This is a rush transcript from "On the Record," February 23, 2010. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Governor Arnold Schwarzenegger live, and right here, right now with us in Los Angeles, California. Good evening, Governor.

GOV. ARNOLD SCHWARZENEGGER, R - CALIF.: Good evening. How are you?

VAN SUSTEREN: I'm very well. All right, Governor, the stimulus bill -- you're a Republican, and you may be one of the few Republicans, maybe the only one, who seems to like the stimulus bill. Do you like it?

SCHWARZENEGGER: Well, first of all, I think that not only I like it, but I think there's a lot of Republican governors that like it. But I think that it is probably, you know, more Republican to say, We don't like the stimulus bill. And then many times, they go out and they get the checks. They're very happy about it in their press conferences they show off what they have accomplished and how many jobs it creates and all those things. But they don't connect it always to the stimulus. They just say that's something that they have accomplished.

So I think that it really depends how you look at it. I think that it has done great things for the state of California. I think it was very helpful when you get $50 billion over a period of two years and tax incentives of $30 billion, and you create those jobs at a time when people are really struggling for jobs. And we have really kept or created 150,000 or so jobs here in California.

So I'm happy about it, and I told this to the president and I tell this to the world that during a time of crisis like this, anything is helpful.

VAN SUSTEREN: All right, now, let me ask you about the jobs. You say 150,000 jobs you've gained here in California from the -- from the...

SCHWARZENEGGER: Kept or gained.

VAN SUSTEREN: Kept or gained.


VAN SUSTEREN: I looked at some numbers in California. In the year 2009, there was a 580,000 loss. I mean, of course, everyone in the country's lost. I don't mean to suggest this is an easy problem, by the way. But that leaves -- with the 150,000, that leaves a net loss in this state alone of 430,000 jobs. So I'm wondering, the stimulus bill may have helped the 150,000, but are we bleeding in so many other areas that this may not have been the right mechanism to sort of stop that bleeding?

SCHWARZENEGGER: Well, look, this is a debate that can go on from here to eternity, what is right and what is wrong. I mean, there's many ways of approaching how to bring the economy back. I think it was very helpful for California. I think that the 150,000 people that kept their jobs or got a job, when you talk to them, they, I guarantee you, are very happy that they are able to bring home money now, that they're providing for the family, that the can make the house payments, apartment payments, pay for the kids at school for their homework material and all those kind of things.

I think that having a job is just such a fundamental and important thing because you feel productive. You make money. You don't feel like a loser that you've lost your job, and all those kind of things. I think it has been terrific. And you know, like, it has been very helpful for us.

VAN SUSTEREN: And I don't disagree, but I'm just sort of curious, I mean, like, we've still got the 430,000 just last year, 430,000 lost. That's the net loss above and beyond that. And the one thing I'm thinking about is, is, you know, how do we make it so it's not just 150,000? Maybe if we had done a different route, it wouldn't be 150,000 jobs we'd be talking about in this state but 250,000 because one of the concerns always you have in this state is whether business is being run out the state because it's a very expensive state to live in.

SCHWARZENEGGER: Two different subjects. I think that we have to have our own economic stimulus package. That's why I make that very clear in my "state of the state" speech that we want to have a home buyer's tax credit, for instance. We want to go and exempt green technology manufacturing equipment from the sales tax. We want to go and cut through all the permitting process to get shovel in the ground.

We want to do all kinds of things like that in order to stimulate the economy and get people back to work, including the people of California have, you know, voted on $42 billion of infrastructure bond money, and now it has to be appropriated. So the key thing is for us to appropriate that money and get it out as quickly as possible because every billion dollars that we are investing in California's future is construction jobs. And that's what we need right now because our housing market crashed two years ago, and so that is why we have such an enormous unemployment rate, especially in the construction business. So we want to get people out there and get them to work as quickly as possible.

But remember that no matter what you do, you cannot turn around from one day to the next the world economy. The world economy has fallen, the whole world. If you read newspapers from Germany, it's the same story as reading a newspaper from California. If you're reading a newspaper from South Africa, it's the same story. If you read a newspaper in Japan, it's the same story. Everywhere, they are struggling and they're beating up on the politicians because of it, and so on. So it's the same story everywhere.

VAN SUSTEREN: I -- I know...

SCHWARZENEGGER: The key thing for us is that we do everything that we can do in our power, as a state and also as a federal government.

VAN SUSTEREN: I don't -- I mean, I don't think people are -- you know, deny that it's -- that it's hit the skids. I think the difference is, how do we rectify it. How do we correct it. You talk about construction here in the state of California. What I read, and correct me if I'm wrong, is that there's a large number of undocumented people who make up the construction industry here in California. I also read that California has an enormous illegal immigration problem. To what extent does is that -- first of all, is that true? Secondly, to what extent does that create an additional burden on California and its chances for recovery?

SCHWARZENEGGER: Well, as you know, we have strict laws that you can't hire anyone that is here undocumented in the state...

VAN SUSTEREN: You can or cannot?


VAN SUSTEREN: But there's...


VAN SUSTEREN: ... certification? Do you have to certify?

SCHWARZENEGGER: Well, there are some people that really are very closely watching that, and others are not. So I'm sure there's people that break the law, and all those kind of things. But the fact of the matter is, yes, it does have -- create an extra burden on our economy and also on our budget situation.

But at the same time, that is not the reason why we have an economic downturn, you know, worldwide. I mean, there just was a crash that happened worldwide. It had an affected on the different countries all over the world. And now the key thing for us is to slowly rebuild, but it's not going to be the comeback as we have seen in the last recession. This has been the biggest recession in history, I mean, since the Great Depression, literally. And I think that that -- to pull out of that will take some time. I would say that at least in the next two, three years, we will be struggling getting back where we were.

VAN SUSTEREN: One of the things that Alan Greenspan said today is that it was an unbalanced recovery, that people who are on the -- you know, the high income earners can get good stocks and buy good deals right now. But it's really the people at the bottom who are immensely hurting. And I'm curious, is immigration a factor in this state that's creating -- I mean, what would you do about immigration, illegal immigration?

SCHWARZENEGGER: Well, I've said this many times, that we need immigration reform...

VAN SUSTEREN: What would you do?

SCHWARZENEGGER: ... because to solve this problem -- well, we've got to go and make a decision so that people can come to this country legitimately, rather than having quotas there, so that -- because we need the farm workers. We need the construction workers. We need to have people do certain jobs that maybe that we cannot fill otherwise.

Watch Greta's interview with Gov. Arnold Schwarzenegger

So I think we ought to provide that. We ought to have, for instance, immigration reform when it comes to students. I think it's irresponsible in the way to have, you know, our students from all around the world come to our country, study, get their great education. Here we have the best university system in California, in the world, without any doubt. And then send them...

VAN SUSTEREN: There are some states that may disagree with you on that, but...

SCHWARZENEGGER: Trust me, you can look at any -- any kind of...

VAN SUSTEREN: I'm teasing you!

SCHWARZENEGGER: Yes. But the problem is that after four years or after six years, or whenever they're finished with their studies, we send the students back. I think they should stay here. They should work here. And they should take that knowledge that they have gained in California and put it to good use for California if they're studying here. So there's kinds of things like that that we ought to do in immigration reform, and it ought to be done now. We should not every two years say, Oh, this is not the right time. It is an election year. I think we should postpone it and go next year. It will never get done this way, and we always will live in this kind of a chaos. This is living in denial, basically, like ignoring that we have this major problem and people are coming across the border. Not as much right now because our economy is down, so we don't have as many illegals coming over. But the fact of the matter is it's a problem, and I think that we ought to solve it.

VAN SUSTEREN: You've been critical of the tea party activists. You think that's just sort of -- or not critical, but I -- I think that -- I don't want to get -- mischaracterize it, but that you think that this is not a serious movement or a movement that's going to last?

SCHWARZENEGGER: I never said that.

VAN SUSTEREN: OK. Good! That -- all right...

SCHWARZENEGGER: Let me just make it clear what I said.

VAN SUSTEREN: I realized that I might be misquoting you.

SCHWARZENEGGER: No, no, no, no.


SCHWARZENEGGER: It's that it can't be, you know, kind of mistaken of what I said. What I said was that the tea party is an expression of anger and of disappointment. The people are disappointed of the way our -- the financial situation is in California and in America. They're disappointed of the unemployment rate. They're disappointed of the housing crisis. They're disappointed that government is not acting fast enough, and all of those kind of things.

But let's not forget, as I've said earlier, the same anger they're, you know, expressing also in Germany. The same anger they're expressing in Austria and Italy and all over the world. So, I mean, they don't have tea parties per se, but they have also a lot of frustrated and angry people and disappointed people, and so on. And they're in (ph) crisis because of that.

So what I'm saying is, is that the tea party is an expression of anger and disappointment. People meet. They talk about it. What can we change? How? And it's all healthy and it's all good. But I'm just saying they're not going anywhere with it because nobody is coming up and saying, Here's our candidate, here's our solution, here's what we're going to do, and have a whole policy debate over the various different issues.

So this is why I think, in the end, when the economy comes back, I think that the tea party will disappear again. It will, you know, twinkle (ph) and disappear, and that will be it. So that's exactly what I feel about it.

VAN SUSTEREN: How -- I mean, the people who are angry and the people who -- if there is this uneven recovery, and I think there is an uneven recovery -- we still have high unemployment. You have over 12 percent, I think, here in the state. How long should the people be willing to sort of wait before there's sort of admission that the stimulus didn't work or did work? I know that you're satisfied with it and you think it's on the road to recovery. But someone who's unemployed is probably sitting there, thinking, like, Well, I don't think it is. When is this recovery going to start in earnest?

SCHWARZENEGGER: Well, to give you an example, in 2008, we passed redistricting reform. Do you see any effect of it today in California? Absolutely not. It's two years later and we still see no effect because the district lines will be drawn in 2010 now and they would have an effect maybe in 2012, a little effect. In 2014, then you will see more effect. You don't go and have changes like that and have an effect from one day to the next.

VAN SUSTEREN: So give me an idea -- so...

SCHWARZENEGGER: It doesn't happen. Sometimes those things take a long time. There's people that have treatments for an illness over a period of a year, of two years and three years. So you can't expect (ph) and just say, Those doctors are all no good. Forget about it. Go to a different team because they haven't helped, and so on. There's certain things that take a long time.

To move government, to move this big thing, it's like the Titanic. You know, you see the iceberg there, so sometimes you cannot move fast enough. In better time (ph), you have, you know, some movement and people change their minds and then something else becomes very important. I think that the most important thing, no matter what state you're in, or if you're in charge of the federal government, you got to concentrate on one thing and it is creating jobs and bringing the economy back. That's the most important thing right now.

All the other stuff, people don't even want to focus on it. We can talk about it and I think it's important to talk about. But I think people want to see action. And I think what we have to do is -- and that's why I say every governor in a state, if you're a Democrat or a Republican, every Senator, every congressman, everyone out there in politics has to work together to get the economy back.

What is unhealthy is to fight each other continuously because it does not make the country move forward. If you have all the debates, you have all the arguments, maybe it's good for politics, but it is definitely not good to get people back to work and to get the economy going.

VAN SUSTEREN: All right, you mentioned something unhealthy, so I've got to get to this. Tomorrow is a summit, talking about health, has to do with a word that's politically incorrect, and I know I'll get a lot of mail when I mention it, but obesity, which has enormous health consequences. And you are championing it here in California, and President Clinton's going to help you, as well?

SCHWARZENEGGER: That's right. He and I formed a partnership already two years ago. He's interested in children's issues and in obesity issues, and so am I. Of course, for me, it goes back to the time I grew up in Austria because I was always, you know, kind of groomed to be an athlete and to eat well and to eat fresh vegetables, to drink my milk, and all of those kind of things. So I had a different upbringing than a lot of kids have in America.

Here you are exposed to the junk food. You're exposed to the fast food chains. You're exposed to milkshakes that are a thousand calories each. You're exposed to all the sodas and the stuff that, you know, you see every day, and now watching -- sitting in front of television and being a couch potato and not going out and getting enough physical activities. So this is a totally different environment, but I have always been interested in training, staying fit, and you know, being on a good diet and watching what I eat and eating fresh fruits, and stuff like that.

VAN SUSTEREN: But people hate when you say the word "fat." And it is, indeed, true that, you know, weight can lead to heart problems, diabetes. You know, it's something -- you know -- and people say, Well, it's my own business. Yet it's so profoundly important (INAUDIBLE) health costs.

SCHWARZENEGGER: I think that people maybe say that, but they know. People are a lot of times in pain when they are overweight. I don't think you have to call them fat. I think that is maybe a derogatory way of calling it. I think it's -- "overweight" will do the job or "obese" will do the job, even though some people don't like "obese." But that's OK. That's not really the issue.

The issue really is, is that we've got to go and make -- give people the chance to get healthy. And so many times, we don't have the access to great exercise equipment in the schools. We don't have the access to gymnasiums or the sports fields where they can do fitness. There's no access to a physical fitness coach or to a physical fitness -- physical education teacher in many of the schools.

There's not even access to a water fountain or to fresh water when they eat lunch. Forty percent of the schools don't even have that, so the kids naturally want to go and get a soda. If they would provide at least the water, then they -- you can go and say, Well, you can't get the soda, but you can get the water. But you don't even have that in 40 percent of the schools, or to have a bicycle path where people can ride and get some exercise or the -- you know, like we just passed very stringent laws, very tough laws in California about menu labeling, about banning these particular foods...

VAN SUSTEREN: Do you believe those menu labels?

SCHWARZENEGGER: Oh, absolutely.

VAN SUSTEREN: You do? I mean, because I see...

SCHWARZENEGGER: Absolutely. I think...

VAN SUSTEREN: ... it when it says 400...

SCHWARZENEGGER: ... it helps me...

VAN SUSTEREN: It helps me. It disciplines me. But I don't know -- how do they come up with it in some of these places?

SCHWARZENEGGER: Well, you do the studies and you find out. Labs can tell you.

VAN SUSTEREN: Do you trust them?

SCHWARZENEGGER: Well, you have to trust it, at one point. You can't always run around and just not trust anybody. But I mean, I think it helps. And it helps me have access to those things. It helps when people get education. And I think it's also important that we always talk about, you know, that it is a joint effort to get -- to solve this problem. The parents have to do a better job with the parenting, in what they give to the kids, what kinds of foods they give them. The kids have to be part of this partnership. The schools have a big responsibility to provide physical education. And we are passing laws now to have vigorous exercising in those physical education classes. And you know, those are the kinds of issues, and to make exercise available and to make bicycle paths available. All those things...

VAN SUSTEREN: All right, let me...

SCHWARZENEGGER: ... that could become available...

VAN SUSTEREN: ... quick question. We've only got a minute left. Did you exercise today? And what did you eat today?

SCHWARZENEGGER: I exercised this morning for almost an hour. I did the lifecycle, cardiovascular training, and so on. And tonight when I go home, I do my weight training because I do every night a half an hour weight training. And what did I eat today? I didn't have really breakfast. I had just a lunch, and I had a soup and a salad.

VAN SUSTEREN: I'm not going to tell you -- I got -- I sat on an airplane for five hours, and I'm not going to tell you what I ate today, nothing but junk. But it is true. It's -- you know, our diets are -- you know, are so important to our wellbeing and even to health costs.

SCHWARZENEGGER: It's very important. And even there, they draw a political line, may I remind you, because there's the conservatives to say that you're responsible for yourself. And then there is the Democrats who say, No, government is responsible. But I think, as I say, it's a joint responsibility. You're responsible yourself, and also we are responsible because we got to provide and make available things for people to stay fit and to get fit. That's the bottom line. So everyone has to work together.

VAN SUSTEREN: All right, well, the summit's tomorrow, and I know you've been working on this for a long time and I know it's important. And the first lady, as well, is focusing on it. A lot of people...

SCHWARZENEGGER: Maria is very much into the health thing and the obesity problem and making sure that there are gardens are created in all the schools so the kids...

VAN SUSTEREN: She's been working hard on it, too.

SCHWARZENEGGER: ... learn early on with fresh vegetables and fruits and so. And like I said, we all work together. Mrs. Obama, like you said, is starting a fitness summit now and cruising around the country and talking to kids and through the parents about this problem. So I think everyone has to work together on this.

VAN SUSTEREN: And we can all start tomorrow.


VAN SUSTEREN: All right, governor, thank you. It's always nice to see you, sir.

SCHWARZENEGGER: Absolutely. Thank you.

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