Special Guests: Sean Hannity - Host of Hannity on Fox News Channel

NEIL CAVUTO, HOST: All right. Close friend of labor, check. Close friend of Bill Clinton's check. Close friend of stimulus, check. Close friend of doing more of what's worked so well, check. Sean Hannity. As Alan Krueger seems perfect for this president. And now as his choice to replace Austan Goolsbee as chairman of the Council of Economic Advisers, it is a perfect fit. Good to see you, buddy.

SEAN HANNITY, FOX BUSINESS: Good to see you, man.

CAVUTO: This is a like a big moment here.

HANNITY: You never invite me on the program? Why don't you ever have me anymore?

CAVUTO: You see that's a lie. I have many times and you just don't even deign it.

HANNITY: Every time I'm here, I raced over from radio, (INAUDIBLE)

CAVUTO: We're very happy to have you. And you're concerned about this. First before we get to the hurricane and how they could exploit it, but more this economic choice, why?

HANNITY: Did you see the interview I had with Austan Goolsbee the other night.

CAVUTO: I did. You were very mean by the way.

HANNITY: I was not mean.

CAVUTO: Yes, you were.

HANNITY: You thought I was mean.

CAVUTO: Yes, I do. But you've gotten very mean.

HANNITY: I have not gotten mean.

CAVUTO: But go ahead.

HANNITY: I'm nicer than I have ever been. You know, here's -

CAVUTO: I think Austan enjoyed it. But go ahead.

HANNITY: He was actually very good about it. I thought, first of all -

CAVUTO: A lot of people smile through an inquisition. It doesn't mean they're happy.

HANNITY: Well, what do you call this? This is an inquisition.

CAVUTO: You were calling Austan on the carpet for a lot of initiatives and all the rest.

HANNITY: It's either two things. Either they believe in their socialist policies or they don't. I think the president interestingly is everything that I warned the country that he would be and that is a rigid ideologue. I don't think he has the capacity to change.

CAVUTO: You don't think he is a pragmatic type like Bill Clinton was forced to be.

HANNITY: No.

CAVUTO: You called that out early. Don't wait for that.

HANNITY: Neil, I had prominent conservatives, names that you would know, pull me aside privately and said, "You know, Hannity, you're pushing really too hard on this Jeremiah Wright, this Bill Ayres. He is extreme. He is radical stuff." And they urged me. They would even say things, like in the best interests of your career we think you're going too far. And, I would rather, for the country's sake I was wrong but nobody really vetted this guy I think the way he needed to be vetted. The way we're vetting the Republican candidates for example, now. And I think on economic matters, the thing that every time I see you, I ask you, you know, what do you think of the economy? How bad is it? You know, when people's homes are underwater to the extent they are. When real unemployment is at 18 percent. Adding we don't count people anymore, underemployment.

CAVUTO: And you think Krueger is just, an addition to that sort of group government speak.

HANNITY: Is there any indication that he is not? Is there any indication somebody is going to walk into the Oval Office, even for the best interests of the president politically and say, "Mr. President, your policies are not working. You're not going to get reelected with a 55 percent, latest Gallup, latest Rasmussen poll disapproval rating. And for the sake of the country you got to pull your foot off the gas here. You got to unleash -

CAVUTO: You know, I watch your show. And I always think - I think the president's a smart guy, Sean. And surely he must realize the torpedoed direction he is going if he doesn't change? Yet, he doesn't and I always wonder, is it because he thinks that Republicans will implode and that the class warfare argument will eventually win and stick even though it never has? What is it, you think?

HANNITY: You know, it does defy logic --.

CAVUTO: Bill Clinton told him to shift a little bit.

HANNITY: Moderate. Bill Clinton in that sense I think was a great, very pragmatic smart guy. And I think he did it reluctantly (INAUDIBLE).

CAVUTO: (INAUDIBLE) Sean Hannity said that Bill Clinton was a great guy.

HANNITY: Yes, reluctantly. You know, you would think that he would do these things. Here is what I think he is counting on. Fifty percent of the country does not pay any federal income tax anymore.

CAVUTO: Entrenched base.

HANNITY: I think he thinks he's got a base. I don't think he is connected the fact that independents have left him in droves if you look at the internal poll numbers. And I think he thinks he will be able to recapture the magic of "Yes we can, Obama, change, change" but all indications are that is not the case.

CAVUTO: But even his most loyal backers have been disillusioned and disappointed.

HANNITY: I think that base will go back to him. I don't think he's going to lose that base. We saw Maxine Waters, congressional black caucus.

CAVUTO: Right but even if the numbers just sit out the election. That's going to be hurting.

HANNITY: That would hurt him a lot. I also don't buy into the narrative that the Republican candidates are weak. I think the Republican candidates in the field is strong. I think this is baptism by fire.

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