The following is a partial transcript of the Nov., 12, 2006, edition of "FOX News Sunday With Chris Wallace":

"FOX NEWS SUNDAY" HOST CHRIS WALLACE: Well, the Democrats won back control of Congress on Tuesday, so what's their agenda for the next two years? Joining us now, the chairman of the Democratic National Committee, Howard Dean.

And, Governor, congratulations and welcome back to "FOX News Sunday".


WALLACE: For all the talk now from Democratic leaders about governing from the center, there is a lot of speculation from both the right and the left that eventually the Democrats are going to show their true colors and govern as liberals.

DEAN: Well, I'll tell you something.

WALLACE: Is that going to happen? If not, why not?

DEAN: First of all, I think the words conservative and liberal are now meaningless. You have a conservative president who ran up the biggest budget deficit in the history of America. I don't know what those words mean anymore.

I think we're going to go back to the kind of governing, the kind of policies that we saw when Bill Clinton was president. We're going to have — I think balanced budget is very, very important. National security is very, very important. We want to implement the 9/11 commission recommendations.

And then I think you're going to see some things that we care about like — traditionally care about, like fixing the Medicare thing, the minimum wage and so forth and so on. But I think you're going to see the main focus on balancing the budget, which Bill Clinton was — was a Bill Clinton legacy, and on strong security, implementing 9/11.

WALLACE: Do you feel, in a sense, that the American people have given you an audition...

DEAN: Yes.

WALLACE: ... over the next two years, you've got to show that you're up to governing and, frankly, governing from the center, not from the left?

DEAN: I think that's exactly right. I think we've been given an opportunity now, and the next two years is our opportunity to show that yes, we can govern, that the things the Republicans have said about us for the last 12 years are not true.

WALLACE: Such as?

DEAN: Oh, I'm not going to go through the "such as". You never repeat somebody else's mean things they say about you.

WALLACE: But I mean, that you're weak on national security?

DEAN: Yeah, all that stuff, right, exactly. I think we have an opportunity now to show that we're tough on defense, that we're tough on balancing the budget, that we're going to be sensible, that we do want a commitment to a social safety net and economic justice, but we're going to use — we're going to be careful and thoughtful and do this in a sustainable way.

WALLACE: Let's get more specific and talk about where Democrats are on some key issues. The Congressional Progressive Caucus — that's more than 60 members of the House, so it's a sizable group — has invited former Senator George McGovern to come speak to them this week and to present his plan to pull all U.S. troops out of Iraq by next June.

Now, you have said over the course of the campaign the American people want out of Iraq, we need a plan to leave. Is next June a realistic deadline?

DEAN: I suspect maybe not, but there will be lots of different kinds of plans, and the truth is the president still is in charge of military and foreign policy. We need to work with the president to get ourselves out of Iraq.

The vast majority of the American people believe the truth, which is that it was a mistake to get into Iraq in the first place. That the president does not believe, but we — everybody in America understands that we cannot stay — except possibly the president and Vice President Cheney, understands that we cannot stay in Iraq forever.

We can't have a stay-the-course mentality. We need to get out of Iraq. The question is how we can do that. We hope to work with the president to bring our troops home.

I think by establishing an arbitrary deadline of next June I think is probably not the way it's going to work, but we need — this cannot be left to the next president, as George Bush once famously said.

WALLACE: Let's talk, though, about the terms for leaving. The president still talks about victory in Iraq, and that seems to have changed his definition of victory, but he at the very least is certainly talking about not allowing Iraq to become a safe haven for terrorists.

What is the Democrats' bottom line? What is it that you must have before we leave Iraq?

DEAN: I think that we need to tell the Iraqi people that we're leaving, because I think, frankly, they are playing political games over there to see who can get into power on the backs of our troops.

Our troops are over there trying to keep order. They don't have an obligation to keep order. I saw a chilling story in The New York Times this morning where an Iraqi was appointed the head of the fifth Iraqi division and came to our general who was working with him saying this is a list of people I want arrested.

Our general said well, where's your evidence. He said we just got this list from Baghdad. And they were all the Sunni sheiks and people who our folks were working with to try to tamp down the insurgency. That is a chilling proposition.

It is not our job to prop up an incompetent regime, and this regime in Iraq looks more and more incompetent as time goes along. So it is our job to keep order. We can do that.

WALLACE: Is it our job to prevent a safe haven for terrorists in Iraq?

DEAN: Yes, and there's a way to do that, and the Democrats have been talking about it for a year.

And if you didn't have a Republican president that we had to work with, my guess is that we would get out of Iraq in a measured, thoughtful way and leave a contingency of special operations forces in a friendly country so that we can go in and deal with terrorist threats wherever they might appear in the Middle East.

WALLACE: But beyond that, beyond preventing the safe haven, is — what ends up in Iraq is not our business?

DEAN: It is our business. The problem is the president had no idea what he was doing when he got us into it and therefore the consequences are going to be bad no matter what happens.

I mean, the worst thing that can happen — and this may well be the outcome — is that Turkish troops end up in Kurdistan, because the Kurds are fomenting terrorist violence in eastern Turkey. That is a real possibility. The PKK, which is the terrorist organization, the Kurdish terrorist organization, now is operating out of Kurdistan. That's a very serious problem.

If we hadn't gone into Iraq, that wouldn't be a serious problem. Turkey is one of our most important allies. There are all kinds of unforeseen consequences to this policy. Our problem is we've got to cut our losses and figure out how we're going to get our folks out and still defend the United States of America.

Keeping 140,000 brave Americans in Iraq is not making America safer. It's very clear that it's not made America safer. And the American people just voted to say send some folks in there who are willing to be tough and smart about how we defend the country.

WALLACE: But cut our losses is what the message you get from this election is.

DEAN: Yeah, don't stay in Iraq. We're not going to put up with terrorism in Iraq or anyplace else, but we can't keep 140,000 brave Americans in Iraq indefinitely. Did not we learn this lesson in Vietnam?

WALLACE: Let's talk about taxes. Here's what former Treasury Secretary Robert Rubin, one of the leading Democratic voices on the economy, had to say this week. Here it is.


ROBERT RUBIN, FORMER TREASURY SECRETARY: You cannot solve the nation's fiscal problems without increased revenues.


WALLACE: He says that to deal with what he calls the deep threat to the economy, you've got to raise taxes.

DEAN: The first thing, Chris, is that I think that both Speaker-to-be Pelosi and Majority Leader Harry Reid have said is that we won't raise taxes on the middle class and that we will — we will — reinstigate something that was there in the Clinton administration called pay-go, or pay as you go.

That is, no one in Congress may propose a tax cut or a program increase without saying where the money's going to come from. OK? That's a very good start principle.

Now, Bob Rubin, of course, is one of the preeminent economic authorities in the country, and he's right. But the revenues will not come from the middle class. In fact, many Democrats would like to give the middle class a tax cut. I think we have to be careful of that because I think, frankly, the budget deficit has been understated by about $100 billion.

None of the Iraq money that we're spending appears in the budget deficit because it's all on special emergency off-the-books stuff, which is a chicanery, frankly. So if there's going to be new revenue, which I think Secretary Rubin is correct about, it will probably come from rolling back special tax breaks that the Republicans gave to oil companies had HMOs and so forth. That's a good place to start.

But the Democrats are — my party is going to have to be very careful about spending. There are some things we want to do — cutting interest rates so kids can get to college easier — but we have to be very careful. We can't do everything.

WALLACE: Let me ask you about another thing, though. You talk about rolling back some of the tax cuts from the Bush 2001-2003.

DEAN: Tax cuts that the...

WALLACE: I understand.

DEAN: ... oil companies got.

WALLACE: I want to get to another...

DEAN: Right, OK.

WALLACE: Ever since the Bush tax cuts were passed in the early part of this administration, Democrats have complained about a bailout for the rich.

You're in control now in the House and the Senate. You finally have your majority back. I know there are a lot of people who voted for Democrats who would say raise taxes on the wealthy.

DEAN: Well, you know, I don't think we ought to use that kind of rhetoric. The truth is that — this is a true story — 18 percent of Americans think they're in the top 1 percent of the income brackets, and the next 18 percent think they're in the top 10 percent.

If you start to — I mean, the president used this, I think, with some effectiveness in the campaign, even though he didn't win, which is claiming we were going to raise taxes. If you start talking about raising taxes on the wealthy, most Americans assume you're going to get to them sooner or later, and a lot of them think they are wealthy, even though they're making $100,000 a year, which sounds like a lot of money, but try putting two kids through college on that.

So, look. I'm not going to make policy for the Congress. That's their job. They're going to do what they have to do. But my advice would be let's not talk about individual tax increases right now. Let's look to the — where the fat really is, enormous subsidies to oil companies who don't need it.

If you're making $10 billion a quarter, you don't need subsidies. They got them from the Bush administration. We'd like to at least help balance the budget by getting rid of those.

WALLACE: The election results were barely in when a top Democratic strategist, James Carville — you can see where I'm headed with this — a former adviser to Bill Clinton, started going after you. And let's take a look at what he had to say.

"The RNC —" this is from Carville — "The RNC did a better job than the DNC —" that's the Republican National Committee and the Democratic National Committee, "— this year. He says the House and Senate Campaign Committees made up for your shortcomings and that Congressman Harold Ford should replace you as chairman of the DNC.

First of all, what do you make of this criticism, and do you have any intention of stepping down?

DEAN: I have to say I get a laugh out of that one. Here we have — let's leave the federal races aside, because the DCCC and the DSCC did do a wonderful job. But the truth is we got six additional governors. We got nine additional legislative chambers. New Hampshire now has a Democratic house and senate for the first time in a century.

We did great. And I think the time really has come now, now that we're in power, at least in the Congress, to pull together, to be unified. We've got a lot to do in the next two years. We've got to elect a Democratic president, and so...

WALLACE: Do you have any intention of stepping down?

DEAN: No. I talked to Harold last night, and he has no — he doesn't want the job. This is some kind of inside the Beltway silliness.

WALLACE: Finally, I'd love to do a triple speed review of the campaign. I'm going to mention a couple of things. I want one or two sentences from you. It's a lightning round on steroids. Otherwise, we're going to hit the buzzer.

DEAN: OK. All right.

WALLACE: Karl Rove as the master strategist.

DEAN: You know, I would never diss Karl Rove, even though I don't care for his brand of politics much, because he has a series of wins. This just didn't happen to be one of them.

WALLACE: John Kerry's botched joke.

DEAN: Overstated.

WALLACE: You didn't put him in the cellar? The party didn't put him in the cellar for the last week?

DEAN: No, no, no. John Kerry did a lot for this party while we were trying to win back. He campaigned like crazy, raised a bunch of money, gave us a bunch of money. I'm not going to go after John Kerry, and I don't think most Democrats will either.

WALLACE: The political effect of the president getting rid of Don Rumsfeld the day after the election rather than two months before.

DEAN: I don't quarrel with the timing, because only the White House folks can know about that. But that was a really important move. Don Rumsfeld was incompetent, and he had no business being there, and I think the president hurt the country by hanging onto him as long as he did.

WALLACE: Wouldn't it have been a lot harder for the Democrats to win if he had been gone in the summer?

DEAN: That I can't handicap, because it's always woulda, coulda, shoulda, looking back on things. But the fact is Rumsfeld should have been gone two years ago.

WALLACE: The Mark Foley congressional page scandal — its political impact.

DEAN: That did hurt them. You know, we got a third of the white evangelical Christian vote. We got record numbers of African- Americans and Hispanics voting for us.

People are turned off by hypocrisy, and what was really bad about the Mark Foley scandal was not chasing after the pages, although that was bad enough. It was the Republican leadership circling the wagons and caring more about their own political rear ends than they cared about that kid and his family. That really hurt them a lot.

WALLACE: And finally, Barack Obama's experience to be a presidential candidate in 2008.

DEAN: Look, Barack has done an enormous amount for the party. I don't comment on 2008, because I really do have to be the referee and have to be entirely neutral, and I'm going to continue to be entirely neutral.

WALLACE: We're going to have to leave it there. Governor Dean, thanks again for coming in.

DEAN: Chris, thanks so much for having me on.