Westboro Baptist Church Leader Talks Supreme Court Ruling; Sen. Durbin, Rep. Hensarling on Budget Battle

The following is a rush transcript of the March 6, 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: I'm Chris Wallace, and this is "Fox News Sunday."


WALLACE (voice-over): They target military funerals, saying the deaths of U.S. service men are the will of God, but the Supreme Court decides, repugnant or not, it is protected free speech. We'll talk with the leader of Westboro Baptist Church, Margie Phelps, about the case and actions one Supreme Court justice calls cool.

Then a partial government shutdown is avoided for now, as all sides try to reach a deal to cut spending and keep the government running. We'll discuss the key issues with two congressional leaders, the Democrats' number two man in the Senate, Dick Durbin, and Jeb Hensarling, chairman of the House Republican Conference.

Plus, the 2012 GOP field begins to take shape. We ask our Sunday panel about Newt Gingrich's semi-announcement and where he stands in the Republican contest.

And our power player of the week runs one of the first programs to face the budget axe. All right now on "Fox News Sunday."


WALLACE: And hello again from Fox News in Washington. The Supreme Court ruled this week that no matter how hateful, speech in public places on public issues is protected by the Constitution. Before we talk with one of the leaders of Westboro Baptist Church, Fox News correspondent James Rosen tells how we got here.


JAMES ROSEN, FOX NEWS: At funerals and other solemn events across the country, members of the Westboro Baptist Church have shown up to wave patently obnoxious signs and chant in-your-face slogans, all to protests the society they deem too tolerant of homosexuality and other perceived sins.

Many of the 100 or so parishioners of the non-denominational church in Topeka, Kansas are relatives of founder Fred Phelps, and while their actions are widely condemned, the Supreme Court on Wednesday ruled that Westboro's protest outside the 2006 funeral of slain Marine Matthew Snyder, who was not gay, was constitutional.

MARGIE PHELPS, ATTORNEY, WESTBORO BAPTIST CHURCH: Our team's reaction is thank God, and praise his name. Our secondary reaction is nothing has changed except this. This case put a megaphone to the mouth of this little church.

ROSEN: Chief Justice John Roberts wrote the court's 8-1 opinion, citing the need to protect even hurtful speech on public issues to ensure that we don't stifle public debate.

For Albert Snyder, the ruling reopened the wound of his son's death.

ALBERT SNYDER, SLAIN SOLDIER'S FATHER: We found out today that we can no longer bury our dead in this country with dignity.


ROSEN: In his dissent, Justice Samuel Alito wrote that the right of free speech does not provide a license for the, quote, "vicious verbal assault" that occurred in this case. At the Supreme Court, James Rosen, Fox News. Chris.

WALLACE: James, thanks for that. Joining us now from Topeka, Kansas is Margie Phelps, daughter of founder of Westboro Baptist, who is also the lawyer who argued the case successfully before the Supreme Court.

Ms. Phelps, before we talk about the case, let's talk about your church. It's not just U.S. soldiers, your church says that 9/11 and that the explosion of the space shuttle Columbia were also God's will.

And after the shootings in Tucson, you said, your church did, that 9-year-old Christina Taylor Green was better off dead and you wanted to picket her funeral. Question, how does an innocent 9-year- old girl end up in this?

PHELPS: Well, if you study the scriptures, you would know that no human is innocent, and that when a nation makes policies of sin, that the God of eternity deals with that nation by pouring his wrath out on that nation. And every description of that kind in the scriptures expressly includes, down to little saplings get caught up in that matter.

So what we're saying to this nation is that they're dying for your sins, and if you want it to stop, you have got to repent and mourn for your sins and stop.

WALLACE: Well, let's talk about interpreting God's will. Your father, Fred Phelps, the founder of the church, was five years old when his mother died of throat cancer. The aunt who raised him was killed in 1950 in a car crash. Was the death of his mother, was the death of the aunt, was that also God's will?

PHELPS: It absolutely was. I'm quite certain, knowing my father as I do, that for him to do the work that he has ended up needing to do in his life, it was absolutely needful to remove those women from the landscape.

There is no question. God holds the breath of life of every human in his hand and he has these things mapped out. And he does them according to his good will and pleasure. So every bit as much --

WALLACE: Ms. Phelps, if I may. Isn't it possible -- I mean, I wouldn't dare to interpret God's will, but isn't it possible that God was sending a warning to your father about the kind of church that he was going to establish, and in fact, God was trying to tell him not to establish that kind of church that would commit these kinds of acts?

PHELPS: Well, I don't see a cause and effect there. But in point of fact, the church was established, and he has been the pastor for nearly 60 years. And an amazing and marvelous work has been brought from this little church and this little body.

WALLACE: The dictionary defines a cult, a cult this way -- a religion or sect considered to be false, unorthodox or extremist, with members often living outside of conventional society, under the direction of a charismatic leader.

Most members of your congregation are members of your extended family. Many of them live in a compound along with the church in Topeka, Kansas. Isn't Westboro Baptist a cult?

PHELPS: Well, of course, you can imagine you're not the first person to make that suggestion, and my dad would probably laugh at the notion that he's charismatic. What he is God-fearing. Of course, we live very mainstream. We're in your schools. We're in your jobs and we're every day a testimony.

But at the end of the day, call us a cult, call us anything. Just publish the words. At this point, all of that name-calling has become white noise, as the entire world looks over at this message. And, in fact, this case put a megaphone to the mouth of this church.

WALLACE: You talk about your father as God-fearing. Your father had 13 children. Two of your brothers, Nate and Mark, say that your father abused your mother and abused you kids. They describe savage beatings and violent outbursts. In fact, one of your brothers, Mark, said this -- "we had to watch out for this madman."

PHELPS: Well, Mark always had an overactive imagination. Both of them have been gone for decades. All of my parents' children who went to serve God, which is actually nine of the 13, not 11 of the 13, but nine of the 13 commune with him and my mom daily, and they are wonderful people.

They taught us the truth about what the Bible says. You don't see that anymore. And they stand uniquely. They are the only two of their generation in this world that I have seen who are actually a testimony to what the Bible says and to the cause of God and truth. And we're very thankful to have them, very thankful.

WALLACE: Let's turn to the Supreme Court's ruling this week, and I want to put up on the screen your reaction to it. You said, "This is not my victory, this is God's victory. There is no shutting up the Church of the Lord Jesus Christ."

PHELPS: Right.

WALLACE: Is the ruling by the Supreme Court this week God's will?

PHELPS: Of course it was, or it wouldn't have happened. He holds the hearts of the team in his hand. He put us out on the battlefield.He told us to go out and tell the nation that your soldiers are dying for your sins and you've got to stop sinning if you want that mayhem to end.

He would not have done that and then left us to the devices of mankind, unable to complete that good work. So, of course, it's his good will. And we're very thankful and we praise his name for it.

WALLACE: Then, Ms. Phelps, how do you explain another Supreme Court ruling in 2003 -- in Lawrence v. Texas, the court ruled by a margin of 6-3 that a law prohibiting sexual acts between same-sex couples was unconstitutional. They said there was a right of privacy for consensual same-sex couples. Is that also God's will?

PHELPS: No, in fact, it's a curse from God. In fact, we picketed outside the Supreme Court the day they were having those arguments. And I recall specifically my dad and I being there, among others, and we told that crowd waiting out there, oh ye, oh ye all you having business before this court, (inaudible) and bend over.

It is sad that the Supreme Court is the conscience of this nation. And on that day, this nation, when they issued that opinion, this nation crossed a line of no return with the Lord God almighty. And in the scriptures--

WALLACE: But if I may, ma'am, you're the arbiter then of when it's God's will and when it's God's curse. Let me ask you, are the --


PHELPS: We're not the arbiter, Mr. Wallace. We can just read plain words and we know that the scriptures are full of passages that when a nation has crossed the line with policies of sin, that one of the ways God curses that nation is by sending them leaders who are immoral. That's what has happened in this nation and every one of its branches of government--


WALLACE: If I may, ma'am, are the nine justices on the Supreme Court -- are the nine justices going to hell?

PHELPS: I have no objective indicator otherwise.

The default for mankind is hell. Unless you bring forth fruits meet for repentance, the assumption is that you will end up in hell when you quit your life on this earth. There is a duty of every human to bring forth fruit meet for repentance. I have seen no evidence of that in a single leader in this nation.

WALLACE: So, the justices are going to hell? The president is going to hell?

PHELPS: Absolutely on the president. That's a big 10-4. I already answered on the justices. The president is going to be king of the world before this is all said and done, and he is most likely the Beast spoken of in the revelation.

WALLACE: Several retired Air Force generals are now seeking to have ten lawyers. I don't know, quite frankly. I assume you're one of them disbarred, they say, because of your failure to maintain professional standards.

PHELPS: Do you know that -- do you know that they ...

WALLACE: They -- if I may -- if I may -- Ms. Phelps, if I may ask the question, then I'll give you a chance to answer. They cite your "decades-long pattern of uncivil and unprofessional conduct." Go ahead.

PHELPS: Right. And the complaint was dismissed. They never even mailed it to us, it was dismissed so quickly. And they included in the complaint the brief that I filed with the Supreme Court and various of our religious publications. It was falling from the beginning.

Now, check this out: the Pentagon has declared war on this little church. And when they did that, they declared war on God almighty. They have epic failed, to use their language, and in God's view of this matter, to use their belly badass term, it's tango down. They are not going to win this fight that they have brought. And the line...

WALLACE: Ms. Phelps -- Ms. Phelps, I have a minute left. I have one more question to ask you. We have less than a minute left. Some of your signs say "Thank God -- thank God for dead soldiers."

PHELPS: Right.

WALLACE: Do you see no moral difference between a fallen American service man and the al-Qaeda terrorist he is fighting, who is slaughtering innocent people for jihad? Do you see any moral difference between the American soldier and the al-Qaeda terrorist?

PHELPS: Yes, there is a difference. The American soldier is worse, because he pretends that he's fighting for liberty and a Christian nation. And there is not a bigger lie on the face of this earth today. Those soldiers are fighting for same-sex marriage and all the lesser included sins. And there is not an ounce of nobility in the United States military in this day. If you fear God, you won't put that uniform on.

WALLACE: And that's -- and that, apparently, is worse than -- and that apparently is worse than slaughtering innocents. Ms. Phelps, we want to thank you so much...

PHELPS: They are slaughtering innocents.

WALLACE: ... for talking to us today, ma'am.

PHELPS: Thank you.

WALLACE: Up next, two congressional leaders in the fight to cut federal spending and keep the government in business.


WALLACE: Congress passed a compromise this week to keep the government running for two more weeks. But the threat of a partial shutdown is still there, and so are the major differences between the two parties. So what happens now?

For answers, we turn to the Senate's No. 2 Democrat, Dick Durbin, who comes to us from Chicago, and the head of the House Republican Conference, Jeb Hensarling, who joins us from Dallas.

Gentlemen, Vice President Biden held talks with congressional leaders this week. Republicans want a total of $61 billion in actual spending cuts. Democrats are offering, at this point, $10.5 billion in actual spending cuts.

Senator Durbin, let me start with you. Where do the talks stand, and are Democrats willing to agree to more cuts?

SEN. DICK DURBIN, D-ILL.: Well, I can tell you that we're going to have a vote. I think we have to demonstrate to the House Republicans and to Speaker Boehner what will happen to their proposal when it comes to the Senate. And my guess is it will not come close to passage.

It's an indication that we need to get very serious, act like adults, sit down and not lurch from one week or two weeks to two weeks in funding our government. We need to try to reach an agreement on a bipartisan basis. And I hope that after our vote in the Senate, that will happen.

WALLACE: All right. Congressman Hensarling, same question. Where do the talks stand? And are Republicans willing to agree to less than $61 billion in cuts?

REP. JEB HENSARLING, R-TEXAS: Well, first, Chris, as you know, we wouldn't in this place in the first place if the previous Democratic Congress taken care of their business, passed a budget, passed a spending bill. It's the first time since, I believe, 1974 that the House hasn't even passed a budget. So that's point No. 1.

Point No. 2, if we're going to help create more jobs in America, if we're going to help save our children from bankruptcy, we've got to take America off of this fiscally irresponsible path. Here, we're borrowing almost 40 cents on the dollar, much of it from the Chinese, and sending the bill to our children and grandchildren.

So House Republicans put forth a proposal that would keep the government open. The Senate, frankly, has had plenty of time to consider it. They wanted more time, so we gave them two more weeks, but I hope that they would join us. And I agree with Dick. I would hope we can work on a bipartisan basis to put this nation on a fiscally sustainable path.

WALLACE: Let me break in, if I may. I might note that, in my [SIC] answer to my question, neither of you said, Democrats, whether you're willing to accept more cuts, Republicans, whether you're willing to accept less cuts.

Senator Durbin, you and other Democratic leaders keep talking about meeting the Republicans halfway. Let's watch.


HOUSE MINORITY LEADER NANCY PELOSI, D-CALIF.: Democrats stand ready to meet the Republicans halfway on this. That would be fair.

PRESIDENT BARACK OBAMA: My administration has already put forward specific cuts that meet congressional Republicans halfway.


WALLACE: But several major news organizations say that talk about meeting the Republicans halfway is a phony. To get there, you claim $41 billion in cuts from President Obama's budget, which was never passed, so you're not actually cutting anything.

Let's take a look at the real numbers. Republicans want $61 billion in actual cuts from current spending. Between the extension you passed last week and the next one, you're offering $10 billion in actual cuts, $10.5 billion in actual cuts from current spending. Associated Press says this: "The White House is arguably meeting the GOP just one-sixth of the way, not halfway at all."

Your response?

DURBIN: Well, let me say this. We can talk about numbers, and I'm willing to, but let's get down to the bottom. The bottom line is this: if we went ahead with the House Republican budget, if we decided to cut education the way they want to cut it, take the money out of Head Start, put hundreds of thousands of poor kids out of the program, and dismiss ten or 20,000 teachers and staff; if we want to cut the Pell grants and force young people from families of limited means to leave college; if we want to cut research, medical research at the National Institutes of Health, which is what they propose; and if we want to cut one-third of the staff at the Oregon National Laboratory and the laboratories around the United States; if we want to cut the infrastructure project, putting people to work...

WALLACE: Senator, I think we -- I think we get the idea. You don't like their cuts. And...

DURBIN: Let me finish this, Chris. Chris.

WALLACE: And if you may -- if I may, I'm going to ask Congressman Hensarling about it, but I want to ask you about your own actions.

WALLACE: Because in fact, Democrats are proposing -- and let's put it up on the screen -- $10.5 billion in real cuts from current spending. That's from total spending of $3.7 trillion.

Senator Durbin, that represents a cut of .28 percent. That's less than one-third of 1 percent. Is that really the best the Democrats can do?

DURBIN: Chris -- Chris, if I could finish my answer.

WALLACE: I ask you, is .28 percent the best the Democrats can do?

DURBIN: The House Republican budget...

WALLACE: I'm asking you about your spending cuts.

DURBIN: Chris, may I answer?

WALLACE: Yes, I'm asking you -- I'm asking you to answer my question, which is, is that the best Democrats can do?

DURBIN: I'm going to finish one way or the other here, Chris. The House Republican budget takes all of its cuts out of 12 percent of our budget. Jeb Hensarling and I sat on the commission, an honest commission that said we need to put everything on the table. You can't balance the budget of America by cutting education, research and innovation, and basic...

WALLACE: Are you willing to accept more cuts in discretionary spending, sir?

DURBIN: It can't be done. What I'm saying is, if you believe that you're going to balance the budget by cutting just 12 percent of the budget down to balance, it is literally, figuratively impossible. If you want the bragging rights for who can cut the most out of education, I'm...


WALLACE: I get it. But you didn't answer the question, sir. And I gave you a chance to answer, and you didn't answer it.

Congressman Hensarling, let me try again with you. Let's look at some of the GOP's proposed cuts that Senator Durbin keeps talking about: $2 billion from jobs training in the middle of a weak recovery; $1.6 billion from the National Institutes of Health; $600 million from border security and immigration enforcement. Really? Cuts in job training and border security?

HENSARLING: Well, a couple of things, Chris. No. 1, at some point you've got to quit spending money that you don't have. We've just come off our first trillion-dollar deficit. Our second trillion- dollar deficit now under President Obama and the Democrats, the single largest deficit in America's history.

Now Dick says everything has to be on the table, but under their plan, nothing is on the table.

Now here's what we have done as House Republicans. We know that the best housing program, the best education program, the best nutrition program is a job. And there's still millions of our fellow Americans who are out of work due to the economic policies of his party and President Obama.

You talk to any of the job creators, and they'll tell you one of the things that concerns them the most is the debt. And so high levels of indebtedness are going to lead to high levels of taxation, which lead to high level of unemployment.

If you really want to get people to have paychecks instead of government checks, we've got to put the nation on a fiscally sustainable course. And when Dick talks about, or accuses us of draconian cuts, yes, this is 2.5 percent, roughly, of the entire federal budget. They're willing to do nothing. Again if you want to help people (ph) today and save children from bankruptcy tomorrow...

WALLACE: Let me -- let me break in -- Congressmen, I've got to break -- Congressman -- Congressman, I've got to break in. Because one of the points that Senator Durbin made, and a lot of people would say this, is that the problem is that you're focusing on 15 percent of the budget, non-defense, discretionary spending, and you're ignoring all the big money in entitlements.

Now Speaker of the House John Boehner spoke to the Wall Street Journal this week. And he said, and this is their paraphrase, "the budget is likely to contain cost containment goals for entitlements but no specific ideas on how to achieve them."

Congressman Hensarling, is that the best Republicans can do? Containment goals but no specific plans?

HENSARLING: Well, what I'd like to do is be able to work with Democrats to reform current entitlement programs for future generations, grandfathering all the grandparents.

And yes, Dick and I were appointees to the president's Fiscal Responsibility Commission. I hope he would agree with me that, if you're ever going to put America on a fiscally sustainable path where we don't destroy the American dream for our children, which means giving them less opportunity than we've had, these have got to be addressed. I mean, Republicans have already done this. For example, Paul Ryan in Wisconsin putting forth his particular plan, which I have co- sponsored, Roadmap for America's Future.

WALLACE: But let me...

HENSARLING: And yet, we have a president who has not led. We only have one president, and instead, all he presents us is trillions of dollars of more debt.

WALLACE: But let me ask about that, Senator Durbin. Because in his new budget, the president, in fact, ignores the debt commission that both you and Jeb Hensarling were a part of and offers no entitlement savings. Is that presidential leadership?

DURBIN: I can just tell you, -- I'm still here, Chris. I can just tell you, that when it came to that deficit commission, I was proud to vote for it, even though I disagreed with some of the particulars. Not a single House Republican voted for the deficit commission report, including Jeb and Paul Ryan and Dave Camp from the House Ways and Means Committee.

And what we believe is you can't cut your way out of our crisis; you can't tax your way out of our crisis. You have to deal with this, in its -- in its entirety, and we have to think our way out of it. We have to come up with the kind of answers that show both sides -- both sides are willing to give.

Chris, one point I want to make to you: we are continuing the work of this deficit commission on a bipartisan basis. There are six senators sitting down. Three Democrats, three Republicans. And they really represent the whole spectrum. We are trying to come up with a comprehensive way to do it. Not about the bragging rights for the next six or seven months...


DURBIN: ... but whether we can have a sensible way that brings us down to the point that Jeb and I agree on.

WALLACE: OK. We've got a couple of minutes left, and I'm going to try again with the question that I asked at the very beginning, which I didn't get an answer to, quite frankly, gentlemen, from either of you.

Congressman Hensarling, as part of the GOP -- House GOP leadership, you not only have to deal with the Democrats; you also have to deal with your Tea Party freshmen. If you come back to them with a compromise as a result of these budget talks, a compromise of less than $61 billion in cuts, in real spending, this year, will they support it, and will you support it?

HENSARLING: Well, all I can say is here's what we're going to fight for. I'm not going to negotiate this on national television today. We're going to fight for, again, is putting America on a fiscally sustainable path to help create jobs today, save our children from bankruptcy tomorrow.

Unfortunately, we well know Republicans only control one of three levers of law-making. The Democrats have the Senate. The Democrats have the White House. Nobody wants to shut down the government.

But one thing is non-negotiable, as our speaker said. We will not pass bills that don't create savings for the American people, create confidence for American job creators...


HENSARLING: ... so we can start creating more jobs in the economy. That simple.

WALLACE: And Senator Durbin, in the time we have left, and it's less than a minute, I'm going to try again with you. You're at this point of $10.5 billion. The White House and Senate Democrats. Are you willing to accept more in cuts than $10.5 billion?

DURBIN: I can tell you personally I'm willing to see more deficit reduction but not out of domestic discretionary spending. When you're cutting education, innovation and infrastructure, you're not dealing with the reality of this recession. Paul Zandy (ph) has basically told us we're going to have 700,000 Americans out of work because of the House Republican budget. That doesn't help us get out of the recession.


WALLACE: OK. Just real quickly, then you're saying $10.5 billion in domestic, non-defense discretionary spending, that's it?

DURBIN: I think we've pushed this to the limit. To go any further is to push more kids out of school, to stifle the innovation which small businesses and large alike need to create more jobs. And it stops the investment of infrastructure, which kills good-paying jobs right here in the United States.

WALLACE: Gentlemen, I'm going to have to leave it there. I want to thank you both so much. Congressman Hensarling, Senator Durbin, thank you both for coming in and talking with us. And we'll stay on top of these budget negotiations. Thanks, gentlemen.

DURBIN: Thank, Chris.

HENSARLING: Thank you.

WALLACE: Up next, some better than expected news on the economy. Our Sunday panel weighs in on just how excited we should get.



OBAMA: This week, we received very good news on that front. We learned that the unemployment rate has fallen to its lowest level in nearly two years, as our economy added another 220,000 private sector jobs last month.


WALLACE: President Obama celebrating the encouraging employment numbers from last month.

And it's time now for our Sunday group: Chris Stirewalt, Fox News digital politics editor; Nina Easton of "Fortune" magazine; Kevin Madden, a Republican strategist who was Mitt Romney's spokesman during his presidential campaign; and Fox News political analyst Juan Williams.

And before we get to the panel, we have been trying to fact- check, which is hard to do on Sunday mornings. And all indications are from our first interview with Margie Phelps -- she claims that the suit by the Air Force general seeking the disbarment of 10 lawyers who are members of the church, she said that claim has been dismissed. We see no indication that it has been dismissed, but we'll stay on top of that story.

All right. Let's get to the economy. And let's look at the numbers, Chris.

Unemployment, now down to 8.9 percent, 12 consecutive months of private sector job growth. But the participation rate, the percentage of people who have jobs or who are looking for work is the lowest in 25 years.

Chris, what does all of that tell you about the strength of the recovery?

CHRIS STIREWALT, FOX NEWS DIGITAL POLITICS EDITOR: Well, the recovery is still uncertain. And everybody knows that. And the people in Congress know that and the president knows that.

And as we have this discussion about cuts and spending and all of these other things, looming very large in background is everybody knows that this could go right over the cliff at any time, and that this progress could be quickly reversed. So it adds a stark anxiety to the discussions in Washington about spending.

WALLACE: We're going to get to oil in a second, but taking that out of the equation, and the spike in oil prices, Nina, when you look at all these numbers, what do you see?

NINA EASTON, "FORTUNE" MAGAZINE: Not to sound negative, because it was a bit of positive news this week, but it's a muted recovery. And this labor participation rate that you talked about is really key.

The number of people who have given up aren't in the job market. Disability rolls are increasing, continue to increase. So that means a lot of people are going on disability. A lot of people are going on or staying on government aid. And at a time when government aid is being targeted for cuts.

And there are a number of long-term unemployed people. That's what we have to worry about.

And you have to worry about what that's going to do to this nation's psyche, when you have got that many people still out of work, six months, a year, even two years and on. And I think that is going to be the most difficult nut for any candidate to crack or any president to crack.

WALLACE: Meanwhile, Kevin, the unrest -- I said take the oil out of the equation. Now let's put it in.

The unrest in the Mideast has contributed to a spike in oil prices. Let's take a look at that.

Crude is now $104 a barrel. That's the highest in more than two years. A gallon of gas has jumped 10 percent this year, from $3.08 a gallon to $3.38 a gallon.

Kevin, the rule of thumb is that for every one-cent increase in the cost of a gallon of gas, that takes a billion dollars of consumer spending away from all other areas except energy prices.

KEVIN MADDEN, REPUBLICAN STRATEGIST: That's right. And in some places you're looking at gas prices go up 3, 4 cents a day. So that's a metric that every single voter, every single American feels every single day when they go to the gas pump.

And so the metrics that we are seeing on the employment side, that is probably not going to be as much as a consolation for those people that are out of work. And then, those ones that are going to work, and they have to pay 3 cents a gallon just to fill up their tank.

So I think that it could very well tamp down any sort of economic recovery that we see. And that is going to be something that the White House is very worried about over the next few months.

WATSON: You know, Juan, when gas prices spiked the last time, the Republicans really hammered Democrats on it, and the idea that their energy policy and their refusal to do a lot of domestic oil production was part of the problem.

When you've got a weak recovery and you've got rising gas prices, that's a bad combination.

JUAN WILLIAMS, FOX NEWS POLITICAL ANALYST: It is a bad combination, but it's directly tied to instability in the Middle East and what we're seeing taking place in Libya, the threat. But, you know, I think most Americans understand that. I don't think they see this as a matter of an oil shortage, they see it as a matter of temporary instability.

The question is how long this might last. But the good news this week is something that is boosting, actually boosting at this moment consumer confidence in this country, and especially boosting the number of private employers who are willing to hire.

That's the good news here. You look at manufacturing, you look at construction industries that have been down in the course of this recession, they're up now. This is a signal Americans are thinking that better times are coming. And most of the economists, the economy forecasters, are saying yes, we see growth in this economy.

To pick up on what Nina was saying, it's slow, it's not at the rate that we like. We know a lot of people are still discouraged, and that's why unemployment may go up subsequently, because more people will get back into the labor market. But what we are seeing is indications that the economy is finally on the right path. And I don't see any reason to naysay that.

WALLACE: Well, there's another factor we have got to throw into all of this, Chris; and that is the battle that we just saw in the last segment over federal spending. There are some economists, Goldman Sachs, Mark Zandi, who say you cut federal spending by $61 billion, and it's going to have an impact, a negative impact on jobs and hiring. On the other hand, Ben Bernanke, the Fed chairman, was up this week on Capitol Hill and said it would have a much smaller effect, $61 billion in multitrillion-dollar economy.

MADDEN: Well, you know, the White House's best-case scenario for the economy, as they laid out in their budget, is for some very anemic growth. But any sign of growth that comes forward hurts the Democrats' argument on cutting spending, because as things stabilize, as the economy normalizes, people say we have -- and Republicans are talking about cutting one-thirtieth of this year's projected $1.65 trillion deficit.

For Democrats -- and you heard Senator Durbin struggle with that -- to push back against those cuts is very difficult because you're not talking about a huge amount of money. And for the president, the greater concern and the long-term concern is inflation that could come in and take away the modest signs of recovery, if it digs in, because of oil prices and other things, so for the president, he has got to deal with deficit spending, entitlement reform, and other things if he doesn't want to see that eat his lunch.

EASTON: Can I just jump in here on the -- you're seeing sort of classic application of Keynesian economics. Look, you cut government spending, and therefore you're going to hurt the economy.

There are other economists like John Taylor (ph) at Stanford who say, look, the problem is private investment is sitting on the sidelines, because private investment is scared of higher taxes and the uncertainty, and is being squeezed out by government spending. So, in fact, cutting government spending in the long run and even in the medium run will actually help the economy.

So I think there is a disagreement. We shouldn't just say it will automatically hurt the economy if you cut spending.

The other thing you have to worry about -- let's not put on blinders -- there could be a debt crisis at some moment that's going to send our economy back into a tailspin, so you have to deal with that issue.

WALLACE: But what a surprise that you could find an economist to back your own political --


WALLACE: All right. We have to take a break here. But when we come back, potential candidates begin dipping their toes in the presidential waters.

The Sunday panel handicaps the likely field and tries to make sense of Newt Gingrich's non-announcement.



NEWT GINGRICH (R), FMR. HOUSE SPEAKER: My expectation is that by the end of this exploratory process, that we'll have an announcement and we'll be in the race. And I think it's very daunting, but it's also very exciting.


WALLACE: Former Speaker of the House Newt Gingrich getting ever so closer to formally announcing a run for the presidency.

And we're back now with the panel.

Well, you know, one of the few things that a candidate can control is how they get into a presidential race. And I don't think it's an overstatement to say that Newt Gingrich made a hash of it this week.

Some of his aides said he was going to announce an exploratory committee on Thursday, some said he wouldn't. In fact, he announced a Web site.

Chris, what do you make of the non-entry into the race by the non-candidate?

STIREWALT: Well, it could be part of a secret brilliant strategy. But yes, on the cover, it's quite a hash and not the way you want to do it. And unfortunately, for the former Speaker, it reinforces a widely-held concern about him in Republican circles, is that he is, as people say, brilliant but undisciplined.

And I think for Gingrich, the problem is going to be going forward, that he has to demonstrate that he has an organization, that he will be disciplined, that he will do what is supposed to happen. And what you saw this week was how quickly your message gets muddled and how quickly things get confused.

WALLACE: Nina, I think that we do all agree that Gingrich, whether you like or agree or disagree with him, is one of the most brilliant men in American politics. He also carries a lot of baggage, both personal baggage and professional baggage.

How big a problem is all of that for him?

EASTON: It's a problem. It's funny. I spent time with him for a profile I did back in 2007, and at the time he was the big ideas guy.

He wanted to put out these big ideas about reforming health care and so on. And he was very, by the way, very bipartisan. I mean, he would go into these bipartisan crowds. He got standing ovations. And his idea was, I'm going to put out these big ideas, and then people will recruit me and I'll run.

Now, flash forward, and he has a much harder edge now. He's -- you know, the calling of Barack Obama as a socialist, which I think Newt Gingrich thinks is a big idea, but that's definitely not a big tent idea, I think, on his part.

And the other issue he has is his personal life. As one religious conservative leader said to me, you know, one marriage too many. I mean, he has been married three times, and that's a problem.

WALLACE: All right.

Meanwhile, on health care reform, President Obama took a shot at Mitt Romney this week. And let's take a look at that.


OBAMA: I agree with Mitt Romney, who recently said he is proud of what he accomplished on health care in Massachusetts and supports giving states the power to determine their own health care solutions. He's right.


WALLACE: But last night, in New Hampshire, Romney responded, "Our experiment" -- meaning in Massachusetts -- "wasn't perfect. Some things worked, some didn't. And some things I'd change. One thing I would never do is usurp the constitutional power of the states with a one-size-fits-all federal takeover." And he called for repeal of Obamacare.

So, Kevin, we have to say that you were a top adviser to Romney, and in all likelihood, you will be if he decides to gets in the race. Is that his answer to the comparisons of Obamacare and Romneycare?

MADDEN: Well, I think that's one part of it. Look, I think related to what President Obama said, I think he has proven that he is not a very good judge of what are good ideas and what are bad ideas.

I think most people will tell you that it was not a good idea to craft a one-size-fits-all health care plan on a federal level and apply it to all 50 states, with 50 unique health care populations. I don't think it was a good idea -- and many Americans would agree -- to spend $1 trillion at a time when we don't have it.

So I think Governor Romney is going to make all those cases and explain very succinctly, I think, that he knows what went right and he knows what went wrong. As a governor, he's had those experiences.

WALLACE: But if I may, I think the concern a lot of conservatives have is the principle. That it's not a question of, yes, they certainly don't like the idea of the federal government versus states, but they also don't like the idea of government getting involved in health care, and particularly the individual mandate, the individual -- the principle of an individual mandate, government telling people you have to get health insurance.

MADDEN: Yes, there is no doubt that that is going to be a challenge.

Look, many of the folks that are already looking at the presidential campaign on the Republican side have already attacked Governor Romney for that. And I think that's going to continue.

WALLACE: So what's his answer on that?

MADDEN: I think the most important thing he can do is talk about why he thought this was the right idea for the unique health care population of Massachusetts, why he thought -- how he thought it would help reduce costs and how he thought it would help increase access. So, I think if you -- and if you leave that as a unique debate about what he did in Massachusetts, and then talk about what he would do on a federal level and how he wouldn't pursue that sort of one-size-fits- all approach for 50 states, then I think people will recognize that he is somebody who has an incredible command of the issue of health care.

He knows what went right. He knows what went wrong. And that's going to make him, I think, a valuable person for the debate on the Republican side.


WILLIAMS: Well, I think it's a difference without much in the way of discernment to most voters. Both men are interested in health care reform and health care plans. That's pretty much -- Kevin says not one size fits all for the nation, but Romney was in charge of a state, and it was one size fits all for the state.

I think the problem for Romney also speaks to the conservative base, that Gingrich can go out there as the idea man and say, oh, I have this idea, and I was the one who reclaimed Congress after a Democratic hold for four decades. But, you know, the problem with someone like Gingrich is lack of discipline, as you were saying. He appeals, though, to that conservative base in some way.

But with Romney, you have to start looking at flip-flops on abortion, immigration. A lot of those issues just pop up, and people are saying, well, is this a guy, even though he is the front-runner, that really holds the conservative flag in some passionate way against Obama? And I just wonder if that's true.

MADDEN: I think where I disagree is that many folks who are offering an absolute analysis about this issue as it relates to the race thinks it's going to be the only issue. And I don't think it's going to be the only issue.

I think the main issue everybody is going to be asking themselves is, who is going to run this country right? Who's going to get the economy going? And I think he has an argument to make to the Republican electorate and the national electorate when that happens.

WALLACE: Let me -- I want to -- excuse me, but I want to move on to some of the other candidates, because one of the interesting questions this year is who is actually going to run. And let's put up four of the question marks, four potential candidates: Huckabee, Palin, Barbour, Mitch Daniels.

Chris, who gets in and who stays out?

STIREWALT: Well, the Republicans are -- what the Republicans want is Chris Christie. So now they want somebody who --

WALLACE: Chris Christie has made it clear. He says, "What do I have to do, commit suicide?"

STIREWALT: Commit suicide.

WALLACE: So I take him at his word.

STIREWALT: He's been more than Shermanesque in his vows.

Now, the question is, which Republican candidate can do the most convincing Chris Christie impersonation in order to win the nomination?


MADDEN: That's why they're all playing hard to get, right?

STIREWALT: And there is that.

WALLACE: They're all gaining weight.

STIREWALT: And they're all gaining wait, trying a little calzone.

The problem for Daniels was on the central issue to the Republican base right now, which is what Republicans consider to be over-weaning federal and state governmental employees. Mitch Daniels botched it. On the first day, when the Indiana Democrats walked out of the legislature in the House, he offered conciliatory words at a time when Republicans wanted to hear thundering denunciations.

WALLACE: Yes, but that was private employees. He had actually taken away the public employees' rights six years ago.

STIREWALT: And he has a strong track record on it, but it was a PR botch in that he tried very hard in successive days to recover. A very telling statement that Daniels made that was recapitulated to me from an adviser of his was basically this -- if his agenda in Indiana precludes him from running for president, so be it.


STIREWALT: And I think that's a strong sign he may be out.

WALLACE: OK. Because we're going to run out of time, Huckabee, Palin, Barbour, Daniels -- who gets in, who stays out?

STIREWALT: Barbour in. I believe the signs are all pointing to a Barbour run.

Daniels, out. Huckabee, Palin, I'd say right now out and out. But it will be very tempting if the field doesn't get stronger.

EASTON: And you're missing one. Jon Huntsman I think is making signs towards a run.

WALLACE: And who is he?

EASTON: I'm sorry.

WALLACE: I want you to explain.

EASTON: And by the way, I also have to do my disclaimer. My husband is adviser to Mitt Romney.

Huntsman is currently President Obama's ambassador to China. And he is leaving shortly. And he's got a team of advisers around him, and it looks like he might make a run. He's also a very popular governor of Utah.

WILLIAMS: Let me just give you the bottom line here since we're running out of time.

WALLACE: Because you are the experts on Republicans. But go ahead.

WILLIAMS: I am. I'll help you out. I know it.

But let me say, four years ago, you had eight Republicans in the race at this time. Today, you have zero if you eliminate Herman Cain, who I don't think has much of a chance.

STIREWALT: Why are you eliminating Herman Cain?

WILLIAMS: And the reason for this is people don't think Obama is beatable.

WALLACE: Oh, come on. That isn't why.

WILLIAMS: Only four -- I think it's four --

WALLACE: You really think that Romney isn't in the race because he's scared of Obama?


WALLACE: You really think that Mitt Romney isn't in the race because he's scared of Obama?

WILLIAMS: Scared of Obama? He is in the race to raise his profile, raise his speaking fees, and sell books. He's not in the race --


WALLACE: Thank you, panel.

You know, this is what we invented "Panel Plus" for, because we're going to get this straight. So don't forget to check out "Panel Plus," where our group here will pick up right with this discussion on our Web site, FoxNewsSunday.com. And we promise we'll post the video before noon Eastern Time.

Time now for some comments you posted to our blog "Wallace Watch."

John Ford from Missouri sent this: "Listening to the howls of protests over $100 billion in budget cuts from a multitrillion-dollar budget, you would think it was a real crisis. It's like me cutting 1.5 cents from my $1,000 monthly grocery budget."

And C.C. Baker wrote us about last week's Power Players, the men behind the "Voice of America" television show that mocks Iran's leaders.

"Kudos to those brave two Parazit producers of sarcasm. I have never felt more spoiled or more cowardly than when I listened to "Fox News Sunday"'S story of their ongoing valiant fight for Iran's liberation."

Please keep your comments coming. You can find us at FoxNewsSunday.com.

Up next, our "Power Player of the Week."


WALLACE: As we've said, Congress passed and President Obama signed a two-week extension the other day to keep the government running, while also cutting $4 billion from the budget. We wanted to find out what that means to a program.

Here is our "Power Player of the Week."


WALLACE: As we sit here right now, do you know whether your program is in or out of the federal budget?


WALLACE: As the head of this program, how does that make you feel?

RASCO: It's a very unsettling time.

WALLACE (voice-over): Carol Rasco is head of the Reading is Fundamental child literacy program. And hours later, she would learn federal funding for RIF, $24.5 million a year, has been eliminated.

When we sat down with her, she was already preparing for the worst.

RASCO: Ready access to print material is critical for learning to read well.

WALLACE (on camera): And if they don't have that access?

RASCO: They will have more marks against them in this battle to learn to read.

WALLACE (voice-over): For 44 years, RIF has been providing books and offering literacy programs to children in need in the inner city, in poor rural areas --

UNIDENTIFIED FEMALE: Gustavo (ph) was the worst mariachi in the world.

WALLACE: -- on Indian reservations.

UNIDENTIFIED MALE: National RIF program Reading is Fundamental brings these boys and girls all kinds of books.

WALLACE: It now gives away 15 million books a year to more than four million children at 17,000 sites across the country.

RASCO: I don't go anywhere to talk about RIF that I don't have people come up to me and say, "I want to show you the first RIF book I ever got. And I want to tell you what it meant in my life."

BARBARA BUSH, FMR. FIRST LADY: This is the mouse House and Senate. WALLACE: Back in the '80s, first lady Barbara Bush was on RIF's board of directors. Four years ago, Laura Bush was helping raise money.

LAURA BUSH, FIRST LADY: I'm delighted to support the important work of Reading is Fundamental.

WALLACE: But the Obama administration decided RIF should be lumped in with other literacy programs. And now House Republicans have ended federal support.

(on camera): What about the argument, look, maybe RIF is a perfectly fine program, but the government is broke and something has to go?

RASCO: It does not seem to make sense to cut out that early undergirding of building strong literacy skills.

UNIDENTIFIED MALE: How many of you like to read?

WALLACE (voice-over): RIF gets 75 percent of its funding from the government. Now Rasco says she'll have to push private donors even harder to make up the difference.

(on camera): Would you still be able to hand out 15 million books each year?

RASCO: Not initially, no. You don't replace 24.5 million overnight. I'm going to become an even louder advocate for kids and reading.

WALLACE: What you are saying is one way or the other, RIF isn't going to disappear?

RASCO: No, sir. What's really at stake here is, is a poor child sitting in a classroom today going to have the skills they need to compete the rest of the way through school and when they're out trying to find a job?


WALLACE: For all the talk of waste, fraud and abuse, cutting the budget will mean ending real programs that serve real people. That doesn't mean it's wrong, but we better get used to it.

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

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