This is a RUSH transcript from "The O'Reilly Factor," December 23, 2009. This copy may not be in its final form and may be updated.

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MONICA CROWLEY, FOX NEWS GUEST HOST: In the "Factor Follow-up" segment tonight, can Christmas be saved at the Illinois state capitol?

Last week, "The Factor" reported that the war on holiday displays in the Springfield Rotunda had gotten completely out of control. In addition to a, quote, "holiday tree," and a Jewish menorah, there is an atheist sign saying religion is a myth and an ACLU sign saying the group defends freedom of religion.

And today, when the Republican candidate for comptroller tried to remove the offensive sign, he was taken into custody and then later released.

Bill spoke with Ann Coulter about the controversy.

Watch the segment!

(BEGIN VIDEOTAPE)

BILL O'REILLY, FOX NEWS HOST: This ACLU thing is pretty -- is pretty smart. They put up a little piece of cardboard. It costs them no money. They just lost a $20 million endowment, so the ACLU took a big hit.

And they say, "You know, if you're a Christmas person, we're on your side. We love religion. We stick up for religion." Of course, that's not true. They try to demean Christmas any time they can, the ACLU. But that's what they're doing here. And how do you react?

ANN COULTER, AUTHOR, "GUILTY": I mean, they can say whatever they want to. They're America's leading anti-Christian hate group. They're parachuting into small towns in, you know, Iowa and whenever anyone -- any town puts up a 10 Commandment display. You may as well have the Klan putting up a sign at a NAACP memorial, saying, "We support equal rights." Well, we know you don't support equal rights. And why you should have any of this -- of this nonsense on a Christmas display is a little hard to explain.

But the Supreme Court has so confused the area. You ever try to explain things in terms of what the Supreme Court has ruled, it's impossible because the Supreme Court has come out with so many ridiculous rulings. Scalia calls it constitutional law by ruler. You know, you have a creche. A town can put a creche up, as long as a snowman is a certain number of feet away.

But the truth of the matter is any of these states, they could have -- they could establish Episcapalianism as the state religion. They could establish Festivus as the state religion. I doubt the citizens would go for that.

But just as a matter of tradition this is a Christian country. No matter how many times liberals tell us it's not, it was founded by Christians. It was founded on Christian principles. America could have been discovered by the Buddhists or atheists or Jews. But it wasn't. It was founded, it was created, the Constitution, the founding documents, the Declaration of Independence, were written by Christians.

And even under the Supreme Court in the same rulings, any town ought to be able to put up an exclusively Christmas display, and I don't mean a Christmas tree. I mean the cross.

O'REILLY: But I disagree with that. I mean, look...

COULTER: It's an historical matter.

O'REILLY: I know, but I disagree with that exclusive thing. Because I think if you put up a Christmas manger scene, and the Jewish people in town say, "Look, Hanukkah is right around Christmas. We would like to have a menorah over here," I think that's fine. I don't -- I wouldn't exclude the Jewish people. Would you?

COULTER: Yes, but what you're saying is -- and by the way, that is how -- that is how states respond.

O'REILLY: Right.

COULTER: And states can establish religions. They didn't -- they started dropping the establishment of religions, because -- because Christians have the same attitude you have. Which is -- and it wasn't, by the way, to accommodate Buddhists or Festivus or atheists. It was the Episcopalians accommodating the Presbyterians, and the Presbyterians accommodating the Methodists. They thought, "Oh, enough of them have moved into the state. We'll drop Episcopalianism as the state religion."

And sure, it's one thing to say, yes, we think that's a fine thing to do, but I'm getting into what is required under the Constitution, and you are certainly not required to have a menorah...

O'REILLY: OK, but that's the Supreme Court's job.

COULTER: ... which by the way, is a specifically religious symbol, as opposed to an historical symbol like a creche.

O'REILLY: OK. Now, the ACLU and the atheists, basically, the atheists are just stupid. Because what -- all they're doing is making people angry. That's all they're doing. They're just saying, "Look, we're going to" -- it's so inappropriate and insulting in a holiday that's a Christian-generated holiday, Christmas, to go in there and say, "We demand to tell anyone who believes in Christianity or Christmas that you're an idiot." You know, that's just insulting. So just by -- just by the context of that...

COULTER: Right. But more than that. The state...

O'REILLY: You say no. Just by the context you say no. Go.

COULTER: The state officials are idiots, too. I mean, even if they're going to use this crazy public forum, as if all religions are the same, and the government, the establishment of America, makes no choice between God and no God, which is not the case, though it is the case with a lot of European countries. This country was founded explicitly on a belief in God.

But even if you're doing this crazy public forum analysis, I mean, it would be like having, you know, everybody is going to bring in a picture of his pet. And people bring in pictures of their dogs and then there's one sign that -- you know, there's Fluffy the dog and then another sign, "I hate Fluffy and Fluffy sucks." That's -- it doesn't even fit within the public forum definition of what speech must be tolerated. So it's the government officials who are being idiots to even allow these atheist signs.

O'REILLY: No, I agree. And the courts basically, as you pointed out in the beginning of the conversation, are confused on the issue.

Final question: I think the ACLU basically just wants to annoy people like you and me, Ann. That's why they did this.

COULTER: Yes, it does. And let that be a happy message to Christians this season. That 2,000 years later Christ is still ticking people off.

O'REILLY: There it is.

(END VIDEOTAPE)

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