Transportation Secretary Ray LaHood Talks Sleepy Air Traffic Controllers; Sen. Coburn, Rep. Van Hollen on Federal Budget Battle

The following is a rush transcript of the April 17, 2011 edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.



Another air traffic controller falls asleep while on duty. The latest -- next on "Fox News Sunday."


UNIDENTIFIED MALE: Zero Tango November, roger. And landing will be at your own risk.


WALLACE: Close calls at airports around the country as air traffic controllers are caught asleep on the job. We'll talk safety in the skies with the administration's top man, Transportation Secretary Ray LaHood -- only on "Fox News Sunday."

Then, President Obama strikes back at the Republican budget, while outlining a plan of his own. We'll get reaction from two top budget negotiators, Republican Senator Tom Coburn and Democratic Congressman Chris Van Hollen.

Plus, the 2012 Republican presidential race begins to heat up. We will ask our Sunday panel to handicap the GOP field.

All right now on "Fox News Sunday."

And hello again from Fox News in Washington.

Well, it's happened again. Early Saturday morning, an air traffic controller dozed off while on the job in Miami. And the FAA said it will finally make changes in controllers' work schedules to address the fatigue problem.

We want to talk today with the man in charge, Secretary of Transportation Ray LaHood.

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


WALLACE: Let's look at the disturbing record that's been -- of what's been going on recently with air traffic controllers. In just the last two months, there have been six separate incidents from here in Washington to Seattle and now Miami, where controllers fell asleep. In some cases, pilots had to land planes on their own.

Secretary LaHood, what's the problem? And has this been going on for a long time? Or are we just hearing about it more now?

LAHOOD: Chris, I have been in the job two-and-a-half years. I don't know when I've ever been madder. I'm outraged about this. I want the plying public to know that we're doing everything we can, 24/7, to correct this problem.

We cannot allow controllers to fall asleep in control towers. We're not going to stand by and let that happen. And we've taken steps, as of this morning, to begin changing schedules for controllers, to change schedules for managers, and to make sure that controllers cannot switch in and out of their schedules in order for the convenience of them if they are not well-rested.

But I also want to emphasize this, Chris -- controllers need to take personal responsibility for the very important safety jobs that they have. We can make changes but when these controllers come to work, they have to take personal responsibility for the fact that they are guiding planes in and out of airports. It has to be done safely. They have to be well-rest and they have to be alert.

And we'll take care of the fact they need to be well-trained. But they have to take some personal responsibility for this.

WALLACE: All right. You say that you are prepared right now to announce what the changes you're going to make are. What are they?

LAHOOD: Well, Chris, number one: we're going to make sure that controllers are well-rested. We're going to increase the rest time by an hour. This is what we're recommending for pilots going from eight- hour rest to nine-hour rest.

We're also going to ask the managers in the control towers to be more available in the early morning hours, and also in the late hours, to make sure that they remind controllers that they can't sleep on the job, that they need to be alert, that safety is the number one priority. So, we're going to change the scheduling of managers.

And we're also going to eliminate the opportunity for controllers to switch out in their positions, in their job positions, so they can have a long weekend. We're going to eliminate that.

Now, we've talked with the controller union, the president, about this. They have agreed to go along with this.

So, those three things, along with the top to bottom review of training and other scheduling things, but we think more rest time, more managers on duty, and making sure that controllers are not looking out for their own schedule rather than the safety schedule, that we think needs to be put in place.

WALLACE: But let's look at the schedule of an air traffic controller. This is what it was until this moment when you changed it. But it's not changing dramatically.

They could work two evening shifts followed by an eight-hour turn-around -- now, it will be nine hours -- to a day shift. Then, another eight-hour turn-around -- now, it will be nine hours -- to two midnight shifts, all of this so the controllers get a long weekend. They work five shifts in four days. Then they could get three or four days off.

Question -- why didn't you tell the controllers a long time ago those schedules are nuts and they're not safe?

LAHOOD: Because we thought controllers really were getting the rest that they needed, Chris. And it was obvious from the interviews that we've done with controllers that have been suspended because they fell asleep, that some of them when they were -- during their rest period, may have been doing other things rather than resting.

And so, we want to extend the rest period and we want to eliminate the opportunity for them to switch things out when they are not well-rested and switch out their positions so they can have the longer weekend.

WALLACE: And do you think, Secretary, that the difference between eight-hour rest period and nine hours is going to make that much difference?

LAHOOD: We just had a fatigue study that we're going to be releasing very soon here that shows that we're recommending this for pilots also. That they go from eight to nine. We think that's about right based on all the studies that we've done.

But, look, if it's not right, Chris, we'll change it. We're not just going to sit back and say that because somebody says this, we're going to -- the administrator and the head of the controller union are going to travel the country this week. They'll be in Atlanta tomorrow morning, interviewing controllers, talking to them about rest time, about workplace rules -- but also reminding them, personal responsibility is a part of their job.

Safety has to be number one.

WALLACE: Secretary, you say safety has got to be number one. The NTSB, the National Transportation Safety Board, the agency that is charged with ensuring safety in all transportation, recommended all the way back in 2007 -- 2007 -- that the FAA and the air traffic controllers change these schedules because they weren't safe.

LAHOOD: Well, we're stepping up. We are deciding that the NTSB probably had it right. And on my watch, Chris, I'm going to make sure we put in place everything possible so that controllers are alert, well-rested, well-trained, and they do take responsibility for their obligations to fly -- to guide planes in and out of airports.

WALLACE: Now, you just said that you are sending the head of the FAA and the head of the air traffic controllers union around nationwide study, interview controllers, find out what the problem is. If the union -- and as we pointed out that these compressed schedules to get long weekends off -- if the union is part of the problem, why have them be part of the solution? Why not have an independent study, these interested parties go in and look and say, "Here's what the problem"?

LAHOOD: Look, Chris. We have a contractual agreement with the union, which languished for five years previously. When we came in, we reached an agreement with the controllers. And -- look, we have to be partners with the controllers. They are the ones that are in the control towers. There are over 15,000 controllers, Chris. And we have received e-mails from them over the last few days. They are also concerned about this. They are also about -- concerned about their good name. And they want to make sure that safety is number one. And that they have people that are in these towers that are doing the right thing.

So, look, they're our partners and we have to work with them. They're going to be the ones that are in the towers. And if we don't work these things out with them -- but they agreed to these three points that I just made, these three changes which are pretty significant changes. If they are not quite right, I guarantee you, they'll be with us in further changes that need be made.

WALLACE: But, you know, again, we are talking about safety. The Seattle controller who fell asleep not once but twice in January was back at the job and he was the one, same controller, who fell asleep this month. Why wasn't he fired?

LAHOOD: Well, because there are investigations that have to go on. If it was up to me, Chris, more action would have been taken. But when the investigations are complete, you'll be hearing from the administrator of the FAA. Look, we take it seriously.

WALLACE: But is part of it are also the unions? That it's hard to fire a union employee?

LAHOOD: Well, there are certain provisions in the contract that allow for these investigations and allow for the kind of review. And when that's complete, you'll be hearing for us. We're not going to countenance, we're not going to sit by and let controllers fall asleep in control towers with the ability to come back and, you know, have the ability to continue to do those jobs.

WALLACE: I mean, forgive me for being skeptical. But if a guy is able to fall asleep twice in January and comes back and falls asleep in April, and you, as the secretary of transportation, or head of the FAA, can't fire him, isn't that a problem?

LAHOOD: Well, Chris, we can -- we can fire him. But there has to be due diligence and there has to be an opportunity for an investigation to go on so that we have, make sure we have the information.

On my watch, we're not going to allow controllers to fall asleep in the control towers and continue to do their job. We're not -- that's why these controllers have been suspended. Chris, as soon as I found out about it, they were suspended.

WALLACE: Now, let me ask about another thing which you haven't mentioned as a possible change. A number of countries allow controllers during scheduled work breaks to take naps. Are you considering allowing that and to follow suit with countries like Canada, France and Germany?

LAHOOD: On my watch, controllers will not be paid to take naps, Chris. We're not going to allow that.

LAHOOD: They're going be paid to do the job that they are trained to do, which involves guiding planes in and out of airport safely.

We want to make sure they're well rested. We want to make that in the workplace there's the ability for them to do their job, but we're not going to pay controllers to be napping. We're not going to do that.

WALLACE: Do you need more controllers? You say you have 15,000. Given the fact that there are a lot of cases where there had been up until now single staffing in these overnight shifts, do you need more controllers? If so, how do you reconcile that with the fact that the House wants to cut your budget $4 billion over the next four years.

LAHOOD: We have about the right number of controllers. We do. We've looked at that and the controllers agree with us on that. Let me just say something about the FAA and our ability to really do the job we're supposed to do.

The FAA bill that gives us our resources, that gives our ability to do our job has not been passed and been extended by Congress 18 times. So my message to Congress is pass the FAA bill so we have the resources.

It's been extended 18 times, Chris. We need a bill. We need the ability to have the resources to do these things we need to do. And I hope when Congress comes back from the Easter recess, they will pass the bill.

LAHOOD: All right. I have got to go through a couple of other issues with you. And let's do this as kind of a lightning round. There was the problem with the Southwest flight a couple of weeks ago, where -- and here we're taking a look at it -- a hole ripped open in the fuselage of a Southwest jet at 34,000 feet, and then you ended up finding cracks in a number of older 737 jets. Question, where are you with that problem?

LAHOOD: Those planes have been inspected. They have been inspected to make sure that that will not happen again. And those planes are back in service, and the NTSB is conducting an investigation.

WALLACE: So you don't have a problem with cracking now?

LAHOOD: They have all been inspected and they passed the inspection and they're back in service.

WALLACE: All right. This week, an Airbus 380, the largest passenger -- commercial passenger plane -- just looking at this video, which is just unbelievable -- passenger jet in the world -- clipped a computer plane on a taxiway at New York's JFK Airport.

Was that a controller problem, or is it the fact that the jet has a wingspan of 262 feet, and the taxiways at JFK are only 75 feet wide?

LAHOOD: Well, obviously there was error there. And that's the reason the NTSB is investigating. And we will see what they come up with. It's pretty clear that human error was certainly a factor there.

WALLACE: Do you think there was human error for the pilot or the controller?

LAHOOD: I don't know, Chris. I don't really want to speculate on that until we really get, you know, the interviews and really get into the weeds on it.

WALLACE: While all of this is going on at airports, the TSA, the Transportation Security Administration, another piece of tape, decided to pat down a 6-year-old girl in New Orleans a few days ago. She got very upset, understandably, and started crying. I know you don't control TSA, but as a government administrator, what do you think of that?

LAHOOD: Well, I'm going to let Mr. Pistole deal with that, Chris.

WALLACE: The head of the TSA?

LAHOOD: He is the head of the TSA.

WALLACE: Does that seem a little nuts to you?

LAHOOD: Look, I have nine grandchildren. I wouldn't want my granddaughter treated like that.

WALLACE: Fair enough. Final question, are the controllers -- are there more controllers falling asleep or is it just that we're hearing about it? And why are all these things happening the same time?

LAHOOD: Chris, I have been on this job, as I said, two-and-a- half years. In the two-and-a-half years, this is -- these are the first instances that I've heard about it. I have always said safety is our number one priority.

We work 24/7 to make sure trains, planes, automobiles, motor coaches, all form of transportation are safe. And that is a reason I am really, really just ticked off about this, about these controllers sleeping. I'm really mad about it.

WALLACE: Are you feeling under the gun? LAHOOD: No, I'm mad about it. Look, I fly. I fly commercially all the time. I fly with the idea that planes are going to be safe, pilots are going to be well-trained, and the controllers are going to be alert and well-trained to guide the plane in and out of the airport.

I'm like every other American. I take these things for granted. I want people to know that I wake up every day thinking about safety. We are going to work 24/7 to make sure these controllers are well- trained and alert, and I want the public to know that. Somebody is looking out for safety.

WALLACE: Secretary LaHood, we want to thank you so much for coming in today and answering our questions about safety in the skies. Thank you, sir.

LAHOOD: Thank you, Chris. Thank you.

WALLACE: Up next, the battle of the budget rages on as Congress and the president turn from billions in cuts to trillions. We'll sit down with two key players when we come right back.


WALLACE: President Obama unveiled his plan for the budget this week, just as House Republicans were passing a very different blueprint for the federal government. To talk about where the debate goes next, we turn to two key negotiators.

From his home state of Oklahoma, Republican Senator Tom Coburn, known as "Dr. No" for his tough stance on spending. And here in studio, Congressman Chris Van Hollen, the top Democrat on the House Budget Committee, who has just been named to the bipartisan team that will meet with Vice President Biden to work on a budget deal.

All right, gentlemen, we know what you and your parties don't like about each other's plans. I'm going to ask you both, please throw away your talking points and let's try to deal with possible areas of compromise.

I want to start with Medicare first. Senator Coburn, the nonpartisan Congressional Budget Office says under the Ryan plan that seniors are going to end up paying more out-of-pocket 10 years from now when the plan kicks in for their healthcare. What can you do about that?

SEN. TOM COBURN, R-OKLA.: Well, you can't do anything about it. We have an unsustainable program. Until we reconnect payment with purchase, you can't fix it. And that is the whole problem with healthcare costs, is everybody thinks somebody else is paying the bill.

And so if you want, there is no way to fix Medicare unless you drive down costs, and there is no way the government is going to drive down costs without rationing.

So if you want to drive down costs, you need a discerning consumer to do that. And that is true in insurance or Medicare. That's why we are seeing this explosive increase in prices.

WALLACE: Well, all right, that brings me to the question I'm going to ask Chris Van Hollen, and again, no talking points. We're looking to find areas of compromise.

The president says let's leave it to a government panel to come up with hundreds of billions of dollars in cuts, which critics like Tom Coburn say means price controls and rationing. What can you do about that?

REP. CHRIS VAN HOLLEN, D-MD.: What the president has said is first of all, we have to fully enforce and commit ourselves to the Affordable Care Act, because Medicare and Medicaid are participants in the overall healthcare system.

And to the extent that you can drive down costs in the overall healthcare system, which the Affordable Care Act will do, you drive down costs in Medicare. Second--

WALLACE: But if I may, basically you are talking about this government panel, and I mean, it's a panel of doctors and administrators and bureaucrats and all of that, that they're going to come up with these ideas to drive down costs, and a lot of people don't believe it.

VAN HOLLEN: Look, what the Republican plan talks about is having private insurance companies drive down these costs. That has not succeeded.

VAN HOLLEN: The whole reason we created Medicare to begin was because private health insurance market could not provide seniors with affordable health care.

And that's why the Congressional Budget Office, an independent entity, said that if you scrap that plan and you throw seniors in the private insurance market to eat the escalating costs, they will pay $6,000 more in the year 2022 than in the current Medicare system.

WALLACE: I'm not hearing much for a compromise.

VAN HOLLEN: Well, the president -- again --

WALLACE: I mean, I know the president's plan. But is there an area where you can accommodate Senator Coburn's concerns?

VAN HOLLEN: Well, the issue with respect to some changes in Medicare, we actually made some Medicare reforms in the health care bill. And they are included the Republican plan, despite the fact that they demagogued a lot in the last round.

For example, we got rid of overpayment to Medicare advantage plans. Those were the private plans in the Medicare system. They were charging 114 percent of fee for services. Now they want to say we'll go into 100 percent of private insurance markets and not provide the Medicare option.

So, that is a surefire way, not just to see the escalating costs but as their plan does require seniors to eat those costs.

WALLACE: Let's turn to taxes. We certainly didn't seem to get a deal here on Medicare. So, let's see if we can turn to taxes.

The president calls for $1 trillion more revenue, largely through raising taxes on the rich, and Republicans flatly reject that. Let's watch.


SPEAKER OF THE HOUSE JOHN BOEHNER, R-OHIO: I think the president heard us loud and clear. If we're going to resolve our differences and do something meaningful, raising taxes will not be part of that.


WALLACE: Senator Coburn, you are prepared to break with your party on this issue. You say, let's lower rates for everybody, but the way to do that is do away with hundreds of billions of dollars in tax deductions and you can use some of that money to address the deficit and debt.

Are Republican leaders wrong to flatly reject any use of added revenue to deal with the debt?

COBURN: Well, I don't think that's what they've said, Chris.

What the president is proposing is to markedly increase taxes on people above, I think, $250,000. You can take all of their money and you wouldn't -- you could take all the money that they earn above $100,000 and you wouldn't cover our deficit this year.

So, the point is: how do we have a system that's fair, that protects the social safety net, and at the same time will generate economic activity and growth in government revenues? And we saw that this has happened. And what everybody on my side is worried about is, OK, if you agree to this, how are you going to make sure that the spending cuts stay there? And that's the problem.

And so, if, in fact, we develop a way to make sure you can't cheat on the caps, both mandatory and discretionary spending, I'm willing to do what is necessary to solve the very real problem that our country is in.

And you can't just say, no, no, no. What you have to say is no within reason that will create opportunity and solve our problems.

WALLACE: So, you would agree to added revenue, not through raising rates -- in fact, lowering rates -- but doing away with these hundreds of billions of dollars in tax deductions?

COBURN: Well, the added revenue comes -- most of that is going to be revenue neutral. What the added revenue comes from the economic expansion and dynamic effect of lowering rates.

WALLACE: Let me bring in Congressman Van Hollen.

The president is still talking about the Bush tax cuts. But the debt commission and to some degree what Senator Coburn are talking about is transcending that whole plan, lowering rates for everybody, rich and middle class, but doing away with these trillion dollars which is spent every year on tax breaks and using some of that to expand growth, but also added revenue.

Why not do that? Why not do what the president's own debt commission suggested?

VAN HOLLEN: Well, let's be clear. The debt commission has $1.7 trillion of revenues in its plan to get to the deficit reduction.

WALLACE: But it doesn't do it by raising rates. It lowers rates.

VAN HOLLEN: But it assumes in the base number, the revenue that will be generated from lifting the -- taking the top rate back to where it was in the Clinton administration. So, that's assuming that's base.

On top of that, they get about another $1 trillion in revenues the way you say, which is by trying to expand the base. And it's absolutely true that we can get rid of a lot of the junk in the tax code on the corporate side we can do it, and there's also room to do it on the individual side.

And Tom Coburn has been a leader in ethanol subsidies. I happened to agree him and get rid of those. I think we should get rid of the big oil subsidies. But those are ways to raise the revenue.

But this is why the fiscal commission said the Republican House plan was unbalanced, because the fiscal commission plan and Tom was a member of the commission.

WALLACE: The debt commission didn't like what Barack Obama announced either this week.

VAN HOLLEN: But, actually, they did. They released a statement saying it's a balance comprehensive approach. They said the exact opposite of the Republican House plan. No, that's --they said --

WALLACE: Actually, well, I --

COBURN: Let me, let me --


WALLACE: Senator Coburn, what?

COBURN: Chris, the fiscal commission didn't make any statement. Two people who led it did. And the rest of us don't necessarily agree with that.

The fact is you can't criticize Paul Ryan's plan until you have one that accomplishes the same thing. The president's doesn't come close to that.

And so, what we need is not partisan bickering, and not the labeling. What we need is what is good about Paul Ryan's plan that they can live with. What is good about Chris' plan they can live with.

What the country needs to hear from the leaders in Washington is we understand how big the problem is. And that we're willing to lose elections to do what is best for the country. And that's what's not happening now.


WALLACE: Senator Coburn, if I may interrupt, sir. You are a member of the so-called "gang of six." Six bipartisan -- three Democrats, three Republicans senators who are trying to come up with your own plan. How -- what are the chances that you are going to be able to come up with a deal when and how will it differ from both Obama and Ryan?

COBURN: Well, first of all, I'm not going to go into the details of how it will differ. I think there's a good chance that we'll be able to come up with a bipartisan agreement that people can swallow.

Nobody is going to like what we come up with. The left isn't going to like it and the right isn't going to like it. And that's one thing that would be an indicator that is probably the best compromise we're going to be able to get.

So, I think there's a good likelihood that we can get there. It's not a sure thing.

But, look, what's the risk if we don't? You know, we, in fact, are going to be making decisions by ourselves, among ourselves, or other people are going to be telling us what we're going to do.

And I think America is tired of bickering. They understand that we have to make some sacrifice -- and so do the politicians.

WALLACE: Let me break --

COBURN: Everybody in America is ready to do that except the politicians.

WALLACE: Senator, let me break in because we're running out of time here. You talk about the other people. That could be, in many cases, are our creditors. And the big issue over the next couple of months is going to be working out a deal so that you can raise the debt limit.

Now, Congressman Van Hollen, you now say Republicans are playing political games with the debt limit. The fact is, in 2004, you voted one time against raising the debt limit.

The question is: are you willing to agree to spending cuts and to some kind of spending caps to get a deal on the debt limit?

VAN HOLLEN: Well, two things. Number one, we have to make good on the full faith and credit of the United States. Otherwise, we'll have an economic catastrophe. I mean, the chairman of the Federal Reserve, Ben Bernanke, has said that. Every economist on both sides of the aisle have said that. So, we have to do that.

We also have to come together, as Tom said, and put together a serious deficit reduction plan. Linking the two and saying you're only going to vote for the debt ceiling if something particular happens on deficit reduction I think is playing Russian roulette with like the fully loaded revolver.

WALLACE: But wait a minute, President Obama, this week, agreed that that there has to be -- there are going to have to be some spending cuts to get the debt limit increased. VAN HOLLEN: What the president has said is we can have a two- track approach. Yes, we have to have a plan to reduce the deficit, but let's not monkey around with the full faith and credit of the United States.

WALLACE: Are you willing -- so, is the answer to your question, you're not willing to agree to spending cut or structural changes to get a deal on the debt limit?

VAN HOLLEN: I am willing to work out a plan to reduce the deficit. It should not just involve spending cuts, as the fiscal commission has said. And as Tom has said, we need to deal with the revenue piece. Deficits are caused not just by spending, which is a driver, of course, but also by -- when you give folks at the very top a big tax break, which is what happened. They exploded the deficit.

WALLACE: OK. We have less than a minute left. Senator Coburn, you have voted against the debt limit half a dozen times over the years. What are you going to need to agree to raise the debt limit?

COBURN: Well, first of all, people ought to ask themselves what's the debt limit? The debt limit is ridiculous. When was it not raised? So, debt limit doesn't mean we limit our debt. A debt limit just says we're going to pause and borrow more.

And so, what do I need? I need absolutely certainty that we've made the critical changes that are necessary to put this country back where it needs to go. And unless we do that, there's no way I support it.

And the fact is we're going to have a debt crisis with this or soon thereafter if we don't come together. So, it's time to come together.

WALLACE: Senator Coburn, Congressman Van Hollen, we want to thank you both so much for coming in. And we'll stay on top of this, the budget -- the battle of the budget. Thank you, both.

VAN HOLLEN: Good to be with you.

WALLACE: Up next, our Sunday panel weighs in on the budget and how the political tone here in Washington is getting downright nasty.



PRESIDENT BARACK OBAMA: We're not going to be able to do anything about any of these entitlements if what we do is characterize as the other party is being irresponsible, the other party is trying to hurt our senior citizens. It's a vision that says America can't afford to keep the promise we've made to care for our seniors.


WALLACE: Well, what a difference a year makes. That was President Obama in 2010, ruling out any attempt to demagogue entitlement reform. And then, this week, going after Republicans on that very issue.

And it's time now for our Sunday group -- Dana Perino, former White House press secretary; Nina Easton of Fortune magazine; Kevin Madden, who was Mitt Romney's spokesman during his presidential campaign; and Fox News political analyst, Juan Williams.

Well, let's talk about the politics of the budget. And I want to put up a couple of Gallup polls this week which are very interesting.

According to the poll, 59 percent think taxes should be raised on families making more than $250,000 a year, while 37 percent do not. And 31 percent support major changes or an overhaul in Medicare, while 61 percent want minor changes or no cost control at all.

So, with that as a basis, Dana, how big a gamble are Republicans making when they want major reform of Medicare and they don't want any tax increases on the wealthy?

DANA PERINO, FMR. WHITE HOUSE PRESS SECRETARY: Well, I think you heard Senator Coburn in there, the last segment, say that there actually might be -- that's not necessarily what the Republicans are saying, but there could be changes to the tax code that bring in more money and actually don't hurt job growth, which is really at the crux of it.

That poll shows you, though, wherein lies the problem for the communicators as they try to talk to the country about, what are we going to do? Because not only do we have the debt problem, the deficit problem, the entitlement one is actually now finally going to be taken seriously. In this past week, what you saw was that only four Republicans voted against the Ryan plan, Representative Paul Ryan of Wisconsin, for the FY-2012 budget which does make those cuts. And I think that's partly because they understand that the crisis that they are looking at is predictable and they feel a responsibility to do something about it. What Coburn just said is they are willing to lose elections on it if it that's what it takes to fix the problem.

WALLACE: Well, that's the question though, Nina. Are they going to lose an election over it?

NINA EASTON, "FORTUNE" MAGAZINE: Well, there is considerable political risk in all of this. And anybody who is serious about what is a crisis facing our country, there is considerable political risk. And the terms of the debate on the serious side, I think, are being set by House Republicans who were willing to go -- to put a marker out there and go towards that marker and doing a deal with the president on cutting spending this year, and who passed -- as Dana said, passed the Ryan plan.

They're not going to get everything they want. The terms of the debate, by the way, are also being set in the Senate in a bipartisan fashion with the Gang of Six.

What we saw this week with the president, however, I thought was a kickoff of the 2012 campaign -- reading the polls. Guess what? These are really hard, difficult decisions to make. And what he did -- you see what's going to be the crux of that campaign, is that we're going to go after millionaires and billionaires. He said that repeatedly.

If we just ask them -- in fact, he said they'd be more than happy to send more money to Washington, as if it's a charity that induces our emotions. But I think that's going to be the centerpiece of their campaign. And again, when he is talking about millionaires and billionaires, he's really talking about people who make $250,000 and above.

WALLACE: Kevin, you know, there were a lot of people who said in 2010, when Democrats and particularly the House, went for this big $787 billion, $800 billion stimulus plan, they ended up over-reading the mandate that they had gotten from voters in 2008. Some people are saying when you see these polls, which indicate by a margin of 2-1, people do not want to see major changes or an overhaul of Medicare, are Republicans in danger of doing exactly the same thing now?

KEVIN MADDEN, FMR. SPOKESMAN FOR MITT ROMNEY: Well, look, there is risk. And this goes back to Dana's point and Nina's point.

There is an incredible amount of risk. But I think right now that the risks of inaction are too great.

If we were not to tack the problem as Republicans right now, I think there's two things that would happen.

We would lose the reform brand. The people that sent us here, both Independents, many conservative Democrats, and many of our base Republicans, have all sent us here to tackle big problems, and to tackle the big spending, the big giant issues that we have ahead of us. So, to not do it, I think would mean that we would not be living up to our promise to the American public.

And look, President Obama did not get to this speech because he wanted to get there. He got dragged and kicking into this speech.

He wouldn't be tackling this problem if it wasn't for Republicans re-framing the public debate. So, if we don't do it now, President Obama is not going to act on it for six years. He will figure he has a mandate not to act on any of these big things, and he's going to continue to operate as if we don't have these big challenges.


JUAN WILLIAMS, FOX NEWS POLITICAL ANALYST: Well, you know, I agree with you. I think President Obama was dragged into this discussion. I think that he was slow to provide leadership on this issue.

But, you know, one of the things that Paul Ryan's budget makes very clear is that the sacrifice will come from the middle class and the poor. And I'm surprised at how much he is willing to put on the seniors. Clearly, you know, people who have parents or grandparents in nursing homes know that they're being taken care of by Medicaid overwhelmingly, and the kind of idea of sending that back to the states as a block grant for governors to squeeze is going to have real implications for how we care for the elderly in this society.

MADDEN: Well, I think that's fair enough. I think the way that this debate is going to break down fundamentally is going to be a defense of the status quo, or are we going to reform the system?

WILLIAMS: No, I don't think -- I think anybody --


MADDEN: I really do, because what you would propose and -- I'm sorry, what Democrats would propose is that we maintain a system as is and we maintain the status quo.


MADDEN: And Republicans are saying that we have to re-look -- we have to look at this system in order to make sure that there are still benefits down the road.

WILLIAMS: Kevin, I think the president had --

WALLACE: All right. Let Juan --

WILLIAMS: -- a debt commission, and I think the president has said, as you just pointed out, he has been dragged into saying we need to have spending reductions, even in terms of this debt ceiling adjustment that has to be made. He said there are going to be spending cuts attached to it.

So, it's not as if Democrats are just for the status quo. To the contrary, it's a matter of how you go at it.

Do you want to go whacking and hurting the poor? And do you also say that the rich are not supposed to pay any more taxes and share the burden?

MADDEN: There are many within the president's party that want a clean debt ceiling raised without any spending cuts.

WILLIAMS: Well, I'm just saying the reality.

WALLACE: And, in fact, let me talk about that and let me bring in Dana, because I completely agree with you, that the 2012 campaign may have been joined this week. And there are going to be a lot of issues that we're just going to argue about for the next year and a half.

But they have to make a deal in the next couple of months on the debt. And what I was trying to get at, not very successfully with Coburn and Van Hollen, was, what are Democrats going to be willing to give and what are Republicans going to be willing to accept to increase the debt limit? Because I've got to tell you, everybody I talk to thinks it would be a disaster for this country if we were allowed to go into default.

PERINO: True. And President Bush had to deal with this issue when he was president. And, in fact, Senator Obama, at the time, viciously attacked President Bush, saying that he would not vote to raise the debt limit, and he admitted that it was political.

This week, the White House spokesperson Jay Carney had to put out a statement saying, oh, whoops, President Obama actually doesn't agree with Senator Obama four years ago. Fine, because now he's principled and he understands it.

I think that the Republicans, because of the budget battle they just took, Boehner did not come out of it unscathed, but he came out of it. But now the Republicans are going to be demanding more. And even if it doesn't make sense necessarily to not raise the debt ceiling, because we're talking a little bit of apples and oranges, that is not going to be easy to communicate, and Boehner is going to be under tremendous pressure to do more.

WALLACE: When you say pressure to do more, because the $38 billion turned out to be $350 million?

PERINO: Depending on how you look at it, yes.

WALLACE: Yes. So, where is the basis for a deal? I mean, it seems that what Republicans are saying, we need structural changes. We're not expecting the 2012 budget to be passed in the next two months, but we need caps, some kind of assurance that we are on a downward path.

EASTON: And let's just look at Medicare. The public -- first of all, these Medicare cuts that Ryan is proposing, those are for people down the road. That's not for people now. That's like phasing things in for people already --

WALLACE: Ten years down the road.

MADDEN: 2022.

EASTON: OK. But we have to have an honest conversation with the public. We have an aging population. We have skyrocketing medical costs.

We can't afford it anymore. You have to do something.

And you can't just go out there and say, oh, we're going to hurt -- you know, the same canard again, we're just going to everybody if we do anything. You have to have the reform conversation.

And it's a difficult one to have, and it carries considerable political risk, but you have got to do it. And I think there are Democrats in the Senate, by the way, who understand this.

WALLACE: All right.

We have to take a break here. But when we come back, the field for the Republican presidential nomination finally starts to take shape. Which candidate would be the strongest, toughest challenger to President Obama?



FORMER GOV. TIM PAWLENTY, R-MINN.: I'm focused on running for president.

REP. MICHELE BACHMANN, R-MINN.: It's a momentous decision. We're talking to our advisers.

UNIDENTIFIED MALE: We'll see if we can raise the money to do that.

FORMER GOV. MITT ROMNEY, R-MASS.: I am announcing my exploratory committee for the presidency of the United States.


WALLACE: Finally -- finally, Republicans are beginning to throw their hats in the ring for the 2012 GOP presidential nomination. And we're back now to review where things stand with the panel.

Having been down this road with Donald Trump at least twice before, I had promised myself, solemnly sworn, that I was not going to mention his name until he actually gets in the race, if he gets in the race. That is until I saw this poll. The poll shows this week that Trump has been playing the birther card heavily, with a big lead over Huckabee, Romney and all the other GOP contenders. Dana, what does that tell you about how the Republican voters feel right now about their field?

PERINO: So, it's like having a GOP fantasy baseball team. Like, you go home and you think, well, if I put this guy in, maybe he would win, and maybe he would get to third base, maybe he won't be able to get all the way home.

And it's tough, but I think what Donald Trump has done is he caught people's attention. He's saying very provocative things some people agree with, some people don't. And he is talking about jobs, and he is playing to people's anxieties about China, foreign influence, and also foreign sources of energy. And he is like, look, I've done it, I've created jobs, I'll be able to do this for you.

How long this star lasts, I don't know. I think he is enjoying it. It's one of the things he hasn't -- you know, he's going to these rallies. He went to one yesterday.



WALLACE: You figure he's enjoying it?

PERINO: I think he's enjoying it, and you get that kind of attention for a while. Whether it lasts, I don't know.


EASTON: I have to, by the way, say that my husband is a Romney adviser, in full disclosure.

But on the Trump thing, you know, you have to wonder where this birther thing is going to take him, making this the centerpiece of his campaign, when not only are we supposed to believe that Barack Obama's mother somehow got him from Kenya to Hawaii to get a false birth certificate, but we now have, again, the Health Department officials in Hawaii coming out and saying he was born here. They have the backup documentation in a book on the second floor of this building.

And she has come out before and said it. So, basically, the Hawaiian state officials have to be in on this conspiracy as well. So, you know, I just don't see where this takes him.

I think Donald Trump, who I have spent time with when I wrote about him, I think of him as kind of like a performance artist -- lighting his hair on fire and getting lots of attention, he's really good at that.

WALLACE: No, I promise you he is not lighting his hair on fire.


EASTON: Yes. That's something we probably don't want to witness.(CROSSTALK)

EASTON: But, that being said, you never underestimate these kinds of candidates.

WALLACE: All right.

Kevin, your man, or your former man, Mitt Romney, announced his exploratory committee. Has he -- and by all lights, he should be the frontrunner, I think it's fair to say -- money, organization from last time, certainly going to run, which some of the others aren't necessarily going to do.

Has he figured out how to deal with what most people consider to be the big chink in his armor -- and that is, Romneycare, the health care plan in Massachusetts, which had an individual mandate much like Obamacare?

MADDEN: Well, I think, first of all, the frontrunner status is one that's usually arrived at by formula. But I think this field right now, as we see in that poll, is very unsettled.

I think on the question of how he's going to run, how he's going to handle health care, I think the best way to describe it is that he's going to confront it. I think it's clearly going to be an issue in this campaign, but I don't think it's going to be the only issue. But it's clearly going to be something that, as we look to contrast ourselves with other folks in the -- seeking the Republican nomination, and seek to contrast yourself with President Obama, it's certainly going to be something that's important to many voters.

WALLACE: Let me just interrupt. When you say he is going to confront it -- because, before, he said some things worked, some things didn't, or this was a state experiment, it wasn't a federal plan -- the principle, which is, I think, what most people that are concerned about and are concerned about, is that he supported an individual mandate.

Is he going to sit there and say, I defend the principle of an individual mandate?

MADDEN: I think the question has to be, do you defend it -- how is it that you decided to drive costs and get more -- and provide more access in your particular state? So, an individual mandate was the best way to reach that with a unique health care population in Massachusetts, a unique health care population of seven million. But the mistake, and where the Obama plan went wrong, was that it tried to apply a federal standard with an individual mandate to over 300 million. And I think that's an important distinction.

Now, there are a lot of people that will say, well, that's not going to sell with many voters, but it's important because it's true. I think, then, you have to move on to health care debate, which is, where are we going in the future? How are we going to drive down cost? How are we going to get greater access going forward?Clearly, Obamacare is not going to drive down costs. It's shown that it's been a great expansion of government power, and what we're seeing is, because of the taxes and regulations, we are seeing higher prices. So that's going to be where the debate focuses -- where do we go in future?

WALLACE: Juan, has brother Kevin persuaded you that Romney doesn't have a problem?

MADDEN: He was taking notes.

WILLIAMS: Well, you know, Kevin is a good political strategist. That's why he is so successful. But, I mean, it's just a hard sell. You know?

I mean, basically, the Massachusetts plan is exactly what Obama's health care reform prescription has been. It's on a state level, so Kevin and Mitt Romney--

MADDEN: But isn't that an important distinction?

WILLIAMS: Well, he was running a state. President Obama is running a nation.

MADDEN: Right. But why would you apply something that works for one unique health care population of seven million people to 300 million? That would be a mistake, wouldn't it?

WILLIAMS: Because -- in other words, in fact, President Obama has said he learned from the Massachusetts plan in trying to draft the national health care --

MADDEN: But what's right for Massachusetts is not necessarily right for other states.

WILLIAMS: Well, let me just say --

MADDEN: That's an important distinction.

WILLIAMS: -- in terms of this Republican field, right now the big money is standing on the sidelines. Everybody is holding their powder dry because they don't see anything out there that indicates that any of these guys can beat President Obama.

So what do you see going on? You see Donald Trump rise to the top of the polls. Donald Trump, out there yesterday, talking to Tea Party people.

And they're all talking to Tea Party people now. Sarah Palin, talking to Tea Party people. Pawlenty, talking to Tea Party people. Haley Barbour, talking to Tea Party people. And they're saying crazy stuff.

I mean, how is Haley Barbour going to get away with saying, oh, we shouldn't be involved in the war in Afghanistan? Donald Trump saying, you know what? Those Japanese -- after the tsunami and earthquake, those Japanese have been ripping us off for a long time. These are offensive, crazy things, but they just like to stir it up.

WALLACE: OK. All right.

But let's talk, though -- I'm going to take one of your points -- don't look at me like that.

WILLIAMS: Well, I'm surprised.

WALLACE: I'm going to take one of your points, which is the idea that there is -- people are waiting to see who else is going to jump in.

And I want to address that with you, Dana, because given the relative lack of excitement about the current field, some people are suggesting that -- and let's put a couple of candidates on the screen -- that New Jersey Governor Chris Christie, or Congressman Paul Ryan could get in the race as late as next fall and still have a chance.

Is that possible?

PERINO: Well, I think anything is possible. And I call that the "maybe someone will emerge caucus," because there is not anyone that has really taken fire.

I want to address one thing on the point, though, which is that there is another person in this presidential race saying offensive, crazy things. And that is President Obama, who called the Republicans un-American this week in a speech in which he invited people.

Now, you can do that if you want to make it a hyper-partisan thing. But the poll you haven't shown yet is that 70 percent of the American people, according to Gallup, think the country is on the wrong track.

So, I think if I were President Obama's political team, I would think, wow, we should have had a better week last week than we did. Rising gas prices will continue to dog them, and maybe somebody will emerge out of this Republican field that will be able to catch people's attention and go the distance.

EASTON: Can I just add to that the bad news on the President Obama front? JPMorgan has downgraded our GDP growth for this year of 1.4 percent. That's not good. I think this president is going to face a really tough economy.

WALLACE: Yes. When you see the inflation in gas prices, the inflation in food --


EASTON: Absolutely.

The other thing I -- a name that hasn't come up here though -- and this wasn't exactly news this week, but it was a leak this week, is that Huckabee is meeting with financial people. And I think he's going to get in the race, and you're going to have this -- the whole -- that sphere, that square of social conservatives, Evangelicals. It's getting crowded.

You'll have Huckabee, potentially, Michele Bachmann --

PERINO: Who went to South Carolina this week. She was in South Carolina last weekend.

EASTON: Haley Barbour, that local South Carolina poll. He's going after that southern base. You've got Tim Pawlenty trying to dip into the Evangelical base.

So, that's a crowded area.

WALLACE: I want to look at three -- at currently non-candidates, put them up on the screen.

And I'll start with you, Kevin, but we can go around the table.

Mike Huckabee, Sarah Palin, Donald Trump -- Nina's just answered it. She thinks Huckabee is going to get in. Do you think any of those get in?

MADDEN: I think that Huckabee and Palin get in. I don't think Trump gets in. I was joking around earlier.

WALLACE: You do think that Huckabee and Palin get in?

MADDEN: I do. I think find myself in this one percentile of people that believe that. But I was saying earlier that when I was in seventh grade, my seventh grade teacher talked about this guy Trump that was running for president. So that was a long time ago. That was about 1985.

WALLACE: I was going to say, it's like me. I have been down this road before. I was in seventh grade at that time, too.


WALLACE: Juan, do you think any of those people get in?

WILLIAMS: If anybody, it would be Mike Huckabee. I think he has a real shot at winning, even, if he gets in. But, you know, Palin and those other folks, that's all about raising speaking fees and book royalties.

WALLACE: And in 10 seconds, anybody of them get in?

PERINO: I was surprised yesterday to see Palin's speech. It was good and it sounded like she was running.

WALLACE: OK. There you go.

Thank you, panel. See you next week.

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

Up next, we hear from you.


WALLACE: Time now for some comments you posted to our blog, "Wallace Watch."

Lucille Gallman writes, "Republican Congressman Eric Cantor's arguments to dismantle Medicare are cause for celebration by Democrats and a guarantee of President Obama's re-election in 2012."

But Alexandra Mark sent this: "I just love the way politicians throw around women's health issues as a way to exhibit compassion and fiscal responsibility. If Planned Parenthood is nothing more than a medical facility for women's health, then they need to change their name and stop doing even one abortion."

Finally, a number of you have been asking what soup my wife Lorraine plans to serve next week. If you go to, you'll find the recipe for Easter Zucchini Mint. I can tell you, it's a great way to start Easter dinner.

Again, that's

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

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