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Sunday Morning Futures

Republicans have their say on Obama's economic vision; tax reform battle looms

This is a rush transcript from "Sunday Morning Futures," January 25, 2015. This copy may not be in its final form and may be updated.

MARIA BARTIROMO, HOST: Good morning. The president had his say. Now it is the GOP's turn. Good morning, everyone. I'm Maria Bartiromo.  Welcome to "Sunday Morning Futures."

From tax reform to free college, the president laid out his vision for his last two years in office, focusing on what he called "middle class economics." But will any of it get past a new Republican-led Congress? The chairman of the Senate Banking Committee is with us weighing in on all of this coming up.

Getting tough on our border, the chairman of the House Homeland Security Committee with me presenting what he calls the toughest border security bill ever before Congress. Congressman Mike McCaul joins me live from the Texas border on why he's pushing this legislation now.

And keeping American innovation inside of America so that we can be the primary benefactors, highlights from my interview in Davos with Microsoft co-founder Bill Gates about that and a lot more as we look ahead this morning on "Sunday Morning Futures."

Well, analysts said he would be defiant, and the president did not disappoint. He laid out a bold liberal agenda and threatened to veto any legislation that reached his desk that did not meet those standards. So what can we expect over the next two years? Richard Shelby is chairman of the Senate Banking Committee, and he joins me right now.

Senator, good to have you on the program. Welcome.

SEN. RICHARD SHELBY, R-ALA.., CHAIRMAN, BANKING COMMITTEE: Good morning, Maria.

BARTIROMO: What is your reaction to the president's tax proposals in his State of the Union last week?

SHELBY: Well, I wasn't surprised, because he has been proposing taxes and big government since he has been president. And now he's in his seventh year, beginning. And I think you're going to see more and more of that. He has lost his -- first he lost the majority that he had in the House, now he has lost the majority he had in the Senate.

So we have a Republican Congress. So I think a lot of his proposals, one, we have heard them before. Most of them don't work. I don't believe they're going anywhere.

I think the president, if he wanted to, he could work with us. But I think he was real defiant the other night. He was saying, look, it's my way or the veto.

BARTIROMO: All right. Well, I want to talk more about that, specifically what you think won't work, and how you believe we could move the needle on middle class families. So stay with us, Senator. A lot to talk about with you this morning, Senator Shelby.

But first, middle class economics, it was front and center in the president's State of the Union this past week. Let's look at the actual state of the middle class today. FOX News senior correspondent Eric Shawn joins us with that angle.

Good morning to you, Eric.

ERIC SHAWN, FOX NEWS SENIOR CORRESPONDENT: Good morning, Maria. And good morning, everyone.

You know, it should be most of us, the middle class. But that's the group that is really being squeezed.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: Tonight, after a breakthrough year for America, our economy is growing and creating jobs at the fastest pace since 1999.

(CHEERING AND APPLAUSE)

(END VIDEO CLIP)

SHAWN: The president laid out new economic proposals that he says will help the middle class. But they hit those who save for education and invest for the future, targeting those 529 savings plans that enable millions of parents to pay for college, while also hiking capital gains taxes.

For the middle class, the American dream has been dimming. The Wall Street Journal found the median household income of Americans, adjusted for inflation, fell from $56,800 in 1999 to just under $52,000 in 2013.

Even more shocking, the median family net worth, also adjusted for inflation, plummeted from $135,400 in 2007 to $81,200 in 2013. And that's a drop of 40 percent. And that Pew Research/USA Today survey reveals, the number of us who say we are middle class is now at an all-time low.

According to Pew, 44 percent say they're middle class, that's down from 53 percent in 2008.

One study found middle class buyers cannot afford the majority of homes in 20 percent of the nation's metro areas. And homeownership is now at its lower level -- lowest level in two decades.

And despite ObamaCare, it turns out that family health care premiums have skyrocketed from just over 9,000 in 2003 to over 16,000 in 2012. And that's a whopping 73 percent increase.

So it's no wonder then that the alternative rock band in California took a name, the Middle Class Rut. One of its songs is called "One Debt Away." "You better call your brother to save your neck, you better get a real job and fix this wreck, you better claim your income like the real men do, you better send your 1099 to anyone you gave 5 bucks to, all in all we're one debt away, one debt away, all in all, there's one more bill to pay" - Maria.

BARTIROMO: Amazing that you worked that song in there, Eric, wow, how apropos. Thanks very much, Eric Shawn.

More now with Senator Richard Shelby.

And, Senator, let's talk about the president's proposal and what you felt really did not work already and what he's proposing already. What specifics struck you?

SHELBY: Well, first of all Maria, I believe instead of helping the middle class, he's attacking the middle class. One, capital gains, he wants to run those up. That's a lot of people invest for the long haul.  The Republicans want to lower that.

He has also proposed taxes on the savings account where middle class families are saving money to send their children to college later in life.  And he has proposed a tax there.

This is an attack on the middle class. It's not helping the middle class. Most the middle class want to be left alone. They want to not be overtaxed and overregulated. He's doing quite the opposite.

BARTIROMO: Right?

SHELBY: A lot of his stuff is rhetoric, it's not going anywhere. A lot of those taxes, as I've said last week, they're dead on arrival. And I believe they're really dead.

BARTIROMO: So if it's all rhetoric, then why waste the time, you know, triggering this conversation, you know, having a national conversation on, you know, free college? Let's talk specific proposals here.

And one of those proposals was raising taxes or making the money that you put into these so-called 529 plans, which has been tax-free, taxing that money. The issue here, of course, is that it's not just rich people that use these 529 plans, which, of course, encourage kids to go to college.

SHELBY: I totally agree with you. I believe it's an attack on the middle class, the middle class worker who's trying to save money, to have money when their children get college age to keep from having such a burden.

College is very expensive. We know this. The president has been -- he is saying one thing and doing another. I think most people will see through that. I know the Republican Senate and House will.

BARTIROMO: All right. So what do you think is the answer then, Senator? I mean, we can't sit here and say, look, this is wrong, that is wrong, and this is wrong. We all know that the tax system is incredibly complex.

What is the solution then to actually moving the needle on middle class families who have seen their situation get worse over the last several years?

SHELBY: The way you really move the needle, and it's going to be a long time in coming, but we need really fundamental tax reform where we can lower rates, where we can knock out a lot of deductions that have been put in there by special interests over the years.

America is crying out for real fundamental tax reform.

BARTIROMO: Knocking out deductions, lowering taxes leads you to the next question, which is, where does the money come from? So where do you give in terms of coming to the middle here and making taxes lower perhaps on the corporate level, given the fact that the corporate level has the highest tax in the industrialized world?

SHELBY: Well, that's another point too. And there's a lot of corporate money overseas we need to bring back. We need to look at all of this. We need to look at the individual and the corporate tax structure.

Are there ways to improve it? Absolutely it is. But by playing games with it, and mainly rhetoric and promising things you know that is not ever going to happen like the president has this past week, that's not the way to get things done in Washington.

BARTIROMO: All right. We'll keep talking about this, Senator. Good to have you on the program. Thanks very much.

SHELBY: Thank you, Maria.

BARTIROMO: We're going to talk with Maya MacGuineas, president of the Committee for a Responsible Budget, get her ideas on specifics there, coming up.

Then from economics to homeland security, the chairman of that congressional committee will join me on why he's proposing the toughest measures ever for securing our borders. Texas's Mike McCaul is with me, next.

Hope you'll follow me on Twitter, @MariaBartiromo is my handle, @SundayFutures. Send me some questions you'd like to hear from Mr. McCaul.  And stay with us as we're looking ahead on "Sunday Morning Futures," next.

(COMMERCIAL BREAK)

BARTIROMO: Welcome back. The secure our borders first bill is being presented to Congress as the toughest border security bill ever. Among its proposals, deploying new technology along the border, new fencing requiring the Department of Homeland Security to implement a biometric exit system at all ports of entry, and giving Border Patrol agents access to federal lands. Mike McCaul is chairman of the House Homeland Security Committee.  He joins us live from the border town of McAllen, Texas. Good to have you on the program. Thanks for joining us.

MCCAUL: Thanks for having me, Maria.

BARTIROMO: We went through the headlines. Can you go through some of the specifics of the bill and why you think this is the answer?

REP. MICHAEL MCCAUL, R-TEXAS: Yes. Let me just say, I took a delegation of over 20 members of Congress, to San Diego, Tucson and now here in Texas. Behind me is the Rio Grand River, behind that is Mexico. You can probably see the boats we're using on the river. But we need more assets and technology.

What we've done in Texas that has worked effectively is what we call border surge. But the state can only afford to do that for so long. This plan would be a border surge all across the southwest boarder and also on the maritime as well.

In addition, it will provide 100 percent visibility from the sky so we can see what's happening on the ground. Right now we don't know what's happening on the ground. If you don't know what's happening, you can't effectively stop it. We fully fund the National Guard in this bill, as you said. We also redeploy assets from theater of war that would have been left over will there, redeploy those that are already paid for by the taxpayer and put them down here on the southwest border.

This is again a very tough, strong bill that I believe with a tight timeline and Congress is leading, telling the department how to do this.  And if they don't do it, there are very tough penalties on the political appointees.

We believe this is a measure. It's time. We can't wait any longer.  We're on standing today is where the 60,000 children crossed last summer of the Rio Grand valley. They're going to start coming pretty soon if we don't do something soon. And there are so many more threats when it comes to drug cartels and potential terrorists that we have to stop.

BARTIROMO: That's what I really wanted to get at. You said we don't really know what's going on. What do you think is going on? Who is getting in? Drug traffickers, terrorists? Give us a sense of what the implications are and why this is so needed?

MCCAUL: That's a great point. The threat I think justifies the need, right? We don't know what's coming in. Because we don't have 100 percent visibility from the sky. We saw technology in the Tucson sector yesterday called Vader (ph) technology from UAV that can see 100 miles out, and see all activity with sensor technology. To see the illegals where they are, see what they're bringing in. And once we can see that, we can stop it.  But you know, Maria, right now we really don't know what's coming into this country. We do know a lot of drugs have come into the country, a lot of human trafficking has come into this country. As chairman of homeland security, one of the biggest fears I have is that threat of a situation like Paris. A threat of a terrorist crossing this border and coming into the United States.

BARTIROMO: So the Border Patrol would have greater freedom to patrol federal lands to the Texas National Guard would be fully funded. This plan would fund, guard, and aid Border Patrol. Where does the money come from, Congressman?

MCCAUL: The money comes from our emergency wartime spending. In my judgment, there's a war going on down here. It's time to get this thing fixed and done once and for all. You can pay for this with two months in Iraq and Afghanistan. I think that's money well spent, because Maria, every time I go home as chairman of homeland security to my state, the No. 1 question I get is, when are you going to secure that border? It's not just my district, it's all across the country that has been impacted in a negative way, economically as well, violence as well. They want to know when we're going to get this thing done. We have a responsibility and an opportunity now that we have both the House and Senate I think to finally get this done once and for all.

BARTIROMO: So what are you expecting out of the new Congress? This upcoming week, you have the House Ways and Means Committee holding a hearing on trade. What's the timing in terms of what you're looking for from Congress?

MCCAUL: Well, I passed my bill at a committee last week. We could have it on the floor as early as next week. That's our goal right now is to get it passed. A companion bill has been filed by Senator Cornyn and Ron Johnson, who chairs the Homeland Security Senate Committee. And we hope that with that kind of team work, Republicans on House and Senate, we can fast track this border security bill, which everybody wants. I mean, if anything, this is the bill to unite rather than divide. We can fast track this and get it to the president's desk.

BARTIROMO: We'll be watching. Congressman, good to have you on the program today. Thanks so much.

MCCAUL: Thanks, Maria.

BARTIROMO: We'll see you soon, Congressman Mike McCaul joining us.

America has got the brains. Bill Gates proves that. He tells me how America can keep the brains and the quality jobs to match them right here in the USA. My interview with the Microsoft founder next as we look ahead on Sunday Morning Futures.

(COMMERCIAL BREAK)

BARTIROMO: Welcome back. The buzz in Davos, Switzerland, this past week at the World Economic Forum's annual meeting centered on the global economy as the European bank announced new economic stimulus to spur Europe.

I spent the week talking with heads of state and leading CEOs on the FOX Business Network about weakness in Europe and the vibrancy in the United States.

Among the highlights, Bill Gates, who released his annual Gates Letter focusing on The Bill and Melinda Gates Foundation's latest initiative:  mobile banking to help the poor, giving the underserved real access to bank accounts.

(BEGIN VIDEOTAPE)

BILL GATES, THE BILL AND MELINDA GATES FOUNDATION: Anything that's been done for the poorest to date always runs into the problem that the transaction fees end up being very high. So the loans have very high interest rates, you're trying to make deposits to pay 5-10 percent in fees.

So only by going to the digital platform, where it's the mobile phone -- no branches, not a lot of labor, not even ATMs -- taking this pure digital approach, that can bring banking down to the 2 billion who have no access today.

And our prediction is that over the next 15 years, we'll get the regulations right. The phones will get out there, the innovators will get there. And this will get to critical mass and we'll basically take for granted that these services are there for everyone.

BARTIROMO: And on that platform, other financial services can be provided on top of that.

GATES: That's right. So we'd see products for farmers, where, when you sell your crop, you set aside money for the next season; programs that help you save for education, so the school fees are taken care of. Even things like insurance: once you have that digital platform, the efficiency, if it's done right so that it's secure and open and low fees and we have good design for that, then it really enables the private sector entrepreneur to come up with lots of new variations.

BARTIROMO: Let me turn to some of the issues of America and really the talk here in Davos has been the U.S. has been really the vibrancy of the world where we're seeing weakness elsewhere.

And yet we have these issues like, for example, immigration. We're educating people, the best schools in America and then they go back to other countries and they innovate.

What do you think it's going to take to ensure that America actually holds onto that innovation, keeps those great innovators in America to create the things that you're talking about?

GATES: Well, certainly our immigration policies are not helping us as much as they should.

Having said that, the amount of the world's innovation that's still in the United States is pretty phenomenal. And I keep thinking we're on the verge of fixing our immigration laws. I hope that's still the case. I said two years ago I thought we were about to fix it.

But it is kind of perverse to provide the education and then even somebody who's been offered a very high-paying job, they've got to go to Canada or back to India.

Other systems are more favorable to people who have skills, who are going to pay taxes, are huge net contributors to the economy and other jobs are created around those people.

BARTIROMO: So do you think that there is a way to ensure that innovation stays in America?

GATES: Well, I'm amazed, in the digital realms, information technology and the medical realm, every one envies the United States. And even though they've tried to copy incubators and things like that, the strength of our top universities, the strength of our venture capital systems, the ecosystem we've created, the lead of the United States is as strong there as it was even 10 years ago.

Now we should reinforce that because the others -- China, probably most notably -- a lot of good things happening there as well. And we should try and maintain a lead. Immigration policies, the quality of our educational system, those are the two things we probably need to change.

BARTIROMO: What would be an appropriate tax policy in your view? I know these are rich problems, given the fact that you're really moving the needle on the underserved and the poor around the world.

But can you give us a sense of what you think would be a smart policy for our lawmakers to look at?

GATES: Well, the current tax system is not far off from being a good tax system. Our deficit isn't that much greater than our economic growth rate. So it's a percentage of the economy. The debt is only growing modestly.

The big challenge is what we do about medical costs.

Are we smart enough to drive the cost-saving innovations, drive efficiency into the system?

If you could really take care of that then the long-term forecast would be OK. And so the argument would be plus or minus 20 percent in terms of the taxation levels. You wouldn't have the forecast that, with health care costs, you really -- if you don't control those costs, then you'd have to have wild increases.

BARTIROMO: Bill, a word on Microsoft; it's been more than six years since you left in terms of a day-to-day operating role. And yet you've said you're very happy with the direction Satya Nadella is taking.

Can you give us a word on in the priorities that he's taking and where you'd like to see the company in the long term?

GATES: Well, they have an exciting announcement this week. They've showed people more about Windows 10 and some of the very cool whiteboard and virtual reality type things that they're building out around that.

It's a very competitive business. Satya is really driving the company to lead in mobile, lead in cloud areas that we hadn't been the leader before. So I'm excited. He's got -- there's a certain energy about the company. And he gets advice from me on some particular areas. And I'm glad to help.

BARTIROMO: Bill, it's great to have you on the show today.

GATES: Thanks.

BARTIROMO: Thank you so much for joining us.

(END VIDEOTAPE)

BARTIROMO: And the president and the Republican Congress duking it out over tax reform.

Where is the fair and balanced middle ground?

An expert on tax reform next as we look ahead on "Sunday Morning Futures." Back in a moment.

(MUSIC PLAYING)

(COMMERCIAL BREAK)

BARTIROMO: Well, President Obama gave his proposals at the State of the Union this past week. Republicans responded, including Senate Banking Committee Chairman Richard Shelby at the top of this program.

We all want to see tax reform. We all want to see it done in a fair and balanced manner. Maya MacGuineas is the president of the Committee for a Responsible Budget.

And it is wonderful to have you back on the program, Maya, good morning.

MAYA MACGUINEAS, PRESIDENT, COMMITTEE FOR A RESPONSIBLE BUDGET:  Thanks, Maria. Good morning.

BARTIROMO: So let's talk about some of the proposals we heard from the president. What do you think is doable? What do you think would work?  And what would not work? We continue to see this as one of the real stumbling blocks that the two can get together on.

MACGUINEAS: Well, I think that the thing to notice was, first off, if you take a step back and you recall a little while ago, it was actually the White House that was saying, we can't do comprehensive tax reform, we've raised rates on individuals to the fiscal cliff deal, and there's no way we can bring them back down, so we should focus on business tax reform.

So many of us who all along have been saying we really need to reform the tax code comprehensively, look at the individual component and look at the corporate component, kind of accept this political reality, we're going to do business tax reform only. We're focusing on that.

And that looked like one of the things that might be able to move forward, ahead this year, because you have Republicans and the White House who want to do this.

So the State of the Union proposals, first off, brought up something really important. How are we going to help the middle class? But did so in a way that I feel like has kind of complicated how we're going to move ahead on tax reform.

Are we doing business only? Are we trying to help the middle class?  Are we doing comprehensive? It stirred up the pot instead of picking a plan and moving forward so we can try to get something done.

BARTIROMO: You're right. And one of the things that sort of stirred the pot is the idea to have free college tuition, but enable that by taxing 529 plans which we all know is the key tool for families to save money that is tax-free, that ultimately will be used to send their kids to school.

MACGUINEAS: Yes. So what this does is it gets in there. And we've talked about this before. Remember how many tax breaks there are to begin with, right? The tax code is filled with deductions and credits and exclusions.

One of the things that you might want to think about when you're doing individual tax reform is, how you get rid of a lot of those. Bring the rates way down. And then start to layer them back and think about which things are most important.

And there are a lot of priorities, though, that help the middle class, but also that help invest in our workers and help in growth that you would put at the top of the list of what you want to bring back.

There is something to keep in mind, which is, whatever we give these targeted tax breaks to often end up driving the costs. So we see this -- the cost up. We see this in housing, in medical costs, in education, where give targeted tax breaks.

Part of the fact is it makes those things more expensive. So one of the questions is, are there other ways than doing targeted tax breaks that may be better for helping growth, simplicity, and American families?

BARTIROMO: So do you think that this 529 idea is doable? I mean -- or is this hurting more people than it's actually helping?

MACGUINEAS: To be direct, I don't think the 529 idea has been well fleshed out yet. I think this was a political speech trying to put out a lot of priorities about what the president, the White House, and probably looking at 2016 Republicans versus Democrats, are going to talk about.

I don't think we're in any position to start saying, let's make these changes to 529s right now. Let's take a step back and think about how we want to build our tax code on the individual side and on the business side.

And I'm worried that this is serving as a distraction, and at this point, one where the details haven't been thought out well enough yet.

BARTIROMO: All right. So it's a lot of noise. And there is one place where actually the individual and the business community come together, and that is when it comes to small business, Maya.

Because if you are going to keep rates or cut rates for large corporations but keep rates at the level they are for individuals, you're keeping high rates for small business and lower rates for larger business.

I mean, the Republicans are saying you're slapping American small businesses with higher tax rates at a time when in fact they're still trying to get traction.

MACGUINEAS: Another argument for why we should be doing comprehensive tax reform. If you look at doing business-side tax reform and the individual code at the same time, we can have policies that make sense for both big businesses and small businesses, and not differentiated so much by the corporate structure.

I also think one of the reasons to think about this more comprehensively is, the way we do things in Washington is way too compartmentalized. We think about one topic, another topic, another topic.

We should be thinking about what's a comprehensive economic growth plan for this country?

BARTIROMO: Right.

MACGUINEAS: Part of that is recognizing that in a global environment we need to allow more competitiveness for our businesses so that they can be the engines of growth, but we also need to capture that revenue somehow because our debt problems are still high.

Remember, our debt is twice the historical average as a share of the economy. So we can't lose money. We need to change where we're taxing, and allow us to promote competitiveness on one side, but capture revenues on the other side.

If you do individual and business at the same time, you have a real chance to do that in a thoughtful pro-growth way.

BARTIROMO: So, Maya, real quick, why then is the president doing this dance? I mean, why come out with things that we've heard before, which are only going to fire up, you know, the Republicans to say "dead," as Mr. Boehner is saying tonight on "60 Minutes."

MACGUINEAS: Yes, it did surprise me because -- listen, I think the priority again is an important one. The middle class is struggling, income inequality issues in this country are real. We need to think about how to address them.

But to talk about this on individual tax reform and kind of shifting some of these policies just at the moment that some of the tax reforms he has been highlighting, business tax reform, has been starting to move forward, seemed to me like it was focusing on the politics instead of the possible and the good economics of what we can get done this year.

It's not going to be a huge vastly successful year. That seems highly unlikely. But if we can get a real jumpstart on things like business tax reform, that would be a great start to building for this bigger economic -- comprehensive economic plan which is what we really need to focus on.

So I think the distraction wasn't helpful even though the priorities are things we need to be discussing.

BARTIROMO: Maya, always practical thoughts from you. Thank you so much. We appreciate your insights this morning.

MACGUINEAS: Thank you, Maria.

BARTIROMO: We'll see you soon. Maya MacGuineas joining us.

And now with a look at what's coming up at the top of the hour on "MediaBuzz," let's check in with Howie Kurtz.

Good morning to you, Howie.

HOWARD KURTZ, HOST, "MEDIABUZZ": Hi, Maria.

It has been a week of breaking news banners, and confrontational press conferences, and serious pundit debates. I'm talking here, of course, about "deflate-gate." Media going absolutely wild over the New England Patriots, and what they did or didn't do to their footballs, and treating it as a full-fledged scandal. Going a little overboard, don't you think?

BARTIROMO: Well, you know, we'll see about that. I mean, now everyone is trying to figure out, how viable is it to deflate a football?  And I guess it's not that tough, Howard. It's the subject to have, certainly, and we'll see you in about 20 minutes. Thank you, Howie.

KURTZ: Thank you.

BARTIROMO: Thank you.

Dual crises, meanwhile, overseas. Another hostage situation involving ISIS and one of America's allies. This time, Japan.

And then Yemen, already a breeding ground for terrorism, now a power vacuum following a takeover by Iranian-backed rebels. Our panel has their hands full. And we're looking ahead with them next on "Sunday Morning Futures."

(COMMERCIAL BREAK)

BARTIROMO: Welcome back. We dive right into these crisis unfolding overseas, the president traveling this morning. He says, "We cannot play whack-a-mole every time there's a terrorist player inside a foreign country," but that we need to continually apply, quote, "patience, training and resources in countries that need our help."

We bring in our panel on this. Ed Rollins is former principal White House advisor to President Reagan. He's been the long-time strategist to business and political leaders. He's a Fox News political analyst. Judith Miller is adjunct fellow at the Manhattan Institute for Policy Research. She's a Pulitzer Prize-winning author and journalist and a Fox News contributor. And Jamie Weinstein is senior editor of The Daily Caller.

Good to see everybody. Thanks very much for joining us.

So ISIS bringing Japan, now, into this, with this hostage situation. Ed, what do you think is our response, or what should our response be?

ED ROLLINS, FOX NEWS POLITICAL ANALYST: Well, I thought the president's response was very weak. I think we have to basically say this will not be tolerated anywhere in the world; we join with our allies; we're going to hunt these people down and we're going to punish them and we're going to basically end this sooner or later. But we have to basically take some very key steps.

But to say we're not going to play "whack-a-mole" and act like it's a game is just absurd. We're the leader in this charge. We're the only ones who can bring it all together and we better start doing it.

BARTIROMO: And he also said that we should be helping those allies in need. And yet, when you look at Ukraine, we sent blankets. I mean, we're not really helping our allies.

ROLLINS: We're not. We're not. And my sense is we're giving up, by the day, the leadership role in the world.

BARTIROMO: And, Judy, then there's Yemen, which, of course, we've got the headquarters of Al Qaida, I guess?

JUDY MILLER, MANHATTAN INSTITUTE FOR POLICY RESEARCH: Right, which only six months ago was declared a complete policy success by the president. We now see a country that's completely collapsed; its government has collapsed; it's heading for civil war. This was one of our staunchest co-partners in the war on terror. It's where we launch a lot of our drones from. And now we're not going to be able to do that for a while. The country seems to be coming apart at the seams. I don't think this administration even has a strategy.

ROLLINS: It was the highlight of the State of the Union speech a year ago. The president took this country and highlighted it; this was -- this is how we have to do it. And now -- now it's basically...

JAMIE WEINSTEIN, SENIOR EDITOR, THE DAILY CALLER: And this was on the same day he gave his State of the Union, when the Houthis got into the presidential palace. And also, on the same day, the State Department issued a warning for Americans to get out of Libya, both of which were not mentioned in the State of the Union speech, both of which were consequences of President Obama's foreign policy while he's patting himself on the back in front of the American people.

BARTIROMO: I think this is a really important point. Because, given what we have seen, these new dangers with regard to ISIS, et cetera, the fact that this State of the Union was largely economic was a surprise to many.

MILLER: Yeah, but how could it have been a surprise, Maria, when you realize that he didn't have a lot of foreign policy accomplishments to crow about. I mean, 16 minutes was about as much as he could possibly give it, and even then he had to, kind of, mislead and misstate his accomplishments.

ROLLINS: What he didn't accomplish is there are 69 fewer Democrats, 14 fewer senators in this first State of the Union speech. He made no acknowledgment of the fact that Republicans are now his partner in Washington, D.C. And by threatening vetoes before he even sees the legislation, he basically laid the gauntlet down. He was playing to his political environment, and he's basically said, "I don't care what the Republicans are going to do; I'm going to do my thing."

He's going to find very quickly he's going to have a very hard two years of confrontation.

WEINSTEIN: There's so little on -- on foreign policy that he could talk about on economic policy, as Ed said. He proposed nothing that could get through Congress. I think the biggest take-away from the State of the Union speech is that we need to end State of the Union speeches.

(LAUGHTER)

They're long and boring and don't actually accomplish anything.

(LAUGHTER)

BARTIROMO: Hey, it's politics. It's politics and not really governing.

All right. Then there's the Netanyahu story, you know, Congress inviting Benjamin Netanyahu to speak to them without consulting the White House. This really caused a flare-up within the White House, I guess.  WEINSTEIN: You know, it's unorthodox for the -- for a foreign leader to come to speak to Congress without consulting the White House. But it's also unorthodox for David Cameron, as the president said, to lobby Congress on behalf of a certain policy.

I think this -- this whole spat, if you will, shows three things. One is the degree that the Congress and the president have, kind of, spread apart. We knew this, but now this is coming into the open. They don't consult the president on a foreign policy thing like this. The degree to which Israel and the United States have split apart, Netanyahu accepting this, and the degree to which Netanyahu sees the Iran issue as fundamentally important, willing to risk further alienating himself from the White House in order to make his case for further Iran sanctions.

BARTIROMO: And one of the few allies in the Middle East...

ROLLINS: I think it was real leadership -- and Judy and I disagree a little bit about it -- I think it was real leadership on the part of Boehner to invite -- this is a very serious debate, the sanctions debate in Iran. And I think, to a certain extent, he showed leadership. The White House -- letting White House aides trash an ally, as they have done this last week, is, to me, outrageous.

BARTIROMO: All right. All right. Hold that thought, Judy. Because we're going to come back and we're going to talk about potential GOP presidential contenders in the face of all of this. They're descending upon the first in the national caucus state -- weekend of Iowa Freedom Summit. Campaign 2016, as we look ahead on "Sunday Morning Futures." Stay with us.

(COMMERCIAL BREAK)

BARTIROMO: Welcome back. Two more possible Republican contenders announcing interest this past week, Marco Rubio and Sarah Palin. We bring back our panel, Ed Rollins, Judy Miller, Jamie Weinstein, joining us.

What do you think, Ed?

ROLLINS: You saw both ends of the Republican Party this week. You saw the summit -- the Freedom Summit in Iowa, 20 candidates talking for 12 hours, which I think would be gruesome to go through, trying to go further and further to the right, very serious candidates, but you didn't have -- you didn't have Romney; you didn't have Bush; and you didn't have Rand Paul.

On the other side, you've got Bush out basically raising gigantic chunks of money. He's got 60 fund-raisers scheduled that he's announced. He's going to people and he's asking for a $1 million contribution to his independent PACs and he's getting the checks right there.

BARTIROMO: Wow.

ROLLINS: So he's really crushing into the old Romney money. My sense is you're going to have the populist wing of the party, the grassroots, which you saw evident yesterday, versus the establishment wing of the party, and that's going to be a real donnybrook.

BARTIROMO: Is it too many candidates? I mean, are we doing the same thing that they...

ROLLINS: Way too many. Way too many.

BARTIROMO: ... that they did...

ROLLINS: Way too many candidates. The serious candidates are -- they will break through, but it's going to take a while.

WEINSTEIN: It's probably easier to say who is not considering a run than who is considering a run.

(LAUGHTER)

But I think you have a split between a group of candidates who are trying to up their profile and get higher speaking fees, a group of candidates who have messages and want to, maybe, run for vice president. And then there's a group of six, seven, eight people who actually can win this thing. And right now, there are just too many, and ultimately it will be weeded down to those -- those people.

BARTIROMO: You don't see that on the Democratic side.

MILLER: No, you don't. They have a different problem. But if I were a Democrat right now instead of an independent, I would be clapping my hands, saying here we go again, back to the future. The more candidates who go at each other on the Republican side, from the populist wing to the establishment wing, the harder it's going to be for the Republicans to pose a coherent alternative to the president's middle-class economics.

ROLLINS: One who came out yesterday as, sort of, a star that I personally have watched for a long time and do think he's a star and think he's a dark horse but could easily be a front-runner is Walker, Governor Walker of Wisconsin. He basically hit the right message. He's a roll-his- sleeves-up -- he could really be the populist candidate with the ability to raise a lot of money, as he's done in the three races he's been in.

BARTIROMO: And, of course, we heard from the president in the State of the Union, in terms of middle-class economics, and yet the middle class has done just worse -- they've been worse off under the president's leadership these last several years.

MILLER: Right, but they don't seem to know that. I mean, middle-class people still tend to align themselves and see the Democrats as the party of the working man, who care about them, because their rhetoric is better.

BARTIROMO: Right.

MILLER: And it's up to the Republicans to let people know that the facts are not what they...

BARTIROMO: Can they do it?

MILLER: I'm not -- so far they haven't been able to.

BARTIROMO: But the Robin Hood policy of the Democrats, take the money from those who have done well and give it to those who have not done so well, is absurd. And it won't work. And my sense is this is the sixth State of the Union speech the president's talked about more spending, when we have an $18 trillion deficit, and more taxes on the rich and not across the board.

BARTIROMO: Jamie?

WEINSTEIN: Which is why I think a governor is going to be appealing this election cycle; they can show -- if they can show that their state did well during an economic downturn. That's why Rick Perry has another chance even though all his mistakes before. He can point to Texas (inaudible) he's done well. So I think a governor is going to be more appealing to show that, as a microcosm, what they can do for the country, what they did in their state.

BARTIROMO: Is there anybody else on the Democratic side other than Hillary Clinton, or is all these guys going up against Hillary?

MILLER: Well, there's always Joe Biden, who hasn't ruled it out yet.

BARTIROMO: Elizabeth Warren?

MILLER: Most people think that's not serious. Of course it's the -- the Warren question, the Warren factor.

WEINSTEIN: I think she could be beat up by someone like Jim Webb. Jim Webb, on foreign policy, he's attractive to the left-wing base, has different positions than Hillary, has a military record, that can really hurt her with the left-wing base, kind of like she was hurt in 2008.

BARTIROMO: And who's your short list on the Republican side?

WEINSTEIN: I think, obviously, Jeb Bush, Marco Rubio if he decides to run, Scott Walker. I think those are three top candidates. There are a few others as well.

BARTIROMO: Ed, what do you -- what about you?

ROLLINS: I would certainly say everyone there. I think, if John Kasich, the governor of Ohio, decides to get in, he would be a viable candidate. You know, the problem is those are the viable candidates that may make the long term, but Ted Cruz, Rand Paul are going to be right up front, right -- get a lot of attention.  BARTIROMO: All right. Stay right there. Still to come, the one thing to watch for the week ahead on "Sunday Morning Futures" with our panel.

(COMMERCIAL BREAK)

BARTIROMO: Back with our panel. What's the one big thing to watch in the week ahead?

Ed Rollins?

ROLLINS: I'm watching the Greek elections today. Obviously, there's a left-wing candidate who is leading who's an -- against austerity, "let's not pay back our debts that we have to Germany; let's basically go back to the big-spending ways," and I think they certainly will go back down -- downward spiral again.

BARTIROMO: Judy?

MILLER: I'm waiting to see whether or not Yemen can put together a government that stands any chance of fighting terror and I'm making sure that Saudi Arabia is serious about its pledge to adhere to the policies that it has followed on oil and security to this date.

BARTIROMO: In terms of not giving up market share?

MILLER: Absolutely.

BARTIROMO: Jamie?

WEINSTEIN: I'm -- I'm watching the Iran sanctions debate in Congress. It's the only way, if they apply sanctions -- I know the president's opposed -- that you can maybe, with the specter of sanctions looming, get Iran to make some more concessions. But right now, it looks to me that America is just being bamboozled in these negotiations.

BARTIROMO: All right. And then back on the home front, there's a Fed meeting on Wednesday. On Friday, we've got the GDP report out and Shake Shack goes public on Friday. That will be a big deal, certainly, on Wall Street.

Thanks so much for joining us, everybody.

ROLLINS: Thank you.

MILLER: Thank you.

WEINSTEIN: Thank you.

BARTIROMO: Great panel, as always.

That will do it for "Sunday Morning Futures." I'm Maria Bartiromo. Thank you so much for joining us. I'll be back tomorrow morning on the "Opening Bell," 9 a.m. Eastern on the Fox Business Network. Take a look at where you can find the Fox Business Network on your cable network or your satellite provider, or you could just click on "Channel Finder" at foxbusiness.com. Stay with Fox News. "MediaBuzz" comes up next with Howard Kurtz. And we'll see you next Sunday. Have a great Sunday, everybody.

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