Karl Rove retired in 2007 as President George W. Bush's deputy chief of staff, ace political strategist and mastermind of public policy. But Rove -- aka "Satan" to liberals and not always popular with limited-government conservatives, either -- is very much involved in the daily warfare of partisan politics. A Fox News contributor and a columnist for both The Wall Street Journal and Newsweek, he's also writing a book about his White House days, traveling the speakers circuit and even becoming a star on Twitter.com. When I spoke with him by phone on Tuesday, March 10, from his home in Austin, Texas, the 58-year-old was so upbeat and friendly he began by reciting lines from the Texas state song -- and even offered to sing it.

Q: If President Obama got really desperate and called you up and said, "Mr. Rove, give me some advice about this economic crisis," what would you tell him?

A: I'd say, "Listen to your economic counselor when he said, 'Any efforts to help the economy should be targeted, temporary and timely.' And people respond more to cuts in their taxes than they do to increases in government spending, particularly things that add to baseline permanent spending."

Q: How do think he's doing so far?

A: Well, he's 50 days in. He's off to a strong start in many respects. He's put together most of his Cabinet quickly. He's put together his White House staff quickly. He's moved aggressively on the executive order front. He's been helped by his secretary of State, who's hit the ground running. On the big challenge he faces -- the economy -- his grade is incomplete. But I don't think that he's been as effective on that front as the nation would hope.

The economy will recover. The America economy is just too big and too strong and the American worker and the American entrepreneur and the innovator are just simply too productive not for the economy to recover. But the question is, "Will his policies hasten that day or will they retard that day?" I'm afraid I'm on the side that says it's going to retard that day.

The Republicans in the House offered an alternative stimulus package that emphasized tax cuts, particularly for people at the bottom. The bottom two tax rates were cut from 10 percent to 5 percent and 15 percent to 10 percent. And there were small business tax cuts and then some safety net (items) -- the extension of unemployment insurance and the expansion of food stamps. They ran that through the same econometric model the White House developed to measure its program and found that for half the cost it created 50 percent more jobs. The administration insisted upon a pork-laden, big-spending, expansion of government that at the end of the day is not going to get the oomph that our economy needs. It spends more in the years 2011 to 2019 than it does in 2009. If we’re supposed to be stimulating the economy now, one would think that you would be focused on giving the economy a jolt here in the short run, not growing government in the out years.

Q: Are you happy to be an observer and commentator instead of a player?

A: Yeah. I mean, look, when you walk into the White House you better walk in with the understanding that your time there will end. It ends no later than eight years. I felt honored to work there nearly seven. You better have enough sense of yourself that you’re not defined by the fact that you’re in the White House or when you leave -- as you have to leave -- you will have a very unpleasant time. I have a fellow who lives around the corner from me who played a role in the Reagan administration. If you engage him for more than five minutes of conversation, he will remind you of it. In a way, it’s sort of sad.

Q: Are you happy with the way you are characterized by your political adversaries and enemies?

A: Much of my definition occurred while I was in the White House. If I had to define happiness or contentment with what other people think or seem to think -- that's not the way to live your life. Particularly when you work in the White House, how you get defined is outside your control. The president used to jokingly say, "Better you than me" when there was some ugly story. That's just the way it is.

Q: How do you define your personal politics?

A: Well, I'm a compassionate conservative. I believe in limited government. I believe in markets. I believe in a robust and strong defense. I believe in traditional values. And I believe that the conservative movement is best served by depicting our philosophy the way that it is -- which is a compassionate and optimistic and hopeful agenda that by emphasizing personal freedom and emphasizing liberty and responsibility gives people the best chance in life to be all they can be -- to develop themselves, to grow, to prosper, to seek their own path in life.

Q: The Bush administration is infamous among libertarians and old-style traditional conservatives for expanding the size of government, for spending so much money ….

A: Well, let me ask you that. Look, we’re spending more on the military, no doubt about that. If a libertarian doesn’t like that, fine; we’re in a time of war and we need to. We’re spending more on securing the homeland, defending our borders. We’ve doubled the size of the border patrol and tripled its budget. I make no apologies for that. When it comes to the discretionary domestic spending budget of the United States, what do you think our record is?

Q: It probably hasn’t grown that much.

A: Well, when we came into office, it was growing a lot -- 16 percent in one year. That was the FY ’01 budget left us by Bill Clinton. We cut that growth rate in our FY ’02 budget to 7 percent and then to 4 percent in FY ’03, to inflation by FY ’05 and essentially flat-lined it in ’06, ’07 and ’08. It was a hard thing to do, because not a single Democrat voted for the president’s budget. They didn’t offer an alternative budget every year, but they did almost every year, and those budgets called for more spending, not less; higher taxes, not lower taxes; and more deficit, not less deficit.

We had to pass the budget with only Republican votes. Now the trade-off was that Republicans would insist on earmarks. We fought them every step of the way. The ugliest argument I had was not with a Democrat in the White House but with a Republican in the White House … yelling at me about the administration’s efforts to rein in earmarks.

But our record on discretionary spending is good -- and unknown. On mandatory spending, we’re the guys who stood up and said let’s reform Social Security and let’s reform Medicare. We’re the guys who stood up and said we have a problem coming in entitlements and let us put this on the table as no other president has been willing to do in a comprehensive fashion, because we need to address this. Now did we succeed? No. But we made it possible for future presidents and future congresses to tackle a problem that absolutely must be tackled -- which is mandatory spending.

Q: What do you say when someone says to you that "politics is a dirty, rotten, slimy business and it causes all the problems in the country"?

A: Well, democracy is at the heart of our system. The "American Experiment" is based around democracy, which requires elections. Have elections always been pristine and sacrosanct? No. In fact, read the rhetoric of the 1800 campaign and you'll be shocked. It would make the Swift Boat veterans and Americans United for Change look like pansies by comparison. The things that John Adams said about Thomas Jefferson. Thomas Jefferson, the sainted Thomas Jefferson, hired a notorious libeler and installed him as an editor of a Democratic-Republican newspaper in Richmond, Virginia, to libel John Adams, and the things he routinely wrote in his editorial columns are vicious … .

American politics has always been tough and American politics today is in many respects less tough than it was before, because now, with national media and with the Internet and with cable TV and with network TV and large national newspapers covering presidential races with a lot of resources, it’s more akin to the emperor’s new clothes. At the end of the parade, people are going to see the candidates as they are -- strengths and weaknesses -- and hopefully see them on their better days and make the best decision they can. As a result, if you go over the top -- if you say things that people perceive as unfair and not appropriate to the campaign -- they’ll discipline you by not giving you their vote.

Q: Did the Bush years damage the Republican Party and hurt its credibility in terms of those old-fashioned GOP principles -- limited government, fiscal prudence, etc.?

A: Look, I would say, less the Bush administration. ... Again, I repeat, yeah, we're spending more on the military. But we were the guys who ratcheted down discretionary domestic spending. We're not the guys who believed in earmarks. Now I understand there is always a tension between what Congress wants and what an executive wants. And I would readily concede that the earmarks hurt us, no ifs, ands or buts about it. But that wasn't the administration. "The Bridge to Nowhere" took all the good that we had done in ratcheting down discretionary spending and washed it all away, no ifs, ands or buts about it. Continued...