The following is a rush transcript of the August 15, 2010, edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

BRET BAIER, ANCHOR: With everyone looking for signs about the economic recovery, the news of the week was confusing at best. For instance, retail sales went up in July after two months of declines, but people filing for unemployment benefits went up last week as well to the highest level since February.

For some insights now, we turn to Mark Zandi, chief economist for Moody's Analytics -- he comes to us from San Francisco -- and Liz Claman from the Fox Business Network, who is in New York.

Welcome to you both.

LIZ CLAMAN, FOX BUSINESS NETWORK: Thank you very much.

MARK ZANDI, MOODY'S ANALYTICS: Thank you.

BAIER: Well, we look at the numbers. The Federal Reserve in a statement about the economy this past week said this, quote, "The pace of recovery in output and employment has slowed in recent months." It said while it still expects the economy to grow, the improvement will be, quote, "more modest in the near term than had been anticipated."

Then we had June's trade deficit numbers. They shot up 18.8 percent to $49.9 billion, much higher than expected, the highest since October of 2008. And because of that and other indicators, now we're hearing the Commerce Department could revise its growth projection, the GDP, from 2.4 percent down to somewhere below 2 percent.

With that preamble set up, is this economy positioned potentially to go into a double-dip recession?

Mark?

ZANDI: It's -- the odds are rising. I'd say they're uncomfortably high. But I don't think we will experience a double dip. If I had to put odds on it at this point, I'd say one in four, perhaps as high as one in three.

But you know, I do think, given how profitable businesses are, given how much cash they have on their balance sheet, given some other things that are going right for the economy, I think we'll make our way through without a double-dip recession.

BAIER: Liz?    CLAMAN: You know what, Bret? I'm glad you brought up a couple of things like the trade deficit, because while that was discouraging, definitely not looking good, you know, we've had, what, 11 recessions since the World War II end and only one double dip. These are very, very rare.

However, there's -- there are all kinds of memos -- and Mark would know about this, too -- that circle among economists because we're all reading each other's work and trying to see what's going on. And it's very, very rare to have this opportunity. But a lot of people say, "How can we have a double-dip recession when we really haven't emerged from the current recession?"

Now, there are all kinds of metrics that say, "We're out of the recession." But you talk to all of the unemployed people out there, and they would say, "I still feel a recession."

That said, Mark mentioned that there are some positive indicators such as, for example, some of the companies looking very healthy. And it's these companies in particular -- UPS, FedEx, a lot of the rails like CSX Rail -- they're actually shipping product. They're shipping things. That gives some people an indication that maybe things aren't as bad as they may feel or look.

BAIER: Mark, you've been quoted by Republicans and Democrats. Should there be more stimulus? You've supported the past effort and the 26 billion that just was approved for the state governments. Should there be more stimulus now?

ZANDI: No. I think we've done what we need to do. I think it was important for Congress to extend emergency unemployment insurance benefits through the end of the year. I think that was the right thing to do.

I think providing more help to state government, which is what Congress has done over the past week -- I think that was appropriate and will be helpful for the economy. But at this point, no, I don't think we should provide more stimulus to the economy.

BAIER: But, Mark, when we look at the first stimulus -- there are folks who look at it and say, "Is this really working?" You know, the administration says it saved 2.5 to 3.6 million jobs -- saved or created.  The Bureau of Labor Statistics say that -- says that 3 million jobs were lost, real jobs, since the stimulus was signed in February. So was it a success?

ZANDI: It was, in my view. I don't think it's any coincidence that the recession ended just about this time last year when the stimulus was providing its maximum economic benefit to the economy.

Now, it's very difficult to prove -- it's impossible to prove because we don't know what the counter factual is. We don't know what the world would have looked like without the stimulus. But in my judgment, based on my work, I do think the estimates that are coming out of the Congressional Budget Office and other sources that we'd have 2.5, 3 million fewer jobs today if we had not had the stimulus is roughly right.

The economy is not good, obviously. We're not creating enough jobs.  Unemployment is still too high and likely to rise further later this year.  But I think it's fair to say that we'd have lost a lot more jobs and unemployment would be measurably higher if we had not gone down the road of stimulus.

BAIER: Liz, the stimulus is a political football 79 days before the midterms.

CLAMAN: Right. Oh, absolutely. And there's so much discussion -- stop spending money. Let the current stimulus -- much of which, by the way, Bret, hasn't actually gone into the system. Let that get into the system. If this is a drip, some type of I.V. drip, let it get in. Let the bag finish up before you start adding more and pumping in more.

Look, you've got a lot of businesses and a lot of states and cities that have money that they, too, are hoarding. They're scared. They don't want to spend that money. Just on Fox and Friends this morning I was watching an interview with the mayor of Fort Lauderdale who said they haven't spent all their money, but what they did with some of it was hire 12 new police officers. So you could look at that as a success. But let the other money go through.

Political football, you bet. And I doubt that the U.S. public has a real appetite anymore for a big chunk of stimulus going in. But there were missed opportunities here, Bret.

You could argue that the prevailing wisdom is what really creates jobs -- what would create jobs? Those are small businesses and brand new businesses that are starting up. But they can't start up if there's a bunch of red tape.

Now, the Obama administration put in some ideas such as tax incentives if you hire unemployed workers. Fine. But what company, what entrepreneur out there, is going to want to actually start a brand new business if its two owners -- for example, the U.S. patent office -- there was an op-ed in the New York Times written by a federal judge and an entrepreneur who said there are 1.2 million patent ideas that are just stuck in this backlog because the process takes five years to get it approved.

If all these ideas were approved, then venture capital -- these are the guys who seed these businesses -- would give money to them, start it up, and they'd start hiring. For every brand new business, you get three to 10 workers hired. Why not? Instant stimulus. It's just a little bit misdirected at this point, I think, much of the public believes.

BAIER: The real political fight here in September will be whether or not to extend the Bush era tax cuts. They expire in January -- whether to extend them all, whether to just extend some of them, and not extend them for the top earners.

Former congressman, now Senate candidate, Pat Toomey weighed in with the Republican's message this weekend. Take a listen.

(BEGIN VIDEO CLIP)

PAT TOOMEY: We should make the current tax rates permanent instead of raising them at the end of the year. And we should cut capital gains taxes to encourage business investment. Even prominent Democrats have recently said the last thing we should be doing in a recession is to raise taxes.

(END VIDEO CLIP)

BAIER: Mark, should all the tax cuts be extended?

ZANDI: Yes. I don't think it would be appropriate at this point to raise taxes on anyone, certainly not in 2011.

Now, I do think when we move into 2012 and '13 when, presumably, the economy is on firmer ground, I would allow the tax rates for upper-income individuals to revert back to where they were before the cuts in the 1990s.  I think at that point it makes perfect sense.

And we're going to need to do that because we do need to address our long-term fiscal problems. Our budget deficit is too high, our debt load too wide. And we're going to have to address that, in part, by higher taxes.