Kentucky Senate Showdown on 'FNS'

The following is a rush transcript of the October 3, 2010, edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

CHRIS WALLACE, ANCHOR: I'm Chris Wallace, reporting from Louisville, Kentucky, and this is "Fox News Sunday." The Kentucky Senate showdown -- with 30 days till the election, it's one of the nation's most closely watched races. Republican Rand Paul, one of the original tea party candidates, who opposes government intervention in the private sector, and Democrat Jack Conway, the state's attorney general, who supports much of the Obama agenda -- Paul and Conway, in their only national debate, on "Fox News Sunday."

Then, a key player leaves the White House. We'll ask our Sunday panel what Rahm Emanuel's departure means for the midterms and a president seeking reelection.

And as Mr. Obama tries to whip up the Democratic base and Congress leaves town with plenty of unfinished business, we go "On the Trail," all right now on "Fox News Sunday."

And hello again from Fox News, today on the road in Louisville, Kentucky, the home of the most famous horse race in the world, the iconic Louisville slugger baseball bats, and now one of the hottest Senate races in November.

We are in the studios of WDRB TV, our Fox affiliate here in Louisville, and we're joined by the two contenders for the Kentucky Senate seat, Democrat Jack Conway and Republican Rand Paul.

And, gentlemen, welcome to "Fox News Sunday."


WALLACE: I'd like to ask each of you to take a minute to lay out what you think is at stake in this race. What is the choice for Kentucky voters?

Dr. Paul, why don't you start?

RAND PAUL, REPUBLICAN CANDIDATE FOR KENTUCKY SENATE SEAT: Well, I think I'm very concerned about the debt that we're piling on -- I think mountains and mountains of debt.

I'm concerned about President Obama adding trillions of dollars of entitlement programs.

I'm concerned about the president adding or allowing the largest tax hike in our history.

And I'm concerned about President Obama foisting cap and trade on Kentucky which will be a disaster for our coal jobs.

I think this election really is about the president's agenda. Do you support the president's agenda or do you not support it? I think his agenda's wrong for America. I will stand up against President Obama's agenda. And I think that's what people in Kentucky want.

WALLACE: Attorney General Conway, same question. What's at stake in this race? What's the choice for Kentucky voters?

CONWAY: Well, Chris, welcome to Kentucky. First of all, it's a real clear choice. I think we need to put the people of Kentucky first.

The special interests in Washington have enough people standing up for them. As attorney general, I have stood up for the people of Kentucky. I've taken on pharmaceutical companies when they have lied to our Medicaid program. I have taken on oil companies that have gouged us. I have taken on anyone that would do wrong by the people of Kentucky.

And there's a real clear choice in this race. There's a real clear choice between someone who has taken on the drug issue and someone who says that drugs aren't a pressing issue in Kentucky, someone who stands up to criminals and someone who says that nonviolent behavior shouldn't be a crime, someone who supports the rights of the disabled and someone who has said that he's against the Americans With Disabilities Act, between someone who's going to stand up and protect Medicare and someone who says in Medicare we need a $2,000 deductible. I mean, that's a really clear choice.

WALLACE: Attorney General Conway, you have even gone further than that. On the campaign trail you have called Dr. Paul "crazy." Your campaign ads call him "out of touch." Why?

CONWAY: I just think he's out of touch with the values of mainstream Kentuckians. You know, as Democrats, we need to talk about our values a little more. I think we value inclusivity.

We have 12,000 new disabled vets since 9/11 here in the Commonwealth of Kentucky. And I don't think it's appropriate to stand up and say that you're against the Americans With Disabilities Act in that environment.

I'm not saying Dr. Paul is crazy. I think some of his ideas are out of the mainstream and they're out of touch with the values of normal Kentuckians.

WALLACE: Dr. Paul, quite frankly, you say very little about Attorney General Conway on the campaign trail. You say nothing about him in your ads. Now's your chance, sir.

PAUL: We're waiting for him to catch up a little bit in the polls and then we may refer to him more. But really, he has to -- what he needs to do is he needs to either defend his president or run away. So far he's running away from President Obama and the agenda.

He supports "Obamacare." He supported repealing the tax cuts before he was against it, before he was before it again. Cap and trade, he's been on both sides of the issue. Kentuckians are not going to tolerate someone who's ambivalent on cap and trade. Cap and trade will be a disaster to our economy.

And these are the issues of the day, and these are the things that people want to talk about. People are concerned about jobs and the economy. And if we pass cap and trade, it will be a disaster to Kentucky's economy and to Kentucky jobs.

WALLACE: Let's talk -- and you kind of led in the direction that I wanted to head in this debate. Let's talk about jobs and the economy, which I think we would all agree are the key issues for voters here and across the country.

Unemployment in Kentucky is now 10 percent. In fact, it has been below that figure of 10 percent only one month in the last year and a half.

Attorney General Conway, you say -- and this picks up on what Dr. Paul was saying -- that you would have voted for the stimulus, you would have voted for TARP's $700 billion for Wall Street. And you would have voted for Obama's health care reform.

So if you had been in the Senate the last two years, you would have supported most of President Obama's agenda.

CONWAY: Some of President Obama's agenda. Listen, these are all hypotheticals. I've been attorney general of the Commonwealth of Kentucky the last two years.

The stimulus, a third of it went to tax cuts. No one talks about it. A third of it went to keeping the jobs of police and firefighters. And a third supposedly went to shovel-ready projects where the administration hasn't done that great a job.

Actually, I wouldn't have voted for the bailouts. The bailouts are -- there weren't enough accountability in them. You know? There were not enough accountability in them. We had people getting bonuses after getting the bailouts.

And on health care, look, we've got 654,000 Kentuckians getting health care for the first time as a result of this bill. I have a friend who's had a kidney transplant -- tells me how hard it is to get coverage with a preexisting condition. I'd like to fix health care. I'd like to make it more responsible going forward by allowing Medicare to engage in bulk purchasing.

What I'm not for -- what I'm not for -- is the $2,000 deductible and taking our health care system back to a pre-World War II system, which is what Rand Paul's on the record as having said. So I'd like to fix health care. He wants to repeal it. And I think that's a stark difference.

WALLACE: You actually take me in the direction of the question I wanted to ask Dr. Paul. And incidentally, this is a free-flowing...


WALLACE: ... debate. Feel free to talk to each other if you would like to.

Dr. Paul, you say you would have voted against the stimulus. Kentucky has received $2.9 billion, almost $3 billion, in stimulus funds. And according to records, to the government, 17,000 jobs were saved or created. What are you saying to those people? Fend for yourselves?

PAUL: Well, actually, if you look at the labor statistics, we have lost 17,000 jobs since the stimulus package. The stimulus package was a trillion dollars. If you divide it out and count only jobs created, it was $413,000 per job.

But more importantly, we have to ask where does the money come from. Jack acts like the money's for free. Just go and get it from Santa Claus in Washington. The money's not for free. The money has to be borrowed. Right now we're borrowing to the tune of $800 billion from China, $700 billion from Japan. The list goes on and on.

I think that amount of debt is threatening the very foundations of our economy. It's incredibly dangerous. It's incredibly foolhardy to have a trillion-dollar stimulus and then another trillion dollars into "Obamacare."

The thing about government also is they notoriously underestimate the cost of things. What the Democrats tell us will be a trillion- dollar health care could turn into a $3 trillion nightmare, a drag on the economy. It's already causing unemployment in Kentucky.

My health insurance went up 15 percent since "Obama" has passed -- since "Obamacare" was passed. What is going to happen is it's going to hurt the economy and hurt jobs in Kentucky.

CONWAY: Chris, I think -- I think of the two candidates, one of us is being much more specific on jobs. I'm proposing a hometown tax credit, a 20 percent tax credit, for the cost of creating a new job.

I think it's important that Americans see that our government is not just growing but that we're providing the incentives for the private sector to grow us out of the recession.

I also think that we need to get the small and community banks lending once again, because the government bailed out a bunch of big banks on Wall Street, and these regulators have come down awfully hard on the small community banks.

PAUL: But here's the problem. You say you want new lending from small banks, but you support the banking regulation bill. The problem was with government banks -- Fannie Mae, Freddie Mac -- bad policy at the Federal Reserve caused the recession, caused the credit crunch.

But yet Jack supports -- President Obama supports -- the new banking regulations, which every bank in Kentucky will tell you it wasn't our problem. No banks failed in Kentucky. But it's much harder to get a loan in Kentucky now...


WALLACE: Wait, wait, wait. No. I want to move on to something else, but it does get to this issue of regulation.

Dr. Paul, you say that you believe the government should stay out of the private sector. Here's what you said on the Fox Business Network last January, "Get rid of regulations. Get the EPA out of our coal business down here. Get OSHA out of our small businesses."

Question: Is there no role for government in protecting our environment and making our workplace safer?

PAUL: I think it's a combination of federal, state and local regulations. And what I would say is which way do we want to shift the debate. Do we want more federal or more local? And there's always going to be a little bit of both.

But what I would say is we now have an EPA that is writing rules. The EPA sent out a press release and said, "You know what? If Congress doesn't pass greenhouse emissions testing, we will simply do it on our own." I think the arrogance of unelected bureaucrats to say that they create law needs to come to an end. We need to say to unelected bureaucrats, "You do not make regulations. You do not write regulations."

WALLACE: I want to give Attorney General Conway 30 seconds.

Just give the quick response to that, if you will...

CONWAY: Sure. Sure.

WALLACE: ... and then I want to move on.

CONWAY: I'm against cap and trade, too. Always have been.

WALLACE: Well, no, no, no. That's not true.


WALLACE: In fact, you supported the Waxman-Markey cap-and-trade bill back in 2009.

CONWAY: No, I didn't. No, I didn't.

WALLACE: Well, the Bowling Green Daily editorial said that you flip-flopped on the issue, sir.

CONWAY: I have said I'm always going to protect coal and I'm always going to protect electricity. And...


WALLACE: Did you not support...

CONWAY: I did not -- I did not support Waxman-Markey. And look, I even took on the EPA. I filed a lawsuit against the EPA when they were doing just what Dr. Paul was describing.

So I have been consistent in this. And don't read the Bowling Green News. Take a look at my actions as attorney general.

PAUL: Well, what about...

CONWAY: But more importantly, Rand...

PAUL: ... the statement from your campaign...

CONWAY: ... more importantly, Rand -- Rand, more importantly, federal mine safety regulations, Chris, are written in the blood of coal miners. Rand Paul has said that he wants to take federal mine safety regulation back to the 1930s. In the 1930s we were losing...

PAUL: No, those are your words, Jack.

CONWAY: ... 1,500 coal miners...

PAUL: Those are your words.

CONWAY: ... a year. We lost 34 last year, and that's 34 too many. Federal mine safety regulations -- we need the federal government...

WALLACE: OK. I want to...


WALLACE: Wait a second.

PAUL: Go back -- go back -- go back to cap and trade. In June of last year you issued a statement that the Paducah Sun reported -- yet another newspaper in Kentucky -- as well as The Courier -- and they have all reported that you issued a statement saying you supported the bill and you were confident it could be reformed.

I met with you at the judge executive meeting, and in the judge executive meeting you said you wanted to be part of the negotiated compromise. You were for it so you could be part of fixing cap and trade and making cap and trade work.

CONWAY: I've been consistent in my position saying I'm going to stand up for Kentucky coal. I'm going to make certain we keep our electricity rates low. And I will do that as the next United States senator, and I even took on the EPA when they were trying to do this outside of the legislative process.

WALLACE: OK. I want to turn to the Bush tax cuts.

Attorney General Conway, I want to ask you about what I believe is a change in your position on the Bush tax cuts. Here's what you told the Louisville Courier-Journal editorial board just in April, "I would favor letting expire probably the majority -- the majority of the Bush tax cuts." Now you want to extend all of them.

CONWAY: I was talking about the special interest provisions that allow companies to shift our jobs overseas. That's where I'm -- that's what I was focused on in that particular interview.

I think that raising taxes -- we shouldn't be doing it in a time of recession, that this now -- with 10 percent unemployment, with capital frozen on the sidelines, it's no time to be raising taxes. And listen, in 2002, when I was running for the United States Congress, I was for the Bush tax cuts then. I was one of the few Democrats who was for them. And I think now we just ought to extend them.

PAUL: Well, you were for them before you were against them, before you were for them again. Interestingly, at the Farm Bureau debate just a couple of months ago, you said you were bringing back the death tax, the tax on people just for dying.

CONWAY: No, I didn't.

PAUL: You did. You specifically said you wouldn't take a 55 percent tax on estates. You said 45 percent.

CONWAY: No, I didn't.

PAUL: And you said...

CONWAY: I never said that.

PAUL: ... you'd have some exemptions.

WALLACE: All right. All right.


WALLACE: Dr. Paul, Dr. Paul, Dr. Paul, I want to ask you a question. You have at least been consistent that you said you wanted to extend all the Bush tax cuts. But that would add $4 trillion to the deficit.

You said at the very beginning -- the first issue you mentioned was the national debt. If you're so concerned about the national debt, how are you going to pay for a $4 trillion loss of revenue from the tax cuts?

PAUL: I think, first of all, you look at whose money is it. It's the people's money who earned the money. And we give up some to pay taxes. So I'm not seeing it as a cost to government.

But I will immediately introduce bills to reduce spending so I think we should offset it. So I'm not opposed to introducing bills that will reduce spending.

WALLACE: There's no way you're going to get $4 trillion by spending cuts.

PAUL: We're going to introduce legislation that will reduce spending. I will introduce legislation that will balance the budget. We will have a balanced budget amendment introduced if I'm elected. We will also have a balanced budget that will be introduced if I'm elected.

But what I would say about the Bush tax cuts is -- is that businesses have made calculations on these for five or 10 years. Business needs predictability. If you take away these Bush tax cuts, if you allow Obama to have the largest tax increase in our history, it will be a disaster for the economy.

And I'm glad Jack has changed his position on this...


PAUL: ... because this is going to be helpful.

WALLACE: All right. Let me -- let me -- let me ask you both -- because everybody likes to say, "Well, we got to get the spending down," but then people don't want to talk specifically about what they want to do.

No question, if you want to get serious -- and I'm directing this to both of you -- about the national debt, you have to do something about entitlements. I want to give you both a chance before the election. Tell me of a single benefit you would reduce, any eligibility you would change, a tax you would increase on either Social Security or Medicare to deal with the entitlement crisis.

CONWAY: Well, let me -- I'm the one that's been more specific in this particular area in this campaign. Dr. Paul talks a lot about having a federal budget balanced all the way next year. He's just not going to tell anybody how he's going to do it this year.

To do what he wants to do would be a 40 percent cut, and it would take the average Social Security benefit from about $1,100 down to about $700.

If you go to my Web site at I've been specific. I think we need Medicare bulk purchasing. I think it was wrong during this health care debate to take pharma out of it. We ought to let Medicare negotiate for lower prices the way we let Medicaid and the V.A. do that. That would save about $200 billion.

WALLACE: President Obama and the Democrats tried to do it, and the drug companies...


CONWAY: Well, it think we should -- that would be the first bill I introduce when I go to the United States Senate.

Secondly, we need Medicare fraud units in each and every state. There is a lot of fraud in the system, and estimates are there are about $100 billion in fraud. But you don't need to be handling it out of Washington in a big bureaucracy.

What I've done as attorney general is take on the Medicaid fraud. Medicaid fraud collections are up over...


WALLACE: Are you willing to reduce a benefit?

CONWAY: Here let me say one more thing on what I want to do as well. I think we need to end the offshore tax loopholes, a $130 billion in those. It can be done like that. We need a pay-as-you-go system. And then we also need a bipartisan debt commission to come back with recommendations.

WALLACE: All right.

Dr. Paul, anything specific you're willing to say? "I will change entitlements this way."

PAUL: Right. Well, I think you don't do anything to people who are currently receiving Medicare or Social Security. But we do have to admit that we have the baby boom generation getting ready to retire and there's -- we're going to double the amount of retirees.

And to put our head in the sand and just say, "We're going to keep borrowing more money" is not going to work. There will have to be changes for the younger generation...

WALLACE: So be specific.

PAUL: For the younger generation, there will be -- have to -- changes in eligibility. And they've already started talking about this.


WALLACE: So you would raise the retirement age?

PAUL: There may have to be -- for younger people, yes. For younger people, longevity is out there. I mean, the average life expectancy in the '30s was 65...


WALLACE: You talked about higher deductibles or higher premiums.

PAUL: Not for those who are currently on Medicare or Social Security.

WALLACE: No, I'm talking about people 55 or younger.

PAUL: Yes. You're going to have to have eligibility changes for the younger people. And I think all younger people, if they're honest and will admit to it and have an adult discussion and not demagogue the issue, will admit that younger people will have to have different rules.

WALLACE: OK. Let's talk about health care reform. You did a little bit at the start of the debate.

Dr. Paul, you say you want to repeal "Obamacare" and replace it with what you call market-driven principles.

More than 600,000 -- you said earlier, Attorney General Conway -- 650,000 people in Kentucky are now uninsured. How are they going to get coverage under your plan?

PAUL: Right. Well, there are two aspects to health care problems. One's the expense and one's access. We had 45 million people nationwide that were not receiving or didn't have health insurance.

A third of them made more than $50,000 a year and weren't getting it because of the expense. We didn't address expense at all. So that doesn't fix that problem.

A third of them were poor and were eligible for Medicaid but not receiving Medicaid because they weren't going down and filling out the appropriate paperwork.

But a third of them were in the country illegal and were illegal aliens. And I don't think we should be giving illegal aliens health insurance. That's what President Obama's bill does. They say, "Oh, well, it doesn't."

WALLACE: No, no, no. That's not true, sir.

PAUL: Well, they...

WALLACE: No, the uninsured (sic) are not...

PAUL: I know...

WALLACE: ... covered by "Obamacare."

PAUL: I know, but it's illegal to ask them if they're illegal, so the thing is -- is it's sort of a Catch-22. They said -- the Republicans kept introducing an amendment to "Obamacare" to say, "You can ask if they're illegal aliens," and the Democrats kept shooting it down, saying, "No, you can't ask whether they're here legally or illegally."

WALLACE: I want to bring Attorney General Conway in here.

You supported President Obama's health care reform plan. But now premiums are going up. According to studies, millions of Americans won't be able to keep their coverage. And spending, total national spending, according to studies, is projected to go up $300 billion over the next decade. That's fixing the problem?

CONWAY: Not necessarily. I think the bill needs to be improved upon. I mean, and that's a key difference between myself and Rand. I mean, I want to go up there to try to improve upon it.

I talked about $200 billion in savings from Medicare bulk purchasing. That needs to be implemented. We need to find some ways to control costs. But you know, preexisting conditions -- people shouldn't be denied because they have a preexisting condition. Nineteen thousand Kentucky kids are staying on insurance as a result of changes to this law. Forty-five thousand small businesses getting assistance with premiums. You know, those are good things. He wants to repeal all of that.

And I tell you what, you know, I've got a friend, and she's a retired bank teller. She's on a fixed income. She can't afford a $2,000 deductible in Medicare. That's not an option for her. And it's not an option for me if I go to the United States Senate.

So these things are going to have to be fixed. We're going to have to watch the cost. It is an access bill. But we are going to have to look at costs going forward.

WALLACE: OK. Let's turn to the issue of illegal drugs, which you both referenced earlier, which has become an issue in this campaign.

Dr. Paul, in August you said this about drug abuse in Kentucky, and let's put it on the screen, "I don't think it's a real pressing issue." You also said drug enforcement should be funded at the state level.

But what about Operate UNITE, a federal program which has spent $16 million over the last two years to fight drug abuse in the state of Kentucky? Would you shut that down?

PAUL: As a physician and a father of three teenage boys, I've always -- concerned about drug abuse. And when they quoted me, it was actually a misquote, because what I actually said was I don't think people are as concerned about where the funding comes from. They want the problem to be tackled.

But there's always a debate between how much is federal and how much is state. All I said is that like most problems, I think the more local control, the better. The more the decisions are made by sheriffs and local communities, the better chance we have of fixing the problem.

WALLACE: All right.

PAUL: You know, look.

WALLACE: Kentucky congressman Rogers has set up Operation UNITE, $16 million, last two years.

PAUL: Right.

WALLACE: Drug problem in Kentucky. Are you going to take -- you're going to say, "No, I don't want that money?"

PAUL: No, but what I would say is here's the problem. Chief law enforcement officer of Kentucky wants to talk about drugs all the time. Under his watch the meth labs have doubled in the state. From the Kentucky State Police, meth labs have doubled. He's been out of the state 20 days of the last month campaigning in California, raising cash. He needs to be in the state talking about and trying to do something about the meth labs.

They're worse since you became attorney general.

CONWAY: Rand Paul will do anything to keep from talking about the drug issue because he doesn't get the state.

PAUL: Meth labs are not part of the drug issue?

CONWAY: No, meth labs are part of the drug issue, Rand. What's happened is we've gotten better at -- we've gotten better at identifying them. I mean, you have new -- called shake-and-bake labs that are much smaller. We're finding a lot more of them. That's where those statistics come from.

But it's another example where Rand Paul doesn't get Kentucky. He doesn't get our farm economy. He doesn't get that drugs are a real pressing issue.

Chris, I've had mothers crying on my shoulders because their daughters overdosed from oxycontin. I get that it's a real pressing issue. I've seen it firsthand. I've worked with...


CONWAY: ... I've worked with...


PAUL: ... worse of a problem since you became attorney general.

CONWAY: Oxycontin is probably down a little bit, to be honest with you, Rand, particularly...

PAUL: Actually, prescription drug abuse is up...


WALLACE: Attorney General Conway, I do want to ask you about this, because you have gone after Dr. Paul on this issue. When you campaigned for attorney general, you said you would set up a drug task force.

It took you a year and a half to do that. And at least according to our statistics, the number of meth labs in the state increased during that time on your watch 60 percent.

CONWAY: I said I would create a prescription pill task force. When you get into office, and you're working with your federal and your state counterparts, and you're involved in an investigation that's going to lead to the largest prescription pill bust in the state's history, called Operation Flamingo Road, sometimes you can't jump in front of a microphone when you're in the middle of an investigation, OK? Now, that's what we did there, OK? Now, meth labs are a different issue. We need to look at -- meth labs in terms of precursors are coming from out of state. Meth labs have changed, Chris, over the last few years. They're not all fixed. You have these mobile meth labs that are these little shake-and-bake operations. And the KSP has the hazmat capability to go do the meth stuff.

I've been focused on drugs from day one. And Rand Paul thinks they're not a pressing issue. And he thinks that no federal money -- the local governments can't do this on their own. It's all fine to say, "Oh, I want it all..."


WALLACE: I want to give you 30 seconds -- 30 seconds to respond...


PAUL: Here's the problem. If he's concerned about the drug issue, he's been in California or out of state 14 of the last 20 working days.

CONWAY: That's not true.

PAUL: He is not in state working on our problems. He's been out of state...


PAUL: ... trying to troll for cash.

WALLACE: All right.

Finally, I want to get -- to ask both of you about your view of what your role as a senator -- one of you's going to be going to Washington in January -- what your view of your role as senator would be.

Attorney General Conway, you have signed the policy platforms of and the liberal Web site Daily Kos supporting union card check, repeal of "don't ask, don't tell," and saying you're open to a government-run plan for health care, the so-called public option.

Fair to say that you would in Washington actually be to the left of President Obama? And if you're elected and he's elected, would you support Harry Reid for Senate Republican -- or, rather, Democratic leader?

CONWAY: Well, I mean, Harry Reid's in his own race right now. I like Harry Reid. And when I go to Washington, I'm going to vote for the -- for the leader that will do best by the Commonwealth of Kentucky.

Look, I'm a Democrat and I'm a proud Democrat. I'm certainly not going to be to the left of Barack Obama. I'm going to put Kentucky first. I'm going to put Kentucky first. And the reason I said something on "don't ask, don't tell" is I abhor discrimination.

And that's why it was -- that's why it was painful for a lot of Kentuckians to see Rand Paul go on national TV and question fundamental provisions of the Civil Rights Act. That's why it was painful to hear him speaking out against the Americans With Disabilities Act and wondering what he would say to wounded veterans.

I'm going to be someone who goes up there, puts Kentucky first, understands the state, try to create the jobs of the future with a hometown tax credit. I try to make certain we look at our trade deals from top to bottom, because we've lost 100,000 manufacturing jobs, someone who looks out for our national security, because we have a lot of soldiers in this state.

I'm not going to be someone who goes up there, like Rand Paul has said, and says it's not a security threat to the U.S. if Iran has one nuclear weapon. So I'm always going to put Kentucky first. And I'm going to be someone who's mindful of where I come from.

WALLACE: Dr. Paul, you talk about helping to start a tea party caucus in the Senate. Fair to say that you would line up to the right of most Senate Republicans?

And to clear up some confusion with your answers over the course of the campaign, would you support Kentucky's Mitch McConnell for Senate Republican leader if you become a senator?

PAUL: Yes, I think Mitch McConnell will be the leader again and hopefully the majority leader this time around. What I have said...

WALLACE: And you will support him. You'll vote for him.

PAUL: Yes. Yes.

WALLACE: Not Jim DeMint, no one else.

PAUL: Right. Well, what we're having is -- we will have a caucus meeting and decide -- I will vote for whoever comes out of the caucus as the Republican leader, absolutely. And I presume that that will be Senator McConnell.

What I've said repeatedly throughout this is what we do to help Kentucky, though, is we need to leave more money in Kentucky. All these big government schemes, "Obamacare," a trillion-dollar stimulus package -- a trillion dollars -- the money's not for free.

We're getting that money and having to borrow it or simply print it at the Federal Reserve. It's all very destructive. And I think we're getting to the point in this country where we could have real problems if we don't elect somebody who will go up there and seriously talk about reining in the size and scope of federal government.

WALLACE: We've got a couple of minutes left. I'd like to allow you each -- take a minute, if you will, and make a closing statement summing up this debate and what you'd like to say to Kentucky voters.

Attorney General Conway, why don't you start?

CONWAY: Well, I -- it's just a tremendous honor to be running for Wendell Ford's Senate seat, to be running for the seat once held by Henry Clay. And I'm always going to be mindful that Kentuckians need someone fighting for them up in Washington.

I think I've fought for them as attorney general. I fought for them as attorney general by taking on pharmaceutical companies that gouged us and now Medicaid fraud collections are up over 600 percent.

I do understand that drugs are a pressing issue and I'm going to work in a bipartisan fashion to make certain that we get the assistance we need to really curb drug use in the state.

I'm going to be focused on being an independent voice for Kentucky. And we're going to have a hometown tax credit. We're going to provide incentives to the private sector to try to create jobs.

And we're going to be focused like a laser on getting Kentucky back to work again. And there's a real choice in this election. There's a -- there's a choice in this election between someone who's going to put Kentucky first and someone who thinks that we don't need any mine safety regulations, we don't need workplace safety regulations, who does not think we need an Americans With Disabilities Act, who thinks that Medicare -- we need a $2,000 deductible.


CONWAY: And I'm going to put Kentucky first.

WALLACE: You get the last minute, sir.

PAUL: I didn't know it was Wendell Ford's seat. I thought it was the people of Kentucky's seat. So I will vote -- I will work for people from both parties. I will reach across the aisle.

But I will say, "Look, the bipartisan nature of this has to be approaching the debt." Republicans have failed us on the debt and so have Democrats. But I will reach across the aisle to say, "You know what? We have to reduce spending." It's not a revenue problem. It's a spending problem in Washington. And I think we can do something about it, but I think we need to do something about it before it's too late.

WALLACE: Dr. Paul, Attorney General Conway, we want to thank you both so much for coming in today, for participating...

CONWAY: My pleasure.

WALLACE: ... in this debate, answering our questions, answering each other's charges. Safe travels during the final days of this campaign, gentlemen.

PAUL: Thank you.

CONWAY: Thank you so much, Chris.

PAUL: Thank you.

WALLACE: Up next, we'll bring in our Sunday regulars live from D.C. to discuss the president's new effort to energize his liberal base, while congressional Democrats go home with plenty of unfinished business. Back in a moment.


WALLACE: So, President Obama, on the campaign trail, trying to fire up Democrats and trying to close the enthusiasm gap that Republicans enjoyed as they approached the midterms. There was also a big rally of liberals, progressive groups on the National Mall yesterday in the wake of the Glenn Beck rally. Tens of thousands of people attended. I think organizers said 175,000. We have two side-by-side pictures. Let's put those up, because it appeared to our untrained eyes that, while it was a good-size crowd, it was considerably smaller than Glenn Beck's rally.

Still, Brit, there are signs in the polls that Democrats are beginning to come home.

BRIT HUME, FOX NEWS SR. POLITICAL ANALYST: There are a few, Chris, but the general atmosphere and the general landscape of this race really has not changed. And when Congress went home this week without acting on the tax cuts that are now facing every American, every single American who pays income taxes is now facing a tax increase in the midst of an economic downturn that has not abated to the point of helping people who are looking for jobs. I think that will deepen that difficulty that the Democrats face. And while I think the president is shrewd and smart to go out and try to rally the race, and you could see him at his fiery best in that sound bite, I have a real question as to whether he will succeed in doing so. And the other problem I think he faces is that there are just not as many Democrats this time around as there were the last time.

WALLACE: Mara, we'll get to the question of Congress leaving town with unfinished business in a minute, but your sense of whether or not the president is succeeding in galvanizing the base, energizing the base, trying to close the enthusiasm gap?

MARA LIASSON, NPR: Well, first of all, there is no hard evidence right now. He has only had one of these four planned rallies. You can't point to the polls and say, oh, look, he left (INAUDIBLE) and all of a sudden, the Senate race was closer there. As a matter of fact, it looks pretty bad for Russ Feingold. But the fact is that the Democrats on the Hill and around the country want him to do this. They believe that he is important in their effort to bring Democrats home and rally the base. The White House certainly thinks this is a good use of his time, and we'll see over the next couple of weeks if some of these races tighten up. Now, it's true that in some races like California, Barbara Boxer looks a little better than she did. But in other places like West Virginia or Wisconsin or Connecticut, things look worse. So it's hard to point to hard evidence. But the Democrats are wagering $50 million that they can get back just enough of those first-time Obama surge voters, young people, African-American voters who came out in 2008, get just enough of them back that they can save enough vulnerable Democrats to keep a hold of Congress.

WALLACE: Bill, I want to pick up on that, because I talked to a very plugged in, very loyal Republican this week who surprised me because he said he thinks the GOP may now fall short of taking back the House. He said that the Democrats' big advantage in money is beginning to work, just as Mara said, in some of these marginal House seats, that the Democrats' negative ads -- they've done a lot of opposition research on personal issues and business issues -- those are starting to having effect in a bunch of districts. And so my question really is, have we -- and it's all of us in the media -- have we all been premature in declaring or presuming a Republican victory in the House in November?

BILL KRISTOL, "THE WEEKLY STANDARD": No one should presume anything. There is a month to go, and a lot of races will move in one direction or another. I would say the Democrats have had a tiny comeback in the last week or two, precisely because they have had more money. Incumbents have gone up on the air typically before their Republican challengers who have been hoarding their money to use in October. They've gone up in the air, they've gone up attacking the personal qualifications of the Republican challengers who aren't that well known, and that has tightened a few races in some House districts, a couple of Senate races. But the bigger picture remains very bad for Democrats. And I think Republicans are, I bet, 4-1 the win the House. I think they will win it quite comfortably, actually. And I think in the last couple of weeks, the race could expand out again. The typical pattern in these big wave elections is the party that is going to benefit from the way establishes a lead. There is a little bit of a comeback, kind of a bear market rally by the other party in late September, early October. We saw that in '94 with the Democrats, saw it a little bit with Republicans even in '06, when the money starts to kick in.

The last three weeks of this election, the money will be even though. Republicans will up on the air against the Democrats. I think voters will focus hard on what message they want to send. I think the message they want to send is that they want a Republican Congress to check President Obama and to repudiate some of what the Democrats have done, and I think they are going to get one.

WALLACE: Juan, let's get to this issue that Brit brought up, which is the fact that Democrats adjourned both the House and the Senate this week to go back in campaign until the election without passing a budget, without extending the Bush tax cuts. That got both sides pointing fingers. Let's watch.


REP. STENY HOYER (D-MD), MAJORITY LEADER: The "party of no" adopted a political strategy of obstructionism and now claims that there is not anything happening in the Congress, and the facts belie their assertion.



REP. JOHN BOEHNER (R-OH), MINORITY LEADER: Look at how the 111th Congress is not so much concluding as much as it has collapsed.


WALLACE: Juan, who do you think has got the better side of that argument?

JUAN WILLIAMS, NPR: Well, I think that Republicans have been dominating this argument for some time by making it out that somehow, the Democrats want to raise your taxes by not extending the Bush tax cuts. But what we see on the ground I think contradicts what we just heard from Congressman Boehner, because even when he said he was willing to compromise with President Obama in terms of going ahead with the tax cut for -- I guess it's 97, 98 percent of Americans who make less than $250,000. He was immediately accused of capitulating by other Republicans who say hold the hard line, we have got to have the additional tax cuts for that 1.5 or whatever percentage of Americans. So, I mean, that has become the narrative. So, Nancy Pelosi, I saw Nancy Pelosi on Friday. And she said she said, you know what? She thought she could have won the vote even though there were several Democrats, I think 30-plus, who said that they wanted to extend the tax cuts for everyone. She thought she could have won it by actually getting some Republican votes.

HUME: Well, then why didn't she call them to vote?

WILLIAMS: Because, if you'll give me a moment, Mr. Hume --

HUME: A moment?

WILLIAMS: -- because she said that she didn't want to give Republicans another chance to misrepresent it because Republicans are out there making the case they should --


HUME: So this poor little Speaker of the House presiding over this massive majority has the vote she says to win on this issue and send her members home, having voted to stave off the tax cuts for nearly everybody, and she was afraid of what the minority Republicans were going to say about it? And you seriously -- do you believe that?

WILLIAMS: Did you just say stave off tax cuts for everyone?

HUME: Tax increases. I'm sorry.

WILLIAMS: That's a distortion.

HUME: Tax increases.

KRISTOL: The fact is -- I was with four Republican Senate candidates this week by chance in New York at a little event. And they said -- I asked, "How is the tax debate going?" And they said, look, until now, it's been the traditional Democratic/Republican debate. Democrats say they want to cut taxes for the middle class. Republicans say, you don't want to raise any taxes in a recession. And it was probably kind of a wash politically.

All of that -- now, maybe they're wrong, but all of them were extremely happy. This was the night -- the day after Nancy Pelosi adjourned the House without allowing a vote -- without allowing a vote on the coming tax increase. Every Republican challenger can now say you have been in charge for two years, you could have dealt with this, you could have cut whatever deals you needed to cut to do as Juan said and bring over some of those moderate Republicans. You could have insisted on an up-or-down vote. You didn't. Every American now faces a tax increase in January thanks to this Democratic Congress doing nothing.

WALLACE: I want to get Mara into -- guys, I want to get Mara into this discussion, because that is the issue I think Republicans are going to make. When they come back with a lame duck in November, they're not going to be able to say at that moment -- tell American what their taxes are going to be on income, on dividends, on inheritance, on capital gains a month-and-a-half away.

LIASSON: No. Well, the problem is that they might very well get some kind of a deal, a temporary extension or whatever, in the lame duck. The problem is that every Democrat now has to go home now without saying, "I voted to continue lower taxes for the middle class." I do think that the White House and the Democrats overestimated how strong their argument was going to be and how easy it was going to be to keep all the Democrats on one page on this. I mean, I think if they had all their Democrats, they would have brought it up for a vote. Now, their argument is Republicans are holding the middle class tax cut hostage to continuing the tax cuts for the rich. The problem with that is, if you don't have a vote and kind of show them holding it hostage, how do you know that they really are?

WILLIAMS: Yes, but my point, Mara, is, look --

WALLACE: Juan? Juan?

WILLIAMS: -- you have to be blind and stupid not to know that the Republicans have been the ones blocking this tax cut.


WALLACE: Go right ahead, guys.

Juan, you can continue talking during the commercial. We're going to take a break here. But up next, some big changes at the White House this week. Will President Obama use chief of staff Rahm Emanuel's departure to change the way he governs? We'll get the panel's take on that, as "Fox News Sunday" continues from Louisville and Washington. Back in a moment.



RAHM EMANUEL, WHITE HOUSE CHIEF OF STAFF: I want to thank you for being the toughest leader any country could ask for in the toughest times any president has ever faced.



WALLACE: I suppose one could put Abraham Lincoln or George Washington into that mix, but in any case, that was Rahm Emanuel ending his time as White House chief of staff and heaping praise on his now former boss. And we're back now from Louisville and Washington with our panel.

Before we get to Rahm, let's talk about the choice that the president now faces, because it seems clear that he is going to encounter very different circumstances in Washington after the election with either a much smaller Democratic majority in the House and Senate, or possibly Republican control in one or both houses. Brit, let me start with you. Does he move to the center like Bill Clinton did in 1995, or should he stay on the left and engage in partisan warfare for the next two years?

HUME: Well, Chris, I don't think we know. I think if this election turns out as it appears overwhelmingly likely to, that's a pretty clear sign that says don't keep doing what you're doing. It becomes the definition of insanity. My question, though, is will he be able and intellectually willing as Bill Clinton was to move to the center? Bill Clinton did that decisively and noticeably after the repudiation in 1994. This president is different. He didn't come from a southern state where he had to be re-elected or elected as a moderate, as Bill Clinton had. He really doesn't have a lot of experience as a moderate. He talked like a moderate during his campaign two years ago, but he's governed pretty much from the left, from the left part of the American mainstream. And my sense about it is that I don't think this new interim chief of staff, Pete Rouse, can someone that can be counted on to tell you to the center of the way, say, Dick Morris did with Bill Clinton after the election in '08.

WALLACE: Mara, let me pick up on that, because if he decided to move to the center, to follow the Clinton model -- and I think a lot of us agree that Pete Rouse might not be the guy who would be a good chief of staff -- should he go outside? And what do you think are the chances that he will follow the Clinton model if he takes, you know, a whipping, a drubbing, as George W. Bush called it in 2006, in the elections in November?

LIASSON: Look, I think that I can tell you on very good authority that at the White House, they totally reject the idea that he would adopt the Clinton model and move to the center. Now, that being said, everything is going to change in November. Even if Democrats retain control, there are going to be a smaller number of Democrats and they're going to be more liberal proportionally. There's going to be a larger number of conservatives, and they're going to be more conservative, relatively. So there's going to be fewer people in the middle for him to make whatever deals he might want to make. Now, that having been said, he is going to have to acknowledge in some way, whether it's the choice of a new chief of staff or something he says, that he got the message of this election. He is going to have to explain what he thinks it is. And then, when you look forward at all the issues he's going to deal with, I don't think it's so simple as just staying to the left or moving to the center. The issues that are coming up are not health care, the stimulus, the bailouts. What they are, are deficit reduction, which by definition has to have a big bipartisan buy-in to work. The president's deficit commission which reports on December 1st, I think, or in December, is talking about a formula of something like three times as many spending cuts to one tax increase. So maybe he could find a way to craft some bipartisan deals.

WALLACE: Let me bring Bill Kristol in, because I was going to ask you exactly that. Do you see areas of bipartisan agreement that this president and Speaker Boehner, just presuming, could find areas of agreement, whether it is on the deficit? Free trade is another area people talk about.

KRISTOL: I think it's possible. I think the president has cleverly and sort of carefully gotten rid of the incredibly arrogant, smart Alecs who dominated the White House in the first term -- Rahm Emanuel, Larry Summers, Pete Orszag. They knew best. They were so clever. Never let a crisis go to waste. We can jam stuff through. No problem. This president can carry anything off. That is not Pete Rouse's attitude. Pete Rouse worked for Tom Daschle for 19 years. He cut a lot of deals with Congress.

He's a liberal, but he's very different in tone and I think in governing philosophy from Rahm Emanuel. I love the way the whole media has decided to accept Rahm's story that he's always wanted to be mayor of Chicago. First, he grew up in the suburbs, went to college in New York, worked in Washington, D.C. Went back to Chicago in 1999. I think you can Google Rahm Emanuel and never find him saying a word about being mayor of Chicago until it conveniently became his lifelong ambition so that could give him a nice excuse for leaving the White House. So I think Republicans should not underestimate President Obama's willingness to get rid of people who he thinks maybe, for all their good intentions, haven't served him very well. And it's not exactly pivoting to the center. Governing in a different way than he did in his first two years.

WALLACE: Let me, Juan, bring you in about Rahm Emanuel, because the original line is -- and Bill quoted it -- during the presidential transition, he said, "Never let a crisis go to waste," which meant let's take advantage of the financial situation to pass a lot of big legislation. But during the debate over health care, he reportedly wanted to go smaller, more incremental, and keep the focus on the economy. So my question is, who was Rahm Emanuel and what was his role these last two years?

WILLIAMS: Well, I think that Rahm Emanuel really was the deal- maker, the guy who was sent up to Capitol Hill to twist arms, crack the whip, and make sure that the Democrats served the president's end. Now, this is interesting, because the criticism that has come from the left is he was far too willing to compromise, and that's why you don't get the public option in health care, that's why you didn't get the level of spending that the left would have wanted in terms of the stimulus, and get the results that they thought would have happened if you had a greater input at that time. And while you haven't seen the kind of populist anger at Wall Street -- so the left thinks that Rahm Emanuel was far too willing to compromise. Now, I must say from the right, the idea is, you know what? Rahm Emanuel is a guy that will take no prisoners. Rahm Emanuel was a hard person to deal with in terms of getting phone calls returned and all the rest. But, you know, I think there is fear and intimidation as a legitimate part of American politics. That's been Rahm's stock and trade. It's time to move on. I think the president feels that way. And I think Pete Rouse, who has been the president's confidante and who was described earlier as much more of a low-key personality, willing to make deals, will do much better with both sides of the aisle.

HUME: Before we run out the clock here, Chris, it is worth pointing out that Rahm Emanuel, as Juan did, is not popular on the left. And in fact, if the president were trying to make peace with the left, one of the things he could have done was to get rid of Emanuel. It wasn't the first time I heard that Rahm Emanuel wanted to be mayor of Chicago. I heard that for a long time. And what's more, you see some of the people who are still around, yes, Larry Summers is gone, but David Axelrod is around and will be around until he takes off to run the campaign. Robert Gibbs is still present. I question whether there is anything that is really at the core of the Obama White House that has changed.

WALLACE: So -- and we have about 30 seconds left -- Brit, you think this is still a liberal, progressive, whatever you -- left-wing presidency and White House?

HUME: Well, he still has the opportunity, Chris, after the election. Pete Rouse is named as an interim. He could be named as a permanent new chief of staff. But if the president wants to make a change, he still has plenty of opportunity to do that before the new Congress is sworn in. All I'm just saying is you don't see it yet.

WALLACE: All right, panel. Thank you so much. We'll see you next week. And don't forget to check out the latest edition of "Panel Plus," where our group picks right up with the discussion on our Web site, And we promise we'll post the video before noon Eastern Time. Up next from Louisville, Kentucky, we go on the trail.


WALLACE: With just 30 days until the midterm elections, the president is trying to light a fire under Democrats. Congress left town to campaign with important business left undone, and both sides are trying to define what Republicans will do if they regain power. You don't have to be in Louisville to say we're now in the home stretch on the trail.


OBAMA: We cannot sit this one out. We can't let this country fall backwards because the rest of us didn't care enough to fight.

BIDEN: It's time to just buck up here, but not yield the playing field to those folks who are against everything that we stand for in terms of the initiatives we put forward.

UNIDENTIFIED MALE: The 111th Congress, the House, stands adjourned.

BOEHNER: And if Democrat leaders leave town without stopping these tax increases, they are turning their backs on the American people.

HOYER: Whether we do it today or we do it six weeks from today, there will be no tax increase for middle class Americans.

ANNOUNCER: He's been in Washington for decades. He knows how the game works. He created the game, and he's taken millions from special interests. And now John Boehner wants to talk about reforming Congress?


ANNOUNCER: Now, that's funny.

BOEHNER: The House finds itself in a state of emergency. The institution does not function, does not deliberate, and seems incapable of acting on the will of the American people.

OBAMA: It's fair to say that we could not have accomplished what we've accomplished without Rahm's leadership.

EMANUEL: Because my temperament is sometimes a bit different than yours, Mr. President. I'm sure you have learned some words that you never heard before. Mr. President, thank you. And thank you all. I look forward to seeing you in Chicago.



WALLACE: And we'll be right back with some final thoughts.


WALLACE: Our thanks to Rand Paul and Jack Conway for participating in our debate. And also, our thanks to our colleagues at Fox 41 Television here in Louisville for all their support. Have a great week. And we'll see you back in Washington next "Fox News Sunday."

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