Sens. Conrad, Barrasso debate chances of 'fiscal cliff' deal; Pastor Rick Warren on tragedy and meaning of Christmas

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Sens. Conrad, Barrasso debate chances of 'fiscal cliff' deal

Key lawmakers on 'Fox News Sunday'

The following is a rush transcript of the December 23, 2012, edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

CHRIS WALLACE, ANCHOR: I'm Chris Wallace.

Talks to avert the fiscal cliff stalled, while Washington debates how to prevent more mass murders.

(BEGIN VIDEOTAPE)

WALLACE: With nine days to go, is it possible to make a deal to head off big tax increases, and spending cuts? We'll ask two senate leaders, Republican John Barrasso, and, Democrat Kent Conrad.

Then, as the nation mourns the victims of the Newtown school shooting, we turn to a man of faith for some answers. In these trying times, he sees the need for a spiritual awakening. We'll discuss the Sandy Hook massacre and the meaning of Christmas with Pastor Rick Warren.

Plus, a change at the State Department, as the Benghazi report is finally released. We'll ask our Sunday panel about the nomination of John Kerry to replace Hillary Clinton. And, where the investigation of a terror attack that killed four Americans goes now.

And, our Power Player of the Week continues in holiday tradition to show respect for veterans.

All, right now, on "Fox News Sunday."

(END VIDEOTAPE)

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

At Christmas, people who are naughty get coal in their stockings, and if the White House and Congress don't make a deal in the next nine days to avoid the fiscal cliff we ring in the New Year with big tax increases and spending cuts.

Here to talk about what is going to happen are two leading senators -- John Barrasso, chairman of the Republican Policy Committee. And, from New York, Democrat Kent Conrad, chairman of the Senate Budget Committee.

Senators, welcome back to "Fox News Sunday."

SEN. JOHN BARRASSO, R-WY.: Thanks for having me.

SEN. KENT CONRAD, D-N.D.: Good to be with you.

WALLACE: Before heading to Hawaii for Christmas, the president laid out a new, stripped-down plan to avert the fiscal cliff.

Here's what it is: extend the Bush tax cuts for people making less than $250,000. Extend unemployment benefits for the 2 million people who will run out, next month. And, delay the sequester of $110 billion in spending cuts next year.

For all of the talk of $4 trillion in debt reduction, this plan would only save $800 billion, over 10 years.

Senator Conrad, is that the best that Washington can do over the next nine days, and can you pass even that?

CONRAD: Look, Chris, it may come to that but we can do better. And we should do better. This is an opportunity to do something that would be hugely important for the country.

And, my own belief is, what we ought to do is take Speaker Boehner's last offer, the president's last offer, split the difference, and that would be a package of about $2.6 trillion. You couple that with the $1.1 trillion that's already done. And, that would be close to the $4 trillion needed to stabilize the debt and begin to bring it down.

And, then, if you want to do add -- add on the alternative minimum tax which costs about $800 billion to fix, you could offset that with overseas contingency operations, war costs -- some people say, well, neither of those are real. Both of them are a fiction. In some sense, that is true, but, at least you are offsetting a spending fiction with the revenue fiction, and clearing the deck so that we don't increase from 4 million to 31 million people the number affected by the alternative minimum tax.

(CROSSTALK)

WALLACE: So, let me just ask you, Senator, briefly, what would that mean? What would the level be for taxes for revenue? How much would be raised in revenue, and, what would it mean in new spending cuts?

CONRAD: The spending cuts would be $1,450,000,000,000. The revenue would be $1,150,000,000,000. So, you see there, that's a combination of $2.6 trillion. And you couple that with the $1.1 trillion that's already done, and, you are at $3.7 trillion.

And, look, is it perfect? No. Is it everything we hoped for? No. Does it match what Bowles-Simpson did? No.

At an even comparison, Bowles-Simpson would be $5.3 trillion.

WALLACE: All right. You're in the weeds.

Let me ask you one last quick question. Are you saying that you don't like the president's plan?

CONRAD: Look, it may come to that. But I would hope we'd have one last attempt here to do what everyone knows needs to be done, which is the larger plan that really does stabilize the debt, and get us moving in the right direction and, does it in a way that is cognizant that we have an economy that is recovering, that is still weak and, we don't slam it. We don't slam on the brakes here in a way that puts us back into recession. That -- takes the jobless rate to 9.1 percent.

WALLACE: Let me bring in Senator Barrasso.

Your reaction to Senator Conrad's plan?

BARRASSO: I want to find a solution. I want us to not go over the cliff, because I think if we do, it hurts our economy and it hurts our country.

When I listen to the president, I think the president is eager to go over the cliff for political purposes. I think he sees a political victory at the bottom of the cliff. He gets all these additional tax revenue for new programs. He gets to cut the military, which Democrats have been calling for, for years, and, he gets to blame Republicans for it.

And when the president recently was in The Wall Street Journal, yesterday, talked about, you know, using the State of the Union and using his inaugural address to blame Republicans, that doesn't sound like somebody who is working with Republicans to find a solution. It's time for the president to lead.

WALLACE: Well -- all right. You heard the president's plan and he basically said, this is all I think we can get done in these next nine days, extend the Bush tax cuts, for everybody below $250,000, and, extend unemployment benefits.

As the number three Republican in the Senate, can you guarantee the Republicans will not filibuster the plan?

BARRASSO: I can't even guarantee that the Democrats will vote for it. You have many Democrats on the record who don't like this either in the Senate. The $250,000 number is too low, according to a number of the Democrats. It doesn't deal with so many of the issues out there.

So, I'm not sure that they even get a majority in the Senate, even though the Democrats do have a majority of the members of the Senate right now.

WALLACE: And what about Republicans? Would you filibuster it?

BARRASSO: That's a different issue. I just don't think this is going to solve the problems -- it actually doesn't solve the problems.

We have a spending problem in this country, Chris. We don't have a taxing problem. The president is fixated on raising taxes.

(CROSSTALK)

WALLACE: I understand that. But we have had this, you know, we've had that argument before.

All right. We got nine days. Are we going over the cliff here?

BARRASSO: I believe we are and I believe the president is eager to go over the cliff for political purposes. He senses a victory at the bottom of the cliff. I think it hurts our country and hurts our economy.

WALLACE: All right. Senator Barrasso, I understand your party opposes raising taxes and I'm not even saying whether you are right or wrong. That's something that your party believes.

But, whether like it or not, the bush tax cuts expire for everyone the first of the year. Why not extend the Bush tax cuts for 98 percent of people instead of raising them for everybody?

BARRASSO: I don't want us to go over the cliff. I want to find a solution. The extension of making permanent the Bush tax cuts for everyone, I think would be a good idea. They have the bill that came over --

WALLACE: That's not going to happen.

BARRASSO: The Senate can bring -- Harry Reid can bring it up, amendments can be offered. So, I think there is still time. We are coming back here on the 27th.

But, realistically, what the president has just proposed, is raising taxes, now, perhaps, dealing with spending later. We need to grow the economy, we need entitlement reform and the president seems to be ignoring those things, Chris.

WALLACE: All right. Senator Conrad, let's talk about the president's -- not the Conrad offer, but the president's offer.

You were a member of the Bowles-Simpson deficit commission and you voted for their final report. Let's remind people. That proposed almost $3 trillion in spending cuts. President Obama's last offer, the one that the Republicans rejected, was less than $1 trillion in spending cuts.

We checked. That would be less than 2 percent of the $44 trillion the government will spend over the next decade.

Again, is that the best Democrats can do? Two percent of all the spending over the next decade?

CONRAD: You know, this conversation means exactly what is wrong in Washington. I mean, just listen to the conversation you just had. It's he said/she said, blame the other guy.

And, look, I tried to be constructive here and lay out an actual plan to get us nearly $4 trillion, by taking the offers that are on the table. Speaker Boehner and president were so close and then, Speaker Boehner went off on plan b. I don't -- I never understood why, had no prospect of succeeding. It did not succeed, even in his own caucus. But now --

(CROSSTALK)

WALLACE: You are not answering my question.

CONRAD: Yes. Because I'll tell you, something, because we only have nine days left here. When are we going to get serious about actual solutions? I would welcome John to tell me, he says he wants a solution. Give us one! Give us one, John! I laid out --

BARRASSO: There is only one person that can provide the leadership and that's the president of the United States.

CONRAD: No, no sir, that is not true. No --

BARRASSO: There is only one person that can provide he leadership, rather than campaigning, he ought to be here, leading and working with people and talking to folks on both sides of the aisle. To get a solution so we don't go over the cliff. They believe the president is eager to go over the cliff.

CONRAD: I don't believe that at all. There are 535 of us that can provide leadership. There are 435 in the House, 100 in the Senate and there is the president, all of us have a responsibility here.

And, you know what is happening? What is happening is the same old tired blame game. He said/she said.

I think the American people are tired of it. What they want to hear is what is the solution? What is the way to stop this, before we go over the cliff? Put the economy back in the recession and put millions more people out of work.

Look, both sides are going to have to give some ground.

WALLACE: All right, gentlemen --

CONRAD: We ought to hear from Republicans what ground they are willing to give. I've outlined what ground this Democrat is willing to give and have demonstrated it with Bowles-Simpson and the group of six. We can do this.

WALLACE: All right. I want to move on to another subject, we have limit time and I think we have exhausted this debate for the purposes of this program.

A week after this massacre at Sandy Hook Elementary, NRA executive Wayne LaPierre joined the debate. Here's part of what he said:

(BEGIN VIDEO CLIP)

LAPIERRE: The only thing that stops a bad guy with a gun is a good guy with a gun.

(END VIDEO CLIP)

WALLACE: Senator Barrasso, Wayne LaPierre proposed having an armed guard in every school in America. Estimates are that would cost somewhere in the neighborhood of $8 billion a year.   Couple of questions: one, would you vote at a time of deficit issues, for $8 billion a year to put armed guards in every school in America? And, are there any laws you could support, in terms of assault guns, assault rifles, in terms of high capacity magazines, tightening background checks -- any new gun controls you could support?

BARRASSO: Let's step back for a second. I'm a doctor. I'm a father of three. And, I'm from Wyoming, a state where we believe strongly in our Second Amendment rights.

We are the people of Wyoming, me, personally, are still absolutely committed to find real solutions that work. So, something like this tragedy never happens again. Three more of those children were laid to rest, yesterday.

WALLACE: I'm asking a very specific question, sir.

BARRASSO: Very, very, very, very, very hurtful to all of us in this country. I think decisions about schools ought to be made at the local level. I would not want a national effort to say you have to do this in schools. I think local education decisions are best made at the local level.

You know, we're going to have a very spirited discussion in Congress, in the beginning of next year. We need to look at all of the issues, because what Wayne LaPierre and the president of the United States agree on, is that in this country, we have a culture of violence. And, I don't think --

WALLACE: That's really --

(CROSSTALK)

BARRASSO: Whether it's a culture of violence --

WALLACE: And also, also the president believes -- I'm not saying he's right or wrong -- but the president believes that there is a need for tighter gun control, would you support it or not?

BARRASSO: I'm a strong supporter of our Second Amendment rights.

WALLACE: That doesn't answer the question.

BARRASSO: I want to find real solutions. I want to find real solutions that work and Washington is not necessarily the place that you're going to find those solutions. They're going to be found in our families, in our faith, in our communities, and in medicine and in health care.

WALLACE: Senator --

BARRASSO: Those are the problems.

WALLACE: Senator Conrad, what do you think of what Wayne LaPierre had to say? And are there any gun controls that you would support?

CONRAD: Well, I already have. I voted for an assault weapons ban twice and I voted for the closing the gun -- closing the gun show loophole where 40 percent of the guns are sold in this country and no background check occurs in those sales. I mean, maybe you can catch people who shouldn't have their hands on a gun if you close the gun show loophole.

I also voted for a lock to be sold with guns, so that you have a trigger lock, $5, you can have a trigger lock, that actually might have prevented this, if the mother had had trigger locks on those guns.

WALLACE: And we've got about a minute left.

CONRAD: She would have been able to perhaps prevent this.

WALLACE: Senator Conrad, what do -- what do you think of Wayne LaPierre's proffer to the debate?

CONRAD: I mean, it is pretty empty, isn't it? That is the only answer, is to put more guns in schools?

Look, we already have armed officers in many schools. And in Washington, D.C., we have armed officers in schools. And, some of that is appropriate, and, perhaps, we can do more. It actually doesn't cost $8 billion, we have 130,000 elementary and secondary schools in this country. If you have two officers in each, that would cost $25 billion. Where is that money going to come from?

WALLACE: I'll give you 30 seconds to respond, Senator Barrasso, and we have to wrap this up.

BARRASSO: Well, it is the Christmas season. Washington doesn't have the answers for everything, for our culture. There are issues of mental health. There are issues of our culture.

And, I think we're can look at get false sense of security from Washington, and in passing more laws, but we need real solutions to a significant problem in our country, and I'm not sure passing another law in Washington is going to actually find a real solution.

WALLACE: Senator Barrasso, Senator Conrad, we want to thank you both. Thanks for coming in today. And merry Christmas to both of you.

BARRASSO: Thank you.

CONRAD: You, too.

WALLACE: Up next, Pastor Rick Warren on the Newtown school shooting and the meaning of Christmas, as the nation faces tough times.

(COMMERCIAL BREAK)

WALLACE: A decade ago in his best-selling book, "The Purpose Driven Life", he wrote God has a plan for us. This holiday season, as the nation tries to cope with the tragedy of Sandy Hook Elementary, his perspective takes on a special meaning. Earlier, I spoke with evangelical minister Rick Warren.

(BEGIN VIDEOTAPE)

WALLACE: Pastor, welcome to "Fox News Sunday."

WARREN: Thank you. Thank you, Chris. Good to be with you.

WALLACE: Nine days later, we are still mourning the victims of the shooting in Newtown, Connecticut. What are your thoughts about this tragedy?

WARREN: You know, "Time" magazine's calling it the massacre of innocence and that actually is a phrase from the first Christmas, where Herod killed baby boys under 2 at Christmas time and, it's very tragic, that this is happening at Christmas time. I think with the two Sandys, Sandy Hook and Sandy hurricane we really need the Christmas spirit right now.

The deeper the pain, the deeper the grief, the fewer the words. There are some long-term things we need to deal with to prevent it from happening again. But now, we need to console those who are grieving. As a pastor, I deal with grief every day of my life, and I discovered that grief is actually a good thing. It's the way we make transitions in the losses of life.

Jesus said, "Blessed are those who mourn, they shall be comforted." If we stuff our grief, I figured out it comes outside ways later on in some strange ways. And so, part of the healing process is actually dealing with the grief.

And, the way we help people in grief, it's to just be with them. You don't have to say anything, you don't need anything profound, you don't need to be wise. You just need to sit with people and love them during their grief.

WALLACE: You know, we talk -- you say long term the solutions, and obviously, some of them, which we're talking to the politicians about, gun control and better access to mental health and, you know, trying to deal with the violent games and the culture of violence in Hollywood.

WARREN: Yes.

WALLACE: But, in a deeper, more spiritual sense, what's the problem and what's the solution?

WARREN: Well, I think spiritual sense is at the root of it. Any time you have a major crisis or tragedy like this, there are multiple angles. You know, we've had seven major shootings since April in America. And, there is always -- there is a mental health angle you have to deal with -- I don't think we are taking care of those who are struggling with mental illness like we need to in America.

WARREN: There is the civil safety issue, which is gun control and, these assault weapons -- they don't call them assault weapons for nothing.

There is the social issues you mentioned, when students are -- by the time they are 18, they have killed 10,000, 20,000 people on video games without any, you know, remorse for it. It creates a culture of violence.

But, at the deepest level is the spiritual issue, which is the emptiness inside of people, that causes people to be enraged, like this. When we -- when we don't have peace in our hearts, we're not going to have peace with each other. That's why Jesus, the prince of peace, came at Christmas.

So, it starts in the heart.

WALLACE: Ten years ago, when your book, "The Purpose-Driven Life", came out, you, I think it is fair to say, became the face of the evangelical movement. You're -- I think you would agree, that your public profile has not been as high in the last few years, but you're just about to begin a new campaign.

What is your goal, sir?

WARREN: Well, first, I intentionally was absent from the scene -- for the last 10 years, I have been in a lot of small villages around the world, Africa and places like that most people never heard of. We started with the proceeds of the book, we took that and put it into a thing called "The Peace Plan". PEACE stands for "Promote reconciliation, Equip leaders, ethical leaders, Assist the poor, Care for the sick, and Educate the next generation.

And in the last 10 years, I've been overseas most of that time. I had over 16,000 of my members doing humanitarian work in 196 countries.

So, I was really not around a whole lot, except when I was here at the church. And the new campaign is -- I realized that when I wrote the book, "What on Earth Am I Here For" and "The Purpose-Driven Life", a girl who was 12 years old, when the book came out is now 22 and needs to know the purpose of life.

And what I discovered, there are a lot of people who are young today, in their 20s who are pretty disillusioned with the American dream. I hear it all the time, people say, you know, Rick, I did four years of college, and I'm out and I have been one, two, three years without a job and I had to move back in with my parents. And a lot of people in their 20s, early 30s, feel like their life is on hold and they're in limbo.

And so I thought, I need to revise, update, the book, write a new six-week spiritual journey called, "what on earth am I here for" and go after a new generation to help them find some meaning and purpose, while we are waiting on the economy to turn around.

WALLACE: You talk about a nation in decline. You talk about it being as divided as it has ever been since the civil war and talk about a need for a spiritual reawakening. What does that mean?

WARREN: Well, there are a lot of things we're never going to agree on. There are some things we all agree on.

When you get down to the basics of it, people want the same thing. They want safety for their family. They want security. They want a good job. They want to prosper and want our nation to be safe. They want to be in good health.

What people disagree on is how to get there. And so the answer to our unity, I believe will not be in politics, because we are going to have different degrees of, you know, all over the spectrum on that.

But, when we come together on the things that matter most and there are three fundamental questions: the question of significance, and, that is, does my life matter? The question of intention, what is my purpose? And the question of existence, why am I here?

These are spiritual issues. They're not political issues. And they can provide a rallying cry of purpose that could help us unify.

We're not ever going to agree on policies but we can agree on direction.

WALLACE: You talk about not agreeing on politics. Four years ago, you delivered the invocation at President Obama's first inauguration.

Question: how do you think he's done as president?

WARREN: Well, you know what? I would say, like every president, there are things I agree that I think he did a pretty good job on. I think there are some things that I totally disagree with him on. I made that known to him.

You know, four years earlier, I did the opening prayer for inauguration week for President Bush also, and I agree with some of the things he did and disagreed with some of them.

Every president is bound to be set up for failure, because the moment he's elected, half the people don't like him. So, he's going to have -- he's a human being and is going to make mistakes.

I'm praying for our president because I believe that the Bible tells us to do so.

WALLACE: What do you think has been his biggest accomplishment and what are you most disappointed about over these last four years?

WARREN: I don't know what the biggest accomplishment would be. I really don't know that.

My biggest disappointment is the disunity. President Obama ran saying I'm going to be a unifier and our nation is more divided than ever before. I think it's more divided than at any time since the Civil War. That's disheartening to me.

WALLACE: Well, you know, he would say, I've tried and, you know, you had Mitch McConnell say in 2010, our number one objective is to make him a one-term president.

How much is he responsible for that? And how much is it everybody else in Washington?

WARREN: Yes. No, I don't believe blame simply the president. I think there is plenty of blame to go around.

But I would say, we need to stop blaming. You can't fix the problem while you are fixing the blame.

I have trained leaders, literally all around the world. For the last 30 years and one of the things I teach in leadership is that leaders accept the responsibility and accept the blame and they give away the credit.

And I see a lot of politicians doing the exact opposite today. You blame, b-lame, every time you blame you are being lame.

And I wish both sides would stop blaming and start fixing the problem.

WALLACE: Finally, Pastor, even if a bleak season like this year and, obviously, Newtown is going to color everything about the rest of the season, we still look forward to Christmas. Do you have a message for all of us -- myself, all of our viewers -- this year, sir?

WARREN: Yes. You know, Chris, the purpose of Christmas is actually found in the three statements at the angels made at the very first Christmas. Christmas is for celebration, it is for salvation, and it's for reconciliation.

WALLACE: Pastor Warren, we want to thank you so much for talking with us. We need a message of celebration right now.

WARREN: Thank you.

WALLACE: And merry Christmas.

WARREN: Merry Christmas.

(END VIDEOTAPE)

WALLACE: Up next, grabbing the rail as we slide toward the fiscal cliff. We'll ask our Sunday panel about the president's latest plan to take some of the pain out of going over the brink. Will the GOP sign on?

(BEGIN VIDEO CLIP)

OBAMA: Call me a hopeless optimist, but I actually still think we can get it done.

BOEHNER: How we get there, God only knows.

(END VIDEO CLIP)

WALLACE: The president and Speaker Boehner are still looking for some way to cushion the blow of going over the fiscal cliff. And, it is time now for our Sunday grill, Bill Kristol of The Weekly Standard. Kirsten Powers from the Daily Beast website, radio talk show host, Laura Ingraham and Fox News political analyst, Juan Williams.

Well, this week, someone gave me a new way to think of the way we are accumulating the huge national debt, in this country. Bear with me for a moment. It's a little complicated, but it is interesting. Under President Obama the debt has increased $5.7 trillion. The estimated cost of recovery from Hurricane Sandy, is $50 billion. So the rate at which our debt is increasing, is as if a new Hurricane Sandy hit the U.S. Treasury every two weeks. Given that, Bill, what do you think of the president's new stripped-down plan which would reduce the debt by less than two Sandies in the first year?

BILL KRISTOL, THE WEEKLY STANDARD: No, the president is not serious about reducing the debt, and I think that has become evident over the last four years, as we (inaudible) deficits and will unfortunately be evident over the next four years. On the other hand, we do have this practical problem, ten days from now, of the fiscal cliff, and on that, I do think -- as I said many times on the show -- Republicans will be well advised to accept the fact that President Obama won the election and minimize the damage that will be done by the tax increase that is coming.

WALLACE: So, you would go for the stripped-down Obama plan?

KRISTOL: I would go for what the speaker tried to do late last week and I would try to get the number up to 250,000. But, yes, there's going to be a tax increase on the wealthy. I would try to protect investments as much as possible, keep dividends at a reasonable rate, for the sake of economic growth, do the AMT patch, have a reasonable deal on estate taxes, but I'm a squish on this, yeah, and totally, you've got to make -- you've got to make the best of a bad situation. I think what will happen, incidentally, is Republicans will be faced on Monday, on January -- on December 31st with having to vote on a much worse proposal than the one they didn't give Speaker Boehner the majority for.

WALLACE: The Plan B.

KRISTOL: Yeah, they are going to end up with -- Harry Reid will pass through the Senate on Thursday or Friday a 250,000 -- tax hike on everybody over $250,000, and Republicans will have the choice on Monday in the House of, A, letting it come to a vote -- I think the speaker probably has to -- and B, then, will they lose 20 or 30 Republicans to join the Democrats, to pass this or not? I think it is the worst outcome, but that is what happens when Republicans decided they would just be obstinate and not go along with the speaker, I think.

WALLACE: Let me bring in Kirsten and let's look again at what the Obama plan -- this new stripped-down plan would do. We talked about this with the senators. Extend the Bush tax cuts, but only for people making less than $250,000 a year. Extend unemployment benefits and delay, kick down the can, kick the can down the road, the sequester of $110 billion in spending cuts. Kirsten, with Republicans in the House already rejecting, as we just pointed out, the Boehner plan, which would have only raised taxes on people making more than $1 million, what are the chances that they're going to go for the Obama plan?

KIRSTEN POWERS, FOX NEWS CONTRIBUTOR: Well, it's -- I mean -- it's very low that you -- well, zero that you would get the entire Republican caucus and maybe something can happen where you can get some Republicans and some Democrats. But even that seems difficult. And I think that it shows how unreasonable the Republicans have become. You cannot even agree to this Boehner plan, which is only -- you know, letting taxes go up on people who make over $1 million a year, which is -- I mean, it isn't even one percent of the country.

WALLACE: No.

POWERS: You know, you -- there's -- you just you can't -- how is Obama supposed to negotiate with them? I mean, I think it is just such an extreme plan. They've gone from being the party of fiscal responsibility, it used to be their brand, to we will never raise taxes on anybody, no matter what. And I think that Obama has actually, look, you know, he gave in on this issue one time, and now, they are coming back, and they will not give even on the small little number of people, and I just -- I think it is going to politically backfire on them, eventually.

WALLACE: Laura, one of -- it isn't just Democrats who feel this way. One of Speaker Boehner's allies in the House, Congressman Steven LaTourrette, also of Ohio, blasted his Tea Party colleagues for blocking the Boehner plan this week. Let's take a look.

(BEGIN VIDEO CLIP)

REP. STEVEN LATOURETTE, R-OHIO, APPROPRIATIONS COMMITTEE: That's the same 40, 50 chuckleheads that all year, starting with HR 1, the entire Congress has screwed this place up. And -- and so, you know -- and he has done everything in his power to make nice to them, to bring them along, to make them feel included. But it hasn't mattered.

(END VIDEO CLIP)

WALLACE: Question: Are the people who oppose Boehner's plan B chuckleheads?

LAURA INGRAHAM, HOST, "THE LAURA INGRAHAM SHOW": Well, when ...

WALLACE: Personally, I've got to say, I love the word. So, I've been --

(CROSSTALK)

INGRAHAM: I love chocolate (ph).

WALLACE: Anybody can get on TV on "Fox News Sunday," just say "chucklehead."

INGRAHAM: I love chocolate, the candy. But when Democrats are praising Speaker Boehner, just sort of conservatives, I think, say wait a second, what is Boehner actually doing? A couple of things. Number one, Republicans lost this election. They lost it very -- fairly significantly. They lost House seats, they lost Senate seats, and Mitt Romney rarely discussed the fiscal cliff. And we look back on this conversation and we think, gosh, it would have been nice if we had a plan that had been laid out, other than what Mitt Romney was saying, is we're going to deal with this in a piecemeal fashion.

So we come to the table with that as a reality. Nevertheless, why is anyone leaving town? Why did the president leave town for his vacation? Why did Republicans start to leave town? Why did Democrats? If this is as serious as people say -- and I think it is serious -- then it would seem to me that, even if the Tea Party is intransigent, even if that is what you want to say, they are intransigent, they are terrible people, they don't want to agree with anything, they are there, and you have to deal with them. So everyone should stay in town, they can have their little Christmas Eve dinner, they can do that, but stay in town and figure this out. And the Tea Party, they believe in certain principles, and they are fighting for those principles. They think it's a spending problem, not a taxing problem. I tend to agree with them.

However, I think Bill's position is also valid. That Republicans are probably going to get a worse deal on the table as a result of what happened. Nevertheless, the president has to deal with the cards that are on the table, and it includes Tea Party folks. So you can demonize them, you can vilify them, maybe you'll feel better, but in the end you have to deal with these folks, and I think Bill is also right, that the president doesn't really care all that much about reducing the debt. It's all about expanding the role of government. And if you can -- if you can look on paper like you are reducing the debt, fine, but if that was really a priority, I think we would have had different things happening.

WALLACE: One, you know, there is a very interesting political question. If the Senate passes the Obama plan, just basically to kick the can down the road and also to protect 98 percent of Americans from having their taxes raised, Boehner is going to be faced with a question, does he bring this up to a vote in the House? And again, they've rejected the million dollars, now it is a $250,000 threshold, does it bring it up to the House where Democrats would have to provide the votes to put him over the top, and do this the same week that he's -- he's going to have to face election as speaker?

JUAN WILLIAMS, FOX NEWS POLITICAL ANALYST: Well, I think the first thing to say is that the big plan that the president and Speaker Boehner were very close on, would pass the House. But Speaker Boehner won't bring it up. And, of course, if he put this plan, the Senate plan, the temporary patch as I call it--

WALLACE: I'm not sure it would have passed the House.

WILLIAMS: I think it would have passed the House. I think the votes are there. You've got a significant number of Republicans.

WALLACE: But it has more in revenue increases than it did in spending cuts.

WILLIAMS: By a little bit. They were very close, and I think there was a little more negotiating to be done. But they were very close.

WALLACE: Then why did Boehner drop out?

WILLIAMS: I think Boehner dropped out because he felt that he wanted to have added leverage. He understood that he -- picking up on something Laura is saying, he understood the election, he understood the polls, the president is acting as if he's in a superior position, and he is. And Boehner wanted added leverage, so he said, you know what, if I can get this Plan B through, I can go back and say, this is something that the House has done. We have passed it, we got it. So, negotiate with me fairly, my troops are behind me. Turns out his troops are not behind him. He looks weaker than ever right now. So, your question becomes the critical question, is he willing to play ball with the president and Democrats in order to get something done at the risk of losing his speakership, with Eric Cantor, the number- two long standing behind him sort of lurking, looking for an opportunity to move.

WALLACE: And what is your answer?

WILLIAMS: I think that he has to do it.

WALLACE: And we've got about 30 second left. Bill? What do you think? Does he -- if -- and, then there is a real question whether it passes the Senate. Barrasso, I asked him, you know, can you guarantee this won't be filibustered? And he said, no, in fact, he didn't think that a lot of Democrats would go along with it. But assume it does, and Boehner is faced with that choice, I have to do this, this will protect 98 percent of taxpayers, but I'm going to do it with Democrats . Does he do it and will that sink him as speaker?

KRISTOL: I think he lets the House vote. I mean, I think let the House vote its will -- I don't know how he would, presumably vote against it. We'd see if all the Democrats want to vote for it, we'd see if there'd be enough Republicans, but let there be a free vote. I do not think it sinks him as speaker. I think there's a fair amount of personal loyalty to John Boehner among House Republicans, and he may have made some tactical mistakes, but I do not think he will be deposed as speaker.

WALLACE: And so, do we end up going over the cliff or not?

KRISTOL: I think not. On December 31st, in a bizarre open vote where this -- both party leaders release their members to vote their conscience, they save -- they save 98 percent of taxpayers from an income tax hike, though incidentally taxes are going up on everyone because of the payroll tax cut...

INGRAHAM: Obamacare. Obamacare.

KRISTOL: Well, Obamacare and the payroll tax cut. And that's not so good for the Democrats when it turns out, six months from now...

INGRAHAM: And the cost of living is going up.

KRISTOL: ... that the Democrats -- the Democrats did not protect 98 percent of Americans, it will turn out.

WALLACE: OK. We have to take a break here. And we'll have -- we'll still be able to discuss this next week.

When we come back, a tough report about the Benghazi attack, and the president starts to put together his new national security team.

(COMMERCIAL BREAK)

WALLACE: Check out foxnewssunday.com for behind-the-scenes features, panel-plus, and, our special Monday preview of the week ahead. you can find it, at foxnewssunday.com and be sure and let us know what you think. stay tuned, for more from our panel.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. LINDSEY GRAHAM, R-S.C.: I want somebody to ask Secretary Clinton, why didn't you go on TV 16 September?

When Secretary -- when Ambassador Rice says that Secretary Clinton wasn't available because she was sick and giving grief counseling to people in the Department of State, I want to see if that really withstands scrutiny.

(END VIDEO CLIP)

WALLACE: Senator Lindsey Graham, not satisfied with a new report that found systemic failures at the State Department contributed to the murder of four Americans at the U.S. consulate in Benghazi. And we're back now with the panel.

Well, this State Department investigation found -- appointed by the State Department -- found that State provided grossly inadequate security at the consulate in Benghazi, and it laid the blame at the assistant secretary level, not at the level of Secretary of State Clinton.

But, given that report, and given the fact that Susan Rice pulled her name out and is not going to be the next secretary of state, Laura, is the Benghazi controversy effectively over?

INGRAHAM: I don't think so. I think there are so many questions that were still left open, and a number of the senators addressed those this week after this report.

We have gross negligence, but the culpability doesn't reach the secretary's office. Some of the information got to her but not enough of the information. And then Hillary Clinton suffers from the immaculate concussion two weeks ago, where...

(LAUGHTER)

... you know, she -- she falls and -- I hope she's OK, but she doesn't show up to testify. And, maybe she'll testify in January. It all just seems a little it too convenient. And, again, who knows? It's like a tree falls in the forest, you know. If no one's there to see it, did it really happen?

But so -- so people just -- that seems bizarre. And, look, Hillary Clinton could answer probably a lot of questions on camera. She could do a full press conference, even if she didn't go to the Hill to testify. I think, as long as there are those unanswered questions...

WALLACE: She has never really answered questions.

INGRAHAM: I mean, it's -- we have four dead Americans, and the secretary of state has refused to answer questions either at a full- blown press conference or get herself to Capitol Hill. I think 2016 politics are coming into play very early on this. And I think people are not going to forget this.

And the question is, are our people around the world safe today? Are they? And what about the criminal investigation into the people responsible? Why did the FBI take several weeks to get onto the site at Benghazi? Why were reporters finding journals of the ambassador, but we still don't know what the ambassador actually really thought or said about the security risks?

WALLACE: Juan, you just heard the clip of Lindsey Graham saying that he wants to ask Secretary Clinton what the "What did you know and when did you know it" questions, and she is reportedly going to testify in January. Is this controversy dead or do you think it still has some legs?

WILLIAMS: The controversy's dead, over, has been dead and over for a long time. I think there are people who want it perpetuated, but the fact is, if you look at the report, it says there is no cover-up, no lies. It was politicized in the midst of the campaign.

With regard to Hillary Clinton, there is no indication that she saw any of these reports. And the report talks about did it get to the 7th floor? That's not clear from the report, but nobody's indicating that Secretary Clinton had some operative decision-making role here that led to this calamity. Nobody is saying that.

So, you know, she may say she saw some of it, but it's not determinative. I think the larger issue here is the fact that this report -- you know, you have credible people behind it saying, you know what; we've looked into all this, and there were assets on the ground. Did anybody tell the people at the compound not to go help the people at the consulate? It turns out that the ambassador had unusual latitude in his personal movements. It turns out that there had been requests for security, but most of the requests were in Tripoli, not Benghazi.

You know what? Human beings make mistakes, but to make it into this political, some people say Watergate, it was ridiculous from the start and it's looking worse now.

WALLACE: Bill, I'm going to let you weigh in on that if you want, but I also want to ask you about the president's new national security team. This week he named John Kerry to be the new secretary of state. And the front-runner for the Pentagon, reportedly, is former Republican Senator Chuck Hagel, who we can see there went on a foreign trip with then-Senator Obama in 2008 to the Middle East.

What do you think of Kerry as the definite -- well, I think it's fair to say he's going to sail through as the nominee for secretary of state. And what do you think of Hagel as a potential secretary of defense?

KRISTOL: Senator Kerry will go through. President Obama won the election and Senator Kerry is an appropriate secretary of state for, I think, for a light-footprint, often unwise foreign policy, that he will execute President Obama's foreign policy competently, I'm sure.

I think Senator Hagel either will not be nominated or will not be confirmed. He's much more extreme than John Kerry. And the conceit in the Obama White House was that, well, he's a Republican so Republicans will go for him. He was a Republican senator, but on foreign policy issues, especially in the last several years as a senator and since, he has been way to the left of President Obama in terms of Iran sanctions...

WALLACE: Explain some of the...

KRISTOL: Well, he -- there were Iran sanctions votes which got 92 and 97 votes in the Senate and he voted against. There was a letter signed by 99 senators, every other senator, denouncing anti-Semitism in Russia. He refused to sign it. On Israel, he's much more anti- Israel. He talked about the Jewish lobby in 2006, kind of a -- if a Republican president had nominated someone who talked about the Jewish lobby having too much influence on Capitol Hill, would that person be thought appropriate to be secretary of defense? I don't think so.

So I think Senator Hagel won't be nominated actually by President Obama. He likes -- President Obama apparently likes Senator Hagel; they went on this trip together. He liked the idea of having a Republican and all that. But Republicans aren't for him and an awful lot of Democrats, I am told, are privately telling the White House, "What are you doing to us? I mean, we don't want to vote for this guy." He was never -- and incidentally, if you're a liberal Democrat, what do you want Chuck Hagel for? He voted against Democrats on gay rights, on abortion, on gun control. It's not like he was ever there for them. And now they're supposed to walk the plank because President Obama personally thinks it would cute to have a -- you know, a Republican as secretary of defense?

WALLACE: Kirsten, how much trouble is Hagel in?

And, given all the publicity he's gotten as the person that Obama wants to pick, if he doesn't go ahead with this, after what happened with Susan Rice, what kind of message does that send, at the beginning of this president's second term?

POWERS: Well, I mean, to a lot of people it would send a message that he's not willing to fight for people. But, there's no reason that he needs to fight for Hagel. I think with Susan Rice it was a little different. She's very close to him. She's been close to him for a long time. You know, with Hagel, I don't think he has a big constituency, as Bill just outlined, certainly not a big constituency among Democrats.  If he can't get Republican votes then what is this point of it, because he's not popular with Democrats. You know, he's had this run-in with the gay community. He's apologized, HRC has accepted the apology, but you know, there is bad blood there.,

So, Michele Flournoy, who is somebody -- the name has been floated. You know, you'd have a woman secretary...

KRISTOL: Who served in the Obama Defense Department in the first term, so actually is someone who has worked for President Obama.

POWERS: Yeah, I think it would be a more popular choice.

WALLACE: We have a little over a minute left. And I want to go on another subject. And we'll go on at length in Panel Plus, what did you think of Wayne LaPierre's statement, NRA's statement.

INGRAHAM: You heard the collective gasp from everyone in the media when he got up there stylistically and substantively what Wayne said. But I think the larger conversation that he began, and I thought it was a terrific interview with Rick Warren, is what families are talking about this holiday season. They are enjoying their time with their families but their thinking of the Connecticut families. I'm from Connecticut. I grew up not far from Newtown. I personally as a mom am thinking about those mothers and fathers, and I get teared up when I even talk about it.

I do believe that this rush to -- if we only had the assault weapons ban, if we only had the ban on the high capacity magazines, we wouldn't have these problems. I think it is wrong headed. We could pass those laws tomorrow and, if we did, I think we'd still have a significant problem, your scowls notwithstanding. I love Juan but he scowls every time someone speaks -- and I still love him. I love your tie.

But look we could pass those laws, Chris, and I think we're going to have people doing all sorts of things with a mixture of chemicals, bomb-making, all sorts of things, would still have violence. The assault weapons ban did not demonstrably reduce violence in the United States. We are the least violent country that we have been in decades today.

WALLACE: All right. Thank you. And we are going to continue this conversation on Panel Plus, as we said, as soon as we finish here. We'll pick up right with this discussion on our web site, Foxnewssunday.com. And post the video before noon eastern time. You will see what Juan has to say beyond the scowls and be sure to follow us on Twitter @foxnewssunday.

Up next, our traditional Christmas Power Player of the Week.

(COMMERCIAL BREAK)

WALLACE: It is a Christmas tradition to share the story how one family has found a way to express the meaning of the holiday season. It is a moving example of love for our country, and personal generosity. Once again, here is our power player of the week.

(BEGIN VIDEOTAPE)

MORRILL WORCESTER, FOUNDER, WREATHS ACROSS AMERICA: We wouldn't have the opportunities if it wasn't for the people that fought for us and who gave their lives for us.

WALLACE: It is that plain spoken wisdom that has driven Morrill Worcester for years on a mission that has touched America's heart.

Each December, Worcester places wreaths at Arlington National Cemetery and thousands of volunteers are there to help him.

WORCESTER: I think a lot of people think like I do. And they just want to, you know, they appreciate the veterans, and, they want to show it.

WALLACE: This story begins back in 1962 when Worcester, then a 12-year-old paper boy from Maine, won a trip to Washington. What impressed him most was Arlington, its beauty and dignity and those rows and rows of graves.

WORCESTER: Every one represents a life and a family and a story. They are not just tombstones, those are all people.

WALLACE: 30 yards later, in 1992, he was running his own wreath company in Harrington, Maine but as Christmas approached he had a bunch left over.

WORCESTER: These wreaths are real fresh, their great, just made. And, I just didn't want to throw them away.

WALLACE: He thought of Arlington and all of those graves.

When the cemetery approved, he and a dozen volunteers drove the wreaths down and laid them on the headstones. And, so it continued for years until a few Christmases back, when an Air Force Sergeant took this picture which ended up on the Internet.

WORCESTER: It kind of struck a nerve, and, people e-mailed it to each other, and, it really went around the world.

WALLACE: We were there the next year as he and his workers at the Worcester wreath company loaded up 5,265 wreaths. Then they embarked on what Worcester calls the world's longest veterans parade, a 750-mile journey that at some points attracted more than 100 vehicles. And when they got to Arlington, so many people wanted to participate.

UNIDENTIFIED MALE: The ceremony you are about to witness is an army wreath-laying ceremony to be conducted for the Worcester Wreath Company.

WALLACE: For years Worcester paid for all of this out of his own pocket and he started Wreaths Across America, sending hundreds to cemeteries and war memorials around the country. But he will need help to reach his new goal.

WORCESTER: I think around 2.7 million graves, and that is a tall order to decorate 2.7 million graves so...

WALLACE: But you'd like to do it, wouldn't you?

WORCESTER: I really would, yeah, sometime, I don't know how, but, hey...

WALLACE: How long will you keep doing this?

WORCESTER: I'm going to keep doing it for as long as I work. And, then I know my family is going to continue. So, it will be here for a long time.

(END VIDEOTAPE)

WALLACE: This is the 21st year Morrill Worcester has taken on his Christmas wreath project at Arlington and other veterans' cemeteries, in all 50 states and overseas. And this year they reached a milestone, they have now have placed 1 million wreaths to honor men and women who defended our nation.

And that's it for today, Merry Christmas to all of you. And we'll see you next "Fox News Sunday."

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