This is a rush transcript from "Hannity," July 10, 2009. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: As talk of a second stimulus bill begins to sweep through the halls of Congress, the wasteful details of stimulus bills past are now coming back to haunt Democrats.

And that is our headline tonight, "Of Mice and Stimulus."

Now, during the debate over the first stimulus, the president and Democratic leaders, including Princess Pelosi, they denied that any earmarks or pet projects would be included in the bill. But now we know that is a flat out lie, it is not true.

In fact, one of the pet projects that Republicans criticized the most was funding for the protection of an endangered rodent called the salt marsh harvest mouse that happens to, by the way, live in Nancy Pelosi's district.

The San Francisco Speaker long denied this money would be included in the bill, and several months ago her office said, "The speaker nor her staff had any involvement in this initiative. This is another contrived partisan attack."

Video: Watch Sean's interview

But as Minority Leader John Boehner revealed at a press conference yesterday in Washington, it turns out this was no partisan talking point.


HOUSE MINORITY LEADER JOHN BOEHNER, R-OHIO: The Democrats claim no, no, we're not going to fund this. It's not in the bill, it's not going to happen. Well, guess what? $16 million of the stimulus money was appropriated to take care of the salt marsh harvest mouse.


HANNITY: So now with the possibility of a second stimulus on the horizon and the debate over the president's trillion dollar health care plan looming, can people in Washington like Nancy Pelosi be trusted with spending your and our money?

Joining us now the FOX News contributor Karl Rove. Karl, you had a great piece, the numbers don't add up, in the Wall Street Journal. We cannot trust the numbers and the information that is being sent our way now.

KARL ROVE, FOX NEWS CONTRIBUTOR: Yes. Look, my point in the column was that when we were sold the stimulus bill by the Obama administration, the president and the vice president said it would go to create jobs, it would have an immediate effect, that if we did it, we would see these kind of results, and if we didn't do something, we would see things bad.

Well, we did, Congress did what they wanted, they passed the bill, $787 billion. And we're finding the money is not being spent quickly, and it's not having the results that we were promised.

In fact, unemployment today is 20 percent higher, the unemployment rate is 20 percent higher than what the Obama administration said it would be if we did nothing. And that's a pretty — that's being off pretty far.

And now they're turning around and making the same kind of promises on health care.

HANNITY: They are making these promises. This is on the very week that Joe Biden said we blew it. We misread the data, nobody guessed right. But yet they told us it was the worst economy since the Great Depression.

Now Tim Geithner said the economy is going through a healthy adjustment as Americans go back to living within their means. So I guess the lecture is deal with it, deal with our high unemployment, forget the promises we made.

ROVE: Yes. And Vice President Biden couldn't even get that line out without being wrong. I mean, he said we followed the blue chip consensus.

Well, the blue chip consensus pointed to a bigger dip and to worse unemployment than the administration forecast. So if they were following the blue chip, they would have been focused on getting something done now that would have had an impact on jobs now instead of doing what they did, which is was take every big spending program they could out of the shelf that had not been passed by previous congresses and stuff it in a bill and slap a label on it called "stimulus."

Remember, this bill spends more money between September 30, 2011 and September 30 of 2019 than it does in this fiscal year.

The problem is now, then let's be putting tax cuts and safety net programs out that have an immediate impact now, not doing what they did, which is blow up in cost of government permanently by putting a bunch of money out there that's going to be spent for the next ten years.

HANNITY: Those of us that read numbers understood it's sort of like Laurel and Hardy or Abbott and Costello, or you pick whatever pair you like, traffic and weather together, all right, which is a great radio line that you hear on radio stations.

If, in fact — it's sort of like spending and taxes go together. You've got to — if you're going to spend all that money, taxes are going to necessarily follow.

Here's the problem. Axelrod even acknowledges taxes may go up even on the middle class. Barack Obama made a George Herbert Walker Bush like statement. He said look, under my plan, no family making $250,000 is going to see their income tax go up, any form of tax increase, payroll tax, not any tax.

Is he on the verge of breaking a major promise now to the American people?

ROVE: Well, look, he's already broken that promise. When they passed the tobacco bill, and I'm not an advocate for smoking, but they passed a tobacco bill earlier this year to raise the cost of tobacco for anybody who has that habit. And a lot of those people don't make $250,000 per year. They have already got a tax in place.

And if you look at their plans, whether it is their plan for taxing soft drinks or fast food, there's no way that you can walk up into a McDonald's and say, here's my income tax return. I made less than $250,000 last year, so I don't need to pay your soft drink tax. Please. Who do they think they're kidding?

The purpose behind this, I think, is unfortunately, to make it so expensive and to drive the deficit so far out of reach that the only result is that people feel compelled to adjust themselves to having a big tax increase, or cutting spending in other places like for the military. And either way it's a bad way to run the government.

HANNITY: I would agree.

But the other thing is, I think Americans are beginning to pay attention. I mentioned this mouse out in San Francisco. They're paying attention to that.

The polls show more Americans now are blaming Obama for the bad economy, Rasmussen, Wall Street Journal, the country's on the wrong track, Americans oppose the stimulus, the GOP leads on not only economic issues and national security issues, more Americans view themselves as conservative, they think the Democrats are too liberal, and independents now have moved toward Republicans.

What does it mean for the Republican Party in 2010?

ROVE: Well, you're right, the conditions are getting better for Republicans.

And guess what? I think that last item you touched on presages even further movement, because what we've seen in the last couple months is, on issues like health care and the stimulus, that independence has moved from a position of enormous support for the Obama initiatives to either opposition for it or to a more neutral position. And I think that's a trim line that's likely to continue, because I think a lot of those independents are being driven by these huge cost numbers that they're seeing slapped on these programs.

When you start talking routinely about programs that have cost tags that are hundreds of billions or even trillion dollars, that starts to scare a lot of people. And what I think it means for 2010 is if it causes a lot of good candidates, prospective good candidates, to say, you know what, next year's going to be a year of opportunity if I want to run as a Republican.

If that happens, then by next year I suspect we're likely to see a lot of very high quality candidates running in races that are likely to be Republican victories come next fall.

HANNITY: And tell me what you think of this. I think now people are beginning to say all right, these are their deficits, this is their debt that they're created for our kids and grandkids.

There was a report with, one congressman saying that he thinks unemployment in Michigan could go as high at 20 percent. They promised it wouldn't go above 8 percent. Warren Buffet says it will go to 11 percent, the GAO says they're misappropriating, stimulus funds, they're not even spending the money right.

It seems to me — I would think that the people that especially worked under Hillary Clinton would have known better, because it reminds me a lot of 1993.

ROVE: Look, they made promises to us about the stimulus bill. And not living up to those promises means they need to live with the people's reaction to it, and people are reacting negatively.

I don't know if you saw the USA Today story, not exactly a conservative outlet, but the USA Today story yesterday pointed out that places that voted for Obama are getting a lot more money than places that voted for McCain.

That shows — we'll have to see if that trend holds up, but if that's true, then if they are slanting these funds to places that are political important to them, that shows that their motive is not creating jobs, but buying political influence. And it's very, very troubling.

HANNITY: All right, Karl Rove, always good to see you. Thank you for being with us on a busy Friday.

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