Will the Credit Downgrade Cost President Obama a Second Term?

This is a rush transcript from "Hannity," August 9, 2011. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: From "The Anointed One's" invisible leadership in the debt negotiations to his deflection of blame on the credit downgrade, the president's move from one disaster to another over the past month, and judging by the criticism, his chances of re-election in 2012 now could be in jeopardy.

At the Washington Post, liberal Dana Milbank writes, quote, "The most powerful man in the world seems strangely powerless and irresolute, as larger forces bring down the country and his presidency."

Now, the Wall Street Journal has an explanation for the lack of leadership, columnist Bret Stephens concludes, "I just think the president isn't very bright. Socrates taught that wisdom begins in the recognition of how little we know, Mr. Obama is perpetually intent on telling us how much he knows. Stupid is as stupid does, said the great philosopher Forrest Gump. The presidency of Barack Obama is a case study in stupid does."

And it's really a watershed moment in "The Anointed One's" presidency when "Mr. Thrill Up My Leg" Chris Matthews is fed up with the president's antics.

(BEGIN VIDEO CLIP FROM "HARDBALL"/MSNBC)

CHRIS MATTHEWS, HOST: It seems like there was a couple steps missed here. When he went to the Tea Party crowd that were pushing Boehner around all day long, he could have said to them, OK, we have differences of opinion. Here's my opinion, and here's my plan, damn it! I think we can cut $4 trillion over the next 10 years. Big national, international cuts that the world will recognize. I want some spending cuts in here but I also want some revenue from the rich. Here's my spending cuts. I'm sticking my neck out boys and girls. Here are the cuts. I want to go after Medicare. I want to put some (INAUDIBLE) testing here. I want to have some co-pays in here. I want to have changes in dates when you're eligible. I'm willing to stick my neck out. Now, I want you guys to do your part and tax the freaking rich!

(END VIDEO CLIP)

HANNITY: What happened to Chris?

Joining me with reaction, the author of The New York Times best-seller "Courage and Consequence," the architect Karl Rove is here. Karl, welcome back, sir.

KARL ROVE, AUTHOR, "COURAGE AND CONSEQUENCE": Thank you, sir.

HANNITY: You know, it seems to me that sometimes there's this tipping point. Moment in history, events happen. And, you know, I got to tell you, I think this downgrade, and along with the debt negotiations, between the two of them, really shows the damage economically that this president and his policies and the Democrats have done. Am I seeing this right, objectively or am I just a conservative ideologue?

ROVE: Well, I think the debt negotiations and the downgrade and the president's involvement in the former and his response to the latter show three things. They show first of all, the president is at times arrogant and disconnected. Second of all, that he really is somebody who while he can say the words can't do the words. That is to say, he can talk about the need to have a plan and then not produce a plan. And finally, they show that these policies that the two-and-a-half nearly three year experiment with that idea that we could somehow spend our way to prosperity has come to a dead and screeching halt.

And the president is unable to deal with that. And as a result, he's stripped away over the last seven or eight months in particular, a lot of the image that he had as a strong leader. And that's the most precious asset a president has. If we see a strong leader, it gives us confidence. If we see a strong leader, even if we don't necessarily agree with him on everything, it gives us willingness to say, well, maybe he knows better than I do and I'm willing to follow him. But how the president has handled himself, particularly in the last 10 days, how he's handled himself, if he is defeated, we'll look back and say, this was the moment where things got locked in.

HANNITY: I think this is very deep and very profound. I mean, you know, this debt rating is what, the first time this has happened since 1917. And we start keeping these records here. And beyond that is that he represent, he is the symbol of that decline. You know, he's the symbol of real unemployment at 18 percent. He's the symbol of quadrupling our debt and our deficit and reckless spending and irresponsible policies and broken promises. And then we've got this petulant crybaby side of him where he casts blame about everybody but himself.

ROVE: Yes. Look, we're seen this reflected. This is out of pollster.com today, I checked it just before I came here. This is the president's approval on the economy. It is now 35 percent approve, 57 percent disapprove. That's a 22 point gap. And I would suspect that it is going to get worse here in the next couple of days as more recent polls replace earlier polls. I suspect this number is going to drop a couple of points and this numbers is going to go up a couple of points. You know, to have that big a gap with all the economists, the Federal Reserve came out today and said, subpar economic growth, anemic recovery, unlikely to change over the next two years, and the jobless picture likely to remain roughly where it is. That means these numbers are not going to improve dramatically. And the president is stuck with them.

HANNITY: All right. Let's talk about 2012 and how this impacts 2012. Here it is, the Politico, I don't know if you can read it, "Kill Romney." "Kill Romney," that's the headline on this, quoting a Democratic strategist here. Because the president can't run on his record. So, the only thing they going to do is go out and try and damage him and hurt him. It is certainly a different message from the "Hopey Changey" thing when Democrats said, that we were getting during the campaign.

ROVE: Right. Look, for weeks, for months, it has been apparent with these lousy economic numbers, the only way the president and his people see that they have a path to victory is to irradiate the Republican nominee, to take whoever that is, whether it is Romney or you name it, and turn them and disqualify them in the views of the American people.

What's interesting to me is this comes from the president who denounced this kind of campaign in a fashion that I heard in 2008. Because he kept saying he was going to get rid of Karl Rove's style politics and then talk about the politics of personal destruction. But look, this is exactly what they are going to do. It is the only way that they can win. And I hate to say it that conceivably, if we have a weak candidate with a weak response to this kind of thing, they could conceivably win.

HANNITY: But it reinforces everything that I think I saw and some of us conservatives saw about him looking into his background before the election. That he is a rigid ideologue, that he can turn on a dime, he doesn't seem to have Clinton's pragmatic side. You know, I'll give you an example of the tone-deafness. You know, the president is still planning his weeklong vacation in Martha's Vineyard. His wife just took a secret vacation to Oregon. You know, the rest of the country is struggling and suffering and battling to make ends meet. And literally, making sacrifices and cuts, and he doesn't seem to have a plan to get us out of this, except more of the same. Another stimulus, more QE3. It seems like he doesn't get it. I don't know.

ROVE: Oh, he doesn't. Look, he's run out of ideas, because the liberal ideas that he has pursued over the last two-and-a-half years haven't worked. And he can't -- you are right, unlike Clinton, he can't say, look, something didn't work out and I need to be more pragmatic and I need to move to the center and actually do something different. I mean, this was -- that speech on Monday was pathetic. Do we have to look at him one more time giving a teleprompter speech to a vacant room based on class warfare, and (UNINTELLIGIBLE) that we are sick and tired of? I mean, you know, the infrastructure bank, please.

HANNITY: All right. Karl Rove, it's going to be fascinating. Thanks for being with us.

ROVE: You bet, thanks.

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