Coming up on Fox News Sunday: House Majority Leader Kevin McCarthy stunned everyone this week when he dropped out of the race to replace John Boehner as Speaker of the House. We’ll sit down for an exclusive interview with former Speaker Newt Gingrich and Representative Jim Jordan (R-OH), Chairman of the House Freedom Caucus, to talk about it.
Michele Bachmann Talks Presidential Politics; Sens. Coburn, Conrad on Extending the Payroll Tax Cut
Written by Chris Wallace / Published December 04, 2011 / Fox News Sunday
Special Guests: Michele Bachmann, Sen. Kent Conrad, Sen. Tom Coburn
The following is a rush transcript of the December 4, 2011, edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.
CHRIS WALLACE, HOST: I'm Chris Wallace.
Herman Cain suspends his presidential campaign. Now, a former frontrunner looks to win over some of his former supporters in Iowa.
She said Barack Obama will be a one-term president. But is she the one to beat him? We'll continue our 2012 one-on-one interviews with Congresswoman Michele Bachmann.
Then, Congress deadlocked again. If legislators can't break the impasse over extending a popular tax cut, will taxpayers be left holding the bag? We'll get answers from two top senators, Democrat Kent Conrad and Republican Tom Coburn.
Also, Newt Gingrich is the new GOP frontrunner. What does Herman Cain dropping out mean for his chances? We'll ask our Sunday panel where the Republican campaign stands now less than a month before we hear from the voters.
And our power player of the week re-imagines how to choose a president. All right now on "Fox News Sunday."
And hello, again, from Fox News in Washington.
The Republican presidential field was shaken up again Saturday when Herman Chain announced after weeks of allegations about his personal life he is suspending his campaign.
(BEGIN VIDEO CLIP)
HERMAN CAIN, FORMER PRESIDENTIAL CANDIDATE: As of today, with a lot of prayer, and soul searching, I am suspending my presidential campaign.
(END VIDEO CLIP)
WALLACE: Now, less than a month before the voters make their choice, here is the latest poll. Newt Gingrich moved to the front of the field with 25 percent. Ron Paul is next at 18. And Mitt Romney at 16, followed by Michele Bachmann who is tied with fourth with Cain at 8.
But things can still change. Eleven percent said they are uncommitted, while 60 percent are willing to change their mind.
Joining us to discus the race is Congresswoman Bachmann, who is in New York. And welcome back to "Fox News Sunday."
MICHELE BACHMANN, REPUBLICAN PRESIDENTIAL CANDIDATE: Chris, good to talk with you. Thank you.
WALLACE: Your reaction to Herman Cain dropping out of the race. Did he do the right thing?
BACHMANN: Well, that was his decision. I do know this: He brought so much energy and goodwill to this race. I think he has a marvelous personality. Everyone enjoys him.
And he is an intriguing candidate, a good candidate. The race was better for having Herman Cain in the race. I really enjoyed talking to him all throughout the race.
WALLACE: Let's drop some practical politics, because some of the polling shows with Cain out, Newt Gingrich picks up more of his support than any of you other candidates. First of all, do you believe that? And secondly, how do you reach out to Cain supporters and try to get them to support you?
BACHMANN: Well, actually, beginning yesterday, our office had call after call after call of people who wanted to switch over and come and support me, because people realize that I'm the true Tea Party candidate in the race. I started the Tea Party caucus in Washington. And I've brought 40,000 people to Washington, D.C., to fight against Obamacare.
People recognize that I'm the real deal. I'm authentic. I'm genuine. And I think we're going to pick up a lot of the support from across the country, people who formerly supported Herman Cain.
WALLACE: Congresswoman, you have spent more than 60 days in Iowa this year, and you held more 120 events. And yet, as we just showed in the latest "Des Moines Register" poll, you're tied for fourth place at eight percent. What's the problem?
BACHMANN: Well, there is no problem. We are within about 30 days of all-important Iowa caucuses. And as we have seen, this is like a political Wall Street. Candidates go up and down.
And what people are finding, they're looking for the true consistent conservative in this race. And they are getting surprises. We launched a Web site called NoSurprises2012.com. And on that Web site, people see, of all of the candidates in the race, I am the true consistent conservative.
And as the layers are peeled back and as the candidates are being examined, people see in me someone who opposed the $700 billion Wall Street bailout. That's not true of Mitt Romney or Newt Gingrich. I opposed Obamacare. That 's not true of Romney and Newt Gingrich.
And also on climate change, both of them were in support of the efforts regarding climate change. I oppose it.
So, as the candidates are looking at who is the true conservative and who's going to fight for them and who's going to stand on the stage and debate Barack Obama and shred his radical policies during the course of the debate, I'm the only one who can do it because I'm the only candidate who's not compromised.
WALLACE: Well, you make a convincing argument, but people in Iowa aren't convinced. Evangelicals and other social conservatives have been talking for months about trying to get together and endorse a single candidate because they understand if they split their vote among several of you, they're not going to have as big a voice. So far, they cannot come up with a single endorsement.
How important is it, do you think, for the value's voters in Iowa to stand united?
BACHMANN: Well, I think that, again, January 3rd will be the day that tells us what the result will be. There is recently some polling that was done in Iowa showing that voters don't even necessarily look at endorsements, they look at the candidates.
Ultimately, that's what they want to know. They want someone who will beat Barack Obama.
I have an opportunity to beat Barack Obama because of all the candidates in the race, I'm the one that will hold him accountable for his principles and his policies. I have done that for the last five years and I will do that as nominee of the Republican Party.
WALLACE: All right. you have talked about Mitt Romney and Gingrich. I want to follow up because you and Newt Gingrich have been going at each other a little bit in the last week, after you accused him of supporting amnesty for illegals. He fired back at you.
(BEGIN VIDEO CLIP)
NEWT GINGRICH, PRESIDENTIAL CANDIDATE: When I was a teacher, I occasionally had a student who couldn't figure out where things were or what things were or what the right date was. You know, when that happens, you feel sorry that they are so factually challenged.
(END VIDEO CLIP)
WALLACE: You feel sorry for someone who is so factually challenged. What do you think, Congresswoman, of Newt Gingrich comparing your relationship to he's the wise student and you're the -- he's the wise teacher, rather, and you are the student who needs some help?
BACHMANN: Well, professors don't like to be challenged. But I think in this case, he's memory challenged because Newt Gingrich signed a letter in The Wall Street Journal where he was in full support of George Bush's immigration program which was commonly referred to as amnesty. It makes 11 million illegal workers legal overnight. And he was in support of the federal DREAM Act, which is federal taxpayer subsidies for the children of illegal aliens for their college tuition.
This is not where the American people are at. I have opposed these measures. And there's a clear line of distinction when it comes to immigration.
Newt Gingrich has the lowest grade of a D-minus on immigration. I have the highest grade of anyone in the field.
I will build a fence. I will secure the border. And I'll make English the official language of the United States government.
WALLACE: You have also accused of Speaker Gingrich of peddling his influence here in Washington with relationships to health care companies, and especially to Freddie Mac. He says he's never lobbied for anyone here in Washington, and that, in fact, because of his experience, he is the one who can shake up the way Washington does business.
BACHMANN: Well, it's impossible, Chris, because he's been a part of Washington, D.C., for over 30 years. He's as establishment as you get. His address is located on rodeo drive of Washington, which is K Street. His organizations have taken over $100 million just this year alone to pedal influence.
You don't have to be a lobbyist within the letter of the law in order to influence the outcome of legislation. These special interests aren't paying him $100 million for nothing. They're paying him $100 million because he's influencing legislation in Washington, D.C.
That's not what we want to see in the White House. We want someone who is actually fight Washington, not someone who's been paid over $100 million in one year alone to influence it.
WALLACE: Well, you say influence legislation. How has he done that?
BACHMANN: Well, he's taken money from special interest and organizations to put forward ideas that they agree with before members of Congress -- whether he's come in to meetings that Republicans or whether he's worked together with Republicans or Democrats to bring forth their special interest.
There is a strict definition of lobbying and influence peddling, and that's clearly what Speaker Gingrich has done.
WALLACE: You oppose extending the payroll tax cuts for another year, which means that middle class families if that payroll tax cut lapses at the end of 2011, would face somewhere between $1,000 and $1,500 a year more in taxes. Question: by opposing the extension of the payroll tax cut, aren't you breaking the Republican pledge not to raise taxes?
BACHMANN: Not at all. I opposed it last December and I urged my Republican colleague not to go forward with it. This is Barack Obama's idea. He said that we would create millions of jobs if we lower the payroll tax.
That's not true. It didn't happen. And his administration admits it didn't work. So, why would you continue a policy that doesn't work?
Plus, the other fact that people need to know, this blew hole of $111 billion in the Social Security trust fund.
BACHMANN: Senior citizens need to have their Social Security checks. This pulled out $111 billion out of Social Security. And so, that's something that I am unwilling to do.
The Social Security trust fund, when they run out of money, they have to go to the general fund to get the money to pay for Social Security checks. Well, we are broke. There is no money in the general trust fund and so we have to borrow more money from China. Why would we do this?
This is a failed policy. It doesn't work. And I won't vote to continue it.
WALLACE: But what Democrats are saying here is someone like you who's against extending the payroll tax cut which helps the middle class and the working calls, but favor extending the Bush tax cuts especially for the wealthy?
BACHMANN: Well, in the deal that was struck last year, there was an effort to establish the tax table so that businesses would know how much to withhold. I voted against the bill last year, which was the payroll tax deduction. When you talk about extending the current reduced tax rate on the people who are job providers, that only makes sense in a down economy. We want to create jobs. That helps to create jobs, to keep more money in the pockets of the job creator.
When you pull more money out of the pockets of the job creators, you're going to have less jobs. What do we need in the United States right now? More jobs, millions of jobs, high-paying jobs.
President Obama hasn't delivered. The only way to do that, Chris, is make sure businesses have all of the money they need to be able to create jobs. Right now, they don't.
BACHMANN: And if the tax increases go into effect that President Obama wants to have, it's not going to help anyone.
WALLACE: Congresswoman, you held a town hall meeting in Iowa this past week, and you ended up taking to some Iowa high school students about same-sex marriage. We want to play the exchange.
(BEGIN VIDEO CLIP)
BACHMANN: There shouldn't be any special rights or special set of criteria based upon people's preferences. We all have the same civil rights.
UNIDENTIFIED FEMALE: Then why can't same sex couples get married?
BACHMANN: Well, they can get married. They abide by the same law as everyone else. They can marry a man if they are a woman or they can marry a woman if they're a man.
(END VIDEO CLIP)
WALLACE: But, Congresswoman, same-sex marriage is legal in Iowa. So, does that mean it is all right?
BACHMANN: No, I don't believe it is. Marriage, historically, for all human history has been between a man and a woman. It hasn't been the same-sex marriage. And remember that in Iowa, it was judges that made the decision -- not the legislature, which are the people's representatives, and certainly, not the people. That's why the people of Iowa threw out three of those Supreme Court judges. That's something that should give pause to all judges.
The people of Iowa are sick and tired of the judges tell them what their laws are. They are not a super legislator. They are judges. And they need to act like judges.
As president of the United States, I will only appoint judges that will apply the strict construction or the original intent of the Constitution of the United States.
WALLACE: Finally, Congresswoman, we got less than a minute left. As we said, you have invested heavily in both time and money in Iowa. If on January 3rd, you don't finish first or a strong close second, how can you go on?
BACHMANN: Well, we'll talk about that after January 3rd. But we fully intend to win in Iowa. You know, Chris, no one thought I was going to win the straw poll in Iowa this summer and I did. No one thought I would win my tough races in the state of Minnesota. I was the first Republican woman ever to get elected in that state to go to Congress, but I did.
And I think what people will find is that in this case, too, the underdog has a very good chance of winning and we are working hard because I am the only consistent, core conservative in this race and ultimately, I think that people are going to come back home on January 3rd and I think I'll get their vote and go on to New Hampshire and unto South Carolina and Florida, and ultimately be the Republican nominee who defeats Barack Obama because I fully intend to repeal Obamacare, repeal Dodd-Frank, abolish the tax code and turn the country around. I know how to do it.
WALLACE: Congresswoman Bachmann, we're going to have to leave it there and we're going to be along for the ride in any case. Thank you. Thanks for talking with us. And we want to note that you, in addition to running, have a new book out called "Core of Conviction: My Story."
Congresswoman, safe travels on the campaign trail.
BACHMANN: Thank you, Chris. We'll do it again.
WALLACE: Up next, will Congress extend a popular tax cut? We'll ask two senators why Democrats are pushing it and most Republicans aren't convinced.
WALLACE: Congress is deadlocked over extending the payroll tax cut for another year. With the Senate voting down both Republican and Democratic plans this week, debating the plans, will middle class families face a tax increase in 2012.
Joining us now, two Senate leaders on fiscal issue, Democrat Senator Kent Conrad, chairman of the budget committee, and Republican Senator Tom Coburn, who joins us from his home in Muscogee, Oklahoma.
Senator Coburn, you voted against extending the payroll tax cut this week. And, in fact, a lot of congressional Republicans have problems with it. Let's talk about that. They say it doesn't stimulate the economy. They say you are paying for a one-year tax break, with 10 years of spending cuts, and it weakens the Social Security trust fund.
Question: is the GOP prepared to let the tax payroll cut lapse, which means a tax increase for middle tax workers at the beginning of the year?
SEN. TOM COBURN, R-OKLA.: Well, you know, I don't think I can speak for all the GOP. The principle that you would, in fact, create a tax cut and say you are going to pay for it over 10 years is exactly why we are bankrupt as a nation. And we are. People don't necessarily see that, but we are.
So, whether or not we continue a reduction in the amount of taxes that come to Social Security is one thing. Paying for it, we have so much waste in Washington to take 10 years to pay for it is ridiculous.
WALLACE: Well, let me just follow me for a second. A good policy or not, haven't Democrats turned the table on you? I mean, here's the situation where you would be perceived if you let it lapse that they are proposing a tax cut for the middle class, and the Republicans are opposing it?
COBURN: I don't think so. I'm all for changing the tax code. I have demonstrated that the game -- the political gotcha game they are playing on this. Let me -- one example, both votes on Thursday didn't matter at all, because both no tax item can start in the Senate.
So, it was pure politics. It was all for playing a game.
America is tired of that. They want real solutions to the problems we have. And all we were doing is playing a charade and America saw right through it.
WALLACE: Let me pick up with Senator Conrad.
Is spending $120 billion next year to give a payroll tax cut, continue a payroll tax cut for middle class workers -- is that good fiscal policy or is it really good politics? You can say we support the tax cut for the middle class, while they support a tax cut for the wealthy.
SEN. KENT CONRAD, D-N.D.: Back up and think what the country needs. What the country needs right now is additional lift for the economy. We still have one in every six Americans is either unemployed or underemployed, and when you asked the nonpartisan Congressional Budget Office, as I did, what's the biggest bang for the buck in terms of giving the lift for the economy? They said extending unemployment insurance is number one. And very high on the list is a payroll tax cut.
And so, it is good economic policy to do. Most economists have said, if you don't extend the payroll tax cut, you will reduce economic growth and reduce jobs in this country by 1 million. So, it would be a very bad mistake to let the payroll tax lapse.
And the Democrat's proposal is paid for, paid for in a different way than what Senator Coburn was discussing. Republican proposal -- paid for a surtax on those earning over $1 million a year.
WALLACE: We both know that's not going to pass. I mean, that is a political stunt.
CONRAD: Well, look, it is a serious proposal and it is --
WALLACE: A serious proposal, I'm not saying it's wrong. But it is serious proposal with no chance of passing.
CONRAD: Look, it got 51 votes in the United States Senate. Normally, this is a country where majority rules. Only in the United States Senate does it take 60 votes.
We understand it is going to take a change. Majority Leader Reid called me yesterday and said he will propose tomorrow a compromise plan to extend the payroll tax cut. You know --
WALLACE: How do you pay for it? What's the compromise?
CONRAD: He will offer at that point and it's probably in my purview to announce his plan. But indicated to me it will be paid for. It will be paid for in a serious way. We will change -- WALLACE: With a tax increase or with spending cuts?
CONRAD: Again, I think that's up to him to define his plan, discuss his plan. But it will be paid for. It will be paid for in a way that's credible and serious. It will be able to represent a compromise from what was voted on last week.
And then it's a serious attempt to move this ball forward because we should not have a tax increase on the middle class. That makes no sense in this economy.
WALLACE: Senator Coburn, will the payroll tax cut be extended? And what about unemployment benefits, will they be extended for the 10th time at a cost of $50 billion?
COBURN: Well, probably they both will be extended. The question the American people ought to ask is: where is the backbone in Washington to actually pay for these extensions in the year in which the money is spent? All we see coming out of Washington is promise about the future, collecting revenues to pay for expenditures today.
We are in very serious trouble. We continue to kick the can down the road. We lack the courage in Washington to make the hard choices now.
Nobody is making hard choices now. What they are doing is promising a benefit and no pain now. It always comes later.
When we start actually making difficult choices and really taking care of people, like unemployment should be shortened somewhat, but we're going to have to include it and probably, the payroll tax cut. We ought to pay for that by decreasing spending now and other low priority areas.
WALLACE: OK. Let me ask you about another issue and a choice, a hard choice you could make right now, Senator Coburn. The government runs out of the money on December 16th. Now, as part of the debt deal last summer, Republicans and Democrats agreed to spending totals. But now, some Republicans, particular in the House, are saying, you know, those spending totals are too low.
Are you willing to say, "Let's cut spending now, let's not go with those spending totals, and therefore let's risk another government shut down"?
COBURN: Well, I think the big lie coming out of the Washington which actually quite frankly the press has helped to present to the American people is that we cut spending. We didn't cut a penny. The budget control act will increase spending over what we're doing today $830 billion.
Tell me how many people understand that. And even -- no matter what you do, even with the sequestration, we're still going to have $265 billion of additional increase of spending. So, we are playing games. We're like the guy in the fair with the pea under the walnut, we are playing the game with the American people. Nobody has cut anything yet in Washington.
WALLACE: Let me bring in Senator Conrad.
Is there a possibility we're going to get a government shut down?
CONRAD: I don't think so and that would be a big mistake. But the time is right, is we have this debt threat looming over the country and it is absolutely imperative for the nation's fiscal security and national security that we find a way to come together in a bipartisan basis on a comprehensive plan.
Senator Coburn and I were part of the fiscal commission. We've been part of the group of six.
WALLACE: The fiscal commission, a lot of people know that as the Bowles-Simpson Commission.
CONRAD: Exactly right.
CONRAD: We did find a way to come together, Republicans and Democrats, to propose $4 trillion of debt deduction. And it is critically important that we find a way to get that discipline in place going forward.
WALLACE: All right. Well, let's review, let's put up on the screen what Bowles-Simpson called for. You actually anticipated where I was going to take this conversation.
It calls for cutting deficits by $4 trillion over 10 years, eliminating tax deductions so that you can lower tax rates. But also, using some of that, what's called tax expenditure, to reduce the debt by $1 trillion over 10 years, raise the retirement age and reduce benefits for Social Security and reform Medicare.
Question, I'll start with you, Senator Conrad. Is there any chance, any chance -- I mean, realistically -- that Bowles-Simpson gets revived and passed in the next year of Congress?
CONRAD: I believe there is. And I believe it's critically important that it does. Look, all we have to do is --
WALLACE: How are you going to do that? The super committee couldn't come up with $1 trillion.
CONRAD: But we on the Bowles-Simpson, 11 of 18, five Democrats, five Republicans, one independent, we agreed to this plan. That is 60 percent. Even in Washington, 60 percent should pass a plan. But we had a super, super majority requirement on the Bowles-Simpson commission.
Look, we have 150 members of the House and Senate who will join together to say let's move forward with a Bowles-Simpson-like approach. And we've got the opportunity to do something critical important for the country. Let's do it. WALLACE: Senator Coburn?
COBURN: Well, I think it's entirely possible we could do it. The question is, what the American people ought to be asking is why would we not, begin the fact that what's in front of us is catastrophic in terms of what's going to happen over the couple of years.
So, I agree. I think we can. I would tell you, I think some of the super committee was designed to fail from the start simply because it was so polarized by the leadership on both sides.
So, I think we have a good basis with which to come together, reforming the tax code, generating the additional revenue, modifying the long-term problems associated with Social Security, Medicare and Medicaid. I think we can do it.
The important thing is, is we better do it.
WALLACE: Let me, Senator Coburn, switch topic. I want to ask you about one last political issue. You served with Newt Gingrich in the House and you say that he was brilliant.
But earlier this year, you were asked about whether or not he could be a good president and you raised questions about that. Let's watch.
(BEGIN VIDEO CLIP)
COBURN: We need somebody whose eye is critical but is not harsh in their -- in their manner. And I don't mean to say he's necessarily harsh. But I'm looking for a leader that can bring us together.
(END VIDEO CLIP)
WALLACE: As Speaker Gingrich takes the lead in the Republican race, do you still have those questions about his fitness to be president?
COBURN: Chris, there is a lot of candidates out there. I'm not inclined to be a supporter of Newt Gingrich, having served under him for four years and experienced personally his leadership.
WALLACE: Why is that?
COBURN: Because I found it lacking often times.
WALLACE: I don't want to pull teeth, but if you could just explain why. I think it's an important thing. People want to know what you think.
COBURN: Well, I -- you know, the thing is, there's all types of leaders. Leaders that instill confidence. Leaders that are somewhat abrupt and brisk. Leaders that have one standard for the people that they are leading and a different standard for themselves. I just found his leadership lacking and I'm not going to go into greater detail in that. And I think if you were poll the gang -- the group of people that came in Congress in 1994, in which he did a wonderful job in organizing that, he's brilliant, he has a lot of positives. But I still -- it would be -- I will have difficulty supporting him as president of the United States.
WALLACE: We're going to have to leave it there. Senator Coburn, Senator Conrad, we want to thank you both for coming in today and talking with us. And we'll stay on top of the debt story, which isn't going away. Thanks, gentlemen.
Coming up, the Sunday panel on Herman Cain dropping out of the presidential campaign, where does that leave the race now?
(BEGIN VIDEO CLIP)
CAIN: I am at peace with my God.
I am at peace with my wife.
And she is at peace with me.
(END VIDEO CLIP)
WALLACE: Well, that was Herman Cain Saturday, in his own unique way, dropping out of the GOP presidential campaign.
And it's time now for our Sunday group. Byron York of The Washington Examiner; Mara Liasson from National Public Radio; Ed Gillespie, chairman of the Republican State Leadership Committee; and Kirsten Powers, columnist for The Daily Beast Web site.
Well, Ed, we gave one of your titles, but another title is the former chairman of the National Republican Party. What's your best guess? Where does the Cain support?
ED GILLESPIE, CHAIRMAN, REPUBLICAN STATE LEADERSHIP COMMITTEE: Well, I think that Newt Gingrich is probably the likely beneficiary. And we're seeing that, I think -- we've been seeing it for at least a week now, maybe a little more. But I would not be surprised to see a Santorum boomlet as well.
I sense from some of my conservative friends -- and I was listening to Mark Levin's radio show on Friday. He was talking up Rick Santorum, as well as Michele Bachmann. So, I don't discount the possibility that you see a little bump for Rick Santorum, especially in Iowa.
WALLACE: I was going to say, he has -- and those of us who cover it know that Iowa has 99 counties, and Santorum has been in all 99 of them. So that's an accomplishment. right there.
Byron, you have been on the campaign trail, following a lot of these folks. What is your sense of what Cain's decline and now dropping out does for the race?
BYRON YORK, THE WASHINGTON EXAMINER: I think for the moment, it's already gone. The support has already gone to Gingrich.
I was in South Carolina the last few days, and actually had the first sense that I've ever really had out traveling that Mitt Romney could lose the support --
WALLACE: Lose in Iowa or lose period?
YORK: Lose the whole thing. The support for Gingrich in South Carolina is very, very strong. Romney is still pretty far ahead in New Hampshire, but Gingrich is moving up there. And this momentum that you've seen for Gingrich in Iowa is really, really, very strong.
Ed is right, there are social conservatives who are trying to unite behind a candidate. They desperately don't want to support Mitt Romney. So they're looking for a candidate to get behind.
Some of them can't get past Newt Gingrich's three marriages or some of his Washington insiderdom. So they're looking for somebody else. They are trying Santorum, but they're worried by the fact that he can't seem to get above two, three, four percentage in the polls.
WALLACE: Even before Cain's announcement that he was dropping out, Newt Gingrich was the new front-runner in the race, and Mitt Romney was the new underdog, this week they both warmed to their new roles. Take a look.
(BEGIN VIDEO CLIPS)
GINGRICH: I want to be the nominee. I mean, it's very hard not to look at the recent polls and think that the odds are very high I'm going to be the nominee.
MITT ROMNEY, REPUBLICAN PRESIDENTIAL CANDIDATE: There's this funny thing in American. It's called an election. You have to win the election. And to win the election, you've got to earn it.
(END VIDEO CLIPS)
WALLACE: Mara, a little early for Newt Gingrich to be declaring victory?
MARA LIASSON, NATIONAL PUBLIC RADIO: Yes. And there, we have some of the seeds of why people think that he won't be the nominee, because he has a penchant for grandiosity and for the self-inflicted implosions, just as he's getting to the pinnacle of power. His speakership was a kind of case in point on that.
When Mitt says he has to earn it, he's, I think, commenting on the strange nature of this Republican fight so far, which is that he's gotten a pass, pretty much, until now. We don't know if Mitt Romney has a glass jaw, because nobody's really challenged.
Now he's going to be challenged, I think, by Gingrich. And he was knocking door to door in New Hampshire saying, I'm going to earn it, I don't think this is going to be given to be on a silver platter.
I think he's going to have to do more than earn it. I think he's going to have to fight for it, and we're going to have to see a real Gingrich/Romney showdown if this thing is going to be resolved. And I do think there are signs of Gingrich finally doing the thing that none of the other anti-Romneys could do, which is starting maybe to consolidate the conservative anti-Romney sentiment.
WALLACE: Kirsten, how seriously do you take Gingrich as a possible GOP nominee? And what do you think are his biggest obstacles getting from here to there?
KIRSTEN POWERS, THE DAILY BEAST: Well, I think if you look at him, whether he could become the nominee and you can easily see a path where that could happen. The question is, it's the laws of nature are fixed, and the laws of nature with Newt Gingrich is that he implodes. And the question is, does he implode when he -- before he gets the nomination, or does he implode after he gets the nomination? I'm not saying he's going to get the nomination, but he's in a position to get it.
And what you see is, if you take Florida, for example, he's up 25 points in Florida. Right? But if you look at the match-up, the head- to-head with Obama, actually Romney does quite a bit better. Obama is leading only by one point, where he's leading Gingrich by six points.
So, what you have is somebody who maybe can consolidate these conservatives and bring them around him, but in a general election, I think it's going to scare off moderates. He's going to scare off Independents.
WALLACE: Before we get to the general election, let's still talk about the nominations since they haven't even had the first vote for that.
Ed, I have to say, I was struck by Senator Coburn. He, in doing the research, I had seen that on C-SPAN back in March, he had spoken somewhat critically, and not in a volunteering, kind of as you saw here, being dragged out of him critical comments about Newt Gingrich. I was impressed that he said it again today.
GILLESPIE: Well, I was struck by it. And I do think one of the things you're seeing -- and he spoke specifically about Newt Gingrich's leadership and his style. And one of the things I think you're going to see over the next few weeks and months is voters looking at Newt Gingrich and wondering, will he have the discipline to be the potential nominee?
At the same time, they're going to be looking into Mitt Romney. But like Mara said, does he have the fire? Will he be tough enough to fight for the nomination?
And it's interesting to me, Chris, that, really, over the next couple of months, I think Newt Gingrich probably needs to be a little more like Mitt Romney and Mitt Romney needs to be a little more like Newt Gingrich if they're going to win the nomination.
WALLACE: Let me, Byron, switch to Mitt Romney, who, up to this point, has been the front-runner. He did an interview this week with my colleague Bret Baier. Bret asked him about the list of perceived flip-flops, and as you can see, Governor Romney got a little testy.
(BEGIN VIDEO CLIP)
ROMNEY: Well, Bret, your list is just not accurate. So, one, we're going to have to be better informed about my views on issues.
(END VIDEO CLIP)
WALLACE: Romney's performance got a lot of buzz this week.
YORK: You know, as I watched Bret's interview, I had an interview with Romney riding around in a car in 2007 that was very much like that. I mean, we talked about abortion and at the end of the conversation he said, "I changed my mind. Is that so hard to understand?" So he's been testy about this for a while.
People around Romney believe that the questions about abortion and about Romneycare have been asked and answered. They feel that they've put out what they need to do.
They have not accepted the fact that if you're going to run for president and get all the way through the primaries, and through the general election, you're going to be asked about this over and over and over again. So he cannot keep continuing to show this testiness, especially when, if you look at his poll ratings, he has been fairly consistent, but he is down in all four early states -- in Iowa, New Hampshire, South Carolina and Florida. He has been trending downward, and that's a big problem.
LIASSON: Yes. What was the dynamic of the race up until recently was that he never changed. He stayed stuck at 25, and that was going to be fine if the other candidates split the anti-Romney vote. He didn't need much more than that.
Now things are changing. He is trending down. And there does seem to be a bit of a shift. And I do think he has to worry about that.
On the other hand, there are proportional primaries this year in the Republican fight. That means the guy who comes in second gets delegates. He has the money and the organization to go the distance. I don't know if Newt can develop that at this late date.
WALLACE: You know, Kirsten -- and we have less than a minute left -- the last time of the Republican race, more than half the delegates were awarded by the end of February. And basically, the race was over by the end of February.
This time, you don't get even half the delegates awarded until the end of April. So this race, almost necessarily, unless everybody drops out, has to go on.
POWERS: Right, which works against Gingrich, because he doesn't have an operation right now.
WALLACE: Yes, but if he is at this level, he's going to get money and an operation quickly, won't he?
POWERS: He's at this level today. I mean, we have to remember, a month ago, Cain was at this level. So it remains to be seen whether he's going to keep this level. And then he's going to have to put together an organization very, very quickly.
He doesn't really have anything to speak of right now, whereas Romney does have an organization and the money and the experience to go the entire distance.
WALLACE: And real quickly, Ed, Gingrich has already missed a filing deadline to get on the ballot in Missouri. Correct?
GILLESPIE: Yes. And his campaign has been essentially Newt being Newt, which has served him very well, and he's done well in the debates. But he's going to have to fill that vacuum in terms of organization in order to get himself across the finish line here soon.
WALLACE: All right.
We have to take a break here, but when we come back, have Democrats turned the table on the GOP when it comes to cutting taxes?
(BEGIN VIDEO CLIP)
PRESIDENT BARACK OBAMA: We need to get this done. And I expect that it's going to get done before Congress leaves. Otherwise, Congress may not be leaving and we can all spend Christmas here together.
(END VIDEO CLIP)
WALLACE: President Obama holding the Christmas break over the heads of congressional Republicans as he pushes them to pass his plan to extend the payroll tax cut.
And we're back now with the panel.
Well, we have seen an interesting role reversal in Congress this week with Democrats pushing for a tax cut for the middle class and a lot of Republicans opposing it and demanding that it be paid for.
Ed, is the pay roll tax cut the political winner the Democrats think it is?
GILLESPIE: I don't think it is, Chris. The fact is, most Republicans do support extending the payroll tax cut, even though there is a very legitimate question as to the impact it has on the job market. We haven't seen much boost from it.
At the same time, they're saying we ought to pay for it. We do have these deficits, and I thought it was very interesting to see Michele Bachmann make the point about the Social Security trust fund. So, Republicans feel pretty comfortable where they are.
WALLACE: Michele Bachmann, incidentally.
GILLESPIE: Michele Bachmann. I'm sorry. What did I say?
WALLACE: I thought you said Obama.
GILLESPIE: Oh, Michele Bachmann. I'm sorry. Michele Bachmann make the point about the Social Security trust fund. So I don't think Republicans are feeling much pain in their position on the pay roll tax cut right now.
WALLACE: Kirsten, do you agree with that?
POWERS: Well, you know, it's interesting you say that they support it. I mean, they support it now. And the leadership supports it, first of all.
There's a lot of fighting among the rank and file, and the leadership initially did not support it. Republicans were essentially saying this is an ineffective tax cut, it's something that people save, it's not something that they spend. And now they've been sort of moved on this, I think, because the Democrats actually have been effective on this.
They have a simple message for once, which they have said, look, you didn't think the Bush tax cuts needed to be paid for, but now you're telling us we need to pay for a tax cut for the middle class? You know, they've just set it up as, you are against the middle class and you're for coddling the rich, and I think it actually has been a very effective message right now, and has done a little --
WALLACE: Byron, you get to break the tie here.
YORK: They've also been trapped by their own rhetoric in the past. I mean, the bottom line was, you had Republicans arguing against the extension of the tax cut. And it made all of their other talk about tax cuts seem weird.
So, now you have them actually divided. There is this group -- I think it was 26 senators -- who voted against the whole thing. They oppose it for a variety of reasons, they don't really view it as a tax rate cut, they just view it as a one-year stimulus which they say won't work.
But the fact is, is that you have a vote about extending a tax cut, and Republicans are divided on this. So I think that's a big victory for Democrats.
WALLACE: Mara, let me ask you as somebody who watches Congress, what ends up happening here? Does Congress end up extending the payroll tax cut? And what happens to unemployment insurance benefits being extended for the 10th time?
LIASSON: I think both get extended, not expanded the way President Obama wants. But they do get extended, and it's not that expensive. It's, like, $110 billion for the payroll tax cut.
WALLACE: You realize a lot of our viewers are breaking out in hives as you say that?
LIASSON: OK, relatively. What I'm saying is, it's not that hard to find the money to pay for it. Millionaires' taxes will not be raised. That will not be the pay-for. But they'll find a way to pay for it.
It won't be over 10 years. It will be something more immediate, and that will happen.
I think this has been kind of remarkable. Republicans, as everybody has said, didn't use to think tax cuts needed to be paid for, they paid for themselves. This is one of those rare times the Democrats have the advantage in the tax debate.
WALLACE: OK. You talked about long-term unemployment. On that front, the president got some good news, Byron, this week, on Friday, but not all good news. And let's put it up.
The unemployment rate dropped from 9 percent to 8.6 percent in November, and the economy created a net of 120,000 new jobs. But the big reason for the drop is that 315,000 people stopped looking for work.
So, Byron, is the glass half full or is it half empty?
YORK: Well, it's good news for the White House. I mean, because you can't say unemployment is 9 percent anymore. So it's 8.6 percent. The bad news is, it's done this before. In November of last year, the unemployment rate began dropping. It went from 9.8 percent, all the way down to 8.8 percent. Then, by summertime, it was back up to 9.2. So, the problem is, at this time of year, it does go down, and if it goes back to something like over 9 by next summer, that's close to the election and it's going to be terrible news.
WALLACE: Yes, I was going to ask you, Mara, because, as I say, 315,000 people dropped out of the workforce, they stopped looking for work. So, therefore, they're not counted as unemployed.
Let's say the economy begins to pick up. Those people are going to start looking for work. So, even if you're creating more jobs, you can see the unemployment rate not go down, but go up.
LIASSON: Yes, you could. And I do think President Obama needs two things.
He needs the unemployment rate to be heading in the right direction for him. He also needs to have people feeling that the economy is getting better.
The reason the unemployment rate is dropping is all these people have given up. They're not feeling that the economy is getting better.
In a strange way, President Obama's fate is tied to Angela Merkel right now. I mean, there are a lot of events beyond his control that are going to affect the U.S. economy.
WALLACE: We should point, the chancellor of Germany.
LIASSON: The chancellor of Germany, who is struggling to rescue the Eurozone. But any time the White House can say the unemployment rate is not 9.1 percent, as Byron said, is a good thing.
WALLACE: And let me follow up on that with you, Ed. This is the lowest rate in two-and-a-half years. The private sector has created jobs for 21 straight months.
Is that good enough for the president, even if unemployment is somewhere between 8 and 9 percent, as most people think? Is that enough for the president to be able to say, well, we're moving in the right direction?
GILLESPIE: No, for the reasons we've talked about. First of all, 50,000, of those jobs are retail jobs that likely could be temporary for the holiday season. On top of that, for every two people who found a new job, five people left the work force entirely, which is part of a continuing pattern.
In fact, if the labor force today were the same size it was when President Obama took office, the unemployment rate would be 11 percent. So, shrinking the labor force is not the right way to bring down the unemployment rate, and that's what we've been seeing, and I think that's going to -- as we talked about here, that's not going to be enough to help him next November.
POWERS: In the short term, it's obviously good for him. But in the long term, what matters is what people are experiencing, how they feel about how the economy is doing, and whether they understand these underlying numbers or not. They do know how they feel. They do know how much money they have. They do know whether they have a job.
WALLACE: And right now -- I mean, to the degree you can generalize -- how do you think people are feeling?
POWERS: I think people are feeling that the economy is not doing very well.
WALLACE: All right. We're going to have to leave it there. Thank you, panel. See you all next week.
And don't forget to check out "Panel Plus," where our group picks right up with the discussion on our Web site, FoxNewsSunday.com. And we'll post the video before noon Eastern Time.
Up next, our "Power Player of the Week."
WALLACE: With the vast majority of Americans unhappy with the way Washington works, a new group says the problem is how we choose our leaders.
Here is our "Power Player of the Week."
KAHLIL BYRD, CEO, AMERICANS ELECT: We're definitely not a third party. We're Democrats, Republicans and Independents coming together with a focused goal.
WALLACE: Kahlil Byrd is CEO of Americans Elector, or AE, a nonpartisan and nonprofit organization that's come up with a new way to choose the next president.
BYRD: As Washington is failing the American people, Americans Elect has been, in a focused way, going out and getting on the ballot on all 50 states and re-imagining the way we nominate a presidential ticket.
WALLACE: With more than $20 million in contributions, much of it reportedly from hedge funders, plus a staff of 150 --
UNIDENTIFIED FEMALE: Are you a registered voter in Multnomah County?
UNIDENTIFIED MALE: Oh, yes.
WALLACE: -- Americans Elect says it's gotten more than two million signatures to put a third presidential ticket on the ballot.
WALLACE: What is wrong with the two political parties?
BYRD: The issues and the ideas that will take the country to a better place are pretty obvious to the American people. They don't seem to be obvious in the governing that we have in Washington.
RONALD REAGAN, FMR. PRESIDENT OF THE UNITED STATES: We, the people, tell the government what to do. It doesn't tell us.
WALLACE: Here is where it gets interesting. Next April, AE will start an online process in which registered voters can sign up as delegates and choose a presidential candidate. In June, the six finalists who must declare their willingness to run will pick a running mate from the other party. Then an online convention will choose the ticket.
BYRD: We think that a coalition ticket, a ticket of a Democrat and Republican running in 2012, is exactly what is needed to break the stranglehold you see in Washington and to re-imagine what it's going to taking to take the United States to the next level.
WALLACE: No one has announced he'll run, but names that pop up include Starbucks CEO Howard Schultz and former secretary of state Condoleezza Rice. Americans Elect won't support the nominees. They will be on their own.
And that's created a controversy. AE is officially not a political committee, but a social welfare organization, which means it doesn't have to disclose its donors or limit their contribution.
Why not disclose?
BYRD: Well, because people are actually living in the real world. And in the real world, retribution is possible. The reality is, is that the Democratic and Republican parties, well, this is very challenging to them.
WALLACE: Kahlil Byrd is a Republican who worked for liberal Massachusetts Governor Deval Patrick. He believes the AE candidate can win.
As for talk its ticket will just act as spoilers, throwing the election to the other side, he says the system can't get any more broken.
BYRD: The thousands of people who have worked on the process and the millions of people who support it, they have an opportunity to really rethink the way we nominate and elect people in this country.
WALLACE: In 2014, AE hopes to take this new way of choosing candidates to the state and local level.
If you're interested, check out their Web site at AmericansElect.org.
And that's it for today. Have a great week, and we'll see you next "Fox News Sunday."
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