 budget. So Congress has gotten the message, and I applaud Senator McCain and also the president when he was a senator saying, "We've got to reform this process."

The amount of earmarks has been dramatically dropping since '05. The president has made plain that he's going to continue to push it, push it downward. The recovery bill that was passed was passed at his direction...

WALLACE: But — but — but, Governor...

KAINE: ... with no earmarks included.

WALLACE: ... why not just — why not just veto this bill? I mean, there's no time like the present.

KAINE: Well, vetoing an entire budget bill, an appropriations bill like this, you know, has consequences with respect to other programs, Chris, as you know.

And so the president's going to have to weigh that, the costs of vetoing an entire appropriations bill to run government, you know, with a set of earmarks that are being dramatically reduced from past years, with - - and he has made very plain that he is going to push for earmark reform just as he pledged to during the campaign.

WALLACE: Finally, Democrats have had a lot of fun this week poking at Rush Limbaugh and, in fact, the Democratic National Committee, the organization that you run, is planning to put up a billboard in Rush's hometown of West Palm Beach, Florida, and you're having a contest to come up with a slogan — I assume it'll be a somewhat snarky slogan, Governor — to — to put on the billboard.

In the campaign, Barack Obama talked about changing the way business is done in Washington. And the other day he said this. Let's watch.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: We know the only way to solve the great challenges of our time is to put aside stale ideology and petty partisanship and embrace what works.

(END VIDEO CLIP)

WALLACE: Governor, isn't going after Rush Limbaugh a perfect example of the stale ideology and petty partisanship that the president was talking about?

KAINE: Well, it's not — it's not like Rush is a member of Congress or, you know, or anyone of that kind. He's a radio personality who has been saying that he wants the president to fail.

We wouldn't even be talking about Rush Limbaugh at all had he not said he wanted the president to fail, and then he's found others in the party and party leaders who have either echoed that claim or, in the case of Chairman Steele, denounced the claim, which I thought was courageous, but then apologized to Rush Limbaugh.

So I think there's an important point here. The billboard is a little bit of fun, admittedly, but there is an important point. At a time of crisis in this nation, no one should be rooting for the president to fail. Both this country and the world needs him to succeed.

Now, that doesn't mean that everybody has to agree with everything. I thought Senator McCain kind of said, "Look, we should be a loyal opposition working together, disagreeing when we need to but always finding areas of agreement."

If that is the spirit, then we're going to do fine. If we have people out there praying for the president to fail and trying to rally folks around that, we need to push back on that.

WALLACE: All right.

KAINE: It's just not the right message for the time.

WALLACE: Governor, we have to leave it there. I do want to point out, though, just as a — as a point of information, that Rush Limbaugh says — and I think if you read what he says, he wasn't saying I want the president to fail. He was saying I want his policies, his agenda, to fail, and that he disagreed with them and thought they were bad for America. But fair enough.

Thank you so much, Governor, for talking with us. Always a pleasure. Please come back, sir.

KAINE: I'll look forward to it, Chris. Thanks.

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