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Fox News "Fox News Sunday" - Transcript

MR. WALLACE: I'm Chris Wallace and this is "FOX News Sunday."

The Democratic race isn't over, but Obama and McCain are gearing up for November. What would that campaign sound like? We get a preview as two key senators -- McCain supporter Jon Kyl and Obama backer Chris Dodd -- debate the issues.

Then, for Republicans, it's three strikes and they're out in special House elections. Can the GOP brand be repaired to avoid a disaster this fall? We'll ask master strategist Karl Rove.

Plus, the president warns against Democratic foreign policy that offers --

PRESIDENT GEORGE W. BUSH: (From videotape.) -- the false comfort of appeasement.

MR. WALLACE: Did Mr. Bush help or hurt the Republican cause? We'll ask our Sunday Regulars -- Brit Hume, Mara Liasson, Bill Kristol, and Juan Williams.

And our Power Player of the Week -- behind the scenes with Kentucky Derby winner Big Brown.

All right now on "FOX News Sunday."

And hello again from FOX News in Washington.

Senator Ted Kennedy remains hospitalized today, reportedly in good condition after suffering two seizures on Saturday. FOX News correspondent Major Garrett has the latest from Massachusetts General Hospital in Boston.

Major?

MR. GARRETT: Well, good morning, Chris. Stephanie Cutter, Senator Kennedy's spokeswoman, tells FOX he had a good night's sleep and they expect a very quiet day. No more medical updates on Senator Kennedy's conditions because they're waiting for test results to determine what caused the seizures, and how to put together a plan of treatment for whatever the causes of those seizures were.

Senator Kennedy's family was with him at the hospital yesterday. Wife Vicki, niece Caroline, nephew Joe, his sons Teddy, Jr., Patrick, and daughter Kara. There were all here with him. He spent the afternoon watching Red Sox games on the television, ordered out for some Legal Sea Food clam chowder, I am told.

And his primary care physician here at Massachusetts General, Dr. Larry Ronan, put out a lengthy statement which I'll read in part.

"Preliminary tests have determined that he has not suffered a stroke" -- meaning Senator Kennedy -- "and is not in any immediate danger. Senator Kennedy will undergo further evaluation to determine the cause of the seizure and a course of treatment will be determined at that time."

Again, Chris, he had a good night's sleep; no further medical updates are expected today, and there will be no contemplation of releasing Senator Kennedy from Massachusetts General until tomorrow at the earliest, and quite probably not before Tuesday.

Chris?

MR. WALLACE: Red Sox and chowder. That sounds like the best medicine. Major Garrett reporting from Boston.

Major, thanks.

Now, on to the Democratic presidential campaign. With just five more primaries, Barack Obama is closing in on the nomination. He leads Hillary Clinton by more than 590,000 popular votes, and although she won West Virginia in a landslide this week, it was Obama who widened his lead among delegates. He needs just 119 more to clinch the nomination.

So how would a general election campaign between Obama and John McCain play out? To preview that debate, we turn to Senator Jon Kyl, who supports McCain. And from Connecticut, Senator Chris Dodd, who supports Obama.

Senators, welcome back to "FOX News Sunday."

SEN. KYL: Thank you, Chris.

SEN. DODD: Thank you, Chris. Good to be with you.

MR. WALLACE: Before we get to that, Senator Dodd, I know that you are a close friend of Ted Kennedy. What have you heard, if anything, about how he's doing?

SEN. DODD: Well, just -- I think the report is a very accurate one. I spoke with Vicki Kennedy yesterday. I spoke with his son last evening, and I think the reports sound good. You've described it rather well, and there'll be some tests, I guess, on Monday.

But he seems to be doing pretty well, and we just hope for the very best for him, and confident he'll be fine.

MR. WALLACE: All right. Now, let's get to the -- with that very good news, let's get to the debate.

And let's start with the argument that we had this week over national security. And McCain and, by implication, President Bush, hammered Obama for his willingness to meet with rogue leaders like Iran's President Ahmadinejad.

Senator Kyl, American presidents met with Soviet leaders, with Chinese leaders at the height of the Cold War. Why is this idea over the line?

SEN. KYL: First of all, let's recall what Barack Obama has said he would do, that he would meet personally and without preconditions. That's not what former presidents have done, and they certainly haven't met with state sponsors of terrorism.

That's the problem here. What would Senator Obama be talking to Ahmadinejad about -- this man who calls Israel a stinking corpse, who has personally said that Israel should be wiped off the face of the Earth? It's hard to know what you would talk to Ahmadinejad about.

Now, that's not to say that envoys can't talk to each other. In fact, I believe that there are both DOD and State Department officials who have talked to lower level Iranians about their involvement in Iraq and so on. That's all permissible.

But to say that without preconditions he would go to Ahmadinejad and sit down and negotiate I think is -- well, it shows weak judgment and, frankly, naivete.

MR. WALLACE: Senator Dodd, when you were running against Obama in the Democratic campaign, you called him on foreign policy inexperienced and confused. Does it make sense for an American president to sit down without preconditions with someone like -- a zealot like Ahmadinejad?

SEN. DODD: Well, first of all, without preconditions -- that is, you're going to insist that the person you're sitting across the table from is going to give up all of their positions. I think that's what clearly Barack Obama was talking about. And you framed the question well, Chris.

I mean, certainly Mao Tse Tung and the Soviet leadership were supporting serious opponents of ours all over the world and groups that would have done us great, great, harm.

John Kennedy, I think, said it very well in 1961, in his inaugural address -- you never negotiate out of fear, but you never fear to negotiate. Certainly every American president -- Richard Nixon may be the classic example, meeting with Mao Tse Tung, people that use rhetoric to describe us and our goals and ambitions in terms equal to that of Ahmadinejad, in the past.

But Richard Nixon understood the value of seeking to find some way to break through; not to give up the use of military force if you need it, but to try and avoid that option if you can by engaging in robust diplomacy.

That's what Barack Obama's talking about, that kind of leadership, I think, which people are looking for.

MR. WALLACE: Can I just ask you briefly, though, to answer Senator Kyl's question? What does Senator Obama say? What carrots does he offer him to get him to change his mind?

SEN. DODD: Well, listen. There are a lot of issues on the table. We have complicated historic relationship with Iran. It goes back -- remember, this is one of the few countries in the region where the general population of the country have very favorable attitudes towards the United States. We've got a lot going for us here.

And let's not be unmindful of why is this an issue today anyway? The fact of the matter is Iran has become more of a problem for us because of the failed foreign policies of the last eight years in Iraq, in Afghanistan, in Pakistan.

Iran is on the rise here because of, frankly, what we failed to do over the last eight years. That's why it's an issue, and American leadership, beginning in 2009, needs to have a different course. And Barack Obama, I think, is going to provide that for us.

MR. WALLACE: Senator Dodd, in a speech on Friday, Barack Obama mentioned Bush and McCain in the sentence 10 times in 10 minutes. Given how many times that McCain has broken with President Bush over torture, earlier on how to wage the war in Iraq, and also a multiplicity of domestic issues, is that really fair to tie McCain to President Bush?

SEN. DODD: Of course it is. I mean, this is a -- again, we've -- (inaudible) -- embraced the policies on tax policy, on the war in Iraq, on the critical issues, on major economic issues. John McCain is very much a supporter of where President Bush has been and where he is today.

In fact, he's changed his view on some of these major issues in the last number of weeks on tax policy, on the war in Iraq the other day announcing he's now all of a sudden discovered that we ought to be out of there by 2013. That's a very different John McCain than even a few days ago.

So clearly, I think associated the policies of this failed administration in foreign policy with a candidate who embraces the same view is very legitimate.

MR. WALLACE: Senator Kyl, while they have had their differences in the past, wouldn't as a practical matter McCain now continue the Bush policies on Iran, Iraq, and the war on terror?

SEN. KYL: Not necessarily so. And Chris, could I go back just a little bit, because I didn't completely answer your question about previous times when American presidents have engaged with countries that were enemy of ours.

Remember that Nixon went to China to drive a wedge between China and Russia; to gain leverage in that three-country relationship. And with respect to Iran, Chris is right that there are a lot folks in Iran who are actually very friendly toward the United States.

The last thing you want to do is to create a dispirited situation for them by granting the prestige of the presidency to sitting down with the head of their country who they don't like any better than we do.

MR. WALLACE: Okay. But let me get you to answer my question, which is wouldn't McCain now continue Bush policies on Iran, Iraq, and the war on terror?

SEN. KYL: No. Take a look at Iraq, for example. Who was it that was first pushing for more troops in Iraq and criticizing the policy that we were engaged in there? It was John McCain, and the president agreed, then got General Petraeus to develop the surge plan, and that's been working ever since.

With respect to Iran, I think you're going to see a John McCain want to engage in a much more aggressive way with the kind of things that we can do to bring pressure to bear on the leaders of Iran, the kind of economic sanctions, financial limitations and so on that could really do some good. I've been critical of the Bush administration for not doing enough there. So --

And on economic matters and other issues, there have been significant difference between Senator McCain and President Bush.

MR. WALLACE: Let me turn, if I can, to economic issues and the taxes.

Senator Dodd, McCain says that Obama wants to raise Americans' taxes and give more money to the government. Does that make sense anytime, especially when you've got a faltering economy?

SEN. DODD: Well, John McCain's views on taxes are fascinating. We all took some heart, those of us who disagreed with the Bush tax cuts to go to the wealthiest of Americans. We've always said, Barack Obama's said -- you ought to give people a break who are working Americans, not just who are wealthy Americans. And John all of sudden has changed his view. John McCain has changed his view on this issue.

He's now saying that those Bush tax cuts were the right things. He was one of the great voices a few years ago from the Republican side who said this is economic irresponsibility. So I'm sort of surprised and stunned --

MR. WALLACE: But Senator, I'm asking about Senator -- I'm asking about Senator Obama's views --

SEN. DODD: Well, he would --

MR. WALLACE: -- and the fact that he would raise taxes on the wealthy and give more money to the government.

SEN. DODD: Well -- (inaudible) -- giving tax breaks to working Americans, and believes that working Americans deserve a break.

You know, Chris, we still provide tax breaks for companies leaving the country, when jobs are -- unemployment rates are increasing in the country. Providing that kind of relief instead of providing the kind of real relief for working Americans is where Barack Obama and John McCain have significant disagreement.

You can't do it for everybody. Why not pick out the people who are working hard in this country and give them tax relief? And that's what Barack Obama's an advocate of.

MR. WALLACE: Senator Kyl, as Senator Dodd started to mention, and I guess he anticipated where I'd go in my question to you, McCain was one of only two Republican senators who voted against the Bush tax cuts in 2001 and 2003. He said that they were, in both cases they were too tilted to the wealthy. Obama says that McCain was right then, and he's pandering to the Republican base now. How do you respond?

SEN. KYL: Well, first of all, he explained that the reason he cast that vote primarily was because he was trying to urge a reduction in spending, and he thought that that should be a precondition for the reduction of the taxes.

But he's made it very clear now -- in fact, I think his tax program goes far beyond what President Bush has proposed, and I can very enthusiastically support it.

He's talking about reducing our corporate rate from 35 (percent) to 25 (percent). We have the second highest corporate tax rate in the world, which is one of the reasons we're sending jobs overseas these days.

He would reduce the death tax, the rate, down to 15 percent and have a $10 million excluded amount. That has not been proposed by the Bush administration. He would retain the rates on the margin income tax rates, capital gains and dividends.

And Obama, on the other hand, would be increasing all of these -- 80 percent of the filers at the top income tax rate report small business income. That's who that would hurt. On capital gains and dividends, 20 percent and 24 percent of Americans making less than -- reporting that kind of income make less than $50,000 a year. So this is hardly the rich that Barack Obama would be taxing.

And finally, Obama talks about raising the payroll tax on Social Security. This would impact over 10 million Americans, increasing their tax liability by over $5,600 a year, hardly hitting the rich and taking care of the middle class.

MR. WALLACE: Obviously, there's a lot more to talk about on this, but I want to get to another big difference between McCain and Obama, and that is on the question of judges.

Senator Dodd, McCain says he wants men and women who will exercise judicial restraint and not legislate from the bench. What's wrong with that?

SEN. DODD: There's nothing wrong with it here, but we're watching this metamorphosis going on with a candidate sort of walking away from years of principles. What happened to the straight talk express? It looks like it lost it axle here.

All of a sudden, John McCain is sounding like someone many of us have a hard time recognizing on some of these issues, at least when he's speaking. And the fact of the matter is, he gave a speech the other day talking to groups here, reminding us that we may get some again, these appointees that have created so many problems for our country here, really ideologues in too many cases, instead of the kind of responsible, thoughtful jurists.

Barack Obama's talked about people like Justice Souder as the sort of the standard of the kind of individual he'd look for. Remember, Barack Obama is an expert in constitutional law, taught it at the University of Chicago. I think would bring a great sense of balance to this in filling these vacancies that may occur on the Supreme Court or in other judicial posts around the country.

So I have a lot of confidence that Barack Obama will head in the right direction here, naming good, strong, balanced people who will not use the bench as a way to write laws.

But let me also mention here about the economy, since we're talking about economy. The economy's in the worst shape it's been in for decades in this country, and to continue policies here that have the largest deficit in our history; we've got jobs we're losing in this nation, we've got a housing crisis of significant magnitude, and here we have John McCain talking about basically continuing the same economic policies.

I think most Americans want a change. They want a new direction for our country. They don't want more of the same; that I'm certain of.

MR. WALLACE: All right. Let me turn to Senator Kyl and let me bring you back to the question of judges. Obama says his standard for judges would be their, quote, "values, concerns, and empathy." What's wrong with that?

SEN. KYL: Well, because a judge is supposed to decide the law. And of course, you bring all of your life experiences into the decisions that you make, but just because you're sympathetic toward someone doesn't necessarily mean that they should win the case.

This is very instructive. Barack Obama votes against people like John Roberts, the chief justice of the United States, and Sam Alito. Those are exactly the kind of people John McCain says he would appoint to the Supreme Court. This is a fundamental difference between the two, and Americans should pay attention.

And by the way, the last thing -- talking about the economy -- that you want to do when the economy is not doing well is raise taxes, which is precisely what Barack Obama would do and John McCain says we should not do.

MR. WALLACE: All right. We've got a little bit over a minute left, and in keeping with our idea of a preview of a debate, I'm going to allow each of you to give a closing statement.

So Senator Kyl, you're here. Thirty seconds, tell us why John McCain would be a better president than Barack Obama. Look straight in the camera.

SEN. KYL: You bet. Well, I've worked with John McCain now in the Congress for over 20 years, and there is no more principled and experienced leader.

John McCain has spent time abroad, he has spent time in the military in the service of his country. He understands the kind of tough decisions that the president needs to make.

He is experienced, he has that kind of good judgment, and he would lead with a new kind of leadership, I believe, that the American people -- Independents, Reagan Democrats, and Republicans -- are looking for this year.

MR. WALLACE: All right. Thank you very much.

Senator -- gosh, this really does feel like a debate. Senator Dodd, look straight into that camera. Thirty seconds, why would Obama be a better president than McCain?

SEN. DODD: Well, I think most people recognize today, after eight years of an administration where our economy is in tough shape, we've got oil prices at $126 a barrel, the cost of higher education, health care costs; we see our reputation and our security in greater threat today than at any time in recent memory.

We're looking for new direction in our country, truly looking for change both at home and abroad, and I think Barack Obama's demonstrated in this campaign his ability to excite an awful lot of Americans who in the past have been reluctant to be a part of the political process, stepping forward, thousands showing up to hear this man, to hear what he has to say.

MR. WALLACE: Senator Dodd?

SEN. DODD: I think he brings character, he brings the background and a future I think America's looking forward to.

MR. WALLACE: Thank you both. It was a vigorous debate. We just hope the candidates do as well. (Laughter.

) Thank you for previewing the sharp differences we'll see on the campaign trail this fall.

SEN. KYL: Thank you, Chris and Chris.

SEN. DODD: Thank you, Chris. Thank you, Jon.

MR. WALLACE: Up next, Republicans take a thumping in three special House elections. What can they do to avoid a crushing defeat in November? We'll ask GOP strategist Karl Rove for his game plan when we come back.

(Announcements.)

MR. WALLACE: Well, the news for congressional Republicans couldn't be much worse. In the past couple of months, three House seats thought to be safe for the GOP have been lost to Democrats in special elections.

So what can Republicans do to avoid a drubbing in November? For answers, we turn to master GOP strategist Karl Rove. And Karl, welcome back to "FOX News Sunday."

MR. ROVE: (Inaudible) -- good to be here.

MR. WALLACE: Let's start with some numbers, because I know how you like numbers. Take a look at a recent New York Times poll which found that in a generic ballot question, which party do you intend to vote for in November's House election, 50 percent chose the Democrat, 32 percent said the Republican.

And Congressman Tom Davis sent a 20-page memo to his GOP colleagues in which he said the political atmosphere facing House Republicans this November is the worst since Watergate.

Is the situation that bad?

MR. ROVE: Well, it's bad. I would remind you, the generic -- so-called generic ballot was 13 points in 2006. So it's actually one point better than it was in a bad election.

But no, the Republicans have got --

MR. WALLACE: Well, in the Times poll it was 18 points, so --

MR. ROVE: I thought it was 50/38, but --

MR. WALLACE: Fifty/32.

MR. ROVE: Oh. Well, you're right. Eighteen. Even worse.

MR. WALLACE: (Laughs.) Yes, even worse.

MR. ROVE: But look, the Republicans have got three things they need to do strategically and three things they need to do tactically.

Strategically they'd better get their act together with an aggressive agenda of reform here at home about the things people are talking around the kitchen table.

What are the Republicans going to do about health care? What are they going to do about providing reliable and affordable energy? What are they going to do about jobs and creating -- keeping our economy innovative and competitive, encouraging exports? What are we going to do about helping people grapple with the cost of college education?

We've got great answers, Republicans do on this, but they'd better get their act together in laying this out in a comprehensive way.

Now, Leader Boehner understands this. He began several weeks ago, several months ago, actually, working with Adam Putnam and Eric Cantor, two of his lieutenants, particularly Adam Putnam, to get buy- in to such an agenda. But they need to lay it out.

In addition, they have to be very clear about their consequences of victory and defeat in Iraq. And finally, they've got to show sharp contrast with the Democrats. They've got to find ways during the course of the legislative debate to say here's where we stand and here's where the Democrats stand.

MR. WALLACE: Well, you talk about showing contrast with Democrats. The primary tactic in some of these election races seemed to be put up a picture of Barack Obama and say the local candidate is a liberal.

MR. ROVE: Yeah. No, look, there are three tactical changes they need to make, and the biggest one is they need to treat the arguments of the Democrats as substantive and get away from labels.

Example -- In the Mississippi special election, look, the Democrats in these races are running pro-life, pro-gun, anti-tax conservatives. Pro-prayer-in-school conservatives. You can't stand up and say that conservative Democrat over there is a liberal.

You need to treat them -- you know, running an ad that says liberal, liberal, liberal is just not going to work. You need to treat their arguments substantively and engage on the merits.

MR. WALLACE: Well, you talk about -- you identify the problems when you say they need a reform agenda -- tax reform, earmarks, energy. Give me one example in just one area of where you think that there's a dramatic solution they could offer that would really contrast and say to the voter hey, I'm going to go for the Republican, not the Democrat.

MR. ROVE: Let me give you two. Taxes. We ought to keep taxes low and no earmarks at all. A moratorium on earmarks. None.

To health care, Republicans are in favor of saying you ought to be able to save tax-free for your out-of-pocket health care expenses. If you get health care, regardless of whether you get it from your employer or out of your own pocket, you ought to get a big deduction on your income taxes.

Small businesses ought to be able to band together to pool their risks to get lower rates like the big companies do, and we ought to stop the junk and frivolous lawsuits that are driving up the cost of health care. I could give you a few more things on health care like that.

But my point is the Republicans have got a plan; they need to go out there and be talking about it.

MR. WALLACE: All right. Let's talk about an issue that you haven't mentioned and a lot of Republicans think is a big problem, and that's President Bush.

Take a look at these numbers -- A recent Gallup Poll found 69 percent of Americans now disapprove of the job he's doing. That's the highest disapproval for any president in the poll's history. And in his memo, Tom Davis said a congressional GOP brand tied to George Bush is struggling.

Question -- should House Republicans break with the president?

MR. ROVE: Well, not even Davis -- who's a very smart guy and whom I like; he's got an interesting mind -- even he doesn't suggest breaking with the president. In fact, he suggests that the Republicans in Congress and the Republicans in -- and the Republican president find ways to both emphasize these sharp contrasts with Democrats.

Look, there's one thing. The president's job approval is not the lowest in history. His disapproval is the highest, but his approval is not the lowest. The lowest was at least three presidents below him, and even below him today by a considerable margin is the Democrat Congress. Their approval ratings are worse.

And what we need to do is sharpen the contrast with the failed promises of the Democratic Congress. They started up here, went down here very rapidly, and it's because they failed to deliver. And Republicans in Congress need to make certain that they are accentuating the reasons why the Democrats have failed.

MR. WALLACE: Well, you talk about not breaking with President Bush, but in recent days we've seen John McCain seem to distance himself pretty aggressively from President Bush on climate change, on the response to Hurricane Katrina.

Are you saying that's a mistake?

MR. ROVE: Look, what's a mistake is to triangulate, to pick out something that's phony and false and deliberately try and find an excuse to distance yourself.

What is important is to be who you are. Both the Republicans in Congress and McCain need to say here's who we are, and in some instances that's going to be different than where the president is. That's normal. That's what happens when you run for office and say here's what I believe in and here's what I want to do and here's what my priorities are.

That's what they ought to do, rather than following the Clintonian model of triangulation, which is a deliberate effort to pick out something and say, you know what? It really doesn't matter where I am in this. I just want to be someplace different than the president is.

MR. WALLACE: Let me bring up another issue that rose on the horizon this week. The California state supreme court ruled that gays have a constitutional right to marry. That issue is now likely to be on the ballot in California, in Florida, possibly in Arizona.

Do you think same-sex marriage will be as strong a mobilizing tool for conservatives in 2008 as it was when you were in the White House in 2004?

MR. ROVE: Not as significant, and simply because there aren't as many battlefronts on which it's being fought. In 2004, there were a large number of states in which this was on the ballot. As you say, it will be on the ballots of three important states -- Arizona, Florida, and California, in all likelihood -- but not on the -- I can't remember the number, but --

MR. WALLACE: Eleven.

MR. ROVE: Yeah, 11. I was going to say over a dozen, but -- and they were geographically dispersed around the country.

But look, there's -- you don't know how this issue is going to play out. In 2004 the issue had a lot of life on its own, and it'll -- we've got five months here for this issue to develop.

MR. WALLACE: All right. Let's talk about -- turn to the presidential election. We saw this firefight this week between Obama and McCain after the president made his remarks comparing negotiating with radicals or terrorists to Nazi appeasers.

And Obama, whether it was directly meant or not by the president, and the president's being pretty coy about whether nor he meant -- I just saw an interview he did today in the Middle East -- Obama certainly ran -- took the ball and ran with it.

MR. ROVE: Right.

MR. WALLACE: Smart politics for Obama?

MR. ROVE: Well, look at it in two frames, short term and long term. Short term, very smart politics. The short term --

MR. WALLACE: For Obama?

MR. ROVE: For Obama -- meaning next Tuesday. Look, he faces Oregon and Kentucky. Last week he went into the West Virginia primary and the headlines were all being driven by Clinton.

And I think he wisely said, look, if I pick a fight with Bush and McCain on this issue, even if it's a stretch, I'll be able to dominate the headlines going into the Oregon and Kentucky primaries. Clinton can't afford to buy TV. I'm going to push her off the front page. So it's very smart.

Broader frame going up to November, I'm not certain it's a smart move. If the argument is who is a better commander in chief, who's going to be tougher in foreign policy, then the answer is going to be John McCain.

And I also think, look, this also focuses on his original statement, which was that he would in his first year, without preconditions, sit down with the leaders of various rogue nations -- Iran, Syria, North Korea, Cuba and Venezuela -- and work things out with them.

The question is, what can he personally say or offer in those meetings that's going to cause those leaders to change their behavior? And between now and November, he's going to have to answer that question.

MR. WALLACE: We've only got about 30 seconds left. Let me ask you the follow-up. And we saw this with Chris Dodd in our, quote, "debate" in the first segment. They feel anytime they can say McCain and George Bush in the same sentence, that's good for them.

MR. ROVE: Well, you know, that's simplistic. The American people are going to make a judgment about John McCain and nobody is going to sit out there and confuse John McCain and George Bush. They were rivals at one point. They've run against each other. They have different opinions and different ideas, different life experiences.

It is a mistake for the Democrats to count on simply saying McCain-Bush, Bush-McCain and expect to win this fall.

MR. WALLACE: Thank you so much for coming in. We'll see if the House Republicans up there on the Hill listen to you.

MR. ROVE: There we go.

MR. WALLACE: (Laughs.) All right.

Up next, President Bush gets in the middle of the political debate over foreign policy. Will his words about appeasement help or hurt John McCain? You heard from Karl Rove. Our Sunday team has some answers when we come right back.

(Announcements.)

PRESIDENT GEORGE W. BUSH: (From videotape.) We have an obligation to call this what it is -- the false comfort of appeasement.

SEN. BARACK OBAMA (D-IL): (From videotape.) This White House, now mimicked by Senator McCain, that replaces strategy and analysis and smart policy with bombast, exaggerations, and fear mongering.

SEN. JOHN MCCAIN (R-AZ): (From videotape.) Why does Barack Obama, Senator Obama, want to sit down with a state sponsor of terrorism?

MR. WALLACE: That's just a taste of the rough back-and-forth this week over negotiating with rogue leaders. As the general election campaign got into full swing.

And it's time now for our Sunday Regulars -- Brit Hume, Washington managing editor of FOX News, and FOX News contributors Mara Liasson of National Public Radio, Bill Kristol of The Weekly Standard, and Juan Williams, also from National Public Radio.

Well, whether the president meant to or not, his comments comparing those would negotiate with rogue leaders like Iran's president, comparing that to Nazi appeasers certainly started a political firefight.

Brit, in the end, do you think it has so far helped or hurt John McCain?

MR. HUME: I don't -- I think it's probably an issue that if the Republicans can't win on this in the fall, there's no way they can win this election.

The position that Obama has staked out, it seems to me, may help him in the Democratic primaries, as Karl Rove has suggested, and it may help him get a few days of news coverage, but I don't think it's a tenable position to say he would engage -- as he has -- in direct presidential negotiations with these leaders.

I don't think it's a plausible scenario; I think the public will -- is likely not to reject it unless the Republicans frame it and handle it so badly that they end up looking bad on it. But if they can't win on this, they can't win.

MR. WALLACE: Let me pick up on that with you, Mara, because I think in campaigns generally fights are one-sided. One side thinks it has the high ground; the other side is playing defense.

MS. LIASSON: No. No.

MR. WALLACE: I didn't sense this in this fight. Both sides seemed eager to mix this up.

MS. LIASSON: Yes. I think that from John McCain's point of view, this is the question for the general election. Who is a better commander in chief, who can handle foreign policy? He's got all this experience. He's going to make the argument, the same one that Hillary Clinton made, that Barack Obama is naive and irresponsible.

Now, from Barack Obama's point, I think he was absolutely right. He had to shoot back fast, because the president, on foreign soil in front of the Knesset, compared him to appeasers. I think he felt --

MR. HUME: He didn't have to shoot back at him, Mara. He never named him. He could have acted like it wasn't about him.

MS. LIASSON: You know what? He felt it was about him and the White House aides who talked to reporters didn't deny that. They said that he was -- the president included Obama in the group of people who would do that.

And he, number one, got the entire Democratic Party behind him. He was the nominee this week, no ifs, ands or buts. Even Hillary Clinton had to kind of get his back on this one. And he is signaling that when attacked, he is going to respond quickly and he thinks this is a good argument for him to have.

Now, I think this is an area where he is going to have to answer a lot of questions, and one of the questions that is legitimate is the one John McCain raised, which is what exactly do you want to talk to him about?

MR. WALLACE: But from Obama's point of view, and I'd like you to respond to this, Bill, you get the sense Obama feels any time I can get McCain and Bush in the same sentence I'm happy to do it.

MR. KRISTOL: Absolutely. That's -- Bush-McCain, Bush-McCain, Bush-McCain. Did he mention 10 it times?

MR. WALLACE: Ten times in 10 minutes.

MR. KRISTOL: Obama mentioned 10 times in 10 minutes Bush and McCain in the same sentence. And I do think he thought if he got in a fight with Bush and McCain would then reiterate his position which, in this respect, is more in accord with President Bush's about a tougher stance towards Ahmadinejad and others, Obama thinks that's a winner for him.

I think he's overdoing it. I mean, I don't know -- he's just -- the Democratic campaign has the assumption that Bush is to toxic that if you just say to the American people a million times Bush- McCain, third Bush term, McCain agrees with Bush on A, B, or C, the American public's going to go Aaaaggggghhh! We can't have a -- no more Bush! (Laughter.) Well, maybe.

I think the American public, in an open-seat presidential election, no incumbent on the ballot, looking at McCain and Obama by October will make a forward-looking decision about who they want to be president. And I think the Obama team is overdoing the utility of a sort of simple-minded linking of Bush with McCain.

MR. WILLIAMS: Forward-looking. That's interesting to me. I hadn't quite framed it that way in my mind, because the fact is I think it's a 69 percent disapproval rating for President Bush, and what's that based on? In large part, on people's sensing that this has been a misguided war. No weapons of mass destruction; can't catch bin Laden.

But the strength of the Republican brand at this point, if there is a strength, that people see McCain and Republicans better at fighting terrorism. Although they're equal, the Democrats and Republicans, in terms of fighting the war in Iraq.

So I think it's all to Obama's advantage to talk about President Bush making the statement on foreign soil and say, in fact, that he's trying to help McCain because that plays to Obama's strength.

I think it was a mistake for President Bush and of benefit to Senator Obama.

MR. WALLACE: Let's talk about this issue of the substance, now, not the politics of it. Brit, you've made it clear that you think that on substance that Obama's wrong. The idea of holding these meetings without preconditions is a bad idea.

Obama goes back and says look, look at the Bush policy over the last seven years, has that made Iran weaker or stronger? Isn't that a fair point on his --

MR. HUME: It's a fair point, but who says it isn't -- who can seriously argue that if President Bush had had some kind of meeting and direct negotiation with Ahmadinejad that that would have weakened Iran's aggressive posture in some way? That makes no sense.

In fact, what it would have done would be to elevate this slightly crazy guy who says these unbelievably nutty things to the level of a world statesman, which his present situation does not suggest he is.

Now, some people on the Obama side will say, well, he wouldn't really meet with him. He might meet with one of the mullahs. Well, that would be -- that's a great idea. I mean, stop and think about it.

When you sit down at the table with somebody, you expect them to offer you something, but you have to offer them something in return. It's not for the purpose of just having a nice chat and getting to know one another.

There have been times when we've sat down with terrorist sponsors. Twice I can recall, the first President Bush, and later President Clinton met with Hafez al-Assad. There were specific, narrow purposes for those meetings and they were very uncomfortable indeed, and were held on neutral soil, as I recall, both in Geneva. They were very odd meetings and they were very narrowly focused. There were, as they say, preconditions.

MR. WILLIAMS: But what's so naive about talking? I don't get this. What's wrong with talking, given the bottom line? The bottom line is Iran is stronger in the Middle East, able to fund terrorists. We have trouble now in Lebanon; Israel is less safe as a result --

MR. HUME: Oh, Juan -- talking for the sake of talking?

MR. WILLIAMS: No, hang on a second. You say talking is wrong? What's the carrot, Brit? I'll tell you what the carrot is. The carrot is you look at what's going on in North Korea, where we did have help in engaging the North Koreans, and we have done -- taken positive steps in dealing with their nuclear capability.

MR. HUME: Excuse me. Well, that's fine. Those are specifically focused diplomatic events, engaged in multilaterally, and not president-to-president contacts, president-to-president negotiations. And it would have made no sense to engage in talks at that level.

MR. KRISTOL: Can I make two points? It's a consensus view of the United States and the European -- the EU-3, the three European nations with whom we are in partnership trying to deal with the Iranian nuclear program, that we don't talk to them until they stop the nuclear program, which has been condemned three times by the U.N. Security Council.

This isn't just Bush being obstinate. This is an allied position which Obama is undercutting. So of all the talk of multilateralism, in this respect, Obama wants to have unilateral talks with Ahmadinejad.

God knows what they're going to resolve, but good luck trying to do that.

Secondly, Bush made a much broader statement in the speech -- which is worth reading; it's a very good speech -- about how we think about dealing with terrorists and state sponsors of terrorism. And there, Bush and Obama are in a very different place.

In his interview with David Brooks in The New York Times, Obama said well, we have -- he disapproves totally of Hezbollah and Hamas, and their terrorist activities undercut their legitimate claims. What are the legitimate claims of Hezbollah?

Obama's view of the Middle East is very different from Bush and McCain's view. That is a real difference and it deserves to be debated.

MR. WILLIAMS: Well, I think that this is an appeal, on -- a base political appeal to Jewish Democrats to look at Obama differently. I think it's a weakness for Obama.

But let me -- but in terms --

MR. KRISTOL: But then a lot of Christians don't think Hezbollah has any -- what is the legitimate claim Hezbollah has?

MR. WILLIAMS: Wait, wait, wait. You think that there's no trouble in the Middle East between --

(Cross talk.)

MR. KRISTOL: No legitimate --

MR. WILLIAMS: -- Arabs and Palestinians --

(Cross talk.)

MR. KRISTOL: What is the legitimate claim that Barack Obama thinks underlies Hezbollah's existence or positions?

MR. WILLIAMS: I think he's trying to bring about some kind of settlement in the Middle East between Israel and its many neighbors, all of whom have complaints. And you know what? It seems to me that if you want to get in there and do tough -- or even if President Bush is over there trying to do the tough work, it is not to be derided and treated as appeasement. That's just wrong.

And especially given the record of this administration strengthening Iran's hand, for them to stand up and say, oh, yeah, this other guy's an idiot and he's going to give a basis and status to these terrible world leaders. People just don't buy it.

MR. WALLACE: Well, I'm glad we worked that one out, panel. (Laughs.)

We have to take a break here. But coming up, House GOP leaders are reeling after another special election defeat. What do they do to turn things around for November? We'll get to that after this quick break.

(Announcements.)

MR. WALLACE: On this day in 1908 Congress passed legislation mandating use of the phrase "In God we trust" on certain coins. It dates back to the 1860s when the Civil War stirred religious feeling across the country.

Stay tuned for more from our panel and the Power Player of the Week.

(Announcements.)

SPEAKER NANCY PELOSI (D-CA): (From videotape.) Three for three, batting 1,000.

REP. JOHN BOEHNER (R-OH): (From videotape.) It was another wake-up call that we have to show Americans that we can fix the problems here in Washington.

MR. WALLACE: That was reaction from Democratic and Republican leaders the morning after another GOP House seat was lost in a special election.

And we're back now with Brit, Mara, Bill, and Juan.

Well, as we were discussing with Karl Rove, panic -- and I don't think it's too extreme a word to say -- panic has broken out among congressional Republicans. Brit, how much trouble are they in?

MR. HUME: I think they're in a lot of trouble and they ought to be panicked. And if it spurs them into doing things a little differently, it might not be a bad thing for them.

You can't say -- you could say at the mid-term it was the Iraq mid-term (sic). I don't think you can of these special elections that they are really about the war in Iraq. And it is certainly true that in the Mississippi case in particular the Democratic candidate basically ran on a Republican platform on important areas.

Nonetheless, does anybody really think that the Republican Party in the House of Representatives today stands for less spending? Of course not. They can't even get together on earmark reform. Now, that is a simple issue that's easy to understand. John McCain simply doesn't ask for earmarks. Now, your constituents want you to and I know it's part of constituent service and all of that. But if they can't even foreswear earmarks and make a successful issue out of that, my sense about them is that it's hopeless for them. They're going to get slaughtered in this mid-term election.

MR. WALLACE: Well, let's talk about ways in which they could avoid getting slaughtered.

Mara, Congressman Tom Davis, who used to be the head of the House Republican campaign committee, sent this blistering 20-page memo out in which he said the GOP brand has been badly damaged. He compared it to dog food that dogs won't eat.

They're having a meeting up on Capitol Hill, the GOP caucus, on Tuesday. How do they go about fixing the brand?

MS. LIASSON: Well, I think they have to come out with some real solutions, not just attacking the Democrats. I think that a lot of people in the GOP House leadership understand the problem. Now they've got to come up with something.

I mean, what Davis pointed out in that memo is these are not northeastern districts that are trending Democrat over time. These are districts where George Bush won by 25 points or more, in some cases.

MR. HUME: Exactly.

MS. LIASSON: And you know what? It's like just because these Democrats are running, quote, "as Republicans," well, that's how people survive in these districts that are in regions where their party is not dominant.

And I think having a ban on earmarks would be a pretty good start. That's one thing they could stand for.

I think -- there was a huge wave against them in 2006. I think the wave has gotten a lot worse now.

MR. WALLACE: Let me ask you about this, Bill, because Mara had some ideas, Karl Rove had some ideas. But you've got an economy that's in real trouble; you've got an Iraq war that people don't like. The right-track/wrong-track is overwhelmingly -- I think it's now 80 percent people think wrong track. Can you fight that if people identify that with your party?

MR. KRISTOL: Well, you could avoid further losses if John McCain does well at the top of the ticket.

Look, the Democrat -- the Republicans lost the 2006 House elections nationally by about eight or nine points. That's -- the current House balance in the House of Representatives reflects a Democratic about eight-point advantage. Right now in the polls, it's 12 to 14 points.

They need to --

It'd be helpful to them to knock that back down to eight. The easiest way to do that is to help John McCain defeat Barack Obama. That will naturally pull Republicans up. The other way to do it is to help Bush's approval rating go up a little bit, which I think is doable, actually. Bush, I think, actually is probably -- has better political sense than a lot of these House Republicans.

The idea that they should distance themselves from the president now -- Tom Davis was a loyal deputy of Tom DeLay. Tom Davis was all for earmarks, he was going right along with Bush and DeLay on everything and now he's decided, now that he's leaving the Congress, he's going to be a hero with the mainstream media by writing a 20-page memo. Distance yourself from Bush! Change everything!

They can't do anything left. They're not going to pass any legislation, they're not going to have an independent identity, the House Republicans, in the last four or five months. There's McCain and there's Bush.

Now, if they think they want to be tough on spending, why don't they support the president's attempt to veto a bloated farm bill?

(Cross talk.)

MR. HUME: They voted for it.

MR. KRISTOL: The majority of House Republicans voted for it.

MR. KRISTOL: Well, they're their own worst enemies. In my view, the House Republicans should be quiet. They should call the McCain campaign and get advice on how they can help McCain win. They're not going to win back the House anyway, but that's fine. At least they could hold their numbers if McCain does well at the top of the ticket.

MR. WILLIAMS: Twenty -- I mean, they lost 30 in '06. It looks -- according to the estimates, they're going to lose 25 in House, five in the Senate this time around. I don't see how they're going to stop it by simply getting along with John McCain, because I don't think John McCain's brand is their brand.

John McCain has in fact made himself a unique entity by distancing himself from the Republican brand and saying he's willing to cross political lines to do business with Democrats. He's willing to talk about things like immigration in a realistic way.

And when you look at the way the House Republicans have behaved this last week, for me it was a real break to see House Republicans take on the White House. They had been in line; they had been the president's bulwark against the Democratic majority in the Congress.

And all of a sudden, even going into this coming week, on energy, looking forward on things like health care, it's possible. And now you're going to get Republicans doing business with Democrats over the head of the Republican leadership. And I think that's really a bad sign for the Republican.

MR. WALLACE: Let me pick up on this, Brit, because I have to say I agree with Juan that the reason that McCain is doing so well is because he is a different brand from the generic Republican brand. In a lot of cases, he's campaigned against Republicans, and congressional Republicans in particular.

MR. HUME: Chris, the elections that they're losing are in places -- have been in places where George Bush did very well and where his approval rating is not in the toilet.

If you think -- if these guys think that by lining up with the Democrats on issues like this whopping farm bill that they're going to improve their national brand, they're crazy.

I don't -- I'm not even -- it's not at all clear to me that that's what they're trying to do. They're not trying to distance themselves from the president so much on the farm bill. They're trying to align themselves with the pressure they're getting from back home to pass the damn thing. That's what's going on up there, and that is the inevitable temptation that always confronts you.

You've got local pressure groups want you to do something that involves spending or some other benefit and it doesn't help you nationally, and they're worried about their own reelection, I suppose.

MR. WALLACE: So what's your answer?

MR. HUME: My sense is that they need to get behind a tough, conservative, constructive program and then they've got to stand firm on it. And one way to do that, of course, would be to -- you could start with spending and stand for the vetoes, fight to uphold them and so on. That would provoke a real battle and we'll see who wins.

MR. WILLIAMS: Well, how could -- what is this conservative agenda that you speak of? Is it family values? (Cross talk.) These guys with all the sex scandals?

MR. HUME: You -- we certainly couldn't listen to what they're saying up there and extract from that any sense of a conservative agenda, could we?

MR. WILLIAMS: No, but I'm saying what is the conservative agenda that you would advise them to take?

And on President Bush, by the way, I just saw a poll the other day said that President Bush does more damage to John McCain than Reverend Wright does to Obama. Which was a stunner to me, but apparently that's how deeply damaged the Bush name is at this point.

MR. HUME: Well, I don't think that's the reason why they lost that race in Mississippi or in the other two -- in the other two that they've lost. They're not even holding places where Bush is not unpopular.

MR. WILLIAMS: But when it comes to something like the gasoline prices, do they see President Bush and the Republicans doing anything? No. And so the Republicans on the Hill say, you know what? Why don't you take some of that gas out of the Strategic Reserve? Help the American people.

MR. WALLACE: Thank you, panel. See you next week.

Up next, our Power Player of the Week.

(Announcements.)

MR. WALLACE: Every year for this one week, the Washington area is the center of the world of horseracing. Outside Baltimore they run the Preakness, the second jewel in racing's Triple Crown. And this time, there was a special Power Player of the Week.

MR. DUTROW: (From videotape.) We were just going crazy, man. It was just -- it was a feeling that I hope I get to feel one more time before I die.

MR. WALLACE: Rick Dutrow was talking about Big Brown, the horse he trained to victory in the Kentucky Derby. (Kentucky Derby audio plays.) And when we caught up with him this week, just two days before they went for the Preakness, Dutrow did the honors.

MR. DUTROW: (From videotape.) Big Brown, this is Chris, and he wants to meet you.

MR. WALLACE: (From videotape.) Oh, my gosh. It's like meeting Mickey Mantle. He's so beautiful. And so calm, you're exactly right.

Actually, both horse and trainer were remarkably calm in the midst of their push for racing history. Just before the big event, Dutrow decided Big Brown needed new front shoes, an event that was covered like Cinderella getting a glass slipper.

(To Dutrow.) Is this fun, or do you just feel enormous pressure?

MR. DUTROW: Oh, we're having a ball. But every day he's been to the track, he's just been so great. There's no pressure.

The horse is great, so why should I feel any pressure?

MR. WALLACE: Dutrow clearly feels he's training a superhorse. He openly predicted his undefeated colt would win the Derby. How about the Preakness?

MR. DUTROW: He's the best horse in the race, and until somebody comes up and looks him in the eye and beats him, I'm going to keep feeling this way.

MR. WALLACE: There was one shadow over the Derby. The filly Eight Belles ran second, then broke down --

DERBY ANNOUNCER: (From videotape.) Here is the equine ambulance pulling up to Eight Belles.

MR. WALLACE: -- and had to be killed.

(To Dutrow.) What about some of these animal groups who say that racing these horses this way is cruel?

MR. DUTROW: You know, this is a racing game. Horses have to go out there. They're born to do it. They love it. That's what they're here for.

MR. WALLACE: But if Big Brown is unbeaten, Rick Dutrow has had plenty of setbacks. He was banned from racing for five years for taking drugs. Then when he returned, he slept in the barn next to his one horse.

MR. DUTROW: I moved in there because I knew that I was good enough to make it in the game and I did not want to give up.

(Cheers in background.)

MR. WALLACE: Dutrow has made it big. He's one of New York's most successful trainers, but he's also been suspended again after some of his horses tested positive for banned substances.

(To Dutrow.) Why have you gotten in so much trouble over the years?

MR. DUTROW: Just myself. You know, the drugs, the gambling, the girls. You know, that gets to you when you're young. It got to me. I did things that I shouldn't have done, but I got through it. Some people didn't get through it. I'm lucky.

MR. WALLACE: Now Dutrow says he's so busy training Big Brown he doesn't have time to get in trouble.

MR. DUTROW: I've never jumped into this game for it to be a business. Always fun being around the horses. And when you see that they've got a chance of winning, man, that feeling comes right to you. (Chuckles.) That's special.

MR. WALLACE: And Saturday afternoon it was all Big Brown as he cruised to victory in the Preakness. Next up, a chance to win the Triple Crown at the Belmont Stakes in June.

Now, this program note -- Tune in this Tuesday at 7:00 p.m. Eastern and then again at 11:00 for our coverage of the Kentucky and Oregon primaries, anchored by Brit Hume.

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


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