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Marc Thiessen slams Clinton's 'new email excuse;' Trump and Clinton asked to defend positions on Iraq War

This is a rush transcript from "The Kelly File," September 7, 2016. This copy may not be in its final form and may be updated.

MEGYN KELLY, FOX NEWS HOST: Breaking tonight, new reaction to a major
moment in the 2016 race for the White House. As just moments ago, Hillary
Clinton and Donald Trump, Trump wrapping up a presidential forum asking the
American people to trust them with protecting the homeland. And to be
commander-in-chief to the greatest military the world has ever known.

Good evening and welcome to THE KELLY FILE everyone where the news is
breaking right now. I'm Megyn Kelly.

With just 62 days to go until the election and just more than two weeks
until early votes are cast, the major party candidates for president on the
same stage for the first time in this campaign tonight. Taking part in an
NBC News commander-in-chief forum from the deck of the USS Intrepid right
here in New York City. In a wide ranging discussion, Donald Trump
challenged over his support for the Iraq war, among other things, and
Hillary Clinton confronted over this. Watch.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: As a naval flight officer, I held a top-secret,
sensitive, compartmentalized clearance and that provided me access to
materials and information highly sensitive to our war-fighting
capabilities. Had I communicated this information not following prescribed
protocols, I would have been prosecuted and imprisoned. Secretary Clinton,
how can you expect those such as myself who are entrusted with America's
most sensitive information to have any confidence in your leadership as
president when you clearly corrupted our national security?

HILLARY CLINTON, D, PRESIDENTIAL NOMINEE: You know and I know classified
material is designated. It is marked. There is a header so that there is
no dispute at all that what is being communicated to or from someone who
has that access is marked classified. And what we have here is the use of
an unclassified system by hundreds of people in our government to send
information that was not marked, there were no headers, there was no
statement top secret, secret or confidential. I communicated about
classified material on a wholly separate system. I did exactly what I
should have done and I take it very seriously, always have, always will.  

(END VIDEO CLIP)

KELLY: Over the next hour, we have a powerful lineup of guests. To
analyze the candidates answer tonight, in moments, we'll be joined by Marc
Thiessen, former chief speechwriter to President George W. Bush and an AEI
fellow. And Krystal Ball, a senior fellow with the New Leaders Council.
And then we'll hear from two veterans who served in Iraq. I have two very
different take on this election. Also former White House Press Secretary
Dana Perino is here, co-host now of "THE FIVE." And then Sargent Robert
Bartlett, an Iraq war veteran who was wounded by an Iranian made IED. And
Larry Korb, former assistant defense secretary under President Reagan.

But first our chief political correspondent Carl Cameron is live outside of
Trump Tower tonight with the details on an incredible exchange we just saw
last hour. Carl.

CARL CAMERON, FOX NEWS CHIEF POLITICAL CORRESPONDENT: It crackled. And
it's important to remember that they actually appeared sequentially.
Hillary Clinton won the coin toss and got to go first and Donald Trump was
going to get the last word. But it also meant that Hillary Clinton could
lob a couple of grenades and Donald Trump might have an opportunity to
answer them whereas Trump having the last word could take his shots and not
get Hillary Clinton's rebuttal.

And they differed in style as well as in substance. On substance whether
it was ISIS, the Iraq war, whether it was the VA, a whole host of issues.
They each took the opportunity to lob a shot at the other. And on the
subject of the VA specifically, Donald Trump suggested that it has been a
disaster and he will reform it, though he didn't say specifically how.
Whereas Hillary Clinton took a bit of a pounding from Trump for having once
said that she thinks that it's perfectly fine the way it is notwithstanding
some of the problems that she promised to fix with the general reforms.

And Donald Trump got into a bit of trouble particularly when he was
talking about how he would form his plan to fight ISIS. He has announced
this week that he would, in the first 30 days of his presidency, have the
generals of the Pentagon essentially come up with a plan. Tonight he said,
he still has his own secret plan and he might choose one or the other. But
when the discussion of his knowing more about ISIS than the generals,
something that he once said came out, he essentially attacked the generals
in general and said that they had been reduced to rubble by the Obama
administration and that he would have new generals.

That's not how it works in the military. He'll have to answer for that
the next day or so. But there is a clear preview of what the last 60 days
are going to be like in this campaign trail. Donald Trump was glib, he was
very conversational with the moderator Matt Lauer, whereas Hillary Clinton
tended to filibuster a lot of the questions, make very, very long -- almost
appeared to stall the answer on a couple of occasions and that kind of
lends itself to one of the criticisms of her as being too much like a
robotic politician.

Whereas Trump was much looser and occasionally when he's loose like that,
he gets himself into a little bit of trouble and there's likely to be some
criticism of him for that tonight as well. The next 62 days are certainly
going to be a brawl based upon what we saw as they were shadow boxing
sequentially -- Megyn.  

KELLY: Exciting. Carl, thank you. We have much more cued up for you too.
As you saw at the top of the hour, the e-mail questions came fast and
furiously at the start of this event. Matt Lauer went for it. Here's a
taste of some of that between the moderator Matt Lauer of NBC and Hillary
Clinton.  

(BEGIN VIDEO CLIP)

MATT LAUER, NBC NEWS SHOW HOST: You've said it's a mistake. Why wasn't it
more than a mistake? Why wasn't it disqualifying if you want to be
commander-in-chief?

CLINTON: Well, Matt, first of all as I have said repeatedly, it was a
mistake to have a personal account. The real question is the handling of
classified material which is I think what the implication of your question
was. Classified material has a header which says top secret, secret,
confidential. Nothing -- and I will repeat this and this is verified in
the report by the Department of Justice, none of the e-mails sent or
received by me had such a header.

LAUER: Director Comey also said this after reviewing all of the
information. He said there is evidence to support a conclusion that any
reasonable person in Secretary Clinton's position should have known than an
unclassified system was no place for that conversation

CLINTON: Well, Matt, I just respectfully point to the hundreds of
experienced foreign policy experts, diplomats, defense officials who were
communicating information on the unclassified system because it was
necessary to answer questions.  

(END VIDEO CLIP)

KELLY: Let's start there. Marc Thiessen is a FOX News contributor and
former speech writer for President George W. Bush. Krystal Ball is a
senior fellow with the New Leaders Council and a Clinton supporter. Great
to see you both.

MARC THIESSEN, FOX NEWS CONTRIBUTOR: Good to see you, Megyn.

KELLY: Marc, your reaction on that email exchange that went on for quite
some time and Lauer did not let up.  

THIESSEN: Yes. To paraphrase Ronald Reagan, there she goes again. I
mean, she came up with yet another new e-mail excuse. And let's review the
bidding. Because it's getting a little complicated now.

KELLY: Uh-hm.

THIESSEN: So, first she said there was no classified information on my
server. FBI says that's not true. Then she says no classified information
at the time. Also untrue. Then she said nothing marked classified. Also
untrue. Now she comes up with a new excuse, there was nothing with a
classified header that all classified information has a header. First of
all, that's not true. And the law says she's required to protect
classified information whether marked or unmarked. The FBI director said
she should have known.

But second, if there were classified information on her server without any
headers, how did it get there? The way it got there was that she and her
staff took the headers off. Classified information can't just appear. It
has to be entered in. The two systems, the classified email system and the
unclassed are not connected. So, somebody -- she or somebody on her staff
put classified information on to an e-mail without a header which is a
violation of the law and she is using that as a defense. It's
unbelievable.  

KELLY: Krystal?

KRYSTAL BALL, SENIOR FELLOW, NEW LEADERS COUNCIL: You know, Marc says some
things that are true there and then he goes a little bit too far beyond
what the FBI reported. You know, everything Hillary Clinton said here was
absolutely accurate, the emails that she received that did have classified
information, they didn't have the proper heading.  

KELLY: Why is that an excuse?

BALL: As a tactician though --

KELLY: No, no, just answer my question. Let's walk the viewers through
truly. How is that an excuse?

BALL: Well, and that's exactly where I'm going. I don't think it is an
excuse and I thought that she needed to take more responsibility here as
she has in the past.  

KELLY: No, she hasn't.  

BALL: I mean, ultimately she didn't screwed up. And there is no denying
that and she has acknowledged --  

KELLY: She hasn't. She was --  

(CROSSTALK)

KELLY: -- to say, it was a mistake after about 50 interviews where she
tried to dodge, she did not say that.  

BALL: She said repeatedly that it was an error.  

KELLY: Right. After he said repeatedly that it wasn't and everybody else
did it from Colin Powell -- I mean we had months on that answer until
finally it was undeniable and she was like, it was a mistake, I'm sorry.
And she was like, I apologize. They were like you apologize? She's like,
I didn't apologize. And they're like, why not? I'm sorry. That's what
happened.  

BALL: I don't disagree with you to be honest with you. I think she should
have taken direct responsibility immediately. I think it should have come
before quickly. And I think we would have been able to -- more quickly if
she has been more forthcoming.

KELLY: Uh-hm.

BALL: But on the facts of the matter, everything she said here was
accurate. I actually think the biggest issue for her in terms of what she
said was that she had done everything exactly right.  

KELLY: That she said that.  

BALL: That she said that.

KELLY: She shouldn't have said that.

BALL: That's been an issue for her politically because ultimately the
voters are looking at this and saying, well, you've already acknowledged
you didn't do everything right and that's clear. So, accept
responsibility, learn the lessons and then we can move forward.

KELLY: Uh-hm.

BALL: You know, one thing I would say here in terms of whether it's a
disqualifying or not, is that ultimately the American people get to decide.
They get to look at the facts --

KELLY: Yes. Yes, it's up to them. It's up to them. Look, I want to get
back --

BALL: We get to decide.  

KELLY: Go ahead.  

THIESSEN: Well, just, number one, what she said wasn't true because she
said there was no indication it was classified. There was a C in one of
the e-mails that the FBI pointed out to her in her interview and she said
that --

(CROSSTALK)

No, no, hold on, Krystal, I let you talk. I am not done. Hold on.

BALL: I'm just correcting.  

THIESSEN: Krystal, stop. There was a C next to that. And she said, oh, I
thought that was alphabetical. Well, did someone bother to ask her if that
alphabetical word was A and B? There was no A and B. She made it up. So,
this is another lie. And the thing is --  

BALL: No, no, no.  

THIESSEN: The FBI -- look, there is right now a United States marine who
is being discharged from the service for sending a classified e-mail back
to Afghanistan warning his marines about a threat and then self-reporting
himself when he realized he had sent classified information. He's been
deemed unfit to leave the United States marine, the service United States
marine. She wants to be commander-in-chief.  

BALL: He was also --

THIESSEN: She had 110 classified e-mails that she continues to lie about
that included to secret information. How would she fit to be commander-in-
chief?  

KELLY: Okay. Let her respond.

BALL: Just to be clear here, he was also not charged criminally. In that
way they were treated in the same.  

THIESSEN: He was kicked out of the marines.  

BALL: The voters are the ones to get to have the final say whether this is
disqualifying or not.

KELLY: Yes.

BALL: But look, you say that she lied. That is not what the FBI report
found, they found that she made a mistake, she didn't recognize that these
were classified emails.  

THIESSEN: That is not true.  

(TALKING OVER EACH OTHER)

KELLY: I got to leave it there. I got to go. Bye.  

Fine. Okay. So -- has got a lot to say about those candidates during this
-- sorry -- sometimes you just got to press forward.

But one of the moments getting the biggest reaction was this remark from
Donald Trump on Iraq.  

(BEGIN VIDEO CLIP)

DONALD TRUMP, R, PRESIDENTIAL NOMINEE: I was totally against the war with
Iraq. You can look at Esquire Magazine from '04.  

(END VIDEO CLIP)

KELLY: I was totally against the war with Iraq. You can look at Esquire
Magazine from 2004. To which a lot of people pointed out that the Iraq war
started in 2003, not 2004 and he had a different position as documented by
the journalist Howard Stern.

Joining me now, co-host of "THE FIVE," White House press secretary under
President Bush, Dana Perino. Carl Higbie who is a former Navy SEAL who
served two tours in Iraq. And Jon Soltz, who is an army veteran who also
served two tours in Iraq and chairman of the group VoteVets.org which led a
demonstration outside of Trump Tower today.

Great to see you all. Let's start with the military vets on this. It's
just -- I mean Trump is on record in 2003 saying that, you know, maybe,
maybe he would be behind it.  

CARL HIGBIE, FORMER NAVY SEAL: He said yes, I guess so.  

KELLY: Yes, I guess so. Okay. But he likes to ignore that but it
happened. Right?

HIGBIE: Yes. Many other accounts where he said, I'm not for the war in
Iraq.  

KELLY: Later, you know, in '04. That's why he put it `04. But no '03
when he went into Iraq. He was for it.  

HIGBIE: Yes. But the monumental journalist Howard Stern in saying, I
guess so, I wouldn't count that as --

KELLY: Mock him if you like. But he got it.  

HIGBIE: He got it. But I wouldn't call that committing troops to a
foreign war.  

KELLY: Okay. Go ahead.

JON SOLTZ, SERVED TWO TOURS IN IRAQ: I think he was for the war. And I
think, you know, the reason he's against it now obviously was because it
differentiated him from the rest of the Republican candidates. And that is
where it is with Donald Trump. Every time he does an interview, I never
know what he's going to say.

KELLY: Uh-hm.

SOLTZ: And so, I want to became politically convenient for Donald Trump to
be against the Iraq war, he was against the Iraq war, but make no mistake,
he was for it in the beginning.  

KELLY: What about Hillary because she's standing there in front a group of
vets, like you guys who served for our country, served our country,
interact, many of whom lost soldiers, lost comrades, lost buddies. And
watch what she said.  

(BEGIN VIDEO CLIP)

LAUER: How do you think these people feel when the person running to be
their commander-in-chief says her vote to go to war in Iraq was a mistake?

CLINTON: Look. I think that the decision to go to war in Iraq was a
mistake and I have said that my voting to give President Bush that
authority was, from my perspective my mistake. I also believe that it is
imperative that we learn from the mistakes, like after action reports are
supposed to do. And so we must learn what led us down that path so that it
never happens again.  

(END VIDEO CLIP)

KELLY: Dana Perino?

DANA PERINO, FOX NEWS CO-HOST, "THE FIVE": Well, I think there's a little
selective memory going on. Donald Trump wasn't in a position that Hillary
Clinton was in 2003 and the lead up, even after 2001 and 2002. He wasn't
in the United States Senate, she wasn't on the Armed Services Committee.
She was.

KELLY: Uh-hm.

PERINO: So, she was privy to the information. So, if he's on Howard
Stern's show and says I guess so, I mean, that's pretty much where the rest
of the country was as well. I mean -- I don't think it's not fair to
actually hold him to that account. Him saying that he wasn't and wasn't,
people are going to hold him into account for that. But her, I've never
understood why she disavowed that vote, because she used her judgment based
on the information that she had at the time.

She was not alone. I think that she got pushed into that politically from
her far left. And if you'll notice one of the questions tonight from
somebody who is self-identified as a progressive, that they're worried
about her being too hawkish. They worried that she would actually take too
much action.

KELLY: Uh-hm.

PERINO: But then she goes ahead and she takes something off of the table.
She says as president, as commander-in-chief, I would not send any ground
troops in. How can you say that? You don't know. And she knows that she
doesn't know that.

KELLY: And she said no ground troops in Iraq. That's it. But we have
ground troops.  

HIGBIE: Yep.

BALL: And more are going.  

KELLY: I have to ask you, Carl. I mean, you guys served there. The rest
of us are just pundits, we just sit here. Right? As news anchors. You
served there. What is it like to hear her say that?

HIGBIE: That battle changes day to day, month to month, year to year.
There is no way you can commit a plan now and look, you can hit Donald
Trump for not having a plan all that you want but the fact of the matter
is, if he's elected, that plan is going to have to change by November.
Hillary Clinton has never been on the right side of a foreign conflict her
entire time in office. I mean, everything she does. Her judgment is
wrong. It always ends up wrong, and it always ends up getting people
killed and it always ends up hurting America. So, I would rather have
Donald Trump who's actually going to sit there and say, generals, give me a
plan in 30 days, let's execute it. Go.  

KELLY: Go ahead.

SOLTZ: The reason her vote doesn't bother me is because I was in Iraq in
2003 with the First -- Division. And I supported the war. And I support
it because I believed the leaders of my country that we were going to find
weapons of mass destruction. It's something that's hard for me still. I
regret that opinion every day of my life and it's one of the reasons that I
opposed intervention in Libya.

I think Dana is right in regards to the politics of it. Obama was very
much running against her in 2008 to be against the Iraq war and she voted
for it and then, you know, she turns around and supports Libya. So, she
clearly is playing a little bit of politics on her positions here. And the
concern that I have still is, when she had another decision in Libya, she
decided to intervene there and that has not worked out well for this
country.  

KELLY: No. What about Trump saying, all this time, he's got a plan to
defeat ISIS and he just needs 30 days with the generals. And 30 days,
first 30 days of his presidency, he is going to get a plan from the
generals. And then he says, they're going to give him his plan. All this
time he's got a secret plan, then we say, what is it? Then he finally
gives us a big reveal which is, I'm going to ask the generals. And then he
gets to, actually I'm going to fire the generals because they lose so much,
they've been losing for a long time. Carl? Really?

HIGBIE: He had a goal, not a plan. He had a goal. I think having these
top secret briefings and having the more experience on the political
specter, he is getting to know that there's substantially more to this
policy than just, you know, reading a book or watching CNN. There is a
necessary -- there's a need for him to listen to the generals, listen to
the people who've been on the ground.  

KELLY: He just said, they're going to be fired. He said the generals had
been reduced to rubble and they've been losing for a long time.

HIGBIE: Well, the good generals --

KELLY: That's what he said.

HIGBIE: Well, the good generals have been fired. I mean, Obama got rid of
a lot of the generals that were willing to push back on him and he just
kept a bunch of crappy ones to be honest that are --  

KELLY: So, the remaining generals are crappy.

HIGBIE: Not all of them but many.  

KELLY: Let's walk that back. Let's walk that back.

HIGBIE: I'll double down.  

KELLY: Go ahead, Jon.

SOLTZ: General McChrystal was fired. And General McChrystal was an
interventionist. He's, you know, he was very much into the Petraeus, you
know, counter-insurgency policy which is, let's not insult Islam and
Muslims. I mean, he is completely inconsistent with where Donald Trump
would be. So, if you're saying Obama fired good generals, that was fired
by the President certainly would not be someone I think who --  

(CROSSTALK)

I will also tell you that this 30-day plan is a joke. The problem with
ISIS is not necessarily just a military problem. It's much more vast than
that. And to be honest, the administration is actually doing, you know, a
better job than they're probably getting credit for right now inside Iraq.
I was one of the last advisers out. We are seeing the Iraqi army conduct office of combat
operations for the first time and the question is, who is going to own this
when we're done. And if we go in and use U.S. force and large amounts of
ground troops, then we're back to where we were in 2004. We own a lot of
territory.

KELLY: Okay. Stand by. Because we have much more with you guys and with
Dana and a few other guests. Because in moments, we're going to get to the
explosive questions on Iran with Sergeant Robert Bartlett, an Iraq war
veteran who is wounded by an Iranian made IED. And Larry Korb, former
assistant Defense Secretary under President Reagan.

Plus, more on the plan for defeating ISIS still ahead.  

(BEGIN VIDEO CLIP)

LAUER: When people like me press you for details like that
gentlemen just said on what your plan is, you very often say, I'm not going
to give you the details because I want to be unpredictable.  

UNIDENTIFIED MALE: Absolutely.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KELLY: Nearly eight months after the Obama administration sent $400
million to Iran, we are learning details tonight of new payments, not once
but twice with a total of $1.7 billion in cash being paid to Tehran.
Critics have called the money a ransom, payment in exchange for four
American hostages being held by Iran. But the Obama administration
maintains it was simply paying back money owed from a failed arms deal in
the late 1970s. Now the interest was running so we had to cut that check
or hide that currency and send it in weird bills. Tonight Hillary Clinton
was asked about her involvement in the nuclear deal with Iran.  

(BEGIN VIDEO CLIP)

LAUER: You have said you expect the Iranians to cheat. Do you think
they're playing us?  

KELLY: On the nuclear issues, no. What I am focused on is all the other
malicious activities of the Iranians, ballistic materials, support for
terrorist, being involved in Syria, Yemen and other places, supporting
Hezbollah, Hamas. But here's the difference, Matt. I would rather as
president be dealing with Iran on all of those issues without having to
worry as much about their racing for a nuclear weapon.  

(END VIDEO CLIP)

KELLY: Joining me now, Sergeant Robert Bartlett and Larry Korb. Good to
see you both.

Sergeant Bartlett, your thoughts on this latest payment. So now we've got
$1.3 billion more that we paid the Iranians in addition to the $400 million
we already paid and Hillary Clinton defending the Iran deal tonight that we
struck on the nuke saying, he's got no concerns about it.  

SGT. ROBERT BARTLETT, VETERANS AGAINST THE DEAL: Yes. It's amazing thing
is that this actually happened in a place on part of that museum that's
there. And here they're having American debate on what the future of
America is going to be. We're sending billions over to a terrorist regime
that's already secured S-300s to defend their nuke sites in the future.
You know and she expects that they're going to cheat now, she says they're
going to cheat now and they already cheated but they're not going to cheat
on the nukes. Why wouldn't they cheat on the nukes? You know, they've
already cheated on the ballistic missiles. It doesn't make any sense.  

KELLY: What's the answer to that Larry? Right? Why? Why wouldn't they?

LARRY KORB, SENIOR FELLOW, CENTER FOR AMERICAN PROGRESS: Well, first of
all, the ballistic missile is not cheating. In part of the nuclear deal we
allowed them to go ahead with that. The International Atomic Energy Agency
says, they're not cheating on the deal because they're in there and they're
having intrusive inspections. And remember, the deal is not just with us,
it's with six countries around the world. So, it's not just us that they
have to do, particularly if they want access to the money and the banking
systems of the major countries in the world.  

KELLY: Go ahead.  

BARTLETT: Let's talk about this. If they say hey, these other countries
can go in there and inspect these sites, how did that work with Iraq?
Because we've already done that once. That doesn't make much sense.  

KORB: Now wait a second. On Iraq what happened was the International
Atomic Energy Agency told Bush to wait, let them finish the inspections and
Bush didn't do it because he had all of the forces in there. In fact --

BARTLETT: Twelve years of them breaking those sanctions.  

KORB: Wait a second.  

BARTLETT: Twelve years of them breaking the sanctions with Clinton, Bush
Sr. and Bush Jr., the whole thing, they kept breaking the sanctions every
time Iraq did whatever they wanted.

KORB: Well, they didn't. I mean, we bombed them when they violated --  

BARTLETT: That's right. We had to bomb them.  

(CROSSTALK)

KELLY: Okay. Right. Because we're talking about Iraq as well and the
question of whether Trump's plan, you know, the plan is he's going to get
the plan from the generals, the generals who he's going to fire because
they're a bunch of losers. But he's going to mix in some of his own plan
as well which has yet to be revealed but may involve taking the oil. Okay?
So, your thoughts on that Sergeant Bartlett on this whole bit about we're
going the take the oil, we're going to take the oil, we're going to take
the oil.  

BARTLETT: You know if you go on for the oil, you say then. Then the
American public says, hey, you went in there for the oil. You know?
You've got to go in there to do the right thing, period. It doesn't
matter. We have to live with integrity as a country and do the right
thing, period. I would say to Trump, listen to the subject matter experts,
let them inform you why we went into Iraq, give you the full spectrum and
not just everything that you've learned from the media over the last 15
years on the issue or 12 years on the issue.  

KELLY: What did you make of it Larry when he refused to acknowledge a
mistake in saying that he knows more about Iraq and ISIS than the generals?

KORB: Well, again, that's typical of him. He seems to know more than
everything. And by the way, it's against the law to fire the generals
expect for cause because we want the generals to be honest both to the
President and the Congress and after Vietnam when there was pressure put on
him, the law was changed. They were there for fix four year terms for the
service chiefs. Two years for the chairmans. So, this idea that you can
fire them, no you can only do it for cause. So, it shows again, I don't
think he understands how the system works.  

KELLY: Stand by. Because I still have my panel out here. And I want to
ask Dana Perino because she's shaking her head as you say that Larry in
agreement with you. I don't think you two often agree but --  

PERINO: I agree with you, Larry.

KELLY: You agree with Larry.

PERINO: When Trump said that during the forum --

KELLY: I'm going to fire a lot of them.  

PERINO: Because they lose all of the time and they don't know --  

KELLY: Do we have that sound bite? I mean, let me just ask if we have the
sound bite? No, the Trump on the generals. It's a mystery. Okay, they're
looking for it. Okay, go ahead Dana.

PERINO: So when he said that, that's when I thought, oh my goodness. And
so, I was following him on Twitter at the same time and Hugh Hewitt the
radio host and also been very supportive, Donald Trump says, oh my gosh,
it's probably not a good idea to criticize the flag officers of the people
that you are trying to get to support your candidacy.

KELLY: Uh-hm.

PERINO: But not only that, I mean, it is true. You can't, as a commander-
in-chief sitting at the White House, you can't look over at the Pentagon
and say, okay, I'm picking you and you and you and you're out. Because
that actually undermines the entire system.

KELLY: Well, the other problem is, you tell me, you guys are still here,
you served, he's never served a day in his life. He had a draft deferment.  

SOLTZ: Draft dodger. True.  

KELLY: And to be calling out these generals as a bunch of losers might be
perceived as disrespectful by some.

SOLTZ: It's another disrespectful issue. I think one of the mistakes that
NBC made, Matt Lauer specifically was he didn't press Donald Trump on his
respect for the military. Why is he disrespectful to Gold Star families
for instance? And so it is disrespectful --

KELLY: Who other than the Khans, he doesn't like the Khans who got up at --

SOLTZ: Well, when you stand up and say, I always wish I had a Purple
Heart, it looks like you're a little detached. When you go on a radio show
and --  

KELLY: That was like a shot at you, gone awry.

SOLTZ: I mean, listen, I think there's others --

KELLY: But you've got plenty of easy targets there.  

(CROSSTALK)

SOLTZ: There's a look of knowledge that came out of that also with the
oil. And that's what I've key into. The oil in Iraq was the reason there
was so much strife. So the Sunni areas --

KELLY: Give us a third-grade explanation.  

SOLTZ: It's really simple because Sunnis don't control the oil in Iraq. The
Kurds and the Shia did. And that was the reason we were fighting so much.
The Sunni wanted that access to those oil and the revenue sharing, and so
to go in and just talk about taking oil just shows complete lack of knowledge.

KELLY: So people might get upset?

SOLTZ: Absolutely. I mean, our allies and the Kurds are going to be like,
why are you taking the oil from us? I mean, we haven't done this since ever
in our history.

HIGBIE: Let's go back to the general comment and let's see. President Obama
has fired an unprecedented amount of generals for saying -- for telling it
how it is. I mean, they fired General Mattis for straight up going and
saying, "I don't like the way this war is going. You need to do this to
win," and he was ousted.

There are tons of generals -- I looked them up during the break -- that
have been put out by this guy. Now, Trump is going to go in there and say
look, you people have been politically correct. You've been unelected
bureaucrats. You've made rank by just not offending somebody and not
causing any major problems.

He's going to get rid of those guys, put guys in there who want to serve,
guys like, you know, who he has surrounded himself with like Mike Flynn and
things like that and say, "Go get the job done and tell me how to do it."

KELLY: All right, stand by. We have much more coming up because this was
nowhere near close to everything that happened tonight, but I do -- we have
the sound bite and I want you to hear it because there was sort of a triple
hit on the generals. It's already making big waves. We're going to play it
for you right after the break when we resume with our panel and some other
guests as well. Don't go away.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

TRUMP: The generals under Barack Obama and Hillary Clinton have not been
successful. ISIS...

LAUER: Do you know more about ISIS than they do?

TRUMP: I think under the leadership of Barack Obama and Hillary Clinton the
generals have been reduced to rubble. They have been reduced to a point
where it's embarrassing for our country.

LAUER: But you're going to convene a panel of generals and you've already
said you know more about ISIS than those generals?

TRUMP: Well, they probably would be different generals to be honest with
you. I mean I'm looking at the generals -- today you probably saw -- I have
a piece of paper here, I could show it, 88 generals and admirals endorsed
me today.

LAUER: It's a numbers game. Hillary Clinton claims more numbers.

TRUMP: And these are -- well, it's not really -- you know, it's not really,
yeah, numbers. People that have been losing for us for a long period of
time.

(END VIDEO CLIP)

KELLY: Back now with our panel, Dana Perino, Jon Soltz, Carl Higbie --
Soltz, sorry Jon. We also still have Larry Korb and Sergeant Robert
Bartlett are still with us. So, I want to actually start with Sergeant
Bartlett on this as somebody who served and was injured in the service of
our country. Your thought on Trump's hit on the generals there.

BARTLETT: You know, as time goes on he's going to get a rude awakening on a
lot of things that he said. I've seen some humility come out in the past. I
hope it continues. If we have more policies that get us in more wars, then
we're going to have more issues and you better listen to the subject matter
experts because they know. He's a subject matter expert in running
businesses, he really is. He's an amazing man who made a lot of money in
this country.

So, I would ask him a business question. Let's ask the generals their
questions. How to stay out of war? How to conquer countries that we need
to? How to get in and out of places that we need to? How to stop regimes
from continuing to kill Americans and other country civilians and their own
civilians, like Iran is doing today?

KELLY: Larry, your thoughts on Trump's talking about that and also talking
about his intelligence briefing saying he could read the body language of
the briefers which he found very helpful.

LARRY KORB, CENTER FOR DEFENSE INFORMATION SENIOR ADVISER: Well, I think
it's important to keep in mind it's not just the generals who make policy.
That's why you have civilian control of the military. You got a Secretary
of Defense with all kinds of assistance. Like I remember when I was there,
giving advice on things like should we stay in Lebanon? Should we get out
of Lebanon, which was the big issue?

If you go back and look at history, what you want are generals like General
Dunford, who is the chairman of the Joint Chiefs of Staff. He tells it like
it is and he also goes up to Congress and tells them. They said, "Hey, we
think we ought to spend more money on defense than Obama asked, OK." That's
what they do.

But once the civilians make a decision, like General Shinseki was opposed
to what was happening -- he's the Army Chief of Staff about Iraq -- how
many troops we were sending. But once a decision was made, he saluted and
carried it out.

KELLY: OK, but I want to tell the audience that, you know, Sergeant
Bartlett raises an issue or point about we need somebody who understands,
understands where to go, where not to go, what wars to get us into, what
wars not to get us into, and one of the questions came at Hillary tonight
from someone who thought she might be a little too, as Trump described her,
trigger happy. A little too anxious to get us involved in these foreign
conflicts. Listen here.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: You have had an extensive record with military
intervention. How do you respond to progressives like myself who worry and
have concerns that your hawkish foreign policy will continue?

HILLARY CLINTON, DEMOCRATIC PRESIDENTIAL CANDIDATE: I assume you're talking
about Iraq because of my vote. Let me say very clearly, I view force as a
last resort, not a first choice.

(END VIDEO CLIP)

CLINTON: Does her record support that, Carl?

HIGBIE: No. I think she has dove head first into every single conflict
trying to overthrow every single government that she possibly had a chance
to, in the State Department and even when she was working...

KELLY: Expect Iran.

HIGBIE: Well, except Iran. Except that now, she's given them an even bigger
vacuum just like she wanted to vote for Iraq to take the troops out and
expose the vacuum crisis. She's given them even a bigger vacuum to exist in
now. So, I think she has a horrible record on this campaign.

KELLY: What do you make on that, Jon, because this is an area which Trump
may pick up some progressives and she may pick up some of the more, you
know, neo-cons in the Republican Party because there's a question
about who is farther to the right when it comes to fighting these overseas
battles.

SOLTZ: Yeah, I always thought Mitt Romney missed an opportunity here in
Afghanistan because President Obama put more troops in Afghanistan and we
haven't really seen a dividend from that, and Hillary Clinton is supporting
that. And so, I think the problem with a lot of people in regards to
Donald Trump, that are more libertarian basis, they don't know where he
stands on anything for instance, yes, he talks about being against the Iraq
War but then, as we saw tonight, he's for it. Hillary Clinton does have an
intervention problem. It doesn't just...

KELLY: He didn't say he was for the Iraq war.

HIGBIE: He's for finishing the job...

SOLTZ: No, no, Donald Trump's initial conversation on the Howard Stern Show
where he expressed support and then changed his position so, but let's
look at Hillary Clinton. She supported the Iraq War. She supported sending
more troops in Afghanistan, which was controversial, and then she supported
Libya.

The only thing that really checkmates her is her political base and her
political support and, you know, individuals like the young woman who asked
that question, which is a large percentage of the progressive base doesn't
support the intervention that she needs to win this race.

KELLY: All right, coming up, Donald Trump said something about Russia
tonight that could spell, well, we'll see how it plays in this campaign
going forward. Marc Thiessen and Krystal Ball are next on that. Don't go
away.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

TRUMP: I think I would have a very, very good relationship with Putin and I
think I would have a very, very good relationship with Russia. Russia wants
to defeat ISIS as badly as we do. If we had a relationship with Russia,
wouldn't it be wonderful if we could work on it together and knock the hell
out of ISIS? Wouldn't that be a wonderful thing?

LAUER: Well, let me ask you about some of the things you've said about
Vladimir Putin. You said, "I will tell you in terms of leadership, he's
getting an A and our president is not doing so well." And when referring to
a comment that Putin made about you. I think he called you a brilliant
leader. You said, "It's always a great honor to be so nicely complimented
by a man so highly respected within his country and beyond."

TRUMP: Well, he does have an 82 percent approval rating according to the
different pollsters, who by the way, some of them were based right here.
Look...

LAUER: He's also guy who annexed Crimea, invaded Ukraine, supports Assad
and Syria, supports Iran. He's trying to undermine our influence in key
regions of the world and according to our intelligence community, probably
is the main suspect for the hacking of the DNC computers.

TRUMP: Well, nobody knows that for a fact.

LAUER: But do you want to be complimented by that former KGB officer?

TRUMP: Well, I think when he calls me brilliant I'll take the compliment,
OK.

(END VIDEO CLIP)

KELLY: That was a moment for our tonight's candidate forum, continuing to
generate some fallout. And "Washington Post" columnist Marc Thiessen
thinks it could become a bigger story in days ahead. He's back along with
Krystal Ball, who's a senior fellow at the New Leaders Council.

OK, so he's a leader, more so than president Obama, and 82 percent of the
Russian people, when told by the government they needed to say that, did.
What? Wait. You know, he's a little -- he's scary. They're a little scared
over there is what people say.

THIESSEN: Absolutely. I mean, I'm old enough to remember when it was the
Democrats who were soft on Moscow and the Republicans who didn't like the
KGB so, we're having a little bit of a role reversal here, but look, I
think this actually could cost him the election.

KELLY: What?

THIESSEN: There's been a lot of focus on how Donald Trump is alienating
Hispanic-American voters but there are millions of East European-American
voters out there -- Polish-Americans, Ukrainian-Americans, Slovak-
Americans, Czech-Americans who traditionally are part of the Republican
coalition. They joined the Republican coalition when Ronald Reagan called
the Soviet Union an evil empire and said tear down this wall and they've
been reliable Republican voters.

They don't like the see the Republican presidential nominee praising
Vladimir Putin and saying well, we might not support NATO's commitment to
defend Eastern Europe. And where do these voters reside? They reside in
most of the key swing states that Donald Trump needs to win. They're in
Ohio, they're in Pennsylvania, they're in Michigan, they're in Florida, by
the millions.

George Bush won Florida by a couple hundred votes. If a million Polish-
Americans, Czech-American, Hungarian-American, even a small number of those
people don't turn out for him in Florida or don't turn out for him in Ohio
and some of these states, that could tip the election. So, this Putin
bromance could be sort of the secret story of why Donald Trump loses some
of those key swing states.

KELLY: What do you make of it, Krystal, because you know, he's trying to
sort of do a straight talk thing where he's like, wouldn't it be great if
we could just get along with a country as, you know, powerful as Russia
that could help us defeat ISIS. And you know, that has a certain appeal I
think to regular folks, like, yes it would. Why are we the only ones out
there, or that's how it feels, in these battles against terror?

BALL: Yeah, I mean, it does have a certain appeal, but you've got to have a
partner to work with. And I think for a guy who has absolutely no public
service record, no international experience in terms of foreign policy or
military leadership, voters look at this and go, "You must be crazy." I
mean, this man is murdering journalists, he's killing off his political
opponents...

KELLY: He's a leader.

BALL: ...he's quashed democracy in the country and he's destroyed the
economy, too. I mean, if you go there and look, it's not doing so well. So,
even from that standpoint, and I think it's pretty obvious that Trump was
very swayed by Putin's flattery of him. It doesn't take much to get right
to his ego and that appears to be the key to his heart.

So, I think it really undermines his judgment and cause him to question
what exactly his moral compass is when he would have such -- I mean, you got
to give him credit. He's been very consistent. He's loved Putin from the
beginning and he stills loves him today and he's not backing off of it. But
I think most American voters, if you poll them on Putin's approval rating,
you will get a very, very different answer.

KELLY: Now, I want to ask you this, tonight Reince Priebus tweeted out
about Hillary Clinton that, "she was angry and defensive the entire time.
No smile and uncomfortable. Upset that she was caught wrongly sending our
secrets." She responded saying, "actually, that's just taking the -- that's
just what taking the opposite president seriously looks like." Your
thoughts on that Marc?

THIESSEN: Well, I expected Reince Priebus to say that and I expect Hillary
Clinton to say that back.

KELLY: Well, what do you think, I mean, you know, Reince spoke she's not
smiling. I mean, really? What?

THIESSEN: You know, I care less if she smiles or -- hold on Krystal. I care
less if she smiles or doesn't smile, if she'd start telling the truth. If
she starts telling the truth, that would be a step forward. I don't care if
she smiles or not.

KELLY: I got to go but I want to know what Krystal thinks. I'm going to
find out during the break and then tell you on the other side because it's a
hard break. We'll be right back.

(COMMERCIAL BREAK)
VOICEOVER: From the world headquarters of Fox News, it's "The Kelly
File" with Megyn Kelly.

KELLY: I'm going to tell you Krystal's reaction in one minute. But in the
meantime, there's new reaction tonight when it comes to Donald Trump's
military policy. Tonight's forum comes on the heels of a military-focused
speech earlier tonight that had some questioning his commitment to the
armed forces. Trace Gallagher has the details from our West Coast newsroom.
Trace?

TRACE GALLAGHER, FOX NEWS CORRESPONDENT: Megyn, when it comes to military
spending, critics say in recent years Donald Trump has done a 180,
completely changing his stance. Others believe that Trump's position is
steady, but evolving, but as you go through previous statements, it is
clear that Trump has sent mixed signals. Here he is on Fox News in 2013
talking about military spending cuts known as the sequester. Listen.

(BEGIN AUDIO CLIP)

TRUMP: I think you're going to have to do a lot more cutting. If you're
going to balance budgets, you're going to do a lot more cutting and there's
no question about it.

(END AUDIO CLIP)

GALLAGHER: In fairness, some of the cuts he referred to were across the
board cuts, but he also said he believed the sequester cuts were over
exaggerated and that they would not have the impact on the military that
many thought. Today, Mr. Trump appeared to believe those military cuts were
significant enough that they prevented military leaders from planning for
our future events and then he said this.

(BEGIN VIDEO CLIP)

TRUMP: As soon as I take office, I will ask Congress to fully eliminate the
defense sequester and we'll submit a new budget to rebuild our military. It
is so depleted. We will rebuild our military.

(END VIDEO CLIP)

GALLAGHER: Tonight during the Commander-In-Chief forum, Trump again seemed
to dismiss his early belief that sequester spending would not affect the
military by restating that he thinks the military is very badly depleted.
Trump says he will offset the increase in military spending by asking
Congress to make the government leaner overall. Megyn?

KELLY: Trace, thank you. So she said that there was plenty to criticize
Hillary on. She's a Hillary supporter, but you didn't have to make the
smile -- one of them, smile. Has anybody ever looked at you and said, smile,
isn't it irritating? You want to do exactly the opposite in response. You
know what, we'll be right back.

(COMMERCIAL BREAK)

KELLY: Love to know your thoughts on tonight's forum. Send me a tweet
@megynkelly on twitter and go to facebook.com/thekellyfile with your
thoughts. Let me know. I'm Megyn Kelly. Thanks for watching. This is "The
Kelly File." Stay tuned for a live "Hannity," now.

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