Gov. Scott Walker on Wisconsin Budget Battle; Sens. McCaskill, Coburn on Capitol Hill Spending Fight

The following is a rush transcript of the February 20, 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."


WALLACE: Wisconsin state capital -- the new frontline in the battle over how to cut government spending. With other states watching, we'll talk with Republican Governor Scott Walker about his plan to change the rules for public employee unions.

And then the president's budget lands on Capitol Hill. Now, the debate over how much to cut. We'll hear from two senators who could hold the key to compromise: Oklahoma Republican Tom Coburn and Missouri Democrat Claire McCaskill.

Plus, protests spread across the Middle East. We will bring you the latest and ask our Sunday panel if U.S. officials we need to rethink what's happening in the region.

And our power player of the week: a general's wife finds her own way to serve our military.

All right now on "Fox News Sunday".

And hello again from Fox News in Washington.

The political firestorm in Wisconsin over proposed changes to bargaining rights and benefits for government workers intensified this weekend. Here is the latest: an estimated 70,000 demonstrators gathered at the state capitol Saturday -- most of them opposed to the governor's budget plan but also some supporters. Public employees offered to pay more for pensions and health benefits if they can keep their collective bargaining rights. And Senate Democrats remain in hiding out of state so no vote can be taken.

Joining us now: the man pushing the changes, Governor Scott Walker, who comes to us from Madison, Wisconsin.

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

GOV. SCOTT WALKER, R-WI.: Good to be with you, Chris.

WALLACE: Those 14 Democrats who fled Wisconsin to avoid -- to block a vote in the state senate say they'll come back if you'll sit down with them and work out a compromise and the deal would be that the unions agree on the money issues but they keep their collective bargaining rights.

Governor, are you willing to do that?

WALKER: Well, no. First off, those senate Democrats should realize, if you want to participate in a democracy, you got to be in the arena. And the arena is right here in Madison, Wisconsin. It's not hiding out in Rockford, Illinois, or Chicago, or anywhere else out there. Democracy means you show up and participate.

And they failed to do that. They're walking out on their job. They're doing what's contrast to the many, many thousands, almost 300,000 state and local workers across Wisconsin, who despite those protesters, most of them showed up and did their job like they're paid to do. For us, this is about balancing the budget. We've got a $3.6 billion budget deficit. We are broke. Just like nearly every other state across the country, we're broke.

It's about time somebody stood up and told the truth. And the only way for us to balance the budget at the state level or at the local level is to make sure that we give those local governments the tools they need to balance the budget, and that's what we're proposing.

WALLACE: Yes, but I don't understand. If it's a money issue and balancing the budget and they are willing to concede on the money issues, why isn't that enough? Why do you also have to take back some of their collective bargaining rights?

WALKER: Well, they aren't because, in the end, they can say that, but that's really a red herring. The same groups back in December, after election, before I was sworn in, tried to ram through literally in a lame duck session employee contracts that would have locked things in before I got there. So, they're not really interested. But more critically, I was a county executive, an elected official in Milwaukee County, a county that's never elected Republicans before -- I was there for three different elections because we tried to tackle these very same issues.

And what stood in the way time and time again was collective bargaining. We've got over 1,000 municipalities, 424 school districts, about 72 counties in the state, all of which need to have the power to be able to offset what's going to happen in Wisconsin next week, just like New York, in California, wherever else, has been doing, and that's cutting billions of dollars from local governments.

The difference is, unlike those other states, I want to give those local governments the tools they need to balance the budget now and in the future. They can't do that with the current collective bargaining laws in the state.

WALLACE: Governor, I understand it's the Senate Democrats who took off. But how long are you willing to let the standoff go on? And what would you think of the legislature voting that the Senate Democrats are in contempt of the legislature, and therefore, what they're doing is a crime?

WALKER: Well, on the latter part, my hope is that cooler minds will prevail and by sometime earlier this coming week, they'll show up for their job. I've said all along, the best way to motivate senators to come back is for constituents in their districts, regardless of how they feel about the budget repair bill, to tell the senators to show up to their job they're paid to do.

WALLACE: But what if they don't come back?

WALKER: Well, we're going to look at every option out there. But I'm an optimist. I'm realistic about their challenges but optimistic about the solutions. And I believe we've got a path that allows to have everybody come back and vote. There's going to be plenty of time to have the debate. They can make their case, they can make their argument. But democracy is now hiding out and out of state. It's about showing up here in the capital and making the case here.

And for us, we're willing to take this as long as it takes, because, in the end, we're doing the right thing. We're doing the right thing for Wisconsin. And we're leading the way, as we did in the past in Wisconsin, on reform. We are leading the way again when it comes to budgetary reform.

And for us, we have to do this. Again, we've had for decades -- we had leaders, Republicans and Democrats alike, who pushed off the problems. Well, there's no place to push them off to. Two years ago, my predecessor and many of the same majority Democrats that time who are now hiding out push through a budget that took $2 billion of one time federal stimulus money and used it to balance their budget for (INAUDIBLE) school-like deficits. They didn't make the tough decisions then. We're going to make them now because we have to, to get the state's economy again and to get our budget balanced.

WALLACE: And President Obama stepped into this controversy this week. Let's look at what he said.


PRESIDENT BARACK OBAMA: Some of what I've heard coming out of Wisconsin where you're just making it harder for public employees to collectively bargain generally seems like more of an assault on unions.


WALLACE: Governor, you've said that the president should focus on balancing his own budget. But beyond that, do you think that his stepping into a state collective bargaining issue is inappropriate? And what do you think of his political arm, Organizing for America, taking a role in mobilizing some of the opposition?

WALKER: Well, I think you're right. The president ultimately should stay focused on fixing the federal budget because they've got a huge deficit, and believe me -- they got their hands full. They're far from getting it accomplished in Washington.

But in a larger context, you know, the thousands of protesters who are over this past week have every right to be heard, at least those from Wisconsin. An increasingly, as you just alluded to, there are more and more coming in from other states across the country. For those who are from Wisconsin, they have every right to be heard.

But I pointed out, there are over 300,000 state and local workers who weren't here, were doing their job, doing what they're paid to do. We appreciate that. My hat's off to them.

But most importantly, there are 5.5 million people in the state, taxpayers who, by and large, are sacrificing in their own jobs in the private sector paying much more than the 5.8 percent for pension and 12.6 percent for health care I'm asking for -- in fact, in many cases, two or three times that amount. They make tough sacrifices to balance the budgets in their communities and their homes and their businesses. I think it is realistic that we make sure that as loud as the voices are in the capital, we don't let them overpower the voices of the taxpayers I was elected to represent and elected to get the job done, which is balancing this budget.

WALLACE: Well, let's talk about that. You say this is not about the unions. This is about balancing the budget. But your opposition says this is about union busting.

So, let's take a look at what is in your plan because beyond making public workers pay more for benefits, here's what your plan would do. It would allow unions to negotiate only over wages, not benefits or work rules. The state would no longer collect union dues and unions would have to win an election every year to keep representing workers.

Isn't that union-busting?

WALKER: No, absolutely not. Our belief is that we're going to ask more for health care and more for pension contribution which is, by the way, very realistic.

My brother is a typical middle class family. He's a catering manager for a hotel here in Wisconsin. His wife works for Sears. They've got two beautiful girls. A typical, Wisconsin middle class family.

He told me last week and he reminded me, he said, Scott, hey, I'm paying almost $800 a year -- or a month, excuse me, to pay for my health care and to set aside the little bit I put in terms of my 401(k). He'd love, like most every other worker in the state would love, to have the deal we're putting on the table for our state and local government workers.

WALLACE: But, Governor, I want to talk about the specific things about collective bargaining and saying that unions have to hold elections every year and that's what your critics say is union- busting, not the argument about the money issues.

WALKER: But the two go hand in hand. If we're going to ask our state and local workers who are doing a great job to pay a little bit more, to sacrifice, to help to balance this budget, we should also give them the flexibility saying that for those members, for those workers, who don't want to be a part of the union, if you don't want that deduction each month out of the paycheck, they should be able to get that $500, $600 or in some cases, $1,000 back that they can apply for their health care and their pension contribution.

For us, if you want to have democracy, if you want to have the American way, which is allowing people to have a choice, that's exactly what we're allowing there. People see the value, they see the work, they can continue to vote to certify that union and they can continue to voluntarily have those union dues, and write the check out and give it to the union to make their case, but they shouldn't be forced to be a part of this if that's not what they want to do.

WALLACE: Just really get --

WALKER: And, Chris, one other quick thing on this.

WALLACE: Go ahead.

WALKER: The other thing that's important to remember -- they talk about worker rights. Wisconsin, several generations before collective bargaining was legal here in the state of Wisconsin, we passed at the turn of the last century, the strongest civil service protections in the country. There is no state that has a better civil service system in terms of protections.

That does not change in this. Worker rights will be maintained even after our bill passes.

WALLACE: This gets to a bigger question, and that is whether or not you think there's something structural here, that -- that the way the system has developed over the years, public employees and public employee unions have the upper hand when it comes to negotiation with state or local governments. Do you think that the public worker unions have gotten too powerful?

WALKER: Absolutely. There's no doubt about it. Like I said, for eight years I was a local official, a county official. I saw firsthand for me at the county level, for every school district, for every city, county town board out there, and they've been asking for this.

This -- this didn't just come up after Republicans took the majorities last November. For decades, local government officials have been asking for these sorts of controls so that they can balance the budgets.

So the counter is, and I saw this at the local level, what they would try and force us to do, to say go ahead, lay 500, 600 hundred people off. We don't care. You can't touch our benefits.

In this case, if we don't do it in Wisconsin, it's 5,000 to 6,000 state government workers who'd have to be laid off, it's another 5,000 and 6,000 local government workers in a state that has a 7.5 percent unemployment rate, which thank God is better than the national level, but still too high to be acceptable in Wisconsin. I can't have anybody laid off. I don't want a single person laid off in the public nor in the private sector, and that's why this is a much better alternative than to losing jobs.

WALLACE: Governor, the same kind of thing, the idea of trying to make unions give up some of their collective bargaining rights is going on in Ohio, in Indiana, in Tennessee and a bunch of other states. Some people are say that what's going on in your state and you're involved in right now is a watershed. This is a Ronald Reagan and the air controllers moment. Is it a test case for the power of government versus the power of the public employee unions?

WALKER: Well, I do think it has large ramifications, and I'm proud of the fact that it was Wisconsin who led the way when it came to welfare reform and education reform under my friend Tommy Thompson in the '90s. Potentially it could be leading the way when it comes to budgetary and fiscal reform in this country.

But this is not something new to me. I've spent eight years before this as account executive, trying to do exactly the same thing. I talked about it in the campaign, I talked about this transition. I talked about it since I took office, and if we're going to be in this together and our $3.6 billion budget deficit, it's going to take a whole lot more than just employee contributions when it comes to pension and healthcare.

But it's got to be a piece of the puzzle, because as I saw at the local level, it's like a virus that eats up more and more of the budget if you don't get it under control. This it about balancing not only our next budget but the budgets two, four, six years into the future.

Now, I think right now frugality is in. People expect us to make tough decisions to make sure we don't pass the buck on to our kids and our grand kids, and that's exactly what we're doing here in Wisconsin.

WALLACE: Governor, we have less than 30 seconds left. Before we went on, you we telling me that you've been talking to some of the other governors, like John Kasich in Ohio. What are they saying to you, hang in there?

WALKER: Well, absolutely. You know, whether it's him or Chris Christie, or Mitch Daniels or Tim Pawlenty, a lot of other folks around the country, they're saying hang in there. You're doing the right thing.

And, amazingly, I got in one day 19,000 e-mails in Friday, the overwhelming majority saying stay the right course, you're doing the right thing, and it's always good when you're doing things for the right reason. And that's what we're doing here in Wisconsin.

WALLACE: Governor Walker, thank you so much for joining us today. We very much appreciate it, and we'll stay on top of this story.

WALKER: Thank you, Chris.

WALLACE: Up next, the fight over government spending here in Washington. The House approved huge cuts early Saturday morning. We'll ask two key senators what happens next.


WALLACE: Now, that the House had approved a measure with deep cuts to keep the federal government in business until the fall, attention turns to the Senate, and we're joined by two senators who will be key players in the budget fight.

From Muskogee, Oklahoma, Republican Tom Coburn; and from St. Louis, Democrat Claire McCaskill.

Senators, the House passed a budget bill early Saturday morning that would cut current spending by $61 billion, and let's look at some of the key provisions. It would ban all funding to implement healthcare reform, ban all funding for Planned Parenthood. It would cut spending for the National Institutes of Health by $1.6 billion, and job training by $2 billion.

Senator McCaskill does the House bill stand a chance in the Senate or is it dead on arrival?

SEN. CLAIRE MCCASKILL, D-MO.: Well, I wouldn't call it dead. I think the Democrats in the Senate and I think the White House are committed to making cuts. I think cuts have to happen.

The question is what are the priorities here? Are we going to take a weed whacker to education funding in this country while we let millionaires continue to deduct interest on their second home? That doesn't seem to be the right priority.

So I hope everyone's willing to compromise. I think we're all going to -- I hope everyone is going to sit down and work this out. I'm a little worried that the Republicans in the House are so anxious to threaten shutting down the government.

WALLACE: But -- but if you say that you're willing to cut, all right, and -- and there's certainly an argument to be made about what should -- what you're going to cut. They want $61 billion from current spending. How much are you willing to cut from current spending?

MCCASKILL: Well, I think certainly there's on the table a $41 billion cut. I think that --

WALLACE: Wait, wait, Senator, that's a -- that's a phony cut because that is $41 billion from the president's budget, that's -- that which hasn't ever been enacted. It -- it would actually not cut at all from current spending.

They want to cut $61 billion from current spending. How much are you willing to cut?

MCCASKILL: I think -- I can't speak for the entire Senate, Chris. I can tell you I'm willing to cut. I've been working on trying to get the federal government spending reined in along with Senator Sessions from Alabama for over a year. So certainly I know there's a lot of us that are willing to cut, and we're sitting -- willing to sit down and negotiate.

We might want some different cuts than the ones in education that the House has done. I, for one, am not happy about the cuts in border security. I mean, for gosh sakes, we've had everybody talking about secure the borders, secure the borders, secure the borders, and then instead of making some reasonable adjustments in checks we write to oil companies, they're cutting border security.

WALLACE: All right, let me --

MCCASKILL: So I think we need to look at the priorities.

WALLACE: Let me bring in Senator Coburn. Do you support the overall level of $61 billion in cuts from current spending, and what about senator McCaskill saying well, look, we need to argue about what we cut?

SEN. TOM COBURN, R-OKLA.: Well, first of all, I don't think that's a severe cut. The federal government in terms of discretionary spending is 93 percent bigger than it was in 2001. We're essentially cutting on -- in terms of inflation adjusted dollars, five percent of that growth over the last nine and a half years.

What seems big in Washington when you lay it out for the American people is small. There is so much waste in the federal government that it will be easy. There's no question there's going to be controversy about what the House has done. We can easily cut $61 billion. We should be cutting $100 billion, and we should be reforming other major programs.

And I would just say Claire McCaskill has agreed to work on a lot of these issues when some of her colleagues haven't because she recognizes that we're going to -- we're going to make these cuts, Chris, sooner or later.

COBURN: We can say they're extraordinary, but we're either going to make them or we're going to be told to make them by the people that own our bonds.

WALLACE: What we're talking about here is a measure that would extend the continuing resolution which funds the government, which runs out on March 4th. And let's take a look at the calendar because this becomes all-important now. The continuing resolution, as I say, runs out March 4, a week from Friday, but the Senate in your infinite wisdom is on recess all this week until next Monday, February 28, which means you'll have only four days before the CR expires.

Senator McCaskill, is the Senate going to be able to pass a new budget plan and work out a deal with the House in four days, or are you going to need an extension of the continuing resolution?

MCCASKILL: I think we're serious about making cuts. I think we're serious about negotiating. I think we can sit down immediately and begin working on that. We may need to extend slightly the current situation for a few days to get a compromise that works for the American people.

You know, keep in mind, Chris, that the cuts have come in a very small part of the budget. Give Tom Coburn credit. As a member of the fiscal commission, he stepped up, along with Democrats Durbin and Conrad, and said, you know, we've got to look at the entire budget, not just 18 percent of the budget. We've got to look at the whole shebang, and I hope that we do this in a comprehensive way, not just take a weed whacker to the discretionary domestic budget while letting the Pentagon off scot-free.

WALLACE: All right. But I want to keep a focus on this issue. What you just said is we're probably going to need an extension of the CR for a period of time to try to work out a deal.

Speaker Boehner of the House this week said if there's an extension, there have to be real cuts in it. Let's watch what Boehner said.


SPEAKER OF THE HOUSE JOHN BOEHNER, R-OHIO: I am not going to move any kind of short-term CR at current levels. When we say we're going to cut spending, read my lips, we're going to cut spending.


WALLACE: Senator Coburn, will there have to be cuts in any extension of the CR? And, if not, are we headed for a government shutdown?

COBURN: I don't think we are. I think nobody wants that to happen, and I think everybody realizes that we have to make some significant cuts. And you can't play the waiting game saying, well, we don't want to agree to this now. Give us a month, and we'll get it done in the next month. The fact is, you'll get waited out and you'll still spend the $61 billion this year that we don't need to spend.

So, you know, it's good for political rhetoric to talk about a government shutdown. But I don't know anybody that wants that to happen. And I think cooler heads if, in fact, everybody says, hey, we have to do this and we have to accomplish this, that, hopefully, we'll have some leadership --

WALLACE: But, Senator --

COBURN: -- on both sides of the aisle that will do that.

WALLACE: But, Senator, if I may, I mean, one of two things are going to happen. Either the Democrats and the Senate and the White House are going to have to agree to current cuts in spending -- cuts in current spending, maybe not the whole $61 billion, but some cuts to get an extension, or Boehner's going to have to back off what you just heard him say. Which is it?

COBURN: Well, you know, I can't answer that question for you. But I can tell you that 75 percent of the American public wants us to cut the size and scope of the federal government. And that Democrat and Republican. That's libertarian and conservative and liberal.

So if you deny the American people what they know to be true, is that we cannot continue living beyond our means and that we're getting ready to collapse in terms of our financial financing of our debt, then it is ridiculous to say that the children in Washington can't come together and cut some spending.

WALLACE: So let me put this to you, Senator McCaskill, are you willing to agree to some cuts in an extension of the continuing resolution or are Democrats going to say, no, we won't do that and we'll have a government shutdown?

MCCASKILL: Well, I'm going to be optimistic that everyone behaves like adults here and we can sit down and get this worked out. But the person who brought up a government shutdown was John Boehner and the House Republicans. They're the ones that are trying to --


WALLACE: Well, he just says he wants to have cuts. He's not calling for a government shutdown. He says, I want cuts.

MCCASKILL: We -- we all want cuts. He is the one that's saying that he won't even do a week or two days or four days. It's silly. The bottom line is we all want cuts. We can find a compromise. We can make serious and significant cuts in this government with some wasteful programs without going out at the heart of education funding, without cutting border security. We can do that.

Now, if we don't want to make political points and if we're not posturing for the extreme elements of our party, we can all sit down and find those compromises, and that's Boehner ought to be emphasizing, not saying I refuse anything. He should say, let's negotiate and make some real cuts. We all want to do that.

WALLACE: Senator Coburn, what we've been talking about so far is just the budget for the last -- next seven months of this year. And then we got to deal with 2012, which starts in October, and there are reports that you, Senator Coburn, are working with a bipartisan group, senators from both parties, to try to put the debt commission for trillions of dollars in cuts into effect. That you would set targets for cuts in spending, in entitlements, in tax deductions and if you don't reach them, there would be automatic triggers. How's that going?

COBURN: Well, we're working at it. You hear a lot of stuff assumed in the press that isn't necessarily true. But I can tell you that there's some intellectual honesty in that room and recognizing what some of the political realities are.

But I think a large number of people are committed to try to do it. But it has to be everything. Everything has to be on the table from Social Security to the Defense Department.

You know, I'm convinced there's $50 billion a year in waste in the Defense Department. We can go get it. I am convinced there's hundreds of billions of dollars in waste across a ton of government programs. We can go it.

So I think -- I think there's a commitment to try to get something done. Whether we will or not, I don't know. But -- the mandate on us is, is do we want to make these decisions ourselves, Chris, or do we ultimately want to have the people who own our debt tell us what we're going to do. And I'd much rather be in the process of making those decisions ourselves.

WALLACE: Senator McCaskill, and we're beginning to run out of time so I'm going to ask you both to try to keep your answers short.

You've become something of a deficit hawk, but Republicans note that you voted for the stimulus plan. You voted for the Obama health care plan. Are you now willing to cut entitlements, including Social Security, which some of your top Democratic leaders say off the table? Are you willing to cut those and is it, as the GOP claims, because you face a tough reelection fight in 2012?

MCCASKILL: Well, I decided that earmarking was not for this former auditor on the day I got there, Chris. I started working on trying to rein in government contracting the day I got there. And Tom Coburn and I have worked together on that for every day I've been in the United States Senate.

So, yes, I voted for big things when our economy was in a crisis, but I've always had an eye on the pivot to make sure that we get to the serious work of cutting our spending and looking long term at our entitlements.

We've got to protect Social Security long term. We would never cut benefits for current recipients. I can only speak for myself. I agree with Tom Coburn. I think we've got to look at everything and be responsible and intellectually honest. The American people are ready for us to be honest with them about the fact that our debt is too high and we've got to get a handle on it.

WALLACE: Folks, we got a minute left, and I want you both to be honest with me about this. Because it's amazing, the president unveiled his three plus trillion dollar budget and we're just getting to it now. And one of the reasons why it's been so widely dismissed on Capitol Hill is because while he says it would cut spending -- the debt by a trillion dollars over the next decade, the fact is it would add $7 trillion dollars to the debt.

So let me ask you both, and let me start with you, Senator Coburn, was the president's budget a failure of presidential leadership?

COBURN: I think so. Look, the savings in that budget won't even pay the interest costs over the deficits of the first three years of the budget. That budget puts us in a tremendously greater hole than where we are today. It's a failure. It's dead. Everybody knows it dead. The question is can Congress come up with one or are we going to run the next year under a continuing resolution?

WALLACE: Senator McCaskill, you say you want to be honest, let me ask you. I know it's going to step on some Democratic toes. Is the president's budget a failure in leadership?

MCCASKILL: He laid down a starter mark. We've got a lot more work to do.

WALLACE: But do you think that it addresses the problem?

MCCASKILL: I think it was a starter mark. Frankly, no matter what budget the president laid down, it was going to be attacked. I think he laid down some significant cuts. I think we've got a lot more work to do and I'm willing to get at the table and get it done.

WALLACE: Senator McCaskill, Senator Coburn, we're going to have to leave it there. We want to thank you both so much for talking with us and both of you please come back.

COBURN: All right, Chris, see you.

MCCASKILL: Thank you.

COBURN: Bye, Claire.

WALLACE: Up next, protests across the Middle East and authorities using lethal force to contain the uprising. We'll have an update from the region and ask our Sunday group to explain what's going on.



WALLACE: That was the scene in Bahrain Saturday as thousands of protesters move back into the central square when riot police retreated.

Before we bring in our panel, let's get the latest from FOX News correspondent David Lee Miller who is in Bahrain -- David Lee.

DAVID LEE MILLER, FOX NEWS: Chris, it looks like a standoff is now taking place between the predominantly Shiite Muslim demonstrators and Sunni Muslim royal family and government here in Bahrain.

Demonstrators have retaken Pearl Square where many of the violent clashes have taken. They set up tent barricades and a P.A. system. Many had spent the night here and say they will not leave until their demands for reform are met. Some have called for the removal of the royal family.

The government says a dialogue is underway with the protesters but did not elaborate.

Elsewhere in the region -- more violence in Moammar Gadhafi's Libya. Security forces fired mortars at a funeral, leaving 15 people dead. The attacks took place in the country's second largest city of Benghazi where the protesters have been steadily gaining momentum.

And in Yemen, during the intense day of demonstrations, one protester was shot dead and five others were wounded. The clashes took place during a protest march. The demonstrators are calling for the removal of Yemen's president who has been in office now for more than three decades.

U.S. officials are closely monitoring developments in the Middle East and most especially here in Bahrain, which is home to the Navy's 5th Fleet, and U.S. military operations here support activities now by the military in both Iraq and Afghanistan -- Chris.

WALLACE: David Lee Miller reporting from Bahrain -- David Lee, thanks for that.

And now our Sunday group: Bill Kristol of the Weekly Standard; Mara Liasson from National Public Radio; former State Department official, Liz Cheney; and Fox News political analyst, Juan Williams.

Well, let's look at a map of the region and it is changing dramatically by the moment from Morocco and Algeria in the west, to Libya, Jordan and Yemen and now Bahrain and Iran in the Persian Gulf. Massive protests, many of them turning violent.

Bill, what's fueling it and how far is this going to go?

BILL KRISTOL, WEEKLY STANDARD: I think the protests actually are pretty peaceful, but some of the regimes are cracking down violently. These countries are very different with each other. I think this is a big moment in the Middle East and I think it's a moment we have to try to shape and not wish it weren't happening or sort of give up and say, oh, it's complicated.

Places like Bahrain, which is a friendly nation and a reasonably advanced one. We're putting pressure on them apparently, working with the crown prince who was educated over here and is a young, more progressive person, to help make constitutional adjustments.

The prime minister, I gather, has been there, what, 35 years or something. Everyone really seems to be in power for three or four decades, you know, which is why we're having this problem. And I think it's attempt (ph) by us to ease him out.

Other countries like Libya are really just terrible tyrannies and there, I think, we should stand with the people of Libya against Gadhafi.

So, I think you have -- we -- our government has to make different -- has to make distinctions among what's happening. But I think we need to try to shape it and not just fear what's happening.

MARA LIASSON, NATIONAL PUBLIC RADIO: Pretty to hard to shape actually. I think that the administration got lucky in Egypt and got the outcome it wanted with relatively little violence, relatively little anti-Western, anti-U.S., anti-Israel sentiment.

There is a sliver of good in Bahrain. One of the reasons that the protesters were able to take back that square is because the military decided, all of a sudden, to retreat for the moment. So, there is --

WALLACE: Under a lot of pressure from the Obama administration.

LIASSON: Under the administration for which he should get credit from all sides.

But -- now, that they are in negotiations, if they can get to some kind of a negotiated nonviolent, peaceful settlement that will allow reforms to happen, then maybe some of these other countries can follow suit.

WALLACE: Liz, let's not talk at least that the point about the Obama administration and the U.S. role because this is happening outside of anything the White House can really shape -- we'll get to what they can do in a moment.

But in Libya, you see the forces of Gadhafi firing on mourners, leaving the funeral of protesters. At least 15 killed in that incident and there are some reports of human rights activists, more than -- that hundreds have been killed. In Iran, the mullahs are also using brutal force to stop the demonstrators.

Is there a lesson here to repressive regimes if you wanted to use enough force, you can use it -- you can quell these protests?

LIZ CHENEY, FORMER STATE DEPARTMENT OFFICIAL: Well, I think that the lesson is the power of the media. And, you know, in fact, I would imagine the violence is probably much worse in a place like Libya, where we do not understand, we don't have the kind of presence on the ground that we had in Cairo, for example. And what I understand is going in Libya is also you got government forces now frankly watching Twitter.

And so, the protesters, when they, you know, put out these tweets and say gather here at the square or gather here at 12:00, you got the government following.

I think that, at the end of the day, what we're seeing is a significant, from a historical perspective, potentially is what we saw in Eastern Europe in 1989 and 1990. No one yet knows where this will end up. I think at the end of the day, all of us need to be hoping for and working for more freedom, more opportunity, more democracy.

And from the perspective of the Obama administration, one of the challenges is, as Bill said, to recognize that these countries are different. You know, I was concern yesterday to see the White House put a statement out that lumped Libya, Iran and Bahrain altogether.

We would like to see the Libyan regime, the Iranian regime, the Syrian regime go. We like to see them finish.

We would not like to see that in Bahrain. I think there is real potential for the monarchy to be able to come up with the kinds of reforms and kind of agreement with the protesters that, in fact, would not result in a crisis or catastrophe when their government falls.

WALLACE: One reason we don't want to see a huge upheaval in Bahrain is it's the home of the U.S. Navy's 5th Fleet, and they've been very much a Western ally.

Your thoughts about what's going on.

JUAN WILLIAMS, FOX NEWS POLITICAL ANALYST: Well, I think it's an important distinction to be made as everyone keeps saying, between totalitarian regimes, authoritarian regimes. But what strikes me here is that even in Bahrain, there is a suggestion that you could have Iranian influence at play. So, this takes us into a larger sort of geopolitical struggles in the Middle East.

We have the administration everyone wants to support what's going on in terms of the green movement inside Iran. But the question is how do you do it, how do you support that without putting people in an untenable position where the crackdown, as you suggested, Chris, would be violence -- and violence that would kill a large amount of people.

Every scene in Libya, they are willing to use violence. Violence is no the going to suppress these uprisings because I think, as Liz was saying about Twitter, but I think the Internet, I think Al Jazeera, all of this is spreading throughout the Middle East, and I don't they're going to be able to suppress that notion of freedom of expression, desire for democracy in the Middle East. But they will use violence and at what point then does the United States have any obligation to get involved, to support people, to use its CIA influence, to put money into it?

WALLACE: Well, I'm going to pick up on that with you, Bill, because the Wall Street Journal had a very interesting editorial yesterday that, in effect, and they used these words, said that Obama should pull a Reagan, that he should meet openly with dissidents from Libya and Syria and Iran, that he should do everything he can to smuggle equipment and money into Iran to back general strikes, to back protests, that you know, this idea of just very even-handed diplomatic statements isn't enough and, in effect, he should do what Reagan did with the Mujahideen against the Russians in Afghanistan. Good idea?

KRISTOL: Absolutely. I mean, the Iranians are doing it. It would be ridiculous not to do it ourselves. We are on the side of the people in most of these cases, all of these cases, really. So I think we -- it's absolutely the right thing to do, both morally and strategically.

LIASSON: You know, there was another point about that. I mean the president was reluctant in the 2009 Iranian protests to do that, because he felt that it would make -- give the regime a chance to say, "Look, this is just an American-controlled effort."

Now, I think there's a better opportunity to do that, now that this is sweeping the entire region. And he did go out of his way at the press conference to say something about Iran. And I think they are edging up very cautiously to something that approaches more of that -- that stand.

WALLACE: They're a long way away from that.

LIASSON: Yes, they're a long way away, but they're getting a little bit tougher in the rhetoric.

CHENEY: Yes. I think I'd like to see them get a lot -- little tougher in their actions a little sooner here. And I think that, you know...

WALLACE: Would you like to see him openly support the freedom fighters, the protesters in Iran?

CHENEY: Absolutely. He should have done it last June. Had he done it, frankly, in June of 2009, we might have a very different Iran today.

I think, you know, you have a situation here where the administration is constantly playing catch up. And one of the things that they clearly are going to be doing now is adding more money to the democracy programs. As they do that, they need to be held to account. Not a single taxpayer penny should go to the Muslim Brotherhood. The administration so far has refused to declare their opposition to that. The Muslim Brotherhood is not Democratic. They clearly support the imposition of Sharia law...

WALLACE: Of course in Egypt.

CHENEY: ... in Egypt. But I think they'll face this issue across the region with Islamists...

WALLACE: All right. We have to take a break here. But when we come back, the Wisconsin showdown between the governor and the state's public workers. What does it mean for other states? And the fight in Washington over spending.



WALLACE (voice-over): Still to come, our power player of the week.

LIASSON: The military is a targeted group. There are several reasons for that.

WALLACE: There are lot of young people with guaranteed paychecks on their own for the first time.

LIASSON: It makes them kind of easy pickings for somebody who's looking to rip them off.

WALLACE: Stay tuned. Our panel will be right back.




RICHARD TRUMKA, AFL-CIO PRESIDENT: We're delighted to protect the freedom of every working woman and every working man in America to join together in unions and bargain for a better life and for dignity.


WALLACE: That was AFL-CIO president Richard Trumka raising the stakes beyond Wisconsin, for public employee unions. And we're back now with the panel.

So what's going on in Wisconsin? Is this just about balancing the budget, Juan, or is Government Walker -- Governor Walker trying to take back the powers of the public employee unions?

WILLIAMS: Well, if you listen to Rich Trumka, he says this is a bogus crisis, that in fact, it's all sort of dreamed up. The reality is Wisconsin does have a budget deficit, and it's ballooning, and the fact is that the public service workers have a very generous pension plan they weren't even contributing to in many cases.

So the requests in terms of negotiating about how much they contribute or the fact that they don't contribute anything in some cases to their pension plans is totally legitimate. This is a reasonable thing for the governor to be doing. But once you come to the idea that he then wants to take away collective bargaining rights, not from policemen, not from cops or public safety people, but especially from teachers, I think that lots of people then say, "Wait a second. If you want to negotiate, negotiate. Let's do this in a kind of shared sacrifice way, but you can't just bully people around."

At that point, then I think you see the protesters rushing to the square and those 14 Democrats disappear from the legislature to try to stop Walker.

But let me just quickly say the teachers right now are in trouble across Wisconsin; I think across the country. The support, public support for unions in this country is at a historic low, according to a Pew poll that was released this week, and I think it's in large part because what people have seen with teachers and the problems in big- city schools around the country. Milwaukee schools, can you believe that their black kids there have the lowest rest -- reading and test scores in the whole country?

WALLACE: I want to get back to this question, though, about whether the position that Walker and other governors are taking about trying to draw back some of the rights of these unions as bullying, a phrase you used, or whether there is something -- a structural imbalance, and if you're going to deal with the deficit now and in the future, that you've got to take back some of the powers from the public unions.

KRISTOL: Yes, I think so. It's a long -- it's a much-needed reform, probably somewhat overdue. I mean, in the private sector, unions bargain with management for a share of the profits. Management's interests are adverse to those of unions, so it's a real bargain.

Here the unions elect a Democratic governor like they did in Wisconsin the last two cycles, Jim Doyle, and then -- and then Jim Doyle gives them an incredibly generous contract. So he doesn't bust the budget, he doesn't give them that much in wages, he gives them these huge benefits: health insurance and others in the out years. It's a -- it's a corrupt system, really, honestly. It can't be sustained. And I think Governor Walker is absolutely right to say you can't just take a one-shot adjustment to this. We need to change the rules of the game.

LIASSON: Well, you know, private sector workers have -- over time they have bargained over benefits, because they've given up wage hikes to get better benefit packages.

And I think right now, where the public is supportive of the roll backs on public sector workers is in -- on the financial side. It's unclear yet whether there's a lot of public support for actually changing the bargain and saying, "You can't even negotiate on your benefits, only on your wages."

And I think the -- they apparently, according to reports out of Wisconsin, the public sector unions have already accepted the wage cuts and the benefits.

WALLACE: Yes, they had.

LIASSON: They have. And now we're just talking about, I think, power politics. The public sector unions are supporters of Democrats. If, you know, the firefighters and the policemen supported Democrats, they'd probably be under the gun, too, but they're not. So this is big-power politics between the Democratic interest groups and the Republican governor.

CHENEY: Now, I think there's -- on the issue of collective bargaining, it's more than power politics, because the governor is going to be asking shortly now for massive budget cuts, as he's got to. And when does that, what he's saying, what he said to you this morning, Chris, was those localities and the counties across Wisconsin, the elected officials there need the ability to be able to make cuts that -- that hurt people the least.

And when you've got collective bargaining in place and when you've got the benefits that are basically sealed in, and no ability by those local officials to touch those or affect them, it reduces their ability to actually manage their own budget.

I also would say, in terms of public support for this, when you've got schools in Milwaukee closed because the teachers are sitting in Wisconsin, in Madison, protesting, I think it's pretty clear where the public is going to come out on this.

WALLACE: All right. I want to switch to another subject because we have a little budget battle going on here in Washington. The House Saturday morning passed the budget that they've promised, with $61 billion in cuts in current spending, the budget, the continuing resolution, funding the government runs out a week from Friday, and the Senate will not even be in session, all this week. They come back a week from Monday.

So, where does it all stand, Juan? And what are the chances we're going to see a government shutdown?

WILLIAMS: Well, I think the chances are increasing by the moment. Although I think Republicans understand it's not in their best interest to have a shutdown. Everybody references back to what happened in '96 with the Republicans and Bill Clinton.

But the fact is, I think what we're seeing here is that John Boehner, the new speaker of the House, in the first six weeks, has not been able to rein the Tea Party element. I mean, the freshmen are the one saying we want more cuts, more cuts. The people who are in the leadership of Republicans in the House wanted a reasonable cut in the neighborhood of $30 billion and Hal Rogers, you know, the head of the appropriations said, this stuff about $80 billion, $100 billion, it's indiscriminate, heavy-handed. But nobody can rein the Tea Party element at this point. And so, they are out of control. This will not come to any reasonable end. It's not going to lead to any negotiations with the Democrats. It's just making the Democrats more fixed in their opposition.

WALLACE: I know you want to respond to that. But I also want, because we're running out of time. I mean, this is going to come down to a decision on March 3rd, Boehner put a marker down there, I want to see real cuts in spending, not the whole $61 billion, even for an extension. Are the Democrats going to agree with that or is Boehner going to have to blink?

KRISTOL: No, I think there will be real cuts in current spending. That's what the voters wanted and I think they will compromise on that.

The idea that this is some draconian budget cuts where they're cutting domestic discretionary spending back to 2008 levels or God forbid, maybe 2007 levels, whoa, that's brutal, is ridiculous. And now, the House Republicans this week, an underreported story, under the leadership of House Budget Committee Chairman Paul Ryan have committed to entitlement reform.

So, they are doing the right thing. And, you know, it's not just cuts to the discretionary spending. They're going to do entitlement reform. Governor Walker in Wisconsin is trying to reform the public employee union system. Wisconsin is Paul Ryan and Walker --


WALLACE: No, they can't be a presidential ticket, though.

KRISTOL: Well, they can. They just have to give up the 10 electoral votes for the vice president.


KRISTOL: On Wisconsin, they would like great fight. A great fight song, you know, on Wisconsin, on, Wisconsin. It would be great.

LIASSON: There is a number of --

WALLACE: Let me ask you a specific question. Do you see -- because Juan says, well, look what happened in '95 with Gingrich and Clinton, this will end up hurting the Republicans, helping the Democrats. Would that necessarily be true this time if this is a shutdown?

LIASSON: If there's a shutdown, I don't know. But I don't think there will be a shutdown. I think there is a number that the Senate Democrats and the White House will accept of cuts in the current year's budget. We don't know what the number is, but the problem is the calendar, that they have hardly any time to get this done before March 4th.

WALLACE: All right. Well, that's why you need an extension. Thank you, panel. See you next week.

And don't forget to check out panel plus where our group will pick up right with this discussion on our Web site and we'll post the video before noon Eastern Time.

Up next, our power player of the week.


WALLACE: He is the most respected military leader of our times, but his wife has also served the country for the last 36 years. And now, she's our power player of the week.


HOLLY PETRAEUS, GEN. PETRAEUS' WIFE: I think it's always better if you have something to occupy you while they are gone. And for me, to do something positive, like work for military families, is a real plus.

WALLACE (voice-over): Holly Petraeus is the wife of General David Petraeus, commander of U.S. forces in Afghanistan.

While he's serving overseas, she has her own mission.

PETRAEUS: Just some of the things you need to think about before you retire.

WALLACE: As part of new financial regulation reform, she's setting up the Office of Service Member Affairs to protect military consumers.

PETRAEUS: The military is a targeted group and there are several reasons for that.

WALLACE: Petraeus says, on military bases, there are a lot of young people with guaranteed pay checks on their own for the first time.

PETRAEUS: So, you add all these factors together and it makes them kind of easy pickings for somebody who's looking to rip them off.

WALLACE: Like auto dealers selling cars at high prices, or electronic stores offering expensive financing or military loans on the Internet.

PETRAEUS: Usually, they either outright scams or they're just very expensive loans.

WALLACE: Now, as part of the new Consumer Financial Protection Bureau, she'll be able to help military families.

PETRAEUS: We have a power to enforce the laws that are on the book books and also to write rules.

WALLACE: Holly Petraeus comes from a distinguished military family, dating back to the American Revolution.

(on camera): How did you omit your husband?

PETRAEUS: He was a cadet at West Point when my father was a superintendent and we met on a blind date.

WALLACE: And what did you think?

PETRAEUS: Well, obviously, we liked each other.

WALLACE (voice-over): So much they married nine months later. Since then, she's made 23 moves in 26 years. But all that seemed to be over when her husband, architect of the Iraq troop surge, was named head of U.S. Central Command based in Tampa.

(on camera): Did you think to yourself his days on the frontlines were finally over?

PETRAEUS: Yes, I didn't expect this late deployment. That's for sure.

WALLACE (voice-over): Until last June, when President Obama asked her husband to take over the war in Afghanistan.

OBAMA: He is setting an extraordinary example of patriotism by assuming this difficult post.

PETRAEUS: He was not able to reach me before he went out to the Rose Garden and made the announcement. So, I saw it on the news with everybody else.

WALLACE: Petraeus has only seen her husband twice since last summer. She notes that's more than most families. But she does know one thing that won't be in their future --

(on camera): How would you feel if he were to run for office?

PETRAEUS: He doesn't want it and I don't want it for him. It's just not something that either of us feels is the way we want to go.

WALLACE (voice-over): Meanwhile, she is helping on the home front.

PETRAEUS: I had a young Seabee who heard me speak come up and tell me -- I had been talking about a scam, secret shopper scam -- and he said, "You just saved us $3,000." So, you know, in a moment like that, of course, it makes you feel it's all worth while.


WALLACE: Military families and all the rest of us can visit a new government Web site at to register complaints against financial companies.

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

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