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Midterm Elections Preview on 'Fox News Sunday'

The following is a rush transcript of the October 10, 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: I'm Bret Baier in for Chris Wallace, and this is "Fox News Sunday."

The fight for control of the House tightens with just 23 days to go before election day. We'll discuss the GOP's chances for taking back the majority and the Democrats' plan for defending their turf with Congressman Eric Cantor, the majority whip, and Congresswoman Debbie Wasserman Schultz, the majority's chief deputy whip.

Plus, we'll handicap some of the key November races with two battle-tested strategists, Republican Karl Rove and Democrat Joe Trippi.

Also, new evidence of a jobless recovery. We'll ask our Sunday group how the latest unemployment numbers will impact the final weeks of the campaign.

And from debates to political ads, we'll see what's been happening "On the Trail," all right now on "Fox News Sunday."

Hello again from Fox News in Washington. For a look at where we stand in the fight for which party will control the House, we turn to two leaders -- from Ann Arbor, Michigan, Congressman Eric Cantor. He's the second ranking Republican in the House. And from Portland, Maine, Congresswoman Debbie Wasserman Schultz. She serves as the Democrats' chief deputy whip.

Welcome back to "Fox News Sunday" to both of you and good morning.

REP. DEBBIE WASSERMAN SCHULTZ, D-FLA.: Thank you.

BAIER: You're both campaigning...

REP. ERIC CANTOR, R-VA.: Good morning.

WASSERMAN SCHULTZ: Good morning.

BAIER: ... for candidates around the country, so we'll start out with a very straightforward question to both of you. Why should American voters send your party to Washington?

First, Congressman Cantor, why should voters give Republicans another chance?

CANTOR: Well, clearly, Bret, over the last 20 months the country has seen what the other party has to offer. Unfortunately, there hasn't been a lot of coming together in terms of trying to come up with solutions to get people back to work.

And now we've got a sense across the country, with unemployment hovering around 10 percent, 86 percent of the country knowing someone who's out of a job -- people want things to get better.

And as you know, the Democratic candidates across this country are running as fast as they can from the agenda that President Obama and Speaker Pelosi have put forward, whether the stimulus bill, the cap and trade energy bill, the health care bill, or the fin reg bill. All of those things have not even been discussed on the campaign trail because they're wildly unpopular.

And on top of all that, we have laid over $4 trillion of additional debt onto the backs of our working families and small businesses in the last two years because of this agenda. People have had enough, and the Democrats haven't listened.

And we as Republicans have positive alternatives every step of the way. And hopefully November 2nd comes. We can have a new day in Washington. We can come together and actually work on some things that will produce some results and get people back to work.

BAIER: Congresswoman Wasserman Schultz, why should voters keep Democrats in power?

WASSERMAN SCHULTZ: Well, Bret, you'll notice that Congressman Cantor said nothing about what Republicans would do, which is generally what you're supposed to do when you're trying to give voters a reason to choose your candidates over your opponent's candidates.

This election really is going to be a very clear choice. American voters are going to have a choice between Democratic candidates and Democratic incumbent members who have been pushing hard to turn this economy around, create jobs, have saved or created through the recovery act over 3 million jobs, passed health care reform, which took insurance companies out of the driver's seat when it comes to deciding about patients' health care choices, and put patients and their doctors in their rightful place where they belong, making those choices, made sure that Wall Street wouldn't continue to run amok, which the Republicans allowed to happen, struck a balance between the appropriate level of regulation and making sure we had appropriate consumer protection in place, and allowing those businesses to continue to thrive, and focus on making sure that we could give 98 percent of Americans a tax break, focusing on middle class tax breaks and focusing on small business tax breaks, Bret, giving 16 different tax breaks in the last -- a little more than two -- a little less than two years to small business owners, and taking this economy from bleeding 750,000-plus jobs a month to now adding an average of 100,000 private sector jobs a month.

We literally have now created 863,000 private sector jobs just this year alone, more jobs than the entire Bush administration created.

And the Republicans offer more of their failed policies of the past, take us back to the stranglehold that they had when it came to tax cutting policy, focused only on the wealthiest, exploded the deficit, took a $5.6 trillion surplus to a $1.3 trillion deficit.

And now they want the keys to the car back. And American voters understand that if we want to keep fighting to move in the new -- in a new direction, we've got a long way to go. And we need to make sure we continue with Democrats being in the majority. And that's why we will hold the majority on November 2nd.

BAIER: Congresswoman, there is a new Democratic strategy memo that is public this weekend. Stan Greenberg and James Carville write this, quote, "Voters are not moved by Democratic messages that say 'go forward, not back,' mention President Bush, compare then and now, or even hint that the economy is showing signs of progress. After hearing this battle of Republican and Democratic messages, 8 percent shift their vote to support the Republican, while only 5 percent move to the Democrats. We lose ground. These messages are helping the Republicans."

You've just used one of those phrases, Congresswoman. So is the Democratic messaging working?

WASSERMAN SCHULTZ: Well, you know, I don't think that most members in the -- that are running for reelection use polling memos like Stan Greenberg and James Carville's. I haven't seen it.

What I know is that they are running on their record. They are running on the choice that they have. The Republicans' -- the Republican choices that have been offered across the country are, you know, pretty extreme.

You've got a stranglehold that's been taken over -- the Republican Party by the tea party. You have a disturbing trend in the corrupt and pretty despicable recruitment job they've done where they have candidates that have been accused of sexual assault in recent weeks.

You have one candidate in Ohio who actually thinks it's a good bonding experience to go re-enact Nazi battles with his son. I mean, those are their top-tier candidates that are in their young gun program.

And so if that's the offer -- the choice that Republicans are offering, then I think Democrats are going to be successful, because they have been represented by members who they know. They're going to be choosing folks like Joe Donnelly and Marcy Kaptur and Betty Sutton, and not this, you know, amorphous blob of attacks that the Republicans have -- levying against us. They just aren't going to stick.

BAIER: OK.

Congresswoman Cantor, Republicans rolled out the "Pledge with America" back on September 23rd, yet more than two weeks later it's not really mentioned that often, unless it's being attacked by Democrats.

Here's what the Washington Post wrote about it, quote, "For all the fanfare and publicity that accompanied the pledge's release, relatively few Republican candidates nationwide appear to be adopting it as a guiding vision, much less incorporating it into their campaigns."

Why not talk about it more? And is the pledge working?

CANTOR: Bret, there is absolutely discussion about the pledge in all the races that I'm in over the course of the last several weeks. What we've got is now a new crop of young leaders energized to go to Washington for the right reasons.

Now, Debbie went and launched into her attacks as to some of the reports about candidates that are running, and particularly the one in Ohio having to do with the Nazi re-enactment. She knows that I would absolutely repudiate that and not support an individual...

WASSERMAN SCHULTZ: Well, you haven't.

CANTOR: ... who would do something like that. I'm doing it right here.

WASSERMAN SCHULTZ: You haven't.

CANTOR: I'm doing it right here, Debbie. You know good and well that I don't support anything like that.

But what I would say, Bret, is our candidates are out there, like Corey Gardner in Colorado, Ryan Frazier, a young African American leader in Aurora, like -- somebody like Martha Roby in Alabama. We -- we've got Randy Altschuler in New York 1.

These are the type of people that have had experience thus far in their life and been successful, some in the private sector as small business people, and understand what we've got to do to get this nation back on track.

And they're talking what about we have put forward with the pledge. And basically, the sense of the "Pledge to America" is this. Republicans understand when we were in charge, we got fired in '06. We spent too much money. We defied the trust that the people had put in us. And we know that there is a better way.

We've also seen the errors being committed by the current Democratic majority in the White House which have exploded the size of government, which has led us to incur more debt than we have in this country in the last 200 years. And we need to actually come together and begin to cut spending, rein in the size of government and get people back to work.

BAIER: Congressman, not...

CANTOR: We've put forward ideas...

BAIER: ... not included in the pledge...

CANTOR: We've put forward ideas in these -- in this -- in this pledge, Bret, that we have been talking about over the last several months. Unfortunately, Debbie and her party are unwilling to sit down and talk about anything that works.

BAIER: Congressman, not included in this pledge are any details about cutting the country's entitlement spending -- Social Security and Medicare. So are you in favor of raising the retirement age or possibly cutting benefits to deal with this situation?

CANTOR: Well, Bret, what we have said in the pledge is we intend to deal with the real question of long-term fiscal sustainability of those programs and, hence, our economy.

But what we have seen transpire over the last year is it has been our side, the Republicans, that have put one plan out there. And in the process, what has then happened is all the nice talk that Debbie and others may say -- is unfortunately, they start to attack us as wanting to deprive seniors of their Medicare or Social Security, et cetera. Nothing could be further from the truth.

We as Republicans understand that we have got to protect these...

WASSERMAN SCHULTZ: The proof's in the pudding.

CANTOR: ... entitlement programs -- these entitlement programs for our seniors today. And we have to sit down and have a discussion. We need more ideas on the table.

We shouldn't see the Democrats continue to attack an idea that's been put out there. Let them come bring more ideas. Let's commit ourselves to dealing with these programs and stop the politics...

(CROSSTALK)

BAIER: All right.

Congresswoman, Majority Leader Steny Hoyer has committed to an up-or-down vote on the president's debt commission recommendations by the end of the year. They're expected December 1st.

Already, Democratic member of the commission Alice Rivlin is reportedly preparing to unveil a plan that could include cutting Social Security benefits or raising the retirement age to 70, or maybe both.

So if the debt commission recommends that the age goes up for Social Security, or means testing, or cutting benefits, even if it's under -- for under -- Americans under a certain age, would you vote against those recommendations?

WASSERMAN SCHULTZ: Well, let me just address what Mr. Cantor just talked about, because their proposal for Social Security reform and entitlement reform with Medicare is to privatize Social Security, and I mean, I have...

CANTOR: Well, here we go again.

WASSERMAN SCHULTZ: ... debated his colleague Paul Ryan.

CANTOR: These are the attacks, Bret.

WASSERMAN SCHULTZ: Oh, no, no, no, no. I didn't interrupt you.

CANTOR: These are the attacks.

WASSERMAN SCHULTZ: Eric. Eric, I did not interrupt you.

BAIER: All right. Hold on.

Congresswoman, go ahead.

WASSERMAN SCHULTZ: They have proposed...

BAIER: You have the floor.

WASSERMAN SCHULTZ: Excuse me. I politely listened to you.

Eric and his colleagues, including Paul Ryan, who I have debated and stood right next to me and acknowledged that he has proposed privatizing Social Security, particularly for the generation younger than 55 years old right now -- they would yank the safety net out from under our seniors...

BAIER: A portion of their...

WASSERMAN SCHULTZ: ... put -- turn Medicare into a voucher program -- turn Medicare into a voucher program.

Eric is a part of that Young Guns Book where they tout that proposal. So one thing that I know that voters don't want -- and I represent a state with a tremendous number of seniors. They don't want to see their safety net yanked out from under them.

BAIER: OK. So your answer is no.

WASSERMAN SCHULTZ: And, Eric, I'm more than happy to sit at the table with you.

BAIER: Your answer is that you would vote no if the debt commission comes back with recommendations that include any of that.

WASSERMAN SCHULTZ: I want to see what the debt commission comes...

BAIER: I know, but right now...

WASSERMAN SCHULTZ: I want to see what the debt commission comes back with.

BAIER: Well...

WASSERMAN SCHULTZ: You didn't -- Eric also avoided answering the question. I'm going to tell you that I want to hear what the -- what the entire...

CANTOR: Debbie, you've just said...

WASSERMAN SCHULTZ: ... range of proposals that the debt...

CANTOR: ... you've just said that we put a -- you just said we put a proposal out there.

WASSERMAN SCHULTZ: No, no, no, no. I want to see what the debt commission...

CANTOR: You've not -- you've not had an equal proposal.

WASSERMAN SCHULTZ: You did, you...

CANTOR: You've had no ideas put forward. This is what I'm saying, is we've got to come together. You know what? I want to -- why don't you and I go sit together?

WASSERMAN SCHULTZ: Eric, we do have to come together.

(CROSSTALK)

BAIER: I've got to interrupt.

CANTOR: Let's talk about it.

BAIER: I've got to interrupt here. Let's -- let's...

WASSERMAN SCHULTZ: I would be happy to sit...

BAIER: Hold on.

WASSERMAN SCHULTZ: Let's do that.

BAIER: One at a time.

WASSERMAN SCHULTZ: I'll go to dinner with you. You guys have refused to do that.

BAIER: I'm glad that we could set up dinner.

WASSERMAN SCHULTZ: I would be happy to...

CANTOR: Oh, come on.

WASSERMAN SCHULTZ: ... sit down at dinner with you.

BAIER: Now, hold on one second. Let me just take control.

WASSERMAN SCHULTZ: If you want to sit down and hash out what we can do...

BAIER: Let me just ask a question.

WASSERMAN SCHULTZ: ... to reach a compromise on Social Security...

BAIER: And then we'll take turns here.

WASSERMAN SCHULTZ: ... I'll be glad to do that.

BAIER: We still have time. Let's try to get as many as we can in here. A big issue today...

WASSERMAN SCHULTZ: Bret, we'll just leave you out and Eric and I will work things out.

BAIER: OK, good. Dinner. Sounds great.

A big issue today, foreclosures. As the number of foreclosures increase, a number of banks around the country are now freezing foreclosure sales.

First to you, Congresswoman, do you in favor -- favor and do Democrats favor pushing for the freeze or moratorium of foreclosure sales?

WASSERMAN SCHULTZ: I do. I mean, I come from a state where the foreclosure problem has been extremely vexing. We have -- we've had a number of different programs that the administration -- the HAMP program and the Hardest Hit Fund -- those are programs that have gone a long way -- Neighborhood Stabilization Program that gives cities and counties and local governments the ability to buy properties back and try to keep people in their homes, but -- those have worked to a certain degree, but the banks have really been refusing to work out -- particularly the larger banks, to work out mortgages.

And I think we need a combination of a freeze, potentially, and also we need to sit down with the -- with the banking industry and talk to them about ways in which we can help them be able to work those mortgages out, because it's absolutely imperative that we keep people in their homes.

BAIER: Congressman, same question to you. Nationwide moratorium?

CANTOR: You know, I am just -- I am just perplexed as to that answer, Bret, because what we know now is that the -- Debbie and her party have been in...

(CROSSTALK)

CANTOR: ... absolute control over the last couple years, and what we're seeing is if you do that, if you impose a moratorium on foreclosures, what you're telling people and institutions that lend money is they do not have the protection to take the risk they need to, to extend credit so people can get a mortgage.

You're going to shut down the housing industry if that's the case. Government's got...

WASSERMAN SCHULTZ: Eric...

CANTOR: ... to pull back.

WASSERMAN SCHULTZ: ... you are not from a state...

CANTOR: They've got to stop intervening. And what...

WASSERMAN SCHULTZ: ... where there are...

CANTOR: And what -- and what we're -- what we're talking about, Debbie...

WASSERMAN SCHULTZ: ... thousands and thousands of people being ejected from their homes.

CANTOR: ... what we're talking about, Debbie, is you've got 10 percent, if that, of the population who are now in a foreclosure situation or perhaps in a mortgage that they have been unable to meet the obligations.

WASSERMAN SCHULTZ: Through the reckless...

CANTOR: But we've got 90 percent...

WASSERMAN SCHULTZ: Through the reckless disregard for regulations...

CANTOR: ... we've got 90 percent...

WASSERMAN SCHULTZ: ... that your...

BAIER: OK.

CANTOR: Now, come on.

WASSERMAN SCHULTZ: ... Administration...

(CROSSTALK)

BAIER: Here we go again.

CANTOR: People have to take responsibility for themselves. We need to get the housing industry going again. We don't need government intervening in every step...

WASSERMAN SCHULTZ: We need to strike a balance.

CANTOR: ... of every aspect...

(CROSSTALK)

WASSERMAN SCHULTZ: We need to strike a balance, Eric.

CANTOR: We've already...

BAIER: OK. All right.

WASSERMAN SCHULTZ: When people are being drummed out of their houses...

CANTOR: There's no question about it, but you can't go in -- you can't go in because...

WASSERMAN SCHULTZ: But you don't support balance.

CANTOR: ... because of this situation...

WASSERMAN SCHULTZ: You support only...

(CROSSTALK)

BAIER: Hold on one second. We're going to save it for dinner again. Hold on. One more question.

CANTOR: There you go.

BAIER: Congresswoman, do you think it was a mistake for Democrats to leave Washington without taking a vote on whether to extend the Bush era tax cuts?

WASSERMAN SCHULTZ: I think it was disgusting that the Republicans held the middle-class tax cuts hostage and this obsession that they have with providing tax breaks to the wealthiest 2 percent of Americans.

We certainly could have voted on making the middle-class tax cuts and tax cuts for working families permanent had the Republicans not insisted that the only way they would support those tax breaks is if we also added $700 billion to the deficit to give tax breaks to the wealthiest 2 percent of Americans. That's what was really disturbing.

BAIER: Your response?

(CROSSTALK)

BAIER: Last word, Congressman.

CANTOR: Bret, they're in complete control. It was a bipartisan majority that felt we ought not to put taxes on anybody right now in a recession. And this question about the $700 billion...

WASSERMAN SCHULTZ: And, Eric, you would have...

CANTOR: ... the proposal by the White House is...

WASSERMAN SCHULTZ: ... voted just for a middle-class tax break.

CANTOR: The proposal by the White House is a $4 billion cost. Let's be honest. We know what the numbers are. But they're in complete control, Bret. That's why we're going to do well in November.

They have turned their backs on working families, small business people...

WASSERMAN SCHULTZ: Oh, please.

CANTOR: ... and the people want a better way. They want this country to get back on track.

BAIER: OK.

Congressman Cantor...

WASSERMAN SCHULTZ: The voters of America...

BAIER: ... Congresswoman Wasserman Schultz...

WASSERMAN SCHULTZ: ... know better than that.

BAIER: ... thank you very much. We learned a few things. One, you should go to dinner.

WASSERMAN SCHULTZ: Thank you.

BAIER: Two, next time you should be in studio with us.

OK. Up next, master political strategist Karl Rove and Joe Trippi on the pivotal electoral contest that could turn the tide for either party. We're back in a moment.

(COMMERCIAL BREAK)

BAIER: Now to take a look at some of this year's most crucial midterm races, we turn to two veteran campaign strategists.

Joining us from Bakersfield, California, the architect of two presidential victories, Republican Karl Rove. And here in studio with me, the former campaign manager to Howard Dean, Democrat Joe Trippi.

Gentlemen, thanks for being with us, as always.

JOE TRIPPI, FORMER CAMPAIGN MANAGER TO HOWARD DEAN: Good to be with you.

BAIER: Karl, first to you, before we dig into some of the races across the country, let's talk about money. Here's what the president said about you Thursday.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: In this Senate race, two groups funded and advised by Karl Rove have outspent the Democratic Party 2-1 in an attempt to beat Alexi -- 2-1, funded and advised by Karl Rove.

(END VIDEO CLIP)

BAIER: Now, the two groups are Crossroads GPS, 501(c)(4) organization, and American Crossroads, a 527 group. Karl, your response to the president?

KARL ROVE, FORMER SENIOR ADVISER TO PRESIDENT BUSG: Well, first of all, the president's completely inaccurate. He said I funded them. I wish I had the billions of dollars that George Soros has that he has used to fund Democratic causes in the past.

I'm helping both of these groups by raising money for them as is allowed under the laws of the United States. American Crossroads is 527. Crossroads GPS is a 501(c)(4). The latter -- the former reports its donors. The latter does not. The latter is, like a lot of liberal groups -- National Resources Defense Council, League of Conservation Voters, Center for American Progress, AARP, MoveOn.org -- do not report their donors.

BAIER: Well, here's what Democratic National Committee chairman Tim Kaine said, responding to you. He released this statement, quote, "Despite multiple confirmed accounts of American Crossroads and Crossroads GPS being conceived in his own home, promoting the group extensively in the media and raising funds for it, Karl Rove claims that he is not helping to fund these groups. Mr. Rove has gone further and accused the president of being misleading. These are serious accusations, accusations that we would think Mr. Rove would be willing to back up with incontrovertible evidence."

Sir, your response to that?

ROVE: Yeah. Look, I am -- I am helping raise money for these groups, but there's a different between helping raise money and funding these groups. The president left the implications in a speech on Thursday and then in this piece that I'm somehow taking a check out of my pocket and putting millions into this -- into these groups.

Now, I'm absolutely helping them. I'm doing everything I possibly can to raise money for them. In fact, if people watching this broadcast want to contribute, go to AmericanCrossroads.com...

BAIER: All right. All right. All right. All right.

ROVE: ... and sign up for a contribution.

BAIER: There's a lot of focus, Joe, by the president and others, Democratic leaders, on what he calls these shadowy groups. But unions and liberal groups are spending, too. Daily Caller writes this, "Unions and liberal groups have said for months that they are spending what amounts to more than $200 million in this election cycle, and an updated count including a verification with major labor groups that their commitments still stand shows that amount to be more than $250 million now."

So is all of this Democratic focus on this spending a little disingenuous?

TRIPPI: No, not at all. I mean, all these groups have been involved before -- labor, all the groups which you just listed, and some of the ones that Karl has said. The difference this year is the amount of corporate money that's pumping into the system we've never seen before.

And also now with the chamber, the U.S. Chamber, there's even accusations that some of that money may be foreign corporate money that's literally funding some of these campaigns and independent expenditures. I think that's where the -- that's going to be an issue, I think, going down through the November election now, is where is that money coming from.

BAIER: Although the chamber denies that. And the New York Times wrote about the foreign money that -- they wrote there's little evidence that what the chamber does in collecting overseas dues is improper or even unusual, according to both liberal and conservative...

TRIPPI: Yes.

BAIER: ... election law lawyers.

TRIPPI: Well, their...

ROVE: Bret...

TRIPPI: ... their money -- I mean...

ROVE: Bret, the -- it went -- it went -- it went further than that, Bret. The White House was unable to back up his charge that the United States chamber of Commerce was spending foreign money on political activity. That's in the New York Times story yesterday.

Look, this is a...

TRIPPI: This is that same New York Times...

ROVE: ... desperate political ploy by the White House...

TRIPPI: No, it's the same New York Times...

ROVE: ... the same -- this is a desperate political ploy by the White House to distract attention from the failed economic policies, from a jobless recovery, from the terrible economic news last week, and from the failure of the "Obamacare" proposal to gain popular support.

And they're talking out these baseless charges. The president of the United States accused the Chamber of Commerce -- and the Democratic National Committee in its new add accuses Ed Gillespie and I of a criminal violation of our law by getting foreign money and spending it on American political campaigns, and they have not one shred of evidence to back up that baseless lie.

This is a desperate and I think disturbing trend by the president of the United States to tar his political adversaries with some kind of -- you know, enemies list, with being -- unrestrained by any facts or evidence whatsoever.

BAIER: Joe, response?

TRIPPI: I mean, the -- look, the chamber in that same New York Times article says that they commingle the -- the funds come from foreign entities. They come from U.S. companies. And then those -- they only supposedly use U.S. company money to influence selections.

(CROSSTALK)

ROVE: Joe, they receive -- they receive a hundred thousand -- they receive $100,000 from American chambers of commerce abroad and they very carefully, they say, segregate that money out of their $200 million budget, observing the U.S. laws that they can spend no foreign money on political activity. And they don't.

And the president of the United States and the Democratic National Committee have no evidence to the contrary, and yet they accuse them of violating the criminal laws of the United States.

Have these people no shame? Does the president of the United States have such little regard for the office that he holds that he goes out there and makes these kind of baseless charges against his political enemies? This is -- this is just beyond the pale. How dare the president do this?

BAIER: OK. With that, we're going to go to these individual races. We asked each of you to come up with three races -- a Senate race, a House race, a governor's race -- that you find a race to watch.

Karl, we're going to start with you. You point to the Illinois Senate race, Republican Mark Kirk versus Democrat Alexi Giannoulias. RealClearPolitics average of pools shows Kirk up 1.2. Why this one, besides the president was talking about you there on Thursday?

ROVE: Yeah. Well, look. This is a -- there are lots of very interesting Senate races. Joe and I have had an interesting set of conversations about these. I just picked this one because to me it's very interesting the president is putting a lot of time and energy and effort.

He's going there. Michelle is going there. The vice president's gone there several times. President himself has been there several times. (inaudible) And this is the president's home state.

It's a seat that the -- should be easily in the Democrats' column. And the fact that it isn't says something both about the quality of the Republican candidate, Mark Kirk, and the -- and the -- and the problems and difficulties of the Democratic candidate, Alexi Giannoulias.

BAIER: Joe, you chose Washington State, the Senate race there, and that pits incumbent Democrat Patty Murray against Republican Dino Rossi. Right now, RealClear has this essentially tied in the polls. Why this one?

TRIPPI: Look, I think if Patty Murray wins this seat, there's no -- in my view, there's no way the Republicans can take the Senate. This will -- this will be the one that goes down to the wire, both parties fighting tooth and nail for it. And I think Patty Murray's been hanging in there. Tough race.

But if she wins it, there's no way that the Republicans take the Senate, and that's why I think this is a key race to watch going down to the wire.

BAIER: Let's turn to House races now.

Joe, you chose Pennsylvania 15, Republican incumbent Charlie Dent against Democrat Bethlehem mayor John Callahan.

TRIPPI: Yeah. Well, John Callahan actually brought 5,000 new jobs to Bethlehem in the middle of all this mess that we're going through when he was the mayor, and is the mayor. I think -- look, this one's simple. This is a Republican incumbent who could go down.

And if that happens -- there are five or six of these races across the country. If that happens, Republicans don't have to win 39.They've got to win 45, 46 seats to take the House. So if you see, this will be an early one to watch. Watch it now.

But if Dent goes down, it means it's going to be a much tougher road for Republicans to take the House back.

BAIER: Karl, you chose Indiana 9, the congressional district there, Democrat Baron Hill against Republican Todd Young.

ROVE: I chose Indiana 9 because, like Indiana 2 and Indiana 8, they will report among -- they will be among the first, if not the first, seats to report in the country. This district, Indiana 9, was won by John McCain with 50 percent of the vote to 48 percent of the vote for Barack Obama. Baron Hill won by 58 percent when he won reelection two years ago.

I think it's going to -- we're going to be able look at this and see how much shift there has been, and this may give us a sense of what the night is going to look like. If the Republicans take this district, and I think they will, the margin of shift from what McCain got to what Todd Young will get will give us a sense of what we might see across the country.

And if there's a sweep, if there's a sense of a shift of four or five or six points from what McCain got to what Todd Young gets, that could be a portend of a big night for the Republicans. But all of those Indiana seats are going to report early and they'll give us an early indication of what kind of movement there is across the country.

BAIER: OK. Finally, governors' races.

Karl, you chose the New Mexico governor's race, and that pits Democrat Lieutenant Governor Diane Denish against Republican Susana Martinez. Now, the...

ROVE: Yeah.

BAIER: ... RealClearPolitics average has Martinez up by 8.3 right now.

ROVE: Yeah. I -- look, I could have chosen one of the Great Lakes states -- Wisconsin, Illinois, Michigan, Ohio, Pennsylvania -- all of which have got, with the exception of Michigan, governors' races and Senate races, and there is a really key contest.

But I took this one because six months ago the Democrats were expected easily to retain this seat. They had a -- the city lieutenant governor -- she had $4 million cash on hand. Republicans had a crowded and somewhat acrimonious primary.

And yet we find ourselves today with the Republican prosecutor from Las Cruces, Susana Martinez, on the edge of becoming the first Latina governor in the United States of America in a key battleground state for 2012 that oft times has shown a -- you know, New Mexico has been indicator, like Missouri, in presidential elections, and this could be an interesting comment on what we face two years from now.

BAIER: OK.

Joe, you chose Florida, the Florida governor's race down there, with Republican Rick Scott against Democrat Alex Sink. The RealClear average has this race very close, Scott up 1.8 right now.

TRIPPI: I think this has big implications -- redistricting later on in the 2012 presidential race. Obama would like to carry Florida. I think Alex Sink is running a hell of a race down there, and I think she can win this thing.

I think -- but that's the one to watch, I think, in terms of governor's race. Does a big state like Florida stay in the Republican column or can Alex Sink pick it up? I think she can.

BAIER: Joe, Karl, as always, thank you. We'll be watching on election night, see how it all turns out 23 days from now.

Coming up, the Sunday panel on the troubling economic outlook. So how will the latest unemployment numbers define the final weeks of this campaign? We'll find out after the break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: It took us a long time to get out of where we are right now. And the damage left by this recession is so deep that it's going to take a long time to get out.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER, R-OHIO: This was not what Americans asked for when they sent then-Senator Obama to be our president in the Oval Office. And the pink slips shouldn't be going to workers here in Ohio. They should be going to the members of President Obama's economic team.

(APPLAUSE)

(END VIDEO CLIP)

BAIER: President Obama and House Minority Leader John Boehner reacting to some tough unemployment numbers. Let's take a look.

The unemployment rate remains at 9.6 percent. And in the month of September, the economy lost a total of 95,000 jobs.

And as foreclosures are on the rise across the country, a number of banks and lenders have put a freeze on moving bad home loans into foreclosure. Here is what "The New York Times" Editorial Board said about the unemployment report, the employment report from September. "There was no good news in the September employment report. The economy lost another 95,000 jobs last month as a modest gain in private sector jobs was swamped by big losses in government jobs. The job market is not stalling, it is regressing."

And it's time for our Sunday group: Bill Kristol of "The Weekly Standard"; Nina Easton of "Fortune" magazine; former White House press secretary Dana Perino; and Juan Williams from National Public Radio.

Bill, first to you. The employment report and how it factors in?

BILL KRISTOL, "THE WEEKLY STANDARD": Well, the economic recovery is sluggish at best. It was stronger a year ago than it is today, which is not good for the incumbent administration, which, remember, it its second or third week in office, jammed through Congress a huge stimulus package on a partisan vote, and the claim was this is going to get the economy going. And I think there's a pretty bipartisan view that it hasn't worked very well, and I think the voters are going to punish the party that put all of its eggs in the basket of borrowing $800 billion to throw into the economy last year.

BAIER: Nina, when you could hear them individually -- Congressman Cantor and Congresswoman Debbie Wasserman Schultz talked about this freeze on foreclosures. What about this as an issue on where Democrats stand and where Republicans stand?

NINA EASTON, "FORTUNE" MAGAZINE: I thought it was really troubling when Congresswoman Wasserman Schultz said that we need to keep people in their homes. And what she should have said, keep people in homes they can't afford.

Yes, the banks are guilty of sloppy paperwork. You don't see the Treasury Department coming out and attacking them, by the way. What you see are Democrats using it as a political football. But we don't have examples of people saying they've been foreclosed on for no reason, wrongfully foreclosed on.

What you have is politics about this. And until you make the foreclosure market move smoothly, and until these properties can turn over, you're going to have -- the real estate market is not going to bottom out, and it's going to continue to be a drag on the economy. And it's been a big drag on the economy, is that the real estate market, we keep kind of holding it up, and it needs to bottom out.

One other thing I wanted to point out in these unemployment numbers this week, we are seeing the beginning of unemployment on the state and the government level, state and local level, because states and the local government have given out these very generous pension systems to retired folks. And now they don't have the money to pay for teachers, law enforcement, personnel, and so on, on an ongoing basis.

We're at the beginning of that crisis that we're going to see. So that's going to continue to get worse.

BAIER: Dana?

DANA PERINO, FMR. WHITE HOUSE PRESS SECRETARY: Well, at the same time, one of the things that you saw reported on yesterday was that for the money that they -- the members of the Congress came back in an emergency session in August so they could save the teachers jobs. It turns out there's really not that many teachers that needed saved. So now you have all these state that have money and they're trying to figure out what to do with it.

This speaks to me to a larger problem that the voters have with Washington and with the economy, which is you hear all these numbers, and they threw out all the numbers, both Congresswoman Wasserman Schultz and Congressman Cantor, and they're just confused. They know that personally, they don't feel like the economy is getting better.

If they're small business owners, they're working every hour that they have. They might make $250,000 or more, but they work every hour.And they feel like, you know what? Washington, you waste our money anyway, so why should you get more of it?

BAIER: Juan, I mean, this foreclosure freezing is a tough political situation for Democrats to have to deal with if they are getting advice that perhaps it's not the best thing for the economy. The administration, Treasury Secretary Geithner, is not pushing this.

JUAN WILLIAMS, NPR: No, he is not pushing it I think because he's not a political player, Bret. I think what's going on here is that the foreclosure episode crisis has become a proxy for Democrats to say we care about the middle class. We care about people who are being thrown out of their homes, we care about people who may have been unfairly treated by these big banks.

So, I think it's a populist push by Democrats, kind of anti-Wall Street, anti-big bank. And that's what they're trying to communicate to the voters.

Overall, in this conversation, Republicans -- and I think you heard this from Bill this morning -- Republicans think the problem is too much government spending. They think the stimulus didn't have impact.

What you hear from the White House is the problem is a lack of consumer confidence and that we need to invest, the government needs to invest in the economy, whether it's in green jobs or infrastructure spending on transportation. But you're not going to get that in this environment.

So rather than the bipartisan, you know, "I'm throwing this out, you're throwing this out," where is the sense of common goal here, get this economy going? I just don't see the ideas right now because corporations are sitting on trillions of dollars in capital. They're not spending. They don't have the confidence.

Americans aren't spending money because, like Dana said, they're anxious. Everybody is worried about their pension, their 401(k)s, their kids finding a job. It's a situation where everybody is just holding tight for safety, and as a result, the economy is not picking up.

BAIER: But is the administration creating the environment for businesses to take that money off the sidelines?

WILLIAMS: That's right. I mean, obviously, part of the Republican argument is that this administration has been so hard -- if Wall Street feels that way, big business feels regulations have been over the top, so they feel that the Obama administration has been anti-business. And that doesn't help.

KRISTOL: You know, I want to half agree with Juan while pointing out that, obviously, if the Democrats control the presidency and Congress by large majorities, and there is a widespread lack of consumer confidence in government policy, that's a huge problem for the Democrats. And that's what's going to happen when you'll see that reflected three weeks from now.

But I think you're right in this respect -- the Republicans can win this election on Obamacare, government spending, keep tax rates where they are, earmarks, what they're all running on and should be running on this November. It's not enough for two years from now.

The economy is not picking up. Republicans will control one or both houses of Congress. They need to have an economic growth agenda, a big economic agenda that is more than reducing discretionary spending to the levels of 2008 or dealing with entitlements over the long term.

We had a financial crisis. They need to have a monetary policy. They need to have a tax reform agenda, I think, that really is -- fundamentally deals with the obstacles to growth in the economy. So that's a challenge for the Republican presidential candidate in 2012. I think for this November, it's enough to say these guys took over, they passed what they wanted to pass, it hasn't worked.

BAIER: Nina, you were saying?

EASTON: Yes. I was just going to say that they also -- the Republicans have to have a program the president is going to sign off on, and that's a more difficult --

(CROSSTALK)

KRISTOL: Well, no. More an alternative. I mean, or a comprehensive alternative.

EASTON: Well, right. But there has got to be -- I mean, I think the thing that we all need to go into this post-election season, with some sense -- I mean, it's so partisan right now, that you look at these questions like Social Security that you had earlier on the show. That's going to be -- there is actually a plan for Social Security that can save it that involves cuts and so on --

(CROSSTALK)

BAIER: But it's too radioactive.

EASTON: But it's too radioactive now. What we need, post election is for both parties to come together. That's going to be tough though.

WILLIAMS: It just seems like everybody is so negative. I mean, even on the stimulus --

KRISTOL: I'm positive. I'm cheerful. I've never felt better three weeks before an election.

(LAUGHTER)

KRISTOL: Certainly not since 1994.

WILLIAMS: Well, I mean, the weight (ph) is -- it's all Republicans. You know, I think Republicans are going to pick up.

But what I'm saying is people are just so negative. Like on stimulus spending, I think Republicans have captured this narrative. In fact, if you listen to the CBO, without that stimulus spending unemployment would even be higher.

We were in a big trough, and President Obama has been trying to pull us out. And yet, people seem to think, you know what? You haven't done it fast enough, Mr. Obama.

PERINO: There is something else here. And if I could just go back to the mortgage piece and the foreclosure piece, it's this issue of fairness.

And if you are paying your mortgage, and you may be under water as well, but you're still making payments because you don't want to be foreclosed upon, and you find out that your neighbor hasn't been making their payments, and now they're going to get a pass and get to live in their house for free, and it's going to slow down the economic recovery? That's why people have lost confidence in Washington.

BAIER: Panel, we have to take a break here. But when we come back, yet another White House shakeup as a key national security figure resigns. How could this affect policy decisions?

The panel gives us their take on General Jones' departure. Stay tuned.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: We spare no effort to keep the American people safe, while also repairing old alliances, building new partnerships, and restoring America's leadership in the 21st century. That is the kind of American leadership that Jim Jones has always stood for and the kind of leadership that Tom and my entire national security team will continue to work for in the years to come.

(END VIDEO CLIP)

BAIER: The president on Friday thanking National Security Adviser General Jim Jones for his service and welcoming his replacement, Tom Donilon.

Now, in Bob Woodward's book, "Obama's Wars," there are a number of references to Donilon. Woodward quotes General Jones scolding Donilon, saying, "You have no creditability with the military. You should go overseas. The White House, Situation Room, interagency byplay, as important as they are, are not everything. You frequently pop off with absolute declarations about places you've never been, leaders you've never met, or colleagues you work with.

Woodward writes this about Defense Secretary Robert Gates: "Gates felt that Donilon did not understand the military or treated senior leadership with sufficient respect. The secretary later told Jones that Donilon would be disaster as national security adviser."

The secretary had a bit of a different tone Friday at the Pentagon.

(BEGIN VIDEO CLIP)

ROBERT GATES, SECRETARY OF DEFENSE: I have and have had a very productive and very good working relationship with Tom Donilon, contrary to what you may have read.

(END VIDEO CLIP)

BAIER: And we're back now with Bill, Nina, Dana and Juan.

Dana, you have been inside the White House. Two years, is it time when things change? This seems like a big change.

PERINO: It is a big change three weeks before the election. And I would love to see Bill O'Reilly body language expert analyze that sound bite. It is a big change.

By all accounts, Tom Donilon is well liked within the White House, has a very good relationship with President Obama. And that's critically important.

There is some criticism coming out about him. He was in charge of Fannie Mae, which was the housing giant that really stopped any type of reform that many people think led to the housing crisis that we just talked about in the first panel. So there is some criticism there.

That might be irrelevant when it comes to what he can do as national security adviser. And I think that eventually, as things settle out, it will be good.

I do think it's unusual to do this three weeks before an election. Jim Jones had already said he was only planning to be there two years. So could they have waited until after and let that all sort of shake out instead of having all of this churning? Like, it feels like the wheels are coming off the bus. Week after week, there's no calm seas at the White House.

BAIER: Juan?

WILLIAMS: Well, Tom Donilon is close to Rahm Emanuel, close to David Axelrod. He's part of the Washington domestic political scene. He is really a skilled domestic policy player. He's a guy who can, as they say, move paper, get the bureaucracy to work.

He was heading an interagency council of the deputy advisers and all this. But the fact is, the criticism you just saw -- listed, Bret -- you know, never met foreign leaders, never been over to Afghanistan.

BAIER: He has since been to Afghanistan, we're told.

WILLIAMS: Right. But, I mean, it is true. I mean, there's just no getting away from it.

So the question becomes, exactly how does he handle things that are now sitting on the edge for the United States? And specifically, Afghanistan.

We are supposed to pull out of Afghanistan next year. We're going to have some kind of review. Where does he come out on these critical issues? How does he work with Bob Gates?

I think Bob Gates was trying to be nice about it. But I think Bob Gates' hones assessment was in the Woodward book. He sees the guy as someone who is an amateur at a time when the game requires expertise.

BAIER: Nina?

EASTON: What I find interesting is there is this low-level tension between military commanders and the White House that the military commanders feel like sharing with the press. Don't forget General McChrystal had to leave, was fired after sharing with his staff, sharing with "Rolling Stone," mocking Vice President Biden. And then we have Jim Jones supposedly telling Bob Woodward that he considers the White House staff water bugs. And now we have Donilon being attacked, who has already been condemned by Gates, supposedly, again in the Woodward book as a disaster.

So I just wonder what that tells us about moving forward, you know, with this White House and its relationship with the military command.

BAIER: Bill, Dana mentioned Donilon's past association with Fannie Mae. Alabama Republican Senator Richard Shelby had an interesting quote released. He's not shying away from any of this. "Mr. Donilon's actions at Fannie Mae to undercut meaningful reform precipitated the largest taxpayer-funded bailout in American history. Now President Obama is entrusting him with America's security."

KRISTOL: I feel like I should echo Bob Gates and say that I have and have had a good and productive relationship with Tom Donilon, who's a likable guy. He'll stay out of housing policy, and I hope he does a better job, honestly, in foreign policy than perhaps he did as executive vice president at Fannie Mae.

I think the picture is the amazing turnover. Within less than two years of this administration, they have lost their chief of staff; national security adviser; budget director; top economic aide, Larry Summers; chairman of the Council of Economic Advisers; head of the National Intelligence Board, Dennis Blair; White House counsel, Greg Craig. I mean, Dana and I have had the privilege of being at White House senior staff meetings. Those are the most -- among really the most important players (ph) of national intelligence directors.

The other five or six, those are the most senior people in White House senior staff. They're all gone. It's pretty amazing, and it does suggest there was more turmoil than the White House press corps perhaps captured going on at the Obama White House. On the other hand, you know, it gives them a chance for bit of a fresh start after the election. I'm not so sure it's a bad thing.

From his point of view, I mean, we can all sit here and say, God, it's chaotic and it's embarrassing to lose these people within two years. And I think it is embarrassing, and I think it's such a great privilege to work there, that people should want to stay there and help the president and help the country as long as they can. And for people to be walking away -- Rahm Emanuel, who allegedly wanted to be mayor of Chicago --

(CROSSTALK)

WILLIAMS: Don't overblow it. Don't overblow it.

KRISTOL: It's bad.

WILLIAMS: It's bad, but it's not crippling. And as you just said, it's a chance to start over.

I think the big issue that we should be talking about this morning are things like what's going on with the Pakistan-Afghan border.

BAIER: Yes. Even as all this change happens, there are these huge events --

WILLIAMS: Yes. Right.

BAIER: -- the Afghanistan-Pakistan situation, the situation in Iran, which appears they are still moving towards nuclear capability. And there is a report out that perhaps they might have a long-range missile capable of reaching the U.S. by 2014. I mean, that's serious --

PERINO: And they're trying to manage the Middle East peace process as well that they touted two months ago, that they were reenergizing. And that is -- it's a sort of meandering threat.

KRISTOL: Bob Gates and David Petraeus have served their country, and I'm sure Gates doesn't like a lot of aspects of his maybe better than Rahm or Jim Jones did, and I'm sure Petraeus took a kind of demotion to go run the war in Afghanistan. Those guys aren't walking away, and the good news is they are in charge of a lot of parts of this -- of lots of these foreign policy challenges.

So I do think the example of maybe serving your country more and complaining less would be a good example for the civilians in the White House.

WILLIAMS: I'm just saying I think this morning, you have the U.S. -- more drone attacks than ever, the terrorist threat rising in Europe. The U.S. is going to have to figure out how to negotiate this as we try to pull troops out. You bet with 2012 coming, Obama is going to pull those troops out of Afghanistan.

BAIER: All right. That's it for the panel today.

We'll see you next week, panel.

And be sure to watch "Panel Plus," where our group here picks up the discussion when the show ends. We will post that segment before noon Eastern on FoxNewsSunday.com.

Up next, we go "On the Trail."

(COMMERCIAL BREAK)

BAIER: With less than a month to go until Election Day, there are debates, political commercials, and voicemail recordings.

It's getting nasty out there "On the Trail."

(BEGIN VIDEO CLIP)

SARAH POMPEI, WHITMAN CAMPAIGN SPOKESPERSON: We think it's more of the politics of personal destruction and political smears that a career politician like Jerry Brown has engaged in for too long.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

RICHARD BLUMENTHAL (D), SENATORIAL CANDIDATE, CONNECTICUT: I take accountability for my mistakes. My opponent has not done so.

LINDA MCMAHON (R), SENATORIAL CANDIDATE, CONNECTICUT: That's a lie. You know that's a lie. I never said it. And it's in your ad, and boy, that's just wrong.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

REP. KENDRICK MEEK, D-FLA., SENATORIAL CANDIDATE: I think it's important that we expand middle class jobs. And I don't think it needs to be trivialized -- a trivial issue here, Marco.

MARCO RUBIO (R), SENATORIAL CANDIDATE, FLORIDA: I didn't say it was trivial.

MEEK: I think it's important.

(CROSSTALK)

RUBIO: I said you didn't have a plan to do it. You said the stimulus would stimulate the economy and create jobs. Unemployment in Florida is at 11.7 percent.

GOV. CHARLIE CRIST (I), SENATORIAL CANDIDATE: What you have just witnessed is the problem and the reason I'm running as an independent. These two guys are going at each other because one is the Republican right, one is the Democratic left.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Bobby Bright opposed bailouts.

UNIDENTIFIED FEMALE: Bobby Bright voted against the health care bill. He will repeal what's wrong with it.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

NARRATOR: When President Obama and Nancy Pelosi pressured Chet Edwards, Chet stood up and voted no against their trillion-dollar health care bill.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

CHRISTINE O'DONNELL (R), SENATORIAL CANDIDATE, DELAWARE: I'm not a witch. I'm nothing you've heard. I'm you.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: We cannot sustain -- oops.

(LAUGHTER)

OBAMA: Was that my -- oh, goodness. That's all right. All of you know who I am.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

DAVID LETTERMAN, TALK SHOW HOST: The seal dropping off the podium, what happened there and who got fired?

DAVID AXELROD, SR. WHITE HOUSE ADVISER: Well, actually, I can only think of one thing --

LETTERMAN: What's that?

AXELROD: Witchcraft.

LETTERMAN: Witchcraft, exactly.

(END VIDEO CLIP)

BAIER: Twenty-three days and counting.

That's all for us today. I'll see you tomorrow evening at 6:00 p.m. Eastern on Fox News Channel for a special report.

Chris Wallace returns here for the next "Fox News Sunday."

Have a good week.

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