Secretary of State Hillary Clinton, Speaker of the House John Boehner Talk Egypt Crisis

The following is a rush transcript of the January 30, 2010, edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

CHRIS WALLACE, ANCHOR: Chaos in Cairo. What happens next for America's closest ally in the Arab world?

We'll get the latest from Egypt. We'll talk with Secretary of State Hillary Clinton. And we'll ask our panel what this means for U.S. interests in the Middle East.

Plus, now that Republicans control the House, what's their plan to shrink government, cut their deficit and get people back to work? We'll ask John Boehner in his first Sunday show interview since he was elected speaker.

All right now on "Fox News Sunday."

And hello again from Fox News in Washington.

We'll get to our interviews with Secretary Clinton and Speaker Boehner in a moment. But, first, the latest on the situation in Egypt -- for the sixth straight day, thousands took to the streets of Cairo and other major cities to protest the country's authoritarian government. President Mubarak named his intelligence chief, Omar Suleiman, vice president. But U.S. officials say Mubarak can't just reshuffle the deck and stand pat.

For more, let's bring in FOX News correspondent, Greg Palkot, who is live in Cairo -- Greg.


With protesters and security forces filling the streets here for yet another day in Cairo, the word to Americans is to stay clear. Cairo airport clogged today with tourists, trying to get out of the country. An official from the U.S. embassy here saying today they are telling Americans to not travel here if they don't have to, that U.S. diplomats and their families can leave if they wish, new flights to help with the exodus starting tomorrow.

Here in Cairo, it is a working day. It should be normal. It's anything but. We were out in the central square of this city, the flash point for a lot of the fighting in the last couple of days.

We have heard from protesters who continue to demand that President Hosni Mubarak leave. And we watch, by the way, as we listened to the Egyptian air force do runs across the city, we watch as 20 Egyptian army tanks rolled in the center of the square.

So far, at least, the relations between the army, the air force and the protesters have been OK so far. Not so, Chris, relations between the protesters and police, those two responsible for a lot of bloodshed in the last couple of days. Police have been pulled back and that's created yet another problem in security. In Cairo and throughout the country, looters have spotted in various neighborhoods, civilian militias. We have seen the shops and businesses close down. All the while, Chris, President Mubarak hoping that some of the changes that he has initiated in the last 24 hours could help things, including -- as you noted -- the naming of his very first in his 30- year rule, Vice President Omar Suleiman, head of the security here. He's considered a safe and secure hand but also considered a Mubarak crony. The word from the street so far, Chris, "unmoved."

Back to you.

WALLACE: Greg Palkot reporting from Cairo -- Greg, thanks for the update.

Joining us now from the State Department, Secretary of State Hillary Clinton.

Secretary, President Obama on Friday called on Mubarak to recognize the rights of the Egyptian people. Are you satisfied with the steps that Mubarak has taken so far?

SECRETARY OF STATE HILLARY CLINTON: Oh, I don't think anyone is satisfied -- least of all the Egyptian people, who have legitimate grievances and are seeking greater political freedom, a real path to democracy and economic opportunity. And for 30 years, the United States, through Republican and Democratic administrations, has been urging the Mubarak government to take certain steps. In fact, we've been urging that vice president be appointed for decades and that finally has happened.

But there's a long way to go, Chris. And our hope is that we do not see violence. We see a dialogue opening that reflects the full diversity of Egyptian civil society, that has the concrete steps for democratic and economic reform -- that President Mubarak himself said he was going to pursue -- and that we see respect for human rights for Egyptian people, and the kind of progress that will lead to a much more open, political, and economic set of opportunities for the Egyptian people.

WALLACE: Secretary, all of your answer has been couched in terms of President Mubarak. Does that mean that the Obama administration still backs Mubarak as the legitimate president of Egypt?

CLINTON: Well, we have been very clear that we want to see a transition to democracy. And we want to see the kind of steps taken that will bring that about. We also want to see an orderly transition.

Right now, from everything we know, the army has taken up positions. They are responding very positively, thus far, to the peaceful protest. But, at the same time, we have a lot of report of looting and criminal activity that is not going to be particularly helpful to what we want to see happen. And that has to be dealt with.

So, there are many, many steps along the journey that has been started by the Egyptian people themselves. We wish to support that.

WALLACE: Secretary, you talk about an orderly transition. How concerned are you that if Mubarak were to be suddenly thrown from power that the Islamic radicals could fill the void?

CLINTON: Chris, we want to see an orderly transition so that no one fills a void, that there not be a void, that there be a well thought-out plan that will bring about a democratic, participatory government.

And I also believe strongly that this is in Egypt's long-term interest. It's in the interest of the partnership that the United States has with Egypt.

So, that is what we are attempting to promote and support, because clearly, what we don't want is chaos. I don't think the Egyptian people want that. They want their grievances to be addressed. We also don't want to see a takeover that would lead not to democracy but to oppression, and the end of the aspirations of the Egyptian people.

So, this is an intensely complex situation. It does not lend itself to, you know, quick yes or no easy answers. But instead, I think the path that President Obama has charted that we are pursuing -- that calls for no violence, that support the aspirations and human rights of the Egyptian people, that stands behind concrete steps toward democratic and economic reform -- is the right path for all of to us be on.

WALLACE: Secretary, on Tuesday, after the protests had already started in Cairo, you said this:


CLINTON: Our assessment is that the Egyptian government is stable, and is looking for ways to respond to the legitimate needs and interests of the Egyptian people.


WALLACE: A number of protesters in the street said, based on that remark and other actions, that the U.S. was acting on the side of the regime, not of the protesters. Was that statement by you a mistake?

CLINTON: You know, Chris, we recognize the volatility of the situation. And we are trying to do exactly what I have just said: to promote orderly transition and change that will respond to the legitimate grievances of the Egyptian people, which is what the protesters are all about. I don't think anyone wants to see instability, chaos, increasing violence. That is not in anyone's interest.

So, what President Obama and I have been doing is sending a very clear message about where the United States stands. We want to see an orderly transition to a democratic government, to economic reforms, exactly what the protesters are seeking.

At the same time, we want to recognize Egypt has been our partner. They've been our partner in a peace process that has kept the region from war for over 30 years, which has saved a lot of lives, Egyptian lives, Israeli lives, other lives. We want to continue to make it absolutely American priority that what we've been saying for 30 years is that real stability rests in democracy, participation, economic opportunity.

How we get from where we are to where we know the Egyptian people want to be and deserve to be is what this is about now. So, we are urging the Mubarak government, which is still in power, we are urging the military, which is a very respected institution in Egypt, to do what is necessary to facilitate that kind of orderly transition.

WALLACE: And, briefly, Secretary, should Americans currently in Egypt leave the country?

CLINTON: Well, we are following the conditions for American citizens extremely closely. This is one of my highest responsibilities, Chris. And we have authorized voluntary departure, which means that we will assist American citizens to leave Egypt. We have warned that there should not be any non-essential travel to Egypt.

Thankfully, right now, there are no reports of Americans killed or injured. Again, I thank the Egyptian army for the support and security that they have provided. But we are watching it closely. And we are assisting Americans who wish to leave.

WALLACE: Secretary Clinton, we want to thank you so much for talking with us today.

CLINTON: Thank you very much.

WALLACE: Joining us now here in studio is Congressman John Boehner, for his first Sunday show interview since being elected speaker of the House.

And, Mr. Speaker, welcome back to "Fox News Sunday."

SPEAKER OF THE HOUSE JOHN BOEHNER, R-OHIO: Chris, good to be with you.

WALLACE: Should our government continue to back Egyptian President Mubarak? And what about the $1.5 billion in U.S. aid to that country?

BOEHNER: I think the administration, our administration so far has handled this tense situation pretty well. Clearly reforms need to occur in Egypt, and frankly, anyplace around the world where people are calling out for freedom and democracy, I think we have a responsibility to respond.

I think listening to the Egyptian people, working with the government, to bring more democratic reforms is all in the right direction.

WALLACE: The dilemma, of course, is if Mubarak were to suddenly go, that the Islamic radicals could potentially take over. The head of the House Republican Policy Committee, Thaddeus McCotter, a Republican congressman, said this -- "America must stand with her ally Egypt to preserve an imperfect government capable of reform and prevent a tyrannical government capable of harm." Is that GOP policy?

BOEHNER: I believe that Mr. McCotter said it exactly right. What we don't want are radical ideologies to take control of a very large and important country in the Middle East.

WALLACE: So, we have to stand by Mubarak under those circumstances?

BOEHNER: I think what we need to do -- there are legitimate grievances that the Egyptian people have and they need to be addressed. Whether that is through free and fair elections, whether it's through more democratic reforms in the short-term, I think all of these again are moving in the right direction.

WALLACE: On Tuesday, we watched you sitting behind the president during the State of the Union. A lot of us wondered what is he thinking while this is going on? Can you accept the increases in spending for education, and research, and infrastructure that the president called for, as part of an overall spending cut?

BOEHNER: Chris, the president of the United States is asking us to increase the debt limit. But on Tuesday night, he didn't even address it. And I don't think the American people will tolerate increasing the debt limit without serious reductions in spending and changes to the budget process so that we can make sure that this never happens again.

The other night, all he did was call for more stimulus spending. I think our team has been listening to the American people. They want to us reduce spending, and there is no limit to the amount of spending we're willing to cut.

WALLACE: So all of the president's so-called investments are unacceptable as far as you're concerned?

BOEHNER: The American people want us to cut spending. They don't want more stimulus spending.

WALLACE: Let's talk about spending, because you and House Republicans say you want to cut non-defense discretionary spending all the way back to 2008 levels. This year, according to the White House, 20 percent cut -- let's put this up on the screen -- means that 200,000 kids would be dropped from Head Start, the FBI would cut 2,700 agents, and the government would detain thousands fewer illegal immigrants. Question, do you support those kinds of program cuts?

BOEHNER: No, and neither do my colleagues. If you wanted to do an across-the-board cut, that's what you would have. But, you know, we started on the first day of Congress by cutting Congress' own budget. I cut my leadership budget, all the leadership budgets were cut, committee budgets were cut. All members' office budgets were cut.

We followed that up with weekly cuts on the House floor, including this past week when we eliminated taxpayer funding of presidential elections. We also voted to repeal the job-killing healthcare bill, which will save us $2.6 trillion in spending in the next 10 years, and avoid a $700 billion tax increase.

We have also called in our Pledge to America to end all TARP spending, eliminate all excess stimulus spending that still may be out there, and while don't we get the federal government out of Fannie Mae and Freddie Mac and save billions in the process.

WALLACE: So what you're saying is you are going to target your cuts. Some programs won't be cut and some will be cut more than the 20 percent.

BOEHNER: I expect that's what the committee will do.

WALLACE: And for instance, are you saying that Head Start and the FBI and programs to enforce immigration would be off the board, off the table?

BOEHNER: The committee will make these decisions in the next 10 days or so. I expect that we'll see the product of the Appropriations Committee. It will come to the floor of the House the week of February 14, as outlined by the majority leader, and the House will be able to consider this continuing resolution to fund the government under an open process. Some may want to cut more. Some may want to cut less. But I'm going to allow the House to work its will, because I think listening to the American people, the House will, in fact, respond with significant cuts in spending.

WALLACE: Let's look at the calendar, which you have just talked about, because the continuing resolution does run out, the resolution funding the government runs out on March 4. By the end of March, we may reach the debt ceiling of $14 trillion. How do you plan to do this? Because to a certain degree, they both involve the same thing, which is in return for these things, continue funding the government and to raise the debt limit, you want spending cuts. Are you going to deal with them both at the same time? Are you going to deal with them separately? How do you see that playing out?

BOEHNER: We expect to deal with these as separate questions. I think these are two opportunities that Congress has to deal with the administration, to cut spending. And if the administration has been listening, as we have to the American people, I would expect they will join us in reducing spending here in Washington, D.C.

WALLACE: How do you resolve your differences with the president? These are two very important issues here. One is you could run out of money for the government. The other is that we might default on our full faith and credit. How do you resolve your differences with the president where he wants a freeze and you want sharp cuts in spending?

BOEHNER: The American people will not tolerate our increasing the debt limit without serious reductions in spending. They're not going to allow us to move ahead if we don't put real budget controls in place so that this just can't happen again.

It's time for us to get serious. The American people on Election Day made it clear, they want us to cut spending and they want us to create jobs. And what we have to understand is cutting spending will in fact help create jobs in America.

WALLACE: So are you saying, basically, you want unconditional surrender from the White House?

BOEHNER: We want to reduce spending.


BOEHNER: Period.

WALLACE: And there is no compromise?

BOEHNER: We want to reduce spending. I hope -- that's what the American people want. I hope the president and his advisers are listening to the American people.

WALLACE: Yes, I mean, there is an implied "or else" in all of this, because if you're not willing to --


WALLACE: Let me finish the question, Mr. Speaker. If you're not willing to compromise, then the government could shut down. If you're not willing to compromise -- and I'm not saying it's your fault or the president's -- but we could default on our debt.

BOEHNER: Well, we have to work our will in the House. We have to work with our colleagues in the Senate and put something on the president's desk. But I'm going to suggest to you that we are going to keep our word to the American people, that we will, in fact, reduce wasteful Washington spending.

WALLACE: I want to -- I know you're not threatening to default. But do you agree with administration officials and other economists that defaulting on the full faith and credit of the United States would be a financial disaster?

BOEHNER: That would be a financial disaster not only for our country, but for the worldwide economy. Remember, the American people on Election Day said we want to cut spending and we want to create jobs. You can't create jobs if you default on the federal debt.

Listen, there has been a spending spree going on in Washington these last couple of years that is beyond control, and if the president is going to ask us to increase the debt limit, then he's going to have to be willing to cut up the credit cards. We've got to work together by listening to the American people and reducing these obligations that we have.

WALLACE: So, defaulting on the full faith and credit is unacceptable to you?

BOEHNER: I don't think -- I don't think it's a question that is even on the table.

WALLACE: You mentioned earlier that if you cut spending, that that will increase jobs. There are a lot of economists, including some conservatives who say, yes, in the long-term, we absolutely have to deal with the debt, but that in the short-term, to have the kind of cuts you have will actually cost jobs and could conceivably endanger the recovery.

BOEHNER: No, I have got 200 economists who say otherwise. And the fact is this, is that by running up the spending money we don't have, running up these huge budget deficits, we create more uncertainty in the private sector.

This is where cutting spending will create jobs because it is going to bring greater fiscal responsibility here in Washington, D.C., and some of the uncertainty, and allow jobs to be created in America.

WALLACE: Now, we had the Tea Party faction in the House. The Republican Study Committee, which has called for even bigger cuts. Not to the 2008 levels, but 2006 levels. They talk about cutting $2.5 trillion of debt over the next decade. Michele Bachmann, who made her own separate reaction. Do you see any problem dealing with the Tea Party faction inside the House Republican caucus?

BOEHNER: Absolutely not. We all got elected in November, all 435 members of the House. We all heard what our voters had to say. Cut spending, create jobs.

BOEHNER: And the fact is is that our spending resolution will be instructed the appropriation committee to come back to the House, we voted on it this past week, said bring us back at 2008 levels, pre- stimulus, pre-bailout levels or less.

So, we'll see what the committee has to bring to the floor. And then again, we're going to allow members from both sides of the aisle to offer their amendments. We'll allow the House to work its will.

I can't predict what the House will or won't do, but I clearly had some members who want to go further than what some others want to do.

WALLACE: But are there some spending cuts that are too much that go too far?

BOEHNER: We'll allow the House to work its will. You know, I'm the speaker of the House -- speaker of the whole House. My job is not to do what's been done in the past and that's to dictate what members will get to vote on. We will allow the House to work its will and we will.

WALLACE: Of course, as Willie Sutton would have said, the real money is in entitlements. You've met with several of us reporters the day of the State of the Union speech, and you made it clear that you are not going first in terms of proposing entitlement reform and let Democrats demagogue whatever you say.

The White House, I got to tell you, because I've been talking to officials there, says exactly the same thing. They don't want to go first and let you guys demagogue them.

So, if sides are doing an Alphonse and Gaston act, and waiting for the other side, how does it get done?

BOEHNER: Listen, I made it really clear that I think it's time for Washington to have an adult conversation with the American people about the big challenges that face us. And, frankly, I think the White House is interested in having that same conversation.

But, here, we've got the Senate majority leader who says there's no problem in Social Security. And if we can't get Senate Democrats and their leader to recognize that we've got real problems, I don't know how we begin to move down this path of having this adult conversation that I'd like to have and I, frankly, like the president would like to have.

WALLACE: So, but -- in the end, does it mean that you and the president and the leaders are going to have to get together and get in the boat at the same time?

BOEHNER: I think that is responsible way to address big problems that face our country. We've been in to this gotcha politics around this town for far too long. And the American people want us to look them in the eye and say, this is how big the problem is. I think that that conversation has to happen.

Once that happens, we can begin to talk about an array of possible solutions. And have that conversation. Then begin to develop a plan of what's doable to address the long-term concerns that we have in these entitlement programs.

WALLACE: What do you think are the chances of a deal on entitlements in at least -- even a partial deal, in the six to eight months that you say we have before everybody goes into campaign mode?

BOEHNER: I'm an optimist. I'll be the first one to admit. And I'm hopeful that we can begin the conversation and make real progress to address our long-term concerns. We can't continue to go down the path we've been on.

And I think the American people are ready for the conversation. They're expecting us to lead. And I'm hopeful that working across the aisle, working with the White House, we can, in fact, begin the conversation.

WALLACE: Would you be willing to accept not only benefit cuts to entitlement but also revenue increases?

BOEHNER: Now, here you're getting -- you're getting right in the same old nonsense we've always gotten into.

WALLACE: It's not nonsense.


BOEHNER: Let's talk about -- let's talk about the size of the problem.

WALLACE: We know it's a bad problem.

BOEHNER: Then once people -- once the American people have their arm around how big the problem is, then and only then should we begin to talk about an array of possible solutions.

WALLACE: After the election, and you just talked about the fact that you and the president and all the leaders need to get in the room together and work together, after the election, you and the president talked about getting together, improving your relationship. You suggested over a good glass of merlot wine.

But you told us the other day, there has been -- and you did this -- zero outreach from the president. Are you disappointed?

BOEHNER: No. He's been busy with a lot of things and I think he realizes that we're going to have plenty of opportunities here in the coming weeks and months to get together.

WALLACE: Are you willing to play golf with him?

BOEHNER: Of course.

WALLACE: Would you give him an handicap? He's not as good a golfer as you.

BOEHNER: I'm sure I'll have to give him strokes.


WALLACE: Serious subject -- in the aftermath of the shooting in Tucson, do you think that all members of Congress should have some form of security in town hall meetings or in Congress on Your Corner meetings when they're actually out in the public?

BOEHNER: Well, we worked with the sergeant of arms office and the Capitol Police and all the members outlining a lot of ideas and steps they can take to enhance the security for themselves and their staff. And I think a responsible way here is for members to follow those steps. There are a lot of things that could be done that don't require additional resources from the federal government, that I think will in fact be helpful.

But in cases where there are specific threats, clearly, the Capitol Police, along with their partners, are willing to take -- to take steps necessary to protect the security of members and their staff.

WALLACE: But you told us in the breakfast we have that one of your colleagues in Congress has said it was just a matter of time, we're easy targets. Do you think as a default position when you're going to have an announced meeting -- you know, I mean, there was no specific threat here with Gabby Giffords, it was simply -- she was meeting in a parking lot in a Safeway, should as a default position -- should there be local police or capitol police? Should there be somebody there?

BOEHNER: Well, I think every member will take steps to enhance their security. But I think it's also fair to say that even if there had been a protective detail there, we do not believe that it would have stopped this particular incident from occurring.

I mean, we have 535 members of Congress. What do we do every day? We're out in the public. We're talking to our constituents. We're out talking to the American people.

This is -- we have a very open society in America. And there is risk. There is risk with our job.

WALLACE: Finally, when I told people that I was going to be sitting down with you today --

BOEHNER: I bet you got a lot of ideas.

WALLACE: I got one idea. A lot of them asked the same question. I want you to take a look at what happened during the State of the Union address.


PRESIDENT BARACK OBAMA: That dream is why someone who began by sweeping the floors of his father's Cincinnati bar can preside as speaker of the House in the greatest nation on Earth.



WALLACE: Why do you cry so often?

BOEHNER: You know, I feel pretty strongly about what I do. I didn't come to Washington to be a congressman. I came here to do something.

And I don't need to be speaker of the House because I need some fancy title. I came here to do something on behalf of the American people.

We have big challenges in America. And I feel very strongly about addressing them. So, I get emotional. Last night, at the Alfalfa Club dinner --

WALLACE: Which is a big fancy dinner.

BOEHNER: If it weren't for my emotions, I don't know if they have anything else to talk about last night.

WALLACE: You look like you're --


WALLACE: I was going to say you like you're --


BOEHNER: They're handing a box of tissues last night. You should have given me a box of tissues. I'll be ready for it.

WALLACE: We thought about having them stack all around the studio, but we thought you might not like or appreciate that. But I got -- look, I was surprised at how many people focus on this. But some of your supporters, strong conservatives, say it makes you look weak or strange.

BOEHNER: Chris, you know me. I am who I am. I'm one of the most transparent people in this town. And, yes, I wear my emotions on my sleeve. But I do feel strongly about it and I'm not going to apologize for being emotionally attached to the things I feel most strongly about in this town.

WALLACE: And, finally, this was the other thing that people mentioned to me -- funny, no issues -- is they said -- and I feel this way. We like you. Why don't you stop smoking?

BOEHNER: Oh, why do we bring this up again? You know, smoking. It's a bad habit but I have it. And it's a legal product. I choose to smoke. Leave me alone.


WALLACE: Well, you know, on that basis, Mr. Speaker, we want to thank you so much for coming in today. It's always a pleasure to talk with you, sir. Please come back.

BOEHNER: My pleasure.

WALLACE: I will leave you alone -- alone on smoking, but not on anything else.


WALLACE: All right. Up next, we'll ask our Sunday group about the situation in Egypt and what it means for U.S. interests in the Middle East. Back in a moment.



HOSNI MUBARAK, PRESIDENT OF EGYPT (through translator): I will designate a new government to shoulder new duties and to account for the priorities of the upcoming era.



OBAMA: I told him he has a responsibility to give meaning to those words, to take concrete steps and actions that deliver on that promise.


WALLACE: Egyptian President Mubarak announcing changes and President Obama putting on the pressure as both men try to deal with the fast-moving events in Egypt.

And it's time now for our Sunday group: Brit Hume, Fox News senior political analyst; Nina Easton from "Fortune" magazine; Bill Kristol of "The Weekly Standard" and "New York Post" columnist Kirsten Powers.

We've all seen these situations before, where thousands of people go into the streets to protest oppressive regimes.

Brit, as somebody who has seen a lot of these, what is your sense of it? Is Mubarak going to be able to tough this out?

BRIT HUME, FOX NEWS SENIOR POLITICAL ANALYST: It doesn't look to me as if he will for a couple of reasons.

One is that the protesters seem utterly unwilling to pay any attention to the curfews. The army, such that it is, that has been put in the streets to restore order, has done little. The police are overwhelmed, and it doesn't appear that this is going to stop on its own, and the protesters do not appear much moved by the steps that Mubarak has announced.

So, you know, short of some kind of brutal crackdown -- and I'm not sure the army would execute it, would carry it out -- I don't see this stopping until or unless he's gone.


NINA EASTON, FORTUNE MAGAZINE: Yes, the army in Egypt is actually made up of people who are required to serve in the army. So it's actually -- it's a broad segment of society, unlike the security forces. And you're seeing them actually step back in some of these protests, in some of these big cities. So that's a very telling moment.

I don't see how Mubarak survives. The problem though is that Mubarak has run this country basically under emergency decree for years. He's quashed the moderate segment in that country, so all you have is the Muslim Brotherhood, for example, which is underground.

You don't have a moderate opposition to Mubarak. And I do think it's going to take some sort of outside force, outside -- including the U.S. -- to talk about how to move toward not just one man, one vote democracy, but rule of law and human rights.

WALLACE: Well, Bill, that brings me to the next thing I want to talk about, because the dilemma for us and Egypt has always been that yes, Mubarak is repressive, but he has advanced our interests in terms of fighting terror, in terms of peace between the Israelis and the Palestinians. And he's always played the card if he goes, then something much worse, the Islamic radicals take over. Could, if he were to be thrown out -- and we don't get the orderly transition Secretary Clinton talked about -- could Egypt become another Iran?

BILL KRISTOL, THE WEEKLY STANDARD: It's possible. I doubt it.

I think it is more likely to become another Iran at this point the longer Mubarak hangs on, the longer chaos is allowed now to grow. The best hope for an orderly transition is a reasonably quick transition away from Mubarak. The army's General Suleiman, who's now vice president, would be an utterly appropriate transitional president. He has full confidence of the army and control of the army.

The army can keep order and can usher in --

WALLACE: But the protesters are never going to buy him. He's been there --

KRISTOL: They're not. That's right, he has to be the head of a transition or interim government that does promise free and fair elections.

Now, everyone's terrified, if there are fair and free elections, won't the Muslim Brotherhood win? I don't think they would.

I think there's quite a lot of actually -- there are moderate, independent figures in Egypt that are famous people -- Saad Ibrahim and Ayman Nour, who are well known. Now, they haven't been organized by Mubarak, so there has to be some time for a moderate party to be able to organize. But I actually think at the current moment, Mubarak is a source of instability. He's no longer, if he ever was, a source of stability.

WALLACE: Kirsten?

KIRSTEN POWERS, COLUMNIST, THE NEW YORK POST: Well, I think that the feeling there is that the Muslim Brotherhood, under normal circumstances, wouldn't be able to win an election, but in the midst of chaos, that they could possibly capitalize on that, and that's the fear. And they are the most organized people despite these other moderates that exist.

Omar Suleiman actually is somebody who has been talked about for a long time as a potential presidential candidate if and when Mubarak stepped down, and once the son was removed. As we know, he was hoping to pass things on to the son.

So I think Mubarak is definitely leaving. I think he is making plans to leave. And there needs to be some sort of transitional government, which is what Hillary Clinton was talking about. All these calls for immediate elections are irresponsible. Right now they really have to get something in the middle prior to getting to the point for calling for free and fair elections.

WALLACE: All right. Let's talk about this from the point of view of the perspective here in Washington.

Brit, that, clearly, let's be honest, the administration has -- any U.S. administration has only limited impact on what is actually going on in Egypt. But how are they doing, do you think, in responding to events?

I mean, we've talked about Hillary Clinton and her statement Tuesday, where she said the government is stable and is responding to the needs, the concerns of the Egyptian people. And I also want to play what Vice President Biden said on Thursday. Here it is.


VICE PRESIDENT JOSEPH BIDEN: And I think that it would be -- I would not refer to him as dictator.


WALLACE: The protesters say that the Obama administration, from their point of view, is siding with the regime and not with the people in the streets.

HUME: Well, that was a very unfortunate statement that the vice president made, one of a long string he has made over the years.

Secretary Clinton, after perhaps a regrettable first assertion, it seems to me, is saying the right things. And she said the right things to you this morning. This is a genuinely hard foreign policy dilemma. Egypt has been unmistakably a major ally, if not the major ally, of the United States in the region. It has been a peace partner. Cold peace though, it may be, with Israel, which was and continues to be a very important development.

So turning our back on Hosni Mubarak is not an easy thing to do, and obviously should be done with some care. But it seems to me the administration is now in the process of doing that and events are dictating that, and I think the administration is doing about as well as it can.

EASTON: You know, I think this administration, though, yes, it's a difficult situation. But this administration is trying to say that this has been a coherent policy. In coherent, we've approached this Mubarak situation --

HUME: For 30 years.

EASTON: -- for 30 years the same.

In fact, let's remember, in 2005, Condy Rice went to Cairo, gave her Cairo speech, and said -- and confronted the regimes of Egypt and Saudi Arabia, and said we need reform, and said through all these years, we have been pursuing stability at the expense of democracy, and we've gotten neither. We did not see that in the president's speech.

HUME: Well, and the other thing is the things that President Bush said about it at the time infuriated Mubarak. Mubarak was -- but --

EASTON: Right. And she got a lot of heat for her speech as well.

HUME: She did.

WALLACE: But then the Bush administration backed off.

KRISTOL: Look, this administration has been a little slow, in my view, in reacting to events and said a couple of foolish things, but they are moving.

On Friday night, the clip you showed of President Obama was, "I told him" -- President Mubarak -- "he has a responsibility to deliver on these reforms." Secretary Clinton told you this morning, 36 hours later, "We are urging the Mubarak government" -- which is still in power -- "to do what is necessary to facilitate an orderly transition."

We have moved from, Mr. Mubarak, please do the right thing, to we are going to work to have an orderly transition away from President Mubarak, dictator Mubarak, which is a good move by Secretary Clinton. And now we need to help make this an orderly and successful transition. And we are not powerless. Everyone keeps saying, oh, the U.S. has so little leverage. We have a lot of experience in working mostly behind the scenes, to some degree publicly, in a wide range of countries -- the Philippines, South Korea, Chile -- on orderly transitions from friendly dictators to friendly liberal democracies.

This may be more of a challenge in Egypt, but that's what the Obama administration now has to do. And if they can pull it off, it would be great accomplishment.

WALLACE: All right.

We have to take a break here. But when we come back, in the wake of the president's State of the Union speech, will he and congressional Republicans be able to resolve their very big differences?



OBAMA: This is going to help spark innovation and businesses across America. This is going to spur new products and technologies. This is going to lead to good new jobs.



SEN. RON JOHNSON, R-WIS.: I hope the president and his allies in Congress accept a simple truth -- big government is blocking job creation, not helping it.


WALLACE: President Obama and new Republican Senator Ron Johnson seeing things very differently when it comes to more government spending.

And we're back now with the panel.

So, Brit, we now know both sides opening positions. The president wants a five-year spending freeze on non-defense discretionary spending. The Republicans want a 20 percent cut this year. And the government runs out of money, the CR, in the first week in March.

How does this play out?

HUME: It doesn't run out of money the first week in March. There are all kind of things the government can do. I think the deadline that they set for the raising of the debt limit was March 31st.

WALLACE: No, no, no. I'm talking about the continuing resolution.

HUME: Well, my sense about that is that there is going to be a huge fight. I mean, a huge fight over the continuing resolution and over lifting the debt limit.

And it will revolve around -- it will originate in the House of Representatives to cut spending in a wide range of areas, and cut it significantly, within this narrow part of the budget we're talking about, non-defense discretionary. But it still will make a difference.

And my guess is it will get compromised in the end. And there may be some temporary extensions as they negotiate. You know, you pass a short-term CR. But the House Republicans recognize that there could be a strategy in that where you keep passing these short-term CRs, and pretty soon the year is over and you haven't cut anything.

So they're view --

WALLACE: I was going to say, and that would continue --


HUME: There is a price to be paid for every one of these. There's going to have to be spending restraint. And they think they have the political high ground, that the public so manifestly -- a large majority, so manifestly -- want to see spending cuts, that they will win on the issue, and they're not going to get all of what they want, but they will get a lot of it.

WALLACE: And I must say, Kirsten, when I asked Speaker Boehner about that, he made it pretty clear that they want the White House to give -- I mean, there may be a question at to how far they cut, but they want to see cuts, not -- a freeze is unacceptable, and this new spending is really unacceptable.

POWERS: Right. Well, I mean, I think that it's interesting. There was a lot of criticism of the State of the Union because he didn't get in to talking about the deficit until really far into it.

WALLACE: Thirty-five minutes.

POWERS: Yes. Well, there is a reason for that, because if you look at recent polls, it's not even remotely the top concern of Americans. It was 14 percent, I think, in The New York Times poll, and 18 percent saying it was their top concern in the NBC/Wall Street Journal poll. So there is a political strategy here.

Separately, when it comes to going after entitlements, the president has to deal with the base on that. And they do not want to see cuts in Social Security at all. They don't want to see raising the retirement age. Any of these things are complete nonstarters.

I thought it's interesting though when you asked Boehner, and you pressed him like you often do when you have people on, what are your specific cuts, what are you going to do about entitlements? And Republicans keep saying, well, we're not going to come out and say anything because we don't want to be demagogues. But we already know what their position is.

I mean, we know that they want to do cuts to entitlements. And so it's kind of unclear to me why they're playing this game and why they're not just going to come out and just say what they want, which they are pretty clear about when they're not on TV.

WALLACE: Well, let me bring that up with Bill, because I can tell you, having had meetings at the White House and with Speaker Boehner this week around the State of the Union, they both basically say if we come out with something first, the other side is going to demagogue us. Republicans say Democrats have been doing it on Social Security for, what, ever Since Social security started in the 1930s? And I can tell you the White House feels that there was a lot of demagoguery against them on health care reform.

In any case, there's this talk about everybody meeting secretly -- or behind closed doors, together -- and jumping into the boat together. Is that going to work?

KRISTOL: No, and I think it's not true that Republicans aren't going to come up with specific cuts. On February 14th --

WALLACE: No, I'm talking about entitlements.

KRISTOL: Well, let's just do -- on non-discretionary domestic spending, they will bring -- the reason Speaker Boehner wouldn't answer it today is because he is letting the Appropriations Committee choose the cuts so it's not across the board 20 percent.

WALLACE: He mentioned a bunch of specific cuts.


KRISTOL: Right. And so they're going to come with a real package of 20 percent of cuts, 20 percent in real-time discretionary spending, which will be a very big cut, and that will be there for the Democrats to attack and for the Democrats to defend the current spending levels.

On entitlements, I believe that Paul Ryan will win the little dispute among Republicans --

WALLACE: And who is he?

KRISTOL: He's chairman of the House Budget Committee, and someone who wants to deal with -- to show how you have to deal with entitlements. And I believe that his budget that will be unveiled around April 1st will show entitlement reforms which reduce the rate of growth in entitlements and show a path forward different than the one President Obama's budget will show into February.

So I think by April 15th, the Republican agenda of discretionary spending cuts and entitlement reform will be pretty visibly on the table.

EASTON: Can I by the happy optimist here? We're all talking about the divide, but we're missing one really important chamber -- the Senate.

In the Senate, there are four senators, two staunch liberals -- well, one staunch liberal and the head of the Senate Budget Committee, Kent Conrad, and two conservative Republicans who voted for the Bowles-Simpson deficit reduction cuts, very specific cuts, including Social Security. I mean, there is a bipartisan consensus, believe it or not, among a lot of these players on how to reduce the cost of Social Security, including raising the retirement age, limiting the cost of living increases, means testing.

So it's not like they are so far off the map. Yes, the president and Speaker Boehner look like they are miles away, but Kent Conrad has said repeatedly -- he has said, I'm not going to raise that debt limit unless we agree to serious budget cuts.

He's a Democrat. He's retiring, too, which gives him a lot of political flexibility to make hard choices. So I don't think things are as divided and dire as they seem. I think there is potential for agreement on this.

WALLACE: Which raises the question, Brit -- and I know this is something that we have been talking about for, what, more than a year now? It's one thing to vote for a commission report, and it's particularly easy for a guy who's not going to seek re-election. And we should point out, one of the Republicans who voted for it has already retired, Judd Gregg. He's not even in town anymore.

Do you see the political will, particularly for the president and Democrats dealing with their liberal base, and for Republican dealing with their conservative and Tea party faction, to make a grand bargain, which I suspect is going to have to involve -- you're going to compromise spending cuts and some revenue --


HUME: You're talking about entitlements?


HUME: And we're talking principally now about Social Security?

WALLACE: Well, Medicare, Medicaid, all of the above.

HUME: Social Security is by far the easiest and simplest one to do. And it's the one that can be done and you can see a clear way to do it.

Nobody really knows how to cut Medicare. We're about to add, you know, 30 more million people on the rolls of the insured. That gets more difficult by the minute.

What I would say about it is that the Republicans, I think, will go for this. The question is, will the president? Because I don't think, absent presidential leadership on this, the Democratic Party will go along with him.

And the polling generally makes it clear this is a hard pill to swallow, as Kirsten points out. So it's not an easy thing to do.

But if you're thinking about a president who wanted to do big things, who says we do big things, what are the big things that really confront us at a nation at this moment, this hour? Well, there are major foreign policy challenges, but we have got this debt overhang that is staring us in the face and coming down the track like a locomotive.

And if it gets to where it hits us, we're going to be in very deep trouble. And it would be a historic achievement if this president were to be the facilitator of a grand bargain to curb entitlement growth in Social Security, first of all, but perhaps even in Medicare as well.

WALLACE: And we have 30 seconds left.

Because you said you think the Republicans would. Your question was the Democrats. Do you think Republicans would agree it's part of steep benefit cuts to have some revenue increase?

HUME: Well, it would depend on how you did it, but there are ways, I think, you know, as part of a grand bargain, I think yes, the answer is yes.

WALLACE: All right.

Thank you, panel. See you next week.

And don't forget to check out "Panel Plus," where our group picks right up with the discussion on our Web site, And we'll post the video before noon Eastern Time.

Up next, we hear from you.


WALLACE: Time now for some comments you posted to our blog, "Wallace Watch," at And you had plenty of advice on how to cut the deficit.

Bob from Michigan says, "Eliminate all tax loopholes, credits, and deductions."

And Janet Dilbone from Sidney, Ohio, adds, "We need to have cuts not only in Social Security and Medicare, but in all government spending." ' And now a soup update.

Last week, more than 20,000 of you clicked on the recipe from my wife Lorraine's book, "Mr. Sunday's Soups." And if you go to, you'll see the soup of today is ancho pork and hominy. If you never heard of it, it's delicious, and she's making it for me right now.

Again, that's And we'll be right back with a special program note.


WALLACE: Before we go, this program note. Next week a special "Fox News Sunday", live from Cowboys Stadium in north Texas, site of Super Bowl XLV.

We'll preview the big game and assess the state of pro football. Among our guests, NFL commissioner Roger Goodell, legends from the Packers and Steelers, and some of our friends from Fox Sports.

And that's it for today.

Have a great week. And we'll see you next "Fox News Sunday."

Content and Programming Copyright 2011 Fox News Network, LLC. ALL RIGHTS RESERVED. Copyright 2011 Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.