Mick Mulvaney talks 'redefining' the federal government

This is a rush transcript from "The First 100 Days," April 12, 2017. This copy may not be in its final form and may be updated.

MARTHA MACCALLUM, THE FIRST 100 DAYS ANCHOR: So on day 83, the head of NATO says, yes, actually, he agrees with the president that of all the nation should pay their fair share.


JENS STOLTENBERG, NATO SECRETARY GENERAL: We know that we all need to contribute our fair share because we need to keep our nation safe in a more dangerous road.


MACCALLUM: And the president who says this as a campaigner.


DONALD TRUMP, PRESIDENT OF THE UNITED STATES: I was asked by a reporter about what do I think NATO? I said it's obsolete because it doesn't cover terror. It was a big scream, oh, Trump is saying is obsolete.


MACCALLUM: And this today. Watch.


TRUMP: The secretary general and I had a productive discussion about what more NATO can do in the fight against terrorism. I complained about that a long time ago and they made a change and now they do fight terrorism. I said it was obsolete. It's no longer obsolete.


MACCALLUM: And China, the country he repeatedly went after is now talking about cracking down on North Korea's nuclear program. As President Trump softens his recent lambasting of China as a currency manipulator. So you're not alone if you think day 83 looks like opposite day. Welcome to "The First 100 Days" everybody, I'm Martha MacCallum and in keeping with our theme, the breathless concern that a Trump Administration would be too cozy with Russia. Now looks downright chilly.


REX TILLERSON, UNITED STATES SECRETARY OF STATE: I expressed the view that the current state of U.S.-Russian relations is at a low point. There is a low level of trust between our two countries. The world's two foremost nuclear powers cannot have this kind of relationship.


MACCALLUM: We begin tonight with Rich Edson traveling with the Secretary of State Tillerson in Moscow. Rich?

RICH EDSON, FOX NEWS CHANNEL CORRESPONDENT: Martha, after hours of meetings in Russia with the Russian President, with Russian Foreign Minister Sergei Lavrov, Secretary of State Rex Tillerson and Lavrov gave a press conference here. They both made it very clear they solved very little. Tillerson said Assad's time in Syria is coming to a close. Lavrov said that Bashar al-Assad is a legitimate ruler of Syria.

He is recognized by the United Nations and also asked that someone point out to him the last time a dictator was successfully deposed. Tillerson and Lavrov also failed to agree on whether Assad used chemical weapons to kill his own people.


TILLERSON: The recent chemical weapons attack carried out in Syria was planned, and it was directed and executed by Syrian regime forces. And we're quite confident of that.

UNIDENTIEF MALE: We -- I'm not convinced because this was the case. Nor are we convinced by the T.V. images or by the statements of people who were at the airport.


EDSON: They also argued over Russian interference in the U.S. election. Tillerson called it fairly well established. Lavrov disputed that and while the two were arguing here in Moscow, the sides were also arguing in New York at the United Nations. This is where Russia used its veto power on the U.N. security council to defeat a western-led resolution that would condemn the use Assad regime and also asked it to provide evidence of what exactly happened the night that the administration charges in the west charge that Assad uses chemical weapons against his own people. Martha?

MACCALLUM: Rich, thank you very much. So with more, Senator David Perdue who sits on the Senate Armed Services Committee. Senator, welcome. Good to have you here tonight. So


MACCALLUM: Hi, there. So, your take on what we saw, you know, my mind goes back to the concerns over Rex Tillerson when he was nominated for Secretary of State because he had received a commendation as a CEO for Exxon from the Russian government. He wasn't giving them any quarter really tonight at all.

PERDUE: Right. I think what you see in the bigger picture is the president of the United States standing up and leading again and that's what we needed for a long time. Look, last week, he reengaged with China in a face-to-face with President Xi. Today, Rex Tillerson is over there face to face with Putin and I think you can see the outcome. Look, when you stand up to a -- to a leader like Putin, you're going to have some rough days and today is it but we're establishing what our national interests are and we are being very explicit about that with NATO, with United Nations, with China and now with Russia.

MACCALLUM: You know, what do you think about the fact that we're hearing such opposites from what we heard from now President Trump when he was on the campaign trail, he went after China, he's been going after them for years. And then, you know, one overnight at Mar-a-Lago and a dinner seems to have changed all of that. And, you know, he talked so much about the opportunity that he saw in a relationship with Vladimir Putin and Russia in terms of going after terrorism. Now we're completely on the opposite spectrum, both of those. Why is that?

PERDUE: Well, I think he's chasing the same objective though and that is to quarter the China influence in North Korea to stop the flow of goods in and out of North Korea. So did he get that fixed? Yes, he got that. So, I don't see an inconsistency here. I think there's some positioning that goes on in the political race but I think it's all part of a longer-term strategy to reengage on the international global scene to support and defend America's interest around the world.

Look. This thing that he did last week in Syria was decisive, it was measured, it was proportional. That's the action of a mature season leader. He's only been here as you said, 83 days today. But I am excited at the fact that we are re-engaging in the world and that's what I hear from foreign leaders all over the world that they want America to lead again. That doesn't mean they want 100,000 troops of American soldiers in Syria but what they want is re-engagement to find balance in the world again.

MACCALLUM: Yes. I mean, there's clearly pushed back where there wasn't any in the past. Senator John McCain who is the chairman of your Armed Services Committee, he's called and Lindsey Graham is called for perhaps the need for continued military action against Syria. Do you agree with him on that?

PERDUE: I think there are couple of things. I have a lot of respect for Senator McCain and -- but I trust this president right now, he acted decisively last week. He also said through is emissaries this may not be the last action you see in Syria relative to what Bashar al-Assad is doing with his own people. But look, there are two things that need to happen in Syria. One is we've got to stop ISIS and that's job one.

And the president said that again just today. And second, Bashar al- Assad's got to go. And once those two things happen, then we have to re- establish the government in Syria and also rebuild Syria. I mean, there's nothing to go home to now. All the refugees around the world who have left that part of the world have nothing to go home too. So, this is another conversation that we're beginning to have.

MACCALLUM: It's a great point. Senator Perdue, thank you very much. Good to have you here tonight.

PERDUE: Thanks, Martha. Thank you.

MACCALLUM: So joining me now, Pete Hoekstra, former house intel committee chairman who also served as a national security advisor to the Trump campaign and Michael Meehan, Democratic strategist and former senior communications advisor to John Kerry's 2004 presidential campaign. And Michael, welcome to you, welcome to you both. But let me start with you because I've been struck, you know, watching the interaction with Secretary of State Tillerson. It is very different from what we saw with John Kerry, who seem to have a pretty warm relationship with Lavrov and also with his counterpart in Iran.

MICHAEL MEEHAN, DEMOCRATIC STRATEGIST: Well, John Kerry had a 40-year relationship with these issues. Secretary Tillerson, new to the job just about three months. But as an American I believe that we keep our politics at water's edge and when the secretaries are over meeting with Putin and its counterparts, I think it's important that a foreign policy has a clear, consistent and easily coherent following and that's the hallmark of many great foreign policy.

And so, I was encouraged to see the dialogue happening that he did get the meeting with Putin, which was typical for secretary of state from our country for the last 70 years. And so, at least the dialogue is happening to deal with all the massive issues that we're dealing with.

MACCALLUM: Yes. There was some question as to whether or not Putin was going to sit down with them, they said, oh, we don't have it in our calendar but since you're here and then, you know, push went to shop and they did end up sitting down together. Pete Hoekstra, let's play this exchange that we have between Secretary Tillerson and Lavrov and I want to get your thoughts on this.

TILLERSON: The final outcome in our view does not provide for our role for the Assad -- for Assad or the Assad family in the future governance of Syria.

UNIDENTIFIED MALE: The next important thing is not to eliminate any political leader from the chessboard, so to speak, but to agree on how the country is going to be built.

MACCALLUM: What are your thoughts on that, Pete?

PETE HOEKSTRA, FORMER HOUSE INTEL COMMITTEE CHAIRMAN: Well, I think this is one of the key issues that's going to be a little bit further down the road. The initial issue here is as the president stated very clearly, we need to fight and defeat radical jihadist and ISIS in Syria. We then need to take a look at how Syria moves forward and with the actions that Assad has taken on or taken place in his own country.

You know, the international community is not going to accept Assad but that going to be negotiated settlement because the president and I think other world leaders have stated very clearly, we're not going to put boots on the ground to topple Assad for couple of reasons. It's what the Trump doctrine has been, saying we're not into regime change. And the second thing is, as we've seen in a Iraq, as we've seen in Libya, when you have regime change as Colin Powell says, you've broken it.

You're not sure what's going to happen afterwards but in those two examples that hasn't been very positive, especially in Libya. And then you have to try figure out how you're going to put it back together because you own it.

MACCALLUM: That was Lavrov's point to an extent. Michael, I want to -- quick question on China because today, there were North Korean vessels that were loaded with coal as they usually are headed towards China and something really significant happened. China said we're not going to accept those and turned those ships back, which is bad news for starving people in North Korea who rely on that transaction. Significant move in your mind?

MEEHAN: I actually give the president credit for this. The Korean peninsula is such a complicated situation and the Chinese have an outside ability to help affect that outcome. You know, the Korean -- North Korean leader's birthday is on the -- this weekend, they like to have a show of force. I think the fact that he is able to use deal making skills to put this kind of pressure both economic and military around North Korea I think is actually -- he should get some credit to my credit for this.

MACCALLUM: Fascinating changes. Thank you so much gentlemen. Good to see you both.


MEEHAN: Good. Thank you.

MACCALLUM: So did you know that there are 43 different government projects all designed to retrain workers in this country? But there is no one person or one office that even attempts to coordinate all those different efforts? That's the kind of redundancy and bureaucracy that Mick Mulvaney wants to end. It's making him pretty unpopular in the swamp as you might imagine. The OMB Director joins us in the White House next.

Plus rumors and intrigues around President Trump's chief strategist. Once thought indispensable as reports suggest that Steve Bannon may have a foot out the door at the White House. Is that true? Former Trump Deputy Campaign Manager David Bossie who produced six films with Steve Bannon and knows him well, joins us with his thoughts.

SPICER: He gets a lot of opinions and ideas and policy shifts that help guide his ultimate decision-making.


TRUMP: I want the entire corrupt Washington establishment to hear and heed the words, we are all here to say, when we win on November 8th, we are going to Washington D.C. and we are going to drain the swamp.

MACCALLUM: That was President Trump just days before his surprise election victory, vowing to take on entrenched special interests and layers of bureaucracy and the nation's capital. Now, the hard part, a planned, massive deconstruction of the agencies of the federal government. In moments, we're going to hear from the Director of Office in Management and Budget, Mick Mulvaney whose job it is to do all of these, but we begin with White House Correspondent Kevin Corke, live on the North Lawn. Kevin?


KEVIN CORKE, FOX NEWS CHANNEL WHITE HOUSE CORRESPONDENT: Hi there, Martha, you're right. Basically, what we're talking about is, rethinking the U.S. federal government structure. We're talking about possible major downsizing and ultimately changing the way agencies themselves are actually managed and made out what they're supposed to do for the people, you and me. Now, it's very interesting, I want to share just a couple of things as the President looks forward to having a memorandum coming out on Thursday, and this is what's important.

It's going to, basically, lift the hiring freeze and here's the rub, replace that freeze with hiring that would be in line with budget priorities. Did you catch that? Now, obviously, you heard the President say, "I'm going to drain the swamp." Well, that means getting rid of what the administration views as inefficiencies in the federal government. Now, the real challenge however, putting on the Director Mick Mulvaney, we'll hear from him in a second, is navigating the politically perilous landscape of shrinking the size of government without hurting the party's chances in 2018.

Now, do keep this in mind, that skinny budget, a lot of people heard a great deal about what it called for historically deep spending cuts. So the question becomes, will the budget battle ultimately lead us to a road down the parade line of physical fitness for this country or will it be the road to political tradition for the GOP? Will they basically blame the President and his party if they shrink too much if the cuts are too drastic?

One other thing I should point out today, we learn that the President has decided not to call China, a currency manipulator, very interesting. You may have read that Wall Street Journal report late this afternoon. He also said he will be willing to work with Beijing on better trade deals, if in turn, they would help real and the North Koreans, very interesting times to say the least, Martha, here at the White House, back to you.


MACCALLUM: Next guest is a key player in that plan, he is heading up an ambitious effort to dramatically restructure government, make it more accountable and more effective. Mick Mulvaney is the Director of the Office in Management and Budget and he joins me now. Good to have you here, Sir. Welcome to the program this evening.


MACCALLUM: It's good to have you. And I want to get that in a moment, but I do want to ask you something about an issue that the President made quite a bit of news on today. Just 10 days ago, he said that China was the world's champion currency manipulator but today, it appears that he has a very different take on that. He said they're not manipulating their currency. How do we put those two things together?

MULVANEY: I think it's a very difficult in the past for any country to establish trade currency manipulation. It's been very difficult to prove those given the rules that the WTO sets out. So I'm not sure what the President was talking about today, but I don't think it changes our policy. I think we had a really good meeting with China last week. Sounds like there's going to be some good trade developments that come out of that meeting. So, I think, all things considered, I think the last couple of days have been a tremendous success in terms of our relationship with China.

MACALLUM: I think you touched on something that may be significant here and that there may have been some developments in that meeting that made him change his language a bit. There may be things he wants to get here and I guess, we're going to see that story unfold as we go through. But I do want to focus on, you know, so much discussion about how the President is changing his tune on a lot of fronts. But we just watched the drain the swamp moment, it was one of many.

You are the swamp drainer and it's your job to do this. I read that there are 43 different agencies in Washington, D.C., that handle workplace training or retraining for jobs and there's no one person that even oversees the 43 agencies. Is that really going to change?

MULVANEY: Yes. Matter of fact, I think it goes further than that. I think those 43 different programs spread across 13 agencies. So imagine, you're the President of United States and you don't like the way that those workforce develop programs are working, who do you go talk to?


MULVANEY: 13 different agency heads? It's pretty different to do that. We have a rule in the private sector which is that, when everybody's in charge, nobody's in charge and we are going to change that. We had a great meeting here yesterday with some business leaders from all across the country and one of the things they encourage us to do is to redefine the federal government so that we focus on what it does, not what the agency's names are or what the committee is on the hill are.

But why not put all of the trade functions in one place? Why not put all of the workforce develop in one place? It's a tremendous idea but just the first step of draining the swamp. It is a promise that the President is absolutely going to keep.

MACCALLUM: It's just one example, as you point out. There are so many examples across these government agencies but, you know, unfortunately, perhaps for you, you now live and work in the area where most of these federal employees live and work, and they are not too happy with you because they're afraid that, you know, life as they know it, which has been pretty good, is going to change dramatically. You're going to be held to the standard whether or not you really revolutionized the way that government works. Are you confident that you're going to succeed in that endeavor?

MULVANEY: Yes, I am. And here's what I tell folks is that, many other presidents have tried this or at least talked about it from Reagan to Clinton, even President Obama, I think talked about doing it. But this is the first time. You really have a business man running the place. We did a hiring freeze when we first got here to sort of give us enough time to sort of get the lay of the land and see how the government was operating, and we just ended that today, and put up a guidance because now we've discovered.

Look, this place can be fixed and needs to be fixed and here's how are going to start doing it. It's going to take us about a year to come up with the specific proposals, but you've got a president who is committed to doing this. It's going to be more accountable government, a more efficient government, and a more spendable government, and that's what he promised.

MACCALLUM: Well, I think a lot of people feel there's a lot of blow and a lot of bureaucracy and they would love to see that managed a little bit better in Washington with their tax dollars. Before I let you go, a story today that says that you all have been meeting on tax reform and that the model for corporate tax reform might be changing. The President talked about going from 35 percent to as low as 20 or 15 percent. Is that - is that not what we're going to get right now, the markets will be very interested in that. And is it now more about a tax - a 10 percent tax on repatriation, bringing back once United States? Can you explain?

MULVANEY: I guess I can explain, because it, sort of, raise two different issues but the bottom line is that, that tax discussions have been going on since we got here in January. I've been participating in a group that's being led by Steven Mnuchin, the Secretary of Treasury and Gary Cohn at the NEC to talk about all sorts of different ideas and all of the issues that you've just raised have been discussed, from corporate tax reform, individual tax reform, how do you repatriate earnings overseas.

We don't have a policy yet. We don't expect to have a policy yet for the next couple of weeks, in terms of specifics that we can try and show the people but were taking a very deep dive right now, in all aspects of our tax code under the theory, go big or go home. We are not looking to, sort of, play around on the edges on tax reform in this country. We want to do much of the same thing we just talked about on restructuring the government.

We're going to take the tax code, back to a blank piece of paper, and rebuild it from the ground up, in a proper fashion in order to help people get back to work. That's what's driving all of this. How do you fix government so that folks have optimism again and have job opportunities again and not get stuck in this 1.9 percent and even growth we've had for the last eight years under the Obama Administration. We're trying to get back to an America that has a healthy economy, puts people to work and gross so that folks have opportunity. That's what's driving all of our work including tax reform.

MACCALLUM: All right. Before I let you go, I'm going to crack - take it one more quick crack at this. You know, corporations and small business owners around this country listening to your words right now, are listening to you very carefully. Are they going to get meaningful corporate tax cuts from this administration?

MULVANEY: OK. Then they can listen to this very closely. Yes.

MACCALLUM: OK. We heard it right here. Mick Mulvaney, thank you very much, Sir. You got a lot on your plate. We appreciate you stopping by. Good to see you tonight.

MULVANEY: Thanks, Martha.

MACCALLUM: Our thanks to him. So coming up, remember the promise that sanctuary cities would be "named and shamed" not happening. We can't say what's going on with that. And then, a man who knows Steve Bannon well, joins us with his take on the, sort of, "game of thrones" environment that some say is, going on in the White House right now. David Bossie, President Trump's Deputy Campaign Manager, straight ahead, after this.


MACCALLUM: New details tonight as rumors swirl over the faith of White House Chief Strategist, Steve Bannon. The embattled West Wing operator is reportedly increasingly at odds with President Trump's son-in-law and advisor, Jared Kushner, who has said to be souring a bit on Bannon's agenda. Earlier today, White House Spokesman Sean Spicer, stopped short of denying that there was a feud. Watch.


SEAN SPICER, WHITE HOUSE SPOKESMAN: I think a lot of it is overblown what you see in the media. There's obviously, you know, going to be spirited debates. I think that is a healthy way for the President to get guidance and ultimately make decisions. So I understand that there's always going to be a little palace intrigue, but I think that the proportion that I've seen of palace intrigue versus policy, is a little out of whack.


MACCALLUM: Joining me now, a man who knows the players well, Former Deputy Campaign Manager for Donald Trump and Fox News Contributor David Bossie. David, good evening. Good to have you here.

DAVID BOSSIE, FOX NEWS CONTRIBUTOR: Hi, thanks for having me.

MACCALLUM: So, as I say, you do know a lot of these players well, so you hear all these, you see it all the time on the internet and everywhere else, what do you make of it?

BOSSIE: You know, I think, Sean was right on. I think this is a lot of due about nothing. You know, look, the President has an incredible team. Steve Bannon is part of that team. Jared Kushner is part of that team. Reince Priebus is part of that team. He has an amazing group of people around him. Steve is an important part of that, no less than anyone else. And I think that that's the atmosphere that the President is looking for, is an important team work element.

And I think that that's what we did during the campaign so well, Steve and Jared and many others. We had spirited debates in the room, but we were able to come together for the President's agenda and support the President. And that's their jobs today, inside the White House. It is difficult. It is hard because of the fishbowl aspect of the White House. But I've got to tell you, you know, they're all in for President Trump's agenda. And President Trump is having a great two weeks here.

MACCALLUM: But I guess the coming together part to support the President's agenda, is the part that sounds like it's gotten a little tricky because the President himself said, you know, either they're going to work this out or I'm going to work them out for them, meaning the two sides between Kushner and Bannon. And then the president also said in this Wall Street Journal piece, he referred to see Bannon as "a guy who works for me" and said, "I am my own strategist."

And we all know that Steve Bannon's title is chief strategist. So, you know, there's a suggestion that he doesn't like that Steve Bannon has gotten a lot of credit for some of this, you know, sort of Trumpist or Trumpism or whatever you want to call it -- mentality and the credo.

BOSSIE: You know, it's interesting to see that from the outside. I've got to tell you, I've known the president now for many, many years. I was there at the beginning when he first thought of running for president, many years ago. And he has been saying the same things for years.

He said to them at CPAC. He said that at our Freedom Summit Series -- across the country in Iowa, New Hampshire, South Carolina as he was running for president. He's been saying the same things. He's had the same agenda and what he's saying is I've been saying these things for a long time. The thing is, Steve Bannon has been saying these things for a long time as well, separately.

They both have been saying a lot of the same things, you know, Steve on the radio show and with the "Breitbart." So I think there is symmetry there and that's one of the reasons why they work so well together.

MACCALLUM: I mean you've put your heart and your passion into a lot of these ideas as well. The America first philosophy, a nationalist, you know, economic nationalism, deconstructing the administrative state which we've been talking about. You know, do you feel that it's important for Steve Bannon to stay in the West Wing in order to see those ideas through? Do you want him to keep his job?

BOSSIE: Well, first of all, certainly I want Steve and the president to do what's best for the administration and for the country and I think Steve is an important part of that. But that's the president of the United States' call. I mean you have -- we all serve at the pleasure of the president whether it was on the campaign, the transition and now in the White House and, you know, I don't speak for the president.

MACCALLUM: In terms of Jared Kushner, there's a lot of power obviously that is concentrated now in Jared Kushner and in Ivanka Trump. Is that a negative?

BOSSIE: It's not. I mean, they're incredible people. Jared is an incredibly smart, smart as a whip guy. He is incredibly confident. And I've seen him work through the campaign and through the transition and now through this White House. He understands the president's agenda and he's working towards that with the rest of the team and I think that includes Steve Bannon.

MACCALLUM: But so much of what we're seeing now, we just talked, you know, through the whole top of the show about China, about Russia, about the attack in Syria, which you know, reportedly Steve Bannon was in the rooms saying, you know, no. I don't think we should fire these Tomahawk missiles at Syria. I think it's going to get us into a mess and it's going to be tough to get out of it.

We're seeing a very different, you know, China is not a currency manipulator we heard tonight from the president. All these ideas and I think that a lot of people who have been very supportive of the president perhaps in your camp kind of don't recognize where he's coming from right now.

BOSSIE: Well look, I think things have changed. I think what we're going to see in coming days is that China was as the president said during the campaign a major currency manipulator. We think we've seen them stop those practices as he became -- as he got elected and I think now six months later, November to now, we are seeing reports that maybe they aren't doing it anymore out of respect for our new leader.

And I think that it's President Trump's leadership that's getting them to stop that. And then -- look, we need to work with them on the North Korea issue clearly and I think that, you know, if there are facts behind the currency manipulation issue where they are stopping it, I think that's a good thing for us to be able to work together in the future.

MACCALLUM: David, always good to talk to you. Thank you very much. Good to see you tonight.

BOSSIE: Thanks for having me.

MACCALLUM: So there is a brand new Republican in Congress tonight. So is the GOP relieved or girding for battle? The next race to keep an eye on.

Plus, while the focus is overseas and off the border, there are reports tonight that a deportation force is ramping up. Are sanctuary cities still going to lose funding or is that not going to happen? We'll tell you what we're talking about. Mercedes Schlapp and Krytal Ball here to debate that, next.


JEFF SESSIONS, UNITED STATES ATTORNEY GENERAL: For those that continue to seek improper and illegal entry into these country, be forewarned. This is a new era. This is the Trump era.




TRUMP: Cities that refuse to cooperate with federal authorities will not receive taxpayer dollars. No one will be immune or exempt from enforcement. And ICE and border patrol officers will be allowed to do their jobs the way their jobs are supposed to be done.


MACCALLUM: Those were the border security promises made on the campaign trail and tonight, some significant developments in the crackdown efforts. The Department of Homeland Security has now suspended the weekly report that they came up with where they were going to name and shame sanctuary cities and list the people that they allowed to go free, all of that.

But now they say that the list is not accurate, so they're pulling back on it for now and they're going to revamp it, so we'll see. At the same time, the president's budget director is pushing Congress to take a harder line against these cities which could complicate those negotiations that are coming over keeping our government funded. So does that mean shut down is a possibility? Trace Gallagher has all the story for us from our West Coast newsroom. Hi Trace.

TRACE GALLAGHER, CORRESPONDENT, FOX NEWS: Hey Martha, you know, the reports published by Immigration and Customs Enforcement or ICE are commonly known as Sanctuary City Reports but officially they are called Declined Detainer Outcome Reports or DDORs, and they're meant to draw attention to local and state governments that refuse to honor detainer requests, meaning they won't hold on to illegal immigrants so ICE can take custody of them.

Problem is in the effort to shame sanctuary cities and ratchet up the political pressure, ICE mistakenly listed some places that do cooperate with the feds like Travis County, Texas and Franklin County, Pennsylvania. So for now, publishing the names of sanctuary communities will stop, which is angering some critics of illegal immigration who believe the Department of Homeland Security is caving to pressure.

But during his first trip to the southern border, Attorney General Jeff Sessions made it clear the administration is not about to back off illegal immigration. Watch.


SESSIONS: This is a new era. This is a Trump era. The lawlessness, the abdication of duty to enforce our laws and the catch and release policies of the past are over.


GALLAGHER: And the president's budget advisor, former conservative South Carolina congressman Nick Mulvaney, who you talked to earlier wants to up the ante even further. Mulvaney wants congressional Republicans to make sure the next budget includes language restricting federal funding for sanctuary cities. The move is meant to placate the Freedom Caucus, you know, the same lawmakers who killed the GOP Health Care Bill. But the move will also enrage Democrats and that could lead to a stalemate otherwise known as a government shutdown, Martha.

MACCALLLUM: Here we go again. Trace, thank you. So Mercedes Schlapp joins us, Republican strategist and Fox News contributor and Krystal Ball, author of "Reversing the Apocalypse: Hijacking the Democratic Party to Save the World." Welcome to both of you. Good to have you here tonight.



MACCALLUM: So that's a bit of a rock in a hard place, Mercedes, let me start with you on this because if you, you know, do the sanctuary city (INAUDIBLE) of federal dollars from places that are not recognizing the laws that are on the books and you use that money to put it towards a wall, you're probably going to get some Democratic pushback and you may end up with a government shutdown.

SCHLAPP: We were going to get plenty of Democratic pushback but I think that we've learned in the lessons of the past, you go back to 2013 when Republicans moved -- conservative Republicans pushed for this government shutdown, it was incredibly unpopular. Almost 81 percent of Americans disapproved of that action and obviously I think that the Democrats when they're talking about shutting down the government, they're shutting down their own very fabulous government program that they themselves support and they highly criticized the Republicans for that act.

So I think it would be unwise for the Democrats to move on a shutdown of the government over the sanctuary cities. With that being said, it would go against every single bone in the body of a Democrat to want to shut down government programs in this case.

MACCALLUM: Interesting position to be in Krystal.

BALL: Indeed it is. I don't know when the president is going to figure out that there is no pleasing the Freedom Caucus. I thought it was encouraging after health care there were some signs that maybe he was going to rethink his approach. The Republican caucus has been notoriously difficult to work with, to work even together so, he was going to reach out to Democrats. This is exactly the wrong way to go about it.

I mean, putting sanctuary city and the defunding of sanctuary cities and the wall into this budget proposal would absolutely poison the well not only for this continuing resolution but also going forward working with Democrats at all. So I think it's a disastrous move not only for potential government shutdowns but moving forward and trying to get anything done in this administration.

MACCALLUM: Go ahead Mercedes.

SCHLAPP: Well, I have to argue a little bit on that point because I think that the Democrats, you know, with their -- the liberal Democrats in particular that they have their resistance movement that they're unwilling to even sit down with the president and get things done makes it very difficult. I think that there is some room with several of the Democrats, not many in the Senate, obviously in those battleground states like Senator Joe Manchin who has been willing to talk with the president.

I think we have to remember back in 2015, it was the House Republicans in a united force, both moderates and conservative Republicans including Hispanic Republicans who voted in favor of defunding sanctuary cities. So I think it's possible to get this done in the House from a governing coalition standpoint.

The difficulty will lie in the senate obviously in terms of the Democrats trying to put a stop to this, but they do run a very big risk if they decide to shut down the government.


BALL: Martha, just keep -- one quick thing in mind. The Republicans are in control of the House, the Senate, and they have the presidency. So if the government is shutdown, voters are going to know where the blame lies and it's not to do with Democrats.

SCHLAPP: No, they're going to blame it on the Democrats.

BALL: How so?


MACCALLUM: The Republicans said, you know, got to give us the House, the Senate and the White House and then were going to get all the stuff done. So it is on them, they own this. Isn't it Mercedes?

SCHLAPP: I don't think it is on the Republican. I think when they view -- look, last time around, I remember Ted Cruz reading "Green Eggs and Ham" on the Senate floor and that was what you saw. That was the visual that you can remember from that government shutdown and it was incredibly unpopular move by the conservative Republicans --


SCHLAPP: -- Chuck Schumer reading "Green Eggs and Ham" on the Senate floor, that's the image that you're going to see.


MACCALLUM: Yes, but is it wise to have the $1.4 billion for the wall in this bill and to have, you know, sanctuary city money that they hope to get from some of these offenders in this bill?

SCHLAPP: My sources in Congress have told me that it's going to be very difficult. I think you'll probably see more of a watered-down approach if you even see some Republicans who are hesitant to put so much money or funding into building the wall and that doesn't even include the potential losses that come with that bill. So I think it really is --

MACCALLUM: It's a big campaign promise.

SCHLAPP: -- problematic and I think Republicans need to think this through.

MACCALLUM: Alright, we got to go. Krystal, thank you and Mercedes thank you.

BALL: Thank you.

MACCALLUM: Nice to see you both. So a slim margin of victory for a Republican veteran over a novice Democrat has some Republicans a little bit nervous about what that might mean. Chris Stirewalt and Guy Benson break it all down for us on what the two parties can take away as we look towards, I hesitate to say it, the 2018 midterms, when we come back.


MACCALLUM: Some potential warning signs out there for Republicans after Congressman Ron Estes won the special election in Kansas last night. I guess it could've been worse for Republicans but it was a little bit closer and squeakier than some Republicans would've liked. So that is being seen as a little bit of a wake-up call for what's to come, especially as they look to next week and a closely contested race in Georgia's six districts where Democrats are looking for an upset they hope after they've gone 0 for 5 in elections across the country since President Trump was elected.

Some are asking if the GOP should worry about this one, which is Tom Price's district, so he was another one who was plucked out of his district and brought to Capitol Hill. Chris Stirewalt, Fox News politics editor and Guy Benson Fox News contributor and the political editor at town hall.com. Gentlemen, welcome. It is good to have you here. So Chris, let me start with you. Is this, you know, is it a wake-up call or not?

CHRIS STIREWALT, POLITICS EDITOR, FOX NEWS: Well, I guess it depends on whether you wake up. The phone is ringing for the GOP. There is no question. There is no question that, yes, this is a candidate who underperformed. There are a lot of reasons. This has been broadly over interpreted that this is a referendum on Trump or (INAUDIBLE). The truth is I wrote that the current Republican administration in Topeka, Kansas is about as popular as wheat fungus in the state. So, there are a lot of local pressures here.

But yes, Republicans need to be concerned because if they don't do this right and they have a bad off year, if they have trouble in Georgia next week, they've got another one coming up in Montana later on in the year. They've got two gubernatorial elections. If they have bad run, two things will happen, Republicans will abandon the president and his agenda here in Washington, number one. And number two, it will be harder to raise money and recruit candidates for next year.

MACCALLUM: Yes. The president has a pretty low approval rating. I think we're all sort of, you know, waiting to see the next round because it will be interesting to see how post the Syrian move the president does because he's had a pretty good last couple of weeks and we don't have, you know, very good new numbers on that. But Guy, the incumbent party tends to lose about 20 seats in the midterm election give or take a few. They only have like a 22-seat margin, right. So there is reason for the party in power to be concerned that they might lose power.

GUY BENSON, FOX NEWS CONTRIBUTOR: Yes, pendulum swing and what tends to happen is the party that's out of power, their voters are extra motivated and they want to come out and they're not happy with the status quo and they have that extra oomph behind them. And we saw this on the Republican side in 2010, in 2014, backlashes against President Obama. So, I think both sides have their own spins on what happened last night in Kansas.

The Democrats will say, look, this was a seat that easily was won by Donald Trump by almost 30 points just a few months ago and the Republican only squeaked by seven points. So this shows that our voters have more intensity and they are more engaged and the Republicans are going to be in trouble. The Republicans are going to say all right, but as Chris mentioned, this was sort of a lackluster candidate who ran an underwhelming campaign. He had ties to this very unpopular governor.

MACCALLUM: Yes. So it may or it may not be as huge indicator.

BENSON: Right. Exactly.

MACCALLUM: Yes, but no doubt, the White House is looking at, you know, what happened in the first few weeks as we get close to the end of the 100 days and they are retooling a bit, Chris, and there's discussion about Bannon and Kushner, you know, all of that which we talked about with David Bossie a little while ago. Do you see this White House recalibrating?

STIREWALT: Yes. Ground day. This is a president and administration of the White House that looks like they're doing a pretty hard reboot right now and we have a lot of campaign promises being traded in. We have a much more conventional version of Trumpism that has come out versus what we heard for example in his address at his inauguration. A very different attitude, and that's probably helpful for Republicans because where the next race is, next week is in suburban Atlanta, which are the very kind of voters who recoiled from Trumpism 1.0, the Steve Bannon version.

If he is lightly interventionalist overseas, bipartisan and accommodating at home, if it's a different Trump, that probably sells a lot better with affluent college-educated suburban voters in Atlanta.

MACCALLUM: Yes. Just 10 seconds, quick thought Guy.

BENSON: You know, we political nerds are breaking apart every little data point on these races, these special elections. A lot of this will come down to how does the economy look next summer, period.

MACCALLUM: Great point. Good to see you both. Thank you guys.


MACCALLUM: Coming up next, a major expose from "New York Times" on rampant mismanagement inside the White House. What could it be about? Stay tuned.
We'll be right back.


MACCALLUM: And now for the quote of the night. This is from Melinda Bates, the former director of the White House Visitors Office under President Bill Clinton. She is very concerned about the Trump White House. She says, "It is the single most high profile event that takes place at the White House each year and the White House and the First Lady are judged on how well they put it on. I am really concerned for the Trump people, she writes, because they have failed to fill some really vital posts and this thing is all hands on deck."

So is she talking about the State Department or maybe a state dinner or the G20? No, she's referring to the White House Easter Egg Roll. You see, they reportedly relate with their order of commemorative eggs and they might only have military bands instead of people like Justin Bieber singing this year and they might have a few thousand fewer egg rollers because apparently last year it was a mob scene out there but never fear, Press Secretary Sean Spicer said it will be an egg-cellent time. He said that, not me. Have a good night, everybody. Bill O'Reilly is up next.

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