This is a rush transcript from "On the Record," October 27, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: It seems like a simple question, but apparently it isn't. What is Senate Majority Leader Harry Reid's health care plan? Senator Reid says a government-run public option will be in the bill but states will be allowed to opt out of the plan. But what does that really mean?

Minnesota governor Tim Pawlenty runs a state, as we just noted. Hopefully, he can answer some of those questions. The Governor is here with us. Governor, what is this opt-out plan? I understand if you don't want to be in something, you can opt out. But what does it really mean?

GOV. TIM PAWLENTY, R - MINN.: Well, we don't know yet, Greta, but what we know for sure is this. Government-run health care is a bad idea. I hope it gets killed. But now they're offering up the opt-out as an alternative. The Democrats are. And I think it's going to end up being a sham because there are reports that I'm getting, at least, from Republican sources that the opt-out is going to require you to pay the money ahead of time -- in other words, pay increased taxes for four years -- then the program will fully kick in four years out. And even if you do opt out, your state and your citizens have to continue to pay their share of the bill.

So if that's the way, it gets proposed, it's really impossible or impractical. And it's really a sham. It's a masquerade and it's something that's very, very, I think, disingenuous and very cynical.

VAN SUSTEREN: Well, it'd be a great idea for the state that opts in if a bunch of states opt out and they still have to pay for it, if, indeed, that is the sort of the payment scheme. That's -- I mean, that is going to lower the cost for -- essentially, for them. I mean, that's -- that's a great deal for the opt-in-ers.

PAWLENTY: Well, it's just a sham and it's another big switch element to this whole thing. This thing's going to go down as one of the biggest bait and switch shams in the country. They're proposing to cut health care costs. This thing's going to increase it more. Now they're promising an opt-out, as if there's going to be voluntary or some flexibility when, if the facts are, you got to pay all the taxes even if you don't participate, it's just -- it's a joke.

VAN SUSTEREN: How do you -- how do you -- this would be -- this would be something the legislature would decide, do you think, or is this something the governor would decide, like, you know, that we -- that the state won't be in?

PAWLENTY: Well, I don't know that. I suspect they would want the legislature and the governor to weigh in on the matter, which would be fine. Again, from my standpoint, I don't like government-run health care. We'd like to opt out, but if these conditions are attached to it, again, it would become impractical or impossible or unwise.

VAN SUSTEREN: Do you know any governors who have come forward or said, Hey, that sounds like a great idea, even a Democratic governor?

PAWLENTY: Well, I am sure there are many who do like government-run health care, most of the folks on the other side of the aisle. I do not. I think we've got a, you know, philosophical problem here and a financial problem. I don't like the idea of the government taking stuff over. Like I said before, what's next? If you're concerned about toothpaste prices, are we going to have government-run Wal-Marts? If we're concerned about gasoline prices, is the government going to take over the gas station down the street from my house? This is a very slippery slope and it's inconsistent with the tradition that this country's economy was built on.

VAN SUSTEREN: I realize you won't be voting on this. You're neither in the House nor the Senate. But do you anticipate that this particular provision, the opt-out provision, will be part of health care reform, or do you think it will be defeated?

PAWLENTY: I hope it'll be defeated, and I heard today that Senator Lieberman may filibuster on this issue if it's included. So I applaud and thank Senator Lieberman if he's willing to stand in and do that. I think it should be removed, but the leaders keep saying it's going to be in. That worries me a great deal.

VAN SUSTEREN: What you think possesses Senator Reid? Because the thing that I find the most curious about it is that there are -- there were hearings held, and the hearings coming out of the Senate Finance Committee and the HELP Committee in the Senate -- HELP Committee came out with a public option, not with a trigger, not with an opt-out, but just a public option. The Senate Finance had no public option. And then suddenly, essentially, Senator Reid goes behind closed doors, and suddenly, there's new provision, this opt-out. What possessed him to do this?

PAWLENTY: I think, Greta, if you know anything about Democrat party politics, within their party, the universal health care or single-payer health care or government-run health care part of their party is very militant. And this is not just, you know, an accident or good public policy. This is driven by partisan, liberal, bare-knuckled pressure and politics. And that's what's driving this decision making. It's a bad idea. The country doesn't like it. But they won't let go of it, I think, because of internal liberal politics.

VAN SUSTEREN: But if that were indeed true, they would have gone strictly with the public option because there are enough Democrats, if they all got on board, that they -- it wouldn't matter what Republicans thought. It wouldn't matter what Senator Lieberman thought or anybody else. And in fact, Senator Reid's public option is really a little bit lighter than an imposed public option straight across the board, since you opt out.

So it seems a little bit more unusual to me. I'm trying to figure out why he did this from a strategy point of view.

PAWLENTY: Well, I think -- I think it's because they want the opt -- they want the government-run -- (INAUDIBLE) votes to pass it. So now they're trying to get the -- some additional votes by watering it down, diluting it. They flirted with the idea of a trigger. Now they're floating the idea of an opt-out. They need to get those Blue Dogs and those moderate Democrats who normally would not be enamored with this approach to vote for it.

But I think it's a sucker's play. I think it's a sham. And they're going to maybe get the votes to do it, but it's really not going to be an opt-out for all the reasons we discussed earlier. It's a very cynical -- I think a very cynical approach to an important issue facing our country.

VAN SUSTEREN: All right, now to New York, to the 23rd congressional district, an interesting race. There is a Conservative candidate and a Republican. You have, as I understand it -- correct me if I'm wrong. You've aligned yourself, endorsed the Conservative candidate, Mr. Hoffman, along with former governor Sarah Palin, Dick Armey. And on the other side, you have former Speaker of the House Newt Gingrich, who has endorsed the Republican candidate.

Why -- why do you -- why are you breaking ranks with your party in going with the Conservative candidate?

PAWLENTY: Well, if we're going to have Republican candidates, they need to meet at least a minimum threshold of being a Republican or conservative. There's a range of people that can meet that definition. We want the party to be able to have some differences internally, but the candidate that they endorsed here doesn't even meet that minimum threshold, Greta.

This is an individual who has voted for tax increases, income taxes in New York. She supports card check. She supports the stimulus. She supported bank bail-outs, and on down the list. She does not meet even the minimum requirement of being a Republican, even broadly defined.

So I love Newt Gingrich. He's a friend and a colleague and somebody I respect and admire, but he and I just respectfully disagree on this issue.

VAN SUSTEREN: But this is the candidate the Republican Party chose in New York. And you've got the two -- you've got, you know, two high-profile former -- one former governor, one current governor, Governor Palin and Governor Pawlenty, reaching across the country, and really reaching across the country in Governor Palin's situation, into a Republican contest in New York state. Why? What's this -- what's the strategy? Why do you do that?

PAWLENTY: Well, this isn't a school board election or a county commissioner race. This is a seat for the United States Congress. It's going to have an effect on the direction of the country, on national issues, on international issues. There's a lot of us, including Speaker Gingrich and Governor Palin and many others, who dedicate their time and energy to try to support candidates across the country that we think will be helpful to the country, and this is an example of that. So to dismiss it as some sort of, you know, local irrelevant race, I really don't think that's doing it justice.

VAN SUSTEREN: And I didn't mean to be -- to dismiss it being irrelevant. It's a profoundly important race. What's sort of interesting is rather -- is sort of the -- the Republican Party and whether or not this is something that, you know, will in some ways divide them as they come up on the mid-terms or whether or not this in some way strengthens the party. And I guess that was my thinking in asking.

PAWLENTY: Yes, no, I -- I understand, Greta. But if you go down the record, not her promises going forward, the Republican candidate, I mean, this is an individual who really has defied almost every important issue from my standpoint for Republicans, the stimulus bill, bank bail-outs, tax increases, card check, and many more. This is not somebody who I think is deserving of wearing the Republican jersey, and that's why you're seeing so much support for the alternative, Doug Hoffman, the Conservative, in this race.

VAN SUSTEREN: You mentioned the word jersey, and I got to go, but I just have to point out one other thing. I'm going to be on a plane. I'll be out of the country. I'm going to miss the game this weekend with your Minnesota Vikings against the Green Bay Packers. But I'll be anxious to see what happens, Governor.

PAWLENTY: Well, I will, too. But I think it'll look a lot like that game in the Metrodome that broke your heart.

VAN SUSTEREN: I'm not so sure! I mean, you know, this is one of the peculiar things where -- you know, I love to watch Brett Favre play because he loves the game. And of course, I got a long history with the Packers, so I'm very conflicted on this one. But Governor, thank you very much. Thank you, sir.

PAWLENTY: You're welcome, Greta. Thank you.

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