Transcript: Alaska Officials on 'FOX News Sunday'

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The following is a partial transcript of the Sept. 14, 2008, edition of "FOX News Sunday With Chris Wallace":

"FOX NEWS SUNDAY" HOST CHRIS WALLACE: And hello again from FOX News in Washington. Well, the excitement and furor over John McCain's vice presidential pick is still at full force, so we decided to take a closer look at Sarah Palin's record in Alaska.

We spoke earlier with two men who know her well.


WALLACE: We're joined now by Alaska's lieutenant governor Sean Parnell, who comes to us from Anchorage, and the former governor of Alaska, Democrat Tony Knowles, who Palin defeated two years ago, and he joins us from Seattle.

Gentlemen, let's start with the central question. Is Sarah Palin ready to be vice president and potentially president? Here's how she answered that question for Charlie Gibson on Thursday.


GOV. SARAH H. PALIN, R-ALASKA: On January 20th, when John McCain and I are sworn in, if we are so privileged to be elected to serve this country, we'll be ready. I'm ready.


WALLACE: Governor Knowles, two years ago when you were running against Palin, you campaigned against her as an untested mayor of a small town. The voters of Alaska didn't agree with you then. Why should the voters of America believe you now when you say she's not ready?

KNOWLES: Well, Chris, the McCain-Palin ticket has embraced the economics and foreign policy of George Bush. I believe that's the wrong direction of the country.

And when Senator McCain chose Governor Palin to be his running mate, it was on the basis that it was going to represent change. And he represented two specific areas that need to be reformed that he looked to Governor Palin to lead, and that was change in regards to wasteful spending and pork barrel, and also in terms of ethics.

But there are serious questions about the stand that Senator (sic) Palin has taken on so-called "Bridge to Nowhere," which she's always supported and which actually she still continues to support on...

WALLACE: Well, we're going to — we're going to get into all of those specifics. But just real briefly, Governor Knowles, why is she not ready to be president?

KNOWLES: Well, the question, I think — and most people feel that on the surface that there has been no vice president that is less prepared in modern history.

But we need to look at what a person does in office, not so — not so much how long they hold an office. And despite the brief time, the case needs to be made on the issues.

WALLACE: All right. We're going to get to...

KNOWLES: And it's on the issues...

WALLACE: Governor Knowles, we're going to get to those in a minute, but let me bring in Lieutenant Governor Parnell.

It's obviously a big jump from mayor of Wasilla to governor. It's a much bigger jump from governor of Alaska to potential president.

Governor Palin says she's never met a foreign leader. She seems not to have thought a great deal about foreign policy. Why do you think she's ready to be commander in chief in a time of war?

PARNELL: You know, Governor Palin is absolutely ready to lead. She's the only candidate who has executive branch experience.

She's the governor of the state that supplies 20 percent of America's oil. I mean, she knows what energy independence is all about, because we're working to provide oil and gas both here locally in Alaska as well as to the rest of the states. She's absolutely ready to lead.

WALLACE: Governor Knowles, one — as you pointed out, one of the central reasons that John McCain picked Palin was because he said that she has a record as a reformer.

Now, I know you're an opponent, but doesn't she have quite a history of going up against the establishment of her own party and against the interests of the big oil lobby?

KNOWLES: Well, just let me just say, again, both McCain and Palin have endorsed the economics and foreign policy of George Bush. So how do they make themselves agents of change and reform?

And they point to Governor Palin's work in terms of not accepting money for the so-called "Bridges to Nowhere." First of all, to get the record straight on that, she did not turn back the money to it.

There were two "Bridges to Nowhere," and one of them, the largest project — and regardless of the merits of the issue, regardless of the merits, she is continuing to support one of the so-called "Bridges to Nowhere," which is across from Anchorage to Point McKenzie.

So it's entirely false that she — it's misrepresentation of the record.

Second of all, ethics was also a reform issue that she has been turned to, and yet we have a situation right now in Alaska where she is under the cloud of investigation for an ethics complaint that has been made...

WALLACE: Wait, wait. Governor Knowles, I don't mean to interrupt. I promised...

PARNELL: Let me — can I jump in here?

WALLACE: We're going to get to all of that in a second. Let's deal with the "Bridge to Nowhere," because it is a big issue.

Governor Parnell, she did tell the Republican convention, you know, "Thanks, but no thanks," that that's what she had told Congress.

In fact, it turns out she was originally for it and pulled the plug on the bridge after Congress had already pulled the plug. And in fact, she kept the $223 million in federal taxpayer money for Alaska.

So was she such a reformer on the "Bridge to Nowhere?"

PARNELL: Well, let me — let me go back to your original question. Governor Palin was absolutely a reformer here in Alaska. She rooted out corruption even before she was elected. When she saw ethics breaches, she stood up to her own party chairman here in Alaska.

As governor of the state of Alaska, she's passed a significant ethics reform package to just close some ethics loopholes in our legislative and executive branches.

She demands the highest standards of ethical practices from her cabinet and from us who work with her and for her. When it comes to the bridge in Ketchikan, she was originally — and has said that she would not stand in the way of infrastructure dollars coming our way to Alaska. But that was when that bridge was, what, $223 million.

When she got to be governor and found out that it became a $400 million bridge, she said, "No, not going to do that." Congress was the — was the body that actually pulled the earmark language off of it, letting that money come to Alaska into our transportation formula funds, just like that money goes to other states' transportation formula funds.

WALLACE: But, Lieutenant Governor Parnell...

KNOWLES: But, but, but, Chris...

WALLACE: And if I may, Governor Knowles, Lieutenant Governor Parnell, let me follow up with you. The fact is when she originally represented to the Republican Party that she pulled the plug on the "Bridge to Nowhere," in fact, Congress pulled the plug.

And let's look at her record as a reformer — and let's put it up on the screen. When it comes to earmarks, which are those small — those sometimes not-so-small pork barrel projects that are snuck into big spending bills, as mayor of Wasilla, she hired a Washington lobbyist and got $27 million in earmarks, and as governor her administration asked for $453 million in earmarks the last two years, including $3.2 million to study the genetics of harbor seals and $2 million to study crab productivity.

Lieutenant Governor Parnell, it sure sounds like business as usual.

PARNELL: Oh, absolutely not. I mean, if you sit through her cabinet meetings, she's driving down the number of earmarks that Alaska is requesting.

The prior administration asked for about 63 earmarks when we came in. The requests are down to 31 earmarks this year. We're driving those numbers down, working to bring reform to Alaska.

This is not something you can just turn the switch on overnight and change. Change takes time, and our reformer is taking that step by step.

WALLACE: Governor Knowles, I mean, it...

KNOWLES: Chris...

WALLACE: ... is a fact that while Palin has not ended the practice, she has cut the number of earmarks that were in the pipeline from the former governor Murkowski dramatically.

KNOWLES: Well, Chris, let me just get a fact corrected here, or a fact presented, that everyone has been overlooking. There were two "Bridges to Nowhere." There was one so-called "Bridge to Nowhere" in Ketchikan, and there was another in Anchorage.

The one in Anchorage the governor continues to support. She never diverted any funds whatsoever. And so that's a question — when she says the "Bridge to Nowhere," there were two bridges, and her position on the other one, which goes to an area which her hometown, Wasilla, is in — that that is absolutely incorrect to say that she said no to the "Bridges to Nowhere."

WALLACE: All right. But what about this idea, Governor Knowles, that she really has cut back dramatically — not ended, but cut back dramatically on the earmarks in Alaska?

KNOWLES: Well, the fact that in terms of business as usual and that she is going to be the reform on that issue is just not true.

There has been a reduction in the number of earmarks, but that has more to do with the fact of what Congress is putting out and the attitude that Americans have against special earmarks more than anything that she is doing for reform.

WALLACE: Gentlemen, let's turn to something that I know, Governor Knowles, you wanted to talk about earlier. That's the so- called "troopergate" case, the question of whether Governor Palin pressured the public safety commissioner to fire a state trooper who was her ex-brother-in-law and then fired the commissioner when he refused.

Here's how she explained it to Charlie Gibson.


PALIN: Commissioner Monegan has said, "The governor never asked me to fire him. The governor's husband never asked me to fire him." And we never did. I never pressured him to hire or fire anybody.


WALLACE: Lieutenant Governor Parnell, originally, Governor Palin said that she was going to cooperate with the legislative investigation. Now the lawmakers just yesterday issued 13 subpoenas. She has said that her lawyer is going to fight those subpoenas.

And she also has talked about wanting the state panel, the personnel board, which she appoints the members to, to take over this investigation. Whatever happened to open government?

PARNELL: Governor Palin practices open and transparent government. There's no question about it.

When this investigation first started, it appeared that it would be a fair fact-finding-type investigation. But since then, it's become a political circus.

The legislative committee, the judiciary committee that voted on the subpoenas yesterday, is chaired by Senator Hollis French. That senator is a Barack Obama supporter.

Everything now is tied to timing for this general election. It's not about finding the facts anymore. Instead, what the governor did is filed an ethics complaint against herself with the personnel board to open up a fair and impartial tribunal to review...

WALLACE: But, Governor Parnell, if I...

PARNELL: ... the charges that have been brought.

WALLACE: ... if I may, two points there. First of all, the fair and impartial tribunal is by the state personnel board, and she appoints the members to that board.

And secondly, you can talk — and there certainly is some partisan aspects to this, and I'll ask Governor Knowles about it, but the fact is the person who broke the tie and voted for the 13 subpoenas was a Republican, not a Democrat. And in fact, it was the state senator from Wasilla.

PARNELL: And I'll just come back. The legislative tribunal is not the appropriate place for these charges to be heard. There's no question that politics are entering in during this time.

Secondly, the personnel board is the body created by the legislature to review these — these kinds of charges and allegations, not the legislature.

WALLACE: Let me, Governor Knowles, bring you into this. Doesn't Palin — and doesn't Lieutenant Governor Parnell have a point?

The fact is that several of the members of this legislative board are announced and public Obama supporters, including the Democrat Hollis French, who's running the investigation, who, in fact, has even talked about Palin is — can look forward to an October surprise.

KNOWLES: Chris, this is a completely diversionary tactic. Let me just put it in the right context.

This is a very serious charge. In fact, when the legislature initiated the investigation, it's for the first time in the history of Alaska that the legislature has ever initiated a ethics investigation of a governor.

Second of all, as to whether it was partisan or not, it's a Republican-controlled legislature. And the committee that — the committee that voted as to whether or not to hire an investigator was a bipartisan committee of 12 House and Senate members, and they unanimously voted to do it. So that's how serious it is.

Now, the question in terms of what was the supposed crime on that, it is — again, it's an abuse of power and possibly an illegal action by a governor to direct a commissioner to take an illegal action in firing of someone — of personnel for a personal agenda — very serious.

You would hope that the American people would have the chance to find out what happened in this particular case...

WALLACE: Gentlemen, we're beginning — Governor Knowles, I...

KNOWLES: ... before an election.

WALLACE: I understand, and we are about to run out of time. And I want to ask you both — we've got about a minute left, and I'd like you each to take 30 seconds — from your unique perspective of having dealt with Governor Palin in a way the rest of us haven't.

And let me start first of all with you, Governor Knowles. Tell us what you think is the single most important thing about Sarah Palin that we don't know yet.

KNOWLES: Well, it's not a question of what we don't know. It's what we do know. And that's why the cover-up that is taking place in terms of this ethics investigation is a very serious matter.

But in a broader scale, the McCain-Palin ticket has embraced — and they're more of the same. They've embraced the George Bush economics and foreign policy.

WALLACE: All right. Let me...

KNOWLES: The American people are hungry for change, and that's why the serious subjects of change that Barack Obama's put forth is why it's the right direction for the country.

WALLACE: All right.

And, Lieutenant Governor Parnell, same question, 30 seconds.

PARNELL: You bet. I think the people of America need to know that Governor Palin is eminently trustworthy. She looks out for everyday people here in Alaska. She roots out corruption. She's a reformer here.

She's got 80 percent approval ratings from the citizens she serves, and she's maintained that for the last two years. That's nothing that any former governor has done. She's done that because she's maintained the trust of Alaskans.

I think she's going to maintain the trust of Americans as well as our vice president.

WALLACE: All right.

Gentlemen, we're going to have to leave it there. Lieutenant Governor Parnell, Governor Knowles, I want to thank you both so much for talking with us today.

PARNELL: You bet. Thank you so much.

KNOWLES: Thank you, Chris.