This is a rush transcript from "Fox News Sunday," July 30, 2017. This copy may not be in its final form and may be updated.


Tough times for President Trump, with a stunning defeat on a top legislative initiative and another shakeup of the White House staff.


DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Reince is a good man. John Kelly will do a fantastic job.

WALLACE (voice-over): We’ll discuss the president’s decision to replace Reince Priebus as chief of staff with retired General John Kelly, when we sit down for an exclusive interview with counselor to the president, Kellyanne Conway.

(on camera): Then, with the collapse of Republican efforts to repeal and replace ObamaCare, what happens now?

SEN. MITCH MCCONNELL, R-KY, MAJORITY LEADER: It’s time for our friends on the other friends on the other side to tell us what they have in mind.

WALLACE (voice-over): We’ll discuss the possibility for bipartisan compromise and what the other side is willing to give with House Democratic Leader Nancy Pelosi.

And with dysfunction in the nation’s capital, the worse it’s been in years, we’ll get a view from outside the beltway, when we talk with Republican Governor John Kasich of Ohio. Conway, Pelosi and Kasich, only on "Fox News Sunday."

Plus, explosive obscene comments by the new White House communications chief shake Washington. We’ll ask our Sunday panel whether the latest White House shakeup will save the Trump agenda.

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


WALLACE: And hello again from Fox News in Washington.

Donald Trump ended one of the worst weeks of his presidency, putting a new man in charge of his White House staff, the secretary of homeland security, retired Marine General John Kelly.

With open this disarray in the administration, and Republicans failing to keep one of their biggest campaign promises to repeal ObamaCare, is another staff shakeup enough.

In the moment, we’ll talk with counselor to the president, Kellyanne Conway. But, first, let's bring in Kevin Corke at the White House with the latest -- Kevin.

KEVIN CORKE, FOX NEWS CORRESPONDENT: Chris, clearly the elevation and the appointment of General Kelly is intended to calm the seas for a White House that despite its best efforts has been rocked by turbulent seas throughout the Trump ministration, especially when you think about what has been happening here politically.

Now, sources do tell Fox News that the new chief of staff will have control, full control in fact, over the Oval Office and schedule, though we have also learned that some key staffers, at least for the time being, will continue to have what’s being described to me as casual access to the president, with Kushner, Bannon, Conway, Scavino and Scaramucci being among the names most often mentioned.

Priebus’ ouster just the latest in a series of departures and seeing (ph) this administration marked by unrest and upheaval at the highest levels, including the loss of national security adviser Mike Flynn, the firing of FBI Director Jim Comey and the departure of key White House figures, Dubke, Spicer and now Priebus.

As for Kelly, to be effective, he will need control over a team that has had competing factions and a president who’s own lack of message discipline has made it exceedingly difficult at times to effectively and coherently shepherd his message. Sources tell Fox News General Kelly will have that control and that was one of the major selling points to get him to come to the White House after several overtures.

His first day on the job, Chris, is Monday, and given that explosive and profanity-laced interview by the communications director last week and, of course, the latest setback on healthcare, it's a safe bet he will have his hands full -- Chris.

WALLACE: Kevin Corke, reporting from the White House -- Kevin, thanks for that.

Let's drill down on what we can expect from the new chief of staff. We are joined now by counselor to the president, Kellyanne Conway.

Kellyanne, I want to start with a question that my colleague Martha McCallum asked you on Friday, whether or not all of the White House staff will now report to the new chief of staff, General Kelly. Here’s your answer.


KELLYANNE CONWAY, COUNSELOR TO THE PRESIDENT: That’s just a pecking order question. I think it’s beside the point, and here’s why. We all serve the president and this country.


WALLACE: Respectfully, Kellyanne, I don’t think it is beside the point. An awful lot of people in and out of this White House say the problem is, there’s the lack of discipline. There’s an absence of chain of command.

So, I’m going to ask you again: will all of the White House staff report to the new chief of staff?

CONWAY: So, I will do whatever the president and our new chief of staff, General Kelly, ask me to do. And yesterday, I was on "Fox & Friends" and said very clearly that if we can have protocol, pecking order, order, discipline, and the chief of staff that empowers the staff to succeed, I know that General Kelly has done that on the battlefield, I know that he’s done that as a chief military aide to former cabinet secretary, I know he’s done that as a cabinet secretary.

And so, we have great faith that that will be done, and that is nothing about our outgoing chief of staff, Reince Priebus, who should hold his head high, as he exits. Many great things happen in the first six months during his tenure and I think that Reince will go down as one of the most successful and certainly longest serving RNC chairs were as chair, they were able to raise a great deal of money and improve the digital and grassroots operation that allowed the Republican Party to succeed by getting the House, the Senate, the governorships, the state legislatures.

So, I’m always a protocol and pecking order kind of gal and I’m very deferential person. I’ve never addressed the president even when he was a candidate and as close as we are as boss and employee, I’ve never addressed him by his first name. I always address people like General Kelly as sir, and I, also with Reince Priebus, was happy to do what I was asked to do, as a member of his staff.

But I think so much of the chief of staff role also occurred outside of the building. There’s a little too much going on right now in terms of acting like he is the personnel chief inside the building only. This is somebody who regularly interfaces with the cabinet. And General Kelly is coming from the cabinet. He will be talking to his peers about their different concerns, their different deployment of issues.

WALLACE: But, look --

CONWAY: We've got a very active cabinet. It often doesn’t get covered. He’ll also be interfacing with Capitol Hill where a lot of the legislative agenda has stalled. I think the chaos this week really was on Capitol Hill and in the Senate. Why after 7-1/2 years nobody jumped out of a cake and gave us healthcare reform on a silver platter, I don't know.

WALLACE: We’re going to get to health care in a moment. I do want to talk, though, about the disarray inside the White House. You had Anthony Scaramucci and a profanity-laced attack on another -- other members, not just one, of the administration, of the White House staff. And so, I just want to ask you directly, has Scaramucci, who said that he reports directly to the president, has Scaramucci, have you, have you now been told you to report to John Kelly?

CONWAY: I will speak with General Kelly and the president about that, as I’m sure Anthony Scaramucci will. We are very -- I think we’re all very curious and very excited to have our first formal meeting with our new chief of staff tomorrow. I had a very brief conversation with him this weekend.

And again, getting -- being able to solve the problems of this nation and doing it in an orderly and rapid fashion is really why we were sent to Washington. It’s why the two people who are elected, Donald Trump and Mike Pence, and no one else are there. So, to the extent that we can do more and do it more quickly in a disrupted fashion in which we're accustomed to with Donald J. Trump, I think that having the tools in place is very important.

But I talked to Anthony this weekend. I talked to Reince this weekend. Everybody is on the same team into terms of we’re on the side of freedom and democracy, repealing and replacing ObamaCare, lowering taxes, putting ISIS in retreat, cracking down on these gangs, sanctions on Russia --


CONWAY: -- North Korea and Iran. You know, there's just so much that’s happening and I’ve got to say, the swamp includes many people, many institutions, individuals, and I think calcified ideas that need disruption. It includes folks also on Capitol Hill who I don't know what they were expecting, Chris, were they not expecting Donald Trump to make good on his campaign promise and the moral imperative of getting the 20 million-plus Americans who have no health care coverage the relief they need, the 6.5 million who we're willing to fork over money, $3 billion worth, to the IRS rather than get simple ObamaCare coverage where -- do they not expect this president to go ahead and do what he said he was going to do?

WALLACE: Kellyanne, you’ve got to allow -- you've got to allow me to ask some questions here. I want to ask you about one more question on the administration and then we’ll move on to healthcare. This week, the president continued to attack his attorney general, Jeff Sessions. And when he was asked whether or not he's going to keep Sessions in the job or fire him, here was his answer.


TRUMP: I’m very disappointed with the attorney general, but we will see what happens. Time will tell. Time will tell.


WALLACE: Does the president want Sessions to continue as attorney general or has been suggested, is he considering him moving over to replace General Kelly as the secretary of homeland security?

CONWAY: Again, that’s a personnel question and only the president can answer. So, just on Friday, you had -- Thursday and Friday, you had Attorney General Sessions in El Salvador and you had President Trump on Long Island, both working toward the same goal, which is to stop these vile groups, these MS-13 gangs, who are murdering innocent Americans and bringing drugs and violence and to our community.


WALLACE: I understand that. Does that mean --

CONWAY: At the same time -- well, he's working.


WALLACE: No, but I understand he’s working. The question is, is he considering him moving over, if you’re going to -- if the immigration part of this is so important, to be the secretary of secretary of homeland security?

CONWAY: I won't comment on that, but I will tell you that the president has expressed frustration about the recusal. So much has flowed from that recusal and so much of President Trump’s agenda flows from the Department of Justice. Many of the primary issues and the program he won successfully on goes to the Department of Justice.

And look what’s happened with this ridiculous Russian collusion delusion. You see all these journalists who built entire TV sets and lower thirds and screaming graphics and breathless coverage now slinking away this week, Chris, from Russian collusion coverage, why, because you have everybody from Jared Kushner giving his -- meeting with the Senate and giving his public statement.

You have no there there whatsoever. It’s completely -- we were promised the next Watergate. We don't even have water polo. We don’t even have watermelon. It’s so ridiculous and the only thing I can see happening with Russia right now is this Fusion GPS matter as the Senate witnessed who said everybody should go look over there and what’s happened. Somebody being paid by the Russians to compile a damaging dossier on Donald Trump, again, filled with falsities and lies.

You know how much time has been wasted away from the victims of ObamaCare?


WALLACE: OK, let’s not waste any more time. Let’s talk -- Kellyanne, let's talk about ObamaCare.

The president put out a new tweet today. I want to put it on the screen. He wrote: Don’t give up Republican senators, the world is watching, repeal and replace, and go to 51 votes, nuclear option, get cross state lines and more.

Is that the president’s plan, stay on repeal and replace, change the Senate rules and legislative filibuster so that you can pass a fuller repeal and replace, including selling insurance across state lines?

CONWAY: The president will not accept those who said it's, quote, time to move on. He wants to help the millions of Americans who have suffered with no coverage. They were lied to by the last president. They couldn't keep the doctor. They couldn't keep their plan.

We’ve met with the ObamaCare victims at the White House several times now. They’re real people, they’re suffering.

And when he talks about the 51 votes, the president is basically making the case that so many of the components of real healthcare reform, Chris, requires 60 votes -- the drug pricing, the selling of insurance across state lines, the associated health plans that allow those who don't get their health insurance to the employers like you and I do, or to government benefits, who have been left out because the premiums are too high.

Premiums have doubled. We see in some states that there are no insurers --


WALLACE: Let's talk about that. Kellyanne --

CONWAY: So, he will. He will stick with it.

WALLACE: OK, failing it, and fail -- and then we should point out that both Republicans and Democrats say that there’s no chance they’re going to change the Senate rules.

Here’s what the president says his plan is.


TRUMP: I said from the beginning, let ObamaCare implode and then do it. I turned out to be right. Let ObamaCare implode.



WALLACE: Failing repeal and replace, is that really what the president intends to do? Does he intend to cut off what are called cost-sharing reductions which lower the out-of-pocket expenses for people, lower income people? And what about -- you talk about real people, what about the millions of people while ObamaCare is imploding that are going to lose healthcare coverage?

CONWAY: So, Chris, I saw the comment from Mr. Schumer, Senator Schumer, about this. What is their plan to help? The CSR payments are being made and we've already got an opinion by one court because you have members of Congress who sued to say that under ObamaCare, this money was never authorized through the Congress. And so, they would like an opportunity to do that, which is, of course, the normal course of business.

Can I just ask Senator Schumer --


WALLACE: Is the present going to cut off the CSR payments, the out-of-pocket payments? He can do it starting next month, this week.

CONWAY: Yes, he can. He can -- he's going to make that decision this week, and that’s the decision that only he can make.

But let's go back to what we are really talking about here. When he said yesterday in the same tweet, I believe, about the bailout -- the insurance companies’ bailout from members of Congress, he’s talked about the CSR payments. He’s also talking about this really sweet deal that members of Congress and their staffers have where they are not beholden to the same health healthcare that so many Americans say is unaffordable and unsustainable and untenable.

And this is exactly what so many Americans hate about Washington, D.C. They feel like they have their nose pressed up against the glass, peering into the special interests, the swamp, these lobbyists, the folks on Capitol Hill. They want people to live under the same rules they do. And, frankly, if people had the same rules on Capitol Hill, maybe they would have a stronger taste of what it feels like to be in a short -- what it feels like --

WALLACE: Kellyanne --

CONWAY: -- to have to choose between paying your premiums and paying your grocery bill.

WALLACE: Kellyanne --

CONWAY: But the president will make that decision. But, look, the Democrats have a big stop sign up. They're obstructing everything.

WALLACE: All right. We’d love to continue. We've got to move on.

Thank you so much. Thank you for your time. Always good to talk with you.

CONWAY: Thank you, Chris.

WALLACE: When we come back, we’ll discuss the Trump White House and we’ll try to answer the question: what are Democrats willing to give to get a compromise on ObamaCare?

House Democratic Leader Nancy Pelosi joins us next, only on "Fox News Sunday."


WALLACE: It's now back to the drawing board for health care reform after the Republican plan to repeal and replace imploded on the Senate floor. Is the solution to ObamaCare bipartisan compromise?

Joining me now is House Democratic Leader Nancy Pelosi.

Leader Pelosi, welcome back to "Fox News Sunday."

REP. NANCY PELOSI, D-CALI., MINORITY LEADER: Good morning. My pleasure to be here.

WALLACE: Thank you.

How much trouble is this president in? And do you think that putting General Kelly in there is going to make a difference?

PELOSI: Well, let me take the second part -- I hope so. I look forward to working with General Kelly. I’ve worked with him as -- with Secretary Kelly at the Department of Homeland Security. So I will be speaking with him today and look forward to working with him. It’s a very important position, the president -- the chief of staff to the president of the United States. And it has to be recognized that he is the chief of staff.

WALLACE: Well, I was going to ask you about that. You've been in Washington. You (ph) see a lot of White Houses, the way they operate. Does this White House need more discipline?

PELOSI: Well, the -- I can just say from my experience working with the Bush I White House, Andy Card, had a great rapport. Everybody knew he was the chief of staff and he had -- and that was recognized on Capitol Hill, that he really was the chief of staff. And with Josh Bolten, highly respected, we also work closely with him with our differences. But nonetheless respectful of getting results.

WALLACE: With the defeat of repeal and replace this week in the Senate, do you think that the Republican effort to repeal ObamaCare is dead?

PELOSI: Well, the American people have spoken. I think what you saw was just an outpouring of stories of how the Affordable Care Act affected their lives. So, where do we go from here?

WALLACE: But let me just say, you say the American people have spoken, they put Republicans in charge of the House, Republicans in charge of the Senate, Republicans in the White House, all running on repeal and replace -- you could argue that they spoke and Washington didn't listen.

PELOSI: Well, they -- no, I’m talking about since the election, they have seen what the replace might be and they have rejected that overwhelmingly. People see what it means in their lives. I think it's really important for us to recognize the facts here, that what the Republicans are putting forth put 17 million, 20 million, 22 million, or 23 million people off the rolls and diminish the benefits, increased the costs, had an age tax, undermined Medicare, and really was not a good proposal.

I think that there is -- in Senator McConnell’s, one of his bills that he had, the repeal and replace, he had a provision that we can all embrace. And it was a provision to cover the cost-sharing that is in -- cost-sharing reduction to extend the range of reinsurance, which is very important. It has about short-term stability, long term stability, and I fully support that and hope that he would advance that.

WALLACE: All right. Let’s -- because this gets in the weeds and I don’t what to get too technical here for folks. You sent a letter to Republican congressional leaders on Friday in which you said, I want to extend my hand, I want bipartisan compromise.

One of the things that you very much want and you just referred to it, I talked to Kellyanne Conway about it, is what are called sharing reduction payments. These are payments to insurance companies that lower the out-of-pocket costs to things like deductibles and co-pays for lower income people who are on the exchanges.

PELOSI: And middle income, and middle income.

WALLACE: Let me just say, President Trump tweeted this yesterday: If a new healthcare bill is not approved quickly, bailouts for insurance companies, he’s talking about the CSRs, and bailouts for members of Congress will end very soon.

Here’s my question, Leader Pelosi -- to keep those CSR payments, what are you as Democrats willing to give to get a real compromise?

PELOSI: Let’s go -- let's back up on it. The Affordable Care Act is a market-oriented proposal, doing the cost-sharing, the reductions, a way to have it be in the free market, in the marketplace as opposed to having everyone say -- have many more people on Medicaid or something. So, you -- there’s governors of states had said, give me the money. I’ll buy insurance for these people.

So, this is not bailing on insurance companies. This is about having stability in the private sector in order to provide healthcare.

WALLACE: With a huge government subsidy. Here’s my point --

PELOSI: But it’s not --


WALLACE: Here’s my point, Republicans -- compromise means both sides give, not one side gives and the other side takes. Republicans want to cut back on ObamaCare’s mandates, on ObamaCare’s taxes, on some of ObamaCare’s regulations. What are you willing to give? What are you willing to agree to as part of that that would allow a true bipartisan compromise?

PELOSI: Well, here’s the thing -- first of all, you will remember that the Affordable Care Act as we passed and as we call it, the Affordable Care Act is something that was very modeled after Romneycare, and that said no free riders. Everybody has to have insurance, so that if your neighbor's not buying insurance and you are, you are paying more because he or she is not. So, this is about enlarging the pool, making it healthier, younger, and having more benefits in the --


WALLACE: I understand the reason and I understand the history. But it doesn't sound like you're willing to give anything.

PELOSI: Nobody is (ph) -- the question is that: what did they have to offer? In other words, you have to have a big pool, and in order to do that, you have an employer and the -- and the --

WALLACE: How about, for instance, you talk about free market, instead of mandating that people have it, what the Republicans were saying, forgive me, was of you don't have it, and now you want to buy insurance, you got to wait for a while, or you got to pay a premium to get it. In other words, instead of saying, I’m the government, you have to buy insurance, why not say, there’s going to be a penalty if you don't buy it?

PELOSI: Well, here’s the thing. When the president went into office, there really was an opportunity to say you, you have -- if you don't like this, how would you do this? But instead, they said, we’re repealing the whole thing, 22 million people off, cost will go up, benefits will go down. That’s not a way to go down a path.

So, what I say in the letter is, as a first step, let us accept what Senator McConnell has in his bill, let us accept that and talk about other --

WALLACE: Yes, but you want other changes. Let me -- let me switch --

PELOSI: But -- and then let's talk about what other changes are.

But you cannot say that we’re going to have -- I do believe as I saw one of your staff (ph) this morning, that healthcare is a right, not a privilege. And the more people who are involved in it, the lower the costs are for everyone. There’s some things we can do right away, lower the cost of prescription drugs, a very -- something I think would have bipartisan support.


WALLACE: OK. I want to a move to another subject. The Democratic leader in the Senate, Chuck Schumer, said something interesting the other day and I want to ask you about it. We’re going to put it on the screen.

When you lose to somebody who has 40 percent popularity, you don't blame other things, Comey, Russia, you blame yourself. So, what did we do wrong? People didn't know what we stood for, just what that we were against Trump, and still believe that.

We’re going to get to your new agenda in a minute, but I want to ask you the specific questions, do you agree with Senator Schumer that Russia and Come were not what beat Hillary Clinton?

PELOSI: Well, I think that they had influence. There’s absolutely no question about that. But when you have a campaign, you’re responsible for your campaign.

I don't even want to go in to that. I do want to go in to our better deal. Let me --

WALLACE: OK, I’m going to ask you about it because Democrats put out a new agenda this week called "A Better Deal". Let's put some of it up on the screen.

You call for higher wages, lower prescription drug costs, as you said, job training, infrastructure.

Leader Pelosi, I’m not saying anything, any of that is wrong.

PELOSI: Right.

WALLACE: What I am saying is that none of it is new. We've been hearing it for years. We heard it from the Democrats and Hillary Clinton in 2016 and you lost.

PELOSI: Now -- well, we're going to hear with more clarity. For the first time since 2006, the House, the congressional Democrats are in charge of the message. In ’06, we were in charge, we won. We had a Democratic president after that in ‘08, and that time line, a very successful presidency.

Now, it's our turn to win the Congress for the American people. But elections are more about -- than about winning election. They’re about having a discussion to how we go forward.

WALLACE: But they’re all about winning the election. That’s what an election --

PELOSI: No, no. No, it’s about winning on the issues. I mean, in other words, if the American people can hold all of us, Democrats and Republicans, accountable, for what is in their interest, instead of a trickle-down agenda that really benefits the high end at the expense of working families. That’s why a better deal is important and it is entrepreneurial in its thinking. It’s fresh in terms of what it suggests.

WALLACE: But let me ask you this -- there were four special House elections in this spring in which there were Republican seats that were opened because they put jobs in the Trump administration -- let me finish -- in the Trump administration.

PELOSI: No, I’m agreeing with you.

WALLACE: And you lost all four of them. Some of your own Democratic colleagues in the House say part of the problem is that you and your leadership team are, frankly, too old. And the question I have is: does -- do Democrats need new leaders with new ideas?

PELOSI: But let me just say this, self-promotion is a terrible thing, but somebody has got to do it.

WALLACE: Exactly. I agree with you on that.

PELOSI: And I think that the situation that we are in, I am a master legislator. I know the budget to the nth degree. I know the motivation of people. I respect the people who are in Congress.

I think this is a great moment for those of us who understand what is stake with the Affordable Care Act, what our possibilities are in terms of working together with the Republicans as has been our experience in the past. So, I feel very confident about the support I have in my caucus.

WALLACE: Let me just ask you one --

PELOSI: I’ve never -- I have never not been opposed within my caucus, and it had nothing to do with support. Suppose you became president and you were a Democrat, and you appoint your cabinet, one from San Francisco, one from Berkeley, one from Brooklyn, one from Santa Monica, do you think that the Republicans could have ever won one those seats? These seats were not seats --

WALLACE: OK. I got 30 seconds and the question is, what are the chances Democrats win back the House in 2018? And if so, will you run for speaker?

PELOSI: It’s so unimportant. What is important is that we have a lively debate on a better deal, better pay, better jobs, and a better future. And that’s what we look forward to having. We have unity in our party. You saw with the fight on Affordable Care Act in the House and in the Senate.


PELOSI: We are very proud of the fact that our party has diverse thinking in it. We can accommodate that.

WALLACE: Leader Pelosi, thank you. Thanks for coming in. Please come back.

PELOSI: Thank you. My pleasure, Chris. Nice to be with you again. Thank you for being a guardian of our democracy, the press.

WALLACE: Well, thank you for that.

Up next, we’ll get a view from outside the beltway when we sit down with Ohio Governor John Kasich. How do Washington's problems look from there?


WALLACE: Coming up, President Trump caps off a tough week with a major staff shake up.


TRUMP: Reince is a good man. John Kelly will do a fantastic job.


WALLACE: We’ll ask our Sunday panel about the state of the Trump White House.


WALLACE: A look outside the beltway of the statehouse in Columbus, Ohio.

At the end of a rough weekend here in Washington, we what to find out how things look some distance from the nation's capital.

Joining me now, Ohio's Republican Governor John Kasich.

Governor, let's start with -- with President Trump. When you look at the events of just recent days, the public humiliation of Jeff Sessions, the -- the shocking interview by Anthony Scaramucci, the open infighting in the White House, sitting there in Columbus, Ohio, what do you think?

GOV. JOHN KASICH, R-OHIO: Well, I'm worried about our country, obviously, Chris. And here's the thing. You know, the White House is an amazing institution. It has great power. But when I think about the people who have been able to lend voice to amplify that power, you know I think about FDR, nothing to fear but fear itself, I think about JFK, you know, it's not what you -- what your country can do for you, what do you do for your country, or Ronald Reagan, you know, the city on a -- on a -- a shining city on a hill.

What we need -- and I think perhaps the president can get there, I sure hope so, is sort of the sense of unity, of hopefulness, not of division but of lifting. And -- and I think we're not seeing enough -- we're not seeing that right now. And so you take the powerful institution of the White House. You combine it with a voice that is power and uplifting. And that's what people loved about Roosevelt. That's what they loved about -- about Kennedy. It's what they loved about Ronald Reagan. And that's what we need. That needs to be thought about.

BLITZER: And -- and other than just belief and optimism about this country, what makes you think that we're going to get that from this White House?

KASICH: Because I'm basically a glass half-full guy. And, you know, we've had six months, but we have -- you know, we've got a long way to go. I just hope we're going to get it. And I -- I would also tell you, Chris, it's also Congress. If we're not going to get this direction out of the White House, then we need to get it out of the Congress.

And in Congress we need people to get along. And, you know, I listen to the leaders talk and I -- I don't actually think the answer is with the leaders in the Congress. I think the answer is with the rank-and-file, people who know that that city is now dysfunctional. And I think, furthermore, we need to realize that it's not just the political leaders that are showing dysfunction, it's the people in the country, the partisans, who demand certain things, as John McCain said in a very bombastic way.

And that's not America. America is give-and-take. America is compromise without giving up your principles. That's -- that's what our country is, Chris, finding solutions to difficult problems, not while tearing each other down, but figuring out how we can get along. And I've been involved in so many of those things.

Let me tell you, at the end of my term in Congress, I was having a conversation with Pat Schroeder, the former Colorado woman who tried to run for president. Kind of a polarizing figure in a way. She was a friend of mine. And I had these Republicans say, what are you talking to her for? And I said, what do you mean what am I -- I gave -- I read them the riot act. I said, you don't have to agree with somebody to respect them, to see if there are areas where you can get along, where you can work together.

That's all kind of gone. And I blame a lot of it on the leadership. And they allowed these people, who were in their rank-and-file, to become partisans too. We don't make it as a country when we spend our time fighting all the time and denigrating people we don't agree with.

WALLACE: So how do you explain -- and we should point out, you're now the governor in your second term in Ohio, but you spent 18 years here in Washington as a member of Congress. How you explain the GOP's failure after seven years of promising to repeal ObamaCare, but also to come up with a replacement, how do you explain that collapse of the bill in the Senate this week?

KASICH: You know, Chris, I'm -- I'm going to say, I actually think it's a good thing for this reason, because I think Republicans looked over the cliff. And I think they saw that there were going to be a lot of people who were going to be hurt, particular people who don't have much of a voice, who the machine in the system grinds down, and they pulled back.

I don't think that this is done. I don't think it ought to be done. I understand there will be hearings in the U.S. Senate on what we can do about the exchanges. I mean, so, to -- to a degree, I'm glad that they didn't fulfill this -- this pledge right now, but they have to work on it. And -- and this is where they should call the Democrats in and they should demand Democratic participation.

And, remember, Republicans are in the majority. They get to call the tune. But when they call the tune, they've got to have a few Democrats singing in the choir. It's just that simple.

So I don't think we're done with it yet. We can't be done with it yet. And we can't be done going after the underlying, rising costs of health care, the problem of entitlements, which is going to, you know, kill our economy in the country. Address the issues of the division between rich and poor. You've got to work together.

I did it when I was there, even when we went through a government shutdown. We balance the federal budget by working together and understanding one another and caring about one another, even when we disagreed.

WALLACE: But -- but let me ask you about that. There's a lot to unpacked there. You say, let's work together. We just had Nancy Pelosi on and she made a very strong case for her side. But when I asked her, what are you willing to give on taxes, on regulation, on mandates, she said nothing.

KASICH: Well, look, my friend Tom Carper from Delaware is willing to give a lot. My friend from Colorado --

WALLACE: But that -- let me get -- but he's a Democratic senator. Go ahead.

KASICH: Yes. And -- and John Hickenlooper, the governor of Colorado, he and I are working together with, you know, ten other -- 9 other governors.

Look, you don't do this in front of a national television audience. You sit in a room, you sit together, you talk but each other's kids, you go out, you have a little dinner and you start saying, what is the area of common agreement. In '97, Bill Clinton and the Republicans had a -- had a feud and a war that led into a government shutdown. You know what happened? The -- the Democrats in the White House came to see me and -- and Senator Domenici, and we had private conversations and we opened up a dialogue of discussions. We balanced the federal budget, paid down debt, the economy was doing great and no one was left behind. You don't do this in front of the TV camera.

But, again, you know, Chris, this is one of the things, everything's not on the leaders. Forget the leaders. Why don't we get the rank and file members who were there hopefully to serve the country and not their party or some ideology? Stick to your principals but figure out how to give and stop asking the leaders for permission. You're not in the fifth grade where you've got to ask the teacher if you can use the bathroom. Go out and talk to people on the other side.

Here's the other thing, Chris, have some guts. You know, all these politicians run around worried about, well, you know, I'm going to get killed by the Tea Party or I'm going to get slaughtered by the left. Who are you surveying? We've got the stop listening to all the yelling and screaming. Those are the people who should be released listen to.

WALLACE: All right.

KASICH: And -- and get to the middle of our country.

WALLACE: All right, finally, because there running out of time, I'm going to pursue a line of questions that my guess is you're going to hate, but here we -- here we go. And that is that you didn't endorse Donald Trump, you say you didn't vote for him. You wrote in John McCain instead. Would you consider running against Donald Trump in the 2020 primaries?

KASICH: No, I don't think about that, Chris. And, frankly, you don't -- you know, you've got a Republican president. We don't know what the future's going to hold. And I don't do these things because I'm worried about my political future. Let me tell you, if I answered a question and said I was even thinking about it, I couldn't go home tonight. My wife would lock the doors on me.

Look, here's the most important thing for me. I've got to serve the country. I've got to be honest inside. I cannot have, you know, just media appearances so I can be on television. I've got to be a good guy. I've got to -- I've got to be a man of faith and I've got to -- you know, it's -- so I don't know what the future's going to bring, but I'm not preparing anything along those lines.

But I want my voice to be out there, because I think my voice and the voice of my colleagues made a difference in this health care debate.

WALLACE: Governor -- Governor Kasich, thank you. Thanks for sharing part of your Sunday with us. Always good to talk with you, sir.

KASICH: Come to Columbus, Chris. We need you to come out here. Let's spend a lot of time talking about all of this. We can heal this country. Thank you.

WALLACE: That's a -- that's a deal.

Up next, we'll bring in our Sunday group to discuss where things stand for President Trump at the end of another wild week.

Plus, what would you like to ask the panel about the state of the Trump White House. Just go to Facebook @foxnewsunday and we may use your question on the air.



LEON PANETTA, FORMER DEFENSE SECRETARY: I think it could be one of the most important personal changes that President Trump has made, assuming that he's willing to accept the discipline and a stronger chain of command.


WALLACE: That's former Defense Secretary Leon Panetta talking about the new White House chief of staff, General John Kelly, who was Panetta's senior military advisor in the Pentagon.

And it's time now for our Sunday group. Fox News senior political analyst Brit Hume, Mo Elleithee of Georgetown University's Institute of Politics and Public Service, former Democratic Congressman Jane Harman, director of the Woodrow Wilson Center, and GOP strategist Karl Rove.

Karl, how much trouble is this president in and is General Kelly the man to get him out of it?

KARL ROVE, FOX NEWS CONTRIBUTOR: Well, he's in a lot of trouble this week. It was the most tumultuous week we've seen of a tumultuous presidency. And Kelly faces for challenge. First of all, the decision-making process inside the White House had broken. It is not disciplined. It's not focused. It's not deliberate. And he was one of the first victims of it in the very first week of this administration when he raised objections which were not taken into account with the first travel ban.

He's got this issue of access. This president is not going to end the practice of allowing people to flow in and out of the White House. Most presidents allow that. The question is, is Kelly going to be able to stop people from using their access to the Oval Office to end run the policy process, to cause things to happen that have not gone through the normal -- normal range. He's going to have to deal with a couple of staff members who can't be fired, the son-in-law and daughter, and maybe a couple of other protected people inside the White House, Scaramucci, for example.

And, finally, he's going to have to reduce the drama, reduce both the sniping within and reduce the leaks and bring some discipline to the relationships between this White House, which is at war with itself. I've never seen anything like it in my life of a White House so eager to -- to leak on itself.

WALLACE: Congresswoman Harman, you have worked with General Kelly on several projects. I don't think anybody questions his competence and his qualifications but -- and his command, but doesn't know enough about politics? Does he know enough about domestic policy, tax reform, health care, do be an effective chief of staff?

FMR. REP. JANE HARMAN, D-CALIFORNIA: I think he knows enough to be an effective chief of staff if this president in tweet allows him to use the process that Karl is talking about to solve our problems. But the first answer is, North Korea launched an ICBM yesterday capable of hitting the continental U.S. It might not happen. A warhead might be too heavy. Reentry might be a problem. But this is a real problem. And if he can focus this White House and this president at a careful answer to the North Korean problem that will be the first test.

Second point is, Congress proved itself capable, not incapable, last week. No one talks about the fact that the sanctions package against three countries passed overwhelmingly --

WALLACE: Russia and North Korea and Iran.

HARMAN: Yes, veto-proof. And Trump is about to or did sign it yesterday. And the point of that is, that was a good piece of legislation. All three countries are screaming about it, which means that Congress and the president acting together sent a tough message. That's a challenge. It's also an opportunity. Congress can authorize the use of military force in the Middle East and around the world in ways it hasn't acted in 16 years. So I think Kelly is well-equipped to deal with those two things, and that would be a phenomenal start.

WALLACE: We asked you for questions for the panel and on this issue of the state of the Trump White House, people seem to be getting fed up. Take a look.

Nick tweeted this, "is there a plan other than 'shock and awe'? Reasonable Americans want to support our" president "but this reality TV nonsense has got to stop."

And we got this on Facebook from Charlette Yared. "How can this White House possibly recover respect after this past week's Sessions/Scaramucci/Boy Scouts/Priebus and other histrionics? Why the drama and the antics?"

Brit, how do you answer them?

BRIT HUME, FOX NEWS SENIOR POLITICAL ANALYST: Well, the first thing I'd say is that Reince Priebus is not the one to blame for such behavior. This all comes down to the president and his behavior and its way of doing things and the casual way that he ran his business in New York where -- where he really kept a very loose schedule and people came and went and he picked up the phone and called different people at different times depending on what he was focused on at the moment.

White Houses can't operate that way. This staff structure that exists in the White House traditionally, which was developed over many years and many administrations, is there -- is that way for a reason. And the question really is not whether John Kelly has the ability to be an effective chief of staff. I think he manifestly does. The question is whether Donald Trump will permit that. Whether he will allow that. Whether when somebody wonders into the Oval Office the first words out of his mouth will be, does Kelly know you're here? And I think that's in doubt.

So what happens, for example, Chris, when -- when they have a date planned with events and so forth and a policy strategy and sir tweets-a-lot blows it all up in the middle of the night with some rant on Twitter? What happens then? Does -- does General Kelly has some say over that? Those are all the unanswered questions. And I think we'll know the answer to them pretty -- answers to them pretty soon.

WALLACE: Wouldn't you assume that he would have gotten some at least assurances?

HUME: Of course (INAUDIBLE).

WALLACE: Because supposedly he was asked about this as -- as far back as May --

HUME: Yes.

WALLACE: And he resisted taking the job.

HUME: Right. I think -- I suspect he does have verbal commitments to the president to that effect. The question is, will the president stick to them? Not will Kelly, will the president? It's all about the president.

WALLACE: Senator John McCain, after his diagnosis of brain cancer, came back to Washington, very dramatically, seized the spotlight. Here he was calling for his colleagues in the Senate to go in a different direction.


SEN. JOHN MCCAIN, R-ARIZONA: I hope we can again rely on humility on our need to cooperate, on our dependence on each other, to learn how to trust each other again. And by so doing, better serve the people who elected us. Stop listening to the bombastic loudmouths on the radio and television and the Internet. To hell with them.


WALLACE: Though it was a powerful moment, but what are the chances that it will actually happen in both parties?

MO ELLEITHEE, FOX NEWS CONTRIBUTOR: Yes. As one of those bombastic loudmouths on television --

WALLACE: No, you're not.

ELLEITHEE: I -- you know, he's right. But what at the chances? I'm not optimistic right now. I think that there are too many factors at play that I hope we can get past. But everything from a White House that seems determined to blow up every institution it can, from the judiciary to the media to its own party, to Congress, to congressional representation that is to driven on both sides -- on both sides of the aisle, that is to driven by the way district lines are drawn now, and the -- the importance of -- of the base for each side, it is incredibly difficult to see a path right now out of the entrenched silos that both sides are living.

John McCain leaving the Senate is going to be a huge loss for -- for that institution because of the fact that he seems to be one of those people -- and there are still some on both sides that are willing to try to get past some of these fissures, but they're dwindling in numbers. And until we start getting more people who will look that way, we're going to be in trouble.

WALLACE: Karl, we've got a couple of minutes left. That's all.

You travel the country. You talk to a lot of Republicans. How do they -- I'm not talking about politicians. I'm talking about businessmen, community leaders. When you talk to them, how do they feel about what they see. I'm not talking just about Trump, the Congress, the Democrats, the Republicans. How do they feel about what they see going on here?

ROVE: Well, among sort of people who are active in politics, party leaders, business leaders, community leaders, I hear an increasing, you know, scratch their head, why can't this thing get done? Why can't the Republicans govern? Why can't the president lead? Why do we have to put up with this drama?

More damaging, I'm starting to hear from ordinary Americans as I travel who say, you know what, it's too much. I'm turning off. I'm turning out. And the problem for the president, when ordinary people start to say, you know what, I've had enough of all of this, is that he's going to be stuck where he's stuck at that moment. And what I'm afraid of is, is that he's had a honeymoon, a ragged, rugged, not normal honey -- political honeymoon with the American people. He's not seized the opportunities given to him on it. And I think a lot of people are starting to say, you know what, I'm done. I've had it. He's had plenty of time to demonstrate to me whether or not he's got an ability to -- to get it down.

Now, maybe General Kelly will get it done. Maybe General Kelly will help turn it around. But I think Brit was absolutely right, this depends upon the willingness of the president to change his behavior.

WALLACE: Thank you, panel. See you next Sunday.

Up next, our "Power Player of the Week, from Navy SEAL to the governor's mansion in the show me state.


WALLACE: For most people, being a Rhodes Scholar or a Navy SEAL would be a crowning achievement. But as we told you earlier this year, for one young politician, it was just the beginning. Here is our "Power Player of the Week."


GOV. ERIC GREITENS, R-MISSOURI: I come as a conservative, an outsider, a Navy SEAL. And we're taking on politics as usual.

Thank you. God bless you.

WALLACE (voice-over): Meet Eric Greitens, elected in November as Missouri's governor. And at age 43, the nation's second youngest.

GREITENS: So help me God.


WALLACE: But what really sets him apart is his path to public office.

Back in 2000, he was a Rhodes Scholar, who also worked with humanitarian groups in war-torn countries like Bosnia and Rwanda. One day at Oxford, he looked at a memorial for Rhodes Scholars who died in the two world wars.

GREITENS: If they hadn't have made that decision, then I wouldn't be standing here. And I realized at that moment that I wanted to do my part and I wanted to serve.

WALLACE: Greitens did four tours as a Navy SEAL, serving in both Iraq and Afghanistan.

GREITENS: You know that at every moment there's somebody to your left and somebody to your right and that they're counting on you. I can stay strong for them for ten more seconds. I can fight for them for one more minute. If I can make it for one more minute, I can make it for ten more minutes.

WALLACE: When Greitens returned to Missouri, he started a non-profit called The Mission Continues to help veterans with disabilities recover by serving others.

GREITENS: Continue their mission of service in communities and start their own businesses and get quality, private sector jobs and to live as contributing citizens again here at home.

WALLACE: The Ferguson riots in 2014 where the turning point that led Greitens into politics.

GREITENS: Ferguson was a tremendous failure. If we'd had a leader who'd show up with any kind of command presence and courage and calm and clarity, we could have had peace by the second night.

WALLACE: Greitens ran as an outsider and he wasn't subtle about it.

GREITENS: Well, I'm no career politician. I'm on a Navy SEAL and I'll take dead aim at politics as usual.

WALLACE: As governor he has kept aiming at the same target.

WALLACE (on camera): You talk about ethics reform before issues. Why?

GREITENS: Well, because we have to have people who trust their leaders. You know, people want to have leaders who they can have confidence in.

WALLACE (voice-over): His first act was to ban gifts from lobbyists to members of the executive branch.

GREITENS: The people of Missouri are ready to work, so let's get to work today.

WALLACE: But he's also signed a right to work law to boost Missouri's economy. And on public safety he's worked out with local police and gone to poor neighborhoods to hand out sandwiches.

GREITENS: We need to have leaders who are willing to go to the front line, and that what -- what too many politicians have just failed to do.

WALLACE: When Greitens and his wife Sheena, held their first event in the governors residences, they were told it's usually a cocktail party for political insiders. Instead, they invited three foster families for dinner as a symbol of the 13,000 kids in state foster care.

GREITENS: As governor, we can make a difference in those kids' lies. As governor, we can keep our promises to the people of Missouri and make their lives better, get results for them. That's what's so satisfying.


WALLACE: And the governor has been busy since then signing legislation to tighten regulations on abortion clinics. And more recently, an executive order creating a prescription drug monitoring program to help deal with the opioid crisis.

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

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