Transcript: Karl Rove, Chris Van Hollen on 'FNS'

The following is a partial transcript of the Dec. 2, 2007, edition of "FOX News Sunday With Chris Wallace":

"FOX NEWS SUNDAY" HOST CHRIS WALLACE: Well, with the Iowa caucuses now just one month away, we've brought in two of the sharpest minds in American politics to debate how the coming campaign will play out — Karl Rove, the mastermind behind President Bush's victories in 2000 and 2004, and Congressman Chris Van Hollen, the man in charge of keeping Democratic control of the House next year.

And, gentlemen, welcome back to "FOX News Sunday." Let's start with something I think that's familiar to both of you, and those are public opinion polls. When voters are asked the generic question, "Who do you favor for president," they pick the Democrat by a margin of 43 percent to 34 percent.

And when asked which party they want to control Congress, they pick the Democrats again by nine points.

Mr. Rove, how do you turn what sure looks like a strong Democratic trend for 2008 into a Republican victory?

FORMER PRESIDENT BUSH ADVISER KARL ROVE: Yeah. Well, if you look at the polls that match the leading Democrat against leading Republicans, the margin that the Democrats enjoy disappears or gets very, very narrow.

And similarly, generic ballot matters a lot. In 1994, the Republicans had a six-point advantage on the generic ballot and picked up 60 seats in the House. Last time around, the Democrats had a generic advantage on the ballot of 13 and picked up 30 seats. So it does have an impact.

And the question for both parties is going to be what do they do between now and next September, October and November in order to demonstrate a positive and optimistic agenda that causes people to say, "Well, you know what? I want that person who represents that party in my district to receive my vote."

WALLACE: And what from the Republican point of view would be the positive optimistic agenda?

ROVE: Well, first of all, taxes and spending, because this current Congress has got a lousy record on both.

The Republicans, though, also have to begin to deal in a very visible and vocal and powerful way with issues that people care about and talk about around the kitchen table like, "What about the cost of my health care? How can my kid go to college? What do we do to create more jobs and energy in America?"

And I'm confident, seeing our candidates around the country and seeing our presidential candidates, that there's a willingness to engage in these issues which heretofore Republicans have got good ideas about but have not been willing to talk about.

WALLACE: Congressman Van Hollen, have you heard anything from Mr. Rove there that scares you?

DEMOCRATIC CONGRESSIONAL CAMPAIGN COMMITTEE CHAIRMAN CHRIS VAN HOLLEN, D-MD.: No, I haven't. Look. The polls clearly show that people prefer Democratic leadership around the country. They prefer Democratic leadership in Congress to Republican leadership in Congress.

And it's pretty clear that they prefer and are more confident in the Democratic positions on key issues important to them on both domestic policy, national security and foreign policy issues. We continue to have the political momentum coming off the midterm congressional elections.

You see Republicans retiring from Congress in droves. Senator Lott and Denny Hastert, former speaker, couldn't even wait around to finish their terms. You've got another 17 Republican House members that are retired.

We have a large financial advantage over the Republican Committee in terms of what we have to support our candidates. That's because of the fact that we have a lot of energy on our side.

And when I think our Republican colleagues thought we would be playing defense going into these next elections, in fact, we've been very much on offense. We're not just consolidating our gains. We've put more than 40 Republican seats in play.

WALLACE: I'm going to let you respond to that, but I'm going to throw one other thing into the mix, Mr. Rove.

Let me show you another set of polls that we have. The president's job approval is now down to 36 percent. But Congress' is even lower, as you can see there, 26 percent.

So — and let me start with you, Mr. Rove, and you can respond to this and that — which is a bigger burden, Mr. Bush for the Republicans or the Democratic Congress for the Democrats?

ROVE: Well, the Democrat Congress will be on the ballot. President Bush won't be. And look. They've got momentum. I grant you that.

They have momentum that went from very high ratings immediately after the 2000 elections to that record low number today.

And it's because they have proposed big taxes, big spending, have failed to support our troops in the war, are undermining our intelligence collection efforts, have shut the Republicans out of any meaningful discussions to move the country ahead as they had promised to do during the campaign, and have demonstrated an utter lack of fiscal responsibility by recommending $205 billion in additional spending over the next four years and two of the biggest tax increases in American history — the repeal of the Bush tax cuts, which is over $1 trillion in tax increases, and then a tax reform plan from the Ways and Means Committee chairman which is $1 trillion in additional taxes.

That's why they have gone from very high to very low. That momentum is going in the wrong way. Now, you may have more money than the Democratic Congressional — than the Republican Congressional Campaign Committee today, but the RNC has more money than the DNC.

And let's see where the individual candidates are when it really matters next September or October. And I'm confident...


ROVE: And I'm confident the Republican candidates are going to have enough money to make enough damage out of this record to make gains in the Congress.

VAN HOLLEN: Look. Look. The fact of the matter is the new Congress has done lots of good things. We understand there are a lot more things to do.

We have made college more affordable. I know they don't seem to apparently care about that on the Republican side. They cut federal support for college by $13 billion when they were in charge. We did something.

We increased the minimum wage. We've finally enacted the 9/11 Commission recommendations. We've done a host of things. We are cutting taxes for the middle class. They left hanging — the Republican Congress left — a tax tsunami hanging over the heads of the American people.

Now, here's what's going on on those numbers. The fact of the matter is people are frustrated that we haven't made more change. We haven't been able to enact the SCHIP legislation, children's health.

We haven't been able to enact stem cell research to look into cures for diseases that plague every American family. And most of all, we have not been able to change direction in the president's disastrous policy in Iraq.

But the American people are smart. They understand who is blocking change in those areas. They see that the president vetoed SCHIP, that he vetoed stem cell research, and that he vetoed a change in direction in Iraq.

The president and his Republican allies represent the status quo. The American people want to see a change in direction. And the frustration with Congress is that things haven't moved more quickly, but people understand who's responsible.

WALLACE: Let's — because there's a lot of stuff out there, so let's hone in on a couple of things, and let's talk, first of all, about the economy, spending, taxes.

Congressman, all the Democratic presidential candidates, as Mr. Rove points out, talk about letting the Bush tax cuts expire. The Democratic chairman of House Ways and Means, Charlie Rangel, is proposing an income surtax on couples making more than $200,000 a year.

Won't people like Karl Rove be able to say, as they've said over and over again, your party will raise taxes, his won't?

VAN HOLLEN: We will not raise taxes, and if you look...


No, no, no. If you look at...

ROVE: Oh, no, no, no, no. Wait a minute.

VAN HOLLEN: Wait. You tell me — wait, wait, wait, wait. Karl, wait. No, no, listen. The question was to me.

Look. The Joint Tax Committee made it very clear — they did an assessment of the Rangel proposal, and it doesn't raise one penny in revenue. What it does is say, "We're going to give broad middle America a tax cut." That's what it says.

ROVE: Well, it raises...

VAN HOLLEN: We're not going to — we're not going to...

ROVE: ... $1 trillion in taxes...

VAN HOLLEN: ... we're not going to spend — no, but it doesn't...

ROVE: ... on people...

VAN HOLLEN: doesn't increase the...

ROVE: And look.

VAN HOLLEN: ... deficit one penny.

ROVE: Oh, come on. Come on, Chris. Come on.

VAN HOLLEN: Karl, that's the number from the...

ROVE: I'd be happy — I'd be happy to answer your question...


ROVE: ... if you'll give me a chance.

VAN HOLLEN: Well, the question came to me. And the fact of the matter is...

ROVE: Well, you've asked a question to me, and...

VAN HOLLEN: ... under the Rangel proposal....

ROVE: ... I'd be happy to answer it.

VAN HOLLEN: ... which is...

ROVE: You have — your party is...

WALLACE: Wait, wait, wait, wait. OK. Let's talk — wait.

Congressman, I think you made your point. Let me let him just talk about — I promise you'll get another shot.

ROVE: Your party is in favor of — your chairman of your committee said there's not a single one of the Bush tax cuts worth preserving.

That means that everybody in America who has a child is going to pay $500 more when that child tax credit goes away, $500 more per child. That means the bottom rate, which is 10 percent, is now going to go to 15 percent.

It means that all the small tax breaks — small business tax breaks are going to go away and the average small business is going to pay $4,000 more a year.

And in addition to that, your Congress this year has not been able to take care of fixing the AMT. We have 25...

WALLACE: That's the Alternative Minimum Tax.


ROVE: We have 25 — we have 25 million Americans who are at risk of paying $2,000 more a year in taxes.

WALLACE: All right. That's it.

ROVE: We had the IRS...

WALLACE: Congressman...


WALLACE: Wait, wait, wait, wait.

Congressman Van Hollen, you're up.

ROVE: ... the IRS say that $87 billion in tax refunds are waiting for you all to act.

VAN HOLLEN: And why is that? It's because the Republican Congress...

ROVE: Oh, come on.

VAN HOLLEN: ... left town with a...

WALLACE: Wait, wait. Let him finish.

VAN HOLLEN: ... a tax tsunami...

WALLACE: Karl, let him finish.

VAN HOLLEN: ... a tax tsunami about to crash down on the heads of the American people. The AMT is going to hit 24...

ROVE: And you've had a year to fix it.

VAN HOLLEN: ... 24 million...

ROVE: You've had a year to fix it.

VAN HOLLEN: ... and we will have it fixed before the end...

ROVE: We have proposed — we have proposed...

VAN HOLLEN: You left...

WALLACE: Wait, wait, wait.

Mr. Rove?


WALLACE: Wait, wait.


WALLACE: Mr. Rove?


VAN HOLLEN: Listen up here. Listen up here just for a minute. You guys spent six years providing great tax relief for the people at the highest end of the economic income ladder, the richest people in America.

We are proposing tax relief for the broad middle America. Under that plan, 93 million American families will get a tax cut. One and a half million will have some tax loopholes closed. And we are in favor of extending the child tax credit...

WALLACE: Let me...

VAN HOLLEN: ... and dealing with...


WALLACE: Gentlemen. Gentlemen. I am going to...


WALLACE: Congressman? Mr. Rove? I'm going to pretend that I'm in control of this situation.

I want to ask you about a different aspect of that, which is the economy, because one of the things that I think you'd agree the Republicans have had going for them for the last seven years has been a strong economy.

Now you've got high gas prices. You've got a housing slump. You've got a credit crunch. Ben Bernanke, the Federal Reserve chairman who was a Bush appointee, keeps talking about a significant economic slowdown.

If you have the economy getting worse plus a continuing war, aren't you guys doomed?

ROVE: No. Look. The war is going better. And look. The economy — people understand that when you have a Democrat Congress intent on spending more and raising taxes that that's not good for the economy, and they'll understand that it's the answers proposed by the Democrats of more taxes, more spending, more government regulation, and less support for our military that's bad for America.


VAN HOLLEN: Look. They had six years to get it right. They saw the problems on the economy coming down the pike. They did nothing about it.

When you're talking about the war...

ROVE: Chris, you really need to...

VAN HOLLEN: Karl, Karl, I do hope — I do hope...

ROVE: Do you really need to...

VAN HOLLEN: I hope you'll take this opportunity, though, to retract the outrageous statements you made suggesting that the Congress pushed the president to vote on the Iraq war resolution during the election, because I was running in 2002.

And I was opposed to the war from the beginning. I didn't think we should give the president a blank check. The president was out there saying to candidates and incumbents leading up to the election, "You guys got to support this resolution." And it was in the context of the election.

Now you've tried to suggest and revise history here. Clearly, things have not gone right in Iraq, and you have tried to revise history and suggest that the Congress got ahead of the president on the Iraq war resolution.

ROVE: Well, no, that's not what I said. What I said was that the general conventional wisdom is that the president was the only person pushing the Congress to vote on the war resolution before the November election.

And that's simply not true. Tom Daschle in June said there's broad support for regime change in Iraq.

WALLACE: That's in June of 2002.

ROVE: June of 2002. The question is how do we do — and when do we do it.

On July 31st, in a news conference, by which time he'd already signaled he wanted a vote in the fall, he said, "I would also say that I think it would be a big mistake for the administration to act without Congress' involvement."

On September 16th, he goes on CNN and says, quote, "I think there will be a vote well before the election, and I think it's important that we work together to achieve it."

WALLACE: Gentlemen...

ROVE: And then goes on...

WALLACE: Do we really think when we're talking about 2008 that we need to go back and rehearse...

ROVE: Well, I'd like...

WALLACE: ... what happened...

ROVE: ... I'd like...

WALLACE: ... in 2002?

ROVE: ... I'd like a chance to set the record straight. Mr. Van Hollen had adequate time to make his charge. I'd like just a few more seconds to make the point.

He then said I'm going to meet with the president on Wednesday morning. The next day, Tuesday, he goes on the air and says, "Look, I called the White House and urged them to work with us so we could have a clear understanding of what their strategy is."

The administration has made clear that they have made — that it has made it clear that they have made no decision about it, he told Gwen Ifill.

He then went on...

WALLACE: All right. All right.


VAN HOLLEN: If I could just have one quick rebuttal.

WALLACE: Wait, wait.



VAN HOLLEN: Look. Let me just read what Ari Fleischer said. He was obviously the press secretary.

WALLACE: One quote.

VAN HOLLEN: It was definitely the Bush administration that set it in motion and determined the timing, not the Congress. I think Karl, in this instance...

ROVE: I disagree.

VAN HOLLEN: ... just has his facts wrong.

ROVE: I disagree with my colleague. And the fact of the matter is I suspect Ari is not aware of and was not privileged...

WALLACE: All right.

ROVE: ... in this conversation...


WALLACE: Gentlemen. Gentlemen.


ROVE: And I was in the middle of the White House and saw these comments...


WALLACE: Gentlemen, let's move to where the war is now. And Congressman John Murtha, one of the top Democratic war critics, just came back from Iraq and said the surge is starting to work.

Doesn't your party run the risk that the war by next November will either look pretty good or just not be as big an issue?

VAN HOLLEN: Well, look. We obviously hope things go well in Iraq. And the fact that there's been a reduction in violence is a good thing.

The problem from the administration's point of view and all of our perspective is that that has never been the goal of the surge.

The goal of the surge was to create the political space for the Iraqis to make the political reconciliation that is necessary for what every general on the ground has said can only be a political solution, not a military solution.

That's why General Sanchez, who was the guy on the ground, supported the position the Democrats have taken, which is we can't say to the Iraqis, "We're going to be there forever."

We have to make it clear to them that they have to make the political compromises that are necessary to achieve stability in Iraq.

WALLACE: Mr. Rove, the recent poll found that the number of Americans who think the war is going well is up sharply.

On the other hand, that same poll found that a sizable majority of the American public still wants the troops home faster than President Bush is calling for it.

Isn't the war, no matter how it goes, going to be a drag on the Republican Party?

ROVE: No. And incidentally, that same poll that you're referring to also found that the position of Democrats like Van Hollen — get out precipitously — drew a very small minority of the American people.

That's why, frankly, when they brought up the Democrat war policy in the McGovern amendment, they got 171 votes in the House. Fifteen of the freshmen Democrats whom he helped elect in the last election voted against the Democrat position of the leadership on precipitous withdrawal.

The war in Iraq is vital to the security interests of the United States of America. And the American people will support that war policy as long as it is succeeding, as long as that policy is aimed toward victory, and as long as they have the assurance that as we succeed, we're going to be able to return combat brigades.

And that's exactly what's happening now. Fifty-seven hundred combat troops will be out of Iraq by the end of the year because it's succeeding. And when it's succeeding...


WALLACE: Congressman Van Hollen?

VAN HOLLEN: The two biggest winners in the war in Iraq have been Osama bin Laden and Al Qaida because we just got distracted in Iraq. We never finished the job.

It is now six years, seven years after 9-11-2001, and we have still not gotten the guy who perpetrated the attacks. That's one of the reasons the Republicans have lost credibility on national security.

The other big winner has been Iran. Now, the Democratic proposal does not call for precipitous withdrawal. We say, "Mr. President, here's the funds to begin a responsible and safe redeployment of forces with the goal of getting U.S. combat troops out of Iraq by December of next year...

WALLACE: Gentlemen, I want to finish up...

VAN HOLLEN: ... and leaving antiterrorist forces...

WALLACE: I want to finish up by going back to the polls.

VAN HOLLEN: ... training forces and other forces for critical missions."

WALLACE: Let's put up on the screen the Rasmussen Report's national tracking poll. It now shows that Clinton, Senator Clinton, is leading Barack Obama by just nine points. This is the national poll.

She's been up by double digits for a long time. In New Hampshire, she leads by just 7 points. And in the latest Des Moines Register poll, she's actually losing in Iowa by 3 points.

On the Republican side, Rudy Giuliani down now nationally to 24 percent, and he isn't leading in any of the first three states.

Let me ask you both, and start with you, Mr. Rove, are both frontrunners in trouble now?

ROVE: I think they could be. And I think both of them are going to face difficulties in Iowa. And the question is going to be for both parties is whoever wins Iowa, if it's not the frontrunner, are they able to carry that through to the following primaries, have a bandwagon effect.

And it's going to be very troublesome for both parties' frontrunners, because we're in uncharted territory. There's very little time between these primaries.

You have a caucus on Monday, a primary on Tuesday, a primary on the following Tuesday, a primary on the following Saturday. These things are going to happen just like that.

On the Republican side, between the 2nd of February and the 5th of February, there are going to be 22 contests. Twenty-two states are going to choose their delegates.

WALLACE: So do you think Giuliani is in trouble?

ROVE: I think it's going to be interesting. You can make the case conventionally that both parties' incumbents are in trouble, because before what has happened is...

WALLACE: The frontrunners.

ROVE: Yeah, both parties' frontrunners are in trouble because if they lost, then that would give whoever beat them a chance to get some momentum in the states because there was distance between those primaries.

What happens when they're all close together? Do they have the same opportunity to gain national momentum? And frankly, I don't know.

WALLACE: Congressman Van Hollen?

VAN HOLLEN: Well, I think the situation is very fluid. I mean, this is something we can probably agree on. I mean, the situation is very fluid in the early primaries. You can see that in the polls in Iowa. You can see it in New Hampshire. Things are bouncing around.

It's unclear what kind of bounce people will get in this compressed schedule.

WALLACE: Do you think that Senator Clinton, who has been inevitable for so many months -- that that crown is being knocked off her head a little bit?

VAN HOLLEN: No, I don't know if it's being knocked off. Again, she is leading the national polls. The question is what happens when you get down to things like the Iowa caucuses and people go into the living rooms of people.

ROVE: Real quickly?

VAN HOLLEN: And again, I think it's just a very fluid situation.

ROVE: Yeah, real disturbing for Clinton has got to be that the Iowa polls are starting now to show that Obama is taking a lead in Iowa. And if I were her, I'd be concerned about that, because there are real difficulties.

If Obama knocks, you know, the cap of inevitability off of her, which is what she's built a lot of her candidacy on, then she could have a real race.

WALLACE: All right. We're going to have to leave it there. Would you guys come back?

VAN HOLLEN: Be happy to.

ROVE: As long as he doesn't keep touching me like this.

VAN HOLLEN: I don't know, we're just trying to make sure we keep you constrained and in check.

WALLACE: Thank you both for coming on -- please come back -- and helping us game out the campaign. This was fascinating.

VAN HOLLEN: Thank you.