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Sunday Morning Futures

Congress reacts to ISIS beheading Japanese hostage; Obama's budget faces GOP lawmakers

This is a rush transcript from "Sunday Morning Futures," February 1, 2015. This copy may not be in its final form and may be updated.

MARIA BARTIROMO, HOST: Good morning. Assessing where we are in the battle against ISIS. Hi, everyone. I'm Maria Bartiromo. Welcome to "Sunday Morning Futures."

The terror group has released another beheading video. But it comes on the heels of a major military defeat for ISIS. They've lost the strategic border town of Kobani to allied forces. And they are getting desperate, it appears. We'll ask the chairman of the House Foreign Affairs Committee about that.

The president set to unveil his budget tomorrow. He wants to roll back sequestration and replace it with billions in new spending. How will Republicans respond? The chairman of the House Budget Committee is with me to tell us.

And Mitt Romney is out, but not without taking a jab at some of the GOP hopefuls who are still in. Our panel on what it all means for 2016, as we look ahead on "Sunday Morning Futures."

Well, Japan this morning condemning an online video that purports to show an ISIS militant beheading a Japanese journalist, Kenji Goto. The video posted online ended days of negotiations and heightened fears for the life of a Jordanian fighter pilot who is also being held hostage.

Ed Royce is chairman of the House Foreign Affairs Committee. He joins us right now.

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

REP. ED ROYCE, R-CALIF.: Thank you.

BARTIROMO: What do you think this tells us, that they are putting this video out beheading a Japanese journalist. Why Japan?

ROYCE: Well, for one thing, they're attempting to raise money. Last year ISIS raised tens of millions of dollars by extorting ransom. And in this particular case, the original request was for -- or demand -- was for $200 million. So that's one point.

But the second point is that ISIS is messaging out to young men around the world that -- that respond to their message to come and join the fight for the caliphate and come and kill the infidel. And that's part of the messaging that they use on social media in order to expand this -- this terrorist organization.

BARTIROMO: Let me -- let me ask you about how Army Sergeant Bowe Bergdahl fits into all of this. Of course, he was the trade for those five Taliban fighters who now, we learn, at least one of them is back to fighting the militant fight. Is this part of that -- that swap?

ROYCE: Well, this was a blunder, in my opinion, and I -- I indicated that at the time. And if you recall, the Senate, prior to the release in, maybe, it was 2011, indicated that we should not go down this road. In other words, the United States and the U.K. traditionally has tried to avoid rewarding this type of situation by turning over terrorists or paying ransom.

And in this case, the five that were turned over, two of them were top not just Taliban fighters but had high-level connections to Al Qaida. Between them, they had slaughtered some 5,000 people in Afghanistan, religious minorities there. And so these are very dangerous individuals. One of them has been caught now trying to enlist back into the fight. And 30 percent of all of those who have been released from Guantanamo have joined again to try to kill Americans and to carry out jihad.

So this, I think, is an example of the administration setting a very bad precedent.

BARTIROMO: All right. We want to talk a lot more with you, Congressman, particularly as it relates to Iran and the Iran sanctions that are being discussed right now. So stay with us, Congressman Ed Royce, to talk more about that.

But first, new questions about the administration's plan to defeat this terrorist group after yet another horrific beheading. Fox News's senior correspondent Eric Shawn joins us now with that angle.

Good morning to you, Eric.

ERIC SHAWN, FOX NEWS SENIOR CORRESPONDENT: Good morning, Maria. And good morning, everyone. The president promises ISIS will be destroyed. Instead, it is only spreading.

(BEGIN VIDEOTAPE)

AHMAD EL ASSAD, LEBANESE OPTION PARTY: The policy of the present administration is doing more harm to the growth of ISIS than it's doing right.

SHAWN (voice over): Ahmad El Assad is the head of Lebanon's Option Party and is fighting radical Islamist terrorism. He says the West is not doing enough. The ISIS atrocities, like the apparent execution of Japanese journalist Kenji Goto, has critics such as El Assad faulting the Obama administration for, he says, not facing the ISIS threat quickly enough.

PRESIDENT BARACK OBAMA: In Iraq and Syria, American leadership, including our military power, is stopping ISIL's advance.

SHAWN: And that, it turns out, is not really true. Well, coalition forces did finally beat back ISIS in the key border town of Kobani. You know, it reportedly took 75 percent of all the air strikes launched there so far to accomplish it. And despite that one glimmer of hope, the Islamic state vows to recapture the town as it scores successes elsewhere.

According to the Wall Street Journal, the Islamic state's territory has grown in the last five months, from controlling this amount of territory in August to ruling this larger amount by last month, despite all of the coalition air strikes.

It is no wonder, then, that The Washington Post wrote, quote, "The Islamic state is growing stronger rather than weaker. Mr. Obama's passivity and false hopes are contributing to the steady worsening of the humanitarian and strategic situation. Kobani's relief, while welcome, won't alleviate the mounting catastrophe."

And El Assad says it's not just ISIS.

EL ASSAD: The Iranian regime is the one sponsoring Hezbollah, is the one sponsoring Hamas, is the one sponsoring the separatists in Iraq, is the one sponsoring the (inaudible) in Yemen. So you cannot say that the Iranian regime is a radical movement that we can talk to and the ISIS people are radicals that are a threat to the world.

(END VIDEOTAPE)

SHAWN (on camera): Well, ISIS has launched a series of attacks through Iraq and vows to spread its caliphate even further, this as those talks to try and stop Iran from building a possible nuclear bomb, well, they continue to drag on for nearly two years now. Maria?

BARTIROMO: All right. Thank you very much. Eric Shawn with the latest there.

More now with House Foreign Affairs Committee chairman Ed Royce.

And, Congressman, what about that, in terms of the Iran negotiations?

A White House spokesperson this week, on Thursday, issued another threat saying that Obama would veto a bill being developed by Republican senators Bob Corker and Lindsey Graham that would basically require congressional approval for any nuclear deal with Iran.

Why shouldn't Congress have approval over any deal?

ROYCE: We should. And what we have seen is concession after concession out of this administration. If you think about the fact that what the Iranians are asking for now -- they've already gained the right to continue to enrich. Those centrifuges continue to spin. But now they're saying we should have no limits on their ICBMs, that they should not have to allow verification at the site at Parchin where they did a lot of their testing.

And so, as we look at this in Congress, this is also a bipartisan position. The vote in the Senate the other day was 18-4 in favor of having Congress having a say. We want the administration to quit giving concessions to Iran because, if they keep doing it, Iran will have the ability to have undetectable nuclear breakout and will be able not only to have a weapon, but remember this, this administration pulled our Intercept system out of Poland and out of the Czech Republic. That was intended to protect Europe and the United States if there was ever a launch from Iran.

So under -- under this situation, we have to be tough in these negotiations.

BARTIROMO: This of course was behind the decision to have Prime Minister of Israel Benjamin Netanyahu come to talk with Congress and get Israel's input in terms of any deal with Iran as well?

ROYCE: Yes, I think, if you look at the situation from the standpoint of Israel, and I was in Israel in 2006 during the second Lebanon war, when Hezbollah were firing rockets over the border and Iranians were helping them fire those rockets, had supplied a lot of those missiles and rockets.

At that time there were 20,000 missiles and rockets. Today there's 100,000. Iran continues to supply and their generals and officers are up now on the border of Israel in Syria, as you know, expanding that Shia crescent all the way from Iran into -- into Lebanon.

And so Israel is in a very precarious situation. We just saw what happened with Hamas. Now, on their northern border, they have to contend with the other state sponsor of terrorism there that Iran is supporting, and that is Hezbollah.

And Hezbollah takes their orders from Iran. So this is very concerning to them that, simultaneous with the development of this nuclear weapons program, Iran is doing this buildup of missiles and rockets on the border across from Israel.

BARTIROMO: All right. We will leave there. Congressman, we'll be watching the developments, obviously. We thank you for your time this morning. Thank you very much.

ROYCE: Thank you, Maria.

BARTIROMO: Congressman Ed Royce joining us.

Meanwhile, the president rolls out his budget tomorrow morning. The chairman of the House Budget Committee will join me next with the good, the bad, and the taxes.

You can follow me on Twitter @mariabartiromo and, for the show, @sundayfutures. Send me a tweet right now. Let us know what you would like to hear from Congressman -- the head of the Budget Committee, Tom Rice. We will talk with him coming up. Stay with us.

(COMMERCIAL BREAK)

BARTIROMO: Welcome back. The president has given a sneak peek of the budget he plans to unveil tomorrow. It includes rolling back about $1 trillion in automatic sequestration cuts that began in 2013. It will reportedly seek to boost spending by $74 billion. That is 7 percent over current caps. That spending increase will be paid for in part through tax increases on the wealthiest.

So how much of this will get passed? The new GOP-backed Congress, Tom Price is chairman of the House Budget Committee. And he joins us right now.

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

REP. TOM PRICE, R-GA.: Hey, Maria. Thanks so much. Good to be with you.

BARTIROMO: So we are expecting the president's budget tomorrow to include rolling back about roughly $1 trillion in automatic sequestration cuts that began in 2013, seek to boost spending and raise taxes on the rich. What are you going to -- what is your response to that if in fact that is what we hear tomorrow?

PRICE: Well, we haven't seen the specifics yet. But the president will roll out his budget this week, and it seems to be more of the same policies that have resulted in the lowest, slowest economic recovery out of an economic downturn in the history of the country -- more taxes, more spending, more borrowing.

And it's important to remember that every single dollar that's taxed and every dollar that's borrowed is a dollar that can't be used to pay the rent, to pay the mortgage, to buy a house, to buy a car, to send your kids to college.

So the -- the things that the American people want to do the president's budget is making more difficult. We simply think there's a better way.

BARTIROMO: Let -- what is the better way? You know, I was talking with Larry Summers, who is going to be coming up in a few minutes here, and he feels like, given the fact that the interest rates in this country are at such rock bottom levels, now is the time to borrow, borrow money to spend that money on infrastructure. Where are you on that?

PRICE: Well, that would be fine if there wasn't any debt at all. But, remember, we're $18 trillion in debt. The Congressional Budget Office told us this week that, in the next 10 years, we'll add $5.6 trillion in payments on interest. We'll add $9.5 trillion to the debt over that period of time. That's if there are -- there are no changes at all.

So the better way is to -- is to present a budget that we will, through our committee and through the House, that will actually get to balance, that will do what the American people have to do in their homes and in their businesses every single day, and that's not spend more money than comes in.

We will provide a path that demonstrates how you save and strengthen and secure Medicare and Medicaid and the -- the health and retirement programs for our country. And we'll demonstrate how pro-growth policies, tax policy reform, energy policy actually create more jobs and more opportunity. We call it an opportunity budget for the American people. We think that's the better way.

BARTIROMO: Let's talk about that, in terms of specifics, in terms of tax reform and what it should look like. Because I'm looking at this sneak peek of the president's budget proposal and it increased -- includes a whole lot of tax increases on corporate America, whether it be taxing unearned income overseas, whether it be taxing companies that are doing business internationally. This is going to be one more pressure for companies today in the face of an economy that is two steps forward one, step back.

PRICE: That's exactly right. And it doesn't work. That's the problem. We have the -- as you know, Maria, and your listeners know, we have the highest business tax rate in the industrialized world. What that means is that it's more difficult for businesses to create and expand jobs here than it is in any other industrialized company, when it comes to taxes.

That's not the right way to do things. The better way is to make it so that the United States is competitive with the industrialized world when it comes to taxes on businesses. We need to bring down taxes for those small businesses as well, the pass-through entities. And we need to make certain that businesses that are domiciled, that are housed in the United States but do business overseas and make a profit overseas are able to bring that money back home without being taxed in a punishing way.

Those are the kinds of things that create a healthy economy, create more jobs and more opportunity for the American people. It can be done. That's the better way to do it.

BARTIROMO: So you're going to be doing hearings on -- on the president's budget proposals. Those details will come out tomorrow. What if, at the end of the day, the president just vetoes all of that, what you're saying? I mean, are we going to have the next two years of doing nothing?

PRICE: Well, the good news about a congressional budget is that it doesn't have to be signed by the president. So we're looking forward to working with our Republican and Democratic colleagues in the United States Senate to come forward with a budget that actually gets us to balance and defines those pro-growth policies.

And, you know, it's curious, Maria. We've been in -- in this session of Congress now for four weeks. And the president has issued eight veto threats. It's -- it's the kind of policies that he puts in place. He says it's my way or the highway. That's not what the American people voted for in November. They voted for divided government, yes, but they want us to work together and solve the challenges that exist in this country. And we call on the president to work with us so we can actually get things moving in the right direction.

BARTIROMO: All right. Real quick, Congressman: the United Steel Workers Union, the breaking news of the day. They are going on strike. They represent employees of more than 200 U.S. oil refineries. They want job security. If they do an all-out stoppage, that impacts 64 percent of oil production in the United States. What are the implications of this strike?

PRICE: Well, what the unions are calling for is more jobs and more job security. And so, when the House passed Keystone Pipeline and the Senate passed Keystone Pipeline in a bipartisan way and the president issues a veto threat, that's what these folks are upset about. They're upset about an administration that doesn't recognize that more energy and more jobs for this country are good things.

That's what we want to do. We want the American people -- we call on the American people to let the president know that the kinds of policies that the House and Senate are pushing through right now in a bipartisan way are the kinds of things that will get this country back on track and get this economy rolling in a healthy way.

BARTIROMO: Congressman, we'll be watching once the president releases that budget tomorrow. Thanks very much for joining us. We will see you soon.

PRICE: Thanks, Maria.

BARTIROMO: Congressman Tom Price joining us.

Another terror group, meanwhile, targeting the West, the latest threat, this time from Al Qaida in the Arabian Peninsula. Former NYPD Commissioner Ray Kelly on homeland security. He's next, right here, live, as we look ahead on "Sunday Morning Futures." Back in a moment.

(COMMERCIAL BREAK)

BARTIROMO: Welcome back.

Al Qaeda in the Arabian Peninsula is showing new threats, releasing am audio message, calling for more attacks on all, quote, "believers." This just hours after the release of that video from ISIS, purported showing the beheading of a second Japanese hostage.

Ray Kelly is the former commissioner of the New York City Police Department. He's now the president of Risk Management Services at Cushman and Wakefield.

Ray, it's nice to have you on the program.

RAY KELLY, FORMER NYPD COMMISSIONER: Good to be with you, Maria.

BARTIROMO: Welcome back.

When you see things like this new video from Al Qaeda, this ongoing beheading situation from ISIS, what does that tell you about the vulnerability of New York and the country right now?

KELLY: Well, (INAUDIBLE) continues. There's no question about it that there are vulnerabilities all over. We're a free and open society.  There's been 16 plots against New York that have not succeeded for a variety of reasons, but there's no question about it that we're vulnerable in the U.S. and vulnerable in New York.

(CROSSTALK)

KELLY: New York is doing more than any other city probably in the world to protect itself. But there are no guarantees.

BARTIROMO: So when you say New York is doing more, why is that?

And how are we doing more?

KELLY: They have over a thousand police officers devoted to counterterrorism duties right here in New York. They have officers assigned overseas to be sort of listening posts, to have their ear to the ground, to help protect New York in foreign capitals that work closely with the federal agencies there, undercover officers like no other police department because of the diversity of the New York City Police Department.  So, yes, I think more is being done here than anywhere else. But, again, we're vulnerable.

BARTIROMO: But it feels like the game has changed, if you will. And I don't mean game in a sort of cavalier way.

But when you look at the idea that, you know, law enforcement and anti-terrorist groups have had to change their own way of approaching all of this because of the threat of cyber, because of the new tools that these terrorists are using.

For example, is cybersecurity a big threat? Where does that stand in the priorities?

KELLY: Cyber is a huge threat. We haven't seen a cyber terrorist attack but certainly that's a possibility. But we've seen cyber intrusions all over. Sony is the latest high profile one. I think that probably woke a lot of people up.

Up until then there's been a lot of what I would call lethargy in Washington concerning the cyber threat, but it is huge. It's only getting bigger. We need to do at lot of things, including compacts with countries to help us go and enforce the law offshore.

Most of our problems, probably the majority of the problems we have here are coming from other states, coming from Eastern Europe, coming from Russia. We need to be able to come together and enforce laws in other jurisdictions.

BARTIROMO: Because it feels like, you know, one of the easier things that a terrorist would want to do is shut down our banking system or shut down the whole financial system through the Internet.

KELLY: Yes. Well, it's not that easy to do. Obviously, a lot of money is being paid to defend to our systems, JPMorgan spending over a quarter of a billion dollars a year. But there's still a vulnerability.

Is that a danger? Absolutely. And most people say, most of the experts say it's only going to get worse.

BARTIROMO: And then you see these lone wolf attacks or sort of these satellite groups like in Paris.

So when you see what happened in Paris, can that happen in New York?

And I guess I would, you know, I would have to ask you to give me your observation about what has gone on in New York between the mayor and the NYPD, this hostility.

Does that make the security even harder to get your arms around in a time that -- at a time that it's more serious than ever, given what we just saw in Paris?

KELLY: Well, an event like happened in Paris could happen anywhere.  Let's face it. Two individuals had rifles and went into a location and very, very difficult to stop that without intelligence. And of course, intelligence is so important. We have to continue to gather that.

As far as the relationship between the mayor and the police, the cops are going to do their job, no question about it. That's always been the case. There's been hostilities and problems between police unions and mayors in the past. But clearly they're going to answer the call when it arises.

BARTIROMO: Is there something done to be done to bring us closer in that regard, though? It feels like it's a very strained relationship.

KELLY: You know there's some intermediaries, obviously, I think the cardinal has been involved. Perhaps other union leaders can help. I mean I haven't heard anything lately. So maybe it is getting better. Maybe silence is a good thing.

BARTIROMO: You're right. The police are out there doing their job.  A big shoutout to the NYPD, who, for working as hard and putting their lives on the line.

KELLY: Absolutely.

BARTIROMO: Ray, Kelly, good to have you on the show.

KELLY: It was good to be with you.

BARTIROMO: Thank you so much for joining us. Former commissioner of New York Ray Kelly joins on security.

More corporate earnings next week expected to show that the strong dollar and low oil prices are impacting the economy negatively. And will new sanctions work against Russia, given its latest acts of aggression? I put these and other questions to former Treasury Secretary Larry Summers.  He's next as we look ahead on SUNDAY MORNING FUTURES.

(MUSIC PLAYING)

(COMMERCIAL BREAK)

SHAWN: "America's News Headquarters." I'm Eric Shawn. Here are some of the stories that are making headlines at this hour.

Oil workers across the country going on strike. It is the first major work stoppage in over three decades. The United Steel Workers Union, which represents the oil workers is telling its workers to walk out of nine refineries in California, Washington State, Texas, and Kentucky. But you know, more could join in. A full strike would affect 54 percent of the nation's oil production at the move coming after the U.S. refineries - amid the union fail to reaching an agreement on a new contract early this morning. They still hope to reach an agreement over pay, benefits and safety before the strike extends even further. The last nationwide refinery strike happened back in 1980 and lasted about three months.

Plus, the massive winter storm expected to dump heavy snow on the Midwest and northeast later this evening. Potentially making traveling to and from the Super Bowl parties a risky endeavor. The most intense period of snowfall will kick in around game time in the Midwest with the northeast getting the worst of it beginning around midnight tonight. So, we'll see what happens with the snow again.

I'll be back with Arthur Neville at noon Eastern with more news than as always. The doctors are in. Dr. Siegels and Samadi joins us always for "Sunday Housecall" at 12:30 p.m. Eastern time. I'm Eric Shawn. Now back to "Sunday Morning Futures" and Maria.

BARTIROMO: Thank you, Eric. Secretary of State John Kerry is set to travel to Ukraine this week to meet with his counterpart in the country. Vladimir Putin has tightened his hold on Crimea even as the west has extended economic sanctions against Russia. On Friday I sat down with former Treasury Secretary Larry Summers to get his take on Russian sanctions. But I asked him first about the president's new budget plan.

LARRY SUMMERS, FMR. U.S. TREASURY SECRETARY: Look, I think the president believes we need to get the growth rate of the economy going up.  I think he believes we need to have our prosperity be more inclusive.  Because he believes as he said to get middle class incomes up is going to be the central question going forward for us in the economic area.

That's what I suspect the 2016 election campaign will be about. We're all going to focus on raising middle class incomes and the questions are going to be what the best ways to do just that are.

BARTIROMO: And this is the ongoing debate that we've been having now for a while. How will you characterize the economy right now when we were both in Davos last week? There was a lot of talk about vibrancy in the U.S., relative to the rest of the world.

But then you have got some headwinds whether it be wages, whether it be the energy sector weakening. How do you see things?

SUMMERS: Look, I think you have to be pleased with the way U.S. recovery seems to be accelerating. But any satisfaction that one takes, and I think one should really take satisfaction, has to be tempered by knowing, one, that the world U.S. economy is the only vibrant economy in the world. And there's a real question how long the world economy can fly on a single American engine.

Two, that we've had a lot of false declarations of victory before and then economic growth slowed. And, three, by the knowledge that while we don't see what will cause it right now, never in the post war period has a recession been predicted one year in advance by the government, by the IMF, or by the consensus or forecasters. So, I think that we are still in a situation where the risks are more to the downside than they are to the upside. Still in a situation where low flation or deflation is a greater risk than excessive inflation. Still in a situation where we need to be focused on growing the economy faster in the United States. And that's where my priority would be.

BARTIROMO: All right. Let me bring in Russia here. The sanctions this week against Russia extended to nine months versus six months. It feel like the Russian, Putin, really, in particular is getting more aggressive. What are the implications here for what's happening in Russia and what should the U.S. be doing?

SUMMERS: I think the most important things are not what we do to Russia. It's what we do for Ukraine. And standing rapidly and aggressively behind Ukraine as a success and giving them every prospect to succeed is the best way of buttressing confidence throughout Europe. It's important leverage on Mr. Putin if Ukraine is able to succeed. And we need to move beyond business as usual in a way the IMF does programs to put more resources behind helping Ukraine.

BARTIROMO: We've been sending blankets, Larry. I mean I don't think we're helping them in terms of armament. Is that what we .

SUMMERS: We need to spend - we need to spend money in significant resources. Perhaps we need to support their armaments. That's the national security area that is outside my area. We need to work with them to handle their debts. This is not a moment where we should be sending them money for the main purpose of paying off creditors. Ukraine needs a re-profiling of its debts in cooperation with its creditors so it can use its resources to grow its economy rather than simply to pay back creditors.

Ukraine needs to do painful things. It needs to raise the price of gas, for example. But as it does that, it needs help from the World Bank, from the IMF, to have an adequate social safety net to protect ordinary Ukrainian citizens.

BARTIROMO: Very quickly, the biggest geopolitical risk that this country faces is what? Is it Russia, or is it ISIS, or is it something else?

SUMMERS: I think the long-run biggest issues are in the Pacific. I think the biggest issues are how we define our relationship with China.  How we define our presence in the Pacific. My guess is when history judges today's statesman, it's going to be on what was done in the Pacific region.  That is where the folk room in the global economy is going. That's where there are enormous tensions. Whether it's China, Japan, South Korea, India and getting that geopolitics right needs to be a preoccupation for the United States.

BARTIROMO: Larry, great to have you on the program today.

SUMMERS: Good to be with you.

BARTIROMO: Thank you so much, Larry Summers.

All right. And now, let's get a look at what is coming up on "MediaBuzz", checking with Howard Kurtz top of the hour.

Howie, good morning to you.

HOWIE KURTZ, HOST, "MEDIABUZZ": Good morning, Maria. We're going to look at Mitt Romney getting out of the race and a lot of the coverage that focused on donors and operatives, but the coverage of Romney possibly mounting a third presidential campaign was so negative and the mockery was so stinging including for many conservative commentators. A look at whether that's the factor. And, of course, it's super Sunday, Maria. And we're going to talk to Brian Kilmeade at the Super Bowl about does it just seem like the whole country outside of Massachusetts and the press is rooting against the patriots in the wake of the Deflategate scandal?

BARTIROMO: Yeah, that is the big story. Let me ask you about the Mitt Romney story for a second here, Howie. Because do you think it was also largely the donors, though? I mean in terms of the money, did all of the donors or most of the donors that were in Mitt Romney's corner. Did they pivot and go toward Jeb Bush?

KURTZ: I think some of the donors were sticking with Mitt, which is why Jeb and the other potential candidates now are trying to scoop them up.  I think enough of them were defecting and were sending signals through the press that Romney saw this was not going to be an easy catwalk to the nomination.

Even though nominally he was up at the top of the poll.

BARTIROMO: All right, we're going to talk about that with the panel coming up. We'll see you in about 20 minutes, Howie. Thanks.

KURTZ: Thanks, Maria.

BARTIROMO: And as the campaign 2016 Mitt Romney hinting Republicans ought to look for a fresh face to be their candidate. You know, now that he's not running, our panel will start right there. Take a look at the 2016 race as well as the upcoming week as we look ahead on Sunday morning futures. We are back in a moment.

(COMMERCIAL BREAK)

BARTIROMO: Welcome back. During his announcement that he will not be seeking the 2016 nomination Mitt Romney called on Republican leaders to support the, quote, "next generation of Republican leaders." Let's bring in our panel on that.

Ed Rollins is former principal White House adviser to President Reagan. He has been a long-time strategist to business and political leaders. He is a FOX News political analyst.

Judith Miller is adjunct fellow at The Manhattan Institute for Policy Research. She is a Pulitzer Prize winning author and journalist and a FOX News contributor.

And Steve Moore is chief economist for The Heritage Foundation. He is also a contributor to The Wall Street Journal and a Fox News contributor.

Good to see everybody. Thank you so much for joining us.

(CROSSTALK)

BARTIROMO: What do you think that meant?

OK, support the next generation of Republican leaders.

Does that include Jeb Bush?

ED ROLLINS, POLITICAL CAMPAIGN STRATEGIST: Firstly, Jeb --

(LAUGHTER)

ROLLINS: -- the irony of it -- and no disrespect to Mitt Romney -- but Mitt Romney was a governor for one term. He won with 49 percent of the vote. Could not have gotten re-elected to a second term. All he did was push through Kennedy's Medicare -- or ObamaCare program in Massachusetts and left office with 39 percent approval rating and started running for president. He's been running for president for 12 years.

Jeb Bush got elected twice in Florida, a very important state, did very progressive things, was a conservative, won 59 percent -- I mean, won 56 percent of the vote. Got 66 percent of the Hispanic vote and he's a very charismatic candidate along with a whole bunch of other governors that are out there that are very, very effective.

So I don't think by taking a shot going out the door at Jeb Bush did anything but diminish himself.

BARTIROMO: So how does this feel -- look now with Romney out?

ROLLINS: I think it looks the same as with Romney in. Romney was going to have a hard time making it. A lot of his supporters did --

STEVE MOORE, THE HERITAGE FOUNDATION: I would say the big winner this week was the Republican Party. Republicans did not want Romney in this race. This is year one of AM, After Romney.

BARTIROMO: Very clear about that from the get-go.

MOORE: And the big winners, obviously, Jeb Bush is a big winner because Romney called all the Republican donors and they said the establishment donors said we are behind Jeb Bush right now.

But I would say a person to look out right now for is the Wisconsin governor, Scott Walker, who is really emerging as a big force. He can unite conservatives and moderates.

The other thing that happened this week that was big out at the Coke Conference in California. One of the big winners was Marco Rubio, another Floridian.

So I would make the case almost every Republican in this large field in 2016 is better than any candidate that ran in 2012.

BARTIROMO: Which is the point Ed made last week and the week before.  This is a field of contenders.

(CROSSTALK)

Absolutely.

BARTIROMO: Real contenders.

JUDITH MILLER, AUTHOR AND JOURNALIST: But that doesn't mean they're not going to tear one another part the way they did the last time. I think the jury is still out on that. It surely is what Hillary Clinton is counting on, that the Republicans are going to self-destruct again because she has slowed down this past week. She said, well, I'm not going to -- we're going to slow things down a bit. I wonder whether or not that's a good strategy. Once the media stopped beating up on the front-runner, Jeb Bush they're going to turn their attention to her (INAUDIBLE) --

MOORE: I would say that Hillary Clinton is doing a pretty good job self-destructing herself. She didn't have a good last couple of months with the crazy statements about how Bush businesses don't create jobs.

And that FOX poll that came out the day after the midterm election said half of Americans don't want her to run for president.

BARTIROMO: What about, you know, her foreign policy decisions"

Will Libya, Benghazi matter?  Will leading from behind matter?

ROLLINS: This whole foreign policy of this Obama administration is going to fall apart before the end, the battles we won this week with the Kurds won it. We didn't -- it wasn't us. And it wasn't the Iranians or the Iraqis.

At the end of the day here, she's diminishing in polls. Her numbers are going down, no challenger on her side. The poll last week, Romney was tied with her 46-46. Every other Republican is basically about two or three points behind her today and she has no challenger.

The most knock-down, drag-out primary in modern times was the Obama, her face, and Obama went on to win. So we're going have a good race. And I think what is going to happen is Bush may be the establishment candidate but there will be a nonestablishment candidate. It could be Walker or one of the others that'll come through. We'll have a real knock-down, drag-out but a positive thing for the party.

MILLER: Well, and this I'll say in Hillary's defense, she's very, very busy distancing herself from Obama's foreign policy. I know, she has to do that.

(CROSSTALK)

BARTIROMO: But can you really distance yourself (INAUDIBLE)?

MILLER: I think she can do it because her record shows that when she was for arming and training the Syrian moderate opposition to ISIS and to Assad, the president shut her down. She will make a lot of issues.

BARTIROMO: So you don't think Benghazi will matter?

MILLER: I don't think it will matter as much as the other positions she's taken which are very centrist.

MOORE: What will matter is the economy. And Hillary will need a big bounce in the Obama economy if she's going to have any chance. Republicans by the way cannot let Obama get away with this rhetoric, like this icky shuffle he did in the end zone about how well the economy is doing, because most Americans don't believe that's true.

BARTIROMO: All right. We're going to talk more about that as well as our top story, ISIS and the tactics hostage-taking and beheading. Our panel on whether the Bowe Bergdahl swap factors into those maneuvers as we look ahead on "Sunday Morning Futures." We'll be right back.

(COMMERCIAL BREAK)

BARTIROMO: We're back with our panel talking about ISIS. And before we get to what happened this past week, you made an interesting point, Steve, during the commercial break. Do you think there is anybody to compete with Hillary on the Democratic side?

MOORE: Oh, yeah, I do. I think that there are going to be a couple that get in this race. I think you're going to see, maybe, Jerry Brown, the governor of California, even though -- how old is he -- in his late 70s?

ROLLINS: He and I started together and he's a couple years older than I am.

My whole life has been Jerry Brown.

(LAUGHTER)

BARTIROMO: What -- who do you think could rival...

ROLLINS: I think Jerry Brown -- I think Jerry Brown basically is -- plays to his own drummer. He is -- he's an extraordinary politician. He's got a ton of money left over and he comes from the biggest state. He...

MOORE: Democrats don't have much of a bench right now. By the way, a big problem for Hillary is going to be if class warfare is the big issue for Democrats, how does she respond to getting $200,000 for a speech, you know?

(LAUGHTER)

She's not exactly poor herself, so...

ROLLINS: "That's only half of what my husband gets."

(LAUGHTER)

BARTIROMO: And at that, let's move on to ISIS and the Jordanian aspect of this, Judy. I mean, all of these beheadings, that's not exactly the way to fight a war. Are they getting desperate?

MILLER: I wish they were getting desperate. I think what we've seen in this latest gambit, the beheading of the second Japanese citizen, is that they have managed to put Jordan on the spot, King Abdullah's stewardship of the country. He is our closest ally in the war, the coalition against ISIS. And now 40 percent of his country is saying, "We want our pilot back. Trade whomever you have to trade, whatever prisoners; get out of this alliance with the United States." At least 40 percent of his country thinks that.

That's what ISIS has done; it has set up a dynamic within Jordan that this is no longer over the beheading of a pilot who's very popular, from a major tribe. It is now an issue of whether or not it's a referendum on whether or not Jordan ought to be in a coalition with us.

BARTIROMO: But now the terrorists know that, OK, we can negotiate. I mean, we just did a whole swap, Bowe Bergdahl, for five terrorists...

(CROSSTALK)

BARTIROMO: ... which, by the way, they've gone back to militant work at this point.

ROLLINS: Sure, and it had been predicted they were going to do that.

The bottom line is we should never negotiate; our allies should never negotiate. Anyone that's captured, you have to assume the worst is going to occur, as terrible as it is, the beheadings. It is terrorism. That's what they're trying to do. They get on the Internet. They're in every paper in the country. They are creating a great fear factor by beheading one person. Hundreds of people are killed every month in those parts of the world, but the beheadings are really the worst of terrorism.

MOORE: You know, there's just one other thing on this. The other big story was with Cuba now, and Castro was basically saying, oh, we will open up diplomatic relations with the United States if you pay us reparations and you give us back Guantanamo. I mean, it's unbelievable how -- what an amateur this president is when it comes to foreign policy.

BARTIROMO: Well, but the White House says the Taliban is not a terrorist group.

ROLLINS: Well, they're...

(CROSSTALK)

MILLER: ... so absurd that no one even in the White House press corps, who is normally very pro-Obama, took this seriously. This is a silly, silly, dangerous debate.

ROLLINS: This -- this whole Middle East situation started when we went to knock the Taliban out of Afghanistan because they were the sponsors of worldwide terror at that point in time. That was our goal; that was our objective. Maybe we should have stopped there, but we didn't. But the Taliban are very, very serious players. They're getting stronger by the day. And my sense is...

MOORE: I thought the president said in his speech that we got them on the run. I mean, I don't think too many Americans believe that to be true.

BARTIROMO: But, I mean, this whole idea that they cannot identify these people as terrorists is just extraordinary to me.

MILLER: Well, it's the same as "workplace violence" instead of terrorism at Fort Hood. President Obama thinks that, if he doesn't call it what it is, it's easier to deny. But the fact of the matter is you cannot fight an enemy you refuse to identify.

BARTIROMO: All right. Quick break, and then the one thing to watch for the week ahead and the weeks ahead on "Sunday Morning Futures" with our panel. We'll be right back.

(COMMERCIAL BREAK)

BARTIROMO: Welcome back. Back with our panel. The one big thing to watch for the upcoming week. Steve Moore, what are you watching?

MOORE: I'm going to be watching that budget that comes out tomorrow. You had that discussion on it. The reports are that President Obama will be $70 billion above the budget caps. Republicans must, must, must, must, must stick to the budget caps and enforce the sequester.

BARTIROMO: And Judy?

MILLER: And I'm looking at Lieutenant Kasasbeh of Jordan. Will ISIS return him? Will King Abdullah get himself out of this terribly difficult hole that he's put himself -- that ISIS has put him in, and will the coalition endure?

BARTIROMO: Ed?

ROLLINS: What I'm looking at is how the president's going to handle this very serious problem he has with the IRS, with ObamaCare, with people that are going to pay enormous sums of money that they didn't owe, both in fines and also people having to pay back because they got too much in subsidies. I think that's going to an Achilles' heel for ObamaCare.  

BARTIROMO: The GOP says they want as much information in terms of the communication between the White House and the IRS for the last couple years. Will they actually get that?

MOORE: Good luck.

(LAUGHTER)

ROLLINS: Yeah, since -- since half the people that call the IRS can't get their phone calls returned, I doubt...

(LAUGHTER)

... the president or the Congress is going to get any more information than that, so -- but they're going to -- they're going to chase after it.

BARTIROMO: All right. We'll leave it there.

(LAUGHTER)

We've got the jobs number out next Friday. That's going to certainly be a market mover. And the week kicks off with the budget and all of the reaction to the president's budget. Thanks for being with us today. Thank you so much to our panel. That will do it for "Sunday Morning Futures." I'm Maria Bartiromo. I'll see you tomorrow morning on the "Opening Bell" on the Fox Business Network. That's from 9:00 a.m. to 11:00 a.m. Eastern time. Take a look at where to find Fox Business Network on your cable network or satellite provider. Have a great Sunday. Enjoy the Super Bowl.

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