Scalise: Tax bill is a big step to get the economy moving

This is a rush transcript from "The Story," December 19, 2017. This copy may not be in its final form and may be updated.

MARTHA MACCALLUM, HOST: And "The Story" begins on the Senate floor where we do expect to see passage of this tax bill any minute now. Could be a little bit later in the evening, but we are watching it very closely. Of course, it will be a huge win to cap off year one for President Trump.


PRESIDENT DONALD TRUMP: We will cut taxes for the everyday hard-working American. The people that work so long, so hard and they've been forgotten.


MACCALLUM: Tonight, this is a moment that many said could never actually happen.


SEN. JEFF FLAKE, R-ARIZ.: Whether or not we can get tax reform, we're going to see over the next couple of months.

SEN. LINDSEY GRAHAM, R-S.C.: My problem is that we promised repeal and replace Obamacare and we failed. We promised to cut taxes and we have yet to do it.

SEN. BOB CORKER, R-TENN.: Some of the things we are doing, I'm sorry, are ridiculous.

TIM PAWLENTY, FORMER MINNESOTA GOVERNOR: If they can't do this, they can't do anything.


MACCALLUM: But Speaker Paul Ryan has been a believer in this moment for 20 years.


REP. PAUL RYAN, R-WIS., SPEAKER OF THE HOUSE: Our tax system is punishing all those qualities that make America great. So, we can have a better tax system.


MACCALLUM: The young Paul Ryan there, right? So, it's going to be pretty hard for anything under the tree to top what Paul Ryan got today -- he wanted it for a long time.


RYAN: This is profound change and this is change that is going to put our country on the right path. We spent 2017 working on this legislation and here it is we're getting it done. This was a promise made. This is a promise kept.


MACCALLUM: So, he was happy. But on the other side of the aisle, Democrats not so much.


SEN. BERNIE SANDERS, I-VT.: We are witnessing highway robbery in broad daylight.

REP. NANCY PELOSI, D-CALIF.: This is the worst bill to ever come to the floor of the House. The worst bill in history.


MACCALLUM: There is a catch, though. Tonight, a procedural issue on the Senate side means that the House is going to have to vote one more time so it is not a done, done, done deal quite yet on the House side. Joining me now, Congressman Steve Scalise, House Majority Whip. Good to see you this evening, Congressman Scalise.

REP. STEVE SCALISE, R-LA.: Good to be with you, Martha.

MACCALLUM: I guess, we'll deal with that first. How big an issue is this procedural difference between your version and the Senate version? You didn't think you were going to have to vote again tomorrow but now you are.

SCALISE: You know, we had so much fun passing this tax cut bill today, that we're going to do it one more time. But the bottom line is, all of the things that have been the critical component to this from the beginning, and that is cutting every tax rate, giving middle-class families more of their hard-earned money. You know, when you hear Nancy Pelosi say it's the worst bill she has ever seen because families will actually have more money in their pockets, because they can do a lot more with it than what Washington might do. It shows you the divide here in this country. I want to be on the side of the people who want to actually put more money back in the pockets of workers, and finally get our economy moving again. And that's what this bill will do. We're going to pass it, finally, to the president's desk tomorrow morning. And it's going to be a great Christmas present for families who've been wanting this kind of tax relief for so long.

MACCALLUM: A lot of discussion about the lack of permanency on the individual cut in this deal that it will go away over the course of 10 years. Do you think that Democrats are really going to want to take this away once people have it?

SCALISE: Yes. I think what you see these kinds of tax cuts get hold and people start spending that money in a lot better way, you start seeing the economy take off, and you start seeing jobs get created by our small business owners who are also big winners in this bill. It's going to be hard for Democrats to take that away. And if you look at tax cuts in the past, because of Senate rules, they can't all be made permanent. But at the end of the day, I feel very confident they will ultimately be able to make them permanent because you're going to see how well this economy does with this kind of tax relief for families and the simplification.

Don't under estimate the power of simplifying the tax code in a way that under our bill 90 percent of Americans will be able to do their taxes on a postcard. So, those are all great components of the bill -- making our country competitive, bringing all those jobs back that we have seen leave over the last decade. Tens of thousands of good high paying jobs. Let's bring the jobs back we do under our bill.

MACCALLUM: So, there's a report today to go to sort of inner office politics a little bit on the GOP side that in the conference meeting, Paul Ryan said quite clearly, I am not leaving this job, and there was applause, he gets a, maybe, a standing ovation?

SCALISE: There was a standing ovation. Absolutely.

MACCALLUM: All right. So, some people look at you and Kevin McCarthy and say, you know, is that a disappointment to you? Is that this a job that you want and do you believe that you have a shot at it or that Kevin McCarthy does? He didn't have the votes the last time around?

SCALISE: Martha, I love the job I've got. I know Kevin loves the job he's gotten, he's doing a great job. Paul Ryan as our speaker has, under what you saw today and tomorrow, will be leading us through one of the most historic tax reforms we've ever seen in our country's history. You got to go back to Reagan to find something anywhere close to this, and that worked really well for our economy. But look, as the speaker said this morning, there is a lot more work to do.

2018's going to be a busy year not only seeing the economy move again, but now we're going to actually go and help improve the lives of even more people by doing welfare reform. We're going to need workers. When you see all of these companies hiring tens of thousands of people, you know, you're going to see unemployment dip down, but all those people that gave up looking for work under those last eight years of President Obama's failed policies, they're going to be able to get back into the workforce.

MACCALLUM: Let me ask you this --

SCALISE: They're going to need skills and training. And we're going to be focusing on that next year.

MACCALLUM: You know, we just looked at that 20-year-old piece of video of Paul Ryan. And there has always been two parts to this for him: one tax cuts, the other is entitlement reform.


MACCALLUM: Now, the president has said that he doesn't want to touch Social Security, he doesn't want to touch entitlement reform. But, many look at this long term and say, there's no way that you can have these tax cuts if you don't start taking a bite out of this enormous entitlement that just keeps growing and growing, and growing over time, and may not be able to be enjoyed by anybody soon.

SCALISE: Well, first of all, we start some of that entitlement reform under this bill by repealing the individual mandate, and by putting real verification into some of the social programs that are already out there to eliminate a lot of fraud -- and we're talking about tens of billions of dollars of fraud just on that alone. Those two things combined, save over $230 billion of taxpayer money over the long term -- that's real money. And then, if you look at welfare reform, Medicaid reform. Those are things that only do we -- as well.

MACCALLUM: What about Social Security, are you going to touch that?

SCALISE: Well, if you look at Social Security, there've been cyclical problems with the program. We want to save it from bankruptcy. We've actually passed, Martha -- we've passed legislation in the house to save Medicare from bankruptcy. It's a program that's very sound.

MACCALLUM: So, is that on the table do you expect in 2018? You're going to take on Social Security reform?

SCALISE: One of the things we've said and President Trump agrees with us on, is let's go after welfare reform. Let's reform this broken welfare system that traps people and denies them opportunity. Let's reform Medicaid which is our most broken form of healthcare. And if you start with those two, look at what you can do not only to help people get more opportunities but to save hundreds of billions of dollars in money that's right now not being spent the right way. So, there's a lot of more big -- a lot of big things that we have ahead of us in 2018. This is a really big step to get the economy moving again.

MACCALLUM: So, welfare reform first. Social Security not on the table is what I'm hearing at this point.

SCALISE: Tax cuts first.

MACCALLUM: Tax cuts first.

SCALISE: Let's celebrate that big win for the American people.

MACCALLUM: Do you believe that Paul Ryan is going to stay in that job through 2020?

SCALISE: I think he's going to -- I'm not going to speak for what he's going to do in the future. He said clearly today, he loves this job. He's doing a great job at it by the way. And that he's going to stay in this job. And we all gave him a standing ovation because of what he's been doing to help lead us through some really tough times, but to lead us into some really good times ahead. And there are really good times ahead, working with a President Donald Trump who is so focused on getting this economy moving again, and rebuilding the middle-class that evaporated over the last decade. So, celebrate big things. We're delivering big results for the American people. But why stop there? Let's keep doing more good things.

MACCALLUM: All right. Congressman Steve Scalise, it's always good to talk to you, sir. Thank you very much.

SCALISE: Great being with you, Martha.

MACCALLUM: Merry Christmas to you if I don't see you before that.

SCALISE: Merry Christmas, absolutely.

MACCALLUM: Thank you. So, with President Trump's big legislative victory within reach at this point, will conservative critics from the never-Trump movement consider changing their tune about how things are going so far in the Trump White House. Rich Lowry, editor of the publication that once called Donald Trump a "menace to American conservatism" is striking a drastically different tone these days. "As the year ends, President Donald Trump is compiling a solid record of accomplishments. It's hard to see how a conventional Republican president would have done much better." Here now, Marc Thiessen, an American Enterprise Institute Scholar and Fox News Contributor; Guy Benson, Political Editor at and a Fox News contributor also; and Zac Petkanas former DNC Trump War Room Director. Gentlemen, welcome to all of you.



MACCALLUM: Hello there. So, you know, Guy, let me start with you because you were definitely in that never-Trump category. It's very interesting to see the folks at national review coming around. We all remember the against Trump national review edition during the campaign. 21 people wrote editorials against President Trump -- or candidate Trump at the time. Now, there are only six left that are still speaking ill of him, at least publicly. Is it time, looking at these accomplishments to eat some crow perhaps, Guy?

BENSON: Well, my attitude about the never-Trump "movement" is that it died on election day. President Trump is the President of the United States. So, people like me who had issues with him as a candidate, we have to move forward with the new reality, which is he's the leader of the free world and praise and criticize as we see fit. And there have been a number of things, especially recently, to praise. We talked about Justice Gorsuch a lot and some of these lower court nominees that have confirmed from the president that are very good.

And then, tomorrow or the next day, the president is going to sign a terrific tax reform bill that's going to cut taxes for 80 percent of the American people and make our international position, in terms of the corporate rate much more competitive than it has been. So, I think it serves no purpose for Trump skeptics like myself to sit here and pretend like when he does things that are good, it's not good. Just because of some sort of personal animus. I don't think that's good analysis, and that's not the approach that I take.

MACCALLUM: All right. Let's play this sound bite from Javier Palomares row last night who was on our program. A Democrat who was against President Trump really liking this bill. Here's what he said last night.


JAVIER PALOMARES, PRESIDENT, HISPANIC CHAMBER OF COMMERCE: There's going to be areas that I clearly don't agree with the president. I didn't clearly agree on everything that President Obama did, for that matter. But the reality of it is, on this issue, I could not agree more.


MACCALLUM: Zac, on this issue, with regard to tax cuts, which Democrats have been very much in favor of over the years -- cutting the corporate tax rate and the like -- are you with the president on this?

ZAC PETKANAS, FORMER DNC TRUMP WAR ROOM DIRECTOR: With this bill? Absolutely not. I mean, let's be very clear, Donald Trump owns this bill and I want to make that very clear. We'll be making that very clear across the country going into 2018. This is a bill that was written by 6200 lobbyists. That's 57 percent of all lobbyists in Washington, D.C. had their hand in this bill. The Bush tax cuts.

MACCALLUM: How many had their hands in the Obamacare healthcare bill.

PETKANAS: Less than 57 percent.

MACCALLUM: I doubt it.

THIESSEN: I doubt it.

PETKANAS: The Bush tax cut, cut taxes for the one percent by 27 -- sorry, 27 percent of the tax cuts of that bill went to the one percent. In this bill, 83 percent of the tax cuts go to the very wealthiest, the one percent.

THIESSEN: Not true.

PETKANAS: It cut -- that's absolutely tax policy center. It cuts taxes by 40 percent, and it --

MACCALLUM: The evaluation I read today said 84 percent of Americans get a tax cut.

PETKANAS: Yes. There will be a tiny temporary tax cut for a lot of Americans that will expire. The tax cut for the corporations, they remain permanent. And they're funded in part by cutting Medicare by $25 billion in 2018.

MACCALLUM: We just heard Steve Scalise, he believes that the individual cuts will remain in place. I think it's going to be very tough for Democrats to argue to their constituents that they want to take that money back from them over the course of the midterms.

Marc, you were not really never never-Trumper, but sometimes he was never Marc Thiessen. Look this tweet that he said about you. He said, "@MarcThiessen is a failed Bush Speechwriter whose work was so bad that he has never been able to make a comeback. A third-rate talent!" Well, you know, we don't feel that way here, because we think you are a first-rate talent. We love hanging --

THIESSEN: Thank you very much. I appreciate that. Well, I tweeted out right after that the note that he had sent me two weeks earlier telling me how great my Washington Post column --

MACCALLUM: He likes to do that, by the way.

THIESSEN: So, he was conflicted about me -- and let's put it that way. And I was conflicted about him, quite frankly. But look, I mean, looking back at it now, I mean, obviously he's got a lot of self-inflicted wounds from Charlottesville to the endorsement of Roy Moore that have distracted from the fact that he's got one of the best records of conservative accomplishment in his first 11 months in office of any president in the American history, including, quite frankly Ronald Reagan.

I mean, he has tasked historic tax reform for the first time in three decades since Ronald Reagan was in office. He is clawing back the regulatory state in this country, getting rid of regulations that have been a wet blanket on the economy at a rate faster than Ronald Reagan -- and the results are very clear. We've had two quarters of plus three percent growth in the New York fed just announced that they're expecting almost four percent growth in the fourth quarter. He got where he could put Justice Gorsuch on the Supreme Court, and he's filling the Appellate Courts which end up making the final say on tens of thousands of decisions with young, conservative judges who are going to be there for decades.

This is revolutionary stuff, and that's just domestic policy. There is foreign policy I could get in to, too. But, he is accomplishing a record of massive achievement. Unfortunately, sometimes it's obscured by the Twitter storms and the noxious tweets and things that are unnecessary for him to do that are distracting from his record of accomplishments. So, I wish he would do more of this and less of that.

MACCALLUM: But you know, I read one evaluation of the president so far today that basically said that what makes him impolite in a number of areas is also what has made him effective when it comes to Jerusalem and other issues.


MACCALLUM: Where it has taken sort of a bold, brash tact to pull off some things that were difficult to do in the past. But, Zac, you know, with regard to the economy, look at the Dow, up 5,000 points in one year. That's never happened before. And you know, after election night, people said that the market was going to tank. That we were going to go in this deep depression in the middle of the Trump presidency. That hasn't happened. You've got a GDP that looks like it might be at four percent. Why is that -- are either of those things tough things to argue with?

PETKANAS: Well, I mean, Obama, for example, in the first 11 months that he was president the Dow went up 29 percent in the first 11 months. Then Donald Trump is president, it went up 24 percent. So, I don't know what Donald Trump has done to take credit for 5,000 points in the Dow that Obama didn't.

MACCALLUM: But that he was anemic. Growth was anemic in the eight years.

THIESSEN: Repealing all the Obama regulation, how about that?

PETKANAS: Yes, sure.


THIESSEN: Tens of thousands of regulation pages in the Federal Registers Act.

PETKANAS: Yes, you got it.

THIESSEN: The Obama administration set a land speed record for regulating the economy which is a wet blanket on the economy.

PETKANAS: So, why did the Dow grow faster under Obama?

THIESSEN: And Donald Trump has dramatically, dramatically lifted those regulations and unleased economic growth.

PETKANAS: So, why did it grow faster under Obama?

MACCALLUM: Percentage-wise, it was -- percentage-wise, but it was down dramatically. It's never been up 5,000 points in one year. It's an astronomical move.

PETKANAS: It grew at faster pace under Obama.

MACCALLUM: An astronomical --

PETKANAS: Like, what are you talking about?

MACCALLUM: Guy, never, never mister. Back in here one more time for you. You know, when you look at, look -- go ahead.

BENSON: I was going to say, the problem that Democrats are going to run into next year is they had been spending a lot of time over the last few weeks flagrantly lying to the American people that this is a tax increase on the middle-class, and it's not. It is a tax cut for 80 percent of Americans. And so, the one line that the Democrats love to repeat is, oh, by 2027, by which point the average American family would have gotten $7,000 of tax relief by 2027 it might expire. I think every Democrat should be asked every day will you pledge not to allow the Republican middle-class tax cuts to expire in 2027? Exactly how President Obama refused to allow the Bush tax cuts for the middle-class to expire in 2012. He made them permanent. It's the same dynamic. It's misleading argument.

MACCALLUM: I mean, we think about -- like entitlement, tax cuts are pretty hard to rescind. Zac, quick thought?

PETKANAS: I mean, what we're talking about here is the Republican led CBO said that not only about what I said about the tax cuts, but they will actually raise premiums by 10 percent per year. So, people will end up paying more.

THIESSEN: Versus Obamacare that raised them by 30 percent, 40 percent or 100 percent.



BENSON: He's rich.


MACCALLUM: Thanks, you guys. Good to see you as always. Thanks to all three of you.

BENSON: Thank you.

MACCALLUM: So, here's a question: can the deputy director of the FBI redeem his agency and himself over how they've handled the Trump and the Clinton investigations? Today Andrew McCabe walked into this room with a near impossible task.


REP. TREY GOWDY, R-S.C.: I'll be a little bit surprised if he's still an employee of the FBI this time next week.



MACCALLUM: So, the deputy FBI director has been in -- behind closed doors in the classified briefing. There is the hallway and here he comes as he is -- is this from earlier today or is this live? That's earlier today. But we are waiting for him to leave the room. It's been going on for hours and hours. No doubt he is being grilled by the likes of Congressman Trey Gowdy, Congressman Peter King on the Hipski Committee as we call it -- the House Select Intelligence Committee.

They have a lot of question for Andrew McCabe, and as you know Trey Gowdy spoke with us last week and said that he'd be a little surprised if Andrew McCabe was still in his job at the FBI this week. He is. He did he show up to testify today.

Last week, he said he had a scheduling conflict and couldn't make it, but he did show up today, and he's been in that room as I say for many hours, and we're watching for him to exit as we wait this evening at 7:21 Eastern Time. So, he is on the hot seat as I said. Highly anticipated moment on Capitol Hill. He's really the man at the center of so much of what we've been talking about.

He knows the inner workings of the Hillary Clinton email investigation, of her exoneration. He was there side by side with James Comey at the time. He then moved right from that into the heart of the Russia probe.

And we now know that members of his team were so biased against the president that they had to be removed from the special counsel's team -- part of this whole thing. So, what happens now? Senate Judiciary Chairman Chuck Grassley says that he believes that McCabe, "ought to be replaced because of all of this."

And we also know that today they were discussing, no doubt, the cryptic text messages of the former fellow investigator Peter Strzok. Here's Congressman Jim Jordan laying in to Deputy Attorney General Rod Rosenstein last week. Watch this.


REP. JIM JORDAN, R-OHIO: This is a text message from Mr. Strzok to Ms. Page recalling a conversation in a meeting that took place in Andy -- Andrew McCabe's office, Deputy of the FBI, recalling a meeting earlier. And Mr. Strzok says this, I want to believe the fact you threw consideration in Andy's office. Then, there's a break, dash, it says that there is no way he gets elected, no way Trump gets elected. He says, I want to believe that. You said that in a meeting in Andrew McCabe's office, I want to believe that, but then he goes, but I'm afraid we can't take that risk. This goes to intent.


MACCALLUM: So, that's one of the big questions with regard to Peter Strzok who as is put in that text message was in Andy's office, believed to be Andy McCabe who's in there now. Jordan and other Republicans are demanding subpoenas for Strzok, for his lover, Lisa Page, also Bruce and Nellie Ohr who are married. Bruce Ohr has been demoted in his role in the special counsel investigation. His wife Nellie worked for Fusion GPS. So, as you can see it's a pretty tangled web that has been woven here. Here now Congressman Andy Biggs and Matt Gaetz, both are on the House Judiciary Committee and both have called for the resignation of Robert Mueller in this investigation. Gentlemen, welcome. Good to have you here tonight. Let me start with you Congressman Gaetz. You know, your thoughts on what likely transpired in there today. It's a classified briefing. So, it's limited in terms of what we know at this point.

REP. MATT GAETZ, R-FLA.: Well, we have to remember this is the very same Andrew McCabe who sent the emails designating the Hillary Clinton investigation as special and different than what applied to any other American. And then as you correctly noted, the very scheme that was hatched by Peter Strzok and his mistress Lisa Page seems to have been hatched in Andy McCabe's presence. So, this is a very critical witness for us to be able to get to the bottom of this information. I don't want this testimony to just occur behind closed doors. One of the things Congressman Biggs and I are fighting for are subpoenas so that before the judiciary committee and all of the American people, we can get answers to these questions, expose the bias that we know exists and ensure that we have a rule of law that we can rely on again in this country.

MACCALLUM: Yes. So, one of the things that we've seen a lot is calling for subpoenas, and then no teeth behind it. It doesn't actually happen. Chairman Goodlatte has said that he will subpoena these individuals. Can you update us on that? Is that actually going to happen this time, Congressman Biggs?

REP. ANDY BIGGS, R-ARIZ.: Yes, it's my understanding that they'll be subpoenaed, they'll have to come in. If they fail to come in, we can go to federal district court and get them held in contempt. And the reality is, we need them to come in. The American people need to them to come in because the bias is so palpable, it's so real. And, you know, when that happenings, nobody believes that the -- anybody's going to get a fair investigation in any level. So, it's just begins stinking from top to bottom. And that's not the way for this good agency to be. We need to get rid of the bad apples in there and we need them to come testify how they were trying to influence whether it's the Hillary's investigation and that goes back years as well as the election itself.

MACCALLUM: Congressman Gaetz, what about Christopher Wray, the new head of the FBI. The judiciary, obviously, has oversight of the Justice Department and the FBI, which is an integral part of that as well. You know, are you going to be speaking with him further about moves that you would like to see take place at the FBI so that they can remove this cloud from over their organization?

GAETZ: Well, absolutely. This is about more than Donald Trump and Hillary Clinton. We need to ensure that we have an FBI going forward that is transparent, that is subject to sufficient oversight and redundancies to ensure that we know what is going on. We never again want to be in a situation where you get an ego maniac FBI director like James Comey who can totally depart from standard procedures in one investigation and then can concrete an environment where a pro-Hillary bias can exist. And then right on the back of it, the very people executing on the pro-Hillary bias, end up working on the investigation, persecuting President Trump with this very anti-Trump bias that is totally indefensible. It's one of the reasons why the American people agree with us. Harvard University just released a poll showing that 54 percent of Americans agree that the Mueller probe is biased and these people were acting on plans to discredit the duly elected president of the United States. That's what we have to stop.

MACCALLUM: Yes. Those polls are problematic because everyone needs to have confidence in this process because the stakes are enormously high for the president of the United States and the people that work with him. So, congressman, both of you, thank you very much. Good to see you tonight.

GAETZ: Good to see you.

BIGGS: Thanks, Martha.

MACCALLUM: So, how far would the outgoing administration go to preserve President Obama's legacy? Democrats scrambling to explain tonight a new report that claims that they let one of the world's worst terror groups off the hook in the name of securing the Iran deal. Breaking news on this next.


MACCALLUM: So tonight there is a scramble to explain a new report in Politico called the secret back story of how Obama let Hezbollah off the hook. The Obama administration gave a terror network a free pass in order to shore up the Iran deal. The report claims that the administration undermined a DEA operation that was targeting top Hezbollah operatives, including one of the world's biggest cocaine traffickers who was also supplying chemical weapons used by Syrian dictator Bashar al-Assad to slaughter his own people.

Fox News chief national correspondent -- Fox News national correspondent Ed Henry is in Washington with the back story on this for us tonight. Good evening, Ed.

ED HENRY, FOX NEWS NATIONAL CORRESPONDENT: Martha, great to see you. Very interesting contrast that as President Trump was unveiling his national security strategy over the last 24 hours that was tough on terror and based on his America first campaign platform, ""Politico"" was breaking a major exclusive charging the Obama administration actually protected that drug ring run by the terror group Hezbollah all to save its controversial nuclear deal with Iran.

President Trump's top aide on national security issues, Defense Secretary James Mattis told reporters point blank in recent days that everywhere you find turmoil around the world, Iran has its hands all over it. A much different approach from former President Barack Obama who allegedly cut back drastically on what was known as Operation Cassandra, a massive effort to stop cocaine shipments into the U.S. by Hezbollah. A terror group, of course, closely aligned with Iran.

Based on interviews with dozens of participants familiar with the Obama administration's dealings, Politico reports, "When Project Cassandra leaders sought approval for significant investigations, prosecutions, arrests and financial sanctions, officials at the Obama justice and Treasury Departments delayed, hindered or rejected their requests."

Now, allies of the former president have responded by insisting he was tough on Hezbollah with sanctions. And that the Politico story notes itself there is no direct evidence that the Obama administration undermined Project Cassandra directly in order to save the Iran deal. But conservatives jumping on a comment in that article by Obama CIA director John Brennan who asserted the administration was just trying to build up moderate elements within Hezbollah.


JOHN BOLTON, FORMER U.N. AMBASSADOR: I think that's delusional. The fact is everybody in the Iranian hierarchy whether they are moderate on religious and social issues or extremists, all of them favored the Iranian nuclear weapons program.

REP. TREY GOWDY, R-S.C.: It's an incredible allegation that any administration would ignore one terrorist group because you were trying to curry favor with favor with another terrorist group.


HENRY: Trey Gowdy is one of several top Republicans now demanding a congressional probe of the Obama administration's handling of Hezbollah. Interesting that when the story broke yesterday, ABC, CBS, and NBC all ignored it on their nightly newscast. Martha.

MACCALLUM: Ed, thank you very much. Here now with more, Mollie Hemingway, senior editor at the Federalist, Jessica Tarlov, senior director of research at, both are Fox News contributors. Welcome to you both. Good to have you here tonight. This is getting a lot of pickup today. A lot of people really want to understand what went on here.

You know, obviously when you look at terror organizations around the globe, drug trafficking is one of the main ways that they raise money to fund their operations. So you would want to go after to cutting that off in order to do that, but it looks, Mollie, as if according to this report in ""Politico"" that the Obama administration wanted to look the other way in order to get the Iran deal signed.

MOLLIE HEMINGWAY, FOX NEWS CONTRIBUTOR: Right. And this is a really riveting long story in "Politico" that's very much worth a read. Looking at how all these people in the DEA were chasing down leads on the massive influx of cocaine into the United States and not just that. I mean, that's one big part of it. Also about how a major Hezbollah operative who was indicted by U.S. courts for trying to kill American government employees was allowed to skate free.

This is a guy who a lot of people believed reports directly to Vladimir Putin. And for people concerned about collusion with Russia or Putin to advance bad aims, this seems just like part of a pattern of sublimating everything in our foreign policy agenda to push forth a nuclear deal with a state sponsor of terror where we gave them $150 billion in concessions for very little to nothing in return. This is definitely worthy of more interest and focus by investigators.

MACCALLUM: Yes. I mean, when you look at some of our least favorite people around the globe, you've got Bashar al-Assad, you've got Vladimir Putin, and you've got Rouhani in Iran. All of these pieces sort of lined up in this story. And just this feeling when you read it they wanted to do anything possible to get this Iran deal through. And I remember there was so much discussion about wanting to attach their behavior to this deal to get concessions. This is the actual absolute opposite of that, Jessica.

JESSICA TARLOV, FOX NEWS CONTRIBUTOR: Yes, I know. I completely agree with what you and Mollie have been saying and I would recommend that everyone read the piece. It is absolutely riveting and it's a very complicated story. As you would expect, anything that relates to a deal with this level of importance as the nuclear deal is would be.

I think that the Obama administration officials pushing back are doing exactly what they should be doing, talking about the kind of higher principles of all of this and also saying that they didn't actually just abandon Project Cassandra, the name of it, to do this. But we all know that there are things that you have to do if you want to get diplomatic things done when you are working with someone that you think it's better to be in bed with than just openly opposing, which is what we have done with Iran.

No one is pretending that Iran is our best friend. We know they chant death to America, but we also know that as of now they are complying with the deal. Rex Tillerson has said that. Nikki Haley last week or maybe just yesterday, and said that there was evidence that they weren't, but defense officials pushing back on that. And I recommend everyone also read the "New York Times" report about that. So, we need to see what happens with the deal but it's an important story for sure.

MACCALLUM: You know, Mollie, you make the point, you know, when you are looking at collusion and what Jessica just brought up, you know, this idea that you want to sort of, you know, that at times in diplomacy you want to bring someone closer to you in order to get something done and in some ways you don't point fingers at them, you know, in other aspects of that relationship.

There are some parallels here to perhaps to what the Trump administration wanted to do to open up the conversation, the dialogue, they were believers to some extent, right or wrong that a better relationship with Russia was worth some of that. Are there parallels here?

HEMINGWAYU: Well, yes, but I mean, the problem with Iran is that they are an out and out enemy of the United States. They work actively to undermine U.S. interests. They attack our allies. They kill Americans. This is a country that should not be appeased. It should be dealt with very strongly. And the Obama administration unfortunately and I'm sure they had good motivation, but they worked to apiece this very dangerous nefarious force that has destabilized the entire region.

It was a huge foreign policy blunder and we're now having to re-orient ourselves and the entire region. You are always playing with bad actors when you are focused on the Middle East, but they chose the worst of the bunch, a group that is a state-sponsor of terrorism. And this is not appropriate.

And you know, everything we find out about this deal we keep -- it was passed in secret and using a little bit of manipulation. But everything we find out about it just makes it worse and worse. We never hear about something in the deal where we go that's a good thing.

TARLOV: but you do hear actually that they are complying with that. And I would add that I agree with you about Iran --

HEMINGWAY: That's not true. We just declined to certify their compliance with the deal. So I mean that's just in the most recent update.

TARLOV: No. The evidence that's being presented right now at the U.N. cannot be corroborated by defense officials that they violated. We don't know where and when that drone came from. We don't know if those weapons made it before the Security Council resolution was enacted or not.

I would just add to that in terms of bad actors, we know that Russia had their hand working with every bad actor that we are opposed to. They are in Iran. They are backing Bashar al-Assad. They are in Venezuela. So to say, oh, we know definitively about Iran, we also know definitively about Russia. So, I don't know if our administration is the kind of (INAUDIBLE) as really warranted.

MACCALLUM: Jessica and Mollie, thank you very much.

TARLOV: Thanks Martha.

MACCALLUM: Good to see you both tonight. So Iran has a new enemy, Nikki Haley, and tonight the U.S. ambassador says when it comes to this, bring it on.


MACCALLUM: Breaking tonight, the Middle East is increasingly on edge as Iran has fired a second missile now directly at the royal palace in Saudi Arabia. The missile courtesy of Iran-backed Houthis is provoking the Saudis in an extremely dangerous situation. It is aimed as we said directly at the king's residence.

The prospect of a proxy war pitting Iran, which is backed by Russia against the Saudis which are a U.S. ally is now getting quite a bit more serious. Trace Gallagher reports on this from our West Coast newsroom tonight. Hi, Trace.

TRACE GALLAGHER, FOX NEWS CORRESPONDENT: Hi, Martha. This cold war between Saudi Arabia and Iran is having some very hot episode. The missile intercepted on its way to the royal palace in the capital city of Riyadh is the second projectile in two months fired deep inside the Saudi kingdom. In November, the Houthi rebels in Yemen also fired a missile at Saudi Arabia's international airport targeting civilians.

Saudi officials say that missile was intercepted as well but some believe there is evidence the missile may have hit near its intended target. Even though Yemen is flooded with both small arms and heavy weapons, Saudi Arabia believes this latest attack is proof positive that Iran is continuing to support the Houthi rebels and continuing to supply them with missiles.

U.S. ambassador to the United Nations Nikki Haley agrees, pointing to recent seizures of weapons in the Gulf of Oman that are of Iranian origin. Ambassador Haley calls it a flaming red siren. Watch.


NIKKI HALEY, U.S AMBASSADOR TO THE U.N.: We have made this information public because Iran's destabilizing behavior is only growing. It will continue to grow unless we raise the cost of defying the international community. International peace and security depend on us working together to expose and hold accountable the Iranian regime's hostile actions.


HENRY: Leader of Houthi rebels in Yemen has told Saudi Arabia that as long as the kingdom continues to target them in the Yemeni capital of Sana'a, the Houthi will continue striking Riyadh. The Saudi-led coalition has been fighting the rebels for three years. Saudi crown prince Salman is also trying to lead his country in anti-corruption and austerity drive, hoping to revive an economy hammered by falling oil prices, though it's notable two weeks ago the crown prince did scrape together about $450 million to buy Leonardo da Vinci's "Portrait Of Christ," the most money ever spent for a single piece of art. Martha?

MACCALLUM: No shortage of pocket change there. Trace, thank you. So who needs Thomas Jefferson when you've got Sally Yates? The former acting attorney general fired by President Trump explaining what our founding fathers really meant. She will tell you when we come back.


MACCALLUM: You remember Sally Yates, she was fired as acting attorney general by President Trump early really in the administration after she refused to defend his administration's travel ban executive order back in January that was. And now she is sounding off in a new op-ed, and though not naming the president directly, she is clearly taking digs at him as she questions the direction of our country.

And without apologies to Thomas Jefferson, she offers her own annotated version of the constitution or the preamble. She writes this quote, "We the people of the United States, we are a democratic republic not a dictatorship -- in parenthesis -- in order to form a more perfect union, her notes, we are a work in progress dedicated to a noble pursuit, establish justice, we revere justice as the corner stone of our democracy, insure domestic tranquility, we prize unity and peace and not divisiveness and discord, provide for the common defense, and she writes, we should never give any foreign adversary reason to question our solidarity."

She went on from there, but you get the idea. Here now, Jonathan Turley, George Washington University law professor and a constitutional attorney. Good to have you with us. So, with no apologies to Thomas Jefferson, she just wants to make some, you know, corner of the page notes to sort of update all of us on how we should understand these words, Jonathan.

JONATHAN TURLEY, CONSTITUTIONAL ATTORNEY: I much prefer the original. It just seems to flow better. It is sort of funny we are having this pattern. You know, James Comey has been responding to every bad story against Trump with sort of celebratory quotes as a way of not directly commenting and then you have this. It's like the next op-ed will be, you know, strategy in bridge and how to avoid the Trump and your opponent.

The meaning is obviously there and all these metaphors and analogies really aren't hiding anything. So, the question really is whether she should be the messenger of this particular message. You know, she talks about the need of the department to be apolitical and yet she is widely been criticized for what she did at the Department of Justice at the very end of her career.

MACCALLUM: Yes. She says, "The rule of law depends on apolitical law enforcement. We need strict separation between the Justice Department and the White House," she writes, which is interesting on a number of notes. And I just want to remind everyone that as we said in the beginning, she refused to defend the president's travel ban when she was acting as his attorney general and then she was fired for that.

She got an email from Andrew Weissmann applauding her decision to not back the travel ban. Andrew Weissmann, I would remind everybody at home is now part of the special counsel team. He said, "I am so proud and in awe. Thank you so much. All of my deepest respects, Andrew Weissmann." Which is fine for him to, you know, let her know how he feels except that he is now part of this investigation, Jonathan.

TURLEY: Well, you know, the action that she took I thought was unwarranted. I was very critical of it. It's unprecedented for an acting attorney general or attorney general to order the entire agency to stand down and not assist the president. Ultimately, judges divided on the issue. The Trump administration recently secured a major victory in the Supreme Court.

But that doesn't mean that the people that were opposing the ban were acting in bad faith. It was a close question. But that actually undermines what Yates did. I mean, she told basically all the Justice Department attorneys including those that believed the president had the law on his side, that they couldn't help the president of the United States.

Now, if you want to be apolitical, you can resign if you think that you are being asked to do something unconstitutional. She wasn't. But you don't order an entire department of the federal government not to assist the sitting president of the United States.

MACCALLUM: I want to ask you one quick question about another story before I let you go, and that is that twitter is finally making moves to crack down on hate speech and removing some white supremacy twitter handles from the site. They are not doing that for other organizations as of yet. What do you think in terms of free speech?

TURLEY: Well, you know, I'm a classic liberal in terms of free speech. I think the solution to bad speech is more speech. I think this is a dangerous road to go down. They're going to put themselves on the same slippery slope that we've seen in Facebook and what we have seen on college campuses is that people tend to be very subjective in what they consider to be hateful.

MACCALLUM: Jonathan Turley, always good to see you sir. Thank you very much.

TURLEY: Thank you.

MACCALLUM: Quick break and our quote of the night is right after that. Stay with us.


MACCALLUM: Russia looms large in our times but it was the same back in the early 60s of course during the Cold War constantly on the mind of President Kennedy, but also on the mind of a little girl named Michelle, who wrote a letter to him about her fear that Santa would be attacked by the Soviet Union. Here is his response to the 8-year-old.

"Dear Michelle, I was about to get your letter about trying to stop the Russians from bombing the North Pole and risking the life of Santa Claus. I share your concern about the atmospheric testing of the Soviet Union not only for the North Pole but for countries throughout the world. However you must not worry about Santa Claus. I talked to him yesterday and he is fine. He will be making his rounds again this Christmas. Sincerely, John Kennedy."

That is our story for tonight. Thanks for being with us. We'll see you back here tomorrow. Tucker Carlson coming up next from D.C. Have a good night, everybody.

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