Gov. Mitch Daniels talks public employee unions; is Big Labor losing its clout?

This is a rush transcript from "Fox News Sunday," June 10, 2012. This copy may not be in its final form and may be updated.

CHRIS WALLACE, HOST: I'm Chris Wallace.

Public employee unions are under fire across the country.

Wisconsin's governor survives a recall effort over labor reforms. California voters trim government worker pensions. Is Big Labor losing its clout?

We'll talk with Indiana Governor Mitch Daniels who has pushed back against labor, Dennis Van Roekel, president of the nation's largest union, the National Education Association, and Thea Lee of AFL-CIO.

Plus, is someone leaking top U.S. secrets to boost President Obama's reelection? We'll ask our Sunday panel what is behind the security breach.

And our power players of the week offer the class of 2012 words of wisdom.

All right now on "Fox News Sunday."


WALLACE: And hello again from Fox News in Washington.

We may remember this past week as a moment when voters across the country decided public worker unions have too much power and benefits that are too generous. But was it a turning point or just a bump in the road for government workers. Today, we'll hear from both sides.

We'll talk with top officials of big labor in a few minutes. But first, from his home state in Indiana, Republican Governor Mitch Daniels who fought and won against the unions.

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

GOV. MITCH DANIELS, R-IND.: Good morning, Chris.

WALLACE: There have been several big developments this week, of course, in Wisconsin, Governor Walker beat back the recall effort. But also in California, two cities -- San Diego and San Jose, those voters passed an initiative to cut back on government worker pensions.

Governor, what's the message?

DANIELS: I think the message is that, first of all, voters are seeing the fundamental unfairness of government becoming its own special interest group, sitting on both sides of the table. And they are also noticing with sadness that when fundamental services -- education and health care and others are diminished because so much money is devoured by very high salaries and higher than those than the taxpayers are earning and more generous benefits, almost bullet-proof job protection and huge pension.

WALLACE: Is this some sort of a watershed what we are seeing right now. Are voters across the country giving state and local officials a green light to go after or at least curtail public unions?

DANIELS: I hope no one thinks of it that way. I hope it means a turning point in trying to re-address the balance. You know, there is a reason that defenders of labor from Franklin Roosevelt to George Meany to many others, always said that unionism had no place in the public sector and it is a necessary freedom in the private sector, but that it was a bad idea in government.

And I think we have seen through its excesses, the one I just mentioned, now visible to voters almost everywhere that it really needs to be brought under control and the interest of people who pay taxes and who would rather see those taxes, more of them, dollars go to vital services.

WALLACE: Are you saying that you would like to see no public worker unions?

DANIELS: I think really government works better without them. I really do. You know, in our state, we had a 16 year run with so- called collective bargaining. And we did end it.

And I want to say that although it led to the savings of large amount of tax dollars, it was not principally about that. We had 160 pages of shackles really on government's ability to deliver better. And seven years later we are delivering services. We could never made the reforms tied down to 160 pages of thou shalt not.

WALLACE: Well, give me an example how have services improve since you cut back on the unions.

DANIELS: If you deserve a tax refund, it comes twice as fast it used to. Our state parks are in a dramatically better shape than they were. And if you go to our Bureau of Motor Vehicles last month, you are out in less than 10 minutes and 97 percent of the time when we surveyed them, customers say they are satisfied.

WALLACE: Well, let's look at what you have done as governor of Indiana. It is a long list. Let's take a look.

In 2005, you ended collective bargaining rights for state workers on first day in office. In 2011, you restricted teachers bargaining rights. In 2012, this year, you signed a right to work law that said people don't have to join a union to get a job.

It sounds, Governor, like a pretty concerted effort to break public and private unions.

DANIELS: I don't see it that way at all. Now, I will say that on the government side, we felt if we were going to do right by taxpayers and if we were going to make government work effectively as it does in Indiana, there was a survey last year in which 77 percent of Hoosiers said they thought the state government was effective. It's the second highest number in the country. If we do those things we have to have freedom to move resources where they were need, move people where they were needed, pay people on the basis of their performance and not simply their seniority, and we are doing that in the state now, I think to a very positive affect.

Right to work in the private side is a different disagreement, Chris, and there, it is simply a matter of bringing more jobs to the state. Indiana has been winning two-thirds of the time to get a shot at new jobs. We have been rated as one of the best jobs climates in the country by everyone now.

But, there was a very large percentage of the time and a third of all of the opportunities, we didn't get a shot at because the businesses were their own reasons insisted on this freedom.

So, two separate questions as we saw them -- we're not going after anybody. We're just going after better government and more jobs for people in our state.

WALLACE: But to take a look at this and all the reforms as you would call it. Government workers in your state have taken a hit. Indiana ranks 46th in state worker gross salary. And public employees in Indiana must pay more for health care coverage than they used to. I mean, they have paid a price because of all of your actions.

DANIELS: I disagree completely. Particularly those who have been rated the best performers and the highest raises by far in state history, in fact, ever in state history. I think we have a fair system now. State workers praise them all of the time. I think the ones that I encounter are rightly proud of the job we are doing.

And as I just mentioned, their fellow citizens appreciate them here in a way that maybe is not the case elsewhere.

WALLACE: But how -- what about this figure I just gave you. Indiana ranking 46 in the 50 states in state worker gross salary.

DANIELS: I don't know where they come from and I've never seen them before. I can't comment on them.

WALLACE: I mean, have in fact -- you know, we have a lot of information in terms of gross salary and in terms of the cost to the state worker and health care benefits that those have gone up a lot?

DANIELS: Well, Chris, all I can tell you that we believe that the most effective state government in America. We have very low turnover, lower than before, among our state employees. Maybe that says something.

We think we have the best health care plan anywhere. It is one which is leading to much lower increases in costs. By the way, 93 percent of Indiana state workers have a health savings account. They are accumulating tens of millions of dollars that they control on those accounts and they are renewing in a high rate -- satisfaction rate every year. So, we're not really believing that we have done anything but improve the lot of Indiana public employees. WALLACE: Let's take a look, Governor, at the big picture, and it's almost a philosophical question. Don't unions have a place in this country and even in the case of state workers, public workers, and with government, to make sure that management, in this case, government, doesn't run roughshod over them?

DANIELS: Once again, we differentiate between the two sectors. Absolutely, there is a place in the private sector and I think there are some issues here. Their problems didn't start with Scott Walker there.

There is a 40 or 50-year decline in union membership. The world of work has changed. Workers have changed and unions I don't think haven't changed sufficiently to go with them.

So, as you know, private sector membership is under 7 percent now and that can't be blamed on Scott Walker or frankly anyone else in public life. Again, on the government side, honest people can differ. But I think there is a fundamental problem with government becoming its own special interest groups, force dues, recycle in politics to elect compliant and friendly politicians in an unending circle.

And ultimately, there is not really bargaining in those situations, because government sits on both sides of the table.

WALLACE: Looking ahead to November, is there a danger for the Republicans? The Obama campaign is just out with a new ad that we put up in a second that, in effect, says that Mitt Romney has become the enemy of working men and women. Let's take a look at the clip.


MITT ROMNEY, REPUBLICAN PRESIDENTIAL CANDIDATE: It is time for us to cut back on government and help the American people.


WALLACE: Governor, is there a danger of a backlash?

DANIELS: You know that ad could be read cynically as simply playing to the core constituency of the president, which is government itself and people who profit from it.

But honestly I conclude over the years, it's not that. That it's just sadly symptomatic of indirectly blind spot he has. He doesn't understand where wealth and jobs come from. It comes from a successful private sector or not at all.

You know, we've got the biggest government and the weakest recovery on record. I think honestly, the president -- this week he said, if I read correctly and to my amazement, he said the private sector is doing just fine. It's government that needs more money.

Well, government doesn't create wealth or income. It just shuffles it around and charges a price and cost for that service or disservice. WALLACE: Let me interrupt for a second because in that news conference on Friday, the president said one way to boost the recovery is for Congress to pass his jobs act. And specifically he asked for $35 billion to save or create 300,000 jobs for teacher and first responders.

I take that you don't think that's a good idea.

DANIELS: I don't, been there and tried that, to the tune of $800 billion in the so-called stimulus bill, which is overwhelming not the new bridges and roads and infrastructure that some of us thought might be the idea. It was overwhelmingly just more money shoveled into government.

Now, this is tire and discredited theory. But I do think that the president sincerely believes it. And there I guess a fundamental disagreement that the American people will have to settle this fall.

WALLACE: Finally, we have less than a minute left. After his victory this week, Governor Walker of Wisconsin said that he had some advice for Mitt Romney. He said it is not enough for him to run simply as anti-Obama this fall. That he has to run as a reformer.

And he went on to say this -- "He," meaning Romney, "has to offer a plan. He has to show a willingness to take on the big challenges facing the country. I think he can win if he does that."

Is Walker right? And does Romney need to offer a bold, affirmative agenda?

DANIELS: Yes, absolutely for two reasons. One, that's the most successful campaign strategy for him. The American people I think will rightly demand to know something more than he's not President Obama.

But secondly, he's got to use this fall as an opportunity to build a consensus across, I hope, a broad spectrum of Americans to make the big changes we need, to restore a vibrant private sector. And all the good things that come with it, including more dollars for government.

So, that's exactly the right advice. It would be I think a huge mistake for Republicans to misread Wisconsin as some kind of great harbinger. I don't see it that way at all. I mean, there was clearly a threat of "enough already" vote there that said it is an abuse of the process with all of the recalls. Not even clear that Governor Romney will be that strong in Wisconsin.

So, he better have an affirmative and constructive message and one of hope. I think that he will, and that's why I think ultimately he'll prevail.

WALLACE: Governor Daniels, we want to thank you so much for coming in today. Always a pleasure to talk with you, sir.

DANIELS: Thanks, Chris.

WALLACE: Up next, we'll sit down to two top union officials to get their take on what happened this week and what it means for big labor.


WALLACE: Now, we want to hear from the other side of the Wisconsin recall fight: organized labor. Joining us are two key officials: Dennis Van Roekel, president of the National Education Association, the country's largest union. And Thea Lee, deputy chief of staff and a leading policy voice at the AFL-CIO, the federation that represents more than 12 million workers.

And welcome to both of you.


THEA LEE, AFL-CIO: Thank you, Chris.

WALLACE: Let's start with the question I asked Governor Daniels. When you look at the recall vote in Wisconsin, as well as the vote in those two California cities to cut back on government worker pensions, what's the message, Mr. Van Roekel?

VAN ROEKEL: I think one thing we overlooked is the changer in the Senate. There's a balance of power now. I think that's very important. Governor Walker --

WALLACE: You're talk about Wisconsin?

VAN ROEKEL: Yes, in Wisconsin. And I think that's very important.

The second thing I think, it really points out the impact of unlimited corporate funding in elections and we have to see as it plays out, especially as we move toward the November.

WALLACE: But, Ms. Lee, I mean -- do you not think that there was s a message from the voters that at the time when the states and local governments owe more than $1 trillion to public pension and health care funds, that at least some private voters and nonpublic workers are saying the government workers we pay with our taxes must tighten their belts.

LEE: Well, it's definitely a tough time economically. I think everybody is looking around to figure out how we're going to balance our budgets. And that's something that unions and management and governments all have to come together to figure out.

But I think at the end of the day, we really need to look at the big picture, which is, in this country, should workers, whether they are in the public or private sector, have a decent pension, have a secure requirement and that's something that people do support at the end of the day.

We have to figure out how to fund it. We have to figure how to fund it. We have to figure out how to make it viable. But I don't think that voters in this country want to go to the places where our elderly people are living in poverty, are struggling and so on.

So, I think it's tough time and when the times are tough, people are trying to figure out who's to blame. But we need to be able to fund our public sector in a way that allows everybody to have a decent.

WALLACE: All right. Well, let's look at the comparison that we put together of what public workers get and what private workers get. Let's put it up on the screen.

Sixty-four percent of private workers have access to pensions. Ninety percent of state and local government workers do.

Sixty-nine percent of private workers have access to health insurance. Eighty-seven percent of the public workers do. And private workers average $8.53 in benefits per hour work. Public workers get $14.31 in benefits per hour work.

Ms. Lee, why should people in the private sector be paying their taxes so that the government workers get more than they do?

LEE: Well, I think we have to turn the question around. It's not so much why do some people have a pension and others not, how do we take away the pension from the people who have it. That's un- American.

I think we need to figure out how do we make sure that everybody in America has a decent pension. This is a wealthy country.

WALLACE: But would you agree that show that more public workers have access to pension, more public workers have access to health care, and that they are getting more per hour work in terms of benefits than private workers.

LEE: Well, the balance of benefits versus wages in the public sector is a little bit different. But if you look at overall big picture, between public sector and private sector workers, if you compare them according to education and experience in the job category, in fact, public sector workers are not overpaid.

WALLACE: Yes, but that mean workers salary, it doesn't work for benefits.

LEE: No, that's when you take salary and benefits.

WALLACE: Well, I'm asking about benefits, though, which is considerably more, $14 an hour versus $8 an hour.

LEE: But some public sector works have chosen to take some of their composition in a form of benefits as oppose to wages. They are not overpaid on average.

In fact, especially on top end where you have doctors and lawyers and accountants and professionals in the public sector, they are earning less even than the private sector can afford, even taking into the account the benefits.

WALLACE: Mr. Van Roekel, can you understand where some people in the private sector would sit there and say, wait a minute, I don't get the benefits and then I have to pay taxes so public workers get benefits that I don't get.

VAN ROEKEL: First of all in the comparison with the wages of private versus public are the qualification and education needed for those jobs, so --

WALLACE: Yes. But having said that, there are people, for instance, in your -- teachers, they get a degree so they can teach, which wouldn't be very marketable in the rest of the world.

VAN ROEKEL: And the other part about the pension is we need to understand that he employees are also paying into the pension. So, in cases like in California, where they want to take away from people that are retired, they paid in every paycheck into to their pension. Government didn't live up to their end. Poor management on the part of government for managing their pension funds denied now the benefits.

In the private sector, the same thing happened. United absolutely blew their pension system, workers got pennies on the dollars, who bailed out the private company who didn't manage their pension system well? The U.S. government.

And so you have a responsibility as management and employee. We pay in and we expect our employers to pay their share so that the system works. WALLACE: Let's look at exit polls from Wisconsin this week, which are instructive. Among people who life in union households, private union households, 62 percent voted for Tom Barrett, but 37 percent, more than a third, backed Governor Walker, who instituted these labor reforms. Mr. Van Roekel, we've seen this in other state, New Jersey, for example, a lot of people who back private unions think that government workers are getting too much.

VAN ROEKEL: I think it's part of divide and conquer. The reason they went after the public sector unions and left private sector alone is part of the things to trying to drive a wedge between people.

I also understand that unions are not monolithic.

But I also understand that when you're outspent seven to one, 68 percent of all of the people saw more ads for Walker than Barrett, I understand their message from the corporate side has been heard better than the one from the common every day workers.

WALLACE: This was the biggest issue in Wisconsin for more than a year. You don't think -- certainly you are right that the Walker side had more money and ads. But the vast majority of people, the exit polls showed that vast majority made up their minds more than a month before the election. They knew what the issues were here.

VAN ROEKEL: One of the big differences between Wisconsin and Ohio -- in Ohio, the policy of taking bargaining rights, the voice -- just the ability to get fairness from the employer at he table, that was voted down by the citizens two to one.

WALLACE: That was private unions.

VAN ROEKEL: No, no, no, it was public sector. But it's on a policy question. In Wisconsin, it was a recall, which is very different. Sixty percent of the exit poll, people said that they didn't believe recalls should be used to oust someone just on political beliefs. So, that was a difficult hurdle to overcome even from day one.

WALLACE: One of the big questions, Ms. Lee, is what government should spend limit said resources on -- benefits for workers or services for all of us, for people?

And let me give you an example. In Wisconsin, pension reform will save schools $600 million over two years. In the New Berlin School District in Wisconsin, to take one example, they are using those savings to hire more staff and reduce class size and add programs.

What's more important? And I ask this of both you.

Actually, let me start specifically because it involves schools with you, Mr. Van Roekel. What's more important to the NEA -- protecting teachers or giving services to the students?

VAN ROEKEL: In Wisconsin, it was never about the economy. It was always a political decision.

The unions did agree to pay more in the pensions and health care in Wisconsin. But Governor Walker, even though he accepted that. He didn't end there. It was a political game --

WALLACE: But they did save money and as a result, they're giving more to the students.

VAN ROEKEL: We advocate for both students and employees. You can't have one without the other. The success of every single student in America depends on well-qualified and well-trained and hopefully well-compensated individuals who are delivering that education.


LEE: I think it's a false choice between good services and decent pay and pensions for workers. And Governor Walker when he came into office, he didn't have a budget problem. He gave a big tax cut to the wealthy and to corporations, that created the budget pressures where you end up having to pit quality against pay.

So, you actually can have both. I don't -- I think that unions are totally supported, as Dennis Van Roekel has said, supporting good schools, good services and then also making sure that workers are taken care of.

WALLACE: But there's just not enough money to go around. Ms. Lee. Let me give you and example.

Look at San Jose, California, where the Democratic mayor of that city says that the cut that was instituted on Tuesday, to public worker pensions, means they are not going to have to close firehouses some of the time because they didn't have the money to keep them all open all the time. He says that it will give them the money so that they can actually open the four libraries they had built that didn't have the money to operate.

So, here, you've got the Democratic mayor of San Jose saying it's not a false choice, it's one or the other.

LEE: But in education in particular, when you think about what the challenges the United States is facing, we need to be competitive in a global economy. We need to attract really great people into the teaching profession. We're not going to do that if we keep chipping away at their pensions and at their pay and at their job security and so on.

So, I think the other thing you need to think about is how do you get the best people into public service. You're not going to do that by constantly cutting away at wages --

WALLACE: Forgive me, though, but you're not answering my question, which is in San Jose, the Democratic mayor says, look, we have a choice. We can let these people keep the pensions that they have, or we can open the firehouses and open the libraries.

LEE: Well, they can find some revenues.

WALLACE: Where are they going to get those?

LEE: Well, you can -- right now, we have seen in the top of the tax scales the wealthiest Americans are paying less taxes than they did 10, 20 years ago. So, that's one place. We have different kind of user fees or tax some corporations that --

WALLACE: So, raise taxes?

LEE: We could raise taxes. We absolutely could raise taxes and we ought to raise taxes if we need to do that to provide social services that Americans need and depend on, and to make sure that we are attracting the best people in public service.

WALLACE: Ms. Lee, how disappointed are you that Barack Obama didn't show up to campaign in Wisconsin?

LEE: That's a decision for President Obama. And I think the people of Wisconsin, the workers of Wisconsin, the families of Wisconsin, worked hard, they led this campaign, they showed a tremendous amount of energy and solidarity --

WALLACE: Well, it was all this effort and it was a tremendous effort. The fact that the president -- I mean, come on, you must have a feeling?

LEE: I'm not going to second guess the president.

WALLACE: OK. Mr. Van Roekel, let me look at it from another aspect. Is it possible for Mr. Romney to oppose the growth of government and not be the enemy of public work?

VAN ROEKEL: You know, I was high school math teacher for 23 years and his math just doesn't add up. I mean, when he said that we need to have less firemen, less police and less teacher, and that we ought to invest in people -- I don't understand that math at all.

I think it is the firemen, the policemen, and teachers who are delivering to the American public. They are the ones who are bringing this incredible service to kid, preparing the next generation and he says what we ought to do is build wealth. There is a difference in building wealth in a very small group of people that doing it for the nation.

You know, the last 29 years, productivity up 80 percent, hourly wages up eight. The lowest one-fifth, their wages up 18 percent. But the top one percent, their wages go up 275 percent.

We have got to find a way to lift all citizens, not just a few. Not a 1 percent, not just the wealthy few.

WALLACE: We're going to have to leave it there. Mr. Van Roekel, Ms. Lee -- thank you both so much for joining us today.

VAN ROEKEL: Thank you.

LEE: Thank you.

WALLACE: Up next, our Sunday panel and those national security leaks. Is someone in the White House revealing top secrets to boost President Obama's reelection?



SEN. LINDSEY GRAHAM, R-S.C.: Somebody in the White House is orchestrating an effort to leak classified information and programs to make the president look good.

PRESIDENT BARACK OBAMA: The notion that my White House would purposely release classified national security information is offensive.


WALLACE: A growing furor in Washington over controversial leaks about how President Obama is conducting the war on terror. It is time for our Sunday group. Bill Kristol of the Weekly Standard. Charles Lane from the Washington Post. Fox News analyst Liz Cheney and Mara Liasson of National Public Radio.

One thing all sides agree on is that this long series of leaks is serious. And let's review some of the worst of them. That the U.S. had an operation to identify bin Laden's DNA, which led to the arrest of a Pakistan doctor who was helping us. The U.S. had a double agent who penetrated Al Qaeda in Yemen and foiled a plot to bomb an airliner. President Obama personally approves a kill list of terrorist suspects for drone strikes. And the U.S. and Israel were behind the Stuxnet computer virus that sabotaged Iran's nuclear program. Bill, how damaging do you think these leaks are to our national security?

BILL KRISTOL, WEEKLY STANDARD: Senator Feinstein is the chairman of the Senate Intelligence Committee, is a Democrat, and has been on the Intelligence Committee for 11 years, thinks they are very damaging, and she knows a lot more than I do about what our enemy should know or did know before these leaks, and now maybe can know and can put two and two together and find out things they did not know otherwise.

So again, the bipartisan outrage on the Hill. Senator Feinstein, from the Democratic ranking member on the House side too, Dutch Ruppersberger, is really startling. They want President Obama to be reelected, so for them this goes beyond politics. And I think they are really alarmed. Dianne Feinstein said she's been on the Intelligence Committee 11 years and quote, "I have never seen it worse."

WALLACE: I have to say I don't know that I've ever seen it worse in the sense of just -- the New York Times two weeks in a row had a huge, incredibly I think two full-page detailed story about the drone operation, and then the next week, about the cyber warfare. And you know, I guess everybody kind of suspected the U.S. and Israel were behind it. This was name, chapter, verse, operation name, the name of the Israeli secret unit. It is pretty extraordinary.

CHARLES LANE, WASHINGTON POST: It is extraordinary. I have to say, I am a journalist, and I always am of two minds about these things. I think especially on the drone strike story, there is a lot of information in there, albeit classified, that is important I think to the public to know about. And so there is a tradeoff there between national security and informing the public.

One thing, though, I really want to know is whether the Obama administration pushed back prior to publication. When they were asked for comment or they knew these stories were coming, because in past cases, I know from the Washington Post, other newspapers, administrations have said to newspapers, look, this is really serious national security stuff. We are asking you not to publish. And sometimes newspapers will do that. So as this investigation goes forward, I think that is going to be one of the really important questions, what if anything did the Obama administration try to do by way of moral persuasion.

WALLACE: I think the New York Times said that in the case of Stuxnet, that the computer virus that was used to try to sabotage the Iranian centrifuges, that they pulled back some of the information under request from the administration. But it's a good question, which raises the big political issue, Liz. We heard Senator Graham in the clip at the beginning of this segment, charge, make the charge someone in the White House is doing this to show that Obama is tough and therefore help him win reelection. But is there any evidence of that?

LIZ CHENEY, FOX NEWS ANALYST: I think in terms for sort of the motive there, that supposition, I think it's clearly suspicious, given the timing of these two stories coming within days of each other, as you said in the New York Times. I was amazed in the Stuxnet story by the attributions that went on. You go through the story, you have got members of the president's national security team. Those are David Sanger's words, who he is quoting in terms of what happened in these meetings. President Obama's aides. And I think in addition to Charles's question about did they push back, you know, I would like to know, did the president of the United States authorize his aides to talk to the New York Times about this program? The American people have a right to know whether or not people who are sitting in the Situation Room, in these meetings, leave the Situation Room and call David Sanger of their own accord, or whether the president acquiesced, or whether the president in fact told them to do it. I think that's a key question. And if he did, why did he do it?

MARA LIASSON, NATIONAL PUBLIC RADIO: You know, and Lindsay Graham states as a fact that it was an orchestrated campaign from the White House. We don't know that yet. The president in the past has been pretty tough on leaks. They've gone after leaks. He said the other day whoever did this is going to suffer the consequences. And he said that the New York Times has stated that the leaks didn't come from the White House. Now-- WALLACE: I don't think that is true.

LIASSON: That's what he said. But look, David Sanger knows where the information came from. He is certainly going to be talked to, whether he's going to, you know, decide that he'd rather go to jail than disclose this -- but I do think this is really serious. And the thing that is amazing is if the New York Times did hold back information about Stuxnet -- the stuff that they published was so breathtaking and so detailed, I can't even imagine what they could have possibly held back.

WALLACE: You know, on Friday, Bill, Attorney General Holder announced the appointment of two U.S. attorneys, one for D.C., and one for Maryland to conduct separate -- separate instigations of the leaks, and those are on top of another probe by the FBI. Is that going to be enough, or will the Republican critics -- and we have heard this from people like Graham and McCain and others -- will they be able to force the administration to appoint an independent counsel?

KRISTOL: I think these U.S. attorneys may be enough as a legal and criminal matter, but it does not answer the question of public interest here, which would be nice to know more about before the inquiry is completed, which is what Liz said, what did the president authorize, when did he authorize it? That story about Bob Gates, which is also in David Sanger -- reported by David Sanger, has not been contradicted by the White House. Bob Gates, the week after the bin Laden raid, when the stuff started to come out about these very delicate Navy SEAL preparations and the operation itself, that Bob Gates, the secretary of defense, walks into the national security adviser's office, Tom Donilon's office --

WALLACE: I hope you are going to clean this up.

KRISTOL: And says, "shut the blank up." Now, I know, and maybe -- I worked with Bob Gates in the White House before, 20 years ago. Unless he changed a lot in the last 20 years, that's not a normal thing for Bob Gates to do and it's not a normal thing for the secretary of defense to walk into the national security adviser's office and say that. It shows how alarmed he was as part of the Obama administration about what was going on, and it shows who he blamed. Think about this a minute. If you walk into someone's office and say, shut the blank up, you think he, the national security adviser, or his deputies were responsible for these leaks.

WALLACE: Chuck, are these probes enough that Holder has authorized, or do we need an independent counsel?

LANE: I think they are going to have to be enough, because there is no way the Democrats in the Senate are going to agree to anything more. There is no way the White House is going to agree to anything more. Both of these--

WALLACE: Why not, just because politically?

LANE: Politically. And I think that furthermore, it's, you know, these U.S. attorneys who have been appointed are both outstanding U.S. attorneys with good reputations.

WALLACE: But they are working within the structure of the Justice Department.

LANE: That's true. But don't forget also that the law is not particularly strong that they have to work with here. It is not a crime, look at that, to release classified information. So I am not sure, we have not had the greatest experience with Patrick Fitzgerald and the special counsel. That was not satisfactory for other reasons. So let's give this some time to play out and give it a chance

WALLACE: Let me ask you, Liz, because, your father, obviously, the whole investigation about Valerie Plame and the outing of the CIA agent, I think they felt that Patrick Fitzgerald was disrobed. Would you like to see an independent counsel again?

CHENEY: I'd like to see an independent investigation. I'd like to see an investigation -- in fact, if you have got members of the president's national security team, which is what we know from reading David Sanger's piece, that's what he says. Giving him chapter and verse of what went on in these National Security Council meetings, then somebody's got to be held accountable for what is a betrayal to the nation. When you are briefed into these programs, you are left with no doubt about what the impact will be if in fact you talk to people who are not cleared.

WALLACE: Real quickly because we've got to go to the next segment. Independent counsel, or when you say independent investigation--

CHENEY: I don't think it has to be an independent counsel. I think you could in fact have independent review of it. But I do think it is important, as Mike Rogers, the chairman of the House Intel Committee, has said that whoever is looking at this needs to be outside of the chain of command, so that you can be absolutely sure that it is followed to its conclusion, and that may well be the president of the United States.

WALLACE: All right. Really?

CHENEY: If the president of the United States has been authorizing people on his national security team to brief the New York Times about one of our most highly classified programs, American people have a right to know.

WALLACE: But you -- I mean--

CHENEY: It is a question.

WALLACE: It is a question.

CHENEY: It is a question.

WALLACE: All right. We have to take a break here, but when we come back, after weeks of Obama surrogates going off message, the president makes a gaffe of his own.



OBAMA: We created 4.3 million jobs over the last 27 months, over 800,000 just this year alone. The private sector is doing fine.

OBAMA: The economy is not doing fine. There are too many people out of work. The housing market is still weak and too many homes under water.


WALLACE: That was President Obama making a politically charged blunder and then having to walk it back less than four hours later. And we are back now with the panel. So, Mara, on the scale of one to 10, 10 being political annihilation, how big a blunder was this?


WALLACE: That's serious.

LIASSON: But you know what? These blunders are not what's going to determine the outcome of this election. We are now in the Twitter war era of politics. You know, Romney made a ton of these during the primary. I like to fire people. You know, my friends are NASCAR team owners. But the point is that this gaffe -- and it was a real gaffe and a hurtful gaffe for him -- came at a bad time.

Look at what just happened in the last week. We've got the loss in Wisconsin, Mitt Romney raising more money than the Obama campaign did. You have the terrible job numbers last week. You have all of these surrogates who can't seem to keep on their talking points, including now the president. So I think that is a real problem. And this is going to be repeated again and again in ads, just the way that every Romney misstep, misspeak is going to be repeated.

But what is interesting is because the fundamentals of this election are so strong against the president, and some of the structural things are also now strong against him, meaning the money, the Romney misstatements don't seem to matter right now. He almost seems like the Teflon candidate.

So I do think this is a problem.

WALLACE: How big a deal, Bill?

KRISTOL: It's a pretty big deal, because gaffes matter when they are not gaffes but they are revelatory somehow of what someone thinks. The Romney gaffes that mattered, that hurt him, were ones that did suggest he was out of touch with middle class Americans. He is a guy who fired a lot of people and never had to worry about being fired himself, et cetera. And this gaffe is revealing about President Obama. And it's his policy. He wants more public sector jobs. That is -- in his address to the -- in his radio address this past weekend was about how we needed, as you pointed out in discussions with Mitch Daniels, how we need to -- Congress needs to spend more money on public sector jobs. That will get the economy going again. So it is a fundamental difference here. The Republicans believe that the private sector is the engine of economic growth, and President Obama believes the private sector is doing fine and that the problem with the economy is that we're -- the government isn't big enough.

WALLACE: I want to pick up on that with you, Charles, because the point that the president was making is that the real problem with the economy are all the government layoffs because the stimulus has run out. So I went back and looked at the disappointing jobs numbers in May. And let's put them up on the screen. Yes, government lost 13,000 jobs in May. But putting that aside, the private sector created only 82,000 jobs. So if there had been no government layoffs at all, it still would have been a lousy month for job creation.

LANE: And you know, on this point about government layoffs, in your previous discussion with the union folks about Wisconsin, you noted correctly there have been no layoffs in Wisconsin due to the reforms that Scott Walker brought in, which raises the question, if you can trim the benefits and the power of unions and not have layoffs, why do you need the money from Washington to avoid layoffs? That's the part of the argument that I'm really surprised the president is pressing in a week like this when voters, including in Democratic bastions like California, seem to be signaling that the way they want to avoid layoffs in the public sector is by tightening the belts of the public workers.

WALLACE: Let's talk, and I want to pick up on what Bill said, in the president's news conference, he said that his prescription for the economy was that Republicans stop blocking his jobs plan, and he called for more spending for infrastructure, for government jobs, and also tax cuts to small businesses that hire.

Is that, I ask you this, I know what your answer is going to be, is that the answer for either the economy or even for his own campaign, bigger government?

CHENEY: One prominent economist said this week, Chris, that if more government spending were the answer, then Greece would now be experiencing a new golden age. So obviously more government spending is not the answer. I think Bill is right. I actually don't think this was a gaffe. This is what President Obama believes. And I think it is interesting if you look at what's happened, which is that you've got responsible governors like Mitch Daniels, Chris Christie, even to some extent Governor Cuomo, a Democrat in New York, who are tightening their own budgets, who are going through a process of fiscal responsibility, who are reducing their state deficits, who are reducing unemployment, but as a result, they have had to in fact cut the government rolls. And the president's prescription now is to use federal tax dollars to come in and essentially undo that. You know, the president ought to be in a situation where he is saying what is working at the state level, let's put that in play here, let's make this a better place for the private sector to invest, let's cut taxes and let's reduce government. Instead he's actually trying to undo even the good that is being done at the state level.

WALLACE: You know, Mara, forget the policy side of it, let's talk about the political side, because clearly one of the things that the president was saying in his news conference is it is the Republicans' fault -- and he's clearly going to try to tie Romney to the Republicans. They are blocking my program that would fix it. Do you think voters, if he goes to the polls with this in November, are willing to buy, I don't even know what it is, stimulus two, stimulus three, stimulus four?

LIASSON: You know, stimulus two, whatever we want to call this, sounds pretty minor. I don't think that the voters are going to buy that there is something that the president could have done if only Congress had passed this bill, the economy would be doing better. There is very little the president can do right now. That is the truth. Europe has a huge drag on the economy, potential to be even bigger. The fact that the first stimulus was poorly designed and that there couldn't be any more of it is a problem. He is not going to get Congress to do anything between now and the election.

WALLACE: And you don't see that the voters are going to--

LIASSON: I don't think voters will -- now, if the president can turn the debate to what are the plans for the future, mine against Mitt Romney's, maybe he can prevail there, because polls do show people prefer his basic approach to deficit reduction, which is a balanced approach, to Romney's. But I don't know whether we will ever get to that debate.

WALLACE: I hope we do.

LIASSON: Well, I hope so too, but at the rate we're going--


WALLACE: I want to pick up on the Europe aspect of it, because, Bill, the president also said that we are in trouble because of Europe's debt crisis, and just yesterday Spain announced that it is going to agree to accept a $125 billion bailout. Its banks are in terrible trouble, and it didn't want to accept the bailout. It understands that that kind of looks like a black mark against its economy. How much of a drag is all of this that's going on in Europe on the U.S. economy, and how much can the president can really affect it? How much clout does he have in Europe? Does he have any more than the German chancellor would have on U.S. politicians here?

KRISTOL: No, he doesn't have much clout in Europe. And it has not been a drag on the U.S. economy. There is zero, zero empirical evidence that anything that's happened in Europe over the last six months has affected the U.S. economy. If anything, capital has flowed to the U.S., which has kept interest rates down here. Obviously if there is a financial meltdown a la Lehman Brothers, that would affect U.S. banks to some degree, but using Europe as an excuse right now -- I'd like to know, again, from someone in the Obama administration, what exactly has happened over the last six months in Europe that has damaged the U.S. economy.

WALLACE: Thank you, panel. See you all next week. And don't forget to check out panel plus, where our group picks right up with a discussion on our website,, and we'll post the video before noon Eastern time. And make sure to follow us on Twitter @foxnewssunday.

Up next, our Power Players of the Week.


WALLACE: It has become an annual tradition here to sample some of the words of wisdom college graduates are getting at their commencements. This year, the speakers include politicians, a general, and two television stars, and they are all our power players of the week.


COLIN POWELL: It brought it up to 2.0. And they said, good enough for government work, get him out of there. Now I'm considered one of the greatest suns the City College of New York has ever had. So those of you who are not graduating with a 3.76 like Emily Batt (ph), have faith, my young friends, have faith. It ain't where you start in a life, it's where you end up and what you did along the way.

OPRAH WINFREY: Be excellent. People notice. Think of how you notice. You go to Taco Bell, somebody gives you extra napkin and some sauce. You notice. You want to go back to that person, because even at Taco Bell, excellence shows itself.

ROBERT GATES: There are children to be taught, veterans to be healed, roads to build, communities to strengthen, especially in these challenging times. In building a good business and staying involved in your community, you render public service in many ways.

BARACK OBAMA: Whether it is starting a business or running for office or raising an amazing family, remember that making your mark on the world is hard. It takes patience. It takes commitment. It comes with plenty of setbacks and it comes with plenty of failures.

ROMNEY: There are some people here who are even more pleased than the graduates. That would be their parents. Their years of prayers and devotion and investment have added up to this joyful achievement. And with credit to Congressman Dick Armey, the American dream is not owning your own home, it is getting your kids out of the home you own.

CONDOLEEZZA RICE: There is nothing with holding an opinion and holding it passionately. But it's those times when you are absolutely sure that you are right, talk with someone who disagrees. And if you constantly find yourself in the company of those who say amen to everything that you say, find other company.

JANE LYNCH: Let life surprise you, don't have a plan. Plans are for wusses. You know, if my life went according to my plan, I would never have the life I have today. Now, you are obviously very good planners or you wouldn't be here, so stop it. Stop it now.


WALLACE: And we wish the best to the class of 2012, including our last student to go to college, Remick. Congratulations to all.

And now a final reminder to check out my wife Lorraine's new cook book, "Mr. Sunday's Saturday Night Chicken." You can find more information at our website,, and you will also see the recipe for skewers of sage chicken with sweet Italian sausage. Yum.

I can tell you from happy experience it is a great treat for Father's Day.

That's it for today. Have a great week. We'll see you next "Fox News Sunday."

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