The following is a transcribed excerpt of "Fox News Sunday" for November 7, 2004.

CHRIS WALLACE, FOX NEWS: Well, fresh from his win Tuesday, President Bush promised to spend the political capital he has earned on a very ambitious agenda. Here now to discuss the second Bush term and the keys to his election victory, we're delighted to have senior adviser, Karl Rove.

And, Mr. Rove, welcome, and congratulations on a truly impressive victory.


WALLACE: How important was this election in terms of realigning the country and giving Republicans a governing majority?

ROVE: Well, we had a very close election in 2000. It was followed by a significant victory for the Republicans in the 2002 election, which we became the first presidential party since Franklin Roosevelt's first off-year election to gain seats in a first off-year election.

And then this election, where the president won 59 million votes, 51 percent of the vote. He becomes the first presidential candidate since 1988 to win with more than a majority of the vote, and a very solid victory. And, interestingly enough, a higher percentage of the vote than any Democratic candidate for president has received since 1964.

WALLACE: I know that your favorite election is William McKinley's victory in 1896. And neither of us were there, despite what people may think.

Does this election have the same potential to grow the size and give a governing majority to the Republican Party for decades?

ROVE: It does. We'll only tell with time. I mean, the victory in 1896 was similarly narrow, and I mean — not narrow, similarly structured. But it took — you know, we only knew that it was an election that realigned American politics years afterwards. And I think the same thing will be here.

It depends on how Republicans act in office. Does the president pursue the agenda upon which he won this election, and do the Republicans in the House and the Senate work with the president and with Democrats to make some important changes in our economy and in our country?

WALLACE: All right. Let's talk about the president's second term and what he needs to do to satisfy and to build on the coalition of voters that gave him victory on Tuesday.

First of all, the social conservatives, the values voters, I know one of their top concerns is the definition of marriage. Given the fact that gay bans — bans on gay marriage were on the ballot in 11 states and passed in all 11, aren't the states handling this? Do you still need an amendment to the federal Constitution?

ROVE: Yes, because without the protection of that amendment, we are at the mercy of activist federal judges or activist state judges who could, without the involvement of the people, determine, as the Massachusetts Supreme Court did, that marriage no longer consists of a union between a man and a woman.

WALLACE: So the president intends to go ahead and push for the constitutional amendment?

ROVE: Absolutely.

WALLACE: What about civil unions? Because near the end of the campaign, he indicated that in fact he supported some legal recognition of these relationships.

ROVE: Well, he believes that there are ways that states can deal with some of the issues that have been raised, for example, visitation rights in hospitals or the right to inherit or benefit rights, property rights. But these can all be dealt with at the state level...

WALLACE: But explain to me. Why can...

ROVE: ... without overturning the definition of marriage as being between a man and a woman.

WALLACE: Explain to me why civil unions can be handled at the state level but marriage can't.

ROVE: Well, marriage is a very important part of our culture and our society. If we want to have a hopeful and decent society, we ought to aim for the ideal. And the ideal is that marriage ought to be and should be a union of a man and a woman.

And we cannot allow activist judges to overturn that. We cannot allow activist local elected officials to thumb their nose at 5,000 years of human history and determine that marriage is something else.

And the people have a right to be involved. And since this was forced upon the political process by activist judges, we need to do everything we can to keep it from being decided by activist judges.

WALLACE: OK. A number of social conservatives say the top issue for them is who the president appoints to any vacancies that come up in the Supreme Court.

Now, I know you're going to say the president has no litmus test. But doesn't he have to appoint pro-life justices to the court to keep faith with those voters?

ROVE: What he has to do to keep faith with the American people is do exactly what he said he would do during the campaign.

If you remember, during the campaign, at virtually every campaign speech he talked about judges and said that he would appoint to the bench men and women who had no personal agenda, no political agenda, but would strictly interpret and apply the law.

He takes that responsibility very seriously. He views judges as the impartial umpires. They shouldn't be activist legislators who just happen to wear robes and never face election. They shouldn't be people who are, you know, able and free — feel free to pursue their own personal or political agenda.

They ought to be men and women of great scholarship and ability who will strictly apply the law, strictly interpret the Constitution. That's exactly what he said he would do in the campaign, and that's what he'll do.

WALLACE: But given all that, Mr. Rove, wouldn't a social conservative voter who's out there watching right now, wouldn't he view it as a betrayal if the president did all of those things you said and ended up appointing a judge who, in fact, was pro-choice?

ROVE: Well, the president said this in virtually every speech, sometimes multiple times a day. He said it seven different times the last day of the election, for example.

And I think the American people understand where he's coming from, appreciate his view that there ought not to be a litmus test and there ought not to be a prejudgment by people that he appoints to the bench of important cases, but that people ought to have a perspective that says, "I'm here to strictly and impartially apply the Constitution as it was written."

And that's what he said during the campaign, and that's what I think people expect him to do in office.

WALLACE: Does it bother you that Senator Arlen Specter, who the president campaigned hard to get re-elected and who's now slated to be the new chairman of the Senate Judiciary Committee, right after his election said that Roe v. Wade, the decision allowing abortion, the right to privacy, is, quote, "inviolate" and also said that it's "unlikely" — his word — that a pro-life judge could be appointed, could be approved to the court?

ROVE: Well, the senator's entitled to his opinions.

What I do know is that he told the president that, if he, Senator Specter, were to become chairman of the Senate Judiciary Committee, that every one of the president's nominees would receive a prompt hearing, a vote in the committee within a reasonable period of time, and that his appellate nominees would all be brought to the floor for an up-or-down decision on the floor.

And we're in — Senator Specter's a man of his word, and we'll take him at his word if he becomes chairman of the Senate Judiciary Committee.

WALLACE: So you're satisfied with that explanation?

ROVE: Well, it was pretty straightforward and pretty plain. He told the president, "I will make certain your nominees receive a hearing, I'll make certain that they receive a vote, and the appellate nominees will be brought to the floor."

WALLACE: The president also talks about tax reform. Now, when he talks about that, is he just talking about tax simplification, closing loopholes, or is the federal income tax itself on the table?

ROVE: Well, the whole code, which is literally tens of thousands of pages and millions upon millions of words, is a mess, as the president says.

It's a drag on our economy. It takes untold hours — literally billions of hours, man-hours, to comply with on the part of individuals and small business and big corporations. It's riddled with special-interest loopholes. If you've got — if you're wealthy and got a smart lawyer and a smart accountant, you can avoid — you can pay a lower tax rate than the ordinary American pays.

And the president thinks we need to step back and revisit the code, because...

WALLACE: But when you say "revisit the code," I mean, would he consider, seriously consider, in a second term, replacing the federal income tax with a sales tax or a flat tax?

ROVE: Well, he believes we need to step back and look at the code in its entirety and discuss and have a dialogue as to what is necessary to keep this economy flexible and dynamic and growing.

How can we encourage savings? How can we encourage ownership? How can we encourage a dynamic, growing economy, and do so in a fair way that requires a minimum amount of paperwork and compliance costs?

Look, we need to recognize that our economy faces some real challenges. Our competition for American business is no longer in the next county or the next state, it's around the world.

And if we're going to keep our economy dynamic and growing and the economic powerhouse of the world, then we better do something about our tax code, better do something about the excessive litigation, better do something about health-care costs, better do something about our education system, better do something about lifetime opportunities for training, or we'll not have an economy that is as strong and as plentiful as we want for our kids and grandkids.

WALLACE: Do you and the president and the rest of the White House, do you worry at all that the war in Iraq, if it gets even bloodier, has the potential to derail the president's second term?

ROVE: Look, we have great confidence in the leadership of Iraq and the coalition and in the ability of the U.S. military to support the security needs of Iraq and to help fight and win the war on terror.

WALLACE: You are the fair-haired boy in this town right now, but not everyone is singing your praises.

Here's what Robert Borosage, head of a liberal think tank, had to say about the president's campaign victory late this week. Let's take a look.


ROBERT BOROSAGE, CO-DIRECTOR, CAMPAIGN FOR AMERICA'S FUTURE: He survived by waging the most negative and dishonest campaign that we have witnessed by an incumbent president, at least since Richard Nixon. He wrapped himself in the flag, he stoked the fears and passions of the evangelical right, he divided the country with gay- baiting.


WALLACE: Mr. Rove, your reaction?

ROVE: Well, I think it's a sad commentary. This fellow seems to think the American people are driven to vote in record numbers by fear and an appeal to base emotion.

I think that, frankly, the reason that the election had such a large turnout and the president won such a strong victory was that people were drawn by his vision and his values and by the positive and optimistic agenda that he laid out for reform of our institutions at home and for security abroad.

I disagree with it. Look, this happens after every election. And he's due his moment of whining and complaining, but that's not what the election was about.

WALLACE: All right. I want to do a triple-speed review of the campaign. I'm going to give you a topic, and I'm going to hold you to this. I'm going to give you one or two sentences to give me an instant reaction to the various moments.

ROVE: Will I get graded afterward?

WALLACE: Well, I'm going to hit a buzzer.

ROVE: Here we go.

WALLACE: When Kerry said, "I voted for the $87 billion before I voted against it"?

ROVE: Disbelief. He had been provoked into this by a television spot that we put up in West Virginia before he visited Huntington, West Virginia. We immediately turned it into a revised version of the ad that featured an ending with those words on it. And it's the gift that kept on giving.


WALLACE: I know you had nothing to do with it, but now that the campaign's over, the Swift Boat ads, how important?

ROVE: Well, I think they were made important by the fact that Senator Kerry at his convention really talked about not his forward- looking agenda or his service in the Senate, but really only about Vietnam.

I was amazed by the people that I met around the country who were energized by that issue being discussed. I had an uncle, a favorite uncle of mine, who did several tours of duty in Vietnam, and I've never been able to think of Colonel Verhigh (ph) as somebody who would have raped and pillaged in a manner reminiscent of Genghis Khan.

And so I have a sense of it, but, I mean, I was really amazed by how strongly men and women who had served in Vietnam and in the armed forces felt about that.

WALLACE: The first debate, what happened?

ROVE: Well, I thought he did — I thought the president did great. I mean, I think this was the classic, if you listened to it on the radio or saw it without a split screen, you thought Bush did fantastic and won. But if you saw it with a split screen, and particularly if you listened to the after-action commentary by the media, it wasn't the same.

WALLACE: Are you going to blame it on us?

ROVE: Well, you're a convenient scapegoat.


WALLACE: All right. Truth to tell, the campaign's over. What was under the president's jacket at the first debate?

ROVE: You know, the poor — I'm not going to mention his name, because I know him and he's a wonderful fellow, but the poor tailor has just got to be horrified. Nothing was under his jacket.

WALLACE: Well, I've had a lot of jackets, you've had a lot of jackets. You've never had something like that under your jacket.

ROVE: Well, the poor — again, he's an awfully nice fellow, he's a rather flamboyant dude. And I'm not going to use his name, but he's just — he's horrified. And, you know, it's — there was nothing there.

But it certainly got a lot of commentary on the Internet.

WALLACE: Truth to tell, how did you feel in the gut of your stomach when you saw the first exit polls on Election Day which showed Kerry winning everywhere?

ROVE: Well, I was on Air Force One, and we were literally on final approach into Andrews, and so — the phone connection kept cutting out. And I was holding a piece of paper on my knee, trying to scribble it down, holding the phone in the other hand, and I got sick as I wrote them down, and then, when I looked at them, I got angry, because they simply could not be true.

WALLACE: When you got sick, I mean...

ROVE: Just almost physically ill. I mean — but then I looked at them, and I got angry. I mean, it had us 19 points down in Pennsylvania, it had us 17 points down in New Hampshire, it had us one point up in Virginia. I mean, you looked at these numbers, and you realize, this is just insane.

WALLACE: Finally, the single precinct or county that you spent the most time watching on Election Day?

ROVE: Well, unfortunately my job was to look at a lot of counties in a lot of states, but I spent, obviously, a lot of time looking in Ohio and a lot of time looking in Florida.

In Florida, we were looking at — in Florida and in Ohio, we were looking at sort of the exurbs. Take Warren and Clermont counties, for example.

WALLACE: What's an exurb?

ROVE: Well, it is like a new suburb that is a little bit distant from the central — from a large town. For example, people who, you know, move past the old established suburbs in order to get better schools or a little bit more land or cheaper housing. And Warren and Clermont counties — Clermont is directly to the east of Cincinnati. Warren is to the northeast. Our margin out of those counties was just huge.

Brevard County in Florida, which was our biggest margin — improvement in the margin over 2000, we took 24,000 votes out of one county, which was pretty close to the margin that Kerry had out of Miami-Dade, which was a much larger community.

WALLACE: We've got about a minute left, and I've got to ask you. You have known George W. Bush since 1973, I believe it is.

ROVE: Yes.

WALLACE: You've been with him every step of his political career.

On a personal level, what does he mean to you?

ROVE: Well, I have great personal affection for him, but more important than that is, he is the right person at the right time in a historic era of challenge for our country. I mean, he is a tremendously inspiring leader.

WALLACE: And when he calls you "Boy Genius" — or there's another expression in Newsweek, which is...

ROVE: Well, he very rarely calls me "Boy Genius." He generally calls me the other name.

WALLACE: The blank-Blossom?

ROVE: Yes. Yes, sir. I mean...

WALLACE: Go ahead.

ROVE: Go ahead what?

WALLACE: The relation — I mean, your relationship, your feelings?

ROVE: Well, I'm honored to serve the country and his administration. And I have great affection and respect for him. He's a remarkable individual.

WALLACE: Thank you so much. We really appreciate your coming on.

ROVE: Thank you, sir.

WALLACE: Again, congratulations on your victory. And now that the campaign's over, come on back.

ROVE: Great.