On the air

POLITICO 
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\015\012\015\012March, 11, 2010 
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\015\012(Recorded March 9, 2010) 
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\015\012INTERVIEWER: MIKE ALLEN, White House Correspondent, Politico 
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\015\012GUEST: KARL ROVE, author of "Courage and Consequence"

MR. ALLEN: I'm Mike Allen, POLITICO's Chief White House Correspondent, and we're here in New York with Karl Rove, who has just published his memoir, "Courage and Consequence."Karl, thanks for having us in.
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\015\012\015\012MR. ROVE: Thanks, Mike. White House, incidentally, is a couple hundred miles south and at the corner of 17 and Pennsylvania Avenue. You're a little bit, you know, lost here, man. This is New York City.
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\015\012MR. ALLEN: But, we figure you'll—you'll show us the way. Courage and Consequence, who does that refer to?
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\015\012MR. ROVE: The "courage" I refer to is principally that of President Bush, and the "consequences" are the—both the consequential times in which he governed and the consequences of the big decisions that he made.
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\015\012\015\012MR. ALLEN: Now, in this book, you're candid for the first time about your dad. Why did you decide to get so personal?
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\015\012MR. ROVE: Actually, I didn't start out to be that personal about it, but last January, a year ago, 2009, my editor came to me and said, "You can't show up at the age of 43 in this book helping Bush run for governor, and people are going to want to know where you came from. And oh, incidentally, I've happened to look at the biographies written about you, and here are the ugly things that they say about you and your family." And so this was an opportunity for me to set the record straight about my parents. My parents, particularly my father, had been used by commentators, political journalists and political commentators, to attack me, and the collateral damage was the reputations of my father and my mother. And so it was a welcome opportunity to set the record straight.
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\015\012MR. ALLEN: And what do you think—have—how have people responded to the fact that Karl Rove, who had always been very on-message, very disciplined, very guarded, suddenly is being very candid?
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\015\012MR. ROVE: Well, I don't know. Look, I've always been candid. It's just that people haven't, you know—the opportunity to talk about my parents or my upbringing or some of the early myths—you know, when you're in the White House and when you're in—when you're living life at the speed that I lived it from the start from the start of the presidential campaign through my departure from the White House, you know, you get a choice, which is you can either deal with the myths that grow up about you or you can do your day job, and I chose to do my day job, but this book does give me a chance to sort of deal with some of those myths of Rove that have—
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\015\012MR. ALLEN: But you benefited from a lot of the myths around you.
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\015\012MR. ROVE: Well, I don't know if I'd say that. I mean, you know, being able—being depicted as I was in some of these things made it a hard thing for my family. But, you know—
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\015\012MR. ALLEN: But you were depicted as having your hands in everything, being all-knowing—all controlling. You didn't do anything to really discourage that.
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\015\012MR. ROVE: Well, I think I did by being myself, because I clearly wasn't having my hands in everything and I certainly wasn't all-knowing. But, look, Washington is a town that creates myths for its own existence and its own amusement, and I was a subject of myth, sort of like Grendel in Beowulf—you know, not seen very often but often talked about.
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\015\012\015\012MR. ALLEN: Now, Karl, what did you learn in the White House that you wished you'd known before you went in?
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\015\012MR. ROVE: I wish I had known that—that—how hard some of these things are to do and how consistent they are requiring of effort, because it—I would have tackled it with—tackled some of these things with, you know, more energy earlier. The second thing is—
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\015\012MR. ALLEN: Wait. Like what?
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\015\012MR. ROVE: Well, like, for example, Bush met with over a hundred-and-some-odd members of the opposition party in his first several months in office, and I wish we had, you know—and which was un—which was an unprecedented level of outreach, and he had to do it in the aftermath of the highly contentious 2000 election. But I wish we'd done even more because—
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\015\012MR. ALLEN: Well, and if he'd kept up things might have been very different.
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\015\012MR. ROVE: Well, and we did—we did keep up, but, I mean, you know, there's a certain pace that you have and then, you know, you get drawn into events; particularly after 9/11 there were large swatches of time which had been available for those kind of activities that now—and rather than being able to entertain people in the private quarters of the White House or have meetings with, you know, one or two or three or four Democrats in the Oval Office, you now had to have a secure "civets" with your battlefield commanders, for example, or you had to meet with the moms and dads and sons and daughters of those who lost their lives in Iraq or Afghanistan. So there—there are constraints in time. The second thing is is that I would—I think I would have learned more patience because, for example, 2001, Bush puts together an energy task force, and it finally produces legislation and a bill, but it takes four years. The—the Cheney task forces leads to a series of legislative initiatives which then leads to a series of discussions and—and maneuvering with the Congress and discussions and negotiations which finally, ultimately generate a very large bill.
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\015\012MR. ALLEN: Okay. So—so play—play—play "McKenzie" for the White House. How would you short circuit that process or how would you speed up that process? What should you have done?
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\015\012MR. ROVE: I don't think you can. I don't think you can, in fact, because McKenzie gets trumped by the triumvirate of Madison, Jefferson and Hamilton. You know, the—well, Jefferson's not in there because he didn't help write the Constitution. He's off in France. But our Founders designed the process not to be speedy, designed the process to be deliberate and slow and restrained. And so, you know, there is a desire once you get in there to try and get these things done, done, done, done done [snapping fingers], and it doesn't—it doesn't work that way.
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\015\012MR. ALLEN: Now, President Obama's aids are feeling the heat right now for lack of speed. There's a lot of palace intrigue stories now going around—going on about the President's top advisors, Rahm Emanuel, the Chief of Staff; David Axelrod, who has your title, Senior Advisor. Do you thing the press is being fair to them?
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\015\012MR. ROVE: I don't think it was as good as it was in the beginning and I don't think it's as bad as it is today, but it is bad. And I think the fundamental mistake—
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\015\012MR. ALLEN: What do you mean by "bad"?
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\015\012MR. ROVE: Well, I don't—I think they fundamentally—they made a fundamental mistake. You need to look at Congress as having a certain capacity. Now, the capacity varies from year to year and from body to body, but there is a finite amount of things that Congress can attentively do. And what they've done is they've tried to jam too many things through that funnel, and it's the—the Congress has had a limited capacity to deal with it. Second of all, legislation as complicated as they've attempted to do with the stimulus or with the cap and trade or with the health care needs the personal involvement of the President in setting the tone and setting the parameters. I was shocked when the President had a March 5, 2009, meeting bipartisan and bicameral to kick off health care reform and the next such meeting he has is February 25 of 2010. I was shocked when John Boehner said that he had not had a substantive meeting at the White House in months and had not had contact with the White House Chief of Staff for months.
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\015\012MR. ALLEN: Okay but—
\015\012MR. ROVE: That's unusual.
\015\012\015\012MR. ALLEN: So it sounds like—as far as the current media storm, it sounds like you have a little sympathy for them.
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\015\012MR. ROVE: I have a sym—I have a certain sympathy for the criticism. I also understand that it's not as—I mean, for example, there's been a lot of attention paid to internecine and warfare ostensibly between David Axelrod and Rahm Emanuel. I'm not—you know, there's a tendency by the press to overplay that and I—so I have a little sympathy for them on that. But I do think the press has got it right, that the administration has a disengaged, aloof president who has not set the tone with regard to legislation. To me, one of the key moments was December of 2008. In fact, I wrote about it early in 2009. When they—when President-elect Obama sends Geithner and Summers to Capitol Hill to say, "We need a stimulus and we need between 650 and 750," two mistakes were made. They said, "We'll take 650 to 750, but we'll accept up to 850." You don't tell Congress we would like to be in between these but we're willing to accept up to here without them going to their—
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\015\012MR. ALLEN: Well, all those plans had been put in their place under your president.
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\015\012MR. ROVE: No, I'm talking about the $787 billion stimulus bill. Did the TARP program—is that what you're referring to? The bank bailout bill?
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\015\012MR. ALLEN: Right.
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\015\012MR. ROVE: Yeah. Look, the bank bailout worked. President Bush gave—
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\015\012MR. ALLEN: But it's unbelievably unpopular.

MR. ROVE: Well, I get that, but it was the right thing to do and it worked, and both President Obama and President Bush supported it. President Bush loaned the banks $240 billion with the understanding that they would have to pay it back and they had to pay interest and dividends along the way. President Obama lent $7 billion to the banks, mostly smaller banks, and all of that $247 billion, virtually all of it is going to be repaid, there's going to be interest and dividends, and we will end up making a profit on that $270 billion—$247 billion. Where we're going to lose money is what was not anticipated which is the money that President Obama lent to the car company—to some car companies—Chrysler and GM, not Ford—and to their financing arms and to AIG. The administration has already admitted in a report several weeks ago that the cumulative losses of the entire program will be $83 billion, meaning there'll be nearly a hundred billion dollars of losses they're willing to admit today on the $300 billion that they lent to the car companies. We'll make money on the 247; we'll lose money on the 300. Bush was the principal driver behind the 247; Obama is the principal driver behind the 300.
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\015\012MR. ALLEN: Let's turn to politics.
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\015\012MR. ROVE: Right.
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\015\012MR. ALLEN: Where does the GOP go from here? Should they be the yes-but party, compromisers, or should they be the hell-no party, sticking to their principles?
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\015\012MR. ALLEN: They ought to be a party that says we have—we are—we stand on certain principles which will bring us sometimes in agreement with the president and sometimes into opposition with the president. When his mind is open to "suasion," we intend to persuade him. And they have to be a party that says we have an optimistic and hopeful agenda for the future of the country, not merely—you know, we can't serve as a party—the wave of discontent with the administration—
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\015\012MR. ALLEN: Okay, but how do they deal with President Obama? More the yes-but or more hell-no?
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\015\012MR. ROVE: Oh, I don't think—I don't think either one of those is a false choice. The choice is to say let us search for areas of agreement where we can, and let us stand for our principles when we—when we—when we can, and let us—let us advocate for a positive agenda at all times. I mean, this is—this is, you know, the idea the administration—this is not in 2001. When you have the leader of the Democrats in the House of Representatives going on Meet the Press and twice being asked by Tim Russert is George Bush the legitimately elected president of the United States, and Dick Gephardt twice refused to say yes he is. This is not there. This is a country now where particularly last year after President Obama came in, the Republicans were looking for ways to cooperate with him and the President of the United States made no attempt to cooperate with them. For example, on the stimulus bill, which we were talking about a few moments ago, he directed the House Democrats and the Senate Democrats to write it and didn't insist, either at the White House or on the Hill, that they sit down with their Republican colleagues and do what was necessary to bring them in inside the tent.
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\015\012MR. ALLEN: Okay, okay. So should House and Senate Republicans be confrontational or should they work on things that they actually would vote for that this president would sign?
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\015\012MR. ROVE: Sure, the latter. But that doesn't mean that they surrender their—their—the necessity of saying, "Here's where we think you're wrong, Mr. President."
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\015\012MR. ALLEN: Okay.
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\015\012MR. ROVE: And they were—they've been right on the healthcare bill to say, "Mr. President, this is a bad bill for America."
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\015\012MR. ALLEN: Okay. How soon do you think a Republican can win the White House?
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\015\012MR. ROVE: Look, several geological ages, which means 2012 or 2016. You know we are 14 months into the administration.
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\015\012MR. ALLEN: So—so 2012. So you think that President Obama could lose.
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\015\012MR. ROVE: He could lose; sure he could.
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\015\012MR. ALLEN: How?
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\015\012MR. ROVE: Well, if—if the economy is "stubbing" along and he continues to do things that are not in keeping with what he led Americans to believe during the campaign. Remember, during the campaign, President Obama's second most-widely shown TV ad in battleground states said, quote, "Government-run healthcare extreme." Unquote. So he didn't prepare the American people for—as, you know, he decried deficits under Bush, which were 3 percent of GDP. He's running deficits of 5.1. He decried the deaf—debt under Bush. He's going to double the size of the national debt in five years and nearly triple it in ten. This kind of disconnect between how he campaigned, I'm going to, quote, "scrub the budget line by line and end government programs that do not work" plus then an expansion and explosion of government, these kind of disconnects are causing him deep problems with the electorate.
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\015\012MR. ALLEN: Do you think that Secretary Clinton should run for president again?
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\015\012MR. ROVE: I don't have an opinion on that. I don't—I hear this cocktail chatter and I don't think it's likely to happen. She—that's even too disloyal for—for a—a Clintonite.
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\015\012MR. ALLEN: No, no, no. I'm talking about 2016.
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\015\012MR. ROVE: Well, look, I think that depends on where she is at that point. She's an able person. If she would have—if she had won the Democratic nomination in 2008 and been elected, I'd sleep safe at night knowing that the White House was in the hands of somebody's whose policies I didn't agree with but who was capable of doing the job. But 2016 is a long time away—seven years from now.
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\015\012MR. ALLEN: All right. Now, do you think it's reasonable to say that for 2012 Mitt Romney is the favorite for the Republican nomination?
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\015\012MR. ROVE: You know, as of today, but-because he was the runner-up last time around we have a tendency in the Republican Party to sort of let the runner-up, you know—the runner-up in '88 was Bob Dole. He becomes the nominee in 1996. You know, George W. Bush sort of had the brand name from having been a Bush and so forth but—and John McCain was the runner-up in—in '00, so he becomes the nominee in '08. But several geological ages are going to come and go. We've got the Permian, the Cambrian and a couple of other ages that will come and go before the 2012 election.
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\015\012MR. ALLEN: Who else could it be? Well, Tim Pawlenty or Mitch Daniels or potentially Sarah Palin or Mike Pence or somebody who emerges in the 2010 elections.
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\015\012MR. ALLEN: Will Republicans take the House in November?
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\015\012MR. ROVE: I think it's too early in the year. I would say that we're somewhere between 23 and 30 seats in the House today. We have filing deadlines in June in states like your—you know, Washington State. So we've got a lot of time. And the question is how does the money come together, how are the quality of the campaigns, what are the messages. But having said that, if the Democrats force through health care, there will—there will be a Republican House in November. No "ifs," "ands," or "buts."
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\015\012MR. ALLEN: Okay. Now what's more likely: A Republican House or a Republican Senate after November?
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\015\012MR. ROVE: Again, it depends on whether they pass health care or not. If they pass health care, there could potentially be both a Republican Senate and a Republican House. Absent that, I think that it's more likely to be a Republican House than a Republican Senate. Republicans will get awfully close in the Senate. And Senate races develop a lot earlier, as you know, than House races do. Even though you still have—like Washington State has a filing deadline in June, you tend to, if you're going to be running statewide, unless you've got the advantage like in Washington State of Dino Rossi with—with 100 percent name ID and a strong, you know, image, those races tend to develop earlier so candidates can develop a statewide image.
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\015\012MR. ALLEN: In the CIA leak investigation, did Patrick Fitzgerald engage in prosecutorial misconduct by letting Hughes twist in the wind for so long when he knew that Robert Novak's source was Richard Armitage of the State Department?
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\015\012MR. ROVE: I—misconduct implies a violation of the rules, and I'm not enough of a lawyer. All I do know is that in October 20th of 2005, he finally revealed the reason why he—you know, he told Bob—he had told Bob Luskin a week earlier that they might indict me.

MR. ALLEN: That's your lawyer.
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\015\012MR. ROVE: My lawyer, Bob Luskin—and a week earlier that they might indict me. They met on the 20th. He re—he finally, at the end of, you know—well into a five-hour long conversation revealed the—the reason that they might consider indicting me, that they would be—all things equal, indict me over. And when—and when—when he explained it to Bob and said, you know, here's the reason for that, Fitzgerald's response was to say you've rocked my world. And I explain in the book what the subject is, and it's amazing to me. It was amazing to me when Bob called me after that meeting and said, "Here's what they're focused on." It was not—
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\015\012MR. ALLEN: What was that?
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\015\012MR. ROVE: Well, it was whether or not I—if I couldn't recall a conversation with a reporter for Time magazine, why was it that I had asked my staff to go check out whether or not I'd—I'd talked with that reporter. And the reason was because Bob Luskin had had drinks with a colleague of the reporter who—and the colleague told Bob the reporter says he—he talked to Karl Rove that morning. So my lawyer had called me and said, "See if your staff can find any evidence that you had any contact with this reporter." And when Bob explained that to Luskin—Lusk—to Fitzgerald, Fitzgerald was taken aback and said, "You've rocked my world," and—and—and—
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\015\012MR. ALLEN: What did he mean by that?
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\015\012MR. ROVE: What he meant was that it blew his argument to smithereens. I mean he—he had assumed that I was misleading them, that this was evidence that I—
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\015\012MR. ALLEN: Okay. So should you have been let off the hook right then?
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\015\012MR. ROVE: Well, he had to obviously get my lawyer to—to—to be deposed and for the other reporter to—for the reporter who had visited with Bob Luskin to be deposed, but that took in the case of Bob a matter of a couple of weeks and it was not until April 26 of 2006 that finally he called Luskin. My sense was that he wanted to use the idea of, quote, "an ongoing investigation" as a tool in the preliminary motions over—over Scooter Libby—Scooter Libby's trial in order to deny defense motions by saying, "I have an ongoing investigation." And when that no longer worked to his advantage, when that had run its course, six months later he released me. Ironically enough, about the time that it—that I'm getting—that I'm on the verge of getting cleared from all this is when the media coverage ramps up that I'm about ready to be indicted, and I—finally I made my fifth appearance to the grand jury in April, which really had things in April and May at a—you know, at a fever pitch. I went in to the grand jury.
\015\012\015\012He asked the questions regarding, you know—you know, why did you ask your staff to go look for this information, which if he'd asked me in the four previous appearances, I'd—I have—it was so oblique, I couldn't figure it out, and that was it. And yet the media at that point was convinced I was going to be indicted, camped out in a deathwatch in front of my house. And when I was finally released in June, you know, which was a long time, why he didn't bring me in earlier than six months I'll never understand.
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\015\012MR. ALLEN: You think that was wrong.
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\015\012MR. ROVE: I—you know, it—I—it took too long and it was unfair, I think, yeah. I mean if he had taken the other two statements, then you would have thought he would have wanted to take the third statement and been done with it, but instead he kept me out there, and it wasn't until June that I was finally let out of this whole process. And then on—in August, it's leaked to The Washington Post that Richard Armitage was the source of the leak to Bob Novak. And when that happened, it was interesting to me because there were no deathwatches in front of his house, no media firestorm, no protestors surrounding his house with bullhorns. The Washington Post wrote an exculpatory editorial, and the reporters who had been so eager—in fact, one reporter for NBC had been on a Don Imus—Don Imus program when Imus was joking about me being raped in prison, and she was chortling along with the jokes. And when—when it was revealed that Richard Armitage was here, I saw no—you know, I saw no similar desire to discuss rape jokes.
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\015\012MR. ALLEN: Why?
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\015\012MR. ROVE: I think he was part of the Washington establishment and I was not. I was the conservative from Texas, and he was the Washington insider. I was the—
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\015\012MR. ALLEN: You were Senior Advisor to the President; that's pretty inside.
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\015\012MR. ROVE: Yeah. Well, he was the number two guy at the State Department, so he's a pretty senior guy, too. But—but again, does that just—the fact that I was a senior advisor to the President and he was the number two at the State Department justify people telling prison rape jokes about me and then writing an exculpatory editorial saying this really doesn't matter?
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\015\012MR. ALLEN: What did that make you think about the media? What did that tell you—
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\015\012MR. ROVE: Well, it said to me, you know, I was a—I was a figure that, you know, that drew the attention of the media, and there was one set of treat—there was one standard of treatment for me and another set of stand—a standard of treatment for somebody who's a Washington insider.
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\015\012MR. ALLEN: You write that Secretary of State Colin Powell and his team hid information about the source of the leak. What do you think of Secretary Powell's handling of—
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\015\012MR. ROVE: I don't say "they hid." I say that they—that—that—that—I don't know when Secretary Powell became aware of—of Secretary Armitage's involvement in this. I do know that—that the general counsel of the State Department came to the White House and said, "We have information regarding this and—but we're not going to share it with the White House. We're only sharing it with the Justice Department." Now, when he became—what that information was and when Secretary Powell became aware of this I don't know, but I do know that I, very early on, when this question was—was raised, immediately let my superiors at the White House know of my involvement in the form of accepting a phone call from—from—
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\015\012MR. ALLEN: Your superiors. You told the President.
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\015\012MR. ROVE: I told the President. The President called me from the Oval Service. First I told Andy Card and the White House counsel, and then I received a phone call from the President.
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\015\012MR. ALLEN: Now, did this cause a rift in your relation with Secretary Powell?
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\015\012MR. ROVE: No. We had a cordial relationship, you know—
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\015\012MR. ALLEN: Did you ever discuss what happened?
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\015\012\015\012MR. ROVE: No. But he had an unusual—he had sort of a very funny attitude about it, and I—I describe a couple of the instances in the book, because he took great delight in sort of at—at—at odd moments making certain that Richard Armitage and I had to shake each other's hand and smile politely at each other.
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\015\012MR. ALLEN: Okay, and the last question about this: Why didn't you come forward and deny Chris Matthews' statement that you had said that Joe Wilson's wife was "fair game"?
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\015\012MR. ROVE: Because the lawyers, both my lawyer and the prosecutor's office, asked me not to say things, not to be talking. And as I recount in the book, the person who said "fair game" was Chris Matthews, not me. Chris Matthews says in a phone conversation with Joe Wilson, "I've just talked to Karl Rove, and he said, 'Your wife is fair game.'" In reality, it was a phone conversation with Chris Matthews in which he asked me the question, "Is she fair game." It's not a phrase I would use. He had previously used it—this is on a Monday. He'd used it the previous Thursday in a broadcast where he said to Trent Lott, "Is Valerie Plame fair game?" So I got blamed for Chris Matthews' phrase. He was one of the people at the end of this process who seemed not to be interested in reporting that I might be indicted but gleeful in announcing that I was going to be indicted. And in the Spring of 2006, he is one of the people, you know, most intent during that April-May period in declaring that I'm—I'm facing imminent indictment, at a point where I had—where I'd been told by the prosecutor the previous October, you know, "You've rocked my world. It's over."
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\015\012MR. ALLEN: I want to take you through a "Rapid Round" now. In the book you express few regrets about policy decisions you made. The Washington Post said you have "Rove-colored glasses."
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\015\012MR. ROVE: Well, I'm not certain I agree with their characterization, but that's okay. Go ahead.
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\015\012MR. ALLEN: So I wonder if you can explain, as I click through what critics say are your biggest flops, starting with the failure to send sufficient troops to Iraq and to plan for the aftermath.
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\015\012MR. ROVE: I think that's incorrect. We sent troop that brought down Saddam Hussein in a very rapid fashion. The—
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\015\012MR. ALLEN: You think there was adequate—
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\015\012MR. ROVE: Oh, absolutely.
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\015\012MR. ALLEN: —planning for the aftermath?
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\015\012MR. ROVE: Well, you know, look, a plan—Napoleon said that a plan is lucky to survive its first contact with the enemy. So there was a lot of planning and—but, you know, you always find conditions different and you have to adapt, and they did. And remember, for a while Iraq was improving, and then the enemy decided to make it the central front in the war. Al-Qaeda decided it was going to in essence conduct its surge and send its forces to Iraq to engage the United States there.

MR. ALLEN: Well, why didn't you do the surge at the beginning?
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\015\012MR. ROVE: Because we didn't need to. Because, you know—there was—
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\015\012MR. ALLEN: So there's nothing—there was nothing you would change about what you did in Iraq.
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\015\012MR. ROVE: No, no, no. Of course you would. Of course you would. But—but—but look, that's not the question you asked. The question you asked is, in essence, why didn't you get it perfect? And I'm saying that in war, you never get it perfect. You always have to adapt. Whatever plan you have in place—
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\015\012MR. ALLEN: Okay. All right.
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\015\012MR. ROVE: —has to—you're not the only actor on the battlefield, and in this particular battlefield, after having removed Saddam Hussein, we then had enter into it a new actor which was Al-Qaeda, which said, "Let us take this and make this the—the—the battle. Let us make this front." So, rather than fighting in Afghanistan and Pakistan, we can now be fighting in Iraq and hopefully rallying the Ba'athist remnants of the Hussein regime to work with us and the Iranians potentially to work with us in order to destabilize—
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\015\012MR. ALLEN: Okay. So what should have been done differently?
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\015\012MR. ROVE: Well, I mean, you know, I think that they—they did the right thing by recognizing that the situation had changed and the President said, "I'm going to do what is necessary to build a consensus behind a surge and to have a strategy in place with adequate numbers of troops to execute a strategy and to meet the new developed threat in Iraq."
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\015\012MR. ALLEN: Politicizing the terror debate.
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\015\012MR. ROVE: I don't agree that we politicized the terror debate. I'm not certain what you're referring to.
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\015\012MR. ALLEN: Well, Democrats would say that the President invoked the War on Terror repeatedly for political advantage.
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\015\012MR. ROVE: I disagree. Look, you can attack the President over the conduct of the war, but that's not using poli—that's not using war for political purposes, but the President could say, "This is what we need to do" and that is politics; I don't get it. I don't accept that at all.
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\015\012MR. ALLEN: Okay. Bringing politics even deeper into the White House.
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\015\012MR. ROVE: You know what? We took the political director to the White House who is sitting in the White House during the Clinton years and put him over in the Old Executive Office Building. It is the Obama administration that has brought the political—has brought the political director and put him back in the White House, replacing—
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\015\012MR. ALLEN: Wait. You had a Director of Political Affairs; it was Ken Melhman
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\015\012MR. ROVE: Sitting over in the Old Executive Office Building, not sitting in the West Wing like Bill Clinton and Barack Obama do. Patrick Gaspard sits in what used to be the office in the Bush years of the Personnel Director.
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\015\012MR. ALLEN: Put aside the seating chart.
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\015\012MR. ROVE: May—may—may—maybe it's why they aren't doing a particularly good job on vetting their nominees because they've got the guy in charge of that sitting over in some dark corner of the old EEOB while they've got their Political Director sitting in the West Wing. Maybe they've got their priorities reversed.
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\015\012MR. ALLEN: An expansion of government that would make LBJ blush.
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\015\012MR. ROVE: I disagree with that. President Bush, when he came into office, faced a budget in 2001 that had discretionary domestic spending growing at 16 percent. Page 414, read it. First year we cut that growth rate to 6.2. Then we cut it to 4 percent, then 3 percent, then to 2.2 percent, and we essentially flat-lined it for the last three years at less than inflation. President Obama comes in, and one of the first things he does in February of 2009, in the middle of the fiscal year, is increase discretionary non-security domestic spending by nearly 10 percent in the middle of the year. And then having bumped it up by nearly 10 percent, for the FY11 budget, grows it another 12 percent, which means we have increased the size of discretionary domestic spending since President Obama came into office by nearly a quarter. Don't be lecturing me about the grow—the expansion of government. This is a president who came in and said, "I criticized the Bush deficits which were 3 percent of GDP," about the outer limits of what economists think are sustainable and said "I'm going to raise that to 5.1" using rosy economic projections; they're actually going to be worse, "and I will double the size of the national debt in five years and nearly triple it in ten." So, no, President Bush does not get the credit he deserves for slamming on the brakes on discretionary domestic spending. And you will remember, those budget resolutions received a handful of Democratic votes in 2001 and one vote in 2002 and none thereafter.
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\015\012MR. ALLEN: Not increasing regulation of an out-of-control financial sector.
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\015\012MR. ROVE: President Bush courageously in 2001 listened to the advice left him by the—given him by the—the regulator of Fannie and Freddie appointed by President Clinton, Armanda Falcon, who said, "These institutions are out of control. I do not have the regulatory authority that we apply to a bank, a savings and loan, or a credit union." We spent four years fighting to get a bill through the Congress to regulate them. I talk about it in the book in detail, and I quote name—I quote quotes and I name names of Democrats who stood in stride the process of—of reform. And in 2005, we passed it through the Senate Banking Committee and Chris Dodd says to Richard Shelby, "You bring that bill to the floor and we're going to filibuster it." And back in the filibuster was the newly elected Senator from the State of Illinois, who'd been the third largest recipient of Fannie and Freddie contributions in 2004. Bust was pro-regulation and pro-reform. He said we cannot take these two huge financial institutions, t
\015\012wo largest financial institutions in America, holding $5.4 trillion worth of mortgage-backed paper and not have them subjected to the same kind of regulation and scrutiny that we give banks, savings and loans, and credit unions.
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\015\012MR. ALLEN: In retrospect, should you have done more to regulate Wall Street?
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\015\012MR. ROVE: Look, Fannie and Freddie, these government-sponsored enterprises, were what—what turned a moderate turn-down—down in the business cycle into a worldwide financial crisis. Should we have gotten that bill through Congress earlier? You bet. But that was the problem of the opposition of two—the two villains in this drama: In the House his name is Barney Frank. In the Senate his name is Chris Dodd.
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\015\012MR. ALLEN: And finally, blowing it when it came to anticipating the housing bubble.
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\015\012MR. ROVE: Look, we were—we were sitting there saying we had these two institutions. In 2001, I remember being in those meetings where we were being told these institutions were leveraged 8:1 or 10:1, meaning a 15 percent to 10 percent decline in the underlying value of their assets. Home mortgages would wipe these companies out. When we started to regulate them, they went on a buying—buying spree. It took them from 1938 to 2000 to buy $2 trillion worth of mortgage-backed paper. We deter—determine we're going to regulate them, and in between 2001 and 2005 they buy another $2 trillion worth of paper. The bill passes the Senate. In the next three years before they collapse, they buy $1.4 trillion worth of paper. And at the end, they were leveraged 70:1. And we were the guys trying to rein them in when the time—when—when—when—when he still had time to do it.
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\015\012MR. ALLEN: Do you agree with Vice President Cheney's critique of President Obama's terror policies, that's he's naïve and he puts the country at risk?
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\015\012MR. ROVE: I agree with the general thrust of it, yes.
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\015\012MR. ALLEN: Finally we have a question from a Playbook reader, Don Ennis of West Harford, Connecticut. You wake up and you're back in the White House only this time you're advising President Obama.
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\015\012MR. ROVE: I don't think that's going to happen.
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\015\012MR. ALLEN: If it does, what would you tell him to do?
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\015\012\015\012MR. ROVE: I'd say, "You know what, Mr. President? Start again on—you know, start again on health care. It is in the vital interest of the country.
\015\012
\015\012MR. ALLEN: That's a talking point. Give us some real advice. How would you get them out of this political corner they're in?
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\015\012MR. ROVE: I'd—hey, I was giving it to you. You may not like the advice, Mike, but I was giving it to him.
\015\012
\015\012MR. ALLEN: All right. What's something else?
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\015\012MR. ROVE: I mean, you know, that—what you've got to do is you've got—you've got to do what you said you'd do. When you said you would—it was red state, blue state, United States, then make it a United States.
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\015\012MR. ALLEN: Okay, pull back the camera from health care. Like what else do you think that they need to do politically? What real advice would you give them?
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\015\012MR. ROVE: They—they—they need to focus on the big thing: jobs and the economy. They need to focus on the structure underneath. Try and get as much bipartisanship as you can. He—he took a situation where the Republicans could have been easily co-opted and instead put them into permanent opposition. And thirdly, what you need to do is be engaged. This is a president who is aloof from the process. When you go—when you go a year—
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\015\012MR. ALLEN: What should he do?
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\015\012MR. ROVE: When you go a year without having a substantive meeting on health care when it's your supposed number one priority between the two parties, that's a problem.
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\015\012MR. ALLEN: Okay, but what should he do now?
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\015\012MR. ROVE: Well, whatever issue he determines is his top priority, approach it in exactly the opposite way of—of what he's approached over the last year, which is to be aloof, disengaged, outsource it Pelosi and Reid, and—and—and don't care about the substance, just care about being able to check it off at the end and say "I got the big—" "I got the big label, and I don't care what goes into it." The stimulus bill is a disaster because the President was unengaged from the process. There—I cannot imagine that there is a smart economist in—in the Obama CEA, the Council of Economic Advisors, and I know they're smart people inside the National Economic Council, who have to wake up every morning and say, "That is a piece of crap that we've got out there. Why didn't we do it better?"
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\015\012CHAPTER CLOSE

This article originally appeared on Politico.com on Thursday, March 11, 2010.