Joe diGenova discusses the Russia investigation; Rep. Thornberry on Trump's efforts to curb nuclear proliferation

This is a rush transcript from "Fox News Sunday," May 6, 2018. This copy may not be in its final form and may be updated.

CHRIS WALLACE, HOST: I'm Chris Wallace.

New legal troubles for President Trump after Rudy Giuliani reveals Mr. Trump reimbursed his personal lawyer for hush money paid to a porn actress.

(BEGIN VIDEOTAPE)

RUDY GIULIANI, PRESIDENT TRUMP'S LAWYER: That money was not campaign money. Sorry. Funnel through the law firm and the president repaid it.

WALLACE: And new questions about whether the president will sit down with special counsel Robert Mueller.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: I would love to speak, I would love to go. Nothing I want to do more, because we did nothing wrong.

WALLACE: How strong is the case against the president? We'll ask former U.S. Attorney Joe diGenova, a strong Trump supporter, and Lanny Davis, who served as special counsel to Bill Clinton.

Then --

TRUMP: We are really doing well with North Korea. I won't use the rhetoric. Now, I'm trying to calm it down a little bit.

WALLACE: We'll discuss the likely summit between President Trump and North Korean leader Kim Jong-un and the deadline this week whether to stay in the Iran nuclear deal with Mac Thornberry, chairman of the House Armed Services Committee.

Plus, unemployment is at a 17-year low but there's a threat of a trade war with China. We'll ask our Sunday panel about where the economy is headed.

And our "Power Player of the Week."

RYE BARCOTT, CO-FOUNDER, WITH HONOR: Their commitment to actually get things done and put the country's interest first.

WALLACE: The founder of a group looking to get veterans elected in the hopes of breaking the gridlock on Capitol Hill.

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

(END VIDEOTAPE)

WALLACE: And hello again from FOX News in Washington.

Well, this could not be a bigger week for President Trump's foreign policy initiatives. The White House is expected to announce soon where and when he will hold his summit with North Korean leader Kim Jong-un. And the president faces a deadline next Saturday whether to stay in the Iran nuclear deal.

But in Washington today the spotlight is squarely on the president's legal troubles. We've now seen the four dozen questions special counsel Robert Mueller wants to ask Mr. Trump. Will the president agreed to sit down with Mueller? A federal judge has challenged the scope of the special counsel's mandate. And when did the president know about that hush money payment to Stormy Daniels?

Joining us now to discuss all this: former U.S. Attorney Joe diGenova, a key Trump supporter, and Lanny Davis, who served as special counsel to President Clinton and has a new book out, "The Unmaking of the President 2016".

Gentlemen, welcome back.

LANNY DAVIS, FORMER WHITE HOUSE SPECIAL COUNSEL: Hi, Chris.

JOE DIGENOVA, FORMER U.S. ATTORNEY: Good to be here.

WALLACE: Let's start with Rudy Giuliani's statements this week.

Joe, did they help or hurt the president's legal case?

DIGENOVA: Well, I think they are irrelevant. What matters here is that the payment was legal. It was for personal reasons to protect the family and I think discussion of it serves really no useful purpose in terms of the facts of it. But as far as I'm concerned, it's a nothing burger.

WALLACE: All right. We're going to get into that payment and a second but I want to ask you, Lanny, because some Trump advisors fear that in all his comments this week about what the president knew and when, that Rudy Giuliani has waived his attorney-client privilege and that he could be asked about his discussions with Donald Trump in court, are they right?

DAVIS: I think they are possibly right. He's a crisis manager by his own description. And he committed three cardinal violations of crisis management, which I also do.

Number one is don't make matters worse for a client and I think by what he said on television, he has exposed President Trump to possible prosecution for those two crimes. Secondly, I do believe that he's waived attorney-client privilege to the extent that he mentioned conversations with the client. That's a waiver.

And third, don't underestimate your adversary. I know Bob Mueller and I know Ken Starr, and to paraphrase a famous expression, Bob Mueller is no Ken Starr. He's not holding press conferences with a cup of coffee every morning and you are going to get a much different conduct pattern from Bob Mueller then you had from Ken Starr.

WALLACE: All right. One of the big issues that we touched on at the beginning is, why Daniels was paid that hush money? Was it a campaign expenditure?

And I think it's fair to say that Rudy Giuliani was on both sides of that issue this week. Take a look.

(BEGIN VIDEO CLIP)

RUDY GIULIANI, PRESIDENT TRUMP'S ATTORNEY: It wasn't for the campaign. It was to save the marriage, their reputation. Imagine if that came out on October 15th 2016, in the middle of the, you know, last debate with Hillary Clinton.

(END VIDEO CLIP)

WALLACE: Joe, given the fact that this payment to Stormy Daniels was finalized 11 days before the election, isn't it hard to argue that this wasn't a campaign expenditure?

DIGENOVA: No, I don't think it is. In fact, the law on this is pretty clear, that if it's a purely personal matter, which this clearly has to be, it doesn't matter what its relationship was to the timetable in a campaign. But let me just say as well to something Lanny said, a lawyer cannot waive attorney-client privilege. Only the client can waive the attorney-client privilege.

So, whatever Rudy may have said, he didn't waive the attorney-client privilege for the president of the United States. But by that, I'm going to say --

WALLACE: Wait, let me ask, is he right?

DAVIS: He's absolutely right. The client owns the privilege, but because Rudy Giuliani mentioned a conversation, he could be subpoenaed and forced to testify and he's a fact witness and has to recuse himself. In fact, the only good news for Donald Trump is that by his words on television, I think Rudy Giuliani has to be replaced, because he is now going to be a fact witness and has to respond to a subpoena for what he said to the president on issue of factual dispute as to what the motive was of the loan.

WALLACE: Do you think Rudy Giuliani already is going to have to be replaced?

DAVIS: I think there's at least an argument that by speaking publicly about a conversation with the president, he becomes a fact witness on a crucial question, was the personal loan that now President Trump admits that he gave to Michael Cohen, and was reimbursing Michael Cohen, is a word that Rudy Giuliani used, that's a fact that needs to be questioned in front of a grand jury on the issue of whether it was a political --

WALLACE: Do you think that's possible that he'd --

DIGENOVA: I do not believe that Mr. Giuliani is going to get a subpoena from anybody, and if they do, I think it's one -- it's another example of how this process is completely out of control. That is not to say that someone, a private lawyer representing a litigant might not try to do that, but I think it will be remarkably unsuccessful.

WALLACE: I want to stay on this question of whether or not the payment to Stormy Daniels was a campaign expenditure to try to protect candidate Trump or a personal expenditure to try to protect Donald Trump from what he says in any case it was a completely unfounded claim by Stormy Daniels.

Prosecutors, Lanny, brought a similar case against John Edwards in 2012, saying that money that was spent to hide one of his affairs was a campaign expenditure. His defense argued, no, it was a personal expenditure to hide an affair from his wife. The jury didn't buy the argument and John Edwards walked.

I mean, if it worked for John Edwards, why wouldn't that work for Donald Trump?

DAVIS: So, the keyword is jury. There is an indictment to determine fact disputes that juries have to decide. There could be two reasons.

Rudy Giuliani stated one reason on "Fox & Friends". He said, well, imagine if it happened during the debate and it would have hurt the campaign, and Michael Cohen did his job. That's one view.

Another view is that it was about his marriage.

That's up to a jury to decide, but I think my friend Joe would say there's enough probable cause on that fact dispute for there to be an indictment.

DIGENOVA: I don't know who would be indicted, but it wouldn't be the president of the United States at any rate. And the bottom line is, is that the -- when there is a history of crisis management inside of a business like there was in the Trump enterprise, there was all sorts of crisis management going on. There were settlements all the time for various disputes involving businesses, financial transactions and personal relationships. All of those predate any campaign and have -- and in fact the allegations here are from 2006.

So, the notion that this is somehow related to the campaign requires an unbelievable stretch of prosecutorial authority.

WALLACE: OK. Let's get off of all that --

DIGENOVA: Thank you.

WALLACE: -- and let's get to the central case, which is the special counsel's investigation of Donald Trump in terms of collusion, in terms of potential obstruction of justice.

This week, a federal judge in Alexandria, Virginia, raised serious questions about whether the special counsel's case specifically against Paul Manafort falls outside the special counsel's mandate. I want to put this up on the screen.

Federal Judge T.S. Ellis told prosecutors, you don't really care about Mr. Manafort's bank fraud. What you really care about is what information Mr. Manafort could give you that would reflect on Mr. Trump or lead to his prosecution or impeachment.

Lanny, is it legitimate for the special counsel to go after Manafort in a case that's supposed to be about the election and actions after the elections for what Manafort allegedly did back in 2005?

DAVIS: I don't know, but I have my doubts. I think Paul Manafort's attorneys have a point that there is a limit to what an independent counsel in my case with Ken Starr with President Clinton and a special counsel, really the same issue. I don't know whether that line has been crossed. I certainly think there's a question to be raised about what bank fraud has to do with Russian collusion, and that's something that needs to be addressed by the court.

WALLACE: Joe, how damaging were the questions -- we should make it clear that Judge Ellis, while he raised the question, did not rule in the case and did not say he's going to throw out the Manafort indictment. How damaging was it to special counsel Mueller?

DIGENOVA: Judge Ellis did something very important on Friday. He started a national civics lesson about what the Constitution is about and about what the powers of the special counsel are. Judge Ellis may very well not dismiss the case but he could also exclude from evidence anything seized in that outrageous rate of Paul Manafort's house at 3:00 in the morning, taking Mr. Manafort and his wife out of bed in their nightclothes, handcuffing Mrs. Manafort -- I mean, outrageous conduct in a case that is as absolutely no significance.

Bob Mueller should be ashamed of himself to allow that to happen on his watch. The answer is the judge probably won't dismiss the case, but he may very well exclude all the evidence from that raid.

WALLACE: OK, I want to get now to perhaps the central issue, which is whether or not the president is going to after all of the back-and-forth end up sitting for an interview with the special counsel.

Here's what President Trump said this week about that.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: I would love to speak. I would love to go. Nothing I want to do more because we did nothing wrong. If I thought it was fair, I would override my lawyers.

(END VIDEO CLIP)

WALLACE: Joe, after all the negotiations are done, should the president sit for an interview with the special counsel's team, and if he refuses, can Mueller subpoena the president?

DIGENOVA: The president will not sit down for an interview because this investigation has now reached the level of bad faith, this is no longer a good faith investigation. The tactics, in terrorem tactics Mueller has used against Michael Cohen, against Manafort demonstrate a lack of good faith.

WALLACE: OK, let's get --

(CROSSTALK)

DIGENOVA: The president will not sit down because other the law --

WALLACE: Wait, let's get to the second issue.

DIGENOVA: He can't be -- the president cannot be indicted. That's number one.

WALLACE: No, I'm asking if he can be subpoenaed.

DIGENOVA: The answer is he cannot be subpoenaed and the reason for that is because under Article II, all executive power rests in the president of the United States. Mr. Mueller cannot subpoena the president because the only way a president can be held accountable for anything, whether it's allegedly criminal or not is through impeachment.

WALLACE: OK.

DIGENOVA: Impeachment, nothing else.

WALLACE: I want to bring Lanny in because there's never been a case exactly like this. But doing a little bit of quick history lesson this week, over the course of our history, Thomas Jefferson, Richard Nixon and your client Bill Clinton have all been forced to submit to court orders.

Can President Trump be subpoenaed to testify?

DAVIS: So, first of all, Mr. Justice diGenova, who I've known him for many years and have a great deal of respect for, I don't want to hurt his career, is just simply, we don't know what the Supreme Court will do and it will ultimately be a Supreme Court question.

Number two, President Clinton decided to accept voluntarily so there was never a test of that and President Nixon did resist the subpoena but it was about documents, not testimony. So, this is brand new.

In my opinion, President Trump as the president, as a political elected official representing all the American people should not resist a subpoena, but should voluntarily do exactly what President Clinton did.

WALLACE: Let me ask you, in the Paula Jones case, didn't the court ruled that the president wasn't above the law and that he had to get involved in the Paula Jones civil suit?

DAVIS: Yes. And in the -- the answer is yes, he was forced to testify in a civil suit. You don't have a test of whether he can be subpoenaed, but in the language of Nixon versus United States, there is language that goes beyond documentary production and testimonial production that even in a criminal case, the president is, quote, not about the law. I think he will have to testify.

WALLACE: I've got one and a half minutes left, I want to get to one final question and that is the question of credibility because President Trump apparently misled the American people on Air Force One in April when he denied knowing anything about this payment to Stormy Daniels. Take a look.

(BEGIN VIDEO CLIP)

REPORTER: Mr. President, did you know about the $130,000 payment to Stormy Daniels?

TRUMP: No. What else?

REPORTER: Then why did Michael Cohen make it if there was no truth to the allegations?

TRUMP: Well, you'd have to ask Michael Cohen, Michael's my attorney. And you'll have to ask Michael.

REPORTER: Do you know where he got the money to make that payment.

TRUMP: No, I don't know.

(END VIDEO CLIP)

WALLACE: Joe, how damaging is that to President Trump and to his political support on this issue?

DIGENOVA: It's not damaging at all because in fact, the people realize that this part of the investigation is why the whole thing is off track. Under Article II -- this relates to what Lanny was saying earlier, the reason Mueller wants to talk to the president is not to investigate a crime. It's to send a report to the deputy attorney general for impeachment. A use of a grand jury subpoena to get testimony from a president about the official act of firing the FBI director is unconstitutional, illegal, and the president should fight it all the way to the Supreme Court.

WALLACE: But the president clearly misled the American people with what he said there.

DIGENOVA: No, he didn't.

WALLACE: Wait, wait, wait, he was asked, did you know anything about the payment and he said no. He did.

DIGENOVA: We do not know the full context of when the president learned everything about this. We have no idea. And first of all, that's on an airplane in the middle of an important trip.

WALLACE: Oh, there's an airplane exception?

DIGENOVA: No, but there is an exception to a kind of goofy reporter's questions that get asked at specific times and the president is entitled to make a mistake. He knows what he knew or didn't know --

WALLACE: Well, Lanny, you're not off the hook here either because the president that you worked for lied to the American people. Take a look.

(BEGIN VIDEO CLIP)

BILL CLINTON, FORMER PRESIDENT: I did not have sexual relations with that woman, Ms. Lewinsky.

(END VIDEO CLIP)

WALLACE: The fact was -- you love seeing that again. President Clinton was able to survive it, so -- I mean, will Donald Trump?

DAVIS: So, look, we didn't have a lawyer contradicting a president and basically calling him a liar. Rudy Giuliani contradicted that statement and said that's what the president told him. And now, the president --

WALLACE: But the facts contradicted Bill Clinton and a dress.

DAVIS: We certainly have an unusual situation where a lawyer contradicts the president and then the president the next day says he doesn't know what he's talking about. This is unusual and Mr. Justice diGenova may be right. But the Supreme Court I think is going to uphold Nixon versus the United States as it applies to testimony. Mr. Trump is going to have to defy a grand jury subpoena, which is what we call a constitutional crisis.

WALLACE: OK.

DIGENOVA: He won't defy it. He's going to take it to the Supreme Court. That's defiant.

WALLACE: If he loses --

DAVIS: But if he loses I think he will say that's the Supreme Court as President Andrew Jackson once said, they issued a decision, let them enforce it.

WALLACE: OK, gentlemen, thank you both. Thanks for your time. This was not only entertaining, I learned some stuff there. So, let's have you back.

DAVIS: Thank you.

WALLACE: And we will continue to follow the twists and turns of this remarkable story.

Up next, we'll bring in our Sunday group to discuss the fallout from Rudy Giuliani's media blitz, and what's the president's legal strategy is now.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

TRUMP: Rudy knows it's a witch hunt. He started yesterday. He'll get his facts straight. He's a great guy.

(END VIDEO CLIP)

WALLACE: President Trump trying to gently walk-back some of the comments from his new lawyer of the Rudy Giuliani about money paid to Stormy Daniels.

It's time now for our Sunday group. Guy Benson of townhall.com and host of "Benson and Harf" which debuts tomorrow on Fox News Radio, I'll be listening to it. Columnist for "The Hill", Juan Williams. Jonathan Swan, who covers the White House for Axios. And Fox News correspondent Gillian Turner.

Jonathan, there's a difference of opinion in reporting about how President Trump feels about his new lead lawyer Rudy Giuliani after this media blitz this week.

What are your sources telling you about Giuliani's standing with his boss?

JONATHAN SWAN, NATIONAL POLITICAL REPORTER, AXIOS: So, it's a bit of a black box for people in the West Wing. The one certain fact is that whatever President Trump and Rudy Giuliani have conducted over the last few days, it's been entirely without any coordination with anybody in the White House.

So, they've been watching, like us, like spectators. Senior people in the West Wing have literally been watching TV, oh, I wonder what he'll say now. And that's including the White House Press Secretary Sarah Huckabee Sanders.

So, they have no earthly idea and, in fact, a lot of people in the West Wing were comparing it to the days of Anthony Scaramucci, his 11 days in the White House where again it was sort of this wild ride watching statements made on TV and not knowing whether there was a grand strategy behind it or not.

There were a lot of people who were relieved when they saw President Trump come out and rebuke Rudy Giuliani and suggests that he had to pull it back. There were a lot of people from the West Wing who found that a source of relief.

WALLACE: Guy, whether -- are you hearing anything about whether the president at the end of the week is pleased or displeased with Giuliani? And what are you hearing about the -- this question, which is the first one I asked our two lawyers, did he help or hurt the president's case this week?

GUY BENSON, TOWNHALL.COM: Oh, on the latter point, I think that you have to say that he hurt, because when your job is to come in and get your arms around a problem and put out a new story with new information to the American people and within 24 to 48 hours you are doing damage control of your own damage control, that's not good. Putting out a memo saying, actually, this is what I meant to say when I went on television four different times.

Now, he's back on television this morning and again last night with Judge Jeanine on Fox News Channel. So, I don't think that you can get an A+ to that performance.

I'm not sure how the president feels about it. Based on his public comment, my suspicion is, he's happy to have someone in his corner who's a fighter and who's pushing back harder against the Mueller team than some of his other lawyers have been able to do in the recent past. But because of his sort of smirking comment about getting the facts straight, eventually, he probably understands that Rudy overstepped, hence the clarification memo.

WALLACE: I want to pick up on the new strategy and the idea of more of a fighter, because it seemed clear to me this week that the president, along with Giuliani, has decided on a new strategy, which is to go after special counsel Robert Mueller more aggressively and make this more of a political issue.

Watch President Trump.

(BEGIN VIDEO CLIP)

TRUMP: This country is right now running so smooth and to be bringing up that kind of crap and to be bringing up witch hunts, all the time, that's all you want to talk about.

Let me tell you, folks, we are all fighting battles, but I love fighting these battles really --

(CHEERS)

(END VIDEO CLIP)

WALLACE: Gillian, clearly hiring Rudy Giuliani, who can be a pit bull and basically letting him off the leash is a dramatic change of strategy for this president.

GILLIAN TURNER, FOX NEWS CORRESPONDENT: It is, I agree with you. He was going in one direction for several months, the president, which was as much as he may have disagreed with Mueller, disagreed with the premise of the investigation, he was going to let it play out. Now with the hiring of Giuliani, he sends a signal this week that he perhaps -- and doubling down on the witch hunt theme, I might add, hiring Giuliani and doubling down on the witch hunt theme indicates he is going to go political on the investigation.

But a cautionary note there in the hiring of Emmet Flood. Emmet Flood is one of the folks who came in at the end of the George W. Bush administration to clean up some of the mess that was left with the Congress in the wake of the Iraq War, the financial crisis, he joined the president's staff on White House counsel back then to try and help deal with the overwhelming number of subpoenas that were just crushing the administration in its waning days.

He's more of a sort of professionalizer. So, may be sending mixed signals this week.

WALLACE: Juan, the president seems to have decided the reason for this change in strategy is that Mueller is coming after him and whether it ends up in court or whether it ends up in Congress with an impeachment proceeding, that he needs to discredit whatever Mueller finds and to rally his political base. Do you agree with that?

JUAN WILLIAMS, FOX NEWS POLITICAL ANALYST: Absolutely. I think that's why you see the president talk about witch hunt, why you see Rudy Giuliani saying this is a garbage investigation. And I think the hiring of Emmet Flood, who someone who helped President Clinton with his impeachment issues suggests that he is looking for that skill set and the skill set is, now I am not about cooperating. What I'm seeing is the possibility of a subpoena, the possibility of this going to the Supreme Court, or if the Democrats are to win Congress and the midterms, that the Democrats might try to impeach me so here comes Emmet Flood.

And I think the absence of people like Ty Cobb, John Dowd, I think maybe we could measure it in those terms. Those are people who thought that if you cooperate, you could in fact limit the investigation, get it to end more quickly. Let's get beyond this, that's why they were making promises to the president that never came true.

SWAN: I actually don't think there's been a fundamental change in the legal strategy. I think this is just going to play out exactly as it would have. Ty Cobb and John Dowd didn't want the president to sit down with Bob Mueller. Neither does Emmet Flood. Nobody in their right mind does. And guess what? He's not going to.

What they are doing now is they've got a very competent lawyer, Emmet Flood, behind the scenes. And a bunch of people like Rudy Giuliani who are very good at muddying the waters and performing political attacks on an investigation. And so, you have a dual track strategy.

You have to discredit the investigation, make it partisan in the same way that Democrats did with the Bill Clinton situation, (INAUDIBLE) Ken Starr. And we're going to have the same thing again here.

(CROSSTALK)

SWAN: And their bet -- their bet is that Bob Mueller will not issue a subpoena. That is the beat internally is that he won't have the guts, because it's going to be a long, drawn-out legal process, could end up in the Supreme Court. And even if he does, that will whip up their forces to discredit.

BENSON: Or the costs. He may not have the cost to issue subpoenas, too, right? It's not necessarily just about guts.

WALLACE: Why would it be about the cost? It seems to me there are a lot of questions. I mean, for instance, take on obstruction of justice. What was in your mind when you did that?

BENSON: Well, we're not exactly sure who wrote those specific questions. I know we are all talking about them as if they were Mueller's questions. They were written by Trump's legal team in response to a conversation that he had with someone in Mueller's office. So, it's an extrapolation of what the Mueller team, special counsel team might want to ask the president.

WALLACE: But I want to -- just let me pick up this. We got less than a minute left. Do you agree with Jonathan that in the end, Donald Trump will refuse to sit down?

BENSON: I do. And I think that the president saying that he wants to sit down, I'd love nothing more, only if it's fair. That's his way I think of signaling rhetorically to the American people, I'm not afraid of Mueller because I've done nothing wrong. So, I think --

WALLACE: But Mueller is unfair, it's a witch hunt, so --

BENSON: So no.

(CROSSTALK)

TURNER: I think the president genuinely does want to sit down with Mueller. I think he believed so fervently in the power of his own interpersonal skills and his ability to sway people. He's doing that with Kim Jong-un at the moment. He believes he can get the deal because he's going to have a one-on-one with him.

WALLACE: On the flip side, Jonathan, you say you don't think that Mueller will have the guts to subpoena him.

SWAN: I think that's what --

WALLACE: But if Mueller does decide to, that's high risk for Mueller, it's also high risk for the president. I mean, because if the Supreme Court goes and decides, you know what, you are liable, you are open to the subpoena, and does he refuse?

WILLIAMS: That was my point to you. And that's why I think that Trump, even as a political issue, wants to be able to say, I did nothing wrong, I'm glad to talk about it. He defied John Dowd on this point, which is why I think he was very difficult with Cobb.

And Emmett Flood will say to him, don't test -- I think a good lawyer will say that. But Trump some instinct, to pick up on Gillian's point, believes in himself that he thinks to sit down, his backers will believe him or --

(CROSSTALK)

SWAN: -- shot him with a tranquilizer dart.

(LAUGHTER)

WALLACE: Let me just say I am glad that we all came to an agreement on this.

(LAUGHTER)

WALLACE: I have a feeling this is what goes on in the White House.

All right. We have to take a break here. Panel, we'll see you a little bit later.

Up next, we turn to the big news on the president's foreign policy. We'll sit down with the chair of the House Armed Services Committee, Mac Thornberry, to discuss the upcoming Trump-Kim summit and whether the president will pull out of the Iran nuclear deal.

(COMMERCIAL BREAK)

WALLACE: Coming up, anticipation grows as we wait for word of the date and location for the summit between President Trump and Kim Jong-un.

(BEGIN VIDEO CLIP)

TRUMP: The good news, everybody wants this. It has a chance to be a big event.

(END VIDEO CLIP)

WALLACE: We'll talk with the chair of the House Armed Services Committee, Mac Thornberry, next on "Fox News Sunday".

(COMMERCIAL BREAK)

CHRIS WALLACE, FOX ANCHOR: As the world awaits the historic meeting between President Trump and North Korea's Kim Jong-un, President Trump's self-imposed deadline to decide whether to stay in the Iran nuclear deal is also fast approaching.

Joining me here in Washington, the chair of the House Armed Services Committee, Congressman Mac Thornberry.

Mr. Chairman, welcome back to "Fox News Sunday."

MAC THORNBERRY, R-TEXAS, CHAIRMAN, HOUSE ARMED SERVICES COMMITTEE: Thanks for having me.

WALLACE: Here was President Trump this week talking very positively about what seems like an almost certain summit with North Korea's Kim.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We're having very substantive talks with North Korea and a lot of things have already happened with respect to the hostages. And I think you're going to see very good things. The trip is being scheduled. We now have a date and we have a location. We'll be announcing it.

(END VIDEO CLIP)

WALLACE: You have expressed serious reservations about the possibility of this summit. How concerned are you that the North Koreans may be trying to play Donald Trump the way they have played previous U.S. presidents?

THORNBERRY: I think the history of these negotiations through several administrations shows that they tried to manipulate world opinion for their benefit. And it may also be that they have conducted enough nuclear test, enough missile tests, that they're pretty confident with their capabilities.

But, at the same time, because of sanctions, because of Chinese pressure, because of the president's rather unconventional rhetoric, they may feel a need to have a PR offensive. And I have no doubt their hope is to divide us from our allies in South Korea, to ease some of the sanctions, to ease the pressure coming from China so that they are not so isolated in the world. It's -- it's -- so there's a military aspect and then there's a world opinion aspect of what's going on here.

WALLACE: So -- so when there's talk about complete denuclearization and, according to the trump camp, we had John Bolton on last Sunday, that would mean shipping all of the -- of the nuclear bombs out, all of the fuel, all of the missiles. You don't think they're going to do that?

THORNBERRY: I'm -- I'm very skeptical. What it also means is inspections to make sure they do not restart a program. So I think you can hope for the best, but we have to prepare for the worst. And that means beefing up our ability to defend against missile attacks, modernizing our own nuclear deterrent, increasing our defense for ships and other military capabilities in that region. So we have to go into this clear-eyed, but also understand this other battlefield of world public opinion, which is one of the things the president has his eye on.

WALLACE: The New York Times reports that the president has asked the Pentagon for options on not eliminating, but reducing the 28,000 troops who are now in -- U.S. troops that are now in South Korea. While the U.S. denies that that is part of any negotiation now as part of the summit, if you were to get a peace deal between the two Koreas, wouldn't a reduction in troops naturally follow?

THORNBERRY: It -- at the end of the day, maybe. And the president may be dangling a carrot out there to try to entice the North Koreans. I think the -- the wisest thing I've ever heard, though, on this topic came from former Senator Phil Graham, where he said, if the lion and the lamb are to lie down together, we have to make sure that America is the lion. So maybe every -- everything will -- history is wrong, that maybe everything will come together. They will voluntarily, permanently, verifiably give up their whole nuclear program. I'm a skeptic. If that happens, we can talk about troop reductions. But in the meantime, we have to be militarily strong.

WALLACE: I want to switch to another very hot topic.

The president has a deadline next Saturday as to whether or not to re-impose economic sanctions in Iran and pull out of the nuclear deal. Israeli Prime Minister Netanyahu and U.S. Defense Secretary Jim Mattis had very different takes this week on the merits of the deal. Take a look.

(BEGIN VIDEO CLIP)

BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: The Iran deal, the nuclear deal, is based on lies. It's based on Iranian lies and Iranian deception.

JAMES MATTIS, DEFENSE SECRETARY: It is written almost with an assumption that Iran would try to cheat. So the verification, what is in their, is actually pretty robust.

(END VIDEO CLIP)

WALLACE: Should President Trump pull out of the Iran nuclear deal next Saturday, by next Saturday, even if the Europeans decide to stay in it and continue to do business with Tehran?

THORNBERRY: I -- I would counsel against it. I was opposed to the Iran deal. I thought it was a bad deal. Iran got most of the benefit upfront with relief of sanctions and a plane load of cash that President Obama sent over there. So we've lost a lot of our leverage.

But the key question is, OK, now we are where we are. What happens next if the U.S. pulls out?

Do -- Secretary Mattis talked about the inspectors that are in there. Does Iran kick those inspectors out so that we lose what visibility we have there? The Europeans are not going to re-impose sanctions. So where does that leave us and Iran?

So I'm not necessarily opposed to sticking with this deal forever, but you need to have a clearer idea about next steps if we are going to pull out, and especially given the larger context of Iran's aggressive activities in the Middle East.

WALLACE: Well, so let's pick up on that because the French and the Germans and the British are all basically pleading with President Trump, stay in the Iran deal and we will add some toughening side agreements that we'll agree on unilaterally without going to the Iranians. And these side agreements would be to limit Iran's ballistic missile program, sanction regional aggression and end the 2025 sunset clause when Iran can start resuming some of its program.

I guess the question is, is the Iran deal fixable? And, if so, should the president stay in it if he can get these add-ons with his European allies?

THORNBERRY: Well, I think these add-ons would be very important. Is it possible? It's hard to say until you try. So maybe the best thing is for the president to delay a bit more his deadline of this month and put the French and the British up to the test about whether it is possible to get this other sort of agreement.

I think one of the key things going on here, and -- and Prime Minister Netanyahu's exactly right, the Iranians always cheat and lie. One of the other things they're doing is they are shipping in arms to Hezbollah right on Israel's doorstep. And -- and the temperature is being turned up there. The possibility of conflict is probably greater than it's been in quite some time and it will be very important for the international community to be united to prevent that conflict, which is another reason staying with our allies and trying to curtail all of these aggressive actions from Iran is important right now.

WALLACE: All right. I've got two minutes left, I want to get into one last issue with you.

A delegation of top U.S. officials has just returned from trade talks in Beijing. And the Chinese, at the end of the talks said that, quote, big differences remain. How concerned are you about a possible trade war with China?

THORNBERRY: I believe -- a lot of countries are very concerned about Chinese trade practices. And working with them, I think we have the best chance of pushing back against a lot of what China is doing. One example in the defense world is China is stealing and obtaining through all sorts of ways critical intellectual property that they are going to use for their defense purposes. We have to close the door on that.

What I worry about is that the steel and aluminum tariffs have alienated some of our friends that we need to work with to push back against the Chinese trade tactics. So, again, we're -- we -- to be more effective, we've got to have allies and we need to not alienate allies in order to push back on China.

WALLACE: So -- so -- so briefly, I want to pick up on that, because the president is talking about imposing tariffs, not just on China, but other countries around the world, including the European Union.

How -- how concerned are you about the fact that the president has apparently decided to use tariffs in general as part of his trade policy?

THORNBERRY: Well, I believe that we are better off with free and fair trade. I also have seen firsthand what China is doing around the world. I was in East Africa not long ago as they are extending their tentacles out to all sorts of places. We have to have a group of allies working together to push back against what China is doing. And so that comes from having folks on the same page, not alienating our friends. I hope the president follows through in -- in his statement that he would like to consider getting back into the Trans-Pacific Partnership because those sorts of trade agreements are the most effective way we can push back.

WALLACE: Chairman Thornberry, thank you. Thanks for joining us. Always good to talk with you, sir.

THORNBERRY: Thank you, sir.

WALLACE: Up next, more on the president's moves this coming week are North Korea and Iran.

Plus, what would you like to ask the panel about the summit between President Trump and Kim Jong-un. Just go to FaceBook or Twitter, @FoxNewsSunday, and we may use your question on the air.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: There's something that I like about it because you're there. You're actually there. Where if things work out, there's a great celebration to be had on the site, not in a third-party country.

(END VIDEO CLIP)

WALLACE: President Trump this week suggesting the DMZ between North and South Korea would be a good spot for his landmark summit with Kim Jong-un. And we're back now with the panel.

Jonathan, what's the latest about where and when the summit will be held? And for all the president's talk about if Kim isn't serious about this, I'm going to just walk right out of that summit, do you get the sense he's getting swept up in the excitement and the hype over the fact that this summit is taking place?

JONATHAN SWAN, NATIONAL POLITICAL REPORTER, AXIOS: Well, the first thing I should say is, we do not yet know the location and the exact date. But what I've been told by sources internally is that it's going to happen after the South Korean leader Moon visits at the -- May 22, I believe, he visits the White House. It will be sometime after that. Likely late May or early June. And it looks like they're signaling it could be on the Demilitarized Zone between the two Koreas.

The momentum is with it. Trump wants to do it, even though he's got people like John Bolton, his national security adviser, who has never thought that meeting and talking is a good idea. Trump really wants to do it, and so that's driving the momentum.

WALLACE: And do you think that he's getting swept up in this and --

SWAN: He's -- I'm told the idea -- the notion of a Nobel Prize has definitely occurred to him.

WALLACE: Yes. When the crowd started -- I guess it was last weekend --

SWAN: Nobel. Nobel.

WALLACE: Yes, that -- he didn't -- he didn't say, no, no, no, don't -- don't do that.

All right, we asked you for questions for the panel and on reports that the president is at least considering the idea at some point of drawing down the number of U.S. troops in South Korea, we got this on -- this tweet from Deva who writes, are we preparing to pull troops and weapons out of South Korea?

Gillian, how to answer Deva?

GILLIAN TURNER, FOX NEWS CORRESPONDENT: I answer the question by saying, it's not news. It's not news that the Pentagon, that the State Department's policy planning office would have contingency plans for an eventuality where if some kind of peace deal is struck between the North and the South, we draw down our troops presence from -- from the border region. That is not news.

I think what happened this week is that John Bolton really didn't like the fact that this was leaked prior and this was being made -- you know, a deal out of this was being made in the media before.

WALLACE: That this would be part of the summit.

TURNER: Right. It's really a question of timing. And is this something the administration is considering putting on the table in advance of the meeting with Kim? And the answer is a straight up no. There's nobody in the administration. And not -- and no reporter that would really tell you that this is something the president is thinking of offering to Kim in advance. I mean that -- that would violate every cardinal Trump rule.

WALLACE: But could that be part of a negotiation?

TURNER: I think -- I think it could be not part of the negotiation, it could be part of a contingency plan for if a deal is struck. It's not going to be something the president is bringing up with Kim in these negotiations. It violates every Trump cardinal rule from, we won't broadcast national security plans in advance, so we won't make concessions before we sit down at the table.

WALLACE: Let's turn in what a normal week might be the headline on this show, very good economic news. And that is, the unemployment rate for April fell to 3.9 percent, the -- the first time that it has fallen below 4 percent since late in the year 2000. President Trump, not surprisingly, was celebrating it. Here he is.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: I thought the jobs report was very good. The big thing to me was cracking four. That hasn't been done in a long time. You'll tell me how long. But it hasn't been done in a long time. We're full employment.

(END VIDEO CLIP)

WALLACE: Juan, Republicans are counting on a strong economy and jobs numbers like this to help them keep control of Congress in November.

JUAN WILLIAMS, FOX NEWS POLITICAL ANALYST: Absolutely. They would hope. But, you know, it just hasn't boiled down to it yet. And you don't hear President Trump reiterating this point. Remember, Ronald Reagan was saying to me, and maybe you too, Chris, the -- you know, the tenth time I'm saying is the first time the audience is hearing it. And Trump is attempting, I think, to push hot buttons, like trade and immigration, instead of staying on the message about the value of economic progress and the value of his tax cuts.

Now, I must say, Marco Rubio didn't help this week when he said the tax cuts really haven't done much for the working people in America, has not bumped up wages, hasn't started the economy in the way we had hoped. He was immediately rebuked. He tried to walk it back a little bit.

But the polls back up Marco Rubio on this. In Pennsylvania 18, what we saw was when the tax cuts and the economy were used by the Republican candidate, it didn't move the needle and the Democrat won the race. And so when you ask the American people about it, even Republicans concerned about the deficit spending implicit in the tax deal, it's only half of Republicans who say, yes, this tax cut was a great thing. And if you ask Americans, the plurality, 36 percent say it was a bad thing.

So I think that he may be right in saying, the midterm are going to be a referendum on Donald Trump and Donald Trump is going to stir his base by pushing these hot button issues in addition to occasionally coming back on message and talking about the tax cut and the good of the economy.

WALLACE: Guy, how strong are these economic numbers? Can they be used to actually mobilize voters and persuade voters? And I guess the question I have, why on earth does President Trump ever talk about anything else except the tax cut and these good economic -- 3.9 percent, I mean, maybe it was that way in 2000. I didn't remember it. That's an astonishingly low number.

GUY BENSON, TOWNHALL.COM: It's a great number. GGP came in just a couple days ago beating expectations. So part of me thinks that it might be a great idea for the president basically to spend most of his time at Mar-a-Lago, do some golfing, watch Fox, you know, tweet a little bit, come out once a month with a giant billboard of economic numbers and just point at it and say, look at these terrific, tremendous numbers, and then go back inside because the economy is booming under President Trump and his policies.

The counterpoint to that, however, goes back to the other subject of our topic here, which is North Korea. If not for all of the tweeting and sort of things that were seen as crazy in this city, that he shouldn't be doing, I'm not sure Kim is paying attention to Trump. I'm not sure Kim fears Trump the way he does. And we may not be in the position that we are in North Korea.

I would still recommend that the president spend a lot more time talking about tax reform, talking about these economic numbers because even as we all talk about Stormy Daniels and Robert Mueller and all of those things, the president's numbers have been ticking up slowly but surely over the last few weeks because most Americans are looking at their bottom lines and smiling.

WALLACE: And -- and how much frustration among Republican candidates and Republican really leaders in that building behind me that the president doesn't stick to these numbers?

BENSON: A good amount of frustration, obviously. But, at this point, it surprises zero people. This is who he is. It's how he operates. And the idea that there's going to be some top-down effort for him to be a disciplined messenger, if that is still your hope about Donald Trump, you've been in a coma for two years.

WALLACE: Do agree with that in -- we've got 15 seconds -- that he just won't stay on message?

SWAN: I don't need 15 seconds. I agree with what he said. But, you know, Trump -- Trump doesn't stay on message. That's not his style. It's not the way he operates.

WALLACE: All right. That's 15 seconds.

Thank you, panel. See you next Sunday.

Up next, our "Power Player of the Week." How one group is trying to fix Washington by sending more of our nation's veterans here.

(COMMERCIAL BREAK)

WALLACE: Partisanship in Congress may be at an all-time high while the presence of military veterans is near a record low. One man thinks that's no coincidence. And he's our "Power Player of the Week."

(BEGIN VIDEOTAPE)

RYE BARCOTT, CO-FOUNDER, WITH HONOR: We want to change the -- the paradigm, which is essentially this record high level of polarization and dysfunction in Congress. And we think the way to do that is through veterans.

WALLACE: Rye Barcott is head of With Honor, a political action committee working to elect more veterans to Congress in November in the hope they can break the gridlock and get things done.

Why veterans?

BARCOTT: When I served in the Marine Corps, I had no idea what the, you know, political party was in the people that were serving to my right or left. We had a common mission and the focus was on doing the mission and doing it well.

DAN CRENSHAW: I knew that I would never stop searching for another way to serve my country and make an impact and do what's right for Texans and do what's right for the American people.

WALLACE: Dan Crenshaw is one of the Republicans With Honor is backing. He served two tours in Iraq and one in Afghanistan, where he was almost blinded by an IED.

CRENSHAW: Whether you have a Democrat veteran or a Republican veteran, at least we both know that the first thing we did in life was serve our country selflessly.

WALLACE: Barcott's group hopes to endorse about 35 candidates running for Congress this year, split evenly between the two parties. Younger vets who enlisted after 9/11 and are willing to take what's called "the pledge."

BARCOTT: Co-sponsoring a piece of legislation with someone from the other party once a year, meeting with someone once a month from the other party.

WALLACE (on camera): That doesn't sounds like it's so remarkable.

BARCOTT: It sounds absurd that that's necessary, but when you talk to members, they actually say, yes -- yes, this is necessary.

M.J. HEGAR: I'm M.J. Hegar. I'm a Texan, a mother, a veteran and I'm running for Congress in District 31.

WALLACE (voice over): Hegar served 12 years in the Air Force as a helicopter pilot, including three tours in Afghanistan. She is a Democrat.

HEGAR: Instead of seeing each other as the enemy but seeing the problems that are facing our country as the enemy, that's exactly why I'm going there.

WALLACE: Back in the 60s, veterans made up more than three quarters of Congress. Now it's less than 20 percent. Barcott hopes to raise $30 million this cycle -- they have about $10 million so far -- to support candidates they screen for character more than policies.

BARCOTT: We interview veterans that actually served with them in a unit under duress. How did they act? You know, how did you act when you were under fire?

TIM KANE: Serving in uniform was the greatest honor of my life. Will you help me continue that service as a new leader in Congress?

WALLACE: Tim Kane was an Air Force intelligence officer. He's in a Republican primary runoff in Ohio on Tuesday.

KANE: Democrat/Republican is what too many people see first. I want to see American first.

WALLACE: Barcott hopes to elect enough vets they'll have their own cross partisan caucus in Congress next year. By 2020, he wants to back 100 candidates running for the House, as well as in state and local races.

BARCOTT: You know you want to join the Marine Corps. It's when you see something happening that's a problem around the world and your initial reaction is, let's run towards that. So we support candidates regardless of their specific policy items, but their commitment to actually get things done and put the country's interest first.

(END VIDEOTAPE)

WALLACE: With Honor has a distinguished group of advisors, including former Defense Secretary Robert Gates and Secretary of State George Shultz.

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

END

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