Karl Rove Takes on the Bush Legacy and the Challenges Facing President-elect Obama

This is a rush transcript from "On the Record ," December 26, 2008. This copy may not be in its final form and may be updated.

JAMIE COLBY, FOX NEWS GUEST HOST: And welcome back. Karl Rove is here to go "On the Record." Allegations, scandal, wiretaps, and the governor of Illinois not going away, and neither (SIC) is Governor Rod Blagojevich, who says he is staying put. And even though he has not been connected at all to any "pay to play" allegations, the scandal is still taking up the huge amount of President-elect Obama's time. Now Governor Blagojevich's lawyer wants Obama's incoming chief of staff and potentially a dozen others to be subpoenaed by a panel that is deciding whether to impeach the governor. How much of a distraction is this scandal for the president-elect?

Karl Rove is with us from Austin, Texas. Karl, thank you so much for being with us.


COLBY: Good evening.

ROVE: Thanks for having me. Yes.

COLBY: Well, how much of a distraction is this? There's an awful lot awaiting the president-elect in the Oval Office. What about the Blagojevich investigation?

ROVE: Yes. Well, look, it's going to be a draw on his time, no doubt about it. He spent two hours with federal agents last week, going over it. I suspect he and his people are going to have more such visits.

And you know, we can understand where Governor Blagojevich is coming from. It's pretty clear he's going to try and make the argument that by putting Valerie Jarrett and Rahm Emanuel, and if need be, others out there, to say, Look, if I was supposedly trying to sell this, why is it that -- you know, that we had no conversations, you and I, Blagojevich and Emanuel, you know, Blagojevich and Jarrett, that could be construed as sort of a quid pro quo, I'll name somebody that you want in return for you paying me off?

COLBY: And you must have that quid pro quo in order to have the crime that is being alleged here. We don't know all the information because the criminal complaint is not an indictment. We haven't heard the tapes. But on its face, based on what you have heard and seen and based on the practice of making recommendations for appointment to vacant seats, does it appear to you, especially since Barack Obama has kept Rahm Emanuel in the fold, that they are correct in their internal investigation that no crime was committed?

ROVE: Yes, well, look, if there was a problem at the beginning with Rahm Emanuel or Valerie Jarrett or any of the other Obama staff who were involved in this, I would suspect that we would have gotten a very strong signal of that from the U.S. attorney, Patrick Fitzgerald. I think he would've been inclined to say something at the beginning. In fact, he went just the opposite. He exonerated the president-elect and his people and said, in essence, there was nothing there that involved them.

I don't think that we're likely to see any of that emerge over the course of the next several months as this plays out, but I do think we're likely to see several things. One is we're likely to get an interesting question about Rahm Emanuel was recommending Valerie Jarrett to be the United States senator before he talked to the president-elect. He talks to the president-elect on the 9th of November, but he's talking to Blagojevich between the 6th and the 8th, recommending Valerie Jarrett. So what is Rahm Emanuel doing out there freelancing, proposing that Valerie Jarrett be appointed to the Obama seat without checking with Obama first?

And second, we're also going to see -- we're going to find out somewhere along the lines where did Governor Blagojevich develop the opinion that he wasn't going to get anything out of dealing with the Obama people? You know, the report written by the Obama general counsel says nobody recommended, nobody proposed anything or suggested any quid pro quo. There was never any discussion of a personal benefit for Governor Blagojevich. Well, if that's the case, how did -- if there was never any discussion about it, how did he arrive at the conclusion that there wasn't going to be anything in there for him? It's an interesting question, and we'll see it play out over the next couple of weeks and months.

COLBY: Very interesting. And it will play out, I assume, right into the time that the president-elect moves into the Oval Office, has to deal with everything else, and this will still very much be on his plate.

Karl, I want to ask you to stick around. One of the things I want to ask you is whether or not our system of presidential pardons works. There's one in particular that is causing a little bit of a controversy. I want to talk to you about that. And I also want to ask you how different you think the job of president will be for Barack Obama on day 1, how different was (SIC) it from the day that George W. Bush took office. So stay right where you are.

And also up next: Would it happen that you might be a fan of a popular TV show called "One Tree Hill"? Well, guess who is? Authorities are looking into Casey Anthony's fondness for that very show and a possible connection to her bogus baby-sitter alibi.

Then -- it had us all stunned and standing still. We could not take our eyes off the TV screen, a million gallons of rushing water making a river out of a rush-hour-filled city street, motorists trapped in their cars, about to be swallowed up by dangerous rushing water as the 911 calls began to stream in.


UNIDENTIFIED FEMALE: My car is going all the way down!

911 OPERATOR: The car is moving now?

UNIDENTIFIED FEMALE: Oh! Oh! I'm going down! I'm going down! Help! Help!

911 OPERATOR: Ma'am? Ma'am? Ma'am?



JAMIE COLBY, FOX NEWS GUEST HOST: And welcome back to "On the Record." Karl Rove is joining us.

Karl, a quick question about presidential pardons. The White House makes an announcement about a pardon for Isaac Toussie and then withdraws. I'm told it's unprecedented. What are your thoughts, and what do we need to know about it?

KARL ROVE, FOX NEWS CONTRIBUTOR: I thought Dana Perino's statement two days ago was pretty revealing. It basically said that the counsel's office had recommended it to the president. The president had provisionally accepted it.

And that additional information came to light and the president took the rather extraordinary but I think entirely appropriate step of withdrawing the pardon.

Actually, he didn't officially withdraw the pardon. He simply asked the pardon office not to act on his-the president makes a statement and then it has to be signed by the pardon office, and he directed them not to ad their approval to it.

COLBY: And are the grounds for that, a donation made by Isaac's father, and is that grounds for not giving a pardon?

ROVE: I think the ground were other than that. They did find out that his father made political contributions and that this White House has a policy of not checking into political contributions made by an applicant for a pardon. You don't want people making decisions based on whether or not political contributions were made.

I think the information that was alluded to was the nature of the offense, the death of the offense, and the fact that it happened less than five years ago. Generally pardons and commutations, except in rare instances, are not granted within five years after the offense.

COLBY: Karl, we're about to have a change over in the White House, as we all know, coming up less than a month from now.

And I am wondering if you can set the scene for what Obama has on his plate? How different will day one be in the Oval Office for him as compared our current president, George W. Bush?

ROVE: Both of them have faced economic difficulties. The economic challenge that President-elect Obama faces is arguably somewhat larger than the challenge that President Bush faced with the recession that he inherited that literally was declared about the day he took the oath of office.

But the big difference will be that President-elect Obama will take office in a time of war. This will be the first president elected in a time of war to take the oath of office for the first time. So right from the beginning he is going to have to deal with the issues of Afghanistan and Iraq.

It's one of the reasons why I think he took the extraordinary step of asking Secretary Gates of the Department of Defense to stay on, and also authorized Gates' deputies and various political officials and nominees throughout the agency, even though they are Republicans, he asked them to stay at their posts until their replacement was duly nominated and confirmed by the United States Senate.

I think that is a pretty sobering realization on his part that we are a nation at war and that different things need to take place,

COLBY: Karl, before I let you go, much of what the President-elect inherits--the tough economic times, the war, as you raised, healthcare, so many issues facing so many Americans.

There is a lot of finger-pointing that the Bush administration is responsible for what ails us right now, and I wonder whether at the time that President Bush took office he could not have predicted that we would have 9/11 and that national security needed to be priority number one.

Do you predict in the end the legacy for President Bush will be that we have not had another terrorist attack, that he has he kept us safe, and that his priorities were in order?

ROVE: I think that will be a big part of it. I think history will see him as a man who put America on a war footing in a struggle that will shape the nature of this century.

He will be seen as someone who liberated Afghanistan and Iraq -- 50 million people now live in freedom in those two countries who did not know freedom before.

And he will also be seen as somebody who created a strategy to confront terrorism that is going to make America and the world safer in the years to come.

Judgment of history is harsh in the short run, and unfairly so many times. Harry S. Truman left office. In fact, the slogan at the time was "To err is Truman." He left town not very popular, and yet history regards him now as a much different person.

And I think this president is not going to leave office in that same state. He is quick to have relatively low ratings, but much better than some of his predecessors.

History, though, will be kind to at the end. I am absolutely confident of that.

COLBY: Sometimes that historical perspective does take time.

ROVE: Sure it does.

COLBY: Karl Rove, thanks for taking your time. Great to see you.

ROVE: You bet. Thank you Jamie. Thanks for having me. Merry Christmas and Happy New Year.

COLBY: Merry Christmas, too. Take care.

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