This is a rush transcript from "On the Record," September 1, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Karl Rove goes "On the Record."

(BEGIN VIDEOTAPE)

KARL ROVE, FORMER GEORGE W. BUSH ADVISER, FOX CONTRIBUTOR: Hey, Greta. How are you?

VAN SUSTEREN: I'm very well. Now, Karl, I think this is immensely unfair to the American people. A CBS News poll says that only 31 percent of American people have a clear understanding of the health care reform being proposed by the Democrats, 67 percent say that the reform ideas are confusing. I think that's grossly unfair to the American people. What do you think?

ROVE: No, I think that's probably pretty -- you know, people have heard a lot. They have been told things that they don't think are accurate, so I can see that. In fact, what was interesting to me was...

VAN SUSTEREN: But I -- let me just -- wait. Let me (INAUDIBLE) I don't mean that those aren't the numbers. What I think is it's deplorable that it hasn't been adequately communicated, that we don't have a clear idea, the American...

ROVE: Oh, sure.

VAN SUSTEREN: That's what I think is unfair, is that...

ROVE: Oh, sure.

VAN SUSTEREN: ... you know, it's being -- it's just being shoved down their throats, is what I mean.

ROVE: Absolutely.

VAN SUSTEREN: And it's not -- and you -- and you should be able to make it clear.

ROVE: Yes, no, I absolutely agree with you. And look -- and this is a big, huge, complex piece of legislation that has not been debated in the normal way. Normally, we would have give and take between the parties in fashioning it. Here we only have give and take between the parties in describing it. And then, you know, we've got the Democrats in control of Congress, both the House, the Senate, and the White House, and they've dominated the -- the conversation and they've been saying things that the American people don't think are true.

In politics, every argument generates a counter-argument. So when the president gets up there and says this won't add to the deficit, and people start hearing information to the contrary, it really -- it really undermines the -- undermines the case and it causes people to say, You know what? I don't like this, and I'm going to -- I'm going to describe it whenever I can in bad terms, like I think it's confusing, not clear.

VAN SUSTEREN: But I think the big, fat lie out there is, I'm not convinced that the members of Congress really understand what this bill is about because I have gone through a number of the pages, not all the pages, it is incomprehensible. And I think a smart person can write a bill so that every one of us can understand it, so that we can make a smart decision whether we're for it or against. And this whole fight that we have about whether it's good or bad is almost silly because we're fighting about something that's incomprehensible.

ROVE: I think you're right. And look, part of that is deliberate. I'm confident there are things in there that are hard to understand, that are deliberately hard to understand because somebody wants to point something in a certain direction, or to have a certain flexibility. And again, we're dealing with a big, complex thing. We're dealing with 15 percent of the American economy is going to be controlled by that. Our -- that's what our health care expenditures amount to, is 15 percent of the GDP. So it's a big, sprawling piece of legislation to begin with.

And then when you have it written by people who are not transparent and are not -- not open in their discussions and you get it written behind closed doors by powerful committee chairmen, and then, you know, this made its way out of the House first, and in the House, Nancy Pelosi brooked no debate, no discussion. It was written by a few key powerful members, brought to the floor and voted on with a very strong cracking of the whip over every Democrat's head, and as a result, they're ill-positioned to explain it, defend it and describe it. And as a result, we're where we are five or six months later, which is the American people are way upside-down on this bill.

VAN SUSTEREN: You know, I -- I think that everyone will agree that there's a lot of gotcha politics in Washington, both sides. And I don't mean this as a gimmick, but President Obama said at a town hall meeting a couple weeks ago that after the recess, he'd love to go line by line through the bill with any member of Congress that wanted to do that. I actually wish that someone would hold his feet to the fire on that because I -- he's a smart man. If he -- if he read it, I think he would agree that it just -- you can't -- you can't write something like this and expect it to be implemented down the road if it is not clear.

ROVE: Yes. Look, I hold the president responsible for this thing getting off the track. He let this bill be drafted in the House by Democrats only. They pushed it through with only Democrat votes. There was no effort to bipartisanship. You know, you start bipartisan in the beginning by sitting down and saying, Where can we find areas of agreement? Where are we going to have disagreement? And can we talk about how we can fashion a bill that could get the largest number of votes and achieve the goals that we mutually agree need to be achieved.

He didn't do that. He said, Let me outsource it. Nancy Pelosi, you're in charge. Have -- have a couple of key members, Waxman -- you know, led by Waxman of California. You go write the bill, shove it down the throat of the House. And then, you know, I'll -- I'll herald (ph) the process as it moves to the Senate. And that stripped away the belief that he was bipartisan. His outsourcing of it to Congress undermined the belief that he was an effective, strong leader. And his diffidence about this, his distance, you know, sort of the hands-off attitude that he's taken towards this has really caused people to believe that they're not being told the truth. And frankly, the things that he has said have simply reinforced that.

VAN SUSTEREN: If -- if it turns out this does get passed -- not in a bipartisan fashion but strictly Democrat, along the -- along party lines, but it gets passed because of the numbers in the House and the Senate -- and it turns out that he's right, he's a hero, then does it matter if it's not bipartisan or not?

ROVE: You know, I -- I -- I think -- they're going to get something. They've got enough votes in the House and Senate to get something. But it strikes me this is a lose-lose. Let's say they get something that sort of looks like the House bill. This is something that the American people do not want, and the resistance to it is going to be problematic.

And remember, we're going to have two years of tax increases and Medicare cuts before we see one word, you know, on the health coverage. This has a two-year phase-in at the beginning, where all they do is collect the revenue. And then it's year three before the program begins to be phased in. That's so that they can get a running head start on getting a stockpile of cash to pay for this, though by, you know, year seven, eight, nine and ten, that surplus has been eaten up and this thing is in annual deficits. That is to say, the annual cost of the thing is larger than the revenues brought in by either the tax increases or by the Medicare cuts. That's what their own plan says.

So they have a point of vulnerability here, and there are going to be lots of members who are going to go home, particularly vulnerable members in the House who are going to go home and have to face constituents in the 2010 elections having voted for something that the American people are today approaching 2-to-1 being against.

On the other hand, if he passes something a lot smaller than what is being talked about in the House bill, then people will question his effectiveness as a leader. I don't see a good outcome for the president in either one of these things.

Bob Dole had an interesting idea to sort of restart the process. We may have gotten well past the point at which that could happen. But there was a point earlier this year where I think that was probably the smart move for the president.

VAN SUSTEREN: So tell us, what is going to happen when the recess ends? What's your prediction? What are the sort of the mechanics? Who's going to do what? And where are we going to be, like, three weeks from now?

ROVE: Well, three weeks from now, on the 15th of September, two weeks from now, on the 15th of September, is when the House -- or excuse me, the Senate Finance Committee has set as its target to produce a bill. I believe they won't do so by the 15th. They may do so a week or so later, but by the 15th, this next artificial deadline, it's not going to happen.

And at that point, the Democrats are going to have to make a decision. The White House is going to have to make a decision, are they going to attempt to pass this through the Senate in the conventional way, which would require 60 votes for cloture? They've got 59 Democrats or independents. Assuming every one of those voted for cloture, they're still one short. Will they get a temporary senator from Massachusetts, change the laws, get everything done so they can bring somebody in? That's a question mark.

Even if they get a 60th senator, is Senator Byrd going to be there for the vote? And are they going to carry every Democrat? That is to say, skeptics like Landrieu of Mississippi (SIC) and Lincoln of Arkansas and Nelson of Nebraska -- are they going to vote for that 60 votes? If they don't get 60 votes to bring the bill up in the Senate, then they're going to have to face a tough decision of whether they try and pass it a bill in the Senate using a process called reconciliation, which is generally used for reconciling different budget items, and it only requires 51 votes.

If they attempt to go that way, that presents its own set of problems. First and foremost is, is that it won't necessarily apply to all the bill. So parliamentary objections could strip out big parts of the bill. And second of all, it will allow the Republicans, a Republican -- and Judd Gregg of New Hampshire has already begun to prepare himself for this -- to make parliamentary objections to slow up the process.

Finally, even if they do succeed in passing a bill in the Senate with 51 Democrat votes, it is going to be -- making a change this big without a national consensus, with the public against you, with the parties badly split on it, and with a highly partisan vote in the Senate, it's going to - - it's going to mean big problems for the Democrats and big problems for this program.

VAN SUSTEREN: Karl, what would you do about the situation? Let's say you're 48 years old. You've worked for a company forever. Your company has just gone under because the economy's a mess. Now you're out of work. You can't get another job. You have a health problem, and now you've got medical bills piling up. You got to see a doctor. What are you going to do about that person?

ROVE: Well, it -- they -- we do have Medicaid, which might cover that individual because they're out of work and therefore don't have income. What we've got to worry about is the person who is working in a company and who is in between -- you know, they're not -- they make too much money to qualify for Medicaid, and yet their company doesn't provide them health care.

And we've got to worry about those kind of people, or the person who has lost a job and is not -- and is not eligible for Medicaid because of assets or is not eligible for health care, even if they have the resources, because of a pre-existing condition. There are things that we can do to solve that problem.

I want you to think, though, about it in this context. There are 307 million Americans. There are 46 million people without health coverage. Nearly 10 million of them are illegal aliens. We don't want to necessarily be concerned about the taxpayer providing as a benefit health insurance coverage to illegal aliens. So that number of 46 million uninsured drops to 36 million.

Thirty-one million of that number either make 300 percent or greater of the poverty level. That means to say, they make $50,000 or more a year. These are people who can afford health insurance and have made a decision - - most of them are young people -- that they're bulletproof and they're, in essence, going to self-insure. But -- but -- but we've got a bunch of those people.

Then we have a bunch of people, about 14 million, who are eligible already for Medicaid or Children's Health Insurance Program or some other government programs but are not enrolled. So when you -- when you sponge (ph) it all out, we've got five 5 million people out of a country with 307 million people who fit the program -- the model that you made, which is somebody who is either working or not working but can't get covered by an existing government program or get coverage in the private market. And that's where we ought to be focusing out effort, and there are a heck of a lot easier ways to do it than what the House bill, HR 3200, attempts to do.

(END VIDEOTAPE)

VAN SUSTEREN: Next: Guess where former Alaska governor Sarah Palin is headed? Karl Rove knows, and so will you coming up. Karl Rove on Governor Palin and much more.

Plus: Cruelty. But this time, the cruelty has nothing to do with a creep holding a young child in a back yard. This time, the creep wears a suit and a tie and laughs and mocks middle-class Americans he hurts. And ready for this? Right now, it might be happening to you and you don't know yet. We're going to tell you coming up.

(COMMERCIAL BREAK)

VAN SUSTEREN: More with Karl Rove.

(BEGIN VIDEOTAPE)

VAN SUSTEREN: All right, let me hit some quick topics before I have to let you go. Number one is that former governor Sarah Palin is going to Hong Kong to give a speech at a huge financial conference, and president -- former -- some former presidents have done that. It's a big conference. Is this a break-out for her, or do you think this is just trying to do what many people do and make -- make a living with a speech?

ROVE: Yes. Look, she's going to -- she's going to have a lot of these opportunities over the next -- over the next year or two, and it's an honorable profession. I do some speaking myself. You remember Ronald Reagan made speeches, went around the country making speeches and doing radio programs. So -- Richard Nixon made speeches after his defeat as governor in California, before he won reelection -- won election as president in 1968. So this is an -- this is an honorable track for a politician.

What is interesting, though, is, is that she is going to now be judged by each of these audiences on the quality of her presentation, which is going to reflect the cast of mind that she's brought to this task. So you know, she's not going to be able just to get on a plane and take out a pad as she wings here way to Hong Kong and scribble out a few notes. She's going to have to figure out what it is she wants to say, what questions she might be asked, and do the research and thinking and writing so that when she starts making these speeches, people say, You know what? That is one impressive individual, not only in how she conducted herself but in what she said and how she handled it.

VAN SUSTEREN: You know, it's so interesting that she still draws so much attention, I mean, all the invitations to speech and all the networks clamoring to talk to her. It's extraordinary how she's still a magnet for that.

ROVE: Well, absolutely. In fact, I'm not surprised. I mean, this is a woman who jumped onto the stage in the 2008 election for 63 days and clearly energized Republicans and was a different candidate than we have seen before. And she has a lot of potential. And she -- she's got (INAUDIBLE) as a result, a lot of opportunities, like the speaking engagements and other things, to make an impact. What people are going to see, though, is -- they judged her by one standard when she ran for vice president. Their expectations are going to be higher when she's now being talked about as a prospective presidential candidate.

VAN SUSTEREN: All right, now the question of potential. I want to put a picture up on the screen. I don't know if you can see it or not, but it's a very young Karl Rove. We found his high school picture. You went to your high school reunion recently, Karl.

ROVE: I went to my high school reunion, Olympus High School, Salt Lake City, Utah, this weekend. And that was -- that's one young dirty kid, isn't it.

VAN SUSTEREN: Well, that's actually -- we dug a little deeper. We found an interview where, actually, I think you referred to yourself a little bit as a nerd. Where you a nerd?

ROVE: I was a nerd. I had Hush Puppies when they weren't cool. I carried around a briefcase. You know, I had a pocket protector. I mean, the girls didn't take...

VAN SUSTEREN: A real pocket protector?

ROVE: ... much interest in me. Oh, gosh, yes, absolutely. I was on the debate team. I was president of the Model U.N. And you know, I was a little guy about 5 inches shorter than I am today, and a high, squeaky voice, a lot of hair and big, thick glasses.

VAN SUSTEREN: How about a -- no girlfriends in high school?

ROVE: Well, you know, a couple of girls -- in fact, I got an e-mail from a girl that I -- that remembered that we went to the junior prom together. I didn't remember it, but she was very nice to say that she went to the junior prom with me. But look, I was a nerd. I mean, I -- I hung around with the wannabes and the dispossessed and the -- you know, the debate team people. I mean, you know, we were -- we were -- we were a group unto ourselves.

VAN SUSTEREN: I imagine you had a good time, though, at the reunion? And I suppose they knew who you were this time?

ROVE: Well, I had a great time. And I've kept in touch over the years with some friends, Mark Gufstason (ph), who's a friend of mine from high school, actually helped organize the reunion. And then I had dinner the night before the reunion with three couples who literally dated in high school and got married shortly after high school and have stayed together, the Ogdens (ph), the Curtises (ph) and the Strongs (ph). And we had a wonderful dinner the night before.

And we were joined -- I was a student body officer my senior year, and all -- and one of each of those couples was a student body officer with me, and we also got together with our student body president, Richard Moore (ph), who lives in Vancouver, Washington, who most of us had not seen in many, many years, and his -- he and Gail (ph) came and we had a wonderful evening, but with Jan (ph) and -- Jan and Rick (ph) Strong and Glade (ph) and Debbie (ph) Curtis and -- and the -- Karen (ph) and Scott (ph) Ogden. And we had a wonderful evening and a great reunion. It was lots of fun to do it.

VAN SUSTEREN: And I guess you'll get even with me for that picture sometime.

ROVE: You know what, Greta? You were simply doing your job. But I know who supplied that to you, and it was two of my staff people. And I think I'm going to have to have a pretty sharp word with them about that when I return to Washington.

VAN SUSTEREN: All right, Karl. Well, call us when you get back to Washington. Thank you, Karl.

ROVE: Great. Thank you, Greta.

(END VIDEOTAPE)


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