Gov. Mitch Daniels on Budget Battle; Mike Huckabee Talks Presidential Politics

The following is a rush transcript of the February 27, 2010, 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 and this is "Fox News Sunday."


WALLACE (voice-over): Governors across the country are struggling to balance their budgets, but one already has a solid record of taking on government workers and turning his state's economy around.

We'll sit down with Indiana governor and possible presidential contender Mitch Daniels. Then the 2012 campaign, the polls say he's a front runner for the Republican nomination. But does he have the desire to get in the race? We'll ask former Governor Mike Huckabee. Daniels and Huckabee, only on "Fox News Sunday".

Plus, the latest on the revolution in Libya and we will ask our Sunday group, could President Obama do more to topple Muammar Qaddafi?

And our power players of the week, taking on the leaders in Iran by making fun of them. All right now on "Fox News Sunday".


WALLACE: And hello again from Fox News in Washington. As states struggle with huge budget gaps and take on public workers, our first guest has become the new "it boy" of American politics.

Republican Governor Mitch Daniels of Indiana is being celebrated for turning deficits into surpluses and adding jobs, and some are saying he should be the Republican nominee for president next year.

Governor Daniels joins us now. Governor, welcome back to "Fox News Sunday."

GOV. MITCH DANIELS, R-IND.: Thank you, Chris.

WALLACE: And we need to say that what is going on there is you just had rotator cuff surgery and you're not going be ready for spring training.

DANIELS: All the right wing jokes have already been made, so--

WALLACE: All right, I went with baseball.


WALLACE: You are in the middle of a standoff right now with House Democrats who have crossed state lines and are inside Illinois and are blocking any action in the legislature.

They first said that they were fighting against the right-to-work law, which is now dead. Now they say they are fighting against 11 other bills on the agenda. Question, are you prepared to make a deal to get those House Democrats back to Indiana?

DANIELS: No, if they come back, we will talk about what sort of changes or amendments they might want, but while they are subverting the democratic process, there is nothing to talk about. So when they come back to work, we will talk about their concerns. You describe it quite accurately, Chris. Our situation is very different than Wisconsin. This is not about government unions. This was a bill I did not initiate and I thought it ought to really wait for a different time, because I thought exactly this might happen and it might get in the way of a very important agenda that was laid in front of the people of Indiana. Low-tax agenda, reduce the corporate tax to attract jobs, reform education and so forth.

And yes, they ran off to Illinois ostensibly over the right-to- work bill. But as soon as they got what they wanted there, they issued an ultimatum from a hot tub over there with about 10 more items.

This is to tell you how reactionary Indiana Democrats are. The first four items they want killed are President Obama's race to the top agenda.

WALLACE: When unions started protesting the right-to-work law this week and House Democrats took off, you said that you thought that the bill should be dropped, as you just pointed out. Then you added this.


DANIELS: Even the smallest minority, and that's what we've heard from the last couple of days, has every right to express the strength of its views, and I salute those who do.


WALLACE: Conservative bloggers immediately hammered you, said you weren't tough enough, said you wanted a truce on fiscal issues, and the day after you issued a much tougher statement. Here it is.


DANIELS: The House Democrats have shown a complete contempt for the democratic process.


WALLACE: Were you trying to reassure conservatives that you are tough enough?

DANIELS: No, I was reiterating exactly what I said the first day.I was a little I guess careless about my pronouns. The statement I made I'll make again. I was referring to the private sector protesters, the union members who came to disagree with the right-to-work law. They had and they have every right to express their First Amendment point of view. When I -- I was distinguishing --

WALLACE: When you said them, salute them, though, you weren't talking about the Indiana House Democrats?

DANIELS: No, I mean, in fact it's very -- I guess I'm glad I made the mistake because it allows us to really I think clarify an important distinction. It is one thing for the people in the private sector to express their point of view as our protesters did.

It is quite another for public servants accepting a public paycheck, having lost an election to a very clear agenda, to try to trash the process, run off to a different state and hide out. That's what I said on both those days was completely illegitimate.

WALLACE: All right. You took away -- what is going on in Wisconsin now, you took away public workers' collective bargaining rights by executive order six years ago the day after you were sworn into office, but now you are calling their unions the privileged elite. Question, teachers, public safety officers -- the privileged elite?

DANIELS: Across America, Chris, we've had a huge inversion. There may have been a time, a century ago, where public employees were mistreated and vulnerable and underpaid. If that was ever a problem, we have over-fixed it. Not everywhere but in many places.

As you know very well, public employees in America -- most decidedly federal employees, but everywhere -- are better paid than the taxpayers that pay their salaries. When you add much more generous benefits and much more generous pensions on top, the gap widens, and then there is near total job security in the last recession.

WALLACE: But you really would call teachers, I mean, they're public servants, you said they are public servants. Would you really call teachers a privileged elite?

DANIELS: I was really talking about the government unions, of whom their union, of course, is one. Now, it is true that teachers are paid in Indiana 22 percent more than the taxpayers who pay their salary. The benefits raise that further, that is all true.

I happen to think that is a good idea. We have some of the best paid teachers in America, and I think that is absolutely fine. In fact, one of the bills our Democrats want us to kill would allow us to pay the best teachers more, which is something I'd really like to do.

But as a general phenomenon, we have a situation in which public sector unions get gillions of dollars in dues, which they hand back to the politicians who then sweeten the pot for them in an unending circle, and that's a bad idea.

WALLACE: You have a strong record, I think it's fair to say, of balancing the budget as governor of Indiana. Let's take a look at the record. You inherited a $600 million deficit and turned into a $370 million surplus the next year.

You ended the last fiscal year with a reserve fund of $830 million. And at the CPAC conference two weeks ago, you talked about the greatest threat facing this country. Let's watch.


DANIELS: We face an enemy lethal (inaudible) and even more implacable than those America has defeated before. I refer, of course, to the debt our nation has amassed for itself over decades of indulgences. It is the new red menace, this time consisting of ink.


WALLACE: I want to do a lightning round because we have limited time. Quick questions, quick answers. What would you do about Social Security?

DANIELS: I would bifurcate it. I would say those in the program or approaching it, a deal is a deal, you're good to go, nothing changes. For the young people who are paying for today's retirees and tomorrow's, we want you to have something when you retire. We will need a brand new compact. I think it starts with means testing, which is to say we shouldn't send a pension check to Donald Trump. We should concentrate the resources on those who are going to need them the most.

I think we should in the future raise the retirement age to catch up to the medical reality of our time. I think we should protect the benefits against inflation, but not overprotect them.

Chris, as I said many times in the past, that is my cut at it. If somebody has another route that gets us with assurance to the same results, I would like to hear it, because I just want to see a solution to this before it destroys the America we know.

WALLACE: You talked about Medicare 2.0, private vouchers, not a government program?

DANIELS: It will be a government program, but instead of a top- down monstrosity that we have today, once again I would divide the program and say to those who are in it or who are about to be in it, nothing will change for you.

But I think for the young people coming up who are going to shoulder the bill, we ought to trust them to make more of their own decisions. You could, again, concentrate the resources on the poorest people, and also in this case the least healthy people, people who are better off --

WALLACE: But you'd give them a private voucher so they could choose their own insurance plan?

DANIELS: I would.

WALLACE: You even say the government should put limits on end- of-life care. Are you talking about what Sarah Palin called the death panels?

DANIELS: No, I didn't say government should put limits on this, but what I'm worried about is the government making these decisions. I just stated what I think is a simple fact. I wish it wasn't, but I think it is. We cannot afford in an aging society to pay for the most expensive technology every -- for every single person regardless of income to the very, very last day.

WALLACE: Who makes that decision?

DANIELS: I think it has -- at least a part of it has to be the family and the patient himself or herself. I mean there --


WALLACE: Does the government at some point say we can't afford to give the 92-year-old the liver transplant?

DANIELS: Chris, I've told you, I think with some specificity, what I think ought to happen in Social Security and Medicare. I just answered the question honestly. I think this problem will have to be addressed. I don't pretend to have an exact answer to this one, except that autopilot won't work.

WALLACE: Do you think voters are ready? I mean, you talked about some things that seem to be sort of political taboos. Do you think voters are ready for such strong medicine?

DANIELS: I can't tell you that for sure, but I have a little -- more confidence maybe in the American citizenry than some.

DANIELS: Some in politics today.

I -- I do believe that people are ready to step up, that once they have the real facts -- many of these facts that you may know are -- have not been shared, honestly, with the American people, and I give -- I give a little more credit than I think some of our politicians do.

WALLACE: You -- you also have a record as the first budget director under President Bush (INAUDIBLE) George W. Bush. When you came in, this country have an annual surplus for the first time in 30 years of $236 billion. When you left, two and a half years later, the deficit was $400 billion. You were also there when President Bush launched his Medicare Drug Benefit Plan that now costs $60 billion a year.

I know there was a recession, but do you think it was wise at a time when we were fighting two wars to have two tax cuts and launch a huge new entitlement?

DANIELS: Well, it wasn't just the recession. It was recession, two wars and a terrorist attack that led to a whole new category called Homeland Security. So nobody was less happy than I to see the surplus go away, but it was going away no matter who was the president.

You know, Chris, I was proud to be part of that administration. Yes, I think the original tax cuts were good and -- and timely and helped the economy to recover very, very quickly from that recession.

But, if you want to know what I think about fiscal issues, don't look at two and a half years where I was in the supporting cast with no vote. Look at six years where I was in a responsible position, submitting budgets and fighting for them. And, you know, there's the record that -- that I think is -- is most accurate.

WALLACE: You've also infuriated the right by calling for a truce on social issues. Here's what you said at CPAC.


DANIELS: Big change requires big majorities. We will need people who never tune in to Rush or Glenn or Laura or Sean.


WALLACE: But some conservative say that abortion and traditional marriage shouldn't be negotiable, and our next guest, Mike Huckabee, says -- and he's a fan of yours -- says he's disappointed that you would suggest that pro-family activists would just lie down.

DANIELS: Well, that isn't what I suggested.

A truce in -- first of all, it's only a truce if both sides agree to stop fighting for a little while. I don't want to have an argument with anybody about this. It was a -- a suggestion, really, tactically. It starts with the premise that our nation is at mortal risk.

I'd love to -- I'd love to learn that I'm wrong about this, but that is not threatening not just our economy but our entire way of life, our role in the world, maybe even our national security.

Now, if you share that fear, then all I'm saying is we're going to have to unify a lot of America, we have to get a lot of people together to make these changes.

You asked me these -- tackling these problems that we're talking about is supposed to be politically undoable. Well, if we're going to do the undoable, we're going to need to gather ourselves together as a nation, and that will, by definition, mean that there'll have to be some folks in that coalition who do disagree about other things.

WALLACE: We've got about a minute left.

Where are you on running for president?

DANIELS: Well, I sure haven't decided to do it, haven't decided not to. I'm -- I'm keeping the option open, and I -- as I've been urged to.

But, you know, Chris, I never expected to run for any office. All I set out to do was to try my best for four years, maybe eight, to make a better state, more prosperous state in the place I live. And, you know, any thought I ever had about national issues was maybe we could set some good examples and create some successes others could look at and maybe here and there offer a constructive thought. And that's still where I am.

WALLACE: And when do you have to make a decision? When -- have you set a timeline for yourself?

DANIELS: No, I've -- others -- others keep suggesting these deadlines, and then they keep passing. I -- I think it's one of the great breaks we've had as voters that this thing didn't start.

WALLACE: But some have said when the legislature goes out of session -- of course it may never be in session, in April.

DANIELS: I will tell you this, I'm giving my full attention to the duty, the job I hired on for, and I hope that we -- that our Democrats get out of the hot tub, will go back to work, will finish at the end of April. And --

But if they don't, I'll still be there, and so will they, eventually because that's the -- that's my duty. If it means that deadlines pass, it does.

WALLACE: Finally, governor, some people have suggested that you don't look presidential. Barack Obama is 6'1", you're 5'7". He's charismatic and, forgive me, but some people suggest perhaps you're not. Does that matter?

DANIELS: Well, probably, you know? Some voters -- I've never in -- in the limited elected time I've had, I've never suggested to a voter what they should consider a valid criterion.

So, you know, sure. If it comes down to height and hair, I probably wouldn't do very well. But I guess that's just something you weight in the balance with many other factors.

WALLACE: Governor Daniels, we want to thank you so much for coming in. I hope you feel better.



WALLACE: And it's always good to see you. And we'll be waiting ready to see what happens in Indiana and what happens on the presidential campaign trail.

DANIELS: Thanks.

WALLACE: Thanks.

Up next, another possible 2012 contender who's leading the GOP polls right now -- former Governor Mike Huckabee. Back in a moment.


WALLACE: By almost any measure, Mike Huckabee is one of the top contenders for the 2012 Republican presidential nomination, if -- and it's a big "if" -- he decides to run.

He's just written a book called "A Simple Government" which offers a blueprint for a possible campaign, and earlier I sat down with him.


WALLACE: Governor Huckabee, welcome back to "Fox News Sunday."

FORMER GOV. MIKE HUCKABEE, R-AR.: Thank you very much, Chris.

WALLACE: Let's start with the big question, which is, of course, whether or not you're going to run for president, and you have recently sent some -- some negative signals, if I may. You said this week you're making big money for the first time in your life and you worry you'll be completely destitute if you run and lose.

You said you'll only run if you have strong financial support, "I don't plant to jump in a pool that has no water." Sensible.

And in your book, you say of the game of campaigning, "I actually dread the process."

Question, should someone run for president who has so many doubts?

HUCKABEE: I love campaigning, Chris. I think I need to qualify, I don't enjoy what I would call the peripheral of it, which is the part you dread. And the peripheral is you spend so much of your time defending rather than actually going out and talking about issues that you think would make America a great country. Now, I don't think that's going to change any time soon.

But what I find interesting is if you are even halfway honest when asked a question, it's sort of like the old jack web, everything you say can and will be used against you. And I'm -- I'm finding more and more that trying to give an honest answer, which is I don't know, but here are the thought processes, people interpret that and then come to a conclusion.

The fact is I'm very much considering doing it again. I think I have the advantage, not only because of poll numbers but I've been there, I've done it, so I know what I'd be walking into. A lot of people don't.

WALLACE: Let's face it, obviously you're promoting a book and being a potential candidate is good for business in that sense. But here's the serious question, which I think relating to all this -- don't the American people deserve a candidate who believes with all of his or her heart that they are the best person for the job?

HUCKABEE: Absolutely. And one of the reasons that I have not yet made that decision is because I'm working through that process. I think I would be an excellent president and a good candidate.

But what I want to know is do I think I can carry it to the finish line? Can I raise the level of money, an obscene amount of money that's going to be necessary to win the primary, and then to challenge an incoming president who's going to have a billion dollars piled up just waiting on somebody to come after him?

WALLACE: One thing you don't express any ambivalence about is your opinion of Barack Obama. And you say this in your book. "Just about everything he thinks is good for America is actually bad for our present and worse for future." Explain.

HUCKABEE: His accumulation of debt is horrifying. He has created more debt in two years than George Bush did in eight. The debt that we face I believe is the most serious crisis outside of the threat of terrorism, the threat of jihadism that confronts America.

And we cannot rebuild our economy and get people back to work and on a job site as long as we have a president who thinks that if the federal government just keeps on spending money, we're going to be so much better off.

I mean, the first rule is, if you're in a hole, quit digging. If you're a family and you just lost your job and you're broke, you don't go out and go on a spending spree. You start figuring out how to cut your expenses.

WALLACE: This week the president decided, decided that the Defense of Marriage Act, which bars federal recognition of same-sex marriage, is unconstitutional, and he directed the Justice Department to no longer defend DOMA, the Defense of Marriage Act, in court. You say that that could destroy the president. Isn't that over the top?

HUCKABEE: No. I'll tell you why. Maybe that's a hyperbole, but heck politicians are given a little hyperbole, as are talk show hosts. But here's what I mean by that. First of all, he alienated the African-American community. Overwhelmingly African-Americans support traditional marriages, more than Hispanics and more than whites. In the white community, it's about 56 percent, 65 in the Hispanic, 75 in the African-American community.

You have African-American church leaders like Anthony Evans coming out saying of the 34,000 churches that he networks with, they are in arms about this. But secondly...

WALLACE: But if he believes that it's unconstitutional, I mean you would say give an honest answer.

HUCKABEE: Well, let's take a look at that. He said because some lower court decided that a part of DOMA was unconstitutional that he would not enforce it. OK. By that logic, he should not try to implement Obamacare, because some lower courts have already decided that it's unconstitutional.

That's hypocritical. It's hypocritical and it's dishonest, because when he ran for president, Chris, he said he supported traditional marriage. He's on the record. Now, the question is was he dishonest then? Is he dishonest now? Or did he change his view, and if he did when and why?

WALLACE: If he did change his view, is that legitimate?

HUCKABEE: He better explain why because that's not why he got elected. And here's another thing I think he's got to explain. Why is it that on one hand, he has been saying that if this issue is addressed, it should be addressed legislatively, and now he's doing it not legislatively, not even judicially?

Judicially, it would go to the Supreme Court. He's doing it administratively. I don't think that what he's doing is constitutional. If a president begins to decide which pieces of the law he's going to choose to support or endorse or enforce based on a lower court decision, not because it's actually bubbled up to a final adjudication -- that is an unusual precedent for a president to take.

WALLACE: He says he's going to enforce it. He just says that he's not going to defend it in court cases.

HUCKABEE: Well, but it's really the same thing. That he has decided that this is a part of the law he doesn't like, so he's not going to recognize it. I don't think a president in the executive branch can thumb his nose at a branch of government that is incomplete in its assessment of a law.

WALLACE: Ronald Reagan's 11th Commandment was thou shall not speak ill of any other Republican, and I would submit that you have been breaking Reagan's 11th commandment recently.

HUCKABEE: Oh, what have I done?

WALLACE: Well, in your book, you say of Mitt Romney's plan for Massachusetts, quote: "If our goal in health-care reform is better care at lower cost, then we should take a lesson from Romney care, which shows that socialized medicine does not work." Socialized medicine?

HUCKABEE: Well, that's what it is when the government runs the program. And by the way, I think there's a real difference in Ronald Reagan saying don't speak ill of another Republican and don't evaluate what another Republican's proposals are.

I mean, if you want to go by that, let's go back four years ago and look at all the different things that I was criticized for by my fellow Republicans, including Mitt Romney. The point is, policy differences are legitimate.

If we start attacking each other on integrity and character, I think that's a problem, which I haven't done. But I do think the Wall Street Journal's analysis of the Massachusetts health-care bill showed that it was exactly almost a carbon copy at the state level of what Obamacare was at the national level.

And it showed that costs have gone up, they are out of control. People are waiting longer to see a doctor and the quality of health- care is down, and the people of Massachusetts are less satisfied with their health-care than they were before the program went into play.

WALLACE: If Romneycare is, as it is, the signature issue for Mitt Romney, his signature accomplishment as governor of Massachusetts, and you say in your book it's an experiment that blew up. It is socialized medicine. You've just said harsh words now. What does that say about his fitness to be the Republican nominee for president?

HUCKABEE: I don't think it disqualifies him. Let me surprise you with this. I think the purpose of states are always to be laboratories of government. I wrote about this in the book and I quote Justice Brandeis from 1932, who talked about states as laboratories.

WALLACE: But is socialized medicine good, conservative--

HUCKABEE: It's not a good plan, but he attempted something that he wanted to see would it work. You know, I think his answer ought to be not hey, it's not what I really did, it's different -- because it really isn't that much different. I don't think he ought to try to say, well, it's the same plan but they didn't implement it the right way. I mean, why doesn't he just say, we tried it, it didn't really work like we thought, but that's what states ought to do and I'm willing to take a risk. That's what leaders do.

I don't have a problem with a governor in any state taking risk, trying something bold. But if it doesn't work, for heaven's sakes, let's not put it in all 50 states.

WALLACE: Sarah Palin, Michele Bachmann and Rush Limbaugh have all criticized Michelle Obama anti-obesity campaign as a nanny state run amok. You say they're all wrong, and in fact that we should all be thanking the first lady.

HUCKABEE: I didn't say they're all wrong. Let's be real clear, because then it sounds like I'm in a war with Sarah Palin, Michele Bachmann and Rush Limbaugh, and I'm not. I'm just simply saying that what Michelle Obama is proposing is not that the government tells you that you can't eat desert.

What Michelle Obama has proposed is that we recognize that we have a serious obesity crisis, which we do. Seventy-five percent of the military eligible kids going into the Army can't qualify for the physical because they're either overweight or obese and can't meet the minimum Army standards.

That's serious. This is no longer just a health issue, an economic issue. It is becoming an issue of national security.

WALLACE: We got less than two minutes left. I want to ask you about two things. Two issues that you are going to face if you get back into that process of all the gotchas that you say you dread. If you do run for president, one of the issues you're going face is conservative fiscal groups said that you were a big tax-and-spender as governor of Arkansas.

Let's put up part of your record. Taxes went up a net of $500 million during your years as governor, including an increase in the sales tax, increase in the cigarette tax, and a 3 percent income tax surcharge.

HUCKABEE: That surcharge I did not support or sign, and I did sign its repeal. So that's a misnomer.

Secondly, the half million dollars sales tax was because of a court-ordered education case that we had to deal with.

WALLACE: But you had another sales tax increase when you came in as governor.

HUCKABEE: That was a one-eighth for conservation, which meant that we were able to dedicate a significant portion of funds for the preservation of the natural state, which is the state's motto, natural preserves.

It was supported by the voters. It was on the ballot. Did I support it? Yes. But you know what, so did the voters, and they voted for it.

Now, here's what I did do. Cut 94 taxes, the largest number of tax increases -- tax decreases in the history of the state.

And in addition to that, we did some tax policies that really helped people at the bottom. We eliminated the marriage penalty. We improved the child care tax credit. We made sure that we cut the capital gains tax so that businesses could afford to keep going. That's a record that I am proud of.

WALLACE: You're going to decide when?

HUCKABEE: I'm waiting to see what kind of reaction. This book is my message. This book is what I stand for and what I believe. I want people to say, you know what, that guy has got ideas we can live with. Or maybe they're going to say this guy is a crazy fool.

WALLACE: So if the book tanks, you're out?

HUCKABEE: Well, it's going to give me an idea. You know what, if you can't sell your own message, then chances are there is not a big constituency out there. And to run for president, you've got to have people who believe in what you stand for.

WALLACE: Governor, I'm going to have to leave it there. You said you were going to decide by this summer, correct?

HUCKABEE: At the latest.

WALLACE: OK, thank you so much, and we'll be waiting and watching to see what you decide.

HUCKABEE: Thank you, Chris. Great to be here, thank you.

WALLACE: Up next, we'll have a report from Libya, and the Sunday panel tells us if there's anything more President Obama can do to stop the massacre.



MOAMMAR QADDAFI, LIBYAN LEADER (through translator): Get ready to defend Libya. Get ready to defend the great manmade river. Get ready to defend the oil. Get ready to defend dignity, independence and glory.


WALLACE: That was Libyan dictator Muammar Qaddafi rallying his supporters to fight to the bitter end.

With international pressure building against the regime, there are widespread reports forces loyal to Qaddafi continue to shoot unarmed protesters.

For more, we turn to Fox News Correspondent Leland Vittert, who's in Tobruk, in eastern Libya -- Leland.

LELAND VITTERT, FOX NEWS: Chris, the battle lines here in Libya are drawn north to south.

In the east, you have the rebels, which have gained control of much of the country. In the city of Benghazi, they have set up shop and are beginning to take charge, and have a provisional government set up to try and provide the basic needs for some of the citizens. In the west, is where you have Colonel Qaddafi and his forces that control the capital of Tripoli.

They have mercenary gangs that are shooting indiscriminately on citizens. However, the protesters have at least gained the upper hand in the town of Zawiya, about 30 miles from Tripoli. Qaddafi, though, has now said that he is going to open up his arms depot to supporters and order other civilians to take shots at the protesters to try to put them down.

The United Nations has now stepped in with sanctions against Libya, and has also referred Qaddafi to the International Criminal Court for his alleged attacks on civilians.

Of course, here, both sides describing this as a no surrender situation and promising they will fight to the end. It may come down to a question of who is willing to spill the most blood. A couple of days ago, I was able to meet with one protester who was shot through the abdomen. We had a long discussion, and I said, "Was it worth being shot?" And he said, "I would gladly take a hundred bullets for the chance of freedom in my country."

Chris, back to you.

WALLACE: Leland Vittert, reporting from Libya.

Leland, thanks for that.

And it's time now for our Sunday group: Bill Kristol of "The Weekly Standard"; Mara Liasson of National Public Radio; former White House press secretary Dana Perino; and Fox News political analyst Juan Williams.

So, Bill, you heard Leland just talk about no surrender. Where is Libya headed? Is this bloodbath just going to continue?

BILL KRISTOL, "THE WEEKLY STANDARD": I hope not, and I think we can do more to end this quickly. Qaddafi is losing ground. He's lost the city just 30 miles away, a city of 30,000 (ph) people near Tripoli.

I think we should move quickly now to enforce a no-fly zone, not let Qaddafi use what part of his air force is remaining to kill Libyans. Probably enforce a no-tank zone, too, so he can't use tanks and armored personnel carriers to kill people in the streets, and probably recognize the provisional government that Leland mentioned that's set up in Benghazi, which would set up a predicate for a somewhat orderly transition.

Qaddafi is going to lose. We can do a lot to make the loss, I think -- to make the civil war less bloody and make the loss much quicker.

WALLACE: Mara, there is growing criticism of the president's response. Before we even get to the military options, world leaders were calling for Qaddafi to go. It was only yesterday that in a phone call with German Chancellor Angela Merkel, that the president finally said Qaddafi should go. Other countries sent warships to evacuate their nationals. We sent a ferry.

Is the criticism legitimate?

MARA LIASSON, NATIONAL PUBLIC RADIO: Right. I think that the criticism is legitimate up to a point.

The White House says that the reason why it couldn't come out and call for Qaddafi's exit until yesterday is because they were waiting for that ferry load of Americans to get out of there, and that they were afraid of a hostage situation. They were afraid of how Qaddafi might react.

And you could argue that maybe the United States should have been better prepared to evacuate its people, but they did get them out. And now the president is working hard at the United Nations get sanctions, to enforce a no-fly zone, and to work with allies around the world.

So I think, yes, things move so fast now. The White House might have been behind a bit, but they caught up.

WALLACE: Are you as forgiving about this? And realistically, when you've got a dictator who is willing to fight to the death, what can you do? I mean, should we invade the country? Should we enforce a no-fly zone or a no-tank zone? Should we try to engineer a coup?

What could we do?

DANA PERINO, FOX NEWS CONTRIBUTOR: Well, they certainly have a lot more information than all of us, right? They're in The Situation Room. They have the intelligence that we don't have at our disposal.

What the White House could have done, though, I think, is, three days ago, provided the information that Mara just provided us, which is on background to reporters, to you, to a few other people, to say, this is why he's not coming out and saying this, this is why he is not being as strong as you might have thought he was in Egypt, give us some time, this is what they're doing. Instead, they only started doing that backgrounding three days afterward, so it does look like they are playing catch-up.

And every president has multiple audiences every time they speak. So, your allies, your people at home, you enemies, and the people of Libya. And I think that the people of Libya, they did not hear a strong enough American support this week.

WALLACE: Two questions, Juan.

One, what can we do? And two, does the president deserve more criticism for what he has failed to do so far?

JUAN WILLIAMS, FOX NEWS CONTRIBUTOR: Well, I think Bill laid it out pretty well. I mean, the key here to me is international cooperation.

The United States has a lot of power. We could send ships into the Mediterranean to protect those oil resources, and that's a growing issue here in this country with gas spiraling at the moment, as to what we do about that. But we need to protect the oil sources.

But I think you want to prevent any signed of genocidal action by Qaddafi, and I like Bill's suggestions very much. But I think you do it in coordination with the international community.

I don't think you want the United States intervening to the point where people are saying the United States is stirring the pot or Qaddafi can blame the United States. No, I think it's an international effort.

The second thing to say is, with regard to this blame, I just think people are nitpicking. I just think they just want to go after President Obama.

Clearly, we had -- I believe it's 167 foreign service officers on the ground. You should protect those people. They are putting their lives on the line for the United States.

And I don't think, Dana, that we have any reason or the president has any reason to come out and suddenly say, oh, this is why I'm doing it. If he says that to us, then Qaddafi --


PERINO: I'm not saying he should have done it.I'm saying that his communications team could have done it, and could have done it very effectively, to call people three days ago and explain that rather than playing catch-up. It would have helped -- it just would have helped the president.

WILLIAMS: But wouldn't Qaddafi --

PERINO: I'm talking about communications strategy.

WALLACE: What about the people on the ground in Libya?

PERINO: That's right.

KRISTOL: Look, other -- the Chinese removed 15,000 nationals over the last week. The British and other European nations sent in warships to remove their nationals. The British sent in a C-130 to take people out.

We rented a ferry that sat at port for 36 or 48 hours because it couldn't make it across the choppy waters of the Mediterranean. That's pathetic.

I don't know why we did it. Maybe we didn't want to look too militaristic. God forbid we should actually use the 5th Fleet and send an actual warship to get our people out. I think it would have been kind of useful to move an aircraft carrier into the Mediterranean, which I'm not sure we've done yet.

So I think the president's response was wildly overcautious, reflecting Juan's view that, God forbid, the Americans should look like they are actually helping an Arab people overthrow a brutal dictator. You asked a couple of minutes, what do you do when a brutal dictator wants to fight to death? What you do is hasten his death, hasten his departure.

And I think we could do much more to do that. We're not.

You said the president's working on a no-fly zone. There's no evidence of that. That's not in the U.N. resolution. There is still -- he is still slaughtering people in the streets of Tripoli.

WILLIAMS: Bill, do you think that it's a reality that Muammar Qaddafi is not a rational person, that he is a terrorist and a sick man? And do you think that there is evidence historically that his response to American military efforts have been off the board? He's gone ballistic and done things that are a threat to not only his own people, but to Middle East stability.

If you're the president of the United States, what you are suggesting would have been reckless action that was provocative to Qaddafi.

KRISTOL: You just said he's a reckless, sick man. You can't provoke such a man.

WILLIAMS: You can't provoke?

KRISTOL: The one message he did learn, in fact, in the Reagan years, I think, is to be a little scared of U.S. forces. And I think we didn't signal enough force and didn't use enough force during the last week.

Having said that, fine, they were slow. We got the diplomats out. Now, can we finally help the Libyan people end this thing?

WILLIAMS: I think you will see that.

WALLACE: And you have no problem with the idea of military force, no-fly zone? If there are tanks in the streets, take out the tanks?

KRISTOL: In conjunction with NATO nations. I don't think it has to be the U.S. alone, but I don't think we should paralyze ourselves by waiting for the Russians and Chinese to approve of it.

WALLACE: And you don't have any problem with that either?

WILLIAMS: No. What Bill and I are agreeing on --

WALLACE: I'll bring you two together.


WILLIAMS: -- but is the idea that you need an international coordinated effort. I like that U.N. sanctions have been put in place, and I think sending it to a criminal court -- again, it's not about the United States, it's about the Libyan people.

WALLACE: All right. We have to take a break here.

But when we come back, can Democrats and Republicans here in Washington cut a deal to prevent a government shutdown, at least for a couple of weeks?



PRESIDENT BARACK OBAMA: Next week, Congress will focus on a short-term budget. For the sake of our people and our economy, we cannot allow gridlock to prevail.



SEN. ROB PORTMAN, R-OHIO: Our goal as Republicans is to make sensible reductions in the spending, and create a better environment for job growth, not to shut down the government.


WALLACE: President Obama and new Republican Senator Rob Portman both hoping to avoid a government shutdown this week, but offering different solutions.

And we're back now with the panel.

So, the continuing resolution funding the government runs out this Friday, and the best, it seems, that Congress can possibly come up with is a two-week extension to avoid a government shutdown. House Republicans who want to cut spending by $61 billion over the next seven months said fine, you want a two-week extension? Give us the prorated amount, which would be $4 billion.

Senate Democrats said no way. Then House Republicans did something very smart. They identified $4 billion in cuts that Obama wants next year, and said we'll give you the cuts -- we want the cuts this year.

So, question, Mara, will there be a deal? Will they avoid a government shutdown, at least for two weeks?

LIASSON: Oh, yes. I think they're going to avoid a government shutdown for two weeks.

Both sides moved, actually, in this new proposal. The House proposal does not have any of those policy riders in it, and it doesn't prorate the $61 billion. What it does is it gets its $4 billion from things Obama would have ended anyway, as you said, and also takes back some earmark money. So, Senate Democrats, vulnerable Senate Democrats, get to say they voted for cuts, and Tea Party people get to say, see, we set the agenda and we're cutting the government, as the two sides talk.

Now, after two weeks, or maybe, at the most, another three -- maybe three weeks or four weeks, you can't do that any more. You have to actually decide on what level of spending cuts you're going to agree on for the remainder of this year.

And what's the number? I mean, I don't know what the number is, but I do think that if it's anything close to what John Boehner originally wanted, which was around $30 billion, it's going to be a victory for Republicans.

WALLACE: Well, I'm just a moderator. You think that House Republicans would agree to $30 billion in cuts total, I mean, when they are now on record as asking for $61 billion in cuts? And more importantly, I guess, would the Tea Party freshmen allow him to sign on to that?

PERINO: There is no reason they should. They have the leverage right now.

And also, I think that what Senator Reid has found is he's got a formidable opponent in John Boehner, who is creative and has kept the new freshmen class together with him for now. And I think you might see some more creativity from there.

And also, he rules differently, a little bit, than Nancy Pelosi, who really had -- she had a very raucous caucus, trying to pull all those people together all the time, and she ruled with an iron fist. And Boehner, as we've seen a couple of votes recently, has sort of opened up the floodgates and let people do their amendments.

And so people feel like they have a little bit more stake in the process. And I think that Boehner is like the tortoise, if it's the tortoise and the hare, and he will come out on top in the end.

WALLACE: Where do you think this is headed? Is there going to be a shutdown? I'm not talking about this week, but two or three weeks down the road? Is there going to be a shutdown? And if there isn't, if they work out a deal, is it more on the House Republicans' terms, bigger, more cuts, or the Senate Democrat and president's terms, smaller, less cuts?

WILLIAMS: Smaller, less cuts, because there is tremendous pressure in the country to reduce the size of the deficit, spending, all that. But when it comes down to the brass tacks, what are you actually cutting, well, let's look at the $61 billion that you were talking about, Chris.

You're talking about things like food safety, homeland security, border security. You're talking about things like education spending, schools.

The American people are just not going to react well to that. They are just going to freak out. They're going to be like, what are you talking about? This is Draconian.

This is taking a hatchet to the budget. It's not doing something that is even going to produce jobs or grow the economy. And that is not Juan Williams talking. That is Goldman Sachs talking. So, when you stop --

WALLACE: Well, wait a minute. The Goldman Sachs number, that's been somewhat discredited.

WILLIAMS: Goldman Sachs -- no.


WALLACE: All they did is they took the multiplier and they said, if you cut so much, and there's a number, that's going to mean so many fewer jobs.

WILLIAMS: Thank you, Chris.

WALLACE: Yes. If that had worked, then the stimulus, we would have unemployment under 8 percent.

WILLIAMS: No, because we had continued losses, and the losses were accelerating. That is the Obama administration position. I mean -- but anyway --

WALLACE: Look, so is this Draconian? I mean, we're going to go back to spending of 2008 and 2009. We all remember that things were just horrible in those days.

KRISTOL: I think Republicans can stand up to the Juan Williams' Goldman Sachs nexus. And they should.


KRISTOL: And look, the big thing that happened this week is that the American public did not react as Juan did. They went home this week, the House Republicans, and they were nervous going home, and the leadership was a little nervous.

What are the freshmen going to hear? The freshmen think they really -- everyone wants to cut government. Where are they going to go home and have the same experience the Democrats had exactly two years ago, after they passed the stimulus and they went home?

And guess what? The public wasn't thrilled to be spending $800 billion, the Tea Party got launched, and the rest is history.

And the big thing that happened this past week, in addition to John Boehner's clever maneuvering here, was that the Republicans went home and the dog didn't bark. Citizens are not outraged. Juan wishes that they were outraged.

WILLIAMS: But Bill --

They had town meetings. There was a conference call of the House Republicans.

WALLACE: Wait, wait, wait, because we're running out of time. Is there going to be a shutdown eventually or not? And if there isn't, and they have to make a deal, whose terms will it be under?

KRISTOL: There will not be a shutdown, I don't think. And I think the deal will be a good deal for Republicans which will cut real spending in real time in a significant way.

WALLACE: Let me ask you, Mara, because the conventional wisdom is, I think fair to say, whether it's right or wrong, is that back in 1995, when there was a government shutdown, it very much worked to the benefit of President Clinton and very much to the detriment of Newt Gingrich and the House Republicans. And that this time, again, a shutdown would help Democrats. But there are some big differences.

I went back and checked the deficit. In 1995, it was $164 billion.


WALLACE: It's now $1.5 trillion.

LIASSON: Sure. I mean, people are in a mood to cut. They want the deficit resolved.

Now, here is the dirty little secret. What they are talking about now has nothing to do with cutting the deficit. It's about cutting spending, that's for sure, but the deficit is being drive by things that none of these negotiations are about.

It's not about domestic non-defense discretionary. The things that drive the deficit are entitlements and tax cuts, and that's not on the table right now.

I do think it's different than '95. I still think that both sides would be hurt by a government shutdown because it would look like Washington can't get its act together. What kind of jokers are they that they can't even keep the government operating?

But I agree, there is a huge kind of fever in the country to do something about the debt and the deficit and spending. You don't have a leader like Newt Gingrich who's out there kind of boasting about how he is going to shut the government down. And I just think it's very, very different. And you have the House Republican -- all House leadership in the Republican Party in both houses saying we're not going to do it.

WALLACE: Dana, less than a minute left. And I want you to go back and address Juan's point, which is -- and I think this is what Democrats are counting on -- when we tell you specifically what they are going to cut, you're going to hate it.

PERINO: But I think that that won't work.

You know, my first day on the job as the press secretary was the first day of the first government shutdown. I remember it very well. Lots of changes since then. Sixteen years or whatever it has been.

I think that the American people are not freaking out about it. I think that the Senate Democrats who are up for election in 2012 are really hoping this doesn't work, that the government doesn't get shut down, and that they get a chance to vote on some spending cuts.

WALLACE: Yes. There are a lot of Democrats, vulnerable Democrats, who are going to vote for the Republicans on this issue.

Thank you, panel. See you next week.

And don't forget to check out "Panel Plus," where our group picks right up with the discussion on our Web site,, and we'll post the video before noon Eastern Time.

Up next, our "Power Players of the Week."


WATSON: As protests spread across the Middle East, people are taking on the dictators with every weapon they have -- guns, the Internet, and even humor, which brings us to our "Power Players of the Week."


WALLACE (voice-over): "Parazit" is a half-hour show. "The Voice of America" beams into Iran each week. It takes on the regime by making fun of it.

These are its creators, Kambiz Hosseini and Saman Arbabi.

SAMAN ARBABI, EXECUTIVE PRODUCER, PARAZIT: The aim is for people to think again.

UNIDENTIFIED MALE (through translator): Ahmadinejad said that if Iran wants to build a nuclear bomb, he has no fear of enemies. The enemies are saying the same thing. Their fear is that you have no fear of using the bomb.

WALLACE: During the protests in Cairo, Saman pretended to be in Tahrir Square.

They say the rulers in Tehran are easy to satirize, like this week, when they condemned what is happening in Libya.

ARBABI: They denounced the government's aggression and violence towards the people. And you listen to these guys and you're like, are you serious? Have you not looked at yourself in the mirror?

WALLACE (on camera): What do you think of Ahmadinejad?

ARBABI: I think he is nuts.

WALLACE: What do you think of the supreme leader, Ayatollah Khamenei?

KAMBIZ HOSSEINI, HOST, "PARAZIT": I think he's just a plain old dictator.

WALLACE: Do you worry at all about your safety or the safety of relatives back in Iran doing what you are doing?

ARBABI: They call us the enemy. And knowing their track record, it does kind of scare you once in a while. But the fact is Kambiz and I have it great. You know, we're not like those kids who are sacrificing their lives in the streets of Iran.

WALLACE (voice-over): The regime tries to jam their show so people in Iran can't watch it, which is how they came up with the show's title -- "Parazit."

ARBABI: We just call the show "Static," so if we ever by chance get through, then we are hiding under the name of "Static."

HOSSEINI: You remember all this. I forget.

ARBABI: It was a long night, but I remember it now.



WALLACE (voice-over): They are certainly getting through. They have 30 million followers on Facebook.

Both men left Iran years ago to escape the repression. Now they enjoy being the Iranian version of Jon Stewart's "Daily Show."

UNIDENTIFIED MALE: You're the prophet. You're the prophet.


ARBABI: Kambiz wanted to sit in Stewart's chair.

HOSSEINI: It's like driving Hyundais for all your life. Now this is a Ferrari, man. This is it.



WALLACE: But they realize there is a big difference from what Stewart does.

ARBABI: Even if he jokes and he has a beef with anyone, within the American system it's still Democratic. We deal with tyrants. We deal with people that would probably want to kill you.

WALLACE: Both men say their goal is not revolution, but they can't help dreaming.

ARBABI: I think at some point him and I are going to be in Iran doing the show.

WALLACE: You will invite me there?

ARBABI: You will be one of our VIP guest. We'll take a plane down there. Yes, I see it happening.


WALLACE: But the men behind "Parazit" know it won't be easy. Earlier this month, one of their friends on Facebook was killed during a protest march in Iran.

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

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