This is a rush transcript from "On the Record," July 9, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Tonight, everyone is buzzing about a possible stimulus 2.0. Is it going to happen? If so, a really good idea or a really dumb one?

Moments ago, we sat down with the former Speaker of the House, Newt Gingrich.

(BEGIN VIDEOTAPE)

VAN SUSTEREN: All right, stimulus 1, we had that in February. Are we going to get stimulus 2.0?

FORMER SPEAKER OF THE HOUSE NEWT GINGRICH, R-GA.: What we should do is get the first real stimulus bill, which ought to be tax cuts aimed at small business and aimed at jobs and helping the American business community compete in the world because stimulus 1 was a joke. Stimulus 1 was a politician protection act, which passed money to state and local governments so that they could avoid making any tough decisions. And in places like New York state, they actually increased the size of government by using all the federal money, changing nothing, reforming nothing.

And of course, they announced today that the San Francisco mouse got $16 million. So if you think that's a stimulus package -- I think that, frankly, was a waste of money. They ought to take the last $400 billion that aren't spent yet, take them away from government, put them into a tax cut package for small business and allow every small business in America to create new jobs for real, rather than having bureaucrats and politicians do it.

VAN SUSTEREN: All right, there's so many things to be very interested about stimulus 1. I remember there was a big rush, rush, rush, Let's get it passed. They dragged that poor congressman back from his mother's funeral so that she -- so that he could vote. And that was on a Friday night, didn't -- and the president didn't sign it on Saturday, didn't sign it on Monday, didn't sign it on -- he signed it on Tuesday, finally, in Denver. Rush, rush, rush. Now we're in July, and only 10 percent has been disbursed (INAUDIBLE) called shovel-ready. How could that happen?

GINGRICH: Well, first of all, they just didn't tell the truth.

VAN SUSTEREN: But didn't they know -- if you're -- if that's right, didn't they know that sometime, you know, that they would face this, if that's true?

GINGRICH: No, no. No. Their hope is that they do so many bad things every week that you never focus on any one of them.

VAN SUSTEREN: Oh, come on. They didn't -- that wasn't (INAUDIBLE) Don't you think that they...

GINGRICH: No, but...

VAN SUSTEREN: Didn't they -- didn't they truly believe back in February when they passed that and sold it to the American people that this was the end-all? You don't -- you don't think they believed it?

GINGRICH: To be fair of the president, you had a brand-new president who had come from the state senate to the U.S. Senate to winning the Democratic nomination to becoming president in four years. That's an amazing achievement. He's all of a sudden in office for the very first time. He's never been an executive before. And he thinks, Let's get it all done. And nobody slows him down. Nobody says, you know, That's not how it works. And so they rushed everything as hard as they could. Now...

VAN SUSTEREN: You're excusing him for that? I mean, you're...

GINGRICH: No...

VAN SUSTEREN: I mean...

GINGRICH: I'm trying to explain it honestly. I think -- I think he was at a moment of hubris where he believed that he could actually change the way Washington works. And you see it because he initially talks about being bipartisan. Then Speaker Pelosi writes a radically partisan bill. He tolerates that. It then has to be rammed through the Senate. And the way they were doing it, I think that the more cynical members of the administration knew that if they had allowed that bill to take an extra three weeks, it wouldn't have passed. And so they knew they had to ram it through to get it done. I think what they didn't realize was exactly what you're doing now, which is these votes never go away.

VAN SUSTEREN: Well, but here's the problem, is that that may be, quote, "an excuse" -- he was new, he was young, he had great ambition. But you tell the two million people who have lost jobs since January that it's sort of, like, Well, you know, it's OK -- he got it wrong. You know, he got it wrong.

GINGRICH: No, I mean...

VAN SUSTEREN: These people are hurting.

GINGRICH: Right. This administration has failed with the economy, and if they're not careful, that failure is going to become permanent and it's going to trap us at 8, 9, 10, 11 percent unemployment for a decade.

VAN SUSTEREN: Suppose instead of doing this massive $787 billion spending that we had completely eliminated withholding taxes.

GINGRICH: Well...

VAN SUSTEREN: And -- and combine it with some -- some spending. Would that have made any appreciable difference to the state we're in now?

GINGRICH: You know, I think there were some congressmen who actually proposed that we have a very -- you take the same $787 billion -- you literally would have paid no corporate or personal income tax through August. Now, if you had done that, if you'd had a tax holiday on that scale, you would clearly have stimulated the economy radically more, but you wouldn't have solved -- I mean, part of this was a deal -- the politicians were covering for the politicians. They were trying to solve the problems of the mayors, the county commissioners, the school boards, the state governments. And in fact, that's not going to work.

We are at the end of an era where we could use our credit card to avoid tough decisions. We're at the beginning of an era where we have to be honest and get back to the basics, and that means very challenging decisions about the size of government and about what America can really afford.

VAN SUSTEREN: But if we -- if we rewind to February, we are facing those same problems.

GINGRICH: Yes.

VAN SUSTEREN: I mean, it's, like -- it's -- so what is this, it was sort of just a payoff to local -- to mayors and to states? That's what this was?

GINGRICH: Look, the Democrats are legitimately the party of government. And as the party of government, they used their power to pay off government. Now, they called it a stimulus because if you'd walked in and said, Hi, I have this great idea, let's pay off every politician in America, people would have thought you were truly crazy. And what's happened -- and this is why they have a big problem. I think they believed the economy would turn around. I think they're suddenly faced with the likelihood that this economy not only has not turned around but there's a real danger it's going to be trapped in the 8 to 11 percent unemployment range for a long time.

They now have won all their big votes. They -- it's going to be very hard this fall for President Obama to go back and say this is George W. Bush's problem because the fact is, this is -- they've gotten what they have asked for and it's not working. If that continues to happen, I think the real debate ought to be between a real stimulus bill, which has to be a private sector small business stimulus bill -- that's where the jobs are.

VAN SUSTEREN: All right, well, the only reason I liked the idea of getting rid of the withholding taxes in February was simply that if it were a mistake, you could all of a sudden regroup. You could change it. Once you did a $787 billion stimulus bill and you started projects, we couldn't turn around if we were on the wrong track.

GINGRICH: Well, my -- no, my guess is...

(CROSSTALK)

VAN SUSTEREN: ... Easier to reverse yourself.

GINGRICH: Look, you point out they only spent about $80 billion so far in actual outlays. My guess is you could capture $300 billion to $400 billion that hasn't been committed yet and you could take all that and turn it into a tax cut, and it would be dramatically better for the country to take the money back from the politicians and give it to the American people in lower taxes, particularly if the lower taxes are focused on the self- employed and then small businesses to accelerate the development of real jobs.

VAN SUSTEREN: My next favorite topic of the days is czars. The president has now hired over 70 czars. Let me ask you about these czars.

GINGRICH: That can't be true.

VAN SUSTEREN: I mean, not 70, over 30, rather.

GINGRICH: OK.

VAN SUSTEREN: Over 30. You're right, it's not 70, over 30 -- is some of these czars, like the Afghanistan czar, Richard Holbrooke, is that one - - Dennis Ross is the central region czar. They've sort of divided in some part different geographical parts of the country. (SIC) Weren't the -- aren't these jobs that belong to the State Department? What...

GINGRICH: Well, first of all, we used to call those people roving ambassadors.

VAN SUSTEREN: All right, whatever we call them. But why are we hiring these extra people? Why -- I've got -- this is my list here, and next to it -- I don't know if you can see my handwriting is, but next to it, I've got -- these are the different departments they fall in. What are the cabinet secretaries doing? Why do we need all these czars?

GINGRICH: Well, historically, you do have people who are presidential envoys. Don Rumsfeld was in the 1980s for Reagan in the Middle East. But they're usually called presidential envoys. They're not -- I don't know how you can be a czar...

VAN SUSTEREN: Well, President Reagan signed that bill creating czars. He created the czars.

GINGRICH: Well, it's one thing to have a czar, say, for the drug war, where you actually have some domestic control.

VAN SUSTEREN: He had two czars, regulatory and Pentagon procurement czar, was Ronald Reagan's. He had two. Bush 41 had one. Clinton had 9. Bush 43 had 12. And to date, President Obama has more than 30.

GINGRICH: This means he has two czars for every cabinet officer. So you could have a czar cabinet and a regular cabinet. They could have meetings.

VAN SUSTEREN: Well, Senator Byrd was mad in February when he started -- when President Obama started rolling out these czars, it was bypassing the advise and consent of the -- of the -- of the Senate.

GINGRICH: This is -- this is administrative chaos. If you put together -- you ought to do this one night. If you put together a chart of the organizational structure that's supposed to be there, and then you lay over that chart all the various czars and where they overlap and who they supposedly report to, it's going to look like spaghetti.

VAN SUSTEREN: Well, see, this is (INAUDIBLE) the AIDS czar -- we have an AIDS czar. Why isn't that HHS? We have an auto recovery czar. Why isn't that Department of Transportation? We have a border czar. Why isn't that Homeland Security? We have a car czar. What happened to Treasury?

GINGRICH: (INAUDIBLE) how much money the total number of czardoms cost.

VAN SUSTEREN: But it -- but even...

GINGRICH: I assume each czar has to have staff and they have to have offices and they have to have travel. So you know, you're probably talking about $5 million to $20 million a czar times 30 czars.

VAN SUSTEREN: But it just goes on! A weapons czar -- what -- why isn't that handled by State or Defense? I mean, all these -- all these brand-new czars -- why do we have cabinets?

GINGRICH: Maybe it's a new technique for giving your friends titles.

VAN SUSTEREN: All right, so you're not -- this doesn't...

GINGRICH: Well, I...

VAN SUSTEREN: Are you scandalized by this or not?

GINGRICH: I'm not scandalized. I think it's an example of their administrative inefficiency and the fact that they -- they think if you name something, you've solved it. And they're going to find out that that's much harder than that.

(END VIDEOTAPE)

VAN SUSTEREN: Coming up, much more with Speaker Gingrich. What does he think of today's explosion between the CIA and the Democrats? Who is lying? Someone is.

And later: There is transparency and there is waste. The White House is about to spend $18 million taxpayer on something that we are afraid is going to set some of you on fire -- $18 million. That's coming up. And remember, we're only the messenger on this.

(COMMERCIAL BREAK)

VAN SUSTEREN: More with former Speaker of the House Newt Gingrich.

(BEGIN VIDEOTAPE)

VAN SUSTEREN: Speaker of the House Pelosi and CIA director Panetta and -- and the CIA -- care to weigh in on that one?

GINGRICH: Well, look, I started to say and it was probably too strong a phrase, so I'm not -- I won't...

VAN SUSTEREN: Oh, go ahead! Why not?

GINGRICH: I just -- I just started to say, you know, are these people just out of touch with reality?

VAN SUSTEREN: Who?

GINGRICH: Well, Pelosi and her six puppets. I mean...

VAN SUSTEREN: Well, wait a second. If the CIA -- if she says the CIA is misleading...

GINGRICH: No...

VAN SUSTEREN: ... and then the director says, Yes, we didn't tell them...

GINGRICH: No, no. First of all, what you had the other night I think should lead to a serious ethics investigation of these six Democrats. They go to a secret briefing on a committee where they are supposed to be doing things in secret. These six guys go off on their own and write a letter referring to secret testimony. Now, I have been told by former chairman and ranking member Pete Hoekstra that -- and he said this publicly, so I can repeat it -- the program Panetta briefed them on never happened. It never occurred. It was...

VAN SUSTEREN: But wait a second. But...

GINGRICH: It was a plan.

VAN SUSTEREN: Is it a fact or not, did the CIA mislead or fail to -- did they fail to tell Congress about the program? Did they fail to tell them?

GINGRICH: Yes, they failed to tell them.

VAN SUSTEREN: Well, then...

GINGRICH: But here's the point. The program never was -- it never happened.

VAN SUSTEREN: Well, why are they now...

GINGRICH: The point...

VAN SUSTEREN: Why are they now talking about it? Sounds like -- they didn't want to talk about it before.

GINGRICH: I think Leon Panetta is trying to bend over backwards to be cooperative and he got bit for the effort. But think about it. How many plans would you guess there are in the Pentagon and how many plans would you guess there are in the State Department and how many plans would you hope there are at the CIA?

VAN SUSTEREN: If it's so unimportant, why, then, do you suddenly in late June all of a sudden say, Oh, by the way, we didn't tell you the last eight years but we did have this rather significant operation, or plan or whatever, going on?

GINGRICH: Which was never used.

VAN SUSTEREN: But apparently, it was -- it was started, and they canceled it.

GINGRICH: They planned -- they planned it. They planned it, which they -- I expect the CIA to plan a lot of things.

VAN SUSTEREN: But if it's so insignificant, then why is he suddenly...

GINGRICH: I think -- I think...

VAN SUSTEREN: ... 'fessing up in late June?

GINGRICH: Well, I think he was being extra cautious. I suspect he had just been briefed on it. And he said, Look, I'll prove how cooperative I am. Now, in return -- remember, in return for his going up to a secret meeting, where the members are supposed to be responsible adults, protecting the secrecy of the United States, you suddenly get a letter signed by six puppets for Pelosi who the CIA says claim he said something he didn't say.

VAN SUSTEREN: Well, why -- you know, maybe the best idea...

GINGRICH: And then -- wait a minute.

VAN SUSTEREN: All right.

GINGRICH: This morning, the CIA explicitly says...

VAN SUSTEREN: The spokesperson.

GINGRICH: The spokesperson said their letter is inaccurate.

VAN SUSTEREN: All right, well, we, the American people, are sort of hung out to dry on this. And we've got this fight going on behind -- between the CIA, the Democrats and the Republicans...

GINGRICH: Well, some Democrats.

VAN SUSTEREN: Some Democrats...

GINGRICH: Some Democrats (INAUDIBLE)

VAN SUSTEREN: ... and some Republicans.

GINGRICH: And by the way...

VAN SUSTEREN: Why don't we have a little, quote, "transparency" and let's air it and let's find out who is lying...

GINGRICH: Well...

VAN SUSTEREN: ... who's telling the truth, who's misleading? If this...

GINGRICH: But you know...

VAN SUSTEREN: If the program is canceled, what's the big secret?

GINGRICH: Well, first of all, we plan lots and lots of things you don't necessarily want to talk about. And you don't know who was involved in the planning. It may well have involved allies who'd be embarrassed. Second, you know who was responsible. Chairman Reyes, the Democrat chairman, said that he agrees with Panetta that the CIA does not routinely lie. Remember, what Pelosi said was not they occasionally make mistakes, they occasionally do things wrong. Pelosi said, They routinely lie to us.

VAN SUSTEREN: Well, and the way it appeared, the way it's currently appearing, is that CIA director Panetta has backed her up. Now, the spokesman of the CIA...

GINGRICH: (INAUDIBLE) publicly he hasn't backed her up.

VAN SUSTEREN: Well, he said something in June before some -- before the committee, right?

GINGRICH: He came up on June 24th and said there was a program that was planned that was never implemented. In my judgment, they should have briefed you on it. I'm now briefing you on it.

VAN SUSTEREN: All right. Well, what -- I mean, obviously -- I mean, it seems to me that the...

GINGRICH: There's a huge gap between not telling you which of the 6,000 plans they have is currently being -- not being done, and lying.

VAN SUSTEREN: OK. I agree (INAUDIBLE) but it seems to me that the smart thing and fair thing to do to the American, instead of us sort of just sitting back and listening to the two sides point fingers at each other, with all sorts of rather accusations, very serious to falsely accuse either side of lying, is why not at least air it so that we know?

GINGRICH: Look, why not ask Speaker Pelosi to give you proof about any lies? She said flatly they lie -- she said they lie all the time. She was the ranking Democrat on the committee. She served on that committee. Now, what are the lies she's referring to?

VAN SUSTEREN: I'd like to have -- I'd like to have them -- see them all in one room under oath, telling -- telling what -- what they know because...

GINGRICH: I think that's a legitimate request. All I can tell you is the Democratic chairman of the committee said that Panetta was right and Pelosi was wrong. The CIA came back out again this morning and said Panetta was right and Pelosi was wrong. You have six renegade Democrats trying, I think, to be puppets for Pelosi, who wrote a letter that was frankly astonishing, based on a secret meeting that they were not supposed to be talking about.

And you now have the former chairman of the committee, Pete Hoekstra, saying bluntly and publicly the letter is false, their allegations are false. I think you could take that amount of data and reach a conclusion that Speaker Pelosi did not tell the truth, that her own former Democratic colleague, Leon Panetta, has said publicly that she was not accurate, and they repeated it this morning. And so if the question is, was Speaker Pelosi misleading the country, the answer is yes.

VAN SUSTEREN: Well, I feel a little bit differently. I am sufficiently confused by the sort of the cross -- the accusations back and forth, and I'm sufficiently concerned that it's a serious topic that if I could have my way, I would like them all to sit down and clear the air and find out exactly what's happening, instead of making this a political game of trying to get each other.

GINGRICH: I suggested they create a special ethics panel...

VAN SUSTEREN: How about a czar!

GINGRICH: No -- well (INAUDIBLE) special ethics panel of former -- an equal number of former members of the Ethics Committee from both parties to actually go through the process and determine whether or not what Speaker Pelosi said is in any way true.

(END VIDEOTAPE)

PART 2 - JULY 10, 2009

JENNIFER GRIFFIN, FOX NEWS GUEST HOST: Love her or hate her, nobody can stop talking about Governor Sarah Palin. Everyone wants to know the answer to one simple question: Why is she really resigning? Enter Levi Johnston, the 19-year-old father of Palin's grandson. Levi almost ended up as Governor Palin's son-in-law. He and Bristol Palin ended their engagement earlier this year. Well, Levi thinks he knows why the governor is stepping down.

He says, quote, "I've heard of people offering books and stuff like that. And actually, there was a reality show they wanted to do. But I think the big deal was the book. You know, that's millions of dollars right there, and she couldn't do that as governor." Levi also says he wouldn't vote for her if she runs for president because he doesn't think she's up to the job.

Meanwhile, a long-time White House reporter is being shockingly honest about the press coverage of Palin. Carl Cannon writes, "In the 2008 election, we took sides, plain and simple, particularly with regard to the vice presidential race. We simply didn't hold Joe Biden to the same standard as Sarah Palin, and for me, the real loser in this sordid tale is my chosen profession."

Governor Palin is outspoken about her contempt for some of the press, but is that why she is resigning? Greta talked to former House Speaker Newt Gingrich about the mystery around Palin's decision.

(BEGIN VIDEOTAPE)

GRETA VAN SUSTEREN, FOX NEWS HOST: Governor Palin.

NEWT GINGRICH, FORMER HOUSE SPEAKER: Yes.

VAN SUSTEREN: What do you think?

GINGRICH: I was really surprised. I knew that she was under a lot of stress, and I knew that it had been very painful for her family, the Letterman things and the "Vogue" magazine article.

And my assumption is that she finally decided it wasn't worth the pain. But you know better than I do.

VAN SUSTEREN: Everyone thinks I know here better. I've only interviewed her. Everyone thinks I know her better. Every time I have seen her, it is been on camera.

But anyway, I find this inexplicable. I mean, I understand not want to get attacked, but the problem is in, some ways, I'm surprised that's how she reacted to it.

GINGRICH: I mean, the challenge she has is, and I wish her well and I wish and her family well, and I think they have had a very hard couple of months. I'm very sympathetic to how much pain they have been put through and how unfair it has been.

I think the challenge they will face is that if she wants to lead a public life, fighting the way through that is unavoidable, that it's not something, you can't just be clever and step down as governor, remerge three months later, and not think the same nasty people with the same nasty ideas and not going to come after you again.

VAN SUSTEREN: In other words, you can't just be right about the media is nasty.

GINGRICH: You have to live with it and you have to live through it. And it has been always true.

Washington almost quit after his first term because the New York newspapers were attacking Martha for having teas that were so formal. And he was so infuriated that this one could be attacked by the local newspapers that he almost left the presidency and said one term is enough. It took Jefferson and Hamilton to talk him into staying.

We have always had a very tough news media, and we have always had a very tough political environment. And it's very painful.

My daughters can tell you, they lived with it from childhood on. It's hard.

(END VIDEOTAPE)


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