Ryan, Goolsbee debate Obama, Romney economic records

This is a rush transcript from "Fox News Sunday," May 20, 2012. This copy may not be in its final form and may be updated.

CHRIS WALLACE, HOST: I'm Chris Wallace.

It's the key issue in raise for the White House: getting America back to work. And both sides are hitting it hard.

We'll have a debate over the Obama and Romney record on jobs and their ideas to get the country back on track. Republican House Budget Chair Paul Ryan faces off against Austan Goolsbee, former head of the president's Council of Economic Advisors.

Ryan versus Goolsbee, only on "Fox News Sunday."

And, there are faces of financial crisis. We'll ask our Sunday panel if President Obama can use the summits this weekend to find a solution.

And our Power Player of the Week. A star figure skater making a name for herself off of the ice.

All right now on "Fox News Sunday."


WALLACE: And hello, again, from Fox News in Washington.

The Obama and Romney campaigns battle this week over who has the better plan to get Americans back to work. We want to continue that debate today with top advisers from both candidates.

From Wisconsin, Republican Paul Ryan as chairman of the House Budget Committee. From Chicago, Austan Goolsbee is former chairman of the president's Council of Economic Advisors.

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

REP. PAUL RYAN, R-WIS.: Thank you.


WALLACE: This week, the Obama campaign launched the attack on Mitt Romney's record at Bain Capitol and told the story of a steel mill in Kansas City that went bankrupt in 2001, laying off 750 workers. Let's take a look.


JACK COBB, STEELWORKER: They came in and sucked the life out of us.

UNIDENTIFIED MALE: It was like watching an old friend bleed to death.

UNIDENTIFIED MALE: Bain Capital walked away with a lot of money that they made off of this planet. We view Mitt Romney as a job destroyer.


WALLACE: And Obama deputy campaign manager Stephanie Cutter followed up with this, "The goal of Romney economics has always been about wealth creation, not job creation. It's wealth creation for a handful of investors, like Mitt Romney, not about creating jobs for everyone else."

Mr. Goolsbee, can you tell me a major CEO in this country that doesn't see the main job as creator wealth for his investors?

GOOLSBEE: I don't know the answer to that. I think that when I saw Stephanie Cutter's statement, it was in response to one of the Bain Capital partners who that said, our was job creation for the investors.

WALLACE: That is for every CEO?

GOOLSBEE: Well, this business is slightly different. And I would refer to this ad not so much as an attack, as a response. I mean, Governor Mitt Romney has been running for president really for six years and over the last six years consistently said that his main qualification to be president is his business experience. And then when there starts to be some examination of what did he do when he was running that business, they get very defensive and don't want to discuss. And I don't think --

WALLACE: But do you see anything --


GOOLSBEE: They ought to open the records and --

WALLACE: But let me just ask you, sir, do you see anything wrong with what Bain Capital did, and what lots of money, millions of dollars into this steel industry, the time when the steel was in trouble, what's wrong with that?

GOOLSBEE: Well, it depends on how they did it. And as I say, they ought to turn over the annual records of the company.

If you want to establish they did not have kind of a leverage buy out mentality of pulling the resources out of the company -- turn over the records and let the people see what the business record was. Don't just pick two or three companies that are the success stories and say look at these because that invites the ones that went wrong.

In this case, the company did horribly but the investors did great. So, I think it's a little bit different than a normal investor philosophy which if we can turn the company around in a positive way, we benefit. This was the case where they canceled the pension, they drove the company into the ground but the investors from Bain actually profited a great deal.

WALLACE: Let me follow up with Congressman Paul Ryan.

Because the Obama campaign says the point of Romney economics is to make money for Bain, to make money for their investors, even if all of the workers get wiped out. And in this particular case, with the steel mill in Kansas City, the workers and that plant went bankrupt. The 750 workers were laid off and Bain did make millions of dollars in profits.

RYAN: You know what's ironic about this, Chris, Mitt Romney was running the Olympics during this time. He wasn't even running Bain during the time period in question.

I think the individual if I'm not mistaken who was running Bain is a big Obama contributor.

But for the point, Chris, what Bain did was they used private capital to help struggling businesses. What President Obama is doing is he's gambling with taxpayer money and giving money to corporate contributors, to campaign contributors like Solyndra and he's losing taxpayer money.

So, what we have in the Obama administration is this crony capitalism, this corporate welfare where President Obama thinks it's right that we taxpayer dollars to give to private companies and take bets on these private companies. That's wrong.

What is right is a private sector that you have risked that capital. You put capital in businesses whether they're struggling or not to try and grow those businesses, some succeed, some don't. On the net, when on Mitt Romney ran Bain, they were very successful. They created thousands of jobs, great success stories.

But for the point, we don't think that the government should be in the position of picking winners or losers in the economy which is the result of the president's economics.

WALLACE: Let me --

RYAN: The result of it is, we have stagnation.

WALLACE: Let me let Mr. Goolsbee into that.

I mean, what about the argument that, you know, it's the private sector. If companies want to take a chance, they take a chance. But the government shouldn't be picking winners and losers.

GOOLSBEE: Well, that's two different arguments. The first one I actually think is a little bit cheeky because in several of these bankruptcy cases, you saw the investors profit by dumping the pension on to the government and actually getting bailouts from the government, which helped to cover the profits that were going to the investors.

On the picking of winners, it is absolutely not the Obama philosophy to try to transform the government into only picking winners. By that I think Congressman Ryan is referring to things like in the midst of the crisis deciding to save General Motors and the auto industry.

WALLACE: I think wait a minute. Without speaking for him, I think he's talking about things like Solyndra.

GOOLSBEE: Well, look, in the case of Solyndra, he's citing there that the lead investor was an Obama supporter. The second investor was a McCain supporter.

So, I mean, the argument that we should go back to stimulus from three years ago and have an argument about each and every line in the stimulus rather than ask starting from right now what does the economy need. Does it need giant tax cuts for high income people and crushing of Social Security and Medicare, or do we want a balanced plan that involves some new revenues with a 3-1 ratio of spending cuts with taxes, I think that's the relevant question that we ought to be asking.

WALLACE: I promise we're going to get into what their policies are for the future in a moment. But, Mr. Ryan, Congressman Ryan, what about this argument that Mr. Goolsbee raises, well, some of the employees ended up having their pensions picked up by the federal government?

RYAN: Well, look, this is an industry that was going down, a business that was going down. They try to rescue it. It didn't succeed. It was done when Mr. Romney was at the Olympics.

So -- but more to the point that we're trying to make, the Obama administration is putting themselves in the business of taking risk with taxpayer money by picking specific individual businesses and industries to prop up for favoritism and then to raise taxes, raise regulations, so that you actually suffocate economic growth.

We believe the genius of American free enterprise is the individual small business, the risk taker and that government should remove those barriers for success, instead of raising barriers of success, but then gives some regulatory forbearance, subsidies, tax businesses -- tax credits to specific winners that they try to pick? What happens when the government sees itself as a venture capitalist, they end up picking a lot of losers.

And we see system of crony capitalism, which is really corrupting (ph) to the system, it's not working, the economy is in stagnation right now.

Look, Chris, for every person who found a job last months, which was not a lot, three people gave up looking for a job last month. These are things we should be talking about -- who has the better vision for getting America back on track, for growing the economy. What system works? A system of entrepreneurial capitalism free entrepreneurism, or this system of high taxes, high regulations and crony capitalism --

WALLACE: Let's --

RYAN: -- which is clearly the president's philosophy.

WALLACE: You know, it's not just a question of vision, it's also a question record because of these men have served in office and have records in office. So, let's take a look at that.

Mitt Romney was governor of Massachusetts for four years, Congressman Ryan. And during that time, Massachusetts ranked 47th of the 50 states in job creation. The only reason the unemployment rate went down because so many people left the work force more than any other state in the country except Louisiana after hurricane Katrina.

Is that a record to be proud of?

RYAN: In Mitt Romney's last year alone in Massachusetts alone, 40,000 new jobs are created. Personal income, wages, went up 16 percent. Unemployment -- people went from unemployment to jobs. That went up 16 percent. The unemployment rate went down to 4.7 percent --

WALLACE: Again, sir.


WALLACE: If I may, sir -- I mean, again over the four years, 47th in job creation and unemployment rate went down because so many people were leaving the state.

RYAN: Jobs went up and he created 40,000 jobs alone as governor of Massachusetts. Wages went up in Massachusetts. People who actually went from unemployment to employment went up.

So, what we saw during Mitt Romney's tenure in Bain -- jobs created, economic growth. What we saw in Mitt Romney's tenure as governor -- job creation, economic growth and lower unemployment.

See, what we are seeing a contrast in visions. We believe in reigniting the American idea of opportunity society. The president has feverishly worked to replacing that vision with what we call a government-centered society vision, where the government sees its job as picking winners and losers in the economy that doesn't work. Many of the countries that tried this vision, it results in economic stagnation, it results in big government and big business joining in a common cause, which makes it harder for entrepreneurs to succeed and create jobs --

WALLACE: Al right. Look --

RYAN: Mitt Romney is an entrepreneur and he knows how to present the kind of conditions of growing economy has proven that.

WALLACE: Let me bring Mr. Goolsbee into this, because I think we would all agree that this is a fascinating choice in this election. There's a fundamental philosophical difference. President Obama wants to raise taxes on the wealthy and he wants to make targeted investments, more spending on things like infrastructure, energy, green energy, education, teaching. On the other hand, you got Mitt Romney who's talking about let's get government out, cut taxes, and cut regulation, cut spending, and let the private sector do it.

Briefly, Mr. Goolsbee, why is your side right and the Romney side wrong?

GOOLSBEE: Well, number one, the record as you indicated in the last question, clearly shows the Romney approach is not the correct approach. The nation was in a boom. Massachusetts was doing worst in all of the states in terms of job creation. The reason you saw jobs growing is because government jobs were rising six times faster than the national rate in Massachusetts.

There is a reason why when Governor Romney stepped down from office, he had a 36 percent approval rating by the people in his own state and that was during a boom. I believe that the reason that the Obama approach is better, it is not -- absolutely not a government-directed approach. That's not correct. The president passed hundreds of billions of dollars of tax cuts for business, for individuals, for workers.

He believes that the main driver of the economy is the middle class. It is not high income people. The Romney budget is premised on the view that absolutely premised the George Bush budget in 2000, and that is if we cut high income people's taxes by hundreds of billions and go try to crush Social Security and Medicare, we try to reduce -- as the Romney budget would -- discretionary spending, all the training, all the infrastructure, all the education, all the law enforcement, we try to get it down to 5 percent of the economy which is by far the lowest of any advanced country and the lowest it has been in almost a century in this country, that somehow that will unleash the forces of growth.

But all I would ask you to do is look at 2000 and explain to me how then it worked then. If that was a magic elixir, why did we not have phenomenal growth?

WALLACE: Wait -- I take your point and you ask a question. Give Congressman Ryan the opportunity to answer it.

RYAN: First of all, what Mitt Romney was talking about in taxes is lower everybody's tax rates across the board by closing special interest loopholes and tax shelters, which primarily go to the well- connected and the well-off. It makes so much more sense to lower our tax rates by plugging the loopholes so that they can decide, the economy can decide how to grow, so that people can keep more of their hard earned money and they can determine how to spend it, instead of sending somebody to Washington and maybe Washington will let you keep more of it if you do what Washington approves of, that's President Obama's approach.

Mitt Romney created 40,000 in just his last year in office in Massachusetts, that's pretty impressive. More to the point though, the kind of budget that Mitt Romney is talking about is one to prevent a debt crisis, save Medicare and Social Security from going bankrupt.

Unfortunately, the president's budget does none of that. Those programs are going bankrupt. He puts a new board of 15 unelected bureaucrats in charge of rationing Medicare.

And more to the point, the big thing hurting our economy is a debt crisis, and the president has done absolutely nothing to prevent this from happening, only to put more uncertainty on businesses, uncertainty on taxes, uncertainty on regulations, uncertainty on interest rates and inflation in a debt crisis which is putting a huge, chilling effect on economic growth and it's because of a fundamental lack of leadership.

Mitt Romney has proven in his life, public and private, he knows how to provide the kind of leadership --

WALLACE: OK. RYAN: -- to prevent these things from happening.

WALLACE: Let -- Mr. Goolsbee, the Democratic Senate has not passed a budget in three years. The Obama budget was up for a vote in the Senate this week, was voted down 99 to zero, and quite frankly as Congressman Ryan points out, the Obama budget does nothing about Medicare and Medicaid and all the burgeoning economic entitlement problems.

I want to put up an ad that was run by an independent super PAC on Obama's record on debt. Let's take a look.


NARRATOR: President Obama's agenda promises so much.

PRESIDENT BARACK OBAMA: Today, I'm pledging to cut the deficit we inherited by half by the end of my first term in office.

NARRATOR: Broken, because he hasn't even come close.


WALLACE: The fact is, Mr. Goolsbee, that under this president, the debt increased by $5 trillion or almost 50 percent.

GOOLSBEE: Look, I don't dispute that the deficit has increased. I would say two things about that. First is all objective analyst -- forget about the campaigns -- acknowledge that the vast majority of the increase and deficit, some $750 billion out of $1 trillion increase in the deficit came about from the business cycle and then the policy choices that were done on a bipartisan basis. And so, at the end of 2010, with both parties vote to extend the Bush tax cuts, everyone understood that that was going to keep the deficit large, we just decided collectively that the economy needed that.

I think for the Republicans who set in place the policies that led to an economic crisis that exploded the deficit, to now be saying, "Well, look, why is the deficit so big," it's a bit -- you know, they lit the back half of the house on fire, now, they complain the air conditioning doesn't work.

The fact is that what we must do is, as Congressman Paul Ryan knows, was on the Bowles-Simpson commission, we must cut the deficit over 10 years by about $4 trillion --

WALLACE: Wait, wait, wait.


WALLACE: Mr. Goolsbee, that commission which was appointed by the president, did take some serious steps in terms of entitlement reform and President Obama refused to endorse it?

GOOLSBEE: Absolutely not correct.

WALLACE: You're telling -- wait, wait, wait, are telling me --


WALLACE: Are you saying President Obama approved the Bowles-Simpson commission?

GOOLSBEE: The central idea of Bowles-Simpson, the central idea was a balanced plan that you would have $3 of cuts for $1 of new revenue. The reason that Congressman Ryan and Republicans -- Congressman Ryan voted against the Bowles-Simpson plan and Mitt Romney stood up and raised his hand when they asked him, would you accept a deal that had $10 of spending cuts for every $1 of new revenue -- Mitt Romney said, absolutely not. Because they had any new revenue, he would not support it.

Now, the president's budget, which is before the Congressional Budget Office, and is not -- I might add -- the thing they voted on in the Senate. The president's budget would cut $4 trillion in a balanced way with whole new --


GOOLSBEE: And with three to one spending --

WALLACE: Forgive me, sir. Let me bring in Congressman Ryan.

Go ahead.

RYAN: Chris, first of all, this promise to cut the definite in half over his first term, that's one of the biggest promise breaks that he made.

Second of all, the Congressional Budget Office did look at the president's budget, and it has $400 billion of deficit reductions over 10 years, an average of $40 billion of actual deficit reduction in the president's budget. It absolutely -- that's according to CBO -- $1.5 trillion in net spending, the increases only to be outdone by $1.9 trillion of net tax increases. For $400 billion deficit reduction, it doesn't even come close to fixing our problem.

But for me to the point, Chris, the president has had four years to deal with this, $4 trillion deficits, four times he decided to do nothing about the debt crisis to get the debt under control. He did disavow Bowles-Simpson.

The reason I didn't vote for it is because it didn't deal with health care entitlement reform, the drivers of our debt. But I put out an alternative plan. I said, here's exactly what I would do to fix this problem and prevent a debt crisis.

That's what House Republicans proposed. The president is yet to propose a budget to fix this problem.


RYAN: The Senate hasn't voted three years on anything.

GOOLSBEE: That is factually not the case. A, I would refer --

RYAN: That's according to the CBO.


GOOLSBEE: -- to the Congressional Budget Offices' Web site to look at it for themselves. But, B, the fundamental choice here is the president putting forward an approach that says, let's address the deficit crisis in a balanced way.

GOOLSBEE: And the counter coming from the Romney campaign and in the Ryan plan itself is: let us have massive cuts, twice as big, so that we can pay for the deficit reduction and multitrillion dollars of additional tax cuts that are predominantly going to high income people. That doesn't make sense.

RYAN: Chris, revenues go up each and every year under our budget.

WALLACE: Congressman Ryan, let me ask you briefly about that because we are running out of time.

What President Obama is talking about is raising the tax rates on the wealthy up to the level they were during the Clinton years. The wealthy did just fine during the Clinton years. Why at a time when we are in trouble with debt and obviously, you say we need to cut more spending, but why not some increase in taxes on the wealthy, just up to a level when the economy was booming in the '90s?

RYAN: Two things: revenues go up each and every year under our budget because we have economic growth and we close loop holes. Second of all, tax rates are set to go up much higher than they were in the Clinton years because of all the new Obamacare taxes. The top effective marginal tax rate goes to 44.8 percent in January. The reason why we don't want to go back to those rates is because now we are in global condition.

Eight out of 10 businesses in America filed their taxes as individuals. And so, we're going to have the top tax rate on successful small businesses nearly 45 percent in January?

Look, other countries are cutting their tax rates to their business. Canada went to 15. China is at 25. Ireland at 12.5 percent.

And President Obama's intent was having the successful, small business tax rate, where most of our jobs come from, go as much as 45 percent? More to the point, all of these tax increases, they go for spending. They're not even for debt reduction.

The taxes increases in the Obama budget don't even pay for a fifth of its proposed deficit spending.

What we're saying is get economic growth by lowering tax rates but plugging loopholes, you actually more revenues into the government, but you got to deal with spending. And under the Obama budget, the debt goes up 76 percent. If we just did nothing it, the debt will go up 78 percent.

This is not leadership, it's economic stagnation. The president has punted.

We're going to lead and what we need to is clear these partisan obstacles, get new leadership in Washington so we can get the American idea ignited again, grow this economy and pay off this debt.

WALLACE: Gentlemen, we're going to have to leave there. Congressman Ryan, Mr. Goolsbee, thank you so much.

I did not think we were going to settle this today. We did not, but I think it was a very useful debate. We thank you so much for coming in, and talking about what is the central issue in this campaign. Thank you both.

RYAN: Thanks, Chris.

GOOLSBEE: Thank you.

WALLACE: Up next, we'll get an update on the president's weekend and summit meetings with world leaders. And we'll ask our panel what can be done about the economic crisis in Europe.



OBAMA: Growth and jobs must be our top priority. A stable, growing European economy is in everybody's best interest, including Americas.


WALLACE: That was President Obama Saturday, vowing that G8 leaders who met at Camp David will take all necessary step to deal with the economic crisis in Europe.

For more on what happened there and what we expect over the next two days at the NATO summit in Chicago, we turn now to Fox News chief White House correspondent Ed Henry -- Ed.


It's the power of incumbency the president getting to flex his muscles in the world stage. But there's a downside, of course, to incumbency. You have to grapple with some tough issues that can burn you in an election here.

Here at NATO, Chicago on high alert because of some terror arrests, as well as protesters throwing parts of this city in a near lock down. But the NATO will be dominated by international security issues, especially Afghanistan. The president is trying to hold the coalition together after the new French president says he's pulling his troops out two years earlier than expected.

But, of course, it's the European debt crisis that is overshadowing everything this weekend. First at the G8 yesterday at Camp David, to give you an idea of intensity of the discussion, we're told the leaders spent an hour and 20 minutes longer than expected on this topic.

And then the president added a surprise one-on-one with Angela Merkel. Significant because, as you know, the Germany chancellor has been taking a hard line in saying that austerity will help dig out of the crisis. Other leaders saying actually, more European spending, even though that could back fire, is the answer to grow those economies and get out of the crisis.

The president is pushing for a little bit of both. Interesting there because it's similar to how the U.S. debt crisis is playing out. Speaker John Boehner saying he's not going to raise the debt ceiling later this year without real spending cuts. That's the battle that's looming in a few months. First, the president has got to get through the election. It's clear the European debt crisis is a wild card in that election -- Chris.

WALLACE: Ed Henry, reporting from Chicago -- Ed, thanks for that.

And it's time now for our Sunday group.

Bill Kristol of the Weekly Standard; former Democratic Senator Evan Bayh; former Bush White House senior advisor, Karl Rove; and Democratic strategist, Joe Trippi.

Well, as mentioned going in to this G8 meeting, there were competing agendas. On the one hand, you had Angela Merkel, the head of Germany, and they are pushing for more austerity to rein some of the huge debt of countries like Greece and Italy and Spain. And then on the other side, you've got the new French president, Francois Hollande, President Obama saying we need more growth, more stimulus.

It's little hard to read this -- I cover them for years, these G8 summits, and the memos afterwards of understanding to parse them. You have any sense that one side prevailed?

BILL KRISTOL, WEEKLY STANDARD: We'll have to read the 39-point declaration of --


KRISTOL: If you're having trouble falling asleep last night, it was very helpful.

There's one word that isn't in there: debt. I mean, there's a European debt crisis, the consensus document makes it sound as if that's not a fundamental problem. Let's just have some growth, more spending. Incidentally, though, they quite say (ph) higher taxes.

So, basically, I think we have a very clear choice internationally now on economic policy, the Hollande/Obama alternative, which is more government spending and higher taxes. That's explicitly what they are for. It's actually what they -- the policies they want.

And the conservative alternative which has been followed in Germany and Sweden and Canada and Israel, all of which have center- right governments, all of which are growing faster than we are, and then France is. And there, they have tried to reduce the budget deficit and create, and have pro-growth fiscal policies.

So, I think there's a very clear choice and we're having real world test of the choice. And I think, honestly, the idea that more spending and higher taxes is going to solve the current economic problem, I don't believe it.

WALLACE: Senator Evan Bayh, your sense of how debate is doing.

EVAN BAYH (D-IN), FORMER U.S SENATOR: Chris, this is what happens when democracy and markets collide. In the short run, democracy tends to win, and politicians tend to take the path of least resistance. But in the long run, markets have the final say.

So, what you're going -- what we really should have here and we may model into eventually is more stimulus in the short run. Hopefully, based upon that tax cuts for middle class families to prop up aggregate demand. Some tax cuts for business to hire people right now.

We learned through hard experience that there really wasn't much of a thing called a shovel-ready project.

That's what you need to do in the short run, to get this economy moving --

WALLACE: You are talking about the U.S. or are you talking about Europe?

BAYH: I'm talking about the U.S. But in Europe, it's probably the same way, even more so.

So, in the short run, you do need more growth to avoid what the economist call the paradox of thrift, where you cut, it causes the economy to go down, less revenue comes in. So, you got to cut even more. You end up in a death spiral.

We need more growth in the short run, but in the long run, you got to keep the politician's feet to the fire, to deal with some of these fundamental problems in our country, is the entitlements, we got to bring them under control.

BAYH: In Europe, their societies just aren't structured for the kind of economic growth they're going to need to be economically strong going forward, labor markets, capital markets, those sorts of things.

That's the balance. So these two things are not irreconcilable. In fact, they need to be coordinated in a way that will accomplish both.

WALLACE: Karl, you have been with President Bush, of course, to some of these economic summits. How much clout, when he's meeting with other leaders who have the same title he does -- how much clout does an American president have, and particularly when you're dealing with a problem like this, which is primarily a European problem, not a U.S. problem?

And having said that, what's the -- what's at stake here in terms of the U.S. election if this economic crisis, debt crisis in Europe gets worse and you see countries like Greece drop out of the eurozone?

ROVE: Yeah. The influence of the president at one of the G-8 meetings depends largely upon the relationship that he has build with the leaders before the meeting.

You know, the meeting -- everything's cooked by the time you get to the meeting. The sherpas who represent the governments spend months arriving at these declarations. And you can see in the declaration from this gang of eight that, you know, everybody won.

There is a paragraph, paragraph six, about fiscal responsibility, and paragraph seven about growth. And so I think Angela Merkel said it best. She said, well, we talked about both threads, and of course we're going to pay attention to austerity and of course we're going to pay attention to growth.

So everybody got what they wanted. The president's able to walk away and say I put an emphasis on growth, and the chancellor of Germany is able to walk away and say, I held the line on -- on fiscal austerity.

Now, you're right. What happens after this has huge ramifications. And it's largely outside the control of these leaders.

What happens to -- if Greece basically thumbs its nose at the European agreement, as we have a sense the parliamentary leader of the party most likely to win the elections, an upstart socialist party, has already said, basically, we're going to tell Europe to take a hike; they'll have to give us the money; we'll get to be able to pursue our spending as we like, and they'll have to pick it up.

But that's not likely to happen, and as a result there are going to be ramifications for the American economy as a result. It will ripple here.

WALLACE: Joe, you know, we spent 22 minutes having a debate about the U.S. economy. But if you see a real meltdown in Europe and you see Greece dropping out and you see some of these other major economies and banks seizing up, that could have a real impact between now and November here in this country?

TRIPPI: Yeah, it could turn out that Ohio and Florida have less -- that the states that have more to do with the outcome are going to be Greece, France and Italy and Spain than Ohio or Florida.

I think what's interesting about it is that this debate now has broken out, austerity versus growth. And -- and it's the same debate we've been having here in the United States. But in Europe, how -- if they keep doing the German austerity, it's clearly not working there.

And so I think, you know, the G-8 summit...

WALLACE: But the Greek spending isn't working, either.

TRIPPI: Well, Greek spending -- there's no money to spend anymore. It's how do you get out of this?

And I think, you know, by continuing -- every time they continue to make job cuts, they're cutting their revenue. It's not a good -- it doesn't work. You're in the death spiral that Senator Bayh is talking about. And Europe is in that death spiral and it's going to take us down with it.

And the question is, does that -- if it happens, does it happen now, soon, before November, or does it happen after November?

Or can it be stopped?

And the president -- I think the one thing this is doing is putting him center stage and influencing it towards growth and a mixture of growth and austerity, not just austerity.

WALLACE: All right. I want to pivot, because they spent the last two days at the G-8 Summit on economic issues. Now they're in Chicago, and starting today and tomorrow, the NATO summit, in which they're going to talk about -- about huge issues, our continued commitment in Afghanistan, what we do about Syria, what we do about Iran.

Bill, what's at stake there?

KRISTOL: Well, I think the May 23rd meeting on Wednesday in Baghdad about Iran is very big. I mean, the question is, will the Obama administration accept a phony deal really to kick the can down the road; will they back off in what the Security Counsel has been insisting on since 2006, which is a complete and verifiable cessation of Iran's nuclear program?

And I think there are a lot of signs that the Obama administration is so eager for a deal and so eager that there not be military action by Israel that they're going to -- they and the Europeans are going to try to strike a bad bargain with Iran to just kick the can down the road that will not deal with the fundamental problem this week. I think that's going to be a very big moment.

WALLACE: All right, but let's -- let me explain. This week what it is is that the P-5-plus-1, which are the permanent members of the Security Council plus Germany, are meeting with Iran in Baghdad, the second round of talks to try to find a solution, a diplomatic solution to the standoff over nuclear weapons.

And, Senator Bayh, there was some interesting talk this week that some members of the Obama administration -- and maybe this was the point that Bill was making -- are beginning to think that the economic sanctions are cutting so tough, are really beginning to bite on the Iranian economy, and that Iran might agree to a diplomatic solution -- some argument as to how -- how true an agreement it would be.

Your sense -- do you share that optimism? And if so, is it going to be a fake agreement or a real agreement by the Iranians?

BAYH: Well, hope springs eternal, Chris. But in this case, it may be the triumph of hope over experience. In all my experience with the Iranians, they never concede anything unless they feel some duress.

In the immediate aftermath of the invasion of Iraq, that was one of the few times when there were feelers to the Iranians out to us, saying, look, we'd like to try and work with you on some of these issues.

So I say keep the sanctions on; keep their feet to the fire. We probably need to pursue this, even though Bill is right to be skeptical, to just keep the Europeans on board and the others for whom -- whose cooperation we will need to make the sanctions meaningful.

But my guess is it won't be until the second set of sanctions hit later this year when they will...

WALLACE: A full-scale oil embargo?

BAYH: Right...


BAYH: Inflation is running rampant in Iran. They're rapidly running through their currency reserves. The regime is not weak, but it's that kind of pressure we need to keep up if we're going to have any hope of ultimately getting a verifiable -- and I want to underline the word "verifiable" -- agreement.

WALLACE: All right. We're going to have to take a break here, panel. But when we come back, the presidential campaign and all the tough talk about how to fix the economy.



VICE PRESIDENT JOE BIDEN: That's Romney economics. Two sets of rules. One for his wealthy investors and the other for everybody else.

ROMNEY: The centerpiece of this campaign is quite clearly character assassination. And the centerpiece of my campaign is going to be my vision to get America working again and provide a brighter future for our kids.


WALLACE: Joe Biden and Mitt Romney getting personal about the economy. And we're back now with the panel. Well as we discussed in the first segment, the Obama campaign this week began what we all expected was -- was to launch a campaign on Romney's record at Bain Capital. Say he's a -- a corporate raider who sucked the life out of companies. Romney said it's really less about profit and loss. They're trying to show that he -- or portray him as being a bad guy who is insensitive to -- to the middle-class. Smart move by the Obama campaign, Joe?

TRIPPI: Absolutely. They've got to -- they've got to point out that he ranked -- Massachusetts was ranked 47th when he was governor on jobs -- job creation. I mean these -- these are important -- they have to take it to what he says is a big claim of his that he's a businessman who knows how to get the economy going. And, you know yeah if it's borrowing hundreds of millions of dollars, giving bonuses of hundreds of millions of dollars to Bain and 700 people losing their jobs, that's a legitimate -- in -- in -- in politics that's a legitimate attack to take.

Particularly when it's what Romney's going to put out there as his selling point.

WALLACE: Well let...

TRIPPI: That he ran Bain Capital.

WALLACE: Well let me pick up on that, Karl. Because some Democrats say that they are taking a page out of your playbook, which is to go after someone's perceived strength. In this case, Romney's business record. And turn it into a liability. ROVE: Yeah. Well actually the problem is this is Romney's strength. And I -- I think we saw that in how the Obama campaign went after him. They put a grand total of $83,000.00 behind their attack ad and everybody in the media lapped it up. But let's look at the facts. Romney invested $180 million in the company. The company made money for a while and eight years later after a flood of cheap end steel came into the United States, principally from China, it and a number of other steel companies went under. Two years after -- over two years after he left Bain Capital.

So -- you know but it's a clever part -- if you don't have a vision to run on. If you don't have a forward looking agenda, go the hell after the other guy's record. But I think over time this is going to be OK for Romney. As long as he engages in it. And he did. They went straight back at him and said, wait a minute, here's the details about GST Technologies and oh, incidentally let's give you another example to look at. Which is we invested in another steel company that went from a couple a hundred employees to 6,000 employees and is a going concern today.

WALLACE: But -- but Senator Bayh, if the economy is going to be the big issue and you know that -- that -- that Romney is going to go after Obama on the -- the problems over the last three or four years, you do have to go after him on his record as governor and as the head of Bain Capital, yes?

BAYH: We -- we saw the two strategies of the campaigns as stark relief in this, Chris. The Obama campaign wants to make it a choice between two people. Part of that is pointing out the weaknesses of his opponent. The Romney campaign wants to make it a referendum about the last four years of the economy. And so we saw that play out -- played out in this ad.

WALLACE: You know, Bill and -- and -- at this quibbling point. Eight years ago with John Kerry everyone was talking about John Kerry the Vietnam War hero and by the time of the campaign -- of the election there were real doubts about just how much of a war hero he had been in Vietnam. Can the Democrats do that to Romney on his economic record?

KRISTOL: I don't think either side is going to disqualify the other candidate on personal grounds. I mean I think most Americans think...


WALLACE: Well this is personal.

KRISTOL: ...Barack Obama.

WALLACE: I mean it -- it's...

KRISTOL: Well...

WALLACE: ...his record.

KRISTOL: Well I mean on his record. But I was in the first Bush White House and there was a huge amount of -- who believed Bill Clinton's crummy job record in Arkansas. And this is a big choice ahead. And it's a forward looking choice between two different paths. And as we were saying earlier, it's a choice of two very different philosophies of government. I mean this isn't, you know, brain surgery here. One -- President Obama and the Republicans have a very different view of the size of government, of entitlement reform, of tax policy and all of that.

And I think that's going to be the choice. I think all the personal attacks on both sides are not going to matter much. I don't think they mattered as much as everyone thinks in 2004. I'd defer to Karl on this but that was a fundamental choice about national security policy and economic policy. That wasn't a personal disqualification of John Kerry for all the media hoopla about the Swift Vote (inaudible.) So think this -- if -- I think if Governor Romney can keep this a forward looking, policy oriented campaign and he will. I think he can win. And I actually think he can win pretty easily.

WALLACE: The -- the other big story on the campaign trail this week was the report that an independent super-PAC was considering and then rejected a series of ads linking President Obama to his former pastor, Jeremiah Wright. In end as I say, the super-PAC, this Republican super-PAC decided not to go ahead and do it. Two questions for you, Joe Trippi. Is Wright off limits or is he still relevant?

TRIPPI: Well I don't think he's relevant but he's not off limits obviously. And a super-PAC can run the ads if they want to. I mean one of the things that this points out though is how campaigns have lost -- super-PACs have -- have made it possible for campaigns to control the messaging. I mean you -- you -- you can't -- neither the Obama campaign or the Romney campaign have control. They can only control their spots and their spots aren't all -- aren't anything compared to the millions of dollars that these super-PACs will be running.

In the end though, look I think this is going to be a very close campaign and the ads aren't going to matter a whole lot. It's going to be the ground game in both campaigns that's going to decide this thing when you look at how close this election is going to...

WALLACE: Let -- let's talk about super-PACs though Karl. Because you were one of the founders of -- not -- not the super-PAC in question, but another one which had put out the ad attacking Obama on broken promises this week, American Crossroads. What about this question? And I'm speaking in general or you can talk -- how do you make sure that you involved in a super-PAC are helping the candidate and not hurting him? And conversely if your in a campaign what do you do about a -- a group that's supposedly supporting you, but -- but could be pushing a point that's the last thing you want to focus on?

ROVE: Well I -- I -- speaking from the perspective of the super- PAC, you want to try and do things that you think will be helpful to the candidate and not things that will be hurtful. And frankly trying to dredge up Jeremiah Wright, right or wrong after -- after this issue was litigated four years ago by John McCain deciding not to litigate it, was stupid. And so you want to try to do things that are helpful, not hurtful.

And -- and look, I thought it was very smart for the -- for the Romney campaign to immediate go out and denounce the tactic. It certainly sent a message to everybody in America what they wanted the campaign to be about. And it certainly sent a message to people involved in the super-PACs don't be doing stupid things like this.

WALLACE: Finally I -- I want to go, and I want to ask Senator Bayh about it. To the Rove.com website where he has now started posting, and there you see it, it's clear as mud isn't it? No, I'll explain it to you. That is an electoral map based on state polls. And here are the latest numbers. States that are the various blue shades with 290 electoral votes, solidly or leaning towards Obama. States reddish, 161 electoral votes solidly or leading towards Romney. The yellow states with 87 electoral votes not toss ups.

With 270 votes for -- needed for elections -- I want to repeat either 290 are either solidly or leaning towards Obama, Senator Bayh, is Obama well in front? I mean does he have a much clearer path to 270 then Romney does?

BAYH: This is -- this is going to be a very close election, Chris. But the Democrats with President Obama do have a slight edge in the electoral college. But there are three states; Ohio, Virginia and New Hampshire where the president is ahead by less than half a percent. That if they switch the other way, Mr. Romney would win the election. So this all comes down in Karl's map to just, you know eight states, nine states?

And in those states about 6 percent of people -- each candidate is going to get 47 percent no matter what. So it's what are those 6 percents of independents and moderates, what do they care about? My guess is, getting back to Bill, this is a big picture election. Growth versus fairness and when you look at the two candidates, which is more likely? That President Obama's' policies will produce better results over the next four years? People are kind of unhappy about the last four. And what about Mr. Romney's proposals? Will that really be just a repetition of some of the things that got us into the ditch? Or will that be something new (inaudible.)


WALLACE: Less than a minute left, Karl. Does, at least at this point and I understand we're six months out, does Obama have a clearer, easier path?

ROVE: Well he has an easier path, but he doesn't have a great path. This map lags public opinion because we're relying upon -- like South Carolina which is a toss up state in this map.

WALLACE: Put it up again?

ROVE: But the last -- the last poll for South Carolina is December of last year. I think for example, up-to-date polling will show Indiana -- excuse me, Iowa and Ohio either up for grabs or leaning for Romney. Same with Colorado. And -- and frankly this is going to come down to a very narrow victory, one side or the other.

WALLACE: All right. To be continued. Thank you panel. See you next week. Don't forget to check out Panel Plus where our group picks right up with the discussion on our website, FoxNewsSunday.com. We'll post the video before noon Eastern Time. And make sure to follow us on Twitter @ FoxNewsSunday. Up next, our Power Player of the Week.


WALLACE: Still to come, our "Power Player of the Week."


MICHELLE KWAN, OLYMPIC FIGURE SKATING MEDALIST: I've been very, very fortunate in my skating career.

WALLACE (voice-over): But three years ago while training for another Olympics, she chose a different passion.

KWAN: Now I sort of approach life differently where I am trying to help others.

WALLACE: Stay tuned, we'll be right back.



WALLACE: We like to profile special people who live in or are visiting Washington at the end of each program. But this week we're going to tell you about someone we had no idea has been living in D.C. for almost a year. Here is our "Power Player" of the week.


KWAN: (INAUDIBLE) is fantastic. It's one adventure after another.

WALLACE (voice-over): Michelle Kwan is the most decorated figure skater in American history. For decades, her life revolved around competition.

KWAN: Nationals in January, then March full world championships, Olympics then in February. So everything was very planned out since 7 years old, all the way to competing until 25 years old. That's what I did. That was my schedule.

WALLACE: But three years ago while training for another Olympics, she chose a different passion. She went to graduate school to get her master's degree in international relations.

KWAN: I was so scheduled, and then actually to wake up and say, oh, what do I have to do today? It's sort of that identity, trying to figure out who you are. WALLACE: Kwan started down this path in 2006 when she attended a White House event and made an off-hand remark to Secretary of State Condoleezza Rice.

KWAN: I said, if there is anything that I could do for the State Department, please let me know. And a few months later, I was appointed as a public policy envoy.

CONDOLEEZZA RICE, FORMER SECRETARY OF STATE: I know that you are going to play an important and valuable role for our nation.

WALLACE: Since then Kwan has traveled the world, engaged in soft power, meeting with government leaders and young people, and trying to make connections.

KWAN: Perhaps when they go into their government, or when they go into the business, they have a different impression of America.

WALLACE: She is just as driven as was on the skating rink.

KWAN: I like winning!

WALLACE: She is now a member of the President's Council on Fitness, and deeply involved in the Special Olympics.

(on camera): All of these things are unpaid, correct? How do you support yourself?

KWAN: I have been very, very fortunate in my skating career, I've toured for 14 years, and financially I am OK.

WALLACE (voice-over): Since last summer, Kwan has been living here in Washington almost totally under the radar. But she finds D.C. just as exciting as skating.

KWAN: Now just being here in Washington, and being surrounded by people who want to make a difference, and think-tanks, non-profit, government, it is just so inspiring.

WALLACE: At age 31, Michelle Kwan is remarkably well-adjusted. While she won nine national championships and five worlds, the best she could do at the Olympics was a silver and a bronze.

(on camera): Do the two defeats in the Olympics still sting?

KWAN: I mean, it was not exactly the color that I was looking for, but, hey, sometimes you can't be perfect.

WALLACE (voice-over): But you get the feeling the best is yet to come.

KWAN: In figure skating, I felt in some ways that I was selfish and I had coaches, choreographers, all helping me . Now I sort of approach life differently where I'm trying to help others. I also see it as just a chapter in my book. And although it's my skating career, it's only one chapter and I'm sort of turning the page to the next chapter.


WALLACE: Michelle Kwan says she might run for office some day. After all, she spent years on the ice with nine judges watching every move she made, facing voters, she says, would not be all that different.

And we'll be right back with a final note.


WALLACE: Finally, I want to let you know about a new cook book that is just out from my wife, Lorraine Wallace, it's called "Mr. Sunday's Saturday Night Chicken." And, yes, just as we have soup on Sundays after the show, we eat chicken almost every Saturday night before the show, pretty exciting.

If you go to our Web site, foxnewssunday.com, you can learn more about the book, and you'll also find the recipe for one of my favorites, stove-top summer chicken, and you don't have to eat is it only on Saturday.

That's it for today. Have a great week. And we'll see you on the next "FOX News Sunday."

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