Darrell Issa, Fred Upton Talk Oversight; Allen West, Mike Lee on Tea Party Conservatives

The following is a rush transcript of the January 2, 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. This is "Fox News Sunday."

Ringing in 2011 with a new-look Congress. With the Republicans in charge of the House, how much will they shake up Washington? We'll ask two new committee chairmen, Darrell Issa who will have broad powers to investigate the White House and Fred Upton who will dig in to health care reform and energy policy.

Then, what effect will the new Tea Party-backed members of Congress have on Capitol Hill? We'll talk with two of them, incoming Senator Mike Lee of Utah and Congressman Allen West of Florida.

Plus, has the Obama administration figured out how to go around lawmakers and impose new regulations on us? Our Sunday panel will have a fair and balanced debate.

And a remarkable story of courage from our power player of the week. All right now on "Fox News Sunday."

Hello again and happy New Year from Fox News in Washington. All eyes will be on House Republicans this week when they take control from Democrats. From investigating the White House to looking for ways to undo Obamacare, our guests will be key players.

Congressman Darrell Issa who will chair the House Oversight and Government Reform Committee and Congressman Fred Upton, who will chair the Energy and Commerce Committee. And gentlemen, happy New Year and welcome to "Fox News Sunday."

REP. FRED UPTON, R-MICH.: Happy New Year.

REP. DARRELL ISSA, R-CALIF.: Happy New Year to you.

WALLACE: Let's start with the big picture. The two of you wrote an article together in the Washington Times in November under the headline "Reclaiming the Right to Oversight," in which you said this, "The new majority in Congress certainly has its work cut out to undo the big government havoc that was wrought during the Democratic one- party reign over the past two years.

Congressman Upton, let me start with you. Given the fact that Republicans still don't have control of the Senate, still don't have control of the White House, how much can you and the House do to undo and block the Obama agenda?

UPTON: Well, we can actually do a lot. I was glad to see the president talk yesterday in his radio address about jobs and the economy, reducing the size of government and reducing the deficit.

We're going to try to help them do that job. We are going to have a very aggressive oversight subcommittee in my committee, and I know that Darrell is going to do the same with his full committee.

We are going to be working together. We are going to be looking to identify programs that don't work, programs that ought to be cut, working with our leadership, Boehner and Cantor, to bring up spending reductions virtually every week, as we've done without success this last year to really get the job done.

WALLACE: Congressman Issa, White House officials have already said they're going to hire more lawyers to deal with all the oversight investigations, particularly coming from your committee. Are they going to need them?

ISSA: They're going to need more accountants. The fact is that in the 1980s, Congress did about 1,600 days of oversight. That's a lot more than my committee alone could ever do.

Last year, we did less than 400, far less. And that's with you being able to call an oversight, whether it is or it isn't. Looking for the hundreds of billions of dollars of waste, Office of Management and Budget, the president's Office of Management and Budget views $125 billion of misspending by Medicare, and yet year after year it doesn't change.

That's 10 percent of the deficit that would go away if we simply stop paying to people who don't exist their claims. There is so much opportunity, but it's more of an accounting function than legal function. It's more about the inspector generals than it is about lawyers in the White House.

And the sooner the administration figures out that the enemy is the bureaucracy and the wasteful spending, not the other party, the better off we'll be.

WALLACE: All right, Congressman Upton, I want to ask you about two big issues that your committee is going to be looking at, Energy and Commerce. First, health care reform. For all the talk about repeal, as long as Barack Obama is president, can you really block the law? Can you really stop what is going to happen between now and 2012? Or are you basically going to be holding hearings to point out problems?

UPTON: Chris, watch what happens. As part of our pledge, we said that we would bring up a vote to repeal health care early. That will happen before the president's State of the Union address.

We have 242 Republicans. There will be a significant number of Democrats, I think, that will join us. You will remember when that vote passed in the House last March, it only passed by seven votes.

WALLACE: But you're not going to repeal it? The vote in the House -- it's not going to happen in the Senate.

UPTON: Just wait. If you switched four votes from last March, that bill would have gone down. So we'll take the Democrats that voted no. We'll take other Democrats who probably agree with Speaker Pelosi's statement.

Remember when she said we want to pass this thing because then we'll learn what's in it? Well, now the American public does know what is in it. Unpopularity numbers are as high as 60 percent across the country. I don't think we're going to be that far off from having the votes to actually override a veto.

Remember President Clinton? It took him three times before he signed welfare reform. If we pass this bill with a sizable vote, and I think that we will, it will put enormous pressure on the Senate to do perhaps the same thing. But then, after that, we're going to go after this bill piece by piece.

We'll look at the 1099 issue, Dave Camp's committee, Ways and Means, to look at the $600 1099 that has to be processed for every business-to-business transaction. We'll look at the individual mandate requirement. We will look at all of those as individual pieces.

We're going to take up early I think the Stupak language, no funds shall be spent on abortion, as a separate bill early on. And we will look at these individual pieces to see if we can't have the thing crumble.

WALLACE: I want to ask you about another big issue your committee is going to take up, and that's the EPA, which starting today is imposing new regulations on some industrial facilities to reduce their greenhouse gas emissions.

In the Wall Street Journal this week, you co-wrote an article in which you said this -- "This move represents an unconstitutional power grab." This is the EPA regulation. "This move represents an unconstitutional power grab that will kill millions of jobs unless Congress steps in."

Specifically, what are you going to do about EPA regulation of greenhouse gases?

UPTON: We are not going to let this administration regulate what they've been unable to legislate, and that's -- came up, if you remember, through the cap-and-trade bill that passed the House and never got through the Senate.

The Clean Air Act, which was passed in the '90s, does require that the administration in any regulation has to look at the impact on jobs and the economy. We knew that through cap-and-trade, we would see at least in the Midwest energy prices increase by as much as about 20 percent almost overnight.

WALLACE: So you are saying you can stop the EPA regulation?

UPTON: A couple things that we can do. We're going to have early, early hearings on this. We're going to see exactly what their analysis is on its impact on jobs. There's also something called the Congressional Review Act, that within 60 days of rules being published, Congress can take this up and with an up-or-down vote, it is filibuster-proof in the Senate. It's been used before.

WALLACE: But it can be vetoed by the president.

UPTON: It can be vetoed by the president, but already we've seen a number of powerful Democrats indicate that they have real, real qualms about what the EPA is intending to do.

WALLACE: I want to follow up quickly on this with you and then I want to bring in Congressman Issa, on this question of EPA regulation. In the article that you co-wrote with the head of Americans for Prosperity, which is a group that is financed in part by oil companies, you say this -- "This presumes that carbon is a problem in need of regulation. We are not convinced."

But we checked, Congressman, on your congressional web site, and you say on the web site, "I strongly believe that everything must be on the table as we seek to reduce carbon emissions. Climate change is a serious problem that necessitates serious solutions."

So question, is carbon a problem or isn't it? And if it is, if you're going to kill the EPA regulation, what is your solution?

UPTON: We want to do this in a reasonable way. Before the end of the next decade, our country is going to need 30 to 40 more percent more electricity that we use today. So we need an all-of-the-above strategy. We need clean coal. We need natural gas. We need nuclear -- something that has not happened. We need a whole host of things.

WALLACE: Do we need to regulate carbon?

UPTON: I don't think that we have to regulate carbon to the degree we have a carbon tax or you have a cap-and-trade system. And the House spoke pretty loudly -- you know, you take that same cap-and- trade bill that passed the House last year. Today it would lose by 50 votes and it could never come up in the Senate. This is not -- this regulation process is not the way to proceed.

WALLACE: Congressman Issa, you have been very patient. I'll bring you in. You're chairman -- going to be chairman in a couple of days.

ISSA: I can be being patient for those two days.

WALLACE: Right, of the House Government Oversight Committee and you've already decided what are going to be your first hearings. I want to ask about one of them, regulatory impediments to job creation.

Given the fact that the White House has made it clear that it's going to do much more this year to govern through legislation and not through regulation, with the House now in Republican hands, does that mean you're going to be in a constant battle with the White House?

ISSA: I think we're going to be in a constant battle over jobs and the economy. My father-in-law was an Air Force pilot, and he used to say when there was a problem that stopped him from doing something, oh, another rock in my knapsack.

But as a pilot, he understood every bit of weight you put on is a fuel you don't have. It's a distance you don't go. You wouldn't want to be bomber pilot over the English Channel and find out you have too many rocks and not enough fuel. We have about $1.7 trillion worth of regulatory costs already in the government. If the president wants to throw another $300 or $400 billion, what he's doing is taking it right out of businesses, right out of employment, right out of competitiveness. We need to make sure we compete.

People always talk about China. We need to compete against Brazil and against Europe.

ISSA: Those countries are doing regulatory reform that is reducing the amount of rocks in the knapsack. We need to do the same thing.

WALLACE: But -- but other than holding hearings, what are you going to be able to do?

ISSA: Well, my committee is the committee primarily of efficiency and regulatory -- some oversight. Fred's and some of the other committees specifically get into the laws.

Yes, mostly what we're going to do is shed light on it. But, at the same time, as you shed light, you build the American people's demand that we realize that the president took two years to say I found out nothing was shovel-ready. Well, you know why nothing's shovel-ready? Because the bureaucracy slows down those road programs, those other things that the president said were so important.

We need to make it to where when we do a WPA-type project, a project about road building or buildings, with government expense, that they can actually happen in six months or a year, not 10.

WALLACE: Over the last two years, you have repeatedly criticized the Justice Department over not investigating the community group ACORN, for scaling back a voter intimidation case against the New Black Panther Party, and for failure to go after WikiLeaks.

Question -- what do you think of Attorney General Holder?

ISSA: Well, I think he's guilty of all of those things. He isn't doing enough. Certainly, he -- he didn't do anything about ACORN, and we're going to continue to make sure that we don't have that kind of waste in government.

He didn't do anything effectively about the New Black Panthers. Chairman Lamar Smith, as a civil rights issue, will take that on.

WALLACE: Head of the Judiciary Committee?

ISSA: The Judiciary Committee.

And when it comes to WikiLeaks, at the end of the last Congress we couldn't get a whistleblower bill passed because ultimately the next whistleblower bill has to deal with WikiLeaks and the loss of these classified documents in a mature, bipartisan way. And we're going to do that right off the bat because the kind of transparency we need is not to have somebody outing what is said by diplomats in private.

And we need to change that, and that's going to be a big part of our committee's oversight, is to get that right so the diplomats can do their job with confidence and people can talk to our government with confidence.

WALLACE: When you say that Attorney General Holder is guilty of all of those failures, should he step down?

ISSA: Well, I think he needs to realize that, for example, WikiLeaks, if the president says I can't deal with this guy as a terrorist, then he has to be able to deal with him as a criminal, otherwise the world is laughing at -- at this paper tiger we've become.

So he's hurting this administration. If you're hurting the administration, either stop hurting the administration, or leave.

WALLACE: We've got a couple of minutes left, and I want to ask you both the same question. The Tea Partiers -- and we're going to talk to two of them in a moment who were elected -- are not very happy with -- and I'm going to talk to both of you as members of the Republican establishment.

They say you made too many deals collectively in the lame duck session, you added a trillion dollars of debt, you voted new money, billions of dollars for the first responders, you reinstated the estate tax, there are no Tea Partiers in the House Republican leadership.

The question -- I'll ask you first, and then -- and then you -- did you get the message or did you fail to get the message the voters sent in November?

UPTON: I think the big message was we need to cut spending, and you're going to see that happen. A year from now --

WALLACE: Added $1 trillion to the debt.

UPTON: No one wanted increased taxes and that would have been the alternative had it not happened.

But we are going to be -- we are going to be cutting the size of government, we are going to be cutting the deficit and we're going to do it on the spending side, not by raising taxes. And a year from now I think you'll see that -- that the evidence of -- of what we do in the House, for sure.

WALLACE: Congressman Issa?

ISSA: Well, as somebody who a state -- will pay the estate tax, trust me, I think it's inherently immoral and wrong, and I -- and I share that with the Tea Partiers that taxing the dead just because the --


WALLACE: But you guys reinstated it.

ISSA: There's no question that the five and 35 -- the $5 million deduction and the 35 percent is nowhere close to what it should be. It will kill small businesses.

You know, Warren Buffett always talks about how he can afford. He's a public company. Small private businesses are killed by the death tax everyday because they can't afford to finance that amount of money.

WALLACE: Real quickly, do you think the Tea Party is going to be good for the GOP in -- in the House?

ISSA: I think fiscal conservative -- all the fiscal conservatives coming in at one time and coming into a group like ourselves who really want that aid and help, giving us a majority of the majority that cares about reducing waste and reducing spending, it's great.

WALLACE: Congressman Issa, Congressman Upton, we want to thank you both so much for coming in on this holiday weekend. And we're going to be following all the action in the House this year.

UPTON: We look forward to it.

WALLACE: You guys will be busy.

ISSA: Thank you.

WALLACE: Up next, how -- will -- how will the Tea Party candidates govern as new members of Congress? We'll talk with two of them when we come right back.


WALLACE: One of the most interesting developments here in Washington in the New Year will be the impact of those Tea Party outsiders who have now been elected to Congress. Will they change the Capitol or will the Capitol change them?

For answers, we turn to new Senator Mike Lee who joins us from his home State of Utah, and new Florida Congressman Allen West who's with us in Washington.

And gentlemen, welcome to "Fox News Sunday."

CONGRESSMAN-ELECT ALLEN WEST, R-FLA.: Thank you for having me.


WALLACE: Congressman -- I want to ask you both. It's been two months since you were elected to Congress, and you both have made several trips to Washington. You've gotten to meet with your colleagues, got to meet with the leadership in the House and the Senate. Is it even worse than you thought it was? Are the problems even bigger? Congressman West, why don't you start?

WEST: Well, I think the problems are big, but I don't think they're insurmountable. I think that if we get back to some basic fundamental principles, we can make sure that we resolve the issues. And I think that that's what the Tea Party was all about. It's getting back to a constitutional conservative government. And that is limited, but it's also effective and efficient. I think that that's what we'll be able to do.

WALLACE: Senator Lee, your thoughts about these last two months. And is Washington even more broken than you thought it was from the outside?

LEE: I -- I wouldn't say it's more broken. It is what it is. You know, voters announced in droves in November of 2010 that the federal government is too big and too expensive. They proclaim what they don't want from the federal government, which is more debt heaped on the backs of unborn generations.

They're in the process now of telling Washington what they do want from the federal government, which is strong national defense, controlling the borders and balancing its budget.

WALLACE: One of the things that I think we're all waiting to see is how you Tea Party members deal with Washington. And -- and particularly with your own party, with the GOP establishment here in Washington.

Congressman West, you've already written a letter to House Majority Leader Cantor when you found out how many days the House was going to be taking off in the New Year and complaining about that. Saying we've got a lot of work to do. We need to be working harder.

Congressman Cantor's spokesman said more days in Washington mean a bigger government. Are you convinced?

WEST: Well, I think that that's a very disconcerting statement for me, because if they believe that the more time that we're spending up here working toward what's best for the American people is a bad thing, then, you know, what's our purpose for being here?

Our purpose is to be up here to resolve these issues. Our purpose is to be up here and represent the people. And I think that we're going to have to work a little bit harder starting off especially in these first three to four months than I think that that schedule showed. And that was something that I had to bring up.

And I think it's important that, you know, even though I'm new up here and then a freshman, if I see something that I feel that is not correct, you know, my responsibility is to bring that up as an issue.

WALLACE: Senator Lee, when you see -- and I was just talking about this with the new chairmen, when you see Republicans making deals in the lame duck session, yes, extended the Bush tax cut but it added another trillion dollars to the debt, and billions for the first responders, did Washington -- and particularly did the Republican establishment get the message that you say voters were sending in the mid-term elections?

LEE: Well, it certainly is disturbing that we have to add an additional trillion dollars to our debt in order to preserve tax cuts without which our economy couldn't survive right now. This just showcases, I believe, the need for a balanced budget amendment. Congress has long abused the authority to incur debt in the name of the United States. And we need to restrict that through adopting a balanced budget amendment. I think that needs to take place this very year. I think we can get it done in 2011. And I intend to push for it.

WALLACE: But are you willing as Congressman West says he is, are you willing to confront the GOP establishment, the leadership of your party in the senate where you think they're wrong?

LEE: Well, certainly. That's what elections are about. That's why we have senators and members of congress from every state. That's why we have elections. Because the people speak and there are different viewpoints out there. It doesn't mean just because we're members of one party or another, doesn't mean that we behave monolithically. It means that we will express our view points and I intend to do that.

WALLACE: I want the to both of you about your agenda. Congressman West, you got a lot of attention when you made a speech last year -- well actually now that it's 2011 -- it was 2009 which was viewed 2 million times on YouTube. Let's take a look.


WEST: We need to meet in places and start talking about restoring our liberty and fighting a backs against a tyrannical government. It starts right here. It starts right now with each one of you that's gathered here today.


WALLACE: Then in November you said your focus -- here is the quote -- "that this liberal, progressive, socialist agenda, this left wing vile, vicious, despicable machine that is out there is soundly brought to its knees."

"Tyrannical, socialist, despicable," is it really as bad as that?

WEST: I think it is. When you look at the things that happen in our country and the nationalization of so much of our production. Being it an automobile industry, being it a health care industry, being the fact that we had an amendment in the health care law that said the federal government is going to take over education. When you look at the fact we're creating more victims and making people dependent on the government, I would not have agreed with extending unemployment benefits with 13 months. I think that if we extent these unemployment benefits, take it through the winter time.

But we need the viable conditions to be set so that we have private sector job growth in this country. When you look at the incredible debt, and the deficit that has occurred over the last two fiscal years, we're going in the wrong direction. I think that this liberal progressive agenda is not the thing that the American people want and it's antithesis to who we are as a constitutional republic.

WALLACE: Well, let me ask you, just following up on that. Because you're going to have a decision to make as an individual member of the House voting on the debt limit, probably as early as late February, early March, continuing resolution, certainly by early March. Are you prepared, backing up these principles, backing up this rhetoric, are you prepared to see government shutdown or the government default in its obligations if it doesn't begin to get its House order?

WEST: Well first, I don't think that we will have the government shut-down. I think that -- you know, I would vote to have that continuing resolution, but when you talk about raising that debt limit, the only way that I would ever support raising the debt limit if we also talk about budgetary controls on the federal government, capping its spending, how do we deal with the Social Security, Medicare and Medicaid problems, because they cannot continue to run on auto-pilot. So I'm not going to write a blank check as far as raising the debt limit without us also saying we're going to do these things to make ourselves fiscally responsible as Senator Lee talked about a balanced budget amendment.

So it's not going to be a blank check that comes from Allen West. We have got to make sure that we are responsible up here before we continue on with business as usual.

WALLACE: But are you saying that you would vote against the debt limit, raising the debt limit if you don't get the things you're talking about and let the country default on its obligations?

WEST: Well, I don't think the country is going to default on its obligations. I think that we will be able to meet our obligations but I think that the American people are looking for us to make a principle stand and say we are going to do something to get this economic situation, this fiscal responsibility under control. And if just say we're going to raise the debt limit, that's not sending the right message.

WALLACE: Senator Lee, you don't use Congressman West's rhetoric but you talk about going back to the budget of 2004 at least as a goal. Are you prepared to tell Americans that it's not just a matter of waste and fraud, that they are going to have to sacrifice, do without some program that do some good because we can't afford them anymore?

LEE: Sure. And look, Americans are already doing that. They're doing that already in their homes and their families and their businesses. State and local governments are doing that. The federal government shouldn't be exempt from everything that other Americans have to do, at every level of our society. And it's time to once and for all we stop perpetually spending money we don't have and sending the bill to unborn generations of Americans.

WALLACE: You both, even in the short time since the election have run in to some criticism for your choices of chiefs of staff. And I want to ask you about that starting with you, Senator Lee. You have chosen an energy lobbyist as your chief of staff. Is that the right person to drain the swamp here in Washington? Incidentally, that's not the right person. But are you -- is that the right person to drain the swamp in Washington, an energy lobbyist?

LEE: I've hired the brightest political mind, political consultant and lobbyist in Utah, Manning Spencer Stokes. He is a brilliant man. He understands Utah politics and he understands Washington politics. And I need a man like that to help me in Washington.

WALLACE: And you're not scared off by the fact he's a lobbyist?

LEE: No. He's a lobbyist and he's a political consultant. And I'm not scared off by that. He and I share a common vision, which is more constitutionally limited federal government. He's willing to fight with me to achieve that objective. And that's exactly the kind of person we need in Washington, D.C. right now is someone who has that goal in mind.

WALLACE: Congressman West, you chose and we can now put her picture up on the screen, a radio talk show host, Joyce Kauffman, as your chief of staff, but when it came out that she called Nancy Pelosi "garbage" and told a Tea Party rally "if balance don't work, bullets will" she stepped down. What did you learn from that whole experience?

WEST: Well, I think first of all what you saw was an attack from the left against Joyce Kauffman and there are some other issues with that, but they didn't play the full clip of her speech when she gave that, I think it was the 4th of July. So once again, it was the editing sound bite.

And I didn't learn anything from it, because you just adjust and you continue on. So Joyce Kauffman was a very instrumental and helpful person in our campaign and she was the one who interviewed my current chief of staff because she knows it's a good match.

WALLACE: We have less than a minute left. Congressman West, if you say you are going to join the congressional black caucus, which has not had a Republican member since the 1990s. What do you hope to add to the conversation and the CBC?

WEST: Well, one of the things people keep talking about bipartisanship and I think I want to bring in that intellectual debate and discourse. I think there are different voices that are coming out of the black community. You had 42 blacks that ran on the Republican ticket this Cycle, 14 made of them made it to the general election and two of us made it to the House of Representatives. So I think that there is a new movement that needs to have a voice in the congressional black caucus.

WALLACE: Congressman West, Senator Lee, we want to thank you both for so much coming in today. And we can't wait to see how you both do here in Washington. Gentleman please come back.

WEST: Happy New Year.

WALLACE: Thank you.

LEE: Thank you.

WALLACE: Up next, if the White House can't get a law it wants through congress, it may now turn to regulation. We'll ask our Sunday group how that will work.



REP. JASON CHAFFETZ, R-UTAH: You worry that the administration is using its rule-making authority to do things that the Congress didn't necessarily intend or didn't come together and build a consensus and actually pass.


WALLACE: That's Republican Congressman Jason Chaffetz of Utah responding to White House plans to go around the new GOP majority in the House and govern more through regulations.

And it's time now for our Sunday group -- Brit Hume, Fox News senior political analyst; Mara Liasson of National Public Radio; Bill Kristol of The Weekly Standard; and Michael Duffy from TIME magazine.

Happy New Year to all of you.

Let's start with health care reform. Section 1233 of the Obamacare law would have mandated government payments for end-of- life counseling. That was dropped out in all the furor over the death panels, but now we find out that the Obama administration intends to -- in fact, has already promulgated a new HHS Medicare regulation that would do the same thing through regulation they didn't do in the law.

Anything wrong with that, Brit?

BRIT HUME, FOX NEWS SR. POLITICAL ANALYST: Sometimes you can do that, but not very often, and not to a great extent. The problem with doing things by regulation is that if Congress has not authorized it, the agency, whatever it is, to do it, it is subject to court challenge and may be barred. So, if it were easy to do a great deal and put in place a sweeping agenda of any kind by regulation, the president wouldn't have spent the last two years going to Congress to try to get all these kinds things of things done.

You look at the rules, for example, that have been put in place now with the Federal Communications Commission under the name of Internet --

WALLACE: Neutrality.

HUME: -- neutrality, it appears that the Court of Appeals here in the District of Columbia, which has authority over the FCC, has indicated in an earlier case that the FCC lacks the authority to do that. So it remains to be seen how far this will go. There will be some sparring over it, but I don't think there's a whole lot -- much that can be done by regulation.

WALLACE: In this case, your thoughts, Mara, about the end-of- life counseling as a part of being paid for in meetings between doctors and patients, voluntary, as a regulation when they had to drop it out of the Obamacare law?

MARA LIASSON, NATIONAL PUBLIC RADIO: Yes. I think this was one of the great kind of myths about Obamacare, that this is the famous death panels, what conservatives called death panels.

In fact, The Wall Street Journal editorial page thinks they're eminently sensible, and I think that most people want the opportunity to plan for their end of life, as opposed to having somebody that they don't know, some bureaucrat or some doctor, do it for them. That's all this is. I think that if there are going to hearings on this, I think this might end up with a whole different conclusion about what these panels really are.

WALLACE: Let's go to the substance of this before we get back to the regulation question, Bill, because there is, the fact -- as I suspect, a number of us have living wills, do not resuscitate things. And The Wall Street Journal editorial, as you say, said the problem wasn't the policy, it was the process, the idea of being forced to drop something out of the law and then going around Congress and doing it through a regulation.

But there was an interesting article I read yesterday that pointed out states like Arizona and Indiana are already in their state Medicaid, beginning to ration care and saying, you know, we're just not going to pay for transplants or extraordinary measures because we can't afford to do it. So, in that sense, there is already rationing going on, a lot more serious than this end-of-life counseling.

BILL KRISTOL, THE WEEKLY STANDARD: And the more government takes over health care, the more government rationing there will be, and the more the government will tell you whether you have to have a living will or whether you have to discuss it with your doctor every year, or every five years. And that is this argument against Obamacare.

The point about this regulation, it was buried in the thousand of pages of regulations. Do we really want our health care system run by people at HHS, writing ten thousands of pages of regulations based on this incredibly complex Obamacare bill, or do we want a system in which people can work this out with their own doctors? I think it's a very good issue for Republicans to have the oversight hearings on, along with many, many other regulatory issues where Republicans should look a look at what the Obama administration is doing.

MICHAEL DUFFY, TIME MAGAZINE: I think we can do some advanced care planning on this regulation right here today, and predict that the Congress will pull the plug on it, even if it does make sense, just because it's politically a loser (ph) for both sides, for the Republicans, I think, to do so, and it sets the stage for what is going to be a years-long -- several-years-long -- five years, maybe, war of attrition between people who are for health care reform --

WALLACE: How can they pull the plug? I mean, I know --

DUFFY: They'll just defund that aspect of Medicare. They'll just say you can't spend Medicare money. They'll just say, you can't spend Medicare money on this kind of advisory planning. And they have done it before and they can do that again. I suspect they will, as I say, yank the cord on that one.

WALLACE: Mara, I want you to pick up on Brit, because the general question of the Obama administration thinking that they can do a lot through regulation, that now that they can't get things through a Republican House, are you as pessimistic as he is about the ability of the Obama administration to get things done through that?

LIASSON: Well, there are a lot of tools at the disposal of --

HUME: But you're optimistic. Yes, that's right.

LIASSON: There are a lot of tools at the disposal of a president that don't need congressional approval. However, of course, you can get more done, more bigger, more substantive, profound things done through legislation.

I think that the trick right now, you're hearing Republicans in a big chorus saying the Obama administration is going to do an end run around Congress and do all this stuff by regulation. Maybe, maybe not.

The cautionary tale for both sides in this is that the country wants the president and the Congress focused on jobs and the economy. Any regulation that the president promulgates that isn't focused on, I think, is a risk for him, and the same is true for Congress. If the Congress is going to spend its whole time hauling up regulators and bureaucrats and looking like they're focusing on tiny, trivial things, instead of jobs and the economy, it could be a problem for them, too.

WALLACE: Brit, your thought about that?

HUME: Well, the country signaled in this election that obviously, it didn't like the condition of the economy. It signaled that two years ago as well.

It also signaled that though that it thinks we're -- doesn't think we're overtaxed and it doesn't think we're under-regulated. And this Republican Congress, following through on those issues, spending and regulation, is not going to be in trouble with the American people because of the economy.

Indeed, a lot of people believe -- a great many people believe that regulation is hindering economic growth. And you see that particularly with regard to the banking sector, where the regulatory crackdown that has occurred there has proved a hindrance to borrowing by firms and individuals who need credit. So that's part of the picture.

WALLACE: I want to, in the time we have left, go to one other subject which one could argue is going around. The president went around the Senate this week with a recess appointment of James Cole to be the number two man at the Justice Department, the deputy attorney general.

Back in 2002, less than a year after 9/11, Cole wrote an article for Legal Times calling for prosecution of terrorists in civilian courts. He wrote this: "Our country has faced many forms of devastating crime, including the scourge of drug trade, the reign of organized crime, and countless acts of rape, child abuse and murder. The acts of September 11 were horrible, but so are these other things."

Bill, what do you think of the Cole appointment?

KRISTOL: I think it's a terrible appointment. The acts of September 11th were followed by an authorization for the use of military force, passed by the Congress of the United States, signed by the president of the United States.

Mr. Cole, in his op-ed, a year later, said, well, this is rhetoric about this is war on terror, but it's really just like these other crimes. It's not rhetoric about a war on terror. Congress authorized a war.

The attorney general, the Justice Department is part of the national security team. I hope that, as deputy attorney general, Cole has rethought this.

But I'd say that the recess appointment there is odd. I mean, it's one thing to recess appoint some foreign service offices who were held up for various reasons for their ambassadorships. To recess appoint the deputy attorney general of the United States, when the Democratic Senate seemed unwilling to bring him to the floor to have a debate and to have a vote, is, I think, unusual. And I think the Justice Department with Holder and Cole is a vulnerable area for President Obama.

DUFFY: Actually, I think they did try to get Cole before. I think it was held up by a Republican.

They haven't had a deputy attorney general at the Justice Department, I think, since -- they have an acting one, I believe. They also have -- this really is important with Cole. Cole has said he's not really for trying a lot of the terrorists in military tribunals. He wants to try them in --


HUME: He says, really, they're criminals, not warriors.

DUFFY: Right. Exactly. Congress has already said when we're not basically going to give any money to try these guys in civilian court. So that one is almost moot.

WALLACE: Yes, but just as you're saying that the Medicare regulation is -- I mean, I'm putting words in your mouth, but it's politically foolish, because it's picking a fight that you can't win. Is putting a guy, when the Justice Department and Holder are already under fire for not prosecuting the war on terror from their end, is this a fight you need to have?

DUFFY: Well, it's a fight I think he's willing to have because he can. You know, they are going to read the Constitution when the House meets on Wednesday. That's the first thing they're going to do when they come to -- you know, reconvene.

And I think they're going to include Article II, Section 2, which says you can go ahead and recess appointment. They're also going to probably read the part that says and after a year, if he's not reconfirmed, he has to step down.

So, you know, it's part of the checks and balances of the way we do business. Every president has recessed appoint people since George Washington.

HUME: I don't think there is any question about the legitimacy or the presidential authority to make a recess appointment. I just think the question is the wisdom of it and whether he's not charging up a hill that he has already charged up a couple of times without any success.

WALLACE: All right. We have to take a break here.

But when we come back, and picking up on what Michael just said, we're going to look at the new balance of power in Washington as the president and congressional Republicans plan their next moves.



PRESIDENT BARACK OBAMA: I'm willing to work with anyone of either party who has a good idea and the commitment to see it through. And we should all expect you to hold us accountable for our progress or our failure to deliver.


WALLACE: President Obama in his New Year's address, emphasizing the responsibility Democrats and the Republicans now share for moving the country forward.

And we're back now with the panel. So this is the theme, Brit, that we have been hearing from the White House ever since the midterms, that now that the Republicans actually are going to control the House, that they can no longer just obstruct, and that they're as responsible as Democrats are.

As a political reality, do you think voters are going to see it that way?

HUME: Well, they haven't in the past. For example, if you look at the period between 2006 and 2008, when the Democrats got back control of Congress from the Republicans, things deteriorated badly over the next two years. The economy in particular did. And in the 2008 election, the Democrats increased their numbers, not to mention the fact that they elected a president.

So this idea that when you get control of part of Congress, or all of Congress, that in the next election you're immediately held accountable for the condition of the country, I think has not been proven -- has not happened much in the past. And I don't expect it to happen much this time, not least because they control one House.

And there is going to be a limit on what they're able to do. And they can be only judged at failure by their base to some extent because of that, and only be judged damaging to the country by the people who don't like them to some extent.


LIASSON: Except for one thing. They're finally going to have to put forward specifics.

Paul Ryan is going to actually have a budget. They can't just talk about balancing the budget or cutting wasteful spending or shrinking the role of government. They're going to have to explain exactly how they're going to do it. And people are going to now know, and they'll be judged on what they put forward. And I think that is in one sense how they're going to share responsibility with the president.

Also, I agree with you, the Democrats still control the Senate. But Mitch McConnell is now considered to be -- who did President Obama negotiate that deal with? I mean, Mitch McConnell is understood, I think, by the country as, in effect, the co-leader of the Senate. The co-leader of the Senate.

WALLACE: The biggest battles, I think it's fair to say, are going to be over government spending and health care reform. As we sit here a couple of days, three days before the new Congress goes in, Bill, handicap it for us.

How do you see -- and there are a couple of benchmarks. There's the State of the Union, there's the debt limit, there's the CR running out, the continuing resolution, running out in early March.

How do you see both sides making their moves?

KRISTOL: I think as (INAUDIBLE), the Republicans who will repeal Obamacare, clean, absolute repeal. I think they will get Democratic votes for that.

WALLACE: In the House?

KRISTOL: In the House, in January, before the State of the Union. And then ask the senators to take it up.

Let Harry Reid explain why he is not taking up legislation that was passed by 250, 260 House members. And incidentally, a Republican senator could add that on the floor.

That's, I think, going to be -- that will have more momentum than people think. They're going to pass spending cuts beginning next week in the House, send those over to the Senate. Then the president will give the State of the Union and try to show that he's a deficit hawk, too, introduce a budget with some cuts.

And then there is this big moment on March 4th. And this is something that people are going to have to get used to.

We're so used to having these budget fights in September and October, at the end of the fiscal year. But the continuing resolution runs out on March 4th, the debt limit runs out probably late in March. So we'll have pretty big fights over spending and over what conditions Republicans will insist on adding to the debt limit extension, the debt limit increase, in February and March.

So there's a lot of pressure on John Boehner and Paul Ryan and Fred Upton and others to sort of have their act together very early. And there will be a lot of pressure from Republican -- people who voted Republican this year to see real change.

And I think there is going to be more change than people think. I don't buy this sort of cynical, oh, they'll do some symbolic stuff, and of course it's going nowhere. Let's see if things don't go somewhere.

President Obama wants to look moderate. Harry Reid isn't going to be able to block all these things in the Senate. I think they can actually make more of a difference in the first two or three months than people expect.

WALLACE: Michael.

DUFFY: I think Bill's right about a surprise. I think the president could surprise us in the State of the Union Address. I think not just calling for cuts. I think he could call for a freeze. I think he could call for a freeze even at prior year levels.

I mean, if you went back to 2006, it was a huge $1.2 trillion budget. There's plenty of money there to go around if you just freeze it at that level. He could surprise people. He could also --

WALLACE: But when the Republicans talk about 2008, he goes back and even further?

DUFFY: Go can go back further. I also think he could make a much bigger push than people expect in his own party for tax reform soon. That would really scramble the political calculus on both sides as well. And then you would have the sort of set the table for a different sort of degree of change that both parties would have to recalculate how they think about it.

HUME: I think he's going to come out for tax reform. The question is how far he can go without a total mutiny on his left. For example, the deficit commission came out and advocated a very deep form of tax reform in which even the mortgage interest deduction is eliminated.

WALLACE: And the top rate goes down to maybe 28 percent.

HUME: And 23 percent in their calculations. Well, you can't get -- you cannot get the top rate down to that level and have it be deficit-neutral unless you eliminate the mortgage interest deduction. And I think that's a very tall hill to climb. But it's not impossible.

WALLACE: But how do you see it playing in out terms of --

HUME: Well, they could end up with a compromise on tax reform not unlike the one that passed in what, 1986? That would be a real triumph.

WALLACE: Obama has already been talking about this is going to take years, to do tax reform.

LIASSON: Well, he's certainly talking about starting the conversation now.

WALLACE: Well, I know, but starting it, not ending it.


HUME: -- because it will be popular. And a lot of Republicans will support most of what he's doing and a lot of Democrats will as well.

WALLACE: But wait a minute. Are you saying that you think this is going to be sweetness and light and that they're going to make --


HUME: No. I'm just saying there's going to be some bloody battles, but there may be sweetness and light as well. There may be areas -- he's going to need Republican support on a whole bunch of things. Tax reform could well be one that he proposes that he support. He's going to need their support on the war.

WALLACE: And what about spending?

HUME: Well, spending is another area where there will be some areas of agreement. There are going to be things they agree on. Republicans are going to want to cut nearly everything, Obama is going to want to cut some things. So, the areas that they agree on will be an area of compromise.

WALLACE: Michael?

DUFFY: They're always good at agreeing when it comes to spending in both parties. They have a long record of that. And there's a highway bill to do, and they can do energy stuff together.

We're talking about cutting that. Even in agreement where you begin to bring down the level of spending to a prior year, you know, level, you are still -- there is a lot of room to spend. So, I think they have room to compromise.

WALLACE: Yes, but usually it's increasing spending. We're talking now about cutting spending.

DUFFY: That's right. But even in agreement where you begin to bring down the levels of spending to a prior level, there's still a lot of room to spend. So they have room to compromise.


LIASSON: Yes, I think that if the president is bold in the State of the Union, kind of bolts above the stale debate that we saw around the tax cuts, puts tax reform as the center of a kind of budget entitlement reform process, I think they could get a lot done.

WALLACE: I mean, maybe I'm the -- I seem to be the contrarian here, Michael, but it seems to me there's a lot of problems -- we only have 15 seconds -- for Obama with his left if he is going to become a deficit hawk.

DUFFY: He's going to go in both directions at the same time. He's going to hold the base and work that middle.

HUME: Watch what he does more than what he says.

WALLACE: All right. We've got to go. Thank you, panel. See you next week.

And don't forget to check out "Panel Plus," where our group picks right up with this discussion on our Web site, We'll post the video before noon Eastern Time.

Up next, our "Power Player of the Week."


WALLACE: As we begin a new year full of hope and promise, we want to bring you a special story we first showed you on Mother's Day. It's about a treasured member of Fox News who fought a tough battle while taking care of her three young children.

Here is our "Power Player of the Week."


JENNIFER GRIFFIN, FOX NEWS NATIONAL SECURITY CORRESPONDENT: I think when you're a mother, you don't have time to stop and think about it. You immediately go into action mode and you think, OK, I've got to be strong because I've got to be strong for my kids.

WALLACE (voice-over): It was September of 2009 when Jennifer Griffin, Fox News national security correspondent, found out she had an aggressive form of breast cancer. Her first thoughts were of her children, daughters Annalise and Amelia, and baby Luke. She and her husband Greg decided right away to be open about it.

GRIFFIN: What scared you?

UNIDENTIFIED FEMALE: Getting breast cancer.

GRIFFIN: Their first question is, can we catch it? And that's the first thing you have to tell children, is that you're not going to catch it.

Then what scared them the most was the fact that I was going to be bald. I said, "I'm going to lose my hair," and that's when Amelia's mouth dropped.

WALLACE: Jennifer tried to involve her children to take the fear out of the illness. She told them she would get wigs like their favorite Miley Cyrus on "Hannah Montana." Then, when she shaved her head before chemotherapy took her hair, she brought 7-year-old Amelia along.

GRIFFIN: Amelia used the video camera and filmed me through the whole thing. And she was much more at tease with the whole bald issue.

WALLACE: It was tougher for 9-year-old Annalise.


GRIFFIN: Does it make you not want to be close to me?

WALLACE: There was another crisis when kids at Annalise's school started saying she had breast cancer. Jennifer ended up going to both her girls' classrooms.

GRIFFIN: You can't catch cancer. You can't catch it from me. She can't catch it from me.

I was bald as a cue ball, and I was taken for show and tell. That helped her explain to her friends why her mom showed up with a different wig at each pickup.

WALLACE: But sometimes it was the children who lifted Jennifer up. One night she came home from a tough chemo session.

GRIFFIN: And there was Luke in the kitchen. And he had just taken his first steps and walked toward me. And then immediately I forgot about the chemo, and the girls had him doing laps in the living room until he could barely walk.

WALLACE (on camera): So there must have been tough moments, there must have been some low moments.

GRIFFIN: Definitely. There were nights where Annalise cried herself to sleep when I had to lie down with her and comfort her. And she asked me if I was going to die.

WALLACE: Did you ever think, what if I miss all the moments of my children growing up?

GRIFFIN: Every minute of every day I thought that. I mean, that's in the back of any mother's head. But you dig deep, and you say, I'm going to be there for the graduations and I'm going to be there for the grandchildren. And that's what pulls you through.

WALLACE (voice-over): After a double mastectomy in April, Jennifer got astonishing news. She is now cancer-free. She says her children were the calmest members of the family.

(on camera): What have you lost this last year and what have you gained?

GRIFFIN: We lost a little bit of innocence this year. But what we gained as a family in terms of them understanding that life isn't always fair, and that if you are strong and you set your mind to something, you can get through it, I think we gave a lot more than we lost.


WALLACE: And since Jennifer's return to her post at the Pentagon after Labor Day, she has been busier than ever, filing reports from a helicopter over the war in Afghanistan, covering the drug cartels in Guatemala, and doing stories along the Mexico-Texas border.

And we wish her and her family a very Happy New Year.

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

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