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Location: Philadelphia, PA

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MR. WALLACE: I'm Chris Wallace, and this is "FOX News Sunday." (Intro music begins.)

A Supreme Court nominee is announced and battle lines start taking shape. Will Judge Sonia Sotomayor be confirmed?

We'll ask two leading members of the Senate committee that will decide her fate: Republican Lindsey Graham and recent Democratic convert Arlen Specter.

Then, our new series on the future of the GOP right now. How do Republicans rebuild and challenge President Obama? We'll kick off the conversation with Mitt Romney, only on "FOX News Sunday."

Also, North Korea shows off its military might. We'll ask our Sunday Regulars what the U.S. can do about it. And our Power Players of the Week offer life lessons to the class of '09.

All right now on "FOX News Sunday." (Intro music ends.)

And hello again from FOX News in Washington.

With the nomination of Sonia Sotomayor to the Supreme Court, we have brought in two leading members of the Senate Judiciary Committee who she will face during confirmation.

From Philadelphia, Arlen Specter, a veteran of many hearings as a Republican --he's now a Democrat. And here in studio, Lindsey Graham, who was and is a Republican.

SEN. GRAHAM: (Chuckles.)

MR. WALLACE: Senators, welcome back to "FOX News Sunday."

SEN. SPECTER: Nice to be with you.

(Cross talk.)

SEN. GRAHAM: (Inaudible.) Good morning, Arlen.

MR. WALLACE: Thank you.

Let's start with Judge Sotomayor's controversial speech back in 2001 in which she said she hoped that a wise Latino woman judge would more often than not reach a better conclusion that a white male judge.

On Friday, President Obama tried to walk that back. Let's watch.

PRES. BARACK OBAMA: (From videotape.) I'm sure she would have restated it. But if you look in the entire sweep of the essay that she wrote, what's clear is that she was simply saying that her life experiences will give her information about the struggles and hardships that people are going through that will make her a good judge.

MR. WALLACE: Senator Graham, does that clear it up for you?

SEN. GRAHAM: No. She didn't say that at all. What she said is that based on her life experiences, that she thought a Latino woman, somebody with her background, would be a better judge than a guy like me, a white guy from South Carolina.

And it troubling, and it's inappropriate, and I hope she'll apologize. And if I had said something like that or someone with my background and profile, we wouldn't be talking about this nomination going forward. But -- we'll listen to what she has to say.

But she's got to prove to me that if I found myself in court with a Latino woman, in front of here I'd get a fair shake. And that's up to her to do.

MR. WALLACE: Well, let me follow up. Newt Gingrich says that she's a racist. Rush Limbaugh compares her to former Klansman David Duke. Are they right?

SEN. GRAHAM: No. They interject themselves in the debate. They've got an audience to entertain; Newt's a political commentator. I'm a United States Senator.

But I do know this: That statement is not about talking about her life experiences. It's getting from her life experiences a superiority based on those experiences, versus somebody else in society. And I don't want that kind of person being a judge in my case.

But I don't think she's a racist. I think she's -- she should be proud of what she's accomplished in life.

But to lead to the conclusion that all the hardship she has gone through makes her better than me is inappropriate.

MR. WALLACE: Senator Specter, are you troubled by Judge Sotomayor's comments, and also about President Obama's empathy remarks? What happened to the idea that justice should be blind and not favoring one side over another?

SEN. SPECTER: Well, when President Obama said that, I think he's looking for diversity, and I think Judge Sotomayor brings that.

But let's put her comment in context with the whole speech -- and it didn't stand out all that much in context -- and further, put it in context with her whole record.

She has an extraordinary academic record -- Princeton and Yale. A prosecutor, had experience in international trade matters, on the District Court, trial court experience, Circuit Court of Appeals. So she has an extraordinary record.

And I believe that it's fair to ask her about the question, but she has a long, solid record to show that she's fair and not biased.

MR. WALLACE: But Senator, when she said -- and those were her words -- that I would think that more often than not, I would hope, that a wise Latino woman judge would reach better conclusions than a white male judge -- what do you think she meant?

SEN. SPECTER: Well, I think she meant that somebody with her experience has something to add.

Look, we live in a very diverse society, and it is really surprising that it took until 1967 to have an African American, Thurgood Marshall, on the Court, or that it took until 1981 to have a woman, Sandra Day O'Connor, on the Court. And still there are only two women.

And that in this kind of a diverse society -- if you go back to the Supreme Court discussion room, a very small room, small table, nine people sit around and decide monumental questions.

And the diversity and the point of view of a Latino woman is significant. It adds to the mix.

MR. WALLACE: Senator Specter, the issue of identity politics has been raised specifically in the Ricci case, a case that she decided as part of a three-judge panel earlier this year, in which she sided with the City of New Haven, throwing out a promotion exam in which 20 white and Hispanic firefighters would have been eligible for a promotion, but no African Americans.

One, do you think that she was right on Ricci, and does it raise concerns that she made a decision based on race?

SEN. SPECTER: I think she was well within the ambit of discretion of a judge. Different judges see issues differently, and you have the Supreme Court deciding cases five to four. But I think her judgment there was very sound.

Is race a factor? Well, it really is in our society. There's no hiding from it, notwithstanding all of the progress which has been made.

And the New Haven firefighters case is like so many tough ones -- you want to be sure that the white applicants get a fair shot, and you want to be sure that the minority applicants get a fair shot.

And they're a tough call, but she made a justifiable call, in my legal opinion.

MR. WALLACE: Senator Graham, do you have a problem with Ricci? And what about the comparison that some of her supporters make to what Justice Alito said during his confirmation hearing?

Let's watch.

SUPREME COURT ASSOCIATE JUSTICE SAMUEL ALITO: (From videotape.) When I get a case about discrimination, I have to think about people in my own family who suffered discrimination because of their ethnic background or because of religion or because of gender. And I do take that into account.

MR. WALLACE: Senator Graham, what's the difference?

SEN. GRAHAM: Well, I think the difference is that we're talking about a comment she made about her life experiences, basically making her superior to someone. Not that I would add something new to the Court that the people on the other side basically have less to offer than I do.

How this case turns out, I don't know. It's a difficult fact pattern. But the judicial temperament of this judge is in question, her philosophy.

I know this, that if I used the Obama standard for confirmation, she would never get my vote. Because Obama, President Obama, as senator, voted against Alito and Roberts, two highly qualified people, saying that you need to look at their philosophy, ideology, and legal record.

If I do that, if I look at her philosophy, her legal philosophy, which I think is very activist in nature -- this empathy word is just a code word for activism -- if I look at her ideology that's being expressed in some of these cases, and that one comment, I could never vote for her, as a Republican.

And President Obama better hope that Republicans treat her better than he treated President Bush's nominees.

MR. WALLACE: Let me bring you another case which may raise the issue of activism and trying to make policy from the bench.

This year Judge Sotomayor joined a ruling that it is settled law that the Second Amendment applies to federal restrictions on guns or weapons, the right to bear arms, but not on state laws.

And she based this on an 1886 Supreme Court ruling, rather than the ruling of the -- that the Supreme Court made just last year upholding an individual right to bear arms.

Senator Graham, do you see a pattern, or do you see that as an instance of Judge Sotomayor making policy from the bench?

SEN. GRAHAM: Yes. If the legislative law doesn't sit with her, she finds a way as a judge to get around it, in my opinion.

When the Congress or the legislature comes up with a law that she doesn't like or feel comfortable with, she's looking for a way to get around that law, rather than living within the confines of the way the law is written.

That's activism at its core, and that case that you just mentioned expresses that.

But having said that, she is going to get firmly treated -- and fairly treated. Miguel Estrada was Hispanic, nominated to one of the highest courts in the land. He didn't get very well treated.

MR. WALLACE: This was an appeals court judge nominee from George W. Bush.

SEN. GRAHAM: Yes. Yes. I intend to do better than our Democratic colleagues did, with Ms. Sotomayor.

MR. WALLACE: Senator Specter, in voting for John Roberts to be a Supreme Court justice, you said the following. Let's watch.

SEN. SPECTER: (From videotape.) He emphasized the point that judges are not politicians and that judges really ought to be having a view of the law which does not inject their own personal views into the law.

MR. WALLACE: Senator Specter, can you honestly say that Judge Sotomayor's statements and rulings live up to that standard?

SEN. SPECTER: Well, Chris, let's -- yes, I can. Let's evaluate her in the context of the hundreds of opinions which she has written.

You take one statement she made many years ago. You take a couple of cases, and they ought to be scrutinized. And I'm going to participate in asking firm questions, probing questions. That's the job of a senator, under the Constitution.

But evaluate Judge Sotomayor's record in the totality of her cases, not just picking a snatch here and a snatch there.

MR. WALLACE: Senator Specter, given the fact that you just switched parties and just became a Democrat, don't you as a matter of practical politics have to vote for President Obama's nominee?

SEN. SPECTER: No. No, I am duty-bound under the Constitution to exercise an independent judgment under separation of powers.

Look here, one of the most highly touted Republican nominees for the Supreme Court ever by a Republican president was Judge Bork. And he was of my own party. And I thought it was my duty to analyze what Judge Bork had to say about original intent and to make an independent judgment under separation of powers.

And my record is pretty obvious, in having voted on an independent basis. And that's a senator's responsibility, and Chris, you can be sure I'm going to discharge it.

MR. WALLACE: Let me ask you both about the question of schedule.

Senator Graham, President Obama, the White House, is pushing for this all to be decided, a confirmation vote not just by the Judiciary Committee, but by the full Senate before you go on August recess, about the 7th of August.

Are you going to do that?

SEN. GRAHAM: I don't think that's practical and I don't think that's appropriate. Chief Justice Roberts was voted on September the 29th.

We've got a lot to do. We don't really know much about her. The FBI report is not done yet. If you use the Alito-Roberts standard, we're looking at September. And I'm not going to cut this short.

She is somebody that has accomplished a lot in America, but my question is does she really understand what America's about.

To come as far as she has is a great compliment to her, but we don't need to take those experiences and say somebody else is smaller because they're different. And I hope she will apologize for the comment we're all talking about.

MR. WALLACE: Senator Specter, can you get it done, should you get it done before the August recess? I can remember when you were on the Republican side you used to jealously guard your discretion to hold hearings and schedule votes when you wanted to.

SEN. SPECTER: I think it can be done by the end of the July session. Let's take a look at the record and evaluate all of the extent of the paperwork, but from this perspective, I think it's doable.

And I think it's important to have her on the bench when the Court starts to consider in September the applications for certiorari, what cases they're going to hear.

We might have to work Mondays and Fridays to do it, but we could get it done.

MR. WALLACE: Senator Specter, I'm -- can you hear me still, sir?

SEN. SPECTER: Sure do.

MR. WALLACE: Oh, good. Okay, because we wondered -- we thought there might be a technical problem.

I've got about a minute left and I want to ask you two quick questions.

You admit, and you were very open about it, that you switched parties because, in large measure, you faced a very tough Republican primary.

Now Congressman Joe Sestak says that you're more concerned about your job than you are about your state and that he may oppose you in the Democratic primary.

First question: Are you certain that you can beat Joe Sestak in the Democratic primary?

SEN. SPECTER: Chris, in a political campaign there's no such thing as certainty.

Listen, it's a free society. I didn't ask that the field be cleared; there was no discussion of that. Everybody ought to run if he or she wants to run, and I'm ready to take on all comers.

MR. WALLACE: And finally, as the newest and most junior Democrat on the Judiciary Committee, instead of having that position right next to the chairman, you're going to be all the way down at the end of the table and probably questioning Judge Sotomayor at 1:00 in the morning.

How do you feel about your loss of status, sir?

SEN. SPECTER: I feel that I can handle it. Listen, it wasn't next to the chairman; I was the chairman during the Roberts and Alito confirmation hearings. I was way down the line when Judge Bork was up for confirmation, and my voice was heard loudly and clearly.

MR. WALLACE: Well, it always is.

Senator Specter, Senator Graham, I want to thank you both so much for joining us today.

SEN. GRAHAM: Thank you.

MR. WALLACE: Should be an interesting summer.

SEN. SPECTER: Nice to be with you. Thank you.

MR. WALLACE: Thank you.

Up next, Mitt Romney on the Republican Party in the age of Obama. We'll be right back.

(Announcements.)

MR. WALLACE: Today we begin a new series called "Right Now" in which, from time to time, we'll bring in the leading lights and best thinkers in the Republican Party to discuss the future of the GOP.

And our first guest qualifies on both counts: former Governor Mitt Romney.

And Governor, welcome back to "FOX News Sunday."

MR. ROMNEY: Thanks, Chris. Good to be with you.

MR. WALLACE: You're making a major speech tomorrow criticizing President Obama for cutting $1.2 billion for missile defense from the next Pentagon budget. Why is that a mistake?

MR. ROMNEY: Well, with what's happening right now in Iran and particularly in North Korea, I think every American recognizes that the best tool we have to rein in North Korea and Iran and to protect the American people is to have a very robust missile defense system.

And the president is cutting by 15 percent the funding of our Missile Defense Agency. He's pulling back on the number of interceptors that we're going to have in Alaska, which is where we desperately need them.

And at the same time, he's cutting back on our funding for a European missile defense by 80 percent. It is simply the wrong way to go.

And I know that there are some liberals who've always been opposed to the fact that Ronald Reagan was the author of this idea of defending ourselves from nuclear attack.

But with rogue nations like North Korea and Iran headlong in their course to have intercontinental ballistic missiles tipped with nuclear warheads, America needs to protect itself.

MR. WALLACE: But Defense Secretary Gates says that his budget still devotes over $9 billion to missile defense and it includes 30 interceptors up there in Alaska for those North Korea missiles, which he says is more than enough to protect this country against the North Koreans for years.

MR. ROMNEY: This isn't the time to be cutting back in missile defense. And so taking from 45, which was the original plan for the missile defense in Alaska, down to 30 is not the right direction to go, particularly as North Korea is developing this technology.

North Korea is in contempt of the world and the United States. On the very day the president gives a speech about nuclear nonproliferation, North Korea carries out a missile test.

And then on our Memorial Day they carry an underground nuclear explosion. They're making it very clear that they're thumbing their nose at the world.

And with a rogue nation like that, you have to be very aggressive in defending ourselves with missile defense. And that's why I would be adding to our expenditures, not cutting back on the budget.

We have a president who has added trillions of dollars to federal spending. We just put almost $800 billion into a stimulus plan. Not one dollar of that is going to modernize our military. It is a course which I find very difficult to understand.

MR. WALLACE: You have taken a middle ground, I think I'd be fair to say, in the nomination of Judge Sotomayor. You called it, quote, "troubling." But unlike some others, you haven't opposed her.

What do you think of Newt Gingrich and Rush Limbaugh calling her a racist?

MR. ROMNEY: Well, I disagree with them. I think this is a process where you have an individual who's intelligent, well educated, with an extensive record. She deserves a full and fair hearing.

And I listened to the prior senators on your show. They intend to give her that.

I think, in the final analysis, we'll make a decision based upon her clarification of some very troubling comments, and also her discussion of some cases that are troubling. The Ricci case, the Maloney case, both of those are very troubling.

But we'll have a chance to hear what she has to say, and we'll --

I'm not a senator. I don't get to vote in that regard, but those that are senators I hope give a thorough examination to her judicial philosophy, which quite apparently is a philosophy of saying look, we're not going to follow the law; we're instead going to bend the law to do what we think empathetically is the right thing to do.

And I don't think a judge who tries to assess which person more deserves the right conclusion, as opposed to what does the law demand, is the kind of judge America wants.

MR. WALLACE: Let's step back for a minute and take a bigger picture, because that's what this whole series is about.

How do you think President Obama is doing, and what do you think the Republican approach should be in dealing with him?

MR. ROMNEY: Well, first of all, I think the Republican approach should be to hold true to the principles that we know are right for America and for our future.

Fundamentally, Republicans believe that individuals and individual freedom are what built America and will build a more prosperous future.

And Barack Obama and his team have made it very clear they have very different view.

They believe that an all-powerful, growing government is the right course for America's future. It is a very dramatic difference between the two.

So when Barack Obama has a stimulus plan, it includes a lot more money from (sic) government. When the Republicans put forward our stimulus plan, it said put the individuals in charge; help small business.

When they look at health care, the Democrats say look, we want government to take over health care because it's not working well. Republicans say how can we give individuals more authority and responsibility for the health care system so they can have better care under their direction?

It's a very stark difference, and I think you're going to find philosophically the American people will recognize that the bailouts, that the growth of government, is the wrong course for America and instead, the principles of the Republican Party will keep America stronger, with a brighter future.

MR. WALLACE: Let's talk about one of the president's big initiatives in an area that you have a lot of personal and even family history in, and that, of course, is the auto business.

It looks like General Motors will file for bankruptcy tomorrow with the government putting up a total -- what they did in the past and what they're going to do now -- of $50 billion, and taking roughly a 70 percent ownership stake.

Back in November you wrote an article in which you said -- this was before there'd been any bailouts by President Bush -- no bailouts; let's go to a managed bankruptcy.

Looking back, wouldn't that, at a time when we were in the depths of the recession, when we were really right in the midst of what looked like a financial crisis, wouldn't that have been disastrous for the economy?

MR. ROMNEY: It'd have been precisely the right thing to do for the economy. To help General Motors at that point, before it had received tens of billions of dollars from the government go through a structured process, either in court or out of court, to rid itself of its excessive union contract obligations would have been the right course.

And at that point, government could have helped with warranty guarantees and so forth, with debtor-in-possession financing, to get the company back on its feet.

We wouldn't have closed the business now or liquidated it. We instead would have helped it restructure at a time when government funding was not going to add billions of dollars to the American taxpayers' burden.

It was the right course to take. It's being taken now -- too late, unfortunately. And as a result, the government ends up with over 70 percent of GM and the UAW some 17 percent.

Look, let me talk about going forward. The right thing going forward for General Motors and for our government is to get government out of the direction of General Motors.

President Obama should indicate that immediately upon this bankruptcy, all of the shares held by government will be distributed to the American taxpayers. And therefore, that the public will be able to vote just like shareholders.

And likewise, that the UAW -- the head of the UAW ought to indicate all of our shares are going to our members, not to the head of the UAW. We don't want a president and a head of the UAW running General Motors. The American public ought to own that enterprise.

MR. WALLACE: So who would run General Motors?

MR. ROMNEY: Well, the shareholders. The shareholders -- and you'll see Americans trade shares, buy and sell amongst themselves. They'll probably consolidate. There'll be shareholder meetings; they can elect their board of directors.

And the company will be run to create products that Americans want. They can be competitive globally. They can hire and fire the CEO as they want.

You don't want politicians in Washington saying, okay, we want you to build this kind of car. And oh, that factory over here? It's in Senator So-and-so's district and you can't close that one, even though it's the high-cost factory. You have to open another one over here.

You don't want politics directing American corporations. That whole approach, which obviously is one that Barack Obama is wedded to, is the wrong approach for America.

Americans recognize it. Individuals, the free market system, is what has built America to the nation we are, and that's who we ought to go forward.

MR. WALLACE: But Governor, for all the doomsayers, Chrysler got a bailout. Now it's gone through bankruptcy, seems to be speeding through bankruptcy court.

They're going to basically be bought by Fiat and they're going to, it looks like, be a viable company within some period of time, maybe weeks.

MR. ROMNEY: Precisely my view. That's why I wrote, as I did in November, that these companies need to go through a process of shedding their excess costs -- hopefully outside the bankruptcy court, but in fact both of them look like they'll go into bankruptcy court.

But let me underscore one thing, Chris, and that is this is a real sad day. I mean, I'm a son of Detroit. My dad was an auto executive. I drive American cars. I love American cars.

My heart bleeds for the people in Michigan, in Detroit, for all those autoworkers. This is a very, very sad circumstance for this country. And it represents bad decisions by management, overreaching by the UAW.

It's really tragic, in a lot of respects. And it has not been well played, either, in my view, by the Bush administration or by the Obama administration.

MR. WALLACE: When you look -- I want to switch to the main subject here, which is the future of the GOP. Since --

If you look at the GOP since 2004, you've lost ground in the West and the Southwest. You've lost ground in the Mid-Atlantic states like Virginia and North Carolina. And in your home region, New England, not a single Republican congressman anymore.

Aren't you in danger of becoming a mostly white, mostly Southern, regional party?

MR. ROMNEY: You know, there've been other times when our Party has been written off and there've been times when the Democratic Party has been written off.

And what typically happens is that the party that gets all the power starts thinking good about themselves and overreaches, and the American people say they've gone too far. That happened to us.

I think we made mistakes when we had the leadership of Congress, and I think you're seeing the president and Democratic leaders in the House and the Senate making mistakes that will make them far more vulnerable to a correction, a mid-course correction.

And I think you'll see the Republican Party come charging back. I was just in Virginia. Bob McDonnell there, running for governor; I think he's going to win. Chris Christie in New Jersey.

I think you're going to see the two governors' races this year both go to Republicans, because people recognize that this Democratic administration is taking us far too far to the left. And America is fundamentally a center-right nation.

And if we hold true to our principles and do a better job communicating those principles, and holding true to them -- (chuckles) -- acting as we speak, I think the American people will put us back in a position of leadership.

MR. WALLACE: But is it enough to just say we're going to hold true to -- and a lot of people say -- the Reagan principles? Don't you have to have new answers for the new problems that people face?

MR. ROMNEY: Oh, sure. Sure. And as the world changes, you have to make sure that those principles are applied to the new reality.

So, for instance, our health care challenge today is 47 million people without health insurance. And we know our principles; we believe in markets and individuals.

So we look at that problem and say how could we get individuals to have more control over their health care?

And one way that's been proposed is to let people buy their own private insurance plan and be able to own it; change -- as they change jobs, they still own that insurance plan. It's a Republican, free market-oriented plan.

The Democrats have a different plan. It's not working, so we're going to have government give folks a government insurance product. And that, in my view, is putting us on a course to become like Canada or Great Britain, which have far inferior health care systems.

MR. WALLACE: We've got a couple of minutes left. I want to talk a little bit about Mitt Romney's future, not the GOP's future -- although they may be linked, for all we know.

MR. ROMNEY: (Chuckles.)

MR. WALLACE: You say it's far too early to think about running for president, but you've got a very active political action committee. You just pointed out you're campaigning all over the country -- in New Jersey, Virginia, Ohio this week.

Fair to say that you're keeping your options open to running again for president?

MR. ROMNEY: Yeah, I'm not going to close that door, but I'm not going to walk through it, either.

And the action that I'm going through right now is trying to help people who I think would make a difference for the country and, frankly, also help some people who helped me.

When I ran for office, I had a lot of folks come out and do a lot of work for me. And they call and say, okay, it's now your turn to help me. And so I'm going out and helping some of those.

And I think it's an important thing, but I -- we have plenty of time to decide what the future holds. It's very early, five months into the president's term. We'll see how he does.

And we as a party, I think, are going to come back stronger and more vibrant and more committed to following the principles that have always been at the base of our party.

MR. WALLACE: Well, there is one decision that you have to make pretty soon. You sold your house -- and I don't know how lucky you were to be able to do that in this market -- you sold your house in Massachusetts.

MR. ROMNEY: (Too cheaply ?), I imagine. (Laughs.)

MR. WALLACE: (Laughs.) That's right. The price was too low.

And the question is where you're going to establish your legal residence. And one possibility, because you have a vacation home there, is New Hampshire.

Are you going to establish legal residence in New Hampshire?

MR. ROMNEY: No, my residence is still in Massachusetts. That is my home. That's where I vote, and I'm going to continue to be a Massachusetts resident.

I can't tell you how many years that's the case, but for the indefinite future.

MR. WALLACE: Any possibility that you, by 2012, could be running in New Hampshire as the favorite son?

MR. ROMNEY: I don't think so. Massachusetts is my home. And I'm not looking forward to any particular race, but my residence continues to be Massachusetts, and will be.

MR. WALLACE: Governor Romney, we want to thank you so much for coming in and kicking off this new series. And sir, please come back.

MR. ROMNEY: Thanks, Chris. Good to be with you.


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