This is a rush transcript from "Your World," October 30, 2017. This copy may not be in its final form and may be updated.


QUESTION: Mr. Papadopoulos is about the campaign. It is specifically about the campaign.

SARAH HUCKABEE SANDERS, WHITE HOUSE PRESS SECRETARY: It has nothing to do with the activities of the campaign. It has to do with his failure to tell the truth. That doesn't have anything to do with the campaign or the campaign's activities.

QUESTION: But it's the clearest evidence yet of ties between the Trump campaign and Russian officials.

HUCKABEE SANDERS: Again, there are no activities or official capacity in which the Trump campaign was engaged in any of these activities.

QUESTION: Is he and the rest of the White House concerned that this will distract from tax reform and the other domestic policy and foreign policy...


HUCKABEE SANDERS: We're not worried about it distracting because it doesn't have anything to do with us.


NEIL CAVUTO, HOST: All right, not one question about what could be the most momentous move on taxes in a generation, not one until the very end? And it was by a Fox Business Network reporter.

But I digress to make this point. This is now all-encompassing. Anything having to do with Paul Manafort or George Papadopoulos or Rick Gates, that's going to get all the attention right now, who knew what and when.

And when it comes the former Trump campaign manager, Paul Manafort, now facing a 12-count indictment that, if he were found guilty on all 12 counts, could keep in prison for the rest of his life, well, needless to see, you have more than just a distraction. Right now, you have a fixation.

Kevin Corke at the White House with the very latest.

Hey, Kevin.


Listen, the Manafort story will clearly get all the headlines today, and obviously that's because he was a former campaign manager. But it's the Papadopoulos -- Papadopoulos story that is really the more significant one here, because, keep in mind, he's apparently been cooperating with the feds since his arrest back in July.

And what that means is, that could have a far-reaching impact as what happens as we continue to examine the Russia investigation.

Now, let me tell you about Papadopoulos. He actually pleaded guilty earlier this month to lying to federal officials about contacts he had with people that he believed had ties to Russia while he was a non-paid volunteer with the Trump campaign.

Meanwhile, the president's one-time campaign chairman Paul Manafort indicted on multiple charges, as you pointed out, that he funneled millions of dollars through overseas shell companies and evaded taxes in the process.

Mr. Manafort and his longtime associate Rick Gates, who also faces charges, both appeared in federal district court today and they both issued pleas of not guilty. Bond, by the way, set at $10 million for Manafort, $5 million for Gates.

The president not talking today, at least on camera. But he is talking by way of Twitter. He said: "Sorry, but this is years ago, before Manafort was part of the campaign. But why aren't crooked Hillary and the Dems the focus?" He goes on to add also, "There's no collusion."

Here's Press Secretary Sarah Huckabee Sanders.


HUCKABEE SANDERS: Today's announcement has nothing to do with the president, has nothing to do with the president's campaign or campaign activities.

The real collusion scandal, as we have said several times before, has everything to do with the Clinton campaign, Fusion GPS and Russia. There's clear evidence of the Clinton campaign colluding with Russian intelligence to spread disinformation and smear the president to influence the election.

We have been saying from day one there's been no evidence of Trump-Russia collusion, and nothing in the indictment today changes that at all.


CORKE: OK, so the men will actually be back in court on November 2 at 2:00 p.m. Eastern time.

And in case you're wondering about the bond numbers we talked about, Neil, $10 million for Manafort, $5 million for Gates, there's a little bit of a technicality I want to tell you about here.

It actually means that these are unsecured. So if they don't show up when they're supposed to, then, of course, the court will expect demanding -- will expect those funds.

By the way, Manafort's lawyer called the special prosecutor's charges ridiculous. He noted that trying to use the FARA statute to prosecute his client has only actually happened six times since the 1960s and only once successfully.

We will be watching takes story, but, as you pointed out, not a lot of talk about taxes or the foreign trip or the Fed chair, because everybody is talking about Paul Manafort and Mr. Rick Gates.

CAVUTO: Yes, all that nerdy stuff I'm obsessed with.

All right, thank you, Kevin. You are never a nerd, Kevin Corke at the White House.

Meanwhile, is the special prosecutor, Robert Mueller, really trying to do something else here, squeeze these guys, get them to talk, get them to turn in other people, maybe go all the way up to the president of the United States?

Defense attorney Ted Williams.

What do you think, Ted?

TED WILLIAMS, DEFENSE ATTORNEY: Well, I think this is a very bad day for the White House. I heard Sarah say that this does not touch and concern the president. And she's right at this stage.

But you know, Neil, not only am I a defense lawyer, but I was a federal agent. I have even worn wires. And one of the things I'm concerned about is not so much Manafort and Gates and their indictment, and their arrests and everything.

It's right now Papadopoulos, because they have had Papadopoulos under a microscope for some time. And I can tell you it's going to come out that Papadopoulos has been wearing a wire.

And, boy, that is where I think it could come in. Now, when it comes to what you said, they're trying to squeeze these guys, meaning Manafort and Gates, especially Manafort. They want them to come over to their side and to be able to cooperate in the investigation. As a federal agent, I have done the same thing.

CAVUTO: All right, in Papadopoulos' case, it was the one and only count of lying. Right? So, he could get that alleviated, if not removed, if he's cooperating or if he had wore a wire and he talked to people over these last weeks or months, right?

WILLIAMS: Absolutely.

And, again, you will find that they don't -- they know that they're not going to get Manafort to wear a wire, because he's like Kryptonite to Superman right now. Nobody is going to want to come close to Manafort. And also I'm sure the judge has ordered him to stay away from certain people in the administration and not have conversations with them.

The one thing that all of these guys may have in their favor, though, Neil, is the pardon power of the president of the United States. But I got to tell you, Mueller is trying to even outflank that, Neil, because Mueller has gone to state prosecutors.

And so what he's now looking at is, hey, if you pardon them on federal charges, they still could very well be looking at state charges. And so he's trying to get these people to sing. It's a terrible situation they're in.

CAVUTO: You know, Ted, help me with this, though. Much has been made of the fact that -- in fact, I think the president himself tweeted as much -- that, look, all these predate his association with me, at least the campaign. I'm paraphrasing here.

But is he getting a little too cocky or, you know, thinking that Manafort is not a worry because a lot of this predates his association with the campaign itself, even though some of these issues technically are concurrent with the campaign? But what do you think?

WILLIAMS: Neil, to be candid with you, they don't -- the FBI, the federal agents, the prosecutors, they don't give a damn about what Manafort did some time ago in the Ukraine.

They're using that as a tool, as a pressure tool to get Manafort to talk about what happened during the course of the Trump campaign. Remember, he was the political director for Trump.

CAVUTO: Right.

So, let me ask you about this. We're just getting video now of Manafort arriving back home. It was from this home back in the summer, of course, that FBI agents conducted, you know, a raid of the home, while I believe he and his wife were sleeping, and just ransacked the place to get any and all documents they could.

What do you think they were after?

WILLIAMS: What they were after is just one thing, to put pressure on him, to make him nervous as the dickens, because, Neil, that was a no-knock raid.

They just went in.

CAVUTO: Right.

WILLIAMS: They didn't even ask him to knock and say, hello, we want to come in. They went in.

They're trying to really rattle his cages.


CAVUTO: But do you think that was a little too heavy-handed or, is it by design heavy-handed?

WILLIAMS: It's by design heavy-handed.

You couldn't make a more eloquent statement, Neil, about it. It's design. And I got to tell you, you're absolutely right. There's going to be a fixation on Gates, Manafort and Papadopoulos. And it's going to suck all of the oxygen out of the room.

And I can tell you, one of the -- one of these guys are going to break. And not only that, Neil. There's other people that Mueller has under his control that are probably already talking. And if those people are talking, I got to tell you, the White House needs to be nervous.


Well, Ted, you're so good. Thank you very, very much, my friend.

Ted Williams puts it all in perspective in a language certainly I can understand, which is clear. I like that.

What is clear, to Ted's point, though, is that, right now, the president's agenda might not be as clear. Of course, he wants to get tax cuts done. He wants to obviously continue an economic agenda that rates well with the American people. But, again, part of that concern today at the corner of Wall and Broad -- and we're going to be getting into this a little bit more in the show -- is that maybe this disrupted that momentum.

To The Hill's editor in chief, Bob Cusack, on all of that.

Bob, what do you think.

BOB CUSACK, THE HILL: Well, so much for tax cut week, huh, Neil?

CAVUTO: Yes, exactly.

CUSACK: We're going to see a bill on Wednesday, but this is just going to dominate the week. And I think it's going to be very difficult for Republicans to push that kind of bill if we're waiting for other indictments. Maybe other indictments come.

There's no doubt about it. I mean, last week, some Republicans were talking about, OK, it's time to wrap up these investigations. And the timing of this, I think, is not coincidental, with Mueller then bringing one.

And then the first batch, we see, OK, with Manafort, there's no collusion. And then there's a campaign adviser, and there's no smoking gun here. But without a doubt, you look at these indictments, and they have got some more stuff coming.

CAVUTO: I'm wondering, though.

I was talking to a guest on FOX Business about this, which, if you don't get, you should demand, Bob.


CAVUTO: But, anyway, one of the issues was, in a way, this is going to help marshal all Republicans being together in unison on this, because they sure as heck now, in this environment, are less likely to get Democratic votes now, as if that was a distinct possibility regardless.

CUSACK: Right.

CAVUTO: But what do you make of that?

CUSACK: I think there's something to that, Neil.

Lindsey Graham has said, if we don't pass tax cuts, it's basically the end of the party. And members have told me kind of similar things. Listen, we have to get it done, no matter what.

And there's going to be days, they say, where you think this bill is dead and then we resurrect it, and kind of like health care. But they have to have a better ending, or they know they are going to get killed in primaries and in the general election next year.

CAVUTO: Is it your sense that -- look, I was aware of the Manafort session and what is going on with this Rick Gates. This George Papadopoulos character out of the blue, that one surprised me.


CAVUTO: Others say that you're going to be similarly surprised with names and indictments that come out in the future, because that's how it goes.

Is it your sense that that is the case?

CUSACK: I think so.

There was a lot of speculation that it was going to be Manafort over the weekend and perhaps Michael Flynn.

CAVUTO: Right.

CUSACK: So, I think there's definitely going to be some twists and turns.

And also investigators throw out some of this stuff and see how people react to it. And, remember, I think that the Manafort thing is very damming in a lot of ways, because there's more coming on him. But also they're embarrassing him, kind of mocking his lavish lifestyle of how much money he liked to spend on cars and rugs.

And this is a real play on him to squeeze him. Basically, you either talk, or you're going to spend the rest of your life in prison.

CAVUTO: All right, when you say squeeze him -- I touched on this Ted prior -- this notion that he would have to serve up higher-ups or people in the administration, even though a lot of this might not involve those people, certainly up to the president, we would think. But is it the idea that you just rattle a lot of cages?

CUSACK: I think so. I think you rattle as many as you can. And maybe there is no there there.

CAVUTO: Right.

CUSACK: But, clearly, I think that these investigators -- and Mueller is very well-respected, as you know, Neil.

But he has taken some criticism, I think justly, that he's hired a fair amount of Democrats, some who donated to Hillary Clinton. But, regardless, this is a very aggressive team. And I think he's going to rattle a lot of cages. And I think he just wants cooperation.

And it's clear that he's not getting cooperation from Manafort. And it just depends on who is going to cooperate from this point on.

CAVUTO: Yes, all right, thank you, my friend, very, very much.

And speaking of that and the rap against Mueller, there's been an effort on the part of some key figures in the Republican Party to say, Mueller, you should go, there's a conflict of interest here.

Thank you, my friend, very, very much.

All right, stocks selling off on a report that this is a distraction. That's one thing. But that the corporate tax rates that are going to be cut will be cut, all right, but it might be spread out over as much as five years, then news that the upper income might not be only getting their own bracket, but it could be a higher bracket, and with their write-offs likely going as well, they could be ending up paying a lot more taxes than they do already.

Not good for that bunch. Not good for the aggressive position Republicans are taking on getting cuts done -- after this.



BLAKE BURMAN, FOX NEWS CORRESPONDENT: This stock market is moving downwards on this news that possibly the corporate rate could be phased in over several years.

I wasn't sure if you were trying to make the point that the president would be for the phase-in or against the phase-in?

HUCKABEE SANDERS: No, I said that the president laid out his principles, and it doesn't include the phasing in. So, we're still committed to that moving forward. But -- and I don't have any reason to believe we changes on that...


HUCKABEE SANDERS: ... at this point.

BURMAN: So, the red line of a 20 percent corporate rate...

HUCKABEE SANDERS: I'm not drawing a red line. I'm just saying those are the principles that we have laid out and we haven't adjusted or changed our principles since this process started.


CAVUTO: All right, from our own Blake Burman and FOX Business Network, these parting words: You're welcome, America.

The only network that was concerned as well about walking and chewing gum at the same kind, and also mentioning that there's a big tax cut right now that could be going back and forth and asking a legitimate question as to talk that they want to phase in those corporate tax cuts over a number of years, which rattled the markets.

To Fox Business Network's Charlie Gasparino, Madison Gesiotto here as well of The Washington Times.

Madison, what do you think? That scared a lot of folks, in that it fueled this argument it is not smooth sailing and there isn't broad agreement among even Republicans on this subject. Now, of course, we learned in the Reagan years that a lot of those tax cuts were phased in, but by a lot bigger and more convincing margins.

So, it's still early. Things could change on Wednesday. But what would the fallout be, do you think, if we phase these in, they're not immediate?

MADISON GESIOTTO, THE WASHINGTON TIMES: Well, I think there's going to definitely be people that are not happy to see these being phased, if that were to happen.

However, this is not definite. As you said, there's still time. These talks will continue. And I know the president is very set on having a 20 percent rate, right off the bat. And I think this is something that is important. It's something that will benefit the American people. It will certainly benefit businesses across this country.

CAVUTO: Gasparino, what do you think? I think that, right now, they're running out of options as far as getting Democratic support, especially now, in light of what has been happening with this other theater here, that they have got to rally Republicans, and there a lot of those Republicans who are worried about deficits, who are worried about paying for things, and this is one way to do it.

What do you think?


I mean, we should point out that the FOX Business Network, my producer, Brian Schwartz, broke it on your show, and on FOX Business Network, your FBN show, that this was in the -- this was in the works about a week ago, that the phase-in of the corporate tax cut was in the works.

The fact that it's still in -- still on the table now, where a day before, I guess the House vote on the budget, which would include whatever deductions are in or out, shows you that, for all the president's rhetoric, it's still -- this is still on the table.

We should point out that it's not just Congress that is coming up with this. This is a negotiation between congressional leaders and Steve Mnuchin, the treasury secretary, and Gary Cohn, the NEC chief, National Economic Council chief.

CAVUTO: Right.

GASPARINO: So this is clearly something that the Trump administration is looking at.

I can just tell you that the market reaction was pretty negative. I mean, listen, 70 points is not a lot when the market is at 23,000, going to 24,000. But it was a pretty stiff drop the minute the story hit the wire.

CAVUTO: No, dropped over 100 points, dropped over 100 points. You're right, yes.

GASPARINO: And, listen, why is this -- why are the markets going up?

Well, they're going up because of a real tax cut. They think it will be a real tax cut, both on the individual side and on the corporate side. And we already know the individual side is not -- they may even raise taxes. We got to see exactly what comes out.

CAVUTO: Well, Madison, I want to pursue that with you, because that's another rumor that made the way -- and it was an interesting item in The Wall Street Journal over the weekend, that not only are the rich going to have to settle for a rate that won't budge, but maybe a rate that goes up, on top of losing a lot of deductions and the like.

Now, again, we won't know officially until Wednesday, but just those gyrations on the corporate thing, this thing. There's a lot of moving parts here. Do they concern you?

GESIOTTO: There are a lot of moving parts. But as I have said before on your show, the president's goal here is to make sure that taxes are simplified and they're lowered for the American people.


CAVUTO: Would you be surprised then, Madison, if for some, the very rich, they are actually raised?

GESIOTTO: If this were to come out on Wednesday and they were raised, I think a lot of people would be very unhappy. I, for sure, would be very unhappy.

I think they should go down for everybody, specifically for the middle class. This is something that we have promised to the American people on the campaign trail...

CAVUTO: You're right.

GESIOTTO: ... and that the president and Congress continue to promise. We can't kick the can down the road. We need comprehensive tax reform and tax cuts.

CAVUTO: Well, I think we're past the reform thing, Gasparino, right?

GASPARINO: Yes. And this is not reform.

I mean, right now, if you can just look at what he wants to do and what deductions are kind of off the table, there's going to be -- my producer, Brian Schwartz, broke the story just moments ago about how they're going to actually start debating the state and local tax, maybe have a compromise on this, on that deduction.

If you keep that deduction in, in some way, well, guess what? There's going to be -- they're going to look for offsets someplace else.

CAVUTO: Or you phase it out for guys like you.

GASPARINO: Look at this way. Let's be real clear.

CAVUTO: Real quick.

GASPARINO: When you talk about tax reform, it means compressing all the rates and getting rid of all the loopholes. That's not what they're doing.

CAVUTO: Yes, easier said than done.

Charlie, Madison, thank you both very, very much.

Meanwhile, there's that little issue of North Korea that wants to send more satellites into orbit. Lovely.


CAVUTO: All right, these things always engender a little bit of controversy.

But we're awaiting Secretary of State Tillerson and Defense Secretary Mattis to appear before the Senate Foreign Relations Committee. They are going to be ongoing military strategy, how to deal with North Korea, for example, many, many other items.

CODEPINK is there. You know the drill. These get to be kind of theatrical events. But -- but that is the right in America.

Retired Four-Star General Jack Keane on all of these developments.

General, so much to get into you about, but, again, our options, especially now, given the increased belligerence out of North Korea to talk about satellites and all this other stuff, what do you make of all that?

GEN. JACK KEANE (RET.), FORMER U.S. ARMY VICE CHIEF OF STAFF: Well, this is pretty routine.

Korea uses the rockets that drive those satellites into space. That's what they're really testing, because they're very similar to what he is going to use with ballistic missiles. So he's actually testing the rocket engine.

So, I look at it as just another step getting closer to nuclearizing ICBMs. He hasn't really done the ballistic missile testing in a couple months that he's done heretofore. I don't know if that -- we have had some impact on that or not.

But I'm really looking forward to the meeting that President Trump is going to have with President Xi, who was just kind of coronated by the 19th Communist Party Congress. Gave him so power, it rivals what Mao Tse-Tung has.

CAVUTO: Yes. What did you think of that? That's pretty amazing.

KEANE: It really is.

And his ambitions are so strategic and so geopolitical in terms of advantaging China. He really sees that China will become the preeminent global power in the world, replacing the United States.

And while Mao Tse-Tung was much more internal, Xi is absolutely external. And I do believe -- we will see, but North Korea blowing up as a result of Kim Jong-un and the problems he will cause are not in China's national interests.

So you have got to believe that, after he has all this power now, that he will start exerting some of it on North Korea and start bringing this thing to a halt. This crisis doesn't serve him well anymore.

CAVUTO: Yes, you would think. Right?

I don't want to hit you blindside on this, General, but we're just learning the White House has announced the apprehension of Mustafa al-Imam for his alleged role on in the September 11, 2012, attacks on Benghazi.

That was the one, of course, that resulted in the death of our ambassador and three other Americans.

The president has said, "Because of this successful operation, al-Imam will face justice in the United States for his alleged role in those attacks on Benghazi."

It would be some closure, I imagine, to the families involved, but your thoughts?

KEANE: Yes, well, listen, I have been so frustrated by this for such a long time.

Ansar al-Sharia, we knew that night had conducted the attack on the consulate, killed the ambassador, burned the place to the ground. And then the other three were -- other three Americans also died, unfortunately.

We eventually had to close our embassy down a year later. We have known that organization did that. And President Obama should have issued the finding to the Central Intelligence Agency and told them and also to Joint Special Operations Command, destroy this organization as quickly as possibly we can.

They actually expected us to come for them. Everybody was hunkering down, and we did nothing. We never went after this organization. We have gotten two people now as a result of it. That organization still thrives in Libya. It should have been destroyed after what they have done to us.

CAVUTO: General, I would be remiss if I didn't mention all the drama on Capitol Hill today with the Paul Manafort indictments, 12-count indictment, and this George Papadopoulos figure, who could already have been wired and talking to a lot of people in order to extract some sort of a deal with federal authorities, and the same with Rick Gates, what have you.

Do you think this mushrooms into something that, you know, causes a crisis here at home?

KEANE: I don't see the evidence of that to date.

I mean, I -- I just have an opinion, like everybody else. I would have to see something more than that for it to be -- where you start to challenge the authority of a president and his ability to be able to do his job. I don't see that at the present.

CAVUTO: All right, General, thank you. I just had to throw that out there, with all the news going on.

Thank you for your patience. Good to see you again.

KEANE: Yes, good talking to you again, Neil.

CAVUTO: All right, speaking of all those indictments, the fallout on the former FBI director and now the guy heading up this probe, Robert Mueller.

Now, there are a lot of folks who seem to think that he's picking and choosing what really gets his attention and what gets indictments and what gets really a focus, to the point now that where my next guest says, you know what, maybe you're the problem, former Director, maybe you're the one who has to go -- after this.


CAVUTO: All right, it won't be immediate.

The markets selling off on news that those corporate tax cuts -- and they're biggies -- taking it down from 35 percent to 20 percent, we still get it, but phased in over five years. If that's so, the fallout -- next.


CAVUTO: All right, we're getting our first formal statement regarding Paul Manafort, who is speaking through his attorney, Kevin Downing, saying that -- and I quote here -- "President Trump was correct. There's no evidence the Trump campaign colluded with the Russian government. Mr. Manafort represented pro-European Union campaigns for the Ukrainians. And in the course of that representation, he was seeking to further democracy and to help the Ukrainians come closer to the United States and the E.U. Those activities ended in 2014, two years before Mr. Manafort served in the Trump campaign."

Let me skip a little further here.

"The second thing about this indictment I myself find most ridiculous is the claim that maintaining offshore accounts to bring all your funds in the United States as a scheme to conceal it from the United States government is ridiculous."

There you go.

All right, we have New York Post columnist, Pulitzer Prize winner Michael Goodwin on putting the focus back on Mr. Mueller himself.

Your argument, Michael, has been in therein lies the problem and the inherent conflicts that he generates, right?

MICHAEL GOODWIN, THE NEW YORK POST: Well, look, Neil, I think that, from the very beginning now, Robert Mueller had one major conflict. And that was this relationship with James Comey, who succeeded him at the FBI.

And Comey, of course, was very instrumental and said he wanted a special counsel. And that special counsel happened to be Robert Mueller.

But I think the events last week, with the funding of the dossier coming into focus, that the Democrats funded it, and the Russian dossier, and the fact that it probably was used by the Obama White House and the Obama Justice Department, the Obama FBI as part of its investigation in Donald Trump.

So, because Robert Mueller worked for the Obama administration, I think that's a major conflict. And then, secondly, the Uranium One deal, with the Congress finally getting the gag order lifted on the informant, that would have happened when Mueller was running the FBI.

So I think that all of this fits neatly into an idea that this is a conflict that can't be corrected, except for resignation. And let me just say, think of it as a Supreme Court justice. Elena Kagan had to recuse herself from several Supreme Court cases could she had worked on them while she was in the White House.

Well, why should we give Robert Mueller a different standard for conflicts of interest, given that people's liberty and reputations, the whole presidential campaign is at stake? I think he has to be purer than Caesar's wife here.

And I think these conflicts will muddy the waters and ultimately undercut the credibility of whatever he comes with as it relates to the president.

CAVUTO: The other argument is that it's too late. The train has left the station. These events are ongoing.


CAVUTO: A lot of this goes back to a time where, to your point, he served as FBI director, where you could argument conflicts there, his affinity and closeness to Director Comey.

Some of his supporters will tell you, well, that's a small camp and a school of people who are in that club anyway. What do you say to that, that it's just not realistic at this stage?

GOODWIN: Well, I agree that it's difficult. And we have moved down the road.

But I think the events of last week changed the dynamics. As I say, the emergence of the dossier into this issue now, because of the fact that the Democrats paid for it and that the FBI used it, you effectively then I think have a very partisan operation going, and because Mueller was part of the partisan operation, in the sense that he worked for the Obama administration, which was trying to help Hillary Clinton and which used the dossier, presumably, for the unmasking, and perhaps the FBI used it as well.

So, I think that there's just too much weight here. Look, Neil, if we go back to the campaign, if we go back to the whole issue of Russia, Russia, Russia, it was how divided the country is. And if we're going down the special counsel route, and if the special counsel's findings are going to be seen as partisan at the end of the day, I think this just further divides the country.

And I think a lot of people that I'm hearing from are saying, why -- how is Mueller different from Clinton in that sense? Think of the things then that happened in the FBI under Mueller. All of these things then become fair game for people to say, see?

CAVUTO: Well, would that always be the case, that someone would glean bias and it would be argued ad nauseam, that if he were to resign, as you advocate now, we would be starting all over again, that the investigation wouldn't stop?

GOODWIN: Well, no, that's right, but it wouldn't necessarily be starting all over again.

You could have the investigation with a new person heading it, in the same way that the argument was made when James Comey was fired.

That didn't end the investigation. Mueller took it over. So, I think it's not about the investigation, per se. It's about Mueller's personal conflicts.

CAVUTO: All right.

Michael Goodwin, very good seeing you again.

GOODWIN: My pleasure.

CAVUTO: All right, in the meantime, when homebuilders are saying GOP tax reform deal is dead with them, is it dead, period? That's a very, very big group giving a thumbs down after this.


CAVUTO: All right, let's just say you would rather have the National Home Builders Association with you on a tax-cutting measure than against you.

But the National Association of Home Builders, Jerry Howard, said he really couldn't do that, that the mortgage interest deduction, treated like it is right now, just makes this unworkable, and a credit going away that would have addressed that, and the fact that Speaker Paul Ryan and others were opposed to that, well, that's that.

Jerry Howard with me earlier today.


JERRY HOWARD, CEO, NATIONAL ASSOCIATION OF HOME BUILDERS: Changes to the code effectively water down and dilute the mortgage interest deduction to the point where the only super wealthy will take it.

We don't think that a housing subsidy for the super wealthy is a good expenditure of the taxpayers' dollars. We went to Chairman Brady. We talked with the speaker's people. We proposed a credit, instead of a deduction, a credit, the benefits of which would largely be enjoyed by the middle class.

It would spur investment in housing. Good economic policy. Good social policy. And it costs less than the diluted mortgage interest deduction. We thought it was a great idea. I know Chairman Brady liked the idea. I think the speaker likes the idea, but somebody in the Republican leadership said no.

We have to walk away.

CAVUTO: The credit idea would be a set dollar amount, or would adjust for different income groups?

HOWARD: It's a set dollar amount with a cap on it.

CAVUTO: All right, in addition to doubling the standard deduction for a lot of families, this would be on top of that?

HOWARD: Yes, sir.

CAVUTO: All right, so their concern among the deficit hawks is, how the heck are we going to pay for that. You say?

HOWARD: I say that we're taking what is left of the mortgage interest deduction, using the tax expenditure that is, in that part of the code, geared only to the wealthy and taking it back and putting it for the middle class.


CAVUTO: All right.

But, again, in the meantime, that doesn't look like it's going to happen.

To economist Dan Mitchell on all this.

Dan, how big of a deal is that, when the Home Builders Association is saying, no, not us?

DAN MITCHELL, ECONOMIST: Obviously, you want every interest group to be possible on your side.

And I can understand why the Home Builder's guy -- I mean, he's in charge of defending his piece of the swamp. And, obviously, when you combine that with all the other swamp creatures trying to preserve the existing system, that's one of the reasons why this tax reform effort is so difficult.

But here's the thing I would say as an economist. It's not good for the long-term health of our economy when the tax code tilts the playing field so that you have more investment in housing and less investment in business, because that's where we actually get the jobs and the higher wages.

CAVUTO: And, you know, I thought about it.

By doubling the standard deduction and all, that's part of housing. That's a benefit. He wanted a credit besides. The difference, I will say, with the National Association of Home Builders, to these guys, is, they have a lot of money. They can have a lot of influence on a lot of elections in a lot of districts.

And maybe they can withhold that support. He was very coy about who he would go after. But he made it very, very clear that, if you're for this, we're against you.

So, where is this going?

MITCHELL: It means that you have some Republicans who are already very nervous about 2018 because they have not repealed Obamacare, they have not dealt with the entitlement problem.

And now, if they don't do something right on taxes, their voters will be upset with them. But if they do something that is right on taxes, the interest groups will get -- be upset with them, which brings me back to the thing I have been complaining about from the very beginning.

If Republicans had simply imposed some spending restraint, that would have freed up a lot of resources, a couple of trillion dollars, to do a much more bold, aggressive tax package, where you wouldn't have had to step on so many toes in the swamp and get all these interest groups against you.

CAVUTO: That's a very good analogy.

And the one thing I'm seeing is, this is getting tamer and tamer, more watered-down by the minute. Now, I don't fault Republicans, per se. I know the reality is that this has got to look like something resembling a balanced measure over the course of the next 10 years.

But the fact of the matter is, they're doing a lot of cuts and allowances to make the figures work, which means that this generational tax reform isn't reform. At best, it might be a staggered tax cut, if we're to believe a lot of the reports on the corporate tax cut, phased in over many years.

So, what do you make of where this is all ultimately going?

MITCHELL: Well, in my fantasy world, I want to rip up the entire internal revenue code and have a flat tax. But I know that is not going to happen.

So I'm not upset that we're doing sort of a halfway step. But I am upset that that halfway step is becoming a third-way step then a quarter-of-the- way step, and maybe, when it's all over and done with, it will only be a 10th of the way.

And given that Russia is in the news right now, here's my deal. Why don't we send Podesta and Manafort and Hillary and Trump and Mueller and all these guys, let's send them to Russia, and Russia can send us their 13 percent flat tax. Both countries might be better off as a result.

CAVUTO: Do you think that this is in serious danger of not passing?

Now, we will get all the details on Wednesday. And you and I could be wrong on a lot of these things we're fearing and getting worked up about right now. But is there a sense that you're getting with people you talk to that there's a distinct possibility this doesn't happen?

MITCHELL: All it takes is, what, 25 or so Republicans -- and, of course, depending whether you can get any Democrats in the House to vote with you.

It only takes a relatively small handful of Republican House members to kill the deal. And, likewise, you only have to lose three Republicans in the Senate to kill the deal, assuming no Democrats vote for the reform package.

So I think this thing really is on a knife's edge, even though, in my mind it, is so critical. With our high corporate tax rate, we have so many very serious problems, that this package, even it's though it's much more watered-down than I want, it would solve and address some really critical problems that would be so beneficial for wage-earners and the American economy.

CAVUTO: I think, as you and I have gotten into it, something is better than nothing, right?

In the end, when push comes to shove, it might not be your flat tax or across-the-board Reagan-type revolution stuff, but something is better than nothing.

But we will see.

MITCHELL: That's right.

CAVUTO: Dan, always good seeing you, my friend. Thank you very, very much.

MITCHELL: Thank you.

CAVUTO: All right, you have heard by now Paul Manafort, two others indicted on this whole Mueller probe. The question is, where does this go going forward?

To a key member of the House Intelligence Committee -- after this.


CAVUTO: All right, so What happens now after the 12-count indictment of Manafort and obviously this growing question as to who is next, what is next?

House Intelligence Committee member GOP Congressman Chris Stewart.

Congressman, thank you for taking the time.

REP. CHRIS STEWART, R-UTAH: Good to be with you.

And I'll tell you what is next, is, we do tax reform. We are not going to be diverted from that. We are so excited and enthusiastic. And I think we're going to get it done.

CAVUTO: All right, is there any concern among your colleagues, though, sir, that this is a distraction that gets in the way? Does it further lock in the notion that Republicans have to get this over the finish line, because you can't count on Democratic help, or what?

STEWART: Well, a little bit, maybe.

And I guess it's a bit of a distraction. I mean, look at us. Today, we are talking about Manafort, instead of talking about the essence of tax reform or some of the elements of it. And I know you have previously with other guests, but you and I are talking about something different.

So, it's a little bit of a distraction. But, once again, the Republicans in the House are so committed to doing this and moving it forward.

And the second thing I would say is, this doesn't tie directly back to the Trump campaign. It doesn't tie back to the president. If someone has broken the law in some way, if they have evaded taxes or didn't register as foreign agents, and that's true, then I think they should be held accountable.

Most of us just say, let the special counsel do his work, and we will continue to do ours.

CAVUTO: Well, the reason why I even mention it, sir, is, with this other fellow, George Papadopoulos, and whether he might be talking or trying to squeeze or -- other players to sort of get roped into this, that it does escalate.

You don't think it will?

STEWART: Yes, I really don't.

And maybe I am being naive, but I don't think so. And part of the reason is because, as a member of the committee, as you mentioned, we have been looking at this for a long, long time.

And if I thought there was something there that was suspicious or that may be uncomfortable that I thought that hasn't come out yet, maybe this compels that to come out, I might feel a little differently. But I just -- there just isn't.


STEWART: There just isn't.

CAVUTO: I only mention that because legal minds, like our own Judge Napolitano, worry about a following series of dominoes and all.


CAVUTO: So far, you see nothing to indicate that that would be the case?

STEWART: Nothing at all. I really don't.


About the tax cut, sir -- and I'm glad you mentioned that, because we have been pounding them as well, even reporting this others news. But at their face value, are you concerned when the National Association of Homebuilders says, as things stand now, we can't support it?

Others expressing concern about corporate tax cuts that might get phased in over a number of years.


CAVUTO: Others talking about a new bracket for the upper-income folks that might mean they pay even more taxes than they do now.

Any of these concern you or water down what you hoped would be a significant, generational cut in taxes?

STEWART: Well, the thing you just said is so -- is so important, a generational cut in taxes, something that I can look back 30 years from now, like we look back in the 1980s, and say, I was proud to do it.

That's clearly the thing we're achieving for. For those who object to it, I would remind them, we don't know what's in it yet. And the other thing - - and this is so important and it's so ironic to me.

I can't tell you how many people I have met with about this. And in, I would say, hundreds of meetings, and they say, well, we want this, we want this, you got to protect that.

And I say, but, listen, assuming you don't get that, but you have your corporate tax rate reduced to 20 percent, aren't you better off financially? Aren't you paying less taxes?

And they would say, well -- either two things. Well, well, one, we don't know, or, yes, we probably will.

And, for heaven's sakes, you can't protect your goodies and at the same time still demand the corporate tax rate to be reduced the way we're hoping to. And I think, taken in its totality, almost everyone is better off with this, including the homebuilders, including those who are going to pay state and local taxes that many of them are concerned about.


CAVUTO: So, even in the high-tax states, if you phase it out, but not, let's just say, for the upper income, you are open to that? In other words, we will know the details, as you say, Wednesday, but you're optimistic that this does get passed?


And I go tell you, I know that some -- some of my colleagues and very good friends of mine from New York and California and some of these other high- tax states.

CAVUTO: Right.

STEWART: And a lot of them are saying right now, I can't support it, I can't support it.


STEWART: And they're doing what they have to do.

But, at the end of the day, some of the guys -- those guys will tell you, yes, there's no way I vote against this. There is no way I'm one of those guys who stops Republicans from doing tax reform.


STEWART: And I think that's true.

At the end of the day, we are going to get many of those guys.

CAVUTO: Congressman, you could be right. Thank you very, very much.

STEWART: I hope so.

CAVUTO: We shall see.

STEWART: Thank you.

CAVUTO: The Dow down 85 points, though, nevertheless, on concerns about this. We will see.

More after this.


CAVUTO: Well, look who is coming back.

We have got Home Depot co-founder Ken Langone, famous last time he was here for saying, you know what, I don't need no stinking tax cut, and neither does the rest of the country, if it means we can help out all those folks who were really hit hard by all those hurricanes.

What does he have to say now? He's loaded for bear and coming here, and only here, tomorrow.

We will see you then.

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