This is a rush transcript from "On the Record," June 18, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: First: He didn't hammer President Obama directly, but former President Bush defended himself last night for his handling of terror suspects, and the former president said flat out you can spend your money better than the government can spend your money.

No one knows President Bush better than Karl Rove. Moments ago, Karl Rove went "On the Record."


VAN SUSTEREN: Karl, thank you very much for joining us.


VAN SUSTEREN: All right, Karl, people are talking whether or not the president, Bush -- President Bush 43 is finally speaking out. Is he speaking out against President Obama? Because last night, he talked about a number of issues that certainly are in conflict with the Obama administration.

ROVE: Yes. No, Greta, this -- his remarks last night in Erie, Pennsylvania, were reflective of things that he said earlier in southeast Michigan at a recent public speech and in Calgary, Canada, and in Toronto, where he had a joint appearance with President Clinton. President Bush is very clear. He will not engage in attacks on the administration. He will say what he is for. He will say what his views are for. But he feels very keenly about not engaging in a -- you know, in a set of back-and-forths with the current administration, and he'll keep to that.

VAN SUSTEREN: You know, it's sort of interesting, Karl, because I was trying to think, you know, how he can speak out about his ideology. I guess the best example is -- you know, is government versus business, in terms of how you stimulate the economy, without it being seen as being -- if he disagrees with the president on ideology grounds, is how it's -- how do you -- how it's perceived. Some people see that's an attack on the administration. Some see it simply as the president speaking out on -- on how -- what he believes in.

ROVE: Yes. Well, it's clearly the latter. President Bush, when he left office, like every other previous president, did not lose his free speech rights. If you go back and look at -- Harry Truman had pointed comments, some of them directly aimed at Eisenhower, but pointed comments about the conduct of public affairs. Same with Lyndon Johnson. The same with Richard Nixon. Same with Gerald Ford, same with Jimmy Carter.

Presidents, after they leave office -- Bill Clinton, Ronald Reagan, President George Bush 41 -- when they leave office, they don't lose their right to opine on matters of public concern. In fact, we ought to welcome that. They after all represent, you know, experience that is rare in our society. That is to say, they are former presidents.

But I thought it was unusual today that Robert Gibbs, the White House press spokesman, took President Bush's comments and turned them into attacks on President Obama and a return attack to President Bush in a highly political matter. I thought it was unbecoming. The best way for him to have answered, in my opinion, would have been to have said of course they weren't attacks on President Obama. President Bush is entitled to his opinions, and we respect that, and it would have been a non-story.

VAN SUSTEREN: It's a lot easier to run for office than it is to govern, isn't it.

ROVE: It always is. I mean, people say things in haste on the campaign trail and they repent once they get into office, often painfully. And we're seeing that in the -- in the -- in this administration's case.

Though in this instance, closing Gitmo within a year, I would remind you, was a promise that Obama made when he came into office. He literally signed an executive order before he developed a plan on Guantanamo that said, We will close it within one year of his signing of this executive order in January. but at the time that he did so, he had no plan as to how he'd either try these people in a comprehensive fashion or to handle the difficult arrangement -- we don't even know where they go.

And look, he doesn't have a year to do this because -- let's say, for example, we need to have some facility we put them in. The supermax facilities that we have in the United States -- those are our most secure prison units, like in Florence, Colorado. I'm in Colorado today. These are occupied. We don't have spare room in these supermax prisons.

So if President Obama's attitude is, We're going to take the dangerous people that we've got in Gitmo and put them into a supermax facility, it's going to take some time to figure out what do you do with the people who are now occupying those cells. Where do you send them elsewhere in the federal prison system in order to -- and what do you do to assure those communities that the people you thought were so dangerous, you put them in the most secure facilities you have, can now be put into a less secure facility without endangering communities. These are some of the very difficult and thorny questions the administration's going to deal with.

VAN SUSTEREN: All right, Karl, I have to confess that from time to time, I hold a grudge. I got to confess to that. Now let me ask you about President Obama. I don't know if you've been following this, but he will not come to FOX News Channel, and he took a little swipe at us the other day, and we've sort of teased him back. But this whole idea that -- that, you know, the largest audience is on cable -- of all the cable news is on FOX News Channel -- what do you make of this little spat he has with us?

ROVE: I think it's petty stubbornness. I mean, here's a man who seems to be willing to go sit down with Ahmadinejad and Kim Jong Il, but he won't sit down with Greta or O'Reilly or Sean Hannity. I mean, it strikes that this guy might be a little fearful of -- of having tough questions asked of him.

You know what? Hillary Clinton had the same attitude until the primary, when she came on FOX, found she was treated fairly. And I can't tell you how after that, how many people came up to me with my travels around the country and said, I'm a Hillary Clinton fan, and I appreciate what FOX did in giving her a fair shot and a fair venue on television.

The President of United States should not be afraid of coming on FOX News, nor should the President of the United States diminish his office by seeming to engage in a petty fight with the -- with the -- with a network himself. It's fine to have his underlings go out and complain. I mean, I -- you know, inside Bush White House, we were complaining about The New York Times all the time.

But it is really not attractive and it's really not -- it says something about the lack of confidence on the part of the president when the president himself engages in that kind of rhetoric. We saw it from Richard Nixon with his paranoia about the media. We're now starting to see it with the thin-skinned nature of President Obama about what he perceives to be criticism.

And look, FOX gives him a fair shot. I've been impressed with how often FOX News, particularly the Sunday programs and the evening news programs, have been -- have been -- as opposed to the opinions, where we're supposed to have opinions -- but to the news programs, how fair they've been to the administration.

VAN SUSTEREN: All right, you singled out the New York Times, so let me ask you this question. Did President Bush 43 ever sit down with The New York Times? If you guys were squawking about The New York Times, in the eight years, did you sit down with The New York Times?

ROVE: Oh, sure. In fact, he sat down with the reporters. He also personally reached out to them to try and discourage them from publishing details about the most highly sensitive intelligence-gathering programs, the terrorist surveillance program, which ultimately, they ignored his wishes and -- and -- and laid out the details of these programs, thereby alerting to the enemy as to how we were monitoring their communications, their electronic communications. But sure, he would. Absolutely.

VAN SUSTEREN: Do you think that President Obama is watching FOX News? I mean, he says that he never watches cable news, but he's been -- on the other hand, he says that -- you know, that FOX News attacks him all the time. I mean, where is he -- is he -- do you think he sits around at night just grumbling and letting us get under his skin? Or where is he getting this information?

ROVE: Well, I suspect he's getting it from his press shop, from the liberals inside his press shop, who -- you know, they love being bathed in warmth by Keith Olbermann. It's probably like taking a bath in warm butter. Or they love, you know, hearing from Chris Matthews about the thrill up his leg.

But you know, they -- I suspect -- I suspect President Obama, if we accept him at his word that he's not watching FOX, is getting this from staff people who got an axe to grind. My recommendation to President Obama, if I can be so impertinent as to suggest something, is show a little curiosity of your own and tune in Brit Hume and Bret Baier. Turn in -- tune in Chris Wallace and see for yourself how you're treated. Turn in on Greta and see how well you would be treated on the program yourself. Don't rely upon some staffer who might be giving you bad advice. Experience FOX yourself, Mr. President. Experience FOX yourself.

VAN SUSTEREN: You know, it's funny, you know, we did interview him "On the Record" when he wasn't running for president, when he was a United States senator. And I think that, you know, he liked our interview. He was fine with it. But whatever, you know? We'll wait and see whether, you know, the grudge goes away. But assure him that we would treat him with respect, like everybody.

All right, let me ask you another question. You've been writing a lot about health care. The Republicans -- I mean, do they have any sort of influence in health care at this point? They don't have the numbers on the Hill, but do they have any influence?

ROVE: Sure, they do because there are Democrats who share some of concerns of Republicans. If I could -- there are basically three of them. First of all, there are Democrats who share the concern about the price tag. I mean, the Kennedy bill, they laid out only one title of the bill -- and for those of your viewers who are not legislative wonks, each bill is broken into various titles. The titles have to do with a certain activity or function. And title I of the Kennedy bill, the cost of that alone was $1 trillion over 10 years.

The draft Senate finance committee bill, which is the bill that the Obama administration was working with, was informally scored at $1.6 trillion over 10 years. So there are Democrats who are concerned about this. President Obama is right. We're out of money, he said, and we are out of money. So we cannot afford something like that.

The second thing is the so-called "public option." That is to say, a government-run health plan that competes with private plans. This'd be enormously problematic because Medicare and Medicaid shows us that government basically under -- you know, doesn't pay the doctors and doesn't pay the hospitals what the actual service costs and schleps the cost of what they don't pay off onto the taxpayer or to the other patients who are not covered by government programs. They do the same in the -- with private insurance. And as result, they would crater private insurance.

A hundred and twenty Americans -- million Americans, 70 percent of working Americans who today get insurance from their employer would be dumped on the government-run health care system that would look much like Medicaid does and it'd be -- you know, it's not what American people want.

And third, the question of who's going to be in charge. I mean, the president has already set up a board, a 15-person board, to set the protocols for health care. That is to say, to tell people what it is that the government is going to pay for and what it's not going to pay for. The government's going to end up rationing, as it does under Medicaid and Medicare. That 15-person board does not have a single currently active practicing physician among its membership.

So a lot of people are looking at this, Republicans and Democrats alike, saying, We're going to end up in a situation where the government attempts to control the costs not by market forces, in which efficiencies are built in by people competing with each other, but instead by price fixing and government bureaucrats dictating, which has all kinds of inefficiencies in it and which ultimately lead to rationing.

And so these three big concerns -- the cost, is government going to take over the system, and who gets in between the patient and the doctor, and do we really want the government rationing health care and making these decisions? This gives Republicans leverage because there are groups of Democrats in the House and Senate who agree with these kind of attitudes and are concerned about it.

And look, most Americans are comfortable with their own coverage, and the idea of losing their own coverage is exactly why President Obama at every single opportunity says something that's absolutely not true, which is under this plan, you get to keep what you've got if you like it. That's not true. It will collapse the private market system.

A very respected research group called the Lewin Group has done an analysis of it. Nobody's disputing it on the core principle that lots and lots and lots of people are going to lose their coverage. They say 120 million people. Others say slightly more. Others say slightly less. But everybody agrees there'll be this kind of effect when you've got a government-run program that's going to pay like Medicare or Medicaid consistently less than the private market pays.


VAN SUSTEREN: We have much more with Karl Rove in two minutes. Karl thinks President Obama is doing something that is devaluing the White House. What's that? You'll hear what that is next.

Plus: Dangerous breaking news out of North Korea tonight. The U.S. military is tracking a North Korean ship that could be carrying nuclear material. North Korea threatens war if we stop their ship. We have the latest.


VAN SUSTEREN: More with Karl Rove.


VAN SUSTEREN: Next week, ABC is going to have a unique access at the White House to discuss health care. The president and first lady are going to be on "Good Morning America." Charlie Gibson is going to do "World News Tonight" from the White House, and then they're going to have Charlie Gibson and Diane Sawyer lead a discussion on health care.

I may be the only one in the media who's not grumbling about it. I'm not sure if it's -- you know, if there should be criticism of ABC or whether it's sour grapes among those who don't. But you know, at least we're going to see what the White House plan is. Do you have any problem with ABC having this access?

ROVE: I sort of do, Greta. And I understand it could be a close call for some people, and I respect you being honest about it. My problems are twofold. One is, look, this is not -- this is going to be a big, high- profile discussion about the president's issue on the president's home turf. I don't remember any network having a similar conversation about another president's agenda in the same way.

And You know, look, the president will win. I mean, this discussion is going to be in the East Room of the White House. It's like -- you know, it's like -- it's like having the junior...

VAN SUSTEREN: Except for...

ROVE: ... high basketball team...

VAN SUSTEREN: Except for...

ROVE: ... playing Los Angeles.

VAN SUSTEREN: Here's the two things.

ROVE: Go ahead.

VAN SUSTEREN: First of all is I confess I would love to do it. I don't get it. He doesn't talk to FOX. That's the first thing. The second thing is, is that, you know, we chased the first lady -- former first lady around the Middle East on breast cancer awareness. Now, that wasn't policy, but that was promoting, you know, a health program. But you know, we had a unique access, but anybody else who wanted to pay the freight, I guess, could have gone along, too, other -- there were other empty seats there. Other networks could have.

And the third thing is, is, you know, the next day, we're going to be doing everything the president hates because we're going to be going over every single thing he says and challenge it. We're going to have -- you will probably be on and everybody else, and we're going to have a chance to see what is it the president said. We finally get -- you know, we get it laid out, and then we can take a look at it and scrutinize it.

ROVE: Yes. I have two points to make. First of all, we'll be scrutinizing it the next day, but we won't be scrutinize that night in front of the big audience that he'll have having a primetime evening news program on a major network with a unique venue, the East Room of the White House. So he wins no matter what.

Second of all, this is my problem about it from the perspective of the president. He's devaluing the White House. The White House ought to be used for big things, like major addresses to the country and press conferences and heralding the best of America. He's turning it into a campaign backdrop. And eventually, it's going to diminish the White House, as it's going to diminish him.

I mean, he is in our face all of the time, and I'm not certain, from the White House perspective, that that's necessarily a healthy thing. I do know that it's devaluing the White House. And I also know that it's extraordinary. Tell me one other major network that during any other big battle that a president did a similar kind of a thing. Did they do it when Bush was working for the tax cut or No Child Left Behind? Did they did it when Bill Clinton was trying to pass NAFTA, or trying to pass Hillarycare? Did they do it for Ronald Reagan when he was trying to pass his tax cuts? Did they do it for Jimmy Carter in any of his initiatives? No, this is really unusual, and I think it's crossing a line.

If it's not crossing a line, it's getting comfortably too close to a line of where a news network becomes a cooperating partner of and an adjacency to the White House communications shop. And I think the presence of a former ABC reporter as the communicator-in-chief inside the White House on this issue also raises questions about how it ended up in the hands of ABC.

So look, I just think this is -- you know, from the White House perspective, I know why they want to do it. They've got a fantastic backdrop. They've got a huge automatic audience that's going to be intrigued to see the president holding forth in the East Room of the White House. It's going to be a winner for them. But whether or not it's in the best interest of journalism and whether it's also in the best interests of the Obama White House to devalue this incredible place that they occupy are two other questions, from my perspective.

VAN SUSTEREN: And you've just given me a lot to think about, so I'm going to chew on this one for a while, but -- the backdrop -- I'll take a look at it. You got me off -- you got me thinking about it.

ROVE: There we go.

VAN SUSTEREN: Karl, thank you. Thank you very much, Karl.

ROVE: Thank you, Greta.


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