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FOX "Fox News Sunday with Chris Wallace" Transcript - Budget Cuts

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WALLACE: And hello, again, from Fox News in Washington.

When all sides agreed to the sequester a year-and-a-half ago, those automatic, across-the-board spending cuts were supposed to be so painful it would force the president and Congress to make a deal. But, now, with just five days to go there is still no deal and the deadline is here.

Joining us today, two Senate leaders on budget issues, from Oklahoma Republican Tom Coburn and from Missouri, Democrat Claire McCaskill.

Senators, let's start with the big question, quick question, quick answer -- will the sequester happen? Will those $85 billion in spending cuts kick in on Friday?

Senator Coburn?

SEN. TOM COBURN, R-OKLA.: Yes, it will and it's not $85 billion, because it's a pro rata portion of that, until the end of this year. So, it won't be a full $85 billion.

WALLACE: But it's going to kick in?

COBURN: It will kick in, but at a pro rata rate. So, you're not going to see $85 billion all of a sudden shrink from the federal government.

WALLACE: We're going to get to that in a second.

Senator McCaskill, do you agree it is going to happen?

SEN. CLAIRE MCCASKILL, D-MO.: Well, unless the Republicans are willing to compromise and do a balanced approach, I think it will kick in.

I am a little confused about the Republican position at this point. It appears that Speaker Boehner does not have any kind of bill that he can even put on the floor of the House that could pass within his caucus. And I think there is a little bit of a civil war that's broken out among the Republican ranks.

WALLACE: Wait a minute, Senator McCaskill. The fact is the House has passed two measures to replace the sequester cuts with other spending cuts, equal in size but, with other cuts. They've actually passed something in the House here. And the Senate hasn't passed anything.

MCCASKILL: That's -- they passed it last year, Chris. But they've not put anything -- there is a new Congress now. And those bills have no effective law. And we are --

WALLACE: I know. But you never passed anything.

MCCASKILL: -- dealing with this in five -- but we will -- we will vote on something this week. And it will be a balanced approach. It will do both spending cuts, and it will close some loopholes -- some really important loopholes that need to be closed just from the sense of fairness in our tax code.

WALLACE: OK, we're going to pick up on that in a second. But I want to go back to what Senator Coburn said, because the president says all kinds of terrible things are going to happen if these triggers, if these sequester cuts kick in.

Take a look.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: Are Republicans in Congress really willing to let these cuts fall on our kids' schools and mental health care just to protect tax loopholes for corporate jet owners?

(END VIDEO CLIP)

WALLACE: Senator Coburn, is the president exaggerating the impact of these cuts?

COBURN: Absolutely. And, you see the typical set up a straw man.

Look, the federal government is twice the size it was 11 years ago. We are spending almost $4,000 per person, per year, coming out of the federal government, $12,000. The average family is on the hook for unfunded liabilities in, quote, "in excess of three quarters of a million dollars per family."

And what sequestration is, it's a terrible way to cut spending. I don't disagree with that. But to not cut 2.5 percent out of the total budget over a year when it's twice the size it was 10 years ago? Give me a break.

The American people, you know, we see all these claims about what a tragedy it's going to be. The great example is, is if the secretary of transportation can assure us all the planes are going to be safe, then the Department of Homeland Security can assure us that we can get through the airports on time. They have plenty of flexibility in terms of discretion on how they spend money. There are easy ways to cut this money that the American people will never feel.

What you hear is an outrage because nobody wants to cut spending except -- and it will be somewhat painful, but, not cutting spending is going to be disastrous for our country.

WALLACE: Let me -- let me pick up with Senator McCaskill. Because, as you just heard Republicans say the problem is that the president isn't serious about cutting spending, Senator McCaskill. Let's watch.

(BEGIN VIDEO CLIP)

SEN. JOHN HOEVEN, R-N.D.: House Republicans have already passed two bills to replace the president's sequester. So, the question is, why won't he work with us? And, the answer, quite simply, is because he wants higher taxes.

(END VIDEO CLIP)

WALLACE: Now, I know you talk about a balanced approach. But, clearly, the Republicans aren't going to agree to that. Not saying who's right or who's wrong, but, Senator McCaskill, Republicans are talking about passing something this week that would give agencies, give departments, more flexibility, to set priorities so that the cuts could be made according to what makes sense and what doesn't make sense, instead of across-the-board.

You have supported this idea, but the White House opposes transfer authority.

What sense does that make?

MCCASKILL: Well -- here's really what's going on. You have as usual in Washington, a large kabuki going on about who can get blamed. There is no question that these cuts are going to be painful and they are thoughtless. And I know Tom Coburn and I agree on that.

We also agree we need to do more spending cutting. We've got to cut more spending. We agree on that.

So, why is it that we can't come to the table and agree what cuts need to happen? That's what we should be doing. We shouldn't be passing the blame to the executive branch, or saying this is Obama's sequester.

The Republicans supported this, I supported it. We need to come together and make the right cuts.

And, frankly, Ash Carter at the Department of Defense said, even if we did some kind of flexibility move at the 11th hour, it's too little, too late in terms of what they've got in motion at the Department of Defense.

WALLACE: But -- I understand that. But -- wait, wait. Senator --

(CROSSTALK)

COBURN: Chris, I want to jump in.

WALLACE: Well, let me just -- let me just ask the question.

COBURN: I did not support this.

WALLACE: Senator Coburn, let me get me just ask Senator McCaskill this question: you're not going to get an agreement on those cuts in the next five days. The sequester is going to go through. So, the question is, why not give agency heads more flexibility so they can decide, I'm going to cut more of this and less of that?

MCCASKILL: Well, I think right now, the way this is set up, there are going to be cuts, a lot of places, and there will be some flexibility. And I think we're going to look at a number of things this week.

But it doesn't take away the real need we have. And I know Tom Coburn agrees with me on this -- we've got a much bigger problem down the line in terms of reducing our debt than just what we face this week. So, why not take offer, the very specific offer the president has on the table, that that does cut some entitlements, that does do more in terms of working on the long term debt?

And let's get a big deal, let's fund the government, let's quit careening from crisis to crisis that, frankly, hurts confidence of investors across this country and hurts our economy.

WALLACE: Senator Coburn?

COBURN: Well, I think, first of all, the crisis is made up. It's been created. I didn't support the sequester because that's a stupid way to cut spending. And I didn't support increasing the debt limit because there is no such thing as the debt limit in this country, because we always raise it.

But the fact is, is we have tons, hundreds of billions of dollars, of fat and waste and excess in the federal government. And we ought to be about cutting some of it out.

We're -- you are seeing the political game go. There is no reason that we don't go on and cut spending, even across the sequestration. Some of it is not smart. But it's the only way Washington, Republicans and Democrats, are ever going to get out of both parties, some spending cuts.

And, the reason there is no agreement is because there's no leadership from the president on actually recognizing what the problem is.

And the problem is, is an excessive, bloated, big federal government that's highly inefficient and highly ineffective.

WALLACE: Senator McCaskill, isn't there a danger for the Democrats that -- this is not a cliff. This is not like the debt ceiling where we immediately go into default. As Senator Coburn pointed out, it's only going to be about $44 billion of cuts in the rest of this fiscal year and they are going to happen rather slowly.

Isn't there a danger for Republicans, people won't feel the pain and they'll say, "You know what, we can shrink the size of government"?

MCCASKILL: Well, I think that there is -- there are several dangers that are looming. The biggest danger is that we've got a dysfunctional Congress that can't compromise. I'm proud to be part of the moderate middle. I'm happy to work with Tom Coburn -- and we have worked on ways to make our government more responsible to taxpayers.

But that's really at the heart of this, Chris. You've got some loopholes. Right now, a guy making $3 million at one end of the hall, managing a hedge fund, pays 20 percent.

And the guy at the other ends of the hall, managing an insurance company, pays north of 35 percent. That's dumb.

We need to fix these things. We need to come together in a moderate middle, have a balanced approach that fixes some of these loopholes, gains some revenue that continue to focus on getting at the waste that Tom Coburn and I agree about.

WALLACE: We are beginning to run out of time. I want to talk about a couple of other issues -- the nomination of Chuck Hagel to be defense secretary comes up this week.

Senator McCaskill, you are a member of Armed Services. You voted for Hagel in committee.

I want to play, though, one of a number of rocky moments that he had during his hearing.

(BEGIN VIDEO CLIP)

CHUCK HAGEL, DEFENSE SECRETARY NOMINEE: I support the president's strong position on containment.

I've just been handed a note that I misspoke and said, I supported the president's position on containment. If I said that, it meant to say, that I obviously -- his position on containment, we don't have a position on containment.

SEN. CARL LEVIN, D-MICH., CHAIRMAN, ARMED SERVICES COMMITTEE: Just to make sure your correction is clear, we do have a position on containment, which is, we do not favor containment.

(END VIDEO CLIP)

WALLACE: Senator McCaskill, during the hearing, Senator Hagel also said that Iran has, a quote, "elected, legitimate government."

Just on a question of competence, just on the question of knowledge, do you really have no second thoughts about Chuck Hagel as secretary of defense?

MCCASKILL: The president was just reelected by the American people. And he has selected a man who is very qualified to be secretary of defense. His resume from his time as an enlisted soldier, fighting in a war with great bravery and decoration, to running the USO, to serving on a variety of different important bodies that deal with national defense policy -- the president wants him in the room as he's making important decisions.

He has -- there is no question about his integrity or his character. I think the president deserves to have the cabinet he wants, as long as the person is qualified, and there are no -- there's no question of how strong his character and integrity are.

I think it's unfortunate, some of the things -- did he have the best day that day? Of course not. It wasn't a great performance in front of the committee. But, having said that, he's qualified, he is -- I think it is despicable the way his character has been impugned by some people through innuendo and inference without any shred of evidence.

WALLACE: I'm not impugning his character, I'm just impugning his competence.

MCCASKILL: No, but Senator Cruz did.

WALLACE: Or questioning his competence, to put it more properly. I mean, I know --

MCCASKILL: No, he said --

WALLACE: -- I know what the administration's policy is on prevention. You know it. He didn't.

MCCASKILL: Well, I think he misspoke, the way he said it. And, you know, was that -- should he be disqualified after a lifetime of service and a resume that clearly supports this position? Should he be disqualified because he wasn't as articulate in the committee as he should have been? I don't think he should be, and I think it's time for us to come together and unite behind him so he can do the best job possible keeping our country safe.

WALLACE: Senator Coburn, we're running out of time. I've got to ask you two quick questions.

First of all, you are one of 15 Republican senators who sent a letter to the president this week asking him to pull the nomination. Having said that, we have Senator Shelby, Senator McCain saying they are no longer going to block his nomination. Do you agree that Hagel will be confirmed this week?

COBURN: Yes, he might be. But the danger for our country and the lack of leadership by the president is recognizing that he doesn't have the confidence of the vast majority of the Senate, which weakens him in that position.

I like Chuck Hagel as an individual, but the fact is, in modern times, we haven't had one defense secretary that's had more than three votes against him. And you're going to have 40 votes against him, or 35 votes. And that sends a signal to our allies as well as our foes that he does not have broad support in the U.S. Congress, which limits his ability to carry out his job.

WALLACE: And finally, Senator Coburn, a bipartisan group of senators is reportedly close to a deal to greatly expand background checks of almost all gun sales. But the hold-up is the question of whether or not the government should keep records of those sales.

Question: you are a member of this group. How close are you to a deal and what's the problem with keeping records?

COBURN: Well, I don't think we're that close to a deal, and there absolutely will not be recordkeeping on legitimate, law-abiding gun owners in this country. And if they want to eliminate the benefits of actually trying to prevent the sales to people who are mentally ill and to criminals, all they have to do is create a recordkeeping, and that will kill this bill.

So, if you really want to improve it, you have to eliminate the recordkeeping and give people the right and the responsibility to do the right thing and, that's check on the NCIS list to make sure you're not selling a gun to somebody who is in one of those two categories.

WALLACE: Senator McCaskill, Senator Coburn, we want to thank you both so much. Thanks for joining us today and we will be counting down to the Friday deadline for those big spending cuts. Thank you both.

Up next, two governors tell us what impact the sequester will have in their states.


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