TRANSCRIPT: 'Fox News Sunday' Interview on Future of GOP

WALLACE: I'm Chris Wallace, and this is "Fox News Sunday."

With growing sentiment that Washington is broken, the president calls for bipartisan action on health care reform, debt and jobs. Will Republicans play ball? We'll ask Mitch McConnell, the Senate's top Republican, only on "Fox News Sunday."

Then, the view from outside the Beltway. Is the recovery taking hold? Is the stimulus working? We'll ask Republican governor Haley Barbour of Mississippi, and Democratic governor Jennifer Granholm of Michigan.

Also, an ominous new warning about Iran's nuclear ambition. We'll ask our Sunday panel what the Obama administration should do now.

And our Power Player of the Week shows us why YouTube has become a key player in the world of politics, all right now on "Fox News Sunday".

And hello again from Fox News in Washington. Well, with growing calls for bipartisanship amid growing concerns our leaders here in Washington can't get anything done, we're joined by the GOP's top man in Congress, Senate Republican leader Mitch McConnell.

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

MCCONNELL: Glad to be with you, Chris.

WALLACE: Let's get it on the record. Will you attend the president health care's reform summit on Thursday?

MCCONNELL: Yeah. I think in all likelihood I'll be there. We're discussing the -- sort of the makeup of the room and that sort of thing, but yeah, I intend to be there and my members will be there and ready to participate.

WALLACE: All right. The White House says that it will post its plan for comprehensive health care reform on the Internet tomorrow, Monday. And Health and Human Services secretary Sebelius says the public option, the idea of a government-run insurance plan, is still on the table. Let's watch.

(BEGIN VIDEO CLIP)

KATHLEEN SEBELIUS: Certainly, if it's -- if it's part of the decision of the Senate leadership to move forward, absolutely.

(END VIDEO CLIP)

WALLACE: Senator, your reaction?

MCCONNELL: Well, she knows there's bipartisan opposition to that, strong bipartisan opposition to that. We know where the American people are on the bills the House and Senate passed, the 2,700-page bill that cuts Medicare by half a trillion dollars, raises taxes by a half a trillion dollars.

The NPR poll just a week or so ago indicated the American people were against that 58 to 38. They really want to us to shelve this bill and start over, and I hope that's what the president does when he puts this new proposal on the Internet later today or tomorrow.

WALLACE: Well, let me ask you about another thing, because it certainly doesn't seem to be headed that way, because the White House and congressional Democrats are talking about using reconciliation. We should point out it's a parliamentary budget maneuver that has been used by other presidents, including George W. Bush, but it would be a way to get health care reform through the Senate with just 51 votes without using a filibuster. Your colleague or your counterpart Senate Democratic leader Harry Reid talked about it. Here it is.

(BEGIN VIDEO CLIP)

SEN. HARRY REID, D-NEV.: Reconciliation can be used for different purposes. We can write a whole new bill, OK? Or we can use reconciliation to pass the bill we've already passed.

(END VIDEO CLIP)

WALLACE: What if they try that?

MCCONNELL: Well, look. You know, we've witnessed the "Cornhusker kickback," the "Louisiana purchase," "the Gatorade," the special deal for Florida. Now they are suggesting they might use a device which has never been used the for this kind of major systemic reform. We know it would be -- the only thing bipartisan about it would be the opposition to it, because a number of Democrats have said, "Don't do this. This is not the way to go."

I think they're having a hard time getting the message here. The American people do not want this bill to pass. And it strikes me as rather arrogant to say, "Well, we're going to give it to you anyway, and we'll use whatever device is available to achieve that end."

WALLACE: So if the Democrats and the Senate decide to go ahead with reconciliation, just 51 votes, can you stop them?

MCCONNELL: There will be a lot of Democrats who will vote against it. Whether there will be 11 Democrats who vote against it is not clear. But the American people who are already quite angry about the effort to jam this down their throats are going to be even angrier.

WALLACE: You can also use amendments, can't you, to slow this process down?

MCCONNELL: Yeah, there are a variety of different options available. But I think the fundamental point I want to make is the arrogance of all of this. You know, they are saying, "Ignore the wishes of the American people. We know more about this than you do. And we're going to jam it down your throats no matter what."

That is why the public is so angry at this Congress and this administration over this issue.

WALLACE: Given all of this, is the health care summit on Thursday as it is playing out a waste of time?

MCCONNELL: Well, I hope not, but I guess we'll find out Thursday. You know, apparently we're going to be there most of the day and have an opportunity to have a lot of discussion.

But if they're going lay out the plan they want to pass four days in advance, then why are -- what are we discussing on Thursday? But look, I'm going to go there in good faith.

We believe that we think a better way to go is to, step by step, move in the direction of dealing with the cost issue, targeting things like junk lawsuits against doctors and hospitals, interstate insurance competition, small association health plans.
There are a number of things you can do without having the government try to take over one-sixth of the economy.

WALLACE: As you know, in the wake of Evan Bayh's surprising announcement this week that he is retiring, there is growing talk, whether it's informed or not, that Washington is broken.

And I want to discuss one example with you, Senator. Last month the Senate voted down the Conrad-Gregg proposal for a bipartisan deficit commission with seven Republican co-sponsors voting against it. You also -- you weren't a co-sponsor, but you voted no. And I want to point out what you said last May about that, and let's put it up on the screen. "I urge the administration once again to support the Conrad-Gregg proposal. This proposal is our best hope for addressing the out-of-control spending and debt levels that are threatening our nation's fiscal future."

Question: Why was it our best hope then and you voted against it last month?

MCCONNELL: Well, there was another commission offered during the same series of votes. I became convinced during the course of the year that the problem was not that the government was taxing too little but that it was spending too much. And another commission approach that was offered and that I voted for dealt with a spending reduction commission. Look, in terms of whether or not we're at a gridlock, I would like to quote the president of the United States himself, who said just a couple of months ago, "If we stop today" -- this is the president. "If we stop today, this legislative session would have been one of the most productive in a generation." My counterpart, the Democratic leader, just last month in the first half of the 111th Congress -- "We made significant progress. It is a long list of accomplishments." They are trying to...

WALLACE: But you're not suggesting...

MCCONNELL: No, look. Look, Chris...

WALLACE: ... that people should be satisfied...

MCCONNELL: ... they're trying to spin the notion that we are stymieing everything they're doing. It is simply not true based on the president's own words.

Let me tell you what we do oppose. We oppose the government taking over one -- the health care system, one-sixth of our economy. And we oppose a national energy tax commonly referred to around here as "cap and trade." We think those are terrible ideas.

But my members were not sent here to do nothing, and the president knows that, and he has said it. We have accomplished much for the American people. It's just that we are unwilling to approve their partisan agenda to take over health care and raise energy...
(CROSSTALK)

WALLACE: All right. Well, let's take another example, jobs. The Senate Democratic leader Harry Reid says that he pulled an $85 billion jobs package that had been written by Republicans and Democrats, he says, because you refused to agree to bring it to a vote on the floor of the Senate quickly. I want to ask you, first of all, whether that's true.

And then second, he's now pushing a $15 billion jobs bill, $13 billion of which is for a payroll tax holiday for companies that hire unemployed workers. Why wouldn't you support that?

MCCONNELL: Well, we may well. I mean, what was a mystery to us is how the bipartisan bill got shelved. I thought it was moving along a bipartisan path. Many of my members were going to support it. And all of a sudden the majority leader decided to skinny it down.

WALLACE: He says it was because you wouldn't agree to bring it to the floor.

MCCONNELL: Well, he can bring -- it's his job to bring it to the floor. All I -- all I told him...

WALLACE: But he said you were -- you're right, but what he said was that you were not going to move to get a vote on it quickly. And certainly...

MCCONNELL: Well, we...

WALLACE: ... you're a master at slowing things down.

MCCONNELL: No, no. We were going to do it as quickly as we're going to do the skinny-down version. I mean, the point is he needs to bring up the bill. We need to have amendments and vote on it.

I think -- in fact, Senator Bayh referred to this in his retirement announcement as one of his frustrations. I share his frustration. I thought that bill was on the way to being called up, amended, debate and voted on.

WALLACE: You also have been very critical of the Democrats' stimulus package. But Democrats say -- and let's put this up -- that your state of Kentucky has been awarded $2.5 billion in funding, which has created or saved more than 10,000 jobs.

And they say that you supported $6 million in stimulus funding for the Bluegrass Army Depot in your state. In fact, last August you were at the depot and you said this, "This is going to be a source of significant employment."

Would Kentucky really be better off without the stimulus money?

MCCONNELL: Well, what I said with regard to the Bluegrass Army Depot -- I've been working on that for 20 years. I didn't go to the Bluegrass Army Depot because they might have gotten some money from the stimulus package. Look, with regard to the stimulus, I think the evidence is pretty clear. You know, Tiger Woods and John Edwards had a better year than the stimulus did. The stimulus probably did save state government jobs, and you're going to have a couple of governors on here, and I'm sure they appreciate it -- the federal government borrowing money from our grandchildren to send it down to them to make their employment situation with state employees less severe.

But Chris, if you look at the private sector, the private sector where job generation really needs to occur, the stimulus was sold to keep unemployment at 8 percent. It's now almost 10 percent, and in my state it's almost 11 percent. It has done little or nothing to stimulate private sector employment.

WALLACE: What about the argument, which we hear from the -- from the White House, from the administration -- and in fairness, most economists do say that between a million and 2 million jobs were saved or created because of it. What about the argument it would have been worse without it?

MCCONNELL: Well, that's their argument. And I'm sure that if you spend a trillion dollars on government jobs you'll save some government jobs. What I'm talking about is the way you get this economy going again is in the private sector. And there's very little -- scant -- evidence that the stimulus package created any private sector jobs.

It probably did save a lot of state government jobs, and I'm sure the governors were grateful to have it. They don't have the luxury we have of borrowing money from future generations to deal with short- term emergencies.

WALLACE: Let's talk some politics. Can...

MCCONNELL: Yeah.

WALLACE: ... Republicans take back the Senate this year?

MCCONNELL: Look, if the election were tomorrow, we'd have a good day, but the election...

WALLACE: Ten seats?

MCCONNELL: Well, if the election were tomorrow, we'd have a good day. It is our hope to be in better position next year than we are now. Right now we have 41 members. We hope to have more than that next year. Clearly, the political landscape has shifted. The most important question in these polls is what we call the party generic ballot question. If the election were held today, would you be more likely to vote for the Republican or the Democrat?

In the NPR poll a couple of weeks ago, we were up five. In all the polls, we're at least dead even or ahead. I think if the election were tomorrow, we'd have a good day. What that translates to, Chris, in terms of actual numbers of seats, I'm not willing to predict.

WALLACE: Well, let me put up a map, because I'm going to try to get you to play handicapper here. Let's put up the map -- the political map. And according to some of the sharp analysts, including Charlie Cook, who does this better than almost anybody, there are eight vulnerable Democratic seats -- obviously, the seats in blue -- and four vulnerable GOP seats.

When you look at those -- and obviously, you've got to not only pick up the eight, you've got to pick up maybe another two. You've got to pick up another two and then defend all of your seats. Is 10 seats -- is regaining control of the Senate realistically, practically possible?

MCCONNELL: Look, no matter how many times you ask it, I'm not going to make a prediction about a...

WALLACE: You can't blame me for trying.

MCCONNELL: ... about an actual number. There is a seascape change, a change in the landscape. And there's no question that if the election were today we'd be -- my side would be in a much better position in the Senate. We hope that that will be the case this November. All indications are that it could be a good day.

WALLACE: Finally, I'm sure that some people watching this interview are going to say, "Look, here's the problem. We're not putting it all on you any more than the White House or congressional Democrats, but you've got Senator McConnell sticking to his position on all these issues. You've got the White House and congressional Democrats sticking to their position on all these issues. There's no give. There's no compromise. Nothing's going to get done."

MCCONNELL: That's just not true. I read the comment from the president about how productive this Congress has been. Senator Reid believes the Congress has been productive. What we are not willing to cooperate in doing is passing this massive overhaul of health care and passing this massive energy tax.

Beyond that, there's been a high level of cooperation, by the president's own words and by Senator Reid's own words, and we'll continue to cooperate on those things that we think are in the best interests of the American people.

WALLACE: But, Senator -- and I understand the point of quoting their words. I mean, can you really say -- and I'm not saying you should take or sign up for the Democratic ideas, but can you really say on the issues facing the country -- the economy, health care, energy problems -- that this Congress has been productive?

MCCONNELL: The president believes it has been.

WALLACE: I'm asking you, sir.

MCCONNELL: Well, look. I think they -- on the -- on some of the big issues they've tried to go in the wrong direction. And we're not going to sign on to efforts to turn America into a western European country, which I think is the net result of something like the energy tax cap and trade bill and the health care bill.

Those kind of things they're not going to get much cooperation on. There are a whole lot of other things that are important to the country that we are cooperating on and are doing.

WALLACE: Senator McConnell, thanks for coming in today.

MCCONNELL: Thank you.

WALLACE: Please come back.

MCCONNELL: I will.

WALLACE: Always a pleasure, sir.

MCCONNELL: Good to see you.

WALLACE: Up next, the nation's governors are in Washington and we'll get the view from the states on the economy, health care and today's political environment. Back in a moment.

WALLACE: The nation's governors are holding their annual conference in Washington this week, and we are delighted to be joined by two of their leading lights, Jennifer Granholm, Democrat of Michigan, and Haley Barbour, Republican from Mississippi.
And, Governors, welcome back to "Fox News Sunday."

GRANHOLM: Thanks.

BARBOUR: (inaudible)

WALLACE: Governor Granholm, let's start with jobs. Michigan, unfortunately -- I don't have to tell you -- has the highest unemployment rate in the country, 14.6 percent. Can you honestly say that the president's stimulus is working and that it is worth the $800 billion of borrowed money that has been spent to fund it?

GRANHOLM: Right. Well, let me just tell you what it has done for us. I mean, we've see long-term and short-term investments. And obviously, the stimulus has helped to transition people through this recession, through unemployment and all of that.
But what the -- and Haley and I were just talking about this. What the stimulus has done is given the companies the ability to invest -- and when I say "these companies" (inaudible) the auto industry -- in the electric vehicle and the batteries that will propel that electric vehicle -- that whole supply chain. MSU economists say that it's going to create a whole new sector for our economy, 40,000 jobs.

So we've got 15 companies in Michigan today that are now doing that, starting to hire people. It's got a whole bright future and a future industry. So it's a short-term and a long-term strategy that has really helped us.

I'm just telling you that if we had not seen the aggressive action on the part of the Obama administration, not only would we have seen General Motors and Chrysler not emerge from bankruptcy, possibly, we would have seen a liquidation.

Millions more people would have been out of work, because not just the auto companies but the suppliers to them would have been without a customer. So it's really been -- it hasn't fixed the problem, and nobody's going to say that. But it has certainly slowed the trajectory of job loss.

And I think -- I mean, I hope, knock on wood, that we've hit bottom and we are starting to emerge.

WALLACE: Let me bring in Governor Barbour.

Mississippi, I don't have to tell you, has 10.6 percent unemployment, also above the national average. A year ago you were talking about not accepting the stimulus funds. And let's look at the record here. Your latest state budget included $370 million in stimulus funds. Public schools are getting more funding than eve before. And stimulus road project signs are up around the state with your name on them. Have you changed your mind--

BARBOUR: No. In fact, we--

WALLACE: -- about the stimulus?

BARBOUR: In fact, we did not take $56 million that was offered to us because it would have forced to us raise taxes later. That's why we didn't take it. State government has benefited by the stimulus package, because it's poured in billions of dollars. The problem is we need private sector jobs. And you mention the Department of Transportation and the highway projects. The Department of Transportation's independent of me. They have a independently elected board who announced last week that the stimulus package created 500 jobs for a cost of $350 million -- $700,000 a job. I was flabbergasted.

WALLACE: So let me -- let me ask you both -- and I want to continue this conversation -- Congress, as we just discussed with Senator McConnell -- talking about another jobs bill. Let's start with you, Governor Barbour. Should they pass something? And what would you like to see come from Washington?

BARBOUR: Well, first of all, the first stimulus package was twice as much money as was needed. Then they could have created twice as many jobs with half as much money.

If they're going to have a stimulus package, let's do something like have a holiday on the payroll tax. Let's do something that helps small business.

Jennifer and I were talking a while ago -- our small businesses can't get credit. They can't borrow money. And small business is the backbone -- I don't think just of my economy. I think it's the backbone of America's economy. And freeing up small business to have some credit I think is something everybody could support.

GRANHOLM: Well, in fact, the -- I mean, the president is proposing small business tax cuts, which is terrific; investing in the banking industry in the terms of small and community-based banks to get loans out to small businesses -- got to be a piece of it. I agree with you on that.

But I mean, I -- I think your recovery site, Haley, says that you guys have created 3,300 jobs as a result of the stimulus. I know that you've been using it to help the private sector to be able to subsidize employment and you've been using stimulus money for that. That's great. I agree with that 100 percent.

For Michigan, it's 42,000 people who are working today who wouldn't be otherwise working. And across the country it's 2 million. So if we didn't have the stimulus -- I mean, remember what it was like when he took office -- 750,000 jobs lost in the month that he took office.

WALLACE: Wait, wait.

GRANHOLM: So this month it was 20,000.

WALLACE: Governor Barbour?

GRANHOLM: It didn't stop it, but it slowed the trajectory of jobs lost.

BARBOUR: In a big way, state government's benefited. A lot of those jobs, quote, "saved" are state government jobs. And we've got states spending 8.7 percent, but a lot of that's been made up of federal government stimulus. So there's no question that state government has benefited. The private sector in Mississippi has benefited--

WALLACE: Let me--

BARBOUR: -- very, very little--

WALLACE: Let me--

BARBOUR: -- particularly in the area of job creation.

WALLACE: We could continue on here. Let me move on to health care reform. And I want to put up some astonishing numbers that we found this weekend, and you can argue with them. According to a Gallup study done last August, 24 percent of people in Mississippi are uninsured when it comes to health care reform -- health care coverage, and 14 percent of people in Michigan. Starting with you, Governor Barbour, what should Washington do to get those people covered?

BARBOUR: I tell you that I guess that's from a poll--

WALLACE: Well, no, it was a -- no, it wasn't.

BARBOUR: The official government statistics are somewhere between 16 and 18 percent of people in Mississippi. But what should we do?

WALLACE: That's a whole lot of people.

BARBOUR: It is a whole lot of people. What should we do? One thing is to bring down the cost of health insurance. And of course, one of the things we don't like about the bill that Congress was passing -- both of them, House and Senate, would drive up the cost of health insurance. We shouldn't put a huge unfunded mandate on states that would make me raise taxes $150 million in Mississippi. We shouldn't put a huge tax on small business. I'm like Jennifer. Small business is our bread and butter. And I'm glad the president's proposed some small business loan programs. But don't then offset it by put an 8 percent tax on their payroll if they don't give them health insurance. I'll be quiet. I'll--

WALLACE: No, no. I just -- I just want to--

BARBOUR: I'll be -- I'll be a good boy.

WALLACE: Governor Granholm?

GRANHOLM: Yeah. I mean, For us, health care is an economic issue, because there were -- there were more cars built in Ontario two years ago than in Michigan. And those auto companies weren't going there because of regulation, or taxes, or anything -- they were going there because there's a partnership on the part of the Canadian government with health care. Now, we don't want to create that exact same system, but I can tell you that other countries are providing health care for their businesses so they can compete globally. This is an economic issue. For us, it's a real issue. Every car has $1,600 worth of health care cost embedded in it, whereas other countries -- and they're our competitors -- don't have that cost.

WALLACE: All right, but--

GRANHOLM: So we need to do something.

WALLACE: All right. You agree you need to do something. But, Governor Granholm, all the polls indicate that there is overwhelming opposition to this comprehensive Democratic plan that the president and congressional Democratic leaders are offering.
And we also saw it was a big issue in Massachusetts, and we saw the stunning upset there where Scott Brown won. If Democrats -- and you must have -- you -- at the very least, you saw my interview with Mitch McConnell. If Democrats decide to try to push this through on a parliamentary maneuver called reconciliation, aren't they just asking for a beating at the polls in November? Is it arrogant, as Mitch McConnell says?

GRANHOLM: I think it would be incredibly arrogant of everyone to assume that we should do nothing. And I think there is a lot of common ground.

WALLACE: That's not the -- that's not the question I asked.

GRANHOLM: Well, I mean -- no, I mean, honestly, I think getting something done is what people expected. I don't think that people expected that 60 is the new 51 -- in other words, that you have to get 60 votes for everything in order to push an agenda through. So I'd like to -- I'd like to see us get something done that does insure people who are uninsured but also gives the tools to states and the private sector to bend that cost curve, as they say, to reduce the cost.

WALLACE: Governor Barbour?

BARBOUR: Well, the history of the country when you have unbelievably broad, powerful change that's going to change 18 percent of the economy -- it's life and death for every American -- to say, "Well, if we can scrape up a partisan majority and get this by by one vote" -- we've never done that. Those kind of things have always had to get over the hurdle of 60 votes. Always. And there's a good reason why. The American people really don't like -- don't want a government-run health care system. Their idea of health care reform is the cost should go down. And in this one, CBO says the cost will go up.

So this is a system that's very bad for jobs because it clobbers small business, the biggest job creators that we have. But one thing is right. Doing nothing shouldn't be the only option. There are lots of things that even Jennifer and I could agree on.

GRANHOLM: That's true.

BARBOUR: There are -- there are lots of things. So the idea they've got to have this comprehensive package that costs a trillion dollars, and despite what they say in the out years it'll be another trillion and a half, two and a half all told -- to say that the -- if you're not for that, you're for doing nothing is just simply not--

WALLACE: OK.

BARBOUR: -- a fact.

WALLACE: I was going to cut you off just as -- we're running out of time, and there are a couple of things I want to ask you about. You say, both of you, doing nothing is not an option. Doing nothing seems to be what happens a lot here in Washington.
You, Governor Barbour, have been around Washington for a long time. You've seen how this place operates. When you have two parties unable to come together to solve -- even to create a bipartisan deficit commission or to deal with health care reform, is this town broken?

BARBOUR: Well, let me tell you what happens when Washington doesn't work. We fix the problems in the states, Democrats and Republicans alike. You know, have a health insurance exchange -- that's something Democratic governors and Republican governors have done to--

WALLACE: But do you think this town is in trouble?

BARBOUR: I think that health care reform is likely to turn out like welfare reform. After a handful of governors did it very successfully in the '90s, it finally pushed it over the edge and President Clinton ultimately signed the bill.

But I think that's where people are going to look for health care reform, is to the states.

GRANHOLM: And I think that--

WALLACE: And, Governor Granholm -- let me just ask you, Governor Granholm, when you see a moderate Democrat like Evan Bayh basically say -- turn up his hands and say, "I just can't take this town anymore," isn't that a serious indictment of Washington?

GRANHOLM: Oh, I think that there is no doubt that people view what's going on here in D.C. as not being relevant to what they are experiencing. The fact that nobody can get anything done is extremely frustrating. But I do think that Haley's right in the sense that taking health care as an example of what states have done and using that as a model nationally is important. That's exactly what is happening in Massachusetts. In Massachusetts, people love what's gone on with their health care plan. And that's what they've tried to embed in this national health care program, looking at what the state did, looking at what's successful, taking it across the country. And that's what they're trying to do.

WALLACE: We've got a minute left. I've got to ask you about yourselves and your futures. Senator -- Governor, are you going to run for president?

BARBOUR: This year, I'm chairman of the Republican Governors Association, and I'm going to spend all the political energy and effort I got till next -- to this November election -- Republican governors. Then if there's anything to think about, I'll think about it.
But I do want to say one other thing they can learn from states here in Washington -- we cut our budgets. We cut -- you can actually cut government spending. And they could learn that from governors, too.

WALLACE: Governor Granholm, your two terms are up at the end of this year. Do you have any interest in moving here to Washington and working in the administration?

GRANHOLM: Are you offering me a job? No, I--

WALLACE: Yes, because I'm a conduit for the Obama White House. Exactly.

(LAUGHTER)

GRANHOLM: No, I'm totally focused this year on creating every single job I can until the last moment. December 31st at midnight is when I'll stop. So I have no idea what I'm going to do next, but I'm not going to run for president. I can tell you that.

WALLACE: Yes, that's true. We should point out Governor Granholm is a Canadian and cannot run for president.

GRANHOLM: I'm American. I've got dual citizenship.

WALLACE: Who are you rooting for in the Olympics?

GRANHOLM: U.S., come on!

WALLACE: OK. There you go. Anyway, they're doing--

GRANHOLM: I left Canada when I was four. Come on.

WALLACE: And they're doing better. Governor Barbour, Governor Granholm, thank you both. Thanks for coming in today. Always a pleasure to talk to both of you.

BARBOUR: Thank you, Chris.