CQ Transcriptwire

[*] WALLACE: I’m Chris Wallace and this is “Fox News Sunday.” President Obama uses tough talk to urge passage of an economic stimulus.

(BEGIN VIDEO CLIP)

OBAMA: As we drag our feet and fail to act, this crisis could turn into a catastrophe.

(END VIDEO CLIP)

WALLACE: We’ll find out where the plan stands now when we sit down with Lawrence Summers, the president’s top economic adviser -- Larry Summers live, only on “Fox News Sunday.”

Then, how will members of Congress resolve conflicting versions of the stimulus? We’ll ask two key leaders -- from the Senate, Republican John Cornyn , and from the House, Democrat Chris Van Hollen .

Also, our Sunday panel examines ethics and the White House. Is the Obama administration living up to its own high standards?

And revealing thoughts from the president on the demands of his job, all right now on “Fox News Sunday.”

And hello again from Fox News in Washington. In the next few days, the Senate is expected to approve its version of an economic stimulus package. Then, tough bargaining with the House over its very different plan before a final bill reaches President Obama.

For more, we’re joined by the president’s top economic adviser, Lawrence Summers.

Mr. Summers, welcome back to “Fox News Sunday.”

SUMMERS: Glad to be with you.

WALLACE: The Senate has reached a tentative agreement on a stimulus package of $827 billion, which has more in tax cuts, but less government spending. How big a rewrite do you expect when the two versions, the House and Senate versions, get to that conference committee?

SUMMERS: Chris, we’ve got to begin with what’s most important. The economy lost 600,000 jobs just in January, lost 3 million jobs last year. We’ve got to give this economy some help.

The Senate bill, the House bill -- the overlap is 90-plus percent. We’ve got to work through the differences, find the best bill we possibly can, and get it in place as quickly as possible to contain what is a very damaging and potentially deflationary spiral.

That’s got to be the priority now. So yes, let’s argue vigorously. Let’s work through the differences. Let’s make sure we scrub out any wasteful programs. Let’s make sure we preserve key investments. Let’s make sure we give incentives where those incentives can make a big difference.

But you know, what’s agreed between the House and Senate is, at the end of the day, much more important for preserving this economy than what’s disagreed.

And so if there was ever a moment to transcend politics, this is that moment and that’s what I very much hope will take place as this legislation moves forward.

WALLACE: Before we get into the specifics, and there are some not minor differences between the two bills, is the president standing firm on his February 16th deadline? And is it realistic to expect that you can work out some sizable differences in less than a week?

SUMMERS: The president believes we need this legislation absolutely as soon as we can. He believes, as Speaker Pelosi has stated, as Majority Leader Reid has stated, that the Congress has to stay here, avoid their traditional recess until this legislation has passed.

There are too many jobs at stake -- the basic economic security, the ability to meet their needs for too many families are on the line...

WALLACE: So is he...

SUMMERS: ... for this to become a -- for this to become a traditional political football. It’s got to happen. It’s got to happen, and it’s got to happen very fast. And there’s no reason why it can’t happen very fast with good will on all sides.

WALLACE: By the February 16th deadline?

SUMMERS: Well, it could happen very fast before the congressional -- before the congressional recess. It’s not about this hour or that hour. It’s about getting this done as rapidly as possible for the American people.

WALLACE: All right. I want to explore some of the major differences in the House and Senate versions. And let’s put them up on the screen.

The Senate bill cuts aid to the states, especially for education, by $40 billion. It cuts $5 billion for health coverage for unemployed workers. And it saves 2 billion by phasing out payroll fax credits at lower income levels.

The biggest difference is that in addition to the immediate economic stimulus, you were pushing and the House passed a lot of what you’re calling long-term investment, what critics are calling -- is more government spending.

Do you want to see some of that restored in the final version?

SUMMERS: We believe that there are strong elements in the Senate bill. There are some very strong elements in the House bill. And what we’ve got to do is take the best of both.

We believe, for example, that it is critically important, at a time when too many of our kids -- you know, we say education is our most important priority. But I have visited school after school where the paint is falling off the walls. How can our kids believe us when we say that?

So we believe school modernization is an absolutely essential investment in the competitiveness and the future of our country.

WALLACE: You want to see that restored to the bill.

SUMMERS: It’s an investment that -- it’s an investment that can take place quickly. It’s an investment that’s labor-intensive in restoring schools and installing laboratory space that our kids need to compete. That’s a place where we think there’s very important investment to be made.

Is it a capacity to scrub this bill? Are there expenditures in -- in the bill that probably aren’t the highest priority? I’m not going to tell you that every item is the highest priority.

And the president really wants this not to be done the traditional Washington way. That’s why he said no earmarks. That’s why he’s vowed transparency and accountability on every project. And I’m sure there are improvements that can be made by taking resources out of certain investments where they’ve been inserted.

That’s why we have a complex legislative process in this country, so that bills do get honed and perfected along -- along the way. But let’s not focus -- and we do that much too often in Washington. We focus on the bit of difference, and we focus on where the political fight is.

Ninety percent of these bills are essentially overlapping. There isn’t a lot of disagreement to create 3 million-and-some jobs. Let’s work it out, get moving, start preserving those jobs.

WALLACE: Last month you set what you called three principles for what we needed in an economic stimulus package. You said it had to be timely, it had to be targeted, and it had to be temporary. But there are critics from both sides who say that these plans fail on all three points.

The Congressional Budget Office says only 64 percent of the House plan actually gets out into the economy in the next two years. So how is that timely?

SUMMERS: Well, if you look at the effects of it, even if some of the money is spent with a delay, the hiring begins even before the government’s in a position to reimburse somebody for the completion of a road project or a bridge project.

And I’ll tell you, Chris, looking at where the economic forecasts are right now, I think this economy is still going to need some support two years from now. And so I think the idea that not 100 percent of it spends out in the next two years is actually a prudent one.

But you know, we can quibble and hassle about the numbers. There’s a variety of efforts underway to accelerate the process of disbursements for infrastructure investment, for example. So I can assure you at the end of the day, the figure will be more than 64 percent.

WALLACE: Clinton Budget Director Alice Rivlin says that much of this program both -- in both bills is social spending that has nothing to do with immediate economic stimulus -- maybe legitimate social spending, but social spending. So how is that targeted?

SUMMERS: You know, it’s -- it’s interesting. Alice Rivlin’s one of the most respected voices in this town, and she had some concerns about the bill. But if you read this morning’s Washington Post, she made clear that what she thinks is important now is that it pass as rapidly as possible.

What’s social spending? Some people think that giving support to enable a low- or middle-income family to send their kid to college is a kind of social support. I don’t. I think it’s a very valuable function that lays the groundwork for...

WALLACE: But it’s not economic stimulus.

SUMMERS: ... the future -- lays the groundwork for the future of our...

WALLACE: It’s not economic stimulus, Mr. Summers.

SUMMERS: It’s not -- if you prevent a family from selling its house to send their kid to college and keep that house off the market and from depressing the community, I think that’s economic stimulus.

If you enable that family to avoid cutting back on expenditures, that’s economic stimulus.

And I have kids myself in college, and I can tell you that if you put money in their pockets, it’s very unlikely to be saved and it’s very likely to be spent. And that’s stimulus as well.

WALLACE: Anyone getting unemployment benefits would be eligible for Medicaid.

The House plan doubles the budget for the Department of Education over two years.

Aren’t you creating a permanent expansion of government that will be anything but temporary?

SUMMERS: You have to look overall at the whole program, and the vast majority of it is investments that are setting the groundwork for our future prosperity, or they’re responses to a countercyclical situation.

Look, there is a lot more money for health insurance for people who are laid off. And you know why that is? It’s because there are a lot more people who are being laid off, and -- so we need to spend a lot more money on health insurance....

WALLACE: But the question is...

SUMMERS: ... for people -- health insurance for people...

WALLACE: If I may...

SUMMERS: ... who are laid off.

WALLACE: ... the question is are you create a new government baseline of spending and we’re going to be at that level from now on? At the end of these two years, we’re not going to go back down, we’re going to have government programs at that level?

SUMMERS: But I think I was just responding to -- responding, Chris, when I said that the reason there’s a big increase in spending for health insurance is because we’ve got many, many more people who are being laid off.

And so no, it will not be permanently in the budget, because at some point we will work...

WALLACE: How about (inaudible) the education?

SUMMERS: ... we will work -- we will work through this recession and then the...

(CROSSTALK)

SUMMERS: ... and then the spending will come down. The president’s been very clear that the support for education is temporary support to prevent teachers from being laid off.

We are having unprecedented pressure on budgets, communities. Laying off cops, laying off teachers -- giving them help so that those things don’t have to happen.

We’re not going to be in this situation permanently, and so these programs aren’t going to be necessary permanently. So these are directly responsive to what is a crucial problem for our country in terms of the recession.

WALLACE: The administration has come up with a plan for what’s called TARP II, the second half of the financial rescue plan.

Instead of starting a government bad bank for toxic assets, you’re going to offer incentives for private investors to buy up these securities. Do you really believe, regardless of the incentives you give, that the private market will pick up these assets?

SUMMERS: You know, it’s been very interesting. We’ve received a whole variety of proposals from private investment firms, from private investors, for how private capital can be part of the solution to this problem.

It can’t all be private capital. We can’t just say, “Private sector, please invest,” not given the size of the financial mess that we inherited.

But with the right kinds of government guarantees, with the right kinds of financing -- you know, the type of thing that you’ve already seen is the actions that the Federal Reserve started taking some months ago to purchase mortgage-backed securities that have brought mortgages -- brought mortgage rates down considerably.

With the right strategic approaches, Secretary Geithner believes that we can bring in substantial private capital, and that’s something we all ought to be able to agree on, that where we can catalyze private capital, that’s a better root to solving this problem than government resources.

But I don’t want to mislead people. We are inheriting the worst financial system since the Depression. We’re inheriting a situation -- when people go back and study major banking crises a quarter century from now, the one that America developed in 2007 and 2008 is going to be one of those crises.

So we’re not going to solve it in a day or a week. We’re not going to solve it without public resources. But we are going to solve it by being as effective and strategic as we possibly can in the use of public money so as to catalyze and spur private investment.

WALLACE: Finally, let’s talk about Larry Summers. You are the president’s top economic adviser at the White House. Timothy Geithner is at Treasury. Paul Volcker is head of the Economic Advisory board.

And there’s been some criticism there are too many chefs. Who is the president’s top man on the economy?

SUMMERS: The president’s top man on the economy is the president. He listens to advice from all of us, and he sets his direction. He thinks about both the narrow economic issues and, frankly, the much broader interests of where the country needs to be four years from now, where it needs to be 40 years from now, and he gives us all the direction.

We, using whatever technical skills we possess, try to implement it.

WALLACE: As I read a number of stories preparing for this interview, several words -- forgive me -- kept coming up -- overbearing, abrasive, not always politic in what you say. How do you plead?

SUMMERS: Oh, I just plead that I’m someone who’s trying to help this president, who shares my opinions, but also works very hard to make sure that he gets access to the best opinions that there are out there.

And I think a high degree of intensity is needed on all of our parts if we’re going to address what is a very serious financial crisis.

WALLACE: So when people say you’re trying to be a kinder, gentler Larry Summers?

SUMMERS: Oh, look. This isn’t about my personality. This isn’t about anybody’s personality. This is about 3.5 million people who have lost their jobs within a little over a year.

This is about a serious economic crisis. And we just all need to focus not on -- not on each other. We all need to focus on a problem that is immense and demands immediate energy and demands all of our efforts, and that’s what the president is insisting we do.

WALLACE: But let me just ask you about it in one aspect where it may affect policies. There is some concern among some observers that you are so sure you are right that you’re going to push your ideas and not be the honest broker so that everybody...

SUMMERS: You know, the president’s made it very clear that he’s got zero tolerance -- that he values everybody’s advice, but he doesn’t value anybody’s advice to exclude other advice. And that’s the rules we’re all playing.

That’s why the president didn’t want to have his advice just come from all of us who are working on his economic team at OMB, at the Treasury, at the National Economic Council, but has established a group of people, business and labor, economists and practitioners, people who voted for him, people who probably didn’t vote for him, to make sure that he’s got all the best advice, chaired by Paul Volcker, who has immense experience and worked through the worst -- the worst previous economic crisis that the country’s had.

WALLACE: Mr. Summers, I want to thank you. Thank you for coming in today, and please come back to give us an update as you try to work through this mess.

SUMMERS: Thanks very much for having me.

WALLACE: Up next, we’ll hear from two critics of the Senate plan -- Republican senator John Cornyn , and House Democrat Chris van Hollen, who supports a very different package. Back in a moment.

(COMMERCIAL BREAK)

WALLACE: After Senate Democrats passed their stimulus plan, they will still have to work out big differences with House Democrats.

Joining us now to discuss where the debate in Congress goes next, Congressman Chris van Hollen of Maryland, head of the Democrats’ Campaign Committee in the House, and Senator John Cornyn from Texas, head of the Republican Campaign Committee in the Senate.

And, gentlemen, welcome back to “Fox News Sunday.”

CORNYN: Good to be with you.

WALLACE: Senator Cornyn, let’s start with you. The Senate version of the plan cuts $83 billion in spending. It has billions more in tax cuts. Those both seem to be Republican priorities. Why can’t you support it?

CORNYN: Well, first of all, it’s important to understand, Chris, this is not an economic document. This is a political document drawn up by Speaker Pelosi and Democrats in the House. Didn’t have a single Republican vote.

And it still represents 1.1 or so trillion dollars of spending, including the interest on the debt and, of course, these -- this is a debt our children and grandchildren are going to have to pay. I don’t think we have any confidence it will actually work, either, other than to create a deficit, actually crowd out private investment, as the Congressional Budget Office has said, in the longer term.

And so I think having three Republicans, potentially, support it in the Senate out of 535 members of Congress is hardly a bipartisan effort. I think it’s a disappointment -- surely must be for President Obama.

WALLACE: President Obama said this week that failure to pass a package will turn crisis into a catastrophe.

If Congress doesn’t pass any plan, if the Republicans have their way, won’t that, in fact, be very damaging for the economy? And wouldn’t it be a terrible setback for a president a month into office? CORNYN: Well, I fully expect this bill to pass with almost exclusively Democratic support. But as the Congressional Budget Office has said, in the longer term, actually this could crowd out private investment. It could hurt the economy.

And I just have to say that in -- in the New Deal with -- Secretary Morgenthau was famously quoted as saying, “We tried spending, and it didn’t work,” in the New Deal. And I don’t know that we have any confidence -- I certainly don’t -- that this will actually work now, to spend a lot of money we don’t have for things we don’t need in a stimulus package.

WALLACE: Congressman Van Hollen, as we discussed with Larry Summers a moment ago, there are big differences between the House and Senate version. He was trying to minimize them, but there are sizable differences -- billions less for education and health care, billions more for tax cuts.

Will House Democrats accept the Senate version?

VAN HOLLEN: Well, there are big differences between the two bills in the areas of education and some other areas. But what unites the House and Senate bills is much greater than what divides them.

There are about $800 billion-plus, both pieces of legislation, combination of tax relief and investment in the economy.

One of the problems right now is the private -- there is no private investment in the economy. Credit lines are frozen. People can’t get those loans. The government needs to take action now. It needs to make these investments.

And while there are differences that will be worked out, this is not the time to draw any lines in the sand. I don’t think anyone’s going to say, “If I don’t get my way with this provision in the House bill, I’m not going to accept the package.”

The priority has to be getting something done and getting it done now. We just saw 600,000 Americans lose their jobs in January. This is not the time for delay.

WALLACE: But one of the points that Larry Summers made -- it was one of the few areas he specifically talked about -- was construction or renovation of classrooms as something that creates jobs and also upgrades education. It creates a different atmosphere in a classroom.

Are there specific things that the Senate took out that you want to see restored?

VAN HOLLEN: Well, sure. I mean, there are provisions relating to classroom construction. I mean, that not is only good for schools, but it puts people back to work.

There are a number of provisions with regard to energy efficiency and renewable energy investments, trying to upgrade the federal fleet, trying to upgrade federal buildings, make them more fuel efficient with respect -- and energy efficient.

So there’s a lot we think in the House bill we should have in the final package. Having said that, we are not in the business of drawing lines in the sand, because we believe the overriding priority right now is to get something done.

WALLACE: But let me ask you about one issue in terms of what’s going to happen in the conference committee this week. You passed it in the House by 56 votes. It looks like in the Senate they’re going to pass it by one or two votes -- very little cushion.

Just as a matter of practical politics, don’t you have to meet Senate Democrats more than halfway?

VAN HOLLEN: Well, I think as Larry Summers said, we’re going to be looking for the balance between the two bills and we’re going to try and take the best ideas in both, listen to what the economists have to say and make the best decisions as to what will boost the economy.

But for the reasons you’ve said, we are not going to be, you know, in a position where it’s take it or leave it, it’s our way or the highway, because the priority, as President Obama has said, is to get something done.

And while there are differences between the House proposal and the Senate proposals, those differences pale in comparison to the fact that we want to get something done.

And unfortunately, in the House and the Senate, the Republican leadership apparently doesn’t want to move quickly to get something done.

WALLACE: Senator Cornyn, let’s turn to TARP II, the second half of the financial bailout. You voted against releasing the second half, the $350 billion.

We’re now hearing how the Obama administration plans to spend that money. They’re going to inject billions more into new banks. They’re going to give private investors incentive to buy up some of these toxic assets. There’s going to be more strings attached.

Are you more supportive when you hear the ideas they have?

CORNYN: Well, I voted for the original economic rescue package because on a bipartisan basis we were told the economy was going to melt down unless we did so, but I was disappointed at the lack of transparency and accountability.

And frankly, even the prior administration used those funds for purposes that Congress did not authorize. For example, the Big Three auto manufacturers were bailed out when the Senate expressly declined to authorize that.

But you know, here we go spending more money again after we are going to vote, I assume, to pass, on a partisan basis largely, a $1.1 trillion spending package.

There’s also the omnibus appropriation bill from last year that remains in the -- in the -- in the pipeline. And it’s just spending as far as the eye can see.

What I really think we ought to focus on initially is housing. Let’s fix housing first. While this bill has a very important tax credit that Senator Johnny Isakson and others have championed, it does virtually nothing else to fix the very -- what’s caused the problem in the first place, which is the decline in housing.

And I think that should be our focus on this so-called stimulus bill, not just spending on social programs and racking up more debt.

WALLACE: Staying, Congressman Van Hollen, though, on TARP II, the second half of this financial bailout money, I think Senator Cornyn is right. There was a widespread feeling in the country that an awful lot of this -- the first half, the first 350 billion, was wasted, that it didn’t do what it would -- you all voted for it to do, to free up the credit market.

Do you see anything in what you’re hearing out of the Obama White House that’s going to fix that?

VAN HOLLEN: Well, I do. You’re going to see a lot more transparency. You’re going to see a lot more accountability.

The president just announced the other day limitations on bonuses so that CEOs of financial institutions that are getting this taxpayer money can’t be, you know, rewarding themselves with these big, huge bonuses.

There’s going to be a lot more transparency throughout the process. And I think you’re going to hear Secretary Geithner tomorrow unveil a plan that addresses the housing issue.

One of the most neglected parts of the TARP approach under the Bush administration was that they neglected the housing component. So I’m looking forward to what Secretary Geithner has to say on that issue going forward tomorrow.

WALLACE: As I said, you are the chairmen of the House Democratic and Senate Republican Campaign Committees. And I want you to look at a poll that’s out this week.

It shows that the public approves of President Obama by a wide margin. It supports Democrats in Congress much more narrowly, and it disapproves of congressional Republicans almost 2-1.

Senator Cornyn, isn’t there considerable risk to Republicans to be seen as voting almost unanimously against the president’s economic stimulus plan when he is seen by the public as making such a big effort to be bipartisan?

CORNYN: Well, the president has done a good job reaching out to Republicans, and he has said he wants to approach this crisis, like other problems the country has, on a bipartisan basis. That’s good, and we’re willing to work with him on that.

But this bill is not the president’s bipartisan plan. It’s Nancy Pelosi ’s plan, and she said, “We won the election. We’re writing the bill.” And that’s what happened in the -- in the House.

And I think every Republican suggestion that’s been offered during the course, almost without exception, has been defeated along a party-line vote.

So this is -- I don’t think Harry Reid and Nancy Pelosi actually got the memo from the president when it comes to bipartisan cooperation. That’s why you’re seeing this outcome.

WALLACE: Congressman Van Hollen, as head of the Democratic Campaign Committee in the House, are you going to go after Republicans for voting almost unanimously -- in the case of the House, unanimously -- against the president’s economic stimulus?

VAN HOLLEN: Well, we’re certainly going to hold people accountable for their votes and explain to the American people what the consequences are.

When you’ve got millions of Americans losing their jobs, it’s hard to defend the position that you don’t want to get the economy moving again. I think the American people see a huge disconnect.

When President Bush came before the Congress and asked for $700 billion for big Wall Street firms, you saw the Republican leadership salute and turn on a dime and provide that money -- $700 billion for Wall Street.

But when President Obama has come up and said, “We want $800 billion for the American people and turn the economy around,” you’ve got them dragging their feet. And I think that’s why you see the numbers that you do.

WALLACE: We’ve got about a minute left, and I’d like you to share it equally.

Senator Cornyn, we now learn that the Obama administration is going to have the director of the Census Bureau report not only to the commerce secretary but also to the White House.

What’s wrong with that?

CORNYN: Well, ordinarily, this has been something that the commerce secretary has done, and I think it ought to be done on a competent, as much as possible, nonpartisan basis.

And to shift it to the White House to me just politicizes the census, which is not something we should be doing.

WALLACE: And what’s the danger, briefly, of politicizing the census?

CORNYN: Well, because, of course, that determines who gets what congressional districts. States like Texas were going to get probably at least three new congressional districts based on the reapportionment -- and then, of course, in drawing those lines, redistricting within states. It’s all based on those census figures. So if you cook the figures up front, I think it distorts that process going forward and undermines the concept of one person, one vote.

WALLACE: And very briefly, Congressman Van Hollen, I mean, why not leave it in the Commerce Department?

VAN HOLLEN: Look, I think the issue at the end of the day we should all agree is that we want the facts and accuracy in the count. And it seems to me that the more eyes taking a look at this, the better.

It’s going to be all on the Internet in terms of how the process is done. This administration has a huge commitment to transparency. So I think at the end of the day, it matters less exactly what the reporting mechanism is than that we get the facts and the count right.

WALLACE: Congressman Van Hollen, Senator Cornyn, thank you both. Thanks for coming in, and we’ll see how things go this week.

WALLACE: Coming up, tax problems in the Obama cabinet. Whatever happened to changing the way Washington does business? Our panel weighs in on ethics and the White House after this quick break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: We can’t send a message to the American people that we’ve got two sets of rules, one for prominent people and one for ordinary people, and -- you know, so I consider this a mistake on my part and one that I intend to fix and correct and make sure that we’re not screwing up again.

(END VIDEO CLIP)

WALLACE: That was President Obama in my Oval Office interview with him this week taking responsibility for the failed nomination of former senator Tom Daschle.

And it’s time now for our Sunday group -- Fox News contributors Fred Barnes of The Weekly Standard, Mara Liasson of National Public Radio, syndicated columnist Charles Krauthammer, and Juan Williams, also from National Public Radio.

Well, Tom Daschle did have to drop out this week as the nominee for secretary of health and human services for his failure to pay some back taxes. So did the administration chief performance officer -- you can see there -- Nancy Killefer. And this after, of course, the controversy over Treasury Secretary Tim Geithner and his back taxes.

Fred Barnes, how damaging is this roll call to the president?

BARNES: I don’t -- well, it doesn’t seem to be very damaging to him. As the poll you showed earlier in the show -- you know, 62 percent approval positive, only 15 percent negative. It was a mistake.

Sometimes presidents can say, “Well, I made a mistake,” and get away with that. But look, in a couple of ways it did -- it did hurt the Democratic Party in Washington. You know, look. He promised -- I mean, who did he think Tom Daschle was -- he was picking -- St. Francis of Assisi?

For heaven’s sakes, this guy is a classic Washington influence peddler, making money for unknown reasons -- well, I guess we do know the reasons -- law firms and other firms, $5 million in two years, riding around in a limo. I mean, please.

And it’s the same with others. You know, the -- his press secretary said, “You know, the problem was we set the bar so high.” So high? What, they have to pay their taxes? That’s not very high.

So I think he hurt this reputation for “I’m going to change Washington by having a lot of different people here.” And now, if you watch the late night talk shows, what do they talk about? The Democratic Party. What is the thing they’re talking about? It’s the party where if you’re a leading figure, you don’t have to pay taxes.

WALLACE: Mara, let me ask you about that, because Fred is certainly right that the president during the campaign set this very high standard and talked about changing the way Washington does business.

Now, in these few weeks since the inauguration, we see him having to give waivers to lobbyists to serve in his administration. He’s hiring people like Tom Daschle, who made millions of dollars after leaving powerful positions in the government and going into the private sector.

Is it -- is it turning out that Washington isn’t so easy to change?

LIASSON: Well, Washington isn’t so easy to change. But first of all, there’s no doubt in my mind, based on conversations I’ve had with White House officials, that if Tom Daschle himself hadn’t woken up in the morning and read the New York Times editorial and decided he couldn’t go through this, they would have still been fighting for him.

They were willing to take the hit on the waivers, on Tom Daschle. They certainly knew everything he had done for Alston & Byrd before they nominated him. Now, of course, the car and driver problem made it worse.

But they were willing to take the hits on this because they feel, and polls do back them up -- a USA Today/Gallup poll shows by 3-1 people still think that Obama’s ethical standards are high, and he is bringing change. They were willing to do this.

Now that Daschle has dropped out and the president has kind of fallen on his sword and said, “I screwed up. It was my fault,” they have raised the bar very high. And it means that their -- the exceptions to the Obama rule are going to be harder to push through in the future.

So I think they have boxed themselves in to a certain extent.

KRAUTHAMMER: Look, I think what the polls are showing is that people haven’t turned against him, obviously, on these relatively small mistakes.

But I think you’ve got to measure him by a different standard in the sense that he came in as a man who was transcendent, had a charisma, and had an aura about him unlike any other figure in politics since the Kennedys, and theirs is largely posthumous.

I mean, he came in with his own cult of personality unlike anything any of us have ever seen. That’s what I think has fallen away. I mean, it was inevitable. To govern is to choose, and to choose is to alienate. And over time, perhaps six months or a year, that sheen, the aura, was going to come off him.

But after the Daschle and the Geithner and the Killefer debacles, after the stories about the limos and the Cadillacs and all that, I think it’s hurt him in a way that -- it’s changed the perception of him as a transcendent, different character and politician.

And that, I think, is something you don’t recover.

WALLACE: Juan, let me ask you about that. I think in Charles’ column on Friday, he said he thought this was going to take six months. It ended up taking 2.5 weeks.

Do you really think that Obama’s image as a transformational character has somehow been damaged, if not disappeared?

WILLIAMS: No, but it’s open to widespread sort of derision, especially among Republicans, who raise questions, as Fred was pointing out, about, “Oh, now we know why they want to raise your taxes, because they don’t want to -- they don’t pay taxes,” things like that.

But the point is that he has raised the bar. And what it’s done is a very interesting thing here. It’s put this out as static in the midst of a real need to deal with policy issues like health care reform.

The absence of Daschle means that his -- that the president’s promise to get health care reform started and under way, maybe even accomplished, in the first 100 days is not going to happen.

And it also raises questions about his experience level. This is a guy, as someone pointed out, was in the Illinois state senate four years ago. Now he’s being rolled, it looks like, by a lot of kind of Washington convention.

And his ability to create that change is difficult, which is why the Chicago Tribune said, you know, if you look at the high standards he’s proclaimed, and then he suspends them for people like William Lynn, who’s the new number two guy at defense, or for William Corr, who’s now the number two at HHS, then people say, “Oh, you’re offering waivers and you’re guilty of hypocrisy or being obtuse.”

The president doesn’t need that in the midst of a huge fight over the stimulus package and health care.

WALLACE: Fred, as we pointed out, one of the things that the president did in the five interviews he did with the networks was to say, “I screwed up. I made a mistake.” And a lot of people said, “Well, that’s a refreshing change from at least his two immediate predecessors in office,” George W. Bush and Bill Clinton. Does that buy him some goodwill to just say, “I take personal responsibility?”

BARNES: Yeah, I think it buys him a little. And you know, it was interesting to hear what Senator Cornyn said when he was talking about Congress and the president. He specifically did not criticize President Obama.

And the problem -- oh, we like all the things he said about changing Washington and bipartisanship, it’s these terrible Democrats, it’s Nancy Pelosi and Harry Reid .

And look. When that strategy of Republicans changes and they start actually criticizing President Obama directly, we’ll know that I think he’s in more trouble then. But I think we’re a good ways from that.

WALLACE: Mara, one of the things that struck me as somebody who participated in the five interviews on Tuesday -- he’s got a prime time news conference on Monday. He’s going around the country holding town hall meetings. There are plans for two addresses to the nation before the end of this month.

Is there a danger -- obviously, the White House knows they have this enormous asset in Barack Obama . But is there a danger of over- using it, of overexposing him?

LIASSON: Well, I asked that very question to people this week at the White House, and they say no. Right now, any time he talks about a stimulus plan, that particular stimulus plan goes up in popularity.

Now, when people read the details and they think Congress is doing this XYZ wasteful spending, they don’t like it. But right now, he sells magazines. That’s why he’s on every cover. He helps them sell their programs.

That’s why they’re going to put him in Florida and in Indiana and at a prime time press conference this week. Right now, they feel he cannot be overexposed.

There’s something else, also. The message you heard from Larry summers, this relentless populist message -- pay caps for executives -- they have to sell something that’s very, very unpopular right now, which is TARP. That’s what they’re going to unveil on Monday.

WALLACE: This is the second half of the financial bailout.

LIASSON: The second half of the financial bailout. They have to make sure that people think that the White House gets it and is on their side.

WALLACE: All right.

We have to take a quick break here. But when we come back, the ups and downs of the economic stimulus plan as it gets closer to becoming law. Our panel tackles the big question: Will it work? Back in a moment.

(COMMERCIAL BREAK)

WALLACE: On this day in 1978, proceedings of the U.S. Senate were broadcast on radio for the first time. Members could be heard opening debate on the Panama Canal Treaty which they would go on to ratify the following month.

Stay tuned for more from our panel.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MCCAIN: If this legislation is passed, it will be a very bad day for America.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: So -- well, then I -- then you get the argument, “Well, this is not a stimulus bill. This is a spending bill.” What do you think a stimulus is?

(LAUGHTER)

(END VIDEO CLIP)

WALLACE: And at times this week, it seemed as if the campaign was still on as President Obama and Senator McCain argued over how best to stimulate the economy.

And we’re back now with Fred, Mara, Charles and Juan.

So, Charles, the House version is 819 billion. The Senate version is 827 billion. But despite what Larry Summers said, there are some big differences between these two versions on aid for education, on health care, on alternative energy.

How do you expect this to get sorted out in the conference committee?

KRAUTHAMMER: In the end, it will be sorted out entirely on the matter of politics and not economics. And the politics here are that you can get anything through the House. If Pelosi wants X, it will pass.

But in the Senate, you’re going to have to appease the gang of three, the three Republicans who defected and joined with the Democrats on this bill. So it’s going to have to be nearer what the Senate has decided on if it’s going to pass.

You’ve got to be careful. Susan Collins has wavered a bit -- one of the three Republicans on this. She’s going to have to be OK with it. And you’ve even had a few Democrats like Dianne Feinstein , who’s expressed questions about the Senate version.

So I think it’s going to tend on the Senate side. You’ll have those large -- you’re going to have a lot of those cuts. You’re going to end up with the Alternative Minimum Tax fix, which is what the Senate had insisted upon.

But in the end it’s going to be, as Larry Summers had said, almost on -- the overlap is huge, about 90 percent. So it’s going to be a huge spending bill.

WALLACE: Of course, when you have an $800 billion spending bill and 90 percent means that you could -- you differ about $80 billion, is that -- is that the way you look at it, that it’s going to end up basically the Senate version just because they have no margin for error?

WILLIAMS: It’s got to be. I mean, you need the bill. And I think he has the votes.

But you know, the thing that struck me this week is the Republican revival. How can President Obama be losing this argument? And I mean, we’ve cited numbers that say the American people still have faith in him.

But in terms of the argument, when you ask the American people about the stimulus package and whether it will work, the numbers are down around 38 percent.

Well, how can Barack Obama , the president of the United States, with a bully pulpit, be losing an argument at a time when we see such high rates of unemployment, now 7 percent?

You look inside...

WALLACE: Seven point six percent.

WILLIAMS: You look inside the black community, it’s 12.6 percent. What is -- and you know, you stop and you think, “Well, what is going on?” Well, the way that the Republicans are couching the argument is in terms of pork and big spending.

And especially if you look at the contrast between the House and the Senate bill, it’s about giving money to the states so that the states don’t have to raise taxes, and don’t have to cut back and start laying people off.

And what you’re hearing from Republicans is, “Well, the states have been overspending and spending recklessly, and all we’re doing is propping them up instead of making them -- allowing -- forcing them to make critical fiscal decisions at tight times.”

But I think the American people understand that jobs, retirement savings right now -- they’re in the tank. Something has to be done immediately. And that’s why Obama, as Mara was saying, has got to go out on the road. But he’s been let down by the leadership, the Democratic leadership, in the House and the Senate because they haven’t been making the case. And it just seems to be such an overwhelming case that something has to be done.

WALLACE: Well, and the question is whether they’ve made the case or whether they wrote the wrong bill.

BARNES: They wrote the wrong bill, exactly. And look. If they -- it would have been so easy -- it would have been so easy to have a bill, a compromise bill, that attracts Republicans. All you needed to give them, really, was some -- some tax cut with stimulus.

John McCain ’s the perfect example. You just showed McCain. Why is he against it? All of us know that there’s nothing that John McCain is more attracted to than a bipartisan compromise, more than anybody in the entire Congress.

And he’s against this, because Republicans got really nothing they wanted on the tax side that would stimulate the economy. Have a corporate tax decrease, which McCain wanted. Have a bill where Republicans get, you know, a third, 20 percent, of the bill. You’d have had a bipartisan bill and everything would have been different.

WILLIAMS: Fred, wait a minute. Didn’t we -- we just gave money to Wall Street. We’ve given money to the banks...

BARNES: Yep.

WILLIAMS: ... time and again. The average guy who’s dealing with a mortgage that’s in trouble or trying to pay a college loan...

BARNES: You still have that.

WILLIAMS: ... retirement -- you look at your retirement savings, your 401(k) going down -- how come those people never get money from the bailout?

BARNES: But they would. Of course they’d get money. They’d get money in this bill. There’d be all this spending, but you would have given Republicans a serious tax cut.

Look, ultimately, you depend on the private economy. It is going to get the economy back in shape.

WALLACE: All right. Guys, I want to break in, because I want to get to the bottom line question.

Is this going to work, Mara?

LIASSON: That is the most important question. We know now they can muscle something through the House. They’ll probably pick up a few Republicans when the bill comes out of conference. They’ve got their three Republicans in the Senate to get them over 60.

I think the big question mark -- and this is really serious -- is if this is going to work. This thing has to be stimulative.

To have a ton of stuff in here like the Alternative Minimum Tax fix, which isn’t stimulative, but it costs $70 billion -- I mean, that means that that’s a certain amount of money that’s not going to pump up the economy.

Unemployment’s still going up. You’ve got the concern now about long-term interest rates. You’ve got two warring concerns -- deflation now and rising interest rates over time to get people to give us money from abroad.

I think there is a big question mark about whether this is going to work. The good thing -- and as -- Brit isn’t here today, but he would say this -- that in the end, if it does work, we’ll never know if it actually was this stimulus bill or if it was something that the Fed did.

WALLACE: Charles, let me ask you about that. I mean, if you’re going to throw $800 billion in tax cuts and spending increases into the economy, doesn’t that necessarily have to be stimulative?

KRAUTHAMMER: It does, but nobody will know if it’s enough, if it was too much or too little. And in the end, there are so many other factors in play -- trade is going to be -- fiscal policy, the bailout of the banks, the strength of the financial institutions -- that we in the end are not going to know if it was this bill or not.

But nonetheless, if the economy is stronger, everybody will say it worked. And if it’s not, everybody will conclude it didn’t work.

WALLACE: Do you believe, Charles, this conservative argument that government spending doesn’t work, and that it didn’t work in Japan during the lost decade of the ‘90s, it didn’t work during the ‘30s in the New Deal, and that that really is not the way to go?

KRAUTHAMMER: Look, the honest answer is no one knows. You’ve got one economist at Harvard who says that this bill is the worst in 70 years, and you have Larry Summers, also ex of Harvard economics department, who essentially is an author of this, in part. And they’re both smart and they both are open-minded.

The answer is our crisis, in many ways, is unprecedented and history often is not a good teacher because conditions are so different. Our economy is a global economy now. Trade is a huge part of our economy. It depends on how others are going to react.

You would expect spending will help, but, in fact, our answer will be in a year or two...

(CROSSTALK)

WILLIAMS: Well, let me -- let me just -- let me re-frame the question you asked, though, Chris, because the question has to be, “Wait a minute, with the construction industry down 18 percent, manufacturing, leisure, hospitality down 10 percent -- well, wait a second, shouldn’t we invest the money in long-term infrastructure that will help America going forward and actually generate jobs?”

(CROSSTALK)

WILLIAMS: Oh, that’s a different question.

KRAUTHAMMER: Each dollar the government is spending is taken away from another use.

WALLACE: All right.

KRAUTHAMMER: So it could have a net effect of zero.

WALLACE: You know the best part of this? We’re going to be able to argue this out next week, and the week -- and the week after that.

Thank you, panel. See you next week.

Our mailbox was full of comments about Tom Daschle’s tax problems that eventually sunk his nomination. Susan Prillman from Raleigh, North Carolina expressed the view of many. “When will we see the same incredulity over the tax evasion practices of people like Daschle and Geithner that Obama seems so ready to criticize in the Wall Street bonuses? Are they not both cases of double standards?”

And regarding the debate over economic stimulus, Don Drake from Littleton, North Carolina writes, “We’ve never spent our way out of similar problems before. Only time, events and the marketplace will work together to give us real recovery.”

Be sure to let us know your thoughts by e-mailing us at fns@foxnews.com.

And take a look at our new page on Facebook where you can watch earlier news-making interviews and find out more about our show.

Up next, revealing comments from President Obama about the demands of his new job.

(COMMERCIAL BREAK)

WALLACE: When I sat down with President Obama in the Oval Office this week, the last question I asked him was what was the biggest surprise about the demands of his new job.

We thought you’d be interested to hear his answer.

(BEGIN VIDEO CLIP)

OBAMA: Every decision you make counts. You know, I think in terms of just raw hours and physical exhaustion, you know, you can’t beat a presidential campaign, all right, especially the one that I just underwent, which was so long.

But here, everything you do matters. You know, I’m now signing letters to the families of troops who have fallen in Iraq or Afghanistan. Every time you sign that, you are reminded that you have enormous responsibilities.

And so that’s why in all of these debates, when I’m talking to Democrats or Republicans, one of the things I try to remind them, and something I remind myself every single day, is the only criteria for what I do should be is it working for the American people, because this is -- this job is too big, too important, to just want to occupy space.

And you know, if I’ve spent the next four years every day making decisions based on that single criteria -- is this going to help the American people achieve their dreams and keep them safe? -- then I’ll be able to look at myself in the mirror and say, “You know what? You did a good job.”

WALLACE: Mr. President, thank you for talking with us.

OBAMA: Appreciate you. Thank you, Chris.

(END VIDEO CLIP)

WALLACE: And that’s it for today.

Now this program note for Monday night. You can watch President Obama’s prime time news conference at 8:00 p.m. Eastern on this station with Shepard Smith anchoring, and on Fox News Channel with Bret Baier leading the coverage.

But for now, have a great week, and we’ll see you next “Fox News Sunday.”

END

.ETX

Feb 08, 2009 10:53 ET .EOF

“FOX NEWS SUNDAY”

FEBRUARY 8, 2009

SPEAKERS: CHRIS WALLACE, HOST

LAWRENCE H. SUMMERS, DIRECTOR, NATIONAL ECONOMIC COUNCIL

SEN. JOHN CORNYN, R-TEXAS, VICE CHAIRMAN, REPUBLICAN CONFERENCE

REP. CHRIS VAN HOLLEN, D-MD., CHAIRMAN, DEMOCRATIC CONGRESSIONAL CAMPAIGN COMMITTEE AND ASSISTANT TO THE SPEAKER OF THE HOUSE

JUAN WILLIAMS, FOX NEWS

MARA LIASSON, FOX NEWS

BRIT HUME, FOX NEWS

BILL KRISTOL, FOX NEWS

[*] WALLACE: I’m Chris Wallace and this is “Fox News Sunday.” President Obama uses tough talk to urge passage of an economic stimulus.

(BEGIN VIDEO CLIP)

OBAMA: As we drag our feet and fail to act, this crisis could turn into a catastrophe.

(END VIDEO CLIP)

WALLACE: We’ll find out where the plan stands now when we sit down with Lawrence Summers, the president’s top economic adviser -- Larry Summers live, only on “Fox News Sunday.”

Then, how will members of Congress resolve conflicting versions of the stimulus? We’ll ask two key leaders -- from the Senate, Republican John Cornyn , and from the House, Democrat Chris Van Hollen .

Also, our Sunday panel examines ethics and the White House. Is the Obama administration living up to its own high standards?

And revealing thoughts from the president on the demands of his job, all right now on “Fox News Sunday.”

And hello again from Fox News in Washington. In the next few days, the Senate is expected to approve its version of an economic stimulus package. Then, tough bargaining with the House over its very different plan before a final bill reaches President Obama.

For more, we’re joined by the president’s top economic adviser, Lawrence Summers.

Mr. Summers, welcome back to “Fox News Sunday.”

SUMMERS: Glad to be with you.

WALLACE: The Senate has reached a tentative agreement on a stimulus package of $827 billion, which has more in tax cuts, but less government spending. How big a rewrite do you expect when the two versions, the House and Senate versions, get to that conference committee?

SUMMERS: Chris, we’ve got to begin with what’s most important. The economy lost 600,000 jobs just in January, lost 3 million jobs last year. We’ve got to give this economy some help.

The Senate bill, the House bill -- the overlap is 90-plus percent. We’ve got to work through the differences, find the best bill we possibly can, and get it in place as quickly as possible to contain what is a very damaging and potentially deflationary spiral.

That’s got to be the priority now. So yes, let’s argue vigorously. Let’s work through the differences. Let’s make sure we scrub out any wasteful programs. Let’s make sure we preserve key investments. Let’s make sure we give incentives where those incentives can make a big difference.

But you know, what’s agreed between the House and Senate is, at the end of the day, much more important for preserving this economy than what’s disagreed.

And so if there was ever a moment to transcend politics, this is that moment and that’s what I very much hope will take place as this legislation moves forward.

WALLACE: Before we get into the specifics, and there are some not minor differences between the two bills, is the president standing firm on his February 16th deadline? And is it realistic to expect that you can work out some sizable differences in less than a week?

SUMMERS: The president believes we need this legislation absolutely as soon as we can. He believes, as Speaker Pelosi has stated, as Majority Leader Reid has stated, that the Congress has to stay here, avoid their traditional recess until this legislation has passed.

There are too many jobs at stake -- the basic economic security, the ability to meet their needs for too many families are on the line...

WALLACE: So is he...

SUMMERS: ... for this to become a -- for this to become a traditional political football. It’s got to happen. It’s got to happen, and it’s got to happen very fast. And there’s no reason why it can’t happen very fast with good will on all sides.

WALLACE: By the February 16th deadline?

SUMMERS: Well, it could happen very fast before the congressional -- before the congressional recess. It’s not about this hour or that hour. It’s about getting this done as rapidly as possible for the American people.

WALLACE: All right. I want to explore some of the major differences in the House and Senate versions. And let’s put them up on the screen.

The Senate bill cuts aid to the states, especially for education, by $40 billion. It cuts $5 billion for health coverage for unemployed workers. And it saves 2 billion by phasing out payroll fax credits at lower income levels.

The biggest difference is that in addition to the immediate economic stimulus, you were pushing and the House passed a lot of what you’re calling long-term investment, what critics are calling -- is more government spending.

Do you want to see some of that restored in the final version?

SUMMERS: We believe that there are strong elements in the Senate bill. There are some very strong elements in the House bill. And what we’ve got to do is take the best of both.

We believe, for example, that it is critically important, at a time when too many of our kids -- you know, we say education is our most important priority. But I have visited school after school where the paint is falling off the walls. How can our kids believe us when we say that?

So we believe school modernization is an absolutely essential investment in the competitiveness and the future of our country.

WALLACE: You want to see that restored to the bill.

SUMMERS: It’s an investment that -- it’s an investment that can take place quickly. It’s an investment that’s labor-intensive in restoring schools and installing laboratory space that our kids need to compete. That’s a place where we think there’s very important investment to be made.

Is it a capacity to scrub this bill? Are there expenditures in -- in the bill that probably aren’t the highest priority? I’m not going to tell you that every item is the highest priority.

And the president really wants this not to be done the traditional Washington way. That’s why he said no earmarks. That’s why he’s vowed transparency and accountability on every project. And I’m sure there are improvements that can be made by taking resources out of certain investments where they’ve been inserted.

That’s why we have a complex legislative process in this country, so that bills do get honed and perfected along -- along the way. But let’s not focus -- and we do that much too often in Washington. We focus on the bit of difference, and we focus on where the political fight is.

Ninety percent of these bills are essentially overlapping. There isn’t a lot of disagreement to create 3 million-and-some jobs. Let’s work it out, get moving, start preserving those jobs.

WALLACE: Last month you set what you called three principles for what we needed in an economic stimulus package. You said it had to be timely, it had to be targeted, and it had to be temporary. But there are critics from both sides who say that these plans fail on all three points.

The Congressional Budget Office says only 64 percent of the House plan actually gets out into the economy in the next two years. So how is that timely?

SUMMERS: Well, if you look at the effects of it, even if some of the money is spent with a delay, the hiring begins even before the government’s in a position to reimburse somebody for the completion of a road project or a bridge project.

And I’ll tell you, Chris, looking at where the economic forecasts are right now, I think this economy is still going to need some support two years from now. And so I think the idea that not 100 percent of it spends out in the next two years is actually a prudent one.

But you know, we can quibble and hassle about the numbers. There’s a variety of efforts underway to accelerate the process of disbursements for infrastructure investment, for example. So I can assure you at the end of the day, the figure will be more than 64 percent.

WALLACE: Clinton Budget Director Alice Rivlin says that much of this program both -- in both bills is social spending that has nothing to do with immediate economic stimulus -- maybe legitimate social spending, but social spending. So how is that targeted?

SUMMERS: You know, it’s -- it’s interesting. Alice Rivlin’s one of the most respected voices in this town, and she had some concerns about the bill. But if you read this morning’s Washington Post, she made clear that what she thinks is important now is that it pass as rapidly as possible.

What’s social spending? Some people think that giving support to enable a low- or middle-income family to send their kid to college is a kind of social support. I don’t. I think it’s a very valuable function that lays the groundwork for...

WALLACE: But it’s not economic stimulus.

SUMMERS: ... the future -- lays the groundwork for the future of our...

WALLACE: It’s not economic stimulus, Mr. Summers.

SUMMERS: It’s not -- if you prevent a family from selling its house to send their kid to college and keep that house off the market and from depressing the community, I think that’s economic stimulus.

If you enable that family to avoid cutting back on expenditures, that’s economic stimulus.

And I have kids myself in college, and I can tell you that if you put money in their pockets, it’s very unlikely to be saved and it’s very likely to be spent. And that’s stimulus as well.

WALLACE: Anyone getting unemployment benefits would be eligible for Medicaid.

The House plan doubles the budget for the Department of Education over two years.

Aren’t you creating a permanent expansion of government that will be anything but temporary?

SUMMERS: You have to look overall at the whole program, and the vast majority of it is investments that are setting the groundwork for our future prosperity, or they’re responses to a countercyclical situation.

Look, there is a lot more money for health insurance for people who are laid off. And you know why that is? It’s because there are a lot more people who are being laid off, and -- so we need to spend a lot more money on health insurance....

WALLACE: But the question is...

SUMMERS: ... for people -- health insurance for people...

WALLACE: If I may...

SUMMERS: ... who are laid off.

WALLACE: ... the question is are you create a new government baseline of spending and we’re going to be at that level from now on? At the end of these two years, we’re not going to go back down, we’re going to have government programs at that level?

SUMMERS: But I think I was just responding to -- responding, Chris, when I said that the reason there’s a big increase in spending for health insurance is because we’ve got many, many more people who are being laid off.

And so no, it will not be permanently in the budget, because at some point we will work...

WALLACE: How about (inaudible) the education?

SUMMERS: ... we will work -- we will work through this recession and then the...

(CROSSTALK)

SUMMERS: ... and then the spending will come down. The president’s been very clear that the support for education is temporary support to prevent teachers from being laid off.

We are having unprecedented pressure on budgets, communities. Laying off cops, laying off teachers -- giving them help so that those things don’t have to happen.

We’re not going to be in this situation permanently, and so these programs aren’t going to be necessary permanently. So these are directly responsive to what is a crucial problem for our country in terms of the recession.

WALLACE: The administration has come up with a plan for what’s called TARP II, the second half of the financial rescue plan.

Instead of starting a government bad bank for toxic assets, you’re going to offer incentives for private investors to buy up these securities. Do you really believe, regardless of the incentives you give, that the private market will pick up these assets?

SUMMERS: You know, it’s been very interesting. We’ve received a whole variety of proposals from private investment firms, from private investors, for how private capital can be part of the solution to this problem.

It can’t all be private capital. We can’t just say, “Private sector, please invest,” not given the size of the financial mess that we inherited.

But with the right kinds of government guarantees, with the right kinds of financing -- you know, the type of thing that you’ve already seen is the actions that the Federal Reserve started taking some months ago to purchase mortgage-backed securities that have brought mortgages -- brought mortgage rates down considerably.

With the right strategic approaches, Secretary Geithner believes that we can bring in substantial private capital, and that’s something we all ought to be able to agree on, that where we can catalyze private capital, that’s a better root to solving this problem than government resources.

But I don’t want to mislead people. We are inheriting the worst financial system since the Depression. We’re inheriting a situation -- when people go back and study major banking crises a quarter century from now, the one that America developed in 2007 and 2008 is going to be one of those crises.

So we’re not going to solve it in a day or a week. We’re not going to solve it without public resources. But we are going to solve it by being as effective and strategic as we possibly can in the use of public money so as to catalyze and spur private investment.

WALLACE: Finally, let’s talk about Larry Summers. You are the president’s top economic adviser at the White House. Timothy Geithner is at Treasury. Paul Volcker is head of the Economic Advisory board.

And there’s been some criticism there are too many chefs. Who is the president’s top man on the economy?

SUMMERS: The president’s top man on the economy is the president. He listens to advice from all of us, and he sets his direction. He thinks about both the narrow economic issues and, frankly, the much broader interests of where the country needs to be four years from now, where it needs to be 40 years from now, and he gives us all the direction.

We, using whatever technical skills we possess, try to implement it.

WALLACE: As I read a number of stories preparing for this interview, several words -- forgive me -- kept coming up -- overbearing, abrasive, not always politic in what you say. How do you plead?

SUMMERS: Oh, I just plead that I’m someone who’s trying to help this president, who shares my opinions, but also works very hard to make sure that he gets access to the best opinions that there are out there.

And I think a high degree of intensity is needed on all of our parts if we’re going to address what is a very serious financial crisis.

WALLACE: So when people say you’re trying to be a kinder, gentler Larry Summers?

SUMMERS: Oh, look. This isn’t about my personality. This isn’t about anybody’s personality. This is about 3.5 million people who have lost their jobs within a little over a year.

This is about a serious economic crisis. And we just all need to focus not on -- not on each other. We all need to focus on a problem that is immense and demands immediate energy and demands all of our efforts, and that’s what the president is insisting we do.

WALLACE: But let me just ask you about it in one aspect where it may affect policies. There is some concern among some observers that you are so sure you are right that you’re going to push your ideas and not be the honest broker so that everybody...

SUMMERS: You know, the president’s made it very clear that he’s got zero tolerance -- that he values everybody’s advice, but he doesn’t value anybody’s advice to exclude other advice. And that’s the rules we’re all playing.

That’s why the president didn’t want to have his advice just come from all of us who are working on his economic team at OMB, at the Treasury, at the National Economic Council, but has established a group of people, business and labor, economists and practitioners, people who voted for him, people who probably didn’t vote for him, to make sure that he’s got all the best advice, chaired by Paul Volcker, who has immense experience and worked through the worst -- the worst previous economic crisis that the country’s had.

WALLACE: Mr. Summers, I want to thank you. Thank you for coming in today, and please come back to give us an update as you try to work through this mess.

SUMMERS: Thanks very much for having me.

WALLACE: Up next, we’ll hear from two critics of the Senate plan -- Republican senator John Cornyn , and House Democrat Chris van Hollen, who supports a very different package. Back in a moment.

(COMMERCIAL BREAK)

WALLACE: After Senate Democrats passed their stimulus plan, they will still have to work out big differences with House Democrats.

Joining us now to discuss where the debate in Congress goes next, Congressman Chris van Hollen of Maryland, head of the Democrats’ Campaign Committee in the House, and Senator John Cornyn from Texas, head of the Republican Campaign Committee in the Senate.

And, gentlemen, welcome back to “Fox News Sunday.”

CORNYN: Good to be with you.

WALLACE: Senator Cornyn, let’s start with you. The Senate version of the plan cuts $83 billion in spending. It has billions more in tax cuts. Those both seem to be Republican priorities. Why can’t you support it?

CORNYN: Well, first of all, it’s important to understand, Chris, this is not an economic document. This is a political document drawn up by Speaker Pelosi and Democrats in the House. Didn’t have a single Republican vote.

And it still represents 1.1 or so trillion dollars of spending, including the interest on the debt and, of course, these -- this is a debt our children and grandchildren are going to have to pay. I don’t think we have any confidence it will actually work, either, other than to create a deficit, actually crowd out private investment, as the Congressional Budget Office has said, in the longer term.

And so I think having three Republicans, potentially, support it in the Senate out of 535 members of Congress is hardly a bipartisan effort. I think it’s a disappointment -- surely must be for President Obama.

WALLACE: President Obama said this week that failure to pass a package will turn crisis into a catastrophe.

If Congress doesn’t pass any plan, if the Republicans have their way, won’t that, in fact, be very damaging for the economy? And wouldn’t it be a terrible setback for a president a month into office? CORNYN: Well, I fully expect this bill to pass with almost exclusively Democratic support. But as the Congressional Budget Office has said, in the longer term, actually this could crowd out private investment. It could hurt the economy.

And I just have to say that in -- in the New Deal with -- Secretary Morgenthau was famously quoted as saying, “We tried spending, and it didn’t work,” in the New Deal. And I don’t know that we have any confidence -- I certainly don’t -- that this will actually work now, to spend a lot of money we don’t have for things we don’t need in a stimulus package.

WALLACE: Congressman Van Hollen, as we discussed with Larry Summers a moment ago, there are big differences between the House and Senate version. He was trying to minimize them, but there are sizable differences -- billions less for education and health care, billions more for tax cuts.

Will House Democrats accept the Senate version?

VAN HOLLEN: Well, there are big differences between the two bills in the areas of education and some other areas. But what unites the House and Senate bills is much greater than what divides them.

There are about $800 billion-plus, both pieces of legislation, combination of tax relief and investment in the economy.

One of the problems right now is the private -- there is no private investment in the economy. Credit lines are frozen. People can’t get those loans. The government needs to take action now. It needs to make these investments.

And while there are differences that will be worked out, this is not the time to draw any lines in the sand. I don’t think anyone’s going to say, “If I don’t get my way with this provision in the House bill, I’m not going to accept the package.”

The priority has to be getting something done and getting it done now. We just saw 600,000 Americans lose their jobs in January. This is not the time for delay.

WALLACE: But one of the points that Larry Summers made -- it was one of the few areas he specifically talked about -- was construction or renovation of classrooms as something that creates jobs and also upgrades education. It creates a different atmosphere in a classroom.

Are there specific things that the Senate took out that you want to see restored?

VAN HOLLEN: Well, sure. I mean, there are provisions relating to classroom construction. I mean, that not is only good for schools, but it puts people back to work.

There are a number of provisions with regard to energy efficiency and renewable energy investments, trying to upgrade the federal fleet, trying to upgrade federal buildings, make them more fuel efficient with respect -- and energy efficient.

So there’s a lot we think in the House bill we should have in the final package. Having said that, we are not in the business of drawing lines in the sand, because we believe the overriding priority right now is to get something done.

WALLACE: But let me ask you about one issue in terms of what’s going to happen in the conference committee this week. You passed it in the House by 56 votes. It looks like in the Senate they’re going to pass it by one or two votes -- very little cushion.

Just as a matter of practical politics, don’t you have to meet Senate Democrats more than halfway?

VAN HOLLEN: Well, I think as Larry Summers said, we’re going to be looking for the balance between the two bills and we’re going to try and take the best ideas in both, listen to what the economists have to say and make the best decisions as to what will boost the economy.

But for the reasons you’ve said, we are not going to be, you know, in a position where it’s take it or leave it, it’s our way or the highway, because the priority, as President Obama has said, is to get something done.

And while there are differences between the House proposal and the Senate proposals, those differences pale in comparison to the fact that we want to get something done.

And unfortunately, in the House and the Senate, the Republican leadership apparently doesn’t want to move quickly to get something done.

WALLACE: Senator Cornyn, let’s turn to TARP II, the second half of the financial bailout. You voted against releasing the second half, the $350 billion.

We’re now hearing how the Obama administration plans to spend that money. They’re going to inject billions more into new banks. They’re going to give private investors incentive to buy up some of these toxic assets. There’s going to be more strings attached.

Are you more supportive when you hear the ideas they have?

CORNYN: Well, I voted for the original economic rescue package because on a bipartisan basis we were told the economy was going to melt down unless we did so, but I was disappointed at the lack of transparency and accountability.

And frankly, even the prior administration used those funds for purposes that Congress did not authorize. For example, the Big Three auto manufacturers were bailed out when the Senate expressly declined to authorize that.

But you know, here we go spending more money again after we are going to vote, I assume, to pass, on a partisan basis largely, a $1.1 trillion spending package.

There’s also the omnibus appropriation bill from last year that remains in the -- in the -- in the pipeline. And it’s just spending as far as the eye can see.

What I really think we ought to focus on initially is housing. Let’s fix housing first. While this bill has a very important tax credit that Senator Johnny Isakson and others have championed, it does virtually nothing else to fix the very -- what’s caused the problem in the first place, which is the decline in housing.

And I think that should be our focus on this so-called stimulus bill, not just spending on social programs and racking up more debt.

WALLACE: Staying, Congressman Van Hollen, though, on TARP II, the second half of this financial bailout money, I think Senator Cornyn is right. There was a widespread feeling in the country that an awful lot of this -- the first half, the first 350 billion, was wasted, that it didn’t do what it would -- you all voted for it to do, to free up the credit market.

Do you see anything in what you’re hearing out of the Obama White House that’s going to fix that?

VAN HOLLEN: Well, I do. You’re going to see a lot more transparency. You’re going to see a lot more accountability.

The president just announced the other day limitations on bonuses so that CEOs of financial institutions that are getting this taxpayer money can’t be, you know, rewarding themselves with these big, huge bonuses.

There’s going to be a lot more transparency throughout the process. And I think you’re going to hear Secretary Geithner tomorrow unveil a plan that addresses the housing issue.

One of the most neglected parts of the TARP approach under the Bush administration was that they neglected the housing component. So I’m looking forward to what Secretary Geithner has to say on that issue going forward tomorrow.

WALLACE: As I said, you are the chairmen of the House Democratic and Senate Republican Campaign Committees. And I want you to look at a poll that’s out this week.

It shows that the public approves of President Obama by a wide margin. It supports Democrats in Congress much more narrowly, and it disapproves of congressional Republicans almost 2-1.

Senator Cornyn, isn’t there considerable risk to Republicans to be seen as voting almost unanimously against the president’s economic stimulus plan when he is seen by the public as making such a big effort to be bipartisan?

CORNYN: Well, the president has done a good job reaching out to Republicans, and he has said he wants to approach this crisis, like other problems the country has, on a bipartisan basis. That’s good, and we’re willing to work with him on that.

But this bill is not the president’s bipartisan plan. It’s Nancy Pelosi ’s plan, and she said, “We won the election. We’re writing the bill.” And that’s what happened in the -- in the House.

And I think every Republican suggestion that’s been offered during the course, almost without exception, has been defeated along a party-line vote.

So this is -- I don’t think Harry Reid and Nancy Pelosi actually got the memo from the president when it comes to bipartisan cooperation. That’s why you’re seeing this outcome.

WALLACE: Congressman Van Hollen, as head of the Democratic Campaign Committee in the House, are you going to go after Republicans for voting almost unanimously -- in the case of the House, unanimously -- against the president’s economic stimulus?

VAN HOLLEN: Well, we’re certainly going to hold people accountable for their votes and explain to the American people what the consequences are.

When you’ve got millions of Americans losing their jobs, it’s hard to defend the position that you don’t want to get the economy moving again. I think the American people see a huge disconnect.

When President Bush came before the Congress and asked for $700 billion for big Wall Street firms, you saw the Republican leadership salute and turn on a dime and provide that money -- $700 billion for Wall Street.

But when President Obama has come up and said, “We want $800 billion for the American people and turn the economy around,” you’ve got them dragging their feet. And I think that’s why you see the numbers that you do.

WALLACE: We’ve got about a minute left, and I’d like you to share it equally.

Senator Cornyn, we now learn that the Obama administration is going to have the director of the Census Bureau report not only to the commerce secretary but also to the White House.

What’s wrong with that?

CORNYN: Well, ordinarily, this has been something that the commerce secretary has done, and I think it ought to be done on a competent, as much as possible, nonpartisan basis.

And to shift it to the White House to me just politicizes the census, which is not something we should be doing.

WALLACE: And what’s the danger, briefly, of politicizing the census?

CORNYN: Well, because, of course, that determines who gets what congressional districts. States like Texas were going to get probably at least three new congressional districts based on the reapportionment -- and then, of course, in drawing those lines, redistricting within states. It’s all based on those census figures. So if you cook the figures up front, I think it distorts that process going forward and undermines the concept of one person, one vote.

WALLACE: And very briefly, Congressman Van Hollen, I mean, why not leave it in the Commerce Department?

VAN HOLLEN: Look, I think the issue at the end of the day we should all agree is that we want the facts and accuracy in the count. And it seems to me that the more eyes taking a look at this, the better.

It’s going to be all on the Internet in terms of how the process is done. This administration has a huge commitment to transparency. So I think at the end of the day, it matters less exactly what the reporting mechanism is than that we get the facts and the count right.

WALLACE: Congressman Van Hollen, Senator Cornyn, thank you both. Thanks for coming in, and we’ll see how things go this week.

WALLACE: Coming up, tax problems in the Obama cabinet. Whatever happened to changing the way Washington does business? Our panel weighs in on ethics and the White House after this quick break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: We can’t send a message to the American people that we’ve got two sets of rules, one for prominent people and one for ordinary people, and -- you know, so I consider this a mistake on my part and one that I intend to fix and correct and make sure that we’re not screwing up again.

(END VIDEO CLIP)

WALLACE: That was President Obama in my Oval Office interview with him this week taking responsibility for the failed nomination of former senator Tom Daschle.

And it’s time now for our Sunday group -- Fox News contributors Fred Barnes of The Weekly Standard, Mara Liasson of National Public Radio, syndicated columnist Charles Krauthammer, and Juan Williams, also from National Public Radio.

Well, Tom Daschle did have to drop out this week as the nominee for secretary of health and human services for his failure to pay some back taxes. So did the administration chief performance officer -- you can see there -- Nancy Killefer. And this after, of course, the controversy over Treasury Secretary Tim Geithner and his back taxes.

Fred Barnes, how damaging is this roll call to the president?

BARNES: I don’t -- well, it doesn’t seem to be very damaging to him. As the poll you showed earlier in the show -- you know, 62 percent approval positive, only 15 percent negative. It was a mistake.

Sometimes presidents can say, “Well, I made a mistake,” and get away with that. But look, in a couple of ways it did -- it did hurt the Democratic Party in Washington. You know, look. He promised -- I mean, who did he think Tom Daschle was -- he was picking -- St. Francis of Assisi?

For heaven’s sakes, this guy is a classic Washington influence peddler, making money for unknown reasons -- well, I guess we do know the reasons -- law firms and other firms, $5 million in two years, riding around in a limo. I mean, please.

And it’s the same with others. You know, the -- his press secretary said, “You know, the problem was we set the bar so high.” So high? What, they have to pay their taxes? That’s not very high.

So I think he hurt this reputation for “I’m going to change Washington by having a lot of different people here.” And now, if you watch the late night talk shows, what do they talk about? The Democratic Party. What is the thing they’re talking about? It’s the party where if you’re a leading figure, you don’t have to pay taxes.

WALLACE: Mara, let me ask you about that, because Fred is certainly right that the president during the campaign set this very high standard and talked about changing the way Washington does business.

Now, in these few weeks since the inauguration, we see him having to give waivers to lobbyists to serve in his administration. He’s hiring people like Tom Daschle, who made millions of dollars after leaving powerful positions in the government and going into the private sector.

Is it -- is it turning out that Washington isn’t so easy to change?

LIASSON: Well, Washington isn’t so easy to change. But first of all, there’s no doubt in my mind, based on conversations I’ve had with White House officials, that if Tom Daschle himself hadn’t woken up in the morning and read the New York Times editorial and decided he couldn’t go through this, they would have still been fighting for him.

They were willing to take the hit on the waivers, on Tom Daschle. They certainly knew everything he had done for Alston & Byrd before they nominated him. Now, of course, the car and driver problem made it worse.

But they were willing to take the hits on this because they feel, and polls do back them up -- a USA Today/Gallup poll shows by 3-1 people still think that Obama’s ethical standards are high, and he is bringing change. They were willing to do this.

Now that Daschle has dropped out and the president has kind of fallen on his sword and said, “I screwed up. It was my fault,” they have raised the bar very high. And it means that their -- the exceptions to the Obama rule are going to be harder to push through in the future.

So I think they have boxed themselves in to a certain extent.

KRAUTHAMMER: Look, I think what the polls are showing is that people haven’t turned against him, obviously, on these relatively small mistakes.

But I think you’ve got to measure him by a different standard in the sense that he came in as a man who was transcendent, had a charisma, and had an aura about him unlike any other figure in politics since the Kennedys, and theirs is largely posthumous.

I mean, he came in with his own cult of personality unlike anything any of us have ever seen. That’s what I think has fallen away. I mean, it was inevitable. To govern is to choose, and to choose is to alienate. And over time, perhaps six months or a year, that sheen, the aura, was going to come off him.

But after the Daschle and the Geithner and the Killefer debacles, after the stories about the limos and the Cadillacs and all that, I think it’s hurt him in a way that -- it’s changed the perception of him as a transcendent, different character and politician.

And that, I think, is something you don’t recover.

WALLACE: Juan, let me ask you about that. I think in Charles’ column on Friday, he said he thought this was going to take six months. It ended up taking 2.5 weeks.

Do you really think that Obama’s image as a transformational character has somehow been damaged, if not disappeared?

WILLIAMS: No, but it’s open to widespread sort of derision, especially among Republicans, who raise questions, as Fred was pointing out, about, “Oh, now we know why they want to raise your taxes, because they don’t want to -- they don’t pay taxes,” things like that.

But the point is that he has raised the bar. And what it’s done is a very interesting thing here. It’s put this out as static in the midst of a real need to deal with policy issues like health care reform.

The absence of Daschle means that his -- that the president’s promise to get health care reform started and under way, maybe even accomplished, in the first 100 days is not going to happen.

And it also raises questions about his experience level. This is a guy, as someone pointed out, was in the Illinois state senate four years ago. Now he’s being rolled, it looks like, by a lot of kind of Washington convention.

And his ability to create that change is difficult, which is why the Chicago Tribune said, you know, if you look at the high standards he’s proclaimed, and then he suspends them for people like William Lynn, who’s the new number two guy at defense, or for William Corr, who’s now the number two at HHS, then people say, “Oh, you’re offering waivers and you’re guilty of hypocrisy or being obtuse.”

The president doesn’t need that in the midst of a huge fight over the stimulus package and health care.

WALLACE: Fred, as we pointed out, one of the things that the president did in the five interviews he did with the networks was to say, “I screwed up. I made a mistake.” And a lot of people said, “Well, that’s a refreshing change from at least his two immediate predecessors in office,” George W. Bush and Bill Clinton. Does that buy him some goodwill to just say, “I take personal responsibility?”

BARNES: Yeah, I think it buys him a little. And you know, it was interesting to hear what Senator Cornyn said when he was talking about Congress and the president. He specifically did not criticize President Obama.

And the problem -- oh, we like all the things he said about changing Washington and bipartisanship, it’s these terrible Democrats, it’s Nancy Pelosi and Harry Reid .

And look. When that strategy of Republicans changes and they start actually criticizing President Obama directly, we’ll know that I think he’s in more trouble then. But I think we’re a good ways from that.

WALLACE: Mara, one of the things that struck me as somebody who participated in the five interviews on Tuesday -- he’s got a prime time news conference on Monday. He’s going around the country holding town hall meetings. There are plans for two addresses to the nation before the end of this month.

Is there a danger -- obviously, the White House knows they have this enormous asset in Barack Obama . But is there a danger of over- using it, of overexposing him?

LIASSON: Well, I asked that very question to people this week at the White House, and they say no. Right now, any time he talks about a stimulus plan, that particular stimulus plan goes up in popularity.

Now, when people read the details and they think Congress is doing this XYZ wasteful spending, they don’t like it. But right now, he sells magazines. That’s why he’s on every cover. He helps them sell their programs.

That’s why they’re going to put him in Florida and in Indiana and at a prime time press conference this week. Right now, they feel he cannot be overexposed.

There’s something else, also. The message you heard from Larry summers, this relentless populist message -- pay caps for executives -- they have to sell something that’s very, very unpopular right now, which is TARP. That’s what they’re going to unveil on Monday.

WALLACE: This is the second half of the financial bailout.

LIASSON: The second half of the financial bailout. They have to make sure that people think that the White House gets it and is on their side.

WALLACE: All right.

We have to take a quick break here. But when we come back, the ups and downs of the economic stimulus plan as it gets closer to becoming law. Our panel tackles the big question: Will it work? Back in a moment.

(COMMERCIAL BREAK)

WALLACE: On this day in 1978, proceedings of the U.S. Senate were broadcast on radio for the first time. Members could be heard opening debate on the Panama Canal Treaty which they would go on to ratify the following month.

Stay tuned for more from our panel.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MCCAIN: If this legislation is passed, it will be a very bad day for America.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: So -- well, then I -- then you get the argument, “Well, this is not a stimulus bill. This is a spending bill.” What do you think a stimulus is?

(LAUGHTER)

(END VIDEO CLIP)

WALLACE: And at times this week, it seemed as if the campaign was still on as President Obama and Senator McCain argued over how best to stimulate the economy.

And we’re back now with Fred, Mara, Charles and Juan.

So, Charles, the House version is 819 billion. The Senate version is 827 billion. But despite what Larry Summers said, there are some big differences between these two versions on aid for education, on health care, on alternative energy.

How do you expect this to get sorted out in the conference committee?

KRAUTHAMMER: In the end, it will be sorted out entirely on the matter of politics and not economics. And the politics here are that you can get anything through the House. If Pelosi wants X, it will pass.

But in the Senate, you’re going to have to appease the gang of three, the three Republicans who defected and joined with the Democrats on this bill. So it’s going to have to be nearer what the Senate has decided on if it’s going to pass.

You’ve got to be careful. Susan Collins has wavered a bit -- one of the three Republicans on this. She’s going to have to be OK with it. And you’ve even had a few Democrats like Dianne Feinstein , who’s expressed questions about the Senate version.

So I think it’s going to tend on the Senate side. You’ll have those large -- you’re going to have a lot of those cuts. You’re going to end up with the Alternative Minimum Tax fix, which is what the Senate had insisted upon.

But in the end it’s going to be, as Larry Summers had said, almost on -- the overlap is huge, about 90 percent. So it’s going to be a huge spending bill.

WALLACE: Of course, when you have an $800 billion spending bill and 90 percent means that you could -- you differ about $80 billion, is that -- is that the way you look at it, that it’s going to end up basically the Senate version just because they have no margin for error?

WILLIAMS: It’s got to be. I mean, you need the bill. And I think he has the votes.

But you know, the thing that struck me this week is the Republican revival. How can President Obama be losing this argument? And I mean, we’ve cited numbers that say the American people still have faith in him.

But in terms of the argument, when you ask the American people about the stimulus package and whether it will work, the numbers are down around 38 percent.

Well, how can Barack Obama , the president of the United States, with a bully pulpit, be losing an argument at a time when we see such high rates of unemployment, now 7 percent?

You look inside...

WALLACE: Seven point six percent.

WILLIAMS: You look inside the black community, it’s 12.6 percent. What is -- and you know, you stop and you think, “Well, what is going on?” Well, the way that the Republicans are couching the argument is in terms of pork and big spending.

And especially if you look at the contrast between the House and the Senate bill, it’s about giving money to the states so that the states don’t have to raise taxes, and don’t have to cut back and start laying people off.

And what you’re hearing from Republicans is, “Well, the states have been overspending and spending recklessly, and all we’re doing is propping them up instead of making them -- allowing -- forcing them to make critical fiscal decisions at tight times.”

But I think the American people understand that jobs, retirement savings right now -- they’re in the tank. Something has to be done immediately. And that’s why Obama, as Mara was saying, has got to go out on the road. But he’s been let down by the leadership, the Democratic leadership, in the House and the Senate because they haven’t been making the case. And it just seems to be such an overwhelming case that something has to be done.

WALLACE: Well, and the question is whether they’ve made the case or whether they wrote the wrong bill.

BARNES: They wrote the wrong bill, exactly. And look. If they -- it would have been so easy -- it would have been so easy to have a bill, a compromise bill, that attracts Republicans. All you needed to give them, really, was some -- some tax cut with stimulus.

John McCain ’s the perfect example. You just showed McCain. Why is he against it? All of us know that there’s nothing that John McCain is more attracted to than a bipartisan compromise, more than anybody in the entire Congress.

And he’s against this, because Republicans got really nothing they wanted on the tax side that would stimulate the economy. Have a corporate tax decrease, which McCain wanted. Have a bill where Republicans get, you know, a third, 20 percent, of the bill. You’d have had a bipartisan bill and everything would have been different.

WILLIAMS: Fred, wait a minute. Didn’t we -- we just gave money to Wall Street. We’ve given money to the banks...

BARNES: Yep.

WILLIAMS: ... time and again. The average guy who’s dealing with a mortgage that’s in trouble or trying to pay a college loan...

BARNES: You still have that.

WILLIAMS: ... retirement -- you look at your retirement savings, your 401(k) going down -- how come those people never get money from the bailout?

BARNES: But they would. Of course they’d get money. They’d get money in this bill. There’d be all this spending, but you would have given Republicans a serious tax cut.

Look, ultimately, you depend on the private economy. It is going to get the economy back in shape.

WALLACE: All right. Guys, I want to break in, because I want to get to the bottom line question.

Is this going to work, Mara?

LIASSON: That is the most important question. We know now they can muscle something through the House. They’ll probably pick up a few Republicans when the bill comes out of conference. They’ve got their three Republicans in the Senate to get them over 60.

I think the big question mark -- and this is really serious -- is if this is going to work. This thing has to be stimulative.

To have a ton of stuff in here like the Alternative Minimum Tax fix, which isn’t stimulative, but it costs $70 billion -- I mean, that means that that’s a certain amount of money that’s not going to pump up the economy.

Unemployment’s still going up. You’ve got the concern now about long-term interest rates. You’ve got two warring concerns -- deflation now and rising interest rates over time to get people to give us money from abroad.

I think there is a big question mark about whether this is going to work. The good thing -- and as -- Brit isn’t here today, but he would say this -- that in the end, if it does work, we’ll never know if it actually was this stimulus bill or if it was something that the Fed did.

WALLACE: Charles, let me ask you about that. I mean, if you’re going to throw $800 billion in tax cuts and spending increases into the economy, doesn’t that necessarily have to be stimulative?

KRAUTHAMMER: It does, but nobody will know if it’s enough, if it was too much or too little. And in the end, there are so many other factors in play -- trade is going to be -- fiscal policy, the bailout of the banks, the strength of the financial institutions -- that we in the end are not going to know if it was this bill or not.

But nonetheless, if the economy is stronger, everybody will say it worked. And if it’s not, everybody will conclude it didn’t work.

WALLACE: Do you believe, Charles, this conservative argument that government spending doesn’t work, and that it didn’t work in Japan during the lost decade of the ‘90s, it didn’t work during the ‘30s in the New Deal, and that that really is not the way to go?

KRAUTHAMMER: Look, the honest answer is no one knows. You’ve got one economist at Harvard who says that this bill is the worst in 70 years, and you have Larry Summers, also ex of Harvard economics department, who essentially is an author of this, in part. And they’re both smart and they both are open-minded.

The answer is our crisis, in many ways, is unprecedented and history often is not a good teacher because conditions are so different. Our economy is a global economy now. Trade is a huge part of our economy. It depends on how others are going to react.

You would expect spending will help, but, in fact, our answer will be in a year or two...

(CROSSTALK)

WILLIAMS: Well, let me -- let me just -- let me re-frame the question you asked, though, Chris, because the question has to be, “Wait a minute, with the construction industry down 18 percent, manufacturing, leisure, hospitality down 10 percent -- well, wait a second, shouldn’t we invest the money in long-term infrastructure that will help America going forward and actually generate jobs?”

(CROSSTALK)

WILLIAMS: Oh, that’s a different question.

KRAUTHAMMER: Each dollar the government is spending is taken away from another use.

WALLACE: All right.

KRAUTHAMMER: So it could have a net effect of zero.

WALLACE: You know the best part of this? We’re going to be able to argue this out next week, and the week -- and the week after that.

Thank you, panel. See you next week.

Our mailbox was full of comments about Tom Daschle’s tax problems that eventually sunk his nomination. Susan Prillman from Raleigh, North Carolina expressed the view of many. “When will we see the same incredulity over the tax evasion practices of people like Daschle and Geithner that Obama seems so ready to criticize in the Wall Street bonuses? Are they not both cases of double standards?”

And regarding the debate over economic stimulus, Don Drake from Littleton, North Carolina writes, “We’ve never spent our way out of similar problems before. Only time, events and the marketplace will work together to give us real recovery.”

Be sure to let us know your thoughts by e-mailing us at fns@foxnews.com.

And take a look at our new page on Facebook where you can watch earlier news-making interviews and find out more about our show.

Up next, revealing comments from President Obama about the demands of his new job.

(COMMERCIAL BREAK)

WALLACE: When I sat down with President Obama in the Oval Office this week, the last question I asked him was what was the biggest surprise about the demands of his new job.

We thought you’d be interested to hear his answer.

(BEGIN VIDEO CLIP)

OBAMA: Every decision you make counts. You know, I think in terms of just raw hours and physical exhaustion, you know, you can’t beat a presidential campaign, all right, especially the one that I just underwent, which was so long.

But here, everything you do matters. You know, I’m now signing letters to the families of troops who have fallen in Iraq or Afghanistan. Every time you sign that, you are reminded that you have enormous responsibilities.

And so that’s why in all of these debates, when I’m talking to Democrats or Republicans, one of the things I try to remind them, and something I remind myself every single day, is the only criteria for what I do should be is it working for the American people, because this is -- this job is too big, too important, to just want to occupy space.

And you know, if I’ve spent the next four years every day making decisions based on that single criteria -- is this going to help the American people achieve their dreams and keep them safe? -- then I’ll be able to look at myself in the mirror and say, “You know what? You did a good job.”

WALLACE: Mr. President, thank you for talking with us.

OBAMA: Appreciate you. Thank you, Chris.

(END VIDEO CLIP)

WALLACE: And that’s it for today.

Now this program note for Monday night. You can watch President Obama’s prime time news conference at 8:00 p.m. Eastern on this station with Shepard Smith anchoring, and on Fox News Channel with Bret Baier leading the coverage.

But for now, have a great week, and we’ll see you next “Fox News Sunday.”