Exclusive: Rep. Kevin McCarthy talks roadmap for budget showdown; key senators debate defunding ObamaCare

This is a rush transcript from "Fox News Sunday," September 29, 2013. This copy may not be in its final form and may be updated.

CHRIS WALLACE, HOST: I'm Chris Wallace.

Washington barrels towards a government shutdown.


WALLACE: Congress in a standoff over a plan the government passed at midnight on Monday, and a dispute over ObamaCare at the center of it all.

PRESIDENT BARACK OBAMA: My message to Congress is this: do not shut down the government. Do not shut down the economy. Pass a budget on time. Pay our bills on time.

REP. DANA ROHRABACHER, R-CALIF.: If this government shuts down it's because you have not accepted the compromise that Republicans have reached out to you and offered.

WALLACE: House Republicans stand firm in their effort to derail ObamaCare, voting to delay it a year.

As the clock ticks, we'll ask the House GOP whip, Congressman Kevin McCarthy, what's their strategy. It's a "Fox News Sunday" exclusive.

Then, the next phase of the president's health care law starts Tuesday, when uninsured learns can start shopping for coverage through online marketplaces.

OBAMA: If you will have ever tried to buy if on your own, I promise you, this is a lot easier. It's like booking a hotel or a plane ticket.

WALLACE: Two leading senators debate how ObamaCare will affect you: Democrat Tim Kaine, who supports the plan, and Republican Mike Lee who wants the law repealed.

Plus, our Sunday panel weighs in on the historic phone call between President Obama and Iranian President Rouhani.

And our American power player of the weekend: an American hero who has received the nation's highest award for bribery on the battlefield.

UNIDENTIFIED MALE: When I looked out from under my helmet, all of these marines were looking at me saying, OK, Lieutenant, what do we do?

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


WALLACE: And hello again from Fox News in Washington.

Well, we're now just hours away from a potential government shut down. While most of us were sleeping, the House passed a revamped spending bill, but added conditions the president and Senate Democrats call unacceptable.

Joining me now, the man in charge of counting votes in the House, the Republican Kevin McCarthy of California.

Congressman, welcome back to "Fox News Sunday."

MCCARTHY: Thanks for having me.

WALLACE: So, now, you have sent a measure to the Senate to keep funding ObamaCare, with a year delay in -- keep funding the government with a year delay in ObamaCare, and also a repeal on the tax on medical devices.

Now, Harry Reid, Senate majority leader, says that is dead on arrival in the Senate when they come back into session Monday afternoon, 10 hours before the shut down. I know you want them to pass it, I know you think there are times, a good reason to pass it, let's assume they don't pass it, true to their word.

What do you do then?

MCCARTHY: Well, you assume they won't, but there were 79 senators who voted for it to end the pacemaker tax. You have the president 10 times this year, every single month, delaying a portion of ObamaCare. Just last week, he did it while he was criticizing us for delaying. I think let's have the debate. Let's allow those senators in states that they need to listen --


WALLACE: But they won't have a debate. He -- it's a privileged motion. They don't even have to debate it. Harry Reid can, with 51 votes, can throw it in the trash.

MCCARTHY: You can throw it back, but I think from the standpoint, when you look at the American public, learning what's going on with this bill, opposing it, you go to Louisiana, you got to Alaska, you got to these states that are overly opposing it, where these senators have some very difficult races, I think they're going to have to be pressuring their leaders to say, let us have that vote.

WALLACE: OK, assume for the sake of this discussion --


WALLACE: -- that they reject it. As they say they're going to reject.

What will the House do then?

MCCARTHY: I think the House will get back together and in enough time send another provision not to shut the government down, but to fund it, and it will have a few other options in there for the Senate to look at it again.

Look, when you look at what has transpired since ObamaCare has moved forward, we've created more than 840,000 jobs in this country -- more than 90 percent of them have been part-time because of ObamaCare. That creates a part-time economy, part-time opportunities. And in the end, it creates a part-time America.

That is why you find that we will fund the government and still ask for delaying the movement of ObamaCare.

WALLACE: OK, here is what President Obama said about the situation on Friday.


OBAMA: My message to Congress is this: do not shut down the government. Do not shut down the economy. Pass a budget on time. Pay our bills on time.


WALLACE: Now, this will be the first government shut down -- if it happens -- in 17 years. Eight hundred thousand federal workers will be furloughed. Economists say it will hurt a fairly weak recovery.

Congressman, are you willing to risk all that?

MCCARTHY: We are not shutting the government. While the president was out golfing and senators went home, we were here working to 1:00 a.m. to make sure we didn't shut the government, that we put a funding bill across.

And the different here is, you just listen to the president, talk to the president of Iran, talk to Putin, but won't sit here and talk to the representatives of the American people they elected to come through and deal with this problem. You have found that the president went out to the American people and said, if you have your health care and you like it, you can keep it.

This letter right here is to a widow in New Jersey who just happened to be the mother of one of my staffers. It says they cannot longer keep the health care. She can't renew it next year.

He cannot ignore this problem. This is an opportunity when you find that ObamaCare is not going to work, to delay it.

WALLACE: All right. Let me ask you a couple of quick questions, quick answers.


WALLACE: Assuming -- just bear with me.


WALLACE: Assuming that the senators do what they say they're going to do and they reject this issue, will you have a clean C.R. with Democratic votes and send it back to the Senate to avoid a shutdown?

MCCARTHY: This is not a place to negotiate, but I promise you this -- we will pass the bill if the Senate does what you think they will do, that will keep the government open, that will reflect the House that I believe the Senate can accept, that will have fundamental changes in ObamaCare that can protect the economy for America.

WALLACE: So, there will be an ObamaCare rider, amendment, if you will? It won't be a clean C.R.

MCCARTHY: I think there will be additions that I have found in the Senate, that Senate Democrats say they can support. You just heard a senator from West Virginia that is a Democrat who said, why do you -- why does the president just treat business one way but he won't treat an individual another way?

I think there is big support inside the Senate that we can pass that will fundamentally help the economy of America.

WALLACE: All right. If delay, and the whole deal, and defund are off the table, what's on it, do you think (ph)?

MCCARTHY: There are a lot of items that are on the table. Look, you've spent more time negotiating with me than the president has spent a time negotiating on this. This is one of the biggest problems facing America.

How many times have you found the Teamsters, the biggest unions in America, partnering with business? What do they say about ObamaCare? They say it's destroying the economy, it's breaking the backbone of America because no longer are we having full time jobs.

This bill is creating a part-time America.

WALLACE: Let me ask another quick question. How about the possibility of a short-term, clean C.R., keep funding the government two or three days just so you can avoid the shut down and keep this going, give yourselves more time.

MCCARTHY: Look, we will not shut the government down. We have to negotiate longer, and we will continue to negotiate. But the one thing you will find --

WALLACE: So a very short term C.R. is possible.

MCCARTHY: The thing that I continue to look at -- we do not want to shut the economy down. That's why we have continued to pass funding bills. But you cannot have a part-time America and ignore the problem.

You cannot have a president that passes legislation and says he won't deal with the subject. And you think, people, that he won't sign? Do you realize? He has signed seven bills that have changed provisions inside of ObamaCare. That there is 70 Democrats sitting in that House today have voted for one form or another of that. So, there is support.   And when you look at the American public, the more they learn about it, the majority is opposed to it.

WALLACE: Congressman, let's be honest. You did not want to be in this position. The fact is that Speaker Boehner and all of you in the leadership wanted to send the Senate originally a bill that would fund the government. Yes, it would have a defund ObamaCare, measure it, it could be taken out and passed and that was refused by members of your caucus.

Then, you wanted to switch, pass a clean C.R., and have the fight over the debt limit. And again, the so-called "Tea Party faction" of Republican congressmen refused, which raises the question -- who is running the House right now?

MCCARTHY: Never doubt, if you watched that vote last night, unanimous Republican voting for it. We all have the same goal, inside the House, and inside the Senate.

WALLACE: But that is if you won?

MCCARTHY: We have different strategies at times.

But this is a much bigger issue. This is an issue about the direction of America. We have a $17 trillion debt, larger than our entire economy. We have a part-time American job creation. Ninety percent of all jobs created last year were part-time.

This is a much bigger issue about what we are spending our money on, and what is coming into this country.

WALLACE: A couple of final questions. Ted Cruz and, our next guest, Mike Lee, have been seen openly on the House floor lobbying Republican conservatives to buck the plans of Speaker Boehner and yourself.

Do you have any problem with them meddling with House Republicans?

MCCARTHY: I find individuals have exact same goal. They have gone on where Cruz has talked for 21 hours, how many more people learned about ObamaCare? How many more people learned about the effects that it will have on America?

So, it's not just that widow finds out they don't get their health care anymore. It's not the trade unions --


WALLACE: Do you have any problem with them going and lobbying in the House floor and banish (ph) your plan?

MCCARTHY: We have the same goal, at times we have different strategies, but we're working to the same end.

WALLACE: Finally, you've got two deadlines in the next month. First of all on October 1st, as we have pointed out, the government runs out of money. We have the possibility of a shut down. And then, as you can see there in on October 17th, we bump up against the debt limit. And the president swears he will not negotiate on that. Take a look.


OBAMA: I will not negotiate on anything when it comes to the full faith and credit of the United States of America.


WALLACE: Now, as you pointed out, at the same time he is refusing to negotiate on that, he has just opened diplomatic talks with the Iranians.

But I want to put up a list of measures that you guys want to add, and let's put them up on the screen if the conditions for adding to -- an increase on the debt limit. A one-year delay on ObamaCare, tax reform, build the Keystone Pipeline, limit environmental regulations. The White House says you guys want to attach the entire Republican platform to raising the debt limit.

Isn't that over the top?

MCCARTHY: No, we want to grow jobs. We want Americans start working again. How is that crazy? When in America -- when did it come in America that creating jobs was something wrong?

And look for one point -- they'll spend the time talking to everybody else. But he is not listening to the American people. The Bloomberg poll just came out that 61 percent of Americans want him to negotiate on where we're going on our debt.

Look at the additions since he become in to the debt, $17 trillion. That is more than our entire economy. Why won't he --

WALLACE: The whole $17 trillion isn't his.


WALLACE: Was it $8 trillion or $9 trillion of it is his.

MCCARTHY: But why isn't he negotiating? He will negotiate everywhere else but he won't sit and focus on what is happening in America today?

WALLACE: Congressman McCarthy, thank you. Get some sleep. You were up late last night. Thanks for coming in today and we'll watch what happens on Capitol Hill over the next 24 hours.

MCCARTHY: Thanks for having me.

WALLACE: You bet.

A possible government shutdown is not the only big event this week, as we've mentioned. On October 1st, people can start shopping in ObamaCare's insurance exchanges or marketplaces.


OBAMA: On Tuesday, about 40 million more Americans will be able to finally buy, quality, affordable health care just like anybody else.


WALLACE: Next up, two key senators debate how the new health care law will affect you.


WALLACE: October 1st could mark the start of a government shut down, but it is definitely day one for a key piece of ObamaCare. On Tuesday, Americans without health insurance will be able to shop for coverage in online marketplaces. We've invited two senators to debate how the president's plan will affect.

Utah's Mike Lee is leading Republican efforts to defund or delay ObamaCare. Virginia's Tim Kaine supports the president's health care reform.

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

SEN. TIM KAINE, D-VA.: Thanks, Chris.

SEN. MIKE LEE, R-UTAH: Thank you.

WALLACE: Senator Kaine, let me start with you. Your side has already, as we pointed out with Congressman McCarthy, rejected the bill that the House passed last night.

KAINE: We'll act tomorrow, right.

WALLACE: You'll act tomorrow?


WALLACE: Will you pass their measure which would keep funding the military in case there's a shutdown?

KAINE: Chris, in all likelihood we will. We think it's insufficient. It doesn't cover V.A. and other important workers, but it is necessary. And I don't suspect that will be too controversial.

WALLACE: OK. Senator Lee, you and Ted Cruz have been openly, as I just mentioned with Congressman McCarthy, lobbying House conservatives to go up against Speaker Boehner's plans. He didn't want to have this fight. He didn't want to shut the government.

Is that appropriate?

LEE: Well, first of all I support what the House has done. I support what the House did last night based on what I've heard about it, haven't yet seen it. And I support what they did last week.

Look, Republicans are doing everything that we can to protect America from a shut down and protect America from the harmful effects of ObamaCare. This law is not ready to be implemented.

Every day, we are learning about somebody else is losing a job, having their benefits slashed or having their hours or their wages cut.

And we also know that the president himself has acknowledged that the law is not ready. He is making exceptions for people for unions, for big business and other special interest. If it's not ready for some, it's not ready for everyone and we should delay it for everyone.

WALLACE: OK, because of the fact that the exchanges kick in, and on October 1st, we want to have this debate. How it's going to affect real people?

First, coverage. Here is what the president promised.


OBAMA: If you've got health insurance, you like your doctor, you like your plan -- you can keep your doctor. You can keep your plan. Nobody is talking about taking that away from you.


WALLACE: But major companies like these on the screen say they will put their workers on public or private exchanges.

Senator Lee, many of those folks won't be able to keep their doctors or their plans.

LEE: Many of those won't, nor will the 20,000 employees of Home Depot who learned just a week ago Friday that they will be losing their coverage as well. People were being told this all the time.

So, I have to ask the question, how many more Americans will have to lose their jobs or their health coverage, or have to have their wages or their hours cut as a result of this law before Congress acts?

It's time to act. And what we keep hearing from Democrats is ObamaCare is the law. Well, if it's the law, then why isn't the president following? Why is the president rewriting it? Why is the president --


WALLACE: All right. But I want to stick to how this is going to affect people.

Senator Kaine, let me bring this up, the president said, if you like your doctor, if you like your plan, you can keep them. But the fact is, a lot of people are going to be thrown into these public exchanges where they can't keep their doctors or their plans without having to pay a whole lot more money because they'll be out of network.

KAINE: Chris, I agree we should have this debate, but we shouldn't connect it to a government shut down. That's the fundamental disagreement between the two sides here. I mean, just for an example, on the Senate --

WALLACE: But let's --

KAINE: No, I'm going to answer your question.

WALLACE: I want to answer my question.


WALLACE: Because the fact is, this goes into effect whether there's a shutdown or not.

KAINE: Right. Well, I hope that we have to read the delay provision. The delay provision says everything that goes into effect beginning October 1 gets delayed for a year. Does that delay the exchanges? It will definitely delay the --

WALLACE: But you're not going to pass --

KAINE: It will definitely -- you're right -- but it will definitely delay the ability of people not to be turns away from preexisting conditions, delay maternity care.

WALLACE: Answer my question, what about --


WALLACE: All right.

KAINE: We're not going to pass it. We're not going to pass it because it is wrong to do a shut down of government as the leverage to make change.

WALLACE: But, sir, answer my question.

KAINE: OK, now, the question.

WALLACE: Well, the question is, the president promised you can keep your coverage, you can keep your doctor -- no, you can't.

KAINE: In the exchanges? In the exchanges, the news that came out about the exchanges last week, and we're going to have to see on October 1st is that people are going to have vastly more voices of insurance products and the ability to have them subsidized if the exchanges go into effect.

This is --

WALLACE: But if I'm seeing Dr. Smith, and I like Dr. Smith, and I've seen Dr. Smith for 10 years, it may well be when I go into the exchange, I can't see Dr. Smith anymore.   

KAINE: I actually doubt that that's the case. The news about the exchanges is that the number of options is so great, you're going to have all kinds of choices, Dr. Smith or others that you might want to see based upon the reports last week.

WALLACE: Senator Lee?

LEE: Well, the facts just don't back that up. The facts suggest that we see is a lot of people losing access to their doctor, to health plans that have worked for them for many years. This law is a train wreck. It's been described it as much by its author in the Senate. And we can't move forward, that we can't simply allow this train wreck to happen.

As difficult as it is to stop, we can't allow it to happen. We've got to do everything we can to protect the American --


WALLACE: Forgive me, I'm trying to stop the rhetoric. I want to get to the specific points here.

KAINE: Let me tell you why it's not a train wreck.

WALLACE: I don't want -- I'm not asking about that.


WALLACE: I'm asking about coverage.

Now, I want to ask about premiums, it's like herding cats here today.

KAINE: We are senators. I mean --

WALLACE: I understand that. The premiums people will have to pay. Here is what the president promised.


OBAMA: They said these rates would come in real high and everybody's premiums would be sky high, and it turns out, lo and behold, actually, the prices came in lower than we expected, lower than I predicted.


WALLACE: But the reality is more complicated. While older folks may pay less, let's take the example of a 27-year-old nonsmoker in Philadelphia who now pays $73 a month. And he will pay $195 a month under the cheapest ObamaCare plan.

Senator Lee, in addition to the fact these plans came out last week, people will pay higher premiums, they also are going to have big deductibles, as much as $5,000 a year.

LEE: Big deductibles, high premiums -- and we're seeing their statistics for 27-year-olds. We see that even when you get up to 40- year-olds, in many parts of the country, people will be paying sometimes double what they have been paying currently. And this is not acceptable.

We are seeing astronomical increases in health care premiums, and people simply can't afford that right now. We can't afford to put that on the American people, especially the time when we're being told by the president that this law would make health care cheaper, that this law would make healthcare more fair and it's having the opposite effect in both respects.

WALLACE: Senator, I want to show you a letter that Regence-Blue Cross Blue Shield sent a 62-year-old couple in Chicago this last week. They run a small business. Actually, it's two weeks ago. They sent it to them. It says, quote, "Under the Affordable Care Act, they must get a new policy that doubles their deductible to $5,000 each, raises the cost of an office visit to specialists from $35 a visit to $100 visit, and increases their premium."

Again, that's not what the president promised.

KAINE: Chris, I don't believe everything an insurance company says. I'm sure the insurance company says, well, this is because of the Affordable Care Act. These are the same guys who were kicking people off of policies and turning people away from policies because they have pre-existing condition.   

WALLACE: So, you're seeing these folks. When they're told their deductibles are going to up, their premiums are going to go up --

KAINE: That might be true, but it may have not nothing to do with the Affordable Care Act. The word that was out this week about the premiums in Virginia, when these exchanges open, will be very favorable to people and some of the numbers you were quoting earlier didn't take into account the fact that there are subsidies as well.

So, if you beneath a certain income level, whatever that premium is, it's going to be subsidized and dropped to be very affordable. Again, very important questions, but we shouldn't be wrapping these questions up with the threat of government shutdown. That's what's fundamentally wrong about this.

WALLACE: I understand that, sir. And the shutdown is a different issue, we'll talk about that.

I want to talk about ObamaCare.

KAINE: I'm going to keep bringing it back because there's only one side that is linking ObamaCare with the shutdown of government. On our side, we say, let's have the debate, let's have the debate about immigration reform, other important, but let's not wrap it up in government shutdown.

WALLACE: I think you made that point. OK, let's go to the question of jobs. Under ObamaCare, any employer with more than 50 full-time workers must provide coverage in 2015, must provide under the employer mandate, or pay a penalty. And full-time is defined as 30 hours a week or more.

President Obama says that won't be a problem.


OBAMA: They said this would be a disaster in terms of job. There's no widespread evidence that the Affordable Care Act is hurting jobs.


WALLACE: But a study this week found 313 companies, 313, are either laying off workers or cutting their hours to avoid the ObamaCare employer mandate.

Senator Lee?

LEE: This is yet another example of what happens in Washington. As we say, the bullet points are very different than the bill, and that's true with respect to any piece of legislation, especially with 2,700-page piece of legislation that no one read before they passed it. We're still learning more and more about the implications of this law.

As it's taking effect, as we're getting ready for this law to kick in fully in 2014, we're seeing the harmful effects and we're seeing that people are losing jobs, we're seeing that people are losing access to health care. The health care is getting more expensive, not less expensive. And that the president is handing out favors to special interests, carve-outs.

We want to hand out those favors to all Americans. We want a delay for everyone. And the best way to do that is by defunding it. The only way to do that is in connection with the continuing resolution.

KAINE: But, Chris, he mentioned all these bad things. We're also seeing that people, kids aren't getting turned away because of preexisting conditions. We are seeing that small businesses get tax credits to buy insurance for their employees, that seniors are getting free preventive care under Medicare, that we can't discriminate against women on the grounds of gender.

A whole lot -- I had personal experience with this. When I was running for Senate, I didn't have a full time employer because I was running full time. I had to buy insurance.

We called to get insurance, and my wife was told, we'll give you insurance for you and your husband, and two of your three kids. But we won't give you insurance for your third kid because of a medical condition. My wife called and said, I think that's against the law.

An HHS called the insurance company and they had to calls us and apologize and say, you know what, we will write you an insurance for your entire family. It's now against the law to say to a kid, we're not going to insure you, we'll insure everyone else.

Those are the good things that are happening and we can reform, but let's not wrap it up with government shutdown.

WALLACE: OK. But let's keep the subject on jobs, because not just Republicans who are saying that this is costing jobs -- so is big labor. Take a look at this.


TERRY O'SULLIVAN, PRESIDENT, LABORERS' INT'L UNION: Well, we'll be damned if we're going to lose our health insurance because of unintended consequences in the law. It needs to be changed, it needs to be fixed and it needs to be fixed now, brothers and sisters.


WALLACE: Union leaders, big Obama supporters are saying this is hurting them.

KAINE: And they're saying it needs to be fixed. So, let's have a debate about a fix than about repeal, defund or delay.

What we've been wanting to have a debate about reforms, in March, the Senate passed in a budget an idea to reform those medical device tax. We want to fix it. We want to reform it. It was in the budget bill. That's the right way to do this.

The Republicans have blocked us from going into a budget conference for now six and a half months.

WALLACE: OK. We're --

KAINE: You fix it in a budget conference not with a government shut down.

WALLACE: OK, I want to get to one last area, and actually this is an area that you're going to like and perhaps more than Senate Lee.

The nonpartisan Congressional Budget Office, I want to talk about access, the nonpartisan Congressional Budget Office estimates, by 2006, ObamaCare will cover 30 million to 33 million people who are now insurance. The CBO found a House Republican would cover only 3 million.

Senator Lee, for all the talk about delaying and defunding Obama care, you guys do not have a plan that takes care of those millions of people who are now uninsured.

LEE: First of all, that same entity, the Congressional Budget Office, also found that 10 years from now, we will still have 31 million uninsured in America. We were promised this law, ObamaCare, would take care of that.

WALLACE: But it would take care of tens of millions of people.

LEE: It would perhaps, and we also know that as go into that, that would come at a cost of many, many jobs. It would come at a cost of many people paying much higher health care premium.


WALLACE: I'm going to hold you to account as I did Senator Kaine. Specific issue -- you don't have a plan that would cover if not all uninsured, tens of millions.

LEE: We do have a number of plans that Republicans have submitted. I submitted one in connection with my Saving the American Dream Plan last year. The House Republican Study Committee has recently introduced another plan.

There are a lot of other plans out there that would make increased affordability and portability of health insurance, making it more possible for more people to afford health insurance and make sure they can carry it state to state and job to job, creating interstate competition so that more people can afford it.

WALLACE: You get the last word, Senator.

KAINE: I'm going to say -- I'm glad that Mike has a plan.

On (INAUDIBLE) with Senator Cruz, I asked him the other day, he talked about reforms he would like. I said, during his filibuster -- well, have you introduced the bill. No, I haven't, I haven't been here long enough but I'm to put one together.

Let's put plans on the table and let's about fixing and adjusting. But, you know, the best word about our current dynamic was a House Republican, Tom Cole, who's the deputy whip, who rejects this shutdown thing and here's what he said, "When you hurt millions of people and inconvenience tens of millions more, you usually don't achieve your end because they wonder why you did that to them."

We should not be talking about government shut down. Let's talk reform. We want to do reforms, but it's wrong to tie it up to a government shutdown, Chris.

WALLACE: Senator Kaine, Senator Lee, thank you both. Thanks for coming in. It should be an interesting week, gentlemen.

LEE: Thanks, Chris.

WALLACE: On Capitol Hill tomorrow is the final day for Congress to find a way to avoid a shutdown and keep the government open for business. Our Sunday panel weighs in on what they think will happen.



REP. DAVID SCOTT, D-GA.: Your hate for this president is coming before the love of your country.

UNIDENTIFIED MALE: Time (inaudible) has expired.

SCOTT: Because if you love this country, you would not be closing it down.

ROHRABACHER: He will negotiate with foreign dictators, before he will negotiate with us. We have reached out with a compromise. Please, accept the compromise and keep the government open.


WALLACE: Well, that is just a taste of the bitter debate on the House floor last night as the shutdown showdown intensifies. And neither side shows any sign of backing down. Sign up for our Sunday Group, Brit Hume, Fox News senior political analyst. Former Democratic Senator Evan Bayh, Kimberley Strassel of the Wall Street Journal and Fox News political analyst Juan Williams.

I think it's fair to say that up until now most folks in Washington thought that this whole shutdown mess was political theater, and that they were somehow going to get it settled, but with the House last night passing a bill, which includes a one year delay of ObamaCare and the Senate not even meeting until 2:00, Monday afternoon, just ten hours before the clock strikes midnight, suddenly, Brit, this is beginning to look quite real. What strikes you about the possibility of a shutdown and how we got here?  

BRIT HUME, FOX NEWS SENIOR POLITICAL ANALYST: Well, what you saw -- you saw it in the interviews that you just did, is how the two sides view this. Senator Lee kept saying this is a bad law. And (inaudible) reasons why. Senator Kaine kept saying don't shut down the government. In fact, it was only Senator Kaine who mentioned the shutdown, and that's because the Democrats believe that shutdown is a disaster for the Republicans because they will be blamed. And if history is any guide, they will indeed be blamed. So that's sort of where we are and neither side I think feels it has an incentive to move forward with a compromise. Now, it's possible, Chris, with (ph) an 11th hour deal where you pass a continuing resolution that doesn't have any of the contentious additions to it for a matter of several days to give us more time. But unless some compromise emerges that both sides seem likely to agree on, I don't think that would do anything which would delay the inevitable. That's where we are. Shutdown appears to be where we're going.

WALLACE: Senator Bayh. You and two Republicans have come together under the non-partisan group, No Labels, not Republicans, not Democrats, no labels, to offer your plan, which would be to freeze all spending, all taxes, to suspend the debt ceiling, all of this, basically, to keep everything in place until employment is back down to 6.5 percent. What's your reasoning?

EVAN BAYH, FORMER U.S. SENATOR, D-IND.: Chris, our reasoning is, the most important issue facing the American people today is getting this economy, businesses growing and creating jobs, and all this policy uncertainty is really holding the private sector back. You had Ben Bernanke a couple of weeks ago, of the Federal Reserve basically saying one of the greatest risks to our economy today is our own government. So we're calling for a timeout. To say, look, let's suspend this argument, let's allow the private sector to grow, so there won't be tax increases, the sequester won't be held in places, the spending will be frozen. We'll suspend enforcement of the debt ceiling to give business certainty, in all likelihood until the end of next calendar year. In the meantime, there'll be an election, and the American people can weigh in on this -- but let's not tank the economy over these political disputes in Washington.

WALLACE: You know, what may be most interesting in this mess is not the split, which you often see between Republicans and Democrats, but the split inside the GOP, which we've seen playing out. Especially, in the House, But we also thought in the Senate, where at one point this last week, Ted Cruz was accusing some of his fellow Republicans of appeasement. And Bob Corker was accusing Ted Cruz of grandstanding. Take a look.


SEN. TED CRUZ, R-TEXAS: You go to the 1940s, Nazi Germany. Look we saw in Britain, Neville Chamberlain who told the British people accept the Nazis.

SEN. BOB CORKER, R-TENN.: Well, I'm understanding the reason we're waiting is that you all have sent out releases and emails and you want everybody to be able to watch.   


WALLACE: So, Kim, as you pointed out in your column the other day, Cruz and some of his fellow Republicans, Mike Lee are putting more pressure on their fellow Republicans than they are on red state Democrats, like Mary Landrieu in Louisiana, and Pryor in Arkansas and Begich in Alaska and Hagan in North Carolina who are -- half of this vote is whether or not they are going to fund ObamaCare or not. Do you think that' the wrong strategy?

KIMBERLEY STRASSEL, THE WALL STREET JOURNAL: Well, look, here is the thing: everyone is saying this is some divide in the Republican Party between, you know, the people who are principled versus the people who are sellouts. What is becoming clear is that the real divide here all along has been between those who actually wanted a commonsense strategically planned way of going forward, and those who just sort of marched ahead, into the headlines, they didn't do any of the hard work that is necessary for adventure of this sort to make it work. And, you know, I called some of these groups, the fund ring leader and said, what's your plan, what Senate Democrats are you targeting to get to come along with you? What is your PR strategy if shutdown comes up to get the American public behind you, what's your fall back when the president doesn't do this?

I was told these were all tedious questions. And so, you know, now this is what we have. And the reality is they have made a lot of strategic blunders. That's the cold eye appraisal. They decided to do this on the budget rather than the debt ceiling, which the American public is much more behind as the issue. They have no fall back plan. They have sacrificed some of their best leverage, things like this congressional exemptions subsidy, fighting on the individual mandate. And they've given Democrats an excuse now to just say we're not doing anything, because this is such a spectacle. This has been a strategic error.

WALLACE: Juan, where is this headed? Will there be a shutdown and if so, who takes the heat?

JUAN WILLIAMS, FOX NEWS POLITICAL ANALYST: Well, I think there is going to be a shutdown, sad to say, and I think the polls indicate that overwhelmingly it's Republicans who take the heat. The president was also at some risk -- I think the latest polls had -- it's like 40 percent would blame the president, but then you have about 30 percent who would blame President Obama. But you know, I think -- you know, listening to what ...


WILLIAMS: Yes, that's what I meant to say, thank you, Brit. I was listening to what Kim was saying, and I just was struck by the idea that, you know, it's not the normal politics anymore on the Hill. What we're seeing here, I think, is Republicans who are responding to the idea that the talk radio folks who are out there saying let's go, let's stir the base. Let's stir -- not all Republicans, but let's stir the Republican base, and we can raise money. And I think that's why you have people from Heritage Action to Freedom Works, to the Koch brothers, they've got ads on the air, they've got all of the rest going saying we know a way here to stir political passions that goes beyond the calculus of saying we're going to actually win. They -- winning for them maybe raising money ...

BAYH: I think you put you finger on it earlier. Kim touched upon this a little bit. Chris, we've seen a complete decoupling of primary politics, particularly within the Republican Party in general election politics. So the reason they make these strategic errors is that a certain number of those House members are first worried about winning a primary. If they don't get re-nominated, they can't get to a general elections. The speaker, Senator McConnell, others -- they have to worry about getting a majority. People who work at the presidential level have to worry about getting a majority. That means appealing to moderates, independents, swing voters -- that's just not a part of the calculus right now in the House.

WALLACE: 30 seconds, Brit. Is there any downside here for the president, for Senate Democrats if this shift goes over the cliff?

HUME: Well, there never has been, and I must tell you that as one who covered the shutdown in '95 and '96 as the White House correspondent, I was stunned by the reaction. The Republican Party was in much better order (ph) with the pubic than it is now. Newt Gingrich was newly elected speaker, Republicans were riding high, big government had a bad name, much as it does now. And when the government shut down as a result of spending cuts that President Clinton refused to accept and vetoed the bill to keep the government open, I thought that he would get much of the blame if not most of it. It was just the opposite: the public absolutely hated the shutdown. Now, you know, Ted Cruz and company argue that it's all different this time. I must say I have my doubts, Chris, I think the Republicans will get blamed and it will be very painful for them. And this could be a game changer for the forthcoming congressional elections. That's, what I think the leaders on the Hill are worried about. That the government shutdowns are political poison.

WALLACE: All right. We have to take a break here. When we come back, that historic phone call, the president's conversation with the new leader of Iran breaks a three decade freeze in relations. We'll ask our panel what it means for Iran's nuclear program. Next.



UNIDENTIFIED MALE: I didn't think about my own safety.

WALLACE: It's the chance to get together and share war stories, but more important, to promote their core value, love of the country and sacrifice.

UNIDENTIFIED MALE: My only fear was that I would make the right decision, hopefully not getting any (inaudible)

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




OBAMA: The test will be meaningful, transparent and verifiable actions, which can also bring relief from the comprehensive international sanctions that are currently in place.

IRANIAN PRESIDENT HASSAN ROUHANI: The whole thing, and they won't refrain from following the short sited interests. A warmongering pressure group. We can arrive at a framework to manage our differences.


WALLACE: President Obama and Iranian President Rouhani making it clear, while they are now talking to each other, there are still major differences to resolve. And we're back now with the panel. The White House released the big picture Friday afternoon. President Obama in the Oval Office on the phone with President Rouhani. The first time the leaders of the two countries have spoken since Jimmy Carter and the Shah of Iran back in 1979. Brit, having said that, where are we now in relations between these two countries?

HUME: Well, we -- I don't think anything can be shown that was changed except that there was this conversation and we have this rather more appealing fellow as the leader in Iran. I mean he does very well by comparison with his thuggish predecessor. He seems more refined, he seems more pleasant, he seems more reasonable. But so far, Iran has not done anything. And if you listen to that sound bite that you just played, he is talking about arriving at an agreeable framework, under which we can resolve our outstanding issues. What does that mean? That's just -- that's just -- that's just talk. And unless and until Iran actually agrees to do something and then does it, to reduce the possibility of having a nuclear arsenal, I think it's that's the only you can have is total mild degree of interest in this, and probably not much hope.

WALLACE: Well, all right. The phone call followed a meeting on Thursday, between Secretary of State Kerry and Iranian Foreign Minister Zarif, the fellow on the right there, with a white beard, and the Iranians are now saying Zarif will bring a plan to address Western concerns about its nuclear program, when they made -- meet in Geneva in mid-October. Senator Bayh, the Iranians are talking about this could get done within months.

BAYH: I think a fair amount of skepticism is in order, Chris, when it comes to the Iranians. The current -- the new president has a, you know, more moderate face. But there is a uniform consensus across the Iranian leadership, including the great leader that they want a nuclear capability. There is some disagreement about how far they should go, what exactly that means, but they want to be a nuclear power. So what they -- what they really want is a lifting of economic sanctions and he is perfectly happy to, you know, pocket any of the concessions we would be want to make, but not compromised on the fundamental goal of becoming a nuclear power.

So, we need to play out this dialogue, but I think at the end of the day it all comes back to are we willing to live with a nuclear Iran? Can they be deterred? Can they be contained? You know, by the way, our allies in Israel and among the Sunni nations might have a different answer to that questions that we would.

WALLACE: Let me pick up on that, because Israeli Prime Minister Netanyahu will be meeting with President Obama tomorrow, Monday in Washington before he goes to New York to make his speech to the United Nations. Kim, you've got to figure he is going to say to the president -- President Obama, slow down.

STRASSEL: Well, right, especially because the Israelis are well briefed on this guy. And as Brit says, he's more pleasant looking fellow, but look at his history. That's what he has done in the past. This guy was Iran's chief nuclear negotiator from 2003 to 2005. And he follows the exact same playbook. You calm down tensions. You make a few conciliatory outreaches to everybody, and what you're doing is, you're buying time for the Iranians to continue moving, marching forward, settling with their program. He bragged about this at one point. When he finished being negotiator, he said hey, that's what we did, we calmed everything down.

Look, we were able to finish work at Isfahan, which is one of their places where they enrich uranium. So, I mean the president needs to be looking as he's just getting played here. And I think the absolute worst situation is actually somewhat of what he outlined, in which what you don't want, just to simply take off this -- all of these sanctions and then even worse, maybe suggest that it's OK for them to do reactor-grade nuclear work, because that is ultimately going to come -- you know, be turned into a nuclear weapons program.

WALLACE: What do you think of the chances that the West will be played?

WILLIAMS: Will be played? Well, if you look at history, you know, North Korea played us. North Korea struck a deal back in '05, to say that we're going to do away with their nuclear capabilities, they reneged on the deal. So I think that's a pretty stark recent lesson for Americans. On the other hand, I just -- you know, I think I disagree with the rest of the panel, I think this is a very historic moment with tremendous, tremendous opportunities. And we've talked about what is going on in Syria. You talk about what's going on in terms of Israeli-Palestinian peace -- all of this is all directly related to Iran. Iran is the prime sponsor of the Assad regime in Syria. If you think about Iran and its implications, its power behind the terrorists in the Palestinian territories.

WALLACE: But (inaudible) their policy?

WILLIAMS: I'm saying, I'm saying, this is a tremendous moment of opportunity for the United States to strike some kind of deal that would allow us to, I think, lower tensions markedly in the Middle East. I mean even in terms of negotiating with Syria, the French and the Russians have said, they are negotiating with the Syrians -- yeah, the French and the Russians have said they want the Iranians at the bargain team.

WALLACE: All right, Brit, I want to talk about Syria. That was progress of sorts on another front. The U.N. Security Council passed a resolution this week under Chapter Seven, which would authorize, generally authorize the use of force as well as economic sanctions, which would advance that Syria honor its pledge to get rid of its chemical weapons arsenal.  On the other hand, it was some negative news, which is Syria a week ago declared what its chemical weapons stockpile was, and the U.S. says that that declaration acknowledged fewer weapon sites than the U.S. believes they have. So there is some questions that they are they already playing the shell game?

HUME: Well, that's the big worry. These outlaw regimes, and Syria certainly is, will make what appear to be concessions on some sticking point to avoid negative consequences, and you look at it carefully, and it turns out that the concession is full of all kinds of loopholes and shortcomings, and they're not really doing what they have pledged to do and what they are supposedly under a U.N. warning to do. So I think that's where we are at an earlier stage with Iran, and that is where we are with Syria in a more advanced stage in terms of their chemical weapon stockpiles. And the worry that I have, and I think it's shared by many, is that President Obama is so eager to have diplomatic processes under way to be addressing these issues that they become kind of an end in themselves to him, and a substitute really for substantive action, which he seems hesitant to take.

WALLACE: We have got less than a minute left. Senator Bayh, I think you would come away, any outside observer, saying that this president doesn't want to get involved in military action in Syria, and the country and Congress even less so. Given that, couldn't Iran look at the situation and say, you know what, we can whether the storm, we can delay, we can do all of this? They're not going to come in in a much harder, tougher military action, and take out our nuclear program?

BAYH: I'm afraid that's exactly what the Iranians have taken away from all of this, Chris. There was no appetite on the part of the American people. Even our closest allies, the British, were not willing to go there. And so the Iranians can just kind of rope-a-dope us along, and eventually get what they want. So the Syrians will probably cheat on any agreement. The Russians won't help to enforce it. The Iranians have been somewhat emboldened. There are tough days ahead.

WALLACE: On that happy note, panel, I'll see you next week, and remember our discussion continues every Sunday on panel plus. You can find it on our web site,

And make sure to follow us on Twitter, @foxnewssunday.

Up next, our power player of the week. American heroes gather in Gettysburg, 150 years after the bloodiest battle of the Civil War.


WALLACE: One of the joys of this job is the people that I meet on and off camera. A few days ago, I got to participate in a special event and sit down with some very special people. Here is our power player of the week.


HARVEY "BARNEY" BARNUM JR., MEDAL OF HONOR RECIPIENT: It stands for, I think, the mettle of America, who we are, what we can accomplish, and what we've done and what we stand for.

WALLACE: Harvey Barnum Jr. is talking about the Congressional Medal of Honor. The nation's highest award for military valor. He received it for actions above and beyond the call of duty 48 years ago.

BARNUM: I was a first lieutenant. I had been in Vietnam less than two weeks. I was on my first patrol.

WALLACE: His company was ambushed by the Viet Cong. His commander killed. Barnum had never been shot at, but now he was in charge.

BARNUM: I looked up from under my helmet, all these Marines were looking at me and saying, OK, Lieutenant, what do we do?

WALLACE: Barnum led the attack on enemy positions, called in air strikes, and directed helicopters to evacuate the dead and wounded.

BARNUM: I did not think about my own safety. My only fear was that I would make the right decision, to do the right thing, and hopefully not get any of my Marines hurt.

WALLACE: I met Barnum last week at the annual convention of the Congressional Medal of Honor Society held in Gettysburg, Pennsylvania. It was the 150th anniversary of when Lincoln first bestowed the award. More than 3,400 men and one woman have received the medal. 79 are still living, and 44 were there.

UNIDENTIFIED MALE: Dedication, service and men and women willing to place their lives on the line.

WALLACE: It's a chance to get together and share war stories. But more important to promote their core values, love of country and sacrifice. They go to local schools to talk to kids that don't even know about the Medal of Honor.

UNIDENTIFIED MALE: The willingness to sacrifice for your buddies is what counts.

WALLACE: I hosted a town hall at Gettysburg College with Barnum and two recipients from Afghanistan. Sal Giunta, whose squad fought off a Taliban ambush and recovered their fallen comrades.

SALVATORE GIUNTA, MEDAL OF HONOR RECIPIENT: That was no special day, that was just October 25, 2007, a day in Afghanistan, a day in combat.

WALLACE: And Clint Romesha, who led his men defending a remote outpost while outnumbered six to one.

CLINTON ROMESHA, MEDAL OF HONOR RECIPIENT: You're just doing your job. Your boys are expecting you to do it. You depend on them, like they depend on you.

WALLACE: Barney Barnum is not happy with where we are today.

From the president on down, politicians talk about how war weary this country is. What do you think of that?

BARNUM: We can go and get some of this done faster. If we're going to go, let's go, let's do it, let's do it right, hit them hard, and come home. You know what it's like, if a wasp lands on you and you smash it, that wasp is dead. But if you just flick it a little bit, you're going to make it mad, he's going to come at you with vengeance.

WALLACE: More than anything, though, he says the medal has set a standard he has tried to live up to this last half century.

BARNUM: This is the venue that's got me to that position. I would never do or say anything to tarnish the history of this medal and what it stands for.


WALLACE: Barnum, who is 73, now works with Seg for Vets (ph), a group that provides Segways to veterans with serious injuries, to give them back some mobility. Barney Barnum, a hero on and off the battlefield.

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

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