David Axelrod defends Obama's handling of economy; Ted Cruz pulls Texas-sized upset

This is a rush transcript from "Fox News Sunday," August 5, 2012. This copy may not be in its final form and may be updated.

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CHRIS WALLACE, HOST: I'm Chris Wallace.

President Obama puts a positive pin on new jobless numbers, and a rising political star pulls a Texas-sized upset.

He's the Republican new man of the moment, coming off his surprising primary win.

We'll talk with Texas Senate candidate and Tea Party favorite, Ted Cruz -- only on "Fox News Sunday".

Plus, the struggling economy and the presidential race.

We'll discuss how the stall would recovery is changing the president's reelection strategy when we talk to David Axelrod, top strategist for the campaign. It's a "Fox News Sunday" exclusive.

Then, battle lines are drawn over Chick-fil-A and the company's support of traditional major. We'll ask our Sunday panel about the debate and the political fallout.

For our power player of the week, it's all happening at the zoo.

All right now on "Fox News Sunday."

And hello, again from Fox News in Washington.

In a few minutes, we'll sit down with Ted Cruz, the Tea Party- backed candidate who shocked the world of politics by winning the Senate Republican primary in Texas this week.

But, first, the presidential campaign battle over how to get Americans back to work. Joining us now from Chicago, David Axelrod, senior adviser to the Obama campaign.

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


WALLACE: Let's start with the latest jobs numbers. The economy created 163,000 jobs in July but unemployment rate rose from 8.2 percent to 8.3 percent. Let's put that into some context. More than 23 million Americans are now unemployed, have given up looking for work, or are working fewer hours than they would like, and 5 million have been out of work more than six months.

Given that fixing the economy was number job one -- why does President Obama deserve reelection given that record?

AXELROD: Well, first of all, Chris, let's put this in perspective. In the six months before the president took office, we lost 4 million jobs. The economy was shrinking at 8.9 percent in the quarter before he took office. We lost 800,000 jobs the month that he took office.

The hole that was created is huge and we're going to fill it. But in last 29 months, we've had 29 straight months of private sector job growth, 4.5 million jobs created. In this last report, 173,000 private sector jobs created, led by the auto industry and manufacturing, that would be in a depression but for the president's intervention -- something Governor Romney opposed.

So, we've got a lot of work to do. The two sectors, by the way, that lagged were construction and education. The president has been urging Congress since last fall to pass his bill that would invigorate those sectors, and that would help. But we have a lot of work to do.

And the real question for voters is going to be, what is the choice on the other side? This week, we learned that Governor Mitt Romney's tax plans would raise taxes for the wealthy -- would cut taxes for the wealthy, a windfall for the wealthy and raise taxes by $2,000 on the middle class. That's not a prescription for getting our economy moving or rebuilding the middle class.

WALLACE: But, David, didn't this White House badly misjudge this recovery? I remember in 2010, two summers ago, you and Vice President Biden were running around, talking about recovery summer. That was the summer of 2010.

And the fact is that your White House said that if you got the stimulus, that $800 billion, that unemployment would stay under 8 percent. In fact with the stimulus, unemployment has stayed over 8 percent for the last 42 months, that's 3 1/2 years.

AXELROD: Chris, first of all, I wasn't running around saying anything that other than we were going to be persistent, that it took years to get into this mess, it was going to take years to get --


WALLACE: You talked about recovery summer in 2010.

AXELROD: Well, you should show me the tape of me saying that. I have been very consistent about the fact we need to be persistent in our effort.

But we can't do is go back to the -- you know, Moody's analyzed Governor Mitt Romney's plan to the degree you can because there aren't enough specifics to actually score it. And what they said was his plan would actually throw us back ward and might tip us back in a recession because it would ratchet down the things we need to keep the economy growing. So, people are going to have a real choice.

WALLACE: If I may --

AXELROD: Do we think -- do we think that raising taxes is the way to get this economy moving? Do we think cutting education by 25 percent is the way to get this economy moving, research that creates innovation and technology? I don't think most Americans agree with that.

WALLACE: But, David, you talk about Romney. I am asking you about the Obama record and the fact is unemployment has been over 8 percent for 42 months, which is 3 1/2 years.

AXELROD: There's no doubt about it, Chris. There's no doubt -- we have faced an economic crisis that goes back -- you'd have to go back to the Great Depression to see a crisis like the one we walked into in 2009. And as we said then and as I say now, the hole was tremendous. We have to be persistent in moving forward. There are more things we can do. We wish Congress would act on them. There are more things we can do.

But we can't do is go back. And the reason I keep bringing up Governor Romney, Chris, is because people are faced with a choice. They need to know -- they need to make a decision as to whether going back to the last policies is going to get us to where we need to go.

WALLACE: All right.

AXELROD: I think most people don't believe that.

WALLACE: All right. Well, let's talk about the choice, because I think you would say, you would agree that the biggest policy difference right now between President Obama -- there are a bunch. But the biggest policy difference right now between President Obama and Governor Romney is on taxes. Romney wants to extend all the Bush tax cuts for everyone, the president says no, extend them only for people making less than $250,000.

But back in 2010, President Obama opposed raising taxes on the wealthy because he said the economy was too fragile. Let's take a look at what the president said back then.


PRESIDENT BARACK OBAMA: Potentially, you'd see a lot of folks are losing business, more folks potentially losing jobs. That would be a mistake when the economy has not fully taken off.


WALLACE: David, when the president said that, the economy was growing at a rate of 2.3 percent. If the economy was too fragile then for a tax increase on the wealthy, why is it OK now when it is the economy was growing more slowly at 1.5 percent?

AXELROD: Chris, I was there at the time. And let me review a little bit of history. The president was prepared to allow the taxes in the higher tax bracket to expire because they cost 800 billion over a decade and we have to deal with our fiscal situation as well. And there is no evidence that those tax cuts are particularly stimulative to the economy.

But as a part of a package that was agreed to with the Congress to move forward on payroll tax cuts and other things --


WALLACE: David, if I may. If I may. No, if I may because you're mistaken. That was December in 2010. This was in January of 2010. It was before the deal with the Senate. This was just on it's own merits. This is, in fact, at the Republican conference, the retreat up in Baltimore, and the president said it's no time to raise taxes on anyone because the economy is too weak, it's only growing 2.3. Now, it's growing at 1.5 percent.

AXELROD: Chris, the president has never argued that tax cuts to the wealthy is stimulative to the economy. The truth is we have to make a choice and the choice is -- what do we need to do to both grow the economy in the short run and to bring down these deficits in the long run?

And $800 billion of tax cuts for the wealthy is not a choice we should make, especially -- you neglect the fact on Governor Romney, which is he wants to add another $5 trillion of tax cuts on top of that and most of the tax cuts that were analyzed this week, they would raise taxes on millionaires by $250,000 and they would raise taxes on the middle class by $2,000. That is not the way to grow the economy. It's the middle class that needs money in their pocket right now. That's what's going to keep this economy moving.

And the president has cut taxes on the middle class by $3,600 on the average for -- an average family.

WALLACE: You keep bringing up the Tax Police Center study. And fair enough.

But I want to ask you another study by the respected accounting firm Ernst & Young which did a study on all the tax increases that President Obama is proposing. And here's what they found when they analyze those. That economic growth with the Obama tax increases would fall by 1.3 percent and employment would fall by 710,000 jobs.

Ernst & Young, a non partisan, respected accounting firm, says that raising taxes that much would be a drag on the economy right now.

AXELROD: First of all, I don't know what they are talking about. And I haven't seen the study. I know that Moody's evaluated the Romney plan and said that it would throttle our economy down. So, we can have competing studies.

But there's what I know: going back to the policies of the last decade, huge, unpaid-for tax cuts skewed to the wealthy is not going to produce the kind of economy that we need. It's not going to help rebuild the middle class in this country, and it's not going to help us grow the kind of economy that we need for the long run.

So, you know, yes, we have a fundamental difference on this issue.

WALLACE: OK, let's do a lightning round. And we have done it before. And frankly, you are not very good at it, but I'm going to give you another chance to try to do better.

Quick questions, quick answers.

AXELROD: I appreciate that.

WALLACE: Senate majority leader -- well, we always have second chances here. Senate Major Leader Harry Reid took to the Senate floor this week to say, the word is out, Mitt Romney didn't pay any taxes for 10 years. I figure nobody is doing more ample research than you guys in Chicago. Does the Obama campaign have any evidence that Reid's charge is true?

AXELROD: I have -- I don't know who Harry was talking to. And the point here, though, Chris, is the Romney campaign and Governor Romney can resolve this in 10 seconds. They can release the tax returns. They gave 23 years of tax returns to John McCain. They have given one year of tax returns to the American people.

It was Governor Romney's father who pioneered the release of tax returns when he ran for president, gave out 12 years of tax returns, because he said one year can be misleading. Why don't they just put it to rest? What is it that he is hiding?

I agree with what Bill Kristol said on your show, he ought to release those tax returns. And I agree with what George Will said, which is, if what was in those tax returns, wasn't damaging, they would be releasing them.

So, they ought to release the returns and that would put all of this to rest.

WALLACE: OK, lightning round, lightning round. That means quick.

Your campaign is suing the state of Ohio for giving members of the military extra time to vote early, to the Monday before the election while other voters are going to have only until Friday. You don't think that members of the military who are serving this country deserve special consideration to vote?

AXELROD: I absolutely do, and the way you stated and the way frankly Governor Romney has stated it is completely false and misleading. What that lawsuit calls for is not to deprive the military of the right to vote on the final weekend on the campaign. Of course, they should have that right.

What that suit is about whether the rest of Ohio should have the same right. And I think it's shameful that Governor Romney would hide behind our servicemen and women to try and win a lawsuit to deprive other Ohioans, deprive other Ohioans of the right to vote.

WALLACE: But wait, David -- 15 military groups, including the National Guard Association and AMVETS, are also hiding behind the military then because they are on Romney's side in this. It's true, David, they are.


WALLACE: Wait a minute.

AXELROD: I understand that. What they need to understand --


WALLACE: Fifteen groups are on their side and the federal law, federal law, gives special consideration to the military on early voting. So, why not let Ohio do it?

AXELROD: Chris, first of all, it's a lightning round and so, ask your question and let me answer. They need to know -- they need to look at the lawsuit and they need to know that that lawsuit, it stands up for the right of the military service people to vote early. But it wants that right fore everybody in Ohio.

I don't understand what it is in the Republican Party that they want to keep shrinking participation in our election? That's not a very confident party to me. Why would they make it easy for every eligible voters to come to the polls and participate in? That's what our servicemen and women are fighting, our democracy, our freedom.

WALLACE: Lightning round.



WALLACE: We're going to keep throwing this back on each other.

What will Mitt Romney's choice of a running mate say about him?

AXELROD: Well, I suspect that what his choice of a running mate will say about is that he is going to double down on the economic philosophy that he has, that he's going to have another one of these back to the future candidates who believes that if we just do what we did in the last decade, that somehow it's going to turn out better for the economy and the middle class. I'd be very surprised if he went in any other direction.

WALLACE: You mean, you say he's going to pick somebody that agrees with him?

AXELROD: Yes, and someone who will augment that philosophy. And, you know, as I said before, we'll have a very clear choice about whether we move forward or whether we move backward. Are we going to rebuild the middle class or whether we're going to stick with this top down economics that failed us so badly in the last decade?

WALLACE: A couple of final questions. Where is this campaign right now, both sides?

"The New York Times" reports today that you guys in Chicago have spent $400 million so far and that Mitt Romney is going to go in the fall campaign with considerably more money than you guys. AXELROD: Well, I have always said that we're going to be outspent in this campaign. As to "The Times" story, we have spent money at a lesser rate than the Bush campaign did in 2004.

But we all have our strategies. We think organizing at the grassroots is key to our chances. They think money is the key to their chances and the super PACs and all of the resources they can bring to bear behind their negative ads.

And we'll see -- we'll see who wins in November.

WALLACE: And finally -- we got less than 30 seconds -- a poll this week by "The New York Times" shows that in three key swing states -- Florida, Ohio and Pennsylvania -- that the president opened up a lead. Have you been affected? And one of the ideas is spending so much money now is to try to define Romney before he defines himself.

Have you been successful in defining Romney to voters?

AXELROD: Well, I put it another way. He hasn't been successful in defining himself to voters. And he's left himself vulnerable to a whole range of questions that I think people are asking about him and whether he'll be the kind of advocate for the middle class and advocate for their interest in this economy, that they're looking for in this election.

WALLACE: David, we're going to have to leave there. Thank you so much for joining us and engaging in the lightning round --

AXELROD: Great to be with you, Chris.

WALLACE: -- and throwing it right back in my face. It's good to talk with you, sir.

AXELROD: Nice talking to you.

WALLACE: Up next, Tea Party favorite Ted Cruz, the Republicans' rising star, fresh off his big win in the Texas Senate GOP primary.


WALLACE: The big story in Republican politics this week wasn't Mitt Romney's foreign trip or speculation over his vice presidential pick. No, it was the upset victory in the Texas Senate primary by first-time candidate and Tea Party favorite, Ted Cruz, who has flown in from Texas to join us here on set today.

Mr. Cruz, welcome to "Fox News Sunday."

TED CRUZ, TEXAS SENATE CANDIDATE: Thank you, Chris. It's great to be here.

WALLACE: All right. This week, we were saying what an extraordinary week it's been for you. You have been called the rising Republican star and great conservative hope.

Why do you think your victory in a primary has resonated so strongly inside the GOP?

CRUZ: Well, I think it is part of a tidal wave that's sweeping the whole country, which is that voters are tired of career politicians in both parties. I mean, our country is in a crisis point right now and we're saying -- and this is true all over the country -- that the American people are looking for new leader to step up and stop spending money we don't have.

And I think this was part of a tidal wave that began in 2010 and I think that tidal wave is only stronger in 2012.

WALLACE: Well, let me ask you about that, because the conventional wisdom in this town, and for what's that worth, had been -- what happened to the Tea Party, that it wasn't out in the streets, and that it didn't have the power, and yes they've won some victories in a few states like Indiana against Lugar but -- and Nebraska -- but not so many.

In Texas, you ran against establishment candidate, Lieutenant Governor David Dewhurst. You beat him by 13 points. What do you think your victory says about the state of the Tea Party at this point?

CRUZ: Well, I think it's emblematic of where the Tea Party is nationally, which is in 2009, 2010, the movement was just beginning. And you had thousands and thousands of people out in the blazing sun protesting. And as we got forward to 2011 and 2012, those protest died down and I think the reason is the Tea Party went to work. They began rolling up their sleeves, going to work in campaigns, getting involved.

And in our race in Texas, what we saw was incredible. I mean, it was a victory for grassroots conservatives all over the state. And it was -- it illustrated at the end of the day, the way elections are supposed to be decided, they are supposed to be decided not by a handful of people in the dark room writing checks and picking the next nominee. But they are supposed to be decided by we the people and it was thousands and thousands of Republican women and Tea Party leaders and grassroots activist that generated our victory.

WALLACE: All right. Let's take a look because a lot of people don't know who you are or what you stand for. So, let's talk about that. Let's look at where you stand on the issues.

You want to abolish Education, Commerce and Energy Departments, TSA and the IRS. You support a flat tax and you serve Chick-fil-A at your victory party.

You are pretty conservative?

CRUZ: Without a doubt. And I think the American people are pretty conservative and I'm certain the people of Texas are pretty conservative.

But I'll tell you -- look, at the end of the day, there are sort of twin worlds. There is the world of Washington and the Beltway and then there's the rest of the country. The spectrum in Washington -- you've got career politicians in both parties that have been going along to get along a long, long time. And that's how we've gotten a national debt of $16 trillion, larger than the gross domestic product.

All across the country, the rest of Americans are looking at Washington and saying, what's wrong with you people?

The principles that I think voters are looking for are not that complicated. It's live within your means, follow common sense principles, don't spend money you don't have. And that's what American people are standing up and demanding right now.

WALLACE: OK. You attacked your opponent, Lieutenant Governor Dewhurst, as too quick to compromise. And here is what you said about the Senate club, as it is called. Let's put it up on the screen.

"We need to kick in the doors of the club, rip down the shades ands auction off the silverware."

Mr. Cruz, doesn't just that mean more gridlock? You're going to have the conservatives on one side, the liberals on the other side, and nothing gets done about any of the big problems here?

CRUZ: What it means is we need to step up and solve the problems. Look, my view on compromise --

WALLACE: That means compromise?

CRUZ: Well, my view on compromise is exactly the same as Ronald Reagan's. President Reagan said, what do you do if they offer you half a loaf? Answer: you take it and then you come back for more.

I am perfectly happy to compromise and work with anybody, Republicans, Democrats, libertarians, I'll work with Martians, if -- and the "if" is critical -- they are willing to cut spending and reduce the debt.

The problem so many Republicans are falling into is they compromise going backwards. They compromise in the way that makes the situation worse, that grows government, that grows the debt. And I think the American people are fed up with deals that just empower politicians and put this country further and further on the road to where Greece is.

WALLACE: All right. Well, let me ask you about that, because that raises a question Washington has been roiling with for the last few years. Reduce the debt, cut spending -- more revenue?

CRUZ: I don't think so at all, at least not for higher tax rate.

WALLACE: But that's the deal.

CRUZ: The reason I don't think so is I don't think the problem in Washington is too little taxes. I think the problem in Washington is too much spending. If you look historically, federal tax revenue historically have been roughly 18 percent of GDP. Federal spending has been roughly 20 percent of GDP. In the last three years, it's gone from 20 percent of GDP to 25 percent of GDP.

WALLACE: Yes, but revenues have gone down to 15 percent of GDP.

CRUZ: Well, and part of that has been the policies of this administration, the Obama administration, has waged a war on jobs and a war on small business.

I listened to David Axelrod a few minutes ago talking about wanting to get the economy going and why there were no jobs, without taking any blame for the fact that their policies had killed thousands and thousands of jobs -- whether it's Obamacare or Dodd-Frank or pushing cap and trade or the offshore drilling moratorium.

At the end of the day, two-thirds of all new jobs in the economy come from small business. And we need the boot of the government off the back of the neck of small business.

WALLACE: You talk about the key to the Republican energy is to tap into the grassroots.

CRUZ: Yes.

WALLACE: Do you think that Mitt Romney is tapping into the grassroots, Tea Party wing of the Republican Party?

CRUZ: I think conservative grassroots in the Republican Party are going to be overwhelmingly behind Romney. I mean, listen, I have spoken to thousands and --

WALLACE: But he is not doing a grassroots campaign.

CRUZ: Well, but the grassroots are energized because I think the absolute highest priority in the country in November is to defeat Barack Obama. And I have spoken to literally thousands and thousands of Tea Party activists. I have yet to meet a single Tea Party leader that is not going to vote for Mitt Romney and work for him because our country is in crisis. And we've got to stop this Obama agenda if we're going to preserve opportunity for our kids and grandkids.

WALLACE: Would you like to see Mitt Romney pick a harder edge, more Tea Party-like conservative like Marco Rubio or Paul Ryan, than a safer, blander candidate?

CRUZ: Look, I think both Marco Rubio and Paul Ryan would be terrific choices. I am big fans of both of them. At the end of the day, Governor Romney is going to make his choice on vice president.

And what I think is important in the next few months is that the country have a clear choice about the economic agenda of Barack Obama, more and more government spending, more government control, more debt. And Romney agenda, which is more free markets, more liberty, getting back to the principles of our Constitution. WALLACE: All right. We are running out of time and there are a couple of more questions I want to ask you.

You are a Cuban-American. Right now, according to the polls, Romney is trailing Obama badly among Hispanics. What does he need to do to reach out to Hispanics without doing what you called Democrat lite?

CRUZ: Look, I think Hispanic community -- the values that resonate in our community are fundamentally conservative. They are faith, family and patriotism. Do you know the rate of military enlistment among Hispanics is higher than any demographic in this country? And they are also hard work and responsibility.

A friend of mine, a Hispanic entrepreneur asked me a question sometime ago, he said, "When is the last time you saw a Hispanic panhandler?" I think it's a great question. I'll tell you, in my life I've never once have seen a Hispanic panhandler, because in our community, it would be viewed as shameful to be out on the street begging. Those are all conservative values -- faith, family, hard work, responsibility.

And I think what Governor Romney needs to do and I think what he is doing is defending those values and making the case that the Obama agenda has been incredibly destructive to the Hispanic community.

Hispanic unemployment is higher than the national average and when the federal government is killing small businesses and killing jobs, it is hurting the future of the Hispanic community and we need to carry that message.

WALLACE: Finally, let's talk about Ted Cruz. As a teenager, I read, you used to travel around the state, in high school, giving speeches around the state on conservative values. You weren't exactly your normal teenager, were you?

CRUZ: I don't disagree with that at all. I was blessed to have a lot of opportunity. And I -- look, when you are a child of a immigrant who was tortured and imprisoned in Cuba, who fled here as a teenager with nothing, with $100 sewn into his underwear, washed dishes making 50 cents an hour, to pay his way through college and start a small business, you appreciate how precious and fragile liberty is.

And I think liberty has never been more threatened than it is right now.

WALLACE: Is it true that you memorized the U.S. Constitution, as a teenage, the whole thing?

CRUZ: I memorized a shortened mnemonic version. So we go speak at Rotary Clubs and write it all on easels and then speak about it.

WALLACE: Do you have still have a favorite passage that you can recite? CRUZ: Well, Article I Section 8 which enumerates the power of Congress. The way we memorized it was TCCNCCPCC Pawn momma run. Taxes, credit, commerce, naturalization, coinage, counterfeiting, post office, copyright, courts, piracy, Army, war, Navy, militia, money for militia, Washington, D.C, rules, unnecessary and proper.

WALLACE: Mr. Cruz, I'm going to thank you so much for coming in, interrupting your vacation to talk with us. We're going to follow the race closely this fall in Texas and I suspect we'll be talking to you again, sir.

CRUZ: I look forward to it. Thank you, Chris.

WALLACE: Thank you.

Up next, our Sunday panel on how rising unemployment will affect the race for the White House.



OBAMA: We are not going to get to where we need to be if we go back to the policies that helped to create this mess in the first place.

ROMNEY: It is another hammer blow to the struggling middle class families in America because the president has not kept policies that put American families back to work. I do. I will put them in place and get America working again.


WALLACE: President Obama continuing to place responsibility for the weak recovery on his predecessor, while Mitt Romney puts the blame right back on the president, and it's time now for our Sunday group. Kimberley Strassel of the "Wall Street Journal," our political insiders, Democratic strategist Joe Trippi and Republican Ed Rollins and Kirsten Powers of "The Daily Beast" Website. So, Kim, the job numbers continue to show a weak recovery and voters, according to polls, disapprove the president's handling of the economy, and yet, according to those same polls, the president continues to lead, especially in the swing states that he has been targeting with a lot of his TV negative ads, his attacks against Mitt Romney. Questions, why isn't the economy hurting the president more?

KIMBERLEY STRASSEL, THE WALL STREET JOURNAL: Well, it is hurting him and every time these numbers come out, it hurts him, because their main narrative is, we can't go back to the policies of the past. The problem is, the policies of today are clearly not working. You know you keep seeing these dips back in growth, you keep seeing these sort of stumbling along unemployment numbers, and it's hard for them to make the case that this is not attached in some way to their own policies. I think the problem for Mitt Romney, is that he's not necessarily gone out and very aggressively talked about what he would do and why it would make a change. Now, you saw a bit of a difference this week. He came out and sort of re-launched his economic plan, slimmed it down, made it a lot more precise, and that's the bet they're now going to make in a lot of these swing states, that perhaps they can push back against some of the president's criticism on him on a negative personal level and start talking about policies.

WALLACE: Joe Trippi, the Obama campaign, and you certainly have heard this from David Axelrod today, got some help this week from a study by the Tax Policy Center, which analyzed Romney's tax plan and said no matter how many loopholes you close, in the end, the millionaires end up with a sizable tax cut and everybody else, the middle class, ends up with a small tax increase. The president jumped on that. Let's take a look at that.


OBAMA: He is asking you to pay more so the people like him can pay less.


WALLACE: Question -- how damaging to Mitt Romney?

JOE TRIPPI, DEMOCRATIC STRATEGIST: It is pretty tough. Because it is just simple mathematics. That no matter -- there is no way to close the loopholes that he wants to close and still end up not having to raise taxes by $2000 on the average American family. So, it -- and then on the same token, you have his own tax problems where Harry Reid yells smoke and he yells fire, and his campaign goes off the rails and he is not talking about the economy. But we've been talking about taxes -- you know, about Romney's tax returns for the last few days. So, it just hasn't worked out really well, hasn't been a good week at all for Romney.

WALLACE: But we'll get to the tax returns in a minute. But your sense of this kind of a study, which would seem to indicate, now here is -- some pointed out to me that according to -- I mean Kim rather -- that -- and why don't you explain this? You said that according to another tax policy center, it turns out that Obama also increases taxes on some of the middle class.

STRASSEL: Yeah, I mean this is a problem for the Obama campaign. So, the Romney campaign says our tax plan will cut taxes and pay for it by closing these deductions and loopholes. The problem for the Obama campaign, Tax Center Policy report says, actually the Obama campaign's claim that you are the 98 percent of the American middle class and you won't see your taxes go up, that is not true either. In fact, Obama's budget, which included its tax plans would be a tax hike for about 27 percent of American households. So, they have dueling claims there. They can both claim that this particular group has said that they will raise taxes on the middle class.

WALLACE: Now, the reason I have -- Kim explained that is because she understood it and I didn't.


WALLACE: But in any case, Ed, your sense as to these tax policies, and I mean a study is not going to be that big of a deal. But the perception that Romney is protecting his folks, the wealthy and he's going to screw the middle class.

ED ROLLINS, REPUBLICAN STRATEGIST: The reality is that top 20 percent pay 94 percent of all income taxes in America. Half of the people in America don't pay any taxes. So this argument is -- should be positioned this way: Romney believes that cutting taxes on people who pay taxes will stimulate the economy. The president believes that that group needs to pay more taxes. He doesn't want to cut the budget, obviously, he hasn't cut the budget, he has now gone through 41 months of eight percent plus unemployment, and there is nothing that he has done that basically has stimulated this economy. Romney's plan, which unfortunately for him was not in much detail, and so, this tax policy group came forward and said well, there is no detail. We'll give you the detail. Well, you can't -- you can't write that. That the Congress is going to put the detail in there. And the bottom line is the premise is, Romney Republicans think that cutting taxes for those who pay taxes will stimulate the economy more than raising taxes on everybody.

WALLACE: Kirsten?

KIRSTEN POWERS, "THE DAILY BEAST": Well, I think, you know, whether Congress is going to end up doing it or not, Congress is not running for president. Mitt Romney is running for president. And one of the problems, I think, for him, is that there are not a lot of details. And when you are talking about all this is going to happen and he puts that on one pager, which says, I'm going to create 12 million jobs, and the Moody's analyst -- analyzed that and said, well, we already are expecting 12 million jobs for the next four years based on Obama's plan. So, you are going to have to give us your plan is different than his, you're going to have to give us more specifics, and he keeps not giving specifics and I think that that makes it look a little suspicious, and you add in the fact that he won't release the tax returns, and it is just not a great picture of him.

WALLACE: Well, let me just interrupt for a second, because we -- I do want to talk about the tax returns, because talk about the silly season. Harry Reid. The Senate majority leader, which used to be a kind of a big deal, took to the Senate floor to say that Romney -- he had talked to somebody and that Romney had not paid any taxes for a decade. Romney had to respond, let's take a look.


SEN. HARRY REID, (D) SENATE MAJORITY LEADER: The word is out that he hasn't paid any taxes for ten years. Let him prove that he has paid taxes, because he hasn't.

MITT ROMNEY, REPUBLICAN PRESIDENTIAL CANDIDATE: Harry Reid really has to put up or shut up, all right? So, Harry, who are your sources?

REID: Kim, even some Democrats said it was a scurrilous attack, but having said that, it kept the issue alive.

STRASSEL: No, I mean the word is out, this is crazy. I mean there is no foundation for this, whatsoever. But as Joe said he yelled smoke, Romney yelled fire, and this is one of the ongoing problems...

WALLACE: When you said Romney yelled fire, do you think Romney shouldn't have said -- shouldn't have responded? STRASSEL: No, the point being is that he had no choice. I mean -- This has now been brought up again, this is what Democrats want to do. They want to chase him on this issue all the way until the election. I don't know if he should put out ten years of tax returns, but the fact that he has not chosen to put out more than his, guarantees that this continues to be an issue for him.

TRIPPI: It was when he said put up or shut up. I mean, put up or shut up -- OK, Romney, put up or shut up, put your tax returns out there or shut up. I mean, if -- they just kind of played into it -- one of the things that I just don't understand about the Romney campaign, is it they knew the Bain stuff was coming, they knew the tax return stuff was coming. They just don't seem to be prepared or handling it well or putting enough information out to shut it down. I think it's a huge mistake for them.

WALLACE: Well, as somebody who I first met managing Ronald Reagan's reelection campaign in 1984, if you are managing Romney's campaign, what would you do about his tax returns?

ROLLINS: I would have put out five or six years, I would not put out 20 years, and I obviously wouldn't respond to anything that Harry Reid states. So, you know, Harry Reid can defend how he became a multimillionaire while in Congress, and I can say it's all about gambling or prostitution.


WALLACE: No, no, no.


ROLLINS: But I think -- I think at this point in time it's going to dog him all the way. And he needs to get it behind him. He's paid a lot of money in taxes. He's made a lot of money ...

WALLACE: Wait. Do you think he should release more taxes?

ROLLINS: I think he should release more taxes.

WALLACE: Really?

ROLLINS: Sure, absolutely.

WALLACE: But you know it is not going to satisfy the Democrats. And they'll certainly going to look at it, and obviously there are shelters in there, perfectly legal shelters.

ROLLINS: At the end of the day, you come to a point where you basically give a little bit more and you move forward. He's got to do that. Two years is not enough, obviously.

STRASSEL: But Chris, it gets to -- I mean why doesn't he want to. It's because he doesn't want to have the debate about the wealth. And he doesn't have -- and this is part of this issue, he's got to go out there and say, I made a lot of money and it is great, it's what we do in the American system and it's what I want everyone else to be able to do, too, with my polices.

WALLACE: So you get a ten second final word.

TRIPPI: Why didn't he during the primaries, after he got through the fight with Gingrich, release some of the Bain documents or the tax returns -- I mean do the five years that Ed is talking about, then we wouldn't be talking about this now. Yes, it would have been a bad week back then, but he would be in the clear now and been talking about the economy. Instead, you know, if you can't stand the fire, get out of the kitchen. It's a presidential race, Harry Reid is going to say things like this and you are going to have to answer it.

WALLACE: All right, we have to take a break here. When we come back, the culture wars and a chicken sandwich as Chick-Fil-A takes a stand defending traditional marriage.



WALLACE: Still to come, our "Power Player" of the week.

UNIDENTIFIED FEMALE: My very first day (inaudible) cheetah. And I remember thinking I have done it!

WALLACE: Mary says she knew by the time she was five what she wanted to do.

UNIDENTIFIED FEMALE: I'm a student of veterinary, student -- and I've touched the cheetah.

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



REP. NANCY PELOSI, (D-CA), MINORITY LEADER: I am a Kentucky Fried Chicken fan, that's where my -- that's where my loyalty lies.

HERMAN CAIN, FORMER PRESIDENTIAL CANDIDATE (R): I am thrilled that the American people voted with the feet and they went to Chick- Fil-A to say they will not be bullied by politicians or threats.


WALLACE: The back and forth over the stand by Chick-Fil-A in support of traditional marriage this week. And we are back now with the panel. Well, the controversy started when the head of Chick-Fil-A said that he supports traditional marriage and he is very much against same-sex marriage. It turned out that his family gives money to groups that oppose legalization. And this week, we saw demonstrations on the street. There it is. Chick-Fil-A Appreciation Day on Wednesday and then a counter-demonstration, a kiss-in favoring same- sex marriage at the same restaurants. Kim, what do you make of all this? STRASSEL: Well, it became a free speech argument, which is actually what was most interesting. It was not so much about gay marriage in the end. It was people in particular, those who went to support Chick-Fil-A, feeling frustrated that you had Democratic politicians out saying they were going to blackball Chick-Fil-A from certain cities simply because this man has political opinions. They ran out of chicken in certain ones of these stores, because there were so many people coming to express. There is part -- there is a lesson here for businesses, I think, too, that are engaged in politics, that, I think the general routine until now is to get hit by some -- get criticized for playing in politics, they duck and cover. But actually, there is the suggestion here, if you actually stand up and you say I am not backing down, there is it a lot of consumers out there who appreciate that and will come and support you.

WALLACE: Joe, what made this as Kim referred to it, much bigger deal, was that you had some big city mayors in Boston, in Washington, in San Francisco, not only opposing what the head of Chick-Fil-A Dan Cathy said, but also seeming to indicate they'll try to block Chick- Fil-A for coming to their cities. Here was a typically charming statement from a Chicago mayor Rahm Emanuel.


MAYOR RAHM EMANUEL, (D), CHICAGO : Chick-Fil-A values are not Chicago values. They are not respectful of our residents, our neighbors and our family members and if you are going to be part of the Chicago community, you should reflect the Chicago values.


WALLACE: Joe, are you surprised that some of these politicians would come close to threatening a private company because of the views that -- the First Amendment views of its owner?

TRIPPI: No. They are politicians, they are politicians and, you know, in Rahm's city, he may think this scores political points and his favorables go up. Who knows. I mean, I think it was -- it's a mistake, though, to legislate any of this stuff or to threaten the company with legislation. We have -- it is freedom of speech, and voters and consumers can vote with their feet, which is what we are seeing happening in this one on both sides of the issue. But the country is very divided, 50-50, roughly on the issue of gay marriage. And so, you are going to see politicians on both sides play to those -- that intensity if it means contributions or moving the needle for themselves.


ROLLINS: Any time you get into culture wars, Democrats lose. They ought to learn this. Every time this issue has been brought on a ballot, 31 states including North Carolina where you are going to have your convention, where 60 percent of the voters passed Proposition One, you lose. Mike Huckabee went on the radio and basically said let's go to the 1,600 stores across the country. This is a $4 billion corporation. The owner of this company basically has the right to express his opinions. He did. And I think at the end of the day, you know, they had the best sales day they ever had, and I think that the lesson ought to be don't take on, don't start the culture wars, particularly (ph) on something as stupid as boycott chicken stores.

WALLACE: Let me just say -- let's not denigrate Chick-Fil-A. It has good chicken and it's a very tasty product that they put out.



WALLACE: Testify to that.

ROLLINS: It is a $4 billion corporation.

WALLACE: Kirsten, I mean, this gets to the interesting question. Because the -- we learned this week that the Democratic Party platform for the first time in history is going to explicitly support gay marriage in the platform that they put out in the Democratic convention. How much political fallout do you expect from that?

POWERS: Well, 65 percent of Democrats support gay marriage. So, in that sense it is not that big of a deal. Where it is a big deal, is only 40 percent of African-Americans support it, and that's where Obama's getting pushback. It's from -- mostly from African-American pastors. There is a group of almost 4,000 pastors who are mobilizing to challenge the president on this. And I think, generally speaking if you look at party platforms, nobody really pays attention to them, and they are not really that meaningful. The only way that could become an issue if there is someone actually at the convention, if there were enough maybe southern Democrats, or people in conservative districts who actually wanted to challenge this. I assume -- I assume that the campaign is going to probably do a really good job of trying to bring those people on line before the convention.

ROLLINS: The fact that it's in North Carolina, though, where your convention is, is going to help us win, Republicans win North Carolina.

WALLACE: Yeah, we should point out, the convention is in Charlotte, in North Carolina and just before the president came out in support of gay marriage, it was on the -- it was on the ballot there and overwhelmingly the state decided to ban gay marriage, which gets to this issue, Kim, because gay marriage was a wedge issue in 2004. If you remember, and the Bush campaign running against Kerry used it very successfully. It was on the ballot as the state constitutional referendum. Polls indicate as Joe says that views are shifting and that now a narrow majority or plurality favors same-sex marriage in the country, but not in a lot of key swing states like North Carolina and Florida and Ohio.

STRASSEL: Yeah, views are shifting, but not necessarily, as Ed says, in the states where this is going to matter the most. I mean, we should also put in perspective that this is going to be an election about the economy, so this is going to play on the margins. The Obama administration put this out, they doubled down on the gay marriage issue because they hope it's going to rev up key elements of their base, and that is important to them to get turn out. It's a little bit of a fine edge, because there are some members of the party who don't always agree with it, but so it's going to play on the margins in some of these states and it maybe one of those things where already aren't in favor of Obama, this is an added reason not to vote for him in those places.

WALLACE: Joe, who does this energize more? Because if Kim is right, this is about energizing base. The liberal pro-gay rights base of the Democratic Party or the social conservatives who are not all that enthused about Romney, but this might give them some reason to go out and vote and organize?

TRIPPI: Look, it energizes everybody on both sides. And -- but I look, I think, one of the things that's going on here is the Romney campaign isn't going to get into this. I mean, you know, Ken Mehlman, the former chair of the Republican National Committee and advisor to Romney has been supporting gay marriage initiative and things like this. I just don't see this being a large issue overall. It will be economy. On -- in terms of, you know, at churches, in some of the swing states, they are going to do mail and things like that, and phone calls. But I don't think this is going to be an issue that drives actual difference in the election.


ROLLINS: I think energizing our conservative base that has not been as enthusiastic about Romney since the primaries -- this will basically invigorate and give them one more issue as it has in the past.

WALLACE: Kirsten?

POWERS: Yeah, I think it is a wash. I think it energizes both sides. I don't think even the African-American pastors who oppose it are going to tell anyone to not vote for Obama. They might not do as much as they would have before. But in the end, it is hard to imagine he is going to lose that many votes.

WALLACE: Those are a lot of Hispanics who are not too pleased about this, either.

POWERS: Right. But in the end as Kim was saying, I mean this is about the economy and this is not going to be decided on gay marriage.

WALLACE: All right. 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 Website, We'll post the video before noon, Eastern time and make sure to follow us on twitter at "Fox News Sunday." Up next our Power Player of the Week.


WALLACE: We have met a lot of fascinating Power Players over the years. But I can't think of when I had a better time with one than back in April. Here's our Power Player of the Week.


SUSAN MURRAY: Flamingo and snake and elephant and salamander, you name it, we treat it.

WALLACE: Dr. Susan Murray is chief veterinarian of the National Zoo.

MURRAY: I'll be there in just a second.

WALLACE: She and her staff of 12 care for 2000 animals from 400 different species. On the day we followed her, she vaccinated a red panda ...

MURRAY: Good, we are done.

WALLACE: ... and drew blood from a salamander.

(on camera): How do you know when an animal is sick?

MURRAY: Our keepers are the ones who see the animals day in, day out, they know everything about them.

So, they are the first ones that say, hey, something is different, and then they call us right away.

MURRAY: When two of the male gorillas died in 2006, Murray's team discovered the problem was heart disease. Now, they've joined the Great Ape Heart Project.

MURRAY: They have implanted this little device that's called ILRs, implantable loop recorders, that continuously monitors the heart and EKG rhythm. Keepers train the gorillas to hold still, the ILRs are implanted just under their back where it won't bother them. The keepers have trained the gorillas to lean back against the edge of the enclosure, and then they can put the sensor over the ILR, download the information and now we read it up here. It's marvelous.

WALLACE: And if you have ever gotten frustrated running around at different doctors, here is how the zoo does it.

MURRAY: When we have a giant panda down under anesthesia, we've got a dentist, a cardiologist, a G.I. specialist, an anesthesiologist, every specialist has their own 15 minutes slot. We joke about it afterwards, we say it's like one stop shopping.

WALLACE: But sometimes, Dr. Murray reaches out to regular doctors, such as when one of the tree kangaroos had a problem.

MURRAY: For young primates, the best people in the field are often physicians and surgeons at Children's Hospital.

WALLACE: It is not just clinical care. Murray advises zoos and wildlife organizations around the world, especially on endangered species.

MURRAY: They were some amongst the groups that produced the first A.I, tigers, A.I. cheetahs, A.I. meaning artificial insemination -- or A.I. giant panda.

WALLACE: As we walked around the zoo, we came across a cheetah, which reminded Murray of when she started here as a student, 25 years ago.

MURRAY: My very first day, we anesthetized a cheetah, and I remember thinking, I've done it, you know, I'm a student, a veterinary student, and I've touched a cheetah, and I can go home now.

WALLACE: But she didn't go home. And has been chief vet here since 2001. Murray says she knew by the time she was five what she wanted to do. Her grandparents owned a farm with lots of animals, and then there was the clincher.

MURRAY: I remember clearly watching a TV show with my dad, it was a "National Geographic" show, and Jane Goodall was on it. And when I saw it, I told my father that's what I want to do.

WALLACE: And she still brings that same sense of wonder to the National Zoo.

MURRAY: You are just beyond belief. I know you, baby!

Pretty much on every day we feel like we've done something great, something great to help endangered species here, and something great to help endangered species worldwide. That's the impact for me.


WALLACE: Dr. Murray says they used to put animals to sleep to treat them, but now, as with the gorillas, they've trained pandas to get their blood drawn and sea lions to sit still for eye drops. She says the vets are now a lot more popular at the zoo. And that's it for today, have a great week. And we'll see you next, "Fox News Sunday."

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