This is a rush transcript from "Fox News Sunday," September 3, 2017. This copy may not be in its final form and may be updated.


North Korea conducts its most powerful nuclear test so far. We’ll have the latest and talk with a member of the National Security Council.

And President Trump sees firsthand the devastation from Hurricane Harvey.


DONALD TRUMP, PRESIDENT OF THE UNITED STATES: I mean, we are talking about -- they say two years, three years, I think that, you know, because this is Texas, you’ll probably do it in six months, I have a feeling here.


WALLACE (voice-over): We’ll get the latest and how Texans are responding and rebuilding it from the governor of that state, Greg Abbott.

And then flooding continues to keep thousands from their homes as victims of Harvey wait for aid.

TRUMP: Seven-point-nine billion. We signed it and now, it's going through a very quick -- hopefully quick process.

WALLACE: As Congress gets ready to debate a huge disaster relief package, we’ll ask Treasury Secretary Steve Mnuchin what it means for a big September agenda: keeping the government open, raising the debt limit, and the push for tax reform.

(on camera): Plus, President Trump will announce the decision on DACA Tuesday.

TRUMP: We love the DREAMers. We love everybody.

WALLACE (voice-over): We’ll ask our Sunday panel what will happen to the DREAMers.

All right now on "Fox News Sunday."


WALLACE: And hello again from Fox News in Washington.

We begin with breaking news. North Korea has conducted its most powerful nuclear test today. It claims to have exploded a hydrogen bomb, much more powerful than the five atomic bombs it has tested since 2006. In a moment, we will have a exclusive interview with Treasury Secretary Steve Munchin, a member of the president's National Security Council.

But, first, let's bring in chief White House correspondent John Roberts with the latest -- John.


And the real concern here if the pictures out of North Korea are to be believed, that this could be a thermonuclear warhead capable of being mounted on top of an intercontinental ballistic missile. The national security adviser, H.R. McMaster, talked with the South Korean counterpart about an hour after the test.

And the president tweeting this morning, quote: North Korea has conducted a major nuclear test. Their words and actions continue to be very hostile and dangerous to the United States.

And the president also putting more pressure on China, tweeting, quote: North Korea is a rogue nation which has become a grave threat and embarrassment to China, which is trying to help but with little success.

Earlier last month, when the first U.S. detected new preparations for another nuclear test, the president raised a lot of eyebrows when he threatened North Korea with what sounded like military action, which the president later seem to indicate may have made a difference in North Korea's behavior. Listen here.


TRUMP: They will be met with fire and fury like the world has never seen.

Kim Jong-un, I respect the fact that I believe he is starting to respect us.


ROBERTS: Since President Trump said that he thinks that Kim Jong-un may be starting to respect the United States, in August the 22nd, North Korea has fired a bunch of smaller missiles in the Sea of Japan, fired an intercontinental medium-range ballistic missile over Japan.

And now, this missile test, President Trump tweeted again today, that talking with North Korea is not the answer, writing, quote: South Korea is finding, as I’ve told them, that their talk of appeasement with North Korea will not work. They understand only one thing.

No word from the president on what that, quote, one thing is. But I think it's only fair to say, Chris, that the White House has been pursuing in terms of North Korea policy has not been working either -- Chris.

WALLACE: John Roberts, reporting from the White House -- John, thanks for that.

Joining me now, Treasury Secretary Steve Mnuchin, who is a member of the National Security Council.

Mr. Secretary, I know that you have spoken with the president this morning. What is his reaction to the news that North Korea has tested another bomb, they say, a hydrogen bomb, but certainly its most powerful explosive in its 10-12 years of testing?


I did speak with the president, and it's clear that this behavior is completely unacceptable. We've already started with sanctions against North Korea, but I’m going to draft a sanctions package to send to the president for his strong consideration, that anybody that wants to do trade or business with them would be prevented from doing trade or business with us. We are going to work with our allies. We’ll work with China.

But people need to cut off North Korea economically. This is unacceptable behavior.

WALLACE: Does that mean, when you talk about a new trade sanction package, that we’re going to be much tougher than we have been so far on Chinese financial institutions, Chinese companies?

MNUCHIN: Well, we’re going to strongly consider everything at this point. And again, I will draft a package for his strong consideration that would go as far as cutting off all trade and other business. And this behavior is unacceptable. And if countries want to do business with the United States, they obviously will be working with our allies and others to cut off North Korea economically.

WALLACE: I know it's early, at this point, Mr. Secretary. But first of all, do we believe the Chinese reports that this was not an atomic bomb but a much more powerful hydrogen bomb. Did our intelligence community believe they have that capability?

And I also want to put up a picture that the North Koreans put out yesterday, and it shows Kim, they said, expecting what they believe -- they say was a nuclear warhead to be put on a ballistic missile. Do we believe they have not only the hydrogen bomb capability but also the miniaturization to put a warhead with that kind of a weapon on a missile?

MNUCHIN: Chris, I can only say that our intelligence community has been doing an amazing job on this and on other issues. I obviously can't describe or discuss some of the things that you've asked me. But I can say the intelligence community has done an incredible job.

WALLACE: President Trump -- and John Roberts just reported this -- put out a tweet today saying that the North Koreans only understand one thing, I wonder in your conversation with the president, did he explain what that one thing is? And the president has been talking about warning North Korea not to reach a tipping point which would unleash the fire and fury of the U.S. Are we getting closer to that tipping point?

MNUCHIN: Well, Chris, what I would say is, the president made it clear, this isn’t the time for just talk, this is time for action. That this type of behavior is not acceptable, and our objective has been and will continue to be too denuclearized the peninsula, that these types of tests are not being part of the world community.

WALLACE: But does this put us closer to -- you talk about sanctions, diplomatic efforts, does this put us closer to a military response, sir?

MNUCHIN: Again, Chris, I think the president made it clear that he will consider everything. But we are not going to broadcast our actions. And, you know, we’ll continue to look at all our options.

But my focus right now, working with the president, with others to make sure that we put additional economic sanctions. We work with China and others. China has a lot of trade with them. There's a lot we can do to cut them off economically, much more than we've done already.

WALLACE: Finally, I want to ask you about another economic question in this regard. There are reports that President Trump is considering pulling out of our free-trade agreement with South Korea. One is, is that true? And secondly, why would he consider doing that at a time when we need to work with South Korea to face the threat from North Korea?

MNUCHIN: Well, Chris, the president has made clear that when we had trade deficits with countries, we’re going to renegotiate those deals. In the case of South Korea, we obviously provide a lot of military assistance and others, and what we’re doing to protect them. And the president has made it clear that we want a better economic deal. But there's been no decisions made other than renegotiating that trade agreement at this point.

WALLACE: Secretary Mnuchin, thank you, and we will see you a little later in the program to discuss the president and his agenda. Thank you for now, sir.

MNUCHIN: Thank you.

WALLACE: Now, to Hurricane Harvey. The big story at this point is life after the storm. Hundreds of thousands are still displaced by last week's flooding, many still living in shelters. President Trump and the first lady visited the area yesterday, meeting with victims of Harvey.

FOX News correspondent Peter Doocy is in Houston -- Peter.

PETER DOOCY, FOX NEWS CORRESPONDENT: Chris, Texas displaced by high water are already doing with red tape. But President Trump sought to cut through it yesterday by trying to resolve a dispute one evacuee said he was having with FEMA.



TRUMP: Where are they? Where are they? Get him up. Get him up here.



DOOCY: As the president handed out hotdogs and played with kids at the NRG Center’s mega shelter, his Education Secretary Betsy DeVos was nearby. Her department will also needs new students for 12,000 students in Houston alone. HUD Secretary Ben Carson was there, too. His department will soon need to find temporary housing for many of the 43,000 Texans who FEMA says have sought shelters since Harvey hit.

From the shelter, the presidential motorcade travel to First Church to help load water and food on vehicles bound for flood victims in need, and the president, who was asking Congress for almost $8 billion in emergency funding, also repeatedly applauded the federal relief efforts thus far.


TRUMP: Then it’s a long time. I mean, we are talking about -- they say two years, three years. I think that, you know, because this is Texas, you’ll will probably do it in six months, I have a feeling here.



DOOCY: But the water is still rising and part of west Houston near the Addicks and Barker Dams where as many as 300 residents remained last night in a mandatory evacuation area. So, the power company is going around this morning cutting off service to those homes, trying to encourage everyone that lives there and hasn’t left you to get to safety -- Chris.

WALLACE: Peter, thank you.

Joining me now is Texas Governor Greg Abbott.

Governor, welcome back to "Fox News Sunday."

GOV. GREG ABBOTT, R-TEXAS: Thank you so much, Chris.

WALLACE: Now that the floodwaters are beginning, and I emphasize beginning to recede, what's your biggest concern right now?

ABBOTT: Well, first, again, in that area just mentioned, we’re concerned about rising water. We have rising water still in the Beaumont area and other parts of the state of Texas that we need to still to be involved in the search and rescue process. But then, the rebuilding process, and this is where the long haul begins.

I was in Houston yesterday with the president. We could go from neighborhood to neighborhood to see how all these homes are digging out, pulling everything out of her house, sheet rock, flooring, et cetera. And now, we get into the long process.

And this is where we come to the part where Congress plays a role. The president has indicated that he's asking for more than $7 billion as a down payment on this. We need Congress to step up and pass this and help Texas rebuild. But I want you to know that Texans themselves, and in fact people across the country, are helping us do that through a fund that we have run by the state of Texas called rebuildtx.org. That’s rebuildtx.org.

WALLACE: I want -- before we get to Congress, and that’s certainly an important part of this equation, how toxic are the floodwaters that are still around. How serious is the pollution and perhaps toxic pollution from some of these chemical plants. And will that be a continuing health hazards, sir?

ABBOTT: Well, Chris, in any type of flood, especially any type of hurricane-based flood, there are going to be issues about contaminated water. It could involve chemicals, it could involve waste. People need to be very cautious as they go through the rebuilding process, understanding that the water has been contaminated.

Separated from that, you're talking about chemicals. They could be from waste sites in the greater Houston area. The EPA is monitoring that. The EPA is going to get on top of that. We are working with the EPA to make sure that we contain any of these chemicals harming anybody in the greater Houston area or any other place.

WALLACE: I take your point about the fact that Texans are going to help themselves, none of us are surprised by that. But I want to get your latest estimate on how much money you think that you’re going to need from Washington, and what do you think of the president's initial request from Congress of $8 billion?

ABBOTT: Chris, understand this, and that is both the geographic area and the population affected by this horrific hurricane and flooding, not just in Houston but also in the Beaumont area, is far larger than the population and geographic area of Katrina. Katrina cost, if I recalled, more than $120 billion. Now, when you look at the number of homes and businesses affected by this, I think this will cost well over $120 billion, probably $150 billion to $180 billion.

What the president has done now is make an initial request before the end of this funding cycle to get things up and running. That request as I understand is over $7 billion. And I think Congress understands this is a down payment on something that would cost far more, understanding again, this is far larger than Hurricane Sandy that I think was around $40 billion to $50 billion.

And so, we have a long road to hoe if we’re going to rebuild the fourth largest city in the United States, as well as the entire geographic region.

WALLACE: Couple of questions about the president's trip yesterday. You were with him in the Houston area.

One, I assume that you have -- you are too smart to not have pressed him on the amount of money that you’re going to need. Did he have a sense or did he make any commitment? We’re talking about more than $100 billion.

And, secondly, take us behind the scenes. What struck you about his interaction with the people of Houston?

ABBOTT: Well, first, the president both did and has made a lot lettuce specific commitments. Basically, he has told me and he’s acted upon what he said that whatever Texas needs, Texas is going to get. We made several specific requests yesterday and before yesterday, the president has granted.

As it concerns the larger funding, of course, that's going to be something the president has to work with Congress on. Yesterday, I got to tell you that the president was warm and compassionate and caring. We made several stops.

First, at one of the large relocation centers, at NRG Center, which is right next to the Houston Texans play. And he would work -- at a play area with young kids, and would hold young kids and kiss them and hug them and support them. Second, we fed lunch to people who are evacuees at this location. And then third, we went a church where volunteers were providing services to our fellow Texans.

And I got to tell you, Chris, what our fellow Texans are doing, helping each other out, these are the real heroes of this whole process. And that process can be aided if people can go to rebuildtx.org and help out.

WALLACE: Finally, Governor, I want to ask you about the related issue. The president is going to announce on Tuesday, what he's going to do about the DACA program. Texas has the second-most DREAMers of any country -- any state in the country, second only to California. I know you have -- when you were attorney general, opposed his Obama's executive orders. What do you think about the possibility of the president ending at the DACA program, putting these DREAMers at risk of deportation, particularly those right now in the Houston area who you are just trying to help out and recover from the flood?

ABBOTT: Well, Chris, we need to recognize that this is really a symptom of a larger problem that remains unresolved. We wouldn't have this whole issue about DACA if Congress would step up and pass immigration reform and do so in working with the president. We will continue to have challenges like this that lasted until both the Congress and president step up and pass comprehensive immigration reform.

WALLACE: Did you ask discuss DACA with the president yesterday? I know you had a lot -- go ahead.

ABBOTT: I spent a lot of time talking to the president, not just yesterday but in his prior trip and over the phone. I got to tell you that what the president’s talked to me about exclusively is his compassion and commitment to helping Texans dig out of this hurricane and as a result, issues like DACA and other related issues never came up.

WALLACE: Governor Abbott, thank you again. This is the second time we've met like this. Thanks for your time, sir. We’ll stay on top, we promise, of how folks in your state are doing in the days ahead.

ABBOTT: Please do. Thank you so much.

WALLACE: Up next, we’ll drill on how Harvey will affect President Trump's agenda here in Washington. Treasury Secretary Steve Mnuchin joins us again to talk about that.


WALLACE: A look outside the beltway at downtown Houston where the sun is out, but much of the city is still flooded more than one week after Hurricane Harvey made landfall. It's not just residents of Texas who are digging out from Harvey. Here in Washington, the president and Congress will be working for years on how to pay for disaster relief and long term recovery. And that could have a dramatic effect on the Trump agenda.

Rejoining is now Treasury Secretary Steve Mnuchin to talk about his day job.

Mr. Secretary, thanks again.


WALLACE: let's start with the effect of Hurricane Harvey on the nation's finances. The White House is asking Congress for $7.8 billion in immediate aid, plus another $6.7 billion within weeks ahead of the House of Freedom caucus, Mark Meadows, says he does not want to see that disaster aid tied to a bill to raise the debt limit.

Can you guarantee him and others that that won't happen?

MNUCHIN: No, I can't. Quite the contrary. The president and I believe that it should be tied to the Harvey funding. Our first priority is to make sure that the state gets money. It is critical. And to do that, we need to make sure we raise the debt limit.

So, if we -- if Congress appropriates the money, but I don't have the ability to borrow more money and pay for it, we’re not going to be able to get that money to the state. So, we need to put politics aside and we’re going to be urging Congress to get both of those things done as quickly as they can.

WALLACE: But I just want to make sure because this is new news, as they say. There's talk that the House is going to take up, that’s almost a billion dollars in disaster relief this next week. You're saying that you want to see a clean debt limit without any other spending cuts tied to that disaster relief.

MNUCHIN: I do. That is our priority. At this point, we need to put politics aside, we need to make sure that we can get to Texas, the appropriate amount of money to rebuild the state. It is absolutely critical and the president is committed to making sure that the states have the money that they need.

WALLACE: And again, just to pin this down, if the debt limit isn't raised, will that interfere with the relief effort?

MNUCHIN: It will. Prior to Harvey, I think, you know, I’ve said we have enough funding to go through the end of September and had urged Congress to focus on this before that period of time. But with Harvey, it’s moved the situation up earlier, and without raising the debt limit, I’m not comfortable that we will get the money that we need this month to Texas to rebuild. And I think as you know, that's our priority. We need to help the people in Texas, and we need to get that done.

WALLACE: I want to ask you about another part of the immediate agenda. President Trump threatened recently that he would be willing to shut down the government if he didn't get money as part of a government funding bill to build the wall, or begin building the wall, the government runs out of money on this September 30th with Harvey, with the disaster relief, with all these top priority to help the people in Texas.

At least for now, is that threat to shut down the government over the border wall, is that out the window?

MNUCHIN: Chris, I can't really comment if it's out the window or it’s not out the window. And again, I know the wall is a huge priority to the president and we want to make sure that we get money for that. I would say the president and my first objective right now is for the people of Texas and make sure that we get the funding to do that. So, that's what we’re focused on this week and we’ll be meeting with leadership of both parties to work on that.

WALLACE: You've got a lot of top priorities, but your long-term top priority right now is tax reform. The White House is pushing out that the president made a new push last week. But in terms of details, the administration seems to be going backwards. And I want to ask you about that, sir.

Here's what you laid out in April. A 15 percent corporate tax rate; individual tax brackets of 10, 25 and 35 percent; repeal the alternative minimum tax and the estate tax; eliminate or at least reduce tax breaks for the wealthy but keep the deductions for home mortgages and charitable contributions.

Mr. Secretary, are all of those elements still in the president’s tax reform plan?

MNUCHIN: Chris, I don't think we've been going backwards at all. As a matter fact, I think we’ve made a lot of progress. And as you know, I’ve been working on tax reform with the president for over the last year and a half, starting on the campaign. We did two economic speeches both in Detroit and New York when we were thinking about this during the campaign and now as president, this is also one of his biggest priorities to create economic growth.

So, we’d been working since January with the leadership in the House and the Senate. We want to make sure we have one plan, not three plans. The objective is to get this passed and get it to the president's desk this year. We've gone through lots of details.

The plan is still similar to what you've described that we put out in the one page, but we've been working with the House and the Senate, going through lots of complicated details. They’re beginning to socialize it with the members. And I look forward to seeing a bill this year signed on the president’s desk.

WALLACE: Are you insisting -- because the president didn't say this in his speech in Missouri this past week, are you still insisting that this will be revenue neutral, that it won’t add to the deficit? That if you lower rates, you’ll also take away some deductions or tax breaks to pay for it. Or could this just turn into tax cuts? And if so, given what you just heard from Governor Abbott about $100 billion, $150 billion, $180 billion in federal money need for Harvey, won't this blow a hole in the deficit?

MNUCHIN: Well, Chris, the president has been very focused on the national debt and concern that it’s gone from $10 trillion to $20 trillion. That's a big concern of ours. So, we want to make sure we can pay for things.

But the way we’re going to pay for things is with economic growth. The difference between 2 percent and 3 percent is trillions of dollars of revenue to the government. So, I think we may be in a situation where the administration believes we’ll get more economic growth than perhaps the models that come out of Congress. But we’ll be working with them on that. And I think now more than ever, it's too early to tell what the economic impact of Harvey is.

But now more than ever, we need to make sure we pass tax reform, regulatory relief, and trade negotiation so we create a 3 percent or higher GDP in this country and rebuild what we need to rebuild.

WALLACE: Just to bottom that up though, sir, I -- you're certainly not indicating that this bill will be revenue neutral in terms of what money the Treasury loses in -- through lower tax rates and what it gains from fewer deductions?

MNUCHIN: Well, again, what we've said is we believe in dynamic scoring and under our growth models at the Treasury, this will pay for itself. And again, we may not get full credit for that. There may be short-term impacts on the deficit, but we’re very -- we want to be very careful in paying for this with growth.

But we also need to boost the economy. We need tax cuts and tax reform now.

WALLACE: I’ve got two more questions I want to try to squeeze in here and we’ve got a couple of minutes, Mr. Secretary. President Trump said this week that cutting the corporate tax rate will primarily benefit workers. Here he is.


DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We need a competitive tax code that creates more jobs and higher wages for Americans. It's time to give American workers the pay raise that they been looking for for many, many years.


WALLACE: But, sir, independent experts, including your own Treasury Department, say that shareholders, people who own stock get -- they are 75 percent to 85 percent of the burden from higher corporate tax rates and that if those corporate tax rates are lowered, that they will get 75 percent to 85 percent of the benefit, not the workers.

MNUCHIN: Chris, most economists believe that over 70 percent of corporate taxes are paid for by the workers. And the fact that the Treasury Department, I think it was eight or 10 years ago, put out a piece otherwise. I don't believe in that. Our current economic team does not believe in that. There is lots of economic research.

We need to create a business tax system that’s competitive. We have one of the highest tax rates in the world. We tax on worldwide income. There’s $3 trillion to $5 trillion sitting offshore. And the president and I are completely focused on creating something that's good for American workers that will create American jobs and bring back American manufacturing.

And we have to be competitive. That's something that people understand. And just as Ronald Reagan did tax rate from 30 years ago, the president is focused on getting it done now.

WALLACE: OK, one last question, less than a minute. I want to turn to DACA and its impact on the economy because this week, some 400 business leaders sent the president a letter saying if the 780,000 DREAMers who now work are put at risk of deportation, the economy will lose $460 billion plus $24.6 billion in Social Security and Medicare taxes.

Briefly, sir, would ending DACA -- forgetting the other aspects of it -- would ending DACA hurt the economy?

MNUCHIN: Chris, I think this is a complicated issue. There’s a lot of important issues that are on the agenda this week. As it relates to immigration, the president is very focused on legal immigration. As you said, this is a complicated issue and something I’m sure the president will consider carefully.

As it relates to the economic impact, I am less concerned about the economic impact. We’ll make sure that we have plenty of workers in this economy. We want to put more people back to work. There's a lot of people that left the workforce and our objective is to bring them back into the workforce.

WALLACE: Secretary Mnuchin, thank you. Thanks for joining us. Good to talk with you and thank you for doing double duty for us today, sir.

MNUCHIN: Thank you, Chris.

WALLACE: Up next we'll bring in our Sunday group to discuss North Korea's test of its most powerful nuclear bomb yet and what the U.S. can do about it.


WALLACE: Coming up, President Trump set to decide this week whether to end the DACA program.


SARAH HUCKABEE SANDERS, WHITE HOUSE PRESS SECRETARY: The president's been very clear, he loves people and he wants to make sure that this decision is done correctly.


WALLACE: We'll ask our Sunday panel what will happen to the dreamers.



REX TILLERSON, SECRETARY OF STATE: We're going to continue our -- our peaceful pressure campaign, as I have described it, working with allies, working with China as well, to see if we can bring the regime in Pyongyang to the negotiating table with a view, to begin a dialogue on a different future or Korean peninsula and for North Korea.


WALLACE: Secretary of State Rex Tillerson last week here on "Fox News Sunday" pushing for a diplomatic solution to our standoff with North Korea. Will today's apparent test of a hydrogen bomb change that policy?

It's time not to bring in our Sunday group. The head of Heritage Action for America, Michael Needham. Marie Harf, a State Department official in the Obama administration. Jeff Mason, who covers the White House for Reuters. And former Republican Congressman Jason Chaffetz, who's now a Fox News contributor.

Well, congressman, let me start with you.

Your reaction to what seems to be a dramatic escalation in North Korea's nuclear program. What they are saying is their first test of a hydrogen bomb.

JASON CHAFFETZ, FOX NEWS CONTRIBUTOR: It is an escalation. And we're going to have to ramp it up. And we've tried everything from sending in Dennis Rodman to boosting up the military presence.

But I think a lot of focus has to go to Japan -- go on, on China. The -- the secretary, earlier in this program, talked about new sanctions with anybody doing business with North Korea. Well, the main trading partner with North Korea is China. And it will be very interesting to see how far this administration takes those types of sanctions. But China has the most vested interest in making that change there. But it's hard when more than $1 trillion of our United States debt is owned by the Chinese. That puts us in a very precarious position.

WALLACE: Yes, Marie, I want to pick up on that with you as a veteran of the State Department. Your reaction to what has happened today in North Korea? And to be fair, your president and George W. Bush and Bill Clinton all tried and they have all failed to stop North Korea from pursuing its nuclear ambitions

MARIE HARF, FORMER STATE DEPARTMENT SPOKESPERSON: That's right. And North Korea has shown that no amount of international isolation has -- has dissuaded them from pursuing this program. So many administrations have tried. There are no perfect options. There aren't even really great ones.

But two things I think are important. The president needs to be very clear that right now is not the time to renegotiate the South Korean trade agreements. Now is not the time to threaten them.

WALLACE: Why not?

HARF: Because we need to stand shoulder to shoulder with them. We need to focus on the real threat here, which is North Korea. And, to be fair, the South Korean trade agreement's a pretty good one. The president's tweet this morning about appeasement when he basically said the South Korean government was wrong, that is breaking news already in Seoul this morning. We've already seen reaction out of there.

This is the time to stand squarely with our allies because, as I said, there are certainly no good military options. We had to make it clear to North Korea that if they do anything like attacking the U.S., that their regime will be destroyed. And I think the president has to walk a fine line in doing that.

WALLACE: And what do you think of Secretary Mnuchin and -- he had just gotten off the phone with President Trump --

HARF: That's right.

WALLACE: Saying much tougher sanctions and much more targeted on China.

HARF: Absolutely, sanctions have to be a key part of this strategy here. But they have to be combined with other things, like making sure missile defense keeps getting better and better, making sure the South Koreans and the Japanese have what they need to defend themselves. And making clear to North Korea that this is not acceptable. And making sure the American people understand the real threat here, not an expiratory rhetoric cycle that we've seen before, but being very clear-eyed about it.

Michael, I want to bring you into the conversation.

A bunch of things here to talk about. The North Korean test, the word from Secretary Mnuchin, a new sanctions regime. And also this question of, is this the right time to possibly pull out of our free-trade agreement with South Korea.

MICHAEL NEEDHAM, CEO, HERITAGE ACTION FOR AMERICA: Yes, we need a full sanctions and pressure regime. We need ballistic missile defense. We need secretary (ph) sanctions on China if they're not willing to participate. That types of sanctions that were in place on Iran previous to President Obama's unadvised Iranian deal were far tougher than anything North Korean has been under. So the president isn't saying -- isn't accurate when he's saying that North Korea is more isolated than any other country ever has been.

I do agree, now is not the right time to pull out of the Korea free trade agreement. That's an important free trade agreement. It benefits farmers and ranchers across America. But the same is also true of South Korea. South Korea and President Moon had talked about restarting the Kaesong industrial complex. This was a joint South Korea-North Korea industrial complex that was started about 20 years ago. It was -- it was -- the expansion of it was stopped in 2006 after a nuclear test. It was pulled out of in 2016. I think if American and Korea are going to stand side-by-side, we should stay in our free trade agreement. But I think it would be a big disaster also for South Korea to reopen the Kaesong industrial complex.

WALLACE: Jeff, I want to -- to a certain degree this all feels like "Groundhog Day" to me, that the clock is waking up -- you know, is ringing at six in the morning and I'm hearing, "I got you babe" again. You know, we -- how many times have we seen that there's a North Korean missile test or a nuclear test. We huff and puff. We talk about military options. We talk about sanctions. We talk about pressure in China. You've been covering the White house now for, what, nine years. Everybody back to Bill Clinton has tried it. It never works.

JEFF MASON, REUTERS: Yes, that's right. I mean Bill Clinton actually, during his presidency, agreed on a package of giving $4 billion in energy aid to North Korea. That ended up not happening. President Obama asked South -- asked his military to work together with South Korea to prepare for a potential attack. George W. Bush called North Korea the axis of evil, or part of the axis of evil.

So you've heard rhetoric like this. You've heard words from president. And now, of course, you have President Trump really raising his rhetoric up in terms of talking about fire and fury. The question is, will any of that matter and where is it going?

WALLACE: And what's the answer?

MASON: Well, the answer is, we had to see what happens with North Korea and see what happens with China. President Trump has certainly working very hard to build a relationship with President Xi of China, but he's shown increasing frustrations with the fact that that relationship is not paying off. And, you know, was there -- as they're deciding whether or not to put more sanctions and economic pressure on China, as Secretary Mnuchin said, you have to also wonder if that's going to alienate a very key partner.

CHAFFETZ: But I -- I don't -- I don't think sanctions would ever work. I don't think the president of North Korea cares about its -- his people. He is only focused on obtaining nuclear capability --

WALLACE: OK, let me interrupt for a second, congressman, because we've been talking around this. The one thing we really haven't discussed is a military option. Is there a realistic, credible military option?

CHAFFETZ: I hope we never get to that point. But I do think the focus of the world has got to be with China, because North Korea's trading partner is China. And if China is not going to live up to the obligation to help -- what they did under the U.N. -- I mean I was very pleased with what Nikki Haley and the U.N. was able to -- to achieve. But China has really got to be the focus here.

HARF: And the -- but the cost of even a perfect first military strike, the cost of that would be so appalling in terms of casualties, not just in South Korea and Japan, but costly to American service members who are still serving over there. The cost of a military option would be astronomical. None of which I think we've thought through.

WALLACE: All right. We have to take a break here. But when we come back, the president is set to announce his decision for DACA this week. What will happen to the hundreds of thousands of dreamers in the U.S.?

Plus, what would you like to ask the panel about President Trump's response to Harvey? Just go to Facebook or Twitter @foxnewssunday and we may use your question on the air.



TRUMP: What are you building?



WALLACE: President Trump meeting yesterday with victims of the destruction left by Harvey in his second trip to Texas this week.

And we've back now with the panel.

Well, we asked you four questions for our Sunday group. And on the issue of the president's response to Harvey, we got this on Facebook from Paige Williams. She writes, what are the differences between how Trump responded to Harvey versus past presidents and their biggest disaster?

Jeff, how do you answer Page?

MASON: Well, the president got some criticism, rightly or wrongly, on Tuesday for not showing enough empathy. But when he went on Tuesday to Texas, he didn't go into the middle really of the disaster zone because it was still being worked on. There was still a lot of response going.

So what he did yesterday was meet with some of the victims. You know, do some of those things that presidents do. And help put some aid into trucks and a church.

You know, it's comparable. But there will be people who say it's not -- it's not the same.

WALLACE: But forget the presidential optics at the moment because in the end it doesn’t matter very much.


WALLACE: In terms of FEMA and in terms of aid on the ground, what's your sense of how the federal response is going?

MASON: So far it seems like the federal response has been very positive. I mean the -- the -- there's been very little criticism coming from the state where it's actually affecting or which has actually been affected. You had government -- Governor Abbott on your program earlier. He's been very complementary. Unlike Katrina, where clearly aid wasn't getting there fast enough, this response appears to have been very rapid.

WALLACE: Also, we have to say, because the first responders are the state and the local government.

MASON: Right.

WALLACE: Texas seems to have done a much better job than New Orleans and Louisiana did.

MASON: Absolutely.

WALLACE: Michael, they're -- I have a feeling I'm going to get to a negative point right now because the news that Secretary Mnuchin made earlier in the program is he said, we want any disaster aid, and they're talking about $8 billion this week, linked to a clean debt limit bill because we're not going to be able to provide all that disaster aid, billions of dollars, unless we have raised the debt limit. Your reaction to that?

NEEDHAM: Yes, I didn't really understand why he thinks the two things need to be linked. Everybody agrees that we should get the $15 billion of real emergency relief that's necessary out to Texas.

I talked to Mark Meadows yesterday --

WALLACE: Chairman of the House Freedom Caucus.

NEEDHAM: Chairman of the House Freed Caucus. Conservatives in the House are tied to that.

I think that exploiting this hurricane of people who lost their house -- houses to allow business as usual in Washington of getting an 18 month increase to our nation's debt limit passed, of continuing to spend money that we can't afford, that we don't have, makes absolutely no sense.

If there's some sort of technical reason that it -- in order to get $15 billion out, it would be very, very small. A couple billion dollar increase of the debt limit is necessary, then of course nobody would have that. But I just completely disagree with Secretary Mnuchin that in order to deliver relief to the people of Houston, to the people of Texas, which we -- and Louisiana, which we obviously want to do, that an 18 month increase of our nation's debt limit is necessary. It makes absolutely no sense.

WALLACE: But he clearly was pushing that line today and he, a couple of times, invoked President Trump to make it clear that the president wants a clean debt limit tied into disaster relief. You say you've been talking to the head of the House Freedom Caucus. Will they oppose that?

NEEDHAM: You know, I -- well, I think they will, first of all, if there's a clean debt limit increase, it doesn't matter what it's attached to. You have to go back to kind of first principles. Why is it that 100 years ago America voluntarily decided to put a debt limit on ourselves? And we said it makes sense to have a smoke alarm in our fiscal house. And when that smoke alarm goes off, everyone agrees we need to raise the debt limit. But you should also start taking the types of steps that are necessary to make sure that our children and grandchildren don't suffer under debts that they can't afford to pay.

WALLACE: Well, not only is that going to be a big issue here in Washington this week, what's going to happen with disaster relief, another big issue is the president is going to announce his decision on DACA. During the campaign, candidate Trump promised to end the DACA program, which protects hundreds of thousands of so-called dreamers from deportation. But as president, he's made it clear, he is struggling with this. Take a look.


TRUMP: DACA is a very, very difficult subject for me, I will tell you. To me it's one of the most difficult subjects I have because you have these incredible kids.

They shouldn't be very worried. They are here illegally. They shouldn't be very worried. I do have a big heart.


WALLACE: Now, Congressman Chaffetz, the president has said he is going to announce what he's going to do on DACA on Tuesday, which is also the day that ten states are saying that they are going to file suit against the government because they claim DACA, as an executive order, is unconstitutional. But a lot of Republicans, starting with your own former House speaker, he's still the House speaker, but you're a former congressman, Paul Ryan, says that he shouldn't end DACA. Is Ryan and are those other Republicans wrong?

CHAFFETZ: Well, the president has a mandate based on the election to lock down that border, get rid of the reward incentives to be here illegally and reject amnesty.

I do think the president, based on my conversations with people on The Hill the last 48 hours or so, I think what the president is going to do is give a window of opportunity for Congress to actually do something on immigration reform over a six month period. That's my best guess as to what's going to happen. I don't think you'll see him clearly just cut it off the very next day, you know, later this week. I don't think that's going to happen.

And I think the president does have a big heart. And it is difficult to deal with somebody who was brought here as a two-year-old. But the president had also campaigned on the idea that we're not going to provide rewards and incentives. I do think it will be an impetuous to Luis Gutierrez and other members on the Democratic side of the aisle to the table to know that they're going to have to actually work in a bipartisan way to try to achieve some of the things that the president has gotten elected on.

WALLACE: Well, let me make sure I understand what you're suggesting. Say that we're going to end DACA but give a six-month window for Congress to do something. And, of course, the obvious question then is, would funding for the border wall be part of that deal?

CHAFFETZ: Well, again, I -- it has to get -- they have to get the funding for the border wall. It's a modest amount. It's less than $2 billion out of a $4 trillion budget. I do think the president will get that money. But I also think you'll see a continued resolution that will punt some of these really tough decisions down to later in December. I -- I --

WALLACE: Let's ruin our Christmas and New Year's.


WALLACE: Let's do that.


WALLACE: Marie, I want to bring you in because, look, people can disagree with the merits of protecting the dreamers, whether it creates an incentive, whether it's amnesty. On the other hand, there certainly is a legitimate argument that President Obama acted illegally, unconstitutionally, and doing this by executive order, and it should be better done by Congress.

HARF: Well, and the courts, I think, are going to take -- they have been looking at it and they will continue to.

I get nervous relying on Congress right now to fix anything because they've shown themselves incapable of being able to pass anything major, even though they control both the House, the Senate, and the White House.

Look, there are 141,000 DACA recipients just in Texas -- to bring together Harvey in Texas for a second. These are people -- we've seen stories -- there's a Houston area paramedic who's been saving lives of people who is a DACA recipient. Getting rid of this without a plan to replace it, as the congressman talked about Congress, you know, may fix it, it seems to me to just, quite frankly, be mean.

And I hate to use that word, but it seems mean. It also is bad economics. You ask Secretary Mnuchin about that during your interview with him and he kind of wavered on that because there are studies that say if you kick out all these people, we will lose billions and billions of dollars in revenue.

CHAFFETZ: But if the Democrats thought this was such an imperative when they had the House and Senate and the presidency, guess what, they didn't do anything with it. President Obama --

HARF: That was a long time ago.

CHAFFETZ: President -- the -- President Obama didn't do anything on this. It fell --

WALLACE: Selective memory.

HARF: it's been a while.

CHAFFETZ: Two (ph) months before a presidential election. That's the reality of it.

HARF: Well, let's all put our hopes in Congress to actually get something done on this point.

MASON: There is a reason that businesses are pushing the president not to do this.

HARF: That's right.

MASON: I mean there is definitely an economic piece to this that -- that the president is clearly considering and that business and Republicans and Democrats are involved (ph).

WALLACE: I got 15 seconds. How would you feel if he did what Congressman Chaffetz is suggesting, I'm going to stop DACA but I'll give you six months to fix it?

NEEDHAM: We need an immigration policy that makes sense for over 320 million Americans, not for small segments of the -- of sympathetic groups.

WALLACE: Thank you, panel. See you next Sunday.

Up next, our "Power Play of the Week." The Blue Angels flying high and inspiring pride.


WALLACE: Pride, professionalism, precession. As we told you in May, those are the watch words of this military unit. And they are our "Power Player of the Week."


RYAN BERNACCHI, BLUE ANGELES COMMANDING OFFICER: We're focused on that very precise control of the airplane and flying it to the very best of your ability. And you're thinking out ahead, OK, what's next and what's next and what's next.

WALLACE (voice-over): Ryan Bernacchi is commander of the Blue Angels, the Navy's precision flight squad troop. He's in the number one jet, leading his teams through intricate maneuvers at up to 700 miles per hour, with the planes sometimes just 18 inches apart.

The Blue Angels were in the area to perform at the U.S. Naval Academy, and we got to go inside their operation.

WALLACE (on camera): Is there a lot of talking going on while you're up in the air?

BERNACCHI: There is a lot of talking. As the leader, I'm calling a cadence for every -- every turn, every pull, every power change. If we're just going to turn left, it's as simple as, coming left. And on the go, all the six sticks will move in unison. Coming further left a little, pull.


And when all that gets going, we call it -- we call it -- it gets fuzzy, because it will -- it will just takes on this rhythm. You're feeling the fuzz, Chris, yes.

WALLACE: I'm feeling the fuzz.

BERNACCHI: Yes, it's something -- it's -- it's -- it's crisp, but it's -- it's electric.

WALLACE (voice-over): Admiral Chester Nimitz started the Blue Angels in 1946 with F-6 Hellcat prop planes to keep up interest in naval aviation after World War II.

Now they fly F-18 Hornet's in dozens of shows each year for more than 11 million spectators, from a cloudy Naval Academy, to a crystal clear San Francisco Bay.

BERNACCHI: I always was going to be a pilot.

WALLACE (on camera): Why?

BERNACCHI: The Blue Angels.

WALLACE (voice-over): Bernacchi used to go with his dad to shows in the bay area every summer.

BERNACCHI: I was that kid and I wanted to fly.

WALLACE: Now he has a nickname.

BERNACCHI: They call the flight leader "boss." The wingmen will talk to me and they'll go, hey, boss, you know, and that's the way -- the way it works and then we do it on the ground as well.

WALLACE: At the end of the show, the Blue Angels do a maneuver called a loop break cross. All six planes headed straight up, then in six different directions, and then back to the center point.

BERNACCHI: At about 800 knots closure, so just under 1,000 miles an hour and deploys it as a sweet (ph) when we -- we put all that together. That that -- that synergy and you feel that fuzz and you get it -- you get it going and it's really, really -- it's -- it's sweet, but it's very, very intense.

WALLACE: Bernacchi, who's flown combat over Iraq and Afghanistan, compares it to operating off an aircraft carrier. And he says that's the mission of the Blue Angels, to represent their fellow service members who are on the front lines.

BERNACCHI: It's about the Navy and Marine Corp. They're forward deployed. They're -- they're providing us with our freedom. And that's the real work.

We makes people feel something. And -- and it's that pride. It's the pride this country has in our Sailors and Marines and we just bring it and display it in a way that people can connect with. And they can -- they can see and feel and touch. And that, I think, is the value of the Blue Angels.


WALLACE: The Blue Angels are traveling the country through November. If you get a chance to see them in action, it is something I promise you'll never forget.

All of us here at "Fox News Sunday" and Fox News Channel are thinking of the people of Texas and Louisiana hit by Hurricane Harvey. If you'd like to support the relief effort, you can donate to the Red Cross, the Salvation Army or go to foxnews.com for more ways to help.

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

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