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Fox News Sunday

Ted Cruz speaks out about his approach to foreign policy; Paul Ryan lays out his party's agenda for 2016

This is a rush transcript from "Fox News Sunday," January 17, 2016. This copy may not be in its final form and may be updated.

CHRIS WALLACE, FOX NEWS ANCHOR:  I'm Chris Wallace.  

The U.S. and Iran exchanged prisoners, as a landmark nuclear deal takes effect.  

And with just two weeks until the Iowa caucuses, Ted Cruz takes the gloves off against Donald Trump.  

(BEGIN VIDEOTAPE)

SEN. TED CRUZ, R-TEXAS, PRESIDENTIAL CANDIDATE:  Since September, the Constitution hasn't changed.  But the poll numbers have.  

DONALD TRUMP, R-PRESIDENTIAL CANDIDATE:  There's a big question mark on your head, and you can't do that to the party.  

WALLACE:  Cruz defending his eligibility to be president, and attacking Trump's so-called New York values.  

CRUZ:  Not a lot of conservatives come out of Manhattan.  I'm just saying.  

TRUMP:  When the World Trade Center came down, I saw something that no place on earth could have handled more beautifully, more humanely than New York.  

WALLACE:  Today, Ted Cruz is one on one, only on "Fox News Sunday."

Then --

REP. PAUL RYAN, R-WIS., SPEAKER OF THE HOUSE:  I think he's been the most polarizing president we've had in our lifetime.  

WALLACE:  House Speaker Paul Ryan responds to President Obama's State of the Union speech, and lays out the GOP agenda for 2016.  It's a "Fox News Sunday" exclusive.  

Plus, our Sunday panel on the Democratic presidential race, which has suddenly too close to call.  

And our power player of the week, the man behind Donald Trump's campaign.

What's it like managing Donald Trump?

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

(END VIDEOTAPE)

WALLACE:  We begin with breaking news.  Three of the four Americans released by Iran have been flown out of the country in exchange for seven Iranians held by the U.S.  A fifth American was released separately.  

At the same time, international sanctions by Iran have been lifted and billions in Iranian assets released as part of the landmark nuclear deal.  
We'll get reaction from leading Republican candidate, Senator Ted Cruz, in a moment.

But first, let's get the latest from chief intelligence correspondent, Catherine Herridge -- Catherine.

CATHERINE HERRIDGE, FOX NEWS CHIEF INTELLIGENCE CORRESPONDENT:  Chris, the prisoner swap is a culmination of 14 months of secret diplomacy, though the secretary of state says it was never tied to a successful nuclear deal.  

(BEGIN VIDEO CLIP)

JOHN KERRY, SECRETARY OF STATE:  While the two tracks of negotiations were not directly related -- and they were not -- there is no question that the pace and the progress of the humanitarian talks accelerated in light of the relationships forged and the diplomatic channels unlocked over the course of the nuclear talks.

(END VIDEO CLIP)

HERRIDGE:  In addition to Washington Post reporter Jason Rezaian, who was arrested in 2014 and convicted of spying by a secret court, the freed Americans include Christian pastor Saeed Abedini, a U.S. Marine veteran Amir Hekmati, and Nosratollah Khosravi, though little is known about his case.  

After the news broke, Abedini's wife spoke cautiously about the family's relief.  

(BEGIN VIDEO CLIP)

NAGHMEH ABEDINI, WIFE OF SAEED ABEDNI:  It just seems surreal.  It came at a time I was not expecting.  It just seem real until be see him, but I know it's real.  

(END VIDEO CLIP)

HERRIDGE:  The prisoner exchange came just before economic sanctions on Iran were lifted, under the terms of the nuclear deal struck last summer, freeing of tens of billions of frozen assets, and opening global markets to Iran's massive oil and gas reserves.  A congressional source briefed on the intelligence says Iran is still holding at least three Americans, some of the names are not public, adding the regime has not turned the page on its use of hostages as bargaining chips -- Chris.  

WALLACE:  Catherine, thank you.

Joining me now here in Washington is Senator Ted Cruz.  

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

CRUZ:  Chris, good to be with you.  

WALLACE:  Let's start with the breaking news.  Iran, as we just reported, has released those four Americans, at least three of them have cleared Iranian airspace and the Iran nuclear deal went into effect, which means the U.S. and other Western countries have started lifting sanctions releasing billions of dollars to Iran.  

What's your reaction to both?  

CRUZ:  Well, listen, praise God that the prisoners are coming home, that the Americans are coming home.  You know, in particular, millions of believers across the world have been lifting up Pastor Saeed Abedini in prayer and speaking out for his case.  And so, we celebrate their coming home, Jason Rezaian, Amir Hekmati, the fourth individual.  We celebrate all of them coming home.

I spoke yesterday briefly to Naghmeh, Pastor Saeed's wife, who I've gotten to know very well, and we're all very grateful he's coming.  

But at the same time, this deal is a problematic deal, and it reflects a pattern we have seen in the Obama administration over and over again of negotiating with terrorists, and making deals and trades that endanger U.S. safety and security.  

This deal has a lot of deals in common with the Bowe Bergdahl deal, where in exchange for Bowe Bergdahl -- someone now facing court-martial -- we released five senior Taliban terrorists.  

And this instance, this deal to bring back Americans who were wrongly imprisoned, we release seven terrorists who helped Iran with their nuclear program and we agreed not to prosecute another 14 terrorists for doing the same thing.  That's 21 terrorists helping Iran develop nuclear weapons that they intend to use to try to murder us.  

And I think it's a very dangerous precedent.  The result of this, every bad actor on earth has been told go capture an American.  If you want terrorists out of the jail, capture an American and President Obama is in the let's make a deal business.  That's a really dangerous precedent.  

WALLACE:  It wasn't the only deal we had with Iran.  Iran's Revolutionary Guard seized 10 U.S. Navy sailors, and released this video showing those sailors on their knees.  

Here was your reaction at the first debate.  

(BEGIN VIDEO CLIP)

CRUZ:  I give you my word, if I'm elected president, no serviceman or woman will be forced to be on their knees, and any nation that captures our fighting men and women will feel the full force and fury of the United States of America.  

(END VIDEO CLIP)

WALLACE:  Now, Senator, I think it's fair to say, all Americans were outraged to see that video of Americans on their knees.  On the other hand, the Iranians did release the sailors in 14 hours.  You still would release what you call the full force and fury of the U.S. military against Iran for that incident?  

CRUZ:  Let's be clear: any nation that captures or military officers, captures or soldiers should face serious repercussions.  And the reason Iran felt free to do that, to seize those ships and to humiliate those soldiers --

WALLACE:  But in this particular case, what would you have done?  I mean, they were -- I'm not saying it was right, but they were released in 14 hours.  You still would have taken action?

CRUZ:  They were released in 14 hours, but the only reason they were seized is because of the weakness of Barack Obama.  The Obama/Clinton foreign policy leading from behind, our enemies are laughing at us.  The days after seizing our sailors and parading them on television to humiliate them, look those images were propaganda from Khamenei.  

Within hours for that, John Kerry and President Obama were profusely thanking Khamenei for letting our sailors go after they wrongly captured them and try to humiliate them and now, they're trying to send $150 billion to Khamenei?  It is the direct result of the weakness of this presidency.  

But there is good news -- which is the fastest thing that can change with a new president is foreign policy.  It's worth remember, the same nation Iran in 1981 released our hostages the day Ronald Reagan was sworn into office.  

WALLACE:  But threatening full force and fury is not the first time that you've used very sharp military rhetoric which has been controversial.  Here's how you said you would handle another threat.  

(BEGIN VIDEO CLIP)

CRUZ:  We will have a president who will make clear we will utterly destroy ISIS.  We will carpet-bomb them into oblivion.  

(END VIDEO CLIP)

WALLACE:  But, Senator, carpet-bombing against ISIS would never work.  ISIS is embedded in civilian populations in major cities.  And if I may, I want to put up this statement here by Bob Scales.  He's one of the leading U.S. military -- former head of the Army War College.

He said, "Carpet bombing, that's just another one of those phrases that people with no military experience throw around."

CRUZ:  Well, look, I will apologize to no one, with how vigorous I will be winning the war on terror, defeating radical Islamic terrorism.  We will start by having a president willing to acknowledge our enemy, say it by its name, which President Obama and Hillary Clinton refuse to do.

And you want to know what carpet bombing means?  Yesterday was the 25th anniversary of the beginning of Desert Storm.  In 1991, we had roughly 8,000 planes.  Today, we have 4,000.  Our Air Force has dropped in half.  In 1991, we have 529 ships in our Navy.  Today, we have 272.  It's dropped nearly in half.  

In 1991, we had over a third more soldiers in our army, and we were launching 1,100 air attacks a day.  We were carpet bombing them.  And after 37 days of 1,100 air attacks a day, on troops went in in a day and a half and mopped up the remnants of the Iraqi army because that's the effect of carpet bombing.

You know what we're doing now?  We're doing between 15 and 30 air attacks.  

WALLACE:  There's a big difference.  First of all, military people will tell you we didn't carpet bomb in Kuwait, in the Gulf War, that we did precision striking.  In addition, if I may, the Iraqi army was all massed by itself in the Kuwaiti desert.  

We're now talking about ISIS soldiers who are not massed.  They were embedded in Mosul.  They were embedded in Raqqa with civilians.  

But if I may, sir, let me move on to --

CRUZ:  Hold on.  If you're going to make a respond, let me respond.  

WALLACE:  OK.  But go ahead.  I would like to ask about some of your votes, though, and not the rhetoric.  

CRUZ:   If you're going to make a point, let me respond to it.  

WALLACE:  Go ahead, sir.  

CRUZ: Which is, right now, our rules of engagement, what we're seeing, 15, 20 attacks a day.  It's photo-op foreign policy.  

So, we're not taking out the oil fields.  We're not taking out, for example, we saw a recent report about jihadist university, where they're training jihadists.  Why isn't that building rubble?  We're not using overwhelming airpower.

You know, in 1991, we had 2,000 planes there launching this air attack.  We have about 200 right now fighting against ISIS.  

And the difference is we do not have directed concentrated effort, because this president pretends like this enemy doesn't exist, like these are isolated lone wolves.  He gives the State of the Union that is a state of the denial, where he says, gosh, you know, ISIS is a bunch of guys in pickup trucks.

No, they are a serious terrorist force that has declared war on us.  We can defeat them, but can't defeat them if the president is unwilling to do so.  And as president, I will defeat ISIS.  I will utterly destroy them, and it takes a commander in chief directing our forces to do that.  

WALLACE:  Let's talk about your report on the Senate.

You have voted three -- the last three years in a row against the Defense Authorization Act.  And while you attack President Obama for failing to observe the red line and go after Assad for the use of is it chemical weapons, in fact, back in 2013, you opposed giving the president that authority.  

CRUZ:  So you have two questions there.  You want to talk about the NDA or Syria?  

WALLACE:  I think they are both of a pattern, sir.

CRUZ:  No -- well, let's talk about them one at a time.  In Syria, my view of foreign policy, is every use -- every aspect of foreign policy, every use of military power should be directed to the vital national security interests of America.  

The problem with Syria, when President Obama wanted to engage an attack, a unilateral attack against Assad, I kept an open mind at first.  I said, all right, let's here the commander in chief tell us how this advances our vital national security.  

President Obama was unable to do so.  They vacillated between points of incoherence.  At one point, John Kerry said the objective was to launch a, quote, "unbelievably small attack", essentially more photo-op foreign policy of press release.  

That doesn't make any sense.  The question I asked over and over again both in public hearings and in private hearings was if you succeed, if you topple Assad, how do we stop radical Islamist terrorists, how do we stop al Qaeda, or al Nusra or ISIS from taking over Syria?  

WALLACE:  Sir, I want to interrupt, and I very respectfully, but I do want to cover some more ground.  So your answer is you didn't think it was effective?

CRUZ:  It's not -- not ineffective.  It would have hurt or interests to give Syria to ISIS.  It hurts U.S. national security interests.  

WALLACE:  But you supported -- you opposed giving him the authority to observe the red line.  

CRUZ:  But why?  

WALLACE:  But if I may -- well, what about the three times in a row that you voted against the Defense Authorization Act?  

CRUZ:  That's an altogether separate issue.  

WALLACE:  Ii understand.  

CRUZ:  Well, you just said they were tied together.  So, you want to talk about Defense Authorization Act?  

So I have voted against it, because when I campaigned for Senate, I promised the people of Texas I would not support a Defense Authorization Act that has within it language authorizing the indefinite detention of U.S. citizens on U.S. soil.  I have supported over and over again with each Defense Authorization Act on an amendment that Mike Lee and Dianne Feinstein have done together, that would say, if you arrest a U.S. citizen on U.S. soil, you're entitled to due process.  You're entitled to what the Constitution gives us and unfortunately the Senate keeps blocking that amendment.  

WALLACE:  And you're saying that protecting an American who is accused of aiding terrorism is more important than authorizing the use of the military of the United States?  

CRUZ:  Honoring a promise I made to the men and women who elected me is my first obligation.  It's what I've done every day in the Senate, is do what I said I would do.  Now, listen --

WALLACE:  And that's more important than authorizing money for the military?  

CRUZ:  By the way, Chris -- by the way, the Defense Authorization Act, I'm on the Senate Armed Committee, each Defense Authorization Act, I have introduced amendments adopted into that bill.  I have worked actively on the Defense Authorization Act.  I would like to support it at the end if they would add the protection for the civil rights of Americans, I would support it in a heartbeat.

And I would note, in fact, one amendment I introduced to the NDA that passed into law was in December a year ago.  It was an amendment mandating that the soldiers murdered at Ft. Hood by Nidal Hassan would receive the Purple Heart.  And the Obama Pentagon fought tooth and nail against me, yet I was proud to get the support of both Democrats and Republicans.  We passed that legislation over a year ago.  Last April I was in Ft. Hood when the Purple Hearts were rewarded, and to each of those soldiers and their families, I simply said, thank you for service and sacrifice, and I'm sorry it took over five years for your country to acknowledge that you were fighting terrorists.

WALLACE:  Senator, you have taken some real hits for your attacks on Donald Trump and the so-called "New York values".  I happen to have, I don't know if you've had a chance to see them, because you've been on the campaign trail.  Here is "The New York Post."  They says Cruz missiles and they quote Rudy Giuliani as saying that he thought that New York had gotten over or rather the country had gotten over this knee-jerk reaction against New York.  

They accuse you of a sneering apology.  Here is The New York Daily News, "Slime doesn't pay, Ted."

Your reaction?  

CRUZ:  Well, look, these are certainly amusing, and it is amusing saying the media elite in New York and D.C. run around with their hair on fire wondering what on earth are New York values?  I'll tell you and the rest of the country, people understand exactly what that is.  In South Carolina when I was there, the people there certainly understand it.  

And you know what is particular --

(CROSSTALK)

WALLACE:  -- 9/11 part of New York values?

CRUZ:  You know what is particularly curious, Chris?  Is that formulation didn't come from me.  It came from Donald Trump.  Donald Trump, when he was being interviewed by Tim Russert, when he was explaining his views a number of years ago.  

WALLACE:  1999.  

CRUZ:  He explained in his views that he was pro-choice, he supported partial birth abortion, open to gay marriage, and his explanation for all that, he said, I'm a New Yorker, I'm from Manhattan.  Those are the views of New York.  Those are what New York values are, they're not Iowa values, but that's New York values.  

So, that was Donald's over explanation of what New York values are.  It's how he articulated it.  It strikes me as curious now that he is displayed such outrage that anyone would even acknowledge that there's a particular political view -- and I would point out it's a view echoed by far left liberal Democratic politicians like Andrew Cuomo, Bill de Blasio, Hillary Clinton, and Donald Trump has supported those candidates and supported their positions on a lot of issues.  

WALLACE:  One final question, and as I say we're just running out of time, you condemn the Washington cartel, which you call the lobbyists and career politicians who rig the game.  I want to ask you about one of your recent acts as a senator.  You voted last month not to add money for the crop insurance program, but then you switched your vote and decided to add the money three minutes later.  Take a look.  

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE:  Mr. Cruz, no.  Mr. Cruz, aye.  

(END VIDEO CLIP)

WALLACE:  Senator, isn't that exactly the kind of game that the Washington cartel plays?  

CRUZ:  You know, Chris, I appreciate you passing on other campaign's oppo hits, but that one is based on a factual mistake.  In that instance, they have flipped the order of votes.  

And so, I went up initially voting one way, believing we were voting on cloture on the issue, on the Export/Import Bank, and when I voted that way, Pat Roberts made a comment about crop insurance, and I was puzzled, because what I had believed I was voting on concerns the Import/Export Bank, not crop insurance.  And I went back to the team and said what went wrong?  And the team apologized and said they switched the vote.  

WALLACE:  Pat Roberts, we should point out is a senator from Kansas, very highly respected, chairman of the Senate Agriculture Committee, says that's not the way it happened, he came up and tried to get you to change your vote, and explains and specifically said this will hurt you in Iowa.  That's what he says.

CRUZ:  Pat said it was about crop insurance and I was completely puzzled, because my staff briefing had said the order of votes -- and you often have a bunch of votes in the Senate and they change the votes sometimes.  And so, my staff had gotten it wrong, they briefed me on the wrong report.  I said, wait a second, I didn't know I was voting on crop insurance, and the vote is open for 15 minutes, so I went back and asked, all right, what exactly is this?  Oh, it's crop insurance.

WALLACE:  But you're saying you didn't change your mind?  

CRUZ:  I didn't change my mind.  And we said that immediately.  This is one of the sort of political games people play, where we said immediately, look, it was a mistake on our part, we understood the order of the votes.  And when we realized it, we corrected it and voted the way I always intended to.  

WALLACE:  Senator Cruz, thank you.  Thanks for your time.  

CRUZ:  Thank you, Chris.

WALLACE:  We're going to be out in Iowa.  I hope to see you on the campaign trail.  And I hope to have some more time so we can talk about more subjects, sir.  

CRUZ:  I look forward to it.  

WALLACE:  Thank you.

Up next, we'll bring in our Sunday group to discuss Iran's release of those American prisoners, just as the West starts to implement that landmark nuclear deal.  

Plus, what do you think?  Is the deal with Iran good or bad fro the U.S. and how much can we trust Iran?  Let me know on Facebook or Twitter @FoxNewsSunday and use the #fns.  

(COMMERCIAL BREAK)
    
(BEGIN VIDEO CLIP)

KERRY:  The United States, our friends and allies in the Middle East, in the entire world are safer because the threat of a nuclear weapon has been reduced.  

(END VIDEO CLIP)

WALLACE:  Secretary of State Kerry announcing implementation of the nuclear deal with Iran, the same day the two countries agreed to a prisoner swap.

And it's time now for our Sunday group: syndicated columnist George Will, Carol Lee, who covers the White House for The Wall Street Journal, GOP strategist Karl Rove, and Charles Lane from The Washington Post.

Karl, what do you make of the release of these four American prisoners, hostages, whatever you want to call them, just as the U.S. starts lifting sanctions against Iran?  

KARL ROVE, GOP STRATEGIST:  Well, I think it's a good thing they were released.  We paid a high price, seven people have to be pardoned, 14 people have to be not prosecuted, but Americans are coming home.  

This, frankly, though, it's obscuring a bigger issue, and that is Secretary of State Kerry said today marks the first day of a safer world.  Why should we believe that?  The Iranians have not lived up to a single agreement that they've made.  They've tested since this agreement was arrived at, ballistic missiles in apparent violation of it.  They took our sailors out in violation of their international agreements, paraded them for propaganda purposes.  

And even on the eve of the secretary's statements, he and the Iranian foreign minister were engaged in a debate about the nature of the centrifuges that Iran under the agreement is allowed to develop within a decade that could allow them to develop a nuclear weapon.

We're already arguing about whether they can go as far as they think they can go.  So, this is not a safer world.  It's the first day of a very long, bad period in which the Iranians will take this deal and run with it.  

WALLACE:  Carol, I want to ask you about what Senator Cruz said and also some of the other Republican candidates, which is basically we traded terrorists, Iranian terrorists -- he said I'm not sure they're terrorists, but certainly bad actors on Iran's part, some of them convicted for crimes for violating the sanctions for four American hostages.  

At the White House, which you cover, is there some sensitivity to that issue?  

CAROL LEE, THE WALL STREET JOURNAL:  Well, their argument is that this -- they needed to show an act of good faith to get the Americans home, and they had a list of Iranians that were held in the U.S. that Iran gave to them, and they chose these seven basically because they were not charged with terrorism or any sort of violence.  It was violations with the sanctions.  

I think the question now particularly for this president going forward with the year left is where this relationship goes from here.  You've had three successes the White House has viewed this week for diplomacy, the release for the sailors quickly, the Iran nuclear deal being implemented and now the release of these Americans, the relationship is really going to be tested in two ways going forward.  First will be this negotiations that they're having to end the conflict in Syria, which Iran is involved in.  And second, what Iran does with this roughly $100 billion of money, and how much mischief they make in the world.  

WALLACE:  Yes.  George, let me pick up on that because I think it's fair to say that relations between the U.S. and Iran already complicated are going to grow even more complicated when you saw that this week.  We got the release of those ten U.S. sailors, first they were seized, then they were released.  

Western sanctions against Iran have been lifted, and now we've had the release of the four American hostages.  What do you make of this relationship?  

GEORGE WILL, SYNDICATED COLUMNIST:  Well, there's a temptation to always see a pattern in a flurry of events, which is why it's good to remember the post hoc propter hoc fallacy, the rooster crows and sun rises, therefore the crowing of the rooster caused the sun to rise.

I'm not sure how these things are related.  Clearly, there seems to be some relationship, but then you go back a week and people say, well, it was really clever of the Iranians to seize that ship -- we don't know whether the ship had engine trouble, we don't know it's a navigation error, we don't know whether it was a bad decision to send, we don't know how it got there in the first place.

Mr. Kerry has decided to construe this as proof that relationships developed while negotiating the nuclear accord are paying off.  We shall see.  He also says this proves the power of diplomacy.  Well, diplomacy will always work in the sense if it will reach an agreement, if there's an asymmetry of desire.  If one side is really eager to get to the end, you'll get to the end.

Finally, there's a temptation here, and there's an echo of a cold war that we're trying to maneuver between the hawks and the doves in the Kremlin during the Cold War, and now the hawks and doves in Tehran.  I don't know.  The supreme leader is supreme, he's not immortal.  So, we're going to see regime change of some sort in Iran, and until then it remains very opaque.  

WALLACE:  Well, and regime change -- it doesn't necessarily mean regime change, just because you replace one supreme leader with another, you still have a theocracy.  

WILL:  But when you have a regime dominated as it is by one man, when you change the leader, you change the nature of the regime.  

WALLACE:  Chuck, is the kind of a rollercoaster we are going to have to expect with Iran, where there are some things that please us like the quick release of the sailors, like the release not so quick of these four hostages, but on the other hand, you know, they continue, as Karl says, to violate the agreement.  They've tested ballistic weapons, and in some ways, you know, we are as disturbed by their actions as ever.  

CHARLES LANE, THE WASHINGTON POST:  Yes, and I would add that the Iranians did something very clever in the midst of all of this, which is make a huge order for airplanes from Europe, the Airbus planes.  

WALLACE:  They announced that yesterday.  

LANE:  They're already working to divide U.S. interests from European interests with an eye on the future of any kind of sanctions that might be supposedly snapped back under this agreement.  

Another group of people who are eyeing all of this with concern, of course, are the Sunni Arab states -- Saudi Arabia, the Gulf Arabs, and Turkey, which isn't Arab, it is Sunni, who see -- who have seen all along in this rapprochement between the U.S. and Iran, a threat to the region and source of instability.  

All the mischief that Iran is up to, Karl mentioned the ballistic missiles, but those countries I just mentioned are worried about things like the Houthis in Yemen and the disturbances along the Shiite regions of Saudi Arabia.  All that mischief is still to be worked out.  John Kerry would argue say the deal on nukes makes all that more manageable.  

I don't think the Saudis would agree.

WALLACE:  And Iran is going to have another $150 billion in its coffer if it wants to use it, and some people are saying, well, instead of using it to help the people of their country, they're going to end up using it to create more mischief.  And that's a nice word for it around the world.

LANE:  The only good news on that score is the low oil price.  That makes this a relatively opportune move -- moment in the sense that Iran will not be able to get maximum revenues right away.  

WALLACE:  All right.  We have to take a break here.  We'll see you all a little later.  

Up next, Speaker of the House Paul Ryan on the GOP agenda heading into a big election year.  Plus, we'll ask him what was it like sitting behind President Obama during the State of the Union address?  

(COMMERCIAL BREAK)

WALLACE: Coming up, with Donald Trump and Ted Cruz duking it out for the top spot --

(BEGIN VIDEO CLIP)

CRUZ: Donald is dismayed that his poll numbers are falling in Iowa.

TRUMP: In the last three polls, I'm beating you.

(END VIDEO CLIP)

WALLACE: The establishment candidates are in a battle of their own. We'll ask our panel which of them has the advantage.

(COMMERCIAL BREAK)

WALLACE: A look outside the beltway of Baltimore's inner harbor, where House and Senate Republicans worked on their policy goals for 2016 at their annual retreat. New Speaker of the House Paul Ryan had a busy week, presiding over his first State of the Union, and then working on the GOP agenda for this year. We spoke with him Friday, just after the party retreat wrapped up.

(BEGIN VIDEOTAPE)

WALLACE: Mr. Speaker, welcome back to "Fox News Sunday."

RYAN: Hey, thanks for having me. Good morning, Chris.

WALLACE: You say that you want congressional Republicans to be the proposition party, not just the opposition party. I know that you're going to be addressing a number of topics this year, like the economy, like national security, but did you agree at all on an agenda, on any specific proposals at this retreat?

RYAN: Yes, we did, actually. We agreed on five basic areas that we're going to be working on to build a very bold pro-growth agenda to take the country in 2016. Like you say, jobs, the economy, national security, poverty and upward mobility, restoring the Constitution, making sure that -- that we get government back to the separation of powers of our Constitution and replacing Obamacare with patient-centered health care and dealing with the entitlement reform issues so we don't have a debt crisis in this -- in this country.

We got into a lot of specifics, but this is something that we're working from the bottom up. This is not going to be a top-down process. This is going to be a bottom-up process. Members of Congress and their represent -- and their people -- and their constituents forming this agenda. So it's way too soon to get into specifics. We're going to be rolling this out in the spring before we eventually have a nominee.

WALLACE:  Now, there is reportedly a big difference in strategy between you and Senate Republican Leader McConnell. You want to pass specific legislation on tax reform, on replacing Obamacare. Leader McConnell supposedly want to protect his members who are seeking reelection from any tough votes. How did you revolve that or have you resolved it?

RYAN: Well, this agenda is not going to be passed into law this year. Barack Obama is the president. So our goal here is not to simply just pass things and watch them go nowhere because we have a dis -- we have a White House that doesn't agree with us. Our goal here is to say, here is what we will do in 2017 if the country gives us the authority to do this. And we're going to need a new Republican president. This will not be an agenda you can pass with a -- with a liberal progressive as president. It's an agenda you can pass with a Republican president in 2017. And that's perfectly consistent with where the Senate Republicans are as well.

WALLACE:  Let's talk a little bit about the current president. You asset behind President Obama during this week's State of the Union Address and your wife Jana reportedly told you that she didn't want to see you grimacing or shaking your head if you disagreed with something the president said.

RYAN: Right.

WALLACE:  You had to practice your poker face. Well, the speech is over, the poker face is over. What did you think of what the president had to say, and why did you say that you felt he had degraded the presidency in the speech?

RYAN: I think he's very political. I think he erects what I call intellectual strawman arguments. He affixes views to people who don't agree with him that they do not have, only to try and win the debate in kind of an intellectually lazy way by just putting up strawman arguments. I think he's been the most polarizing president we've had in my lifetime and I think he tries to shift blame for his own mistakes on to other people.

And I think it was a fairly partisan and political speech, quite frankly. I don't think he can help it. I think he's always in this sort of campaign mode. And I think he just sees the world as what he wishes it would be, not what it is, and -- and that makes for tunnel vision for a president.

WALLACE:  Let's talk about a specific issues, ten Yemeni prisoners were transferred from Guantanamo By this week. And that now bringing the total at Gitmo to under 100. Last Sunday on this show, the White House chief of staff, Denis McDonough, said that if Congress doesn't close Gitmo, the president will. Take a look.

(BEGIN VIDEO CLIP)

DENIS MCDONOUGH, WHITE HOUSE CHIEF OF STAFF: We will close Gitmo because it's bad for our national security and because it's too costly. That's what the president will do. He feels an obligation to his successor to close that and that's why we're going to do it.

(END VIDEO CLIP)

WALLACE:  Now, Congress has repeatedly barred the president from doing that
--

RYAN: (INAUDIBLE).

WALLACE: But what if he goes ahead, which they certainly indicated, as you heard McDonough say, we're going to go do it.

RYAN: Look, I watched you -- I watched that interview live last week and I did not have my poker face. I just kept shaking my head. You know, there they go again. I don't think they think like the Constitution matters anymore. That -- that the executive just can make it up as it goes.

Look, the law is really clear. Even the attorney general -- the president's attorney general came to Congress and acknowledged the law is the law. The president can't do that. The president cannot send these prisoners to -- to the states. And so he can send whatever proposal he wants to us. The law is really -- oh, by the way, Chris, the law banning the transfer of Gitmo detainees to America was put into law by Democrats in Congress and has been in law ever since and recently signed into law as recently as December. So, look, he can send whatever he wants to Congress, but the law is the law. And -- and I'd be really amazed that the president is going to then try and direct or military to carry out orders where they knowingly are breaking the law. I can't imagine he would do that. he can send us whatever plan he wants. But this just goes -- this is just another chapter in the story of the president trying to make it up as he goes.

WALLACE:  But -- but -- but, if I --

RYAN: You know, eviscerate the limits placed upon him in the Constitution. And so, look, if he tries to break the law, he'll be called for trying to break the law.

WALLACE: Well, OK. I mean that's the point, though, is that you and other Republican leaders said the same thing about Obamacare and some of the changes he made there. You say the same thing about the temporary amnesty for illegals.

RYAN: Sure.

WALLACE:  If he goes ahead and does it, can you stop him?

RYAN: Look at detainees. There's two points I would make on that. Number one, are these guys going back on the battlefield? I mean shouldn't we be more worried about our national security than him keeping a 2008 campaign promise? Point number two, executive amnesty. We didn't -- we -- he was obviously doing something that we believe was unconstitutional, because it was. And so what did we do? We found the best way forward to prevent that from happening, which was our border state governors who had standing in courts went and sued the administration. And, guess what, he didn't get the executive amnesty. It's not happening because we were successful. So what we will do, whenever he does one of these actions, is take the best way forward we can -- we can come up with to get the best result, which is to stop him from doing it.

WALLACE:  You keep talking about "we," but there's obviously a serious split within the ranks of House Republicans. It's one of the reasons you're now speaker because Speaker Boehner, your predecessor, was forced out. And some of the more hardline conservatives are upset that you and some of the people before you, including Boehner, have raised the debt limit, have passed a budget and, in effect, lost your leverage. Which raises the question, when the budget runs out next September, are you prepared to really wield the power of the purse if -- if it means shutting down the government, shutting it down, to push your policies?

RYAN: Well, what I think is more important -- what is most important is, we actually have an appropriations process that functions. What was really dysfunctional, and there are lots -- there's lots of blame to go around, was the fact that we piled up all of the appropriations, which is supposed to be broken up into 12 pieces, 12 bills, into one, big omnibus bill. I hate doing that. So that's why we're starting our budget process a month and a half ahead of time this year, having 12 separate bills, so that we don't have, as you described, some big shutdown moment. Twelve separate appropriation bills, regular order, the way the founders intended it, and the Senate's going to follow suit. So that's what 2016 is going to be about, which is, using the power of the purse more effectively, getting Congress to work the way it was supposed to be working in the first place, and that's why we're off to a really good start do you that.

WALLACE:  South Carolina Governor Nikki Haley gave the official GOP response to President Obama this week. And in that response, she criticized Donald Trump. Rush Limbaugh and a lot of conservatives basically took off after you and said that there was an effort by the GOP establishment to stop Trump. Take a look at Haley and then Limbaugh.

(BEGIN VIDEO CLIP)

GOV. NIKKI HALEY (R), SOUTH CAROLINA: During anxious times, it can be tempting to follow the siren call of the angriest voices. We must resist that temptation.

RUSH LIMBAUGH, "THE RUSH LIMBAUGH SHOW": Nikki Haley is the establishment, or the firewall, in South Carolina, where the establishment is going to put the brakes on and bring all this Trump stuff to a screeching halt.

(END VIDEO CLIP)

WALLACE:  Mr. Speaker, how do you plead?

RYAN: Look, I read her speech the day before she gave it. It was a great speech. She wrote it, just like I wrote my own when I gave it in 2011. And when I read her speech, I wasn't thing anybody in particular. I wasn't thinking Donald Trump. I was thinking about, this is a good message to unify the conservative movement and therefore go to the country with a positive vision that unifies. Look, I think we win as conservatives if we unify. And I think that -- that was the -- the beauty of her message. And I wasn't thinking of any one particular individual when she gave that -- when she made that address.

WALLACE:  Finally, you seem to have perfected your poker face for the State of the Union. I wonder, could you give that same look again? I'd like to see what the poker face looks like.

RYAN: Geez. You know, it's really hard to do. But I just had to stare at the back of his head and just not -- look, I don't agree with the president on -- on pretty much anything. I'm a fairly expressive person. I'm an Irish guy. And that was really hard to do. And you can't ask me to do it on command. I'm just not that good at it.

WALLACE:  Oh, come on, give us five seconds of the poker face.

RYAN: I can't -- I really -- OK. There, how's that? Does that work for you?

WALLACE:  Well, that was two seconds, but, anyway.

And, briefly, how did your wife, Jana, --

RYAN: (INAUDIBLE). Try doing it for an hour and 15 minutes for the first time. It was hard to do.

WALLACE:  How did you wife Jana say you did?

RYAN: She thought I passed the test.

WALLACE:  Mr. Speaker, thank you. Safe travels.

RYAN: You bet.

WALLACE:  And we'll see you back here in Washington.

RYAN: Thanks, Chris. Take care.

(END VIDEOTAPE)

WALLACE:  Up next, the latest polls show Bernie Sanders is gaining on Democratic frontrunner Hillary Clinton. Our Sunday group handicaps a coronation that's turning into a contest.

Plus, what would you like to ask the panel about the tightening Democratic race? Just go to FaceBook or Twitter @foxnewssunday and we may use your question on the air.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. BERNIE SANDERS, I-VT., DEMOCRATIC PRESIDENTIAL CANDIDATE: We need to have the courage in this country to bring forth a political revolution where millions of people stand up and say, enough is enough.

HILLARY CLINTON, D-PRESIDENTIAL CANDIDATE: He wants to roll Medicare, Medicaid, the children's health insurance program into a national system and then turn it over to the states to administer. Now, if -- if that's the kind of revolution he's talking about, I am worried, folks.

(END VIDEO CLIP)

WALLACE:  Hillary Clinton and Bernie Sanders sharpening their attacks ahead of tonight's Democratic debate, as the battle for the nomination has suddenly turned into a real contest. And we're back now with the panel.

Well, as we say, the Democratic race is tightening across the country. Here is the latest Real Clear Politics average of recent polls. First, nationally, you can see Clinton now leads Sander by 8.5 points, down dramatically from just a month ago. In Iowa, Clinton's lead is now down to 4 points, down to 2 points in at least one poll. And in New Hampshire, Sanders continues to lead Clinton by more than six points.

Carol, a month ago it seemed that Hillary Clinton was on her way pretty easily to the nomination. Question, what happened?

LEE: Well, Bernie Sanders has -- there's a lot of enthusiasm on -- in -- among Democrats for something different. And he's really tapped into that. It's cutting into her -- her advantage. And, you know, it's coming down to basically a race between enthusiasm and organization. And the interesting thing about Bernie Sanders is that he has the enthusiasm some are comparing to what Barack Obama had in 2008, but it's unclear that he has the organization and that will be -- that remains to be seen in what happens in Iowa and in New Hampshire.

WALLACE:  And in particular whether he has the organization after those --

LEE: After those.

WALLACE:  Those first two states.

We asked you for questions for the panel and we got this on Facebook from Steve Norton. He writes, "why do at the New York/D.C. experts say Bernie can't win? I say if he wins the first two states, the support and money will overtake Hillary. Because that is where the Democratic base really is."

Karl, how do you answer Steve?

ROVE: Well, I'd say two things. One is, there are not enough Johnson County, Iowas, around the country and Keene, New Hampshires, around the country for --

WALLACE:  And explain what they are.

ROVE: These are very liberal bastions of very liberal Democrats. In Iowa, they turn out -- it's a college county, for example, in Iowa, it's a college town in New Hampshire. Look, Bernie Sanders is likely to win both of these. If you take a look at -- even in Iowa, where Hillary and the Real Clear Politics average lead by four points, she -- she -- if you -- there's one poll, which was done using automated telephone devices, it gave her a 21-point lead. You take that out, and all the polls in January average out to a 0.6 percent lead. And she's -- she was way ahead in -- in December. Eight of eight polls, led by 18 points on average in December. It's collapsed. And it's collapsing because, not just because he's got the excitement. It's because she's old and tired and she -- and he seems to be fresh and liberal. And the fact of the matter is, though, after you head south, it gets very tough for him because there are not a lot of liberal places as liberal as we find in New Hampshire and Iowa to sustain him. When you get to South Carolina or Nevada, you get a lot more African-Americans, a lot more Latinos, and a lot fewer liberal wackos.

WALLACE:  Well, they're -- they're Americans, too, Karl.

Then there is the Republican race, which increasingly seems to be a battle between two candidates, as we saw in the debate this week. Take a look.

(BEGIN VIDEO CLIP)

TRUMP: I'm not bringing a suit, I promise, but the Democrats are going to bring a lawsuit. And you can't -- you have to have certainty.

CRUZ: I'm not going to be taking legal advice from Donald Trump.

TRUMP: You don't have to.

(END VIDEO CLIP)

WALLACE:  George, have you wrapped your head around the idea that it is more likely than not that the Republican nominee is going to be either Donald Trump or Ted Cruz?

WILL: I think it's a little too early to do that. The Republican dilemma, plainly put is, they can't win with Trump, they can't win without Trump supporters. So the big question mark hanging over the party right now is, will, and if so how much, will Donald Trump underperform his polls? Iowa doesn't have a great record of picking the Republican nominee and New Hampshire likes to go against Iowa. I think South Carolina is the place to look.

Trey Gowdy, a very respected man -- I don't know much endorsements matter, but he has endorsed --

WALLACE:  A member of Congress.

WILL: A member of Congress. He has endorsed Rubio. Senator Tim Scott has not endorsed anyone yet, neither has Governor Haley. Chris Christie says it's not going to be -- come down to two in a hurry, it's going to come down to a final four in its own March Madness, just paralleling basketball. If what is going to happen, he thinks, is you'll have Trump and Cruz sustain for a while, you'll have, he thinks, Christie and Rubio sustain for a while. Then the governors will sort this out preferring Christie, because he is, A, a governor, he notes that four governors have endorsed so far, 24 haven't. And Christie says that will propel him.

WALLACE:  I can just hear some of our viewers right now saying George Will remains in denial about what's going on here. I say that respectfully, but I'm sure that's what they're saying.

WILL: I'm in denial.

WALLACE:  Chuck, how do you see the Republican race?

LANE: Well, the new development for me this week was the clashes between Cruz and Trump, who had previously treated each other with kid gloves. I think Cruz was surfing the Trump wave, so to speak. And they -- I think, on net, I would give the advantage to Cruz slightly because he was the first guy to flummox Donald Trump, leave him a little bit speechless in that exchange about the so-called birther issue. He is the first guy in this whole campaign to get under Trump's skin a little bit, to make him act defensively, to start attacking and so forth. And we see the first shade of vulnerability -- even though Trump did very well in that debate, the first shade of vulnerable in Trump, the first crack in his veneer. And if somebody -- and the others can continue to widen that, Trump may finally have this long awaited fizzle.

WALLACE:  Karl, we've got about a minute left. There are, as George mentioned, there's four so-called establishment candidates all vying to be the one coming out of that lane. You can see them there, Rubio, Christie, Bush, Kasich. Of those four, who's got the advantage right now?

ROVE: Well, if you look at the polls today in Iowa, Rubio is running third. If you look at the polls in New Hampshire --

WALLACE:  Third behind Trump and Cruz.

ROVE: Trump and Cruz. And I -- I believe that Trump leads modestly in the Real Clear Politics average, but I think Cruz is likely to win the state. In New Hampshire, it's a lot less clear. You have Rubio, Cruz and Kasich all with -- bunched, within 2.4 points of each other. And if you add Christie and Bush into it, in the Real Clear Politics average, they're all within 4.5 points. And given the nature of the average, that means it's a dead tie for third place in New Hampshire (INAUDIBLE).

WALLACE:  So, you going to give us a name or not?

ROVE: I -- I'm not because I think it's -- I think it's way -- it's going to be -- New Hampshire is going to be the key to making this a slimmer field.

WALLACE:  Thank you, panel. See you next Sunday.

Up next, our "Power Player of the Week," Donald Trump's right-hand man.

(COMMERCIAL BREAK)

WALLACE:  With the presidential race now at fever pitch, we want to take you inside the campaigns to meet some of the key figures behind the candidates. And there was only one choice for who should go first. Here's our "Power Player of the Week."

(BEGIN VIDEOTAPE)

WALLACE:  What's it like managing Donald Trump?

COREY LEWANDOWSKI, TRUMP CAMPAIGN MANAGER: That's a tough question. Nobody manages Mr. Trump. I think -- I equate this to being a jockey on the greatest racehorse you've ever seen. Maybe American Pharaoh.

WALLACE: (voice-over): Corey Lewandowski runs the Trump campaign, and the jokey analogy works because Corey says while he may guide his candidate occasionally, his main job is to hang on and let Trump run.

TRUMP: Oh, that is amazing.

WALLACE (on camera): When he gets up on the stage, or when he does an interview, do you know what's going to happen beforehand?

LEWANDOWSKI: I don't think anybody knows. I mean that's -- that's what the American people love. He tells it like it is.

WALLACE (voice-over): But Corey says, experts underestimate the organization behind the man, noting their state director in Iowa is Chuck Laudner, who helped Rick Santorum win the caucuses in 2012.

LEWANDOWSKI: We have our faith in Chuck because he know what he's doing. This is the Super Bowl for Chuck. This is Christmas and the Super Bowl combined.

UNIDENTIFIED MALE: Caucus for Donald Trump. You need caucus cards?

LEWANDOWSKI: I find it just fundamentally wrong the notion that those people who waited six hours in line to attend a one-hour political rally aren't going to walk in on caucus night and say, I'm supporting Donald Trump. I just don't believe it.

WALLACE (voice-over): Corey says there's another misconception about Trump.

WALLACE (on camera): Do you ever tell him no? And, if so, does he listen?

LEWANDOWSKI: When he asks for advice, and we tell him no all the time and he listens, but like everything else, you'll be selective and you choose the right places to insert yourself.

TRUMP: Sometimes he'll hold me back a little bit, which is good. He has tremendous energy, the opposite of Jeb Bush. He has tremendous energy. Going all the time. And he really does have a good vision for politics.

LEWANDOWSKI: Hang on one second, OK?

WALLACE: (voice-over): Corey admits he's an adrenalin junkie. When we visited campaign headquarters, he had to burn off energy. He even has a wall of shame with unflattering photos of each candidate he's dropped out.

LEWANDOWSKI: The professional pundit class doesn't know what to do.

WALLACE: How did he get into politics?

LEWANDOWSKI: I was six years old and I turned on the television and I heard Ronald Reagan say "strong military, smaller government," and I said, I don't know who that is but I like that guy.

WALLACE: Why in college, he ran for state representative in his hometown of Lowell, Massachusetts, and lost big. Then there was a stint working on Capitol Hill and for the RNC. But over the last 15 years, he moved away from the GOP establishment.

LEWANDOWSKI: It was the end of the day, nothing's getting done.

WALLACE:  He worked four years as a New Hampshire state policeman.

LEWANDOWSKI: Right, I get to go around and arrest people for, you know, boating while intoxicated. That was a great job. It was a fantastic job. And they paid me to do this. And I said, I can't believe it.

WALLACE:  And in 2011, Corey he debated a cardboard cutout of New Hampshire's Democratic governor about taxes.

LEWANDOWSKI: Yes, this is the greatest place, right?

WALLACE:  All of which has some people saying, Donald Trump's campaign manager is a lot like him.

LEWANDOWSKI: Watching him in action, and that is what drives us every day. He -- he will not be outworked. There's nothing he won't do to be successful in this endeavor.

(END VIDEOTAPE)

WALLACE: Corey has been called a bomb thrower who dismisses country club Republicans. Little wonder then Trump hired him to run his presidential campaign a year ago.

Now, this program note. Next Sunday I'll sit down with Republican candidate, Senator Marco Rubio, just ahead of the next GOP debate. It's a Sunday exclusive.

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

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