This is a rush transcript from "Hannity," July 22, 2010. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: On the campaign trail President Obama pleaded with the American people to take on the issue of race. Now he said addressing the issue was necessary in order for the country to progress. For example, remember this?


THEN-PRESIDENTIAL CANDIDATE BARACK OBAMA: Race is an issue that I believe this nation cannot afford to ignore right now. And if we walk away now, if we simply retreat into our respective corners, we will never be able to come together and solve challenges like health care or education, or the need to find good jobs for every American.


HANNITY: Alright, well, it seems we have been addressing the issue nonstop. But not the way the president envisioned. It was a year ago today that the president gave these comments about the arrest of Harvard professor Henry Louis Gates, Jr.


OBAMA: I think it's fair to say, number one, any of us would be pretty angry. Number two, that the Cambridge Police acted stupidly in arresting somebody when there was already proof that they were in their own home.

And number three, what I think we know separate and apart from this incident is that there is a long history in this country of African- Americans and Latinos being stopped by law enforcement disproportionately.


HANNITY: Now you may remember the beer summit that followed which I thought was supposed to ease the country's racial tensions. But since then, we've seen the Obama Justice Department dismiss a voter intimidation case against the New Black Panther Party. We've also seen liberals unfairly smear Tea Party activists as racist. And we've seen the administration jumped the gun in its dismissal of former USDA official Shirley Sherrod.

But these events beg the question, are liberals interested in racial harmony or in stoking racial animosity in this country?

And joining me now with analysis is the author of the brand-new book, "Dismantling America," Thomas Sowell is here.

Professor, welcome back. Good to see you.


HANNITY: Well, you have a column out right now, as a matter of fact, headlined "Credit card fraud is a serious problem but race card fraud is even a bigger problem." Tell us the premise of what you're writing here.

SOWELL: Well, I think that the — using the race card has become just sort of standard operating procedure in many cases whether or not there's any substance. One of the more egregious cases was Judge Charles Pickering down in Mississippi who for decades fought for civil rights for blacks, became a hero to the local blacks and defied the Ku Klux Klan, where, you know, it took a lot of guts to do that.

And then when he was up for a judgeship, they immediately started painting him as a racist. They had nothing to go on, but they derailed his nomination. And so this has become one of those things you can just do and get a big payoff.

I don't think the public understands how big the payoff can be. When a bank, for example, wants to merge with another bank, it takes nothing for someone like Jesse Jackson to show up at the hearings, accuse them of all kinds of racial things. It doesn't matter whether he has a speck of evidence or not. To adjudicate what he claims would take months, probably, and the whole deal could fall through.

And so they're perfectly happy to come up — come up with contributions to one of the organizations he controls in order that they can go forward without having this charge. And then the charge is dropped once the money changes hands. That's just one of the ways.

HANNITY: You said the — you said the NAACP — your article once again, once again — these are your words — played the race card in attacking the Tea Party movement. What specifically did you mean by that? And do you think this is planned, orchestrated? Do you think they know what they're doing?

SOWELL: Sure, they know what they're doing. Good heavens. It's a very rewarding thing for them in terms of money, in terms of the Democratic Party, of which they are simply one of the constituents.

HANNITY: All right. But so — we've seen this with the James Byrd ad, the 1998 Democratic Party ad that ran in Missouri, radio ad that said if you elect Republicans, black churches are going to burn, et cetera.

Do you think — how connected is this to the upcoming election? We're 103 days out of an election. Obviously, all the polls show the Democrats are not doing well. Is this an effort to energize their base? And you say it can be successful. Do you think this works or does it backfire?

SOWELL: This particular recent episode may or may not work. But it's worked for years. There are people with a vested interest in keeping other people paranoid and in keeping people at each other's throats so they can then be the saviors who are protecting you.

HANNITY: All right. What did you think of the case of Shirley Sherrod? The initial tape that came out, the rest of her statement, she admitted that she had harbored in the past some — some racist and bigoted feelings, but she — she talks about a story of redemption, and she changed in some ways.

What was your reaction to that, the White House's handling of it, and her — her comments in general?

SOWELL: Well, I don't think this was anybody's finest hour. She was referring to something in the past. But the way she referred to it in the present, you know, "I sent him to one of his own kind" and so forth and other statements she's made since the episode broke don't speak well for her or for the people who've fired her and then hired her back.

HANNITY: In other words, are you saying, then, that you don't think she should have been hired back? Or—

SOWELL: Well, that's a purely tactical political decision. And — but I think that her initial statement about what happened 20-something years ago, it was not clear at first that she was talking about that from what was broadcast on the television.

But, also, the way her — she phrased it even in her recent speech doesn't speak well for her.

HANNITY: You talk in your article, racial issues are — you want a government where all citizens are treated alike. Which begs the question about the New Black Panther Party and this voter intimidation case.

Because I was — I was kind of shocked that the Justice Department dropped that case, considering, as this whistle-blower, Christian Adams, said, this was a slam-dunk of any case that they've ever had of voter intimidation at — at a polling place. Why would the Justice Department do that? And should they be investigated for it?

SOWELL: Well, I don't know. Who would investigate the Justice Department?

HANNITY: Congressional hearing. Special prosecutor.

SOWELL: They could.

HANNITY: Go ahead.

SOWELL: I doubt — I doubt that, with the Congress controlled as it is, there will be an investigation.

I wasn't so much — I was disgusted, but I was not surprised because I've always judged Obama and others by what they've done, not by what they've said. And judging by his past as a community organizer, it doesn't surprise me in the slightest.

HANNITY: All right. Thomas Sowell, we appreciate you being with us, as always. And we'll see you again soon. Thank you for being here.

SOWELL: Thank you.

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