Mulvaney on budget deal, stock market and 'dreamers' debate

This is a rush transcript from "Fox News Sunday," February 11, 2018. This copy may not be in its final form and may be updated.


Talk of a possible White House shake-up over the domestic abuse scandal while President Trump signs of budget-busting spending bill.


WALLACE: We'll discuss what the deal means to the nation's debt, the stock market, and the coming debate over the Dreamers with White House Budget Director Mick Mulvaney, who is being talked about as a possible replacement for chief of staff.

Then, the deficit hawks in Congress feel betrayed by a Republican president and congressional leaders.

SEN. RAND PAUL, R-KENTUCKY: A country cannot go on forever spending money this way.

REP. JIM JORDAN, R-OHIO, FREEDOM CAUCUS: In the past decade, this is the second largest discretionary spending increase, second only to Obama's stimulus package. So, you know how obnoxious that was.

WALLACE: We'll ask Ohio Congressman Jim Jordan whether his hard line House Freedom Caucus is out of business.


WALLACE: Plus, backlash to President Trump's defense of a senior staffer accused of abuse by two ex-wives.

TRUMP: As you probably know, he says he's innocent.

COREY LEWANDOWSKI, FORMER TRUMP CAMPAIGN MANAGER: There's no question they could have handled it better.

WALLACE: We'll ask our Sunday panel if White House mishandling of the Rob Porter affair will cost other officials their jobs.

And our power player of the week, the keeper of a trove of Nazi art glorifying Adolf Hitler few people will ever get to see.

Do you ever feel like you are in that huge warehouse at the end of "Indiana Jones"?

All, right now, on "Fox News Sunday."


WALLACE: And hello again from Fox News in Washington.

This was always going to be a big week for White House Budget Director Mick Mulvaney, with the release of the president's spending plan for next year.
But that has been overtaken by events. First, Congress passed and Mr. Trump signed a two-year spending plan that adds hundreds of billions of dollars to the deficit.

And now, the White House is dealing with its mishandling of domestic abuse allegations against former staff secretary Rob Porter. And there's talk the president may be looking to replace chief of staff, General John Kelly. Among the names being floated, Budget Director Mick Mulvaney.

And welcome back to "Fox News Sunday."

MICK MULVANEY, WHITE HOUSE BUDGET DIRECTOR: Good morning. Thanks very much for having me back.

WALLACE: Yes. I'm sure you are delighted about that introduction.

MULVANEY: You forgot about the shutdown last weekend too. So --


WALLACE: Yes, that's true.

Has the president or anyone around him talk to about replacing General Kelly as White House chief of staff?

MULVANEY: Absolutely not. And I think all the stories about replacing General Kelly are mostly being fed by people who are unhappy that they've lost access to the president under General Kelly's leadership as chief of staff. So, no, I'm extraordinarily pleased with the job the chief has been doing. Everybody in the West Wing is. The president is as well. I think the talk about the chief's departure is much ado about nothing.

WALLACE: Have you talked with General Kelly about his status, his standing?

MULVANEY: Absolutely not. And again, that's because I don't think it's an issue. Keep in mind, working in the West Wing and reading about it in the newspaper, watching on television, could not be more different. The place is very stable, very quiet. So, all the media hype about disarray is just that.

WALLACE: When you suggest that these stories are being fed by people who lost access because General Kelly has imposed order, you seem to be suggesting it's being fed by people inside the West Wing.

MULVANEY: No, keep in mind, before the general got there, just about anybody could get access to the West Wing. So, there's a bunch of people who are not inside the White House who were also upset that he has controlled it in a way that has made is much more productive. Keep in mind, since the chief has come on, we've managed to pass the tax bill, the economy is going again. ISIS is defeated.

There's a lot of good things that have been happening since the chief is there. I think the president sees that. The results speak for themselves.

WALLACE: Let's talk about the bigger underlying issue there and I promise we'll move on to your day job. You ran a congressional office. You now know run a major governmental agency.

What is your policy on dealing with allegations of domestic abuse against our staff?

MULVANEY: That we don't tolerate it at all. Keep in mind, it's never come up. It's never come up. Maybe I'm just fortunate with the people that I surround myself with, fortunate the people that are higher. It's never come up to me in business. It's never come up to me and my congressional staff, and it's never come up to me as my position as the director of Office of Management and Budget.

WALLACE: But you say you don't tolerate it at all. What does that mean?

MULVANEY: You simply don't -- you don't tolerate it. You cannot have domestic. You can put trust in people who would do that to their spouse of either gender. So, we have a zero tolerance policy for it.

WALLACE: I want to ask you about that zero tolerance because President Trump has been criticized for his response to the Rob Porter scandal. Here's what he said on Friday. Take a look.


TRUMP: We certainly wish them well. It's obviously a tough time for him. He did a very good job when he was in the White House and we hope he has a wonderful career and, hopefully, he will have a great career ahead of him.


WALLACE: And the president we did this yesterday: People's lives are being shattered and destroyed by a mere allegation. Is there no such thing any longer as due process?

There was no mention of zero tolerance. In fact, at no point either Friday or Saturday did the president even mention the two ex-wives who claimed that they were victims of abuse.

MULVANEY: Go back and watch what happened this week, and I think it's a very normal reaction to the circumstance. Someone who we know and trust and work with, Rob Porter, came to the president of United States and chief of staff and said, look, I'm being accused of these things, they are not true.

For the president and the chief of staff to give that person the benefit of the doubt is probably a very normal and human reaction. If your cameraman came to you and said, look, I'm going to be accused of something but it's not true, you'd be likely to try to want to give that person benefit of the doubt until they were proven wrong.

As soon as Rob Porter was proven wrong and it was proven that he was not telling the truth when the photos came on Wednesday, he was gone almost immediately. So --

WALLACE: I really don't want to keep on this --


WALLACE: -- but even after he was gone, the president still has not said anything about zero-tolerance. He still hasn't mentioned that the lives of the two women who were the subjects of abuse, that they -- those lives have been shattered too.

MULVANEY: What I think you saw there were a couple of different things. I think the tweet can be applied to a bunch of different people. In fact, when I saw the tweet, I know Rob Porter wasn't mentioned, I wondered if the president was talking about his friend Steve Wynn, who has been accused and essentially condemned without any due process. What you also saw there from the president is a certain sadness that somebody that he liked had let him down.

WALLACE: All right. Let's go to your day job, let's talk money. On Friday, the president signed a bipartisan plan passed by Congress that will add $400 billion in new spending, deficit spending to the budget over the next two years.

Here's how our next guest, your former colleague in the House Freedom Caucus, Jim Jordan, reacted.


JORDAN: This is probably the second-largest spending increase, second only to Obama's stimulus package. So, you know how obnoxious that was. So, this is not what we're elected to do.


WALLACE: Is Congressman Jordan wrong?

MULVANEY: No, he's not. He's just not recognizing the realities that we deal with.

The reality is that the president wanted to defend the nation. The president's first priority, he said this during the campaign, he said this since he was elected, he said it at the other night at the State of the Union, was to defend the nation. We really thought we could cut a deal with the Democrats that would increase defense spending in order to defend the nation.

They said that, publicly, they wanted to work with us on that. But when the doors closed, what happened was they would not give us a single dollar worth of additional defense spending without giving us additional money for welfare spending and that's just the world we live in.

People think we can do what we want to in Washington because Republicans control the House, the Senate and the White House. But the truth of the matter is, because of the 60-vote rule in the Senate, we need Democrat support. And Democrats would not support our increase in defense spending without that dramatic increase in social welfare programs.

WALLACE: During your confirmation hearing for this job back in January of 2017, you criticized the Obama presidency for overspending. Here you are.


MULVANEY: I believe, as a matter of principle, that the debt is a problem that must be addressed sooner rather than later. I also know that fundamental changes are necessary in the way Washington spends and taxes if we truly want a healthy economy.


WALLACE: But under this new plan, with a new spending, the deficit will rise from $439 billion in 2015 under Obama to a projected $1.2 trillion in 2019 and trillion dollar deficits for the years after that. There's always a reason. In other words, you're saying, well, it's the Democrats' fault. Obama might have said it was the Republicans' fault in the recession.

Bottom line, isn't President Trump the big spender now?

MULVANEY: Go to your premise. Your premise is that we're going to have larger deficits this year, which is absolutely true. But then you also say we're going to have larger deficits forever and ever and ever.

WALLACE: Well -- 2019, next year --


WALLACE: -- one-point-two trillion is the protection.

MULVANEY: And that's correct. And I think that's probably close to being accurate.

Again, we haven't had a chance to completely integrate the numbers from the bill that passed a couple days ago to what we are working on last week. But the truth of the matter is that when we roll out the budget on Monday, which is tomorrow now, you're going to get a chance to see how we can avoid that future. The budget does bend the trajectory down, it does move us back towards balance. It does get us away from trillion dollar deficits.

Just because this deal was signed does not mean the future is written in stone. We do have a chance still to change this trajectory and that's what the budget will show tomorrow.

WALLACE: Well, you know, I sympathize with you because you were writing a federal budget, that's a complicated thing. It was going to be released tomorrow and now on Friday, the president signs a bill which adds $400 billion in spending over two years.

Will this new budget that you'll release tomorrow reflect what Congress had just passed and the president had just signed?

MULVANEY: This may be the most complicated budget anyone's ever going to do. Tomorrow, what we're going to be doing, Chris, is we're going to be doing an update to our 2018 budget, which we released back in the spring in order to bring it in line with a spending deal that was passed last week. Then we're also going to be updating --

MICK MULVANEY, WHITE HOUSE BUDGET DIRECTOR: Then we're also going to be updating our 2019 budget. Keep in mind, we started doing that last September, to also bring it in line. And the argument --

CHRIS WALLACE, FOX NEWS HOST: Which will reflect the --

MULVANEY: Both of them, yes, the 2018 and 2019 budgets. It's been a very busy week at OMB.

What we're doing is, is saying, look, you don't have to spend all of these money. These are spending caps. They're not spending floors. So, you don't have to spend all that.

So, we are going to show how you can run the government without spending all of that.

WALLACE: But you know (ph) --

MULVANEY: And that will be our 2019 budget.

But if you're going to spend it, which is exactly what we think Congress is going to do, here's how you should spend it and that will be our 2018 budget. So, take the money that the Democrats want to put to these social programs and move it to things like infrastructure, move it to things like opioid relief, move it to things that are in line with the president's priorities so that if it does get spent, at least it get spent to the right places.

WALLACE: In your first budget, the one for 2018, for this year that you introduced last year -- yes, it's complicated -- you called for major spending cuts on the domestic side. Let's put them up on the screen: 28 percent less for the State Department and foreign aid, 31 percent cut for the EPA, 18 percent less for the National Institutes of Health.

But under the congressional compromise, all of those agencies get more money, not less money. So, in the sense, haven't the Trump-Mulvaney spending priorities for this year and last, haven't they been rejected by Congress?

MULVANEY: No. And keep in mind, I don't want to get too far deep in the weeds, but the bill that passed last week is not a spending bill. It's not an appropriations bill. It will simply set the caps, set the spending limit --

WALLACE: There was some detail in it as to what the spending will be.

MULVANEY: There is. But you are still going to see some reductions in our proposals to the State Department. You still are going to see some reductions in our proposals to the EPA. There's still going to be the president's priorities as we seek to spend the money consistently with our priorities, not with the priorities that were reflected most by the Democrats in Congress.

WALLACE: Now, in this new budget that you're going to be putting out tomorrow, will you allocate some of the money that was going to go to DHS as a down payment on President Trump's border wall?

MULVANEY: Yes. In fact, a couple different things. Last year in the 2018 budget, we asked for some money for the wall. I think it was about $1.6 billion. We're asking for about $3 billion I think this year for the wall, but we're also putting in a contingency in this 2018, what we call this pivot, as we try and pivot off of the old budget onto the new, to reflect the spending priorities or the spending bill that just passed, is enough money to build a whole wall or actually most of it assuming that DACA gets done. So, what I'm saying in a very confusing way is that we are assuming in our 2018 proposal that a DACA deal is done and that the border wall is funded.

WALLACE: So -- and is that $20 billion?

MULVANEY: It's 25 and I think we do half of that this year and half of that next year.

WALLACE: The stock markets, I don't have to tell you, have been going crazy over the last 10 days. We've seen the two biggest point drops, not percentage drops, but point drops in history, over a thousand points two days. And we're now in correction territory, down 10 percent from the high a couple of weeks ago.

One of the big concerns is that the economy is in danger of overheating, that we're going to have inflation, that we're going to have higher interest rates, that that's going to tamp down growth. Under this new spending plan that Congress has passed and the president has signed, we are talking about deficits next year 5 percent of GDP, which is usually only happens during war or recession.

Isn't it dangerous to have a 5 percent GDP -- deficit as a percentage of GDP when you're talking about an economy that's going at great guns?

MULVANEY: Certainly there's a risk that interest rates will spike and there's a concern -- I think what you saw last week when you started these wild gyrations in the stock market -- keep in mind though, Chris, that that thousand-point drop I think we had of Monday of last was only the 99th largest reduction on a percentage basis. So, even though that thousand points sounds like it's fairly dramatic, in a history of things, it's not that large of a swing.

But I think what triggered that was not the fact that we were overheating the economy, but that we were borrowing too much money. The Treasury had reached out to some of the primary dealers last week to --

WALLACE: But now, you're going to have to borrow more money.

MULVANEY: -- to anticipate the additional -- the additional debt. I think the one thing we keep coming back to, though, is we fundamentally changed the structure of the economy. This is not a fiscal stimulus. It's not a sugar high. It's not the same thing as what President Obama did -- I'm now talking about the tax bill.

We have fundamentally changed the structure of the American economy to where we think we can change the long-term trends of our growth possibilities, the long term trends of the economy, and that we have that sustained growth that could maintain --

WALLACE: I just have to pick up when you -- because now you are also adding $400 billion in new spending and a trillion dollar deficit next year, which only increases government borrowing. You say that could make interest rates spike.

MULVANEY: It absolutely could. Keep in mind though that we are also looking now at a healthier economy than even we expected. The -- when we rolled out the budget last year, we were accused of being way too overly optimistic on our growth rates for this year and for next, and we're already below what we're actually achieving. You saw the Atlanta Fed come out last week and I think predict growth over 5 percent in this quarter.

So, if we can keep the economy humming and generate more money for you and me and for everybody else, the government takes in more money, and that's how we hope to be able to keep the debt under control.

WALLACE: Director Mulvaney, thank you. Thanks for coming in today. It's always a pleasure to talk with you, sir.

MULVANEY: Thank you.

WALLACE: Up next, one of the founders of the House Freedom Caucus, Congressman Jim Jordan. Is the era of spending restraint now over?


WALLACE: Ever since the rise of the Tea Party in 2010, congressional Republicans have talked about shrinking the size of the federal government. But all that seemed forgotten this week with passage of a budget deal with $400 billion of new spending.

Joining us now, Congressman Jim Jordan, a founder of the House Freedom Caucus and still a deficit hawk, which has become something of an endangered species on Capitol Hill.

Congressman, welcome back.


WALLACE: Some people are suggesting that this bipartisan spending deal means that the era of spending restraint in the Tea Party is over, when you have big majorities of Republicans in both the House and the Senate approving this kind of a bill and a Republican president signing it. Are those folks right?

JORDAN: Well, here's what I know, Chris. This was not consistent with what the American people elected us to do. Not consistent with what we told them we were going to do.

And in your first segment with Mick, look, he said we don't have 60 votes in the Senate to get some things done. And I'm all for changing the Senate rules. But the last time I checked, Democrats don't have 60 votes in the Senate either and last time I checked, there's more Republicans in the Senate than there are Democrats. More Republicans in the House than there are Democrats and there's a Republican in the White House.

So, this deal which increased spending $300 billion, second largest spending increased in a decade, second only to the stimulus, was not what we said we would do and we're going to have to fight harder now as the Freedom Caucus and conservatives to get things back on track.

WALLACE: When you say that there are more Republicans than Democrats and a Republican in White House, are you saying in effect the Democrats won and the Republicans caved?

JORDAN: No, I'm saying the swamp won and the American taxpayer lost. And here's the frustrating thing -- we were so poised to win. Three weeks ago, we sent a bill to the Senate. Chuck Schumer shut down the government, didn't pay our troops, because he said amnesty was more important. Earlier last week, the House sent the same bill, the exact same bill to the --

JORDAN: Earlier last week, the House sent the same bill, the exact same bill to the Senate, except we did one thing different. We funded the military for the entire year.

And instead of standing firm, our leadership said, no, no, no, let's do what Washington always does. Let's just spend more on everything. Let's just grow government, give into the Democrats instead of fighting and stand firm, and do what the people elected us to do. They gave into the Democrats and we got this boondoggle that we passed.

I didn't vote for it, but that passed on Friday morning.

WALLACE: Well, you talk tough, but some folks are now saying that this deal puts the House Freedom Caucus that you and Mick Mulvaney helped start, put you guys out of business.

Let me put up the reasons that they suggest. You lose the debt ceiling for the next two years as a weapon to demand policy changes. With this to your agreement, you can no longer use the threat of a government shutdown. And with no budget resolution this year, you won't be able to use reconciliation to get a major initiative through the Senate with just 51 votes.

Honestly, Congressman, with this agreement, haven't you and deficit hawks like you and the House Freedom Caucus lost your leverage to shrink government spending?

JORDAN: Well, I think -- I think who lost in this deal was the American taxpayer, the --


WALLACE: No, no, but -- I understand the talking point. But I'm saying --

JORDAN: No, no --


WALLACE: Hasn't this made the House Freedom Caucus a lot less effective in your ability to force change?

JORDAN: First of all, it's not a talking point, it's the truth. Second, people have been trying to write off the Freedom Caucus since the last election. I remember, right up to the last election, said, oh, the Freedom Caucus is gone now because Republicans -- I think we've been the most effective caucus, and certainly the most talked about caucus on Capitol Hill the last year and a half, and I would argue our chairman, frankly, is probably the member closest to the president, closer than probably any other member in the House or the Senate.

So, they can only say they're going to write us off. But what I know is we got a big debate coming, the debate on immigration. And the Freedom Caucus is going to be in the middle of that and the speaker of the House promised the Freedom Caucus, promised conservatives in the House that he would put the Goodlatte legislation, the legislation that is consistent with the mandate of the 2016 election, that he would whip that, bring that to the floor and we would have that --


WALLACE: That's a hard line immigration package.

JORDAN: It's the package that's consistent with the election. It says build the border security wall, end chain migration, stop sanctuary city policy, do all those things that the American people want us to do. And then also deal with the DACA situation, so it prioritizes things in the right manner and it focuses on what the people elected us to do. Let's pass that legislation.

And that's the big fight coming. That's what we're going to be weighing in and trying to accomplish.

WALLACE: All right. Before we get to immigration, and we will, I want to ask you a little bit more about the spending package because House Speaker Paul Ryan defends the compromise that he helped get through. Here he is.


REP. PAUL RYAN, R-WIS., SPEAKER OF THE HOUSE: This is a bipartisan bill. Just like Leader Schumer said, you get some things you like, you give the other side things they like. That's what bipartisan compromise is all about and I think on the net, this is a very good solution.


WALLACE: On net, a very good solution. Do you still have full confidence in House Speaker Paul Ryan or is it time for him to leave?

JORDAN: Well, here's what I know. Spending bills start in the House of Representatives. The person most responsible for the spending bill is the speaker of the House. He could have stood firm for the position that we passed earlier in the week, the position that our conference then supported. I wish he would have done that.

So, do I think the speaker has problems? Yes I do, particularly now as we head into this big immigration debate. Just a few years ago, he was viewed as the fiscal -- the leader of fiscal responsibility in our party and now he presides over a bill that increases spending $300 billion, a trillion dollar deficit, when we were so poised to win this fight.

Of course, he's got problems. But the key is let's see what happens next on the immigration issue.

WALLACE: You say he's got problems, Congressman. Is it time for a change?

JORDAN: Well, you know, look, we'll have that debate at the appropriate time. You asked if he has -- if he has -- if there's concerns with the speaker, I think there are big concerns because he just presided over one of the biggest spending increases in the history of this country at a time when we were elected to do just the opposite.

WALLACE: Let's turn to immigration. The Senate takes up DACA this week trying to find some solutions, some compromise, and what they are talking about -- and also what the president is talking about, is a package that includes -- now you put the tough part first, the president and some Republicans say that it all comes together, that you're going to have a path to citizenship for the Dreamers in 10 to 12 years. You're going to have tougher border enforcement on our southern border and also tougher enforcement both legal and illegal immigration.

Would you support that package?

JORDAN: I'll support a package consistent with what the voters said. I mean, look, the voters don't trust that Washington is going to do the right thing on immigration and they are tired of this, oh, we'll give some kind of amnesty to folks who came here illegally and we promise, promise, promise will do something to secure the border -- they're sick of that play.

What they want is border security first. So, build a border security wall, end the chain migration, get rid of this crazy visa lottery, do things in a way that make good common -- sanctuary city policy, get rid of those. Do those things first and then we'll deal with the DACA situation. That is consistent with the mandate of the 2016 election and frankly consistent with what the president and what Republicans campaigned on.

WALLACE: But I'm asking you --

JORDAN: And that is consistent with Goodlatte's legislation. That's why we want to pass that.

WALLACE: I'm asking you a direct question because that isn't where this compromise seems headed in the Senate. They are talking about doing them all at once, the path to citizenship and these other things all at the same time, not enforcement first.

JORDAN: Yes, and you --

WALLACE: Can you accept all of those as a package?

JORDAN: Of course -- of course not. The Freedom Caucus won't support that, I don't think of the majority of the House of Representatives will support that. And Speaker Ryan knows that he can't put a bell on the floor unless the majority of the House Republicans are supportive of that measure.

WALLACE: So, you're saying if all of these things come together as a package, DACA, you know, deal for the Dreamers and the tougher enforcement, that's unacceptable to you and you believe the majority of Republicans?

JORDAN: I'm -- you asked me about the Senate bill. What's being proposed in the Senate is not going to be acceptable to conservatives in the House, I guarantee, because it's not going to be acceptable to the American people. If they do legislation like what is Chairman Goodlatte's legislation, that's been worked on by him, Congressman Labrador, Senator -- or excuse me, Congressman McCaul. You stick with that kind of legislation you will see conservatives support that because again, Chris, it's consistent with what the American people elected us to do in 2016.

WALLACE: Let me ask about that because you've made that point several times, what the American people elected you to do and with the Republican majority in 2016. Do you think that the passage of the spending bill, and depending on what happens on immigration, could this hurt Republicans in the 2018 midterms? In other words, the folks that felt, well, the conservative voters, if we elect a Republican House, or a Republican Senate and Republican president, we're going to get conservative policies.

Do you think some of them just may stay home if they see Congress --

JORDAN: Heck yes. Heck yes. I mean, come on, when you get elected to do the right thing in immigration and a bill talking about in the Senate may be passing, that's not going to -- that's going to hurt I think turnout and going to -- you know, the people are going to be pleased with that. And then when you increase spending, $300 billion, just grow government, run a trillion dollar deficit -- heck yes that can hurt us.

That's why -- that's why we're so focused on making sure this immigration bill gets done right. That's why we fought the spending bill as hard as we did last week.

WALLACE: I got one more question for you and I got less than a minute. Friday evening, the president sent a Democratic memo on FISA and the FBI back to the House saying there's too much sensitive intelligence in it.


WALLACE: Democrats have to rewrite it.

How do you answer folks who say, well, you know, the president just ignored the criticisms from the FBI when it came to the Republican memo, but now he's using their objections to --


WALLACE: -- delay the Democratic memo?

JORDAN: The president was in no win situation the way Schiff constructed the memo. If he redacts it or doesn't release it, oh, he's not for transparency. If he releases it, he'd actually jeopardize the sources, methods and potentially lives of Americans and others who helped in our intelligence community. He's in a tough situation.

But that wasn't the big news this week. The big news is this week was the text message from Lisa Page to Peter Strzok where she said POTUS -- referring to President Obama -- POTUS wants to know everything we're doing. And the significance of that, Chris, was when it came. July 5th, they let Clinton off, no charges brought against Clinton. End of July, Peter Strzok opens the Russia investigation.

Peter Strzok, the same agent who ran the Clinton investigation, and then September 2nd, you have this text message which says, POTUS wants to know everything we're doing. Peter Strzok, the guy who ran the Clinton investigation --


JORDAN: -- ran the Russia investigation. That's the real takeaway this week on the whole Russian matter.

WALLACE: All right. We're going to have to dig down into that, we'll have you back. It's always interesting to talk to you, Congressman Jordan. Thank you.

JORDAN: Thank you.

WALLACE: Thank you for your time. Please come back, sir.

JORDAN: I will. Take care.

WALLACE: Up next, we'll bring in our Sunday group to discuss the Democratic FBI memo the president refused to release.

Plus, what would you like to ask the panel about how the White House handled the Rob Porter domestic abuse scandal? Just go to Facebook or Twitter, @FoxNewsSunday, and we may use your question on the air.


WALLACE: Coming up, Vice President Pence tries to counter the North Korean charm offensive at the Winter Olympics.


MIKE PENCE, VICE PRESIDENT OF THE UNITED STATES: The United States of America will soon unveil the toughest and most aggressive round of economic sanctions on North Korea ever.


WALLACE: We'll ask our Sunday panel whether Kim Jong-un can drive a wedge between the U.S. and South Korea.



COREY LEWANDOWSKI, FORMER TRUMP CAMPAIGN MANAGER: The general is there to put in policies and processes and procedures. And in this case, those didn't work and we need to find out why.

DAVID BOSSIE, FOX NEWS CONTRIBUTOR: I believe that this president has confidence in John Kelly. I will say that the process here failed. I don't know who -- where the buck stops on the process.


WALLACE: Former top Trump campaign advisors Corey Lewandowski and David Bossie, who still have the president's ear, wasting no time pinning the blame for the Rob Porter scandal on White House Chief of Staff John Kelly.

And it's time now for our Sunday group.

Former Republican Congressman Jason Chaffetz, Fox Mews analyst Marie Harf, Rachael Bade, who covers Congress for "Politico," and Guy Benson of

Well, congressman, as someone who's seen how Washington works, how do you explain the way the White House has handled or mishandled the Rob Porter scandal? And do you think that General Kelly's job is in real jeopardy or do you think these leaks that the president is mentioning other names is just a way of him showing Kelly whose boss?

JASON CHAFFETZ, FOX NEWS CONTRIBUTOR: I think they still have a lot of confidence in General Kelly. I do think Mick Mulvaney, if it came to that, would be a great chief of staff.

But, nonetheless, even the White House spokesperson said earlier this week that they had mishandled this.

I do think the White House should have an accounting. Let's understand who has a security clearance and who doesn't. And if you have to take a timeout and go take another job -- but in the inner sanctum, the closest people to the president cannot be operating with proximity to top secret, classified information without a security clearance. I think it's pretty black and white.

WALLACE: We asked you for questions for the panel and we got this on Twitter from Brett Schuchat who writes, given the last year with high-profile harassment and assault, why wouldn't Chief of Staff Kelly and White House Counsel Don McGahn have put Porter on paid leave until accusations fully investigated? Was the White House deaf and blind to high-profile assault stories?

Marie, how do you answer, Brett?

MARIE HARF, FOX NEWS ANALYST: Well, I think that the White House was a little blind here. And this isn't the first time they've dealt with this. You know, Steve Bannon worked at the White House. He had been accused in the past of assaulting his wife as well.

So this is a process story in part, but it's also a principle story. They have known for months about these allegations. Both wives -- ex-wives went to the FBI, gave them accounts. It was only when it became a public relations problem and the photos came out that the White House actually acted.

So I would say in this country right now we are going through a moment where sexual harassment and sexual assault are really -- been a topic of discussion. They're being handled in a much more serious way. And the White House really feels like it's behind the eight ball here in how they handled this. And I think John Kelly has some answering to do for it.

WALLACE: Guy, let me pick up on that with you because it -- we've got the president here, who on Friday, after Porter is gone, after they've dealt with the, quote, public relations problem, is saying, well, I feel sad for Porter that he's going to have a great career, and then the tweet on Saturday in which he says, you know, we need due process here and people's lives are being destroyed by allegations. No mention of the two ex-wives.

GUY BENSON, FOX NEWS CONTRIBUTOR: Yes, well, the statement from the president was one of regret on behalf of Porter. Oh, it's been a tough time for him. We wish him the very best in his career. Nary a word about the alleged victims, of which there are three.

And I'm sympathetic to this argument that just because an allegation exists, that someone should lose their job and have their life shattered. But in this case, you have to use reason and evidence. And we know this is three women, there's a photo of a blackened eye, there's a police report, there is a restraining order, and the FBI was not giving this man a security clearance for a reason. There's a pile of evidence. And to sort of elide all of that the way that the president did in his statement, I think did a disservice to this ongoing fiasco at the White House on this issue.

WALLACE: Let's turn to another subject because the president sent the Democrats back there FISA memo saying that it still reveals too much intelligence, sensitive intelligence. That clearly set off some partisan sniping. Take a look.


ANTHONY SCARAMUCCI, FORMER WHITE HOUSE COMMUNICATIONS DIRECTOR: I love the fact that the president's out there explain directly to the American people, this is what they sent me. This is why I can't put it out.

ERIC SWALWELL, D-CALIFORNIA CONGRESSMAN: I'm skeptical of most things the president says because he is consistently inconsistent and consistently obstructive.


WALLACE: But, Rachael, while Democrats are suspicious that the president is using the secret intelligence excuse to block the memo, they also seem eager, willing, to work with the FBI and the Justice Department to clear up any concern so they can get their memo out.

RACHAEL BADE, POLITICO: Yes, that's right. It sounds like Republicans on The Hill are at least saying they are supportive of releasing this memo at some point in time. Paul Ryan has said he wants it to be out there for transparencies sake. And I think Republicans are worried that if they don't release this memo or the president blocks them from doing so, that it will just undercut their entire purpose for writing the initial memo, which was to highlight what they say was potential civil liberty obstruction, civil liberty -- infringing on civil liberties of Americans.

So I do think it's going to go through at some point. The FBI also said they needed to redact certain information. So I think Democrats are willing to look at that and then they're going to, of course, send it back up to the White House. If the president rejects it then, I think you'll see even more partisan bickering. But I think until then we're going to see them working together to get it out.

WALLACE: What about the argument that the Democrats, in a sense, set the president up? That they purposely put stuff in there they knew was unacceptable because it would make the president look like he was blocking it for political reasons, when, in fact, the FBI and Justice Department say there is too much sensitive material there?

BADE: Yes, it was sort of amazing. Even before the memo came out, we heard partisan sniping on this from both sides, which just shows you how incredibly partisan this committee has actually become.

The memo is actually longer. It's ten pages instead of four. And it sounds like the FBI, again, said some of this stuff we don't want out there. So Democrats are going to try to work with them on that, get that part out, and then try to release it from there.

Now, again, if the White House rejects it for a second time, then we very well will see this argument heat up.

WALLACE: Congressman, as somebody who's worked in these areas as the chairman of the House Oversight Committee, do you think the Democratic memo eventually gets released? And to some degree, talking about -- picking up on Rachael about the partisanship, has House Intel lost its credibility because of all this partisan wrangling?

CHAFFETZ: You want to see them come and be more united than they have been in the past, but I just -- I just don't believe Adam Schiff. The flailing that he has gone through about the ramifications of the four-page memo, none of that turned out to be true. So I do want to --

WALLACE: And let's just remind people that he said that -- that this memo revealed government secrets and sources and methods. And when we read it, the only thing that it potentially revealed was the fact that there had been a FISA warrant granted to Carter Page. Now, that's classified, but everybody in the world knew about it.

CHAFFETZ: And so he lost a lot of credibility. Now, we do need the Democratic memo out there. Probably the most compelling piece of information to come out, though, will be the inspector general, Michael Horowitz, when the 450 people that he has working on that, an Obama appointee approved by the Senate, when they come out with the IG report, I think that's going to be the most compelling to America.

WALLACE: Guy, final word here. I mean has -- what credibility does House Intel have left when you have these two competing -- the parties are just totally divided on this whole issue, and even what the investigation is about.

BENSON: Very little credibility, right? Nunes is not trusted by the Democrats at all. Schiff is not trusted by the Republicans. Schiff does have a credibility problem to the congressman's point. And the question is, did they put poison pills in the memo to create this PR issue for the president? I hope that you're right, Rachael, that the DOJ, FBI and Schiff get in the same room, figure out what to redact and get the memo out. That's the best course of action.

HARF: I think they will. I think they will.

BADE: Trump (ph) built a wall apparently this week between the Republican and the Democratic staffers on the --

HARF: Devin Nunes did.

BADE: Correct.

HARF: Right.

BADE: Devin Nunes did. And so, again, just --

WALLACE: Yes, this isn't the staff. They (ph) -- all you can sit in one big room --

BADE: Right.

WALLACE: And now they literally have put a wall between them. So he can build a wall.


BENSON: Yes, built a wall.

WALLACE: All right, we have to take a break here. When we come back here, the stock market's wild week. What's behind the correction and will it hurt the economy?


WALLACE: The sister of North Korean Dictator Kim Jong-un attending the Winter Olympics and inviting South Korean President Moon to meet with her brother back in Pyongyang later this year.

And we're back now with the panel.

Well, Marie, as a State Department official, you dealt with North Korea. They're clearly engaged at these Winter Olympics in a charm offensive. And at the opening ceremony, you can see there, there was president -- Vice President Pence (ph). And right over his shoulder, in the second row, was Kim's younger sister, who's also a top advisor.

Are they succeeding in their effort, which is pretty obvious, to try to drive a wedge between the U.S. and South Korea?

HARF: Well, I think it's worth keeping in mind that if there is some conflict, if we cannot solve this diplomatically, it is the South Koreans who will bear the brunt of this conflict if it were to happen. So, just from a human interest perspective, seeing the athletes from the North and the South march in together, I actually think was a reminder of the stakes here.

And I think the North -- or, excuse me, the South Koreans have been concerned about some of the inconsistencies coming out of the Trump administration about negotiations, whether they're still on the table, what the pre-conditions could be. So I think the North and the South have put out there a possible way to start talking to avoid conflict. We shouldn't be naive. But the Trump administration really needs to, you know, narrow their focus on what their policy is, on what they're looking for out of negotiations, because our allies are pretty scared by some of this talk of preemptive strike, of a bloody nose (ph) strike. That scares them because they will bear the brunt of that conflict.

WALLACE: But, Guy, the point of the Trump policy, to put pressure on North Korea and to isolate them, the reason for all this is because they want to seek Kim stop his nuclear program, stop the missiles, stop the nuclear tests. If you get South Korea saying, well, we don't need that, you can keep your nukes, that has a real implication not only for South Korea, but for the world.

BENSON: It could. And I think what the Trump administration would argue is that the previous administration's approach, and frankly others, had been virtually the same for years and has not paid dividends, to put it kindly. And being more unpredictable is actually what is needed in this circumstance.

I also briefly want to go back to your point about this charm offensive by Pyongyang at the Olympics. It is distressing and bewildering to me watching how much our media seems to be buying into it. The swooning and the gushing over the cheer squad that is cheering under threat of death, you know, for their families. And this sister of a vicious killer giving side eye to the vice president. A lot of people saying, oh, you know, she's slaying, she's stealing the spotlight. We should not be buying into North Korean propaganda.

WALLACE: But here's what -- the only point that I disagree with you, saying that this is media creation. I watched the opening ceremony at they had a North Korean and South Korean athletes, two of them, going up the stairs with the flame to deliver it to the final person who lit the flame. I mean the South Koreans are buying into that. That has real implications in terms of the south Korean-U.S. alliance.

BENSON: That's fine. That's fine. My concern is the celebration of Kim's sister and talking about, oh, isn't -- aren't these cheerleaders cute. To me that's dangerous because this is a brutal regime and it seems like they are putting out chum in the water and there are people in out media willing to eat it up, and we shouldn't.

WALLACE: How concerned are you, Congressman Chaffetz, about the danger of North Korea splitting South Korea off and thereby weakening the alliance we're trying to create of the world against the Kim regime and its nuclear ambitions?

CHAFFETZ: We, obviously, want peace and we want some prosperity, but we've also got to make sure that they don't get the nuclear capability. And so you have to be able to do both.

And, again, President Moon, who's still fairly new into this position, is a great partner to the United States. You also saw Vice President Pence sitting next to the prime minister of Japan. And a very important symbol there as well.

WALLACE: All right. The other big news this week was the wild ride on Wall Street. Take a look.


UNIDENTIFIED MALE: The Dow is down more than a thousand points, now officially in correction territory.


WALLACE: Last week we saw two separate thousand point drops. The two biggest point drops, not percentage drops, but point drops in history. Which makes me wonder, Rachael, with all the concern that we saw in those drops about the economy overheating, rising inflation, rising interest rates, was there any talk in Congress as they were passing his huge spending bill, which is going to add hundreds of billions of dollars more in deficits, was there any talk that this only adds to that problem?

BADE: Yes, absolutely, particularly from conservatives. Jim Jordan, as you just interviewed, conservatives are not happy with this deal at all. I mean, obviously, this is a $300 billion increase in spending. A whole debt ceiling increased for a year, increasing the national debt by more than a trillion dollars potentially, over $20 trillion, which it is currently.

Look, conservatives are not happy with this at all. This is not something they want to campaign on back home. There was some Republicans who voted for this just because they didn't want to vote against military spending and they were --

WALLACE: Well, when you say some Republicans, it was a majority.

BADE: That's right.

WALLACE: In was 167, 169 Republicans in the House and a majority of Republicans in the Senate. And that's what I'm wondering. I mean did they express no concern about what they were approving?

BADE: You know, a lot of them were not happy that they had to take this vote and leadership has been using the same sort of justification that Mulvaney gave you this in morning, which is, we needed to bolster the military and there was only one way to get it. We had to increase spending for Democratic priorities in order to do this as well. And so a lot of them did so reluctantly, but we'll see how much it hurts the next election.

WALLACE: Congressman Chaffetz, what happened to your party, the party of fiscal restraint?

CHAFFETZ: They blew up -- they put a torch to the mantle of fiscal discipline. That is long gone.

You know, there's been a lot of talk about a parade around here. They should be doing a parade for Chuck Schumer because he took them to the cleaners. I mean he really did.

Listen, he got every spending priority that he wanted. Nothing was cut. If took reconciliation, the most powerful tool that the Republicans had, off the table. And it's just unbelievable to me that we were spending this much money. Nobody campaigned on that. And there is going to be a political price taken, particularly in the primaries.

WALLACE: So -- so explained to me, as somebody who was in Congress until recently, why? I mean I understand the argument, well, you need 60 votes in the Senate, which means you needed nine Democrats to come along. Why did Republicans do it? I mean they did have the majority in the House, in the Senate, and they had a Republican president and they went along.

CHAFFETZ: Look at the trajectory over the last few days. It just happened in a couple of days. I mean at least Rand Paul was trying to have at least a little bit of a semblance of a debate on one of the most massive things that the Congress does in this spending. It's absolutely unbelievable to me. I just -- I can't even fathom the idea that if we had gone into the election saying we're going to raise spending and we're going to go back to trillion dollar deficits, none of these Republicans would have gotten elected. We love our military, but we're in the majority in the House, the Senate, and we have the presidency. And we have this kind of deficit? It's unbelievable.

WALLACE: I've got less than a minute left, Guy. Let's talk about the election. I brought this up with Jim Jordan. What impact does this have on the 2018 midterms? You've got conservative voters out there who were promised certain things if they elected a Republican government. They did, and this is what they get.

BENSON: I think there will be some Tea Party leaning Republicans who are wondering, where did the Tea Party go? And will it emerge again when there's a Democrat in the White House? And if that's the case, will it be convincing? And I think the Republicans have done themselves harm.

WALLACE: I mean that's the interesting thing. Some people are seeing the only way you get hard Republican on spending is to have a Democrat as president.

BADE: That's how it feels to a Democrat, I should say.

WALLACE: Yes, elect a -- elect a Democrat and cut the deficit.

BADE: Exactly.

WALLACE: Thanks, panel. See you next Sunday.

Up next, our "Power Player of the Week." The Army's art collection, including powerful Nazi propaganda from World War II, under lock and key.


WALLACE: One of the highlights of this job is to get to see historic treasure trove not open to the public and to share them with all of you.

A few days ago the Army opened its doors to show us one of those collections. Here's our "Power Player of the Week."


CHARLES BOWERY, U.S. ARMY CENTER OF MILITARY HISTORY: They used it to enhance, in their view, toward the sanctity of the Nazi way of life.

WALLACE (voice over): Charles Bowery is the chief of Army history. And we met at a huge warehouse at Fort Belvoir outside Washington, that holds thousands of pieces of military art and artifacts. The battle standard of an African-American regiment in the Civil War. A Taliban motorcycle. Norman Rockwell illustrations from World War II.

WALLACE (on camera): Do you ever feel like you're in that huge warehouse at the end of "Indiana Jones"?

BOWERY: We make that joke all the time.

WALLACE (voice over): But we were there to see the Army's stash of Nazi propaganda, 586 pieces seized during Hitler's fall and sent back to the U.S.

UNIDENTIFIED MALE: Hitler's retreat at Berchtesgaden, the luxurious mountain residents.

WALLACE: The man in charge of the operation, Gordon Bilki (ph), who was appointed by President Roosevelt.

WALLACE (on camera): Why was it so important to remove this art from Germany post-war?

BOWERY: They believed that the presence of these pieces in German society could be essentially a powder keg that could kick off additional incidents of the rise of Nazism.

WALLACE (voice over): Pieces like this 1937 painting, "In the Beginning was the Word."

BOWERY: The piece is very intentionally titled to mirror the first verse of the book of John in the Bible. And it very clearly equates Adolf Hitler with John the Baptist.

WALLACE (on camera): It's an almost god-like figure and his disciples.

BOWERY: That's correct.

WALLACE (voice over): The Army seized another work called "The Standard Bearer."

BOWERY: It portrays Adolf Hitler as a medieval night. He's carrying a Nazi flag. He's mounted on a horse. And he is prepared to lead his people into battle.

WALLACE (on camera): Now what is this hole their?

BOWERY: An American soldier took his rifle bayonet and he punched through the eye of Hitler as a direct message.

WALLACE (voice over): The Army found this huge bust of Hitler in the eagles nest.

UNIDENTIFIED MALE: Where the Nazi furor (ph) held meetings of triumph in the mountains of Bavaria.

WALLACE: A grand hall he used for key meetings.

BOWERY: The monumental scale of it conveys his personal power and the fact that this was a cult of personality, that he led through individual magnetism.

WALLACE: Perhaps most fascinating are these watercolors painted by Hitler. As an aspiring art student and then a soldier in World War I, long before his rise to power.

BOWERY: One of the comments on his early evaluations of his work was that while he was pretty good at depicting buildings and structures, he was not so good at depicting human life.

WALLACE: But chances are you will never get to see any of these works in person. The Army keeps them locked up in its mammoth storage facility.

WALLACE (on camera): Is there concern that some of these pieces could be used as a rallying point for neo-Nazis here in this country?

BOWERY: That's the heart of the tight control that we maintain over the collection.

WALLACE: It could be potentially dangerous.

BOWERY: The term I like to use is powerful.


WALLACE: The Army is building a national museum near Fort Belvoir to open in 2020 that will house many of the military artifacts now in that huge warehouse. But don't expect to see any of the Nazi propaganda that glorifies a tyrant.

Now this program note. Be sure to join us next Sunday when the king of conservative talk radio, Rush Limbaugh, joins us for our annual conversation. It's a rare television interview for Rush. You don't want to miss it.

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


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