This is a rush transcript from "On the Record," August 26, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: We spoke with former senior adviser to President Bush, Karl Rove.


VAN SUSTEREN: Nice to see you, Karl. Thank you for joining us.


VAN SUSTEREN: Karl, you know, the news that has sort of consumed everybody in the last, oh, 24 hours has been Senator Kennedy's death. I bet you had occasion when you were here in Washington to work with him. Your thoughts on this.

ROVE: Well, he was a -- you know, I had a different opinion once I got to meet him. I recognized how hard-working he was. If you came to a meeting with Ted Kennedy, as we did many times at the White House, you'd better have done your homework because he'd done his. I mean, here was a guy who got up every morning and said, How can I advance the cause that I believe in? And he worked hard at it.

He was willing to compromise. He was willing to sit down and deal with you, but he was a fervent advocate and he did his homework. So I had a great deal of respect for him after I saw how hard he applied himself, particularly in comparison to a lot of people around him.

He was an enormously outgoing person. He was very friendly when he came to the White House, and you know, very courteous, a generous person. I found it hard to square the person that I saw in that respect with the person that I saw savage, for example, Robert Bork or Sam Alito or John Roberts, particularly Sam Alito and Robert Bork. The things that he said about them I thought were beneath the dignity of a United States senator and beneath the dignity of a Kennedy, and yet he said them. So he was a very complex person. I had enormous respect for him, but I didn't agree with him all the time, but I did have a healthy respect for his abilities and his commitment.

VAN SUSTEREN: Well, it's sort of -- it's sort of interesting, is that politics really is a contact sport in so many ways, and some people can say such horrible, rotten things about each other, yet sometimes in the end, you know, have respect for each other or work together for the common good. It's sort of -- it's sort of interesting how fluid the situation is.

ROVE: Well, look, you can -- I think you can have a big, fervent disagreement, but I do think -- I have to say -- and I -- you know, and with all due respect to Senator Kennedy -- and he was an enormous figure in the American political scene for a long time -- I think what he said about Robert Bork was fundamentally unfair and diminished him. I thought what he said, calling Sam Alito a bigot, diminished Senator Kennedy, not Justice Alito. I think his life would have been better had he not carried the thing that far.

But you're right. I mean, you know, one of the interesting things about Kennedy, too, was Kennedy had a keen understanding of the presidency and of how to operate. I just put this in my book, in fact, about how during the No Child Left Behind, I would occasionally walk through the West lobby -- West Wing lobby of the White House, and there would be Senator Kennedy sitting on a couch with Margaret Spellings, the domestic policy chief, surrounded by stacks of paper, going through intimate, you know, small, precise amendments and language of the bill. And it wasn't that Senator Kennedy felt like he needed to take President Bush's time for this. He knew President Bush had authorized Margaret Spellings to be his negotiator.

So Kennedy had no, you know, sort of ego about dealing with the domestic policy chief, rather than, you know, insisting that he had to sit down with the president to iron out the detail of, you know, subsection 43, subparagraph five. I mean, it was a sign of how seriously he took the job of legislating. And again, particularly impressive compared to a lot of the colleagues of -- his colleagues that I saw in action who could barely identify the bill number, let alone have a keen understanding of its nuances and language like he did.

VAN SUSTEREN: How does his death -- or what impact does his death have, if any, on the health care debate in this city?

ROVE: Yes. I hear a lot of Democrats say, and some commentators, that this gives health care a big boost, and you know, after having a bad August, gives it, you know, some energy coming into September. And that may be the case, but I doubt it. I mean, I think people are not looking to pass a bill to honor Senator Kennedy that changes their life, their health care, makes their health care worse, raises taxes, spends a trillion dollars, you know, changes a whole big chunk of the American economy just to sort of honor a passing senator.

I -- you know, with all due respect to Senator Kennedy's memory and his great work in health care -- prodigious work, I should say, over the years in health care -- I don't think that at the end of the day, members of Congress are going to feel comfortable going home and saying, I know the bill was bad, but I voted for it because it had Kennedy's name on it.

VAN SUSTEREN: Well, what's -- as a practical matter, though, it certainly is going to make it more difficult for the Democratic Party to get 60 votes in the Senate on any bill. I mean, they have one less, you know, person in their corner.

ROVE: Yes. Interesting -- interesting point. Between now and -- the election is likely to be in January. I need to find out if there's a runoff, which might take a little bit longer. But between now and January, the Democrats have no more than 59 votes, so they cannot bring cloture. They have to have Republican agreement between now and next January and February. They just can't just ram it through with 60 Democrats sustaining a cloture vote.

So it's going to be interesting to see how Harry Reid handles it. He's got a terrible job. The job of the majority leader in the Senate has a lot of responsibility but not enough authority to match it. And it's going to be interesting to see how Reid, who already faces a contentious Senate, handles it.

VAN SUSTEREN: Karl, explain to me because -- and I -- this is probably one of those things I've just missed and maybe I'm just, you know, fool, but suppose that this bill doesn't get passed. The president -- (INAUDIBLE) president (INAUDIBLE) doesn't get passed. He flat-out loses on this. Why can't they go home for a week and just start it right up again a little bit differently? I mean, why do we have this sort of fixation on these -- you know, it's got to be this one by a certain time?

ROVE: Yes. Well, it's because the president made it that way. I mean, the president said he wanted a bill out of the House and Senate by the end of July and into conference committee. I thought it was a mistake on the administration's part and on the president's part to set that deadline because this kind of a complex bill -- I mean, this bill is huge. I mean, it's a big piece of legislation, and members are going to have to take a lot of time to digest it. So by setting an early deadline, he already set himself up for a defeat.

But you're right, if -- at the end of the day, if they come up and in December they can't get it done, they can start it again. If they do start it again, the question will be, Does the president make the same mistakes he made earlier this year, or does he recognize the error of his ways and come at it in a different direction?

I would say there are three big mistakes. He turned it over to the House of Representatives to write a bill without any Republican input. He -- he did not give critical -- clear guidance as to critical elements of the bill. Is he for a public option or against a public option? You know, we've been whipsawed by that one.

And thirdly, does he personally intervene in this process in order to make certain that there is a true bipartisan bill? The president has sort of defined bipartisanship in this as Republicans give in to everything that their Democrat colleagues want, and I don't take any responsibility for the bill.

VAN SUSTEREN: Well, in the beginning, he said he wanted a public option. If that doesn't make it to the bill, does the president -- and if a bill is passed minus that public option -- I don't know if it will be -- but does the president do like lawyers do when all the lawyers walk out of the courthouse and both sides announce that they've won? Does he come out and say it's a great victory?

ROVE: Well, I think he -- he -- you know, if the bill -- if a bill passes without a public option, he's got to say, Look, I was for it, but at the end of the day, in the interests of -- of the Congress coming together, it wasn't in the bill. I thought it would be useful, but at the end of the day -- and then pivot to what the bill actually does.

But look, there's a long way between here and the end, and it may be that he can't get a bill with a public option and he can't get a bill without a public option. He can't get a bill without a public option because he may have a bunch of people on the left of the Democratic Party who insist upon it, the sort of Moveon.org crowd, and as a result, he doesn't have the votes in either the House or Senate to get it done. Or, similarly, he clearly -- Democrats are signaling in the Senate -- enough Democrats are signaling that they're against the public option in the Senate that he may not be able to get a bill through the Senate because you have enough Democrats who say, You know, I'm -- I can't vote for a bill that has a public option in it, so he can't get cloture. He doesn't have 60 votes to vote cloture on a bill.

So he's got a big -- he's got a big conundrum here. I do think the president is missing an opportunity here. There are things about which there could be some bipartisan agreement, and he's not trying to fashion those into separate items and move them to sort of build confidence that they can tackle this whole thing.

He's also made a mistake in that he's made the financing of this -- two thirds of the financing of this is dependent upon Medicare and Medicaid cuts -- not just simply restraining the future growth of spending for Medicaid and Medicare, but actually cutting the absolute amount of money that's going to be spent on some of these programs, like Medicare Advantage.

I've got this in my column tomorrow morning in The Wall Street Journal. There are 10.2 million seniors. One out of every five seniors have a Medicare Advantage health plan that is going to be demolished by the President Obama's financing plan for the health care bill. That's 23,400 seniors in every congressional district, on average, in America. That's enough to tip any close race, and if you're a vulnerable House member of a vulnerable Senate candidate, you got to be thinking about what's going to happens when seniors find out that President Obama wants to cut Medicare and your Medicare Advantage program and kill it in order to pay for this health care plan that you're already very suspicious about.


VAN SUSTEREN: Democrats -- they're not taking it. They have a new strategy, pushing back at the town hall protests. They are now organizing protests to the protests. What does Karl Rove think about the grass roots, or is it astrotuf, tug-of-war? Stay tuned for more with Karl.

Plus: Former Governor Sarah Palin is under attack, and the former governor's enemies are targeting Palin's friends. What friends, and how are they doing this? Stick around. You'll find out.


VAN SUSTEREN: More with Karl Rove.


VAN SUSTEREN: Well, the Democratic Party is really revving it up. They're now at least publicly trying to organize people to go to town hall meetings in support of the bill. I mean, that's sort of -- that -- at least, I found that sort of interesting that they're so overtly doing that.

ROVE: Yes, well, they sort of had to. Look -- but look, members could smell the difference between the SEIU or the Teamsters busing people in who are being paid a wage to sit on a bus and show up at a meeting and kind of passion that they're seeing from ordinary Americans who've never attended a political gathering, shown up at a town hall meeting.

You know, all you need to do is read the papers or -- you know, I get a lot of e-mails from people saying, Look, I've never been involved in politics. I'm a Democrat. I'm an independent. I'm a -- you know, I've never had political beliefs. But I'm so worried about this, I went to my town hall meeting, or, I'm so worried about it, I called my member of Congress and asked for an appointment to tell him my concerns.

I mean, this has touched a lot of people. In fact, look at the last FOX poll. The last FOX poll shows how strong the opposition to this -- only, you know, 30 -- and I may be wrong on the numbers here a little bit. I think it's 37 percent of Democrats do not support the president's plan, 50 percent of independents do not support the president's plan, 81 percent of Republicans don't support the president's plan. In the NBC -- excuse me -- in the ABC/Washington Post poll, 40 percent -- 45 percent supported the president's plan, 50 percent opposed it, and 40 percent of all Americans strongly opposed his plan, while only 27 percent strongly supported it.

I mean, that -- those numbers are -- have got to be discombobulated for the people inside the White House. They probably match the numbers they're seeing, and it shows that there's this enormous outpouring of people, particularly independents, but even a significant amount of Democrats who do not like what the president is proposing to do on health care.

VAN SUSTEREN: Do you think President Obama is making daily -- or Rahm Emanuel -- daily calls to Senator Reid and say, you know, Get your Senate Democrats in line, and you know, really get this going, and see if you can't lure some Republicans (INAUDIBLE) Is there -- just sort of a fly on the wall, you think there's back and forth with Harry Reid, saying, you know, This is your job to arrange this?

ROVE: I think there's a lot of discussion between the White House and the Senate about whether or not they need -- they need to sit down seriously and talk with Republicans, whether they can peel Olympia Snowe off, whether they can have -- you know, or whether they got to go it alone.

I thought it was interesting last Sunday, Schumer, Senator Schumer, who is the former head of the Democratic senatorial committee and has a big, you know, leverage inside the Democratic Senate caucus, said, you know, in essence, We're ready to go without any Republican votes. And rather than having it done requiring 60 under the normal Senate rules, we'll do it with 51 as part of what's called budget reconciliation.

I think this was a threat. I don't think they're going to be able to carry it out, but it was indicative of the mindset of some of the key leaders of the Democrats in the Senate, which is, Forget negotiating with the Republicans. We don't care to have a bipartisan bill. We're willing to just go straight forward with Democrats only and try this very risky procedure of reconciliation, which would require only 51 votes.

Now, I've talked with a number of experts who tell me that there are real problems with the Democrats trying to do this. They can't necessarily pull it off with the ease that Schumer talked about on Sunday. But I thought it was indicative of the mindset of a lot of people inside the Democratic caucus.

VAN SUSTEREN: Do you think Senator Harry Reid's in trouble in terms of getting -- with this bill, is this going to affect his -- you know, his numbers are slipping down, but is -- you know, politically, for him back home?

ROVE: Yes, look, his numbers are dreadful in Nevada. And not only that, but it's spilled over and affected his son, who's running for governor. And Reid today is losing by double digits to a twice-failed candidate for office who's the son of the former University of Nevada Las Vegas basketball coach, and he's losing by 5 points to a former Republican state assemblywoman who's the Republican state chairman.

I mean, Harry Reid's numbers are dreadful, abysmal. And it's connected partly to what he's doing nationally, partly to what he's -- partly to President Obama and to a very negative reaction to President Obama by the people in Nevada. But mostly, it's Harry Reid. He has come across to as not representing Nevada values but representing Washington values. He's come across to slippery, undependable, unreliable and more liberal than he's tried to convey back home. And guess what? All those things are true. And as a result, his numbers are dreadful. These are much worse than Tom Daschle had when he lost to John Thune in 2004.

VAN SUSTEREN: You know, I wonder to what extent...

ROVE: Much worse.

VAN SUSTEREN: I wonder to what extent his sort of slipping numbers at home are sort of undermining his strength in the Senate to sort of corral his senators to -- you know, to figure out the Senate bill.

ROVE: Yes, I'm not certain that has much impact on it, except that it may be to the degree that it makes a more engaged in his own business at home and less engaged in the Senate business. I mean, again, that's the worst job in the world. And people want to have that job. Trent Lott wanted to have it. Bill Frist wanted to have it. Senator McConnell would love to have it. But -- and Harry Reid has it. But once you have it, it's a difficult job to fulfill, particularly on the Democratic side.

Remember, there are a bunch of more senior Democrats who are -- who are -- who have a more liberal viewpoint then Harry Reid has traditionally had. He's become more liberal in his voting pattern, but he is sort of a Western moderate, or he came as a Western moderate and become more liberal. But there are more senior Democrats that don't necessarily have the greatest respect for Reid.

It's sort of like they couldn't agree on which one of them should have it -- you know, the Chris Dodd and the Ted Kennedys of the world. So they let him have it. And as a result, he has always had sort of a weak control over his caucus. I'm going to -- again, I don't want to talk about the specifics, but I am writing about this in my book because I saw this up close, where he would say, I will do X, but he had no ability to do X because the rest of his caucus said, Oh, that's just Harry trying to cut a deal and we're not going to be backing him on that.

VAN SUSTEREN: Karl, as always, thank you, sir.

ROVE: Thank you, Greta. Thanks for having me.


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