Kellyanne Conway on alt-right, keeping Trump on message; Gary Johnson on push to be included in presidential debates

This is a rush transcript from "Fox News Sunday," August 28, 2016. This copy may not be in its final form and may be updated.


It's still August, but the presidential race hits a new low as Donald Trump and Hillary Clinton trade blistering accusations over race.  


DONALD TRUMP, R-PRESIDENTIAL NOMINEE:  Hillary Clinton is a bigot who sees people of color only as votes.  

HILLARY CLINTON, D-PRESIDENTIAL NOMINEE:  He is taking hate groups mainstream and helping a radical fringe take over the Republican Party.  

WALLACE:  Today, Donald Trump's new campaign manager, Kellyanne Conway, on Clinton tying Trump to the alt-right and the effort to keep Trump on message.  

Then, the Libertarian Party's presidential nominee, Gary Johnson -- on his push to get on the stage for the presidential debate.  It’s a "Fox News Sunday" exclusive.  

Plus, we'll ask our panel whether Trump's position on deporting illegal immigrants will gain or cost him support.  

And our power player of the week.  After dominating in Rio, what's next for Katie Ledecky?  

KATIE LEDECKY, U.S. OLYMPIC SWIMMER:  I haven't been in the pool, and I’m starting to itch to get back in.  

WALLACE:  All right now on "Fox News Sunday."


WALLACE:  And hello again from Fox News in Washington.  

It's been an ugly week on the trail as Donald Trump and Hillary Clinton accused each other of racism.  Meanwhile, Trump is under fire for a possible shift on immigration, and Clinton faces new allegations about her private e-mails and the Clinton Foundation.  We still have 72 days until the election.  

Joining me now is Trump's new campaign manager, Kellyanne Conway.  

Kellyanne, let's start with Hillary Clinton's emails -- almost 15,000 of them that the FBI has uncovered from her private server or from other accounts and handed over to the State Department.  The scandal over her private server, and the Clinton Foundation has been going on for a year now, more than a year.  

What makes you think that there is a game changer in this new batch?  

KELLYANNE CONWAY, DONALD TRUMP CAMPAIGN MANAGER:  Well, Chris, first, thanks for having me, giving the campaign a platform this morning.  

Hillary Clinton achieved something this week that even I am impressed with.  She made her trust problem even worse.  And the new Quinnipiac poll out this week shows 66 percent of Americans say that she is dishonest, 29 percent think she's honest.  Those numbers have actually gotten worse since she announced her campaign over a year ago.  And she's earned that dishonesty and untrustworthiness because of the ever-growing scandal incident that you laid out that even though she said she had turned over all the emails to the FBI as part of their investigation, it turns out she has not.  

What the director said last month, excuse me, about her being reckless and careless about thanks she had said turning out not to be true, the number of devices, the classified information, we see that there's still more happening.  And what is really amazing to me as put forth by ABC News last night in a report, laid out by the Associated Press this week, Chris, these aren't right wing websites.  This is the Associated Press and ABC showing Americans the revolving door between the State Department and the Clinton Foundation, and Americans have the right to be concerned.

This is our State Department.  This is our public entity.  We don't want a straight line between the Clinton bank account, the State Department, the Clinton Foundation, and it doesn't -- it shows Americans how she may do business if she were elected in the White House.  

WALLACE:  All right.  You've got your own issues with the Trump campaign.  This week began with Donald Trump appearing to back away from his pledge during the primaries that he was going to deport all 11 million illegals who were in this country.  But by the end of the week, he seemed to be backing away from backing away.  Here he is.  


TRUMP:  There certainly can be a softening because we're not looking to hurt people.  We want people -- we have some great people in this country.  

I don't think it's a softening.  It’s --  

ANDERSON COOPER, CNN ANCHOR:  But 11 million people are no longer going to be departed.  

TRUMP:  I’ve had people say it's hardening, actually.  


TRUMP:  There is no path to legalization unless they leave the country and come back.  


WALLACE:  Kellyanne, please clear this up for me.  Is Donald Trump saying that if someone has come into this country illegally -- so they broke the law, but they've broken no laws since then, been in the country for 10 years, 20 years, without breaking any other laws -- is he still going deport them, or is he going to let them stay?  

CONWAY:  So, what he's said is very consistent, Chris.  Number one -- and this is important -- the signature piece of his legislation has, and his campaign, has always been build the wall.  That has not changed.  Build the wall.  No amnesty.  No citizenship.  No more sanctuary city.

You know, the face of our campaign are people like Michelle and Julie and Laura and Agnes, these angel moms who stood with Donald Trump in different forms just this week, Chris, talking about their grievous losses, the loss of their children, all of whom were murdered by immigrants who should not have been there.  That's also part of Donald Trump's plan.  

WALLACE:  But, Kellyanne, if I may --

CONWAY:  Those who’ve committed, a crime, they're out of here.

WALLACE:  If I may respectfully, he said in the campaign and said it on the debate stage -- I was there as one of the moderators -- "I’m going to set up a deportation force, and all 11 million people who have come here illegally have to go."  Do they, or don't they?  

CONWAY:  And what he's said now is that he will look at that.  But he wants to look -- the softening is more approach than policy, Chris, because we -- did you -- in the clip that you played, you heard the words that followed it, that we need a fair and humane way of addressing the fact that 11 million -- or we don't know the number -- 11 million or so as estimated illegal immigrants live among us.  He wants to find a fair and humane way.  

And if you enforce the law and you deal with those agencies that already exist to enforce the law, then we'll see what we've got.  I mean, nobody bothers to enforce the law.  They keep -- Washington always layers new laws on top of laws that don't work or unenforced to pretend to the American people that they're somehow being active on an issue.  But I think it's important to look at the five, six, seven main tenets in his overall --


WALLACE:  I understand, though, and I think you made them clear.  I just want to be clear, though.  What you seem to be saying is, you're leaving the door open that President Trump would consider the possibility of giving people who have not committed more crimes to living in this country legally.  

CONWAY:  What he has said is no legalization and no amnesty.  He also said this week, Chris, that if you go back to your home country and if you'd like it come back to the United States as an immigrant, you need apply through the many different channels that allow people to apply for citizenship or entry into the United States legally.  And so, that's important.  

We all learned in kindergarten to stand in line, to wait our turn.  He is saying that, as well.  

Now, the deportation force, I would like to address that.  He hasn't mentioned that since last November.  So, I think in a few of the debates as you point out.  And if you look at his convention speech last month, he's consistent on that now in terms of addressing these many different areas of a very complex issue.  

But I would really implore the viewers, Chris, and others to look at the contrast between Donald Trump and Hillary Clinton on immigration.  There are very few issues where they're more different.

In fact, Hillary Clinton is to the left of Barack Obama on immigration.  She has been critical of President Obama deporting what's close to two million or more in some estimates, immigrants, in this country.  She says she will use executive amnesty.  She’s for catch and release.  She's for the sanctuary cities that harbor illegal immigrants.  

In the case of Kate Steinle, the man who murdered her right in front of her father over a year ago, Chris, he had been deported five times.  Why is he here?  

So, everybody needs to be -- everything needs to be examined and looked upon.  But give Donald Trump credit for at least trying to address a complex issue and not pretending like Hillary Clinton does that we don't have these problems.  

WALLACE:  All right.  Let's move on to another one.  Donald Trump has also been reaching out to African-Americans this week, asking, what do you have to lose after decades of Democratic neglect?  Here he is.  


TRUMP:  Poverty, rejection, horrible education, no housing, no homes, no ownership, crime at levels that nobody's seen.  


WALLCE:  But, Kellyanne, that totally misrepresents what blacks face in this country.  Trump says black youth unemployment is 58 percent.  It's actually 19 percent.  Twenty-six percent of blacks live in poverty.  That's not good.  But the vast majority do not.  

How can Trump address the problem when he doesn't seem to understand what it really is?  

CONWAY:  So as I understand it, Chris, the 58 percent refers to the number of African-American youth who are not working.  

But you're right.  We're also taking our message to African-Americans who are concerned about other things like lending, like housing, like discrimination.  They may be unsafe.  They may live in safe neighborhoods with fine schools, but it certainly isn't what their children deserve.  They deserve the same high-quality education as other children.  And that's his point.  

And we just -- I sat with him and African-Americans on Wednesday, I believe it was, or Tuesday.  And we had a round table.  It was a very productive conversation where he did most of the listening.  And they laid out their concerns, they laid out their achievement.  

WALLACE:  I want to --  

CONWAY:  Yes?  

WALLACE:  Well, I don't mean to interrupt, but we are running out of time.  I want to pick up on exactly that.  

Trump has been running for president, though, Kellyanne, since June of 2015.  That's 14 months.  Question -- how many times has he gone in to an American inner city and held an event for a largely black audience?  

CONWAY:  I don't know the answer, but I can tell you there are some --


WALLACE:  Let me say, would you be surprised if the answer is none?  Never?  

CONWAY: No, I would not be surprised.  I will tell you, Chris, and I pledge to you, and everybody who's watching that those events are actually being planned.  And we're very excited about them.  

And, look, John McCain and Mitt Romney are fine -- they're wonderful human beings, great Americans.  They were fine presidential nominees.  John McCain got 4 percent of the African-American vote, and Mitt Romney improved that to a whopping 6 percent.  

We're fighting for every single vote.  We're going to leave it all on the field.  And that includes going where the voters are and taking the case directly to them --

WALLACE:  But you say that --


CONWAY:  -- the churches --

WALLACE:  You say that, the fact is, in 14 month, he's never once been in an inner city and held an event for black Americans.  And this a tweet that Mr. Trump sent yesterday -- I’m sure you're familiar with it -- it's gotten a lot of attention after the tragic shooting of the cousin of basketball star Dwyane Wade.  Trump tweeted, "Just what I’ve been saying.  African-Americans will vote Trump."

Do you think it's right to have that kind of a political response to a personal tragedy?  

CONWAY:  I was pleased that his next tweet expressed his condolences to the Wade family, about the death of his cousin.  That horrifying example of a woman who had just signed up her children for school, pushing a baby stroller, that is a nonpartisan issue that should sicken us all.  And I also would express my condolences the entire family.  I’m pleased that he did.

But, Chris, I’m new to this post, and he's going to take his case right to people where they live.  And that includes everyone.  We're vying for every vote.  Every ethnicity, both genders, every age group.

This is an American presidential election, and he is going to -- I mean, look what Hillary Clinton did this week.  My goodness, she missed another opportunity to deliver a speech about Obamacare, energy, or infrastructure, the economy or ISIS.  She went and she elevated personal insults into an art form.  

WALLACE:  Let me ask you -- let me --

CONWAY:  At least he is talking policy.  

WALLACE:  Let me ask you about that.  Hillary Clinton in the speech you're talking it said that Donald Trump is taking hate groups mainstream.  Here she is --


CLINTON:  Racists call themselves racialists.  White supremacists now call themselves white nationalists.  The paranoid fringe now calls itself alt-right.  But the hate burns just as bright.  


WALLACE:  You say that she's making personal insults.  

I mean, she does have a point.  The new CEO of the campaign, I guess he's your boss, is Steve Bannon, who’s the head of Breitbart News.  Here are some of the headlines that Bannon has written on Breitbart, "Birth control makes women unattractive and crazy."  And, "Would you rather your child had feminism or cancer?"  And he's called -- Breitbart has called -- rather, Bannon has called Breitbart the platform for the alt-right question.  

Question, this is the man that Trump chose to run his campaign?  

CONWAY:  Well, he chose me to manage his campaign, and I report directly to him.  

But I will say this -- the idea that Hillary Clinton who's been in public life for 30 years gives a speech this week, Chris, about -- it was totally content-free, policy-free address about consultants is just remarkable to me.  

I understand Hillary's campaign is now a hot mess.  Revelation after revelation, the Clinton Foundation, State Department, brand-new reports overnight that's reflected in the polls.  

There's a new poll this morning by Morning Consult showing that we cut her lead nationally from six points to three points in just a matter of two weeks?  Why?  Because people are uncomfortable voting for someone that they think is corrupt and rigged.

I know she's trying to divert attention away from her campaign and her State Department e-mail scandals, Clinton Foundation, foreign donations in the tens of millions of dollars by talking about consultants.  But the fact is that the hot mess that has become the Hillary candidacy cannot escape the fact that a majority of Americans think she is corrupt and rigged, and they're not going to want that in their next president.  

WALLACE:  Finally, I’ve got about 30 seconds left.  There is a report that Donald Trump is going to be holding a debate prep session today at his golf course in New Jersey.  One, is that true?  

And secondly, how is he preparing for debates?  Are you having mock sessions?  Is it true that Laura Ingraham is going to play Hillary Clinton?  Is he cramming thick briefing books?  

CONWAY:  I'll be at lunch at Bedminster, and I’m sure we'll have a lively conversation.  

Look, he's an unconventional candidate, and he's not going to prepare the way Hillary does which is, you know, locking her in a room and crammed her head with all those binders and get the Hollywood types that she raised gazillions of dollars with in fund-raisers this week instead of standing with sanctuary city moms, you know, who lost their children.  She's in Hollywood raising money.  She'll have them helping her consult.  

He will be prepared for these debates.  All of his policy prescriptions that he’s putting just in the last two weeks, Chris, on defeating radical Islamic terrorism, on middle-class tax relief, on law enforcement, on taking his case to the communities of color --

WALLACE:  But is he going to hold -- just real quickly, is he going to hold mock debates?  

CONWAY:  He might.  But remember, he's an unconventional -- and this idea of role playing Hillary Clinton -- Laura’s a friend of all of ours.  And we appreciate any insight and advice that she is willing to give in her very busy life.  

We take advice and we take counsel from many people who have experience and mean to be helpful.  But this -- you know, the Donald Trump, the authentic Donald Trump who's been taking his case directly to the voters is the one that you will see on the debate stage with Hillary Clinton.  

And I think they're nervous over in Clinton camp because he is the x -- he’s the unpredictable x factor.  She is a scripted, staged (ph) Hillary Clinton that basically memorizes lines.  You saw these two interviews she gave by phone this week on cable stations.  She obviously was reading something somebody gave her.  I didn't think they went well.  

The scarcity as strategy that they use for Hillary Clinton, making sure that we don't see that much of her, that changes when she's forced to get to the debate stage.  

And so, he will be preparing in a very different way.  

WALLACE:  All right.  We're going to leave it there.  

Kellyanne, thank you very much for coming on.  Thanks for your time.  Please come back.  

CONWAY:  Thank you, Chris.  

WALLACE:  Up next, the Clinton Foundation and private emails.  They're not going away as campaign issues for Hillary Clinton.  We'll bring in our Sunday group to discuss the latest revelations.  

Plus, what would you like to ask the panel?  Will thousands of new emails create more problems for Clinton, or has the political damage already been done?  Just go to Facebook or Twitter @FoxNewsSunday.  We may use your question on the air.



TRUMP:  Hillary Clinton ran the State Department like a personal hedge fund.  It's hard to tell where the Clinton Foundation ends and where the State Department begins.  

CLINTON (via telephone):  Neither my husband, my daughter, nor I have ever taken a penny of the salary from the foundation.  My work as secretary of state was not influenced by any outside forces.  


WALLACE:  Hillary Clinton on defense, responding to Donald Trump's new focus on links between the foundation and Hillary Clinton's tenure as secretary of state.  

And it's time for our Sunday group.  Syndicated columnist George Will.  FOX News political analyst Juan Williams.  Susan Page from USA Today. And GOP strategist Karl Rove.

Well, I want to start with the remarkable number that the Associated Press came up with this week and that Kellyanne Conway just referred to.

During the first half of Clinton's time as secretary of state, she met with 154 people from private interests, not U.S. or foreign officials, 85 of them, more than half, were donors to the Clinton Foundation who contributed as much as $156 million to the foundation.  

Karl, I don't have to tell you, money does buy access in this town.  So, is there anything new here?  

KARL ROVE, GOP STRATEGIST:  Yes.  The volume is jaw-dropping.  You left out another number.  Nearly 150 phone calls, phone messages left by the CEO of the Clinton Foundation for Cheryl Mills, Hillary Clinton's chief of staff.  

WALLACE:  At the State (ph).

ROVE:  At State.

So, how many phone calls was she able to receive beyond that?  This is a two-year period.  She left a message every three days.  It looks like she was constantly in communications.  

Hillary Clinton says, "I know there's a lot of smoke there, and there's no fire."  Well, there's a lot of fire there.  The more we look at this, the more we see favors being traded, people being appointed to boards they shouldn't have been on.  People attending meetings that they shouldn't have been at, people being invited to state dinners, people being able to circumvent the normal process of the state department in order to get special pleading in front of the secretary.  

WALLACE:  Juan, when you see all of the emails from people in the Clinton Foundation to Cheryl Mills to Huma Abedin, these are the people right at the right hand of Hillary Clinton in the State Department -- when you see the phone messages, all of that, does it trouble you?  The coziness of the relationship?  

JUAN WILLIAMS, FOX NEWS POLITICAL ANALYST:  Yes, it sets off alarm in my mind as a journalist.  I mean, even before I knew about the A.P. report, the phone calls and the like, I mean, the whole structure, Chris, seems to me to invite suspicion, the idea that there's some quid pro quo for access going on.  So, it's concerning to me.  

Let me just state, in all fairness, I think the foundation does good work -- malaria, HIV, and the like.  But there's no getting away from the appearance of impropriety here.  I’m astounded that this foundation has existed since, in fact, 1997, during President Clinton's tenure.  I don't understand how she -- Mrs. Clinton -- doesn't see that this would invite people including the Boston Globe, Ed Rendell, fellow Democrats to say, this is a problem, you can't do this.  

She had to sign an agreement with the Obama administration which she apparently violated by going about these phone calls, meeting people, even if it's -- you know, I don't think there's any evidence of impropriety.  Just by the standards you set, lots of people say, access is for money in this town.  

But still, if there is no evidence of illegality, the appearance of trouble abounds.  

WALLACE:  Let me quickly pick up with you on Karl, because that is the defense of the Clinton campaign at this point.  There's no smoking gun.  There's no official act that was done.  

ROVE:  There's plenty of smoking guns available.  Steve Hayes has a great piece in this week's Weekly Standard on it.  

Let me just give one example.  The largest donor from Ireland who gave between $10 million and $25 million is a guy named Dennis O'Brien.  He has the cell phone concession in Haiti.  

When the earthquake happens, what happens?  He ends up getting USAID grant.  He participates in a $10 million grant for the development of mobile banking put together by USAID and the Gates Foundation. Then, he starts parting with USAID on education initiatives.  

In all the news releases, the amount of money the federal government is putting in is spelled out, but never is it spelled out what's being put in by him.  

And then, Bill Clinton personally intercedes and arranges for the construction of a $45 million luxury hotel owned by him, works it out with Marriott to build the hotel, goes to a World Bank affiliate to get the money, and presides over the dedication ceremony.  And he's the largest contributor from Ireland.  

WALLACE:  OK.  Let’s switch to, because there was another revolution this week about Clinton and emails.  And that's the fact that the FBI had apparently uncovered almost 15,000 new ones that we didn't know about either from this supposedly wiped clean server or from other people's e-mail accounts.  And because of lawsuits, there's going to be a steady release of these emails between now, right through Election Day.

George, how big a deal is that?

GEORGE WILL, SYNDICATED COLUMNIST:  Well, it’s a big deal and it demonstrates redundantly what a tangled web we weave when we practice to deceive.  I mean, she has just been, all along, her judgment, it appears worse and worse.

Second, because this is all tangled with the foundation, this really illustrates the Clinton's graspiness, that’s a word the Washington Post used in an editorial 15 years ago when the Clintons absconded with some of the White House furniture.  So, we've done down this path before.  

The question is, is this a big deal electorally?  I’ve got my doubts.  I’m not sure how many people have made their minds already and remain to be persuaded.  Voting begins in this country on September 23rd.  So, it's coming up on us and fast, North, South Dakota, and I think Minnesota.  

The five of us are peculiar people.  We're really interested in all the details of this.  Thirty percent of Americans could name their two senators.  A majority of Americans can't name the three branches of government.  They're not paying that much attention.  

WALLACE:  Well, I want to pick up on that because that's what we asked you for questions, but and that was the political impact of these new revelations about the emails.  And you had a lot of answers.  

Craig Coldren sent this on Facebook, "Does anything matter when her supporters don't care?"  

And I love this one, Bill Smith sent this on Twitter, "If you want me to tweet about this, donate to the Bill foundation, 10 percent administration fee, and pay my wife to make a speech."

Susan, this has been going on, whether it's the private emails, whether it’s the Clinton Foundation, at least since March of 2015.  And I guess the question is, if people -- if a voter hasn't been turned off already -- and obviously she has a lead in the polls -- are these new revelations going to turn them off and make them change their mind?  

SUSAN PAGE, USA TODAY:  I think the election is partly baked but it’s not entirely.  There’s some still swing in the election.  We have a Morning Consult poll this morning that shows only a 3 percent lead for Hillary Clinton.  That’s pretty close.

It does reinforce the worst impression that voters have about her, that she always pushes the edge of the envelope.  I think there's not any clear evidence so far of something that was criminal.  It's not even unusual.  It is pretty politically unsavory.  

And I actually think it reinforces not only questions about honesty and trustworthiness, but the idea that she is a creature of the status quo in a year when Americans are really hungry for change.  

WALLACE:  And does the fact -- I mean, we were talking about this -- does the coziness of the relationship, the fact that she met with 85 people, the fact that there are dozens of -- the fact that it seems that Doug Band, who is one of the top Clinton Foundation officials and also a personal aide to Bill Clinton, is just back and forth all the time, sending notes to Cheryl Mills and Human Abedin with various asks.  

PAGE:  Pretty cozy, pretty predictable.  I mean, these were concerns that were raised at the point she was being confirmed as secretary of state.  And what is surprising I think perhaps quite surprising is she didn't do more to address this way in which Washington works.  You ask any elected official if they take a call from a big donor or willing to meet with a big donor, and they'll say, yes, but it is entirely -- you could entirely have predicted that she would be in this place, in this presidential election if she proceeded the way she did.  

WALLACE:  All right, panel, we have to take a break here, but we'll see you a little later.  

Up next, the Libertarian Party's presidential nominee, Governor Gary Johnson, who's at almost 10 percent in the polls and says he's going to play a big role in November.  

Plus, what do you think -- does Johnson have a shot at swinging the election?  Let me know on Facebook or Twitter @FoxNewsSunday, and use the #fns.  


WALLACE:  Coming up, is Donald Trump softening his stance on his signature issue?  


TRUMP:  When Mexico sends its people, they're not sending their best.  

There certainly could be a softening because we're not looking to hurt people.  


WALLACE:  We'll ask our Sunday group how a possible change will sit with hard-line conservatives.


WALLACE: A look outside the beltway at Carlsbad Caverns National Park in New Mexico as the National Park Service celebrates 100 years.

Well, he’s the former Republican governor of New Mexico, and now the Libertarian Party's presidential nominee, who says he has a path to victory in this election. Joining us now, Gary Johnson.

Governor, welcome to "Fox News Sunday."


WALLACE:  Your campaign manager says you have a two-part strategy to win the White House. The first part is that you have to get on that stage for the presidential debates starting September 26th. In the Real Clear Politics average of recent polls, you're at 8 percent. So you -- and you need to reach 15 percent to get on the stage. Would you agree that if you don't get into the debates, it's game over?

JOHNSON: Winning the election. Yes, I would say game over winning the election. But the Presidential Debate Commission has identified five polls. We're at 10 percent flat on those five polls. And that's an increase really of probably about 4 percent consensus over the last six or seven weeks. So we're optimistic that we're going to actually get into the debates. We're spending money right now in many states. In five states right now, I'm at 16 percent. So I’m just really optimistic.

WALLACE:  OK. So now you get on the debate stage and now this brings us to phase two, which is, as I understand it, is to keep both Clinton and Trump from reaching the majority of 270 electoral votes to be elected president. Throw the race into the House of Representatives, where you say that you could win and, in that case, each state gets one vote, that you could win on a second ballot. How does that happen?

JOHNSON: Well, the object is to win outright. And it's not impossible that if we go into the presidential debates with the polarization of Clinton and Trump that we might actually run the table on all this. And I’m talking about me and Bill Weld, two former Republican governors re-elected in heavily Democrat states. So --

WALLACE:  Bill Weld, the former governor of Massachusetts.

JOHNSON: Yes. I don't think there's any arguing that we did make differences in our state being fiscally conservative, socially inclusive. I'll add to that, that we're really skeptical about intervening militarily to achieve regime change that I think has resulted in a less-safe world. So I think that we represent about 60 percent of Americans with that philosophical belief.

WALLACE:  So let -- let's get into that, because you say the key to your candidacy is if people sit down and compare you to Clinton and Trump on the issues, they're going to pick you.

JOHNSON: Yes. Yes. Yes.

WALLACE:  So let's do a lightning round.


WALLACE:  Quick answers. Quick questions on a variety of issues.

International trade.

JOHNSON: Free trade. Supporting IPP. It's a good thing. Free trade. The -- more jobs.

WALLACE:  The -- the TPP?


WALLACE:  The Pacific trade deal.

JOHNSON: Yes. Yes. We're the only ones that support it.

WALLACE:  Immigration.

JOHNSON: Make it as easy as possible to come into this country and work. To be able to get a work visa. A work visa should entail a background check and a Social Security card. Don't build a wall across the border. These are hard-working individuals that are taking jobs that U.S. citizens don't want.

WALLACE:  What about the 11 million people -- and that’s just an -- an arbitrary number -- but the millions of people who are already in this country illegally?

JOHNSON: Complete -- complete misunderstanding of why they're here in the first place. The reason they're here in the first place is you cannot get a work visa to come into this country and work. And they're hard work, cream of the crop when it comes to workers. So you or I in that same position where jobs exist in the United States that U.S. citizens don't want, you or I would be crossing illegally to take those jobs just like they are doing.

WALLACE:  So would you give them amnesty?

JOHNSON: I would set up a -- I would set up where they could come in the door, get a work visa, as long as they've been law abiding. With regard to citizenship, there needs to be a pathway to citizenship. Look, with regard to those that are in the country that are undocumented, they're not going to jump the line. But that's part of comprehensive immigration reform that Bill Weld and I think we can bring Democrats and Republicans to the table over.

Look, Hillary or Clinton -- isn't the polarization in Congress going to be greater than ever? Does anybody believe that anything is going to get better in Congress? Our pitch is the third alternative, which is a couple of libertarians in the middle, hiring a bipartisan administration. Everybody libertarian leaning. But I think you could make a case that that third scenario might work.

WALLACE:  I want to drill down on a couple of issues. You want to cut spending by 20 percent you say and --

JOHNSON: Which is balancing the federal budget, yes.

WALLACE:  And you call for eliminating these departments -- the IRS, Commerce, Education, the FDA, DEA, drug enforcement, and the National Security Agency. Governor, you --

JOHNSON: Actually -- actually, the ones that I'm citing -- and -- and, by the way, we're getting --

WALLACE:  But all those are on your website.

JOHNSON: Well, not on my website. You might read that in some other website. But, look, we're not getting elected dictator here or king. We're getting elected president, vice president. So there --

WALLACE:  But you don't think any of those agencies do any good?

JOHNSON: Well, in the case of Education, in the case of Commerce, and there are some vital functions in these agencies, but do they require an entire agency? I don't think so. But Education, Commerce, Housing and Urban Development, Homeland Security. Why -- why is Homeland Security an agency unto itself? Shouldn't it be a part of the FBI? Those are the ones that I am advocating out of the chute.

WALLACE:  Then there are taxes. You want to eliminate the federal income tax. You want to eliminate the federal corporate tax and replace them with a consumption tax, a national sales tax. Experts on both sides of the aisle say that this would be highly regressive. That rich folks are going to make out like bandits and it's going to end up hitting the poor and the middle class.

JOHNSON: Well, of course we're not getting elected dictator or king, president --

WALLACE:  I know, but that -- but that --

JOHNSON: Well, no, but -- but in that -- in that --

WALLACE:  But what you’re saying there, governor, is that we have --

JOHNSON: Wait -- wait, in that -- in that --

WALLACE:  My final -- don’t take my -- let me just make -- but you’re saying, when you say we’re not going to be elected dictator, you’re saying, don’t take my policies seriously because they won’t get through.

JOHNSON: Take them very seriously, but count on certainty that we’re going to always support taxes going lower. We're going to always support being in business being easier. Rules and regulations not getting worse, getting better.

That said, if I could wave a magic wand, I would eliminate income tax, corporate tax. I would replace it with one federal consumption tax. I put up the fair tax as the template for how you accomplish one federal consumption tax. You're right about a consumption tax being regressive. The way that the fair tax deals with that is it issues everyone a prebate (ph) check of $200 a month that allows everyone to pay the consumption tax up to the point of the poverty level.

WALLACE:  But the -- the --

JOHNSON: I maintain that if we had --

WALLACE:  But if I --

JOHNSON: Zero corporate tax, which you and I paid for, I maintain that that would create tens of millions of jobs and that it would also issue pink slips to 80 percent of Washington lobbyists --

WALLACE:  But, governor, the result of that, again, the experts say is, OK, even if you have the prebate, OK, now that helps the poor, but the rich are still going to make out because there's no tax on their income, there’s no tax on their --

JOHNSON: Well, believe me --

WALLACE:  Let me just finish. There’s no tax on their savings. So now you're hitting the middle class. They're going to pay more.

JOHNSON: Well, I -- I'm going to argue that the more money you make, the more money you consume, the more tax you're going to pay. This is a proposal. The fair tax is a proposal that has been before Congress for about ten years. Every year, 80 Congress men and women sign on to it. So it's been pretty well vetted out there.

WALLACE:  OK. I want to switch to foreign policy. You say you are a non-interventionist. You say that the threat from radical Islam is, quote, "overblown." You don't want boots on the ground. You say that air strikes either from planes or from drones have, quote, "unintended consequences." So the question is, what's your plan to stop ISIS?

JOHNSON: Well, I do believe that if you want to look at ISIS, that they are regionally contained. Think of them as sands through an hourglass. We're going to see those sands through the hourglass.

There was a poll a couple of weeks ago --

WALLACE:  Well -- well, wait a minute. I mean what happens to the attack in Belgium? What happened with the attack in San Bernardino? What about the attacks in France?

JOHNSON: These -- we -- we can -- we can call these -- we can call these ISIS-inspired attacks. Do they come directly, geographically from ISIS and the machine (ph)?

WALLACE:  Well, in the case of France, they seem to, yes.

JOHNSON: Well, Chris, a poll among active military personnel two weeks ago, who do they favor for president of the United States? Me. So what are they saying? What are -- what they're saying is judicious use of the military. If we're attacked, we're going to attack back. But the fact that we involve ourselves in regime change has resulted in the unintended consequence of making things worse, not better, and nobody’s standing up to this. Hillary Clinton, Barack Obama, not intentional. They go in. They support the opposition in Libya and Syria. The oppositions aligned with ISIS. We arm the opposition. Now those arms are in ISIS' hands. This is the unintended consequence of our foreign policy.

WALLACE:  So basically we're going to contain ISIS? We're not going to eradicate it?

JOHNSON: Well, if we eradicate it -- and -- and, hey, you know, not that we're going to -- we’re going to continue to stay engaged in that, but there will be a void when that gets eliminated. We didn't even hear about ISIS until two years ago. This was al Qaeda until it became ISIS. And wipe out ISIS and it will be something else. Look, the biggest threat in the world right now is North Korea. We need to deal with the civil war in Syria. That's joining hands with Russia diplomatically to see that through. Biggest threat in the world, North Korea. We need to join arms -- join hands with China to deal with that diplomatic.

WALLACE:  Got one more question for you. We've got less than a minute left. Until January, you were the CEO of something called Cannabis Sativa, which is, I guess I pronounced that correctly, it’s a marijuana marketing company. Question, of all the things in the world you could be involved with, why sell pot?

JOHNSON: Well, in this case, marijuana products, which directly compete with legal prescription drugs on the medical front, don't kill anybody. Not one documented death, and yet these drugs do -- marijuana/cannabis -- does compete, does provide that relief. So it seems to me that there needs to be research and development in this area that can't currently happen because marijuana is listed as a class one narcotic. As president of the United States, I would delist marijuana as a class one narcotic. This is going to be an issue that is left up to the states, just like alcohol. And then on the recreational side of this, Chris, I have always believed that legalizing marijuana will lead to less overall substance abuse because it's so much safer than everything else that's out this, starting with alcohol.

WALLACE:  Governor Johnson, thank you.

JOHNSON: Chris, thank you.

WALLACE:  Thanks for coming in.

JOHNSON: You know how crazy this election cycle is. I might be the next president. You know that, right?

WALLACE:  Well, and --

JOHNSON: That’s why I’m on.

WALLACE:  I hope you’ll give me your first interview in the White House!

JOHNSON: There we go. There we go.

WALLACE:  Safe travels on the campaign trail, sir.

JOHNSON: Hey, thank you very much. Appreciate the opportunity to be here.

WALLACE:  Up next, we'll bring back our Sunday group to discuss Donald Trump's move to broaden his base and his change in rhetoric on deportation.



TRUMP: I’ve had very strong people come up to me, really great, great people come up to me and they've said, Mr. Trump, I love you. But to take a person that's been here for 15 or 20 years and throw them and the family out, it's so tough, Mr. Trump. I mean I’ve had -- I have it all the time. It's a very, very hard things.


WALLACE:  Donald Trump opening the door this week to possibly moving more to the center on immigration policy.

And we're back now with the panel.

Karl, it's been fascinating to watch Trump this week on this issue. First he said there was a softening. Then by the end of the week he said there's a hardening. Is his opening the door to possibly softening on the idea of deporting all 11 million people in this country illegally, is that good politics?

ROVE: Well, it's good general election politics. But also, this is not the first time he did it. You know, there's a -- there's a continual confusion about where he is on this issue. But I remind you, last year he said, I’m going to build the wall. And then he said, I'm going to build the wall and we're going to put a big, beautiful door in it so that they can come back, leaving the impression that all you had to do was to was to do what’s called touchback.

WALLACE:  Right.

ROVE: This is Senator Kay Hutchinson's proposal in 2006 and ’07. You know, if you’re here illegally, you've got to go back and touchback.

So this is not the first time he’s brought this up. But, look, we’ve got confusion. Is he -- does he want to deport people or not? Does he want to have a touchback or not? And does he have -- form -- support some form of legal status for these individuals? My suggestion is, is that he is better off getting a position, clarifying it, and sticking with. I would prefer, I think for the general election, that he, quote, "soften." That is to say return to his position of last fall to say, people who are -- who’ve been here for a long time, kept their nose clean, raised their families, paid their taxes, you know, are employed, they have -- have some path to a legal status. It will be -- they will contrast to what Jeb Bush and say that sort of sounds like where Jeb Bush was. But, frankly, that's where he sort of was last year and was again there temporarily this week.

WALLACE:  Susan, let me pick up on that with you, because there are two aspects of this. One is the fact that he’s been having this debate in public and you have the Hannity town hall, you had the interview with Anderson Cooper. He is seen -- it’s been a moving target. Is that the right way to handle this, or as Karl suggested, he just come up with a -- a position and stick to it? And is this about actually trying to win Hispanic votes, or is this about trying to get that white Republican moderate suburban woman who is worried that he's a racist?

PAGE: No, 72 days before the election, he is debating with himself about his stance on the signature issue that launched his campaign. I think that's quite extraordinary. It raises concerns among his core supporters who are worried he's moving away from the hard line that was appealing to them initially. And I think it's less than persuasive to the voters he's reaching out to.

I spent yesterday in the Philadelphia suburbs talking to white suburban reporters who are very much in flux in this election and they are quite concerned about whether Donald Trump is intolerant and they are unpersuaded by this public debate that's been going on for a week or so.

WALLACE:  So he's getting the both -- the worst of both worlds?

PAGE: That's right. He's not persuading the people in the middle that he need to get back. And it seems to me he is raising concerns among people on the -- on the right who think that a hard line on immigration is the most powerful position he has taken, and the one that got them to support him in the first place.

WALLACE:  Then we had Trump reaching out to African-American voters saying -- asking them, what do you have to lose after decades of Democratic neglect. And then he said this.


TRUMP: Hillary Clinton is a bigot who sees people of color only as votes, not as human beings worthy of a better future.


WALLACE:  Juan, we -- we had this remarkable moment in my interview with Kellyanne Conway where I -- I presented to her the fact that Donald Trump -- and he's been 14 months into this campaign -- has not held a single event in an American inner city devoted to a largely African-American community. The campaign is talking about, now they're going to start going into the inner city. Dr. Ben Carson is going to be -- his escort, if you will, into -- into those parts of America. How’s that going to play?

WILLIAMS: I don't think it has any chance. It’s a -- but, again, to come back to something Susan said, this is not about the black community. I don't think it's about the Latino community. I think it's about trying to consolidate the Republican base, especially college-educated, white Republicans, and specifically women, who don't want to be associated with a racially charged campaign. I mean when you look at the numbers, this week I saw numbers saying 35 percent of all Americans, all Americans think Trump is a racist, 56 percent think that he's biased against minorities and women. And if you go into the Republicans, it's something like 20 percent of Republican men think Trump is a biased person and a quarter of Republican women. That's a problem.

So right now, Chris, he's getting about 1 percent in the latest Fox poll, 1 percent support among black voters. He's down 46 percent among Latino voters. So there's almost no chance that he's going to make substantial inroads in that vote.

WALLACE:  Then there was Hillary Clinton's attack on Trump this week, saying that he is taking mainstream -- or making mainstream hate movements like the alt right white nationalist movement. Her campaign even ran a video that showed -- and here it is on the screen -- members of the Ku Klux Klan supporting Trump.

George, do you think that’s a -- that attack has traction?

WILL: I don't think so, nor should it. There are about 320 million people in this country and a few of them are lunatics and/or vicious. And the alt right is probably both largely. But that doesn't mean they're taking over one of our great parties. They're attaching themselves as a barnacle to a ship and they're not defining the ship.

We've seen this movie before. In 1964, the John Birch Society had about 100,000 members. And it was used to tar the Goldwater campaign. The Birch Society was run by a man named Welch who said that Dwight Eisenhower was an agent of the communist conspiracy. It's not fair to define Donald Trump by David Duke of the Ku Klux Klan any more than it would be fair to define Hillary Clinton by some of her supporters who I guarantee you believe the United States connived at 9/11. There are nuts on both sides of this sundae.

WILLIAMS: But, George, when you see Paul Ryan, the speaker of the House, say that Donald Trump has engaged in textbook racism in his -- what he had to say about Judge Curiel, unable to be a judge because of his Mexican heritage, I think that's a little bit noxious.

ROVE: Yes, but this week --

WALLACE:  You’ve got 15 seconds, Karl.

ROVE: This week, in -- in -- at a fundraiser, Cher stood up and said, Donald Trump reminds her of Adolf Hitler, Stalin, is a racist, insane and -- and a lunatic. And Hillary Clinton said, we're so excited that Cher is with us tonight.

WALLACE:  Well, she always was a Cher fan.

We've got to go. Thank you, panel. See you next Sunday.

Up next, our "Power Player of the Week." America's golden girl on her future in and out of the pool.


WALLACE:  We've been following Katie Ledecky for two years now after her upset victory at the London Olympic, as she geared up for 2016. Like all of you, we celebrated her victories in Rio. And we were delighted to catch up with her the other day to discuss all she's accomplished and what's next. Here's our "Power Player of the Week."


KATIE LEDECKY, OLYMPIC GOLD MEDAL SWIMMER: It’s pretty sweet. I've been smiling a lot. My cheeks are hurting.

WALLACE (voice-over): It's good to be Katie Ledecky these days. Since the Olympics, she's made a triumphant return to Washington, she got Bryce Harper to hold her medals why she threw out the first pitch at a Nationals game, met with young patients at Children's Hospital and went back to her former school to meet with students.

UNIDENTIFIED FEMALE: What is Michael Phelps like?

LEDECKY: He's nice. He’s a good swimmer.

I love answering those questions. I love sharing those moments with them. And hopefully inspire them to dream big.

WALLACE:  What makes it especially sweet is Katie can look back on the Olympics with a sense of total fulfillment.

LEDECKY: I achieved all my goals in Rio and that's the best feeling any swimmer, any athlete I think can have.

WALLACE:  Katie set those goals three years ago. She was swimming a 3:59 for the 400-meter freestyle. She went 3:56 in Rio. She was swimming 8:11 for the 800. She went 8:04 and broke her own world record.

LEDECKY: When we set those goals, those were pretty out there.

WALLACE:  And so Katie had Michael Phelps teaching her how to arrange her five medals for a cover shoot.

MICHAEL PHELPS, OLYMPIC GOLD MEDAL SWIMMER: I put them on one by one, then tuck them behind.

WALLACE:  Katie brought her medals with her. Each one means years and years of hard work.

WALLACE (on camera): Is the silver the stepchild?

LEDECKY: No! I mean, it's -- it’s just as special as the others. We broke the American record and we got silver to the Australian team that broke the world record. So we couldn't -- couldn’t have done any better that day.

WALLACE (voice-over): We first met Katie two years ago when she was 17 after a shocking victory at the London Olympics.

LEDECKY: Numbers don’t -- don’t like and they don’t -- they show what you do in practice. And I like that aspect of it.

WALLACE:  Now, 19, and one of the headliners of Rio, she's grown up.

WALLACE (on camera): For someone as goal-oriented as you, what's it like when you have met all your goals?

LEDECKY: It's a good feeling and it's been, you know, now a week or a week and a half since -- since the Olympics, and I haven't been in the pool and I'm starting to -- to itch to get back in -- in and --

WALLACE:  Are you serious?


WALLACE (voice-over): While Katie had a great Olympics, teammate Ryan Lochte created an international incident with his false report of being robbed. What's the lesson?

LEDECKY: Just take care of business in the pool, I think. Just -- what we do in the pool is -- is important, and also how we represent ourselves outside of the water, as well.

WALLACE:  Katie is getting ready to start college at Stanford, to begin her next chapter as a student athlete. But the call of the Olympics is still there.

LEDECKY: Hopefully I'll make it to 2020, and I know I'll -- I’ll have some goals for that and looking forward to representing my country again.

WALLACE (on camera): Can you think you can go even lower?

LEDECKY: We'll see. I have a little bit of a cushion maybe, but I know -- I know the world will start catching up, and I'll have to, you know, stay at the level I'm at or get faster.


WALLACE:  Katie was the youngest swimmer of the U.S. swim team, which is why she talks about competing in the 2024 Olympic at the ripe old age of 27.

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

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