Will 2010 Be the Year of the Obama Referendum?

This is a rush transcript from "Hannity," September 9, 2010. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: And tonight in Your America, even President Obama is admitting the Democrats could be in serious trouble this November. Let's take a look.

(BEGIN VIDEO CLIP FROM "GMA")

PRESIDENT BARACK OBAMA: If the election is a referendum on, are people satisfied about the economy, as it currently is, then we're not going to do well because I think everybody feels like this economy needs to do better than it has been doing.

(END OF VIDEO CLIP)

HANNITY: All right. So he says Democrats will suffer if the election is about the economy. But what if the election is about him?

Now polls suggest that an Obama referendum would prove disastrous for the left. According to Rasmussen reports, President Obama's approval rating has dropped to 41 percent. Fifty-eight percent of those surveyed disapprove of the job that he is doing.

But the president is not only facing opposition from the American people. Rifts appear to be developing within his inner circle. Now days after he unveiled a $50 billion infrastructure spending spree his own secretary of state said this about the out-of-control spending in Washington.

(BEGIN VIDEO CLIP)

HILLARY CLINTON, SECRETARY OF STATE: Our rising debt levels poses a national security threat. And it poses a national security threat in two ways. It undermines our capacity to act in our own interests. And it does constrain us where constraint may be undesirable. And it also sends a message of weakness internationally.

(END OF VIDEO CLIP)

HANNITY: And then there's former Obama budget director Peter Orszag. He recently broke from the White House and called for the extension of all the Bush tax cuts. He wrote, quote, "The best approach is a compromise. Extend the cuts for two years and then end them all together. Higher taxes now would crimp consumer spending."

So could this November be a referendum on the president? And what will this mean for the Democratic Party?

Here in studio with analysis, former White House special counsel, the one and only, Lanny Davis.

Well, you're friends with Hillary. What is that -- that was a nice shot across the bow.

LANNY DAVIS, FORMER WHITE HOUSE SPECIAL COUNSEL: She is the greatest secretary of state and the greatest friend anyone could ever have.

HANNITY: You're going to dodge. Is that -- listen I -- look.

DAVIS: I don't think she --

HANNITY: How often do you hear me say a Clinton is right? She's right.

DAVIS: I think she's right. And her husband was right about balancing the budget and leaving us a trillion-dollar deficit. But Obama

HANNITY: That was a Republican Congress.

DAVIS: -- inherited a serious deficit and a serious economy.

HANNITY: Wait a minute. Stop. Stop.

DAVIS: And I don't read her comment as a knock on President Obama.

HANNITY: First of all he didn't inherit an economy as bad as what Ronald Reagan inherited. Number one. Number two, I'm sick of him blaming Bush. He's been president now for 20 months. This is his budget. Three trillion dollars of his debt and deficits. You know trillion-dollar deficits as far as the eye can see.

You actually wrote a piece that I found interesting.

DAVIS: You did?

HANNITY: Yes.

DAVIS: Your ratings just went down.

HANNITY: I know.

(LAUGHTER)

HANNITY: If the Democrats lose the House you say it could be a good thing for Obama. And you suggest that that would mean an opportunity to compromise, like Bill Clinton did. To his credit he went along with Kasich and Dominici -- he was kicking and screaming, but he did it.

I don't see that pragmatic side in Obama. I think Obama is a radical. I think Obama is a rigid ideologue.

DAVIS: Well, Bill Clinton's experience, and he's gotten, I think, pretty close to president Clinton is that sometimes --

HANNITY: I think Clinton hates him.

DAVIS: Sometimes dealing with Congress --

HANNITY: Clinton has never gotten over the racial comment.

(CROSSTALK)

DAVIS: Well, I think right now Bill Clinton sees the problem and he's out campaigning for Democrats. And he's become the most effective campaigner in the Democratic Party.

HANNITY: Listen. Russ Feingold -- he's in Wisconsin on Monday. Russ Feingold doesn't want to be anywhere near him. What does that say?

DAVIS: Interestingly, his approval ratings are down so politicians are going to not want to be too close to him. But personally --

(LAUGHTER)

HANNITY: You really want this segment to end, don't you?

(LAUGHTER)

HANNITY: You really do.

DAVIS: Watching you sometimes, scratching a blackboard. But this isn't too bad. No. His personal ratings, Sean, are still pretty good. It's the approval rating because the economy is in pretty bad shape.

HANNITY: He's in the 30s on the economy, he's nearly in the 30s on personal approval according to Rasmussen. Sixty-six percent of Americans are now saying America is on the decline under his policies. Nine out of 10 issues the Republicans win in terms of everything.

Intensity, generic ballot is at a 68-year high, Lanny. Do you not acknowledge a potential political tsunami is in the making?

DAVIS: I think it is the economy stupid. And I do think that the Democrats have lost one thing that Bill Clinton achieved, which is to be friendly to the business community --

HANNITY: Cut taxes.

DAVIS: And including tax cuts but he also increased taxes at the same time that he cut spending. But Bill Clinton was a balanced budget fiscal conservative which is why what Mrs. Clinton is talking about consistently - -

HANNITY: You know what a model of mine is and it's been all my life, I want to under promise and then over deliver. I always want to give more than what I promised. Isn't this the case where the president overpromised and under delivered?

In other words, eight percent of unemployment won't go above eight percent. We gave him the stimulus so we wouldn't face a catastrophe. Stimulus did nothing except rob our children and grandchildren. Now he wants more money. Why should anybody have confidence based on his past promises?

DAVIS: Look, first of all, I'm an admirer of a guy --

HANNITY: It's almost over.

DAVIS: -- who has achieved what he achieved and inherited a tough deck of cards and he's doing the best he can.

HANNITY: Wait a minute, Ronald Reagan had 21.5 percent inflation, interest rate -- double digit interest rates 21.5 percent, inflation double digits, unemployment double digit.

And look what he did? He cut taxes 70 to 28 percent and guess what happened? We doubled revenues, 21 million new jobs, Lanny.

DAVIS: In 1982, he lost a lot of seats in Congress because it took a while for him to turn the country around and that may be exactly what I'm saying that Barack Obama may have a chance to do.

HANNITY: Just the opposite. Alright. I got to run. You agree me on the mosque don't you?

DAVIS: I definitely think that there's an assault on sensitivity by putting a mosque --

HANNITY: Do you think this imam is radical?

DAVIS: No.

HANNITY: "America is an accessory to 9/11"?

DAVIS: I think he should denounce Hamas, he hasn't done that.

HANNITY: He won't.

DAVIS: But I think that the message we want to send to Islam around the world is this is a war against terror, not Islam.

HANNITY: Alright, you can go back and have a drink.

DAVIS: This has been really tough.

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