This is a rush transcript from "Hannity," March 30, 2010. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: Welcome back to this special edition of "Hannity" and we are at the beautiful Reagan Library in Simi Valley, California, kicking off our "Conservative Victory" book tour, defeating Obama's radical agenda. And California is one of the states most in need of a conservative victory in 2010.

Now over the past several years it has suffered massive job losses due to a weak economy and a state budget so mismanaged that it has driven the state into debt and brought it to the brink of disaster.

Our next guest, well, promises and proposes to do something about it. We're now joined by California gubernatorial candidate, the former president and CEO of eBay, Meg Whitman.

How are you?

(CHEERS AND APPLAUSE)

GUBERNATORIAL CANDIDATE MEG WHITMAN, R-CALIF.: Thank you. Thank you for having me.

HANNITY: This is (INAUDIBLE). My eight-year-old daughter was on eBay the other day, just so you know.

WHITMAN: Excellent.

HANNITY: Excellent. Well, yes and no.

(LAUGHTER)

HANNITY: Well — all right. We got to ask this question because Arnold Schwarzenegger is a Republican. Arnold Schwarzenegger got elected. We know what happened with Grey Davis.

Where do you think things went wrong as so far as the economy goes in the state of California?

WHITMAN: We lost our fiscal discipline. We spent more than we took in. And that is the problem. And today we have a $20 billion budget deficit, 12 1/2 percent unemployment, an infrastructure built for a population half our size.

We to get back to basics.

HANNITY: All right. I love back to basics because in my own my life, whatever I find I'm a little off-track here or there, I always want to hit the reset button, as I say, and go back to the fundamentals.

And I think this is simple. If anybody in this audience, if they were having some fiscal difficulty, you would spend less, right? You try and bring in more money.

Governments never seem to do that but — all right, so, Governor Schwarzenegger tried these proposals. One of the great things about California, you're going to have a referendum, and you're going to have an up and down vote, you have propositions. He put it to the public and the public voted him down.

Did that hurt his efforts to accomplish what he wanted to accomplish?

WHITMAN: It did hurt his efforts. But in fact, what needs to happen now is we've got to focus on getting three things done. We first have to put Californians back to work. If we do not decrease the unemployment rate in California, I promise you there is no way out of this mess.

HANNITY: What is the unemployment right now?

WHITMAN: Twelve 1/2 percent.

HANNITY: Twelve 1/2 percent.

WHITMAN: Fourth or fifth highest in the country. And for perspective, that's 2.3 million Californians without a job. That's more population than 15 states have.

HANNITY: No. And it's a problem. And I got to tell you. States like New York and New Jersey, and around the country, they're facing similar fiscal problems.

The question is, how do you do that? How do you go up to Sacramento —

WHITMAN: Yes.

HANNITY: — where there has been nothing but cronyism, you know, that makes Nancy Pelosi look morally upright.

(LAUGHTER)

HANNITY: You know? How do you — honestly, how do you get state assemblymen and senators to agree that they've got to do the right thing and balance the budget? How do you do that?

WHITMAN: Well, first, as I said, I think it is about focus in a crisis. You cannot go to Sacramento and what I would call boil the ocean. You've got to focus on a small number of things.

And in the end, Sean, this is about leadership. You've got to stand up and you've got to be — you've got to stand for something.

I'll make a couple of observations. One is, something no one talks about is the appointments process in California. The governor gets 3,000 appointments. For perspective, the president of the United States gets 3,800.

And those top —

HANNITY: By the way, it's 3,800 way too many, but go ahead.

(LAUGHTER)

HANNITY: No, that Cas Sunstein, that Van Jones and Kevin — Kevin Jennings not good choices.

WHITMAN: Well, my first question is could we do with 1,500 appointments? But in any case, those top 300 are essential. There, your agency heads, your department heads. And I did not run eBay by myself, I won't govern California by myself. This is essential to get the right people.

And then you've got to use the veto pen. We have a very powerful veto pen in California. We have line-item veto as well as — it requires 2/3 majority to overturn a gubernatorial veto.

HANNITY: I like a business background because you actually had to meet a payroll, you actually have to pay health care benefits. You actually have to produce a product that people wanted and needed and obviously, like a lot in eBay.

You know when Reagan was president he actually commissioned the Grace Commission.

WHITMAN: Yes.

HANNITY: Some of the best and brightest business minds in the country and he said come up with a plan how we can run government more like a business. And what's fascinating about that, they came up with some great ideas. The country adopted none of them, but they came up with great ideas.

Do you think politically it's possible knowing the environment that both in Washington and in Sacramento?

WHITMAN: I do think it's possible because people have had it. I will tell you I travel all over this state, and people are so ready for a different direction in Sacramento.

The legislature —

(CHEERS AND APPLAUSE)

WHITMAN: The legislature has a nine percent approval rating. I mean we are literally down to blood relatives and —

(CROSSTALK)

(LAUGHTER)

HANNITY: Harry Reid is lower, eight percent. And Nancy Pelosi is winning. She's got 11 percent favorability. You got to watch out. She's really way up there.

WHITMAN: But I think Californians are ready for a change. And they are ready for a focused approach. They want people — they want the fundamental business climate to be changed.

And you said it earlier. It is not the government's job to create businesses and create jobs. What we do is create the conditions for small businesses to grow and thrive. And I know how to do that. As you said, I've met a payroll, I've been on the receiving end of burdensome regulation.

And I think actually having a person from the real world at head of the government I think will make a big difference.

HANNITY: You know, I lived in California until I was run out of town —

(LAUGHTER)

HANNITY: — for being too controversial in Santa Barbara. That's a different story for a different day. Forty on-air hours, I was fired. That's a record in radio.

(LAUGHTER)

But one of the things that is amazing about California is, it's sad to me that people are leaving this great state. They're going to Arizona. They're going to Utah. They're going to Nevada. They're leaving because of the high burdensome regulation, taxation.

You know, and I just always looked at it as the Golden State. The state that would, you know, literally create jobs and opportunity. Go West, young man. Now it is go East. Go back in the other direction.

WHITMAN: You know, California many in ways as much as a state of mind as it is a state. Right? Everything was possible in California. And we are, you know, crushing the California dream. And people are moving to Colorado and Arizona and Texas and Utah, because it's simpler and easier to do business.

HANNITY: Do you realized if — if I left New York and I moved to Florida or Texas, I would save 11, 12, 13 percent more of my income.

WHITMAN: Yes. Well, that's the same truth here. We have the highest — among the highest personal income tax rate, the highest corporate tax rate. Among the highest health tax rate.

HANNITY: It's unbelievable.

WHITMAN: So in the end, we have to make California more competitive. And you know why this matters? Because in many ways California is a microcosm of the United States.

HANNITY: Very much so.

WHITMAN: We're so big. And where goes California goes the country. So the revolution —

HANNITY: I've said that —

WHITMAN: — has to start here. We have to take back California.

HANNITY: And by the way, I'll agree. Well said.

(CHEERS AND APPLAUSE)

HANNITY: Good luck to you, Meg Whitman.

WHITMAN: Thank you very much.

— Watch "Hannity" weeknights at 9 p.m. ET!

Content and Programming Copyright 2010 Fox News Network, Inc. Copyright 2010 Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.