Rep. Michele Bachmann on Debt Ceiling Debate; Sens. Lindsey Graham, Kent Conrad on Air Strikes in Libya

The following is a rush transcript of the May 1, 2011 edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

CHRIS WALLACE, HOST: I'm Chris Wallace.

Libyan Leader Muammar Qaddafi escapes a NATO missile attack, but his family doesn't. The latest next on "Fox News Sunday."


WALLACE: A Tea Party favorite considers a run for the White House. But will Congresswoman Michele Bachmann take the next step? We'll ask her about the budget, Libya, and what she plans for 2012. Michele Bachmann -- a "Fox News Sunday" exclusive.

Then, will Congress raise the debt limit or will Uncle Sam default? We'll talk with two key players: Democrat Kent Conrad, chairman of the Senate Budget Committee, and Republican Lindsey Graham. Conrad and Graham -- only on "Fox News Sunday."

Plus, with the first Republican presidential debate just days away, we'll look at the GOP field and whether Donald Trump blew up a possible campaign with a series of F-bombs.

All right now on "Fox News Sunday."

And hello again from Fox News in Washington.

Before we talk with our guests, there was a deadly NATO airstrike in Tripoli last knight. The Libyan government says Muammar Qaddafi was not hurt. But one of his sons and three young grandchildren were reportedly killed. NATO calls that report unconfirmed and says it does not target individuals.

Fox News correspondent Dominic Di-Natale has the latest from Benghazi -- Dominic.

DOMINIC DI-NATALE, FOX NEWS CORRESPONDENT: Chris, the NATO strike was at the compound of Colonel Qaddafi in Tripoli, the so- called Bab al-Aziziyah. NATO says it wasn't targeting any specific individuals. It was just targeting the command centers there.

There is no independent evidence or proof yet that indeed Colonel Qaddafi's youngest son, Saif Al-Arab, is indeed dead or indeed his three children were killed, as was claimed by the government spokesman last night. Journalists were taken to the scene and some reporters, they did see blood actually the site and an unexploded missile which appears to have come from NATO forces. But again, no confirmation that actually it is indeed that.

And many people believe here now that, actually, it's just another effort by Qaddafi to gain sympathy internationally, alleging that civilians have been killed.

Some details about Saif. He knew he was a student in Munich. And, apparently, he was brought back just before the uprising gone very serious. No one has actually seen him. And so, people here are actually doubting whether in fact he really has been killed.

So, Chris, details yet to be confirmed. But people are very skeptical about the news. Back to you.

WALLACE: Dominic Di-Natale reporting from Libya -- Dominic, thanks for that.

With the first Republican presidential debate to be shown on here FOX News Channel only four days away, the field is far from settled. One potential candidate who enjoys strong support in the Tea Party joins us now.

Congressman Michele Bachmann, welcome back to "Fox News Sunday."


WALLACE: Let start with the budget, because you want to go even farther than House Budget Chairman Paul Ryan. You voted for the Republican Study Committee plan which would cut spending by $3 trillion more over the next 10 years and balance the budget by 2020, not 2040, as Paul Ryan does.

Let's take a look, though, at some of the big differences. You want to cut $700 billion more than Ryan from Medicaid. You want to raise the Social Security retirement age for people who are now 59. And you would change Medicare to a voucher system for those who are now 59.

Question -- Paul Ryan doesn't go far enough?

BACHMANN: Well, remember, both Paul Ryan's budget and the Republican Study Committee budget changed the trajectory that we're on. We are on a trajectory of failure right now. So, both Paul Ryan and the Republican Study Committee were making very good responsible choices, they're trying to get America's house to balance. That's what we have to do.

WALLACE: But, if I may, you're saying let's go even further, faster than Paul Ryan?

BACHMANN: Well, remember again, what both of those bills are. They aren't pieces of legislation. They're aspirational documents, which means these are goals that we're trying to come toward.

And one thing that I have heard all across the United States, people want us to get our financial house in order. They recognize we may not have 26 years to get our financial house in order. We may need to do it sooner.

And so, people want to us get serious. People who have been doing this in their own lives and with their own businesses don't understand why Washington is taking so long to get our house in order.

WALLACE: But I just wanted to make it clear -- you stand by your vote for the Republican Study Committee plan. There is nothing in there that you say would go too far?

BACHMANN: Well, remember, what -- again, this is an aspirational document. It's not legislation. It may --

WALLACE: But would you support all of those things we just talked about?

BACHMANN: What I'm saying with that vote is that we have to make decisions. We aren't saying that every single decision that's in that bill, or aspirational document, will be the final result. But what we are saying is we have a conviction, those of us in the Republican Study Committee, those of us who supported Paul Ryan that we thank them and applaud them, that they want to get in the game and they want to make sure that we don't go down in flames with our economy.

WALLACE: Let me ask you about one specific -- and it may be the most controversial in both plans. The nonpartisan Congressional Budget Office says that under Medicare premium support, which both plans would have, seniors would bear a much larger share of their health care costs, than they would under the current plan.

What do you tell people nearing retirement who say I can't afford to pay more of my own health care costs out of pocket? Which is what the Ryan and the Republican Study Committee plans would do.

BACHMANN: And I understand that. I put an asterisk on my support and I put a blog posting up that said just as much. That is my area of concern. I support these bills with that proviso, because there are a number of people across the United States who have exactly expressed the fear that you just mentioned.

I think that's what we need to do with Medicare. It isn't that we are saying that we don't want people to have the health care. It's -- will there be a better way to fund it?

I think there is a better way than the way that the federal government is currently funding the program. Various ideas were put out on the table. Even Paul Ryan said he was open to tweaking his position that he has staked out.

One position that I'm concerned about is shifting the cost burden to senior citizens. Seniors are saying, "Look, I'm not in a position to be able to handle that." I also share that real fear. That's why I put the asterisk out there.

Will there be greater efficiencies? I think so. Will there be choices and options that I think we should offer people? Absolutely.

In the private sector -- I'm a private business person, my husband and I have our own business. What we try to do is offer better solutions all the time for our customers. The federal government isn't keen on doing that.

That's what I think the ingenuity is behind what Paul Ryan wants to do and behind what the Republican Study Committee wants to do, new and different ideas. That isn't the be all and end all. We're only just starting.


BACHMANN: But with the proviso and the asterisk that I agree with the concern for senior citizens and their fear that they will have to assume the cost themselves. One thing we also need to focus on --

WALLACE: Well, let me -- let me ask you this. You're not wedded to the idea of a voucher plan for Medicare?

BACHMANN: I'm wedded to the idea of efficiencies and cost-cutting and savings.

WALLACE: But not a voucher plan?

BACHMANN: How we get there is open to discussion. Plus, the other thing that we should focus on would be cures -- cures for things like Alzheimer's, cures for things like diabetes. It's very expensive to just cover the care for sickness. I'd prefer to see money that we have at the federal level go for cures.

Probably one of the best examples is polio. If you look in the 1950s, polio was a huge issue. And government was forecasting at that point that we might be looking at $100 billion in costs.

Today, polio costs us really virtually nothing. Why? A private charity, March of Dimes, put money in to finding a cure. We all have the little vaccines that Jonas Salk came up with. Thank God. I would like to see that with Alzheimer's and diabetes and others.

WALLACE: You're a hardliner. I think you would agree on the question of the debt ceiling. You say you won't vote to raise it. You won't vote to raise the nation's debt ceiling unless Obamacare is defunded. And you suggest that the government should pay its debt first and then worry about its other obligations and perhaps cut some of the spending for other obligations.

Here is the problem with that, Congresswoman -- Deputy Treasury Secretary Neal Wolin says, "Adopting a policy that payments to investors should take precedence over other U.S. legal obligations would merely be default by another name." So, you're willing to default on our debt?

BACHMANN: Well, let's face it. If we continue on the trajectory that we're going right now of borrowing money that we don't have, because 41 cents of every dollar the federal government spends today is borrowed money. So, every hour, we are borrowing $188 million. So, about a fifth of $1 billion in the hour you're on today, we will borrow.

We can't do that. This -- the music is about to end. The game is going to be over.

So, don't let anyone tell you that by increasing the debt limit, the ability for the federal government to keep borrowing, that somehow that's going to show the world that we're even more credit-worthy because we're borrowing? Very soon, Chris, we are going to be at the point where we're going to be -- we're going to be borrowing more money so that we're essentially having a $4 trillion budget and $2 trillion of it will be borrowed money. We can't live that way.

WALLACE: But here's the question.

WALLACE: Top officials and everyone from Ben Bernanke, the Fed chairman, to Republican House Speaker John Boehner say this: Default will raise interest rates on our debt, which will therefore not lower the deficit, but increase the deficit because we are going to have to pay higher interest rates. It will raise interest rates for mortgages and loans for individuals, and it will threaten our recovery.

I want you to give me a single piece of hard evidence that defaulting would not be a disaster.

BACHMANN: Who is advocating defaulting? I'm not. No one is advocating defaulting. That's why Senator Pat Toomey and Representative Tom McClintock have a bill that would direct the treasury secretary to first pay off all obligations, and after that, prioritize spending.

WALLACE: But you just heard the deputy treasury secretary say that's default by another name.

BACHMANN: Well, that is his opinion. My opinion is we could go with the Toomey-McClintock plan. We could pay off the debts first and prioritize. What a shock to the ruling class in Washington, D.C. They don't have all the money they want to spend. We never did have that ability to be able to spend all that money.

WALLACE: Don't you worry , I mean, what our creditors would say, what the financial markets would say if we don't raise the debt ceiling and we have to start doing that? As I say, everybody from Ben Bernanke to your speaker, John Boehner, say it would be a financial disaster.

BACHMANN: Well, I don't know if you heard what I said. I am not calling for default.

WALLACE: But if you don't raise the debt ceiling, that is what is going to happen.

BACHMANN: But that's not true. Because what we would do is, again, we'd prioritize spending. Just because Congress has authorized spending for various programs doesn't mean that we have to fulfill that spending.

If you look at the off-the-charts increases in spending from 2008 until today, we have accumulated $4 trillion in debt just in the time that President Obama has been in office. We just can't do that. Just because Congress in its wisdom has authorized almost 50 percent more spending than what we can afford doesn't mean that we should do it.

It's like if my family was overspending or if your neighbor's family was overspending, you cut up your credit cards, you'd sell the boat. You'd sell your vacation home if you had one. You wouldn't be going out to eat.

You'd make every decision you could to scale back and then you'd consolidate. Everyone else is doing that. The only one not doing that is the political class here in Washington, D.C. And all I'm saying is that if we continue this fantasy of thinking that if we can continue to raise the debt ceiling, somehow that will bring prosperity.

It's game over. It is not happening. We have to realize we're only accelerating decline for the United States. That is not going to bring us into prosperity.

WALLACE: I want to switch to foreign policy. You say that we should have stayed out of Libya.


WALLACE: We're going to have Lindsey Graham on in a moment. Is he wrong when he says in fact we should get more deeply involved and in fact should take out Qaddafi? I would also like your reaction to the missile strike overnight that apparently killed some of Qaddafi's family.

BACHMANN: Well, remember, Defense Secretary Gates said we were not attacked by Qaddafi, nor were we threatened attack. He also said we have no vital national American interest in Libya. Those are the two prerequisites for our United States military entry.

He was later asked what our military goal was in Libya. He couldn't state what our military goal is. What in the world are we doing in Libya if we don't know what our military goal is? And if we still aren't sure about who the opposition forces are? What possible benefits--

WALLACE: When you say the opposition, you mean the rebels?

BACHMANN: The rebels. What possible benefit could there be for the United States if in fact we could potentially be benefiting Al Qaida of North Africa or Hezbollah, which is a very strong likelihood?

This would be a terrible mistake for this reason, because if we give Al Qaida of North Africa access to sustained revenues from oil, they could continue to fund global terrorism. How is that going to help anyone? This is a disaster in the making.

That's why President Obama's policy of leading from behind is an outrage. And people should be outraged at the foolishness of the president's decision. He said he wanted to go in for humanitarian purposes, and overnight we are hearing that potentially 10,000 to 30,000 people could have been killed in the strike. Those are some of the reports.

WALLACE: In the NATO strikes, 10,000 to 30,000 people?

BACHMANN: There is a report that came out from an ambassador from Tripoli that said we won't know until we're able to go in.

WALLACE: But did the NATO strikes killed 10,000 to 30,000 people?

BACHMANN: A report that came out last night from the Tripoli ambassador said that potentially there could be 10,000 to 30,000 --

WALLACE: When you said the Tripoli ambassador, you mean the Libyans?


WALLACE: So you're believing the Qaddafi regime?

BACHMANN: We don't know. We don't know. All I'm saying is that --

WALLACE: Do you think Muammar Qaddafi is a reliable person?

BACHMANN: I don't think anyone thinks that. When President Obama went in, his doctrine was to enter into Libya for humanitarian purposes.

The point of what I'm saying is that we are seeing many, many lives lost including innocent civilians' lives. What will be the ultimate objective and gain? I don't see it. I think it was a foolish decision to have gotten involved.

WALLACE: We are running out of time. You're a tax lawyer, which may surprise some people. You're a successful businesswoman. But the rap against Michele Bachmann is that you say some -- forgive me -- flaky things.

I want to run through a couple of them. One, in March, you told a crowd in New Hampshire this.


BACHMANN: New Hampshire, what we have in common is our extreme love for liberty. You're the state where the shot was heard around the world Lexington and Concord.


WALLACE: Lexington and Concord, New Hampshire?

BACHMANN: Well, you know, after that, I promised I would never again use President Obama's teleprompter and I intend to keep that promise.

WALLACE: OK. In 2010, you said this at a Tea Party rally.


BACHMANN: Now the federal government owns or controls 51 percent of the private economy. We're on to them. We're on to this gangster government and we are not going to let them have their way.


WALLACE: Briefly, what does "gangster government" mean? And secondly, our brain room, which is the Fox News Research Department checked it out. They say if you add up all the companies that the U.S. government has a stake in -- General Motors, Chrysler, Fannie, Freddie, AIG, on and on -- it only adds up to 1.3 percent of the private economy. Not 51 percent, 1.3 percent.

BACHMANN: Well, the numbers that I had gotten were ones that I had read from a professor of economics who had said we were over 51 percent. And that was something that was reported in the "Investors Business Daily." And that was my source for that comment, and I stand by that source that I've cited at the time. And the previous question that you had was?

WALLACE: Gangster government.

BACHMANN: Yes, well, I think that it is gangster government when you have President Obama taking away the property rights of the secured preferred bondholders of Chrysler and essentially giving their private property interest over to the union interest in Chrysler.

We had over 3,400 pink slips given to dealerships across America by the Automobile Task Force. These are privately owned and held automobile dealerships, and the federal government pulled the rug out from under those dealerships and essentially took away their private property interest.

That's a gangster government when government makes the decision, as opposed to the free market, about who will win and who will not survive. If you are politically connected, you survive, and if you aren't, you don't. That is a gangster government.

WALLACE: Finally, Congresswoman, one last question about, explicitly about the campaign. I'm curious about the fact you're appearing here. You appear in a lot of places, but you are unwilling to go up against your fellow candidates in South Carolina at the debate Thursday night. Do you not feel you are ready for primetime?

BACHMANN: Well, I was just on primetime yesterday and the evening before. I was in New Hampshire --

WALLACE: But you weren't in a debate with the other candidates.

BACHMANN: Well, I was with Mitt Romney, with Tim Pawlenty, with Rick Santorum --

WALLACE: Yes, but separate speeches.

BACHMANN: And with Herman Cain. Well, we were back-to-back with each other and all on the same topic and all being asked questions. So I've already been there, done that.

I'm not making my formal announcement either way until June. So I didn't feel that it was appropriate to be in the first official debate, which Fox will be sponsoring on--


WALLACE: Are you going to get in the race?

BACHMANN: I'll let you know in June.

WALLACE: Congresswoman, thank you so much. Thanks for coming in. Please come back and tell us whether or not you're going to run. Perhaps we'll be seeing you on the campaign trail.

BACHMANN: Thank you, Chris.

WALLACE: Thanks. Up next, will Congress cut a deal to raise the debt ceiling or is government default an option? We'll talk with two leading senators after the break.


WALLACE: It's getting close to crunch time for Congress to act on raising the debt limit or let the country go into default.

Joining us to discuss what happens next are two key senators: Democrat Kent Conrad, chairman of the Senate Budget Committee, and Republican Lindsey Graham.

Senators, welcome back.

Before we get to the budget, you have seen our report and I'm sure read about it, the report that NATO airstrike overnight did not kill Muammar Qaddafi, but killed his youngest son and three of his young grandchildren. Not confirmed by NATO.

Senator Graham, perhaps as a member of the Senate Armed Services committee, you can confirm or not something in that regard -- but in any case, someone who has called on President Obama to take out Qaddafi. Your reaction?

SEN. LINDSEY GRAHAM, R-S.C.: Well, I think this is a good move by NATO to go after the source of the problem. If you want to protect the Libyan people, go after his inner circle. Do two things -- support the rebels, give them better air cover, get American aircraft back in the game to diminish Qaddafi's military, but also put pressure in Tripoli.

In my view, wherever Qaddafi goes, he is the legitimate military target. He's the command and control source. He's not the legitimate leader of Libya. And the way to get to this to end is to go after the people around him and his support network. So, I support what NATO is doing. It'd like to have a "pour it on" approach to get this over with.

WALLACE: Now, I know it's against the law to target and assassinate foreign leaders. This doesn't fall under that?

GRAHAM: In my view, he is not a foreign leader. In my view, he's a murderer. He's killing his own people.

He's acting outside of international law. He's bombing civilians. He is not the legitimate leader of Libya. He should be replaced, the president said.

And I think NATO's construct of protecting the Libyan people would allow them -- NATO and us -- to use Predators to go after his inner circle, his commander and control. And I totally support what they're doing and I'd like the do more of it.

WALLACE: And him.

GRAHAM: To me, yes. He's the source of the problem. He is not the legitimate leader of Libya. He should be brought to justice or killed.

WALLACE: Senator Conrad, as a member of the Senate Intelligence Committee -- we'll get to your role as budget chairman in a moment -- your reaction?

SEN. KENT CONRAD, D-N.D.: Look, Qaddafi has got to go. I said repeatedly, I think you go after the pillars of his power. And the pillars of his power are the regimens that are controlled by his sons, the mercenaries that he's brought in from other countries, his money, and his tribe.

Those are the four pillars that sustain Qaddafi in power. I believe all of those should be targeted and aggressively gone after. You can't allow him to continue.

WALLACE: And when you talk about the pillars, do you have any problem with going after him personally?

CONRAD: Well, we have legal issues I'm not an expert on. It is stated policy that we are not targeting an individual. But we can target the pillars of his power. And those are what I've described and what I would endorse.

GRAHAM: The fact is that I support what NATO did. I thought this was a good use of the mandate. This is the way to end this. Thousands of people are subject to dying the longer this takes. No one in the world is going to regret Qaddafi being replaced, however you do it.

So, I want to thank NATO for expanding the scope of the operations and I wished we act earlier. But we're on the right track of supporting the rebels and going after the inner circle. Everything around him needs to be subject to attack.

WALLACE: OK. Let's go to the budget. Senator Conrad, you are part of the so-called "gang of six," bipartisan group, three Republicans and three Democrats in the Senate trying to work out a compromise on the budget. There was a lot of speculation that you'd come out with a plan this coming week. Now, there seems to be a sense that it's not going to happen this week.

Have you hit a roadblock?

CONRAD: You know, we've agreed not to talk about the status of our negotiations. And so, I'm going to be good to the commitment I have made to the others that we not talk about those negotiations. But I can say we've made enormous progress in that group. And I hope that we are able to announce an agreement soon. If we don't, we're simply not going to be relevant because this debate marches on.

WALLACE: Well, that's the thing I was going to follow up with. You have said that if you don't do it soon, and as I said, there have been a lot of talk about this week, you're going to be irrelevant to the process. How hopeful are you that you're going to be able to come up with a compromise in time for it to be part of the debate?

CONRAD: I'm always hopeful. I'm an optimist.

Look, I have spent eight months on the commission, the fiscal commission. I have spent five months in this negotiation. I would haven't spent all of this time if I didn't think there was a serious chance of reaching an agreement.

WALLACE: Senator Graham, one of the big issues -- and we were just talking about it with Michele Bachmann -- is what to do about Medicare.

And let's put up the differences. Paul Ryan's GOP budget plan calls for $389 billion in cuts and would turn Medicare into a voucher plan. President Obama would cut $200 billion by having an independent panel find savings somewhere.

Question -- according to the polls, most voters think that Republicans are in effect by this -- if they follow the Ryan plan, taking away for seniors some of their health care.

GRAHAM: Here's what I tell the public. You have can't balance the budget unless you deal with entitlements. Ronald Reagan and Tip O'Neill showed us the way forward. The "gang of six" is creating the dynamic that leads to solutions. When President Obama tried to overhaul the health care system in a partisan way, it cost his party. When President Bush tried to reform Social Security and couldn't get one Democrat, it failed.

So, Medicare has to be reformed. I like what Ryan did. He was brave. He was -- in 2022, you will have a chance to buy health care with the government support. On Medicare, if you are over 55, it doesn't -- it doesn't affect you.

But, at the end of the day, his plan is not going to make it through the Senate. If we have a vote on Paul Ryan's plan, we're not going to get 60 votes.

Now, the truth is President Obama's health care reform is not going to make it through the Senate. If they can't come up with something, I don't know what we do. But I do know this: Medicare is a great program that is going to fail and bring the whole country down with it, like other entitlements if we don't do something.

WALLACE: Senator Conrad, you say the Ryan plan, when it comes to Medicare, is -- and the word you used is "draconian." But isn't telling what the president would do, an advisory panel, to come up with unspecified cuts in the future, isn't that a cop-out?

CONRAD: No, I don't think it is at all. I think it's exactly part of the solution. We're going have to do more.

But, look, when I referred to Representative Ryan's plan as "draconian," what I was speaking of is, right now, a senior pays about 25 percent of the cost of their health care. Medicare, 75 percent. Representative Ryan's plan would flip that.

Over time, the individual would have to pay 68 percent of the cost. I mean, that is a shredding of the social safety net. I just think that's extreme.

GRAHAM: Can I -- 75 cents of every dollar paid for Medicare services comes out of the general treasury. That's extreme. Bill Gates should not be having his Medicare payment subsidized, nor should Lindsey Graham or Kent Conrad.

We've got an unsustainable system when it comes to Medicare. What Paul Ryan did, he saved it from what I believe to be a complete failure over time. If you can get a better way to do it, do it. But just criticizing someone who is trying to fix a problem doesn't impress me. You've got a better alternative, put it on the floor and let's vote on it.

WALLACE: OK. I want to talk about the most immediate problem, which is the debt limit, would sometime in the next two months is going to come up and you're going to have to deal with. Both of you say that letting the country go into default would be draconian -- I mean, rather, that's the last one -- would be catastrophic. But both of you also say you're not going to vote to raise the debt limit unless there is some plan to deal with and to cut the deficit.

So, let me talk about some of the alternatives.

Would you support, Senator Conrad, an automatic cap on the deficit? Which is what -- not spending, but on the deficit, which is what the Senate Majority Leader Harry Reid is talking about. Would you support a cap on spending? Which means that you're not talking about tax increase, you're talking about spending cuts. Or do you need to see actual cuts to vote for an increase in the debt limit?

CONRAD: What I've said and said repeatedly is I'm not going to vote for any long-term extension of the debt unless there is a credible and serious plan to deal with the debt.

WALLACE: Is a cap a serious plan?

CONRAD: I don't know. I've not seen the details of it, so I don't know how it works, I don't know if it would work. But what I have to see is a comprehensive plan.

I want to see the revenue system reformed, a fundamental tax reform. I want to see the spending side of the equation dealt with.

Look, we are -- right now, the revenue of the United States is the lowest it's been in 60 years as a share of the economy. Spending is the highest it has been in 60 years as share of the economy. So, we've got problems on both sides of the equation and they need to be addressed.

WALLACE: Senator Graham?

GRAHAM: The way to fix the money problem coming to Washington is to create more jobs in the private sector. If you raise taxes now to try to solve our budget problems, you are going to destroy job creation.

The reason we have such low revenue coming in is because the economy is still suffering. So I will do nothing that will hurt job creation.

The game is to turn around the ship of state in entitlement reform. I do believe that the debt ceiling is an opportunity to provide leadership that has been missing in the past, to prevent America from defaulting on the debt , provide leadership now. Kent has the got right construct.

WALLACE: OK. We've got about two minutes left, and I want to ask you two questions about GOP politics, Senator Graham, and then we'll get you guys out of here and to the rest of your Sunday.

Forty percent of Republican voters in a poll say they are not satisfied with the current field of potential Republican candidates. One, are you, or would you like to see some new faces get in the race?

GRAHAM: Well, I think the more choices the party has, the better. But to win the White House, you have got to win Independent voters who are center-right. But we've got to find a candidate who can play in states all over the country. We ought to have a candidate who can get the Independent voter in our column. I want the most conservative candidate who can win Independent votes to capture the White House. And that person may not have even been in the race yet. But we do have some good choices. I'm not that negative on the field.

WALLACE: OK. One choice, possibly, Donald Trump. Pushed the birther issue hard, and this week -- and we're going to talk about it with the panel -- made a speech. You are overseas, so maybe you missed it, in which he delivered a string of f-bombs.

Do you take Donald Trump seriously as a presidential candidate?

GRAHAM: People in South Carolina are going to weed through the field. And they're going to look at the entire candidacy being offered by the individual.

There's a lot of things Mr. Trump can be proud of, but some of this rhetoric and this focusing on the president's birth, I do not think is the way for us to win the White House. Most Americans don't want their president to go around saying the f-word. So Mr. Trump has a lot to offer, but he will have a tough sale in South Carolina.

WALLACE: We're going to have to leave it there.

Senator Graham, Senator Conrad, we want to thank you both so much for coming in today. Gentlemen, always a pleasure to talk to both of you.

Up next, the 2012 Republican presidential race as some of the contenders prepare for the first debate of the campaign. Is Donald Trump already out of the mix?

Our Sunday panel talks politics when we come right back.



DONALD TRUMP, ENTREPRENEUR: I'd drop a 25 percent tax on China. The messenger is important. I could have one man say we are going to tax you 25 percent. And I could say another, listen, you (EXPLETIVE DELETED), we're going to tax you 25 percent.


WALLACE: Well, Donald Trump dropping an f-bomb while explaining how he would handle China if he were president.

And it's time now for our Sunday group: Brit Hume, Fox News senior political analyst; Nina Easton, of Fortune magazine; Bill Kristol, of The Weekly Standard and Fox News political analyst, Juan Williams.

Before we get to all of this, I just want to clear up, because we looked into what Michele Bachmann had been saying. She quoted the U.S. ambassador to Libya as saying the 30,000 people had been killed in the NATO strike so far. In fact, what Ambassador Gene Cretz said is that he estimated that 30,000 people had been killed by all sides in the entire conflict. That includes the rebels and the Qaddafi forces. So a big difference.

In any case, some of us had doubts about Donald Trump from the start, about running for president. But in a speech Thursday, in Las Vegas, at a casino, he let loose with a string of f-bombs.

Let's watch some more.


TRUMP: They want to go in and raise the price of oil because we have nobody in Washington that sits back and said, you're not going to raise that (EXPLETIVE DELETED) price. You understand me?

Our leaders are stupid. They're stupid people.


WALLACE: Then at the White House Correspondents Dinner last night, you may have heard President Obama ridiculed Trump. And so did the comedian Seth Meyers. We'll have more of that later.

But I guess the question is, Brit, is Donald Trump done before he even got started?

BRIT HUME, FOX NEWS SR. POLITICAL ANALYST: Well, I'm not sure he's done in the sense that, you know, he is going to stop this effort to continue to get attention for himself and go around attacking the administration. But I think as a -- and I don't think he ever was a serious candidate for the Republican nomination. I don't think there is any way with his record and background and support of Democrats and so on down the line that there was any way that the Republican Party was ever going to nominate him for president.

And I think people say, well, he is interesting. And he is. And he is colorful. And he is that. But he's pretty exotic character.

And you see him up there, uttering the things you just showed, with his hair in the back looking like he's got a pageboy. And it's just inconceivable that he is going to be a serious candidate for president in either party.

WALLACE: Nina, meanwhile, let's talk about people that we all think are serious candidates. At least five candidates are going to appear in South Carolina on Thursday at the Fox debate. Let's take a look at the latest poll from Fox News.

It shows only two candidates now, Romney and Huckabee, in double digits, followed by Palin, Trump, and as you can see, all the others. At this point, is it just name recognition, or does this tell you anything about how the GOP field is beginning to shape up?

NINA EASTON, FORTUNE: It doesn't tell you a lot. And I have to do my requisite. My husband is a Romney adviser. But I went back and looked at polls from April, 2007, so the same time in the cycle last time. So, McCain was up 16 percent, but his leading -- leading people behind him were Gingrich and Fred Thompson. Now, of course McCain then rose and then imploded, and then rose again. A lot happens between now and then.

Hillary Clinton, as we know, was the dominant frontrunner. Obama was tied with John Edwards and Gore at this time during that period. So, so much happens.

And even this week, we can tell. Haley Barbour dropped out of the race. That's -- already, it's starting to remake the field.

And I also think, you know, I'm not sure Donald Trump's going to run. He's somebody who faces the prospect that he was a Democrat for all those years, that he gave most of his money to Democratic -- he was a registered --

WALLACE: I think he was a registered Democrat since 2008.

EASTON: Exactly. He gave the majority of his money to Democrats. And I'm not sure that he's -- when push comes to shove and he has to release financials about his business dealings, and when more starts coming out in the press about his business dealings, I'm not sure he's going to run.

WALLACE: Bill, as we sit here today, on Sunday, Romney has not decided whether or not he's going to participate in the Fox debate on Thursday. But, you know, you look at those numbers, and he's largely stayed under the radar, hasn't really gotten very involved, hasn't come on any of the Sunday talk shows and he's doing just fine. I mean, he is, at this point, maybe by default, the leader.

So, is his strategy the right strategy, or should he be out more, engaging more, and dealing with issues, specifically Romneycare?

BILL KRISTOL, THE WEEKLY STANDARD: Yes, I think the issues are the key. We just had a 2010 election which was very issues-heavy, right? It was a very ideological election, very interesting election. And I think to the degree some of the candidates aren't taking off is because they sound the way they sounded in 2007. They're not addressing the current issues.

What do they think about the debt ceiling? That's going to be a huge debate over the next -- people want to hear it. And I don't think you can say, well, I'm not a member of Congress, I don't have an opinion.

And that's why, incidentally, why is Michele Bachmann catching on? Because she has an opinion and is voting on the actual courage issues of the day.

But look, a huge amount is going to change. Mitch Daniels, I think, the governor of Indiana, will get in, in the next two weeks. And I think Mike Huckabee is going to run. He'll get in, I think, at the end of August. And there is still room then for the sort of late entries, the Chris Christie, Paul Ryan types. Well, there is.

WALLACE: He says.

KRISTOL: I know. I have a little bit of a broken record on this. The broken records are occasionally right, or broken alarm clocks are right. I can't remember what that is, once or twice a day.

HUME: Twice a day.

KRISTOL: Twice a day, thank you.

So I do think it's very early. But I guess what strikes me the most, the reason there's a certain dissatisfaction of the presidential candidates is they're giving their stump speeches, and there are these huge issues going on in Washington, and people would like to know what their opinions on them are.

WALLACE: Let's talk about Mitch Daniels, because with Haley Barbour out, suddenly Mitch Daniels is coming up a little bit in terms of speculation. And he did something very interesting this week.

On Friday, he announced that he is going to sign, when it gets to his desk, the bill that will make Indiana the first state in the country to cut all Medicaid funds, which are handled by the states, for Planed Parenthood. And as a politician who, just a few months ago, said there should be a truce on social issues, a lot of people are reading the tea leaves and saying he is trying to get right with the right this means he is going to run.

JUAN WILLIAMS, FOX NEWS POLITICAL ANALYST: Well, it sure looks that way. And people have also interpreted Haley Barbour's decision not to run as another signal that Mitch Daniels will get in the race. And if you are thinking from a perspective of, what will Independent voters buy? You've got to think that they would be interested in a governor who has shown the ability to manage fiscal affairs of his state.

Mitch Daniels is that guy. He's a solid, serious person, has experience as budget director under President Bush, and is much admired around this town. The deficit for him --

KRISTOL: Juan, you're hurting Mitch here. I like Mitch. Say something nasty about him, would you, please?

WILLIAMS: Well, I'm about to.

KRISTOL: Oh, good. OK.


WILLIAMS: But the deficit here is he would be what you cal l charismatically challenged. And the question --

WALLACE: But don't you think the question perhaps -- I don't know, maybe this is my crazy theory -- that with Obama, who has all the charisma, and a lot of people question the record, maybe less sizzle and more substance might not be a bad thing?

WILLIAMS: I think you're -- remember, we're in politics. We're talking politics here. And you've got to give a speech and you've got to wow a crowd. At some point, people have to respond to you emotionally and say, you know, that's our leader.

WALLACE: Brit, you get the last one.

HUME: You're trying to find out how the Republican field is doing. The numbers to watch are not the polling numbers for the candidates. The number to watch are the Obama polling numbers. And also, the numbers like the growth of the economy, which was quite meager in the recent quarter.

The continued unpopularity of the health care program, President Obama's abysmal poll ratings on his job on the economy, these are the things, these broader issues, that are being fought about here in Washington related to the debt, the deficit, the economy. These are the things that are really important right now. This is the interesting political fight of our time right now here in Washington, not out on the campaign trail for the presidency.

And these are the things that are likely to determine the position of the race when we finally get around to actually running the race, which really hasn't started. And if the president's condition in these maters does not improve dramatically, any reasonable Republican nominee is likely to be.

WALLACE: You've been saying that for a while. That does sound sensible. It's going to be a referendum on Barack Obama's record.

We have to take a break here. When we come back, Republicans take their plan to overhaul Medicare to the people, and they get an earful.



UNIDENTIFIED MALE: It's rationing. That's what you want to do, is ration Medicare!

UNIDENTIFIED FEMALE: Why did you vote for the Ryan bill? It's against Medicare.

REP. MICHAEL GRIMM, R-N.Y.: Wait. Wait. Let's -- it's against Medicare.



WALLACE: Just a taste of what some House Republicans heard during the congressional break when they had to defend the GOP budget to the folks back home.

And we're back now with the panel.

So, Nina, it wasn't even close to the scale of the health care reform town halls in the summer of 2008. But Republican congressmen were taking heat in the recess for supporting Paul Ryan's plan, especially on Medicare overhaul.

How big a problem do you think for the GOP?

EASTON: I think it's a problem in explaining it. And there's two pieces to this.

There's whether you move to a premium support plan, which you might in the shortcut call a voucher plan. But -- and you do that, but the other question is, do you put more of the cost burden on seniors by doing that?

And I think Michele Bachmann's response to that was very telling when she was willing to back away on the question of, you know, if it's going to be more of a cost burden on seniors. And I think -- so I think it is going to be a problem.

The other thing that, as Lindsey Graham points out, this is not going to -- this isn't going to get anywhere in the Senate anyways. But I do think that Republicans are serving and Paul Ryan is serving a huge service to start a very difficult conversation with the American people.

Are you willing -- Medicare cannot continue to exist the way it exists. We do have to make changes. We do have to consider things like means-testing.

We do possibly -- and by the way, this premium support has been supported by Democrats. President Clinton's commission in the 1990s supported a version of it. So it's not that out of the ballpark to be talking about it.

WALLACE: Let's take a look, though, in terms of the political reality, not the policy legitimacy of it, at the latest Fox News poll on proposal to cut if deficit.

Reforming Medicare to a voucher system, 31 percent favor, 53 percent oppose. Increasing taxes on those making $200,000 or more, 63 percent support, 36 percent oppose.

Bill Kristol, are Democrats who seem to think that the Republicans have handed them a big weapon here, are they right? Or are they mistaken in thinking that the Medicare overhaul gives them something to win back seniors and score points?

KRISTOL: They are mistaken. I mean, the Ryan plan doesn't touch anyone 55 and older. If the Fox poll asked that, the question that way, and made clear that if you're 55 or older, you get the current Medicare system, I think those numbers would be different. Over the next 10 years, people can tinker and offer different proposals than Paul Ryan has to reform Medicare. It has to be reformed.

I'd prefer to be the party of reform than the party of the status quo when you have a $1 trillion-plus deficit. And right now, the Democrats look like the party of the status quo, and the Republicans look like the party of reform.

The big fight over the next month is going to be the debt ceiling. And one thing that I think the Republicans are thinking of doing is the position of the administration -- and you articulated this when you were sparring with Michele Bachmann when she was deftly handling your attempts to throw her off stride there and then earlier in the show, the Democratic position is just extend the debt ceiling. No conditions.

You know what? The Speaker should bring that to the floor of the House next week. The president deserves a vote on his proposal. Let's see how -- no Republican will vote for that. Let's see how many Democrats vote for a debt ceiling extension with no reforms and no cuts. And then let's have a debate on the kinds of reform and kinds of cuts. And I think Republicans are going to do fine on this debt ceiling question.

WALLACE: I want to -- before we run out of time, I want to get to exactly that, Juan, because as we saw with Kent Conrad, who's the Democratic head of the Senate Budget Committee, growing numbers of Democrats are willing to defy the White House and say no, no clean vote on the debt ceiling. You want to raise the debt ceiling? There are going to have to be tangible spending cuts.

WILLIAMS: Right. And people want those spending cuts. And the president has said that there will be -- that there will be spending cuts attached to it. But the question is, what spending gets impacted?

Now, for example, in thinking about the Ryan budget, versus the Obama budget, the American people, the polls show, the Fox News poll showed, people prefer the Obama budget. And Bill says oh, it's just going to affect people over 55.

In fact, when you ask people, they say they don't want Medicare eliminated for young people. They want Medicare in place in this country. And it is having political damage on Republicans.

I don't think there's any question, looking at the tape of what we just saw, people screaming and shouting at these town hall meetings, that Republicans have been politically hurt by the stance they take on budgets and on the debt ceiling.


HUME: Two things. One is, a lot of the criticism hurled at Republicans -- and not that many of them -- at these meetings was organized. Now, that doesn't mean it's not there, but it's a little different. It didn't seem spontaneous.

A lot of it that I saw was from people who are, from the looks of them, are current Medicare recipients who do not grasp that they are exempt. So I think that it -- that the Republicans need to make sure that that gets out there, that that's how this is being done.

I think a great many of the younger people I've talked to, when you talk about these entitlement programs, Medicare and Social Security and others, that benefit elderly people don't expect them to be there. They are afraid of their insolvency, which is what the Ryan plan and others are trying to address.

My sense about this is that their constituents and many others will not forgive Republicans, and the Independent voters in particular, if they come to the next election not having made a really arduous effort to cut spending and taken some risk to do it. And I think in the long run, it pays off.

WILLIAMS: And one of the risks is raising taxes, even on the rich like you, to raise taxes. And you say don't raise any taxes. But you just saw the poll.

HUME: Juan, what you want to do is not raise tax rates. What you want to do is raise revenue.

And the secret to raising revenue is an expanding economy. During economic expansions, what happens, even with the tax rates we have now is, not only do the rich pay more, as they already do, because they pay at a higher rate, but their share of the overall revenue contribution grows during expansions.

So, what we need is an economic expansion. And that's the way to get revenue. And put that together with spending cuts and you're on a path to something serious.

WALLACE: Right. And you're all about cuts and not about raising revenue through allowing people who make more than $200,000 to pay taxes.

HUME: Juan, I love you, but some days I think you're deaf.

WALLACE: OK. All right. You know what? Thank you, panel. See you next week.

And guess what? Don't forget to check out "Panel Plus," where our group here is going to pick up with the question of Juan Williams' hearing on our Web site, We'll post the video before noon Eastern Time.

I'd also like your input for questions to ask at our Republican presidential debate Thursday night in Greenville, South Carolina. The debate begins at 9 p.m. Eastern on Fox News Channel. And just send your ideas to We could always use the help.

Up next the comedian in chief.


WALLACE: They held the White House Corespondents Dinner last night, which has become the D.C. version of the college prom. Washington's power players dress up and mingle with Hollywood stars, but for some reason, want to spend the weekend here.

Presidents with varying success try to be funny. Last night, President Obama focused on a potential Republican opponent who was in the hall.


OBAMA: No one is happier, no one is prouder to put this birth certificate matter to rest than "The Donald." And that is because he can finally get back to focusing on the issues that matter, like did we fake the moon landing?


What really happened in Roswell? And where are Biggie and Tupac?


WALLACE: As the evening went on, Trump seemed distinctly unamused.

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

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