David Axelrod on White House response to Libya attack; Ed Gillespie defends Romney tax plan

The following is a rush transcript of the October 14, 2012, edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

CHRIS WALLACE, HOST: I'm Chris Wallace.

Biden versus Ryan is in the books. Now, it's the debate rematch for Obama and Romney.

With just 23 days, until the election, can the president come back from a bad night, and regain the upper hand? We'll talk with his campaign senior strategist, David Axelrod.

Then, Governor Romney tries to build on his first debate, and continue his surge in the polls. We'll ask senior advisor Ed Gillespie how Romney hopes to keep the momentum going.

Axelrod and Gillespie, only on "Fox News Sunday."

Also, more questions about the deadly terror attack on Americans in Libya. We'll ask our Sunday panel about warnings the Obama administration ignored, about the security threat in Benghazi.

And, the candidates learn the heat is on in the kitchen and on the trail.

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

And, hello, again, from Fox News in Washington.

With two presidential debates, in the next eight days, and the polls getting much tighter, we may be reaching the decisive moment in the long race for the White House. We have questions for both sides, today, starting with David Axelrod, senior strategist for the Obama campaign, who joined us from Williamsburg, Virginia, where the president is getting ready for Tuesday's debate.

And, David, welcome back to "Fox News Sunday."


WALLACE: Let's start with the growing controversy over the killing of those four Americans in Libya. Here is what Vice President Biden had to say about that in Thursday's debate.


MARTHA RADDATZ, DEBATE MODERATOR: They wanted more security there.

VICE PRESIDENT JOSEPH BIDEN: Well, we weren't told they wanted more security. We did not know they wanted more security again.


WALLACE: But, David, just the day before, several State Department officials testified under oath that there were repeated requests for more security that were rejected. What is the vice president talking about?

AXELROD: I think the vice president was talking about what the White House knew. There are embassies all over the world and installations all over the world, and these requests go into the security professionals at the State Department. And there is no doubt, some of these matters went into the security department at the state security agency at the State Department. But it didn't come to the White House and that what is the vice president was responding to.

WALLACE: So, we're now getting into a definition of what the word "we" means. When the vice president says "we" he's not talking about the Obama administration, because, the question was not about what you knew, it is that there were requests for more security. Biden is not talking about the Obama administration. He's not talking about the State Department.

He's just talking about himself and the president?

AXELROD: No, I think, Chris. Again, he was talking about was what he, the president knew because these matters were being handled at the State Department.

But, listen, here's the fundamental thing. Nobody -- there is nobody in this planet who is more concerned and more interested in getting to the bottom of this than the president of the United States. He feels personal responsibility for every representative he sends around the world. He knew Chris Stevens, he admired Chris Stevens.

So, look, we want to get to the bottom of it and the first order of business is to bring to justice those who committed this heinous act. And, secondly, find out what went wrong and what adjustments need to be made to further secure our diplomats around the world.

WALLACE: Well, let me ask you directly, does the president take personal responsibility for the fact that repeated requests for more security were made, and were rejected and that that may have contributed to the death of those four Americans? Does he take personal responsibility for that?

AXELROD: Chris, at the top line level, the president of the United States is responsible for everything that happens under his -- on his watch. These were judgments that were made by the security folks at the State Department and, of course we will review that whole process and see how those decisions are made, why those decisions were made, and, how we adjust in the future to make sure that we are giving our diplomats the maximum protection we can.

The reality is that many of these folks serve in dangerous places in the world and you can't 100 percent guarantee anything. But we want to get as close to 100 percent as we can and that's why these investigations are moving forward.

WALLACE: I want to ask you about this question of personal responsibility by the president, because in the debate, the vice president also blamed the intelligence community for the false reports that came out immediately after, about the idea that this was a spontaneous demonstration that ran amok. In fact, the top State Department official said this week, he was asked about that and this is what he said: "That is a question that you would have to ask others. That was not the idea of the spontaneous demonstration, that was not our conclusion."

Question, with all this finger-pointing going on at the State Department, going on towards the intelligence community, whatever happened to the principle the buck stops with the president?

AXELROD: Well, as I said, the president is responsible for everything that happens on his watch. The reality -- I mean, it isn't the -- it isn't us or anyone else who is suggesting that that's what the intelligence was at the time. The intelligence community itself, and Director Clapper has said that.

And in fact, Chris, you had people from the State Department testifying under oath that on a day, for example, when Secretary Rice -- when Ambassador Rice appeared on your program and other programs, anyone would have said the same thing that she said, because that was the intelligence we were receiving.

And, it's not a matter of blaming. That's just the fact. Sometimes intelligence has to catch up with the reality on the ground. This was one of those cases.

WALLACE: Well, but it doesn't quite square with the facts, sir, because Charlene Lamb, who is a top State Department official said in the sworn hearing that she was in real-time communication, real-time communication with the people on the ground in Benghazi.

So, there was a difference of opinion between what the intelligence community was saying and what the State Department was saying. The State Department officials, we said, said that was never our conclusion that there was a spontaneous protest, which raises the question -- how soon after the attack did the president meet with the National Security Council, with people from State, with people from the -- the director of national intelligence, with all of the various people to try to sort out what happened in Benghazi?

AXELROD: Look, we are sorting out what happened there. Understand that the president the day after the -- the day after the attack called it an act of terror and charged everyone with responsibility to get to the bottom of what happened, why, and as the first order of business, to make sure we bring to justice the terrorists who were responsible for this act.

So, the president has reacted as you would want him to react to this. But, just getting back to your point on the State Department. Just a second, Chris. You talked about the State Department spokesman -- you had representatives of the State Department testifying under oath this week before Congress, and they said what I said to you, which is that anyone, based on this intelligence that they had at the time, would have said what the administration said, what Ambassador Rice said, the day after the attack.

WALLACE: The reason I ask this is because you say, well, the president made a statement. Yes. The president made a statement, and then he went off to a fundraiser or to a campaign stop in Nevada.

Question, before he went to the fundraiser in Nevada, did he meet with his National Security Council to try to sort out the shifting stories, because State said they never said it was a spontaneous demonstration and intel did, you are quite right -- did he meet with the national security council before he went to campaigning in Nevada?

AXELROD: Chris, I assure you that the president was in contact with all those who had information and responsibility in the national security chain about this incident. Again, let me stress, there isn't anyone on this planet who feels a greater sense of responsibility for our diplomats, for our service people, who takes this more personally than the president of the United States. And he's determined to get to the bottom of what happened, to bring these killers to justice, these terrorists to justice and to make sure that whatever adjustments we have to make we make.

WALLACE: Well, you talk about responsibility and the president's care, let's look at what deputy campaign manager Stephanie Cutter had to say this week about the attack in Libya that killed the four Americans.


STEPHANIE CUTTER, OBAMA 2012 DEPUTY CAMPAIGN MANAGER: The entire reason that this has become this political topic it is, is because of Mitt Romney and Paul Ryan.


WALLACE: Do you really believe, David, that the concern over Libya is just politics that's been ginned up by the Romney campaign?

AXELROD: Look, I think there are two separate issues. Obviously, there is a serious issue here. We've just been discussing it for several minutes and it's an essential matter that we get to the bottom of what happened, that we bring the terrorists to justice. This president is totally committed to that.

There is a separate issue of how Governor Romney handled it. I refer you back to the famous 47 percent tape in the spring, where Governor Romney told in private, told his supporters that he was waiting for a crisis, waiting for an incident, to jump in on national security, and, he did.

He jumped in right away the day of these attacks, with half information in a way that was denounced by both Republicans and Democrats. And there is no doubt he is working hard to exploit this issue and I would point to the fact that this morning, in Bloomberg News, Chris Stevens' dad said that he regretted that people were trying to exploit this issue.

AXELROD: And I think we ought to follow the lead of the ambassador's family and allow this investigation to run and get to the bottom of it. And, make the adjustments that are necessary.

By the way --

WALLACE: Wait. Wait. Wait. Wait. David, wait a minute.


AXELROD: This interview --

WALLACE: This is the first U.S. ambassador that has been killed since 1979. Susan Rice came on this show and five others and gave the American people a story that turned out not to be true, and you are saying we shouldn't discuss this. That we should wait for the investigation to be completed?


WALLACE: That's what you just said.

AXELROD: That's obviously -- Chris, calm down, that's obviously not what I am saying.

WALLACE: You said that we should follow the lead of Chris Stevens' father --

AXELROD: I'm happy -- I'm happy to discuss it with you. And I do think that it is worthy of discussion. I think that's different than the manner in which Governor Romney has conducted himself.

And it's not just me who attacked him for the way he handled this. He was roundly criticized by people from right to left, the Republican establishment and the Democratic establishment.

WALLACE: You are talking about what he said the day after the attack.


WALLACE: You are talking about what he said the day after the attack. I don't think anybody is criticizing him for what he's saying now except the Obama campaign.

AXELROD: Well, I am just telling you from the beginning of the issue, before any facts were known, he was cravenly trying to exploit it.

And look, that's politics. I understand that, Chris. I understand the whole deal. We're in the last weeks of the campaign and, of course, Governor Romney is going to be talking about the issue. But the president's concern -- the president's concern is to get to the bottom of it and bring the terrorists to justice and bring whatever adjustments are necessary based on the investigation to ensure that in the future, that if there were lapses, that those lapses are addressed.

WALLACE: All right. Let's turn to a couple of other subjects. We went much longer on Libya than I expected. Your campaign now concedes that the president had a, quote, "bad night" in Denver during the first debate. What's he going to do differently on Tuesday?

AXELROD: Well, I think the president -- nobody is a harsher critic than the president is of himself, and he viewed the tape. I think he's going to make some adjustments on Tuesday and, you know, I'm not going to get into details about strategic changes that he might make. But I just encourage you to watch and show up. I think it will be an interesting debate.

WALLACE: Will he be more aggressive in taking on the Romney record?

AXELROD: I think he's going to be aggressive in making the case for his view of where we should go as a country. And a country that's built around a growing, thriving middle class, not this top-down theory that Governor Romney has.

But the other thing he's going to certainly do is -- I mean, we saw Governor Romney sort of serially walk away from his own proposals and certainly the president is going to be willing to challenge him, on it, as we saw the vice president challenge Paul Ryan.

You know, Paul Ryan was on your show a couple of weeks ago and could not answer how Governor Romney would pay for his $5 trillion tax plan and had all the time after your show to prepare for the debate. And in 90 minutes, he still couldn't explain it. So, we're going to give Governor Romney another chance on Tuesday to try and square this impossible circle.

WALLACE: We'll, we will talk about that with Ed Gillespie in the next segment.

Finally, I want to ask you about the latest numbers. In the "Real Clear Politics" average of recent polls, Romney now leads the president in national surveys, by a little over 1 point. And in key swing states, Obama's lead is now just 1.7 percent, in Ohio, less than half a point in Virginia, and Romney now leads in Florida by three points.

Question: hasn't Romney made real gains since the first debate and where is the race now?

AXELROD: I think -- I think he made a little bit of progress after the first debate. I think he picked up some of these Republican-leaning independents who lost heart watching his convention, watching that 47 percent tape. He got some of those people back. I think he made all that progress in the first couple of days.

And in fact, Chris, this morning, there's a poll that shows the president leading in Ohio by 5 percent, leading in Arizona by 2 percent. The data I see suggests that whatever progress Governor Romney made, he made in the first couple days after the debate and the race has been stable, and we are even or ahead in every one of these battleground states.

And the most tangible marker is, early voting, all over the country. There is a poll out this morning that suggests the president was winning 59 percent of those early voters. We have reason to believe we are doing well with the early voters.

So, I mean, there's a lot of hype and as I've said, throughout, even when the polls were wildly positive for us, that these public polls are all over the place. And, the reality of the race on the ground is that we're ahead. It's a little bit narrower than before the last debate. But we feel good about where we are and we have a great ground game going and we're going to have a great debate on Tuesday and the following the week.

We expect Governor Romney will have a great debate, too. He's a great salesman. That's what he did as a professional and he's very, very good at it.

But at the end of the day, people are going to judge on our plans, on our records and our vision for the future. And we are looking forward to discussing that on Tuesday.

WALLACE: David, thank you and thanks for taking time out of your debate prep and we'll all be watching, Tuesday night.

AXELROD: OK. Looking forward to it. Thanks.

WALLACE: Up next, we'll talk with Ed Gillespie, senior advisor to the Romney campaign.


WALLACE: Joining us now to discuss Governor Romney's plan to keep his momentum going, as he heads into Tuesday's debate, the senior advisor, Ed Gillespie.

And, Ed, welcome back.


WALLACE: You just heard David Axelrod.

What specifically is Governor Romney saying, the president is personally responsible for what happened in Benghazi? Or at least for the failure to provide more security? That he is personally responsible for the evolving, changing story of what happened about the spontaneous protests?

GILLESPIE: Well, a couple of things. First of all, in order to ensure we make the changes necessary to protect ambassadors and our embassies and consulates in the right way going forward, we need to know what went wrong here, in the days leading up to, and months leading up to the attacks on Benghazi.

And secondly, we have --


GILLESPIE: I understand.

But you have to get honest answers and accurate answers in response to the questions. And what we have seen is a constantly shifting story from this administration, from various parts of the administration. And when Vice President Biden said in the debate Wednesday night, that we weren't told that they wanted more security there in Libya, he directly contradicted the sworn testimony of the regional security director for the State Department with responsibility for Libya.

WALLACE: Well, hold on --

GILLESPIE: That's a real problem, Chris. That's a problem.

WALLACE: What about -- what about the argument that you just heard from David Axelrod, when he said "we", he meant the president and the vice president. And, even the White House, and, quite frankly, there is no reason that they would have heard that people were asking for more security in Libya. That is not something that would rise to the presidential level.

GILLESPIE: Well, first of all, you know, I guess we'll accept that explanation. "We" generally means your administration, when you are talking as the president or vice president of the United States, including your State Department.

And clearly what we saw here this morning and what we have been seeing is an effort by President Obama and Vice President Biden to say, no, it was really Secretary Clinton. It was the State Department that you ought to be looking at and talking to and criticizing here or questioning here as opposed to us in the White House.

GILLESPIE: I'm not sure that that's sustainable, frankly. I think that the buck does stop at the -- in the Oval Office. And, you know, we'll see, on top of that, though, Chris, maybe even more important is, two weeks after the attacks, the president of the United States stood in the well of the United Nations and he talked about the YouTube video six times and did not say that these attacks were an act of terrorism, or a terrorist attack, but again continued for six -- in six different instances citing a YouTube video.

WALLACE: So, what is behind all of this? Does the -- does Governor Romney believe that the president is engaged in a political cover-up?

GILLESPIE: Governor Romney believes that in order for us as a country to be more secure, we need to learn from the lessons here of Benghazi. We need to know what happens going into the terrorist attacks and, what happened after.

WALLACE: You are ducking my question, which is, why does he think that the administration, two weeks after the fact, was still talking about the video, still talking about a spontaneous protest. Why does he think they are doing that?

GILLESPIE: We don't know.

WALLACE: You don't think it was an effort at political blame- shifting or covering up?

GILLESPIE: We think there are more questions than answers, right now, Chris, and those questions deserve answers and the American people have a right to know the answers, accurate answers.

WALLACE: OK. The president's mainline of attack against Romney now is in effect that the governor is lying about his policies to make it seem that he is more moderate than in fact he really is. Let's watch.


PRESIDENT BARACK OBAMA: After running for more than a year in which he called himself severely conservative, Mitt Romney is trying to convince you that he was severely kidding.


WALLACE: Hasn't Romney moved to the center, shifted some of his positions to the center, or at least his emphasis on those positions, in recent weeks?

GILLESPIE: No, Chris. The fact is, Governor Romney's positions don't comport with the 30-second attack ads that the Obama campaign has been running nearly a year now, at least over six months, millions of dollars of these 30-second attack ads distorting the governor's position.

And what, you know, nearly 70 million Americans saw last week in the debate and in another, you know, tens of millions more, and the vice presidential debate are the real positions of Governor Romney, which would get or economy moving again, which would reform our tax code, by lowering tax rates by 20 percent across the board and offsetting those, and reform that would unleash economic growth. They learned the facts in that debate and that's what the president is clearly frustrated about.

WALLACE: OK. Let's talk about the Romney record, then. Let's look specifically at abortion and what Romney said to the "Des Moines Register" editorial board this week. Here it is.


MITT ROMNEY (R), PRESIDENTIAL NOMINEE: There is no legislation with regarding -- with regards to abortion that I'm familiar with, that would become part of my agenda.


WALLACE: But here is the legislation that Romney has promised in his campaign to sign: a law to protect unborn children capable of feeling pain to protect them from abortion, ending federal funding of Planned Parenthood because of their involvement in abortion. And he's also said he wants Roe versus Wade overturned.

So, what does he mean when he says he has no legislative agenda on abortion?

GILLESPIE: Well, Chris, that was cut short a little bit. He also went to say that he would reverse the Obama administration's policy on federal funding for abortion, taxpayer funding for a abortions overseas. He would repeal Obamacare, which also has taxpayer funding for abortion.

He would be a pro-life president. He's a pro-life candidate --

WALLACE: Why did he say he has no legislative agenda when there are at least two bills we know of that he would sign?

GILLESPIE: He would sign those bills. I think what they were talking about was the economy, obviously. And that is the governor goes around the country, seen the clip yesterday in Ohio, where he talked about his five-part plan, for restoring the middle class and getting the middle class growing again. The Romney-Ryan plan for a stronger middle class --

WALLACE: He was talking about abortion.


WALLACE: -- the "Des Moines Register" board, he wasn't talking about the economy. He was talking about abortion.

GILLESPIE: He has been consistent throughout this campaign. Governor Romney believes that Roe versus Wade was wrongly decided. That it should be overturned, that the American people should be allowed to address this very important issue through their elected representatives. He believes it shouldn't be federal funding for abortion and will act immediately to ensure that that is not the case. By reversing the Mexico City policy and he would, indeed, sign the legislation that protects -- that further protects innocent human life. He's completely consistent here.

WALLACE: All right. Let's talk about what David Axelrod brought up in the question of taxes. In the vice presidential debate, Paul Ryan, once again, got roughed up for failing to explain how you're going to pay for the 20 percent cut in tax rates by limiting deductions.

Let's take a look. Here it is.


REP. PAUL RYAN (R-WI), VICE PRESIDENTIAL NOMINEE: We want to work with Congress and how best to achieve this, that means successful.

MARTHA RADDATZ, MODERATOR: With no specific, yes.

RYAN: What we are saying, lower tax rates 20 percent, start with the wealthy, work with Congress to do it.


WALLACE: Ryan is saying, we don't want to get hemmed in. Let's leave it to negotiations with Congress to get into the details.

Here's my question: Why is it all right to tell voters about the candy -- hey, everybody is going to get a 20 percent tax cut -- cut in their tax rates, but let's not tell them about the spinach, which is you're going to lose some deductions.

GILLESPIE: We have talked about losing deductions. We've talked about --

WALLACE: But you haven't given specifics.

GILLESPIE: Well, because, Chris, in a campaign environment, to start negotiating in a campaign environment, you're going to lock in Republicans, you're going to lock in Democrats --

WALLACE: You locked in on the 20 percent tax rate.

GILLESPIE: The 20 percent tax rate, I think that people understand that that is a broad principle, that that tax rate needs to come down and we need to broaden the base. That's the principle. The principle is also that we're not going to change the share of taxes paid by upper income earners and we're going to give tax relief to the middle class and it's going to be deficit neutral.

You can do all of those things and have people understand that this election was about this, and we need this kind of pro-growth tax reform agenda. And, then work out the details in the same way, by the way, Ronald Reagan did with Tip O'Neill, with working across the aisle. Governor Romney has a proven record of being able to work across the aisle.

WALLACE: But you're not explaining, because there are a lot of question from independent people, how do you pay for it and you refuse say how you're going to pay for it.

GILLESPIE: What we have said is we are going to pay for it with this by limiting deductions in the loopholes. By the way, making sure for the middle class, that protecting the home mortgage deduction and other important deductions for them. But at the high end, you would eliminate deductions and, you know, a lot of special interest loopholes that would allow you to bring down the rate 20 percent.

Six different studies have said --

WALLACE: Those are very questionable. Some of them are blogs. Some of them are from the AEI, which is hardly an independent group. Those are not --

GILLESPIE: These are very credible sources, and, you know --

WALLACE: One of them is from a guy who is -- a blog from a high who was a top advisor to George W. Bush. These are hardly nonpartisan studies.

GILLESPIE: Look, Chris, this -- I think if you look at Harvard and AEI and other studies, are very credible sources for economic analysis.

WALLACE: You wouldn't say that AEI is a conservative think tank.

GILLESPIE: I would say it is a right-leaning think tank. That doesn't make it not credible.

WALLACE: It doesn't make it nonpartisan.

GILLESPIE: It does make it nonpartisan. It's not a partisan organization. I can tell you, there have been many instances where there are things that AEI has come out with and said, I didn't find to be necessarily --


GILLESPIE: -- with the Republican Party.

WALLACE: Would you say the Brookings Institution is nonpartisan?   GILLESPIE: I would say the Brookings Institution is left leaning and that they are nonpartisan.

WALLACE: OK. You know the president is going to be much more aggressive Tuesday night in this next debate. How does the governor plan to handle that?

GILLESPIE: I think, you know, the governor is going to do what he did on the last debate. He's going to talk about his agenda. He's going to talk about his policies and there is a big choice election here between President Obama's policies and Governor Romney's policies.

That became clear in the first debate. It will be clear in the second debate. It was clear in the vice presidential debate.

This is a big choice election and, the fact is, what we saw was, even if we changes his style, and whatever political tactic the president settles on as being in his best interest for the debate, he can't change his record and can't change his policies.

WALLACE: As you saw, I talked with David Axelrod about the tightening polls. Romney now leads in the national polls. You've closed the gap on a lot of the other polls.

Where do you think the race is now?

GILLESPIE: I think the race is very close. I think the wind is at Governor Romney's back and we're clearly on momentum. You can see it on the trail. You can see it in the data.

But, the country is pretty evenly divided, Chris, and we've also felt that this was going to be a close election. You know, David Axelrod and I don't degree on much, we couldn't agree on a stopped clock what time it is. But we could agree from the outset, this is going to be a close race. I knew that when we were behind in the polls. I know it now when we're ahead in the polls.

But I believe the momentum is clearly on Governor Romney's side, and he's going to win in November.

WALLACE: Ed, thank you. Thanks for coming in today. Safe travels on the campaign trail.

GILLESPIE: Thank you.

WALLACE: Up next, we'll ask our Sunday panel if the Biden-Ryan debate changed the race at all, and what to expect when Romney and Obama meet again on Tuesday.



BIDEN: We have a fundamentally different vision for America. And, quite frankly, a fundamentally different value set.    RYAN: The president is simply saying, more of the same. Hope and change has become attack and blame.


WALLACE: That was Vice President Biden and Congressman Ryan still arguing their case to voters, the day after their debate. And it is time for our Sunday group: Brit Hume, Fox news senior political analyst, Bob Woodward of the Washington Post and author of the new book "The Price of Politics," syndicated radio hoist Laura Ingraham, and Jeff Zeleny from the The New York Times.

Brit, same question I asked both campaign advisers, where is this race 23 days out?

BRIT HUME, FOX NEWS POLITICAL ANALYST: Well, it's tight. Obama may still be a little bit ahead, but so little you would not notice. There was momentum for, and is momentum for Romney coming out of the first presidential debate. I don't think that it was entirely breaked by the dominant, if not not necessarily attractive performance by Vice President Biden this week. So I think that's about where it stands.

The race had begun to tighten a little bit, Chris, even before that first debate. And we all know who covered the stuff for years, it late in a campaign, typically from sort of mid-October forward, races tend to tighten. This one has started to tighten. It may tighten further. But at the moment, it looks like Mr. Romney has a little something going and the president has a challenge this week to try to turn that around.

WALLACE: Jeff, as the one of us spending the most time actually in the field with the candidates, with voters, your sense, has the race tightened? And is it because of the first debate?

JEFF ZELENY, NEW YORK TIMES: I think it is because of the first debate and there's no question that the race has tightened and voters are sort of reexamining this. I spent five days in Ohio, this week. And one thing I was struck by was just the enthusiasm on the Republican side.  The crowds that Governor Romney was getting, I would describe as them Obama-size crowds from 2008, some 10,000 people, day after day after day, at these rallies at county fairgrounds.

And these people that I spoke to were not as intent on defeating the president which they are but they were saying in the affirmative, they want to elect Mitt Romney.

So I think that a lot of people after that first debate performance saw him in a different light, were finally sort of proud of him and saw him as the Republican nominee.

And all these early voting things going on, Democrats do have an advantage, but that is also helping to fire up Republicans. It gives Republicans three more weeks to sort of say, hey, we really need to get you out to the polls, so there is a bit of a mixed opportunity here for the early voting.    WALLACE: Laura, let's talk about Tuesday's debate. What do you think is job one for Romney and, specifically, because it is clear, that Obama is going to try to be more aggressive, more present than he was in the first debate, how does he handle that?

LAURA INGRAM, RADIO SHOW HOST: When Obama is in your face, which he will be in this next debate, Romney has to respond as he did in the first debate. It might be a little different for him, because it's going to be very different. The town hall format is much friendlier to Barack Obama, he's good in that format. So I think Mitt Romney has to bring his A game.

And Jeff is exactly right, I was in Columbus last Saturday. And people coming up to me for the first time saying we have a reason to believe that Mitt Romney can actually win this.

Three or four weeks ago, and I was traveling to places like Kansas City, they didn't have that same feeling, they do now. And I should say, even in California, the local CBS-5 poll showing that - there was an 8 point gain for Mitt Romney, he's still, what, 14 points behind in California but if he is moving up that far in California that is not insignificant.

I think without a doubt, Mitt Romney in this debate has to show that connection, that ability to be a little self-deprecating, but on the march and staying off the defensive. When he's on the defensive, I think he looks weak. He has to stay on the march.

WALLACE: Bob, what do you think is the top priority for the president in the debate. And given that it is a town hall, how does he get more aggressive with Romney when he has to respond to the questions of real people about their real problems and he's not just getting questions from reporters?

BOB WOODWARD, WASHINGTON POST: Well, to answer your broad question, the race is volatile. It can go either direction, I think. And what is really important for Obama, he can't come on in the next debate, and all of a sudden be a different person in a radical way. People are going to say, wait a minute, is this showmanship?  And I think the key question is, remember everyone is kicking around this idea of, are you better off, now, than you were, four years ago?  I think the question people want answered is, how are you going to make me better off in next year, in the next four years, and if you really look at the details, neither campaign has answered that sufficiently and, it is quite possible that somebody is going to come out with something and explain what they really mean, what their plan is, and that could tip it.


HUME: I think it strikes me that in this debate in which you're answering questions from voters, the president will do well in being empathetic toward voters and in expressing in his way their concerns. Mitt Romney has been suggested here, is not as bad at that, but the question is can he really, in that format, make up the ground lost in the first debate?  I'm not saying it is impossible, but I think it is difficult, because, if you are saying, well, Mary, the best way I can handle the problem you have just described is to keep us away from the policies advocated by my opponent here who wants to do X, Y and Z and burn down the house. I'm not sure that that kind of turning something into an attack will work well in that format so I think it may be more difficult for the president to recover as fully as I'm sure he'll try.

WALLACE: Bob, don't you think in a sense this town hall format potentially could be a real advantage for Romney and here would be my argument, because Romney has been portrayed as this rich, uncaring, unfeeling rich guy. And, if he were to come out and, when Mary asks her a question, you know, he plays some version of Clinton's, I feel your pain, isn't that an opportunity to kind of undo millions of dollars of Obama attack ads.

WOODWARD: And there are stories that have dribbled out that demonstrate he can be really good at that. What will be interesting is, you can get the killer question from somebody at a town hall meeting. Somebody can ask the kind of thing that sets everyone back. We could sit here and devise those questions and they can come from real voters and there may be a moment where somebody is going to ask one of those and it will really put either candidate or both on the spot.

WALLACE: Jeff, I don't want to ignore the event of this last week. From your reporting, did the Obama camp always intend for Joe Biden to be so aggressive, some would say over the top in his dealing with Paul Ryan?  Did they think that that was a good tactic?

ZELENY: Perhaps not always, but after the debate in Denver, absolutely. They knew that they needed a moment to sort of quiet things down, on the democratic side, just show that they had some fight in here and, really to kind of shake voters' attention who may have been swayed by the first debate and try and get them to sort of reexamine the Ryan budget plan and the Romney-Ryan plan.

ZELENY: So from the Denver debate, that was the strategy, to have the vice president, sort of, shake things up a bit. I'm not sure if all the smiling and all the -- all the hectoring was necessarily part of the plan, but, you know, it's Joe Biden being Joe Biden. And he was -- you know, that perhaps was not ideal. I think if you were listening to this on the radio, which, of course, not that many people were, it was probably a different Biden performance. But I think they were fine with it overall because he got a lot of his points across.

WALLACE: Do you think it moved the needle at all or is just, kind of, a non-event and we go on to the...

ZELENY: I think it was a non-event. I mean, it was a placeholder. It gave the president a few days, I think, to, sort of, have Democrats stop complaining about him. But I think we are not talking about this very much. I mean, it's a forward-looking thing and the vice presidential candidates are the vice presidential candidates.

WALLACE: Laura, a quick last word?

INGRAHAM: Oh, I think -- I think they -- most people are going to remember one thing out of that debate, the smirking, the mugging to the camera, the interrupting. I think regular people who aren't all that political say, look, he's the vice president of the United States; is that the best you can do? And a lot of them, in their life, they're not laughing much; they're really struggling. And so the vice president laughing his way through most of that debate -- I think it looked unserious and immature and I think that's the lasting image.

WALLACE: All right. We have to take a break here, but when we come back, that deadly terror attack against Americans in Libya grows into a bigger issue in the presidential race.



ERIC NORDSTROM, FORMER REGIONAL SECURITY OFFICER, U.S. EMBASSY IN LIBYA: It's not the hardships. It's not the gunfire. It's not the threats. It's dealing and fighting against the people, programs and personnel who are supposed to be supporting me. And I added it by saying, for me, the Taliban is on the inside of the building.


WALLACE: That was Eric Nordstrom, the top security officer in Libya last summer, testifying to Congress Wednesday about his frustrations over not being able to get more security approved by the State Department.

And we're back now with the panel.

Brit, there were several big developments in the Libya story this week. At a congressional hearing, we learned the top security people, like Nordstrom, on the ground in Libya, repeatedly requested and were turned down for more security. We also have the comments from Vice President Biden in the debate, quote, "We weren't told."

How politically vulnerable do you think the president is on Libya?

HUME: I think it's a significant vulnerability. It's on two tracks, really. One of them is a security and intelligence failure that's manifest by what happened there. And the second is the possibility that there has been a cover-up here with some real me mendacity on the part of the administration.

We now know from the testimony this week and from a briefing given by senior State Department officials to reporters that the State Department knew immediately what was going on here. At least, certainly, the -- the personnel in Libya knew. On the night of the attack, reinforcements were sent from Tripoli to counter this paramilitary terrorist attack. They knew what was going on. The State Department, so far as we can tell, never thought that this was some kind of a spontaneous reaction that went crazy. They never thought that. And yet...

WALLACE: Well, in fact, there was no -- there was no spontaneous demonstration.

HUME: Exactly. There were no demonstrations.

WALLACE: There were no protests at all.

HUME: It was all quiet.

All right. Yet, by the end of the week, here came Susan Rice, an official of the State Department, on this program and all those others, to say that the best information they have from intelligence was that this was a reaction to the video, sparked by what happened in Cairo.

I don't think that was ever true and I don't think the State Department ever thought that. And it's unimaginable to me that Susan Rice believed that was true. I think that Susan Rice went out on that Sunday because no one else would do it. And I think -- and I think it was a -- an utterly political act.

WALLACE: Bob, as one of the key people who broke the Watergate scandal -- and I'm not comparing this to that -- as you look at what happened in Benghazi, the changing story of what happened; as you look at the security warnings beforehand, are you troubled by the actions of the Obama administration?

WOODWARD: There -- yeah. There are lots of unanswered questions. And I love documents, and they released some documents in this, and if you go and look at the original request for more security, they say our policy, our goal here is to shift from an emergency footing to normalize the security relationship.

Now, this is in March, six, seven months ago. Anyone looking at that what say, wait a minute, read the document in which they say, oh, the situation is incredibly unstable. Well, why are you trying to normalize your security in a situation that's visibly unstable? You even acknowledge that.

So you've got a bad policy. And anyone looking at that would say, wait a minute; we are screwed up; we can't normalize here.

So that's the first problem. The second problem is, as soon as an ambassador is killed, the president should be more proactive and be out there. He can go, you know, five minutes in the White House briefing room and say this is really serious; we're going to get to the bottom of it; we don't have the answers. And all of this could have been nipped in the bud and it was not.

WALLACE: And what do you make of the fact that, five days later, Susan Rice goes out and tells this story about a spontaneous protest, when we now know the State Department never thought there was a spontaneous protest?

In fact, we know -- and they were in touch, in real time, with people on the ground in Benghazi on the 11th.

WOODWARD: I haven't -- you know, I don't think we know exactly why she did that or what was going on. But the key, which you pointed out to David Axelrod, is, two weeks later, the president's at the U.N. and citing this YouTube video, I guess half a dozen times. That, as we now know, had virtually nothing to do with what happened in Benghazi.


INGRAHAM: Well, I think about Susan Rice going out there on this show and four other shows on Sunday, and I'd like to know did Susan Rice have any direct or indirect contact with anyone from the Obama campaign, David Axelrod, Plouffe, maybe Valerie Jarrett? She still works in the White House, but obviously very close to the president.

HUME: Tom Donilon.

INGRAHAM: Yeah, Tom Donilon. I would like to know that. I'd like Mr. Axelrod to answer that question.

I would hope that the New York Times, as they camped outside of Scooter Libby's house during the whole Valerie Plame thing, are they -- are you guys camped outside of the Susan Rice residence?


I mean, seriously, whether she was put out as a -- as a sacrificial lamb or not...

WOODWARD: It's great...


WOODWARD: ... another assignment...



INGRAHAM: No, but this is -- we have a dead ambassador, two Navy SEALs, dead, another security officer dead. The president answers this the next morning by flying to Vegas for a fund-raiser. If I -- I submit that if this were a Republican president and this went down this way, you'd have reporters camped outside of Hillary's house, Rice's house, and demand that the president do a full-blown press conference on what happened. Maybe it is just incompetence, maybe it's a series of innocent mistakes, but my goodness, when you had three attacks, violent attacks inside Benghazi, on the Red Cross office, the consulate and then postings on Facebook we're coming after you on September 10th, they didn't have any actionable intelligence? What? I mean, this is ridiculous. And I think the press is partly culpable here.


ZELENY: Well, I think this is one of the things that's going to be litigated in the final weeks of the campaign. I mean, you actually hear on out there talking to voters, people are raising this as a question, and this was not the case three weeks ago when Ambassador Rice was out making the statement, it was not really on the minds of people. Now it is on the minds of the public. So I think that is one of the key things that we'll be discussed at this debate and certainly at the next debate next week, next Monday in Florida on foreign policy.

I think the Obama administration and the campaign has created a pretty large opening here for Governor Romney to make the broader argument about competence and leadership and things. And, it is up to the president to answer some of these questions.

I don't think we have all of the answers right now, and I'm fascinated to see how he's going to respond when asked by a real person or next week by a moderator, about this. He has not had many press conferences. He hasn't really explained himself. And they have a lot of questions to answer.

WALLACE: Do you think this has legs in the campaign? I mean, do you really think voters care about this?    ZELENY: I don't know. I mean, there are only three weeks left and millions of people are already voting so I'm not sure if there is enough time for this to have a huge effect, but I think on the margins it does plant more questions in people's minds about what exactly the administration is up to.

But in terms of congressional hearings and other things, there is not much time before the election. If this was June or July, I think potentially more so.


HUME: Well, without suggesting that Jeff ought to leave early and get over to Susan Rice's residence I do think Laura has made a good point, it shouldn't just be up to the campaign and candidates to try to get to the bottom of this before election day, this should be a job for all the good investigative reporters in the media to be out on the story, investigative teams such as they are should be all over this, this does have, it seems to me, an extremely strong scent of cover-up and it does look like it was engineered in some way. There's just something about those five appearances on a Sunday with a story that they had to know was off base. That doesn't smell right and ought to be exposed.

WOODWARD: But it is also a mindset, sometimes, when there is trouble, in the White House, there is too frequently a passivity. OK, let's step back and let the State Department handle it, let's let somebody else handle it and not jump in, and realize the seriousness of the moment. That...

HUME: You don't think this was orchestrated in the White House?

WOODWARD: Yeah, exactly.

WALLACE: But don't you think is politically toxic and they wanted to stay...

WOODWARD: But they should've have done that, but time and time again, you can -- the Obama was out saying, hey look, we have got al Qaeda back on its heels, well, anyone in the intelligence committee knows that's not true.

INGRAHAM: That's where the press's role comes into play.

HUME: You know the answer to this question, when you are seeking Sunday show guest for this program, where do you get the answers from the administration? Where does that come from.

WALLACE: It comes from the white house.

HUME: Exactly.

WALLACE: Always. For anybody in the administration.

HUME: So, if anybody in the administration. So if Susan Rice is going out, that has been OK'd, approved, and - by the White House. That's where this comes from, correct?


HUME: Thank you.

WALLACE: I don't like having to answer the questions. Thank you panel. See you next week.

And, don't forget to check out Pane plus where we're going to pick up right with this discussion on our web site, Foxnewssunday.com. We'll post a video before noon eastern time and make sure to follow us on Twitter @foxnewssunday.

Up next, we go on the trail.


WALLACE: With a hotly contested vice presidential debate, fiery campaign rhetoric and candidates cooking for votes, it has been a heated week on the trail.


ROMNEY: I know the president hopes for a safer, freer and more prosperous Middle East, aligned with us. I share this hope, but hope is not a strategy.

OBAMA: You can't turn a page on the failed policies of the past if you are promising to repeat them. We cannot afford to go back to a foreign policy that gets us into wars with no plan to end them.

RYAN: Joe Biden has been on this stage many times before. It's my first time. So, sure, it is a nervous situation.

OBAMA: Looking forward to it. Looking forward to it.

BIDEN: More people signed up for Medicare Advantage after the change. No -- nobody is...

RYAN: Mr. Vice President -- I know you are under a lot of duress to make up for lost ground, but I think people would be better served we don't keep interrupting each other.

UNIDENTIFIED MALE: The vice presidential is very respectful

UNIDENTIFIED MALE: I think the president loses some points, at least stylistically, for kind of looking like an arrogant Cheshire Cat back there.

UNIDENTIFIED FEMALE: I've got a cooking emergency - the grill is too hot.

ROMNEY: Those aren't ready...

BIDEN: I've got news for Governor Romney and Congressman Ryan, America is neither dependent nor is it in decline.

RYAN: At a time when America has a jobs crisis, wouldn't it be nice to have a job creator in the White House?

UNIDENTIFIED FEMALE: Get some this weekend!


WALLACE: Have candy?

And there are 23 more days of campaign fun for the kids and a tough grind for the grown-ups. Now, this program note: tune into this Fox station and Fox News Channel for complete coverage of the next presidential debate. That's Tuesday night at 9:00 pm.

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

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