Sen. McConnell Talks State of the Union; Sen. Durbin on Working With Republican House

The following is a rush transcript of the January 23, 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, and this is "Fox News Sunday." The state of our union, 2011. As President Obama prepares Tuesday's big speech, what are the Democrats' plans for getting people back to work? How will Republicans use their new clout in Congress to cut spending and to run government?

We'll sit down with two Senate leaders, the top Republican, Mitch McConnell, and the number two Democrat, Dick Durbin. McConnell and Durbin, only on "Fox News Sunday."

Then President Obama moves to the center and gets a bump in the poll. We'll ask our Sunday panel if this is the blueprint for his reelection.

And our "Power Player of the Week", a film legend lends his voice to the celebration of JFK's inaugural.

All right now, on "Fox News Sunday."

And hello again from FOX News in Washington.

President Obama's State of the Union speech Tuesday will not only lay out his agenda, it will help frame the political debate for the next two years. Joining us now with the Republican view of the state of the union is Senate GOP leader Mitch McConnell, and Senator, welcome back to "Fox News Sunday."


WALLACE: The word from the White House is that in his State of the Union speech, the president will focus on jobs at a time when Republicans are talking mostly about the deficit and health care reform. In the latest Fox News Opinion Dynamics Poll, 45 percent say the economy and jobs should be the top priority, 17 percent say the deficit and government spending, and 14 percent say health care.

Question, I know you think that they're all related, but can the president frame this as he is focusing on the future and you guys are stuck in the past?

MCCONNELL: I don't -- I don't think that will work for him. I mean, in fact, these issues are all related and the excessive government spending of the last two years is one of the reasons the private sector is not doing any better than it is.

The president needs to pivot. He seems to be pivoting on virtually everything else, and I don't put him down for that. I mean, he obviously saw what happened in the November election and is trying to go on a different direction. He's quit bashing business and is now celebrating business.

Well, it's about time because the only way we're really going to get unemployment down and get out of this economic trough is through private sector growth and development. I think excessive government spending, running up debt, making us look like a Western European country is the wrong direction. That's the direction they took the first two years. The American, you know, public, as one pundit put it, issued a massive restraining order, and I don't think we're going to go in that direction any longer.

WALLACE: Well, let me ask you about that, because the White House says while the president will call for budget cuts, that he's also going to call for some new spending in areas like education and research and infrastructure. Will you support any of that?

MCCONNELL: Well, look, when you hear, with all due respect to our Democratic friends, any time they want to spend, they call it investment, so I think you will hear the president talk about investing a lot Tuesday night.

We've got a huge spending problem here. We've had over $1 trillion annual deficit each of the last two years. Our friends on the other side a couple of years ago passed a budget that will double the national debt in five and triple it in 10. I mean, most of us think, and most American -- of the American people think that we need to do something about this and start doing it now.

We'll take a look at his recommendations. We always do. But this is not a time to be looking at pumping up government spending in very many areas.

WALLACE: Well, I mean, let me ask you again, specifically, as he says, and you're exactly right, they're calling it investments, in education, in research, things like renewable energy, in infrastructure. How does that sound to you?

MCCONNELL: Well, I don't think anything ought to be off-limits for the effort to reduce spending. And I've said to my constituents over the last couple of weeks, as they brought up particular areas of interest, don't assume that we can tackle this without impacting something you like.

So I don't think we ought to start out with the notion that -- that a whole lot of areas in the budget are exempt from reducing spending, which is what we really need to do and do it quickly.

WALLACE: There's a lot of talk that the president has moved to the center, since the midterms. You say that he's pivoted, making the deal with you on extending the Bush tax cuts, naming a former banker, Bill Daley, as the chief of staff, calling for this week in the Wall Street Journal a review of all regulations. And the fact is that -- that you can see he's gotten a significant bump up in the polls.

You have a little smile on your face. Do you think he's moved to the center?

MCCONNELL: Well, he certainly has, rhetorically. I mean, the president obviously got the message from the November election. I think, you know, hiring Bill Daley, hiring the vice president, hiring Bruce Reed, this competitiveness appointment the other day of Jeff Immelt. All of this is an effort to -- to kind of retool the -- the image. Look, I think that's fine. He ran as a moderate. I'd like for him to govern as a moderate.

Now look, what we're going to find out beginning next week is how much of this he really means. For example, I'm told he's going to come out for lowering the corporate tax rate. We have the second highest corporate tax rate in the world right now. It's not competitive. It doesn't help us create American jobs in America.

To the extent he actually, Chris, wants to do some of these things, our answer is going to be yes. Trade -- trade agreements. He's talking about Korea. Well, what about Colombia and Panama? We need to do all three of them.

These are the kinds of things that will create private sector jobs in America.

WALLACE: So is this a trust but verify moment?

MCCONNELL: I think that's a good way to put it. I mean, I'm happy that the president's pivoting. We all know why. But it is kind of a trust but verify moment. Let's see if he's really willing to do it and, if he is, I think he'll find a lot of help among Republicans in Congress.

WALLACE: Let's talk about spending, because you and House Speaker Boehner have been talking about a Republican plan to cut spending back to 2008 levels, before the stimulus and all of the actions of the last two years. But this week, the Tea Party faction, including your own Senator Jim DeMint, said that's not enough, and they proposed a freeze to 2006 levels that would reduce our debt, they say, by $2.5 trillion over the next decade.

Do you support that, Senator?

MCCONNELL: Well, I think we ought to try to reduce spending as much as we possibly can and there are going to be a lot of different ideas as we work our way through the -- through the legislative process.

And, by the way, Chris, it's not just the short-term annual debt we're talking about here. I think we ought to be looking at our long- term unfunded liabilities to the entitlement programs, and of course they can only be tackled on a bipartisan basis. And we'll look to the president to see what we wants to do about our long-term problem as well as the annual deficits we've been running, which are completely unsustainable.

WALLACE: But -- but when you hear this Tea Party idea, $2.5 trillion over the -- the next decade, I mean, is there some spending cuts that are too much?

MCCONNELL: Look, there are 535 members of Congress, a whole lot of different ideas. What we are going to try to do is reduce domestic discretionary spending as much as we possibly can that will get a signature by the president. So I welcome all of these ideas, and we're going to have members who want to do more, who want to do less. That's the legislative process.

WALLACE: OK, let's talk about the other side of the aisle, because our next guest, Senator Durbin, says whatever cuts you make that you should wait until the country is clearly out of the recession, and Democrats also say that all these cut, even the level that you're talking about, back to 2008 levels, would gut areas like law enforcement, and education and medical help. NIH would have to be cut, Head Start, FBI agents laid off.

Your response to that and also Durbin saying you got to wait.

MCCONNELL: Well, if -- if government spending would have solved the problem, we'd have a rip roaring economy right now, with all due respect to my friend Dick Durbin and his allies. And that's what we've been doing the last two years, the stimulus bill, massive borrowing and spending in order to try to advance the economy.

I think there is scant to no evidence that the stimulus bill had any impact on the private sector. And look, everybody knows the only way we're going to get out of this economic trough is to get the private sector growing again.

WALLACE: Republicans talk about -- and I think this is all going to come to a head when the continuing resolution runs out on March 4, the government runs out of money and the question is where do you go from there? Do you -- would you accept a continuing resolution at that point, at current 2010 levels? Or are you going to say, right then, we need to see some significant spending cuts when the government runs out of money in early March?

MCCONNELL: Yes. I think there are two opportunities that we ought to take advantage of. One is the continuing resolution, and the other is the president, as you know, has asked us to raise the debt ceiling. Both of those opportunities, I think, should be taken advantage of, on a bipartisan basis, to do something significant about spending and about debt.

I don't think either one of them should just be passed, as we say in -- in Congress clean -- cleanly. They need to -- to carry along with them something really significant on spending and debt. That's what the American people are expecting. I think it's the right thing to do for the country.

WALLACE: I mean, implied in that is an "or else."

MCCONNELL: No. No, we're not -- you know, I think we ought to view this as an opportunity. Nobody's going to put a gun to anybody's head here. Let's take advantage of these two sort of seminal moments to do something really important about the biggest problem other than joblessness, and I think it's all related in that spending and debt.

WALLACE: But -- but the fact of the matter is you're going to have a view and it clearly is going to be more than the Democrats want. Are you willing to shut down the government over this? Are you willing not to -- to raise the debt limit?

MCCONNELL: Well, the only one talking about shutting down the government is in your question. I mean, what we're talking about here is trying to get some results. The American people would like for us to get some results on spending and debt, and both of these actually provide a good opportunity, Chris, because it kind of focuses your mind on -- on the biggest problem other than unemployment that we have in the country.

WALLACE: Would you agree that failing to raise the debt limit would be an economic disaster for this country?

MCCONNELL: Nobody is talking about that at this point.

WALLACE: Plenty of people are talking about that.

MCCONNELL: What we're talking about here is using that as an opportunity to do something significant about the issue raised by the president's request to raise the debt ceiling, which is we're spending too much.


MCCONNELL: So why not use that as an opportunity to carry along with it some significant spending reduction.

WALLACE: I'm going to ask you one more time. Not saying that you're threatening in any way not to raise the debt limit, but would you agree with Timothy Geithner that failing to raise the debt limit would be a disaster?

MCCONNELL: What I'm going to say one more time is we're going to use it as an opportunity to do something significant about spending and debt.

WALLACE: After the House voted to repeal healthcare reform, the Senate's Democratic Leader, Harry Reid, said don't worry, it's not even going to come up for a vote in the Senate. Here is what you said.


MCCONNELL: The Democratic leadership in the Senate doesn't want a vote on this bill, but I assure you we will.


WALLACE: With Republicans still in the minority, still in the minority in the Senate, how do you force a vote, number one? And number two, beyond that, how much do you think the Republicans can do in the Senate and the House to chip away at and defund healthcare reform over the next two years?

MCCONNELL: Well, first, I don't know why the Democrats don't want a vote on it. They're proud of it. They think it's one of the most important things that they've done for the country. In fact, only three House Democrats have voted for repeal last week.

So first of all, I'm a little perplexed they don't want to have this vote. But look, if they don't want to have the vote, we'll have the vote. I mean, I'm not going to discuss how we'll do it from a parliamentary point of view here, but it's very hard to (inaudible) votes in the Senate, and I assure you we'll have a vote on repeal.

If that does not pass, and I don't think anyone is optimistic that it will, we intend to go after this healthcare bill in every way that we can. It's the single worst piece of legislation that's been passed in my time in the Senate.

The American people get it. They understand here what has happened. And we need to try to repeal it overall, and then go back after it piece by piece and try to do what we can to keep it from being implemented.

WALLACE: How much do you think you can do to take apart, at least piece-by-piece, healthcare reform?

MCCONNELL: Well, I'll give you an example of something we've already done. The short-term continuing resolution we passed in December over until March took out funding for additional bureaucrats in both healthcare and the financial regulation bill that the president wanted to continue to ramp that up.

So we'll be looking at the funding. We'll be looking at getting rid of some of the absurdities like the 1099 requirement, anytime you do business that amounts to $600 with someone, you have to send a 1099 form to the IRS. Even the IRS says they don't know what to do with the paper. This is a 2,700-page monstrosity that is replete with problems, and we're going to go after as many on this as we possibly can.

WALLACE: Let's talk a little 2012 politics. This week two senators who vote with the Democrats, one, a full-fledged Democrat, Kent Conrad and independent Joe Lieberman announced they won't seek re-election, and in 2012, 23 Democratic seats are up, but only 10 Republicans. Aren't you in really good shape to take back the Senate in 2012?

MCCONNELL: Well, it's hard to predict what will happen in '12. Retirements happen every cycle. And I think there is a tendency to maybe read more into it than we should. We had six Republican retirements in the last Congress.

But I'm not going to predict what is going to happen in '12. We do like the odds. We think having 23 Democrats up and only 10 Republicans is certainly helpful.

WALLACE: You got some blow-back last fall when you said that our top priority ought to be to make Barack Obama a one-term president. And you explained, look, we don't like his agenda, we don't like the way he is taking the country, and the best way to stop that is to get him out of the White House. Would you agree when you see this bump in the polls and see his move to the center that he is less vulnerable now than he was at the time of the mid-term?

MCCONNELL: Well, the election is not right now. And the question is what are we going to do between now and '12? Sure, I'd like a Republican president in January of 2013, but the real question for the American people right now is not the election in '12, but what are we going to do now?

And I'm hoping the president's pivot to the center will be more than just rhetoric and we can actually do some important things for the country in the short term. The election will take care of itself over a period of two years.

WALLACE: Finally, are you going to sit with a Democrat at the State of the Union?

MCCONNELL: I'm going to sit where I usually sit. We don't have seating assignments for most of our members. They can sit anywhere they want to.

WALLACE: So you're going to sit at the leadership table on the Republican side of the aisle?

MCCONNELL: Well, it's a seat that I typically sit at. And if people want to mix it up, they certainly can. We don't have seating assignments for most of our members.

WALLACE: What do you think of this whole idea?

MCCONNELL: More important than the appearance of sitting together is what we do together. And the American people are more interested in actual accomplishments on a bipartisan basis here in the next six to nine months than they are with the seating arrangement at the State of the Union.

WALLACE: Senator McConnell, we want to thank you so much for coming in. I'm very glad the seating arrangement allowed you to come here this Sunday morning.

MCCONNELL: Glad to be here.

WALLACE: Thanks so much. Always a pleasure to talk with you, sir.

MCCONNELL: Thank you.

WALLACE: Up next, we'll hear from the number two Democrat in the Senate, Dick Durbin.


WALLACE: Democrats still hold power in the Senate, so how will they deal with legislation passed by the Republican-controlled House? For answers, we turn to the number two Democrat in the Senate, Dick Durbin, who comes to us from his home state of Illinois. Welcome, Senator.

SEN. DICK DURBIN, D-ILL.: It's good to be with you, Chris.

WALLACE: We hear that the president will focus on jobs in the State of the Union speech, but I want to bring up the point that Senator McConnell just did. Haven't the trillions of dollars in new spending and the thousands of new regulations enacted under President Obama, haven't they stopped some businesses from more hiring?

DURBIN: Chris, people shouldn't forget where we were when President Obama took the oath of office. We were facing not only a recession, but the prospects of something much, much worse. We understood that we lost a lot of jobs. In fact, we were losing jobs at dramatic, historic rates when the president took office.

And he moved forward with the stimulus package, which was one- third tax cut for working families, a third safety net for the states, localities and the unemployed, and a third investment in infrastructure for America.

I think that stimulus package stopped the bleeding, if you would, and really gave us a chance to come out of this recession, not as quickly as we wanted, but to avoid a dramatic global recession which could have been much, much worse.

WALLACE: Well, maybe, and I think a lot of people would argue it could have been much worse. But the fact is, with everything you talked about and with those thousands of new regulations, we've ended up with at this point still 9.4 percent unemployment.

DURBIN: Which is unacceptable, but we're at least moving in the right direction. The president I'm sure in the State of the Union address will make it clear, his highest priority is putting America back to work, making sure that our nation is more competitive.

You know, Chris, we just had a visit from the Chinese president, and I had a chance to meet him when he came to Chicago. It's a reminder to us that we are in competition in this world for jobs.

DURBIN: And if we are going to make it in the USA, which we can make, in terms of our success and in terms of making products, we have to focus on educating and innovating. We can't be so laser focused on the deficit that we ignore the obvious. We are still in a recession. We need to put America back to work. You can't end the deficit unless you start putting America back to work.

WALLACE: Well, let me ask you specifically about that, because the reports are that the president will call for some additional spending in the State of the Union on infrastructure, on education, on research. Is this still another stimulus plan?

DURBIN: Well, it is part of a stimulus but we're sensitive to the deficit. You know, I was part of the president's deficit commission. Five out of the six senators who were appointed, three Republicans, and two Democrats, myself and Senator Conrad, voted for the deficit commission.

And they said be careful. Don't start the serious spending cuts, the deficit reduction until we're clearly out of the recession in 2013. Maybe it will be sooner. But that warning is something we shouldn't forget.

We learned in history with President Franklin Roosevelt that after the Great Depression when they started to hit the deficit breaks too soon, they went in a double dip recession and higher unemployment. Excuse me. We've got to get beyond that. We've got to make sure this economy is growing with more jobs and more business success.

WALLACE: Well, I mean, I want to pick up on that because I asked Senator McConnell about your comment -- let's not hit the deficit break too soon. Does that mean -- and it's clear that the Republicans when the continuing resolution for government funding runs out on March 4th, that they're going to come up with a big, and I think a tough package of spending cuts. Does that mean that Democrats, like yourself, will oppose them?

DURBIN: It depends on how deeply they cut and what they cut. Remember, we not only have stimulus package when President Obama was elected, we just passed another stimulus package a few weeks ago that added to the deficit as well. That stimulus package was the extension of tax cuts, across the board, the extension of unemployment benefits. It means that less money will come in to Washington. More money will be circulating in the economy.

So, I think that we tried to be sensitive with President Obama's leadership to really looking at the long-term. Let's get America's economy strong and moving forward. And we can and we must deal with this deficit.

WALLACE: Would you -- and obviously, you wouldn't decide this by yourself. But your personal opinion, would you be willing to shut down the government rather than to accept a steep and what you felt were overly draconian Republican spending cuts?

DURBIN: Absolutely not. And let me tell you something. We remember Speaker Gingrich 16 years ago shutting down the government, a confrontation with President Clinton, which backfired on Speaker Gingrich and really caused some problems across America.

Speaker John Boehner is much more responsible. He said let's look at the debt ceiling like adults. And that's a quote.

He's right. We don't want to risk foreclosure on the full faith and credit of the United States of America. It would be disastrous. China, our major creditor, is re in a position where tomorrow, if they've announced that they've lost confidence in the dollar and the American economy, it would have a devastating impact on people across America, businesses, homeowners, people who rely on interest rates in terms of their own daily activities.

So, I understand that we need to be serious about the deficit, but we don't need to play any kind of brinksmanship or doomsday scenario when it comes to the debt ceiling.

WALLACE: Senator, you say you need to be serious about the deficit. Give me an example. What specific program cuts will Democrats propose to get serious about the deficit?

DURBIN: Dust off that deficit commission report, the president's deficit commission. Take a look at some of the things that we address there.

First, $3 in spending cuts for every dollar in new revenue. So, it was serious when it came to cutting spending. You must do that.

Secondly, when it came to revenue, take a look at the tax code. Chris, in all the time I've been in Washington, we never put the tax code on the table and said, does it still make sense? All the deductions, all the credits, all the tax earmarks -- do they make sense?

They cost us $1.1 trillion each year. All of the tax code deductions, taking money out of the treasury, equal the personal income taxes collected in America.

Why don't we have that conversation? The deficit commission thinks we should. And I agree.

WALLACE: And, of course, the deficit commission, and as you say, you voted for the Bowles-Simpson plan, also called for raising retirement age far off in 2075. But you stand by all of that and you would support all of that?

DURBIN: There were some parts of it that I, of course, would change. I don't agree with every paragraph. But, you know, I was around in 1983 when Social Security was facing bankruptcy.

On a bipartisan basis, we bought how many years? Almost 50 years of longevity in Social Security, because we finally said for goodness sakes, this isn't about sound bites. This is about Social Security. Get it right. And we did it.

We can do it again. The deficit commission -- Chris, you referred to one aspect of it. Raising the retirement age by one year, from '67 to '68, over 40-year period of time -- what it means is that any person in America over the age of 28 today, would not see any change in social security. That is not an unreasonable approach.

WALLACE: As you heard in my discussion, Senator McConnell vows, he is going to bring a repeal of health care reform to the Senate floor.

First question: can you stop him? And beyond that, how much do you think that Republicans in the House and the Senate will be able to chip away at health care reform over the next two years?

DURBIN: I think we should revisit our laws and revisiting the health care reform law is not unreasonable. I happen to agree.

Let me be really bipartisan about this. I happen to agree with Senator McConnell that the revenue portion, the 1099 portion that he referred to, needs to be changed. It's unreasonable. It goes too far.

But here are the numbers that people should remember. There are 47 Republicans, 53 Democrats. It takes 51 for a majority. And I think there's a serious question whether Senator McConnell can find four Democrats to join him in repeal. I certainly don't believe he's going to find anywhere near 60, which is probably going to be the vote required to repeal health care reform.


WALLACE: If I may, sir -- I just want to make sure I'm clear. You don't have a problem with allowing a vote on the floor to repeal health care reform?

DURBIN: Harry Reid has said we're not going to bring up repeal of health care reform. Now, if some Republican senator wants to offer it as an amendment at some point, it's possible they will. It's possible we'll face that vote.

But having spoken to my members in the Democratic Caucus, with Senator Reid, we feel there's still strong support for health care reform.

Let me remind the people who are listening, the Congressional Budget Office told us that health care reform reduces our deficit. So, when Senator McConnell says repeal it, he is adding over $200 billion, maybe $300 billion more to the deficit.

WALLACE: Wait -- Senator, I know they said that. But the fact is they said that based on the assumptions that were built in that they had to accept -- I mean, there's a half a trillion dollars in Medicare cuts and a lot of people have questions as to whether you're actually ever going to do that.

DURBIN: Well, I think we need to find ways to reduce overspending when it comes to health care programs. What I'd say to Senator McConnell and the Republicans, if you're really serious about deficits, sit down with people, the staff at the deficit commission and they're going to tell you the number one driver in terms of deficits in America is the cost of health care. And if we walk away from health care reform, which is providing security and freedom to a lot of Americans when it comes to buying health insurance, and we say we're not going to deal with this issue, it will aggravate the situation and add to our deficit.

WALLACE: Senator, I got a minute left and I got two questions. I'm going to ask you to answer quickly.

First of all, as we discussed in the first segment, two senators on the Democratic side, Conrad of North Dakota, Lieberman of Connecticut, have both said that they're going to retire. You are already defending 23 seats; the Republicans only 10.

Aren't you in real danger of losing the Senate?

DURBIN: No. Let me tell you. I think the world changes. The election that we're going to face in 2012 is going to be a lot different than the last election. I can't tell you exactly how different. But we've got Patty Murray, who's running the Democratic Senate Campaign Committee. We have a complete commitment of the Senate Democratic Caucus for our incumbents and the challengers who will go against the Republicans. We're in a solid position.

WALLACE: And, finally, who are you sitting with on Tuesday night and on which side of the aisle?

DURBIN: My new Senate Republican colleague from Illinois, Mark Kirk, and I are going to sit together. I'm bringing the popcorn. He's bringing a Coke with two straws. We're -- just kidding, of course. We haven't decided which side we'll sit on but we are going to sit together.

WALLACE: And, very briefly, what do you think of this idea?

DURBIN: I like this idea. But before we close, I've got to say four words to you, Chris. "Bear down, Chicago Bears." This is our day, buddy. And we're looking forward to big victory at Soldier Field.

WALLACE: I just want to say that, as FOX News is fair and balanced in all areas, we take no sides in the Bears-Packers game, Senator.

DURBIN: Thanks, Chris.

WALLACE: Thanks so much for coming in. Thanks for talking with us. And please come back, sir.

DURBIN: I will.

WALLACE: Up next, the Sunday panel on Barack Obama using the State of the Union to redefine his presidency and his political future.


WALLACE: Up next, the Sunday panel on Barack Obama using the "State of the Union" to redefine his presidency and his political future.



PRESIDENT BARACK OBAMA: The past two years were about pulling our economy back from the brink. The next two years, our job now, is putting our economy into overdrive.


WALLACE: President Obama this week giving a preview of what he'll say Tuesday during his "State of the Union Address."

And it's time now for our Sunday group: Brit Hume, Fox News Senior Political Analyst; Mara Liasson of National Public Radio; Bill Kristol from "The Weekly Standard"; and Fox News Political Analyst Juan Williams.

Now, I just want to point out that we said in the last segment when we got a complete plug for the Chicago Bears, understandably, from Illinois Senator Durbin, that we are fair and balanced.

I understand that you brought something to the event today, Bill Kristol.

BILL KRISTOL, "THE WEEKLY STANDARD": I brought this. I received this in the mail last week after I said that Wisconsin had a good week with Reince Priebus being RNC chairman and Paul Ryan and the Packers winning. And in the mail Wednesday came this wonderful cheese head.

WALLACE: Now, I want you to put it on.

KRISTOL: I was scared you were going to say that. OK. Here I am.

WALLACE: And I want you to bear this for the entire panel. I want you to wear this.

KRISTOL: This is in honor of our colleague Steve Hayes, who is at the game in Chicago today. And he'll have stripped down the way all those crazy Green Bay fans do.


WALLACE: Is he going to have a "P" or an "A"?


WALLACE: Now, I want you to keep this on for the entire panel.


KRISTOL: Thank you.

WALLACE: Oh, I wanted him to wear it. Oh, you spoil all the fun.

Anyway, all right. Since the midterms, Brit, President Obama has at least made a show, some would say a reality, of moving to the center. He made the tax deal on extending the Bush tax cut with Republicans. He named Bill Daley chief of staff. This week, in "The Wall Street Journal," he announced review of all regulations.

Is this move real or is it a re-election conversion?

HUME: That is the question. And it's going to take a while to find out.

I don't think we know the answer. Certainly, you know, in outward terms, he's made a significant move. But Bruce Reed being brought back to go along with Bill Daley in the White House --

WALLACE: Explain who he is.

HUME: Bruce Reed is the former head of the Democratic Leadership Council, a distinctly moderate group. And he was in the Clinton White House, as was Bill Daley, as adviser, and then commerce secretary. So this whole set of actions by the president, or moves by the president, has a very distinct Clintonian flavor.

The president, it seems to me, looks at this as, in political terms, as if he needs two things. One thing, he needs an economy that picks up enough to create some jobs. And that's what the Democrats and the president, I think, think was a political problem. The second thing he needs to do is appear not to be such a big lefty.

Now, all this outward and visible signs seem to be directed at that. Whether he will in fact become less of a lefty I think remains to be seen.

WALLACE: Mara, what's the answer?

MARA LIASSON, NATIONAL PUBLIC RADIO: I think he's become left of a lefty, if that's the way you're going to define it. I don't think there is any doubt about that.

He's not going to be presenting any new big spending programs. They're going to be targeted, small investments in things like education and infrastructure, and science and technology, and research, and he'll dare the Republicans to fight him on those grounds, as opposed to big, abstract calls for lower spending. That's a debate where the president is not on such firm ground.

But the other thing about Bruce Reed to point out is that not only was he all those things that Brit just mentioned, he was the chief of staff for the deficit commission, the Bowles-Simpson commission. And one of the things that will be interesting to watch on Tuesday is to what extent the president embraces the formula, the strategy that that deficit commission laid out for him, which is don't just call for reducing the deficit, add it to tax reform, lowering individual income rates and broadening the base. And if you put those two things together, you have a chance to find some common ground.

Now, I think he'll talk a lot about deficit reduction, but I don't know how specifically he is going to embrace the recommendations.

WALLACE: Bill, I want to pick up on this because, as I mentioned, with both senators, the word from the White House is, yes, he will call for budget deficit reductions. But also going to call for some targeted new spending and as somewhat contemptuously Senator McConnell put it, investment in things like infrastructure and research and education.

Can the president sell a mix of both cuts and spending increases?

KRISTOL: I mean, he might be able to sell it for a few days or a few weeks, but reality is going to catch up. And I think that's the key thing to remember.

The speech will be what, January 25th? On March 4th, as you pointed out, using (ph) both senators, the continuing resolution, the budget resolution expires. The funding for this current year expires, and we will have in real time, real votes on current domestic discretionary spending.

Republicans in the House will pass a cutback to 2008 levels, which is about an 18 percent cut. Discretionary spending has gone up a lot in the last three years. The Democrats will oppose that, I predict. And we'll see what the Democrats in the Senate do, we'll see what the president does.

I mean, that's -- so March 4th becomes more important, in my view, than January 25th. That is a real vote on real spending cuts. And the president is not going to be able to say, oh, those Republicans talk about spending, but they're not really wanting to cut it. They are going to pass a budget that cuts spending in the current fiscal year, not next year, that cuts appreciably.


JUAN WILLIAMS, FOX NEWS CONTRIBUTOR: Well, cuts have to be seen in the context that the president will present the "State of the Union Address," which is it's all about jobs, it's all about competitiveness. And he is going to talk -- and this is the language of the day that you highlighted, Chris -- are you talking about added spending or are you talking about investment? And the president is going to go on and on about what is going on with China and with India, and the need for increased American exports in order to be competitive in this global atmosphere.

I think the president has the leverage at this moment. His poll numbers are quite strong. He has had a resurgence. And I think the question about, is he a left or a righty, the voters are overwhelming at the moment saying that he is not a lefty, that he is a moderate.

And that's a big shift from the time that we were having the argument over the health care debate, when he was being hammered by Republicans as a socialist and all the rest. That argument is gone. And guess what? Republicans are still back there trying to repeal health care, still arguing about, you know, doing things that might damage the economy.

That's all to the president's advantage.

LIASSON: Can we say one thing about the poll?

HUME: What's so striking about -- oh, go ahead.

LIASSON: No, I was just going to say something. There is no doubt that he has a bump, but let's not get carried away. It's modest. Still, a majority of voters --


WALLACE: Well, no. Wait. Wait. Let me put these up, because we have them.

The latest Fox News poll shows that 47 percent now approve of the job Mr. Obama is doing, while 44 percent disapprove. That's up seven points from last month. But "The Wall Street Journal" poll, 53 percent now approve. That's up eight points from last month.

LIASSON: Yes. So he is above water across the board. He still does not get great marks for the economy.

But just something I want to add to what Bill said in terms of those important dates, January 25th and March 4th, there is a date in between there. The president gets to present his own budget, and he gets to go first with the "State of the Union" and he gets to go second when he presents his budget in February, before the Republicans do. And I think that is when we're going to see how he can frame the terms of this big debate over spending on his --

HUME: Look, Mara, the truth is that you can hear this. You hear it from Durbin, you hear it in what the Democrats are saying. The president suggested this as well.

They want to cut spending, they want to get into the deficit, but they don't want to do very much right now, because, they argue, we need the continuing levels of spending to keep the economy -- economic momentum going. And there remains a belief that this spending by the government over the past couple of years has really helped the economy, and we don't want to hit the brakes now.

You heard Durbin say you don't want to hit the brakes too soon. That's what happened in the '30s and so on.

So, I think that we can -- in term of the kind of cuts that Bill Kristol is talking about here, that Republicans will pass that affect spending now, you can count, I think, on very strong Democratic resistance. And I doubt you will see anything like -- any room for that in the president's speech.

WALLACE: All right. We have to take a break here. But when we come back, we're going to continue this conversation, flip it around. How do Republicans handle their new power? And what's their counter- argument to President Obama?



HOUSE SPEAKER JOHN BOEHNER, R-OHIO: And whether it's the health care law, whether it's what some of these agencies are doing, all of this has a tremendous impact on jobs in our country. And we will deal with these one at a time.


WALLACE: New Speaker John Boehner listing some of the items Republicans plan on tackling now that they control the House.

And we're back now with the panel.

Bill Kristol, I want to start with a question that I asked Senator McConnell. With the polls showing that the economy and jobs are voters' top concern by a wide margin, can the president use the "State of the Union" to frame the debate that he is focused on the future while Republicans are stuck re-litigating deficits and especially health care reform?

KRISTOL: I think Republicans have to make the case, and I think it's easy to make, the deficit and health care reform are about the future. Do we seriously think we can have robust economic growth with a $1.3 trillion deficit, with the current projections on entitlements? I think that's what Paul Ryan is going to say Tuesday night when he responds to the president.

He's willing to make tough choices now for the sake of the future. The president is putting off the tough choices.

WILLIAMS: Well, I don't see how you can say that to American people who say, right now, it's important that we keep this economy rolling and that we want jobs. I don't think there's any question, that is the number one issue.

And if you look back at the lame-duck session, when the Republicans were working with the president, things got done, people thought very positive about it -- so all people are looking for at this juncture is that Republicans would be willing to work with the president, as opposed to simply continue this policy of obstructionism. I mean, they certainly benefited from it politically.

But I think that era may be done. I think people now are saying, hey, we want a government that is actually working, and specifically working to produce jobs. And if you're just going to say cut, cut, cut without an awareness of the impact it would have on the economy, people may punish Republicans for that.


KRISTOL: I think people think that the federal government could afford to cut domestic discretionary spending to 2008 levels. Most Americans have taken a little bit off their spending back to maybe 2008, levels maybe back a little further than that. And that would be good for the economy, not bad for the economy.

WALLACE: Let me pick up with you on this, Brit, because there was an interesting development this week, when you saw the Tea Party faction in the House and Senator Jim DeMint in the Senate saying that the Republican plan to cut back to 2008 levels doesn't go far enough. They want to cut all the way back to 2006 levels, much steeper cuts. They want to cut $2.5 trillion out of the deficit, out of the debt, in the next 10 years.

How do you see that playing out with sort of a battle about how much cuts are enough?

HUME: The only way that you can make a cogent argument, the only cogent argument, the only politically powerful argument that says let's keep the spending at still a pretty high level, is if you believe, as many Democrats seem to, that this high level of government spending is really helping the economy, and that it's not -- and that the level of the debt and the deficit and all that is not undermining the economy. I think the public, by and large, believes that it is undermining the economy.

And I don't think -- I think the Republicans are in greater danger of not doing enough than doing too much. Now, which is not to say -- and you notice now we haven't heard anybody on either side start talking about making a real whack in entitlements now.

You heard Senator Durbin talking about things that can be done in Social Security. It will be interesting to see if the president wants to go there.

Republicans, it seems to me, are on pretty safe ground when they try to cut back to 2008 or even 2006 levels, which the public thinks is awfully high. They can't unilaterally pass that and put it into effect. And so my sense about that is they will be in trouble if they don't try, and they will be in very little trouble if they do.

WALLACE: Mara, what do you make of this apparent split between, for lack of a better word, the GOP establishment, the leadership, and the Tea Party faction in Congress?

LIASSON: Well, there's a reason that when Paul Ryan put out his roadmap, he didn't get a whole lot of co-sponsors. I mean, as long as the Republicans are talking about abstract spending cuts, and spending cuts in general, they're on very strong political ground. But soon, very soon, they're going to have to defend specific spending cut.

And they're also going to be confronted with the reality that you can't solve the deficit problem without touching entitlements. And very few of them want to do that.

They can read the polls. They see the public wants the deficit down, and they want spending cuts, but they don't want any of their entitlements touched. So that's going to take some real leadership.

But I do think that there is this healthy tension in the Republican Party between the freshmen and Jim DeMint, who want to go farther than the establishment has been willing to go. And if you look just back in the last couple of months, so far the upstarts, or whatever you want to call them, the Tea Party has won quite a few battles. I mean, earmarks was something that Mitch McConnell defended a heck of a lot longer than I thought he would, and then he folded.

WALLACE: I want to pick up on what you just said about the fact that people don't want their spending cut. There was a very interesting poll in "The New York Times" this week which showed people absolutely, in general, favor cutting spending, just not in areas that directly affect them.

People were asked which would they be willing to cut? Twenty-one percent said Medicare. Thirteen percent said Social Security. Fifty- five percent said the military. And when asked about changes to Social Security, 18 percent backed raising the retirement age, eight percent chose cutting benefits in the future, 66 percent said cut benefits for those with higher incomes.

HUME: I think, Chris, the problem with some of this polling is that it carries the suggestion that those who are currently receiving benefits, Medicare and Social Security, would see those benefits reduced. In fact, however, nearly all the plans that I've heard in advance to try to rein in the spending on those program deals with future retirees and future benefits --


WALLACE: But this question in The Times --

HUME: I saw that.

WALLACE: Let me finish. This question in The Times talked about cutting benefits for future retirees, not for current retirees.

HUME: I understand. But nearly everybody voting on it -- I mean, that includes the whole pool of potential -- was it all adults? I don't remember whether it was, or whether it was registered voters or whoever. WALLACE: No, it was all adults.

HUME: Yes, all adults. Well, a poll of all adults I don't think are terribly useful.

And I will tell you this -- you talk to anybody under the age of 50 these days about Social Security and Medicare; particularly Social Security, and whether they're going to get their benefits, they virtually all expect they won't see anything. So, are they ready for some reduced benefit? I think they are.

And I think if you do that, raise the retirement age, reduce the benefits for those who are not yet receiving them, that will pass. And the political blowback will be very minor indeed.

WALLACE: Juan, what do you make of that? I mean, I'm struck that 55 percent said don't cut Medicare, don't cut Social Security. They want to cut the military.

WILLIAMS: Well, you know, I appreciate Brit's position. He's saying, look, there is a way out of the forest here, people can come to some common ground. I think you're going to hear some of that logic from President Obama on Tuesday.

But the fact is that when you put these things on the table and you say to people there are going to be cuts involved, guess what? The seniors say don't touch it. They don't believe that you're not going to cut it. I mean, that's exactly the fear.

HUME: I know, but if you do it, and they still get their benefits, they'll believe it then.

WILLIAMS: And that's exactly the fear tactic that Republicans played on in talking about death panels and all --


WALLACE: Let Mara in here.

LIASSON: Yes, there is a problem, that Republicans are now on record saying that not one hair on Medicare's head should be touched. That was their position in health care. However, if there was real bipartisan leadership, and the deficit commission laid out the path to this, and if President Obama and Senator Coburn and Jim DeMint wanted to get together and try do this, there is a way to do this.

WALLACE: All right. We're going to leave it there for now.

But don't forget to check out "Panel Plus," where our group picks right up. And we'll pick up right 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: This week was the 50th anniversary of President Kennedy's inauguration. Here in Washington, the Kennedy Center commissioned a new work blending music and the words from some of Kennedy's most famous speeches.


RICHARD DREYFUSS, ACTOR: Finally, (INAUDIBLE) men of dedication, compromised by no private obligation or --


WALLACE: And at the center of the event was our "Power Player of the Week."


DREYFUSS: He was young and handsome, and she was gorgeous.

WALLACE (voice-over): Richard Dreyfuss is talking about the Kennedys. And this week, as part of the Kennedy Center marking the inauguration, he participated in a new musical work called "Remembering JFK."

JOHN F. KENNEDY, PRESIDENT OF THE UNITED STATES: Ask not what your country can do for you.

DREYFUSS: Ask what you can do for your country.

WALLACE (on camera): What does it mean to you to be asked to perform at this event?

DREYFUSS: It means that I'm not just an actor.

WALLACE (voice-over): Dreyfuss has always been politically active.

DREYFUSS: -- that by doing good, you get good.

WALLACE: But he has now launched the Dreyfuss Initiative to get public schools to teach children about their civil responsibility.

DREYFUSS: I want every kid in America to sign a document that says, "I want a more rigorous training in how to run the country before it's our turn to run the country."

WALLACE: Dreyfuss says this focus on citizenship is his new mission after a 50-year love affair with acting. And what a career it's been.


DREYFUSS: Someone wants me. Someone in the streets wants me.


WALLACE: He got his big break in 1973 in "American Graffiti."

(on camera): What did that do to your career?

DREYFUSS: It made my salary go from here to here.

WALLACE: But it was "Jaws," two years later, that made him a star.


DREYFUSS: What we are dealing with here is a perfect engine, an eating machine.


WALLACE: Dreyfuss has long been a lefty, from avoiding the Vietnam draft, to the conscientious objector, to calling on Congress in 2005 to investigate whether President Bush should be impeached.


DREYFUSS: My name is Bob Rumson, and I am running for president!


WALLACE: Which was surprising given some of his roles in recent years.

(on camera): How come someone of your political beliefs keeps being cast as a conservative Republican?

DREYFUSS: Because I'm a hell of an actor.

WALLACE (voice-over): He says he likes playing villains, like Vice President Cheney in the movie "W."


DREYFUSS: There is no exit. We stay.


WALLACE (on camera): But why are all the villains conservatives?

DREYFUSS: They're not. They're not.

WALLACE: Well, all the ones you've played are.

DREYFUSS: No. No. I played Billy the Kid.


DREYFUSS: And if we cannot end our differences, at least we can make the world safe for diversity.


WALLACE: Whatever you think of his politics, there is no question about his devotion to this country.

DREYFUSS: America is the finest idea so far for, how can people live together in some decency and freedom and opportunity? I love trying to make it better.


WALLACE: For more on how Richard Dreyfuss is trying to make that happen, go to his Web site at

Now soups.

This past week, more than 19,000 of you have went to our Web site at to check out my wife Lorraine's recipe for black- eyed pea soup. Well, today she's making me French onion soup, and you'll find that recipe there.

And finally, a program note. Next week we'll have an exclusive interview with John Boehner. It's his first Sunday show appearance since being elected Speaker of the House.

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

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