Joe Cirincione, Sen. Mitch McConnell on Crisis in Japan; Sens. Mark Warner, Sen. Saxby Chambliss on Efforts to Cut Deficit

The following is a rush transcript of the March 13, 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."

Japan is rocked by a huge earthquake, and then a devastating tsunami that killed hundreds and damaged two nuclear plants. We'll have the latest from Japan and talk with a nuclear safety expert.

Then, Congress deadlocks over the budget as gas prices climb. We'll discuss both with the Senate top Republican, Mitch McConnell.

Two budget hawks sell a bipartisan plan to cut the deficit. We'll sit down with Senators Mark Warner and Saxby Chambliss.

Plus, the latest on Libya. What can and should President Obama do to oust Muammar Qaddafi? We'll ask our Sunday panel.

And our power player of the week: the undercover provocateur strikes again.

All right now on "Fox News Sunday."

And hello again, from Fox News in Washington.

Here is the latest on the situation in Japan:

Officials there now fear more than 10,000 people may have been killed in the earthquake and the tsunami. They are fighting partial meltdown at two nuclear reactors and more than 170,000 people have been evacuated from around the plants as a precaution.

For more, we turn to FOX News correspondent Greg Palkot who is in Shimada-shi, Japan -- Greg.

GREG PALKOT, FOX NEWS CORRESPONDENT: Chris, strong words from Japanese Prime Minister Naoto Kan calling tonight, the situation surrounding the earthquake and the tsunami that this country got hit with on Friday the worst crisis in Japanese history, calling on his country to face it with determination.

One part of that crisis -- the stricken nuclear power plant in the area of the natural disaster. Sea water had to be pumped in to the second reactor today to try to cool things down. Authorities say they have the situation under control. But the evacuation of citizens from the immediate area around the reactor continues, as does the screening for possible radiation poisoning. Dozens of people reportedly are testing positive for that.

This as the overall scope of the disaster becomes even more clear. We went up and down the coastline today and heard from people and saw as they try to put together the shattered bits of their lives. In fact, they also had to deal with some aftershocks, a big one felt by this crew this morning.

This also as help is on the way, including from the United States. The carrier USS Ronald Reagan off the coast of Japan may be reporting today that 20 helicopters brought aid from that ship, part of a multipronged effort, not just from the United States, but from the international community, to help Japan at this very troubled time -- Chris.

WALLACE: Greg Palkot reporting from Japan -- Greg, thanks for that.

Joining us now is Joe Cirincione, who is an expert on nuclear issues.

Mr. Cirincione, Japanese officials are now talking about fighting two partial meltdowns in nuclear reactors. Briefly, what's going on and potentially how dangerous?

JOE CIRINCIONE, NUCLEAR SECURITY EXPERT: This is an unprecedented crisis. It is extremely serious. One of the reactors has had half the core exposed already. This is the one they're flooding with sea water in a desperate effort to prevent it from a complete meltdown.

They also have lost control of a second reactor next to it. It is a partial meltdown. And there is actually a third reactor at a related site, about 20 kilometers away, that they have also lost control over.

So, you have multiple reactor crises at the same time. We've never had a situation like this before.

WALLACE: And what does it mean if you have a meltdown of the nuclear core?

CIRINCIONE: The worst case scenario is that the fuel rods fused together -- the temperatures get so hot that they melt together in a radioactive molten mass that bursts through the containment mechanisms and is exposed to the outside. So, it spews radioactivity in the ground, into the air, into water. Some of the radioactivity could carry in the atmosphere to the West Coast of the United States.

WALLACE: Really? I mean, thousands of miles across the Pacific?

CIRINCIONE: Oh, absolutely. In Chernobyl, which happened 25 years ago, the radioactivity spread around the entire northern hemisphere. It depends how many of these cores melt down and how successful they are on containing it once the disaster happens.

WALLACE: Now, you talk about the possibility of a huge exposure. The Japanese officials so far have evacuated people 12 miles from these plants. Is that far enough?

CIRINCIONE: Not under a meltdown scenario. And you've seen these evacuation radiuses extend as the crisis has developed. First it was two, and then it was six, now, it's 12.

We're told by reporters on the ground that, actually, 50 kilometers out they're being blocked from access. So, the effective evacuation area is actually larger than the official one that's been declared.

WALLACE: Put this in context: Japanese officials had been rating this as a four on a scale that I didn't know existed of one to seven for nuclear events. How does the situation in Japanese as it now stands compare to Three Mile Island in this country in 1979 and Chernobyl, that you mentioned, in Russia in 1986?

CIRINCIONE: If it were to stop right now, five might be a fair characterization of this -- a local event without significant injury. If it continues, it will certainly get to five, which is the Three Mile Island category of a serious event.

We almost lost Three Mile Island and almost went meltdown. It stopped at the last minute. That is the situation we're fighting to maintain in Japan.

If there is a meltdown, that puts in a six, even a seven, that's a Chernobyl category -- a serious nuclear incident with potential for large scale loss of life.

WALLACE: So, what are we talking about, 12 hours, 24, 48 hours? And what are the keys as to whether this becomes a serious accident or a catastrophe?

CIRINCIONE: We're in a key period now. So, the next 12 to 24 hours will tell us whether the Japanese officials will able to get control back over these reactors, or it's gone, it's lost. The pumping of the sea water into reactor number one is that last ditch effort to try to stop it before it's too late. If they can succeed, if they can hold it for the next 24 hours or, so then these reactor cores will cool down and will be implied path to containing this disaster.

WALLACE: Mr. Cirincione, we're going to have to leave it there. We want to thank you so much for coming in and helping to shed light -- help us understand what's happening in Japan right now. Thank you, sir.

CIRINCIONE: Thank you, Chris.

WALLACE: Joining us now from his home state of Kentucky is the Senate's top Republican, Mitch McConnell.

Senator, let's start with the very serious situation in Japan. You and frankly politicians from both parties have recently been supporting the idea of nuclear power plants. You called it a critical component of a comprehensive energy plan. Based on what you're hearing, are you having second thoughts about that?

SENATE MINORITY LEADER MITCH MCCONNELL, R-KY.: Well, I think what we ought to do right now is concentrate on trying to help our Japanese friends after this disaster. This discussion reminds me somewhat of the conversations that were going on after the BP oil spill last year.

I don't think right after a major environmental catastrophe is a very good time to be making American domestic policy. I think we ought to just concentrate on helping the Japanese in any way that we can.

WALLACE: I certainly understand that. And nobody is asking you. But -- I mean, just as a human reaction, isn't this going to make it harder for nuclear power plants to be located -- aren't just American citizens going to look at it and say, "Not in my backyard"?

MCCONNELL: Well, we certainly had that experience after the Three Mile Island issue in 1979. That's a fairly common reaction to catastrophes.

WALLACE: And your thoughts about that?

MCCONNELL: My thought about it is, we ought not to make American and domestic policy based upon an event that happened in Japan. And we ought to concentrate on helping the Japanese get past this catastrophe.

WALLACE: All right. Let's take a look at the budget -- as if you didn't have enough problems. House Republicans -- House Republicans have proposed another short-term continuing resolution, this time for three weeks with $6 billion in cuts to keep the government running. First of all, will that pass? And what do you think of the idea of some Republicans to attach riders that would cut off all funding for Planned Parenthood or all funding for implementing Obama healthcare reform?

MCCONNELL: First, with regard to the short-term C.R., I don't think we ought to let the government shutdown. There are -- I think it's going to include about $6 billion in cuts. So, we're on a path, a slow path but a path nevertheless, to get to the $61 billion in reductions of this year's spending that House Republicans were able to send over to us. So, I think it should pass and will pass.

The second issue is related to policy. These are always controversial. There are people that want policy riders on appropriation bills, people that want them off. This will all be worked out in some kind of negotiating process as we go forward, trying to get an ultimate solution to the funding of this year's budget.

We've got lots bigger financial problems than just this year's budget. But we're working on this year at the moment.

WALLACE: But I take it from what you are saying -- you would oppose any riders being attached to this three-week extension?

MCCONNELL: Well, the House is going to produce a three-week extension. I expect to support it. I expect it to pass. They'll make a decision since the initiates in the House as to whether to include any riders or not.

This is not the ultimate solution for this year. That's going to be negotiated in the next couple of weeks.

WALLACE: Ten of your fellow Senate Republicans are now saying that they are going to oppose any bill that comes before the Senate that doesn't include significant spending cuts. This comes at a time when the top Democratic leader in the Senate, Harry Reid, has said that your party, both in the House and the Senate, is ignoring voters' top concern.

Let's watch.


SENATE MAJORITY LEADER HARRY REID, D-NEV.: The one thing that the Republicans have not talked about is the one thing that the American people care about more than anything else. That is, jobs. In fact, it's the direct opposite. We're destroying jobs.


WALLACE: Senator, will the GOP, at least in the Senate, block all government business that does not include spending cuts? And secondly, what about Harry Reid's contention that besides the question, which is arguable about spending cuts, that the Republicans are ignoring putting people back to work?

MCCONNELL: Well, if government spending would create jobs, we'd be in the middle of a boom, because we have added $3 trillion to the national debt in the last two years with the government stimulus efforts.

So cutting spending and job creation are not mutually exclusive. In fact, we believe reducing government spending is helpful to get the private sector going again. With regard to the procedure of going to bills, I think it's a good idea to go to bills in the Senate, we can offer amendments on any subject.

We've had a couple of bills up this year that were not directly related to spending. But my members have been offering spending reduction amendments. So we intend to continue to focus on reducing government spending no, matter what bill happens to be before the Senate.

WALLACE: But does that mean, then, that Republicans would filibuster an unrelated bill if it didn't include spending cuts?

MCCONNELL: No, it means we get on an unrelated bill and we'd offer amendments related to spending and debt because we do think that's what we ought to be talking about. But under the Senate rule, you can offer amendments that are unrelated to the underlying bill and we intend to do that.

WALLACE: But I'm saying you wouldn't then filibuster the bill?

MCCONNELL: No, I mean if it's a bill that has some merit there is no particular reason to keep it from going forward. But we'd try to add on to it measures that we think address the problems of spending and debt.

WALLACE: Understood. The government will reach its debt limit sometime either in April or May. And this week, you challenged President Obama to lead a bipartisan effort to deal with the debt problem.

You said this in an interview with the "Wall Street Journal" -- "unless we do something important about the debt, I don't believe there will be a single republican senator voting to raise the debt ceiling."

Senator, what does that mean? That there has to be a deal on entitlements and taxes or you are going to vote against extending the debt limit?

MCCONNELL: What it means is this, we have a $14 trillion debt, $14 trillion. That's the size of our economy, which begins to make us look a lot like Greece. Over and above that, we have over $50 trillion in commitments we have made that we cannot keep on entitlement programs. Very popular programs like social security, Medicare, Medicaid.

We aren't doing anything to bend the curve. Raising the debt ceiling is the perfect opportunity to do something important about the subject being raised by raising the debt ceiling, which is our debt. And so what I've said is that I don't intend to support raising the debt ceiling and I don't believe any Senate Republicans do, unless we do something important related to spending and debt.

I think the administration understands that that we're just not going to bring up the debt ceiling and everybody say all right. It's going to have to carry something with it that the markets, foreign countries, the American people believe is a credible effort to begin to get a handle on spending and debt.

WALLACE: But I'm just trying to clear up. When you say "do something important," does that mean that you would have begun negotiations or does that mean that you'd have a final deal?

MCCONNELL: What it means is I'm not going to negotiate the deal here on your show. But we all have a sense of how you could get at the problem. The administration understands that we understand it, and we need to come together and figure out what we can do and add it to the debt ceiling.

WALLACE: But I do want to ask you about this aspect of the debt ceiling. Speaker Boehner said the other day that to fail to raise the debt would be irresponsible.

This is how he put it. "If we were to fail to increase the debt limit, we would send our economy into a tailspin." I guess the question is he seems to be saying no matter what, we've got to increase the debt ceiling.

MCCONNELL: Well, as you know, I was talking about the Senate. There are 53 Democrats and 47 Republicans. My prediction is not a single one of the 47 Republicans will vote to raise the debt ceiling unless it includes with it some credible effort to do something about our debt.

Now, the House is another matter. I'm just predicting that the Senate Republican votes. I don't believe Senate Republicans are going to vote to raise the debt ceiling. The Democrats can raise it themselves if they choose to and try to do nothing whatsoever about the problem.

I think to get any of the 47 Republicans, you've got to do something credible that the markets believe is credible, that the American people believe is credible, the foreign countries believe is credible in addition to simply just raising the debt ceiling.

WALLACE: New subject. Your party is beginning to hammer President Obama for rising gas prices and calling for an all of the above strategy. Now on Friday, the president noted that domestic oil production this past year is higher than it was over the last seven years. Let's take a look.


PRESIDENT BARACK OBAMA: Any notion that my administration has shut down oil production might make for a good political sound bite, but it doesn't match up with reality.


WALLACE: question: is President Obama to blame for rising gas prices?

MCCONNELL: Well, he certainly participated, because in spite of what you just heard him say, oil production is up slightly principally because of actions taken by the previous administration. But this administration in the last two years has been shutting down wells.

Senator Vitter from Louisiana had a whole list of rigs in the Gulf of Mexico and were they have been moved around the world. Bureaucrats making it very difficult to get permits. There has been a conscious effort to make it difficult to drill in this country.

Both on shore and offshore by the bureaucrats who have been appointed by this administration and president. Noting that there has been a slight uptick in production doesn't get to the heart of the problem.

Sixty percent of our oil is coming from overseas. That's unacceptable. We have vast reserves in this country particularly in Alaska. My goodness, when are we going to use our own reserves and quit depending so much on areas of the world that don't like us?

WALLACE: Senator, we have less than two minutes left and I want to get into one last area with you and that is, Libya. It's beginning to look as if the Qaddafi regime with the superior fire power is beginning to turn the tide on the rebels.

Yesterday, we had the Arab league calling on the international community to impose a no-fly zone. Should the U.S. intervene militarily and should we be willing to do whatever it takes to oust Qaddafi?

MCCONNELL: Well, it certainly is note-worthy that the Arab league passed a recommendation for no-fly zone. That would have included Syria, by the way. So, if this regime is that unacceptable to the Arab league, it tells you that it's a pretty unacceptable regime.

Having said that, the question is how can you be helpful? How can the United States be helpful? The secretary of state and secretary of defense are looking at all the options. One thing I've suggested that might be considered, it wouldn't involve the use of U.S. personnel or U.S. airplanes would be arming the insurgents.

I know the secretary of state is apparently going to meet with the insurgents this week. Hopefully they'll be making some recommendations. This is not an easy conclusion to reach, but it is noteworthy that the Arab league thinks we ought to have a no-fly zone.

WALLACE: And we have less than 30 seconds left. As the leader of Republicans in the Senate, it doesn't sound like you're willing to commit at this point that you favor a no-fly zone.

MCCONNELL: I think we ought to continue to monitor the situation. I don't think I'm going to reach a conclusion in the middle of this conflict. That's why we have an administration.

That's why we have a secretary of state and secretary of defense. I know they are on top of this and monitoring it. We're looking forward to seeing what their recommendations are.

WALLACE: Senator McConell, we'll have to leave it there. We want to thank you so much for coming in today. It's always a pleasure to talk with you, sir.

MCCONNELL: Thank you, Chris.

WALLACE: A bipartisan effort to find an answer to the nation's growing and dangerous debt problem. We talk to two senators behind the effort right after the break.


WALLACE: While the president and congressional leaders continue their deadlock over what to do about the nation's debt, two senators are working on a bipartisan plan to cut $4 trillion over the next decade.

We're joined by Virginia Democrat Mark Warner, and Georgia Republican Saxby Chambliss.

Senators, welcome back to "Fox News Sunday".

SEN. MARK WARNER, D-VA.: Thanks for having us, Chris.


WALLACE: The key to your plan, you say, that everybody has got to have some skin in the game. For you as a Republican, Senator Chambliss, that means agreeing to the politically unpalatable increases in revenue. Are you willing to increase taxes?

CHAMBLISS: Well, we can increase revenues without increasing taxes, per se, Chris. And as a matter of fact, that our proposal does is to reduce the effective and direct tax rates all the way across the board. And we do that by making a significant reform in the tax code. And every time, we've made a significant reform in the tax code, whether it was under Reagan in '86 or Bush in 2001, what we've seen is reduction in rates and increase in revenue.

WALLACE: What you're basically talking about is doing away with about $1 trillion in deductions that are currently in the tax system. But Grover Norquist, head of the conservative group Americans for Tax Reform, says what you're talking about means that you're still breaking your pledge -- and he's obviously going to hold this against all Republicans who support it -- breaking your pledge not to raise taxes.

CHAMBLISS: Well, let me just say we're joined on my side in these discussions by Senator Tom Coburn of Oklahoma, Senator Mike Crapo of Idaho who just been designated by "National Journal" as three of the most, if not the most conservative members of the United States Senate. We don't believe in raising taxes.

But let me tell you, Chris -- this is such a massive problem. As Senator McConnell just stated, a $14 trillion debt, that if we don't get our arms around it now, and then we're going to become a second tier nation. And we cannot allow that to happen.

So, it's imperative that we put everything on the table for discussion. I don't know where we are going to wind up. We're not there yet.

But if you look at the debt commission report, you have to address spending. We have to reduce spending in a major way. You've got to address entitlements. We've got to reform entitlements in a major way.

And you've got to look at revenue and reform our complicated tax code in a major way. And when you do that, everybody does have that skin in the game and everybody gets their score just a little bit.

WALLACE: All right. Well, let me bring in Senator Warner.

For you, as a Democrat -- having a skin in the game means that you have to take the politically unpalatable choice of cutting entitlements. As a Democrat, are you willing to scale back on benefits for Social Security and Medicare and Medicaid?

WARNER: Well, you see? We have to do this because otherwise, if we focus the discussion as we have so far on the back and forth in Congress, all you're cutting is 12 percent of the federal budget, the domestic discretionary spending. And you are seeing actually good programs perhaps being eliminated because you focus the discussion only in that area.

You got to put everything out. That means Saxby and I are probably going to take some arrows -- he on the Republican side and he, because we're taking, willing to take on reforming some of these entitlement issues. But every day that we punt, every day that we don't act, we add $4 billion to our national debt. At some point, we're going to have to pay that back.

So, why not now go ahead and put a plan in place -- we didn't get in the situation overnight. We're not going to dig out in a single year. But if we put a plan in place, I think the markets will respond and I actually think the economy will be better. But that's going to require a little give from both sides.

WALLACE: But the Democratic leader in the Senate, Harry Reid, said this recently: "Social Security has contributed not a single penny to the deficit. So, we can talk about entitlements as long as you eliminate social security from the discussion."

First of all, isn't that wrong? Social Security is already paying out more than it takes in and that's just going to get worse as the baby boomers retire. Isn't that as a fact wrong that it doesn't contribute the deficit? And secondly, can Social Security really be off the table?

WARNER: Well, Chris, until recently, Social Security has actually been running major surpluses. In effect, we've been borrowing from Social Security to finance the government. Now that's clicked over on an annual basis -- as you said, we're paying out more than we're taking in.

What the debt -- what our proposal puts out is not taking Social Security proceeds any longer and paying off the deficit. It's saying let's make sure Social Security is solvent for the next 75 years. If we don't do it --

WALLACE: But you're also talking about, first, is raising retirement age.

WARNER: Well, my sense is, you know, remember Social Security was put in place back in the '30s. They set 65 as the period -- the start, because life expectancy was 64. Now, Americans, thank goodness, are living towards closer to age 80.

And the idea that we're going to slowly raise the retirement age a couple of years over the next 40 years -- nobody, you, me, Saxby, we're not going to be effected at all. Folks under 35 might see a slight bump in their age increase, but frankly, a lot of folks under 35 don't even think there's even going to be Social Security if we don't do something in this.

WALLACE: Senator Chambliss, how close are you to an actual comprehensive plan? There is talk that what you are thinking about is a set of specific proposals that you would come up with targets for spending, for revenue, for entitlements. And that if they are not met by subsequent congresses, there would be automatic triggers to cut spending or to increase revenue. Is that where you're headed?

CHAMBLISS: Well, Chris, first of all, what we've got to do is when we see an increase in revenues coming in to Washington, we got to make sure that Congress doesn't have the ability to spend that, because history dictates to us if we have revenues coming in that are uncontrolled, that's what's going to happen. What we're going to make sure of and, frankly, one of the major issues that we're dialoguing about in our group now is what do we do with the revenues.

We need to make sure that we commit the most significant part of those revenues to tax reduction, tax rate reduction. Get our corporate rate down to where we are competitive in the world marketplace. Get our individual rates down to where people actually do pay less in taxes.

If you are one of the 70 percent that don't itemize, you will certainly pay significant amount less in taxes.

And then we've got to take a portion of that -- the debt commission said somewhere between 20 percent, 15 percent, 10 percent and apply it to this $14 trillion debt. Otherwise, if we don't commit some of it to that, we're going to be stuck with this $14 trillion debt and it's only going to increase. And that's not right.

WALLACE: So, Senator Warner, how close are you to an actual plan, and for instance, because we talked about this a lot with Senator McConnell, will you offer it as part of the debate over raising the debt limit in the next couple of months?

WARNER: I think we want to make sure we get it right more than some arbitrary timeline. I really think -- I want to commend Saxby Chambliss. He's been a great partner.

We've been saying, listen, we got to do this. We shouldn't allow this work of the debt commission, the so-called Simpson-Bowles commission to go for naught. We're willing to kind of link arms and we have other colleagues who are working with us. I think you are seeing a whole lot of other members in both parties say we need this long-term solution.

I get a little worried when you start tying it to the debt limit vote, because as Chairman Ben Bernanke of the Federal Reserve said, if we play Russian Roulette with that, with the instability in the financial markets, if we were to default on America's obligation to pay, you could up seeing back in the financial crisis the way we were in 2008.


WALLACE: But are we talking about something this year, next year?

WARNER: If we get into next year, you get into a presidential year and this whole issue would probably be punted until 2013. We may not have that long of a time before the financial markets say we're going to either no longer want to buy American debt or charge such a higher interest rate on it, it would have dramatic negative effect on the economy.

WALLACE: Senator Chambliss, we have less than a minute left. I want to ask you, because, obviously, one of the questions is: whatever you guys come up with, you got to sell it to Congress. You're one of Speaker Boehner's closest friends, I know, here in town. Would he back a compromise that included revenue -- any revenue increases? And do you think these Tea Party freshmen would?

CHAMBLISS: Well, I think it's a matter of -- not a matter of is it going to get done. Are they going to back it? It's a question of whether we do it on our terms. And I think at the end of the day, we're going to have to have within the discussion, within the room, a discussion between the White House and House Republicans and Democrats.

John Boehner is a great leader. John Boehner is about the business of bringing our fiscal House back in order. He gets it.

So I think at the end of the day, we'll be able to develop a plan that -- we've got to develop a plan that does fit within the parameters of the House Republicans and Democrats, as well as Senate Republicans, Democrats, and the White House.

WALLACE: On that optimistic note, we're going to leave it there.

Senator Chambliss, Senator Warner, we want to thank you both so much for coming in. And we'll stay on top of this plan. Good luck.

CHAMBLISS: Thank you.

WALLACE: Up next, a possible nuclear meltdown. We'll ask our Sunday panel what the disaster in Japan could mean for our nation's energy policy.


WALLACE: You are looking at the alarming video of the explosion Saturday at a nuclear power plant in Japan that has raised the stakes in that country's disaster even higher.

And it's time now for our Sunday group: Bill Kristol of The Weekly Standard; Jeff Zeleny, The New York Times national political correspondent, and a first-timer here; former White House press secretary Dana Perino; and New York Post columnist Kirsten Powers.

So, Japanese officials now trying to prevent multiple meltdowns, radiation leaks, evacuation of more than 100,000 people.

Bill, at a time when Democrats and Republicans were finally getting together and supporting nuclear power as safe, clean, non-polluting energy, and President Obama had $36 billion in loan credits in his 2012 budget to promote more plants, what happens now to the domestic industry?

BILL KRISTOL, THE WEEKLY STANDARD: Well, we can probably save $36 billion from the 2012 budget because I think it's a bit of a setback to nuclear power here in the U.S. I'll go out on a limb and make that prediction.

But, you know, people will say, well, we build new plants. Twenty percent of our electricity currently comes from nuclear power plants. I think there are 104 in the United States, two of them around the coast in California. Very earthquake-resistant, but I guess there could be a tsunami there. It sounds like it's the tsunami that did the most damage in Japan.

So, on the one hand, it's impressive how resistant these things are to damage. On the other hand, I do think, as you say, these alarming fears, whether or not they -- certainly if they come to fruition, and let's hope they don't -- it's obviously a setback to nuclear power. And I think it makes even stronger the case for going after natural gas and oil domestically.

WALLACE: Jeff, when you hear -- and we don't know how bad it's going to be. But when you just hear the Japanese situation mentioned in the same sentence with Three Mile Island and Chernobyl, after Three Mile Island we had a 30-year moratorium on nuclear power in this country. Is that what we are headed for again?

JEFF ZELENY, THE NEW YORK TIMES: Certainly, the president has angered even some members of his own party by embracing a nuclear power and the possibilities of that even during his presidential campaign. But it's -- I think Bill is right. I mean, if something major happens there, of course it will stop it. But even if, you know, this does not turn out to be as bad as it sounds initially, I think it is going to make people very nervous about this.

So the White House right now is focused on this, but it's really concerned about high gas prices, of course. And this all ties together. So the president will have to decide what -- you know, if he should embrace nuclear power or not. But in the short term it is going to --

WALLACE: Nobody is embracing nuclear power this week.

ZELENY: No, no one is embracing nuclear power, but he's going to have to come up with some type of an energy policy, which right now has -- you know, has been -- it's very uncertain what it's going to be.

WALLACE: Well, let me switch to that subject with you, Dana, because even before the events in Japan, President Obama had scheduled a news conference on Friday to talk about higher gas prices as Republicans are beginning to really come at him again as they did in 2008 when gas prices spiked. Well, they came against him, but also against the Democrats in January for resisting domestic oil production and calling for all of the above.

How potent a political issue is this?

DANA PERINO, FMR. WHITE HOUSE PRESS SECRETARY: Gas prices can make or break elections. There is no doubt about it.

And what was interesting to me is how the administration allows President Obama to say things that are so quickly proven false. He stood up at the press conference on Friday saying, my policy has been great and I'm actually encouraging production. And it's something that can't possibly be true.

And it doesn't matter -- well, production is up this year, but it's in spite of President Obama's policies, not because of. This takes 10 or more years to develop. So President Clinton even agrees on Friday. Almost at the same time President Obama is speaking, President Clinton is saying it's ridiculous to continue the moratorium in the Gulf.

And so I don't think it's so much partisan as, if you go into America where you are on a fixed budget, and gas prices go up, and you have to decide on whether or not you're going to be able to put money towards X or Y, maybe that means you don't go on a family trip or something like that, it does make a huge difference. And a lot of small businesses, very small margins of profit, and gas prices are a big deal to them. And that's why I think the White House is trying to get in front of this, but the facts are standing in the way of their rhetoric.

WALLACE: Kirsten?

KIRSTEN POWERS, NEW YORK POST: Well, yes, he's on the defensive about this. And so I think he did come out and try to make a case that he's on top of it and that everything is OK. But he can say whatever he wants. The proof is in the pudding. If the gas prices continue to go up, and there is not enough supply, people are going to continue to drumbeat for more drilling, and it doesn't matter what he says.

Can I say just say something on the reactor?

WALLACE: Yes, you may.

POWERS: Thank you. Well, because I just want to say that I think when we hear "meltdown," it sounds very scary. But the reality is they actually are able to contain it, at least at this point.

And so I think there are going to be a lot of people, especially anti-nuclear people, who are going to jump on this and try to exploit it. But we have to see what happens. You know, wait maybe a week out and really see.

The World Health Organization has come out and said they don't think there's going to be any negative health impact from any of this. A lot of even environmental people are very pro-nuclear, so I think that it is something that may not get scuttled depending on how this actually plays out.

WALLACE: Let's go back. I'm glad you added that. Let's go back to the oil prices, because the president did make a case. He said domestic production is the highest it's been in seven years. He said that they have begun issuing deepwater drilling permits again after the BP disaster. He talked about increased exploration and development in Alaska and in the Atlantic.

Everybody is shaking their heads at me.

Go ahead.

KRISTOL: Well, there is an awful lot of -- if you talk to people who are in the oil production business, they would like to explore a lot of places they're not currently being permitted to explore. There's been huge commodity -- on the other end, it's not clear that's why oil prices are up. There's been huge commodity inflation, perhaps thanks to the Fed's monetary policy, and part of that is oil price inflation.

So, you know, people shouldn't overreact to it. It didn't just -- there's a huge issue, what, July, August of 2008. And somehow, by Election Day, "Drill, baby, drill" was not carrying a whole lot of states for John McCain.

So I'm not sure that Republicans will be wise to demagogue, frankly, gas prices. I think they can make a broader case that inflation is on the way and gas prices are a leading indicator of that.


ZELENY: I think it will be interesting to see as gas prices remain, really, a central political issue over the summer -- they're not going down anytime soon -- to see what this president does short term. When he was a presidential candidate, he proposed an increase in the gas tax. He called it a gimmick. So I'm watching to see if this White House, very concerned about this, is going to come up with any sort of short-term gimmicks, to use a word of his, of their own, because it is going to a weight around their necks, really, probably for the rest of the year.

WALLACE: So, like, what kind of gimmicks can they do? I don't think raising gas prices is going to be -- gas taxes is a very good solution.

ZELENY: No, I don't think it is a good solution. But, I mean, like one of the things they are talking about is reserves and things. We'll see what they do, but in the short term, there is very little that they can do.

And I think Bill is right. I mean, it's probably not wise for Republicans to demagogue this. But it is going to be a problem for the person in charge. And that's him.

WALLACE: Final 30 seconds.

You were shaking your head at the idea of tapping the Strategic Petroleum Reserve.

PERINO: Well, we've been down this path before. It's been used -- some people would accuse Al Gore of having -- President Clinton of trying to help Al Gore in the 2000 campaign by releasing SPR oil to try to affect price.

It doesn't work. And the reserve is there for emergency purposes.

We're not necessarily in an emergency right now. We could be. What we need is a longer-range energy policy.

And interestingly, I read yesterday -- I didn't know about it. I wish I had. Representative Nunes of California has a roadmap for America's energy future. What we need is something like what Saxby Chambliss and Mark Warner did, to come together from two parties' end, get something comprehensive so that we can deal with this long term.

WALLACE: No, I think we should just keep putting it off and putting it off, wring our hands whenever there is a crisis, and then forget about it.

PERINO: That's what we've been doing for decades.

WALLACE: That's what we've been doing for 30 years, 40 years.

PERINO: That's right.

WALLACE: Thank you, panel. We'll take a break here.

When we come back, Muammar Qaddafi begins to turn the tide in Libya. Should the U.S. get more involved?



BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Across the board, we are slowly tightening the noose on Qaddafi. He is more and more isolated internationally, both through sanctions, as well as an arms embargo.


WALLACE: That was President Obama on Friday, claiming some gains in the effort to oust Libyan leader Muammar Qaddafi. But reports from the front lines tell a different story.

And we're back now with the panel.

So, yesterday, the Arab League called on the United Nations to impose a no-fly zone, and said that Qaddafi, the Qaddafi regime, has lost its sovereignty.

Bill, what are the chances that that will increase the likelihood of the international community intervening militarily?

KRISTOL: I think no one will do anything unless the United States does anything. And it's humiliating for the Arab League, which has always been a play thing of dictators, to now be further along in calling for serious actions to remove Qaddafi, an enemy of ours, with American blood on his hands, who would presumably restart a nuclear program and restart terrorism if he survives this. It's humiliating for them to be ahead of us.

I suppose if the Obama administration feels it needs somehow the cover of a bunch of Arab dictators calling for us to intervene against this terrible dictator, I'm for it if it helps the Obama administration finally do something. But we need to do something.

WALLACE: Let me ask you about that, Jeff.

Your sense as to whether this does provide the international cover for the Obama administration and some of the other western countries? Clearly, the U.N. isn't going to do anything because you've got Russia and China with possible vetoes, but that NATO would act now with the support of the Arab League.

ZELENY: It definitely provides some cover and increases the urgency of this administration and this White House to act. You saw Defense Secretary Robert Gates yesterday. He was traveling in Bahrain. And it seemed to me like he was saying imposing a no-fly zone would be easier than before.

He still thinks it's unwise, but it seems to me that this administration, this president, is inching closer to do so, but will look for every possible exit strategy to not do it. But I think the coming week is going to be sort of critical in this period of seeing what he is going to do.

But I'm not sure that this president is eager. He is definitely not eager to involve American pilots in this. And they are still stressing how difficult it will be.

So, a very tough decision for him. And I think he will do everything he can to not go down that path.

WALLACE: Let me follow up on that with you, Dana, because I think -- I mean, it certainly seemed to me, as somebody who watched the president's news conference on Friday, that he was still very unconvinced about the effectiveness, the need. I thought it was quite remarkable in a situation where people are getting slaughtered to talk about, well, I have to analyze the cost-benefit relationship.

Is he being cautious or is he being timid?

PERINO: It's so confusing. It's hard to say because you don't know what their strategy is. A key word in his sound bite that you played at the beginning of this segment is "slowly" tightening the noose.

I think that when this week his director of National Intelligence, James Clapper, said that in the long run, Qaddafi will prevail, that that signaled to all the generals in the Libyan army that might be willing to go against Qaddafi that, you know, we might not be there for you. And it was an admission that the Western powers aren't able to do anything.

And I find it odd that we had Tunisia, Bahrain, Algeria, Egypt all go through their struggles and we never called for U.N. Security Council resolutions. All of a sudden, we have Libya, and now we need the United Nations. And Susan Rice, our ambassador --

WALLACE: But we weren't getting militarily involved in any of those other countries.

PERINO: Well, right, but even before that, nobody called and said let's get together from a civilian standpoint and help them build up their democracies. And then our ambassador to the United Nations, Susan Rice, missed the first two emergency meetings on Libya.

So I think that whether he's timid or cautious, the one thing I know for sure is it's confusing.

WALLACE: You know, Kirsten, let me raise one of the questions that may be part of a calculus for the president. Given the advantage that Qaddafi has -- forget about air power -- in military experience, in ammunition, in artillery, in tanks, even if you ground the jets, does that change the occasion?

POWERS: Well, that's the question, is can you achieve what you want to achieve just from the air? Are we going to set ourselves up where we go in with air strikes and then, suddenly, it's going to be, no, now we have to send ground troops? And so I think that that's what the administration is thinking about.

And if you remember in 1986, when we went in and did limited air strikes, we ended up killing about 100 people in a suburb. You know, so different things happen that you don't always predict.

And so I think the administration is being cautious, and I think rightfully cautious. And I'm saying this as a person who supports humanitarian interventions.

You don't like to see people being slaughtered. But they also don't want to suddenly get us in a situation where an American pilot is shot down and is held hostage. I mean, there's all these other things that can happen. And I think that they rightfully want this to be more of a world community responding than just the U.S.

WALLACE: Bill, let's talk about it, because, clearly, you seem to favor the idea of military intervention. But what happens if you impose the no-fly zone and it doesn't change the situation?

KRISTOL: I think at this point you probably have to do more than a no-fly zone. You probably have to tell Qaddafi he has to stop in his movement east, and that we're going to use assets to stop him from slaughtering people as he moves east across the country. We might take out his ships in the Mediterranean, we might take out tanks and artillery.

WALLACE: But are you saying that, for instance, as he starts to move -- and he has apparently taken Ras Lanuf and some of these other towns on the way to Benghazi -- you're saying that we would -- "we," either being NATO or the United States -- would fire from the air, would take out his troops and prevent them from moving further?

KRISTOL: I think we should recognize the opposition government in Benghazi as the French have, as the Arab League now has, and basically tell Qaddafi that at least we may not be willing to go in and remove him from part of the country he controls, but at least that we will not let him slaughter people and retake the country. If he retakes control of the country, he will restart his terror activity, he will quite possibly restart his nuclear program. He has chemical weapons. It's an unacceptable outcome.

The president of the United States has said Qaddafi must go. I mean, how can you stand up as the president of the United States and say Qaddafi must go, and then do nothing about it?

It would be a horrible defeat for us. It will set back our efforts elsewhere in the Middle East, and it will be a disaster have him back in charge. Not just a humanitarian disaster, it will be a national strategic disaster for us to have him back in charge of Libya.

WALLACE: Jeff, we have less than a minute left.

I mean, what does happen if Qaddafi holds on to power and then slowly, brutally grinds down the rebels? What is the impact on the president and his effort to appeal to the Arab street?

ZELENY: I think the impact is quite severe and quite frightening (ph). He is already on a little bit of thin ice, if you will, there. But more importantly, they do not -- he is going to follow the advice or judgment of Defense Secretary Gates. And they can do it, but it's not the wise thing to do. I think that is the most important voice in this president's ear.

WALLACE: Thank you, panel. See you all next week.

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

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


WALLACE: Whether you admire or condemn his tactics, there's no debating that undercover activist James O'Keefe has taken on some big targets and come up with some stunning results.

Once again he is our "Power Player of the Week."


JAMES O'KEEFE, UNDERCOVER ACTIVIST: We thought it would be a funny YouTube video and we'd get them to say something silly like, "Oh, you guys, that's cute." But never in our wildest dreams did we ever imagine this.

WALLACE (voice-over): That was James O'Keefe in 2009, marveling at the impact of his undercover ACORN videos that pushed Congress to cut off federal funding.

Now he has struck again, masterminding a sting of NPR executives at what was supposedly a lunch with rich Muslim donors that showed their political bias here against the Tea Party.

RON SCHILLER, NPR: I mean, it's scary. They're seriously racist, racist people.

WALLACE: We wanted to find out what drives the 26-year-old O'Keefe, who describes himself not as a conservative, but a progressive radical. And what we discovered is an outrage with liberal hypocrisy.

O'KEEFE: If you use their rules against them, you can really just tease them and mock them and really destroy them.

WALLACE: As a student at Rutgers, he says he became fed up with political correctness, especially about race. So, on St. Patrick's Day, 2004, he met with an administrator to demand they stop serving Lucky Charms cereal with its Irish leprechaun.

O'KEEFE: As you can see, we're not all short, green, but we have our differences of height. And we think this is stereotypical of all Irish Americans.

They said yes. And then I realized, OK, now I'm on to something.

WALLACE: Four years ago, he called Planned Parenthood offices to say he wanted to donate money to abort black babies so his child wouldn't be hurt by affirmative action.

O'KEEFE: So that's definitely possible?

UNIDENTIFIED FEMALE: Oh, always. Always.

O'KEEFE: Can I put this in the name of my son?


WALLACE: In 2009, when Hannah Giles called and proposed they sting ACORN, O'Keefe was on board.

O'KEEFE: She said, "I can be a prostitute." And that's when I said, "What if I'm a pimp?" And then we said, what if there are 13-year-old girls involved? And we just upped the ante and just made it more ridiculous.

UNIDENTIFIED FEMALE: I'm not (ph) sure now you can make it legal.

WALLACE: O'Keefe has had problems. Last May, he pleaded guilty to a misdemeanor for posing as a phone repairman to get in Senator Mary Landrieu's office. But now he has a new scout.

The head of NPR was forced out in the latest scandal. And Congress may oblige what that executive said was his secret hoax (ph).

SCHILLER: Well, frankly, it is very clear that we would be better of fin the long run without federal funding.

WALLACE: O'Keefe says his friends always tell him the next sting will never work.

O'KEEFE: "They'll never say yes. That's ridiculous. That's absurd."

Every time they say yes. So people say, "You're never going to do it again." I disagree with them. I think that I'll come with a new strategy and I'll get them to say yes.


WALLACE: O'Keefe has also engineered an undercover sting of a public television executive. And his groups says it will release that tape this week.

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

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