This is a rush transcript from "On the Record," April 30, 2010. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Tonight: Arizona says, "The heck with the feds, we'll do it ourselves!" But is the new illegal immigration law a mistake or good policy? Karl Rove goes "On the Record."

(BEGIN VIDEOTAPE)

VAN SUSTEREN: Arizona is certainly at the center of a firestorm. President Obama has said that the Arizona statute is misguided, or what they're doing in Arizona is misguided. I don't know if the statute will ultimately be determined to be constitutional or unconstitutional, but all eyes are on Arizona. What do you think about what's going on?

KARL ROVE, FORMER BUSH SR. ADVISER/FOX CONTRIBUTOR: Well, I -- first of all, I understand what the people of Arizona -- what motivated them to do this. As borders become more, you know, difficult, more hardened, it becomes -- you know, the -- the narco-traffickers and others look for places along the border, and some of the people who come across the border tend to be more violent. And we had a bunch of violence along the Arizona border, including a terrible murder at a ranch in southeast Arizona.

I'm not certain how effective this bill is going to be. I think we're making much more of it than we should. Each side is seizing upon it for its own purposes. Look, there's -- you've got to have to have a preexisting cause for pulling -- for stopping a person. It creates no new basis on which you can stop anybody. But it does -- and it does require a reasonable suspicion that the person you've stopped for another reason is not a U.S. citizen. As a result, I think it's going to have a very small impact on the number of people it deals with.

I do, however, think that there is a real question as to whether or not there is a federal preemption of state regulation of the border. And I also am concerned about this being treated in a very political fashion. I think it will hurt the Republicans to some degree because Latinos will say, Once again, the Republicans are picking us out unfairly.

On the other hand, it's going to split Democrats, as well. Look, this bill has a 70 percent approval in Arizona. That means a lot of Democrats and a whole bunch of independents like it. The immigration cuts against both parties in different ways, and it's why President Obama, after a month ago saying he was going to bring up an immigration bill this year, is now saying, Well, there's not a political appetite for it. He recognizes that high-profile issues like this in the election year, particularly with high unemployment and jobs being the number one issue, is going to Christian against both parties, and he'd rather not have something -- something else cut against is Democratic Party.

VAN SUSTEREN: You know, Karl, members on both sides of the aisle have said going back 20-plus years, even -- I mean, going back at least to President Reagan, probably back before, is that we need to secure our borders. Nobody has been able to do it, for whatever reason. President Bush 43, where you served in that administration -- you know, it may -- you know, it -- he didn't do it. Everyone says it has to be done.

ROVE: Well...

VAN SUSTEREN: What is the problem? Why can't we get this done?

ROVE: Well, first of all, we are doing a better job. It's not as good as it should be or could be. But look, we doubled the size under Bush of the border patrol and tripled its budget. Unfortunately, President Obama is trimming the agents -- the number of agents in the border patrol. That's not the way to go.

And we made it much harder to get across the border. You used to, in the 1990s, be able to hire a coyote to get you across the border from northern Mexico for about 150 bucks. Now it can cost as much as $2,500. It's a tougher to get across the border. We ended "catch and release" in the Bush years, in July of 2006, finally got the number of facilities expanded enough and the amount of time to process somebody other than a Mexican out of the country down low enough that we ended catch and release for people from -- OTMs, "other than Mexicans."

Mexican nationals -- roughly a million people -- roughly a million Mexican nationals a year are caught in this country and returned back across the border. So it is getting harder.

But we're not going to be able to solve this problem until we have a guest worker program that causes people who want to come here for jobs to wait. Maybe they have to wait a couple of years until the economy improves, but the fact that they would have a chit in their hands that says, You can go north and pick onions, or you can go work in a chicken factory or you can have a job working for a landscaping company -- you may have to wait six months, you may have to wait two years, but the fact that they would have that kind of chit would remove a lot of pressure on the border.

And if you couple that with increased security on the border and some way of resolving the problem with people who are here already illegally, you could have a much better, more secure border. But we are doing better on the border, Greta, and we ought to recognize it.

I am worried about what the administration, the current administration is doing by reducing the size of the border patrol. I'm worried about them stopping building the fence. The fence deserves to be built in certain places. I'm worried about them being reluctant to grant what is called 287-G authority. That is where they train local law enforcement to help the federal government enforce immigration laws.

But let's -- let's -- you know, we had a much more porous border 10 years ago and an even more porous border 20 years ago, and it's getting better.

VAN SUSTEREN: You know, I -- I guess that -- I mean...

ROVE: Not good enough.

VAN SUSTEREN: I like -- I like to hear that it's getting better, but it doesn't seem like good enough, at least to me. I mean, it almost -- I don't know if you remember the scene in "Blazing Saddles," where they're all going through the toll booth in the desert and it's almost silly.

ROVE: Right.

VAN SUSTEREN: I mean, and I have the sense that I come in from Europe through JFK, and I'll stand in line to go through it to get into the United States, and I can't just sort of walk into the United States, but if I came in through Mexico, I could probably sneak over and God knows what else could be brought over, not only just exporting violence to this country but drugs and...

ROVE: Yes.

VAN SUSTEREN: It's just not hard to get into this country if you come in the right way.

ROVE: Well, look -- look -- well, remember, though -- you mentioned flying in from Europe. Do you know a substantial number of the people who are here illegally came here legally? They came in flying in from Orly or Hong Kong, to Gatwick or Singapore on a legitimate passport with a visa, and they overstayed their visa. I -- you know, it's literally several million of those people.

And you're right, across on the border -- as it's getting tougher to come across the border, the people who are coming across the border are paradoxically becoming more dangerous because -- you know, look, there may be fewer people coming up to pick onions or work in chicken plants. But the people bringing drugs up to the United States and then taking money and arms back south -- that traffic has not dissipated in the same degree that the other traffic has.

The jobs are drying up in the U.S. for those kind of -- for the first kind of people, but the demand for drugs and the cash it generates and the guns that they want to get and can't get in Mexico -- the demand for those hasn't dropped. And that is making the border, paradoxically, more dangerous, even though it's a lot harder to get across the border.

That's what we've seen in Arizona. As Texas and New Mexico and California got hardened, some of the weak points left were in Arizona, and the narco-traffickers have focused on there, trying to get their drugs across and then get their money and their guns back south.

VAN SUSTEREN: Well, I guess the silver lining is that our attention now is on our borders, at least for a while, now with this Arizona issue. And so that's good. But (INAUDIBLE)

ROVE: I worry -- I worry -- I worry about that, Greta, because I think the administration -- the president's comments are political. He has not cared a twit about this issue for the last year. He popped up and only said, after Luis Gutierrez, a congressman from Chicago, said, I won't vote for the bill -- for your health care bill unless you bring up immigration reform today -- or this year -- that's the only time he then popped up and said, Let's do it. And then he said, We're going to do it. And then last week he said, We're not going to do it. And it's because there's no political appetite on Capitol Hill.

The president is nowhere to be found on this issue. It is a thorny issue that will only get resolved if the president gets his hands dirty by working on this issue on a consistent, strong basis, and he's not willing to do that.

VAN SUSTEREN: Well, I tell you one thing, though. The people in Arizona certainly are talking about it and people around the country, whether it's seeking boycotts or whatever. This issue is being put on the front burner, whether the president has an appetite for it or not, or any member of Congress, is that this -- this is an issue that is literally going to be shoved down everybody's throat because it is now at a billing point, at least down in Arizona, at least for the moment.

ROVE: Yes. We all ought to be careful of the rhetoric. I've now read the bill. I'm still concerned about the bill. I think there are better ways to deal with this problem. But I understand why the people of Arizona did it. And the president and particularly the opponents of this bill have to be very careful and measured in their comments. The suggestion that this is somehow going to unleash a -- a -- you know, a raft of -- you know, of bigoted, you know, actions by the police in Arizona is ridiculous. It's a very measured bill. I wish -- you know, I -- I'm not certain it's going to end up at the end of a day making a big difference because it really will -- it will -- it's almost superfluous. You're going to stop some guy because...

VAN SUSTEREN: Except that it...

ROVE: ... he's driving erratically...

VAN SUSTEREN: The one thing it does is it draws attention to the issue. I don't know if it's a lousy bill or not a bill, and I -- and I'm not the judge who's going to make the decision. There are some things about it that -- that have certainly piqued my interest, I think, are -- that are going to be subject to a strong analysis by some court, maybe unconstitutional. But everyone's attention is now on this issue, at least for the moment.

ROVE: Yes. We should have had our attention on the issue, though, when a rancher in southeast Arizona got killed by -- you know, by drug traffickers and narco-traffickers. I mean, that's -- that -- that -- that ought to have grabbed our attention and we ought to -- we ought to be dealing with this in a substantive way. I'm not certain how substantive this bill ultimately will prove to be.

(END VIDEOTAPE)

VAN SUSTEREN: Next: Is President Obama guilty of a Chicago-style shakedown? More with Karl Rove in two minutes.

(COMMERCIAL BREAK)

VAN SUSTEREN: More with Karl Rove.

(BEGIN VIDEOTAPE)

VAN SUSTEREN: Karl, this week I read your op-ed in The Wall Street Journal, in which -- and this is my characterization, correct me if I'm wrong, but it seemed -- what I got out of it is that you think President Obama is demonizing his political opponents or his opponents and ideas. Is that a fair description? And if not, correct me.

ROVE: Yes, well, I think it's largely directionally right. It was my piece yesterday, Thursday morning, in The Wall Street Journal. I was taken aback by what the president said in his speech to the financial executives in New York. He brought them in and then he basically threatened them. He said, in essence, explicitly, I know you have hired lobbyists to work against the financial regulation bill. You're doing it for, in essence, venal and illegitimate purposes. And you better stop those lobbyists from trying to derail my bill.

And look, it's one thing to say, We have an honest disagreement over the issues and I want to persuade you and the American people of the correctly of my opinion. It's another thing when it sounds sort of basically like it's intimidation and where he goes out of his way to basically question the motivations of those with -- who disagree with his policy agenda.

I mean, I know it's -- every White House feels put upon by this, but our system is based in a way -- it's designed to have as what the -- what James Madison called factions, interests working at cross purposes and thereby forcing compromise in the halls of Congress and producing legislation that can get broad support. And President Obama's basically saying, My way or the highway. And if you're not with me, you're against me and I will personally demonize you and call you out.

I mean, imagine the President of the United States sitting there, saying to those financial executives, Stop hiring lobbyists and speaking out in Congress on this bill that's important to you. They're all sitting there, saying, What kind of power does the federal government have over my existence, and what could he do if he decides that me or my firm crossed the line in opposing him on the financial regulation bill?

VAN SUSTEREN: OK. Well, first of all, no one in Washington should be talking about lobbyists since everyone is up to his eyeballs on both sides of the aisle in terms of lobbyists. The president...

ROVE: Absolutely!

VAN SUSTEREN: ... (INAUDIBLE) lobbying his point. That's the first thing. But the second -- are you saying that it's unseemly for him to do it, or are you saying -- or are you saying that it's wrong and has a real impact?

ROVE: I think it's wrong. I mean, he did this with the insurance company executives, where he sent them a 22-page letter basically saying -- questioning their motives in opposing his bill. And at the same time, he was content to receive tens of millions of dollars from insurance companies and pharmaceutical companies to pay for ads in support of health care, but he was demonizing these people!

I think there ought to be some restraint. The president ought to recognize that people can disagree with him and still have good motives. He ought to recognize that it is good for our country to have a vigorous debate about the components of the issue. Just because the president lays something out doesn't mean that anybody who disagrees with him is somehow unpatriotic or un-American or has venal or inappropriate motives.

And he should stop sort of -- it's like a Chicago-style, you know -- you know, shakedown. Come on. Get in front of them and get in their face and tell them to -- you know, to shut up and sit down and get out of the way. And that's just not the way the system ought to work.

VAN SUSTEREN: All right, but does it -- I understand that you -- that -- you know, that it shouldn't work that way and that it may be, you know, a little rough around the edges. But does it have a sort of a real impact in the sense that the people in the audience then take some action that has some repercussions as a result of it, or is it just that you don't like -- you just think it's wrong in how he's doing it, but does it have a real impact, for instance, on me?

ROVE: Yes, it does have a big impact on you because what it says is, if you oppose the President of the United States on an issue, he may call you or your industry out, try and make you into a pariah, somebody who's not worthy to participate in the public discourse of our country. And it also raises, I suspect, doubts in the back of the minds of these business leaders. Am I going to be singled out? Is some word going to go out from the White House that they ought to -- that somebody ought to be, you know, looking into our activities or giving us a rough time or refusing to grant us a routine exemption?

I mean, these business people, you know, fear the federal government. And when the president goes out of his way to call them out, invite them to a meeting and then call them out by name and then basically question their motives and threaten them, it's intimidation! And that's inappropriate in our political system.

VAN SUSTEREN: I was sort of curious, though, what many of them, who have been donors to both parties -- Republican Party but also donors to the Democratic Party -- what they were thinking about in terms of, you know, 2012, listening to the -- the discussion and whether or not this may not have sort of a political sidebar to it.

ROVE: Well, look, there are a lot of Democrats on Wall Street. I mean, Wall Street gave more money to Obama than it did to McCain by a wide margin. I mean, he got a million dollars from Goldman Sachs executives. But look, here's the deal. He can call them out. He can accuse them. He can make them pariahs. But when they show -- when they -- when he sends his solicitors and they show up on the doorstep, you can bet that they might be inclined to write a check because it's fear! It's intimidation! Yes, he called me out, but now he's back on my doorstep wanting my money. And it takes a bold person, a courageous person to say, Well, you know what? The president excoriated me in public and my industry in public, but yes, I'm going to tell him to go take a hike when it comes to campaign funds.

No. A lot of those people reach for the checkbook and view it as protection money. This is again why I think this is so trouble. The president does this routinely. You can't agree with -- disagree with the president without the president or his people questioning your motives, whether it is on health care or taxes or spending or the financial regulation bill or even immigration. On immigration, if you don't take a position that he agrees with, you're somehow a bigot.

And I really am concerned about that. The president should step back and consider the power of the language that he has as the occupant of the most powerful office in the world.

VAN SUSTEREN: You have one less Republican. Governor Crist is now going to run as an independent for the United States Senate out of the state of Florida. What happened to Governor Crist?

ROVE: He went from being way ahead of Marco Rubio a year ago to being 56-34 in the latest polling. And this is about self-preservation. He said, I can't win the Republican primary because I have been a colorless, energy-less, you know, candidate against a remarkable young, conservative leader who has been, you know -- you know, exciting and has caught, you know, lightning in a bottle. So this is all about Charlie Crist and his personal future. It has nothing to do with anything other than that.

VAN SUSTEREN: But a personal future, you've really sort of -- you've cut yourself off from your friends, your Republicans, because I don't think your Republicans are going to be helping him out. What -- what does your chart say, your chalkboard?

ROVE: This is the -- this is the latest poll out of Rasmussen on the general election in a three-way race. It would be Marco Rubio, the Republican, at 37, Charlie Crist, the independent, at 30, and Kendrick Meek, a Democrat, at 20. I'm sorry. That should be 22, not 20.

And you know, it's -- that's -- the best day for an independent is generally the first day they get in the race, and I would suspect that we're going to hear -- as people hear these sound bites of Charlie Crist saying, Oh, no, I will always be a Republican, I will never run as an independent -- as they get those played back, they'll start -- they'll raise questions about his character, and we will find that this is going to be enormously damaging.

What he did yesterday did himself no good, nor the party that -- in which he spent his adult life. And I suspect it's going to have a very unhappy ending for the governor of Florida when he loses the general election in a -- in a -- in a landslide.

(END VIDEOTAPE)

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