This is a rush transcript from "On the Record," December 11, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Well, it's funny how things change sometimes, isn't it? Remember when President Obama said this?


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Health care -- people say, Well, you have this great health care plan, but how are you going to pass it? You know, it failed in '93. What I've said is I'm going to have all the negotiations around a big table. We'll have doctors and nurses and hospital administrators and insurance companies, drug companies. They'll get a seat at the table. They just won't be able to buy every chair.

But what we will do is we'll have the negotiations televised on C-Span so that people can see who is making arguments on behalf of their constituents and who is -- who are making arguments on behalf of the drug companies or the insurance companies.

And when we are negotiating for that plan, we are going to have C-Span on and you will see who's compromising the American people's interests.

Here's the only thing, though. I'm going to do it on C-Span. We're going to do it publicly.

But here's the difference. I'm going to do it all on C-Span.


VAN SUSTEREN: Well, clearly, that didn't quite happen. Karl Rove joins us. Karl, he didn't say it once, he said it -- I think we listed just four. He probably said it a few more times. And I guess the polite thing to say is that -- you know, that it didn't happen. (INAUDIBLE) a lie.

KARL ROVE, FORMER BUSH ADVISER, FOX CONTRIBUTOR: Yes. Well, I don't know if it was a lie. Certainly, I...

VAN SUSTEREN: What do you mean? I mean, like -- I mean, it's, like, I -- no one wants to call things like it is! But you know, this is so important to the American people. And with all due respect to both parties, we ought to be able to have it out in the open.

ROVE: Well, look, he's obviously changed his mind about it because, look, he said a lot of things during the campaign that have to do with health care that don't matter to him any longer. He said -- remember all that inspiring language about red state and blue state but we're United States, he was going to bring Republicans and Democrats together? There's not been one substantive meeting on health care in the House, the Senate, or at the White House, in which Republicans have been given a seat at the table for substantive discussions.

He might have brought them in once or twice to say, I'm going to work hard on this issue, but there's been no substantive discussion when he said, What do you want in here, and how do we make it work? Remember also, he ran television ads in battleground states -- it was the second most widely displayed ad in the entire campaign -- in which he called, quote, "government-run health care," quote, "extreme." So he said a lot of things during the campaign which he's clearly changed his mind on and discarded.

VAN SUSTEREN: All right, well -- and we can go back historically, every administration, we could find probably -- you know, and probably the one you worked in and every other one that's done that, too. But the thing that bothers me is that when something is so profoundly important, what's wrong with transparency? I really -- I -- you know, when he promised it -- and I don't know if he's -- you know, changing your mind -- I don't mind if you change your mind on it. You know, facts change, but I mean, like...

ROVE: But at least (INAUDIBLE) explain it!

VAN SUSTEREN: Well, yes, explain why we can't do it.

ROVE: Yes. Yes.

VAN SUSTEREN: And -- well, I mean, so -- I mean, is it naivete when he said it or is it just...

ROVE: Look, I did think it was naive because this is a very complicated undertaking, as we can see. We have a 2,000-page bill with 70 new programs in it and 1,357 instances where the secretary of Health and Human Services is directed to write rules. So it's a big, complex deal. And you can't necessarily show it on C-Span, but you...


ROVE: Well, because, look...

VAN SUSTEREN: Why, why, why not?

ROVE: Because people will be preening for the cameras. You do want - - you do want...


ROVE: ... this thing...

VAN SUSTEREN: We -- we can make fun of them. We'll make fun of all the ones that are preening, and you know, everyone'll take a shot at it, but at least it's -- you know, at least we can see what's going on.

ROVE: You know, though -- and look, I thought it was naive and not very smart to do it. But look, if you're sitting there in the back room, you do need the ability to say -- for people to say, Look, Mr. President, if you'll do this, we'll give way on that. And you put that on a television camera, and people are going to be very loath to do it.

VAN SUSTEREN: What do you mean, to see how the sausage is made?

ROVE: Yes. Sausage is not very -- very -- it...

VAN SUSTEREN: So -- so instead, we sort of just get it dumped on us, whether it's good or bad...

ROVE: No...

VAN SUSTEREN: ... it's just all of a sudden, at the end...


VAN SUSTEREN: ... of the day, it gets dumped on us!

ROVE: It ought to be a process in which the -- all the policy players have a seat at the table and can discuss things and at the -- and driven by a president who really does want to listen to people and bring them together.

Let me just give you an example. In 2001, George W. Bush had advocated a big tax cut. The administration sat down with Democrats, out of camera's view, and said, What is it that we need to do in order to make this thing more palatable for you? And over a course of weeks and months, they said, Slim it down from 1.7 to 1.3, get an expiration date on everything that's in there, and dial it up a little bit here and dial it down a little bit there. And that's exactly what ended up happening. And as a result, a quarter of the Democrats in the United States Senate voted for the Bush tax cuts in 2001.

And you know, it -- maybe that would have happened if there had been - - if it had been on television. But I think -- look, putting it on C-Span -- what he originally talked about doing would have probably hardened opposition, made it -- rather than having the sort of give-and-take that you can have in private conversations. Look, there ought to be more transparency in government, but sometimes presidential leadership means sitting down and saying, What is it that we need to do to help you come to support this?

VAN SUSTEREN: Well -- OK. Well, the Republicans tell me that they don't get a seat at the table. Of course, he went through this long list. He doesn't name Republicans. I talked to majority leader Steny Hoyer and he says, What are you talking about? Of course, they can. I mean, we -- you know, depending on...

ROVE: Foolish. I think that's foolish...

VAN SUSTEREN: Well, I'm saying that both sides...

ROVE: ... for him to say that.

VAN SUSTEREN: ... tell us completely different things...

ROVE: Well, look...

VAN SUSTEREN: ... which is why we like the transparency. Let us at least see who is and who isn't.

ROVE: Yes, look, the record, though, shows it. I mean, I repeat, let Steny Hoyer point to a single substantive meeting.

VAN SUSTEREN: He says it's the party of no.

ROVE: No, no, it isn't. It's a party that's got a lot of yesses. They're in favor of increasing the amount of money people can save tax free for out of pocket medical expenses. They want to have interstate sale of health insurance. They want to have risk pools at the state -- they want to allow small businesses to join together to pool their risk. They want to have transportability of health insurance so people can take it from job to job. They want to have a significant tax credit for people who are working but don't have coverage, make too much to get it under Medicaid, don't have enough from their employer to get it and don't make enough to pay for it themselves.

There are a bunch of things that Republicans have talked about -- and medical liability reform. Not a single one of the things that I've just outlined that Republicans have been advocating have the Democrats sat down and said, What's on your list and what can we put in this bill?

VAN SUSTEREN: And that's why I love the whole idea of the C-Span because I'd love to see the different questions and the give-and-take because we get told different stories by different sides. And I'd love to see that.

ROVE: Well, you know what? We do have a chance for C-Span to play a role here, and that is in committees and on the floor of the House. And in the floor of the House, what has happened is Speaker Pelosi has called for a closed rule which limits the amount of amendments and the amount of discussion there can be.

I -- there was not -- they rolled that bill through the House of Representatives with virtually no effort -- no attempt to make -- to give the Republicans a shot to amend the bill. They said, You got to come up with a vote to substitute, and that's it.

VAN SUSTEREN: All right. Well, never dull.

ROVE: Never dull.

VAN SUSTEREN: Karl, stand by. We're going to have much more with you in a moment.


VAN SUSTEREN: OK, hang onto your seats for this one. In an interview with USA Today, former governor Sarah Palin praises President Obama for his Nobel Prize acceptance speech.


SARAH PALIN, FORMER VICE PRESIDENTIAL NOMINEE: I liked what he said. In fact, I thumbed through my book quickly this morning to say, Wow, that -- that really sounded familiar because I talked in my book, too, about the fallen nature of man and why war is necessary at times and history's lessons when it comes to knowing when it is that we engage in warfare. And a couple of the other things he said were -- I thought, Wow, good. Those are nice -- a broad message, so broad that I just wrote about those. And a lot of Americans right now are getting to read also my take on when war is necessary.


VAN SUSTEREN: Karl Rove is back with us. And Karl, we always tease about -- the women talk behind the men's back here and we always laugh that the men -- sort of, like, I said it first, or I said it before you.


VAN SUSTEREN: Or I knew that first. And so we have a woman who's sort of doing that, too, but nonetheless, it's unusual that she and President Obama are on the same page on this one.

ROVE: Yes. Good. Good. And look, I think President Obama gave a good speech. I think he was absolutely right in describing terrorism as evil. I think he was absolutely essential to say that it was in the security interests of the United States and the world to confront terrorism. And I thought it was a good speech.

In fact, I jokingly said that I thought Mike Gerson, Bill McGirn (ph) and Mark Thiessen (ph), who had been President George W. Bush's speech writers, had enough personal loyalty to 43 -- President 43 that they wouldn't accept jobs in the Obama administration so quickly, but apparently they did -- jokingly.

VAN SUSTEREN: Jokingly, obviously. All right, one of the things that's sort of interesting is when we watch Governor Palin and people are saying, is she running, is she not running, and who knows what she's doing in that, but the focus on 2010. You've just written an op-ed -- or a piece in The Wall Street Journal. So what's the story on 2010?

ROVE: Well, first of all, I thought it was very smart of her to say, My focus is not on 201, it's 2010. And I hope that everyone else who is thinking about 2012 listens to that because Republican candidates in 2012 will help themselves if they don't spend their time worrying about 2012 and instead focus on 2010.

If you go around the country helping candidates, you'll gain points. If you spend your time pinging between Iowa and New Hampshire, so it looks like all you're concerned about is yourself, you'll lose points among grass roots Republicans around the country. So I thought it was a very smart move on her part.

But look, 2010 -- the Senate races will shape up early. Governor's races will shape up a little bit later, and House races shape up even after that. But because you're running it statewide and a Senate race, that starts to sort of shape up earlier. And the Republicans have had a stellar recruitment period, and I would not be surprised to see Republicans pick up between four to six seats next year and could conceivably pick up more. They're leading in five states with a Democrat incumbent.


ROVE: Well, Connecticut is an example, where the Republicans are in the front on that one. They're doing well in Pennsylvania. They're doing well in the open Democrat seat in Illinois. They're doing well in the open Biden seat in Delaware.

And the Republicans are in the seats that they've got to defend -- they're on the offense in places like Colorado, where they've got a very popular lieutenant governor and a couple of other candidates running, and they're doing well. Arkansas, where Blanche Lincoln is behind state senator Gilbert Baker (ph) by about 6 points -- I mean, the Republicans are showing an early strength that bodes well for the election next year.

VAN SUSTEREN: Which, of course, is important to the Republican Party based on the 60 votes in the U.S. Senate.

ROVE: Right.

VAN SUSTEREN: What about the House? How does the House look for the Republican Party?

ROVE: The House tends to shape up a little bit later, but we've had some big news in the last couple of weeks. Democrat congressman Moore (ph) of Kansas -- he has a suburban red district that is -- the Kansas City suburbs, Johnson County, Kansas -- announced his retirement. Congressman Tanner of Tennessee, the founder of the Blue Dogs, with, again, a conservative west Tennessee district, announced his retirement.

Then Brian Baird, who represents a seat in the southwestern corner of Washington state, one of the more volatile and sort of -- you know, it serves as a guide for what may happen. Brian Baird, a Democrat, announced his retirement. This is the seat that during the '90s, if the Republicans were in the ascendancy, they won it. If they were in the descendancy and the Democrats in the ascendancy, the Democrats won it.

He got hammered in August over the tea parties. In fact, he announced he would hold no more town hall meetings. And then what he did is he would only have these telephone calls where you could dial in and listen to him talk, but you couldn't ask questions. And as a result, he is -- he's retiring and this seat is up for grabs. This is, I think, an early indication that in particularly red district places, Republicans are starting to have some mojo and Democrats are starting to get worried.

VAN SUSTEREN: If -- let's say that you are a Democrat in a red district and you're really worried -- let's say in the Senate, and you're really worried you're going to lose your seat if you vote for the health care bill because you're really worried (INAUDIBLE) taken out against you and you're up in November. Does it ever happen that you go to the White House and you say, Look, if I lose my seat, can I be ambassador -- can I get an ambassadorship? I mean, is there any wheeling and dealing with the White House?

ROVE: I don't think so, but it clearly -- you know, politicians like to have a second career. So I think that in some instances, it's the people who never ask who get those kind of rewards. If they stay in there and are loyal soldiers and fight hard for the administration and do a good job and then get electoral defeat, then there's a natural tendency by the administration to try and pick up a few of those...

VAN SUSTEREN: Take care of them later.

ROVE: ... and take care of them to send a signal of, Look, you stand strong, you do the right thing, you loyally support the president, and if bad things happen to you, we'll do what we can.

VAN SUSTEREN: Karl, thank you.

ROVE: You bet.

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