Palin optimistic about 'volatile' GOP race: 'Competition makes everybody better'

This is a rush transcript from "Hannity," February 21, 2012. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: Tonight we are one week away from two critical Republican primary contest, including one in Michigan, the home state of Mitt Romney. And while some are calling that contest Romney's Waterloo moment, top campaign aids to the former governor say that Michigan is not a must-win primary.

Now, according to the latest survey from public policy polling, Romney is now trailing former Pennsylvania Senator Rick Santorum by four points in the Great Lakes state. And earlier today, in a Fox exclusive, we learned that the Super PAC that is supporting Senator Santorum has now dumped an additional $600,000 into Michigan. Now, that massive allocation of funds will allow the group to run TV ads through next Tuesday's primary.

So what are the implications if Governor Romney does in fact not win his home state? Could a brokered convention actually be in the Republican Party's future?

Joining me now with analysis, somebody who's often mentioned when discussing the possibility of that brokered convention. From Wasilla in Alaska, former Alaska Governor Sarah Palin. Governor, welcome back.

SARAH PALIN, FORMER ALASKA GOVERNOR: Thank you so much, Sean.

HANNITY: All right. Topsy-turvy, volatile, unpredictable. Just standing back, and I know you were at CPAC and you've been in New York and you've been in Indiana. You know, what is your -- you know, if you were to give the state of the race now, what would you say it is?

PALIN: It is quite volatile. Lots of fluidity, and that is the nature of competition which makes all of these candidates so much better. So, I think that we should be pleased with the process, and I think the process should continue. It will be quite interesting, though, to see what happens there in Michigan in Romney's home state. He having deep roots there with his father having been governor of the state for so many years, and he's claiming it as his home state, and his wife being from Michigan also. Perhaps a win or a loss there will be perceived quite indicative of his electability in a general.

HANNITY: You know, when you were recently interviewed on "Fox News Sunday," you raised the question about, you know, his conservatism. And when I had Governor Romney on the program last week, he's going to be back on the program tomorrow night, I asked him about what you said. And he went on to explain his record as governor, the areas where he is conservative and how he would govern if he were president of the United States. I don't know if you saw the interview, but certainly you have been hearing about it on the stump. Do you think he is now answering that question?

PALIN: He is certainly attempting to answer the question about his credentials as a conservative, as all the candidates must do, Sean. Because this general election will be absolutely paramount to the future of America, whether we are able to defend our republic, save our republic or not because of president Obama's failed policies that we can't afford four more years of.

So, yes, as Romney explains more about his past positions, having supported some form of cap-and-trade, which is, you know, kind of the antithesis of the opposite of what we need in energy policy in our country, and his positions on some social issues having evolved over time. He, through you, through others in the media has had opportunity now to start explaining that.

However, some people still are not convinced. Look at his numbers, say, there in Michigan where folks are, I believe, according to the numbers as being an indicator, the poll numbers, they are connecting more to Santorum it seems. And that's why Santorum's numbers are good in Michigan. The Reagan Democrats, the church-going Catholics, who are, you know, a lot of good union brothers and sisters who just want to make sure our economy is going back on the right track, and that connection to this blue-collar background of Santorum's is boding well for him as opposed to some of what Romney has been saying.

HANNITY: Yes. Well, let me ask you more specifically about how you feel about it. Because you had doubts about his conservatism. And he went through a litany, and his answer was, well, hang on a second, I balanced the budget every year I was governor, I didn't raise taxes, I had 800 vetoes. He talked about, you know, all the things that he did there, and he never, for example, even though he said he was pro-choice when he was running, when it was put on his desk, he says, he went pro life. Then he says, I'll repeal Obama-care, I'll balance the budget, I'm going to cut spending, things that conservatives want. Now that he's been explaining it, in large part I think you jump started part of this conversation, do you have more confidence in his conservatism?

PALIN: His answers as to his conservative credentials should lead us all to believe that he, along with any other candidate on that GOP ticket, will be immanently better than Barack Obama and the leftist failed socialist policies that he has crammed down our throat. So yes, thankfully, Romney has had more opportunity to explain. I'm anxious to hear in the next debate how all four candidates will even further explain their ideas on how to get the economy back on the right track and how it is that we build up the foundation of free men in free markets that America was build upon again as opposed to Obama's leftist failed policies.

HANNITY: Yes. One of the things that you have been advocating Governor from early on is what you call the process, and the reason that you are supporting Newt Gingrich heading into South Carolina is you wanted more vetting, you wanted the process to go on, you think the debate within the party is healthy. That is now happening. Got another debate coming up. So, my question to you is if, you were going to vote in Michigan, and I know I have asked you this before about other states, who would you vote for in Michigan?

PALIN: I don't know at this point who I would vote for there in Michigan. I do want the process to continue. We know that we had a poor process last go around and it's the fault of the media, the leftist lamestream media that did not vet Barack Obama, who then obviously became our president, and now we are suffering the negative ramifications of what Barack Obama stands for and stood for as a candidate as he promise to fundamentally transform, us and that's exactly what he's doing to the detriment of the future of our country. I want the process to continue. Competition makes everybody better. It is still sharpening still with these gentlemen who are putting themselves forward in the name of service to our country. It needs to continue.

HANNITY: Does there come a point where maybe, because I agree, you know, it was interesting, coming out of New Hampshire I think Newt Gingrich's appearance and performance in the two debates prior to South Carolina helped make Romney a better debater come Florida. And of course, you know, subsequently the results in South Carolina leading into Florida. Does there come a point, you think though that the process begins to hurt the eventual nominee? In other words, at some point the people need to settle, rally. Do you think that a brokered convention is good for the party?

PALIN: I do not believe that that process should be stopped yet, no. I believe, you know, that old staying about a boiled egg is hard to beat. These candidates, they are being boiled in this boiling pot of water with the ads and the Super PACs and the media beating them up. Look what Santorum is going through with things that he has said and said in the past that the lamestream media, taking things out of context and trying to subscribe to him that traditional, normal type negative narrative that they want to pin on any conservative. You know, I've gone through that also. Look at what Santorum is going through and how that is making him tougher, more articulate, more focused on his true convictions and not being afraid to stand strong on his principles, not backing away from what he believes in. I respect that.

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