This is a rush transcript from "On the Record ," April 1, 2008. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, HOST: What's Senator McCain up to? Is he watching these two Democrats? Should he be? As Senator Obama and Senator Clinton go punch for punch, is Senator McCain doing enough to capitalize on his position as the presumptive Republican nominee?

Joining us live in Florida is former deputy chief of staff to President Bush and now a FOX News political analyst Karl Rove.

Welcome back, Karl.

Video: Watch Greta's interview


VAN SUSTEREN: I'm doing very well. Let's talk first about strategy for Senator McCain. In the past couple weeks, we've heard him get hit with the fact that it has been taken — my — my — not my belief, my knowledge, out of context, where it says let's make it a hundred, meaning a hundred years in Iraq. And I just want to make sure that we have the right facts out for the viewers.

This is what Senator McCain really said. He said, "We've been in South Korea, we've been in Japan for 60 years. We've been in South Korea for 50 years or so. That would be fine with me, as long as Americans are not being injured or harmed or wounded or killed, then it's fine with me. I would hope it would be fine with you if we maintain a presence in a very volatile part of the world, where al Qaeda is training, recruiting, equipping and motivating people every single day," which is a far cry from what it's being — he's being whacked with.

Nonetheless, it's a PR flap. How should he handle this?

ROVE: Well, he's doing it the right way. He's going straight back at Senator Obama, who has been the most recent member of the Democratic hierarchy to misconstrue Senator McCain's remarks, and he's — and he's setting the record straight and challenging Obama.

And this is a problem for Senator Obama. He's built his campaign, in part, upon being a, you know, post-partisan kind of politician, somebody who can work with Republicans and Democrats alike. You may remember, in Springfield, Illinois, when he announced, he called to an end to this kind of cheap-shot politics. He's reiterated that almost every Tuesday night when he's won a primary. And for him now to be engaged in what a lot of, you know, neutral observers are calling a really cheap shot, it's a mistake for him.

He ought to find differences and articulate them clearly, but this kind of cheap-shotism that he's been engaged in for the last week or two on this point — well, actually, longer than that, I think his first comment was in February on this — is a mistake for him.

VAN SUSTEREN: What about the comment that Senator McCain made — it was something about that — and I — actually, this one I have to paraphrase, I don't have it in front of me — about him not being — that the economy is not his strong suit. Those aren't his words, but essentially that. That's being pushed in his face. As a strategic matter, what does he do about that one?

ROVE: Well, he needs to — he needs to soon, not tomorrow, not the day after tomorrow, but soon, begin to engage in a pretty fundamental way on some of these kitchen-table issues that people care about, like jobs, the economy and health care. And the good news is he's got, you know, seven months and some odd days in order to do that. And I would expect, from what I've read in the papers and what I've heard from gossip around town that he's going to shortly begin engaging on some of those kitchen- table issues.

VAN SUSTEREN: Would you pick or recommend to him that he pick a vice president that might have the economy as a strong suit? Would that be a good tactical move for him?

ROVE: Well, yes. Yes, it would be. You know, he's already started. He understands this is something he needs to address, so for example, he got Meg Whitman, one of the founders of eBay, and Carly Fiorina, one of the — the former president of Hewlett-Packard, to take high-profile roles in the Victory Committee activity, so they can be surrogates and advocates for him.

He went and gave a very comprehensive speech out on the West Coast about the subprime market problem. And so he's not afraid to engage in this, but it is a question of, over a period of time, demonstrating through focus on the issue and comfort in talking about it, that the American can have confidence he'll address these issues when he gets in as president.

VAN SUSTEREN: Is this a nightmare or the best thing that's happened to him that all the attention is on the two Democrats slugging it out? I mean, this is — what — how does that play for him?

ROVE: Well, first of all, it is what it is. You know, sometimes in politics, you can change things, affect things, but other times, you just have to deal with it as it is. On Super Tuesday, the Pew Charitable Trust survey of content said that all the candidates were roughly equal. That is to say, in all the stories, their names appeared in about 40 percent of the stories.

The week before last, the last week for which they have data, 70 percent of the stories concerned Barack Obama. He appeared in 70 percent of the stories. Senator Clinton appeared in roughly 30 percent of the stories. And Senator McCain appeared in 18 percent of the stories, which was actually up for him. The week previous to that, two weeks ago, he was in 17 percent of the stories.

So he is where he is because the focus is on where the controversy is, and the controversy's on the Democratic side. So he's very smartly using the time to both get himself organized and to begin to lay some big meta- themes, some big sort of — you know, a firmament, foundation underneath his candidacy, for example, starting with his "biography tour," which I think is coming off — it looks like it's starting off pretty well and it looks like it could come off in a way that will help add to the knowledge that the American people have about him.

VAN SUSTEREN: See, if I were Senator McCain, I would love that these two were slugging it out and dividing the party and getting bloodied because what I would do is, I'd be busy raising money and just sort of sitting back and sort of a licking my chops, thinking that these two are eating each other alive.

ROVE: Well, he's raising money, but he also understands that there's a — you know, there's a finite — your most precious commodity in a campaign is time. And there's a finite amount of time between now and November, and you cannot wait until too late to begin to engage and describe who he is, what his vision is and how he would tackle the big challenges facing the country. So he's got to be careful about being too laid back. He's got to fight his way through the media filter as much as he can and get his story out there, which is, again, this "biography tour," where he's sort of sharing his values and his views, his character, telling people what's inside of him is so important.

But you know, there's also — I have to say, being a little bit counterintuitive, let's remember there are advantages to particularly Senator Obama in having a shorter general election campaign and in having a larger primary campaign. In fact, whoever wins the Democratic side could conceivably benefit by having a long primary campaign in which the focus is on them and then a big burst of positive press, as they will have in all likelihood, when they become the presumptive nominee or win at the convention.

And the closer that is to the election, the more difficult it is for Senator McCain to overcome, and you'll have the Democrat candidate get this big positive bubble, and it'll affect public opinion, and McCain is going to need to fight his way back into contention. And you'd rather have that happen sooner, rather than later, if you're Senator McCain.

VAN SUSTEREN: If you're Senator McCain, do you embrace or distance yourself from President Bush, or do you do both at the same time?

ROVE: Well, I think the better word is "differentiate." You know, you do not want to look like you're turning your back on a president of your party. On the other hand, you need to be clear about who you are and what you're all about and let a natural process of differentiation occur.

The advantage for Senator McCain is he clearly has a record as an unconventional maverick who marches to the beat of his own drummer and has in the past. So part of that predicate is already laid there. But you don't need to look — remember, Senator — or Vice President Gore looked like he was going out of his way to distance himself from Bill Clinton in 2000, when Clinton had very high approval and very popular, and it hurt him inside the Democratic Party.

And Senator McCain, who faces a tough general election in the midst of a war and a struggling economy, or apparently struggling economy, has got to be very careful about not looking to distance himself but to differentiate himself. If you look like you're distancing, you're artificially picking out things where you can disagree with somebody else. You're triangulating, to use a Clintonian phrase. But if you're differentiating, you're being who you are and letting people come to the conclusion that you are where you are and that somebody else is someplace else.

VAN SUSTEREN: Do you think that it may have been a little different 2000 if Vice President Gore had made the decision to use President Clinton and embrace him, rather than distance himself?

ROVE: Well, I know it would have made at least Arkansas a heck of a lot closer. And as you recall, we couldn't afford in 2000 to have lost a single state. Every state was vital. If we'd lost any single state, we would not have the Electoral College votes necessary to win. And so the failure of, you know, Vice President Gore to carry his home state of Tennessee or to carry Bill and Hillary Clinton's state of Arkansas was, you know, a problem, as was, you know, the loss in West Virginia, for example, which the Republicans last won in an open race for the presidency in 1928.

VAN SUSTEREN: Karl, if you'll stand by, we have much more. Thank you. So do stand by.

ROVE: You bet.

VAN SUSTEREN: All right, now, under the headline "Never dull," we have a question for you. In fact, for all of you. You have to go to Gretawire right now to answer this question. Here it is. Which potential first spouse would do the best job representing the United States, Mrs. McCain, Mrs. Obama or President Clinton? OK, you tell us now. Go right now to Gretawire.com and vote.


VAN SUSTEREN: We are back with Karl Rove, President Bush's former deputy chief of staff and senior adviser. He's now a FOX News political analyst.

Karl, if this were the general election — and the question refers to both Senator Clinton and Senator Obama — what do you see as their greatest individual vulnerabilities against Senator McCain?

ROVE: Well, Senator Clinton's is the fact that people don't like her. The second one is, is that she's got a problem with honesty. The third one is she has yet to make a good rationale for why it ought to be her, other than she's experienced because she was first lady, which carries with it a bit whiff of a sense of entitlement.

With Senator Obama, it is, first of all, he's very liberal. He's got the most liberal voting record in the Senate. Second of all, that he's had this problem with exaggeration which has popped out. And thirdly, that he — you know, we don't really know yet if he's real. He claims that he's a post-partisan leader who can unite Republicans and Democrats, but he has no record of doing that in the United States Senate. And he talks about these big, important issues facing the country that demand urgent leadership, and yet again, we have no sense of him tackling these big, important issues during his years in United States Senate.

So each one has a different set of vulnerabilities, and one of them is a tested candidate in Senator Clinton, another one is an untested candidate, but both of them have gone through a long primary season that's making either one of them a better candidate for the general election.

VAN SUSTEREN: Let me ask you a question. Women who write in to us and women I spoke to, they'll say that men'll say — and I hate to put you in a hot spot — that men exaggerate, women lie. What's the difference? You just used that distinction. You said that Senator Clinton lied and he exaggerated. What's the difference?

ROVE: Well, I didn't say that she lied. I said (INAUDIBLE) question with her honesty, I believe. But with both them...

VAN SUSTEREN: You're right. You're right. Absolutely. I'm sorry. You're right. You're absolutely right.

ROVE: Yes. Yes. Yes. But both of them have problems with a question of whether or not they have, you know, told the truth about personal experiences. And the problem is, is that Senator Clinton's example, big example, Bosnia, happened last week at a time when she's down in the polls and when the — when, you know, sort of the media just jumped in and made a big thing of it.

Obama's exaggerations happened generally when he was on the upswing, either when he was not well known, or more importantly, when he was on the upswing and the press was willing to give him the benefit of the doubt.

But I think over the course of the campaign, each one of these could be equally troubling, depending on if they were in the same circumstances. That is to say, at a point where the media was going to give each candidate a lot of attention. But you look at Senator Obama's, and there are a lot of troubling ones. You know, I was — you know, I was — my parents got together at the '60s — at — at the march at Selma and I came along afterwards. Well, he was born four years before the Selma march. I was a law professor at the University of Chicago. No, he was an instructor in a class. You know, he exaggerated what he did as a community organizer, claiming credit for other people's work.

You know, there are a whole series of these. We saw one this week where people went back and checked his Selma speech and found that he'd claimed in the Selma speech last year to have — that his father had been brought to the United States of America through the generosity of the Kennedys, and it turned out not to be true. Each — you know, each one of them has had their problem...

VAN SUSTEREN: Oh, we just lost the satellite to Karl, which is too bad because we didn't get to hear everything he has to say. All right. Well, we'll get Karl — we'll bring Karl back. And sorry to Karl that his satellite went down.

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