This is a rush transcript from "Hannity," March 10, 2011. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: We just heard from the Wisconsin Governor Scott Walker about the latest happenings in Madison over the past 24 hours.

And joining me now with reaction and all of these recent developments and her fight with Michael Moore is former Alaska governor, Fox News contributor, Sarah Palin.

Governor, welcome back.


HANNITY: You know, I'm watching this from a distance. Why do you think the unions put so much stock in Wisconsin? I think there's a reason.

PALIN: I think there is a political reason. And that's because Wisconsin is a Democratic stronghold. And there are a lot of Republicans, though, in the state who are pro-union because in the past any way, some union bargaining has benefited even Republicans there.

So, yes, I think it was strategically picked because if you look at Ohio and Indiana, other states that are having these union protests, you don't see the turmoil and all the attention given as you're seeing there in Madison.

HANNITY: Yes. And I wonder -- you know, in one sense, what was worse what happened with Obamacare? In other words, the Democrats had a chance. They could have debated this. They could have come back to the capitol, they didn't do it.

But we had Obamacare, last minute, rammed down our throat. Nobody had a chance to read it. Now, we find out they have funded a big portion of this.

What was your reaction to that?

PALIN: Yes. There's a lot coming to the surface on Obamacare that really are reflective of what is going on, believe it or not, there in Wisconsin with union protests.

Look, what happened there in Wisconsin, when Democrats who retreated across state lines in order to avoid civil debate and just doing their job, they needed to have been reminded that if your cause is worthy and just, and if it's -- if it's worthwhile, then you should have the ability to defend it. You shouldn't just retreat and duck and cover as the Democrats did there in Wisconsin because what it has caused is a distrust of the work product -- as Obamacare, we have so much distrust of what's in there because in that instance, too, Democrats crammed something down our throats, then kind of ducked and covered and said, well, you got to pass the bill and then find out what is in it. Same kind of paralleling situations here.

HANNITY: As states come to grips with these budget deficits, what,

$3.7 billion deficit in Wisconsin, $8 billion in Ohio, we now have, what,

$14 trillion nationally. And as soon as cuts start being made, what we see there the violent rhetoric, the threats, this reaction -- do you think we're going to see a lot of more of this? In other words, is this the beginning of things to come?

PALIN: Well, these union bosses that are acting like thugs, as they are leading some of their good union members down a road that will result in, unfortunately, somebody getting hurt -- if you believe the death threats that are being received by those who just happen to support amending some collective bargaining privileges of state unions. Well, it is these unions bosses' responsibility to turn down the rhetoric and start getting truth out there so that nobody gets hurt.

And, you know, I talk about unions perhaps with a bias and it's because, you know, I'm a teacher's kid. As we speak, my daughters are enjoying the tutelage of some of the best public school teachers in the nation as they are in their classrooms today. And Todd and I both have union memberships in our back pockets through our professional careers.

So, maybe my bias is, as a union member having known the way that this works, where it's not the good union members who want to be portrayed and perceived as being selfish and shortsighted, but it is union bosses who ultimately are driving towards governors having to be forced to privatize and outsource the jobs and the services that previously union members would have enjoyed. It's not the good union members and I say that from firsthand experience.

HANNITY: All right. You took to Twitter today. And as always, it seems to make a lot of news when you do this. And you took on Michael Moore as a hypocrite. Now, Michael Moore was saying -- he actually used the phrase, "This is war." Jesse Jackson said -- you know, used terms like fight back, rebellion, et cetera.

But you pointed out and found the hypocrisy on his part. Explain.

PALIN: Yes, Michael Moore is a hypocrite. He's declaring war on this situation, trying to get people to believe that what Walker has succeeded in doing in trying to get their state to rein in government and live within their means, that that is somehow declaring war on the working class when -- look at what Michael Moore in his profession choosing not to use union workers as crew members on his film. That's hypocritical.

And, you know, he's contributing to that rhetoric and causing more problems. If he could just help to turn down the volume, deal in truth, deal in reality. Reality is we have 15 million Americans who are out of work. We have states who were underfunded and underwater when it comes to pension and retirement plans for union employees. We have a $14 trillion debt. We have Middle East turmoil that is contributing to future inflation and high oil prices. And we have a president who is anti-U.S. oil.

We have all these contributing factors, a kind of a perfect storm right now, where the last thing we need is someone like a Michael Moore trying to ratchet up the rhetoric and the panic in the electorate.

HANNITY: You know, the idea that he didn't use union employees in his film is pretty ironic, considering he's now going to start a war and then he even went further last night by suggesting that, you know, this is a war leveled against working people in the country. And they got to stand up. Why didn't anybody stand up to him?

Well, let me stay on the spending issue here, because, as you know, NPR gets funding. And when the Republicans now proposing -- we got to look at everything to close this budget gap we have. This year alone, another $1.6 trillion in new deficit. So, NPR is on the table, National Endowment for the Humanities and Arts and Corporation for Public Broadcasting.

And we hear this NPR executive caught on tape and this is what he had to say about the Tea Party Movement.


RON SCHILLER, NPR EXECUTIVE: The current Republican Party is not really the Republican Party. It's been hijacked by this group that --


SCHILLER: It's not just Islamophobic, but really xenophobic. I mean, basically, they are -- they believe in sort of white, middle America, gun-toting it's scary. They're seriously racist.


HANNITY: Now, considering this election was about returning to first principles and the Constitution and limited government. And here's NPR meeting with people that he thought were from the Muslim Brotherhood and associated with them, saying this about the Tea Party. What was your reaction?

PALIN: I think it's quite revealing of what the agenda there at NPR has been all these years. And it's kind of refreshing to see some proof of that.

NPR, National Endowment for the Arts, National Endowment for the Humanities, all those kind of frivolous things that government shouldn't be in the business of funding with tax dollars -- those should all be on the chopping block as we talk about the $14 trillion debt that we're going to hand to our kids and our grandkids. Yes, those are the type of things that for more than one reason need to be cut.

HANNITY: All right. We are going to talk about specifically those things that need to be cut. And also, how you think the Republicans are doing. We'll have more with Governor Palin right after this break.


HANNITY: And welcome back to "Hannity" as we continue with former Alaska governor, Fox News contributor Sarah Palin.

All right. So, how do like the idea that Julianne Moore will be playing you in an HBO upcoming movie? Your thoughts.

PALIN: Well, I'm all about job creation. And I guess I could provide some of these gals who pretend like they are me some job security. I would ask, though, if they're of the mind of spreading the wealth around, that perhaps they want to spring for one of my kids' sets of braces or something as they capitalize on pretending to be me.

HANNITY: She doesn't really look -- I mean, she's a good actress. I thought Courtney Cox, Demi Moore, might be a little bit more -- a little closer look, no?

PALIN: Well, I'm absolutely flattered that you would say that. But, no, I don't know. I think I'll just grit my teeth and bear whatever comes what may with that movie.

HANNITY: All right. Let me move on to one serious issue. Newt Gingrich seems to be gearing up. He's going to be running. Tim Pawlenty is going to be running. Rick Santorum is going to be running. Mitt Romney looks like he's going to be running. And any number of other people.

And I know a lot of people are wondering, is Governor Palin getting closer to making a decision?

PALIN: Still contemplating it, Sean, because, you know, it's, obviously, a huge life-changing decision to be made. But there are some extremely, extremely difficult situations that our country is facing today.

And unless I have the confidence that we have a GOP candidate who is out there willing to tackle these issues, regardless of what perhaps some special interests or ties they may have had in the past to these special interests, if those influence discussions that are being made -- unless I'm confident there is a GOP candidate who can tackle these things and provide solutions, then, yes, seriously, I will continue to think about it, offer myself up in the name of service.

But, as I'll tell you, Sean, national security issues and impending self-imposed energy crisis that is looming and the fiscal crisis that we face because of a $14 trillion debt and this practice of deficit spending, those things are going to bring America to her knees. So, we certainly need the strong, tough, smart leadership that hopefully, a GOP candidate can bring.

HANNITY: Does that mean you would wait a little longer and see who gets in the race and then make a decision based on who is in there, whether you think you could do a better job?

PALIN: You know, and that -- thinking along those lines is unconventional for me, because I've never waited for anybody else to line up and then I jump in at the end. In fact, in my races over the last 20 years, I've usually been the first to jump in. But in this case, because it is so monumental and so affecting on a family, I probably would wait to see who is willing to put their name forward in the hat in terms of serving this country.

And if I'm confident that there are people who can engage in healthy debate and contested, strong primary, then that would go into my thinking as to whether or not to run.

HANNITY: All right. We're going to continue to follow the process with you.

All right. You know, we just talked about Wisconsin. We talked about NPR. We see that states are facing huge, massive budget deficits. We see the price of oil, which you mentioned, is going up. We have the federal budget deficit.

As the Republicans now battle over last year's budget, they want to cut $61 billion. The Democrats only want to cut $4.5 billion of a $3.7 trillion budget with a $1.6 trillion deficit.

My question is, how do you feel they are doing, the Republicans now, including the new freshmen that many of whom you campaigned for? Do you think it's enough by waiting for next year for the bigger cuts in spending or should they be doing it now?

PALIN: I'm kind of embarrassed for some of the GOP to -- for them to be assuming that the American public believes that this is a serious discussion when we're talking only about $54 billion in cuts that they have on the table. Certainly that's better than the $4 billion that the Democrats are proposing.

But, no, we need to be looking along the lines of a Rand Paul $500 billion cut and granted that's a more long-term than just these continuing resolutions and the cuts we need to make there to sustain our government.

But, no, we need much greater cuts and a more pro-growth development, pro- industry agenda being plugged into these budgets in these coming days -- certainly much more than the $60 billion or $54 billion cut that's on the table.

HANNITY: So, in essence, are you disappointed then that -- when Paul Ryan was on this program, he said, all right, we have to deal with last year's business because the Democrats didn't pass a budget. But he says in April they're going to deal with entitlement reform, deal with the bigger cuts.

Do you think, politically, it would advantageous? Mike Pence says, you know, let's have a fight right now. Do you think they fight for all the cuts they want now and not wait until next year?

PALIN: Absolutely. They need to be bold and strong, and they those steel spines and they need to keep Americans believing that the GOP principles will be able to be those things when they're plugged in appropriately to get the economy back on the right track. We're going to lose faith in the party if -- no, if we just take these tiny baby steps, you know, million here, billion there, to start ratcheting down a $14 trillion debt.

No. We need to bite off some big chunks today. And if that takes a fight, then, hopefully, the GOP leadership is willing to fight for America's future.

HANNITY: It seems like there's a political calculation out there that if Democrats -- it seems like they were pushing for a government shutdown because I think they thought it would be advantageous.

The president punted when he presented his budget. Do you think there's -- they are being timid because they are afraid of this idea that they will be blamed if the government shuts down?

Do you think it would be right to shut the government down, at least nonessential services that -- while they fight for -- again, I agree with you, I think billions are nothing compared to the trillions. Do you think maybe they are just making a political calculation here?

PALIN: Well, they certainly should not be assuming that capitulating to this president who seems quite disinterested really in what the debt is going to do to our country. If the president were more interested in it, I think he would be the one showing the leadership skills that are needed in order to start ratcheting down the debt. And we are not seeing that from President Obama.

So hopefully, the GOP knows that through the midterm elections, we elected more Republicans in order to engage in the agenda that would put the country back on the right track.

Hopefully, they are strong enough, they're bold enough to do what the American public has sent them to Washington to do, get the economy back on the right track by cutting spending and allowing more of a pro-growth, pro-private sector agenda to be engaged in, in D.C.

HANNITY: All right, Governor, good to see you. Thank you so much for being with us. We really appreciate it.

PALIN: Thanks so much.

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