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Gen. Jack Keane talks Trump Tower national security meeting; Trump supporter defends stance on potential Muslim registry

This is a rush transcript from "The Kelly File," November 17, 2016. This copy may not be in its final form and may be updated.

MEGYN KELLY, FOX HOST: Breaking tonight, "Fox News" just confirming a
critical new pick for President-elect Trump with the job offer going to a
controversial candidate, one you know very well.

Good evening and welcome to "The Kelly File," everyone, I'm Megyn Kelly.

Topping a list of priorities for the president-elect, building the team
that will protect this country at one of the most uncertain times in our
history.

Just moments ago, "Fox News" confirming that President-elect Trump has
picked former Obama administration military intelligence chief lieutenant
General Michael Flynn to be his national security adviser. This is a
critical post in the national security landscape. It will not be without
controversy. But it will be without Senate confirmation, which is not
needed for that job.

We're going to get into this in just one minute.

Among the other candidates who visited Mr. Trump today, legendary foreign
policy giant Henry Kissinger, South Carolina governor and reported
candidate for secretary of state, possibly Nikki Hailey, head of the
national security agency Admiral Mike Rogers and our next guest, retired
four-star general and former vice chief-of-staff of the United States army,
General Jack Keane, who says this country is facing global security
challenges on a scale not seen since the rise of the Soviet Union. General
Keane in a moment.

But we begin tonight with chief national correspondent Ed Henry, who is
here with me in New York on the breaking news and the transition. You just
broke this. You just confirmed this. It's a deal.

ED HENRY, FOX NEWS CHIEF WHITE HOUSE CORRESPONDENT: Lieutenant General
Mike Flynn, who has been offered it. He has not officially accepted, but
widely accepted that he will take this post.

Why it is significant that he's being appointed to a top White House job
as, as you say, he's made very controversial statements about Muslims
before he's taken on President Obama, challenged him on national security.
That's why he got forced out. And so Democrats would want a pound of flesh
if he was nominated to a post like defense secretary or secretary of state.
This allows President-elect Trump to get him installed right into the White
House.

Kellyanne Conway today pushed back on all these reports charging that more
broadly the transition is moving too slow. She declared while they have a
lot of work to do, they are moving methodically and calmly to focus on
quality rather than speed.

I mentioned Flynn. It is also another surprising move tonight, President-
elect Donald Trump inviting Mitt Romney to a meeting this weekend at his
golf club in Bedminster, New Jersey. The same former Republican nominee
that Trump called a choker and the same Romney who called Trump a phony and
a fraud in that searing speech last March.

Sources telling us tonight Romney is a potential secretary of state, a sign
Trump maybe trying to bring together a team of rivals as we saw President
Obama do with Secretary of State Hillary Clinton.

Trump's friend Rudy Giuliani has been a contender for secretary of state as
well after indications that he was not as interested in attorney general as
outsiders expected. Other options include Senator Jeff Sessions for
attorney general; the first lawmaker to stick his neck and endorse
candidate Trump. As well as another surprising pick, a rival again for
either attorney general or a spot on the Supreme Court, Ted Cruz who now
sounds ready to join the team based on what he told "Fox and Friends"
today. Watch.

(BEGIN VIDEO CLIP)

SEN. TED CRUZ, R-TEXAS, FORMER PRESIDENTIAL CANDIDATE: I have an incredible
job right now representing 27 million Texans and I'm incredibly honored to
hold that job. And it's a job I take very, very seriously. I'm eager to
work with the new president in whatever capacity I can have the greatest
impact.

(END VIDEO CLIP)

HENRY: Now Senator Sessions also in the running to be defense secretary.
You mentioned Henry Kissinger. General Keith Kellogg has also passed the
Trump Tower. Lieutenant General Michael Flynn as well has been huddling
with President-elect Trump.

The bottom line is they want to get this national security team in place as
quickly as possible, Megyn, because this is, as you said, critical, not
just protecting the nation, but we're still at war and during a transition
is when someone like ISIS is going to try to make some sort of a statement.
You want to be on guard for that. And so while they are under great
pressure to get this transition moving, national security top of the list.

KELLY: Absolutely. Ed, good to see you.

HENRY: Good to see you.

KELLY: Adding to the urgency for Mr. Trump to assemble his national
security team, today the director of national intelligence James Clapper
submitted his letter of resignation. He will stay on, however, until
President Obama leaves office in January, putting Mr. Trump in the position
to choose his successor.

Joining us now, General Jack Keane, who is a retired four-star general,
former vice chief-of-staff for the U.S. Army and chairman of the board for
the Institute of the Study of War.

As we mentioned, he also visited Trump Tower today and there's some
vacancies there, general. So, come on, let's have it. What did you get
offered?

GEN. JACK KEANE, RETIRED FOUR-STAR GENERAL: Look, it was his meeting, all
right, not mine and he controls the information. But I'll tell you this.
The thing I have in common with Donald Trump is about a dozen years ago, we
got a "Man of the Year" award in New York City, the Hotel Plaza from the
USO. So I met him once and I found him to be very personable. He asked
excellent questions, you know, throughout the 45 minutes that I was with
him. Very, very engaged and very curious about, you know, the world and
its complexity. You know, something, let's be honest, that he and many of
his close in advisers that he's selected don't have a lot of knowledge
about.

Most people who aspire to be president don't have a foreign policy and
national security background. The exception was certainly Hillary Clinton.

KELLY: But you do. You do, so I mean, you tell me, because you are
enjoying your retirement and all your many stars. And now, you know,
you're working in the Institute of the Study of War, which you co-founded -
- you founded.

So you tell me whether you might have some interest in being the director
of national intelligence or even secretary of defense or something like
that.

KEANE: Well, that's between myself and Donald Trump. I feel --

(CROSSTALK)

KELLY: That's not a no.

KEANE: I spoke very frankly to him and he understands where I'm coming
from.

KELLY: All right, viewers, we are getting some place with the general.
We're getting some place. I feel like we know, but he just can't say.

I want to ask you about the breaking news and Michael Flynn -- Lieutenant
General Michael Flynn. We know him. He's on "The Kelly File" all the
time.

Many people are going to lose their minds over this. Just explain why this
position is so important, national security adviser to the president.

KEANE: Yes, it's a real important position certainly. Just the name
itself implies that. There's two jobs there. The one is the one -- the
one is very visible, the national security adviser to the president. And,
obviously, the president judges whether that person is successful or not
because he or she speaks to that person on a regular basis, just about
every single day, multiple times a day.

KELLY: That person is like the clearinghouse for information from the
intelligence agencies and who else?

KEANE: From all of the inter-agencies that deal with national security.
So the second piece of the position, it gives you a better sense of it,
he's also the director of the national security council which has members
on it from the Department of Defense, Department of State, all of our
intelligence agencies, the Department of Treasury, et cetera. And it has
its own staff, which now is about 400. Senate Arms Service Committee wants
to reduce it. so those are the two jobs.

KELLY: So he doesn't need to be confirmed in that position. He can just,
you know, if Donald Trump wants him, he's got him. But people are already
pointing to some controversial statements that General Flynn has said in
the past, including let me pull it up this one from his Twitter account.
This is from April, last April. "Fear of Muslims is rational," in all
capital letters, RATIONAL. "Please forward this to others. The truth
fears no questions."

I mean, his language like that and as General Flynn's somewhat
controversial history especially with the Democrats going to hurt him at
all. I mean, can it?

KEANE: Well, as I said before, he's advising the president of the United
States. That's between the two of them. The president is going to judge
whether Flynn is doing a good job or not. The other thing he does so I can
just carry that thought a little further, he could -- when a president
makes a decision to implement a national security policy, it will be
General Flynn's job to coordinate all of the agencies I mentioned in the
execution of that policy. And also --

(CROSSTALK)

KELLY: Do you feel good about it? Do you feel like General Flynn can do
this?

KEANE: I know him. He's a good guy. You know, this is about the
president's confidence in somebody that he knows, somebody he likes and
somebody he trusts. That's what this is really all about.

KELLY: We got our eyes on you, General Jack.

KEANE: I frankly don't think whether we think he's a good guy or not, or a
great guy or a bad guy, it's not even relevant. This is about the
president picking a guy he wants to talk to every single day about national
security. That's what's important.

KELLY: I'm just telling you, we're watching you. I'm going to see you
going back in the Trump Tower. We're going to see a big announcement. I
hope you come right here to "Kelly File" first after you get it. Great to
see you.

KEANE: Good talking to you, Megyn.

KELLY: Also with us tonight, Katrina Pierson, who is the former Trump
campaign national spokesperson and Matt Bennett, who is co-founder of the
"Third Way" and a former deputy assistant to President Bill Clinton.

Great to see you both.

So let me just start with you on this, Katrina. It's now being confirmed.
Our Ed Henry has confirmed General Michael Flynn and he is already taking
the incoming on this.

What say you to the people who say he sat in on intelligence briefings
while he was advising foreign clients, he made the controversial tweet
about how fear of Muslims is rational, not radical Muslims, but just
Muslims. Your thoughts?

KATRINA PIERSON, FORMER TRUMP CAMPAIGN NATIONAL SPOKESPERSON: Well, I
won't confirm or deny the appointment simply until the transition team
does.

(CROSSTALK)

KELLY: We already know.

PIERSON: I don't want to make that mistake.

KELLY: OK.

PIERSON: Simply because we've heard rumors and people for the last two
days. And, you know, the media can't decide, Megyn, on how to shift gears
from trying to defeat Trump to trying to actually cover him by holding him
to a completely non-existent standard.

And, you know, it's really bad when David Axelrod, chief strategist to
Barack Obama, took to Twitter today to remind the media that they didn't
even have these appointments made at this time without criticism.

KELLY: No one here is criticizing him for not making appointments fast
enough. I'm talking about General Flynn and whether he's good for this
position.

I'll give it to you, Matt, on why the Democrats don't seem to like him

MATT BENNETT, CO-FOUNDER, THIRD WAY: He is a horrendous choice for this
job. General Keane is being polite. But being the national security
adviser is incredibly important.

Think about it. Condi Rice was the national security adviser in 9/11. You
have to coordinate all of the agencies as the general is discussing. You
have to make sure that the president's wishes are carried out by the entire
national security establishment, which is gigantic and most importantly you
have to be an honest broker for the incoming that you're getting from the
State Department and CIA and the intelligence agencies and the defense
department.

He is, by all accounts, a very difficult guy to work for. But, also, and
much more, importantly, he's just not a good person. He's talking about
how we should fear all Muslims. That is not the kind of person that you
need in the most important position in Washington.

(CROSSTALK)

KELLY: Well, just because he made that one statement, which I've had him
on the show many times and I have heard him speak about radical Muslims for
the most part, although this tweet doesn't say that, just for the record.
So I don't know that you can lead to he's not a good person, Matt.

PIERSON: Can I --

KELLY: Good ahead, Katrina.

PIERSON: But if we're being honest here, I mean, whoever Mr. Trump
nominates to any position, there's going to be scrutiny. There's been
scrutiny over his initial appointments.

KELLY: Of course.

PIERSON: And so I think to expect that that this is just going to be, you
know, icing on the cake is just completely unfounded.

(CROSSTALK)

KELLY: OK, but the criticism, Katrina, is that the people who are going in
there, that they don't have any experience and that it's just favors he is
returning. He's putting, you know, people in major positions as just
favors because they were loyal to him as opposed to people, this is the
criticism, who know what they're doing.

PIERSON: Right. And the election is over and the people chose Donald
Trump. Someone who had never been a politician before because they trust
him to make the right decisions and to choose the right people. And,
again, this is not just one person that's going to be making these
decisions. There are teams that are going to be put in place. The landing
teams are going to be announced soon. Mr. Trump is brilliant when it comes
to putting together teams and when it comes to doing what he wants to get
done. And I think he's proven that time and time again.

KELLY: Go ahead, Matt.

BENNETT: Well, look, he's made three appointments, one of them I think
most Democrats are comfortable with, which is his chief-of-staff Reince
Priebus. But the other ones, Steve Bannon as you well know , Megyn, is
unbelievably controversial because he again is somebody who is just so far
outside the mainstream.

If George W. Bush had had a meeting in the Oval Office with Steve Bannon,
it would have been news because it would have been a scandal. Now he's
going to have an office next to the Oval Office and I think there is going
to be same kind of questions raised about General Michael Flynn.

KELLY: But, you know, as Katrina pointed out, Steve Bannon was running
Trump's campaign and the people elected him, Matt, so you know --

BENNETT: No doubt.

KELLY: Is there really any objection to Trump using him as he wants,
President-elect Trump?

BENNETT: No. We can't -- we can't stop it. He can appoint who he wants
and he will, but we can object to it because this is not the kind of guy
that you want in the halls of power. You want somebody much more
reasonable and much more mainstream than guys like Steve Bannon.

KELLY: I think your objection may be overruled.

PIERSON: There's a laundry list of controversial people surrounding Barack
Obama as well.

(CROSSTALK)

KELLY: Good to see you. I got to go. I got to go. Great to see you
both.

Also breaking tonight, new reports that Nancy Pelosi could be caught in the
crossfire as the Democrats get ready to punish someone for the epic losses
last week. Will it be Ms. Pelosi.

Plus, a fierce fight breaking out today over the idea of tracking
immigrants who come here from terror hot beds. We'll show you what the law
says about this, and then we'll pick up the political fight with Hassan
Shibly from The Council on American Islamic Relations and former Navy
S.E.A.L. Carl Higbie. They are next. Don't go away.

(COMMERCIAL BREAK)

KELLY: Breaking tonight, growing fallout over reports that the president-
elect's team may be considering some kind of registry for folks who are
coming to the United States from areas that are hot beds for terrorism.

While critics are hitting the plan as anti-American, some constitutional
experts say it's not only legal, but several administrations have used
practices this.

Trace Gallagher explains how this might work.

Trace?

TRACE GALLAGHER, FOX NEWS CORRESPONDENT: Megyn, when it comes to
implementing Donald Trump's call for extreme vetting of immigrants from
some Muslim countries, Kansas secretary of state Chris Kobach, a member of
the Trump transition team says the answer might be reinstating the National
Security Exit and Entry Program System known as NSEERS, which required
people from primarily Muslim countries deemed as a higher risk to be
interrogated and fingerprinted.

The program started after 9/11 and ended in 2011 when the Department of
Homeland Security decided it was redundant. It was also criticized for
unfairly targeting Muslims.

And Chris Kobach who helped design the program acknowledges NSEERS didn't
result in any terror charges, but says it was a great tool for fighting
terror because law enforcement could identify potential terrorists who did
register and arrest those who didn't. And even those who oppose NSEERS say
it would be easy to reinstate because technically it's still on the books.

Former policy director for Homeland Security Theresa Brown told BuzzFeed,
the program is inactive because the 25 high risk countries were taken off
the list. But if the president issues a new order and if the homeland
security secretary issues a new list of countries, the program could be
easily reactivated.

Whether it passes constitutional muster is a different question. Experts
say there is no comparison to the interment of the Japanese during World War
II because those were American citizens. And now the Trump team says they
would not be registering just Muslims, but rather those who come primarily
from Muslim countries, a distinct legal distinction.

KELLY: OK. Trace, thank you.

Our next guest is among the legal experts suggesting that a program like
this, like that post-9/11 registry would likely pass constitutional muster
before a judge in part because it already has.

J. Christian Adams is a former DOJ attorney.

Great to see you, Chris.

J. CHRISTIAN ADAMS, FORMER DEPARTMENT OF JUSTICE ATTORNEY: Hey, Megyn.

KELLY: So describe what exactly you think would be legal.

ADAMS: Foreigners do not have a constitutional right to enter the United
States, Megyn. Even Americans, they don't enjoy the Fourth Amendment
rights against search and seizure when they are at the border. So the
Constitution doesn't apply normally at the border.

All you have to do is say these hot beds of terror have to be subject to
additional screening. This is a reasonable request. It's something I
think most Americans would agree with.

If you come to this country and want in from these hot beds of terrorism,
you're going to be subjected to additional screening. It's neither Muslim
nor a registry. It's where the terror is.

KELLY: How far could they go with that? I mean, could they say, we need
your address, we need your cell phone, we need your fingerprints, you need
to check in with us every three days and if you don't, you're out?

ADAMS: Absolutely. It's totally constitutional. And it was in play,
something similar to that up until 2011, which naturally the Obama
administration quit doing. You could say you have to check in INS every
week.

Remember, the 9/11 terrorist, Megyn, overstayed their visa. A tool like
this would have been effective to help stop 9/11.

KELLY: So how -- I mean, the concern is that what if we wanted to go
beyond that? What if we wanted to do something like corral them and keep
them in a certain area? I mean, they do have constitutional rights once
they get on U.S. soil and get past the border.

ADAMS: That's right. And nobody is suggesting that. Nobody is suggesting
-- that's part of this attack on the Trump transition is they're making
things up that aren't actually being suggested.

You cannot corral people based on their religion and nobody is suggesting
it. But you can impose entry requirements that will protect this country
by asking them about their views of certain issues. Or do they think it's
legitimate to wage jihad against the west.

KELLY: Can Donald Trump just do that with a stroke of a pen or does he
have to, you know, get that pass through a Congress.

ADAMS: He can do it with a stroke of a pen and I suggest he probably is
going to do it, because that's why he was elected, to try to keep America
safer than we've seen over the last couple of years. In places like Paris,
where you can see what happens if you don't protect the country.

KELLY: The president has a lot of power in dealing with the border to
protect the nation.

Christian Adams, great to see you.

ADAMS: Thanks, Megyn.

KELLY: Well, this debate over this has been on fire in the media today and
we're picking it up there with Carl Higbie, a former Navy SEAL and Trump
supporter and Hassan Shibly, the chief executive director of the Florida
branch on The Council of American Islamic Relations known as C.A.I.R.

Great to see you both.

So, Carl, you -- we had this debate on the show last night.

CARL HIGBIE, FORMER NAVY SEAL: Right.

KELLY: You just want to make clear that -- we got into this back and forth
about, you know, whether there was legal precedent for doing this.

HIGBIE: Right.

KELLY: Checking at the border. And you were not -- you made a reference
to the Japanese in World War II and your position tonight is that that was
not a reference to internment camps, is that right?

HIGBIE: Oh no, absolutely. I was quite frankly -- I was actually shocked
that you brought in internment camps. But it was a reference strictly to
the scrutiny on immigration and the stopping of immigration and the
registration of immigrants coming from places like Japan and Italy and
Germany and things like that. So, no, it had nothing to do with interment
camps whatsoever.

KELLY: OK. You didn't say that you were shocked. Here is what happened
between us last night when we were talking about this proposal by Chris
Kobach to check out Muslims at the border. Listen.

(BEGIN VIDEO CLIP)

KELLY: You're discussing drafting a proposal to reinstate a registry for
immigrants from Muslim countries, for immigrants from Muslim countries.

HIGBIE: Yes. And perfectly honest, it is legal. They say the whole
constitution a muster. I know the ACLU is going to challenge it, but I
think it will pass. And we've done it with Iran back a while ago. We did
it during World War II with Japanese, which, you know, call what you will -
-

KELLY: Come on, you're not proposing we go back to the days of interment
camps I hope.

HIGBIE: No, no, I'm not proposing that at all, Megyn. But what I am
saying is that --

(CROSSTALK)

KELLY: You know better than to suggest that. I mean, that's the kind of
stuff that gets people scared, Carl.

HIGBIE: Right. I'm just saying there is precedent for it. And I'm not
saying I agree with it.

(END VIDEO CLIP)

KELLY: So I mean there wasn't shock expressed there. You were saying
there's precedent for it, which is what got people, you know, confused, but
I take you at your word if you're saying you were referencing something
else. You were trying to make a different point.

HIGBIE: Yes. It was references in parallel with Iran when we, you know,
under Jimmy Carter, when we banned immigration from Iran. So I assume that
-- forgive me for not being as clear as I possibly could.

KELLY: Because you mentioned the Japanese and World War II.

HIGBIE: Yes, no, I did, but I did not ever mention internment camps. So,
you know, for those out there who thought it was --

KELLY: I know, but that's kind of the big story about what we did here
with the Japanese.

HIGBIE: You put words out there, Megyn, and let's be honest the media has --

KELLY: Only after you put out the words about what we did to the Japanese
in World War II, which is like, OK, I remember that.

HIGBIE: Yes, well, I tell you what, you know what, I think the left-wing
media took this by the horns because they're not a fan of Donald Trump. It
is exactly why he ran because of the dishonest media. I'm not saying you.

KELLY: OK. Listen, I understand you're clarifying it. Got it.

Hassan, let me bring you in on what Carl is actually saying tonight, which
is he supports this proposal. You just heard our lawyers saying it would
be upheld in a court of law to say Muslims coming into the country from
countries where terror originates, or where there's a terror problem that
they could be forced to submit to this kind of monitoring.

Your thoughts?

HASSAN SHIBLY, EXECUTIVE DIRECTOR, CAIR: Thank you, Megyn. And to Carl I
say have you no sense of decency, sir? I mean, America is a country based
on freedom of religion. Freedom of religion is a fundamental principle
that I have taken an oath and I'm sure you've taken oath to protect. And
it is ineffective to target people simply based on religion.

Let's target criminals, let's target terrorist but let's not divide people
simply based on their religion. And my children hear you. After Donald
Trump won, my children came home, their ages 4, 5 and 6, and we don't talk
about politics at home, but they said, daddy, daddy, Trump won and now he's
going to kick us out and he's going to build a wall so big we can't even
fly back home. And I told my kids, don't worry, you were all born here,
this is your land and I'll protect your freedom to practice your faith in
this land as we will protect the freedom of all Americans to practice their
faiths in this land and their freedom.

(CROSSTALK)

KELLY: Well, he's not talking about Americans, though, Hassan. He's not
talking about Americans. He's talking about foreigners, who want to come
in to America and the kind of screening that we should do when we're in a
war on terror.

SHIBLY: Well, I think anybody coming into America should face scrutiny and
screening to make sure that people who are coming into America are --

(CROSSTALK)

KELLY: You don't think there should be any heightened scrutiny for those
who come from hot beds of terror.

SHIBLY: I don't think there should be heightened scrutiny based on
people's religion. Again, that's not what America is about. You have IRA
committing terrorism --

(CROSSTALK)

KELLY: Is that based on religion or is it based on geographical -- you
know, geopolitical war.

SHIBLY: Well, we've heard many different things. We've heard many
different things from Trump supporters and Trump surrogates and some have
advocated -- I mean, this gentleman here himself has said some very
negative things about the entire Muslim community.

We can't be promoting fear and hate against an entire religious community.
Let's target on actual threats, but let's not divide Americans based on
religion because what makes America so great is freedom of religion.
That's what the U.S. Constitution is about.

KELLY: Go ahead, Carl.

HIGBIE: Well, Hassan, forgive me for not taking you too seriously about
American security and safety, which is the paramount of Donald Trump's
policies here.

Your organization CAIR was listed as a terror organization by the UAE.
Seven of your board members can't come into the United States because they
have alleged terrorist ties. And you supported Hamas.

So let's be very clear here. Donald Trump wants to protect Americans first
and scrutinize people who want to join our country. And make sure when
they do join our country, they do it on our terms which is safe for
Americans but we also want to be fair to the people who are already here.

So I welcome immigrants, I welcome people from all over the country or all
over the world to join us here. But I want to make sure that it's safe for
Americans in my country that I fought for.

KELLY: Go ahead, Hassan.

SHIBLY: And that's absolutely false. You know, I'm a civil rights lawyer.
I run the largest civil rights organization in the state of Florida. We
defend the rights of all people of discrimination regardless of race, or
religion or ethnicity --

(CROSSTALK)

KELLY: The UAE has designated CAIR as a terrorist organization.

SHIBLY: The UAE, the UAE did designate CAIR, not CAIR of Florida and we
don't go by the UAE. We live in a democratic country. The UAE does not
have a democratic freedoms or liberties and the reason they did this is
because.

HIGBIE: There is another Muslim county --

SHIBLY: .here is a civil rights organization -- yes, a dictatorship. Are
you under UAE laws? Or do we believe in American laws? I go by the
American system.

Only a couple of months ago, I met with the president. Our deputy director
is a sheriff deputy and he protects this country day and night. We keep
our country safe. We are proud Americans and we want to keep America a
free and just nation for all people regardless of their race or religion.
And we will stand for all victims of discrimination. Let's stand united.
Let's not let fear and hate divide us and turn us against each other. We
stand united. Thank you.

(CROSSTALK)

KELLY: Carl, I'll give you the quick last word and I got to go.

HIGBIE: I just want to say thank you, Megyn. I think the American people
understand where we stand on our differences on this one. So thank you.

KELLY: Great to see you both.

Also tonight, we're doing a new investigation into fake news reports and
whether they change people's votes.

Plus, Nancy Pelosi may lose her 14-year grip on power as a result of the
pounding the Democrats took last week. Marc Thiessen and Austin Goolsbee
are here on what that means for the country.

(BEGIN VIDEO CLIP)

NANCY PELOSI, D-CALIF., HOUSE MINORITY LEADER: Well, let me just say that as
I said without even asking anybody for a vote, I have over two-thirds of
the caucus supporting me.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KELLY: Breaking tonight, a young Democrat from the Blue Collar Town of
Youngstown, Ohio has stepped up to challenge Nancy Pelosi and possibly
break her 14-year grip on power. That news comes as President Obama faces
roughly two months in office left and the legacy under possibly going under
from the President-elect.

The Clintons appear to be leaving the political stage meantime after being
a powerful force in Washington for over 30 years. Senator Harry Reid is
retiring after three decades in office. Nancy Pelosi could do nothing but
watch as her caucus decided this week to delay leadership elections while
they figure out what went wrong on Election Day. Joining me right now, Fox
News Contributor Former Chief Speech Writer to President George W. Bush
Marc Thiessen and President Obama's Former Chief Economist and Economic
Professor at Chicago's Booth Schools of Business, Austan Goolsbee, great to
see you both.

MARC THIESSEN, AMERICAN ENTERPRISING SCHOLAR AND FOX NEWS CONTRIBUTOR:
Good to see you, Megyn.

AUSTAN GOOLSBEE, PRESIDENT OBAMA'S FORMER CHIEF ECONOMIST AND ECONOMIC
PROFESSOR AT CHICAGO'S BOOTH SCHOOLS OF BUSINESS: Thanks for having us
back.

KELLY: So Marc, let's put this in perspective for us about the state of
the Democrats and the Democratic Party right now.

THIESSEN: Well, the Democrats have called off their elections until they
can figure out what the hell is going on. That's what it sounds like right
now. Look, the state of the Democratic Party is pretty bad. A few weeks
ago the Democrats were preparing to measure the drapes in the White House.
And once the Republican Party infight over how they had this devastating
lost to Hillary Clinton. Now it's the Republicans that are measuring the
drapes and the Democrats are infighting.

And they have a lot to fight about. As Congressman Ryan has correctly
pointed out, they've had the smallest congressional minority since 1929.
Donald Trump has been elected president of the United States. They've lost
60 seats in Congress since 2010 and that is at the Republican wave at the
national level. At the state level, the Democrat Party has lost 242 state
legislative seats, since Barack Obama took office, lost control of 30 state
legislative chambers and a dozen governorships.

When Barack Obama took office Democrats - I am sorry. Republicans had
control of about eight state legislatures where they had the governor and
the state legislature. Today it's half the country. And Democrats
controls it. So the Democratic Party has been -- we have been focusing on
the national election at the state level they've been completely wiped out.
The wave is in the national level, there is a tsunami at the state level.

KELLY: Pretty compelling argument there, Austan. What's the counter?

GOOLSBEE: Yeah, look, several of those things I don't disagree with. You
know, Donald Trump wins a very narrow presidential victory. But I think
Marc is right, that completely turned the tables. Now it's the Democrats
fighting with each other trying to figure out, you know, why did this
happen and whose fault was it and where should they move.

The only thing I would observe at the state level is a lot of what you've
seen at the state level is true at the House of Representatives too, which
was 2010 was a big year for Republicans and because 2010 is a census year,
you had a massive amount of redistricting in those states. And that has
absolutely redounded into the House of Representatives and into the State
Legislatures. You've seen the senate remain much more balanced because
there's no redistricting.

KELLY: What do you make, I mean, obviously the Democratic Party has some
soul searching to do. You tell me, they don't seem like they fully
understand why or how they lost.

GOOLSBEE: That is partly true.

KELLY: From the diagnosis, I guess the postmortem I'm looking for.

GOOLSBEE: Look, we can both parties we have seen can overreact to very
narrow election victories by the other side. You've seen that happen
multiple times over the last 20 years.

KELLY: You think Nancy Pelosi is going to get the boot?

GOOLSBEE: Well, see that is what I was going to say. That said, it's
clear with the Clintons, with Pelosi, we got a generation of leadership
that sometime in the near future is going to shift to the next generation.
I don't know if it's right now. Nancy Pelosi is pretty strong and pretty
effective. I don't know if this one congressman from Ohio will be the
challenge. But I do think, you know, the winds are blowing, the winds of
change are definitely blowing.

KELLY: Wind of change, yeah. Marc, basically the Republicans took over
the Congress in 2010, Austan is saying and re-jiggered the lines such as,
you know, in a way to help the Republicans.

THIESSEN: Yeah. If it were that easy then they wouldn't have any
problems. Then they would have to wait for the redistricting. Look, the
reality is I hope they keep Nancy Pelosi in power, because if you have the
same leadership, you have the same results. The reality is that reason
that the Democrats have been wiped out is because they've lost the white
working class vote in states like Ohio, state like Pennsylvania, state like
Wisconsin.

KELLY: Why is that?

THIESSEN: Because they lost, personal - because they have utter contempt
for those people. These are people that Barack Obama said are bitter
people who clean the guns, that Hillary Clinton called them the
deplorables. They are not going to win those people back with the San
Francisco liberals. Tim Ryan is from Youngstown, from that part of the
world, he knows how to bring the Democrat Party back, but I hope they don't
listen to him.

KELLY: Quickly, Austan, go ahead.

GOOLSBEE: Marc is kind a firing the most inflammatory things that he can
fire. I mean Barack Obama's popularity rating is following Ronald Reagan's
at this point of presidency. And Donald Trump just lost the popular vote
by more than a million.

KELLY: But he won the Electoral College.

(CROSSTALK)

Let that be your warm blanket as you go to sleep, to President Trump.

(LAUGHTER)

Great to see you both, nine days after Donald Trump's victory and some of
Hollywood's ardent liberals are still having trouble coming to terms with
the results. We'll show you what actress Lena Dunham is now doing in her
struggle to cope with the results.

Plus, have you heard about fake news? Did you hear about this on Facebook?
Did it really change how people voted? Our investigation is next.

(BEGIN VIDEO CLIP)

BARACK OBAMA, FORMER UNITED STATES OF AMERICA PRESIDENT: There's so much
active misinformation and it's packaged very well and it looks the same
when you see it on a Facebook page or you turn on your television.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

From the world's headquarters of Fox News, it's "The Kelly File" with Megyn
Kelly.

KELLY: Developing tonight, a brand-new analysis from Buzz Feed News has
found that in the months leading up to the U.S. Election, bogus election
news stories generated more engagement on Facebook than top real stories.
Now some of the left are claiming that fake news contributed to the outcome
of the race and President Obama is warning about living in an age of
misinformation.

(BEGIN VIDEO CLIP)

OBAMA: There's so much active misinformation and it's packaged very well
and it looks the same when you see it on a Facebook page or you turn on
your television. If everything seems to be the same and no distinctions
are made, then we won't know what to protect.

(END VIDEO CLIP)

KELLY: Joining us now, Chris Stirewalt, our Fox News Digital Politics
Editor and Dana Loesch, host of The Blaze on TV and Author of "Hands Off my
Gun: Defeating the Plot to Disarmed America", great to see you both.

DANA LOESCH, THE BLAZE ON TV AND AUTHOR OF "HANDS OFF MY GUN: Thanks for
having us.

Fake news, it's apparently a real thing though I don't know if it was a
real cause of Hillary's defeat. Let's just start with -- apparently the
fake stories, the biggest ones include that Mrs. Clinton sold weapon to
ISIS, that the Pope endorsed Donald Trump, that Ireland was accepting
American refugees fleeing Donald Trump and that RuPaul, the drag queen, you
know, right, said he was groped by Trump.

LOESCH: Well, that was a foul story.

CHRIS STIREWALT, FOX NEWS DECISION DESK CORRESPONDENT: Whoa.

LOESCH: That probably moved a lot of needles.

STIREWALT: Don't say that.

(LAUGHTER)

LOESCH: There was a story where - no, seriously. There was some story
where it was, it was Media Research Center and they discovered that about 8
percent of voters, they determined that maybe if what they had believed was
being said about Hillary Clinton that they saw on the news, maybe if they
would have believed it. It would have had an impact on the way they voted.
But nobody trusted the media, 70 percent of voters don't trust the media.
That is a MRC poll from last week, so, I don't really think -- and those
are so outlandish, the RuPaul. That is my favorite. I haven't heard that one until tonight.

KELLY: Stirewalt, you know, fake news I guess could be potentially a problem.

STIREWALT: Yeah.

KELLY: What seemed to be the bigger issue in this election was real news
that was completely ignored by a lot of people, for one reason or another,
on both sides?

STIREWALT: Well, look, the attack, the sustained attack on the press, so
we earned it in large part. The broken faith with the American people by
dishonest reporting heavily biased reporting passing itself off as
objective journalism, decades of mistakes brought.

KELLY: Some of which was revealed in WikiLeaks.

STIREWALT: Some are revealed from WikiLeaks, not just revealed by turning
on the television for some channels and going oh, I see how it is. So, all
of these decades of misconduct laid open the door in 2016 that you had both
campaigns, particularly Donald Trump waging war against the press. Hillary
Clinton said it's because of the coverage of my e-mails that I'm in
trouble. Actually it's because of the emails that you're in trouble. And
then Donald Trump of course with an all-out attack on the press. CNN
sucks, CNN sucks.

KELLY: Disgusting was his favorite.

STIREWALT: Rage and hate against the press. He ran against the press and
Clinton did to a degree too.

LOESCH: He skull-stumped the press. I mean, there is really no other
way to put it. I mean, there's really no other way to put it, but that is exactly what
happened. But the thing is he did to the American media what so many
voters have wanted to see happen for the longest time. Think about this.
Back in 2010, even before that, back in 2008, if you didn't vote for Barack
Obama, then maybe you have some racist tendency that is how it started.
And this in 2010, right before the healthcare, unaffordable healthcare I
prospect, there was a whole story of congressional members that were spit
on by tea Party demonstrators in Washington, D.C.

There was zero proof of this. It was a made up story. Nothing was
confirmed. And it kept going, going and going and the stories got more,
more, and more outrageous. This wasn't a left meaning website or it wasn't
a right leaning website doing this. This was major network news that was
doing this. I remember there were reports of tea Party activists that were
carrying firearms, but they were cropping people out, so you couldn't tell
that it was a black American voter who was carrying a firearm lawfully. I
mean that is the kind of stuff they did so people would freak out.

KELLY: It's almost like you want a do-over. Let's start with media over
again. It's gotten so clammed up with bad information and bad actors. You
know in some cases, in the eyes of the viewers in particular.

STIREWALT: Social media is great, because it connects people in ways that
they haven't been before. The success of Donald Trump is reflection, not
just of his ability to share information or misinformation, but it is a
reflective of the ability to create a network and an organization of people
that transcend normal networks. Great, that is really good. But there is
something that we have to pay attention to which is if we can't be sure
we're telling the people the truth, and they are un-trusted sources, we
won't keep the Republic.

KELLY: I would say, no matter, you know we have taken a lot of bumps and
bruises, we the press, many of them been deserved.

LOESCH: Some of them better than others.

KELLY: It's still a noble profession.

STIREWALT: We got a job to do.

KELLY: We're looking out for them. We're trying. There are a lot of
great journalists who give up a lot and who work very hard, usually for
very little money, giving you the best information they can, great to see
you both.

LOESCH: Thank you, Megyn.

STIREWALT: Yeah.

KELLY: So, Lena Dunham, Tom Hanks and Brian Kilmeade. Only one of them is
here, next.

(LAUGHTER)

(COMMERCIAL BREAK)

KELLY: Two winners in the 2016 election, Donald Trump and the therapists
working in and around the Hollywood area. It seems some of the best known
names from the entertainment industry are having, especially hard time with
the results. Here to discuss it, is the Co-Host of "Fox & Friends", Brian
Kilmeade and, listen to this, if you're in Dayton, Ohio tomorrow night, you
can catch Brian at a signing for his book, "Thomas Jefferson and the Triple
E Pirates", 4:30 p.m. Eastern at Book and Co. Dayton, Ohio. Kilmeade will
be there, exciting.

BRIAN KILMEADE, FOX AND FRIENDS SHOW HOST: And I will not be crying. Lena
Dunham, evidently the story goes. She is at the Javits Center, waiting for
Hillary Clinton to show up, so she could have a party of a lifetime. Then
she would realizes Florida stone the other door action, she reaches to her
face to find tears there. He was crying. A little bit later she found
hives on her chin, she found somebody else, and who also have hives in her
chin. It was clear Hillary Clinton is going to lose. The only thing she
could do is join her boyfriend at home and take a shower. And she did.

KELLY: You know what, can I tell you for the record one of our producers,
Emily Jeffers she also breaks out in hives when she gets upset.

KILMEADE: Really?

KELLY: Not in this particular instant. But I think it could happen. That
could happen.

KILMEADE: Is she upset now? Please bring her out.

KELLY: I think she is feeling pretty good.

KILMEADE: All right. Ok, good. I've never had that kind of reaction.
Sometimes if I scratch a dirty cat, my eyes will puff up.

KELLY: Well, you know, the truth is, this is very upsetting to a lot of
Americans the same way as, you know when Barack Obama won two times in a
row. It was very upsetting to someone on the other side.

KILMEADE: But in which famous people get upset, they do interesting things
that blue collar people can't do.

KELLY: Like what?

KILMEADE: They go to Aspen, Colorado, where they just go and climb rocks.

KELLY: Is that where Lena Dunham is?

KILMEADE: That is exactly what she did.

KELLY: In Aspen, I thought she was in Arizona, the same thing.

(LAUGHTER)

KILMEADE: Same thing. She is in Arizona. Don't look for her. She is out
now and she decides.

KELLY: Just don't look for her.

KILMEADE: Right. Don't look for her, but she is back she says she
realized she is going to fight the good fight.

KELLY: How about Tom Hanks. He is taking a different route.

KILMEADE: Typical classy Tom Hanks. Tom Hanks got another award on
Wednesday, so finally he is getting recognized.

(LAUGHTER)

So he gets the trophy, because there's nothing in the trophy case. I am so
embarrassed for. He was really good at "Growing Pains?" (Inaudible) he
was fantastic, by the way.

KELLY: Would you get to the point.

KILMEADE: All right. He is making a speech, that was Tom says, listen, I
was form to somebody else but the paraphrase, he says it is time for as
Americans, we are not Republican or Democrat, we are Americans. And my
hope is that Donald Trump does so well I vote for his reelection in four
years and that is the attitude that most people have. When Barack Obama
won and Mitt Romney lost, you're an American. Same thing with George Bush
and Al gore, you are an American.

KELLY: Although I have to say I will never get over the fact when Barack
Obama was elected and inaugurated in 2008 and I went to his inauguration in
2009, there were people in that crowd who booed George W. Bush and Laura
Bush and George H.W. Bush and Barbara Bush. How do you boo Barbara Bush,
explained that to me, I don't understand.

So, healing is good. You helped produce a healing moment as well that
people don't know. It's in my book, "Settle for more" which you can buy
right now, it is on stand and it helped Donald Trump and I get over the
weirdness that went on between us. And people don't know that Brian is
like, Henry Kissinger, I reached out to Donald Trump to meet with me, like
sit down with me so we could stop that and he didn't want to see me. And
then enter Brian Kissinger, tell them what happened. It is in the book.

KILMEADE: He disrupted me because he made up with Mitt Romney too today,
the same type thing, as bad as he gets, fundamentally he does want to get
over things. My sense is I went to interview him and we got in a fight
earlier that day, because of you. Because he is going to have to - to make
the long story short, I had a chance to talk to him, that was the time I
said listen, if I talk to Megyn and Megyn wants to talk to you, can we get
this thing done. You want it to get it done, and so he said go ahead.
Call - text my office. Hope they bring me back, sure enough, let's do it
Sunday, can't do it on Sunday. Can Melania come, can't come. Next thing
you know he met you and now you're friends. It is very similar to the same
pattern with Mitt Romney and Ted Cruz.

KELLY: It was amazing. You did a great job and you really helped us both
out, great to see you. We'll be right back.

(COMMERCIAL BREAK)

KELLY: Are you a working parents struggling with the joys of doing and
having it all. Check out "Settle for more" at your local bookstore and we
can share some stories. Thanks for watching, everybody. I'm Megyn Kelly.
See you tomorrow.

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