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Kelly File

Rove reacts to Democratic town hall; What happens if Clinton can't run for president?

This is a rush transcript from "The Kelly File," January 25, 2016. This copy may not be in its final form and may be updated.

MEGYN KELLY, HOST: Breaking tonight on an ever tightening race. And with just one week to go before the first contest in 2016, Democrats are making a last-ditch effort to win over voters.

Welcome to a special live 11:00 p.m. edition of "The Kelly File." I'm Megyn Kelly.

Tonight in Iowa the three Democratic contenders are sort of facing off. Not really. Instead they're taking the stage one after the other, answering questions directly from Iowa voters. Iowa Democrats have a strong track record of predicting the eventual Democratic nominee. Although as Karl Rove pointed out earlier not necessarily of choosing.

So a good showing tonight is crucial for the candidate if they want to lock up the nomination. Bernie Sanders was up first and an attempt to fend off suggestions that Hillary Clinton is better prepared to be president. We have a big show for you tonight on how the Democratic race may have changed complete with the manager mentioned Karl Rove. Plus, Chris Stirewalt and Kurtz are here. We'll also be joined by Kirsten Powers.

But we begin tonight with Ed Henry reporting from Des Moines, Iowa. Ed, what are your impressions?

ED HENRY, FOX NEWS SENIOR WHITE HOUSE CORRESPONDENT: Well, Megyn what's interesting is you put your finger right on ii, which is that Bernie Sanders was on some defense, dealing with the fact that Hillary Clinton has ads saying that he would not be a strong commander-in-chief. He was trying to defend his record on national security. He scores some points by pointing out that when faced with a big vote on the Iraq War for example, despite all of Hillary Clinton's experience, he believes he got it right and she got it wrong. Something we've heard before.

He was also on defense about taxes. Admitted to point blank that he's going to raise taxes to pay for more health care coverage those single pair system. So that is something you'll likely see in an ad. Maybe a Clinton ad. But he gets the nomination certainly a general election ad.

I think where he scored is from the first moment he sat down, he said to the host, Chris Cuomo, you know, my wife told me to button my suit jacket but I can't do it. I'm too fat right now, he said because he's gained few pounds on the campaign trail. A lot of people candidates and reporters can understand that frankly. And so, Bernie Sanders is authentic, he's real. He wants to just say that right up front.

The other moment where I think he scored is he basically was pressed on the commander-in-chief issue. And he stood up, he got out of the chair and basically said, you know, I want to stand up for this. I want to show -- he's vigorous but he also wants to push back on it.

And I then I thought Hillary Clinton, where she scored is that there was a voter that asked about how old his friends are leaning towards or supporting Bernie Sanders and they believes that she's simply not honest. The questions of honesty and trustworthiness that's come up again and again for Hillary Clinton, on the Clinton foundation, the e-mail situation. She pushed back. She was chopping her hand in the air. She was more animated than I've seen her out on the campaign trail frankly saying you need a proven leader, not just someone who's going to make speeches.

So she was more animated. What I saw was a candidate who sees her back is against the wall. She finished third in Iowa here in 2008. If she comes in second here she's going to be in a lot of trouble.

Finally, Martin O'Malley. This is much like we see on the Republican side, Rand Paul, other candidates who are on the bubble if he doesn't score well in Iowa. Doesn't come in at least second, Martin O'Malley's Campaign might be over. And so he said point blank, to the people in this town hall for him my candidacy is in your hands. And we've got to remember that there are a lot of these candidates more than a dozens on the Republican side, just three on the Democratic side. Some are going to survive after Iowa, some may not.

KELLY: All right Ed, with all the respect to Martin O'Malley. What his still doing in this race. He has like 1 percent in the polls. I mean really -- we have the same situation going on in the Republican side. But what he still -- is this about, you know, selling books? At this point, you've got to ask what these candidates are still doing in the race.

HENRY: Yeah, fair question. There are Democrats who privately say Martin O'Malley has been waiting to see if the FBI was going to do anything with Hillary Clinton, and if they did move forward. They haven't yet. We don't know what they're going to do. That is still a great unknown in this campaign. He though he was the fresh face who could compete with Bernie Sanders. The FBI hasn't done anything. And number two Martin O'Malley frankly hasn't done much of anything either.

And so, he's in there, hoping something else happens, maybe. And also, given the caucus system, he may have clout if he's the second choice of some people who are going then have to decide to go from O'Malley to Sanders or Clinton.

KELLY: One more question.

HENRY: And that's where he'll have clout. Yeah.

KELLY: My question is this was hastily scheduled. This was not on the schedule.

HENRY: Yeah.

KELLY: How did it come about that they decided they needed an extra town hall forum for these Democrats a week before voting?

HENRY: I'm told by senior Democrats as well as people at CNN that Martin O'Malley and Bernie sander had agreed to do this a long time ago and Hillary Clinton was the only hold out. And it was only within a week or so ago that Hillary Clinton said fine, I'll do it. What it does that tell us? Two things. Number one, the DNC, it's been a biggest open secret and they've privately finally admitted it in recent days. They were protecting Hillary Clinton by having a limited number of debates and some debates at odd times on the weekends, going up against the NFL and other things.

Now they realized inside the Clinton camp that didn't work. She's actually a pretty good debater and they should have got her out there more. And number two, why did she agree with CNN to do this in lasted few days? Because her back is against the wall. And that's why people make this kind of rash political decision, Megyn.

KELLY: You got sort of do what you can to seal the deal. With seven days.

HENRY: She need to shake it up.

KELLY: . left to go. She was.

HENRY: Yeah.

KELLY: She was a much more fiery version of herself tonight at this town hall.

HENRY: Big time.

KELLY: You see her all the time but that was my impression. Ed, thank you sir.

HENRY: She is not like that. Yeah, good to see you.

KELLY: We're going to have some of the best exchanges for you in just a moment. We're getting it teed up. It's a long story but we have it for you. Chris Stirewalt is our Fox News Digital Political Editor and Howart Kurtz is host of "MediaBuzz" on Fox news.

So as I saw thought, A Sanders got an hour, she got a little bit, about an hour. Martin got like half an hour? I don't know. But the point is -- we saw a very energized Hillary Clinton tonight. Stirewalt did we not. I mean, I was -- she was clearing trying to send a message. I mean, you rarely see with the hands and the. Yeah, if you're listening Sirius radio it's not that impactful but trust me, it was like the Italians. I am half Italian, I can say it.

CHRIS STIREWALT, FOX NEWS DIGITAL POLITICAL EDITOR: OK, all right. Well, I'm not, and i did. Howard and I reenact scene to this was sack puppets until the video is ready. But I would say this that Hillary Clinton, when she tries to match the mood, so she's probably a very smart person, she is the very smart person I'm sure, but she has a low emotional quotient. She has a hard time matching the emotion of the moment. Bernie Sanders is a natural, right? He's funny. He's at ease. He's human.

KELLY: How about the remark I'm too fat.

STIREWALT: Too fat? To button the -- what is talking about? I don't know what he's talking about. And so, Bernie Sanders is funny, human, relatable all of that stuff. Hillary Clinton, it's like they changed the chip. They say OK. Now, it's angry or now it's this or now its relatable. I thought she showed a lot of energy but I think Sanders had it.

KELLY: Be relatable. All right, listen.

STIREWALT: Put the relatibility chip in.

KELLY: So Sanders I don't know if we have the I've gotten too fat clip. By that way haven't you notice that a lot of these candidates they are like getting a little bigger. You can see on the screen I'm like don't adjust your television by you can see that it tough, it's tough to stay slim out of the campaign trail.

But here is a highlight of Mr. Bernie Sanders the senator. Watch.

(BEGIN VIDEO CLIP)

CHRIS CUOMO, CNN ANCHOR: Is Secretary Clinton simply better prepared for the job than you, sir?

SEN. BERNIE SANDERS, D-VT., PRESIDENTIAL CANDIDATE: This calls for a standing up response.

CUOMO: OK.

SANDERS: I've known Hillary Clinton for 25 years. You know what, I like Hillary Clinton and I respect Hillary Clinton. I have tried as you hope you all know not to run a negative campaign, not to be attacking every other day. To keep this discussion on a high level where we debate issues facing this country. By the way with a few exceptions we're doing a lot better than the Republicans on that regard, but on the other hand that is not a very high bar to reach, so.

I voted against the war with Iraq. Hillary Clinton voted for the war in Iraq. I led the effort against Wall Street deregulation. See where Hillary Clinton was on this issue? On day one, I said the Keystone Pipeline is a dumb idea. Why did it take Hillary Clinton such a long time? In other words, yeah. I do think I have the background and the judgment to take this very, very difficult job of being president of the United States.

(END VIDEO CLIP)

KELLY: Howie, he went on from there and used a lot of lines from his campaign that we've heard before. We need a political revolution, going off on the rigged economy that stained by a corrupt campaign finance system. And this is like cat nip to a lot of voters.

HOWARD KURTZ, HOST, "MEDIABUZZ": The crowd was I think kind of pro Sanders. And he hit his greatest hit, if you will. But I think he spent part of the time on the defensive. Because when he was going on and on about universal health care and taxing the hell out of Wall Street, Chris Cuomo pushed back said you're talking about a massive redistribution of wealth. He said you're talking about bringing back the era of big government, which Hillary's husband and famously said was over and bigger than over.

And that caused Sanders to have to back pedal. But contrast Hillary spent the whole time in front of the crowd on her feet, most animated I've seen her all year. But the enthusiasm gap was apparent because Ed mentioned. The first question was a young guy says all his friends don't think you're dishonest. The second question who said Joe Biden says, your late to the battle against income and equality. But she did handle herself. Well, she tends to do better in these formats, than an anchor interviews which she kind of sticks to the safe talking points.

KELLY: All right. Now, the question of her enthusiasm was raise with her. We have that, watch.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: It feels like there is a lot of young people like myself who are very passionate supporters of Bernie Sanders. And I just don't see the same enthusiasm from younger people for you. In fact, I've heard from a quite a few people my age, that they think you're dishonest.

But I'd like to hear it from you on why you feel the enthusiasm isn't there.

HILLARY CLINTON, D-PRESIDENTIAL CANDIDATE: Look. I've been around a long time. People have thrown all kinds of things at me. I just keep going forward because there is nothing to it. They throw all of this stuff at me. And I am still standing.

(END VIDEO CLIP)

KELLY: That is a tough question, Chris?

STIREWALT: That is a toughie. That wasn't really a question. That is just a big stink ball. That was just saying you're terrible.

KELLY: Right. Like your so mean.

STIREWALT: . and my friends in Iowa worked on. Right, exactly. We're in the dorm and we're like I hate her. And she -- I think she reciprocates. The feeling that you can feel there was clear. But, that is her best message. Hillary Clinton's best message for Democrats is that she is durable.

KELLY: Still saying.

STIREWALT: She gets knocked around. She has bad times. She is still standing, she's there. That's really her best message, which is. If you don't like me, you don't love me, you might not even trust me but I'm the one who will get through and the Republicans who know what's they're going to do. Now they mentioned Donald Trump's name approximately one quadrillion times.

But whatever the Republicans do, Hillary Clinton says I'll be the one who can weather the storm of Bernie Sanders want.

KELLY: But that guy's question, even though it was a little snarky, does speak to one of the things she's got to overcome, which is that Obama coalition that got President Obama elected twice is not necessarily the Democratic coalition. If a GOP wants to win, the White House is going to have to peel off some of the young people, some of Hispanics, some of African Americans and so on, to win. Some of are women.

And so, it this voting group is important to her Howie. And he raises a point about. How do you energize the young people? You know his telling I don't see it, I don't feel like it.

KURTZ: Right because look, Hillary Clinton has been around roughly forever and clearly she's not connecting with many of younger voters

KELLY: Not as long as Bernie.

KURTZ: Right. But I lost track of how many times Hillary Clinton brought up President Obama. She was hugging him. She was acting like they would do all the foreign policy

KELLY: She was mentioning he's interview with Politico.

KURTZ: Yes.

(CROSSTALK)

KURTZ: And she was Ginger Rogers doing it backwards and in high heels. So that was her strategy. Bernie kept bringing up my vote against Iraq, as he said. So there were each, you know, plans. What they saw is their strengths. But it's a good format for Hillary. And it does shows how she's cautious that she stayed away from these things. When actually she's pretty good at it, instead, you know, the DNC limited the number of debates and put him when nobody was watching.

KELLY: What do you think of it, Chris? Because that, you know, she was it she knew questioners were not going to be, you know, that they're going to be Democrats, right? Because like the one guy stands up and he said I have a question about Benghazi. And it was like how are you so awesome at the Benghazi hearing? I know, your awesome but, this ultimately and did you work could you explain why you even more awesome than that.

There is something along those lines and so, that does allow, you know, we have it? Go, stand by. Stand by.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I was a lukewarm person for you before the Benghazi hearings. I watched all 11 hours, every second of it. And came away from that a gun ho supporter of yours.

CLINTON: Thank you. Thank you.

UNIDENTIFIED MALE: I woke up one night thinking that maybe I could see if Donald Trump was sitting here, maybe he'd punch Gowdy out.

(END VIDEO CLIP)

KELLY: So. I don't know. Too soon, I think. I don't. You tell me. I don't know.

STIREWALT: Too soon.

Look. That for Democrats Hillary Clinton and, by the way President Obama did a very good job marginalizing the issue of Benghazi among Democratic voters, among core voters. That word meaning fake story, pay no attention, Republican, Republican that, same with their e-mails. But you notice there is a thread there. Which is, at some point if this gets to be a real problem, the elephant in the room for Hillary Clinton tonight, every night, everywhere she goes. It remains possible that she could be indicted for a crime of a very serious nature.

KELLY: We're going to get to that.

STIREWALT: And no matter what she does, that put a real stink on it.

KELLY: It's the little, you know, pig pen in the peanuts, like, still there. OK, thank you both so much. But you're coming back in a little bit because we have much more to discuss.

In the meantime, Mrs. Clinton not only ran against Bernie Sanders tonight. She also unloaded a couple of times on those guys on the other side of the aisle, those Republicans. Here's one of those moments.

(BEGIN VIDEO CLIP)

CLINTON: We've got to do everything we possibly can not to let the republicans rip away the progress and turn us backwards. That would be such a loss for our country. We need to build on it, and go further.

(END VIDEO CLIP)

KELLY: Karl Rove is a Fox News Contributor, he serves has senior advisor to President George W. Bush as well as the president Deputy Chief of Staff. Good to see you Karl.

So if you listen to Hillary tonight. You really -- well, at A you would have thought the Republicans are going to be very bad for the country. But B, you would have thought that she is very much looking forward to working with them cooperatively to get things done.

KARL ROVE, FOX NEWS CONTRIBUTOR: Yes, sort of the inconsistent. But look, that was a side show though. The main focus of her comments tonight was continuity. I'm going to build on the legacy of Barack Obama. She wrapped herself as close as she could to him. In fact at one point said the whole purpose this, the whole purpose she said our campaign was to win the White House to continue this legacy.

On the other hand, Bernie Sanders summed it up in one sentence. He said, "My campaign is about a political revolution." And therein lies her problem in Iowa and New Hampshire. On the one hand she is the candidate of continuity. He's the candidate of change. I promise you a revolution. It's one of the reasons why she's doing so poorly among younger Democrats because they're more attracted by guy who said, "Let's go have a revolution. As supposed to somebody who says "Let's have continuity."

KELLY: You get a sense listening to her and actually a lot of Democrats sometimes that they cannot believe what's happening with the bern. That subject also came up tonight, listen.

(BEGIN VIDEO CLIP)

CUOMO: Here you are, again, another election. But another nail biter with a self described socialist named Bernie.

CLINTON: Right.

CUOMO: How did that happen?

CLINTON: Look, it's a great country. Despite what one of the Republicans says. It's a great country. And we are all on the Democratic side having a spirited debate about the issues we care about. The other side is not talking issues, they're talking insults.

(END VIDEO CLIP)

KELLY: Your thoughts?

ROVE: Well, I thought it was smart on her part not to answer the question but instead to go back and take a slam at the Republicans. But when she opens it up with that cackle, with that really weird cackle, I think this is why people have a sense of her not being honest and trust worthy.

All the national poll shows about 60 percent of the American people do not think she's honest and trust worthy. I think part of it is just her demeanor when she let's out for those cackles, we know that's a sign that she's not going to answer the question, she's not going to be straight forward with us.

KELLY: It's sort of a nervous laughter, where you sort of buying time, maybe to think of what you're going to say. And these are hard questions in her defense. But, you know, I guess the truly skilled politicians like her husband, they're on it. She was asked a little later about Republicans and really talked about how she's going to work with them. She talked about how whenever I'm running they hate my guts. I'm the worst thing ever. Whenever I'm actually in office, I'm great, they can work with me. We have cooperative relationships. Any truth to that?

ROVE: Well look when she got elected in 2000 and faced a Republican president in the White House, and with Democrats had, for a brief period of time a majority in the senate. She did try and work across the aisle because she was thinking that in 2004 she can potentially run for president and maybe run as, you know, as a candidate who can unite the country. Then came 9/11 and George Bush was the candidate who united the country and she put off her ambitions.

In the second term after 2004 election, in the 2004 election and afterwards she turned into a much more heavy partisan particularly she decided I'm going to be able to run in 2008 and I need to win the hearts and minds of the Democratic Party.

Again, this is one of her problems. She's been on stage for 40 somewhat years. And we've seen her. And one of the things that the American people have concluded is she will say and do anything to get elected. And when -- in the run up to the 2004 election when she thought she might be a candidate. And it was to her advantage and develop her reputation is working across party lines, she was on the arm services committee for example, she did it.

And when she decided it was going to be, you know, to her advantage to become a strident partisan, she did it. She was against things for eight years ago. But today she's in favor of. And this is her, that overwhelming ambition at the heart of it a liberal that somebody willing to say and do anything in order to get elected.

KELLY: You know, the problem with American politics today, many would say is that describes most of the people who actually run for presidency, right. That that overwhelming ambition for sure. But so many of these guys, I mean ...

(CROSSTALK)

KELLY: . as someone who's preparing right now for another presidential debate, so many of these guys say one thing and they reverse themselves to win.

ROVE: I would say two things. One is that you better have ambition to run for president. Otherwise you're not going to get the job.

And second of all, yeah, granted there is a little bit of that. But most people try to be consistent because they are consistent. It really takes a calculating personality to do the kind of things that Hillary Clinton has been saying you doing. And we saw it on the e-mails.

Well, once again, we got the, you know, explanation that was all allowed and blah, blah, blah, blah, blah. We've heard that all before and it doesn't rank through.

KELLY: Well the e-mails came up tonight and Shannen Coffin has been watching that, he's been following the whole e-mail situation, we'll have him.

Karl, it's great to see you.

ROVE: You bet, thank you.

KELLY: There was some interesting answers tonight when Mrs. Clinton was pressed on Benghazi not once, but twice. We'll have more on that in a moment.

Plus Bernie Sanders gets asked about the whole socialist thing and comes out swinging.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CLINTON: I had no intention of doing other thing -- anything other than having a convenient way of communicating and it turned out not to be so convenient.

So again, we've answered every question and will continue to do so.

(END VIDEO CLIP)

KELLY: That was Hillary Clinton moments ago defending her use of a private e-mail server as secretary of state.

There are currently 150 FBI agents investigating that case. And last week we learned that her unsecured server contained the nation's most secretive and highly classified national secrets though she denies that description.

Shannen Coffin is a former Justice Department assistant deputy attorney general and for counsel to Vice President Dick Cheney. Shannen good to see you.

So she said she answered all the questions and she was just looking for a way, you know, to improve her convenience.

We've heard that before. That is going to be the party line. But now, she says it wasn't that convenient. I mean it was convenient just now it turned out to be a pain in the neck.

SHANNEN COFFIN, FMR DOJ ASSISTANT DEPUTY ATTY. GENERAL: There are those rules in place that we know about that, you know, convenience doesn't come into play when you're dealing with national security information. Convenience is the least consideration that comes into play.

And, you know, taking something off of one server that is supposed to be secure and moving it to an unsecure e-mail system in your basement may be convenient, but it might be illegal, as well.

KELLY: You think it's very significant that she signed this agreement as to how she was going to handle classified material apparently at the outset of her term as secretary of state.

Explain that in terms that we can all understand.

COFFIN: Sure, just like every other federal employee, when she's given access to classified information. She's told up front she has to store it properly that she can't remove it from her classified settings and she's told up front that her failure to abide by these rules can subject her to criminal prosecution.

So she was on notice from the beginning just like every other employee that deals with this. And those other employees Megyn are often prosecuted when they do similar things.

KELLY: You know, she said over and over, I never sent or received anything that was marked classified.

COFFIN: Right.

KELLY: And I get that that's a red herring because .

COFFIN: Absolutely.

KELLY: . it doesn't have to have a stamp. What matters is what is in the document? Is it defense to say I actually didn't realize this stuff was classified? I didn't know.

COFFIN: Well no. It's not a defense for the secretary of state who is a classifying authority as designated by the president of the United States. It's absolutely not a defense.

We have talked at length in the past about foreign communications. Those foreign communications are inherently classified and as the secretary of state she would know that.

And when you're talking about these top secret documents, Hillary she -- pardon me, Megyn. When you talk about these top secret documents, the very nature of the information is going to tip off that it's protected.

KELLY: What is the most problematic in your view the fact that they were kept on an unsecured server that may have been attack and you got former top defense official under the President Obama saying "Guarantee me." We've got to guarantee you. It was hacked by Chinese and Russians.

That, or the fact she has admitted giving these documents to her lawyer who does not -- in the question does not have necessary security clearance?

COFFIN: Well look all the above. Don't forget that.

KELLY: Because that's what Petraeus did. He have the document to his biographer who had a security clearance of member service but not the highest level.

COFFIN: Don't forget this. She gave the entire server to a company, a server company that had no clearance either, right?

So the entire server was put at risk. But look, as far as National Security goes, just keeping these documents on this server subjected them to all sorts of hacking risks, from China, from Russia, from all of these other countries.

KELLY: Iran.

COFFIN: Exactly. So she was creating National Security risks just by having the server as my friend Jonah Goldberg likes to say, "It's the server, stupid."

KELLY: Shanen, good to see you.

COFFIN: Good to see you too, Megyn.

KELLY: So is there really a chance that Hillary Clinton might be indicted? And if she is, what happens to this race?

Kirsten Powers is a Fox New Contributor in the USA Today. Kirsten, good to see you.

So I don't know what the chances are. I mean heard smart lawyers say "It could happen." And I heard smart lawyers say "It's a partisan witch hunt."

If she gets in, if there's, you know, if she gets indicted what does happen?

KIRSTEN POWERS, USA TODAY COLUMNIST: Well, first of all I think the chances of her getting indicted are remote. And I'm not saying this for a legal perspective. I'm talking about it more from a political perspective.

It's impossible to imagine the Justice Department moving forward with this, even if the FBI made a recommendation, there's no grand jury without the Justice Department being on board with this. And I just don't see them doing that especially in the election.

KELLY: And President Obama, he presumably have to sign off on that. I mean today President Obama heaped praise on her, he seemed to be making very clear and political this is who I would like you to vote for. His comments about Bernie Sanders were not that large, sorry. And his comments about her were.

So the -- I mean and he must believe she will be an Obama third term. He doesn't want to see her get indicted if that's the case.

POWERS: No, he doesn't want to see her get indicted. And obviously Democrats will be very upset if that happens.

And so -- but setting that aside let's just say she did get indicted and what would happen. I presume that Joe Biden will jump in the race.

Probably we would see Bloomberg jumping into the race. Michael Bloomberg is a former mayor of New York City who has said he would only run if it was Trump or Sanders who is the candidates, who would be running against.

So essentially on the Democratic side would only want to run against Sanders. So if some reason Hillary Clinton is not in the race, maybe Michael Bloomberg jumps in.

KELLY: How do you think this e-mail issue is playing among Democrats? You know, Republicans they want to know about it all the time. Is she going to jail? Is she going to the White House or she's going to the big house? What about in Democratic circles?

POWERS: I don't think its play -- it really an issue that's matter not much to your average Democratic voter certainly not your Democratic base voter. It's something that they have decided to, you know, they've taking her word on this I think which is that if whatever happened was an accident. It was that, you know, she didn't know it was classified it was classified after the fact all the different explanation she's given I think people are just taking a face value.

Great to see you Kirsten Powers as always.

POWERS: Good to be here.

KELLY: So Hillary Clinton did try and turned the tables on her Republican colleagues. We'll have some of that for you.

And they also discuss the wild card of Mayor Bloomberg joining the race. And we'll discuss too.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CLINTON: One of the most distressing aspects of this campaign has been the language of Republican candidates, particularly their frontrunner. The insults demeans denigrate different people.

He has cast a wide net. He started with Mexicans, he's currently on Muslims. But I found it particularly harmful the way that he has talked about Muslims, American Muslims, and Muslims around the world and I have called him out continuously about that.

(END VIDEO CLIP)

KELLY: That was Hillary Clinton using tonight's Democratic town hall as an opportunity to knock the Republicans and their current frontrunner over language that she says, quote, "demeans minorities".

Nomiki Konst is founder and executive director of The Accountability Project, Lisa Boothe is a Republican strategist and president of High Noon Strategies. Good to see you both.

So the question there was pretty powerful right? It was a woman who had served in the Armed Forces who came and said, "How am I supposed to explain this to my young children who are Muslim and, you know, convince them that they're going to be raised in a country that will love and accept them?" That's my paraphrase.

Nomiki, how is this issue, because if you look at Trump's approval rating when it comes to his ban on the Muslims, you know, proposal, he does very, very well with the Republicans on that. How about with the Dems?

NOMIKI KONST, FOUNDER, THE ACCOUNTABILITY PROJECT: He does not do very well (inaudible). You know, listen the Democratic Party is a diverse party we don't look as an equate diverse party in the country. In Millennials in particular are the most diverse generation in history.

So not only as speaking to the Democratic base but this is speaking to the next generation of Democrats. And Hillary knows that every Democratic person running for president right now knows that.

But the Republicans don't seem to get that. Some Republicans do, fairly. Some Republicans like Jeb Bush are understand that the country is moving forward, we have a diverse country and that includes Muslims, that includes Mexicans, that includes Latinos and African-Americans. But Donald Trump right now is speaking to his base because he wants to win Iowa.

That base, however, is an older demographic and it is not reflective of the Democratic Party or the independence that Bernie Sanders is winning right now.

KELLY: Well that's the key, right? So Lisa that's the key is the independence. I don't think Trump is planning on getting a ton of Democrats although there is some evidence he's attracting some. You know, in particular lower to middle class earning Democrats who were sort to feel disrespected and ignored.

But your thoughts on the Independent in this issue?

LISA BOOTHE, REPUBLICAN STRATEGIST: Well, Megyn, I find it ironic that Democrats want to talk about diversity in the country. When you look at the Republican ticket, the Republican ticket is the only -- or the Republican field I mean is the only field right now that represents the diversity in America. We have two Hispanic candidates who are running to be president of the United States. We have an African-American. And a woman that are running as well.

KELLY: They say just as a tweak of the GOP presidential field has diversity, doesn't mean the party does, right?

BOOTHE: Rather, you know, I disagree because look at the faces of the Republican Party and he's running for the Republican nomination right now. And what I think tonight's debate did for Hillary Clinton was actually underscore her biggest weaknesses. And those biggest weaknesses are the unlikability factor.

If you remember during the 2008 debate it was an ABC debate, she would ask point blank (ph) if she was likable enough. Then we saw that problem tonight, especially with the justification between the more comfortable or relax style someone like Bernie Sanders and Martin O'Malley and Hillary Clinton we already .

(CROSSTALK)

KELLY: Who doesn't like to look in the Brooklyn accent, right? I love that accent, it's endearing right? Any guy that's up and says I'm too fat that's I like to go, I love him. But that doesn't mean people are going to vote for him Nomiki.

KONST: Right.

KELLY: I realize he's leading now in New Hampshire by a lot and doing well in Iowa. But that doesn't mean the Democrats are going to make them their nominee. And the odds are very much against him.

KONST: And, you know, when his voters are more agitated group of voters. They're looking at the issues, they listen to him talked about tax policy. I mean when is the last time income and equality was something that president - presidential candidates run on.

If that his demographic, they want to know about the issues in detail. And that's really Hillary Clinton's demographic as well. And he want to talk about unfavorability.

How is Donald Trump doing so well when his likability factors are so low? So this is a very strange election. I don't normally see elections where -- I don't think in history we've had presidential candidates' frontrunners with such low likability factors.

So if you're going to talk about that Lisa, you got to look at on the other side as well.

KELLY: Well both Trump and Hillary Clinton have low trust ratings that's for sure, very low in trust. But it's like, you know, notwithstanding, this doesn't seem to be a deal breaker for voters because it's 2016. This is the world in which we live.

Ladies great to see you both.

KONST: Thanks Megyn.

BOOTHE: Thank you Megyn.

KELLY: Up next, Bernie Sanders goes after Hillary Clinton and embraces his socialist side.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CLINTON: I want to be the president for everyone. And I believe that is exactly what any president should do.

UNIDENTIFIED MALE: You've all made a few people upset over your political careers. Which enemy are you proud of?

CLINTON: Well in addition to NRA, the health insurance companies, the drug companies, the Iranians, probably the Republicans.

(END VIDEO CLIP)

KELLY: Well so that was Hillary Clinton striking a much different tone tonight just months after saying one of the highlights of her political career is making enemies of Republicans.

So what should voters believe? Joining me now is Mark Hanna, who served as a campaign aide during the Obama and Kerry presidential campaigns.

There is no question that she learned after that debate answer, you don't want to listing half the country as your number one enemy.

MARK HANNA, FORMER OBAMA AND KERRY CAMPAIGN AIDE: Right.

KELLY: And don't list them right with the Iranians.

HANNA: No.

KELLY: Because people aren't necessarily thinking Ted Cruz when they hear Republicans. They're thinking like, "She means me this little like, you know, average Joe in the middle of Iowa" and she's trying to say, "I didn't mean that."

HANNA: Yeah, you know, Hillary has got a problem. She positioned herself as somebody who's willing to work with Republicans and at the same time -- and when you have a primary a Democratic primary you're going after a liberal base, you need to demonize, you need to create wages, you need to -- especially when Bernie is doing it.

So that is what she's doing. It's going to come back to haunt her.

KELLY: What -- explain what we saw tonight with the enthusiasm for him? I mean he got to ask, you know, "What's the deal?" You know you're a socialist, explain it.

And far from running for him he was like, "Hell's bells, I am" and he give this full throat of explanation, it's really long so I'm not going to play the whole thing.

But basically he goes on about how it means economic rights, economic security, there's something wrong when the rich get richer, everyone else gets poorer, we need a government for everyone that one dominated by the billionaire class.

HANNA: He told people he was going to raise taxes on them. I mean -- and this is how on a bashed (ph) Bernie is. I give him credit for sincerity. I think the actor Rob Lowe sent out a tweet saying, who is this man hectoring me on televising and telling me he's going to raise my taxes too?

You know, so he's got a delivery issue over Bernie does. He comes across sincere but he's a -- yeah, he's rough around head (ph).

KELLY: Why are they claiming he's an outsider?

HANNA: Because he's been in, you know, been in the Senate for as long as he has or -- yeah.

KELLY: Yeah, and men in congress before that, I mean, he's not an outsider.

HANNA: Vermont, maybe? I don't know.

KELLY: That doesn't count.

HANNA: That goes time.

(CROSSTALK)

KELLY: I mean, he's been independent, he just needs a socialist.

HANNA: Right, right.

KELLY: But I don't get. I mean, the people who are thirsty for the outsiders looking at Donald Trump, that make sense. Even Ted Cruz, he's been backing the establishment since he got out of the Senate. That makes sense. I don't know, Bernie?

HANNA: So the Democrats in the '90s when more toward the center and that has won them the center, that has won them the majority and won them the presidency. Bernie is advocating for ideas that haven't been popular in along time, expanding social security, raising taxes on people in the middle class that in order to provide a social safety net. So he is outside of the main stream. He's been in the institution a long time but he's certainly on the outside when it comes to institutional politics and where his policy positions are.

KELLY: Last question.

HANNA: Yeah.

KELLY: What's with the one after the other debate format? I mean, it's not debate at all its like this is -- I love this, I have to pour (ph) to on myself and really know it's challenging me?

HANNA: Maybe I'll sit, maybe I'll stand.

KELLY: Ridiculous. Love it over here.

HANNA: Being cuddled a little bit.

KELLY: I mean, would you come on, Fox News, come on. The Republicans do it.

HANNA: You're asking tough questions -- there are tough questions there. You saw the audience members ask questions that weren't always soft balls necessarily?

KELLY: It's a lot harder when you're -- the people you're running against are to your left and right and ready to (inaudible)

HANNA: No question.

KELLY: I think that's how it's going to go. Well, I will see. Great to see you.

HANNA: Good to see you Megyn, thanks.

KELLY: Up next, the Bloomberg question.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Are you going to run for president?

MICHAEL BLOOMBERG, FORMER NYC MAYOR: No. I do not believe that a third party candidate with win. And I can tell you categorically, I am not running for president.

(END VIDEO CLIP)

KELLY: Oh, but that was then and this is now. That was about 18 months ago to be exact and the New York Times has just published an attention getting story about former New York Mayor Michael Bloomberg considering a third- party run for the White House depending on the conditions.

Joining us now, Howie Kurtz, host of "MediaBuzz" on Fox News. Howie, and the conditions would be what?

KURTZ: And the conditions would be that either Ted Cruz or Donald Trump is the GOP nominee and Bernie Sanders is the Democratic nominee. But we don't have to worry how this is going to play out because he's not going to run.

The media fall for this every four years there were leagues, well, Mr. Bloomberg is considering the independent run. He knows an independent candidate isn't going to win the White House. He's 74 years old. He made a fortune on Wall Street. I'd love to see another New York billionaire in the race. But it's not going to happen.

KELLY: You disagree with Bernie then who says, that would just prove his point that we're no longer a democracy, we're in oligarchy?

KURTZ: Well, anybody can run and win even if you happen to have billions of dollars and Bloomberg has many more billions ...

KELLY: He said he will be self-funded according to the Times.

KURTZ: Yeah, sure just like Donald Trump. Look I -- Michael Bloomberg was a very good mayor of New York City for 12 years, and nobody can take away from him. He's also a soporific speaker and it's not like he has a natural constituency out there that is clamoring for him to get into this race.

KELLY: Can you say soporific? Don't ever say soporific again.

KURTZ: OK. He's boring.

KELLY: What did you say boring? Could you trying not to be soporific?

KURTZ: I'm trying not to.

KELLY: But why are you so sure it's not true? Because, you know, given the sentiments we've heard at this, you know, forum tonight all over the country, both sides. The level of dissatisfaction, you know, that the Bernie Sanders supporters have and Hillary, the level of dissatisfaction that someone the GOP have with both sides, you know, whether it's Trump or slash Cruz or the establishment, why couldn't you see somebody like Bloomberg saying, if those guys, if it's, you know, Trump and Sanders. I mean, because I'll take all those disaffected voters.

KURTZ: Well, because it's difficult to take all those disaffected voters even if you get on all 50-state ballot when you've got the party machinery beside. I think Hillary Clinton for all her problems is probably going to be the Democratic nominee amidst Mike Bloomberg won't run.

And I think he was being honest. Maybe he is tempted a little bit. You know, he's been out of the limelight, he's back to running his company, he doesn't have the excitement, he doesn't have reporters chasing him down every day. So this is a way of keeping himself in the news.

I think the ads are very, very slim that he would actually get into this race..

KELLY: But if he did? If he did?

KURTZ: If he did.

KELLY: Who would it hurt? Because, you know, Bloomberg was a -- he was like a Democrat and then a Republican and then an independent.

KURTZ: Right.

KELLY: And he is very anti-second amendment. But he is, you know, an economic genius and he kept this city running like a well-oiled machine. Oh, look who is back. Oh, look who woke up from a nap. Thanks for being back with us, Stirewalt.

STIREWALT: Oh no.

KELLY: Since you bothered to show up, I will ask you the question I'm going to ask Howie which is, who would he hurt? I am so mean. I'm following the kids whose at the forum.

STIREWALT: So if we have the prefigured condition that it must be both Trump and Sanders for him to run then he would -- that we are in such a bizarro world, it is hard to say.

KELLY: Just the answer.

STIREWALT: Look, I would say probably it hurt Trump more because there would probably be Republicans who would gravitate to Bloomberg more -- or not moderate, it's not the right word but more usual kinds of Republicans who might gravitate to Bloomberg. But, look, Bernie Sanders couldn't beat a wet paper bag. He couldn't fight as way at a wet paper bag in a general election.

Self-declared socialism is lovely in Iowa Democratic caucuses and it delights -- it warms every cockle of their hearts in a middle of a snow storm. But in a national campaign issue, it is a dead-dog loser. You cannot get there as Bernie Sanders as the nominee.

I would think that Donald Trump would beat him even if Michael Bloomberg run a campaign. I think that's how bad Bernie Sanders would be in the general election.

KELLY: Before we go, Howie, what is with the town hall -- I mean, these Democrats? They've done a couple of debates but really sequential presentations with no adversaries next to you challenging you.

KURTZ: Look, the Democratic National Committee wanted to hand this to Hillary on a platter so they set up a system where there were very few debates, debates that were held were hardly be seen by anybody. And now suddenly, Hillary back against wall down 22 points to Bernie in New Hampshire, a74-year-old socialist. She wants to get out there more in debate because she's good at it.

KELLY: Let's check. I don't want to be anywhere near Bernie or Martin. All right, guys I got to go. Good to see you. Just sorry, Stirewalt, I think I hurt your feelings, I didn't mean to. You know, I love you.

So Thursday night, you guys, Thursday night. The Fox News/Google Republican debate. This is the last one before they actually begin voting in Iowa. We hope you'll join us, thanks everyone. I'm Megyn Kelly.

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