Gingrich predicts victory in Alabama, Mississippi; Sen. McCain talks foreign trouble spots, 'Game Change'

Written by Chris Wallace / Published March 11, 2012 / Fox News Sunday

Special Guests: Newt Gingrich, Sen. John McCain

The following is a rush transcript of the March 11, 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.

As the GOP presidential race heads South, Newt Gingrich goes all in to mount another come back. With Alabama and Mississippi at stake, we'll ask Gingrich if those two states are must-wins for his campaign to continue.

And then foreign trouble spots -- should the U.S. intervene in Syria? Are the U.S. and Israel on the same page about Iran? We'll discuss both issues and talk about the new movie "Game Change" in an exclusive interview with Senator John McCain.

Plus, better news on jobs, but no relief on gas prices. We'll ask our Sunday panel how the economy is driving the president's poll numbers.

And as the candidates recalibrate after Super Tuesday, we go on the trail.

All right now on "Fox News Sunday."

(MUSIC)

And hello again, from Fox News in Washington.

While the political world waits to see how Alabama and Mississippi play out on Tuesday, we have results from Saturday. In Kansas, Rick Santorum easily won the caucuses with 51 percent. Mitt Romney had 21 percent, with Newt Gingrich and Ron Paul rounding out the field.

In Wyoming, Mitt Romney first with 44 percent, followed by Santorum at 27, Paul was third and Gingrich last.

Including the results from three U.S. territories Saturday where Mitt Romney did well, here is the latest delegate count: Mitt Romney leads with 454. Santorum has 217. Gingrich is third and Paul last.

It takes 1,144 delegates to clinch the nomination.

Joining us from Birmingham, Alabama, a man looking for a strong showing in the South Tuesday, Newt Gingrich.

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

NEWT GINGRICH, PRESIDENTIAL CANDIDATE: It's good to be back with you.

WALLACE: The polls show a surprisingly close race Tuesday in Alabama and Mississippi. Question -- are you going to win them both?

GINGRICH: I think we'll win both. We are campaigning very aggressively on both states. As almost everywhere, you start a little behind because of Romney's money and the length of time he's advertising. And as you campaign, you catch up with him pretty rapidly, and I think we're probably polling ahead in both states right now. We have great organizations in both states and in particular in Alabama where Senate Majority Leader Jabo Waggoner has put together a great statewide organization.

But I will be campaigning both in Birmingham and in Mississippi. And then we'll be campaigning tomorrow morning in Biloxi and then back in the Birmingham area. So, we're not taking anything for granted these next two days.

WALLACE: Let's talk some math, Mr. Speaker. You have won two of the 25 contests, states that voted so far. The Romney camp points out you must now take more than 70 percent of the outstanding delegates to clinch the nomination.

You said on Friday, even if you were to lose one or both, Alabama or Mississippi, you are going to stay in this all the way to the convention. But doesn't it get awfully hard and doesn't it become impossible to get to 1,144 if you don't win both states?

GINGRICH: Well, you know, the Mitt Romney camp has been trying to sell since last June that I should get out of the race and that Romney is inevitable. But the fact is, Romney is probably weakest Republican front runner since Leonard Wood in 1920, and Wood lost on the 10th ballot.

Romney has a challenge. He wins a state, for example, he wins Ohio. He gets 38 percent of the vote, places where no one competes because of money. Guam, for example he does fine. But overall, you reported Wyoming, 47 percent. He loses Kansas outright.

The most he's going to get in Mississippi and Alabama is probably a third and more likely to get 25 percent or 28 percent.

So, yes, he is a front runner. He's not a very strong front runner. Almost all conservatives are opposed, which is the base of the party. And I think we are likely to see after the last primary in June, we're likely to see a 60-day conversation about what's going to happen as we already see Romney dominating.

And in that context, I think that the both that I got remembering that I was in first place both in December and again in mid-January in terms of the Gallup poll and the Rasmussen, I think there is a space for a visionary conservative with big solutions like national American energy policy and leading at $2.50 a gallon gasoline, or a personal Social Security savings account for young Americans, or replacing the current 130-year-old civil services system with a brand new management model.

These are big ideas. They take a while to sink in. But we have a lot of states where we are second and we have a lot of states where we're gathering delegates and I feel pretty good about representing people.

The other that I say, Chris, is I have 175,000 donors, 95 percent of them under $275. I think I owe them something representing their views and their desires for a positive kind of conservatism. WALLACE: We're going to get to some of those big ideas, especially energy in a moment. I just want to ask you, though, about exactly your point, which is that Romney is winning but not with winning with a majority. He's winning with the plurality.

You put out a new web video this week going after Rick Santorum. Let's take a look at it.

(BEGIN VIDEO CLIP)

RICK SANTORUM, PRESIDENTIAL CANDIDATE: I teamed up with Joe Lieberman. Barbara Boxer and I wrote a law protecting open space. I've even working with Hillary Clinton.

You know, politics is a team sport, folks.

(END VIDEO CLIP)

WALLACE: Now, I understand that you think you would make a better president than Rick Santorum. You think you have bigger ideas and bigger solutions. But given the fact that you are both conservatives and you say that Romney is a moderate, at some point, does it make sense to get out and give Rick Santorum a shot at Romney who, as you point out, is not winning by very impressive margins in a lot of these states.

GINGRICH: Well -- that video, though, makes the point of why I didn't get out. When I was speaker of the House, we led an effort which led to four consecutive balanced budgets.

When Rick was in leadership, they went up $1.7 trillion deficit. Very big difference, I think just to put the label conservative and assume that covers everything is very misleading.

I went to work to change Washington and I think it's fair to say in some ways, and just to use Rick's own language, people see it themselves. This is somebody who on a number of occasions had Washington change him. He admits it and he says it's a team sport. You had to go along to get along.

I don't believe that. I'm not running in order to go along to get along. And frankly, the leadership team that Rick was in suffered a disastrous loss in 2006, because the country didn't want bigger deficits, more earmarks, the bridge to nowhere, and those kinds of things.

So, I think there's a principle difference. It's not just a label. What are you trying to accomplish, how do you think the system works, and are you in the business to change Washington decisively, or are you just in the business to be a part of the team?

WALLACE: Let's talk energy and $2.50 a gallon gasoline, which is become the center piece of your campaign. How quickly do you believe you be could get us back to that, Mr. Speaker?

GINGRICH: Within two years, maybe faster. When George W. Bush signed up the executive order opening up offshore drilling at presidential level, it still required congressional action, the price of oil per barrel dropped $9 that day.

I think the market moves in anticipatory basis. I would sign the Keystone Pipeline immediately. We believe that could be up in a year, or to expedite the procedures. But 700,000 barrels a day going to Houston from Canada. There are a number of steps like that.

I'd sign opening up the gulf off of Louisiana and Texas, about 400,000 barrels a day. The folks down in Louisiana believe that can start turning around very fast once they knew it was coming.

So, there are steps you can take that would dramatically lower the price of gasoline; $2.50 a gallon is not irrational. It was $1.89 when Obama (VIDEO GAP), $1.13 when I was speaker. So, you can imagine circumstances to get below $2.50.

The key thing is, the direction I would take the country is towards developing our energy resources to be independent of the Middle East so that no American president would bow to a Saudi king.

The direction the president is taking the country is greater dependency and much more expensive gasoline, maybe ultimately as high as $9 or $10 a gallon, which is what his secretary of energy, Dr. Chu, says he wants it to be. He has said publicly the wants us to pay European levels and that would be $9 or $10 a gallon.

WALLACE: But, Mr. Speaker, gas experts make two points. First of all, you pointed out the fact that gasoline was $1.89 a gallon when President Obama took office. They say that's a bit misleading because it was the depths of the recession. So, understandably, gas prices have gone down. The fact is just six months before, it was $4.11 under President Bush.

The other point they make is even if you were to begin a big onslaught of domestic drilling then it would take three-five years for that to result in more production here domestically -- which is not to say we shouldn't start doing it, but it wouldn't indicate or it wouldn't cause gas prices to go down sharply in a two-year time frame you are talking about.

GINGRICH: Well, first of all, it's a question of what the futures market does and whether it starts to anticipate production. Secondly, I led the effort called "drill here, drill, pay less." WE got 1,600,000 signatures back in '08, when as you point out, gasoline prices were up to $4. If we had started then, we'd be inside the window you are now describing.

But let me use the example of natural gas. Natural gas production has gone up 11 percent since 2008.

GINGRICH: The price crashed from $7.97 a unit down to under $3. From 2008 to today, it's crashed.

If you had exactly the same pattern in oil that you had in natural gas you'd be paying $1.13. Now, I didn't project that, I'm not saying you'll get there. But that is literally the direct parallel to what's happened in United States with natural gas in the last four years.

WALLACE: Let me pivot to another subject. Mr. Speaker, there is a terrible incident which I assume you knew about this morning, where a U.S. serviceman apparently walked off his base in southern Afghanistan, started firing at civilians and, according to some reports, killed as many as 16.

Your reaction to that, sir?

GINGRICH: Well, we clearly have to investigate it. I see that the NATO command has already commented on it. We have to indicate clearly and convince the people of Afghanistan that justice will be done and we are not going to tolerate that kind of thing.

And also there I think it is a grave difficulty in reaching out those the families. And they should be compensated for the tragic loss. I think when those kinds of things happen, what makes us different from the Taliban or Al Qaeda, they target, killing civilians.

We work very hard not to have things like this happened and we have to live up to our standards and our values.

WALLACE: You know, it brings up a bigger question, though, that I want to discuss with you about our future in Afghanistan. After the accidental burning of the Koran, are so-called Afghan partners targeted and killed six U.S. servicemen. And you reacted very sharply to that.

Let's watch.

(BEGIN VIDEO CLIP)

GINGRICH: This is a real problem. And there are some problems what have you to do is say, you know, you're going to have to figure out how to live your own miserable life.

(END VIDEO CLIP)

WALLACE: I want to ask you about that. Are you saying that we should pull out of Afghanistan now? And what about the argument that we need to be there longer because we need to get the Afghan, the government and the military and the police to stand up so they can stand up to and defend us against the Taliban and Al Qaeda after we leave.

GINGRICH: Well, first of all, what I've said is very directly related to President Karzai. I think he owes -- as much as we at times have to be concerned about our impact on the Afghan people, he owes the American people an apology. Some of those killings were by Afghan soldiers. Now, it's got to be a two-way street.

And I think that this idea that we have to tolerate and tolerate and tolerate while things are done to us is wrong, I think it sends the wrong signal. And I think we have to reconsider what's going on.

I reached a conclusion frankly about the entire region that is much more pessimistic than Washington's official position. When you look at Pakistan and realized that they have been hiding bin Laden for at least seven years in a military city within a mile of their national defense university, and their reaction wasn't to fine the people who'd been hiding him, but it was to find the people who helped the Americans, there is something profoundly wrong with the way approaching the whole region. And I think it's going to get substantially worse, not better. And I think that we are risking of young men and women in a mission that may frankly not be doable.

WALLACE: Well, that's what I want to pick on, that final point, because you didn't just say Karzai needs to apologize. You said that there are some problems where you just have to say you're going to have to live your own miserable life.

Are you saying that the U.S. needs to just -- you know, we fought bravely and with all good intent for more than 10 years, is it time to just say, enough?

GINGRICH: I think it's very likely that we have lost -- tragically lost the lives and suffered injuries to a considerable number of young Americans on a mission that we're going to discover is not doable. And what point do you -- by not doable I mean you are not going to get Afghanistan and Pakistan and frankly watch what's happening in Egypt with the Muslim Brotherhood -- look at the things that are going on around the region and then ask yourself: is this, in fact, a harder, deeper problem that is not going to be susceptible to military force, at least not military forces in the scale we are prepared to do?

And if that is true, this is part of why I decide to make energy independence a major theme of my campaign. We need to decide that the United States is going to have to back off from that region, not take primary responsibility for the flow of oil from the Persian Gulf and say to the Chinese and the Indians and the Europeans -- you have a problem, but it's not necessarily America's problem. And I think they're going to have to recognize that this is a region that's going to be hard to deal with in the near future.

WALLACE: Speaker Gingrich, thank you. Thank you so much for joining us today. Safe travels on the campaign trail, sir, and we'll see how things turn out on Tuesday.

GINGRICH: Thanks, Chris.

WALLACE: Up next, from Iran's nuclear program to the revolt Syria, we'll ask Senator John McCain what the U.S. should be doing.

(COMMERCIAL BREAK)

WALLACE: With big foreign policy challenges and unsettled presidential race and a controversial new movie on the 2008 campaign, we have plenty to discuss with our next guest. Senator John McCain joins us from Cottonwood, Arizona.

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

SEN. JOHN MCCAIN, R-ARIZ.: Thank you, Chris.

WALLACE: Let's start with the terrible news overnight from Afghanistan, what's your reaction? And we just talked about it, you heard, with Speaker Gingrich to the news that apparently, one U.S. serviceman walked of his base in southern Afghanistan, went to civilian's homes, shot them up, may have killed -- according to unconfirmed reports -- as many as 16 people, including children.

What's your reaction to that? And also, your reaction to the growing sentiment among conservatives, like Speaker Gingrich, that our mission in Afghanistan may not be doable and we may need to get out.

MCCAIN: Well, it's -- obviously, it's a terrible situation that happened there and it's you know, it is one of those things that you cannot explain except to extend your deepest sympathy to those victims and see that justice is done. I might add that there was a significant step forward in agreement concerning the detainees between President Karzai and the United States which I think would move us very much closer to a long-term strategic partnership agreement. That is I think an important step forward.

But these thing in warfare that happened give us all the more reason to have it be avoided. And, finally, there's still the serious fundamental problems of corruption in the Karzai government and sanctuary in Pakistan. Ambassador Crocker made it very clear in a cable that he sent back through the CIA which, of courses, naturally appeared on the front page of "The Washington Post."

WALLACE: But, you know, let's walk our way through this. I mean, you have the accidental burning of the Koran, and then our Afghan partners -- police and military -- targeted and killed six U.S. servicemen. Now, we have this incident with obviously -- it would seem a deranged American serviceman killing more a dozen. You know that the blowback from that is going to be terrible. And as a result, you get people, like Newt Gingrich, who's, you know, no dove on defense, saying maybe it's just time to get out.

MCCAIN: I understand the frustration and I understand the anger and the sorrow. I also understand and we should not forget the attacks on the United States of America in 9/11 originated in Afghanistan. And if Afghanistan dissolved into a situation where the Taliban were able to take over or a chaotic situation, it could easily return to an Al Qaeda base for attacks on the United States of America. That is still our goal, as it was the day we went in.

WALLACE: You became the first senator this week to say that the U.S., in coordination with other countries, should use our airpower to go after the Assad regime.

Here's what President Obama said in response.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: What happened in Libya was we mobilized the international community. And we knew we could execute effectively in a short period of time. This is a much more complicated situation.

(END VIDEO CLIP)

WALLACE: You know, and the point that he and others make in response to your call for using U.S. air power is that Syria has got a much stronger army, they got a much stronger and more air defense system. They have big caches of chemical and biological weapons, and that we don't really know who the opposition is. That it isn't united, it isn't reliable. And they say those are big differences from Libya.

So, what about their counter-argument -- this is just different and more complicated than Libya?

MCCAIN: First of all, let make it clear -- I never called for unilateral U.S. action and we do not have to have boots on the ground.

What is taking place in Syria, as we speak, and, by the way, they are going into Idlib and the slaughter continues, is a violation of United States national security policy made by the president of the United States that we would prevent massacres wherever they take place. If the United States of America does not have the military capability with our allies to subdue the Syria military, then we have wasted about $700 billion a year.

Every time one of these crises comes up, we hear from this administration reasons why we can't do something, why we can't lead from in front. Instead, they want to lead from behind.

People are being massacred as we speak. And, by the way, General Mathis, the head of our Central Command, said and others have said, that if Syria fell, it would be the biggest blow to Iran in 25 years.

But the point is: massacres are taking place. Massacres were taking place in Bosnia and Kosovo, and under President Clinton, we intervened because that's what America is all about. These people are fighting for their freedom. They are being slaughtered in an unfair fight, being supplied by the Russians and Iranians -- not only Iranian weapons but Iranians on the ground. It is not a fair fight.

And the United States of America does have capabilities with the our allies in exercising a lot of options and airpower is one of them. And for us not to do so, in my humble opinion, is disgraceful and shameful.

WALLACE: Let's turn to Iran. The president seemed to send two different messages about what he is willing to do to stop Iran's nuclear program. First talking to Jewish leaders at AIPAC and then talking about his Republican rivals at a news conference.

Let's watch.

(BEGIN VIDEO CLIP)

OBAMA: I will not hesitate to use force when it is necessary to defend the United States and its interest.

When I see the casualness some of these folks talk about in war, I'm reminded of the costs involved in war.

(END VIDEO CLIP)

WALLACE: What would you do, sir, if 2008 turned out differently? What would President McCain do? Would you give Israelis the green light to strike? Would you what would be your red line as to what you would allow Iran to do before you would strike?

And would you give diplomacy? Because now, we got this new oil embargo, the European oil embargo against Iran, and new sanctions against the Iran central bank. How much time would you give them to work?

MCCAIN: Well, first of all, let me say that the president said he doesn't bluff. His national security policy is to prevent massacre and said Bashar Assad is unacceptable and has to go. We'll find out about bluffing.

Second of all, it's a little bothersome that the president of the United States would denigrate the views of other people who feel that they have the right to weigh in on the issue. It's not casualness that some of us in the Senate have become engaged. It's not casual on the part of Mitt Romney to say that it is unacceptable for the Iranians to develop a nuclear weapon.

And so, the president sends the national security adviser and chairman of the Joint Chiefs of Staff to Israel and then leaks that they are there in order to urge Israel not to act.

Now, if you are a nation that is threatened by extinction, as Iran has threatened Israel, would you rely on another country's capabilities in order to make sure that you are not attacked with nuclear weapons? That's the situation the Israelis find themselves in. Why Prime Minister Netanyahu said Israel is a sovereign nation and will act in their sovereign interest.

So, what the president has done, rather than bring us closer with Israel has shown great degrees of separation. What he should have done? He should have sat down with the prime minister of Israel with our national security adviser and said, here are the following red lines that if Iran crosses those red lines -- and, by the way, they continue, they continue to develop a nuclear weapon. And there has been no change from that course despite the sanctions and all the other efforts that are being made, which need to be made.

And these are the following red lines, and we will act with you if Iran reaches those red lines -- and those red lines could be drawn.

Instead the president has decided to try to persuade Israel not to attack at least between now and November of 2012. It's not helpful, the relations between the United States and Israel have never been worse.

WALLACE: Well, that brings us -- speaking of elections to the new HBO movie "Game Change" about your selection of Sarah Palin as your running mate. Now, you have swore that you are not going to watch "Game Change". And I want to know because it premiered last night on HBO.

Did you break down and tune in?

MCCAIN: I watched the Phoenix Coyotes defeat the San Jose Sharks, 3-0. It was a great game.

Of course, I'm not going to watch it. It's based on a book that's completely biased and with unattributed quotes, et cetera. And what I don't understand even in the tough world of politics, why there continues to be such assaults on a good and decent person, Sarah Palin, a fine family person, a person whose nomination energized our campaign. We were in the lead and they continue to disparage and attack her character and her person.

I admire and respect her and proud of our campaign. I'm grateful that she ran with me and I will always be proud of what we did and humbled by the fact that I was able to get the nomination of the Republican Party for president of the United States.

WALLACE: I do want to ask you, not about Palin but about yourself, because it does portray in the movie. What one of the things it says is that for all of your talk about putting country first, that your decision to pick Sarah Palin was pure politics. And here is a clip from the show.

(BEGIN VIDEO CLIP)

WOODY HARRELSON (as Steve Schmidt): We desperately need a game changing pick. None much these middle aged white guys are game changers.

ED HARRIS (as John McCain): So find me a woman.

(END VIDEO CLIP)

WALLACE: "So find me a woman." Simple question, Senator, did that ever happen?

MCCAIN: Of course not. And, by the way, I have been told I am portrayed as using an exceeding amount of coarse language. I don't use coarse language very often. I have a larger vocabulary than that.

But, of course not. I thought that she was best qualified person. I thought she had the ability to excite our party and the kind of person that I wanted to see succeed in the political arena. She is very effective and successful governor of a state.

And, again, Chris, I look forward and not back. This kind of stuff is something that I don't spend a lot of time on, because right now, I am trying to work on issues such as those we previously discussed.

WALLACE: I just want to ask one last question on this regard.

MCCAIN: Sure.

WALLACE: Because it does speak to the question credibility. And then we'll leave it.

You say that the authors and Hollywood made stuff up. But I want to point out some quotes from Steve Schmidt who was your chief strategist during the 2008 campaign. He's played by Woody Harrelson in the movie.

And here's what he says. He says, "It's the true story of what happened over those 10 weeks." This is Schmidt talking now. And then he says this, "I regret playing a part in the process that yielded someone on the ticket that was not prepared to be president."

So, I'm not asking you to respond to Hollywood or to the authors. But what do you say to the guy who was one of your top advisers in the 2008 campaign, Steve Schmidt, who says this is all true?

MCCAIN: I regret that he would make such a statement.

WALLACE: We'll leave it there.

Senator McCain, thank you. Thank you as always for coming on, sir. It's always a pleasure to talk with you.

WALLACE: I was going to say that, in the movie which I watched part of, you swear like a sailor, but I guess that would be unfair to sailors, so I'll -- I'll leave it there.

(LAUGHTER)

MCCAIN: Thanks again, Chris.

WALLACE: Thank you, sir.

Up next, our Sunday panel on the recent streak of good economic news, but are rising gas prices the reason behind the president's flat poll numbers?

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: I did not run for this office just to get back to where we were.

(APPLAUSE)

I ran for this office to get us to where we need to be.

(APPLAUSE)

(END VIDEO CLIP)

WALLACE: President Obama pointing out some good news on the economy and promising even better news ahead.

And it's time now for our Sunday group, Dana Perino co-anchor of "The Five" on Fox News Channel former Democrat Senator Evan Bayh; Chip Saltsman, campaign manager for Mike Huckabee's 2008 presidential run; and Liz Marlantes of the Christian Science Monitor.

Let's start with the latest numbers on the economy, 227,000 jobs created last month but unemployment stayed at 8.3 percent because almost half a million people joined the workforce; 1.2 million jobs created in the past six months, but there are still 5.2 million fewer jobs than four years ago.

Dana, what does all of that mean for the economy and President Obama's reelection chances?

DANA PERINO, FOX NEWS: I think good news is good news and it should be called that. I remember, in the Bush administration years, you would get 150,000 jobs one month and on the Hill Democrats would say this is absolutely horrible and not good enough.

Two hundred twenty-seven thousand jobs, though, is a current -- is a positive trend, and should that continue and we see a drop in the unemployment rate, one, good for Americans, but, two, I think that you'll see the central focus of the campaign will still be the economy; it will just shift a little bit to the debt, the deficit. Obamacare still is going to play a really big role.

So the economy, still, for the administration, plays the most important role going forward.

WALLACE: Senator, we're going to talk about gas prices in a moment, but putting that aside, what does this say to you about the strength of the recovery, and what does it say to you about Republicans trying to make the economy and Obama's mismanagement of it the big issue in this campaign?

SEN. EVAN BAYH, D-IND.: Well, three things, Chris. First, the economy clearly is gaining momentum. You know, what's the old saying, that one set of data can be an aberration; two can be a coincidence, but three is a trend.

We now have three months in a row. And over the last year, there have been 1.3 million new jobs created. So, clearly, there -- there is wind at our back now.

The stock market, which tends to be a forward-predicting mechanism is looking pretty good. Consumer confidence is higher, so people are starting to feel this.

But we're not out of the woods yet. Gas prices are higher. We may discuss that in a minute. Europe is a mess.

And if you look at history, the recoveries from financial panics are almost always more sluggish than other recoveries from other recessions because confidence has been affected and people have to get their debts down, states, the government, people as well.

So it's going to make it harder for the Republicans. They have to run on it. It is the issue, as Dana said, but it's harder to run on it when times are improving, and they are.

WALLACE: Chip, if you look at this in a historical context, no president, even if we're talking about 8.3 percent, 8.2 percent, even get down into the high sevens, no president has won reelection with unemployment as high as it's going to be on Election Day since FDR in 1936. The highest since then is Ronald Reagan at 7.2 percent in 1984.

What's more important, the absolute number of unemployment rate or the trajectory, that we know, yes, it's high, but it's heading down?

And if you were running the Republican campaign in -- starting on Labor Day, how do you go after Obama on the economy?

CHIP SALTSMAN, REPUBLICAN STRATEGIST: Well, the reelection of the president is usually based on the president. And the economy's news is good, which is good for all Americans, exactly what Dana said, but it's a feeling out there. And right now, the feeling is the economy is picking up but it's slow.

And typically, in a reelection year, you get to about the end of the second quarter, kind of, people lock in their votes on the feeling of the economy.

So it's slow but it's good, and as Republicans, we need to celebrate that but then contrast with him on the issues that are important to us like Obamacare, EPA, regulations and gas prices, as we move into November.

WALLACE: All right. And let's turn to gas prices, which are now, as of today, $3.79 a gallon, forecast that it could go up over $4 a gallon this summer.

Liz, how big a problem for the president?

LIZ MARLANTES, CHRISTIAN SCIENCE MONITOR: I think it could be a problem for the president. And obviously, they are worried enough about it that you saw him talking about it in his weekly address, and he's talking about calling for ending subsidies to oil companies, improving fuel efficiency, those types of things.

Newt Gingrich has been hammering this issue in the last couple weeks, and he's been really...

WALLACE: $2.50 a gallon gasoline.

MARLANTES: The $2.50 plan; he's mocking President Obama as "President Algae," in the way that only Newt can.

And there are some indications that he's actually picking up some movement in the polls, maybe. I mean, the polls are, a little bit, all over the place.

But -- so we'll see. We'll see if this message really works.

I think, on the other hand, I will just say about gas prices, we've had so much volatility in gas prices over the last several years that I feel like consumers, to some extent, feel like they've seen this movie before. And although no one likes higher gas prices, I just wonder if there's a little bit of a cushion where people think, well, it's up high now; this is seasonal; it may go back down. I don't think there's quite the sense of, like, it's up high and it's never going to go back down, necessarily.

WALLACE: All right. Dana and Senator Bayh, I want the two of you now to debate gas prices. And I'm going to start with you, Dana. And let me, sort of, set it out there. Because President Obama says domestic production is the highest right now than it's been in the past eight years. But critics say that's because of drilling on private property, not on federal land, and they also because it's -- and that's why I want to bring you into this -- because of decisions made under President Bush. So how fair is it to go after Barack Obama on the high gas prices we face right now?

PERINO: Well, if you're dealing in fact and reality, those two things are true. Public land drilling has been down about 11 percent. Private land drilling is up. Certain states like North Dakota have found new technologies to be able to go after natural gas, and they have a 3 percent unemployment rate up there. That's all on state and private lands, not on federal public lands.

In addition to that, it takes about four to five years to find a site, test it, get the equipment there and that stuff online, which is why I don't believe a lot of people that the Keystone Pipeline would have given them lower gas prices tomorrow.

But I do think that President Obama was in a position that he has now lost, but he was in a position to go against type and to say, "I'm going to have a longer-range strategy here so that a president in the future can say that there will be a brighter future for us on gas prices in America."

WALLACE: So just quickly to sum this up before I go to Senator Bayh, when the Obama White House claims, well, domestic production is the highest it's been in eight years, his...

PERINO: There's a "but," and they never finish the sentence. That's why I just got a chance to.

BAYH: Chris, I think you raised two very good points in your interview with Newt Gingrich. Number one, gas prices fluctuate under every president, and they were over $4 a gallon under President Bush not too far before he left office. So these things do go up and down regardless of party, regardless of president. There's only so much a president can do. That's number one.

Number two, in the short run, the president did support the continued payroll tax cut in part to offset the blow that consumers are taking at the pump. That is one thing that could be done in the short run. He was for it.

In the long run, it's supply and demand. He's done some very good things with regard to demand, trying to diversify our fuel sources, higher mileage standards for cars and trucks, to get the demand down. And in the long run, supply -- look, President Bush does deserve some credit for opening up more land. But the fact of the matter is, President Obama has not rolled all that back. We are producing more. We are less dependent today on foreign petroleum than in a long time, and an incumbent president deserves some credit for that.

WALLACE: Chip Saltsman, going to end this segment with you. Briefly, how vulnerable is Obama on gas prices? SALTSMAN: It is his Achilles' heel. And if -- gas prices are a daily reminder for people that they're having a problem in the economy when they have to spend $80, $90, $100 to fill up a truck when they're going to work. And if he doesn't get the energy prices under control, it can damage the economy recovery. It's very fragile.

WALLACE: All right. We have to take a break here, but when we come back, the candidates head south, and the stakes couldn't be higher. We'll ask the panel who has the most riding on Tuesday.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ROMNEY: I'M not really a politician. I guess I kind of am, because I was governor for four years and I've run for office, but -- but my -- my heart is a conservative businessman.

SANTORUM: If you go out and deliver a conservative victory for us on Tuesday, this race will become a two-person race.

(END VIDEO CLIP)

WALLACE: Candidates Mitt Romney and Rick Santorum making their case in two southern states that may have a big impact on the campaign. And we're back now with the panel.

Chip Saltsman, from your perspective, as Mike Huckabee's campaign manager four years ago, what's going to happen in Alabama and Mississippi Tuesday? And what's the potential that this will really shake up the race?

SALTSMAN: Well, it could shake up the race if Mitt Romney gets a win in the South. If he could win Mississippi or Alabama, I think that would shake up the race.

WALLACE: Let me ask you something, because I'm stunned at these polls. Why is he even competitive down there?

SALTSMAN: Well, he's got great organization. He's got a lot of people on the ground. He's spending money. He's done mail. He's done radio. He's done everything that a campaign's supposed to do in all these states, where the other campaigns have lagged behind on all those resources and are just getting in the game. And it's not any different than any other states he's been in.

WALLACE: But, you know, the fact is that there -- you would think -- and it's the evangelicals, the very conservative, the (inaudible) Tea Partiers are an even bigger part of the electorate than they are in other parts of the country. Isn't he going to have the same problem with them he's had in other places?

SALTSMAN: Well, whether you're evangelical or not, a job's pretty important to you. And he's doing well across the board on those things. Look, if -- if your social issues are the only reason you're voting, Mitt Romney is probably not your first choice in this group. But if it's jobs, if it's the economy, Mitt Romney is going to compete for your vote, and that's what he's doing in Mississippi and Alabama, and the polls seem to support that.

WALLACE: Senator Bayh, do you believe Newt Gingrich and Rick Santorum when they say that they are in this race all the way to the convention, regardless of what happens?

BAYH: No, Chris, I don't. There's an old saying in politics that -- presidential politics -- Chip, maybe you'd agree with this -- that no one ever stops running for president, they just run out of money. So I guess in Newt's case, does Sheldon Adelson continue to write these checks? If he doesn't, then...

(CROSSTALK)

WALLACE: We should explain, he's the casino owner from Las Vegas who has been giving more than $10 million to Newt's super PAC, so...

BAYH: Correct. You know, if that dries up, how does Newt go on? And Rick Santorum at some point, the money's going to stop flowing. How does he go on?

So if they continue on past a certain point, it's just all about ego and that sort of thing. And I would think at some point their supporters will say, "Enough already."

I guess the point I would make, too, Chris, is that the real winner here, frankly, is President Obama. If you look at what's happening to the likely Republican nominee, his unfavorables are higher than his favorables now, independents have been alienated, the Republican enthusiasm is down. In swing states, where they had to run these very ugly campaigns, Ohio, Michigan and elsewhere, he's now behind in the polls. The longer this goes on, the harder it is for him.

The last thing I'd say, it presents a strategic dilemma. As long as he's got to appeal to the very conservative base of the Republican Party, and the later he pivots to appeal to moderates and independents, it bleeds into this authenticity issue again. And so he's just kind of stuck.

So the sooner they can wrap this up, the better it is for them.

WALLACE: Dana, I want you and Liz to go big picture on this. Where is, as we sit here today, where is this Republican race now? How close is Mitt Romney to wrapping it up, if not mathematically, which he won't for a long time, at least practically?

PERINO: If you look at all of the states except for Tennessee that Mitt Romney has won, he has won the -- two -- two important things, people who think the economy is the most important thing and that want to beat Obama. And so I think that voters across the country, whether they're -- whether they're watching the day-to-day, big picture, they think that -- at least in the states where he's won -- and I think that's why he's competitive in the South, when a lot of people thought he wouldn't even be able to show up there, people, if you ask those two questions, tend to think that Romney would be the best nominee.

WALLACE: And what do you think is the possibility, sort of picking up on what Senator Bayh said, that at some point Republicans, who may not be sold on him, particularly more conservative Republicans, will sort of hold their nose and say, we've got to stop the bloodletting, he does seem like he's the nominee, and we'll just go in and vote for him whether we like him or not.

PERINO: And I think the enthusiasm is actually there under the surface. They've let this play out. I believe that the independents have actually been alienated by President Obama, and that's that razor-thin margin that I think the Republicans have the opportunity to pick up, but they're also going to have to continue to do well with the Hispanics. And I think that is one of -- a huge hurdle for them to be able to get through the primary and then to be able to appeal to those voters in the general election.

WALLACE: Same big picture, Liz. Where is this race now? And how close is Romney to effectively putting it away?

CHENEY: I think he's pretty close. I mean, the basic big picture really hasn't changed, which is that the states where Romney has lost are not states that are going to go for Obama in the general election. He's not going to lose any of these southern states, even if he happens to lose them now in the primary, and that's just the fundamental fact of this.

The states that are going to matter in the general election are states like Ohio, states like Florida, where Romney has actually won. And so that's really kind of the bottom line.

I do think, in the South, Romney finally has a chance to beat expectations. He's kind of been hobbled in a way throughout this campaign by being a frontrunner who everybody has assumed all along is going to win, but who does still have significant weaknesses, and so he really has never had a situation where he can go in and beat expectations. And this might actually be the first time that he can do that, and I think in terms of perception, that would actually go a long way for him.

WALLACE: But, Chip, before we'll be seen -- we're seen as anointing or coronating Mitt Romney, the fact is, Santorum is running a very strong campaign, did very well in Kansas, and more importantly, I mean, came within 12,000 votes of winning Ohio and 3 percentage points of winning Michigan. How big a deal that he continues to show strength and conversely that Romney continues to show weakness in closing the deal with evangelicals, strong Tea Party supporters, and people who identify themselves as very conservative?

SALTSMAN: Yeah, it's a challenge. I mean, Rick Santorum is running this passionate campaign, he's running a crusade that people are getting behind they're excited, they love watching him on TV, they love showing up to his rallies. It's an excitement, whereas as you saw from Governor Romney, his campaign's kind of more clinical, and he's more surgically kind of approached this, where Santorum's all passion, Romney's all business. And the passion is definitely and the energy is with Santorum, but at the end of the day, it's a heart versus mind decision. And does the mind say Mitt Romney gives us our best chance to beat Obama? Or is our heart and we go with our passion? We're still having the same debate we had 13 months ago. It's Mitt Romney and who's going to be not Mitt Romney.

WALLACE: All right. So as a very talented Republican strategist, what would you say to Mitt Romney? How do you close the deal with those parts of the active, more conservative part of the base that he has failed to reach?

SALTSMAN: I think he's starting to do it a little bit. He's tried to do it on the stump using his humor, which he's not great at. But if he can laugh at himself, I think that's a very effective tool. Open him up, and who is this guy? I mean, I still think we're still a year into this, and we're still not sure about his bio. Who is he? What does he believe? Why does he want to be president? I'm not sure I can answer all those questions today about Mitt Romney.

WALLACE: You know, Senator, it's a little bit of a flip for you, but here you were as a Democrat in a very red state of Indiana, how do you cross over and persuade people, you know, you can be trusted and that you share their values?

BAYH: In terms of reaching out to independents?

WALLACE: No, I'm talking more in his case about reaching out to the base. I mean, what -- what would you tell Romney to do?

BAYH: I would tell Romney to just be himself and to say, look, I've been fortunate to be successful. I've made money. I may not be the most natural person at a lot of this political stuff, but I know how to create jobs, I know how to run an economy, and I'm going to be there working for you every single day.

He's just got to, you know, maybe just relax a little bit more and be him -- be the authentic Mitt Romney, because people right now are wondering, is the authentic Mitt Romney the moderate who served as governor of Massachusetts or is it the arch-conservative who's now competing for the Republican nomination?

WALLACE: You know, it reminds me of the line, Dana, that Samuel Goldwyn, the Hollywood mogul, supposedly said: The key is sincerity. Once you learn to fake that, you've got it made.

(LAUGHTER)

I mean, what -- what does he do?

PERINO: I think -- I like that, be himself. There was also a point in his Michigan speech, which a lot of -- Romney's victory speech in Michigan, it was towards the end, and it was talking about this big picture issues, the questions of, are my children going to be able to compete in this world? Are we going to have the America that we want to have? I'm going to be that person to do it. He did the big picture. And the media, of which we are part, I think it's like Lucy with the football. They keep raising the bar on Romney. Even if he wins, the headlines don't say, "He won." It says, "Romney didn't lose."

WALLACE: All right. Thank you all, panel. See you next week. Don't forget to check out Panel Plus, where our group picks right up with a discussion on our website, foxnewsunday.com. We'll post the video before noon Eastern time. And make sure to follow us on Twitter @foxnewssunday.

Up next, we go on the trail.

(COMMERCIAL BREAK)

WALLACE: After Super Tuesday, the race shifted down South. And that's where we go on the trail.

(BEGIN VIDEOTAPE)

(UNKNOWN): What would you like to say to Mr. Romney?

OBAMA: Good luck tonight.

(LAUGHTER)

ROMNEY: Tonight, we're -- we're doing some counting. We're counting up the delegates for the convention, and it looks good, and we're counting down the days until November, and that looks even better.

(APPLAUSE)

SANTORUM: We're going to get at least a couple of gold medals and a whole passel full of silver medals.

PAUL: Are we going to win?

AUDIENCE: Yeah!

PAUL: We always win, right?

ROMNEY: Morning, y'all. Good to be with you. I got started right this morning with a biscuit and some cheesy grits, I'll tell you.

GINGRICH: Governor Romney indicated yesterday morning it was the first time he'd ever tasted grits.

(LAUGHTER)

I just wanted to reassure all of you that I have had some acquaintance with shrimp, with cheese, with gravy. I get it.

SANTORUM: If he wants to get out, I'm all for him getting out, but I'm -- but I'm all for Mitt Romney getting -- I'm for everybody getting out. I wish President Obama would just hand me this thing.

GINGRICH: And we are staying in this race because I believe that it's going to be impossible for a moderate to win the general election.

ROMNEY: But I spent my life in business, 25 years. In business, you have to be fiscal conservative.

SANTORUM: Outspending your opponent and trying to pound them into the ground is not going to win this election.

(UNKNOWN): Sweet home Alabama, where skies are so blue.

GINGRICH: This has been the wildest rollercoaster -- I tell people it's like riding Space Mountain at Disneyworld. You know, that's the roller coaster that's in the dark. You don't know where you've been, you don't where you're going, and you're not sure where you are, but it's real exciting.

(END VIDEOTAPE)

WALLACE: For all the anticipation, Super Tuesday did not mark a big turning point in the race, but there's a good chance the results in Alabama and Mississippi may do just that.

And now a personal note. Wednesday evening, I was honored to receive the Sol Taishoff Award for Excellence in Broadcast Journalism from the National Press Foundation. My thanks to that group and all my colleagues here at Fox for their support.

To see some highlights and lowlights from my career and my acceptance speech, check out our webpage at foxnewssunday.com. And, yes, there you see me -- oh, you didn't see it. I'm interviewing the Olsen twins.

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

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