Report: Obama White House 'miscalculated' Russia threat

This is a rush transcript from "The Story," December 27, 2017. This copy may not be in its final form and may be updated.

TRISH REGAN, GUEST HOST: "The Story" starts now, everyone. Breaking tonight, a bombshell new report raising concerns that the Obama administration "miscalculated the Russia threat", allowing Putin to launch years of attacks against the United States tampering with everything from our economy to our election. And ultimately, leaving Americans vulnerable even at this very moment. Good evening, I'm Trish Regan in for Martha MacCallum. The explosive report from The Washington Post best summed up by its title: "Kremlin trolls burned across the internet as Washington debated option." It describes Obama administration failing to take action until it was "too late". That makes sense when you look back at what President Obama said during a 2012 debate. Watch.

(BEGIN VIDEO CLIP)

BARACK OBAMA, 44TH PRESIDENT OF THE UNITED STATES: When you were asked what's the biggest geopolitical threat facing America, you said Russia. Not Al Qaeda. You said Russia. And the 1980s are now calling to ask for their foreign policy back.

(END VIDEO CLIP)

REGAN: Remember that one? Well, Fox News chief national correspondent, Ed Henry, is live in Washington with the story for us tonight. Ed?

ED HENRY, FOX NEWS CHANNEL CHIEF NATIONAL CORRESPONDENT: Trish, that's an oldy but goody. The old narrative about Russia, Russia, Russia has centered on the assumption that President Trump and his advisers had been too supplicant to Russian President Vladimir Putin and his government dating back to the last campaign. This Washington Post report is suggesting that during the administration of President Barack Obama, Russian aggression and provocations went unchecked for years. All of it spilled out in an FBI counterintelligence probe dubbed northern night. The documents examples of those provocations by Moscow that were ignored by Washington.

The paper declaring: "U.S. Intelligence and law enforcement agencies saw some warning signs of Russian meddling in Europe and later in the U.S., but never fully grasped the breadth of the Kremlin's ambitions. Top policymakers did not appreciate the dangers, then scrambled to draw up options to fight back." Who can forget early in the Obama years, new Secretary of State Hillary Clinton literally pushing the reset button, hoping for warmer relations with Russia? And much later in the second term, National Security Adviser Susan Rice actually tried to justify why the Obama team was trying to walk a fine line with Vladimir Putin by not pushing back too hard.

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UNIDENTIFIED MALE: Don't you understand that perspective of Americans who may not be in the foreign policy establishment who say when is enough, enough? I mean, when do you confront Putin at some point and call him on all of this.

SUSAN RICE, FORMER NATIONAL SECURITY ADVISER: Well, we have confronted him and we do call him on it, and the president is very plain and very forceful in his dealings with Putin. But it's not necessary nor is it in our interest to return to a cold war construct, which is long out of date and that doesn't reflect the realities of the 21st century.

(END VIDEO CLIP)

HENRY: Interesting since for most of the past year, Democrats have charged: it's President Trump who's been too soft on Putin and colluded with his government in the 2016 campaign. Yet, the year is now ending with no evidence of collusion and the Trump administration has actually recently cracked down on Russia on a number of key fronts. And most notably, the White House just approved a plan to provide lethal weapons to Ukraine to help them deal with Russian-backed separatist -- something the Obama administration never did despite desperate pleas from the Ukrainians. And last week, the Trump administration imposed those new sanctions on five Russians leaving Kremlin officials to tell state media that Putin is getting a little concerned. Trish?

REGAN: Ed, I think one of the first times I ever met you was actually at the Lobster Summit in Kennebunkport, Maine.

HENRY: That's right.

REGAN: And that was when you had Putin and Bush coming together, it was a big deal. And that was a time, I guess, when people were actually pretty concerned about Russia. You think about Condoleezza Rice, for example, and her background in Russian studies. And Russia was certainly front and center on everyone's mind and people seemed, at least to me at that time, to be a little bit more aware of Vladimir Putin and the threat he might have represented.

HENRY: You're right. They were weary then at the end of the Bush administration, weary at the beginning of the Obama administration. But I think what binds it together is that when you talk about that Lobster Summit, that was the first President Bush bringing Vladimir Putin to his estate at Kennebunkport for the lobster so that his son, George W. Bush, could maybe open up warmer relations with Putin. And a lot of people said that might be a good idea. The Obama administration, and I said with the reset button, they tried to do that too. What's different now, is the Trump administration has talked about look, we can have warmer relations with Russia that can help with us Syria and North Korea. And people have said no, this is about collusion; you shouldn't have warmer relations with them. And I think that's why there are some frustrations in the White House with no evidence, at least not yet of collusion to say, wait, the last two administrations tried to have warmer relations, what's wrong with that?

REGAN: Good point. I know I'm going to see you tonight, 11:00 p.m. You're going to be hosting all week at 11:00 Eastern, in for Shannon.

HENRY: All right. Let's get some lobster in the new year.

REGAN: Deal. Looking forward to it. Thanks so much, Ed.

HENRY: Good to see you.

REGAN: All right. Here right now with more, Michael Caputo, former Trump campaign senior adviser; and Michael Starr Hopkins, Democratic strategist who served on President Obama and Hillary Clinton's presidential campaigns. Good to see you both. I'll start with you, Mr. Caputo. You know, it seems as though, as Ed points out, that various administrations have tried to reset, if you would, with Russia. But what troubles me is that during the Obama administration, while Hillary Clinton was secretary of state, decisions about Russia, including Uranium One and the passage of that deal, they were made despite, I think what were very real concerns about Putin's territorial ambitions and the reality that Ukraine was going to be facing sooner or later. How come?

MICHAEL CAPUTO, FORMER TRUMP CAMPAIGN SENIOR ADVISER: Well, when I lived in Russia, in the 1990s, it was in, I guess, 1995 when the Russians were kind of forced to sign a treaty where they gave up Crimea. I remember liberals, communist, conservatives, every politician in Russia said to each other that they were someday going to have Crimea back. That was always going to be -- was going to happen. It was always going to be in the cards. And somehow or another, the Obama administration took their eye off the ball. And it was during their siege of Ukraine that they really honed their skills in its online warfare with Twitter and Facebook and all the other online tools they have, and they've turned those tools on us.

REGAN: Michael Starr Hopkins, do you think how we used to fight more of a propaganda war, especially during the cold war-era. And then, that kind of came to a halt back in 1999, at least on our side. But the Russians kept it going. And no one, for whatever reason, really cared or seem to notice. How come?

MICHAEL STARR HOPKINS, DEMOCRATIC STRATEGIST: That's -- I think that's partly true. You know, we, I think, lost our focus when it came to Russia. I will say, however, the Obama administration put harsh sanctions on the Russian economy. And then, Jeh Johnson, during the 2016 election attempted to have our election system determined as critical infrastructure so that then it would be federally taken on instead of having states deal with it. And that was something Mitch McConnell stopped him from doing. So, I think both sides from have little blood on their hands.

REGAN: Well, you know, one of the questions I had is: why the heck nobody noticed what was going on, Michael Caputo? Why is it that no one in the Obama administration said, wait a second, they are trying to influence things? I mean, they were getting reports. We have learned of this. In the final months of the Obama administration, the final year, and yet nobody, nobody responded to these in a way that you should, if they're trying to influence our elections.

CAPUTO: Well, the Obama administration had an ambassador in place in Russia named Michael McFall. Even though I disagree with the Ambassador McFall on a lot of things, he knows a lot about Russia. And there's probably no one more plugged into what goes on in Russia. So, I'm quite sure that Ambassador McFall, you know, sent up flairs time and again, and, of course, our national security apparatus was aware that they were tinkering and poking in a lot of our computer systems. And we all have known for many years that some of the best or worst in this case -- you know, Internet scammers in the world are in Russia, especially hackers and the like. So, the signs have always been there.

I think it's quite true that Obama and his administration didn't follow through, perhaps, on a lot of this online activity, these online active measures of the Kremlin. And the commentary in 2012 about we saw it on the tape earlier, about how Romney was insulted about saying Russia went on the top of his list of national security concerns, it really came back into play again just after the Ukrainian invasion. And unfortunately, it doesn't appear that we really kept up -- in July of 2016, when the hack of the DNC e-mails came out, I set off the alarm then that this was most likely Russia. And in fact, something needed to be done about this state, and nothing was.

REGAN: Well, I can remember 10 years ago one of the cover stories of the CFR journal was by Yulia Tymoshenko who was then, of course, in the Ukrainian government, and she was, you know, pleading for some help saying that this is the goal of Vladimir Putin and this is the goal of Russia to have a bigger presence in Europe, and in fact, to take parts of the Ukraine. So, a lot of questions as to why nobody cared about it until perhaps it was too late. But, before I let you go, Michael Caputo, you actually worked for the Kremlin. You spent years working in Russia. Then you were on the Trump campaign. I know that you've certainly been questioned by authorities, what is your response when they say what role did Russia have in the election?

CAPUTO: Yes, I worked in Russia for the 1990s during the Yeltsin administration. I worked with the Kremlin in those days on election and western corporate market entry. And I actually founded and put together the (INAUDIBLE) Russia project which brought young people out to boat and droves in 1996. But when Vladimir Putin came in, those of us who were advising the Yeltsin administration were quickly sent packing. In fact, most Western advisors were sent out during that time.

REGAN: Did you ever see any contact with the Russians while you're on the campaign?

CAPUTO: No. When I was interviewed by the House (INAUDIBLE) on intelligence they asked me that question. I said, you know, I've known President Trump since 1998. I worked more closely with him in the last several years. But we had one conversation, only one conversation about Russia. And he asked me what was it like to work there? And I told him and we changed the topic to the NFL after that. No one ever, during the entire time I was at that campaign, ever asked me one question about my seven years in Russia. That's why in my opinion that there is no collusion.

REGAN: That's an important, fun word --

HOPKINS: I just want to make one point really quickly. Really quickly. I just want to say President Trump's comments about rigging the election made it really hard for President Obama and Jeh Johnson to respond to some of the hacking of Russia, because they were worried about the politicization of, you know, bringing it into the media's network and explaining to the American people what was going on. So, you know, I don't think President Trump did the American people a service by making it so political.

REGAN: Thank you so much.

CAPUTO: We probably have to look it doing that again.

REGAN: Good to see you both. Thank you very much. Coming up, everyone, President Trump makes a surprise appearance in Florida today.

(BEGIN VIDEO CLIP)

PRESIDENT DONALD TRUMP: How is the media, good? Everyone, good? These are great -- these are great people.

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REGAN: Rich Edson was there and he's going to be here next with his message to the group of local firefighters and what we learned about the president's plans to tackle healthcare reform in 2018. And breaking news tonight from the IRS regarding the new tax bill, and there are some big changes you need to know about. Plus, former President Obama grants a rare interview with Prince Harry, but unlike his predecessors, he decided to weigh in on the current White House. Is that fair? We report. You decide. Next.

(BEGIN VIDEO CLIP)

HENRY CHARLES ALBERT DAVID, PRINCE OF WALES: You sat through the inauguration with your game face on. Not giving much emotion away as we all saw. What's going through your mind?

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TRUMP: The stock market hit a new high, 84 times, since we won the election on November 8th of last year. So, that's something we can all be proud of. That makes you all look very smart and your family say, boy, you're a great investor, right? When you have your numbers go up and your stocks go up and everything else.

(END VIDEO CLIP)

REGAN: The president, making a surprise public appearance just a short time ago in West Palm Beach, talking up the stock market there. Stopping by a firehouse near Mar-a-Lago to thank some of Florida's finest first responders and touting the economic boom that's been happening under his watch. Fox's Rich Edson has the story for us tonight from Florida.

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RICH EDSON, FOX NEWS CHANNEL CORRESPONDENT: President Trump again touted his first year in office. He met with first responders at the West Palm Beach fire and rescue this afternoon -- his first public appearance since this weekend. He highlighted his reversal of an Obama administration rule against police departments using older military equipment, growing stock valuations, reduce regulations and the recently signed tax law.

TRUMP: I'll tell you that tax cut bill is something the way it's kicking in. Little did we know one of the big companies: AT&T, Comcast, some of the others, Wells Fargo, they're giving thousands of dollars to their employees. So, the country is really big, big beautiful ship that we're turning around.

EDSON: He also celebrated opening the Arctic National Wildlife Refuge in Alaska for oil drilling and the elimination of the Obamacare individual mandate -- both items are in the tax law the president just signed. Also on healthcare, officials tell us the administration is looking at relaxing some Obamacare regulations, it would allow Americans to buy cheaper healthcare plans. That's something the administration is looking at doing unilaterally. The president is also asking Congress to work together, Democrats and Republicans, to try to overhaul the U.S. healthcare system. Republicans attempted to do so alone. Democrats say, they want to make Obamacare better. Republicans say they want to repeal and replace Obamacare. As for the president, he spent today as he did yesterday, at the Trump International Golf Course. Back to you, Trish.

(END VIDEOTAPE)

REGAN: Well, before today, we have only really heard from President Trump on his Twitter this week. That's where he really likes to talk to supporters. But you know what, former President Barack Obama in his first interview since leaving the White House, very first one, tells Britain's Prince Harry: people in power should be careful in their use of social media. Watch this.

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OBAMA: The truth is that on the internet, everything is simplified. And when you meet people face to face, it turns out they're complicated. It's also, by the way, harder to be as obnoxious and cruel in person as people can be anonymously on the Internet.

(END VIDEO CLIP)

REGAN: So, is that a dig at the president? Here now, RNC Spokesperson Kayleigh McEnany; and Jessica Tarlov, Author of "America in the Age of Trump" and a Fox News Contributor. Great to see you both.

KAYLEIGH MCENANY, SPOKESPERSON FOR THE RNC: Hey, Trish, again.

REGAN: Kayleigh, was he trying to kind of take a jab?

MCENANY: He might have been. I wouldn't put it past President Obama for doing that, but it's a curious comment coming from President Obama given the history of his divisive presidency -- the times when he went in (INAUDIBLE), like Ferguson, and like Baltimore, and came out against police officers in those incidents that was when they ended up being innocent. So, it was a curious comment from the president who many of us see as divisive.

REGAN: Jessica, what about the fact that he's doing this in his first interview with the royal, by the way, Prince Harry, and he's doing it on overseas soil? I mean, you know, there used to be kind of an unwritten rule you don't criticize when you're abroad, yet he did.

JESSICA TARLOV, FOX NEWS CONTRIBUTOR: I don't think that that matters actually for what's going on here. I don't think the venue matters or who he was speaking to. And I think he knows that he may have been talking about Donald Trump. He was absolutely speaking about the president. And I think that we have all acknowledged that there is a certain way in which the president uses his social media accounts that is not necessarily what we have come to understanding as presidential. But to Kayleigh's point that President Obama was so divisive, I mean, when you look at the polling, even on this issue, President Trump, 66 percent of Americans have said that he's done more to divide us than unite us. Barack Obama only ever got to 55 percent, and George Bush only got to 55 percent. And I'm sure they'll say it's the media coverage, but it's also the action.

REGAN: Well, let me pause you there for a second, because, you know, one of the things that the president, former President Obama is criticizing is, in fact, the use of social media and Twitter. And that would be something that, Kayleigh, I think the president would tell you has been extremely effective. In other words, he's able to bypass reporters and journalists and members of the media that want to basically take certain parts of what he says and reinterpret it and spin it out to the public. He's able to bypass that level and go straight to them himself. And that, to him, has a ton of value.

MCENANY: Trish, that's exactly right. Twitter is really indispensable to what the president is doing. As you said, it's his direct connection to the American people. He is facing unprecedented hatred from some members of the mainstream media. You see the Harvard study that said 80 percent of the coverage of his first 100 days was negative. The new MRC media research center study said 90 percent of coverage in his first year was negative. He has to use Twitter to attack the fake news onslaught coming directly at him. Unlike President Obama where most of the coverage was positive according to the Harvard study.

REGAN: Well, I'm glad you brought that up, because there's a study we want to show you here. You can see different administrations and how they were regarded by the press and how they were treated by the media. This is by Pew Research Center. And you can see as you progress there from Clinton, to Bush, to Obama, to Trump. President Trump wins the award for the worst, most negative coverage. You can see a lot more red on the pie chart there next to Donald Trump. Why is the media so out to get him, Jessica, in ways that we haven't seen?

TARLOV: Because Donald Trump is so out to get the media himself. No former president has had the kind of contentious open warfare relationship with the media that this president does. And he also -- no, what President Obama did --

REGAN: But, but, wait a second, because in some ways, a lot of Americans would say we like this because it's refreshing.

TARLOV: Yeah, his approval rating sat 35 percent, not that many Americans are going to be saying that.

REGAN: However, you know, when the media goes after you, what defense do you have? If you can't speak up for yourself?

TARLOV: He should be able to speak up for himself. What I think what President Obama is saying is that he personally attacks people. When he said, you wouldn't say these things to someone's face. Now, Donald Trump may walk up to crooked Hillary and call her crooked.

REGAN: He might.

TARLOV: -- or lion's head, or all of it.

MCENANY: But Jessica, he doesn't attack, he counterattacks.

TARLOV: Really?

MCENANY: And that's what's so important.

TARLOV: He lives his life on defense. He's most powerful man in the entire world. He doesn't need to do that anymore.

MCENANY: No, if someone attacks him unfairly as much of the media does. Attacks him personally, his family, him in ways they've never attacked a president before. He counterattacks with Twitter. I understand Democrats want him to take it lying down. They want him to just go away and stay quiet, but he's not going to do that.

REGAN: I have to leave it there but you know this is Mitt Romney's biggest problem, right? The media went after him. They went after him hard, and he was ashamed of what he was, which was a tremendous success than somebody who had earned a lot of money. Donald Trump did anything but roll over and play dead for sure. So, good to see you both.

Still to come, everyone. The big news that could break the new bond between President Trump and Chinese President Xi. Plus, historic tax reform is set to take effect next week. So, why is there a big rush in several states to pay property taxes this week? And should you be trying to do the same? Could it save you some money? We're going to explain after this.

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TRUMP: We have signed more legislation than anybody. Broke the record of Harry Truman, and I was saying if we get this big tax cut, because that's the legislation of all legislation, that's the biggest there is.

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REGAN: That was President Trump just a short time ago touting the legislation of all legislation, a sweeping overhaul of tax reform. But one thing the president did not mention is the mad dash by residents of high tax states to pay property taxes in order to get larger deductions before the end of the year. Fox Business Network's Blake Burman has the story for us tonight from the White House.

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BLAKE BURMAN, FOX BUSINESS NETWORK WHITE HOUSE CORRESPONDENT: Hi there, Trish, some homeowners all across this country are rushing to prepay their property tax bills. Take a look at the scene just down the road from us here at the White House throughout the day in Fairfax County, Virginia. At the government building there, lines were forming as taxpayers want to pay their 2018 property tax bill now before the new tax code hits next week because it caps the state and local income tax and property tax deduction at $10,000 total. The calculation here is very simple: to try to take on as many deductions this year before they go away next year. The tax administrator in Fairfax County says he has never seen a rush like this.

SCOTT SIZEMORE, DIRECTOR OF THE REVENUE COLLECTION DIVISION OF THE FAIRFAX COUNTY'S TAX DEPARTMENT: This started off as a slow drip, turned into a trickle, and then a stream, and now a river. We did not anticipate the numbers that have showed particularly yesterday on Tuesday and then today much less. But it's -- I'm amazed.

BURMAN: Architects of the tax bill argue the cap is offset by lower rates. But homeowners in high-tax states like New York, New Jersey, Connecticut, Illinois, and California could be hit especially hard. New York's governor cleared the way for prepayments last week with an executive order with New Jersey's governor following suit today. Now the IRS put out a statement today about these prepayments saying they may be tax deductible under certain circumstances. So, the best advice with taxes remains in this case, Trish, if you are considering these prepayments, you probably should advise with your accountant first. Trish?

(END VIDEOTAPE)

REGAN: Yes. I'd say that's some good advice. Blake Burman, thank you very much. Another is wrinkle in the new GOP tax bill is the carried interest loophole. It is a little-known deduction that private equity firms use as a way to pay less in taxes -- a whole lot less in taxes. President Trump wanted this loophole removed and he campaigned on it.

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TRUMP: There are reasons the hedge fund managers are all donating to Hillary Clinton's campaign, and not to mine. Everybody getting rich off the rigged system and who want nothing to change and nothing -- they don't want anything to change. They want to keep it the way it is. Are throwing their money at Hillary Clinton. We will eliminate the carried interest deduction, well-known deduction, and other special interest loopholes that have been so good for Wall Street investors and for people like me.

(END VIDEO CLIP)

REGAN: It was a good idea. But the message fell on deaf ears. Watch.

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REP. KEVIN BRADY, R-TEXAS: Look, carried interest we can talk about that for the next hour if you'd like, but for most Americans, they could care less about that.

That's the best question you've got.

WILLIE GEIST, MSNBC: No, it's one of many questions I've got.

BRADY: . transformational tax return is carried interest? Seriously.

REGAN: Do you consider that carried interest income or investment?

STEVE MNUCHIN, TREASURY SECRETARY: Well, again, it's technically it's carried interest in the way that it's allocated in the tax system. Also known as profits interest.

REGAN: So then you believe it should get a lower tax rate.

MNUCHIN: Again, it's a complicated issue. It's not that much money.

(END VIDEO CLIPS)

REGAN: Actually, it's kind of a lot of money, as in $180 billion over 10 years, possibly. So you know what? Americans do care. And every single one of us should care. Fat cat billionaires are paying off both parties to ensure that they can treat their income, and it is their income like an investment, and pay a lower tax rate. Investment gets taxed at a lower rate and it should, absolutely should. I don't begrudge anyone that and I don't begrudge the industry that. But income is income and you can't, or at least you shouldn't be treating it otherwise. Steve Schwartzman, CEO of the world's largest private equity firm has given more than $3 million to a Mitch McConnell linked super PAC. So, you wonder why a New York City cop might be paying a higher tax rate on his income than a Steve Schwartz private equity type that may make $400 million?

Because I'll tell you what, the swamp has allowed it. Now, the good news is we have found a way for the president to still fix this and to save American taxpayers $180 billion enough to -- hey, pay for the wall, maybe a couple of walls. Maybe reduce our deficit. And the president, he will not need the swamp to do it, to heck with congress. In a new op-ed for the hill, my next guest argues, quote, Mr. President, close the carried interest loophole. Ned Ryun, CEO of American majority joins me now. Ned, it's good to see you. You've been talking about this a lot lately, often with me on the Fox Business Network. But, let's back up for a second because I want people to understand what they're actually doing. These are private equity managers. It's a wonderful industry. And they work very hard. But they're basically taking the money off of their client's gains and calling it their profit that they've made off of their investment but it's not that. Tell us why.

NED RYUN, AMERICAN MAJORITY CEO: No. They're trying to act as full partners with their other investors when, in fact, they might not have even put their own dime of their money in. Yet they're claiming that they are entitled to capital gains, which is again a much lower tax rate. I think the thing that's a little insulting listening to those clips coming into this, Trish, when they say the American people don't understand it, don't care about it? Well, I'll tell you what the American people care about, they care about fairness. This is fundamentally unfair. And I would argue the carried interest loophole is immoral. This guys -- this carve out has given the private equity and even real estate investors billions a year, and as you said, maybe up to 18 billion a year. And what they've been able to do is essentially by the silence of congress, you look at the open secrets from 2016 election cycle, they gave 21 million to 381 members of congress. Like you said, Steve Schwartzman gave 3 million to Mitch McConnell's leadership PAC. Now, those donations, some will call them free speech. In this case, Trish, I would call it approved bribery.

REGAN: So they're buying themselves a lower tax rate? And we've got some numbers here. We can show you. I mean, it's not as though it's just the Republicans. It's not just Mitch McConnell and just Paul Ryan. It's Chuck Schumer as well. I mean, both sides. And this is just the beginning of it. If you go down the list, the private equity industry has given quite a bit of money away. But why wouldn't you, Ned. Hey, if you get a much better tax bracket as a result and you get to treat your income as though it's investment and pay half as much, so what if you pay a few hundred thousand or even a few million dollars?

RYUN: Few million. But, I will say this, Trish, congress is never going to close this loophole. The swamp dwellers are never going to bite the hands that feed them.

REGAN: OK.

RYUN: There's so many political donations coming in. So, I think Trump can do this and he can do it unilateral. There is a code section 707 inside the tax code that has given treasury wide discretion on how they can deal with partnerships and how they define, perhaps, partners that are not actually partners, but are in fact service providers, because that's the heart of the issue here, Trish.

REGAN: I think you're right, because I think about what treasury did under President Obama. And treasury actually said we're going to end these inversion deals. Remember those safety deals where American company say we're going to relocate to Ireland because they have a 12 percent corporate tax rate, but they weren't really in Ireland. Same kind of thing. They said at treasury, enough. Well, this is an opportunity, perhaps, for this administration to say enough, and save us a whole lot of money. Ned, do you think it will happen.

RYUN: So, there's a couple things that I would say could happen. I mean, Trump could pick up the phone and call secretary of treasury Mnuchin and say you need to deal with this, and you have wide discretion, too. I would hope that he has the political courage. Because the thing is, Trish, he was right in 2016.

REGAN: Yes, he was.

RYUN: This is wrong. It should be dealt with. There are two things though, a billion here, a billion there. We're talking real money. Like you said, this could build like 8 southern walls. But I will say this, I think the American people -- this is a microcosm of the 2016 election. The American people woke up. They started to realize the system was rigged against them. And I would argue it's been hijacked by ruling class that they've done it to benefit themselves and their special interest cronies. Enough is enough. Drain the swamp. Close the carried interest loophole.

REGAN: this is an opportunity to do it. Thanks for explaining it, Ned. Ned Ryun, thank you very much.

RYUN: Thank you.

REGAN: Coming up, everyone. New Year's resolution suggestions for Hillary Clinton.

(BEGIN VIDEO CLIP)

UNINDENTIFIED FEMALE: Get someone on your tech staff to disable auto fill on your iPhone so that typing in an F doesn't become form exploratory committee.

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REGAN: And that's not all. Wait until you hear the rest of the stinging list and it's from Vanity Fair. I've got to say from all places. Also breaking tonight, new reports that the Chinese are going behind our back and they are helping North Korea. General Anthony Tata is here on that, next.

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TRUMP: And to those nations that choose to ignore this threat, or worse still, to enable it, the weight of this crisis is on your conscience.

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TRUMP: We call on every nation, including China and Russia to fully implement U.N. Security Council resolutions downgrade diplomatic relations with the regime and sever all ties of trade and technology.

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REGAN: Just last month, President Trump made an unprecedented 12-day trip to Asia pushing for a united front against the threat of a nuclear North Korea. But now, there are new reports tonight that China is helping the rogue regime, secretly shipping them oil which violates U.N. sanctions. Here now, General Anthony Tata who served in the army for nearly 30 years before retiring in 2009. He's also the author of the brand new book, Direct Fire. Good to have you here, sir. So, China, signed on to these sanctions. But China is not abiding by them?

ANTHONY TATA, RETIRED U.S. ARMY GENERAL: Well, China, you know, normally when they agree with us they abstain from a U.N. vote. And now they are trying to put a good face forward on this, Trish, I think. But about a year ago, they were -- they had 28 percent increase in trade with North Korea, and I think they're probably feeling a little bit of sting, and they're probably funneling things to North Korea that they shouldn't. And they're fighting a proxy war with us through North Korea. They don't want to lose that North Korean buffer between the west and their border.

REGAN: OK. So they're basically telling us one thing and doing another.

TATA: Exactly.

REGAN: I mean, look at the North Korean economy, $28 billion. It's not huge, but it's grown 3.9 percent most recently in the last year. And the number one trading partner is China. We now get reports that basically the Chinese have been secretly giving them oil. And so doing this trade transaction -- if they're growing nearly 4 percent and their only partner to trade with is China. It means that China is not doing what it promised to do. So, how do we go back at China and make them understand.

TATA: Well, I think we need to tighten the screws on China now, obviously, diplomatically. You think about fighting a war and that's what we're doing with North Korea right now. It's not just a hot war. We've got diplomatic information, military, economic elements of national power. And so, what we're trying to do diplomatically was tighten the screws on North Korea and use Russia and China as pliers, you know, to pop them so to speak. But they're not doing their part. And Russia is not innocent in this thing as well. And so.

REGAN: But, we have the purse strings, right? I mean, we, China doesn't have a lot of economic opportunity without us. We are crucial to China's success. So why don't we go back and say, OK, China, you want to keep trading with North Korea, well, guess what? You're not going to be able to trade with the people you actually do need to trade with.

TATA: Well, I think that's the next step here. When we get verifiable evidence that China is actually not participating in the sanctions, and I think what we do is we go to China. What we're also trying to deal with North Korea, and we go to China with Secretary Tillerson and the department of treasury and we go back and say, OK, here's the deal. We're going to cranked down on these things that you like about being a trading partner with us, and you're not going to like the way we're moving forward.

REGAN: You know, general, we sanctioned one Chinese bank, treasury did, and I think there's a whole host of others that we could sanction as well, because that's the other part of this. Those Chinese banks are doing enough business somehow filtering this money through to North Korea as well. So, there's a lot of opportunity. I think treasury could actually do something about this in a pretty big way before we start talking about actual force.

TATA: Right.

REGAN: . which is your domain. I think that there's a lot of opportunity, at least on the economic front for us to do more.

TATA: Well, I agree with you. And I think the president's new national security strategy supports exactly what you're just saying. They talk about protection. They talk about the prosperity of Americans. Well, there's a big linkage between prosperity and America and the Chinese economy. And so, you have to sort of unpack that a little bit before we go in there, and you've got to be very surgical about what we do because.

REGAN: A lot of people tell me, well, the businesses won't like it. American companies will go ballistic because they don't want to lose this opportunity in a huge market. But I keep saying, you know, when it comes down to it, wouldn't we all rather lose dollars than lives.

TATA: That's right.

REGAN: This is the first opportunity.

TATA: That's why in the national security strategy, protection is number one and then prosperity is number two in President Trump's strategy.

REGAN: Thank you for the book.

TATA: You're welcome.

REGAN: I look forward to readings it.

TATA: I hope you enjoy it.

REGAN: Good to see you, general. All right, everyone, this is a Fox News alert, artic weather taking a grip on a majority of the U.S. tonight, and it could be even worse to ring in the New Year. Rick Reichmuth is standing by in the weather center with the frigid forecast for you. Plus, some brutal New Year's resolutions for Hillary Clinton, coming up from an unexpected source, that's next.

(BEGIN VIDEO CLIP)

UNINDENTIFIED FEMALE: Take up a new hobby in the New Year, volunteer work, knitting, improv comedy, literally anything that will keep from you running again.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

REGAN: A Fox News alert, artic weather gripping much of the U.S. tonight, and the worst could come this weekend as millions around the world are here in New York getting ready to ring in the New Year. Chief meteorologist, Rick Reichmuth, he's live in the Fox Extreme Weather Center with the very, very cold forecast. Hi, Rick.

RICK REICHMUTH, FOX NEWS CHIEF METEOROLOGIST: Hi, you know, it's going to be bad for a lot of people for a lot of days. We'll probably talking about the second week of January before we see any real significant warm-up from this cold air that we're talking about. So, here you go. This is what it feels like right now. Obviously, going towards northern Canada and that is where the super cold air is. But a lot of that air is settling down here across the lower 48. So, it feels like minus 17 right now in Fargo. And really this cold air is kind of spilling down here on the eastern side of the Rockies, all the way in across part of west Texas. Thirty seven is your actual air temperature right now in Dallas. But, obviously, the coldest air as you go further toward the north. So, international falls. We've got the Icebox of America last night broke the record for your coldest temperature for the date, which says a lot for that place this time of year.

So right now, actual air temperature is minus 19. Not a lot of wind there. But you get the idea here that we've got cold air all across the central part of the country. We also have a little bit of rain here across the south right now. But the snow has been the big thing across the great lakes. Tapers off a little bit the next couple of days, change in wind direction but it is back by Sunday into Monday, so more snow. And I'll tell you what, we're going to be talking about temperatures by Sunday night in New York City, Trish, right at around 10, 11 degrees. Actual air temperature not wind chill.

REGAN: Well, that will keep me inside for sure.

REICHMUTH: Absolutely.

REGAN: Thanks so much, Rick.

REICHMUTH: You bet.

(BEGIN VIDEO CLIP)

HILLARY CLINTON, FORMER PRESIDENTIAL CANDIDATE: He's not qualified to be president. But more than that, he's temperamentally unqualified to be president.

(END VIDEO CLIP)

REGAN: That was Hillary Clinton just last month on her book tour trying to explain what happened during the 2016 election. But Vanity Fair, um- huh, that magazine, has some advice for her for the New Year. And it includes, well, stop talking about it, watch.

(BEGIN VIDEO CLIP)

UNINDENTIFIED MALE: It's time to start working on your sequel to your book, "What Happened." What the hell happened?

UNINDENTIFIED FEMALE: Get someone on your tech staff to disable auto fill on your iPhone so that typing an F doesn't become form exploratory committee for 2020.

UNINDENTIFIED FEMALE: You know what, Anderson Cooper? You were telling him about alternate nostril breathing. Is he really adept. You should try teaching a class.

UNINDENTIFIED FEMALE: Take more photos in the woods. How else are you going to meet unsuspecting hikers?

UNINDENTIFIED FEMALE: Take up a new hobby in the New Year, volunteer work, knitting, improv comedy, literally anything that will keep you from running again.

UNINDENTIFIED MALE: To finally put away your James Comey voodoo doll that we all know you think that James Comey cost you the election, he might have, but so is a handful of other things. It's a year later and time to move on.

(END VIDEO CLIP)

REGAN: That's pretty funny, right? Here now, we have Emily Compagno an attorney, and Eric Guster an attorney and political commentator. I don't know, Emily, do you think she's getting the message? This is Vanity Fair after all. And they're basically saying please, please don't even think of running again.

EMILY COMPAGNO, ATTORNEY: I think, you know, there's been a level of shock by the public in part because this wasn't "Saturday Night Live," this is Vanity Fair, right? They were so proud when they launch it. We're going to focus relentlessly on the characters driving these power centers of Washington. But, frankly, she shouldn't run again. She's already failed twice. And the simple fact is that the voters had it two chances to elect Hillary Clinton president and both times did not do so. So the notion that three times a charm and galvanize this now transformed party to maintain her face at the helm. That's the same antiquated notion that elected officials like Nancy Pelosi refuse to relinquish, and it just broadens the gap between these aging out officials and the actual voter base. That would be disastrous.

REGAN: You know, it certainly hurts the Democratic Party. Let's face that reality. Eric, I mean, had they run Joe Biden they might actually had a fighting chance. I don't think you can blame it on all the things that she wants to blame it on whether that be James Comey, whether that be that she's woman, whether that be that the Russians stole the election. The reality is she didn't connect as a candidate. She simply didn't. And they need someone for the future of the party for their sake that can connect, right?

ERIC GUSTER, ATTORNEY: Right. The Democrats do need someone for the future of the party. That is true. And they made this commitment to come out with younger fresher voices which we haven't seen a lot of that yet on the national level. But we do anticipate that Joe Biden may put his hat in for 2020, which would be great. But we also must remember, Hillary Clinton won the popular vote. She was not the best candidate in the overall election, obviously, but she did win the popular vote.

REGAN: We don't decide elections by the popular vote. I mean, if we did, then the little tiny states that I'm from, New Hampshire, wouldn't have any say and any opportunity to voice their opinion in the elections. I mean, this is the system we have. And Emily, this is the system that has worked. So when they start saying, well, she won the popular vote. The reality is it doesn't matter. You have to win fair and square.

COMPAGNO: I agree wholeheartedly. And frankly, you know now this president -- he's been in office for almost a year now. And I think it's more important for these voters to learn about policies that are behind the GOP and the Democratic Party. Let's discuss what's actually happening and away from the kind of knee jerk reactions of public scorn and the tirade of -- well, she did win the popular vote and she should be in office. She's not and she didn't. And so, let's move forward on how we are being affected by those elected officials on the hill. I mean, we have a multi- million-dollar slush fund right now that is not transparent for sexual harassment on the hill. Let's talk about those kinds of issues. And I don't mean to tangent, but just to draw attention to the fact that I think our conversations are on issues that are not important to voters moving forward. And if either party wants to succeed, it behooves them to educate and stay clear and concise on policy for these voters.

REGAN: I really do think that people vote their pocketbooks. They want to feel financially secure, Eric. They want to feel physically secure, but also financially secure. And she too often on the campaign trail, I mean, not going to places like Pennsylvania and spending time with coal miners, she too often came off as sort of the let them eat cake kind of candidate. And she was above it all. And she -- you can't be. You can't be. You can never be above it all because these are real people with real problems.

GUSTER: Hillary was not a great candidate. And that's what I said earlier. However, what Trump is doing -- President Trump is not comes straight on the issue with his twitter account. Someone needs to put him on twitter punishment, and so that he can.

REGAN: Well, that's another conversation. But, you know, if you want to talk about concentrating on issues.

GUSTER: Emily brought it up. Let me answer it. Trump is the one who put those things on front street where things that we shouldn't really care about. But this is the president of the United States using his twitter account.

(CROSSTALK)

REGAN: But I will only point out that he at least has gotten tax reform through, and that's a biggie. It's not perfect. You heard what I had to say earlier about it, but it's a biggie. And it should help the economy. We'll be right back.

(COMMERCIAL BREAK)

REGAN: Thank you so much being part of "The Story" tonight. We'll see you back here. I'll be in again for Martha tomorrow night at 7:00 PM Eastern. And you can also catch me every weekday at 2:00 PM on "The Intelligence Report" on the Fox Business Network. Have a terrific night. Mark Steyn is in.


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Content and Programming Copyright 2017 Fox News Network, LLC. ALL RIGHTS RESERVED. Copyright 2017 CQ-Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of CQ-Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.