Who Were the Real Winners and Losers in the Deal That Averted a Government Shutdown?

This is a rush transcript from "On the Record," April 8, 2011. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Well, we're now at the point where the Senate Majority Leader is thanking everyone, as both sides of the aisle thank each other. Karl Rove is back with us.

Karl, what did Senator Harry Reid win? What did President Obama win?

KARL ROVE, FOX NEWS CONTRIBUTOR/FORMER BUSH SENIOR ADVISER: Not much. President Obama did not win much of anything. He has been absent from the process until this week. He said he wanted this done early in the week, this morning, didn't happen. He said he would never sign another short term continuing resolution. He's going to sign it.

But most important of all, both Senator Reid and President Obama attacked the fundamental idea of cuts, spending cuts. Senator Reid said this was going to be dangerous to the republic if we cut a dime. We are going to end up cutting 40 -- nearly 40 billion dollars out of the budget. That's going to be important.

Senator Reid did win one thing. He kept the Democrat Senate caucus relatively united and quiet, and they got a deal they can live with.

VAN SUSTEREN: I'm curious. He herded his cats. They didn't want those cuts. Right? That's right. They didn't want the cuts, number one.

ROVE: He's got some who don't. Remember, he's got 23 Democrats up next year out of his 53 member caucus. Some of those are in red states and they're very nervous about being put in the place where they vote against spending cuts and for more spending.

VAN SUSTEREN: I guess that they would see in the Senate -- the Senate Democrats would see that the Planned Parenthood aspect was out of the picture. However, it has been agreed upon that it is going to be a standalone and it's going to come up.

The question is what is going to happen when it comes up? Because it's probably not going to make a lot of friends then. Secondly, in order to keep the troops quiet, he made -- someone made calls to, quote, K Street, which are all the lobbyist groups. So what can be said to them to keep them quiet?

ROVE: I don't know who he called.

VAN SUSTEREN: I don't mean he, but somebody called.

ROVE: I assume that the Senate Democratic operation was talking to sort of the liberal interest groups, everybody from the ACLU to the National Organization for Women, Planned Parenthood, you name it.

But here is the language: this language has been in the law for 14 years. "None of the funds appropriated under this act shall be expended for any abortion, except where the life of the mother would be in danger if the fetus were carried to term, or where the pregnancy is the result of an act of rape or incest."

Forty nine of the 53 members of the Democrat Senate caucus have voted for that provision.

VAN SUSTEREN: Why was it such a hang up?

ROVE: Because they had a chance. They took it out in 2009, when they had those huge majorities in the Congress, 60/40 in the Senate, 278/155 in the House. They took it out.

So after having voted for it for 14 years, they had their chance. They ripped it out. Then they don't want to put it back in. It is going to put them in between a rock and a hard place.

You're going to have 49 current Democrats -- remember, some of the new members include like Joe Manchin who will vote for this. He's a pro-life Democrat from West Virginia.

VAN SUSTEREN: So that's when they lose. So when it comes back up, that is going to be a problem for them. I tell you, I've been on Capitol Hill all week long. The most organized group of people up there were people wearing Planned Parenthood T-shirts and placards and everything

else. This is not a happy group that's going to be happy when this comes back up.

ROVE: Look, the winner tonight is John Boehner. John Boehner has shown incredible leadership in keeping what could have been potentially a fractious cautious united and together. He has put at front and center of the national debate spending cuts. He has won dramatic spending cuts over the opposition of the Democrat leader in the House, the majority leader in the Senate and the President of the United States.

VAN SUSTEREN: But I don't think he had much choice. Those Republican freshmen, I don't think they can be underestimated in terms of their determination and how much they are sticking together. I don't think he had a lot of wiggle room.

ROVE: You know, he didn't want to have a lot of wiggle room. You have to remember, this is a guy who came to Congress in 1992, John Boehner, and has never asked for and never sought and would never encourage his district to receive an earmark, because he considers them corrosive and wrong.

The amazing thing to me is he has kept this all together. I talked in the last couple of days with a couple members of the Tea Party caucus in the House. They told me independently, I've again to John Boehner and told him I'm with him in this fight, which is powerful. John Boehner created a sense of unity.

VAN SUSTEREN: Unless he changed his mine. If he changed his mind, if he wasn't fighting for what they wanted, they weren't going to be with this fight.

ROVE: You know what? They were convinced he was working for them and working with them.

VAN SUSTEREN: Because they have like a 90 bloc, a 90 vote bloc.

ROVE: Well, it is not that unified. It is not just freshmen. It's freshmen and others. We have a diverse House, and he kept it together. That's a remarkable accomplishment.

I want to say one thing, you had earlier guest, Congressman Peter Welsh, a Democrat from Vermont, a pretty reasonable and thoughtful guy. I thought it was interesting, when you were talking about the bigger problem we face as a country with our budget -- huge budget deficits. This year, it's going to be 10 trillion, 363 billion dollars. That's going to be the

public debt of the United States.

He said three things to you. He said the tax code, defense budget and revenues. That's not where the problem is. The problem is right here. This year, 2.055 of the budget is mandatory spending. One trillion, 361 billion is discretionary spending. Ten years from now, the CBO projects that the mandatory part of the budget will be three trillion, nearly 3.3 trillion, and the discretionary part will just be 1.6.

So, we will grow the mandatory side 1.2 trillion dollars. And we will grow the discretionary side 200 billion. As a result, our deficit is going to be driven primarily by what is happening to that mandatory side.

VAN SUSTEREN: There's a part, though, Karl -- I think that the American people have to be with you in order to fix things. The tax code is important. When they hear that there are 3,300 loopholes, and that -- the person tonight who gets a notice of the audit and has to go through all these loops, and then they read in the newspaper that these huge corporations do legal tax avoidance and don't have to pay.

I know all the arguments favor the corporations. But 3,300 tax loopholes? It's hard to be with your government when you find out that you are not getting the call. K Street the call. You are getting the audit. They're getting the tax avoidance.

ROVE: That's why Paul Ryan's "Path to Prosperity" is so, in a way, revolutionary, because it says simplify the tax codes. Get all those special breaks and privileges and special treatment out of it, and lower the rates for everybody.

So the people who are working hard for a living get a lower tax rate because we are taking out -- I mean, we keep larding the code up with all these special provisions that benefit this seemingly worthwhile group, or this seemingly worthwhile group. But all it works to is the advantage of some to the disadvantage of the many.

VAN SUSTEREN: And never to the little guy. I mean, it never it is. It is never to the person who is sitting out there who doesn't have an expensive lobbyist.

ROVE: Loophole in the law, you have to have a lobbyist in Washington.

VAN SUSTEREN: But it is disgraceful. I think that's, in some way, why people are so dissatisfied. If you say that, you know, this is the big problem in the budget -- meanwhile, they are sitting back and they're getting taken on those other issues.

ROVE: Even when we fix the tax code -- the principle benefit of fixing the tax code is not going to be that it's going to generate a lot more revenue. This is a spending problem, not a tax problem.

VAN SUSTEREN: It is also a waste and fraud problem. It's a huge -- how does the government even know how much money it needs when it's got -- every time we need money, instead of going to see where there is waste and fraud and maybe --

ROVE: We just compounded it in the most powerful way possible. We have through the Affordable Care Act, health care reform law, basically put all of this money that's going to be taken and spent by the federal government and --


ROVE: And they've taken away the fraud and abuse. If you are a private insurance company, you want to make certain that you stop the fraud and abuse of the people in the system. And they've taken that away in the Affordable Care Act.

So we will not have -- you know, the FBI, which is responsible for investigating Medicare, says as much as 10 to 15 percent of Medicare expenditures are fraudulent. And we don't have the tools that private industry has to get that kind of fraud and abuse.

VAN SUSTEREN: How about since October -- at least between October and December, there are about 1,000 big companies that got waivers from the --


ROVE: The states have gotten them. Big unions have gotten them. My problem with waivers is this: Why should we have people coming to Washington, hat in hand, begging some anonymous bureaucrat deep in the bowels of the Department of Health and Human Services to get a waiver from an onerous requirement that is going to keep them from providing health care?


ROVE: Full disclosure, I'm involved in a group called American Crossroads. We've asked the Department of Health and Human Services to tell us who applied for waivers and didn't get them, and tell us on what business did you grant the waivers you granted? They are stiff arming us. They are refusing our Freedom of Information Request and saying it is none of your damn business.

Guess what, it is every American's business to understand if the government is handling out special privileges. Right from the get go, it looks smelly because unions -- unionized workforce is basically 13 percent of the total American workforce, seven percent -- less than seven percent in the private sector.

Yet, more than a third of the workers covered by these waivers are in unions. So why is that?

VAN SUSTEREN: Because they don't have lobbyists.


ROVE: Is that fair?

VAN SUSTEREN: No. It's absolutely not fair.

ROVE: I agree with you totally.


ROVE: The more power gets centralized in Washington, the more it becomes dependent for people to have lobbyists and people come here and plead their special interests cases.

VAN SUSTEREN: You get the last word because I'm told we have to go break. So you win on that one, anyway.