This is a rush transcript from "Fox News Sunday," May 28, 2017. This copy may not be in its final form and may be updated.

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

Keeping America safe after the terror attack in England. What steps is the government taking this Memorial Day weekend?

(BEGIN VIDEOTAPE)

JOHN KELLY, HOMELAND SECURITY SECRETARY: It's a constant threat and we always have to be vigilant.

WALLACE: We’ll discuss the investigation into the bombing and the response here in the U.S. with the secretary of homeland security, General John Kelly, live, only on "Fox News Sunday."

Then, new reports the president's son-in-law Jared Kushner discussed setting up a secret communications channel between the Trump transitions in the Kremlin. We’ll ask our Sunday panel where this takes the expanding probe into Russian interference.

Plus, President Trump returns from his first trip overseas to a domestic agenda in trouble, from ObamaCare repeal and replace to the budget, some on Capitol Hill wonder whether Congress will pass anything.

SEN. LINDSEY GRAHAM, R-SOUTH CAROLINA: Yes, definitely dead on arrival.

SEN. DICK DURBIN, D-ILLINOIS: This is step backwards. You’re not going to make America great again with this budget.

WALLACE: We’ll break down the president's priorities and prospects with a number two Democrat in the Senate, Dick Durbin, and Republican senator, Dr. Bill Cassidy.

And our power player of the week flying high for the Blue Angels.

UNIDENTIFIED MALE: Boy, is it sweet when we put all that together and get that synergy and you feel that fuzz.

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

(END VIDEOTAPE)

WALLACE: And hello again on this Memorial Day weekend from Fox News in Washington.

President Trump is back at the White House arriving late last night after a largely successful nine-day trip to the Middle East and Europe. But he returns to a spreading scandal about links between the Kremlin and some of his current and former advisors, and to a domestic agenda that stalled in Congress.

We’ll get to all of that this hour, but we begin with terror, that suicide bombing at a concert in Manchester, England, that killed 22, just the first of four savage attacks this week around the world.

Joining us now, the man in charge of keeping America safe, the secretary of homeland security, General John Kelly.

Mr. Secretary, welcome to "Fox News Sunday."

Before we get to terror, let me ask you about the hot story in Washington now. These revelations about Jared Kushner trying to set up a back channel to the Kremlin, through the Soviet and -- the Russian ambassador. Your reaction to that? Is there anything improper with that?

KELLY: Well, I don't know if it's true or not. I know it’s being -- it's being reported in the press.

WALLACE: It has been confirmed to me the conversation took place.

KELLY: OK. Then I would just tell you, Chris, that I think any channel of communications back or otherwise with a country like Russia is a good thing. I mean, multiple ways to communicate back and forth is a good thing with a country I think, and particularly a country that’s like Russia. So, it doesn’t -- it doesn't bother me.

I mean, you just have to assume, obviously, that what you’re getting is -- may or may not be true, they may be working you. But that's the whole point. I mean, that communication goes into the White House as a data point in terms of discussion. So, I don't see the big deal.

WALLACE: Let me -- you say you don't see a big deal?

KELLY: No, I think any time you have channels of communication with a country, particularly one like Russia, I wouldn’t criticize it.

WALLACE: But you talked about a data point into the White House. This is during the transition.

KELLY: Right.

WALLACE: These were private officials.

KELLY: Right.

WALLACE: We have one president at a time. Does that make a difference?

KELLY: You know, I mean, obviously, during the transition period, the people in transition, the incoming Trump administration is not in a position to do anything to inhibit with the Obama administration literally days before they transitioned out. So, again, as they begin to build relationships, there's nothing wrong with that. As they begin to build their own situational awareness with Russia in this case, I don't see an issue here.

WALLACE: OK. Let's turn to your day job. What's the latest on the Manchester bombing? Have they rolled up the network that was supporting the bombers, and what have you learned from this plot that will help you better protect the U.S. homeland?

KELLY: I mean, I don't know what the -- actually the better way to put it, I can't comment on whether they finish their investigations, or roll -- you know, completed rolling up on the network that we’re dealing with. But I would just say that this is -- yes, I’ve said it many times, it really is a generational struggle. This is one tragedy in line with dozens of other tragedies in the world.

I mean, last week, you had Manchester, you had Egypt, you had Indonesia, you had the Philippines, all ISIS-inspired or ISIS-controlled terrorist attack.

WALLACE: Was there something different about this network and the way this was pulled off that says to you, gee, we've got to up our game?

KELLY: Well, it’s this kind of -- in my view, there's kind of three types of terrorist attacks. The most sophisticated that we look at, that is against aviation, that's the hardest to do but it's the biggest payoff for these people.

Then you have kind of the middle of the road one, which I think this one was. It’s a network. It's hard to do. You have to construct a bomb and all, and then you have kind of the low-end where -- I mean, just as tragic but you have people running people over in trucks, that kind of thing.

But this is just the way terrorism is today and I think it will be around for many, many years to come. You know, the good news is those officials in the United Kingdom, Europe, around the world are relentless. They are just as relentless in terms of trying to prevent these things as the terrorists aren't trying to create them.

The good news is, for our country, we have not had an outside the United States terrorist attacks since 9/11. And that goes to the issue of those that fight our away game, that’s DOD, NSA, CIA, and those that fight the home game. That’s DHS, FBI, local law enforcement.

WALLACE: Let me pick up on this, because part of the story this week was the leak of information about the bomber and the bombing that made its way into the U.S. media, and that set off this exchange.

(BEGIN VIDEO CLIP)

THERESA MAY, BRITISH PRIME MINISTER: I made clear to President Trump that the intelligence that is shared between our law enforcement agencies must remain secure.

REX TILLERSON, SECRETARY OF STATE: We take full responsibility for that. And we, obviously, regret that that happened.

(END VIDEO CLIP)

WALLACE: How was this kind of sensitive information leaked to "The New York Times"? And, General, why is it that whether it's politics or terror, our intelligence agencies, our law enforcement agencies, can't keep a secret?

KELLY: It's outrageous. When I call -- immediately after the attack, I called my counterpart in U.K., offered my condolences. By the way, the third time I’ve offered her, Amber Rudd, my condolences in 120 days. That's how frequent this kind of -- these terrorist attacks are happening.

Anyways, she rightfully and very graciously accepted the condolences and leaned into me on this leak. It's outrageous. I don't know why people do it. It jeopardizes not only investigations, it puts people's lives in jeopardy.

I don't why people do it, but they do. And that's the world we live in.

WALLACE: Let's get to what you're going to try to do to protect the homeland. There are a lot of crowded events in the summer, concerts, sporting events. How do you harden these soft targets like this concert? And do you have new thoughts because this person didn't get into the event, he was outside the event, what do you do about parameters?

KELLY: We -- one of the great things about America, there's many great things but we are a free and open society. And in many -- and I wouldn't change that at all. But that's also one of our vulnerabilities. People can live their lives day in and day out, privacy issues, all of that, it's a good thing. It’s what America is all about. But as I say, that is a vulnerability.

The good news is to all Americans, I mean, the good news is that local state law enforcement today -- not to even go down the issue of the FBI, DHS -- it's in their DNA now to harden. We are just about as hard as we can be. I don't know if there's a way to prevent these kinds of things in the kind of society we live in.

WALLACE: Let me pick up on that, because I want to play a clip of your testimony before Congress this week. Here it is.

(BEGIN VIDEO CLIP)

KELLY: It's everywhere, and that’s -- you know, that's the nature of this threat that we are dealing with. As horrible as Manchester was, my expectation is we’re going to see a lot more of that kind of attack.

(END VIDEO CLIP)

WALLACE: A lot more of that kind of attack, here in the U.S.?

KELLY: I think we’re relatively -- we have no specific -- we have threats all the time, but no, right now, specific threat. But that goes to the fact that we are over here and not over there.

The fact is that it's the caliphate is being destroyed, that is Syria and Iraq, there are large numbers of returning fighters, Western Europe, and, you know, in many cases like this guy that did this thing in Manchester, he’s a citizen of the U.K. In this case, he’s a passport holder. I don't if the U.K. had any idea that he was outside -- that he was in Libya, but I think he’s also traveled to other points.

The point is, they have a real threat and it's growing, it’s metastasized, as fighters come back from the caliphate to be I believe to be more of this kind of thing.

The good news is, all decent people, all decent governments, and it doesn't matter whether we are politically close to them or not, all governments for the most part are sharing tremendous amounts of information, passport-type information, aviation, travel information. But, you know, people like this are below the radar.

WALLACE: I want to pick up on aviation because you are in the process of making some big decisions on aviation. And I want to do a lightning round, quick questions, quick answers.

Are you going to ban laptops from the cabin on all international flights both into and out of the U.S.?

KELLY: I might. That's a quick answer.

WALLACE: Yes, well, expand a little bit.

KELLY: Well, there’s a real threat. Numerous threats against aviation, that's really the thing that they are obsessed with, the terrorists, the idea of knocking down an airplane in flight, particularly if it’s a U.S. carrier, particularly if it's full of mostly U.S. folks, people. It's real. You know that I implemented I think on the 21st of March a restriction on large electronic devices in the cabins from ten points of origin.

WALLACE: Right.

But there was talk, as you say, about all international flights both into and out of the U.S. When you say you might, when are you going to make that decision and what’s going to determine it?

KELLY: (INAUDIBLE) follow the intelligence. The very, very good news is that we are working incredibly close with friends and partners around the world. We're going to, and in the process of defining this, but we are going to raise the bar for generally speaking aviation security much higher than it is now.

So -- and there’s new technologies down the road, not too far down the road that we will rely on. But it is a real sophisticated threat and I will reserve that decision until we see where it's going.

WALLACE: Another lightning round question, I do need a quick answer here because we’re running of time. The TSA is testing tighter screening of carry-ons, and the idea that people who bring their carry-ons are going to have to unpack them and put food in one bin, and electronics in the another bin, and paper in another bin.

Are you going to spread that nationwide and what’s that going to do to the screening lines?

KELLY: Yes, I mean, the reason we’ve done, TSA, of course, works for me. The reason we've done that is because of -- people trying to avoid the $25 or $50 or whatever it is to check a bag are now stuffing your carry-on bags to the point of, you know -- well, they can't get any more in there. So, the more you stuff in there, the less the TSA professionals that are looking at what's in those bags through the monitors, they can't tell what's in the bags anymore. So, if you put --

WALLACE: So, are you going to do that nationwide?

KELLY: We might, and likely will.

WALLACE: Soon?

KELLY: Well, what we’re doing now is working out the tactics, techniques and procedures, if you will, in a few airports to find out exactly how to do that with the least amount of inconvenience to the traveler.

WALLACE: A couple final questions I want to ask about the travel ban. The Fourth Circuit Court of Appeals issued a ruling this week continuing the stay on President Trump's revised travel ban -- and I want to put up -- the chief judge called it, the revised travel ban: an executive order that in text speaks with vague words of national security, but in context drips with religious intolerance, animus and discrimination.

Mr. Secretary, judge after judge has said that this is a Muslim man that violates the Constitution.

KELLY: They are dead wrong.

WALLACE: Well, I mean, you say that, but they are the ones who were --

KELLY: They are wrong. Remember the seven, now six countries? These were the same countries identified by the Obama administration that we should be extra cautious about and backed up, you know, by the United States Congress. That's where those seven countries came from.

The fact is that in those countries, we have very little ability to actually verify, vet the people that are coming out of those countries. So, what the president and it's not a travel ban, remember. It’s the travel pause. What the president said, for 90 days, we were going to pause in terms of people from those countries coming to the United States that would give me time to look at additional vetting to see --

WALLACE: OK. I want to pick up on that and why you’re even talking about the travel ban, because I want to put some numbers on. Take a look at this.

The first executive order that was issued on January 27th banned citizens from seven nations from entering the U.S. for 90 days, suspended the refugee program for 120 days, as you say, a pause, while you set up an extreme vetting program. It's now been 121 days since that first order. So, why don't you have the program in place?

KELLY: We are actually implementing it. The irony here is, had it stood, we would have had the 90 days to study. We’re not even studying what would be procedures, because we are enjoined and can't do that. In the meantime --

WALLACE: You can't study extreme vetting?

KELLY: No. We’re -- the irony again is we can't study it, but I’m just guessing, and implementing.

But we are going to find implement ways to determine who this -- an individual is, and remember, most of these countries have no passports. They have no police. They have no intelligence. Many of the countries in question don't even have a U.S. embassy there to help us vet. The U.N. will tell you it's almost impossible to vet these people from these countries because there are no passports and all the rest of it.

We have to figure out a way to determine who they are and why they come into the United States. Otherwise, we’re guessing. And this president and John Kelly doesn't want to guess when it comes to national security and protection of the U.S. population.

WALLACE: Secretary Kelly, thank you. Thanks for sharing part of your holiday weekend with us.

KELLY: Absolutely. Thanks.

WALLACE: Up next, new reports that Jared Kushner attempted to set up a back channel between Russia and the Trump transition. We’ll bring in our Sunday group to discuss the expanding Russia probe.

Plus, what would you like to ask the panel about the continuous leaks in Washington? Just go to Facebook or Twitter @FoxNewsSunday, and we may use your question on the air.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

HILLARY CLINTON, D-FORMER PRESIDENTIAL CANDIDATE: We were furious about the past presidential election of a man whose presidency would eventually end in disgrace with his impeachment for obstruction of justice.

(END VIDEO CLIP)

WALLACE: Hillary Clinton talking about Richard Nixon in her commencement speech at Wellesley College, but clearly taking a shot at President Trump. By the way, Nixon resigned before he was actually impeached.

And it's time now for our Sunday group: the head of Heritage Action for America, Michael Needham, Charles Lane of The Washington Post, Gerald Seib from The Wall Street Journal, and National Security Council staffer, Gillian Turner.

And just to catch you up, President Trump returns home to reports that his son-in-law, Jared Kushner, met with the Russian ambassador to the U.S., Sergey Kislyak, in December, and that they discussed setting up a secret secure channel between the Trump transition and the Kremlin. That communications link reportedly to be based in a Russian diplomatic facility in Russia.

A source close to the Trump administration tells me the conversation did take place but he says it was the ambassador who proposed the back channel, not Kushner, so the Russian military could talk with Trump advisors about the situation in Syria and the source points out that the secure link was never set up.

So, with that as a preface, Gerry, your reaction to the Kushner story, and how does this complicate the already complicated investigation of links between the Kremlin and the Trump transition?

GERALD F. SEIB, THE WALL STREET JOURNAL: Well, look, I mean, back channels are not unusual, they are not unprecedented. This one might have seemed perfectly innocent. Two problems though with it. One is, this happened during the transition, it seems to violate as you suggested earlier in the show the only one president at a time rule. And the second one is it’s Russia, after a campaign in which the Russian connection to the campaign, the Russian interference in the campaign was a big issue.

And I think the fact that it was at a time when people were looking for whether there were going to be signs of special favors for Russia as a result of help they might have given President Trump, then-President-elect Trump during the campaign, that's what makes this a big story, is the context of the conversation as much as the actual content.

WALLACE: Michael, I want to ask you, one, whether it's a big story, and, secondly, about the talk we are hearing, that is just rampant in Washington today about major changes in the White House that they’re going to set up a rapid response operation to deal with all the incoming leaks, that the president has hired at least one criminal defense lawyer and may be process of hiring a team and the staff is urging the president to let the lawyers vet his tweets. I mean, it really does sound like they’re going on a war footing on this.

MICHAEL NEEDHAM, CEO, HERITAGE ACTION FOR AMERICA: Yes, I don't know if it's a major story, there are several investigations going on. They probably should be allowed to work their course. It's kind of exhausting reading some of these new stories and trying to figure out what did you read three weeks ago that’s just being recycled, versus what new?

I think it's smart for the administration to try to put this stuff to the side, have, you know, a team that looks at these issues, and another team that looks at a lot of real policy issues, which are closer to the American people. You have the most conservative, exciting budget that's come out in a decade.

WALLACE: We’re going to get to the agenda in the next segment.

(CROSSTALK)

WALLACE: I mean, at the very least, it seems dumb.

NEEDHAM: Clearly, the optics of these are awful, and I think that especially when you have people who are new to the political system coming in and getting advice from a guy in Mike Flynn who probably didn't show the best judgment through a lot of this, you know, dumb might be a good word for it. I don’t know. You know, I think Kushner said a couple of weeks ago that he was happy to participate with the Senate investigation. He said he’s happy to participate with this investigation.

You are at a disadvantage when you are the focus of an investigation and your lawyers are saying, don't participate, don't comment, and everyone else in the country seems more than eager to talk about it. So, I think a little prudence in keeping our mouth shut while we let the investigations play out is probably fair and we’ll see what comes up in them.

WALLACE: You talk about the fact that they're all the stories and sometimes it's hard to remember what you've heard this week and what you heard last week. And this gets to the question of leaks. I asked our staff to put together, let's put it up on the screen, a list of the headlines from just the last two weeks. This is just Sunday two weeks ago until today. And as you can see, there's been a torrent of disclosures from intelligence and law enforcement officials.

Gillian, as somebody who worked in the government, have you ever seen anything like this? And, you know, the conservatives talk about a deep state, that there are people embedded in law enforcement and embedded in the intelligence community that are trying to bring this president down. It sure seems like it's true.

GILLIAN TURNER, FORMER WHITE HOUSE NATIONAL SECURITY COUNCIL: So, to me on the question of leaks, it seems that without a doubt leaks of information today are the number one threat to U.S. national security interest across the globe. And I think for evidence of that, we need look no further than the very public reprimand, we the United States had to endure from Britain earlier this week, in the wake of the Manchester attacks. A reminder that the British-U.S. intelligence cooperation, relationship, is one of the closest that has ever existed. And in my lifetime, in government and policy, I have not seen something so public, so public a risk (ph)

(CROSSTALK)

WALLACE: Most of these leaks aren’t about national security. They are about Trump's political security.

TURNER: Yes. And so, this gets to the question of the deep state. So, I’m somebody who likes to push back against the narrative having been a civil servant in the government. Again, in the national security community is different than the political community, the rest of the policy community. But I will say that from I have seen and experienced, it does not exist.

There is not this liberal --

WALLACE: How do you define this?

TURNER: There isn’t a liberal core of people -- put it this way, Chris, for a hard fact, more than 50 percent of the federal workforce today is made up of people that joined the government prior to President Bush's tenure in office. So, the idea that these are Obama holdovers is simply not true, it's not the case.

I think that when we talk about why individuals leak information, the explanations are as varied as human beings’ psychology. So, for example, a lot of things we are seeing leaked about the president are probably being leaked by his senior staff to hurt one another. That's not unique to the Trump administration.

WALLACE: We ask you for questions for the panel and we got some different reactions in this question of leaks.

Adri Ane sent us on Facebook: Do whistleblowers hold a vital role in the health of a democracy holding those in power to accountability?

But chuck Coo had a different take: Simple question. If our intelligence agencies are as good as advertised, why can't they find the leakers?

Chuck, how do you answer both of them about leaks?

CHARLES LANE, THE WASHINGTON POST: Well, as a member of the press, and is a believer in the role of the media and holding government accountable, I’m not going to come out against leaks, because, you know, for all the leaks that may cause this or that official trouble, there's going to be another one that does play an important role in accountability.

But going back to what Gillian said, I think part of the reason that these leaks are flowing so uncontrollably to the viewer’s question is the factional struggle within this administration. You know, we have this famous dispute between Bannon and Kushner that supposedly was papered over. But I wouldn't be surprised if, you know, those were present two currents, to put it politely, within the White House that are trying to get bad stories out about one another.

And this goes to your point about the staff shakeup and so on and so forth. You can shake up the staff all you want, but if man at the top is not laying out a clear and consistent line, is not himself modeling behavior, for example, by not blowing an Israeli source in a meeting with a foreign government, that sets the tone that this stuff is not really on, then it will continue.

NEEDHAM: I take your point about the responsibility of the press and how leaks play into as it requires a responsible press also. That when James Fallows of The Atlantic today put side-by-side The Washington Post in The New York Times and how they treat, I think it was three unnamed sources in the White House talking about Jared Kushner and his desire to be here and stay here, this is not an urgent story. This is not something that’s getting out there.

I don't think you see in the press, The Times and The Washington Post, the way they are playing this kind of using leakers to try to unearth the truth and taking two months like --

(CROSSTALK)

WALLACE: We need to --

NEEDHAM: It’s kind of getting ridiculous.

WALLACE: We need to -- because we’re going to run out of time. Let me simply say, we're just receiving information. It’s people who had sworn, oftentimes taken legal oaths not to divulge the information, they are the ones putting it out. We’re just the recipients.

All right. We have to take a break here. We’ll see you a little later.

When we come back, Senators Dick Durbin and Bill Cassidy. Is the president's agenda, both his new budget and the new effort to repeal and replace ObamaCare in trouble?

(COMMERCIAL BREAK)

WALLACE: Coming up, President Trump releases his budget.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: My administration is laying a foundation to build a future of economic prosperity and achieve American greatness.

(END VIDEO CLIP)

WALLACE: But does it have any chance of getting through Congress?

Two key senators join us next.

(COMMERCIAL BREAK)

WALLACE: A look outside the beltway of the Indianapolis Motor speedway, home to this weekend's Indianapolis 500.

Back from his first foreign trip, President Trump's focus will now shift to his domestic agenda, his new budget and a bill to repeal and replace ObamaCare.

Joining us to discuss the president's priorities from Springfield, Illinois, the Senate’s number two Democrat, Dick Durbin. And here in Washington, Louisiana senator and doctor, Bill Cassidy, who’s on both the Senate Finance and Health Committees.

Well, senators, before we get to the Trump agenda, I’ve got to ask you about the big story in Washington. This weekend, the Jared Kushner story, discussions about setting up a possible back channel with Russia.

Senator Durbin, what's wrong with that?

SEN. DICK DURBIN, D-ILLINOIS: The bottom line, of course, is we now have a special counsel in Bob Mueller. I have the highest level of confidence in him. And I hope that he will follow all the evidence, all the leads, and all the suggestions. And I’m sure he will.

WALLACE: Do you have any specific comment about the Kushner conversation and whether or je should keep his security clearance?

DURBIN: Well, of course not. I mean this is a rumor at this point and whether it is something that should be followed up on, I’ll trust Bob Mueller's judgment.

WALLACE: Senator Cassidy, are you troubled by this?

SEN. BILL CASSIDY, R-LOUISIANA: I agree with Dick’s assessment. And I’ll say, when you speak to folks back home, voters across the nation, they’re more concerned about their climbing health care premiums and the need to have jobs with better wages and better benefits. This will play out. We will know eventually. Right now Americans need help with their premiums.

WALLACE: Well, you know what then gentlemen, let's switch to health care. And the Congressional Budget Office, non-partisan, released its score of the House bill this week. And let's put the numbers up on the screen. It would reduce the deficit $119 billion over ten years, but 23 million more people would be uninsured by 2026. The cost of insurance, according to the CBO, for a 64-year-old earning $27,000 a year would increase from $1,700 a year under ObamaCare to more than $13,000 under the GOP bill. Here's what Senate Democratic Leader Chuck Schumer said this week.

(BEGIN VIDEO CLIP)

SEN. CHUCK SCHUMER, D-NY, MINORITY LEADER: Unless you’re a healthy millionaire, Trumpcare is a nightmare. This report ought to be the final nail in the coffin of the Republican effort to sabotage our health care system.

(END VIDEO CLIP)

WALLACE: Senator Cassidy, is Schumer right?

CASSIDY: So the Senate will write its own bill. And it shouldn't be the final coffin because right now there's families sitting around their kitchen table, they’re play $20,000, $30,000 and $40,000 a year for premiums and there's about to be a 40 percent increase in many states in these premiums. Cassidy-Collins, a bill I’ve introduced with Susan Collins, we have four co-sponsors.

WALLACE: Yes, we’re going to get into that in a --

CASSIDY: But that said, actually would -- would -- would meet that family’s needs and I think it should be a place we go and those families are asking us to address those issues.

WALLACE: So -- so what would you say to Americans? How should they regard the House bill?

CASSIDY: The House product, the Senate will have its own product. We will go to conference. But I think the Senate product, I'm hopeful, will be more likely to address their needs.

WALLACE: Senator Durbin, I know what you’re going to say, and the CBO certainly indicates there are problem with repeal and replace, but ObamaCare has its own problems. You heard Senator Cassidy mentioned some of them. Blue Cross Blue Shield of Kansas City just announced this week that it has lost $100 million through 2016 and that it is going to pull out of exchanges. That means that in 25 counties in western Missouri they may have no insurer at all. Doesn’t something have to be done dramatically?

DURBIN: Well, it should be. But first we ought to have an administration that supports our health care system. What the Trump administration has done since day one is to find ways to cut off support for our current health care system, lack of advertising, for example, to bring new people on board so we have larger insurance pools and lower premiums. We have to have an effort made to sustain the current system while we repair it. We shouldn’t be sabotaging it.

WALLACE: Wait, wait, wait, wait, senator --

DURBIN: But let’s look at the bottom line here. What the Republicans --

WALLACE: Senator Durbin, let me just point out, when Blue Cross Blue Shield of Kansas City says they’ve lost $100 million in 2016, you can't blame that on Trump. He wasn't president.

DURBIN: No, of course it is not a situation where the system we have is perfect, and it isn't. I voted for it. And it needs to be repaired. And I think Bill Cassidy and Susan Collins are at least willing to sit down in a constructive fashion and deal with that. Bill and I have had conversations about that. I'm sorry that the two of them are not in the room with the 13 apostles that Senator McConnell’s chosen to come up with the Republicans plan. I wish Bill and Susan were in there.

WALLACE: All right, let -- let -- let me bring Senator Cassidy back, because let's talk about the Collins, Susan Collins, the Republican senator from Maine, and Cassidy plan. And here are some of the highlights of that plan. Keep most ObamaCare taxes to pay for a replacement instead of an individual mandate. That would end. Auto enroll people in insurance so they have to opt out, not opt in. And let states keep most of ObamaCare if they want.

Senator, it's a very interesting plan, but I don't have to tell you there are some of your more conservative colleagues in the Senate who are never going to go for this because they’re --

CASSIDY: That’s --

WALLACE: I mean they’re already upset that they say the House plane leaves too much of ObamaCare in place. You're leaving more of it in place.

CASSIDY: A couple things. It is the conservative solution. The conservative thinks the power should return to individuals and to states. We do that. The power that ObamaCare gave, took from states, we give back. And you can't say you’re a conservative and we believe in states’ rights, and then tell states what they can't do. If a blue state wishes to do a blue thing, God bless them.

And as regard to taxes, it isn't so much that we have to keep these taxes. As a fiscal conservative, I do think we need to pay for things. We have to balance our budget. We just say those taxes should be addressed in comprehensive tax reform, not piecemealed beforehand. I will repeat, the Cassidy-Collins plan is the conservative solution.

WALLACE: But have you gotten any buy-in, and let me just take a few names, from Ted Cruz, from Rand Paul, from Mike Lee? And what are the chances, honestly, that the Senate won't pass anything, that this health care reform is going to die?

CASSIDY: I can't speak for those senators you listed. I will say that between -- aside from Susan and I, there’s four other Republicans who support it. Now what would really be --

WALLACE: That’s six. You need 44 more.

CASSIDY: But of all the plants out there, we’re the one that have the most support. And there are others who are very much interested. But I’ll also say to my friend Dick Durbin, if we had Democrats involved, because we do allow a blue state to do a blue thing. That’s states’ rights. That if they can’t -- if we had 25 Democrats and 40 Republicans, it wouldn't be a Republican plan, it wouldn't be a Democratic plan, it would be an American plan.

WALLACE: OK, let me quickly -- because I want to get to the budget briefly. But -- but, real quickly, Senator Durbin, any Democratic buy-in?

DURBIN: As long as we take repeal off the table, there are a lot of Democrats who want to bring a chair to the table. I'm one of them. Let’s sit down together with Bill Cassidy and Susan Collins. I don't agree with their -- many aspects of their start-up plan, but it's a good faith effort to do two things, reduce the cost of health insurance and expand the reach of health insurance. That should be our national goal.

WALLACE: All right, now there's the Trump budget that was released this week, and let's go through some of the highlights of that. Here are some of the key increases in spending. For the military, increase by 10.1 percent, border security by 6.8 percent, but EPA is cut 31.4 percent, the State Department by 29.1 percent, and NIH, the National Institutes of Health, by 18.2 percent. Here's how Trump budget director Mick Mulvaney explained it.

(BEGIN VIDEO CLIP)

MICK MULVANEY, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: Compassion needs to be on both sides of that equation. Yes, you have to have compassion for folks who are receiving the federal funds, but also you have to have compassion for the folks who are paying it.

(END VIDEO CLIP)

WALLACE: Senator Durbin, I know you’re going to bash the Trump budget, but -- but don't we have to cut spending at some point? Are we just going to keep piling up the national debt?

DURBIN: Well, that's a very -- very important question that you asked, Chris, but the question is, where you cut it and how you cut. I do not believe you make America great again by cutting medical research to the lowest level in 12 years. I don't think you make America great again by saying to working families, it's now more expensive for your kids to borrow money for student loans. You certainly don't make us a great nation by cutting back in infrastructure. All those three things are in the Trump budget. So if we’re going to have priorities, let's look at the things that are important for building jobs and opportunity in the future.

WALLACE: Senator Cassidy, how dead -- I know it's dead -- but how dead is the Trump budget?

CASSIDY: So class -- typically, in fact, always, the Senate and the House write their own budget, but it does reflect the president's goals. I actually agree with those goals, but would take a different approach. Let’s speak of Medicaid, which under their budget is cut. Medicaid is unsustainable, both for states and for the federal government. It has to be reformed. But as a physician who worked with Medicaid patients, I know that benefit has to also be preserved. I've actually worked on legislation that would bend the cost curve, at the same time reform it so that states would not go bankrupt trying to continue their Medicaid program.

WALLACE: But --

CASSIDY: We have elements of that in the Cassidy-Collins plan. We share the goal, we just have a different way to get there.

WALLACE: But just real quickly, though. I know you’re concerned about the Gulf Coast and Louisiana. Are you OK with cutting EPA? You’re a doctor. Are you OK with these kinds of big cuts in NIH?

CASSIDY: Again, I think the best way to control future health care spending is to find that cure for Alzheimer's. I agree with the goal. I have a different approach. If we find a cure for Alzheimer’s, which postpones or heals, then those folks are not taking a trillion dollars out of our economy with their illness. Rather they are contributing, that capital is used for something else. We can actually get at this in a different light.

WALLACE: Senator Cassidy, Senator Durbin, I want to thank you both for coming in and thank you for your time, especially in this holiday weekend.

CASSIDY: Thank you.

WALLACE: Up next, President Trump wraps up his first foreign trip, but his troubles here at home haven't gone away. Our panel comes back to discuss both.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

TRUMP: We made extraordinary gains on this historic trip to advance the security and prosperity of the United States, our friends and our allies.

(END VIDEO CLIP)

WALLACE: President Trump at the end of his first foreign trip giving himself good reviews, which is what presidents always do.

And we’re back now with the panel.

Gillian, how do you think the president did on this trip and why do you think he seemed to get along so much better with the leaders in the Middle East than he did with our allies in Europe?

TURNER: So I really divide the trip into two parts conceptually. It’s helpful. So the first is really going around and touching on major worlds -- the world’s major three religions, excuse me, Chris, Christianity, Judaism and Islam. And I think that that part of the trip went relatively well. We had some pushback from the media about certain protocol optics, like, you know, like what was donning the heads of Melania and Ivanka Trump. That's fine.

I think the second part of the trip was really NATO-focused. And there the president’s speech actually got a lot of criticism. But I think for the first time the administration cabinet-wide is actually striking the right tone on NATO, by which I mean they’re focusing on recommitting themselves to the importance of the alliance and they backtracked, or progressed, however you want to phrase it, on the -- the idea that it's become obsolete, which is a good thing for everyone.

At the same time, they’re encouraging the member nations to contribute 2 percent GDP, which at this time -- remember, this was part of the president’s campaign platform. So I think he's got a mandate from the American people to push for that and it's something he's doing. I think it's a nice balance.

WALLACE: We should point out that the first part of the trip, especially the Saudi part of the trip, was largely organized by Jared Kushner, and people who support him say he was talking to all of those Saudi leaders and helping -- and Sunni Muslim leaders during the transition, and that's one of the reasons it was such a success.

Chuck, what struck you about these nine days?

LANE: I have to say, the chilly atmospherics of the Europe portion of the trip, in contrast to the warmth, the abundant good feeling that was on display in Saudi Arabia between the president and the royal family of Saudi Arabia, that -- that contrast I think spoke volumes. It's true that he's -- the president got a lot of criticism for not uttering the words I personally support Article Five, the mutual defense guarantee in NATO --

WALLACE: Attack on one is an attack on all.

LANE: Correct. But the reason for -- another president with another history, who had run a different campaign, that wouldn't be an issue. The Europeans feel very embattled and nervous with respect to the Trump administration. He supported Brexit. He openly spoke warmly about Marine Le Pen. He’s called NATO obsolete. And they were looking for some -- the kind of reassurance that he gave the Saudis, and they didn't get it. And I think that will have repercussions going forward.

WALLACE: Let's talk about the domestic side, because the president returns to a Congress that is addley (ph) divided about repeal and replace and has already, both Republicans and Democrats, rejected his budget that we were just talking about with the two senators.

Michael, some Senate Republicans are talking about just giving up on health care and moving straight tax reform.

NEEDHAM: It would be a mistake. I mean the American health care system is collapsing under ObamaCare. But part of the reason that this agenda is so complicated and that we need a real sense of urgency on both the White House and the Congress about health care, tax reform, the budget, the debt limit, all this stuff that’s coming up and how it fits together is that for seven years the Republican Party has told itself a lie, that we are all united on wanting the same ends, that we all want to repeal ObamaCare, it’s about what the replace is. And what you actually have is you have very legitimate and heartfelt disagreement within the party about what the best path forward is.

Some conservatives who want to focus on Title One regulations. Bill Cassidy, who has his plan, the Tuesday Group in the House, which is more of a force --

WALLACE: More moderate.

NEEDHAM: The moderate group. Kind of a force for the status quo. I think the healthiest thing that’s happened in the last couple of months is that in the House, for the first time, leadership and the members themselves acknowledge that there are real differences of policy in this party. This isn't good guys and bad guys. It isn’t disagreements about tactics. They sat down for a couple of weeks. They understood where they were coming from. And they came up with a coalition form of government that said, you know what, let's let the state decides. If they want to wave out of ObamaCare, that's fine for some of them and others don’t.

WALLACE: But -- but --

NEEDHAM: That's the model that needs -- that needs to happen going forward to bring them together.

WALLACE: But -- but the problem, of course, with that, as you just heard from Bill Cassidy is, he’s saying they’re basically going to put that over the side, maybe they’ll take a little bit out of it, but they’re going to write their own bill.

Gerry, is it possible that we could get to the end of 2017, this year, and that a Republican-controlled Congress, Republican control of the House and the Senate, will not have passed a single major Trump legislative initiative? And if so, what does that mean for prospects for Republicans in the 2018 midterms?

SEIB: Well, it is -- first of all, it is possible because we’re staring down the path here of no easy wins. You know, no big, easy wins.

By the way, there's one other that you shouldn't forget, which is by the fall, this Congress has to raise the debt ceiling, which everybody hates to do and -- and --

WALLACE: You’ve also got to fund the government.

SEIB: You have to fund the government, have to raise the debt ceiling. They’re going to have to get Republican votes. Conservatives hate raising the debt ceiling. Everybody hates raising the debt ceiling. That has to happen as well. So you have a whole series of tough or unpleasant choices before the Congress.

My guess is that, in the end, I think a Republican Congress will figure out a way to get together and get some of these things done, even in a truncated form because it’s too heavy a lift to go through an entire year in full control of the government and not have anything to show for it.

WALLACE: You think they pass tax -- health care reform or do you think they’re going to end up eventually realizing -- you had Mitch McConnell say, I don't see how we get to 50.

SEIB: Yes.

WALLACE: Which is not the kind of thing he openly says. Do you think that they could just punt on that and go to tax reform?

SEIB: I think they could easily walk past health and go to tax reform. I -- Mitch McConnell’s a smart guy. He’s not going to move down a path unless he knows there’s success at the end of that path. And if he doesn't, you know, that's because there is no way to get 50 votes plus one.

I do think tax reform is something that Republicans really want to do. They’ve come to Washington to cut taxes. They’re not going to walk out of this town I think in December without having given that at least a really good try.

WALLACE: Michael?

NEEDHAM: Yes. No, I think, you know, they need to do both and all of these things are intertwined. At some point they have to sit down and look at these various points, the debt limit, spending, tax reform, health care, and define which wings of the party, which different factions within the parties will get what wins where. And once they do that, they’ll get some.

The other thing that has to be considered this week is, is the Paris Accords, Paris Climate treaty, and what makes that so complicated, I think, for the president is it’s non-binding. I think he’s actually going to come out this week and pull out the Paris Accords. He made an explicit promise on the campaign trail. He’s somebody who likes to keep his promises. And, second, the United States shouldn't stay in a treaty just because it's non-binding. If we don’t intend on participating, we should pull out. I think the president will do that.

WALLACE: All right, we have to leave here. Thank you, panel. See you next Sunday.

Up next, our "Power Player of the Week," the Blue Angels, flying high and inspiring pride.

(COMMERCIAL BREAK)

WALLACE: Soldiers placing flags by the 230,000 grave markers at Arlington National Cemetery.

Pride, professionalism, precision, those are the watchwords of this military unit. And on this special weekend, that unit is our "Power Player of the Week."

(BEGIN VIDEOTAPE)

RYAN BERNACCHI, BLUE ANGELS COMMANDING OFFICER: We’re focused on that very precise control of the airplane and flying it to the very best of your ability and you’re thinking out ahead, OK, what's next, and what's next, and what’s next.

WALLACE (voice-over): Ryan Bernacchi is commander of the Blue Angels, the Navy's precision flight squadron. He's in the number one jet, leading his team through intricate maneuvers at up to 700 miles per hour, with the planes sometimes just 18 inches apart. The Blue Angels were in the area to perform at the U.S. Naval Academy, and we got to go inside their operation.

WALLACE (on camera): Is there a lot of talking going on while you’re up in the air?

BERNACCHI: There is a lot of talking. As the leader, I’m calling acadence (ph) for every -- every turn, every pull, every power change. And we’re just going to turn left, it's as simple as, coming left. And on that go, all six sticks will move in unison. Coming further left, a little, pull.

(INAUDIBLE).

And when all that gets going, we call it -- we call it fuzz -- it gets fuzzy because it will -- it will just take on this rhythm. You’re feeling the fuzz, Chris. Yes.

WALLACE: I'm feeling the fuzz!

BERNACCHI: Yes. It’s something -- it’s -- it’s -- it's crisp, but it's -- it’s electric.

WALLACE (voice-over): Admiral Chester Nimitz started the Blue Angels in 1946 with F-6 Hellcat prop planes to keep up interest in naval aviation after World War II. Now they fly F-18 Hornets, in dozens of shows each year for more than 11 million spectators, from a cloudy naval academy, to a crystal clear San Francisco Bay.

BERNACCHI: I always was going to be a pilot.

WALLACE (on camera): Why?

BERNACCHI: The Blue Angels.

WALLACE (voice-over): Bernacchi used to go with his dad to shows in the bay area every summer.

BERNACCHI: I was that kid and I wanted to fly.

WALLACE: Now he has a nickname.

BERNACCHI: They call the flight leader "boss." Wingmen will talk to me and, hey, boss, you know, and that’s the way it -- it works. And then we -- we do it on the ground as well.

WALLACE: At the end of the show, the Blue Angels do a maneuver called a loop, break, cross. All six planes headed straight up, then, in six different directions, and then back to the center point.

BERNACCHI: At about 800 knots of closure. So just under 1,000 miles an hour. And, boy, is it -- is it sweet when we put all that together. That -- that synergy and you feel that fuzz and you get it -- you get it going and -- and that's really, really -- it's -- it’s sweet, but it's very, very intense.

WALLACE: Bernacchi, who’s flown combat over Iraq and Afghanistan, compares it to operating off an aircraft carrier and he says that's the mission of the Blue Angels, to represent their fellow service members who are on the front lines.

BERNACCHI: It's about the Navy Marine Corps, they’re forward deployed, they’re -- they’re providing us with our freedom. And that’s the real work. We makes people feel something, and -- and it's that pride. It's the pride this country has in our sailors and Marines and we just bring it and display it in a way that people can connect with and they can -- they can see and feel and touch. And that, I think, is the value of the Blue Angels.

(END VIDEOTAPE)

WALLACE: Blue Angels will be traveling the country this summer. If you get a chance to see them in action, it's something you will never forget.

And that's it for today. We hope you’ll take a moment this weekend to remember all the men and women who have given their lives defending our freedom.

And we’ll see you next "Fox News Sunday."

(COMMERCIAL BREAK)

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