This is a rush transcript from "Hannity," July 8, 2009. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: We are now 141 days removed from the signing of the president's stimulus package and in that time more than two million more Americans have actually lost their jobs.

Now in recent weeks, the administration has now been forced to acknowledge that its $787 billion spending spree is not producing the results that they promised you. Now we've heard the vice president say that the White House, quote, "misread the economy," and that, quote, "everybody guessed wrong."

And a report issued this morning by the Government Accountability Office proves that the stimulus has, in fact, failed. And that is our headline tonight. "Stimulus Disaster." Now a hearing on Capitol Hill earlier today highlighted the fact that the money intended to get this economy back on track is instead being used to cushion state budgets and to fund short-term projects that are not creating jobs.

And President Obama is now forced to rewrite history. He once said the stimulus would create up to three to four million new jobs. But as this GOP video shows, he is changing his story. You're going to love this. Take a look.

Video: Watch Sean's interview


PRESIDENT BARACK OBAMA: The recovery act was designed to make sure that local districts didn't lay off teachers and firefighters and police officers, and it's done its job. It's done its job.

UNIDENTIFIED MALE: It is not creating new jobs. The jobless rate is going up, it's headed right to 10 percent. Those shovel-ready projects which we heard about four months ago, they're simply not there. They're not ready.

UNIDENTIFIED FEMALE: The headlines are grim.

UNIDENTIFIED MALE: The unemployment rate heading closer now to double digits.


UNIDENTIFIED MALE: House Republicans offered a real plan to create jobs. And get our economy moving again. Fiscal discipline for Washington and tax relief for working families, small businesses and family farms. Real solutions for a real recovery.


HANNITY: All right. So what's next for our economy? Is a second stimulus now on the way?

Joining me now is John Kasich, who is running for governor of the great state of Ohio. And by the way, he helped get us on a balanced budget plan using real congressional budget office numbers.

Well, first of all, it's gotten the job done, is what Obama said. Here's what I don't understand. They ran on the idea that this was the worst economy since the Great Depression, John. And now, they're out there saying, well, we misread the economy. Everybody guessed wrong.

JOHN KASICH (R), OHIO GUBERNATORIAL CANDIDATE: Sean, you know, you and I both wished that we were wrong and that the stimulus was going to work. You and I both said at the time that it was filled with pork, special favors, backslapping one politician to another.

And it hasn't worked. And in fact, the states have abused the money. They have not used it effectively to create jobs. They've not improved productivity. And you know what, Sean? People are beginning to think about, not just Republicans, not just independents, but Democrats as well.

When you take a look at all these massive plans that have come out of Washington, everybody is asking themselves, how are our kids and our grandkids going to pay these bills off?

So that's why you're beginning to see Obama's popularity begin to drop and you see people beginning to question whether this man really does have the right formula. And we can see in the stimulus package he does not.

HANNITY: All right. So — in other words, if he ran on the idea that it's the worst economy since the Great Depression but now they're trying to claim that they misread the economy and that they guessed wrong, how could it get any worse than the worst economy since the Great Depression? That sounds like political spin and dishonesty to Sean Hannity. And I think to a lot of other people.

KASICH: Right. It — yes, it sounds to me, Sean, like they're saying, "The dog ate my homework." You know? You remember when you used that when you went to school.

HANNITY: No, I said John Kasich.

KASICH: And the dog had it. Like you said the dog did.

HANNITY: I said you stole my homework.

KASICH: I don't understand — look, Sean, here's the thing. The cynics and the skeptics missed one thing. In the '90s, which was an incredibly successful and prosperous time in our nation's history, we cut taxes. We provided incentives to invest and risk-take, we shrunk the size of government.

Our 401(k)s were growing like crazy. And frankly, the Republicans when Bush came in, they forgot the formula, they had tax cuts but they had too much spending. And now Obama is like Bush on steroids. They're just spending money and now they want to raise taxes. This is absolutely the wrong direction to go to fix this country.

HANNITY: All right. Let me run some recent poll numbers by you. Because I think our audience needs to know this because it's impacting the political debate in the country.

John, there are two battleground states. One of them is yours, Ohio, the other one is Virginia, where his approval rating has now dropped below 50 percent. We have an L.A. Times poll, Washington Post poll, 9 out 10 Americans think that Obama is spending too much.

Rasmussen, more Americans are now blaming Obama for the bad economy. Wall Street Journal, the American people oppose the stimulus, think the country is on the wrong track, and more than — about 2 to 1 Americans are conservative over liberal.

Are things changing and changing dramatically, politically for Barack Obama?

KASICH: Yes, you know what? Things are starting to change, Sean, because people are taking a look. And they wanted to give Obama a chance and they still hope he's going to be successful. But the proof is in the pudding.

You know you get a nice doctor that comes in that has a nice manner and he's charming, and everything else. But if you don't feel any better, you start looking for another doctor. And what people are doing is taking a second look.

And if this unemployment gets up to about 10 percent around Labor Day, which I hope it doesn't, but I fear it might, everybody is going to take a second look and then they're going to have a problem. And I hope they don't try to do more of the same. Like what save me from a second stimulus package, you know?

Save me from a cap-and-trade bill that's going to put a dagger in the Midwest and is basically one politician against slapping another on the back. Save me from that. Cut the taxes. Make small businesses more effective, you know?

HANNITY: But Congressman.

KASICH: And that's what they have to do.

HANNITY: But nobody — no Democrat is talking about cutting taxes. They're not talking about stimulus two.

KASICH: No. No, they're not.

HANNITY: Tax and...


KASICH: Well, you're right. They're not.

HANNITY: Cap and taxes and tax increase, health care is on the horizon, $2 trillion and that's just the bare minimum cost as far as I'm concerned. It will cost a lot more. So the question is, will the country wake up now in time to stop the next phase of this dramatic debt and deficit that they're creating?

KASICH: You know, Sean, you know where Salem, Ohio is. Tiny little town in northeastern Ohio. They had on the July Fourth in this tiny little town a tea party. 1700 people showed up. You know here in Columbus, there were 7,000.

There's a movement gathering inside the country where people are saying, we're heading in the wrong direction. And you know what, Sean? People are smart. They understand it. They want to give this guy a chance. A new direction. The problem is now they're beginning to realize we're going in the wrong direction.

And when you're going in the direction, you don't step on the gas pedal and go faster. You begin to stop and turn around.


KASICH: People are going to get his attention.

HANNITY: Jim Pinkerton, who I like a lot, is a good friend of the program, and I've known him for many, many years. He writes on FOXNews.com. And the headline is...

KASICH: Awfully tall, too.

HANNITY: No. He's very tall. "Obama's Katrina." Is the failing economy — for example, will the American people now view this his debt, his deficits, his botched, you know, economy, his broken promises on spending?

Are they not going to blame him? Is he now going to take responsibility for this? How long does he get away with saying, this is Bush's economy?

KASICH: Well, I think those days are coming to an end, Sean. And here in Ohio, his approval rating has fallen under 50 percent, which is — was in, you know, the middle-60s and it's really plummeted.

So I think people are — I mean, first of all, Republicans are very energized. Independents are getting more energized. And those old Reagan Democrats, who you and I understand, because we come from that part of the world, they're beginning to say, hey, I am worried about my kids.

I'm worried about spending. And you guys are getting it wrong and in Washington, it's the same old nonsense we've seen for a decade, Sean. And, you know, it's — look. Let's keep the faith. You keep doing your job. We'll all do our jobs. We'll turn it around.

HANNITY: All right. You do me a favor. Go get elected governor, although why you would ever want that job, you're out of your mind, but good luck. And I'm supporting you in the effort.


HANNITY: All right. Appreciate it.

KASICH: All right. Sean, thank you.

Watch "Hannity" weeknights at 9 p.m. ET!

Content and Programming Copyright 2009 FOX News Network, LLC. ALL RIGHTS RESERVED. Transcription Copyright 2009 CQ Transcriptions, LLC, which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon FOX News Network, LLC'S and CQ Transcriptions, LLC's copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.