The following is a rush transcript of the June 19, 2011 edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.
CHRIS WALLACE, ANCHOR: I'm Chris Wallace.
With our nation's military fighting multiple wars while facing budget cuts, there's a change coming at the top.
WALLACE: As the secretary of defense nears his final salute to the troops, we'll ask him about Afghanistan and Libya, whether Pakistan can be trusted. And working for two very different presidents. It's a special exit interview with Defense Secretary Robert Gates.
Then, I have been waiting months for this one.
(BEGIN VIDEO CLIP)
STEWART: I come on "Fox News Sunday", be hard on me, unless I'm announcing I'm running for president.
WALLACE: Candidate or not. We'll grill the bad boy of political comedy about liberal media bias, Fox News, and what he really thinks of President Obama. Jon Stewart in his first appearance on a Sunday talk show.
Also, the president and congressional Democrats pick apart the GOP budget without coming up with one of their own. We'll ask our Sunday group whether playing the waiting game is paying off.
All right now on "Fox News Sunday."
And hello again from Fox News in Washington.
We have political odd couple this week. We'll talk with comedian Jon Stewart a little later. But, first, we're honored to sit down wit Defense Secretary Robert Gates, just days before he leaves office -- having serve Presidents Bush and Obama in his demanding job.
Mr. Secretary, welcome back to "Fox News Sunday."
DEFENSE SECRETARY ROBERT GATES: Thank you.
WALLACE: Today marks the 90th day of U.S. involvement in Libya. Congressional critics say that s that the administration is now officially in violation of the War Powers Act. If Congress cuts off funding, pulls us out of Libya, what do you think are the consequences for U.S. national security and our standing in the world?
GATES: Well, we've been through this on a number of occasions, even since I've secretary, where Congress has threatened to cut off funding in Iraq and on several occasions and so on. Frankly, I think cutting off funding in the middle of a military operation when we have people engaged is always a mistake.
By the same token, I would say that, you know, I was in the White House and the NSC staff not long after the War Powers Act was passed. And I believe that President Obama has complied with the law, consistent in a manner with virtually all of his predecessors. I don't think he's breaking any new ground here.
WALLACE: And so, therefore, you don't think he's in violence of the War Powers Act?
GATES: No. And I think -- but I think he's been clear as well, that he would welcome the Congress passing a resolution of support.
WALLACE: Secretary Gates, is the U.S. involved in the hostilities in Libya?
GATES: The way I like to put it is from our standpoint at the Pentagon, we're involved in a limited kinetic operation. If I'm in Qaddafi's palace, I suspect I think I'm at war.
WALLACE: President -- the reason I'm asking, of course, is that President Obama, and you kind of duck the question very ably I must say. President Obama told Congress this week that the War Powers Act does not apply to what's going on in Libya.
The official White House report to Congress said this -- "U.S. military operations are distinct from the kind of hostilities contemplated by the War Powers Act." And the president reportedly rejected the legal opinion of the Pentagon's general counsel, Jay Johnson, as well as the Justice Department's Office of Legal Counsel.
Question: are you comfortable with that?
GATES: I think that the president is in a position to take the advice of variety of people. And also on legal, as other matters, that he has the opportunity to make his own decisions. I think that -- in fact, I'm confident that he would not make judgment along these lines if he were not confident that he was acting a constitutional manner.
WALLACE: Well, I understand that you're saying that he's confident and comfortable with the fact that he is operating a constitutional manner. But, you know, to someone who sees we're spending, what, $10 million a day, we have drones bombing Libya, we have surveillance, we have intel -- how is that not hostilities?
GATES: Well, I'm going to defer to the White House and to the president on the legal interpretations.
WALLACE: You said that getting involved in Libya in the first place was the only major disagreement that you have had with this president. Do you agree with the current strategy of letting NATO take the lead of as it's being called the strategy of leading from behind? Is that a strategy for success?
GATES: I think it's absolutely the right strategy. When this operation started, the president, we were at war in Iraq, still. We had 50,000 troops in Iraq. We had 100,000 troops in Afghanistan. We had 24,000 people engaged in Japanese earthquake relief. We have a number of commitments around the world.
And so, the arrangement and the understanding the president had with our key allies from the very beginning was the U.S. would come in heavy at beginning, establish a no-fly zone and then hand off the operation to our allies and that we would recede into a support role. That was his decision going in and he stuck to it.
WALLACE: But can this work? Can this get Qaddafi out of power?
GATES: Yes, I think -- actually, I think it can in over time. I think --
WALLACE: Time, meaning?
GATES: -- talking to various people, the chairman and others, I think we all sense that the Qaddafi regime is getting weaker by the day. Their military forces are being attritted every.
So, I think it is a matter of time. I do know -- I can't make a prediction how long it will take. But they clearly are getting significantly weaker as this effort goes along.
WALLACE: President Obama is now deciding how many troops to pull out of Afghanistan as part of the July drawdown that he announced back in December of 2009, when he announced the troop surge.
The Wall Street Journal reports that the military wants to keep -- the majority, the vast majority of the 33,000 surge forces there, to the fall of 2012, through two more fighting seasons. Is that true?
GATES: Well, first of all, fall of 2012 would be one more fighting season after this one. And --
WALLACE: Well, right. We're in the middle of one right now.
GATES: And the truth is, our obligation is to present the president with a range of options, and the risk attendant to each of those options, and then for the commander-in-chief to make a decision. And he will do that, and, frankly, I don't want to get into further in the process than that.
WALLACE: Well, let me ask you this. And I understand you don't want to get ahead of the president. You're calling for a modest drawdown. Mr. Obama keeps talking about a significant drawdown. Have you told the president -- without getting into numbers -- anything over a specific number jeopardizes the gains that we have made in Afghanistan?
GATES: I'm absolutely not going to go down the road of what I tell the president.
WALLACE: Let me ask it a different way. You look at me like I only have 11 more days and I don't have to put up with these guys anymore. How confident are you that given the renewed debate within the administration about the way forward in Afghanistan, counterinsurgency versus counterterrorism, how confident are you that the president won't pull enough troops out Afghanistan to jeopardize the gains that we have made there?
GATES: I think that the president has a good strategy. He decided on that strategy in December of 2009. It's always been envisioned that with success on the ground, that the balance between combination of counterinsurgency and counterterrorism, the way it would shift more to counterterrorism over time. We have had a lot of success over the last 15 months in Afghanistan. The conditions on the ground are far better than they were a year ago.
So far in this fighting season, we have not only held on to everything we took from the Taliban last year, have been able to expand security, further and further disrupt the infiltrations coming in from Pakistan.
So, I would say that whatever decision the president makes, it's going to be a decision that is based on the gains that we e laid on the ground, success on the ground.
WALLACE: And that he won't jeopardize those gains.
GATES: I don't think so.
WALLACE: During the Republican debate last week, several candidates talked about in effect heading for the exits in Afghanistan and in Libya. Mitt Romney called for getting our troops out of Afghanistan as quickly as possible. Let's watch.
(BEGIN VIDEO CLIP)
MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: Our troops shouldn't go off and try and fight a war of independence for another nation. Only the Afghanis can win Afghanistan's independence from the Taliban.
(END VIDEO CLIP)
WALLACE: And Jon Huntsman talks about reducing U.S. forces in Afghanistan to 15,000. He said this: "The very expensive boots on the ground may be something that is not critical for our national security needs, nor is it something we can afford at this point in our economic history."
Question: do you worry about growing isolationism in the Republican Party?
GATES: I worry that people whose primary worry and concern is the economy and the deficit will see defense and our engagement around the world as a way to reduce those obligations and that deficit. I believe that -- I believe that misunderstands -- misstates the problem.
GATES: The base defense budget is not part of the deficit problem. Our percentage of the base budget, not counting the cost of wars, the defense budget is about 3-1/2 percent of GDP. That's basically the lowest that's been, except for a brief period in the '90s since before World War II.
We know we have to be a part of the savings. The cost of these wars is coming down dramatically, between fiscal year '11 and '12, go down $40 billion, between '12 and '13, it will probably go down several billion more.
So, I think that it's a mistake -- particularly to couch the question in terms of the cost of war, because my question is, what's the cost of failure? What was cost of 9/11 because we left Afghanistan in 1989? How much money have we spent since 9/11 trying to deal with that problem?
We are on the right road. We know we are going to end our combat role there by the end of 2014, our role, the kind of role we have now. So, this isn't an open-ended conflict. I just ask people to consider the consequences of failure.
And, by the way, my recollection is that Mr. Romney also went on to say that the withdrawal should also be based on the recommendations of the commanders in the field.
WALLACE: He did, however, and you're hearing this from Bachmann and you're hearing it from Huntsman, there does seem to be something of a rush for the exits. And it does seem to be a war of weariness. It's not just budget.
GATES: Of course, there's war weariness. This country has been engaged in two wars everyday in the four and a half years I've been secretary of defense. So, I fully appreciate that. Believe me, there's nobody more war-weary that our at this point.
But the preside responsibility -- and I have seen this in his predecessors -- his responsibility is look out the long-term national security interest of the United States. He has to have a longer view.
And frankly, other than the first couple of years of World War II, there has never been popular war in American history.
WALLACE: I want go to, quickly -- I know you don't like lightning rounds, so I'm not going to call it that. But I want to go quickly over some hot spots with you. First of all, Pakistan. Five informants who helped us capture, find or identify Osama bin Laden have reportedly been arrested. The head of the Pakistani army is under fire for being too pro-American. How close are we to a breach in relations with Pakistan?
GATES: Well, I think -- I think I don't know the answer to that. I know that we need other. And each side recognizes that. Our relationship has been a complex one for decades. And the way I put it is we just have to keep working at it.
WALLACE: There's been a spike in violence recently in Iraq. CIA director and secretary of defense nominee, designate, Leon Panetta, says there are a thousand al Qaeda in Iraq. All U.S. forces are supposed to be out of country by the end of the year. Would you like to see some of them stay?
GATES: Well, I think that there is an interest. And I believe that it's in our mutual interest to have some limited number of U.S. forces to remain and training and equipping and a doing counterterrorism.
WALLACE: Beyond the end of 2011?
GATES: Beyond the end of 2011. But at the same time, you know, although there are a number of al Qaeda -- al Qaeda in Iraq for the most part has been targeting Iraqis. This has been their practice. It's one of the reasons why they lost and why they suffered such grievous losses because the Iraqis got fed up with it.
Actually, more concern and the direct threat to our troops is more extremists Shia groups that are sponsored or have an affiliation with Sadr. And so, these are the groups right now that constitute the biggest threat to our troops and our troops that have been killed over the past several weeks for the most part are being attacked by this affiliate --
WALLACE: We have, what, about 40,000 troops there now?
GATES: About 47,000.
WALLACE: How many would you like to see stay into 2012?
GATES: Well, I think that's a matter for the Iraqis, first of all, to tell us what they would like for us to do and to have a dialogue. And I think we're beginning that dialogue. And until we figure out what the mission, then it's hard to figure out how many people you'd have there. But it I would be a fraction of what we have now.
WALLACE: As you leave office, how much of a disappointment is it to you that Iran still an active nuclear weapons program?
GATES: Well, I think it's an ongoing problem for the world, not just for the United States. I think that Iran with a nuclear weapon is extremely destabilizing. I think it could precipitate a nuclear arms race in the region. I think we haven't thought through all of the consequences -- or we haven't talked enough about the consequences of Iran acquiring nuclear weapons.
So, I think our position that we can't accept that as outcome is the right position. And my hope is that we can, you know, as the president has -- his predecessor said, all options are on the table.
But my hope is that we can find a peaceful way to persuade these guys. This is in their interest.
WALLACE: Finally, I want to get some big picture reflections from you. I was looking at your record -- 45 years on and off in government service, eight presidents.
What's your big take-away as you leave Washington? What's the big lesson?
GATES: That when we have been successful in national security and foreign affairs, it has been because there has been bipartisan support. And agreement between the president and the Congress that the fundamental strategy -- maybe not all the tactics, maybe not al the specific decisions -- but that the fundamental strategy is the correct one. That's what happen through nine presidencies and the Cold War that led to our success, because no major international problem can be solved on one president's watch.
And so, unless it has bipartisan support, unless it can be extended over a period of time, the risks of failure is high.
WALLACE: When you look ahead to the future, what do you worry about?
GATES: A loss of bipartisanship.
WALLACE: And with the hyper-partisanship this town on a lot of other issues, do you see that bleeding into foreign policy, national security?
GATES: I do.
WALLACE: Any thoughts about what can be done?
GATES: Well, I think that there some -- I think that -- I'm not sure what can be done quite frankly. I've tried to what I could in terms of a civilized dialogue, of a civil dialogue between the executive branch and the Congress under both President Bush and President Obama.
And I think that the kind of relationships that I've had on the Hill show that when individuals make this effort, they can make headway. They can make progress, and at least having civil conversation about these issues.
WALLACE: I want to -- you'll hate this -- go through some association with you. I want you to give me a word, a phrase, thumbnail sketch for some of the presidents that you served in top jobs.
GATES: A great preside. I think vastly underestimated terms of how good he was and how important has.
WALLACE: Bush 41.
GATES: I think that the fact that the Cold War -- 1991 was the first time in history that a heavily armed great power collapsed without a war. Some day, Bush will get the credit he deserves for helping bring that about.
WALLACE: Bush 43.
GATES: Decisive. A man of strong beliefs.
WALLACE: And Obama?
GATES: Analytical and decisive.
WALLACE: Finally, I want to talk about the troops. You say that you think of them as your own sons and daughters. You signed the papers that send them in to war. You say when you sign -- send letters of condolence, that you like to get a packet with information about them, with a picture of them, so when you write to their loved ones, you know.
What has it meant to you to serve with our remarkable fighting men and women?
GATES: By the way, I would put it as -- there are many aspects to this job. The only thing that I'll miss is the people I worked with and above all, the opportunity to interact with the troops. I just spent three days with them in Afghanistan. Week-and-a-half ago, and getting on that plane was very hard.
GATES: Leaving them behind, and still in the fight. And just -- they're so dedicated and so confident and they're so capable. They're just so extraordinary people.
WALLACE: Secretary Gates, we want to thank you. We want to thank you for coming in and giving us one last interview as secretary of defense. And we want to thank you -- and I know I speak for everyone -- for your service to our country, sir.
GATES: Thank you.
WALLACE: Up next, Jon Stewart, the host of "The Daily Show" -- this time, I get to grill him.
WALLACE: It was last November when Jon Stewart promised on his show he would come here and answer my questions. After months of evasion, disconnected phone numbers, and press agents saying, "Who are you again?" -- it appears he finally ran out of excuses.
And so, Jon Stewart, welcome to "Fox News Sunday."
STEWART: Thank you so much, Chris. I really -- I appreciate it. I just want to say, as a viewer, I can't tell you how disappointed I am that you would sully a program of this integrity, of this quality, with the presence such as Jon Stewart.
WALLACE: No. Have you checked out the mugs?
STEWART: Yes. They're very nice. They're very --
WALLACE: You can see what it says on the inside of the mugs?
STEWART: Can I read it out loud? It's somewhat anti-Semitic. Do you want me to read it?
WALLACE: "Fair and balanced."
STEWART: "Fair and balanced."
STEWART: Yes. I like to --
WALLACE: How about -- how about we toast and we both take a big drink out of our mugs?
STEWART: I'd be -- you know, it's interesting that the mug itself --
WALLACE: No, no. No talking. Just drink it. Just drink the water.
STEWART: Why do you want me to drink it?
WALLACE: Just, please.
STEWART: It's just interesting that you want me to drink it. Why don't you have a taste of this first? WALLACE: I'm drinking it myself.
STEWART: Yes. But we could have different waters. I've seen --
WALLACE: Are you scared of this?
STEWART: All right.
WALLACE: 'Nuff said.
There you go.
And while you're drinking -- you love to take shots at FOX News.
STEWART: Yes, I did.
WALLACE: Over the years, you have called us -- and we're going to put this on the screen because this is heavy stuff.
WALLACE: "A biased organization, relentlessly promoting an ideological agenda under the rubric of being a news organization."
WALLACE: And -- I actually think that's slightly the wrong use for the word rubric.
"A relentless agenda-driven, 24-hour news opinion propaganda delivery system."
WALLACE: Where do you come up with this stuff?
STEWART: It's actually quite easy when you feel it. You got to feel it in your soul, you know?
WALLACE: Well, here's the deal. Are you willing to say the same thing about the mainstream media, about ABC, CBS, NBC, "Washington Post," "New York Times"?
WALLACE: Would you say the same thing about them that they are -- in your words -- a propaganda delivery system relentlessly pushing a liberal agenda?
STEWART: No, I wouldn't say that.
WALLACE: Why not?
STEWART: MSNBC is attempting that. I think they're attempting. They've looked at your business model and they have seen the success of it. And I think they're attempting to be a more activist organization.
WALLACE: You don't think "The New York Times" is a liberal organization?
WALLACE: Pushing a liberal agenda?
STEWART: "The New York Times," no. I think they are to a certain extent. Do I think they're relentlessly activist? No. In a purely liberal partisan way? No, I don't.
I think is this -- FOX is a very special --
WALLACE: The shutters to go from your eyes because I'm going to prove it to you in the next few minutes.
STEWART: Oh, OK. I don't -- I'm excited about that.
WALLACE: Here we go.
STEWART: Can I tell you this? I love to learn!
WALLACE: Even you make fun of the fact that "The New York Times" and the "Washington Post" when this document dump of 24,000 e-mails of Sarah Palin was released, and they got so excited about it, they asked their readers, help us. Go through these 24,00 documents?
WALLACE: How do you explain the fact that they would do that? Would ask the readers to help them go through the Palin e-mails -- inconsequential as they turned out to be --
WALLACE: -- but they never said help us go through the 2,000 pages of the Obama health care bill?
STEWART: Because I think their bias is towards sensationalism and laziness. I wouldn't say it's towards a liberal agenda. It's light fluff. So, it's absolutely within the wheelhouse.
I mean, if your suggestion is that they are relentlessly partisan and why haven't they gone and backed away from Weiner? Now, they jumped into the Weiner pool -- so, with such delight and relish, because the bias --
WALLACE: Some things are indefensible.
STEWART: -- the bias of the mainstream media -- oh, I'm not saying it's defensible, but the bias of the mainstream media is toward sensationalism, conflict and laziness.
WALLACE: You take your own shot recently at Sarah Palin. You compared her video of her one bus -- One Nation bus tour to a certain commercial. Let's take a look.
(BEGIN VIDEO CLIPS)
UNIDENTIFIED MALE: As the tour rolls on.
UNIDENTIFIED FEMALE: Stopping at historic places, like Gettysburg, and then to Philadelphia, to see the Liberty Bell.
STEWART: You know what's cool, man? The way they have reporters finishing each other's sentences. Where have I seen that technique before?
(CUE VALTREX AD)
(END VIDEO CLIPS)
WALLACE: Sarah Palin and the herpes drug, really?
STEWART: Yes, as a technique for the commercial? You know, so, you're saying that by comparing the technique that she used in her video --
WALLACE: You are not making a political comment?
STEWART: You really think that's a political comment?
STEWART: You're insane.
STEWART: Yes. Here is the difference between you and I -- I'm a comedian first. My comedy is informed by an ideological background. There's no question about that.
The thing that will never understand and the thing that in some respect conservative activists will never understand is that Hollywood, yes, they're liberal. But that's not their primary motivating force. I'm not an activist. I'm a comedian.
WALLACE: All right. I want to thank you for saying that because --
WALLACE: Baltimore Sun TV critic David Zurawik -- put it up on the screen -- says that is your dodge. "Stewart has never held accountable in his media criticism, is he? When he is wrong, he goes in a tap dance of saying he's only a comedian and shouldn't be taken seriously."
STEWART: OK. Let's talk about that -- when did I say to you I'm only a comedian? I said I'm a comedian first. That's not only. Being a comedian is harder than what you do.
What I do is much harder. I put material through a process, a comedic process.
WALLACE: But you are a political commentator. The comedy has a political --
STEWART: Some of it.
WALLACE: Here is your take on GOP presidential candidate Herman Cain.
(BEGIN VIDEO CLIPS)
HERMAN CAIN (R), PRESIDENTIAL CANDIDATE: That's why I only allow small bills. Three pages. You'll have time to read that one over the dinner table.
STEWART: If I am president, treaties will have to fit on the back of a cereal box. From now, on the "State of the Union" address will be delivered in the form of a fortune cookie. I am Herman Cain, and I do not like to read.
(END VIDEO CLIPS)
WALLACE: You're planning a remake of "Amos 'n' Andy"?
STEWART: Why don't you show -- do you want to show me doing the voices for all the other people that we do? You want to see my New York voice? My Chinese guy voice?
Are you suggesting that you and I are the same? Are you suggesting that -- what am I at my highest aspiration and what are you at your highest aspiration? Tell me.
WALLACE: I think -- honestly, I think you want to be a political player.
STEWART: You are wrong. You're dead wrong. I appreciate what you're saying.
Do I want my voice heard? Do I want my voice heard? Absolutely. That's why I got into comedy.
Am I an activist in your mind, an ideological partisan activist?
STEWART: OK. Then I disagree with you.
You can't understand because of the world you live in that there is not a designed ideological agenda on my part to affect partisan change because that's the soup you swim in. I appreciate that. I understand that. It reminds me of, you know -- you know, ideological regimes. They can't understand that there is free media other places. Because they receive marching orders.
WALLACE: How do you explain me? Do you think I get my marching orders?
STEWART: I think that you are here in some respects to bring a credibility and an integrity to an organization that might not otherwise have it, without your presence. So, you are here as a counterweight to Hannity, let's say, or a counterweight to Glenn Beck, because otherwise, it's just pure talk radio and it doesn't establish the type of political player it wants to be.
WALLACE: It's a part.
STEWART: I understand that.
WALLACE: Wait --
STEWART: But for you, there is hope -- this is important.
WALLACE: No, this is -- but you sound like.
WALLACE: -- during the CNN debate.
STEWART: Am I dodging you? Am I dodging you by saying I'm just a comedian?
WALLACE: No, you're filibustering. Here is the question. Here is the question.
And I think there are plenty of examples. Let me give you another example of -- this isn't you. This is the mainstream media.
Here's Diane Sawyer.
STEWART: All right.
WALLACE: Diane Sawyer, leading her program last year, announcing the new immigration law. Take a look.
(BEGIN VIDEO CLIP)
DIANE SAWYER, "ABC WORLD NEWS": If a stranger walking down the street or riding the bus does not seem to be a U.S. citizen, is it all right for the police to stop and question him? Well, today, the governor of Arizona signed a law that requires police to do just that.
(END VIDEO CLIP)
WALLACE: But that isn't what the law requires them to do. In fact, the law says the only way that you can stop somebody as part of a lawful enforcement stop, you can't just say, hey, you're walking down the street exactly as she suggested. It has to be because there's a broken taillight or they're loitering, or they're do something else.
Don't you think she should have mentioned that?
STEWART: Sure. Yes. No, I think you're right. I think we should have more full context and more of the types of things that you're talking about.
But I don't understand how that's purely a liberal or conservative bias. That's, like I said, sensationalist and somewhat lazy.
But I don't understand how that's partisan. The embarrassment is that I'm given credibility in this world because of the disappointment that the public has in what the news media does.
WALLACE: I don't think --
STEWART: -- not because I have an ideological agenda.
WALLACE: I don't think our viewers are the least bit disappointed with us. I think our viewers think, finally, they're getting somebody who tells the other side of the story.
WALLACE: And in -- no, no, no. One more example.
STEWART: Who are the most consistently misinformed media viewers? The most consistently misinformed? Fox, Fox viewers, consistently, every poll.
WALLACE: Can we talk about your network? Can we talk about Comedy Central?
STEWART: Yes. I'd be delighted to.
WALLACE: Because case and point --
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: How did you physically have sex with Tommy Lee? He has a huge (EXPLETIVE DELETED). If he put that thing in front of my face, I wouldn't know whether I should (EXPLETIVE DELETED) spit or feed it a peanut.
(END VIDEO CLIP)
WALLACE: That's not exactly "Masterpiece Theater" you're working for.
STEWART: You're damn right. And I think I'm perfectly placed. I think that is my -- that is where I belong.
WALLACE: You're the counterbalance to that. I'm suggesting that there is bias, and that you only tell part of the story.
STEWART: Oh, there's no question that I don't tell the full story. I mean, I don't disagree with that. But I don't not tell the full story based on a purely ideological partisan agenda. That's my point. My point isn't --
WALLACE: I think your agenda is more out there, and you're pushing more of an agenda than you pretend to.
STEWART: But it's about absurdity. It's about absurdity and it's about corruption. And that is the agenda that we push.
WALLACE: I will defend everything that we put on this show.
STEWART: Oh, and by the way, how often do you see your show on my show? My beef isn't with you.
STEWART: But I believe you exist as -- I think that Mr. Ailes has very brilliantly put you on. And I think you're a tough interviewer. I think you're a fair interviewer. I think some of the things that --
WALLACE: Keep going.
WALLACE: Are you disappointed in Barack Obama as president?
STEWART: Yes, I think I am.
WALLACE: Do you think he's lived up to his promise to fix the economy?
STEWART: No. I don't know the kind of sway that a president can have on the economy, but do I believe that he is lived up to the promises? No.
He came in and said you can't expect to have a different result with the same people. That was, in many ways, his seminal campaign focus. And all I see as far as economic stewardship are the guys that got us into this mess in the first place.
WALLACE: Honestly, did you watch any of the CNN debate with the Republicans?
WALLACE: Did you see anybody on the stage who you could envision voting for against Obama?
STEWART: I thought that in general, you know, their responses to things in terms of tax cuts being the magic bullet as to what it is -- so far, I haven't heard anything that appeals to my sense of, that intrigues me politically, or in any way that is different. What intrigued me about Obama was a statement that I thought he understood the corrosiveness of the system that existed, and I thought he was going to do more to blow the system up.
WALLACE: When is the last time you voted for a Republican for president?
STEWART: For president? H. W.
WALLACE: Against Michael Dukakis?
STEWART: That's right.
WALLACE: Really? How come?
STEWART: He seemed like a different -- there was an integrity about him that I respected greatly. And there's something about tiny people in helmets. I assume that part of this is to delegitimize criticism against Fox by suggesting that it's coming from a place of contrived political --
WALLACE: I'm just trying to understand you.
STEWART: Is that really true?
STEWART: Because here's the thing that surprises me about that. I've existed in this country forever. There have been people like me who satirize the political process and who have satirized -- what was it that Will Rogers said? How crazy is it when politicians are a joke and comedians are taken seriously?
WALLACE: That assumes a kind of -- and this is where I think you're wrong and you don't get it --
STEWART: That may be right.
WALLACE: -- is that there is not a single marching order. There is not some kind of command. There is not a talking point memo. I'm saying --
STEWART: Well, that I disagree with.
WALLACE: I am sitting here talking to Jon Stewart and I'm trying to get it, trying to understand you, and trying to see whether or not you recognize that what I believe is true, that there is as much bias the other side as you subscribe to Fox, and why you seem to go easy on that.
STEWART: I think that there is a -- probably a liberal bias that exists within the media that is because of the medium in which it exists. I think that the majority of people working in it probably hold liberal viewpoints, but I don't think that they are as relentlessly activist as the conservative movement that has risen up over the last 40 years.
And that movement has decided that they have been victims of a witch hunt. And to some extent they're right.
People on the right are called racists and they're called things with an ease that I am uncomfortable with -- and homophobic and all those other things. And I think that that is absolutely something that they have a real right to be angry about and to feel that they have been vilified for those things. And I've been guilty of doing some of those things myself.
WALLACE: I accept your apology.
WALLACE: I want to thank you for coming on.
STEWART: Do you get me?
WALLACE: Well, you know what? When you come back we can explore this some more.
STEWART: All right.
WALLACE: And we validate.
STEWART: Still? You're a good man.
WALLACE: Up next, we'll ask our Sunday panel why the Democrats are missing in action when it comes to laying out a plan to deal with the nation's debt problem.
WALLACE: Last week, after I interviewed Republican presidential candidate Tim Pawlenty about his economic plan, I got a number of e- mails like this one.
Matt D. from Effingham, Illinois, wrote, "You were ridiculously tough and specific on Tim Pawlenty. Good. That's your job."
"When have you or anyone else ever been equally as tough on Obama? How could you be? Obama has no plan."
Matt makes a good point, which is why we're going to discuss that now with our panel: Bill Kristol of The Weekly Standard; Mara Liasson from National Public Radio; former Bush press secretary Dana Perino; and Bill Burton, former deputy press secretary to President Obama, who now heads Priorities USA, an independent political group.
And welcome, Bill. Good to have you on the panel.
BILL BURTON, FMR. DEPUTY PRESS SECRETARY TO PRESIDENT Obama: Thank you.
WALLACE: The president submitted a budget in February, Bill, which he replaced with an outline in April. Congressional Democrats didn't pass any budget last year. And the Senate Democrats haven't written a budget this year.
Is that any way to leave the country?
No, I'm asking -- not you.
BILL KRISTOL, THE WEEKLY STANDARD: My answer is no.
Bill, you can explain it. And it's really a good way to lead the country, to back off your original budget that was submitted a few months ago, so, laughably, doesn't address the debt and the deficit.
To criticize Paul Ryan's serious attempt to address the debt and the deficit in April in a demagogic way, and then still not to have submitted any particulars, and the Senate, which the Democrats control, has not passed a budget resolution, whereas perhaps Republicans stepped up to the plate and passed a budget.
WALLACE: And what do you think that's about?
KRISTOL: I think it's about the president not showing leadership in dealing with the debt and deficit, or in dealing with jobs. I mean, we have a bad economy. And it's really the first time I remember when it's a bad economy and the president seems almost paralyzed.
And what's his economic agenda? What's his jobs agenda? What's his growth agenda? What's his debt and deficit agenda? And the answer is attacking Republicans when they suggest other things.
WALLACE: All right. Let me bring in Bill Burton.
The president, in not this budget, but in the outline, the April outline, sets all kinds of targets. He talks about cutting about a half-trillion dollars from Medicare and Medicaid through unspecified inefficiencies. He talks about forming the tax code, but again, not very specific. As we point out, Senate Democrats haven't even written a budget this year.
Is that showing leadership when the country faces a national debt crisis?
BURTON: Well, for starters, it looks like there is going to be a Senate budget that will be introduced coming soon. But I will say --
WALLACE: They're pretty late in the process. It's June.
BURTON: Well, the government hasn't stopped working. And what's important here is, what are we going to do about jobs? What is the government going to do to try to get jobs going?
We can talk about the context. That's not how this election is going to be run. But the president has created 2.1 million jobs in this recovery. The economy is growing and not contracting.
And if you look down the road, what the president wants to do is he wants to get some trade deals passed that will help to create jobs. And there's a series measures that had they passed, had Republicans allowed them to go forward, be it the small business bill, be it some unemployed benefits, be it off-shoring bills, we could have created a lot more jobs than we could have otherwise.
Now, I will give it to the congressional Republicans, yes, there was specificity in that budget they passed. But it's not really a serious document in the sense that if you are talking about gutting Medicare to turn it into a voucherized program, that's not something that's going to pass the United States Senate and get signed into law by the president.
So, I would say that the president is doing what he can to get jobs created in this country. He has had some success, would like to have more. But he's not exactly had an able partner in the congressional Republicans.
WALLACE: Is this all, Dana, the failure of Republicans to be an able partner? And how do you explain -- Bill kind of gives them a pass -- the failure to come up with a serious budget?
DANA PERINO, FMR. WHITE HOUSE PRESS SECRETARY: I mean, it's been 781 days since the Senate Democrats have passed a budget. And what that means is that if you want to have power, the control of the purse, then you have to step up.
Remember, in 781 days, the Democrats ran both the House and the Senate, and had the executive branch, and they still didn't do it. So it's interesting to see Democrats try to pin that back on Republicans. And in some ways, Republicans fall for it.
They are like, well, we do have a plan. And they did put forward a plan. It's immediately -- you know, you talk about the bipartisanship, that's something that is earned and it's not just a given.
And I think that the executive branch would be smarter to try to co-opt some of the Republican ideas to actually put something through. If they're going to put forward a budget, that's fine, but it's coming up against everything where, after two-and-a-half years, the communications problems that they have, have solidified. And it will be increasingly difficult to get something serious done in the next few months.
WALLACE: I'm going to bring in Mara in a second.
But Bill, I want to go back specifically to this point. No budget. I credit Dana with having actually counted the number of days, 700 days. It's pretty remarkable.
BURTON: Right, but sort of meaningless in the context that what's important is, are jobs being created?
WALLACE: I don't mean to -- but part of is it a budget. A country needs a budget to run. Forget the jobs for a second.
BURTON: Right, but the country is still running. Like, we're doing OK without a budget in the sense that nothing is shutting down.
The Congress can still pass the jobs measures that the president wants to move forward. Congress can still move forward on a lot of the different things that will help to actually create jobs and grow the economy.
We have made progress on jobs, 2.1 million in this recovery. The economy is growing as opposed to contracting.
There's a lot more that need to get done. I don't know that the budget is necessarily the be all, end all as it relates to how we're actually going to get to economy on a track that's going to have sustained growth.
MARA LIASSON, NATIONAL PUBLIC RADIO: I think that, clearly, the battle cry of president has no plan, he's not leading. That's the Republican talking point. And I think the White House made a calculated decision that it was worth taking the hits on leadership for not having a new scorable budget, because the speech he gave in April didn't include a scorable plan.
But he does have the outline of a plan. He wants $4 trillion in deficit reduction over 10 years. And now decides --
WALLACE: Twelve years.
LIASSON: I'm sorry, 12 years. And now, both sides are in negotiations. And the only thing that is going to pass in this divided government is something that has been negotiated by both sides.
That's what the debt ceiling talks are about. And if they come up with something that raises the debt ceiling, that gets $2 trillion worth of cuts, I always say this -- presidents have unlimited abilities to run to the front of the parade and grab the flag. And that will become Barack Obama's plan when those negotiations are successful.
Now, if they are not successful, it will be really, really bad, because we'll default on the debt, and then our interest rates will go sky high. But that's what will become his plan.
WALLACE: Which brings us to this question of negotiations, Bill, to the big news this weekend, whether it's serious or just style, and that was the golf summit -- and yes, we do have pictures of it -- between President Obama and Speaker Boehner. We don't know if business got done there. From their point of view, I kind of hope that they weren't sitting talking about the debt or the War Powers Act.
But, first of all, do you think this does any good for them to sit and slap each other's back and spend a few hours together in a less formal situation? And what do you think are the chances that there will be a substantive deal on the debt and the deficit before we run into what Treasury Secretary Geithner says is this drop dead date of August 2nd?
KRISTOL: I don't know. I have been doubtful that there would be a major deal.
I've been struck that Vice President Biden and House Majority Leader Eric Cantor seem pretty hopeful about a deal. I'm worried about it in the sense that I think it could be a very weak deal that I think a lot of conserves in the country are going to have trouble with it. And I think the politics of --
WALLACE: Well, wait a minute. Are you suggesting that the Republicans are going to sell out?
KRISTOL: Yes. Well, not sell out. I think that you get in the room with the president, you get bludgeoned by the treasury secretary with partly phony threats about how we're about to default on everything, and then you cut a deal.
And I think the politics of that are dicey for both parties and dicey for the country. But I think if I were Michele Bachmann, I would already be writing my speech on the House floor on August 2nd, denouncing with deep regret, of course -- a speech given in sorrow, not anger -- denouncing Speaker Boehner for cutting a bad deal with the president and not for not insisting on serious spending cuts and serious reforms and serious budget cuts and the prospect of a balanced budget in the near future. And I think that would be a pretty powerful speech for Michele Bachmann to give on the floor of the House.
LIASSON: I think you can predict that she's going to do that no matter what. And they're not just getting pressured by Tim Geithner. They're getting calls from wall Street, they're getting calls from all of their constituents and their big donors saying you better raise the debt ceiling.
LIASSON: Yes. Yes.
PERINO: I heard the opposite.
KRISTOL: Yes. LIASSON: Well, they've been reassuring Wall Street that the debt ceiling will go up. That's why Wall Street didn't react badly when they had that symbolic vote not to raise it. And I think if all of a sudden, they reach the debt ceiling, I think there will be a bad reaction from the markets. The markets think it's going to go up.
KRISTOL: They're mostly reassuring Wall Street that they're going to cut spending down the road.
KRISTOL: And we're not going to have trillion-dollar deficits forever.
LIASSON: Yes. And there will be cuts in spending.
WALLACE: We're running out of time and I want to touch on one more subject, a little 2012 politics.
Texas Governor Rick Perry, Dana, spoke at a Republican thing down in -- I love it, "Republican thing" -- down in New Orleans this week and this weekend. And apparently stole the show. Let's watch a clip.
(BEGIN VIDEO CLIP)
GOV. RICK PERRY (R), TEXAS: That mix of arrogance and audacity that guides the Obama administration is an affront to every freedom- loving American and a threat to every private sector job in this country.
(END VIDEO CLIP)
WALLACE: What's your guess? Does Rick Perry get in the race? And if he does, how formidable a candidate is he?
PERINO: About six weeks ago I would have said no, but in the last three weeks I have seen him come out.
He gave a speech similar to this one in terms of passion in New York last week. And in some ways, you know, people have talked about how boring the field is, there's no passion, there's no emotion. And he brings that to the table. And so I think that he is a little bit closer to running, and we'll see what happens.
WALLACE: And if he does, do you think he goes right up near the top of the field?
PERINO: Potentially. I mean, I will get criticized for this, but you do need to have an organization. You need to have an ability to do some good fund-raising, people in the states in order to help you through those first primary states.
They've got a little bit of time, not a ton of time. I would say he will probably announce by, you know, the end of July if he's going to get in or not.
WALLACE: Bill, do Democrats worry about Rick Perry? And how would you go after him?
BURTON: Well, as an observer, I think it would be pretty exciting if he got into the race. If you watched that debate earlier this week, it was fairly boring, frankly. And Rick Perry, if nothing else, is a showman and would make things pretty exciting.
Rick Perry, though, is a pretty extreme version of George W. Bush. And my guess is that he may get in. He even could get the nomination. But I think the choice between a guy like President Barack Obama and a person like Rick Perry would be a --
WALLACE: But when you say an extreme George W. Bush, extreme in what way?
BURTON: Well, he wouldn't be the first candidate for president who thought that secession was a good policy, but he probably would be one who ended up losing.
WALLACE: So that's the way that you end up -- you would go after him, you would target him as --
BURTON: I think that no mater who the candidate is, be it Pawlenty, Romney, Perry, Bachmann, this is going to be about the economy and who is better for your family's future. I think that there are extreme elements of what Rick Perry has done in the past besides just --
WALLACE: Rick Perry has had huge job growth. It's the biggest job-producing state in the country.
BURTON: But on thee bottom on education, on the bottom on the unemployed, on the bottom of a lot of different
WALLACE: We're going to have to leave it there. To be continued.
Thank you, panel. See you all next week.
Don't forget to check out "Panel Plus," where our group here will pick right up with the discussion on our Web site, FoxNewsSunday.com. We'll post the video before noon Eastern Time.
Up next, we hear from you.
WALLACE: Time now for some comments you posted to our blog, "Wallace Watch," about last week's guest, presidential candidate Tim Pawlenty.
B.P. thought the former governor did well. "He came across as knowledgeable on the direction of our domestic policy."
But Kay Anderson from Winston-Salem, North Carolina, disagreed. "If they cannot answer your questions in a straightforward way, then that shows they either do not know what they're talking about or do not want the American people to hear the real answer."
And then there was an exchange on "The Factor" over whether Tim Pawlenty was to bland to run for president.
Cynthia Y. Bowman writes, "Bill O'Reilly and Chris Wallace, look it up. Plain vanilla is the favorite ice cream flavor in the USA. You shouldn't say things like that before you know the facts."
Please keep your comments coming. You can find us at FoxNewsSunday.com.
And we'll be right back with a note about next week's program.
WALLACE: Now this program note. Next week we continue our series of 2012 one-on-one interviews with the GOP presidential candidate creating the most buzz these days, Congresswoman Michele Bachmann.
And that's it for now.
Happy Father's Day to my dad and all the dads out there.
Have a great week and we'll see you next "Fox News Sunday."
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