Sen. Joe Lieberman on Secret Service scandal; Gov. Mitch Daniels talks race for the White House

The following is a rush transcript of the April 22, 2012 edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

CHRIS WALLACE, HOST: I'm Chris Wallace.

The latest on the Secret Service sex scandal. Is what happened in Colombia an isolated incident or part of a pattern of misbehavior? We'll get answers from Senator Joe Lieberman, chairman of the Homeland Security Committee, which is looking into the case.

Then, is the recovery beginning to stall just as the general election campaign takes shape? We'll discuss one state's economic success story and play the Beltway's favorite parlor game. Who's on the short list to be Mitt Romney's running mate -- with Indiana Governor Mitch Daniels.

Also, government workers behaving badly -- Secret Service agents and that Vegas spending spree by the GSA. We'll ask our Sunday panel if President Obama will pay a political price for controversies on his watch.

All right now on "Fox News Sunday."


WALLACE: And hello, again, from FOX News in Washington.

Investigators are still gathering evidence in that Colombian sex scandal to determine if it was a one-time occurrence or something more. So far, 22 members of the Secret Service and military have been implicated and six Secret Service agents have been forced out.

Joining us now to discuss where the controversy goes from here is Senator Joe Lieberman, chairman of the Homeland Security Committee, which oversees the Secret Service.

And, Senator, welcome back to "Fox News Sunday."

SEN. JOE LIEBERMAN, I-CONN.: Chris, good to be with you.

WALLACE: Before we get to that subject, there is a report today that Iran has reverse-engineered that U.S. spy drone. You can see it right here on the screen, that apparently crashed in Iran and that they captured last year and that the Iranians have begun building a copy.

As a senior member of the Senate Armed Services Committee, if this report is true, how significant is it militarily?

LIEBERMAN: I haven't been briefed on it at all. This is the first this morning with the announcement from Tehran I heard about it. I would take it with some skepticism. I think there is a history here of Iranian bluster, particularly, now when they are on the defensive because of our economic sanctions against them.

But, look, it was not good for the U.S. when the drone went down in Iran, and not good when the Iranians grabbed it. I don't have confidence at this point that they are really able to make a copy of it. It's a very sophisticated piece of machinery and has served our national security well, including I would guess being used to look all over Iran; particularly, at areas where we have reason to believe that they are working on a nuclear weapon.

WALLACE: All right. You have been getting briefed by the Secret Service on its investigation into this sex scandal in Colombia. How seriously do you take what happened in Colombia, and is there anything new?

LIEBERMAN: Yes, I take -- I take what happened in Colombia very seriously. I mean, this is the Secret Service. They're charged with the protection of the life of the president and vice president of the United States and their families.

From what we know of what was happening in Cartagena, they were not acting like Secret Service agents. They were acting like a bunch of college students away on spring weekend.

It's more serious than just a frolic. History is full of cases where enemies have compromised people and security or intelligence of positions with sex. And beyond that, just a much more practical way, I don't think we want our Secret Service agents, you know, spending a lot of time drinking bottles of vodka and carousing with women before they are going on duty, to protect the president of the United States.

WALLACE: All right.

LIEBERMAN: This is serious.

WALLACE: Let's run through some of the key questions that people are asking that seem to be unanswered.

Any evidence that the women, from what you have been told in briefings, any evidence that these women had access to privileged, secret, classified information? Whether they actually used it or not?

LIEBERMAN: The answer I'm going to give is not conclusive. But from everything I've heard from up to this point -- no, there is no evidence that information was compromised. But here again, if the Secret Service gets the reputation that when they are off-duty, not when they're on duty -- when they're on assignment and off-duty, they're going to be acting like a bunch of college kids on spring weekend, then people who are hostile to the U.S., people who may want to attack the president of the United States will begin to take advantage of that vulnerability.

And that's why I've begun with my staff and Senator Collins, my ranking member, an investigation of not just this episode. I want to give the Secret Service Director Sullivan, the Office of Professional Responsibility some space to conduct its investigation of what happened in Cartagena.

But we're going to send them some questions this week as the beginning of our broader investigation, asking whether there was any -- whether this was an exception, or is there anything in the records that show this is a pattern of misconduct that has gone elsewhere by Secret Service agents on assignment, but off-duty? Why wasn't it noticed if that was the case? What's the Secret Service going to do to make sure it never happens again?

WALLACE: I want to ask you about that. The so-called culture of the Secret Service, because it turns out that one of the supervisors who was allowed to retire, a fella named David Chaney, posted pictures and you can see it right here on Facebook of himself -- on Facebook, guarding Sarah Palin back in 2008. That's him standing behind him there. And he posted this beneath this as you can see, "I was really checking her out, if you know what I mean."

Which raises the question -- and again, I don't know if you are just asking questions or whether you found anything out -- was this isolated incident or, in fact, is an indication that Secret Service agents have acted inappropriately before?

LIEBERMAN: Right now, I don't know. But that's a really important question to ask. And our committee is going to ask it. We'll go to a public hearing -- more than one public hearing when we feel we're ready to do so. We have something constructive to say.

But this is really important. People have said to me, it's hard to believe this was an isolated incident, just happened all of a sudden in Cartagena out of nowhere. I don't know.

But I'll tell you, when you are dealing with the life of the president of the United States, the continuity of our government, we've got to ask every possible question we can about whether there was evidence this was going on, or it should have been seen by the Secret Service and what can be done to stop it.

For instance, what are the regulations, the rules of conduct that are drilled in to Secret Service agents about what behavior is expected of them when they are on assignment but off-duty? That's very important. And I don't have the answer to that yet. But we're going to get it.

WALLACE: A couple of quick questions. Again, people are asking, any evidence that any White House staffers, who were there in Cartagena, were involved in this?

LIEBERMAN: Well, there's no evidence. But I don't know that the Secret Service is investigating that question.

I saw that my colleague, Senator Chuck Grassley asked the Secret Service, the inspector general of the Department of Homeland Security to ask -- to begin to investigate whether any White House personnel, including, of course, the advanced teams that go ahead of the president when he makes a trip either at home or abroad. I -- if the White House asked me how to respond to Senator Grassley's inquiry or request, I'd say it's a reasonable question. That the White House ought to be conducting its own internal investigation of White House personnel who were in Cartagena, just to make sure that none of them were involved in this kind of inappropriate behavior.

I understand a White House advanced person is not -- doesn't have quite the same range of responsibility that a Secret Service agent does. On the other hand, the White House advance person knows exactly where the president is going to be at any time. If anybody -- thinking the worst -- wanted to attack the president of the United States, one of the ways they might find out, the path he would follow in Cartagena is by compromising the White House advanced personnel.

So, that's an important question and the White House ought to take Grassley's inquiry not defensively but making sure that they answer the question.

WALLACE: There has been one report, one report that cocaine was found in the room of one of the Secret Service agents. Do you know whether that's true or not?

LIEBERMAN: I don't. I don't.

Incidentally, one of the rules that I've looked at as my staff and I began to go over Secret Service rules, there's a rule the Secret Service agent cannot be using what is described as intoxicant within six hours when he or she goes on duty. I want to take a look at that. And as I say, the other rules of conduct that Secret Service agents are supposed to conduct themselves by, if in fact they were adequately informed of those rules.

WALLACE: Do you still have confidence in Secret Service Director Mark Sullivan, especially given the fact that not only this is on his watch, but also that he was running the agency back in 2009 when not one, but three people were able to crash President Obama's first state dinner?

LIEBERMAN: Yes, I do have confidence in Mark Sullivan. I mean, that was an unfortunate lapse. I think he reacted to it. It was the fault of the Secret Service agents on the ground. I think they have corrected that problem.

In the case of the Cartagena situation, I think Director Sullivan has acted with a sense of urgency and determination. So that's what I would say today.

LIEBERMAN: And I hope when we look back at what happened before Cartagena, we will still be able to have the same confidence in Mark Sullivan.

WALLACE: Let me switch suggests on you. Your committee also oversees the General Services Administration as part of your governmental affairs function. How do you explain this wild overspending?

We can look at some of the videos here that have been all over TV, $823,000 for a conference. A conference in Las Vegas, the regional commissioner taking a 17-day trip through the Pacific.

How do you explain it? What's your committee going to do about it?

LIEBERMAN: There is no explanation for it. There is no excuse for it. I mean, when I heard about it, I said what were these people thinking? This is taxpayer money. They were living in some strange bubble.

Incidentally in 2010, the deputy to Mr. Neely, who director of region 9, where all of this happened out of San Francisco was charged and then convicted of embezzlement. He was embezzling money from the federal government.

But that didn't seem to stop Neely and others in the region from the extraordinary waste, fraud and abuse with taxpayer money. I don't have to say it, but its effect, when the economy is down, when people are struggling to pay their bills, when they're struggling to pay their taxes -- it's outrageous that federal employees did this.

I believe this is an exception. But I'll tell you, we have a responsibility in our Government Affairs Committee, which is the oversight part of our jurisdiction to not just walk away from this.

I'm with Senator Collins, asking the inspector general of the General Services Administration, GSA, to begin an investigation of the other 10 regions to make sure that there is no similar behavior, such as we found in region 9 with the extraordinary Las Vegas party.

I'm also going to be holding hearings in which will call in the leadership of GSA to make sure they have take an good hard look at the way the GSA does business. I mean, this is an agency that is supposed to achieve efficiency in renting, leasing, operating federal buildings. Instead they were wasting money. But they have had a tradition of having each of their regions have a lot of autonomy. That autonomy was clearly abused in region 9. I want to make sure it's not happening in other regions and never happens again in region 9.

WALLACE: Former Governor Sarah Palin says that President Obama should be held responsible for these boondoggles at GSA, the breakdown in discipline at the Secret Service because they happened on his watch and he is the chief executive officer.

Do you think that's fair?

LIEBERMAN: Well, I say that president -- it would be unfair to hold President Obama responsible for this outrageous behavior at the Secret Service and the GSA. But it is fair to hold a president accountable.

What do I mean? I mean, we have millions of federal employees. The responsibility for the abuse of authority at the Secret Service and the GSA really is the employees who did it and their supervisors.

But what do I mean when I say the president should be held accountable? The buck stops at the president's desk. He is the leader of our government. He now has to be acting with kind of relentless determination to find out exactly what happened and to make sure that people who work for him at the Secret Service and GSA and everywhere else in the government don't let anything like this happen again.

As somebody who spent a lot of my life in government, I get sickened by these kinds of stories from Secret Service and GSA. They don't reflect what I know to be the typical federal employees, but they do nothing but increase the cynicism that the American -- and anger that the American people feel toward their government. And that's just bad for our democracy.

WALLACE: Finally, we've only got about a minute left. You were, of course, Al Gore's running mate back in 2000. You campaigned for and very much supported John McCain in 2008.

Have you decided who you are going to support this time, Romney or Obama? And in a minute, what are your thoughts about the two of them?

LIEBERMAN: Yes, I'm going to try something different this year. I'm going to try to stay --

WALLACE: Didn't work out so well the last time.

LIEBERMAN: No. I'm going to try to stay out of this one. You know, I'm not running for re-election. I'm enjoying not being involved in the nastiness of campaigning in America these days.

I think this year, when it comes to the presidential election, I'm just going to do what most Americans do. Go in the voting booth on Election Day and in the privacy of the booth, cast my vote. This is a very important election.

One thing I will say, it seems obvious from the polling that's going on the whole year, that the American people are very unsettled, they are uneasy about the economy, about the government. They have changed their mind a lot as this has gone on.

And this is going to be a very close and unpredictable presidential election right down to Election Day.

WALLACE: Senator Lieberman, we're going to have to leave it there. Thank you so much for coming in today. And we will stay on top of the GSA and the Secret Service stories.

LIEBERMAN: Good. Thank you, Chris.

WALLACE: Up next, a favorite of fiscal conservatives -- Indiana Governor Mitch Daniels joins us to talk about the economic recovery and whether he will be Mitt Romney's running mate.


WALLACE: A lot of Republicans wanted Indiana Governor Mitch Daniels to run for president this year. Now, a lot of Republicans want Mitt Romney to choose Daniels as his running mate.

Joining us from Indianapolis to talk about that and an economic recovery that seems to be stalling is Governor Daniels.

And welcome back to "Fox News Sunday", sir.

GOV. MITCH DANIELS, R-IND.: Glad to be here.

WALLACE: You finally endorsed Mitt Romney this week. But here's what you said in an interview with the "Indianapolis Star." We're going to put it on the screen.

"You have to campaign to govern, not just to win. Look at everything through the lens of folks who have yet to achieve. Romney doesn't talk that way."

Question -- is Romney out of touch with Americans who are struggling in this economy?

DANIELS: No, I think he is much more in touch honestly than the president, apparently will ever be. He's been out there. He's been roughed up in the primaries. He's been face to face with a really serious, lingering economic difficulties America faces. If anybody is, you know, detached from the lives of real Americans, if anybody is disconnected from where jobs and wealth comes from, it's our president. So --


WALLACE: If I may, though, sir, what did you mean when you said Romney doesn't talk that way?

DANIELS: I'm just saying that he's got the right prescription for America, he is meeting the objective that I hoped our party would meet of offering specific, positive, constructive remedies for our debt problem and our slow growth problems. As things go along, I just want to encourage him to express these very same principles more often from the standpoint of the young, the poor, those that have yet to start up the ladder of life. It's the very same principles, but aimed in a slightly different way. I know he'll do that.

WALLACE: The polls are pretty clear at this point that the horse race between Obama and Romney is very close.

WALLACE: But they're also clear that maybe perhaps because of the primary process and positions he took during the primaries, that Romney trails the president by significant margins among women, among Hispanics, among lower-income workers.

How does he reach out to them?

DANIELS: Again, I think simply by identifying with the real problems they're facing. I don't think he wants to trade problems with the president this fall.

This economy is in a lousy shape, everyone knows it. The only surprise to me is that anyone is surprised that it's still sputtering. And I don't see it. I hope I'm wrong, but I don't see it much better a few months from now.

And so, Governor Romney, I believe is already getting good marks for his superior point of view on the thing that bothers Americans most. It bothers everyone, all the groups you just mentioned, as much as anyone. And so, he's got a great opening, I think. I predict he'll seize it.

WALLACE: All right. I'm going to get to the economy in a moment, but I want to talk about the specific groups, because -- for instance, with the Hispanics, and yes, of course, the economy is the overwhelming issue. But during the campaign, Romney said he opposes the DREAM Act. He supports the Arizona crackdown on illegals. He said that the illegals should self-deport.

A lot of Hispanics are expressing concerns about those positions. He can't just say I didn't mean it.

DANIELS: I don't think he has to at all. I think that, you know, he has nothing -- he gives away nothing here with regard to the president who's been, I believe, very duplicitous sometimes on this very same subject. But I think he's got to speak the language honestly, not of narrow broadcasting, to narrowcasting let's say, to individual groups as much as the language of unity that talks about the issues that unite us all, the threats that menace us all and try to bring Americans together.

You know, that quote you put up, Chris, the most important part to me is the notion of campaigning to govern. Meaning, try to assemble people who may disagree about other things, about the largest national challenges and objectives we have.

WALLACE: Let's deal -- I know you are not going to particularly enjoy this. Let's deal with a question of you as a possible running mate for Romney. During the run-up to the primary campaign, you made it clear that your wife and your daughters were not especially enthused at the idea of you running for president.

Would they feel differently about your running for vice president, which is a shorter and less intrusive campaign?

DANIELS: We haven't had the conversation and I don't expect to have it. You know a lot went into that decision not to run. Very specifically, that I promised the people of my state eight full years and I like living up to that commitment, showing that it was real.

So, no, I don't -- I think this is a hypothetical question that will probably stay that way.

WALLACE: All right. But let me ask you directly, if Romney asks you to be his running mate, will you accept?

DANIELS: Chris, you will remember what William F. Buckley said when he ran for mayor of New York and asked what he would do if he won. He said, "Demand a recount."

I think I would demand reconsideration, and send Mr. Romney a list of people I think could suit better.

WALLACE: All right. Let me ask you who would be at the top of the list. Who should he pick?

DANIELS: I have seen a lot of names and I like them all. I don't want to ruin anybody's chances this morning by singling him or her out. You know, there is a lot of talent in the Republican Party. A lot of new governors and young legislators have joined our ranks in the last few -- just few years.

And I think he has a wide range of people to pick from. I have full confidence he'll find the best one.

WALLACE: Let's turn to the economy, which you touched on earlier and where it is right now. There seemed to be signs for last few months that the economy and the recovery was picking up, more jobs were being created each month. The employment rate was steadily coming down.

But now, in the last month, there seems to be a sense from a variety of signs -- job creation, housing -- that the recovery is stalling.

What's your sense of where the national economy is now?

DANIELS: That it's stalling and it never had much momentum. Even when consumption seem to be going up, if you look one level deeper, people were digging in savings to make those purchases. Last year, income in America rose slower than inflation. People actually lost purchasing power. You know, our state happens to be one where the workforce is growing, but all around us there are states, Chris, where people have simply given up looking for work. Everyone now knows if we had the same size workforce we had when this all started, unemployment as reported would be 11 percent. Not 8.x.

So, you know, this is still a very tough slog in most of America. And honestly, I can't name one thing that this administration has done that hasn't leaned against jobs and against growth. So, to that extent -- to the extent national policy has an affect, it's not really a surprise.

WALLACE: Well, let me pick up on that, though. What about the Obama argument that he inherited a mess from George W. Bush, and that if Romney gets in to office and enacts the policies he's espousing, that he will simply return us to that mess?

Governor Romney has endorsed Paul Ryan's budget. In principle, Ryan cuts tax rates for the rich without specifying which loopholes he would close. Ryan cuts nondefense discretionary spending by 19 percent in 2014, which the Obama campaign says would mean major cuts in Head Start, medical research and healthcare for the poor.

So, how about the Obama argument, what Romney will do is give tax cuts to the rich and spending cuts to the poor and the middle class?

DANIELS: First of all, the president did inherit a mess but it's not the first time it's ever happened. He's done less with the mess than anyone else ever did. Ronald Reagan inherited a bigger one and had a roaring economy already by this stage.

This is the weakest recovery, at least in the post-war period, if not ever, given the depth of the recession that we were in. With regard to how we get out of it, you can start by saying we couldn't do worse than the policy mix of this president -- gigantic new spending, gigantic new taxes, a takeover of 18 percent or 19 percent of the economy in the Obamacare bill. Anything would be better than that.

Now, with regard to the Ryan budget, it's certainly a much better starting point than what we have now. Yes, fill in the blanks. Yes, let's describe exactly where or at least the extent to which the tax loophole should be closed.

But you know, the president -- apparently, nothing in his life has acquainted him with where jobs and wealth come from. He has no ear at all for the small business of this country. They're the ones on the receiving end of all of his new taxes. And, you know, frankly, I guess he never is going to get it.

WALLACE: Finally, Barack Obama won Indiana four years ago, the first time that any Democrat had won your state since Lyndon Johnson in 1964. What are the chances that Barack Obama can win Indiana again this November?

DANIELS: Slim and none. I want to give credit to a very savvy strategy in 2008. They were in a very competitive primary here. They spent a lot of time and money, had a running head start, saw an opportunity and capitalized on it.

But it will take a massive change, I believe, in the view of Hoosiers for him to repeat that this year. The kind of policies he's pursued have been very, very hard on people out here in the middle of the country. And my fellow citizens seem to see that. Every indication I have seen says they are open to change and a new direction in favor of more limited government and more pro-growth economic policy.

WALLACE: So you think that Indiana is basically locked up pretty tight for Mitt Romney in November?

DANIELS: I think you got to go earn it, of course. And I hope he will do that. But you asked me what the president's chances are, and I'll just -- I think I'm on firm ground saying they're not too good.

WALLACE: Governor Daniels, we're going to have to leave it there. Thank you so much as always for talking with us and please come back, sir.

DANIELS: I'd like that.

WALLACE: Up next, the general election campaign heats up. And new polls show the race is even closer than expected. Our Sunday panel on the 2012 campaign in a moment.



PRESIDENT BARACK OBAMA: I wasn't born with a silver spoon in my mouth. Michelle wasn't. But somebody gave us a chance.

FORMER GOV. MITT ROMNEY, R-MASS., PRESIDENTIAL CANDIDATE: By his own measure, this president has failed. We're going to get him out of office.


WALLACE: President Obama and presumptive Republican nominee Mitt Romney playing politics this week over their personal backgrounds and their records.

And it's time now for our Sunday group -- Bill Kristol of The Weekly Standard; former Democratic campaign manager, Joe Trippi; Former Bush White House senior advisor Karl Rove; and Fox News political analyst, Juan Williams.

So, the president you saw there talking about silver spoons, the Democratic governor of Montana talked about polygamy communes. On the other hand, the Republicans mined the first Obama autobiography and found out he ate dog as a young boy in Indonesia.

Is this what this campaign is going to be about? I mean, and seriously, is there going to be an effort by both sides to paint the other side as somehow weird or foreign, Bill?

BILL KRISTOL, THE WEEKLY STANDARD: I think it would be unfortunate. It's not what the campaign should be about. It's a big moment; it deserves a big election. I think Republicans would be well advised to keep it on the -- and they have been so far (inaudible) -- keep on the high -- at a high level.

He's the incumbent president, he's run up $5 trillion of debt, he passed ObamaCare. Are those the policies that you want or are those not the policies?

WALLACE: But, I mean, you expect talk about Mormonism and polygamy and silver spoons. And on the other hand --

KRISTOL: Yes, I think if you are an incumbent president who doesn't -- isn't thrilled to (inaudible) record, you will try to disqualify the opponent. You can try to disqualify him on personal grounds. It has not worked. It has not worked.

I was in the first Bush White House, and a lot of people privately thought, well, they'll never elect Bill Clinton. Look at his personal background, look at the draft dodging. George H.W. Bush is a more admirable, honestly human being, I think (inaudible) had achieved more in his life, had been a war hero.

Voters vote on policy. Voters vote going forward. A lot of people thought that Barack Obama could not be elected president because of his background and his race and all that. And that didn't happen either. I think voters in this kind election will vote on policy, not on sort of phony personality or background issues.

WALLACE: Joe, let's talk about money, because we just got latest filings and they're very interesting. At the end of March, the Obama campaign had $104 million -- this is the actual campaign -- cash on hand, while the Romney campaign had $10 million.

But the Obama super PAC, Priorities USA, had only $5 million in the bank, while two Republican super PACs were in much better shape, American Crossroads with $24 million and Restore Our Future with $6.5 million.

Joe, will money be a big factor in this campaign or do you think that, in effect, both sides have enough to make their case?

FORMER DEMOCRATIC CAMPAIGN MANAGER JOE TRIPPI: Well, I think both sides will have enough to make their case. The president is going to be raising, I think, a lot more than the Romney campaign is going to raise.

But as the chart pointed out, the super PACs on the Right are going to do much better than the super PACs on the Democratic side. So you're going to have the money to make the case. The problem is, with all of that money, I think you are going to see one of the most negative campaigns out there.

You've got a president who is not very popular, a Congress that is not very popular and you got the least popular Republican, any challenging nominee in recent history. So at that point, I think everybody is going to be pointing up the negatives on the other side, not necessarily the positives.

WALLACE: Karl, I want to talk to you about money and support as one of the founders of American Crossroads, the Republican super PAC. "The Washington Post" says that outside independent Republican groups are going to focus on television, the air wars; while outside democratic groups, especially big labor, are going to focus on ground game.

One, do you think that's true? And secondly, if it's true, which is more important, the air wars or the ground game?

KARL ROVE, REPUBLICAN STRATEGIST: Well, first, both are important. And but I think you have got it exactly right. The Citizens United Supreme Court decision gave unions the ability to spend money not just on a ground game as previously allowed, aimed at their members, but now the broader public. And they will take advantage of that new strength.

The Republican National Committee is going to take the lead in the ground game on the Republican side and outside groups will take the lead probably on air war. But both are important and absolutely vital in the election.

I'd like to make one quick point about money. I think sufficient money will be found on both sides. But interestingly enough to me is, not just the money raised by the Obama campaign, but the money spent. Thus far, they've raised $197 million. They got $104 million on hand, which means they've spent 48 percent of what they've raised.

In fact, last month, March, they raised $46.4 million but spent $37.7 million. They spent 81 percent of the money they raised that month. Their burn rate is really, really high. And if I were sitting in Chicago I'd be worried about how much money are they going to have at the end of the campaign.

WALLACE: Let me ask you, I mean, as somebody who was very involved in the re-election campaign for George W. Bush in 2004, did you have a 40 percent burn rate?

ROVE: No, in fact, you know, look at the first quarter, last April, May and June, first three months of Obama's reelection campaign and the first three months, incidentally, in '03 of Bush's reelection campaign, they spent 25 percent of the money that they brought in. We spent 9 percent. We were spending --

WALLACE: What are they spending it on?

ROVE: Well, they're spending it on a gigantic staff, with a lot of bells and whistles. They have got about as many people as you'd expect to have in a general election in the final couple of month, they've already got. And they are opening up a lot of offices around the country.

They would tell you that they are investing in a ground game that will pay off at the end. Having invested a lot of money in a ground game in 2004, I know how expensive it is. But I also know that you can spend too early. And it strikes me they are spending way too early.


JUAN WILLIAMS, FOX NEWS CONTRIBUTOR: No, I don't think they are spend too early, because they are going to need a ground game. I think it's going to be a close election. In that case, then, you want to make sure that you have the capacity necessary to make sure you are reaching voters. And don't forget, part of this is making sure for the Obama campaign that they are able to excite their base. One advantage the Republicans have had -- and, you know, we can argue about this -- is whether or not the primaries excited the base, got the base involved.

Actually, Republican turnout has not been great in these primaries. But the reason I mention this, on the Democratic side, they haven't had primaries.

Any challenge to President Obama that would excite the base, that say now is the time to get in gear, they have taken advantage of this time, spent the money, as Karl just said, but put in place a network, to even challenge in states that are considered somewhat on the line, Arizona, for example.

And they will be in place now for the rest of this time, leading up to the November election in order to capitalize on it.

And the second thing to say is the super PACs already are now trying to counter for Mitt Romney in advance of this campaign. They're out there defending him with the big bucks, supplied by my pal, Karl, that the Romney campaign doesn't have.

WALLACE: Karl, go ahead.

ROVE: Well, first of all, I'm delighted I'm your pal.



ROVE: I'm really too pleased, deeply moved. Would you like to contribute?

WILLIAMS: Oh, stop.

ROVE: Look, Juan made a point that they're spending big on a grassroots effort and that they'll (inaudible). Yes, right, good. We did that in 2004. We spent on a big grassroots effort, the biggest in the history of American politics at that point.

But there are differences between spending the vast sums of money that they are spending now and spending the vast sums of money later. Strikes me they're running --

WALLACE: OK, let me turn to Bill and a slightly different subject.

You had an editorial in the new issue -- you have an editorial in the new issue, and here it is, of the "The Weekly Standard," in which you say that President Romney, as you put it, should largely ignore President Obama during this campaign. Explain what you mean.

KRISTOL: I think he should let Karl and the big buck pals attack President Obama and call attention to his deficiencies. But, look, President Obama has been president for three-and-a- half years. His approval rating is, what, 46-47 percent? It's not at 50 percent. Voters don't like "Obama-care." They don't like the stimulus. They don't like, I think, the notion of $1.3 trillion deficits forever.

And I think President Romney -- "President Romney." Governor Romney, candidate Romney needs to make the case that he can be President Romney. I honestly think this election is Romney's to win. I don't think he needs to disqualify Obama at this point.

President Obama is the incumbent. He has got 45 percent support, not that much more. President Romney should go -- and this is a little contrarian I think, because every conservative I know wants President Romney to just hammer -- Governor Romney to hammer President Obama as much as possible.

But I actually think that would be a mistake. He has got -- the best way to convince voters that you can be president is to be presidential. And that means giving serious speeches about foreign policy, about the Supreme Court, about the debt and the deficit, and I think running a high-road, big picture campaign.

WALLACE: Joe, do you agree with that?

TRIPPI: Well, I think that is what Romney should try to do. I don't think he is going to be able to do it. I think -- look, this is going to be a really mean-spirited campaign all the way down to the wire on both sides.

I mean, we have already seen it. It is going to happen. I don't think the Romney campaign is going to be able to stay above it.

WALLACE: But how about the candidate himself, and candidate Obama?

TRIPPI: Well, the candidates should both try to do that. But I don't think -- I mean, there is so much money on both sides from committees you can't control. It's those ads that are going to be the real tell-tale of how this thing goes down. And I think it's going to be a very tough election.

The one cautionary note on the money, they're spending this money to build the most massive online list ever. And that is something that he has built it, something like that, when they hit that button, they could raise $100 million in a week, the Obama campaign.

Do not -- anybody who thinks that just roll over, they're spending more money than they should, I think they're wrong. These guys know what they're doing.

ROVE: They may know what they're doing but the fact is is that they ought to be -- in order to get to their $750 million goal, they are going to need to raise $68 million a month. That is well above the $28 million a month they're now raising. And they may be able to hit that button, but I don't think so. May I say one thing about Bill's very...


ROVE: ... excellent editorial. I agree with a lot in there. I do think Romney needs to use Obama's words to indict him, his own standards, his own words in a presidential way.

But the most important thing that was in Bill's editorial was in the second to last paragraph in which he talked about the tone. Republicans need to remember the swing voters in this election do not hate Obama. They like him.

But they are terribly disappointed...

KRISTOL: They voted for him.

ROVE: They voted for him. Or stayed home. Or if they didn't vote for him, wished him well. But they are disappointed with his policies and regretful that they gave him their support but they don't want to have their nose rubbed in it. And they want the Republican candidate, Romney, to make a case that is prospective and optimistic as well as one that is a specific point-by-point indictment.

WALLACE: All right. We have to take a break here. But when we come back, the Secret Service scandal, the GSA blow-out in Las Vegas. Will there be any political fall-out for President Obama?



SARAH PALIN (R), FORMER ALASKA GOVERNOR: The buck stops with the president and he's really got to start cracking down and seeing some heads roll. You know, he has got to get rid of these people at the head of these agencies where so many things obviously are amiss.


WALLACE: That was former Governor Sarah Palin, laying blame for the Secret Service and GSA scandals on the doorstep of President Obama. And we're back now with the panel.

Bill, do you think these cases of government workers behaving badly will have a political impact? And do you think it's fair to blame and to hold President Obama accountable?

KRISTOL: I think it's a government problem honestly more than a President Obama problem, though he has to be held accountable. He appointed the head of the GSA, so I guess he will remove that person and we'll see what else he does to reform the agency.

I think it would be mistake, honestly, for Republicans to put too much in the way of hopes in exploiting these scandals. Remember in 1988, everyone thought that Bush -- Vice President Bush was doomed because of Iran-Contra, which really was a big scandal and dominated the news for a year.

In '96, Republicans spent an awful lot of time complaining about the Clinton-Gore fundraising scandals, which were genuine scandals and which much more personally implicated Bill Clinton and Al Gore, and you know what, Vice President Bush won in '88, and Bill Clinton won in '96.

And I come back to what I said before. I think this election will be much more about the policy going forward than particular scandals that have happened.


TRIPPI: I think that's right. I mean, look, I think to the extent people have more distaste about government, and more distaste about corruption scandals, et cetera, that doesn't hurt anybody who is in.

And so it can actually have a bigger impact on the congressional races around the country than it may on the presidency. But I do think the Republicans can't put too much into this and try to exploit it too much.

WALLACE: Karl, I have a couple of questions I want to ask you. First of all, you worked in the White House for almost seven years. Did you ever see any signs of a breakdown in Secret Service discipline? Especially, did you ever hear anything about agents going on the road before a presidential trip and partying, that kind of thing?

ROVE: No. Especially on a foreign trip. I mean, this is one of the more dangerous moments. The Secret Service guys are always wired up about foreign trips. I -- Mark Sullivan, the director of the Secret Service, is an enormously able individual. I think he has moved aggressively and appropriately here.

I think at the end of the day, when all of this is known and when all of it has been handled, that the people who will be most disgusted and most angry and most upset about this are the members, the men and women of the Secret Service.

This is not up to the standards that they, themselves, hold out for their own agency and for their own mission. A it's terrible blot on their record. And I suspect the vast majority of the Secret Service personnel feel that way.

WALLACE: But you never heard of any agents -- lead agents...

ROVE: No, no, particularly on a trip like this. Look, it's one thing -- you know, they're human beings. So, you know, after a mission, you know, after a trip is over, you know, have a beer or something. But not on duty. Not -- and when you are on a foreign trip, you are on duty all the time. There is no off-hours.

You may have a time that you're not on active watch, but you are on duty 24 hours a day when you're on a foreign trip.

WALLACE: All right. So now let me ask about the politics of this. Do you think it is a legitimate weapon? Do you think it's an effective weapon to go after the president on this? When I say "this," Secret Service and GSA, the Palin argument is, he is the CEO of the corporation, it's happening on his watch.

ROVE: Yes, well, with all due respect, every argument in politics generates a counter argument. And the counter argument that will be generated if Republicans try and make this a big push against President Obama is the ordinary American will look there and say, you know what, that is going over the top.

Yes, the GSA thing needs to be reformed. Yes, there needs to be a top to bottom review of this issue at Secret Service, but the Republicans will make a big mistake -- I agree with Joe and Bill -- this will be a mistake if the Republicans do it. They need to do it with restraint.

Sure, it creates a problem for President Obama. It adds to the sense that Washington is broken. But if the Republicans try to make this a point in their arguments, they are making a big mistake.


WILLIAMS: I couldn't agree more. I think it's been said here that, you know, people are going to look at this with a large sense of gosh, you know, what is going on not only in Washington, but just the lack of trust in American leadership at this point from Wall Street to Washington, our culture. But the idea that somehow President Obama is responsible I think it's a reach. And it's overreaching at that point, then people start to wonder why are you being so aggressive and attacking someone who was pointed out earlier, President Obama personal ratings are pretty good. People do not see him as someone who is personally involved and would personally give license to this kind of irresponsible behavior.


TRIPPI: It's the fourth sign of the apocalypse, the four of us agree on this.

UNIDENTIFIED MALE: Quick, let's change the subject.

WALLACE: I want to flip it around, though, a little bit. And I certainly take your point to say that the president knew or has specific responsibility for what happened in Cartagena. But the wild overspending on the GSA junkets, Bill, even though it's obviously $800,000 is a minuscule part of the overall budget. But just looking at this video, does it bolster the Republican argument that the federal government is bloated? You raise taxes, you spend more, and some of it will end up going to this junk?

KRISTOL: Yes. This should be folded in an argument about this -- if you want big government, this is big government. And this is a case for putting someone in there who will downsize and reform government. And let's look at the GSA. Why is it -- let's look at all these agencies. Why are they having the conferences? Really, in the time of austerity with $1.3 trillion deficits, everyone has retreat and workshops, and team building exercises. Maybe they could put them on hold for a few years and maybe they can downsize some of these agencies.

The GSA is supposed to be the agency that makes the federal agency more efficient. So I think it's good as part of an anti-big government argument. As Karl says, it's not carried too far and made kind of the personal responsibility of Barack Obama.

ROVE: You heard something earlier today that caught me by big surprise and that is that Mr. Neely, the executive at the center of this, had according to Senator Lieberman been found embezzling funds...

WALLACE: No, it wasn't him. It was somebody underneath him. It was an agent.

ROVE: OK, well. I mean, even then. I mean, this is a dysfunctional agency. They fire the administrator. She tendered her resignation. But they should have gone deeper with...

WALLACE: What do you think about this argument, Joe, to the degree that people are suspect about government, and spending, and waste and bloated government, that this only feeds in to that? And to that degree -- particularly when you have got a president who is saying hey, government is going to invest and government is going to help solve your problems and you have a challenger saying we want government out and let the free market work.

TRIPPI: Broad strokes. Anybody who is in will be hurt by this and that applies to the president. And it applies to members of congress and the Senate, everybody who is government.

The problem is I agree if you try to make this personally the president's fault or try to take it and somehow blame him for this is that the buck stops here, that is not going to work, that will backfire on Republicans and anybody who tries to make that argument.

In the broader sense, absolutely, this is not good for the president. It's not good for incumbent member of congress for people to be sitting here looking at these GSA videos and wondering what is going on in Washington?

WALLACE: Karl, we have got a little over a minute left and I'm going to take advantage of it to switch subjects on you. What is your feeling at this moment -- I assume that you don't know anything, because I assume really there hasn't been anything done -- but what is your analysis right now about the vice presidential sweepstakes?

ROVE: Well look, this will be a fascination for months. But the fact of the matter is, we have on the Republican side a broad range of opportunities for Mr. Romney, for Governor Romney. And this is going to be a long exhaustive process if he does it right. And he will do it right. Beth Meyers, the woman in charge of is it meticulous, conscientious and detail-oriented.

At the end of three or four months, Governor Romney will have absorbed a lot of information about the prospects and the possibilities and I hope he will make the decision on the basis that everybody has this decision makes it, or should make it, which is who would be the best partner to him in the Oval Office? Whose judgment, whose abilities, whose talents, whose communication skills would augment his ability to govern. And who would the country have confidence him if something terrible happened to President Romney? And would be...

WALLACE: And specifically, reaching out to somebody that might help you wane state, a geographical choice, or a demographic choice. Let's pick a Hispanic, because we're in trouble with Hispanics? I mean, those guys can also be good partners.

ROVE: Look, the principle ought to be what helps me govern. The politics ought to be secondary. And there are lots of different abilities that people could bring to the fray. But first and foremost, who is going to help me govern?

WALLACE: All right. We are going to have to leave it there. And we'll only be playing this parlor game for what, between now and august, you figure out the math.

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, We'll post the video before noon Eastern time and make sure to follow us on Twitter @foxnewssunday.

Up next, we hear from you.


WALLACE: Time now for some comments you posted to our blog Wallace Watch. After my interviews last week with top advisers to President Obama and Governor Romney we got a lot of e-mail.

Gary Purdum wrote, "on one hand you had Chris interviewing David Axelrod, and a lively confrontation it was, winner to be determined. On the other hand, you had an exchange of information between Ed Gillespie and Chris. I'd call at it tie."

Mary from Michigan posted this, "Gillespie defined the political campaign spot-on, stating President Obama's campaign is a government- centered society campaign. The clearest statement of all regarding social government."

And we received a lot of notes about my tribute to my dad. Gary Corbell sent this "I must say that this 71-year-old man was moved to tears. Thanks for sharing that moment with us."

And thanks to all of you who sent me such kind messages. They have meant a lot to me. Now this program note, next week our guests will include Joel and Victoria Osteen who are bringing their ministry to Washington.

And that's it for today. Have a great week. We leave you with one more look at the spectacular pictures of the Space Shuttle Discovery atop a 747 jet, doing a fly around Washington earlier this week.

And we'll see you next "Fox News Sunday."

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