Mitt Romney on South Carolina defeat; Speaker John Boehner talks jobs, State of the Union

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The following is a rush transcript of the January 22, 2012 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.

Newt Gingrich gets a big win in South Carolina.

Where does the race for the Republican presidential nomination go from here? We'll bring you the latest on the results and the reaction. And we'll have an exclusive interview with Governor Mitt Romney.

Then, with battles over spending, taxes and jobs, will anything get done in Washington this year?

We'll preview the president's State of the Union speech and Republican agenda with John Boehner.

Romney and Boehner only on "Fox News Sunday."

Plus, with South Carolina in the rearview mirror and Florida coming fast, how much longer will the Republicans battle it out?

We'll ask our Sunday panel to break down the GOP contest.

And after the wildest week yet, we'll bring you the remarkable ups and downs on the trail -- all right now on "Fox News Sunday."

And hello again from FOX News in Washington.

A week of dramatic swings in South Carolina has scrambled the Republican race for president.

Here are the final results of the primary-- Newt Gingrich scored a big victory winning 40 percent of the vote. Mitt Romney was a distant second at 28 percent. Rick Santorum finished third with 17 percent and Ron Paul was last.

We'll have an exclusive interview with Governor Romney in a moment.

But, first, for the reaction and results last night, we turn to Fox News senior national correspondent John Roberts in Charleston -- John.

JOHN ROBERTS, FOX NEWS: Chris, good morning to you.

For nearly half of the South Carolina voters, the number one issue was electability, and the man they chose as best able to beat President Barack Obama in November was Newt Gingrich.

(BEGIN VIDEOTAPE)

ROBERTS (voice-over): This primary season has been all about momentum, and Newt Gingrich caught it in the perfect moment, surging to a decisive win over once front runner Mitt Romney.

NEWT GINGRICH, PRESIDENTIAL CANDIDATE: It is very humbling and very sobering to have so many people who so deeply want their country to get back on the right track.

(CHEERS AND APPLAUSE)

ROBERTS: Many voters said it was Gingrich's debate performance that sealed the deal as late deciders broke heavily for the former speaker.

Romney was left to lick his wounds and wonder what might have been -- hurt according to exit polls by his religion and lingering questions about his record at Bain Capital.

MITT ROMNEY, PRESIDENTIAL CANDIDATE: When my opponents attack success and free enterprise, they're not only attacking me, they're attacking every person who dreams of a better future.

ROBERTS: Rick Santorum came in third, a showing that might have ended some campaigns. But with newly proclaimed Iowa win under his belt, he set his sights on the next contest in Florida.

RICK SANTORUM, PRESIDENTIAL CANDIDATE: You know, we're going to take the state. There's no one state that's going to be decisive here. This is a wide open race.

ROBERTS: For Ron Paul, a last place finish. But South Carolina was never his state. Others more to his liking lie ahead.

REP. RON PAUL, PRESIDENTIAL CANDIDATE: We will be going to the caucus states and we will be promoting the whole idea of getting more delegates, because that's the name of the game and we will pursue it.

(END VIDEOTAPE)

ROBERTS: South Carolina correctly chose Republican nominee in every Republican contest since 1980. Will the streak remain unbroken? With three winners in three states, it may be a while before we find out -- Chris.

WALLACE: John Roberts reporting from South Carolina -- John, thanks for that.

Joining us now from the state capital of Columbia is Mitt Romney.

And, Governor, welcome back to "Fox News Sunday."

ROMNEY: Thanks, Chris. Good to be with you.

WALLACE: I want to put up the dramatic change in South Carolina over this past week. Let's look at the polls. On Monday, before the Fox News debate, you were leading Gingrich 29.7 to 22. Last night, Newt Gingrich beat you 40 percent to 28 percent. That is a swing of 20 points in just five days. Question, Governor: what happened?

ROMNEY: Well, Speaker Gingrich had a good day. I think his debate sparring with Juan Williams was a great opportunity for him to show some strength. It was not a great week for me. We spent a lot of time talking about tax returns and, of course, the change in the vote in Iowa. And, you know, it is a time when we faced a setback.

You know, in my experience, a lot of people face setbacks, and you come back from them. And that's the way to be successful, is to come back from the inevitable downturns. We're hoping and expecting to do that down the road.

WALLACE: Let's look the exit polls, though, may have raised some worrisome questions for the campaign. Voters who said they were conservative went to Gingrich over you, 45 percent to 24 percent. And among voters who said it matters that a candidate shares their religious beliefs, Gingrich beat you 46 percent to 20 percent.

You seem to be hurt, Governor, by the idea that you are a moderate and the fact that you are a Mormon?

ROMNEY: You know, I realize that South Carolina is in Newt's neighborhood. This is a state very close to his home state, and he had a good strong starting place here. I indicated from the very beginning. We thought it would be an uphill climb here in South Carolina. We did a lot better this time than we did four years ago.

But there is a lot of states across the country and the great majority of people chose the candidate who they think should be the next president as opposed to someone who maybe in the same faith that they're in. So, you know, I'm looking forward to a long campaign. This is a tough process. You know that. And that's the way it ought to be.

We are selecting the president of the United States. Someone who is going to face ups and downs and real challenges, and I hope that through this process, I can demonstrate that I can take a set back and come back strong.

WALLACE: But how do you deal with this notion, and you know that Gingrich is going to play it -- Massachusetts moderate and also the fact that you are a Mormon? And at least in South Carolina, people have concerns about that.

ROMNEY: Well, I don't think in the final analysis that religion is going to play a big factor in selecting our nominee. I do think that conservative values do play an enormous role and I think the speaker has some explaining to do for sitting down on the sofa with Nancy Pelosi and arguing for climate change regulation, for calling the Paul Ryan plan right wing social engineering.

You're going to look at his record and say, well, he is not so conservative, as a reliable conservative leader, as people might have imagined. But we'll get a chance to frame up those issues as time goes on. He had a very good week going after me on taxes and Bain and so forth, and a great confrontation with Juan Williams. That's hard to imagine in every single state.

WALLACE: I want to pick up on exactly this issue. How will -- you gave us a couple of ideas -- but generally speaking, how will you go after Newt Gingrich now?

ROMNEY: Well, you know, the key for me is not so much going after Newt Gingrich as it is pointing out my capacity, my background, my strengths. Look, I don't think that the people of this country are going to choose as the next president of the United States a person who spent 40 years in Washington as a congressman and a lobbyist. That is not going to be, in my opinion, be the most effective way to replace the current president who also spent his career in politics.

I think that in order to replace a president who's never had the experience leading a business, leading a state, leading a community, that it makes sense to have someone who actually has done those things, who's led a state, who's also led an Olympics, who's led businesses. I think that background is critical.

And I think Speaker Gingrich, having not done any one of those things, is not ideally suited to face off against the president.

WALLACE: Aides are quoted overnight as saying that you're also going to make Newt Gingrich's character an issue. How so?

ROMNEY: Oh, no question. But leadership is the key attribute that people should look for in considering a president. We have differences on issues, but in the final analysis, those issues are important.

But leadership -- the capacity to move others and accomplish various ideals is something which you look for in a person that will guide the nation. And character is a big part of leadership, as is vision, sobriety, steadiness. These are attributes which I think people want to see in their candidate. That's one reason we go this grueling process of selection of our nominees.

We get a good chance to really see them under fire, see how they respond. And I hope that I'll be seen as being strong in that kind of a setting.

WALLACE: Having said that, I want to play a clip from Speaker Gingrich's victory speech last night. Take a look.

(BEGIN VIDEO CLIP)

GINGRICH: One of the key issues -- and I'm prepared to take this at the president and frankly straight at the elite media -- one of the key issues is the growing anti-religious bigotry of our elites.

(CHEERS AND APPLAUSE)

(END VIDEO CLIP)

WALLACE: Governor, is -- and you've heard this kind of argument from Newt Gingrich before -- is he tapping in to the anger that many voters feel these days more effectively than you are?

ROMNEY: You know, I don't know whether anger is the source of his campaign win here in South Carolina. I think he's had a campaign that's gone across a whole series of issues. There's no question, but if you look at those last couple of debates, he was angry, and there may have been some people who like that.

And, look, you know, I remember Mike Huckabee once said, he said, "Look, I'm proud to be conservative, but I don't have to be mad at anybody about that." And, you know, I'm not someone who is angry at -- and mad, but I am very upset about the direction this country is headed. And if I'm president of the United States, I'm going to take America back.

WALLACE: You know, you talk about the fact that he had a good week and you said, quite frankly, that you didn't have such a good week. And I want to talk to you about some of the mistakes you made.

Gingrich and Rick Perry demanded that you release your tax returns. Here's how you handled it this last week.

(BEGIN VIDEO CLIPS)

ROMNEY: If I become our nominee, I'm -- and what's happened in history is people have released them in about April of the coming year. And that's probably what I'll do.

ROMNEY: What's the effective rate I've been paying? It's probably closer to the 15 percent rate I think.

JOHN KING, CNN: When you release yours, will you follow your father's example?

ROMNEY: Maybe.

(LAUGHTER)

(END VIDEO CLIPS)

WALLACE: Forgive me, sir. Who said "maybe" in a presidential debate? Why were you -- and I think this is a question a lot of political pundits are asking -- why were you and your campaign so unprepared for what seem to be such an obvious line of attack?

ROMNEY: Well, actually, what we said was that I was planning on releasing them in April when they have been released by the candidates in the past. What you know what? Given all the attention that's been focused on tax returns, given the distraction that I think they became in these last couple of weeks -- look, I am going to make it clear to you right now, Chris. I will release my tax returns for 2010 which is the last returns that were completed. I'll do that on Tuesday of this week. I'll also release at the same time, an estimate for 2011 tax returns.

So, you'll have two years and people can take a look at it. We'll put them on the Web site and you can go through the pages. This, I think, we just made a mistake in holding off as long as we did. If it was a distraction, we want to get back to the real issues in the campaign -- leadership, character and vision for America, how to get jobs in America, and how to rein in the excessive scale of the federal government.

WALLACE: Not to quibble. But, you know, there's an issue about your dad, I'm not saying it has to be 12 years. But why not release more years than just this year, or rather 2010 and then an estimate for this year?

ROMNEY: Well, that will be more than any other Republican candidate and I'm not going to go back to my dad's years. That was even before the Internet.

We'll be putting our -- we'll be putting our returns on the Internet. People can look through them. It will provide, I think, plenty of information for people to understand that sources of my income are exactly as described in the financial disclosure statements that we put out several months ago.

WALLACE: In the last debate, you said that one of the reasons you wanted to release them at one time is because you knew the Democrats are going to go after them and you didn't want a drip, drip process of that. Are there more political problems in these tax returns, like the 15 percent, like investments in offshore account in the Cayman Islands?

ROMNEY: Well, one of the -- one of the reasons that we're putting together the 2011 estimate, as well as the 2010 return is so there's not a drip, drip, drip. We put out both returns, both numbers at the same time, so that there's not a second release down the road.

And I'm sure the Democrats will do their very best to see if they can find something that stirs up interest. But look, the income I have is derived from the investments which are disclosed in the financial disclosure report. The Cayman Islands account, so to speak, is apparently an investment that was made and an entity that invests in the United States, the taxes paid on that are full U.S. taxes. They'll try to drum that up to be something. But, by the way, it was the same issue four years ago. It was responded to four years ago, nothing changed since then.

I know people will try and find something. But we pay full fair taxes, and you'll see it is a substantial amount.

WALLACE: I want to ask one last question about the taxes. You have been very open about the fact that like a lot of another devout Mormons, you tithe to your church. Given the results that we saw in South Carolina, do you think it might be any kind of a political problem, the fact that being as wealthy as you are, you have given millions of dollars to the Church of Latter Day Saints?

ROMNEY: Gee, I hope not. If people want to discriminate against someone based upon their commitment to tithe, I'd be very surprised. This is a country that believes in the Bible. The Bible speaks about providing tithes and offerings. I made a commitment to my church a long, long time ago that I would give 10 percent of my income to the church. And I followed through on that commitment.

And, hopefully, as people look at various individuals running for president, they'd be pleased with someone who made a promise to God and kept that promise. So, if I had given less than 10 percent, then I think people would have had to look at me and say, hey, what's wrong with you, fella, don't you follow through on the promises?

WALLACE: Finally, sir, I want to talk about the debates, because, again, this is just my perception, you seem -- particularly this last week -- to have shown a tendency to get irritated when you're challenged. Let me put up clips from the debates.

(BEGIN VIDEO CLIPS)

SANTORUM: An answer to the question, first.

(APPLAUSE)

ROMNEY: We have plenty of time. I'll get there. I'll do it in the order I want to do.

JOHN KING, CNN: Governor Romney, questions whether you are genuinely pro-life.

ROMNEY: I'm not questioned on character and integrity very often, and I don't feel like standing here for that.

(END VIDEO CLIPS)

WALLACE: Are you letting these guys get under your skin, Governor, and is that a problem for you?

ROMNEY: Not in the slightest -- no one is under my skin. But I can tell you this, I'm not going to make very clear. When there are things I care about deeply and my character is one of those things, when that's going to be challenged, I'm not going to sit there and smile and act like it is something of no significance. I have emotion and passion. I'm concerned about the great challenges that America faces and I'm going to show the passion that I have when it comes naturally.

But this is a process where I'm proud to be pretty steady. No one says to me that I'm a -- someone that flies off the handle, that I'm erratic or incapable of dealing with stressful situation. People see as a guy who's calm under fire. I have been tested time and time again, had success, had some losses.

I have learned from those losses and I will show passion. And from time to time, perhaps a little energy as I think is appropriate and as I feel it in my heart. But I'm a person of sobriety, capacity, steadiness, and I think that's what you need in the White House.

WALLACE: Finally, sir, you hesitated before agreeing to participate in the two more debates that are going to take place this week. I guess one on Monday, one on Thursday in Florida. And I wonder, have you made a mistake agreeing to all these debates?

You are the one candidate who has got a real national campaign, huge organization, lots of money. You're on the ballot in every state. Have you made a mistake by agreeing to these debates with a bunch of candidates who are relying, have to rely on national TV time in effect playing on their field and giving away a lot of your advantages?

ROMNEY: Well, perhaps. But I think the American people want a chance to see the candidates and understand something about their character.

And, you know, I hope that I wear well in that process. I hope that overtime, as people see more of me and more of the other guys, that I'll come out ahead.

But if not, that's the way it's going to be. I'm going to do what I think is best to have the American people get a chance to know who I am and hear my views on issues.

Look, this is a critical time for America. We are choosing someone who will lead our country at a very critical time. People are suffering in this country right now.

And I spent my life in the private sector. I understand how to create jobs and how to get America strong again.

And I'm running against, in the case of Speaker Gingrich, someone who has never worked in the private sector, who spent his life Washington and has been working as a lobbyist. And he doesn't call it officially a lobbyist, but that's what it is.

And I simply cannot imagine America being led by a person whose sole experience is not inside the private sector, but is inside Washington. I just don't think Washington can fix Washington.

WALLACE: Finally, sir, we have less than a minute left. And just on a personal level, I know you have said and your campaign has said, look, we are in this for the long haul and, you know, we never expected it to be easy. But, you know, there was really a possibility if you had won a decisive victory and you were way ahead in South Carolina, that this race might be over.

In just a personal level, when you and Mrs. Romney went to bed last night, what did you say to each other? I mean, it's got to have hurt?

ROMNEY: No, hurt isn't what comes to mind. We look at this as a long process. Clearly, we wanted to win in South Carolina. But from the very beginning, we understood that this would be an uphill battle for us.

Look, I came in fourth four years ago. This time, I came in second. That didn't feel that good, by the way. I wanted to come in first.

But we looked and looked behind the numbers. You saw in the very part of the week, I was at 29 percent in the polls. I got 28 when we were finished. The undecideds virtually all broke for Newt and I understand that. He had a good week.

But, you know, this is a long process. We are looking ahead to a number of other races. I think -- what are we -- three states in now. We got 47 more to go.

So, we are looking forward to being successful and, by the way, we have confidence in the American people. I think in the final analysis, they'll do the right thing.

WALLACE: Governor Mitt Romney, we want to thank you. Thank you for talking with us today. And we will be tracking what happens now in Florida, sir.

ROMNEY: Great, Chris. See you there.

WALLACE: Up next, the Speaker of the House John Boehner on President Obama's State of the Union Address Tuesday, and the Republican agenda. Will Washington get anything done this year?

(COMMERCIAL BREAK)

WALLACE: With all of the focus on the Republican campaign, it's easy to overlook, there is still a country to run. President Obama delivers his State of the Union speech Tuesday night. Seated directly behind him will be the man pushing the GOP agenda, Speaker of the House John Boehner.

And, Mr. Speaker, welcome back to "Fox News Sunday."

SPEAKER OF THE HOUSE JOHN BOEHNER, R-OHIO: Chris, always good to be with you.

WALLACE: President Obama has made it clear that part of his campaign of reelection is to go after the do-nothing Congress. And in fact, he's already doing it. Let's watch.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: When Congress refuses to act, and as a result, hurts our economy and puts our people at risk, then I have an obligation as president to do what I can without them.

(END VIDEO CLIP)

WALLACE: Question -- how will you counter that line of attack?

BOEHNER: Chris, 30 jobs bills passed over the last year in a Republican House of Representatives that are sitting in the United States Senate -- thirty.

Our focus over the last 12 months has been on jobs. Our focus over the course of the next 12 months is going to be on jobs.

The president asked us to extend the payroll tax credit, to make sure that we extended unemployment insurance with reforms, and make sure that doctors that dealt with Medicare patients were adequately reimbursed. And he asked us to do it for a year. We did it for a year. It was the United States Senate who decided, we're just going to do it for two months and we can't agree on how we're going to offset these costs. And so, we'll just kick the can down the road.

We've done our job for the American people. The fact is this, Chris -- the president's policies failed to get our economy moving again and as a matter of fact, it's the president's policies that have actually made our economy worse.

WALLACE: OK.

BOEHNER: It's time for a new direction.

WALLACE: Here is the problem -- several studies found that Congress this last year, 2011, has been one of the least productive ever. Let's take a look.

You passed -- when I say you, I mean, the Congress, the House and the Senate -- 80 laws last year, and 20 percent of them were to name a federal building or other housekeeping measure.

And here are the latest polls. The president's job approval is at 46 percent. Congressional Republicans 19 percent.

Isn't Mr. Obama, rightly or wrongly, isn't he winning the battle for public opinion?

BOEHNER: Is the measure of the job the Congress does the measure of the laws that we passed?

WALLACE: It's a measure.

BOEHNER: No, it is. Most Americans think we've got too many laws already.

WALLACE: What did Congress do this year that was significant? None of those --

BOEHNER: The House passed 30 bills that will help our economy grow again.

WALLACE: But none of those got through.

BOEHNER: Look at the United States Senate. We are doing what the American people are asking us to do.

I made a commitment that our job was to listen to the American people and follow their will and that's exactly what we're doing.

But the real facts are that the president's policies failed to get our economy moving again and the fact is, they made them worse.

WALLACE: But the fact is also, I'm not saying you are right and the Senate is wrong or vice versa. But the fact is, I don't have to tell you the art of the legislating is the art of compromise and nothing got done. Nothing got done in any of those jobs bills.

And the question people are asking, sir, is -- particularly in an election year when you're already saying Obama's policies make things worse, will anything get done in Washington this year?

BOEHNER: If the president will listen to his own jobs council and the report that they issued this week, many of the ideas in the president's own jobs council are bills that have already passed in the House. WALLACE: Such as?

BOEHNER: Take the issue of infrastructure. We need big -- we have big problems with our highways and roads. We need to get those things done. When you look at the --

WALLACE: He supported infrastructure as part of those jobs bills.

BOEHNER: You look at regulatory bills that passed the House. Same kind of suggestions coming in from the president's own jobs council, let's slow down the regulatory onslaught coming out of the Washington. We talked about fundamental reform of our tax code. Absolutely critical if America is going to be competitive, and we're going to have jobs for hardworking American taxpayers.

WALLACE: Big event Tuesday night, the State of the Union, we know some of the broad outlines of what the president is going to say at the State of the Union, let's get through them.

More help for the middle class, such as aid for people going to college, or having problems financing their home, income inequality. He'll demand that the wealthy pay more taxes and once again, he'll propose a grand bargain to cut the deficit and avoid that $1.2 million in automatic triggers.

Do you see a compromise on any of those issues?

BOEHNER: You know, I read a lot about what the president is going to talk about Tuesday night. And it sounds to me like the same old policies that we've seen. More spending, higher taxes, more regulations -- the same policies that haven't helped our economy, they made it worse.

And if that's what the president is going to talk about Tuesday night, I think it's pathetic. I think it's time for the president to listen to his own jobs council. It's time to go in a new direction.

We need to end the regulatory nightmare that's coming out of Washington serving as a wet blanket over our economy. We need to work to fundamentally change our tax code.

WALLACE: But you are saying no grand bargain on the deficit?

BOEHNER: Chris, I've tried. Nobody in this town tried harder to come to an agreement with the president over solving our long-term deficit problems.

And the facts are these: the president would never say to fundamental reform for our tax code. He asked for more revenue. I told the president, I'll put revenues on table, but only if we're going to have fundamental reform of our entitlement program. The president never said yes, and then he wanted $1 trillion worth of new taxes.

The problem in Washington is there's too much spending. And we've got to get our arms around it. Republicans in the House and Senate are committed to real reforms of our entitlement programs and real control on spending here in Washington.

WALLACE: What about -- talk about an immediate measure, what about extending the payroll tax cut holiday for a full year, not just the two months that runs out in the end of February? And are you as part of that going to attach the Keystone pipeline, approval of the Keystone pipeline to a deal?

BOEHNER: The House already passed the bill that will extend the unemployment program and the payroll tax credit for a year. And it was offset with reasonable reductions on spending, most of them coming from the president's own budget. I'm hopeful that we'll get this finished as soon as possible.

The Keystone pipeline is the prime example of a shovel-ready project that's been through every approval process here in Washington.

Every option is on the table. We're going to do everything we can to try to make sure that this Keystone pipeline is, in fact, approved. It's 20,000 direct jobs. It's over 100,000 indirect jobs. And as more energy independence for America as opposed to forcing our friends across the border in Canada to run a pipeline out to the Pacific Ocean and sell it to the Chinese.

WALLACE: Well, you say all options are on the table. Are you saying that you may link the Keystone pipeline to extending the payroll tax holiday?

BOEHNER: We may. But as I said, all options are on the table.

WALLACE: Now, here's an interesting question, because what you did this last time is you just said you have to disapprove it again in two months and he disapproved it again as he had before.

Why not demand that if he wants the payroll tax cut, he has to approve it? In other words, it comes with it. You want the payroll tax cut? The pipeline goes with it.

BOEHNER: All options are on the table.

WALLACE: So, you're suggesting it might not just be -- because, quite frankly, it seems like just a political statement. You're -- you know, he can disapprove it, and his measure goes through. You're saying that you might demand approval as a price for --

BOEHNER: The Keystone pipeline is a bipartisan issue in the Congress. Democrats and Republicans in the House and Senate, a lot of people, want this pipeline built. The president is just saying, hey, I'll take care of this, but I'll do it after the election, I don't want to irritate anybody who might think about voting for me.

Listen, the president knows that the number one issue in America is jobs, and here's an example of 20,000 direct jobs, over 100,000 indirect jobs. And it's time for the president to say yes. And as I said, all options are on the table.

WALLACE: Will the House pass a budget this year, and will it have serious entitlement reform in it again such as last year's proposal by Paul Ryan for premium supports (ph) as a way to change and reform Medicare?

BOEHNER: Well, that was one option on how we could save Medicare. There are other ideas. Paul Ryan and Ron Wyden, the Democrat senator from Oregon, came up with a bipartisan proposal.

The idea here is that we've got to make changes to Medicare. Otherwise, it will not be there for seniors who count on it. So we will do a serious budget. But also, remember this: on Tuesday, it will be 1,000 days since the United States Senate passed a budget. One thousand days, and they have yet to pass a budget.

How do you deal with the long-term fiscal problems that we have if you refuse to come to an agreement on a budget?

WALLACE: So I want to make it clear, because there had been some thought that maybe because of the hits that you guys took last year, you weren't going to pass a budget. You are going to pass a budget again this year?

BOEHNER: Of course we are.

WALLACE: And how do you prevent Democrats from turning it again, particularly proposals like entitlement reform, into a political punching bag, as they did last year?

BOEHNER: You know, I tell my members every day, if you do the right things for the right reasons, the right things will happen. Don't worry about it.

WALLACE: At a retreat that you House Republicans just held in Baltimore, you personally kept talking about oversight, holding this president accountable and making this next year a referendum on Barack Obama's policies. It sounds to me, and I'm sure to a lot of people, like you're basically saying this whole year is going to be politics.

BOEHNER: No, not at all. I do think that it's part of our job in the Congress to hold the administration accountable. His policies have in fact made our economy worse. Our job is to -- in order to change those policies, is to help people understand what the policies are and they've how they've made the economy worse. That's our job and we're going to do our job, but in addition to that, we do believe that fundamental reform of the tax code is important.

The American and Energy Infrastructure Jobs Act will be on the floor here in the next months that will open up American energy production, use those new royalties to fund our aging roads and bridges. So there's a lot of work that is going to be done. And if the president will listen to his own jobs council, there will be an awful lot of unanimity between the bills that we're passing and what his own jobs council is calling for.

WALLACE: President Obama said this week in an interview that you two get along fine, he likes playing golf with you, but then he add this -- we'll put it up. "No matter how much we yukked it up, he (Boehner) had trouble getting his caucus to go along with doing the responsible thing on a whole bunch of issues over the past year."

And there is, Mr. Speaker, a perception out there that you would like to make a deal, that you're being held captive by the 87 freshmen in your House caucus.

BOEHNER: Well, the first thing, it's not our freshmen. The fact is --

WALLACE: Are you held captive by other people?

BOEHNER: We have some members who always want to do more. And God bless them, I want to do more, too. But that's not really an accurate statement.

The problem is, is getting the president to say yes. If the president and I can come to an agreement on something, I don't think I'd have any problem selling it in the Congress.

WALLACE: But he says that --

BOEHNER: No. He wants to shove off his own responsibility for the lack of an agreement on me and my ability to deliver. If the president and I could come to an agreement, I have no doubt that we can get unanimity and bipartisan support in the U.S. House of Representatives and, for that matter, the Senate.

WALLACE: A number of members of your caucus, including a lot of those Tea Party freshmen, no news to you, were very unhappy with you for what they said was shoving the two-month payroll tax cut extension down their throats.

Have they agreed to go slower? Have you agreed to go faster?

BOEHNER: Listen, we've had a lot of talks last year about how the year ended. Our focus this year coming out of our retreat was on jobs.

As you mentioned earlier, legislating is about the art of the possible. And the art of the possible is to try to find some common ground with this White House. The American people don't care about Democrats and Republicans, they don't care about the squabbles that go on, they don't care about our ideological corners that we sit in. At the end of the day, they expect us to find enough common ground to be able to move forward. And my job is to work with the president and to work with my colleagues on both sides of the aisle to do what the American people want us to do, create more jobs.

WALLACE: Are you convinced that your caucus goes along with that, it's the art of the possible, not the art of the idea?

BOEHNER: I sure am.

WALLACE: Finally, your number two, House Majority Leader Eric Cantor, suggested this weekend at the retreat that he'd like to see the presidential race end sooner, rather than later, because he said it's important that the Republicans put up a clear choice against Barack Obama.

Does Newt Gingrich's victory yesterday -- and I'm not singling him out, he just happened to win -- but the fact that there's probably going to be a longer, rougher, tougher primary, does that hurt Republicans?

BOEHNER: Well, I think the fact that we've had three primaries, one caucus and two primary elections, and we have three different winners, I think it shows the vibrancy of the Republican Party. And, while, yes, everybody would rather have it over sooner rather than later, the fact is, is that those who show up in Republican primaries around the country are going to choose our candidate.

It's not going to be chosen by a handful of people in Washington. Not going to be chosen by me. It's going to be chosen by the Republican voters. And I trust the judgment of Republican voters, and I'm as anxious as anybody else to see who our nominee is going to be.

WALLACE: Speaker Boehner, we want to thank you so much for coming in today. We will be watching you sitting right behind the president on Tuesday night.

BOEHNER: I'll be right in my chair.

WALLACE: Do you have any problems about possibly falling asleep? Is that a --

BOEHNER: No.

WALLACE: Do you do something? Do you pinch yourself or bite the inside of your cheek?

BOEHNER: No. I just do not want to be the issue, and so I can tell you all about the back of the president's head.

WALLACE: You just sit there and --

BOEHNER: Look right at him.

WALLACE: Mr. Speaker, thank you very much, as always.

BOEHNER: Thank you.

WALLACE: Coming up, Newt Gingrich wins big in South Carolina. We'll ask our Sunday panel what it means as the Republican race rolls on.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GINGRICH: And we proved here in South Carolina that people power with the right ideas beats big money. And with your help, we're going to prove it again in Florida.

Thank you and good luck!

(END VIDEO CLIP)

WALLACE: That was Newt Gingrich Saturday night, fresh off a crucial and decisive victory in the South Carolina primary.

And it's time now for our Sunday group -- Fox News contributor Liz Cheney; Karl Rove, who served as senior adviser to President Bush; former Democratic campaign manager Joe Trippi; and Liz Marlantes of The Christian Science Monitor.

Welcome, all.

Karl, we were here late last night. And when we talked just before Gingrich's speech, you said that he should, among other things, go after the news media, because it had played like gangbusters in South Carolina and it would help down the road. But as we discussed with Romney, he did even more. He went after Washington and New York elites who he said -- and let me get the quote right here -- "are trying to force us to quit being American."

Effective or over the top?

KARL ROVE, FOX NEWS CONTRIBUTOR: Well, look, I suggested that he do it because I knew he was going to do it. He can't help himself. And look --

WALLACE: Yes, but you also thought it was a good idea.

ROVE: Well, it works in a Republican primary, but it does create a little bit of problem with Independent voters for the general election, because this is not the centerpiece of their concerns. They're concerned about economy, jobs, spending and health care. And, you know, some have talked about Washington and New York elites, and the "lamestream" media, as some people call it, is not the center of their concern.

WALLACE: Joe, I gather that you have stolen Karl's whiteboard.

Karl, you can --

JOE TRIPPI, FMR. DEMOCRATIC CAMPAIGN MANAGER: I would never steal his whiteboard.

WALLACE: -- be the holder.

And I don't know this. This is news to me, folks. You want to have some takeaways from last night?

ROVE: Yes. The interesting thing about the exit polls last night is that when people talked about what mattered to them most, there's some low scores. And you see the big problem here is that Paul and Santorum both score less on electability. No one thinks they can win. And then you get up here, and here's the big problem. On moral character that matters most to people, Newt is dead last, with six percent And who's the true conservative? Dead last, Mitt Romney, at two percent.

So you have this -- all these people are scoring low. Romney, low on true conservative. Newt, low on moral character. How's that going to get answered as you go into Florida? I think that's a really fascinating problem for the GOP right now.

WALLACE: Liz?

LIZ CHENEY, FOX NEWS CONTRIBUTOR: You know, I think the interesting thing in addition to this about last night was the extent to which the debates mattered. And not just because Newt was eloquent or Newt was skilled as a debater, but because people are so frustrated and concerned about a second term for President Obama, both Republicans and Independents, that they want somebody who's going to stand and fight.

And what you saw with Newt was the ability not just to lay out policy prescriptions, but a willingness to stand and fight. And I think that clearly paid off for him.

I would watch Santorum closely though. I think that Santorum comes out of this in a very interesting position.

All the focus is now going to go to Florida, and I think you'll see Santorum look beyond that. Florida is winner take all. There's not much for him to gain from spending a lot of time and effort there. But he's going to look beyond it, towards those states that are proportional, where he actually could pick up some delegates. And I think he represents the kind of concern the voters have for finding somebody who's going to stand up for true conservative principles.

WALLACE: Liz Marlantes, how big a setback is this for Mitt Romney? I mean, one of the things that he was projecting was that he was the inevitable candidate, you might as well get on board. And we saw just this last week more and more Republican officials getting on board the Romney train.

How big a setback for him, the puncturing of that aura of inevitability?

LIZ MARLANTES, CHRISTIAN SCIENCE MONITOR: I think it's big, and I think, actually, the biggest takeaway from the exit polls last night was what a hit Romney took on electability, which really has been his ace in the hole all along, that he's been able to say I'm candidate who would stand up best against President Obama. And I think it's interesting.

You know, all along, everyone has assumed that this is going to be an election about the economy, correctly, and then there's been this assumption that a candidate with business experience, who understands the economy like Romney, would be the strongest candidate to go up against Obama. And I think what we saw in South Carolina was something a little different, which was the suggestion that, do we really want a candidate who's going to come forward and say, I'm an economics expert, or do we want a candidate who's going to come forward and say, I understand your pain, I feel your pain?

And that's something that Romney has been particularly bad at. And I think in an election where people are feeling economic pain, they might actually want that.

Newt Gingrich performed very, very well with voters who, by their own admission, were struggling the most last night. Mitt Romney actually won voters who earned $200,000 or more. Newt Gingrich won voters who earn $50,000 or less by a huge margin.

WALLACE: All right.

Karl, put yourself in the place of chief strategist, the role that you played with George W. Bush, the chief strategist for Mitt Romney. What would you advise him to do? And he made some news today. He's going to release his tax returns, not wait until April. He's going to get 2010 out and a summary for 2011 out on Tuesday.

ROVE: Right. First of all, I thought that was a very smart move. Get it behind and acknowledged it was a mistake. It's important that Romney, going forward, needs to say to the Republican primary voters, I get the message.

The second thing, playing off of what the L2 said, Liz and Liz, I do think he needs to show feistiness, combativeness. His best moment on Thursday night was when he said, ,I didn't inherit this money, I made it my myself, and I'm not going to apologize for it, and anybody who attacks me is attacking the free enterprise system. And I thought that was a very strong moment for him.

So, going forward, he needs to do that.

Third -- and you saw it in the interview earlier -- I thought it was smart. He took on Gingrich on the question of character, but not on the question of the marriage, but on the question of, you were working for Freddie Mac. You were the guy who's the Washington insider. You're the guy who attacked the Republican House members about being for the Ryan budget by saying right wing (INAUDIBLE). He's got to use attacks that distinguish him as being more conservative or as conservative on certain issues.

WALLACE: And conversely, what would your advice be to Newt Gingrich?

ROVE: Well, Newt Gingrich has had two things working for him. One is the attacks on the media.

So, the first thing is, do what he did with Juan Williams and John King. And in the next week's debate, arrange for some member of the media to ask him a question of particularly stupid fashion to allow him to pound it out of the park.

WALLACE: Unfortunately, I will not be there. So he's going to have to be on his own devices.

ROVE: Yes, on his own. So, the question is, can he repeat that?

The second thing is, is he's got to broaden his appeal out from just being, I'm the guy who's going to be able to beat Obama in the debates. Because, look, let's be honest, we're not going to have seven three-hour Lincoln-Douglas-style debates. We're going to have three debates run by the presidential commission. So he's got to be able to say, I'm capable of carrying this battle to Obama on a wider range of issues, and you'll get a sense that it's not just my debating skills, but I've got a concrete, specific vision that you can count on me following up (ph).

WALLACE: Joe, you were saying last night that you thought this could turn into a long, bitter, personal fight that really divides the Republican Party. And you even had an historical analogy.

TRIPPI: There's two ways this could go. It could become Obama/Clinton, where you have two titans going at it, if Gingrich keeps going -- and I think he will -- or you could have what the Democrats had in 1980 with Ted Kennedy and Jimmy Carter, where it got ugly, bitter, they didn't like each other, and it started to show.

And both of these -- both Romney and Newt don't appear to like each other. And I think --

WALLACE: And what's the danger? I mean, it's good for us, but what's the danger for the Republican Party if it becomes a Carter-Kennedy?

TRIPPI: That's a disaster. I think there have been a few of those kind of Donnybrook kind of fights within a party with two giants. And in the end, in that situation, the other side always has won. So I think it's a very dangerous time, and I think Newt's personality in particular makes it possible for this thing to generate into sort of an ugly fight.

WALLACE: I am not going to say "Liz 1" and "Liz 2." They're both "Liz 1" to me.

But, Liz Cheney, for the first time, three different candidates winning the three first contests, if there is such a thing as three firsts -- the first three contests, Iowa, South Carolina and New Hampshire. What does that say about the way voters regard this field? And does it raise the possibility that if things go on and get split, that you can get a late entry, Chris Christie, or a Rubio, or a Paul Ryan or one of those guys?

CHENEY: Well, I think I disagree a little bit with Joe. I think it's good for us that this is going on the way that it's going on. And I think that each of these candidates gets stronger.

I think it was Rick Santorum last night, but I've heard Sarah Palin say as well, that this is like steel on steel. They sharpen each other, they get ready to have to deal with the attacks that we know are going to come in the general election. I think there is some talk out there -- you certainly here it -- about the possibility of a late entry. I think it's unlikely. And I think, frankly, that these guys who are in, all four of them, deserve just tremendous respect.

I mean, this is absolutely brutal. And they get up every single day and they go back in the fight. They put their families through it. You know, it is a firing squad in a lot of ways. And they have been out there fighting it.

And I think it's making them better candidates, and I think it's going to make it a very interesting four or five months.

WALLACE: Liz Marlantes, we've got less than a minute left. Your thoughts about the idea that this race is so wide open, and what does it say that three different races, three different contests, three different winners?

MARLANTES: I think the other interesting thing to look at, after Florida we're going to enter this period that everybody thinks is going to save Romney because we've got all these caucuses, it's a whole bunch of states, there's not going to be debates, that sort of thing. On the other hand, I think we've really seen that the news media has had a huge impact, and Newt Gingrich is going to be able to use those benchmarks. He's going to go from Florida probably straight to Ohio. And we'll see if that kind of momentum can carry him.

WALLACE: All right, panel. Thank you so much. See you all next week.

Don't forget to check out "Panel Plus," where our group picks right up with this discussion on our Web site, FoxNewsSunday.com. We'll post the video before noon Eastern Time.

Up next, we take a look at the most intense week yet of the Republican race for president when we go "On the Trail."

(COMMERCIAL BREAK)

WALLACE: What a week it was in the 2012 Republican presidential campaign. There were two debates, two candidates dropped at, and two others were on the hot seat.

Here we go "On the Trail."

(BEGIN VIDEOTAPE)

JON HUNTSMAN, FMR. PRESIDENTIAL CANDIDATE: Today, I am suspending my campaign for the presidency.

GINGRICH: I'm going to continue to find ways to help poor people learn how to get a job, learn how to get a better job, and learn some day to own the job.

GOV. RICK PERRY, FORMER PRESIDENTIAL CANDIDATE: Mitt, we need for you to release your income tax.

ROMNEY: If that's been the tradition -- and I'm not opposed to doing that, time will tell -- but I anticipate that most likely, I'm going to get asked to do that around the April time period.

GINGRICH: He could have today released his tax records so the voters of South Carolina could discover something.

ROMNEY: It's good to see you. I appreciate you stopping by this morning.

SANTORUM: There we go. Just a little lunch.

PERRY: We've had our differences, which campaigns will inevitably have. And Newt is not perfect, but who among us is?

MARIANNE GINGRICH, NEWT GINGRICH'S EX-WIFE: Oh, he was asking to have an open marriage, and I refused.

GINGRICH: I am appalled that you would begin a presidential debate on a topic like that.

SANTORUM: Newt's a friend. I love him. But at times, you've just got sort of that worrisome moment that something is going to pop.

GINGRICH: This is our grandson. And Robert is -- you're playing hooky. This is his mother. This is an education field trip for Robert.

PAUL: You know, in Washington, when I give a speech, I never get applause. So I'm always glad to get out of Washington.

GINGRICH: Thank you to everyone in South Carolina who decided to be with us in changing Washington.

(END VIDEOTAPE)

WALLACE: What a week. And now the candidates head to Florida, where the next primary is just nine days away.

We'll be right back with a special program note.

(COMMERCIAL BREAK)

WALLACE: Next week we'll have an exclusive interview with Republican Congressman Paul Ryan, responding to the president's State of the Union Address and laying out his plan for the budget.

And that's it for today. Have a great week, and we'll see you next "Fox News Sunday."

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