Rep. Paul Ryan Previews GOP Budget; Sen. Marco Rubio on Debt Crisis, Libya

The following is a rush transcript of the April 3, 2011 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 (voice-over): House Republicans offer a dramatic new plan to cut spending and reform entitlements. We'll get an exclusive first look at the proposal from its architect, Congressman Paul Ryan.

Then a rising GOP star emerges from the Tea Party ranks and makes his mark in Congress. In his first Sunday show interview, Senator Marco Rubio talks about the debt crisis and his political future. Ryan and Rubio, only on "Fox News Sunday."

Also the CIA puts covert operatives on the ground in Libya. We'll get the latest on the conflict and ask our Sunday panel just how deeply involved the U.S. should get.

And our power player of the week. An old Washington hand goes Hollywood. All right now on "Fox News Sunday."


WALLACE: And hello again from Fox News in Washington. On Capitol Hill, Republicans and Democrats are battling over a few billion dollars in government spending, while facing the deadline for a partial government shutdown next Friday.

But this week, the House GOP will unveil a new budget for next year that would cut trillions of dollars. Here with a first look at his plan is Congressman Paul Ryan, chairman of the House Budget Committee.

Congressman, welcome back to "Fox News Sunday."

REP. PAUL RYAN, R-WIS.: Thank you for having me back. Good to be with you.

WALLACE: Let's start with the big picture, President Obama's budget for 2012, for the next fiscal year that starts next October, calls for a five-year freeze on nondefense discretionary spending he says would save $400 billion. No addressing of entitlements. How is your budget different?

RYAN: His freeze locks in very high spending levels. It's really more of a floor to gain (ph) -- with 24 percent increase in discretionary spending. If we go to 2008 levels, we'd get another $400 billion on top of that over the next 10 years.

Nothing on entitlements. He does nothing to address the drivers of our debt. The public debt will double in his first term and triple by the end of his budget. He adds $13 trillion more to our debt.

He's punting on the budget and not doing a thing to prevent a debt crisis, which every single economist tells us is coming sooner rather than later in this country. We will address these issues.

WALLACE: All right, let's talk about your budget. Widely reported that your budget will cut spending by $2 trillion over the next decade. True?

RYAN: Well, it's more than that, quite a bit more than that.

WALLACE: Three trillion?

RYAN: More than that.

WALLACE: Four trillion?

RYAN: We're looking at more than that right now. We're fine- tuning our numbers with the Congressional Budget Office literally today, over the weekend. But we're going to be cutting a lot more than that.

WALLACE: So more than $4 trillion, which is a significant number, because that was the president's debt commission cut the deficit by $4 trillion.

RYAN: Yes, we will be exceeding the goals that were put out in the president's debt commission.

WALLACE: How do you do that?

RYAN: By cutting spending, reforming entitlements and growing our economy. Look, we intend to not only cut discretionary spending and put caps on spending, you have to address the drivers of our debt. We need to engage with the American people on a fact-based budget, on stopping politicians from making empty promises to people and talk to the country about what is necessary to fix these problems.

Now the good thing we have going for us is we have time to fix this problem. So the kinds of reform we're going to be putting out there won't make changes to people who are already in or near retirement. If you're 55 or older, you won't see changes. You won't have to reorient your lives around these things.

But if we keep kicking the can down the road and keep making more empty promises to people, then we'll have the European kind of pain and austerity. Then you have cuts to current seniors, tax increases that slow down your economy.

By addressing the drivers of the debt now, we do it in a gradual way. We can guarantee the mission of health and retirement security, not just for current generations, but for future generations. And we are going to put out a plan that gets our debt on downward trajectory and gets us to a point of giving our next generation a debt-free nation. That in and of itself will help us grow the economy today and create jobs.

WALLACE: All right, we're going to get to the entitlements in a moment. But first of all, you as I understand it, would set a cap on discretionary spending as percentage of economy. How would that work?

RYAN: A cap on all spending as a percentage of the economy. We would put statutory caps on actual discretionary spending going over the next five years and beyond that. The president proposes the same kind of thing, but it's at a much higher level.

WALLACE: And so how does it work, a cap?

RYAN: So we'd put it in law. We are calling for statutory spending caps. We've had them in the past. They worked before, and Republicans turned them off in the 1990s.

WALLACE: But what percentage of--

RYAN: You don't do discretionary caps as percentage of the economy. You put discretionary caps at the levels of the discretionary spending you set. And then you put them in the law, and if Congress spends above that amount, an automatic spending cut comes and brings it back into the cap, or Congress passes spending bills to keep spending within the cap.

That's what we proposed in discretionary spending. The global caps you're talking about as a percentage of GDP occur on all of government spending.

WALLACE: What would your cap be?

RYAN: Well, we're going to set it at the levels we call for spending in our budget. We want to get spending back toward the historic levels of spending that our government--


WALLACE: Are we talking 20 percent?

RYAN: Our numbers are moving around right now, so we're basically trying to get government back toward its historic size.

WALLACE: Which is what?

RYAN: Right now we're at about 25 percent of GDP. The president's budget keeps us on a huge trajectory where we are at, about 23, 24 percent of GDP. He never gets even close to balancing the budget. He never even gets close to doing what he calls primary balance. So the metrics that he put out for the fiscal commission are not even being met.

We're going to exceed the goals in the fiscal commission. We're going to put out a budget that gets us on a path to not only balancing the budget, but gets us on a path of paying off the debt.

WALLACE: Now you talk about the president's debt commission. They got $1 trillion from closing a lot of tax loopholes, ending a lot of tax deductions. Do you do that?

RYAN: Well, the president's commission, which I was a member of, first and foremost said to have economic growth in America, you need to lower tax rates for corporations and individuals and broaden the tax base. We will be recommending those kinds of things.

We will put all these details out on Tuesday, but we will be calling for fundamental tax reform. Not only do we want to cut spending, not only do we want to reform government spending, we want economic growth. We want job creation.

Pro-growth tax reform is a key ingredient to getting this economy working again, getting this economy growing again. The way to do that, and we agree with the direction of the fiscal commission, lower tax rates, broaden the tax base, and those are the kinds of things we're going to be proposing.

WALLACE: But do you -- and the reason I ask this is because a lot of Democrats are already saying even before they have seen your budget, that you do all of this balancing of the budget on the spending side, and unlike the president's debt commission, you don't do it on the revenue side. Do you eliminate tax breaks? Do you bring in new revenue by eliminating, for instance, tax breaks for oil companies?

RYAN: We don't have a tax problem. The problem with our deficit is not because Americans are taxed too little. The problem with the deficit is because Washington spends too much money. We have got to stop spending money we don't have.

So we're not going to go down the path of raising taxes on people and raising taxes on the economy. We want to go after the source of the problem, and that is spending. So yes, we want pro-growth job reform for job creation, for economic growth, not for tax increasing. We'll go after spending --


WALLACE: -- you will not eliminate tax breaks for big oil and gas?

RYAN: Those are the kinds of details that we'll come out later with, that the Ways and Means Committee will work on. We're not going to go into the little details of which tax expenditure goes and which tax expenditure stays. We're going to lower tax rates, broaden the base. You'll see more of these details on Tuesday.

And then, as the year goes on, that is the job of Chairman Dave Camp and the Ways and Means Committee to fill in all those little specifics.

WALLACE: OK, let's talk about entitlements. You would cut spending for Medicare by turning it into a voucher system after 2021, which means anyone under 55 would not be affected by this. But a voucher system where seniors would get government money to buy private health insurance.

RYAN: That's actually not accurate, and there's been some leaks that are not -- my road map does do a voucher program, which means the money goes to the person and they go out and buy insurance.

WALLACE: Right. You're not--

RYAN: That's not what we're proposing.

Our reforms are along the line of what I proposed with Alice Rivlin, the Democrat from the Clinton administration in the fiscal commission, which is a premium support system. That's very different from a voucher.

Premium support is exactly the system I as a member of Congress and all federal employees have. It works like the Medicare prescription drug benefit, similar to Medicare Advantage today, which means Medicare puts a list of plans out there that compete against each other for your business, and seniors pick the plan of their choosing, and then Medicare subsidizes that plan. It doesn't go to the person, into the marketplace. It goes to the plan. More for the poor, more for people who get sick, and we don't give as much money to people who are wealthy.

Doing that saves Medicare. It doesn't apply to anybody. Those who are 55 or above keep their Medicare exactly as is it today, but the problem is the biggest driver of our debt is Medicare. It has trillions, tens of trillions of dollars of unpaid promises.

We want to keep these promises. Meaning, we want to fulfill the mission of health retirement security for future seniors, and so we will be proposing a premium support system like the Rivlin-Ryan plan, which is identical to the system I as a member of Congress and all federal employees have.

WALLACE: Obviously, I am at a disadvantage, because I haven't seen the plan, but the CBO did an analysis of the Ryan-Rivlin plan, and it said that it would -- the effect of the plan would be to shift more of the burden of health care costs out of their own pockets to seniors.

RYAN: Right, so for wealthy seniors especially. It also did not say these are vouchers. These are premium support, and there's a big difference here with that. It said that we're going to protect people who are low-income. We are going to protect people as their health condition gets worse. If you get sicker, you'll have more so that you can have -- your rates stabilize. No more premium increases.

The key is this. There is nobody saying that Medicare can stay in its current path. Even Obamacare acknowledges that. So we should not be measuring ourselves against some mythical future of Medicare that isn't sustainable.

Medicare itself, literally, crowds out all other government spending at the end of the day. We can't sustain that. We have got to get Medicare solvent.

Rick Foster, the chief actuary, came to the Budget Committee just the other day and said, one of the best things we can do to save Medicare, one of the best things we can do to bend that cost curve and help inflation is to go to the kind of system we are proposing.

WALLACE: Now, Medicaid -- and I'd better ask because I'm only -- I'm basing this on the reports, the reports are that you're going to save $1 trillion over 10 years on Medicaid. True?

RYAN: No. Those numbers are different as well. You'll see our specific numbers --

WALLACE: Block grants for the states?

RYAN: You will -- we propose block grants to the states.

We've had so much testimony from so many different governors saying give us the freedom to customize our Medicaid programs, to tailor for our unique populations in our states. We want to get governors freedom to do that --

WALLACE: But critics say --

RYAN: -- and we will be proposing block grants --

WALLACE: But critics say you're not reforming, that you're cutting. That's you're actually going to be cutting. By giving these block grants, you're going to be cutting health care services to the poor and the disabled.

RYAN: Let me say this one thing, Medicare and Medicaid spending will go up every single year under our budget. They don't just go up as much as they're going right now, because they're growing at unsustainable rates.

Free programs alone, Medicare, Medicaid especially, and social security, take over all government revenues by the time my children are my age. When my kids are my age, who are six, seven and nine years old, at that time when they're raising their children, three programs crowd out every other federal priority. They can't keep growing at the pace that they're growing at.

So, yes, we do increase and grow Medicare, Medicaid spending but albeit not at -- at the pace they're growing at because they're completely unsustainable. And that's why we're (INAUDIBLE) them with key reforms that are proven to stretch that Medicare, Medicaid dollar farther.

WALLACE: OK, let's talk about the current situation, because there's a -- a budget battle now before we get to your new budget this week. Congress is deadlocked right now over the last six months of this fiscal year, 2011. Democrats are willing to agree to $33 billion in cuts, which is more than you originally proposed.

Should the House make a deal -- House Republicans make a deal, accept this budget, which, as I say, is more in cuts than you originally proposed, not shut down the government over a few billion dollars and move on to -- to your budget, which is -- involves not billions but trillions?

RYAN: Well, I don't want to undercut our chief negotiator, John Boehner, on what number we should accept or what number we shouldn't accept. But let's also look at why we're in this position. We are here because the Democrats didn't even pass a budget last year.

The good news is we're now talking about how much spending to cut. You think if we got elected in the majority, we'd be talking about this right now? A year ago, they're talking about how much more spending to increase. This Congress, already this year, has gotten into law more spending cuts in law than any past Congress.

WALLACE: But does it make sense?

RYAN: So --

WALLACE: But -- all right --

RYAN: So we don't want to shut the government down. We've already passed our bills to keep the government spending -- running, albeit in lower levels than President Obama wants.

Just last Friday, 42 days ago, we passed our legislation to prevent a government shutdown and cut spending. The Senate has never done anything. They haven't passed a single bill to keep the government running.

WALLACE: So it doesn't make (ph) sense to shut down the government over this when you've already gotten all these big cuts?

RYAN: And, by the way, we -- so I do want to get off to talking about tens of billions of dollars, shaving two to four percent off our budget deficit and get down to the debate about trillions of dollars and paying off those debt. That is where we're going to go with our discussion this week.

But let's put the emphasis where it ought to be. The Senate Democrats have not even passed a bill to prevent a government shutdown. We passed out -- we've passed two.

WALLACE: Congressman, on the -- on the other hand, if the two parties are having so much trouble as they are right now over a couple of billion dollars, one or two percent, you're talking about cutting you say more than $4 trillion. Revamping Medicare, Medicaid -- how is that going to happen when you can't even get an agreement on a couple -- ?

RYAN: You know, it's a good question, and I find it kind of ironic that the week we're trying to engage the president, the Democrats and the country with an honest debate about our budget, with real solutions to fix this country's problems and prevent a debt crisis, the president is launching his re-election campaign.

Look, these are tough times for America. We don't need a good politician. We need a strong leader. We need to engage this country on the issues that are necessary to secure out prosperity, to get this debt paid off, to get our economy growing right now.

We know for a fact that we're giving our children and our grandchildren a lower standard of living --

WALLACE: But -- but do we start --

RYAN: -- and we need to have -- we don't need good politics. We don't need to keep making empty promises to people. We need to engage and fix these problems while they're still in our control.

WALLACE: But my question, though, is isn't your plan dead on arrival? If they can't agree on $3 billion, how are they going to agree on $4 trillion?

RYAN: You know, I don't know the answer to that, but I -- I know this. I want to look my kids in the -- in the face, I want to sleep soundly, and I want to put out a plan that tries to fix this country's problems.

So whether it's dead on arrival, I don't know. But where the president has failed to lead, we are going to lead, and we're going to put out ideas to fix this problem.

WALLACE: Last question, as you look ahead, and a lot of people would say look, the answer is you're not going to get this budget passed. It's really setting up an issue and -- and a sensible debate for 2012.

As you look ahead to the next election, aren't Democrats going to be able to say, look at Paul Ryan, look at the House Republicans. They want to kill Medicare, they want to kill Medicaid, they want to gut the programs that you depend on. Aren't you playing into the Democrats' hands?

RYAN: We are. We are giving them a political weapon to go against us, but they will have to lie and demagogue to make that a political weapon.

Look, we don't change benefits for anybody over the age of 55. We save Medicare, save Medicaid. We save these entitlement programs. We repair our social safety net, and we get our country a debt-free country for our children and grandchildren's generation. And we get jobs. We get economic growth.

They are going to demagogue us, and -- and it's that demagoguery that has always prevented political leaders in the past from actually trying to fix the problem. We can't keep kicking this can down the road.

The president has punted. We're not going to follow suit. And, yes, we will be giving our political adversaries things to use against us in the next election, and shame on them if they do that.

WALLACE: Congressman Ryan, we want to thank you so much for coming in today, giving us a first look at your new budget. We'll stay on top of what promises to be a fierce debate. Thank you, Sir.

RYAN: All right. Thanks, Chris. Appreciate it.

WALLACE: It was a pleasure to talk to you.

RYAN: Thank you.

WALLACE: Up next, the freshman senator who's a rising star in his party starts to speak out on key issues.


WALLACE: Ever since he was elected to the Senate in November, Marco Rubio has been talked about as one of the new shining lights of the GOP. A Tea Party favorite, people are already asking whether he might run for president or vice president next year.

Joining us now from his home state of Florida is Senator Rubio for his first Sunday show interview since the election. And, Senator, welcome back to "Fox News Sunday."

SEN. MARCO RUBIO, R-FLA.: Thank you for having me back.

WALLACE: Senator, you made some news this week in an article in the "Wall Street Journal" in which you said that -- flatly that you wouldn't vote to raise the debt limit unless the following conditions are met -- fundamental tax reform; an overhaul of our regulatory structure; a cut to discretionary spending; a balanced budget amendment; and entitlement reform.

Question, are you saying that Congress has to pass all of that in less than the next two months or you're going to let the country go into the default?

RUBIO: Well, first of all, the people who are against my position on this argue that if we do not extend the debt limit that it will lead to a catastrophic default and my answer to that is if all we do is extend the debt limit, it will be even worse. And so, what I have said is that the only way that I will vote on this debt limit thing is if it's the last time we do it, plus a series of meaningful reforms that put us on a path towards fiscal sanity.

You just had Paul Ryan on a moment ago. He outlined a lot of those things that I just spoke about in my op-ed earlier in the week are going to be part of his budget. Now, we haven't seen the details yet, but those -- that's the kind of leadership we're looking for.

If all we do is go in there in three, four weeks or in a couple of months and extend the debt limit again and do nothing else, the world's going to look at us and say America and its political leadership is not serious about dealing with this incredible issue and the fact that their government continues to spend money it doesn't have.

WALLACE: But, Senator, aren't you pulling the same stunt, if you will, that Barack Obama did when he was a senator in 2006, when he voted against increasing the debt limit, but he knew a lot of other senators would do the right thing so he could make his political gesture, but they would keep the country out of default?

RUBIO: Well, first of all, I want to thank you for reminding the viewers that Barack Obama, when he was a senator, voted against extending the debt limit because back then, he called it leadership failure. Now, apparently, he thinks it's the mature thing to do.

But I would go on and say that the difference between that vote and what he did and what I'm doing is I'm saying here's what we should do instead. I'm offering a clear alternative.

Now, if someone has a better idea about how we can make and send a more positive message to the world that America is serious about dealing with its debt issue, then let's hear the idea.

But the fact is that as I sit here with you today, my colleagues on the Democratic side of the aisle in the Senate haven't proposed a budget for last year, much less one for this year or plan to deal with the things. Instead, they're sitting back and waiting to see how they can use this issue to win elections.

WALLACE: But, Senator, I guess the question I'm asking is it's easy to say "I'm going to vote against increasing the debt limit" when you know that a majority of the other senators are going to do it. If you were the deciding vote, would you still vote to put the country in default if you don't get all of your conditions met?

RUBIO: I don't want everyone to vote to put this country in default, and it's exactly what we're doing. If we all we do is extend the debt limit and do not start dealing with the fundamental fact that the American government spends money it doesn't have, that it borrows $4 billion a day, that almost 41 cents out of every dollar it expends is money we are borrowing, half of it from overseas and most of that from China -- anyone who votes to continue to do that is voting for default eventually, sooner rather than later, quite frankly.

WALLACE: One last question in this regard. Federal Reserve Chairman Ben Bernanke has talked about the possibility of the country going into default and says this: "Failure to pay interest on the debt would create an enormous crisis in the financial markets."

Experts say it would make it more expensive for the U.S. to borrow. It would raise interest rates for home mortgages and consumer loans.

House Speaker John Boehner says it would "send our economy in a tail spin."

So, let me ask my question again. If you were the deciding vote, if you were the 51st vote, are you saying that if your conditions aren't met, you would vote to put the country into default? RUBIO: I would never want to see our country in default, but that's exactly where the guys are taking us because they refuse to make reform.

WALLACE: That -- yes or no, sir?

RUBIO: If you simply extend the debt limit -- well, I'm not voting for simply raising the debt limit, unless -- as I outlined in my op-ed -- it's the last time we do it and it's coupled with meaningful reforms that put us on a path toward fiscal sanity. Otherwise, all you are doing is guaranteeing default.

So, these guys that are going around saying let's just simply raise the debt limit, we'll deal with these issues later -- these issues have to be dealt with now. Every year that goes by, it becomes harder and harder to deal with these issues. And, quite frankly, we get closer to the day when those horrible things that Bernanke is talking about are going to happen.

WALLACE: OK. Before the debt limit, you got another issue that you got to deal with this week and that is about funding the government before the deadline runs out on Friday at midnight. And there's growing support -- and we talked about this just with Paul Ryan -- within the GOP, since you're talking only about a couple of billion dollars here for -- only in Washington incidentally would you say "a couple of -- only a couple of billion dollars."

RUBIO: Right.

WALLACE: But there's growing support for the idea -- look, make a deal, declare a victory, you're talking about billions here, focus on the debt limit, focus on the Ryan budget, when you're talking about trillions of dollars.

RUBIO: Well, I would say three things. First, this is a good opportunity to remind ourselves of while we're still debating the 2011 budget a third of the way in 2011's calendar year. And that's because the Democrats, when they control the House, the Senate and White House, did not offer or pass a budget. In fact, our Senate Democrat colleagues still have not. They offered one short-term spending deal, and it got less votes than the House bill that passed originally, the so-called House resolution number one.

That being said, I would say that, clearly, it's important -- the one I want to vote for is the one the House has already passed. We've already voted for that, it actually got more votes than what the Democrats have proposed.

But, ultimately, how we spend money over the next six months is important. But how we spend money over the next 60 years is even more important. That is a fundamental debate and we've got to get to it.

But what we do on the rest of this year's budget will be a strong indicator of how willing and how serious we are about dealing with our debt problem. WALLACE: Senator, I want to turn to another subject. You have sent a letter to the Senate leadership this week in which you called for resolution that would specifically put Congress on record, authorizing the use of force in Libya, and also, explicitly, make it clear that the goal of the mission is regime change.

So, the question naturally flows: are you willing -- do you want to put the U.S. ground troops on the ground in Libya?

RUBIO: Well, first of all, let's talk about why Muammar Qaddafi must go because the other alternatives are simply unacceptable. The first alternative and the one that I fear perhaps we're headed for is a long stalemate, a civil war, that all that will do is create conditions in Libya that are -- that are conducive for Al Qaeda and other terror groups to come in and really take advantage of it.

The other is that Qaddafi actually defeats the rebels. And then you're talking about emboldened, an angry, destabilizing force in the region that will impact everything from oil prices to the U.S.'s interest in every other country in that area.

That being said, as far as tactics are concerned, I don't think you go to military engagement, announcing what you will not do. I think that the United States has plenty of capabilities, both covert and overt, to help along this process of getting rid of Muammar Qaddafi.

Look, the stated goal of this engagement is to protect civilians and prevent genocide. As long as Qaddafi is in power, you can't protect civilians or prevent genocide.

WALLACE: So, let me ask you some specific questions, and we're beginning to run out of time, so I'm going to ask for brief answers.


WALLACE: Should we send in U.S. ground troops?

RUBIO: Well, ultimately, listen, the people on the ground, for example, the Libyan rebels -- they don't want that. I don't think that's the ideal scenario. But I don't think you enter military engagement by making bold public announcements about what you will or won't do.

WALLACE: Question --

RUBIO: The fact of the matter is, that are -- the people working with us there don't want that.

WALLACE: Question, should we arm the Libyan rebels?

RUBIO: I think the president was right not to take that off the table. I think we need to learn more about who they are and how they're working. And when you talk about the Libyan rebels, well, that's a lot of different people. We need to learn about who they are and whether it would make a difference. But the president was right not to take that off the table.

WALLACE: Senator, you criticize President Obama for what you call phony multilateralism and say that the U.S. should lead. But does that mean we shouldn't share command and cost with NATO? Does that mean that we should spearhead a third U.S. war against Arab country or in an Arab country?

RUBIO: Well, first of all, Chris, we are NATO. With all due respect to the our French and British allies who are -- shown a lot of courage and bravery and foresight in this endeavor, without the United States, NATO doesn't function and can't work. Absolutely, we want to work alongside them and we're pleased that they've actually taken the position they've taken in this regard.

But ultimately, the United States has capabilities that France and Britain do not have; particularly, militarily. And without those capabilities engaged in this endeavor, it will be impossible to accomplish the goal of this mission, which is to prevent genocide and the massacre of civilians because as long as Qaddafi is in power, that's what we're facing.

WALLACE: But I guess the question I have is: in a sense, isn't it smart to try to fold in to NATO and to fold in to the French taking the lead? And for instance, we're going to pull out our combat aircraft this week. Isn't that a good thing, not a bad thing?

RUBIO: I think it's a good thing we have allies in this endeavor. We should always try to have allies in this endeavor. We have them in Afghanistan. We had them in Iraq. We certainly had them in the first Gulf War in the early '90s. That's always the ideal scenario.

But we have to recognize that we have unique capabilities, as Secretary Clinton and others have said, that our allies do not have. And so, American leadership is essential to missions like this being successful.

WALLACE: Finally, a little politics. What do you make of all this talk -- and there has been a lot -- about you possibly being on the national ticket, either for president or vice president? And let me ask you, frankly, do you think you're ready? Do you think that you know enough to be either the president or vice president of the United States?

RUBIO: Well, I would say two things. Number one, I'm not going to the president or vice president of the United States in 2012.

WALLACE: All right. But either way -- let me just say, people are already saying, well, not 2012, because you actually wouldn't get sworn in to 2013. So, let's talk about 2013.

RUBIO: Well, or 2013. OK? I'm not going to be the candidate for president or vice president.

As far as whether we're prepared, that's why we have elections in this country. I have a lot of confidence and faith in our republic. Our voters almost always get it right -- more often than not quite frankly. And through that election process is what we've come to learn whether someone is prepared and whether someone has to answer that question for themselves.

I do think the most important thing we need in leadership in our country, not just in the presidency but in the United States Senate, are people that have a clear vision of what the role of government should be in our lives and what the role of America should be in the world.

And in my mind, it's pretty straightforward. Government should allow people to go out and do the things Americans have always done, create jobs and prosperity. And America's role in the world -- the world is a safer and better place when America is the strongest country in the world.

WALLACE: Senator Rubio, we're going to have to leave it there. We want to thank you so much for coming in and joining us today. It's always a pleasure to talk with you, sir.

RUBIO: Pleasure. Thank you.

WALLACE: Up next, our Sunday panel on the war in Libya. Are we headed for a stalemate there?



MOUSSA IBRAHIM, LIBYAN GOVERNMENT SPOKESMAN: You hate this government? You can hate it. Many people hate the government. That's not the question. If you want peace, you keep things as they are and you sit down and you negotiate.


WALLACE: A spokesman for Libyan leader Muammar Qaddafi rejecting the rebels' call for a cease-fire.

For the latest on the situation in Libya, let's bring in Fox News correspondent Steve Harrigan, who is in Tripoli -- Steve.

STEVE HARRIGAN, FOX NEWS: Chris, the rebel leaders in Benghazi say now they want to establish a parliamentary democracy in Libya. They've also pitched a cease-fire to the Qaddafi government which, for the first time, does not call for the immediate ouster of Colonel Qaddafi. That proposal was rejected here in Tripoli as madness.

In the meantime, on the battlefield, NATO is investigating what could be an incident of friendly fire which left 13 rebels dead. It happened Friday outside the city of Brega after dark. The rebels say that they may have been firing in the air before that strike happened, but it does underscore how complicated the battlefield here has become, with Qaddafi forces increasingly using civilian cars and pickup trucks to mask their movement from NATO air strikes.

And finally, the conditions here in Tripoli remain calm. It's a city securely under government control. But there are shortages of basic products like gasoline. And the value of the Libyan dinar against the U.S. dollar is about half of what it was just one month ago, a sign that perhaps the street here, in the long term, is betting against the Qaddafi regime.

Back to you.

WALLACE: Steve Harrigan, reporting from Tripoli.

Steve, thanks for that.

And it's time now for the Sunday group: Brit Hume, Fox News senior political analyst; Mara Liasson of National Public Radio; Bill Kristol of The Weekly Standard; and Fox News political analyst Juan Williams.

Well, Brit, it appears that the allied coalition can keep Qaddafi from winning, but the rebels still aren't strong enough to push them out. What happens next?

BRIT HUME, FOX NEWS SR. POLITICAL ANALYST: Well, it does appear that the pro-Qaddafi forces have figured out a way not to be completely blown away by the allied air power. And they are finding ways to regain the territory that they lost.

The president said this week that, you know -- or in his speech, you will recall, that, basically, Qaddafi had been checked. It looks like he hasn't been checked.

He is advancing and may well now prevail. And in the meantime, we have stalemate. What we don't have is the immediate prospect of regime change or victory for the rebels, whom we supposedly are trying to protect.

And it also looks like there's all kinds of humanitarian atrocities occurring in some of these cities. So this is going badly at the moment. Now, it changes from time to time, but I think the administration faces a decision about what to do additionally to try to reverse the tide.

WALLACE: I mean, if we have -- and it appears to be a stalemate at this point, Mara. Don't we face the real possibility of a much longer and perhaps deeper commitment by the U.S. and its allies?

MARA LIASSON, NATIONAL PUBLIC RADIO: Well, certainly a much longer one. The president did say in his speech this might take a long time. In other words, getting rid of Qaddafi. But that's the part that most people don't listen to.

The problem is that we learned in Bosnia and we're learning here in Libya that air power has its limits. I think we did prevent a major humanitarian massacre in Benghazi, but air power alone can't oust Qaddafi. It can't even reverse the dynamic on the battlefield.

So I think you come to the question of, will there be boots needed on the ground? Now, the United States has absolutely -- the White House has absolutely ruled out our boots being on the ground, but maybe somebody else's have to. Secretary Gates, when he testified in Congress this week, even ruled out Americans doing the training that is absolutely necessary for the rebels to become more than just a ragtag guys running around in pickup trucks.

WALLACE: He also pretty much ruled out arming.

LIASSON: Arming them, although some of that might be already happening covertly. But -- so those are questions that remain.

I think this is going to be a longer conflict. But what the president has done is remove it from the immediate responsibility and main responsibility of the United States.

WALLACE: You know, Bill, we learned this week that the CIA already has operatives on the ground in Libya. We also learned that the president, several weeks ago, signed a secret finding that would allow the CIA to arm the rebels should he decide to go ahead and do that.

I have a couple of questions.

First of all, have you ever seen a covert operation that was less covert? And secondly, given this stalemate, how deeply should the U.S. get involved?

BILL KRISTOL, THE WEEKLY STANDARD: Well, we should topple Qaddafi. The covert operation, I'm told, became un-covert because it was leaked by the administration, which, in a charitable version of their motive (ph), they were trying to intimidate Qaddafi and embolden the rebels and send a signal that they were determined to get rid of Qaddafi. And an uncharitable version of why they did it was to show they're tough and they're doing things.

Here's the fact. Everyone keeps saying well, air power alone can't do it. We don't know. Because guess what? We stopped using our air power.

We pulled back our strike planes, the planes that were doing a lot of damage. We're now depending on the French and British, which is fine, but we have a lot more capabilities than they do. So we're fighting this war with one-and-a-half arms tied behind our back, and then we're saying gee, it's a very tough war to win. It's not clear to me that it will be tough to win if we just set about winning it.


JUAN WILLIAMS, FOX NEWS POLITICAL ANALYST: Well, I don't think the American people want us to be much more involved, to be quite frank. I mean, we don't want to have troops on the ground. The Defense Department is already strained in terms of its commitments in Iraq and Afghanistan. And I think there is a reluctance, therefore, on the part of many of the American people to support this effort beyond what we've done. It hasn't --

KRISTOL: Can I ask the question, what's the morality of saying Qaddafi must go, supporting the rebels, using our strike aircraft, and then pulling back when Qaddafi is on the ropes so that he can kill more people and take back the country and create a stalemate that, as Mara says, could go on for months? It's not the right thing to do. If you're in this, you should win it.

WILLIAMS: Well, I think that the United States intends to win it. The Obama administration intends to win it. It's just that the Obama --

HUME: How?

WILLIAMS: -- administration does not intend to use American military forces to win it. I think they've isolated Qaddafi. I think they've embargoed his oil. I think they've frozen his finances. I think they've put an international coalition in place to cut off arms supplies going to Qaddafi. But it's just something that takes time.

You can't do it in an instance. And I think the United States government has to be responsive to the idea of all the problems that were set up before by ill-gotten military adventures.

WALLACE: All right. I want to talk about one other subject in this panel, and that is the situation in Afghanistan, where there have been riots for several days now. A terrible situation on Friday, where a riot -- they ended up shooting and killing seven U.N. officers, staff and guards.

And in my e-mail box today I got an e-mail from General David Petraeus -- I'm sure a lot of other people got it as well -- noting the fact that he and the NATO ambassador have specifically condemned the burning of the Koran or desecration of the Koran, disrespect for it in general, and specifically the burning of the Koran by Pastor Terry Jones in Florida, which seems to have set this whole thing off. And it was clear to me -- and, in fact, I got a note from his colonel saying -- Petraeus' colonel -- we're really concerned about this and we're worried, obviously, about this bloodshed, but also that it could endanger the lives of some of our military.

I mean, this is a really dangerous situation.

HUME: It is, Chris. And it gives you a sense of how unbelievably United the people are who were doing this. I mean, you'd think that Terry Jones was Billy Graham from the way people reacted to him, instead of a guy who has some two-bit church with very few adherents somewhere in the United States.

I don't think most Americans knew about the Koran-burning. The people in Afghanistan knew about it before that. Obviously, Karzai said something about it, and that didn't help matters.

But that these people could become so enflamed by an event so trivial and so minor is very, very distressing. And here you're got the guys trying to win a war over there having to deal with this stuff. It's utterly dismaying.

LIASSON: You know what? There is no such thing as trivial in the age of the Internet. The Internet makes everything the same.

There's no proportion. It completely levels everything. Something that we consider to be completely inconsequential -- I think this guy has actually two dozen adherents, this pastor. I mean, it's something that we wouldn't pay attention to, but on the Internet it seems like there's some major American religious leader burning the Koran.

HUME: But is it clear to you that the Internet is what got this going, or did this come out of Hamid Karzai's mouth and --

LIASSON: Well, no. I think that --

WALLACE: Hamid Karzai condemned it.

LIASSON: Yes, but we went through this before, where the guy was going to do it and he didn't do it --

WALLACE: I understand. I'm talking about this week.

LIASSON: Yes, but that was also spread by the Internet.

WALLACE: But, you know, Bill, I mean, when we talk about how united (ph) the reaction is -- and some of the reports out of Afghanistan are saying the Taliban is purposely using this, knowing that it will enflame people and are trying to create a mess there. And it's a way, obviously, to help -- another step in the way to win the war.

KRISTOL: Well, obviously, the Taliban is trying to exploit this. The guy is a total jackass and is acting without regard to the safety of our troops there.

Having said that, it's not an excuse, of course, for people to use this occasion -- this as an excuse to kill U.N. workers or anyone else, including their fellow Muslims on the ground in Afghanistan. So it's a very bad situation. I don't think it should distract us from the fact that we've made actually a ton of progress in Afghanistan.

WALLACE: Real quickly, Juan. A final thought?

WILLIAMS: Well, I mean, it's clearly a situation where you have to hold the people responsible who are engaging in this kind of crazy response and killing each other. It's terrible.

Now, Jones, I just think he's despicable in terms of disregard for American life, but all life. I mean, he just acts as if he can have this little demonstration and it's not going to have an impact.

Well, I'm sorry, sir, but it does. It hurts people. It hurts the United States government. It hurts world peace. I mean, I don't understand what is in his brain except for getting publicity for himself.

WALLACE: All right. We have to take a break here. But when we come back, the moment of truth for a government shutdown.

Our panel handicaps. Will either side blink?



PRESIDENT BARACK OBAMA: It appears that we are getting close to an agreement between the leaders of both parties on how much spending we should cut.



SPEAKER OF THE HOUSE JOHN BOEHNER, R-OHIO: Democrat leaders claim an agreement has been reached on this issue. But let me be clear -- there is no agreement.


WALLACE: Well, President Obama and Speaker Boehner with very different views of where negotiations stand to avoid a government shutdown this week.

And we're back now with the panel.

So, Brit, the government does run out of money on Friday. Are we going to see another extension for a couple of weeks? Are we going to see a deal? Are we going to see a shutdown?

HUME: I don't know.




HUME: But I would say that those two statements by the president and by Speaker Boehner are not necessarily contradictory.

Boehner is making the point that until everything is agreed to, nothing is agreed to and nothing is final. And all the president said was that they were close.

My sense is that they probably are close on a number, and the Speaker is in a situation where he has to be very careful not to appear to be giving away too many billions of dollars worth of cuts in order to get a deal. He needs to hold his caucus together. He needs to seem to have negotiated and bargained as hard as he can in order to pull a majority together to pass the darn thing. And that's probably what's going to happen.

WALLACE: Mara, some Tea Party members of the House are saying $33 billion, which seems to be the number that the Democrats are offering. The Republicans are at $61 billion. It isn't enough, and if they don't cut more they should shut the House down.

On the other hand -- and you certainly got this sense, although they wouldn't say it explicitly, from both Paul Ryan and Marco Rubio, look, we are talking about billions here in the debt limit. And in the 2012 budget, the Ryan budget, we are talking about trillions. Maybe we should declare victory and move on.

LIASSON: I think the fact that Paul Ryan is coming out on Tuesday with his budget that really addresses the deficit is the bigger potato. The CR is tiny potatoes. It will help put the CR in perspective and help Boehner make his argument to the freshmen. What I think is so interesting about this is that John Boehner knew where the center was originally. He picked a number originally that was pretty close to this $33 billion, and then the Tea Party freshmen moved him to the right. And he had to go through this exercise of letting them try to pass something that was much bigger than that, and it failed in the Senate.

And he said the other day, we're one-half of one-third of the federal government. We can't pass what we want through the Senate. And he has to make an argument to this freshmen that they have already won.

You asked earlier, who is going to blink? In a real negotiation, neither party blinks. They get something that they can sell to their troop as a victory, both of them at the same time. That's what a negotiation is in divided government.

And I think what's really interesting is that when you heard Barack Obama say we're close to an agreement, he is talking to the country, because any kind of bipartisan agreement is good for him. When you hear John Boehner say no, no, we're not, he's not sure yet if a bipartisan agreement is good for him, and he has --


WALLACE: Well, or maybe he doesn't know whether he can sell a bipartisan agreement.

LIASSON: He doesn't know whether he can sell it. Now, I think that is the big question. I think he will sell it. I think the small turnout that you saw on the Hill on Thursday, the Tea Party rally, was an indication that he can get his troops in line.

WALLACE: Let's turn, Bill, to the 2012 budget. And it's pretty astonishing, what Paul Ryan unveiled for us today -- more than $4 trillion in cuts over the next decade, major revamping of Medicare and Medicaid.

Is it good policy and is it good politics?

KRISTOL: I think it's both. And he'll get criticized from the left and from the right, incidentally.

A Republican study committee which is the conservative House Republicans -- more conservative even than Paul Ryan -- will unveil a budget that gets the balance within the decade, which Paul Ryan doesn't, because we are in such a hole now, that even making these major reforms, as long as you don't want to affect people who are currently on Medicare -- if you want to grandfather them -- you don't get the balance within the decade. And Jim Jordan of the Republican Study Committee will unveil a more drastic reduction and more rapid reduction in the rate of growth of Medicare.

So I think Ryan's is the responsible way to cut government. I mean, we have a crisis. We're going bankrupt. And Paul Ryan is trying to prevent us from doing that. And I think that can be sold -- personally, I think it can be sold as policy and politics, but it will get attacked from the right for being too slow and, of course, by President Obama as being too harsh.

WILLIAMS: And what you see on the Republican side is the need, then, I think to sell it not only to Republicans, but sell it to constituents. And what Ryan's solution is, oh, we're just going to grandfather in everybody who is over 55, I think he told you this morning.


WILLIAMS: You know, at some point you say, well, if this is really a national emergency, don't we have to make some kind of sacrifice, everybody in the country working together to cut back on these entitlements? The one point that I think Paul Ryan is exactly right on is President Obama hasn't led on this. Why hasn't he led? Because he thinks Republicans will beat him about the head politically and endanger his re-election prospects if he gets out there and says we need entitlement reform in this country.

Well, let's see Ryan really get out there, gain political support for it. And I think then President Obama might come along.

But I'm impressed that Paul Ryan wants to do something. I think it's what needs to be done for our generation in terms of substantially reducing the size of the government.

But let me just say, tax increases should not be off the table. I don't know why it is that he somehow suggests the rich in this country have no obligation to support the country.

WALLACE: I want to talk about the politics of this, because the Democrats -- and you can certainly already see it, if not from the president, from Harry Reid and Chuck Schumer in the Senate -- they think that budget politics is going to work for them, that they're going to be able to go out in 2012 -- and that's exactly what Paul Ryan said -- and say look at these Republicans, they're going to take away your Medicare.

HUME: Throw mama from the train.

WALLACE: And they're going to take away all the goodies that you have depended on. The counter-argument from Ryan is that we're in such trouble, and the country has woken up to it, that being serious about the debt is actually good politics.

HUME: What the Democrats are likely to do has always worked. Always worked. The question is, in the aftermath of the 2010 election, is whether things are now different and whether the party that leads on trying to do something serious about this mammoth, yawning deficit and debt that we face will win politically.

I'm not sure. Look at Wisconsin, where they passed this bill which will have a major effect on the budget in years to come. Labor fought it tooth and nail. Labor may end up winning a judgeship election out there to throw a judge that rule in favor of the bill that was passed off the Supreme Court in favor of their own guy.

Public opinion is mixed out there at best. Governors who have fought this issue on the budget have seen their popularity decline markedly. In some cases, their popularity has recovered.

But the indispensable ingredient was winning. In other words, having the reforms, the proposal, the cuts go into effect, and the benefits that flowed there from become recognizable to the public.

These House Republicans, they can't single-handedly do that. All they can do is vote something and go as far as they can --


WILLIAMS: In taking taxes completely off the table, remember Governor Walker out there cut taxes for the rich. Remember that there has been extension of the Bush tax cuts. And you're going on as if, you know what? We don't know in America how to help our own deficit problems.

We do. We just have to tax people.

HUME: Juan, what we need is not higher tax rates. What we need is higher revenues. And how do you get higher revenues? You get higher revenues from an expanding economy. That's where the big money comes from.

WILLIAMS: Yes. GE paying no taxes, that's good for America? Come on. You know that's not right.

WALLACE: I just want to say I pay all my taxes.

WILLIAMS: Good man.

WALLACE: Thank you -- if there's any IRS agent out there.

Thank you, panel. See you next week.

And don't forget to check out "Panel Plus," where our group is going to 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 was once a powerful U.S. senator. Now he rubs elbows with Hollywood's elite.

Here is our "Power Player of the Week."


CHRIS DODD, FMR. U.S. SENATOR: I just left the best job in American politics, a United States senator, to take on what I believe is the best job in America business, and that is to promote this great industry.

WALLACE (voice-over): After 36 years on Capitol Hill, former senator Chris Dodd has found there is life after Congress. On St. Patrick's Day, he took over as head of the Motion Picture Association of America, representing Hollywood's six major studios in Washington.

DODD: Are we going to have a brief here on the upcoming meeting with the distributors?

WALLACE (on camera): Before you left Congress you said no lobbying.

DODD: Yes.

WALLACE: What changed your mind?

DODD: Well, there's still no lobbying. It's against the law. WALLACE (voice-over): Ethics laws prevent a former member of Congress from meeting with his old colleague for two years, so Dodd will leave that to his staff. But he makes no apologies for representing a great American business.

DODD: How many industries employ 2.5 million people in the country, have a positive balance of trade with every nation in the world, producing something the world still covets and seeks as valuable? And if I am promoting that at home and abroad, I don't think that's necessarily evil.

WALLACE: Running the MPAA is considered one of the best private jobs in Washington.

(on camera): No question, this is one of the perks. You have your own movie theater.

DODD: It was one of the ways for Washington to understand the industry and the importance of it, and to provide a venue and an attraction, clearly, for people to come together.

WALLACE (voice-over): But Dodd says it's a business that's in trouble, losing more than $4 billion a year to digital piracy.

DODD: Piracy sounds romantic. But if someone is stealing the product that someone worked so hard to produce, that's just theft. And when millions do it, it's looting.

WALLACE (on camera): Do you miss Congress?

DODD: Yes and no. I love the job. But when it's over it's over. Some of the saddest people I ever knew were people who stayed a little too long.

WALLACE (voice-over): As chairman of the Senate Banking Committee, Dodd came under fire for taking a VIP home mortgage from Countrywide Financial. The Ethics Committee found no wrongdoing, but it still may have had something to do with his final speech to the interest.

DODD: Powerful financial interests free to throw money, along with -- about with little transparency, have corrupted, in my view, the basic principles underlying a representative democracy.

My children saw this one and my children saw this one. This is one of the great ones, "Shawshank."

WALLACE: Now Dodd is doing his new job with the same enthusiasm he showed in the Senate. But he says he's not swept up by the glamour.

(on camera): Are you looking forward to the Oscars? Are you looking forward to walking down the red carpet?

DODD: Not particularly. I mean, you reach a point in your life that I'm not 25 years old. Frankly, the glitz of is it overstated.

This is a business. It's the one thing that kind of brings everybody together. But we don't want to lose it. And that's my job, to make sure we elevate this industry again and remind people of what it can do.


WALLACE: Dodd made his first big speech this week at the NATO summit. That would be the National Association of Theater Owners.

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

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