Sens. Durbin, Ayotte on where Ukraine will side; nation's governors talk tough issues in Washington

Reaction from Sens. Dick Durbin and Kelly Ayotte


This is a rush transcript from "Fox News Sunday," February 23, 2014. This copy may not be in its final form and may be updated.

CHRIS WALLACE, HOST: I'm Chris Wallace.

Crisis in Ukraine. Who is running the country?


WALLACE: We'll discuss Ukraine's future and whether it will ultimately side with the west or Russia with two leading senators -- Dick Durbin, the number two Democrat in the Senate, and Republican Kelly Ayotte, a member of the Senate Armed Services Committee. And we'll ask our Sunday panel whether President Obama has badly misjudged Vladimir Putin.

Then, the nation's governors come to Washington to tackle tough issues like immigration and ObamaCare. We'll talk with Wisconsin Governor Scott Walker and Vermont's Peter Shumlin.

And our power player of the week. I get up close and personal with Washington's newest and certainly most adorable celebrity, the giant panda cub Bao Bao.

All right now on "Fox News Sunday."


WALLACE: And hello again from Fox News in Washington.

We start with Ukraine where the situation is changing by the hour. The parliament has voted President Yanukovych out of office, and opposition forces appear to have taken over most of the capital of Kiev. But the president says he will not step down and speaks of a coup carried out by bandits.

Let's get the latest from Fox senior foreign affairs correspondent Amy Kellogg reporting from Moscow -- Amy.


Well, the parliament is very quickly cobbling together an interim government, even though President Yanukovych, or former President Yanukovych, is in hiding. He's still not resigned, and it's not clear whether he or any of his supporters will pick up resistance.

Now, the parliament voted in today, the new acting president, the speaker, Oleksander Turchinov. They fired some old ministers. They put out arrest warrants for the former prosecutor general and minister of income. Now, we can imagine that has to do with future inquiries into corruption which has been as much a part of this revolution as the whole east-west tug-of-war has been.

Last night, former Prime Minister Yulia Tymoshenko was freed from jail. She was Yanukovych's archrival. She has said she will run for president, but she is also a divisive figure in the country.

An aide to Yanukovych said he was in Kharkhiv, Eastern Ukraine, as of Saturday night and doesn't plan to leave the country, but the state border guards said he tried to flee the country on a chartered flight. But the plane was not allowed to take off. Now, the U.S. continues to urge de-escalation and constitutional change. Russian's foreign minister Lavrov has slammed the opposition, making new demands under the influence of what he calls, quote, "armed extremists and rioters."

Now Russia, of course, Chris, pressured Ukraine out of signing an agreement with the E.U., offering the nearly bankrupt country a lot of money to keep it afloat. Russia's now cut off that money, and the finance minister has suggested Ukraine turn to the IMF now for help, essentially, Chris, wishing Ukraine well.

WALLACE: Amy Kellogg reporting from Moscow. Amy, thanks for that.

For more, let's bring in two Senate leaders on foreign policy. From New Hampshire, Kelly Ayotte, a member of the Armed Services Committee. And from Illinois, Dick Durbin, the Senate's number two Democrat and a member of the Foreign Relations Committee.

Senator Durbin, you spoke with former Prime Minister Tymoshenko yesterday. What is your latest information? Have the protesters and the West, have they won in Ukraine?

SEN. DICK DURBIN, D-ILL.: Well, Chris, it was quite a relief yesterday. Yulia Tymoshenko has been in prison for two and a half years, but I've been working for almost two years for her release, and she was finally released by a unanimous vote in their parliament. I spoke to her just after she had addressed the crowd in the square.

She sounded tired and looked frail on the reports that we'd seen, but she told me, she assured me that she's looking for a peaceful resolution to the problems in Ukraine, to follow the constitution and the law. This whole charge of a coup by Yanukovych -- let me tell you -- it makes no sense. The coup, if any, was by the parliament that enacted the laws that made it clear that they wanted change in Ukraine.

WALLACE: Senator Ayotte, as we say, Ukraine's parliament has voted President Yanukovych out of office, but he is calling it a coup and refusing to step down. What happens now?

SEN. KELLY AYOTTE, R-N.H.: I would say, Chris, that they need to focus on forming a unity government. Yanukovych needs to step aside, and I will say this. Now that the Olympics are over, we need to watch the behavior of the Russians.

And I believe the president needs to up his game and send a clear unequivocal public message to Putin not to interfere in what is happening in Ukraine to let the Ukrainian people determine their future, to ensure that there is no interference in their sovereignty, and I think this is an important time for him to do that.

WALLACE: Let me pick up on that because President Obama famously came into office saying that he intended to repair relations between the United States and Russia, which brought us to that famous moment involving then-Secretary of State Hillary Clinton and the Russian foreign minister. Take a look.


HILLARY CLINTON, THEN-SECRETARY OF STATE: I wanted to present you with a little gift which represents what President Obama and Vice President Biden and I have been saying, and that is we want to reset our relationship.

UNIDENTIFIED MALE: Let's do it together.

CLINTON: We will do it together.


WALLACE: But it turns that instead of reset in Russia the button said overcharge and that's where the problems began. Senator Ayotte, has President Obama's reset effort with Russia failed, and has it contributed to the problems that we have in Ukraine, in Syria, in Iran?

AYOTTE: Yes, it has, Chris, and I think that's why this is an opportunity for the president to really be unequivocal with Putin right now in the Ukraine, what happens in the Ukraine very much matters. They need to determine their future, not Russia. We have seen obviously behavior from Putin from harboring Snowden to the efforts to interfere in Syria and also with arming the Assad regime, in addition to that thinking about the reports of their violations of the IMF treaty, their reset policy has failed.

It's time to reset the reset, and I think Ukraine presents an opportunity for the president to do that with clear American leadership here for a good outcome.

WALLACE: Let me follow up on that because President Obama this week warned all the parties in Ukraine not to step over the line which reminded a lot of people of a comment he made, a warning he gave to Syria's President Assad back in 2012. Let's look at both of those comments.


PRESIDENT BARACK OBAMA: We'll be monitoring the situation, recognizing that along with our European partners and the international community there will be consequences if people step over the line.

A red line for us is we start seeing a whole bunch of chemical weapons moving around or being utilized.


WALLACE: Senator Durbin, this week the president said that this is not a cold war chessboard between us and the Russians, and it's not a zero sum game, but there are a lot of people, a lot of experts, who say that that's exactly the way that Vladimir Putin is playing it and that he's taking advantage of Barack Obama on a lot of these issues.

DURBIN: You know, let me say this. Every new president is going to try to forge a new relationship with Russia and try to have a more peaceful outcome to our dealings. You expect that, whether the president is Democrat or Republican. President George W. Bush said he looked in Putin's eyes and saw a spiritual man.

So let's remember that each president tries to find a positive track, but let not forget that Vladimir Putin wasn't just a member of the KGB, he was the head of the secret police, the Soviet KGB. This is a man that we should take very seriously.

In this circumstance, I know what's going to happen next. They are going to continue, Russia and Moscow and Putin, will continue to pressure Ukraine, and the trump card they own is natural gas. Gazprom provides gas for these countries, and when Putin doesn't like their political behavior, he cuts it off or raises the price out of sight, so he has the power to pressure. We have to do everything that we can to encourage Ukraine to move forward peacefully toward democracy but understand that Putin has been a threat for many decades.

WALLACE: Well, beyond rhetoric then, Senator Durbin, what does the president, what does the European Union do if they are going to put -- if they are going to make threats, if they are going to use gas as a weapon, what does the West do because rhetoric isn't going to be enough?

DURBIN: We have to combine our efforts with the European Union to help Ukraine move forward in a peaceful Democratic way. We have to put the pressure on Putin to stop his efforts to undermine this natural evolution towards democracy, and Yanukovych has always been a puppet of Moscow, and that's why he headed to the Russian part of Ukraine and why he ultimately will leave the country, I'm guessing.

But we can -- and the West can gather with the European Union and put a force in Ukraine that moves it towards Western ideals and values.

WALLACE: When you say put a force, are you talking about boots on the ground?

DURBIN: Absolutely not. Let me underline not.

A lot of my colleagues, and I'm not pointing to my friend Kelly Ayotte in this instance, but a lot of my colleagues think any answer for a conflict in the world is for the United States to invade. I am not one of them.

I have watched two wars, thank goodness, come to an end, and I want to make certain that --


WALLACE: So, when you say force, sir, what did you -- when you said force, what did you mean?

DURBIN: There are political forced involved in this, and that's the way we should work with them -- political and economic force moving Ukraine in the right direction towards democracy.

WALLACE: So, let me give you a chance to respond, Senator Ayotte. You never mentioned the idea of a force. I guess the question is, one, is this over? Have the rebels won? And, two, what do you think is the possibility of a counterstrike by -- whether it's political or economic, by the Russians, and even the possibility of splitting off the eastern half of the country which is very pro- Russian?

AYOTTE: Well, Chris, that's why I think the president needs to be clear public and unequivocal right now with a message to Putin, because the idea that they could actually interfere with the territorial sovereignty of the Ukraine -- I mean, look what happened with Georgia. I think that this is a very real possibility.

And so, we need to be very clear, work together, and I think there is economic pressure that we could provide, Senator Durbin mentioned. We could provide a leadership role in the IMF. We also, of course, in other instances have imposed sanctions, not only on the oligarchs which recently the administration moved to do, but also we think what we've done with Russia with the Magnitsky Act, and that could be expanded.

WALLACE: Let me turn briefly to Syria because we had this deal under which Assad, the president of Syria, was supposed to turn over his entire chemical weapons stockpile by early February. So far, it has turned over only 11 percent of that stockpile. In the meantime, Assad remains in power. He continues to slaughter his own people, and as we say he's holding on to his chemical weapons, most of his chemical weapons stockpile.

Senator Ayotte, who is winning in Syria right now, Putin or Obama?

AYOTTE: Unfortunately, it's Putin right now, and, again, Putin can play a role of putting pressure on Assad. They are not putting enough pressure on Assad.

Assad regime is slow, dragging its feet, slow rolling trying to comply with the chemical weapons agreement. And so, right now, Assad is winning, which is very unfortunate. And what I'm worried about also is the recent testimony of the Director of National Intelligence Clapper about how the al Qaeda extremists in Syria are now actually posing a threat to our homeland, so this is a real issue for us as well.

WALLACE: Senators, we have a couple of minutes left, and I want to get into one other issue, and that is the president's budget. We got some information about the budget that he will release a week from Tuesday. Let's put up the details on the screen.

He'll reportedly call for an end to the era of austerity and ask for $56 billion in new spending for job training, early childhood education and other initiatives, and he won't include a measure to slow cost of living increases in Social Security which was in his last budget.Senator Ayotte, the White House says this slowing in the cost of living adjustment, so-called chained CPI, was offered only as part of a grand bargain, and you Republicans rejected that.

Briefly, what do you think of the president's new budget from what you've heard so far?

AYOTTE: Well, this is news to me. The era of austerity since the president has been in office, we've added $6 trillion, excuse me, more to the debt. So we're over $17 trillion in debt.

There hasn't been an age of austerity and it's really disappointing that the president hasn't stepped up really to lead this effort of a grand deal, I think, that needs to be done for the nation, and it began when he didn't embrace obviously Simpson/Bowles, the presidential commission, and it's gone forward from there.

But to see this budget, it's really a political document. It's not what we need for America when we're $17 trillion in debt.

WALLACE: Senator Durbin, you have proposed substantial reform of entitlements, including Social Security apart from any grand bargain. You say we need it because we're going to run out of money, but the president, as we pointed out, is taking at least one reform in the cost of living adjustment off the table, and there's another point in this whole question of spending.

The White House argues we can spend more now because according to the Congressional Budget Office deficits are going down. You can see it up on the screen in billions of dollars from $514 billion this year, deficit, to $478, but they ignore the rest of the CBO projection, which is that starting in 2016, deficits start going back up again.


DURBIN: I can just tell you this, Chris. Since President Obama has been in office, we've reached the point we're cutting the annual deficits in half, and we're going to reduce the overall debt of the United States by $3 trillion over the next 10 years. Simpson/Bowles had a goal of $4 trillion. We can get that additional $1 trillion by passing comprehensive immigration reform, which is stalled in the House of Representatives.

What the president is saying in his budget we need to get America back to work. We need to make sure that the people who get up every day go to work and work hard can make it. They are living paycheck to paycheck. We've got to be more sensitive to the fact that more Americans working, paying taxes is going to expand our economy and reduce our deficit.

WALLACE: We're going to have to leave it there, to be continued, and the budget doesn't even come out until a week from Tuesday. Senator Durbin, Senator Ayotte, thank you both. Thanks for joining us today.

DURBIN: Thank you.

AYOTTE: Thank you, Chris.

WALLACE: We wanted to ask the Obama administration about the crisis in Ukraine but they decided to put national security adviser Susan Rice on one show in his first Sunday appearance since 2012 when she blamed the Benghazi terror attack on reaction from an anti-Islamic video.

Of course, Fox has led the way in questioning how the administration handled Benghazi. Perhaps Susan Rice didn't want to answer the tough questions we would have asked.

What happens now in Ukraine, and what does it mean for relations between Barack Obama and Vladimir Putin? Our Sunday panel tackles that next. And what would you like to ask the panel? Just go to Facebook or Twitter @FoxNewsSunday, and we may use your question on the air.



OBAMA: Our approach in the United States is not to see these as some Cold War chessboard in which we're in competition with Russia.


WALLACE: President Obama addressing the crisis in Ukraine this week and downplaying the role of the U.S. and Russia.

And it's time now for our Sunday group. Syndicated columnist George Will, former Congresswoman Jane Harman, Heritage Action for America's Michael Needham, and Fox News political analyst Juan Williams.

Well, President Obama called President Putin on Friday. We're told they spoke for an hour about Ukraine and Syria and Iran, and afterwards White House officials called it surprisingly positive and constructive.

In fact, George, what's more, these officials are now talking about a possible meeting between President Obama and President Putin in Russia this summer to make a -- sign possibly a trade deal using a term of art I learned from the comic strip "Peanuts." Is this Lucy and the football all over again?

GEORGE WILL, SYNDICATED COLUMNIST: It could be. The president may not look upon this as a Cold War chessboard, but Putin clearly does, and it's going to be interesting when the Olympic flame is extinguished later today, and Putin is free from his public relations exercise at the Olympics, what is he going to do? The real danger is the dismemberment of the Ukraine, because the eastern Ukraine is Russian-speaking and associated culturally and historically with Russia, Western Ukraine much more close to Europe, once part of the Austria-Hungarian Empire and part of Poland. So, it's got a very mixed history.

The United States can influence this probably by weighing in with what Putin has used with quite effectively, with money, because Ukraine needs the money.

Chris, the Dutch, Portuguese, the Spaniards, the French, the British have all lost empires, and with varying speeds and gracefulness they reconciled themselves to that. Putin is un- reconciled to the collapse of his empire.

WALLACE: Congresswoman Harman, I ask you this. As a former Democratic ranking Democrat, you ready for this.


WALLACE: Has Russian President Putin outmaneuvered Obama when it comes to Ukraine, and Syria and Iran?

HARMAN: Well, he's an obstacle, there's no question. It ain't over until it's over, and I would like -- I think we would all like to see a more forceful administration policy. After all, we had a forceful policy on Libya, and when that happened, a lot of us said -- well, this will set an example for Syria and it should set an example for Ukraine and elsewhere, and the president said that he would intervene if there was an acute humanitarian crisis, an international coalition and way to do this without boots on the ground to protect vital American interests.

So, I see this playing out across all three theaters. I don't exactly agree with George, by the way. I agree that eastern Ukraine alliance with Russia and Western is -- Ukraine is more Western.

But I don't think the people of Ukraine want to split up the country, and I think in that sense, the president's rights to listen to the people.

WILL: I didn't mean to suggest the Ukrainians would want to split the country but that the -- the Russian army might.

WALLACE: Michael, I'd like you to weigh in on the Putin/Obama dynamic and give me your sense of what's going on with Ukraine.

MICHAEL NEEDHAM, CEO, HERITAGE ACTION FOR AMERICA: Yes. Well, what's going in Ukraine isn't in isolation. A situation in Syria where the United States drew a red line, allowed them to go past the red line and then need Vladimir Putin to come in and place statesman to get America out of the myth that's been created by that failure to enforce a red line.

So, we have a situation in Ukraine, which is pretty easy to understand. You have a majority of Ukrainian people who want to move towards Europe, the crooks and spooks in Russia who don't want to let that happen, and the vacuum of American leadership in the world that has been created by our failure to enforce red lines in Syria, by what's going on in Venezuela right now and our own hemisphere creates an opportunity for a lot of mischief to be going on which is what you see with the Russians mingling in Ukraine.

WALLACE: We asked you for questions, and we got one on Facebook from Ellen Klage, and led me read it to you. Should I mean, "Since Obama draws red lines and nothing changes, why would Putin respect anything Obama says?"

Juan, how do you answer Ellen? It's a pretty good question.

JUAN WILLIAMS, FOX NEWS POLITICAL ANALYST: Well, I don't think it's a matter of somehow waning Western influence or this is about President Obama. To the contrary, what I think is we have president Putin's enemies taking control in Kiev and Yulia Tymoshenko, you know, who has long been his rival in terms of that orbit now looking at if she is going to resume having power.

But you go beyond, that and you start to think about, you know, even the political consequences. He tried to invest money in the Ukraine, $15 billion. It didn't carry the day with the people.

You know, he has a concern about that naval base in Crimea. He has concern about the gas reserves. All of that now is in question.

So, to me, Western influence, the deal that was struck with the Germans, the Poles, the U.S., led to Yanukovych to leave and has put his battle, you know, this geopolitical game that I believe Putin is playing in question because clearly his influence is on the wane.

WALLACE: Is it Putin's influence that's on the wane? Is this because of Western strength, or is this because of people power in the streets of Kiev?

WILL: Well, people power is prevailing at the moment, but people power against tanks is nothing, so the question is how ruthless is Putin? He has a track record, and his track record suggests that he is absolutely un-reconciled to the diminished status of Russia, and this is his chance, perhaps his last and only chance, to try and recapture great power --

WALLACE: Let me pick up on that because what we've seen so far, and I certainly agree it's a fluid situation, the police have one, returned to their headquarters or are, two, openly in the street with the protesters. The military has made it clear that they are not going to get involved. Are you -- do you really believe that the Russian -- I was going to say the Soviet army, the Russian army ala Budapest, you know, like Prague, might roll down the streets of Kiev and take over.

WILL: Not Kiev but parts of the country and then you would have a messy negotiation about whether the territorial integrity of this enormously important country, the size and population of Spain.

WALLACE: Congresswoman?

HARMAN: Yes, maybe, but 82 people were killed the other day, and reports are that maybe Putin ordered Yanukovych to do that, unclear, and what did that do? That caused the people to rise up. I mean, we're seeing this all over the world. My sort of shorthand is that, you know, politicians are analog and people are digital. They use social media and they won't take top-down structures anymore and sometimes it plays out badly, think Egypt.

But there is a possibility that Putin's efforts could backfire here, and we have to be adroit, we and the rest of the world that really cares about a Ukraine that has a modern pluralist technocratic government. That would be what -- I think that's what the Ukrainians want. That's what the folks at the Wilson Center who study this think that the Ukrainians want.

They don't want Putin, and they also don't want a European- dominated government. They want their own government.

WILLIAMS: One other point to consider is Putin really is sensitive to international investment. He wants international influence. Remember, he's playing the game not only in Syria but in Iran.

In Syria, his client state is again in chaos, much as we see in Ukraine. Things are influx with Iran. So, this idea that somehow he's this giant and he's controlling the West I think is misbegotten.

NEEDHAM: He's sensitive to the international banking system which he needs to launder money --

WILLIAMS: Very sensitive, I agree.

NEEDHAM: And that's the pressure point that we have.

WILLIAMS: Exactly.

WALLACE: Well, I don't know. At this point, he seems to be winning in Syria.

WILLIAMS: No, he's not. How do you figure he's winning in Syria?

WALLACE: Assad is in power. He's not turning over his chemical weapons and he's continuing to slaughter by the tens of thousands.

WILLIAMS: Correct. That's not to his advantage. That's not a stable client state that he can rely on.

WALLACE: I understand that. But would you say the rebels are winning?

WILLIAMS: No, at this point, it's in chaos. But I'm saying that's not good for Putin and for his geopolitical ambition.

HARMAN: Yes. Syria owes Russia $10 billion, and Russia wants access to its port, and these things are rather at risk given the state of play there.

WALLACE: All right. We have to take a break here, but we'll see you later in the program.

Up next, the nation's governors are meeting in D.C. this week, ahead of elections in 36 states this fall. And Democrats are not missing an opportunity to criticize their Republican colleagues.


GOV. PETER SHUMLIN, D-VT.: They seem more focused on passing policies that alienate women, minorities, immigrants, gays and other Americans.


WALLACE: We'll talk with Governor Shumlin and Republican Scott Walker of Wisconsin, next.

WALLACE: The nation's governors are back in town for their annual winter meeting. In the past, they have often celebrated bipartisan efforts in sharp contrast to the gridlock here in Washington, but this year the governors seem just as divided as our national leaders over ObamaCare, jobs and social issues. Joining us now, the Republican governor of Wisconsin, Scott Walker and Peter Shumlin of Vermont, chair of the Democratic Governors Association. Governors, welcome back to "Fox News Sunday."



WALLACE: Governor Shumlin, we ran a clip of you just before the break bashing your Republican colleagues for as you said alienating women, immigrants and gays and in a session that -- with President Obama earlier this week he talked about the fact that Republican, your colleagues are pushing the same old top-down tired economic policies. Is this conference all about trying to win Democratic seats? You now trail 21 to 29.

SHUMLIN: No, it's not, and I guess I disagree with you a little bit, Chris. I do think the nation's governors work together in a bipartisan fashion to get things down because governors have to get things done. Having said that, we clearly are in an election year, and when we want to talk about politics we do. My view, is and I think the president agrees, that we have seen the Republican governors get elected in 2010 deploy failed economic policies that have not created jobs for the middle class who are struggling and refuse to raise minimum wages and refuse to lift the boats of working people and instead, have cut taxes for the top one percent, giving goodies to the very wealthiest and charge that to the middle class. Now while they have done that, they have been distracted by the same social agenda that has absorbed the Tea Party folks in Congress going after sonograms and women and making the most personal of health care decisions, going after, you know, gays and working Americans, teachers, and they paid for these tax cuts by slashing education, so we just don't think that's a prescription for job growth.

WALLACE: Governor Walker, all of you meet tomorrow at the White House with President Obama. If he tries to put Republicans on the defensive, how are you going to push back?

WALKER: Well, I think in this particular session, the initial point that Governor Shumlin mentioned I think I agree with. For example, we're going to talk about the National Guard where I think there is a common agreement amongst all 50 governors that we shouldn't go back to pre- 9/11 standards when it comes to the National Guard in any of our states or nationally so there are issues we agree on. I think we get together as all the nation's governors both at the conference and in the White House. The one area where I would disagree with the governor is that when you look at the successful governors across America that are Republicans in states like mine where private sector job growth is the best from April through December of last year than it's been since 1994, or place like Florida where Rick Scott brought the unemployment rate down five percent, Rick Snyder did about the same thing in Michigan. Look at Susana Martinez and Nikki Haley and other governors like that. They are focused on economic and fiscal issues just like I am and that's why we're doing well across the country.

WALLACE: One big issue that all governors are dealing with and I suspect it's going to come up over the next few days is ObamaCare, and reading about the two of you, you couldn't be on more different tracks. Let me put it up on the screen. In Wisconsin Governor Walker, you rejected the federal money to expand Medicaid, and you deferred to a federal exchange to run ObamaCare, not a state exchange. On the other hand in Vermont, Governor Shumlin, you accepted money to expand Medicaid and are running your own exchange. Let's discuss both of those. Governor Shumlin, Vermont's exchange, I think it's fair to say, has been a mess.

SHUMLIN: Well, no it hasn't.

WALLACE: Let me just finish. I mean, there've been big problems with both small businesses and individuals trying to sign up, no?

SHUMLIN: No. Listen ...


SHUMLIN: There isn't an exchange in the country that hasn't had a challenge of the rollout. We acknowledge that, but Vermont happens to be the state that has signed up more people per capita for affordable health care than any other state in the nation, including the federal exchange, so, you know, you've got to keep all of this in context. But listen, here's the point.

WALLACE: Aren't small businesses still having a problem because the back end hasn't been filled?

SHUMLIN: Small businesses can't sign up on the exchange. Individuals have. We've gotten everybody in. But listen, here's the point. We all acknowledge, including the president and governors, getting the exchanges up was tough, but here's the challenge for I believe this issue for governors in this election. Let's say it gets fixed. We're fixing ours, they are fixing theirs and the federal exchange is working better. The problem for the Republican governors, in my view on this one is, listen, I have people come up to me every day and say, thank you, governor. I finally have health care I can afford. Now, governors get held to a different standard on health care than congressional folks. Our constituents are smart. They know we didn't pass it, we didn't vote for it. We didn't create it. We have to implement it. Now what voters want is for their governors to get health care to folks who can't afford it, to accept hundreds of millions of dollars of federal money to help support something that both business ...


WALLACE: Let me bring in Governor Walker on exactly that subject. I'd like you to speak to ObamaCare and the exchanges and whether this is just a blip or something more serious and to Governor Shumlin's point. You turned down $119 million in federal money to expand Medicaid. A lot of people would say, really?

WALKER: Well, in our case I don't think the measure of success in government is how many people are dependent on the government. I want people to no longer be dependent, because we empower them to get good jobs, family supporting careers in the private sector. And that's part of our philosophy. We did something unique. We didn't not do what other states did but just not taking the Medicaid expansion. We didn't take the challenges that come with the Medicaid expansion and putting our taxpayers as risk. Instead, we found a way to do something in the Wisconsin way, but we for the first time in our state's history, even my predecessor, Democrat, had people on our waiting list living in poverty for health care. We cover everyone in poverty -- who's living in poverty under Medicaid, we cover everyone above it by transitioning them to the marketplace. We have 224,000 more people covered than we did before and yet we don't put the taxpayers at risk. I think that's a win -- I think that's what people are looking for out of Republicans or Democrats as leaders who find a unique way to reform things.

SHUMLIN: (INAUDIBLE) You know, what Governor Walker just said may be true, but he's turning down in Wisconsin, as an example, $4.4 billion in federal money over the next decade that would help Wisconsinites get affordable health care. Now, I'm just saying in my state and other states around the country these Republican governors have, because they don't like the president, because they want to make a political point, are hurting their constituencies.


WALLACE: Governor Walker, you've got 30 seconds to respond.

WALKER: Because I love the taxpayers, and I don't want to put them at risk. Even before the Medicaid expansion I had $600 million more to Medicaid, almost 40 percent of that was to fill in the federal government reneging on commitments they've already made even before the Medicaid expansion. That commitment is not going to be there and taxpayers all across America will be on the hook. They are not going to be on the hook in Wisconsin.

WALLACE: Governor Walker, you are getting heat now for two local investigations in the state of Wisconsin. First, when you were at the Milwaukee County executive, there are allegations, and in fact people have been convicted, for working on county time to help you and the lieutenant governor get elected. Here is an anti-Walker ad that is running right now in Wisconsin. Take a look.  


UNIDENTIFIED MALE: The investigation is getting closer to Governor Walker.

UNIDENTIFIED MALE: What did the president know and when did he first know it?

UNIDENTIFIED MALE: What did Scott Walker know and when did he know it?


WALLACE: Now, we should point out that they have brought charges against a number of people. They've brought absolutely no charges against you, but the reason this is hot again is because thousands of emails were released this week that indicate that you knew that public workers were working on county time in political campaigns, which is against the law.

WALKER: Right, and that's just not -- that's absolutely not true, and if you look at the facts out there, this is old news. This is about a case that was closed last March. A Democratic district attorney in Milwaukee County spent multiple years looking at all this information. The 27,000-plus pages of documents that were just released have been looked by a team led by a Democrat in Milwaukee County and last year in March he announced the end of that case, plain and simple. It's old news. We have our political operatives at the DNC and the DGA that desperately want to switch the subject from the fact that things like us taking a $3.6 billion budget deficit and turning it into a nearly billion dollar surplus. They don't want to talk about the improvements in the economy. They don't want to talk about the success of new head (ph) of the state. Instead, they desperately want to switch this subject on a subject that's already been resolved as of last March.

WALLACE: Now, it may be old news, and I want to point out again that no charges were brought against you, but because of this dump of 25,000 documents it's new news to a lot of the people in the state and it's been big news in local papers in Wisconsin. In one email that was released this week your then chief of staff Thomas Nardelli, let's put this up on the screen writes, "Campaign and county workers that you wanted to hold daily conference calls, quote, "to review events of the day or of a previous or future day so we can better coordinate sound timely responses," and in another email county administrative director Cynthia Archer suggests that colleagues should use a private email account. "I use this private account quite a bit to communicate with SKW, that's you, and Nardelli, the former chief of staff. Question, if county workers were doing nothing wrong, why should they be using a private email account?

WALKER: Well, but that's exactly to my point. You had a Democratic district attorney spend almost three years looking at every single one of those communications, interviewing people, talking to people and closed the case last March.

WALLACE: Did you know there was a private email account?

WALKER: No, again, it's one of those right point out -- the district attorney has reviewed every single one of these issues.

WALLACE: You're not answering my question.

WALKER: No, because I'm not going to get into 27,000 different pieces of information. The bottom line is a Democrat who led the district attorney's office looked at all this, decided not to charge anything other than the individuals. You mentioned, people who had worked for county in the past, but don't work for me today. I think that's pretty straightforward. It's one of those things where they just want to keep pushing this issue into the forefront because in the end the folks running against us can't counter a positive message when it comes to the economy and creating budget surpluses.

WALLACE: But you are in an election this year, as you point out. And a lot of people talk about you possibly running for president in 2016. Should Republicans worry from all of this about you as a potential presidential candidate in 2016?

WALKER: No. I think we'll weigh the issues out. I think voters are much more concerned about the problems you mentioned with state and federal exchanges across the country because that actually affects their health care. They are concerned about the economic decisions that are distracting from putting focus on helping private sector employers creating more jobs. Those are the things they should be worried about. Those are the things we replaced in Wisconsin where our state lost 133,000 jobs because of the poor policies in the past. Instead we've created over 100,000 jobs in our state, we turned a budget surplus -- a budget deficit into a surplus. Those are the things voters are concerned about.

WALLACE: Governor Walker, Governor Shumlin, we want to thank you both for coming in today, and we'll stay on top of all of these issues.

WALKER: Thank you.

SHUMLIN: Thank you, Chris.

WALLACE: And thank you both.

When we come back, don't expect a budget compromise President Obama floated last year to show up in his new plan. The panel comes back to discuss his changing position on entitlement reform and be sure to tell us what you think on Facebook and share your favorite moments from today's show with other "FNS" fans.


WALLACE: Still to come, our power player of the week.

BRANDIE SMITH, SENIOR CURATOR, NATIONAL ZOO: We watch her growth and we compare it to our own kids.

WALLACE: Brandie says there's something about pandas that's deeply appealing to humans.

SMITH: They are so cute. They are so sweet. They are the ultimate teddy bear.

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



OBAMA: We're going to have to take on entitlements, and I think we've got to do it quickly.

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: This was a give as part of a give and take.

WALLACE: Candidate Barack Obama promised he would push hard for entitlement reform, but the White House announced this week President Obama's budget will not include his offer to trim cost of living increases in Social Security and other benefit programs, and we're back now with the panel.

Well, as we said earlier, the president will submit a new budget this week calling for an end to the era of austerity, including $56 billion in new spending. That's on the table, but taking chain CPI, which is that way to lower the cost of living adjustment for Social Security, taking that off the table. George, what do you think of the new budget, the little bit that we know of it so far?

WILL: The frugality has to end sometime. (INAUDIBLE). This is about November. In a normal -- normal time, 63 percent turnout in presidential elections, but only 48 percent in off-year elections, and that falloff comes disproportionately from the president's party, whoever is in power. It comes also, we know, from young people, minority and single women, three pillars of the president's constituency. But therefore, off-year elections are mobilization elections, therefore, the point is to arouse your ways and don't demoralize it or aggravate it. Therefore, you come out talking rubbish about era of austerity, which most of us missed and on the Republican side they say we are not going to annoy our base or divide it with taking up an issue like immigration.


WALLACE: I'm not sure I'll use the word rubbish, Congresswoman Harman, but it's the same question. Isn't this really all about politics to help Democrats win in November, and in terms of policy isn't this proposal dead on arrival?

HARMAN: Well, I think it's about politics on both sides, and I think it's extremely unfortunate. I am still an unabashed supporter of Simpson/Bowles. And I think they got it right. We didn't go there.

WALLACE: Let me just quickly say the bipartisan commission that came up with a serious what -- $3 trillion or $4 trillion in deficit reform.

HARMAN: Cutting entitlement reform, tax reform and spending cuts, responsible spending cuts. Instead we went to sequestration, which hasn't served us well in my view. That's why we have a decrease in debt and deficit. But that wasn't the right way to do it, and I think this is a missed opportunity on both sides. I left Congress ...

WALLACE: We sit in both sides, I mean this is the president's budget.

HARMAN: Sure it's the president's budget, but it then sets up a response, which we're going to hear about. Which is also one ...

WALLACE: Let's talk about the president's budget.

HARMAN: OK, well, I -- should he have kept the chained CPI in the budget? I think he decided that he wouldn't get any credit for doing that, so the $56 billion is half defense and half domestic spending, we should put that out there, and it's offset by other cuts to -- I think it's either Medicare or Medicaid, so it is paid for, but nonetheless, this is not a bipartisan budget, and I think that's a missed opportunity.

WALLACE: Michael, I want to ask about the deficits, which I discussed with the senators in an earlier segment because the White House talks a lot, let's put it up on the screen, about the fact that in the next few years the deficits go down, 2014 it will be $514 billion. 2015, it will be $478 billion, but they ignore this, which is the fact that the deficits start going back up in 2016 and are back over $1 trillion a year by 2022.

NEEDHAM: Well, and this is because of the looming cost of entitlements. But look, I don't think it's worth bragging about the fact that we're now only borrowing $1 trillion from our children and grandchildren every two years instead of every one year. Over the last 12 years the number of Americans on food stamps has quadrupled. It requires a radical redefinition of the word austerity to say that what our country is going through right now is austerity. We should be cutting spending. We should be looking at ways to responsibly put forth an agenda that unites Americans and allows them to grab on to the ladder of opportunity, but there is plenty of room in this budget to cut spending the president is not interested in it.

WALLACE: Yeah, but what about the argument, and you heard it from Jay Carney there when he said this was part of a give, of the give and take? Yes, he was willing to go up against his base which was very unhappy with the idea of reducing cost of living increases in Social Security, reducing the increase in them. They were still going to go up, but it was as part of a grand bargain, in which Republicans would ante up with some tax increases, and you can argue whether they are right or wrong, but he's saying why should I give what was -- I put on the table if the Republicans take all their chips off?

NEEDHAM: Well, the first bill that passed the 113 Congress was the tax increase, an increased tax by $600 billion. The last thing that happened in the year 2013 was a tax increase in the Ryan/Murray plan. Look, the president has perfected the art of going behind closed doors, pretending to the American people that he's going to negotiate when he's not. The president talked in his budgets about changing Social Security and common sense reforms. There has been no indication from this president that he's actually interested in coming together and reaching the grand bargain or any plan to address the long-term entitlement problems our country has. He wants to play to his base by increasing spending and fulfill the Woodrow Wilson view of progressivism that sees no limits to government's ability to intrude into our lives.

WALLACE: I'm going to switch subjects a little bit. But you -- Juan, you will be able to talk about that as well. House Majority Leader Eric Cantor issued a legislative agenda for the House this week to try to show that the GOP also has its plans for the economy and for the middle class. Let's put up what the Republicans are offering. They want to stop ObamaCare from cutting wages and work hours, reduce home heating costs, roll back regulations that they say cost jobs and stop what they call government abuse. Juan, can Republicans persuade voters it's really the GOP that is looking out for the little guy, looking out to help the middle class and not the Democrats?

WILLIAMS: Yeah, they could do it by closing some of these loopholes that are on the table in terms of not increasing taxes per se, depending how you define it, but closing loopholes that allow the wealthy to continue paying lower taxes so you'd get more tax revenue, and I think that could help with some of the spending issues that we are concerned ...

WALLACE: But in terms of the agenda that you ...

WILLIAMS: But this agenda that just come out from Majority Leader Cantor doesn't include all of that is a dead -- many of those things have been proposed previously and gone nowhere (INAUDIBLE). So it's like it's going nowhere. And to respond what Michael was saying earlier, last year the GOP wanted -- urged President Obama include chained CPI in your budget and then when Paul Ryan, the House Budget Chairman's budget came out, it was -- nothing was in there in terms of closing loopholes or any increase in revenue and then Greg Walden, you know, the head of the Republican Congressional Committee said this is a shocking attack on seniors, made it thoroughly political at high cost to the president, given what Chris just told you about how his base reacted to this, doesn't want it, so why would the president stick his neck out again given that the Republicans chopped it off the first time?

NEEDHAM: This is a great opportunity for bipartisanship in Washington if you're willing to take on the (inaudible) interests. We were thrilled to have Juan over at the Heritage Foundation two weeks ago talking about school choice. Let's take on teachers unions who don't want to increase choice in education. Mike Lee has a great bill that looks at a country with more student loan debt than credit card debt. Mike lee has legislation that would radically transform the higher education cartel. So, I think there are these bold ideas requires getting outside the box of the broken system in Washington that just protects special interests.

WALLACE: And on that rare note of bipartisanship and comity thank you, panel. See you next week. Up next, our power player of the week. We've got a special look at Washington's, oh, boy, rising star.


WALLACE: The website has had almost 12 million hits in the last half year. There are 140 different pieces of merchandise that bear her image. Who is this superstar? Here's our "Power Player of the Week."


WALLACE: Oh, I guess that's the only reaction you can have.

SMITH: She's a little bit sleepy this morning.

WALLACE (voice over): Meet Bao Bao, the National Zoo's baby panda. Her name is Chinese for precious treasure, and that's what she's become to Washington and the world. Bao Bao turns six months old today, and this week we were allowed to participate in a training session. Brandie Smith is senior curator of mammals at the zoo.

SMITH: One of the things that we're trying to teach her is to come toward a target so you call her name. You can tap on the edge.

Bao Bao -- Bao Bao ...

WALLACE: At first, Bao Bao paid as much attention as my own children did as babies. But then Brandie gave me a piece of bamboo with sweet potato on the end.

(on camera): Can I ...

SMITH: You can see if she wants that.

WALLACE: Yeah, she's liking that a little bit.

SMITH: These are just little treats that we're kind of teaching her -- we're trying out the new food so just like any baby, you know, her first cereal, her first fruit.

WALLACE (voice over): But once she weans off her mother, bamboo will be her main diet.

SMITH: She is going to take it from you, so she will pick it up in her hands and like an adult panda she will just grab it if she wants it. So, she's pretty grown when she does this.

WALLACE (on camera): I, for one, am very proud of her.


SMITH: We watch her growth, and we compare it to our own kids so it's fun to watch her grow up.

WALLACE (voice over): Bao Bao is with her mother Mei Xiang, almost every moment. They spend much of the night playing.

(on camera): And how did you get her away from her mom to come in here?

SMITH: In the morning her mom actually is very happy to get some mom time, some alone time.

WALLACE: That sounds familiar.

SMITH: I know.

WALLACE (voice over): Brandie says there's something about pandas that is deeply appealing to humans.

SMITH: Their faces are just so -- you know, they are so cute. They are so sweet, and I think a lot of people look at them, they are the ultimate teddy bear.

WALLACE: But for all the comparisons to babies the staff never let Bao Bao climb on them.

SMITH: They are bears, they are dangerous animals, they have big claws, they have big teeth, and so we don't ever want them to think of us as toys. We always maintain that distance with them.

WALLACE: And when she turns four, the panda will be sent to China.

(on camera): You're going to be pretty attached to Bao Bao by the time she has to leave.

SMITH: This is something that a lot of parents can kind of sympathize with because our goal is to do what's best for Bao Bao and the best thing for her is to go back to China, to act like a panda, to breed and to create more baby pandas, so we're sad for us but we'll be very happy for her so that will make things easier.

WALLACE (voice over): In the meantime, Brandie Smith loves what she's doing.

SMITH: We're helping to save a species here. Every day I come in and I help to save a species. To see Bao Bao succeed is really, you know, that's a success we all share. We share it here at the zoo, and we share it with the public. You know, the pandas belong to Washington, D.C. They belong to the world.


WALLACE: Bao Bao has certainly changed over the last six months. When she was born, she was the size of a stick of butter. She now tips the scales at just over 20 pounds. Full grown she will weigh more than 220 pounds, and that's it for today. Have a great week, and we'll see you next "Fox News Sunday."

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