CQ Transcriptswire

SPEAKERS: CHRIS WALLACE, HOST

[*] WALLACE: I’m Chris Wallace and this is “FOX News Sunday.”

The Obama administration ratchets up attacks against groups that oppose his policy. We’ll get reaction from two players on what’s being called the new White House enemies list -- from the U.S. Chamber of Commerce, Bruce Josten; and from America’s Health Insurance Plan, Mike Tuffin.

Also, Afghanistan -- what happens next with an election runoff and President Obama deciding whether to commit more U.S. troops? We’ll ask Abdullah Abdullah, a presidential candidate, and two key senators, Democrat Carl Levin and Republican Jon Kyl .

And the White House cracks down on executive pay. We’ll ask our Sunday panel -- Kristol, Liasson, Perino and Williams -- if more government wage controls are on the way, all right now on “FOX News Sunday.”

Hello again from Fox News in Washington. We’ll discuss how the White House is targeting what it considers its enemies in a few minutes.

But first, the latest on Afghanistan. With the presidential runoff there less than two weeks away, and with President Obama now one month into his policy review, we want to get an update on political and military developments.

To start our coverage, we turn to correspondent Connor Powell in Kabul.

Connor?

CONNOR POWELL: Thanks, Chris. in recent months, the U.S. military has seen a big increase in resources as equipment like helicopters and Humvees and MRAPs are transferred from Iraq to Afghanistan. This has been a big boost for morale here on the ground.

But there is an air of uncertainty that hangs over the mission here in Afghanistan. The U.S. military is waiting to find out if President Obama will approve a surge of troops to Afghanistan. Military planners say there is still time before a decision must be made, but the sooner, the better.

Now, as for that ongoing Afghan election, in just two weeks’ time, Afghan president Hamid Karzai will face challenger Dr. Abdullah Abdullah in a second round runoff election.

Western officials are frantically trying to organize this vote and trying to prevent the widespread fraud and ballot stuffing that marred the first round from affecting the second round.

But as one western diplomat told me recently, there’s very little they can do in just two weeks. The best they could hope to do is tweak the system. Back to you in Washington, Chris.

WALLACE: Connor Powell reporting from Kabul.

Connor, thanks.

Earlier we spoke with one of the two candidates in the Afghan presidential runoff, challenger and former foreign minister Abdullah Abdullah.

(BEGIN VIDEOTAPE)

WALLACE: Dr. Abdullah, there have been reports that in order to avoid a runoff with the possibility of more violence and more fraud that you and President Karzai might agree to share power, to a coalition government.

Is that a possibility? Or have you ruled that out?

ABDULLAH: No, I think I should rule it out, because I am ready to go for a runoff. I -- and what I am focusing at this stage -- to -- to provide the relevant institutions which sets off recommendations and sometimes conditions to ensure the transparency of the Afghani elections.

WALLACE: Let’s turn to the runoff, which is scheduled for November 7th. There was rampant fraud in Afghanistan. Your supporters now say that unless there are changes in the election commission, which is run by Karzai supporters, that you may, in fact, boycott the runoff.

Is that a real possibility, sir?

ABDULLAH: So I’m not talking about boycott at this stage, though my supporters are pressing on that point, that if the state machinery a fraud, as well as election commission, which was unfortunately involved in fraud -- both are in place, and then both are working in collaboration with one another, perhaps we might have to go through the same sort of saga.

And that -- I am under a lot of pressure. But at the same time, I’m working with the international community on sets of conditions which have to be met. These are not conditions in favor of one candidate against another.

WALLACE: And if those conditions are not met, will you go ahead with the runoff?

ABDULLAH: No, I think some of -- some of the things which we will be putting forward are very serious issues. Without it, without considering it, we will not have a transparent, credible process, and it will be very difficult to convince the people to turn out and to show up, because the people are taking risk. And they are taking risk in the first round elections.

So it will -- it will make the situation very difficult if those conditions and recommendations are not met.

WALLACE: So does that mean that a boycott by you of the runoff, if there are no reforms, if there are no changes, is a possibility?

ABDULLAH: I don’t want to give a message to our people so that momentum for campaign will be lost. So by that, that shows my commitment to the process.

But at the same time, I would say that it will be a very serious situation if we are up against the same sorts of conditions that we went through in the first round elections.

WALLACE: Dr. Abdullah, even with so many of President Karzai’s votes thrown out, he still led you 49 percent to 32 percent. With him so close to a majority, do you really have any chance to win?

ABDULLAH: I’m sure that with the -- with the fate of the people (inaudible) on the process, there will be higher turnout and the people do want change in this country.

The reason that there was lesser turnout, apart from -- from the security situations -- it was also because of lack of faith on the process.

WALLACE: If Karzai wins, can he be a credible partner for the U.S. going forward?

ABDULLAH: I think there is a -- there is a record -- there is a record in the past few years. I think so far one of the problems for the United States and the international community has been the fact that the Afghan side has not been able to deliver, and the Afghan side has been led by Mr. Karzai in the past few years.

WALLACE: There is a big controversy here in the U.S., Dr. Abdullah, about when President Obama should announce the result of his policy review on strategy and troop levels.

Would you like to see him announce his decision as soon as possible? Or would you like to see him perhaps delay till after the election because whatever the U.S. decides could be disruptive to the campaign?

ABDULLAH: There is a need for more troops. There is no doubt about it. There are need in Afghanistan. And that’s based on military analysis and especially by General McChrystal.

At the same time, when is the best time? Of course, even if the decision is made today doesn’t mean tomorrow we will have troops -- boots on the ground. It will take time.

WALLACE: If President Obama decides to scale back on U.S. strategy and the number of troops that he sends, what is the danger that the Taliban will overrun the country?

ABDULLAH: The need for more troops is there in order to reverse the situation. If the situation is not reversed from deteriorating further the security situation, so the future of this country will be at risk, and the future of the engagement of the international community will be at risk.

So this situation requires a sort of dramatic increase in the number of troops in order to stop -- stop it from further deteriorating and reversing it. The permanent solution is in a road map that Afghanistan stands on its own feet in a few years down the road, troops -- number of troops could be decreased in Afghanistan, finally, and eventually will stand on its own feet. WALLACE: You talk about a few years down the road, which brings me to my final question, Dr. Abdullah. If the president commits to a full-scale counterinsurgency, how many more years will U.S. troops have to stay in Afghanistan?

ABDULLAH: I think this is -- this is very difficult to give a sort of time table for anybody, I think. But as long as you can see through a clear strategy that the situation in Afghanistan will be stabilized, as long as you can see that in that strategy, you know, with a sort of realistic analysis, so the issue of one or two more years, more or less, will not be the main matter.

WALLACE: Dr. Abdullah, we want to thank you so much for talking with us, sir.

ABDULLAH: You’re welcome.

(END VIDEOTAPE)

WALLACE: Joining us now to discuss the choices President Obama must make are the Democratic chairman of the Senate Armed Services Committee, Carl Levin , who comes to us from his home state of Michigan, and here in studio, Jon Kyl , the number two Republican in the Senate.

Senators, you just heard Dr. Abdullah. He’s leaving open the possibility that he may boycott this runoff unless there are significant changes to the Afghan election system.

Senator Levin, let me start with you. Should the U.S. pressure President Karzai to make those reforms?

LEVIN: Well, I think we ought to put as much pressure on that process to be open and honest and transparent as possible without looking as though we’re intervening in the process. It’s got to be an Afghan process.

There are more than one -- groups there that are looking at it. There’s one controlled by Karzai, of course, but there’s another one which is an international group, and it was that group which I think caused the re-election to take place when it found that there were so many fraudulent ballots.

But I would think it would be a mistake for Dr. Abdullah to do anything other than what he just did, which is to avoid calling for a boycott, because he’s hoping that he can win. So I think, yes, we ought to press as hard as we can without appearing to be dominating or taking off -- taking over the process.

WALLACE: Senator Kyl, Dr. Abdullah also says that the record is clear over the last eight years that Hamid Karzai has not been able to deliver as president of Afghanistan.

Should the U.S. get more involved in Afghanistan if Karzai, after the runoff, ends up being our partner? KYL: The answer is I believe we should follow the recommendations of General McChrystal and continue the mission so that we can prevail.

That means for a while we will have to be more involved. Obviously, when you’re talking about a country like Afghanistan, you don’t have a perfect government. That’s why you have to have a counterinsurgency policy. The populace can’t be protected by their own government.

And the point of a counterinsurgency policy is for the United States forces and the other United -- NATO forces to be able to help protect the Afghan population. Our being there will, as Carl Levin said, provide some leverage over the government to be more cooperative and assist us in that effort.

So I think for all of those reasons, following General McChrystal’s recommendation makes a lot of sense.

WALLACE: As we said earlier, President Obama is now just about one month into his second strategy review about the way forward in Afghanistan.

This week former vice president Cheney was upset about the president’s long policy review. He accused him of dithering, said he is encouraging our enemies and demoralizing our troops. And the White House responded very sharply. Let’s take a look at that.

(BEGIN VIDEO CLIP)

CHENEY: President Obama now seems afraid to make a decision and unable to provide his commander on the ground with the troops he needs to complete the mission

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

ROBERT GIBBS: What Vice President Cheney calls dithering, President Obama calls his solemn responsibility to the men and women in uniform and to the American public.

(END VIDEO CLIP)

WALLACE: Senator Kyl, three weeks ago you defended the president against critics who said that he was taking too long in this strategy review. Do you still feel that way?

KYL: Republicans want very much to support the president’s decision. And if he makes the decision along the lines that General McChrystal has recommended, I believe we will do that. I think that’s -- that’s an element of bipartisanship that is called for here.

But let me read what General McChrystal himself said. “Time matters. We must act now to reverse the negative trends and demonstrate progress.” And he also said, “I believe the short-term fight will be decisive. Failure to gain the initiative and reverse insurgent momentum in the near term, next 12 months, while the Afghan security capacity matures, risks an outcome where defeating the insurgency is no longer possible.”

It’s been more than two months since the recommendation went to the president. And General McChrystal is talking about a 12-month time frame. So clearly, time is of the essence here.

WALLACE: Do you believe that the review the president has undertaken has hurt our chances and hurt our mission there?

KYL: It depends upon how quickly we can get the forces in. And remember, Afghanistan is not a country like Iraq where you’ve already got roads, and electricity, and water and so on. So you basically have to set up your camps from scratch.

If we can quickly get forces in there, then perhaps we will not have lost critical time. But as General McChrystal said, time matters. And I’m afraid with every passing day we risk the future success of the mission.

WALLACE: Senator Levin, is there a cost to the president engaging in such a long and such a public review? And do you think at this point that he should wait till after the election so that whatever his decision is, it doesn’t affect the runoff?

LEVIN: Well, first of all, I thought that the comments of the former vice president were totally out of bounds. I don’t think he has any credibility left with the American people in any event.

But I think it’s really wrong for the vice -- former vice president of the United States to be talking as he did about the president dithering, because the president needs to reach the right decision.

President Bush took three months in considering whether or not to surge troops in Iraq. When he made a decision to surge those troops, he overruled the recommendation of his commander on the ground, General Casey, who was opposed to sending in more troops at that time.

I think that history will show that President Bush reached the right decision. It wasn’t the only cause for the improved situation in Iraq, to the extent it has improved. But nonetheless, he took the three months.

No one pressured President Bush at that time to reach a decision more quickly than he felt he could. And for -- I think for some of the Republicans in general -- and Senator Kyl is not one of those Republicans who is unduly pressing the president. I give Senator Kyl credit for not pressing the president the way Cheney and some of the Republicans have.

But it just is important the president reach the right decision. And this is a NATO decision. Right now we have Secretary Gates going over to NATO, talking to NATO allies. This is not just a decision of the United States and whether to send more troops. There is a lot more involved than just more troops.

There’s a question of equipping the Afghan army. There’s a question of reintegrating the lower-level Taliban. There’s a number of issues that are involved here. The whole training mission is critical. We need our NATO allies on board.

And the president is taking the appropriate amount of time. I’m hoping he’ll reach a right decision, which is to Afghanize this process much more than it has been.

WALLACE: All right. Let me -- let me break in here, because I think we all agree that less important than -- the question of when he decides is less important than the question of what he decides.

The Wall Street Journal just yesterday had a report that said that the president is moving towards a hybrid strategy that will be part training Afghan forces, part counterinsurgency, somewhere between the 10,000 added troops, which was the lowest level that McChrystal was talking about, and 40,000 troops, which is what McChrystal is asking for.

Senator Levin, would you support this -- what’s being called a middle ground? And do you think that’s where the president is headed?

LEVIN: Well, I’d want to see the entire mix. There’s a lot of ways of showing resolve, and resolve needs to be shown. General McChrystal himself said that it’s appropriate to deliberate and to change, as he put it, the strategy to one which is more workable than the one that is currently in place.

And so it would depend upon the mix of actions which we take, not just the question of more trainers, which are critically important because we’ve got to increase the size and the capability of the Afghan army, but also the question of equipment for the Afghan army. We took a vote just this week which allows for our equipment to be transferred from Iraq to the Afghan army.

It has to do with a plan to reintegrate the Afghans. There’s a lot of things that need to be done to show resolve. I think it would be a mistake to have any significant number of additional combat forces, because I’d like to see the large increase in the Afghan army be the major way in which this war is successful.

WALLACE: Senator Kyl, there were some who say that this would be a kind of “split the difference” decision that would give General McChrystal and the military part of what that want, but it would also give something to the president’s liberal base. What do you think of the idea?

KYL: Well, first of all, I would note that Friday in Bratislava the NATO ministers agreed and they supported the counterinsurgency policy that General McChrystal laid out, so I think NATO will...

LEVIN: Could I interrupt there just for a second?

KYL: Wait, let me just finish, Carl.

WALLACE: Well, let him finish.

KYL: Yeah.

WALLACE: I’ll give you a chance, Senator.

KYL: Secondly, I don’t believe that this is a choice between one or the other. The policy has always been to try to take out Al Qaida when we can. The policy has always been to train up more Afghan military and police.

The question was how many additional combat troops would go into theater. And if we can get close to 40,000 combat troops into theater and also do the other things that everyone agrees need to be done, then I think it is a workable strategy. It basically follows General McChrystal’s recommendation.

So when it’s described as a hybrid, I think that’s a bit of a misnomer. We were always going to do the other two things. But you can get better intelligence and perform more effectively both the training with more troops and the counterterrorism against Al Qaida if you have more American combat troops in theater.

WALLACE: Senator Levin, you get a brief final word.

LEVIN: Yeah. I just -- in Bratislava, the minister -- defense ministers supported a counterinsurgency strategy. That did not reach any conclusion relative to additional number of troops.

This is a NATO effort. Many countries have to be involved in this.

WALLACE: But it is a fact that they endorsed General McChrystal’s plan, is that not true, Senator Levin?

LEVIN: No. They -- what they -- no. They endorsed the counterinsurgency plan, the part that has been made public. They specifically did not decide whether there should be additional...

WALLACE: No, but -- but -- but...

(CROSSTALK)

... they did endorse a counterinsurgency.

LEVIN: I do, too. I think the counterinsurgency plan is the right way to go and the way to make it effective -- I believe is to have a much larger, much quicker Afghan army and a much better equipped Afghan army.

WALLACE: All right. We’re going to have to leave it there.

Senators Levin, Senator Kyl, thank you both so much for coming in. Please come back, both of you gentlemen.

KYL: Will do. WALLACE: Up next, is the Obama administration creating a new enemies list? We’ll talk with leaders of two groups who say they’re being targeted by the White House -- talk to them right after this break.

(COMMERCIAL BREAK)

WALLACE: The White House war against Fox News has gotten plenty of attention recently. But this week there were reports the Obama administration has targeted other so-called enemies.

Joining us are Bruce Josten, executive vice president of government affairs at the U.S. Chamber of Commerce, and Mike Tuffin, executive vice president for America’s Health Insurance Plans, the trade group for private health insurers.

And, gentlemen, welcome to “FOX News Sunday.”

Mr. Josten, you were quoted this week as saying the following about dealings with the White House, and let’s put it up on the screen. “When you’re on their side, it’s all OK. But if you’re not, they rain hell down on you.”

What do you mean rain hell down?

JOSTEN: Well, there’s been a number of invectives that have come out of the White House, such as trying to neuter the U.S. Chamber of Commerce or trying to marginalize the U.S. Chamber as we continue our efforts and work to represent our members to get the best possible outcome on health care legislation, which we strongly need and want; on cap and trade legislation with respect to climate change; and with respect to the financial consumer product safety agency.

Now, we have some differences of opinion with respect to the legislation, unlike earlier in the year when we worked with the White House to help move the stimulus package forward, to help move the auto rescue package.

But things seemed to change when we had a difference of opinion.

WALLACE: OK.

Mr. Tuffin, you’ve talked about the White House trying to villainize the private health insurance industry, trying to stifle dissent. Does this go beyond the normal hardball politics in Washington?

TUFFIN: No, I think it’s normal hardball politics. But what’s different now is the stakes have never been higher. We’re talking about one-sixth of the U.S. economy. This is something we have to get right.

We support health care reform, but it’s got to be affordable, and it’s got to be sustainable. And there shouldn’t be a penalty for speaking out and introducing data into the public domain.

WALLACE: And you feel there is a penalty?

TUFFIN: Well, there’s been a political public relations campaign run against people who put data out that says specific provisions are going to increase costs.

For example, if we have a plan that says wait until you get sick to get insurance, everyone who has looked at that says that’s going to explode the insurance market and make it less affordable.

If we tax health care, it’s going to drive up costs, not bring them down. And so we’re going to keep talking about those issues. But we’re also going to keep working with both parties to get this done.

WALLACE: Mr. Josten, let’s talk a little bit about the chamber, because the chamber does, as you point out, now oppose the White House on several issues -- the public health insurance option, certain specific -- not the overall policy, but certain specific aspects of cap and trade, and certain specific aspects particularly of the consumer financial protection agency.

The president called the chamber out this week, and let’s take a look.

(BEGIN VIDEO CLIP)

OBAMA: That’s how business has been done in Washington for a very long time. In fact, over the last 10 years the chamber alone spent nearly half a billion dollars on lobbying. Half a billion dollars.

(END VIDEO CLIP)

WALLACE: Now, you say the White House has launched -- your words -- a frontal assault on the chamber, and let’s talk some specifics.

You say they’ve cut the chamber out of meetings. They’ve made an end-run and talked to CEOs of top companies without going through the chamber. And Energy Secretary Chu has said that it’s wonderful that some of these big companies are resigning their membership from the chamber. Is that so bad?

JOSTEN: Well, I think the White House needs to appreciate a couple of things. I mean, first off, I’m not sure what Chu means by it’s wonderful that a couple of companies, a handful of companies, have left the chamber out of 300,000.

We do have a disagreement with Secretary Chu, who earlier this year suggested that the new clean energy technologies largely being developed by American companies be given away to emerging market countries.

Nobody’s going to invest billions of dollars which are necessary to get to the kind of outcome we need if it’s going to be given away.

WALLACE: But to get -- to get to my point, what do you see as the purpose of all of these moves by the White House?

JOSTEN: Well, in their words, not mine, it’s, again, to try and neuter us and marginalize us. What we think they’re missing is that they simultaneously talk about small business being the engine of job growth.

And as I’ve said, I am certain they get good advice from the corporate CEOs. These are smart people running huge companies. But they’re not the engine of job creation. And we need to get to that point.

We need health care. And I agree with the president. He even acknowledged Mike’s point. Unless we get everybody into a fully insured marketplace, meaning the young invincibles who continue to opt out, it’s not going to work.

Yet we have a piece of legislation that’s moved through the Senate that has vastly weakened that obligation that those people get in.

WALLACE: The Chamber of Commerce, I don’t have to tell you, has a lot of clout in Washington. I want to put up some numbers. And these are numbers about lobbying done here in Washington.

Since 1998 the chamber has spent $488 million on lobbying. That’s double the American Medical Association, which is number two in Washington lobbying at $208 million.

White house official Dan Pfeiffer says the insurers, the chamber and other special interests had the run of this town for the last eight years. That’s not true any more.

Question: Is it just that there’s a new sheriff in town and you don’t like it?

JOSTEN: Well, we certainly didn’t have the run of the town. There are a number of other chamber priorities that we worked on, such as comprehensive immigration reform for more than two years -- would have been enacted into law.

We also went through...

WALLACE: But they’re talking about in terms of dealings with the White House.

JOSTEN: Well, we have dealings with the White House. But what I have said is being invited to auditoriums with 130 or 150 people where the president comes and gives prepared remarks, calls on a couple people in the audience, is not a consultative outreach. That’s not an exchange of ideas. That doesn’t even come close to a negotiation and an open vetting process to understand where both sides are (inaudible).

The president, when he was a candidate, said people should vigorously and passionate defend their positions, and we should undertake those debates in a civil manner. I don’t know where the name calling suddenly came from.

WALLACE: Mr. Tuffin, your group, the AHIP, the American Health Insurance Plans, issued a study and ran some ads opposing one version of health care reform. The White House said some of the data in your study was misleading. Here’s how President Obama reacted generally to the efforts of AHIP.

(BEGIN VIDEO CLIP)

OBAMA: The insurance industry is rolling out the big guns and breaking out their massive war chest. They’re earning these profits and bonuses while enjoying a privileged exception from our antitrust laws, a matter that Congress is rightfully reviewing.

(END VIDEO CLIP)

WALLACE: Question: Do you review -- do you view that reference to possibly taking away your antitrust exemption as a threat, as punishment, for the fact that you’re opposing the president and Democrats?

TUFFIN: No, we don’t, Chris. That is a very limited federal exemption. It has nothing to do -- every analyst who has looked at this has said it has nothing to do with competition or costs.

WALLACE: No, no, but that’s not my question. My question is why do you think the White House and the president are bringing it up right now.

TUFFIN: Well, I think it’s a good talking point. I think it’s a good talking point. But at the end of the day, it’s not going to bring down the cost of health care for the American people. So what are we really accomplishing?

And that’s what we’d like to return the focus to, is affordability and sustainability. Get everyone in, as Bruce said. There is broad agreement in Washington, unprecedented agreement. So rather than playing politics and pitting people against each other, we should focus on common ground, get everyone covered and bring down costs.

WALLACE: Mr. Josten, there’s a report this weekend that White House Chief of Staff Rahm Emanuel has accepted an invitation from the chamber to speak to your board of directors early next month. What do you hope to get out of that?

JOSTEN: Well, we traditionally invite members of the cabinet to chamber board meetings to speak. We invited Rahm earlier this year. He had a conflict, which is understandable. He couldn’t make it.

We’re glad he finally accepted this invitation and have an opportunity to present the views and hear back from our board members with respect to an exchange, hopefully, that would be a constructive exchange of ideas and goals and objectives.

WALLACE: Are you trying to dial down tensions with the administration?

JOSTEN: Well, that invite has been out for several weeks, and he apparently had clearance on his schedule to come, and we welcome the fact that he accepted it.

WALLACE: But you didn’t answer my question. Are you hoping that somehow you can dial down the tensions with the administration? When you talk about them raining hell on you, obviously...

JOSTEN: Well...

WALLACE: ... you’d like the rain to stop.

JOSTEN: ... let’s be clear. We haven’t raised up the cane. It came from their side of the street. We intend to remain focused on our goals and our responsibilities to represent the American business community, and get the single best outcomes for the economy and the American worker, and do what we do.

We’re not going to take the bait and engage in a name-calling campaign here of invectives back and forth. We’re going to stay focused.

WALLACE: Mr. Josten, Mr. Tuffin, We want to thank you both so much for coming in today.

TUFFIN: Thanks, Chris.

WALLACE: Coming up, Obama’s pay czar issues his verdict on executive compensation -- our Sunday panel on this latest round of government intervention. Back in a moment.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: It does offend our values when executives of big financial firms, the firms that are struggling, pay themselves huge bonuses even as they continue to rely on taxpayer assistance to stay afloat.

(END VIDEO CLIP)

WALLACE: President Obama expressing his displeasure with the compensation paid to executives at big companies that were bailed out by the government.

And it’s time now for our Sunday group, Fox News contributors Bill Kristol of The Weekly Standard, Mara Liasson of National Public Radio, former White House press secretary Dana Perino, and Juan Williams, also from National Public Radio.

Well, Bill, it wasn’t just the pay czar cutting compensation dramatically at the seven firms which had gotten huge government bailouts. The Federal Reserve also has announced plans to regulate executive pay at the thousands of banks it oversees. So the question is legitimate oversight after a financial crisis or big government run amok?

KRISTOL: And the White House this -- early this morning announced a plan to cut salaries at Fox News by 80 percent across the board.

(LAUGHTER)

WALLACE: Thank God they don’t control that decision.

KRISTOL: Well, that is the key point. You know what? This reminds you why you do not want government controlling more of the economy than is absolutely necessary, and why you do not want government -- you know, when government controls, they have some right, I suppose, to make some of these pay decisions.

It’s all trivial in terms of actual financial reform. It doesn’t do anything to deal with the problems that led to the meltdown late last year. But it is a good reminder of why -- of the case for limited government, I think. LIASSON: Look, I think that when the government -- when the taxpayers own huge portions of these companies, they have a right to make sure that the taxpayers’ money has the best chance of getting repaid.

I agree with Bill, though. To think that this is going to solve the underlying problems that led to this crisis would really be a mistake.

I mean, as this was happening, you’ve got bills moving through Congress that wouldn’t make the trading of derivatives completely transparent, that would allow all sorts of exemptions from this consumer finance agency, including auto loans would not be covered.

And you’re still going to have the situation where companies that are too big to fail still exist. In other words, I wonder if you’re too big to fail, why aren’t you too big to exist?

And as a matter of fact, they’re getting bigger. One of the TARP officials said this week that because there have been so many mergers, and there’s so many fewer of them, they’re even bigger, and all of the same risks are still in the system.

WALLACE: But, Dana, it isn’t just a question of pay czar Ken Feinberg saying we’re going to cut pay at the -- at the seven companies that have a lot of government money, because you all had Ben Bernanke of the Fed saying we’re -- we regulate thousands of banks, and we now view it as part of our purview to look at the executive pay, because we want to encourage the kind of behavior that will be good for the economy, not the kind of short-term risk-taking that ended up causing this crisis.

PERINO: It seems to me like it could be one of these policies that ends up having unintended consequences. So you have -- you want really good, talented people to be working at these -- at our banks.

What’s happening right now is that overseas banks like Barclays and Credit Suisse are poaching our best talent. And if we want our companies or our banks to succeed, they need to have the people that are able to actually do the work.

WILLIAMS: Well, the problem here is that in many cases these people who are supposedly so good are the ones that led us into this terrible economic crisis.

PERINO: But a lot of those people have left.

WILLIAMS: Well, if they’ve left...

PERINO: And so the new people there are cleaning up somebody else’s mess.

(CROSSTALK)

WILLIAMS: Well, but the question is, then, OK, so you have to find some system of rewarding people for good risk-taking. But at the moment it’s more like a casino economy -- is what they’re calling it -- in which, you know, people take these huge risks that are out of line to the best interest of all of us as Americans, in terms of the American economy, and then we suffer the consequences. Maybe they lose their job and move on, but then we go into a deep recession.

So I think that what you’re seeing here is the White House, Ken Feinberg, Treasury -- and now you’re seeing elements up on the Hill saying, “You know, we need to put in place protections for American consumers,” whether it’s consumer protections or limits against the kind of derivative trading that we saw go overboard so recently.

WALLACE: I want to talk about the brain drain, though, Bill, because Steve Pearlstein, the Pulitzer-prize-winning economics writer for the Washington Post, made an interesting point this week. He said, “Look, let’s say that cutting back on these salaries drives the risk-takers away from the big banks into smaller companies like hedge funds.”

He said, “Maybe that’s not so bad, because then if they take a risk and it goes bad, they’re bringing down a company that the government isn’t going to have to bail out.”

KRISTOL: Well, and they’re investing -- they’re taking a risk with their own investors’ money.

The great irony of this whole thing is 18 months ago everyone was concerned about hedge funds bringing down the economy. It was the regulated banks that brought down the economy, where people were gambling with investors’ money, government-insured money, and then it turned out -- too big to fail -- the whole money -- the whole bank was government insured.

It’s not unreasonable, in my view, as a regulatory matter to take a look at separating risk-taking from commercial banking. And that is a reasonable regulatory proposal, and that should be debated in a serious way.

And what’s striking about the Obama administration is how slow they’ve been in addressing this core issue, which is to prevent the meltdown of last year, and instead are involved in these diversions like executive pay.

LIASSON: Well, look. It’s not necessarily a diversion. But Paul Volcker, who’s on the president’s advisory board, is saying we should separate. There should be unregulated, risky enterprises that can fail if they want to with no harm to the greater economy and to the taxpayers, and then there should be other ones that are regulated.

And so did the -- the central bank governor in England, Mervyn King, said the same thing. I think it would be akin to restoring some parts of Glass-Steagall, which is the law that used to...

WALLACE: Let’s not get too in the weeds here. LIASSON: ... separate the -- well, it used to separate the risky behavior from the insured government-regulated behavior. And I think that would probably be a good thing.

WALLACE: We’ve got a couple of minutes left in this segment. I want to turn to another subject.

Christina Romer, the head of the President’s Council of Economic Advisers, said Friday that the economic stimulus package has already done most of what it’s going to do in terms of stimulating the economy and that unemployment will remain at severely elevated levels through next year.

Dana, the significance of this, both speaking in terms of the economy and talking about politics?

PERINO: Well, I think -- one, I was surprised that that didn’t actually have screaming headlines in all of our news papers, because remember, they said that the stimulus package would only -- would keep unemployment at 8 percent. Now it’s almost at 10 percent and probably -- now she says it’s going to hold.

In addition to that, what confuses me is that only 14 percent of the stimulus money has been spent, so how could it be that it’s already done what it’s going to do? And if it was that ineffective, do we really need to be talking about doing a third one?

WILLIAMS: I couldn’t agree more. I was -- I was kind of stunned by what she had to say. I didn’t get it, because I think they have laid out a set of expectations that said, “You know what? We’re going to spend a lot of the stimulus money in 2010, and therefore it’s going have tremendous impact, building infrastructure and the like. Look towards 2010 at the time in which you can anticipate the stimulus having its greatest impact.”

Now comes Christina Romer saying, “No, in fact, it’s had its greatest impact now.” And I see she subsequently now has put out a statement, because she realized the fire storm she set off, and said, “Well, what it’s really done is like you’re putting your foot on the accelerator, and so it’s had its greatest impact this year in 2009.”

And I -- maybe she’s pointing here towards Wall Street in terms of -- because last week Wall Street was just doing great, hit 10,000 and the like.

And then she’s saying, “But in 2010, while there might be some, you know, greater layout of actual monies for projects, it won’t have the same stimulative effect on the economy.” Maybe that’s what she’s trying to say.

But the impact on me was to say, “Wait a second. I thought this was all about saying that -- to critics, especially the Republicans, ‘Yeah, the stimulus money is coming, and it’s going to really boost us at a critical time next year.’”

WALLACE: We’ve only got about a minute left in the segment, Mara, but let’s talk about the politics side but not this deep, heavy economic analysis we’re getting here.

LIASSON: Yeah, yeah, yeah, yeah.

WALLACE: If you’ve got unemployment -- and I don’t think anybody thinks it’s stopped; we’re going to be up over 10 percent through next year -- what does that mean for Democrats?

LIASSON: Not good for -- not good for a party that controls all branches of government, and they’re up for re-election. It’s just not good.

Now the economy might be reviving, but we might have a jobless recovery. Actually, I think that’s probably a pretty fair thing to predict. And Wall Street might be doing better, but the unemployment is still going to remain high. And that is a very risky way to go into a midterm.

WALLACE: OK. We have to take a break here, but when we come back, the one provision of health care reform that refuses to die -- will the public option make it into the final bill? Our panel has a fair and balanced debate in just a moment.

(COMMERCIAL BREAK)

WALLACE: On this day in 1962, U.S. Ambassador Adlai Stevenson presented pictures to the U.N. of Soviet-built missile bases in Cuba. Stevenson challenged the Soviet ambassador to deny the evidence before what he called the courtroom of word opinion.

Stay tuned for more from our panel.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

PELOSI: At the end of the day, we will have a public option in our legislation to keep the insurance companies honest and to provide real competition.

(END VIDEO CLIP)

WALLACE: Speaker of the House Nancy Pelosi keeping hope alive for a government-run health insurance as a central feature of health care reform.

And we’re back now with the panel.

Well, it seems like it was only a week ago that everybody in this town said that the public option was dead.

Bill Kristol, what happened?

KRISTOL: Well, it’s alive, but I don’t think health care reform is going to pass, so it’s going to be part of a bill that’s going to fall apart on the Senate floor, as opposed to not being part of a bill that’s going to fall apart on the Senate floor.

This is about getting a majority within the Democratic caucus, and that’s a pretty left-wing caucus, and they like the public option. They still have the fundamental problem that anything they try to pass is going to cut Medicare and raise taxes and raise premiums, and the bill is going to fall apart on the floor, if it comes to the floor, incidentally, which I’m sort of waiting for.

LIASSON: Wow. Bill Kristol is a very smart guy, but I actually don’t see evidence of that. It’s moving forward step by difficult step. And what Nancy Pelosi was talking about is certainly a bill that comes out of the House of Representatives is going to have a public option in it.

WALLACE: But why -- the fact that...

LIASSON: But not even -- she’s even backed away from the robust- style public option that she originally...

WALLACE: I know, but (inaudible) about a public option.

LIASSON: Yes, but not the one she ...

WALLACE: And my question is why...

LIASSON: ... used to be talking about.

WALLACE: ... did the public option seem dead...

LIASSON: OK.

WALLACE: ... even a week ago and now it...

LIASSON: I don’t believe the public...

WALLACE: ... seems very much alive in the House and the Senate?

LIASSON: I don’t believe the public option was ever fully dead. Now, the kinds of things they’re talking about now are maybe an opt- out public option, an opt-in for the states, maybe a fallback trigger. The robust Medicare-style public option is definitely dead.

But a couple things did happen. There has been a little bit of a backlash against the insurance industry, who came out with this report saying, “If this happens, premiums will rise,” not “We will have to raise your premiums,” but -- as if it was kind of the unseen hand of God that was going to do this.

But I do think that the search is still the same. It’s for 60 votes in the Senate. If there is going to be some kind of public option in there, maybe there’ll be an amendment on the floor to take it out, or to change into an Olympia Snowe-style trigger, and then it will have lost fair and square. That could be one political strategy.

But in the end, you’re going to have to get 60 votes, and I don’t see moderate Democrats in the Senate voting for a robust public option.

WALLACE: I’m searching to find a panelist that agrees with my basic premise for this segment, so I’ll try you, Dana.

Do you think that the public option is, to use a medical metaphor, no longer on life support?

PERINO: I think it’s like a cat. It’s had nine lives, right? But then there’s a tenth scenario, and so, like, we’re getting -- we’re almost there.

So what you have here is a field of dreams communication strategy. This is what I think the Democrats have decided to do, is just go out there and say, “Looks like we’ve got consensus. Everything is fine. We’re going to be able to do this, and we’re going to have a public option.”

I think, though, that the facts don’t back it up. The “Doc Fix” bill -- the “Docs Fix” vote this week in the Senate was a big one.

WALLACE: You should explain. This was -- this was -- well, you explain it. You’ll do it better than I will.

PERINO: Well, they tried to take something that would be a way to pay doctors $247 billion, take it off of the bill so that they could pay for it separately. It’s a budgeting sleight of hand. And they lost 13 Democrats in the Senate, so I think that gives them a little bit of a pause.

They might -- I think that -- I think they’re wasting their time continuing to talk about a public option if they think they’re going to get a bill.

WILLIAMS: First of all, let me say the premise of this question is just wacky. Of course the public option was alive. It’s been alive. And it’s been thriving. And if you look at the polls, what do the polls show? The polls show that overwhelmingly Americans favor having a public option.

This is not in dispute. Nobody is arguing. Americans like it. They want it. Why do they want it? Because they feel insurance companies have been ripping them off.

You know, I think, you know, like, Bill Kristol got a B vitamin shot earlier this morning if he thinks that somehow public option has no chance, and health care has no chance, to pass.

KRISTOL: I didn’t say it has no chance to pass.

WILLIAMS: Of course health care has a chance -- a chance to pass.

KRISTOL: It has a chance.

WILLIAMS: And I think health care...

KRISTOL: I think it’s less than 50-50, and let me say why.

WILLIAMS: It’s better than 50-50.

KRISTOL: Let me say why.

WILLIAMS: Let me finish this thought.

KRISTOL: The same poll you like so much which has the public option...

(CROSSTALK)

WILLIAMS: Look at this. He has the poll.

KRISTOL: OK. What is the real question in this poll? Do you support in general the health care reform proposed by President Obama and the Democrats or not? What’s the answer to that? Forty-six forty-eight. What was it two months ago before Obama began his huge public relations offensive? Forty-six forty-eight.

(CROSSTALK)

KRISTOL: I do not believe that a bill will pass the Senate and the House...

(CROSSTALK)

KRISTOL: ... that does not have majority support.

WALLACE: To ask Juan’s question, what about the fact that the poll shows that there is still...

WILLIAMS: Thank you.

WALLACE: ... strong public support...

WILLIAMS: That’s the big news.

WALLACE: ... for public option?

KRISTOL: If the question’s asked the right way, I do think a public option actually has a little more support than the Medicare cuts or the tax hikes.

WILLIAMS: Yeah.

KRISTOL: Unfortunately, they’re passing a piece of legislation that has huge Medicare cuts and huge tax hikes.

WILLIAMS: No, no. Look, that’s appealing...

KRISTOL: It’s going to go down.

WILLIAMS: ... that’s appealing to the worst fear of seniors who want to make sure that Medicare is protected. OK, so that’s a strategy by the opponents. And of course, then it leads to questions about the overall health care reform bill, and that will be...

(CROSSTALK)

WILLIAMS: But let’s -- wait a minute. Mr. Wallace asked a question about the public option and I said, as you just demonstrated in the headline, public option is overwhelmingly supported by the American people.

LIASSON: But they’re not voting on the public option in a vacuum.

WILLIAMS: And the real -- what the real... LIASSON: That’s -- they’re not...

(CROSSTALK)

WILLIAMS: But hang on. But the real news this week was that Harry Reid in the Senate -- and I thought the Senate was going to say, “No, we’re not open to a public option,” just because, as Mara said, the need for the 60 votes, and conservative Democrats like Mary Landrieu from Louisiana saying, “I can’t back it.”

To the contrary, Harry Reid said this week he intends to have public option in the -- what comes out of the Senate so that it will be in conference. And Pelosi says she believes she can advance a bill with it.

LIASSON: It will be on the floor...

(CROSSTALK)

KRISTOL: ... Senate (inaudible) you’re paying attention to what Harry Reid says. Harry Reid brought a health care bill to the floor of the Senate this week. He moved for cloture on what should be a popular thing, restoring $247 billion to doctors (inaudible) $247 billion to doctors.

WALLACE: OK.

KRISTOL: They couldn’t pass it.

WALLACE: Enough.

KRISTOL: They got 47 votes.

WALLACE: Enough. I’m tired of asking my wacky question. I want to turn to one last thing, and that is the latest chapter in the Obama White House’s war on Fox News and what some people are calling the administration’s Chicago way of doing business.

(BEGIN VIDEO CLIP)

SEAN CONNERY AS JIM MALONE: He pulls a knife, you pull a gun. He sends one of yours to the hospital, you send one of his to the morgue. That’s the Chicago way.

(END VIDEO CLIP)

WALLACE: That’s the Chicago way. You’ve got to love Sean Connery in that.

Dana, the latest chapter in the Chicago way was that the administration made an effort this week to use the White House pool -- that’s the -- all the five major networks -- to try to exclude Fox from interviewing pay czar Ken Feinberg.

The White House now says, “Well, it was just an honest mistake.” Question: When you were in the Bush White House, did you ever try to do that against CBS when they were trashing President Bush? Or do you know of any White House that’s ever tried to use the White House pool to eliminate somebody, to kick somebody out?

PERINO: Certainly not with the pool. I mean, there are ways to exclude doing interviews with other networks, such as what happened to Fox News about four weeks ago when President Obama did all the other networks and decided not to do this one.

But you never use the pool. It’s a huge no-no. And I was glad to see that the reporters in the -- in the room decided to stand up and have solidarity, because they could be next in this Chicago-style way.

WALLACE: And what do you make -- it was happening as we were on the air a week ago today -- of Rahm Emanuel and David Axelrod going on other Sunday talk shows and, in effect, lecturing the mainstream media Fox is not a legitimate news organization and don’t follow them?

PERINO: That was a coordinated, calculated attack. It was unbecoming. And if you look at some of the coverage of what mainstream media covers when, for example, somebody like a Hugo Chavez shuts down television stations, he calls them illegitimate.

Now, I’m not suggesting that this White House believes that they are going to come over here and shut down Fox News. But they are defining a narrative in their first year, and it’s going to be very hard to recover from it.

The best thing they could do is try to find a way to, you know, give a -- send out an olive branch, try to get this behind them and to move on.

WALLACE: You were telling me earlier -- and we’ve only got about 45 seconds left -- that you deal with the free press in emerging democracies and you worry about the message being sent.

PERINO: Every -- everyone across the world watches and listens to everything that the White House is saying.

Through our State Department, we are trying to help emerging democracies get journalists and government officials to talk to one another, because freedom of the press is essential to any democracy. Believe me, they are watching this, and they have -- surely are raising questions.

And the next time we go to them and say, “You want to make sure that you have reporters covering this,” they’ll say, “Why should we do that? You don’t.”

WALLACE: Thank you, Dana.

Thank you, panel. See you next week. Sorry I asked a wacky question.

And don’t forget to check out the latest edition of “Panel Plus,” where our group here continues the discussion on our Web site, foxnewssunday.com, shortly after the show ends.

Up next, we hear from you.

(COMMERCIAL BREAK)

WALLACE: Time now for some comments you posted to our blog, “Wallace Watch,” and they were mostly about the White House targeting Fox News.

Sven had this to say. “Everyone that says Fox News is right-wing just acknowledges that everyone else is left-wing. They never complain about anyone else because all other media outlets in this country agree with their politics.”

And Jim writes, “My view is that the viewer decides what is and what is not news. It’s not for the White House, the Democratic or Republican Party, or any news channel to decide.” Here, here.

Please keep your comments coming.

Now a program note. Next week, Rush Limbaugh will be our special guest. Please let us know what questions you’d like us to ask Rush by going to foxnewssunday.com.

And that’s it for today. Have a great week and we’ll see you next “FOX News Sunday.”

END

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