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December 02, 2007

Karl Rove, Chris Van Hollen, Roundtable

Fox News Sunday

CHRIS WALLACE, HOST: I'm Chris Wallace and this is "Fox News Sunday."

One month to Iowa. Which party has the edge on key issues? We'll talk strategy with two political powerhouses -- Karl Rove, the architect of President Bush's two election victories, and Congressman Chris Van Hollen, in charge of holding on to the House Democratic majority. It's a "Fox News Sunday You Decide '08" exclusive.

Then could big business solve some of government's toughest problems? We'll get some answers as we continue our "American Leaders" series with Fred Smith, founder and CEO of FedEx.

Also, the presidential frontrunners run into trouble. We'll sort it out with our Sunday panel -- Fred Barnes, Mara Liasson, Bill Kristol and Nina Easton.

And our Power Player of the Week is in charge of some of the nation's greatest treasures, all right now on "Fox News Sunday."

And good morning again from Fox News in Washington. Well, with the Iowa caucuses now just one month away, we've brought in two of the sharpest minds in American politics to debate how the coming campaign will play out -- Karl Rove, the mastermind behind President Bush's victories in 2000 and 2004, and Congressman Chris Van Hollen, the man in charge of keeping Democratic control of the House next year.

And, gentlemen, welcome back to "Fox News Sunday." Let's start with something I think that's familiar to both of you, and those are public opinion polls. When voters are asked the generic question, "Who do you favor for president," they pick the Democrat by a margin of 43 percent to 34 percent.

And when asked which party they want to control Congress, they pick the Democrats again by nine points.

Mr. Rove, how do you turn what sure looks like a strong Democratic trend for 2008 into a Republican victory?

ROVE: Yeah. Well, if you look at the polls that match the leading Democrat against leading Republicans, the margin that the Democrats enjoy disappears or gets very, very narrow.

And similarly, generic ballot matters a lot. In 1994, the Republicans had a six-point advantage on the generic ballot and picked up 60 seats in the House. Last time around, the Democrats had a generic advantage on the ballot of 13 and picked up 30 seats. So it does have an impact. And the question for both parties is going to be what do they do between now and next September, October and November in order to demonstrate a positive and optimistic agenda that causes people to say, "Well, you know what? I want that person who represents that party in my district to receive my vote."

WALLACE: And what from the Republican point of view would be the positive optimistic agenda?

ROVE: Well, first of all, taxes and spending, because this current Congress has got a lousy record on both.

The Republicans, though, also have to begin to deal in a very visible and vocal and powerful way with issues that people care about and talk about around the kitchen table like, "What about the cost of my health care? How can my kid go to college? What do we do to create more jobs and energy in America?"

And I'm confident, seeing our candidates around the country and seeing our presidential candidates, that there's a willingness to engage in these issues which heretofore Republicans have got good ideas about but have not been willing to talk about.

WALLACE: Congressman Van Hollen, have you heard anything from Mr. Rove there that scares you?

VAN HOLLEN: No, I haven't. Look. The polls clearly show that people prefer Democratic leadership around the country. They prefer Democratic leadership in Congress to Republican leadership in Congress.

And it's pretty clear that they prefer and are more confident in the Democratic positions on key issues important to them on both domestic policy, national security and foreign policy issues. We continue to have the political momentum coming off the midterm congressional elections.

You see Republicans retiring from Congress in droves. Senator Lott and Denny Hastert, former speaker, couldn't even wait around to finish their terms. You've got another 17 Republican House members that are retired.

We have a large financial advantage over the Republican Committee in terms of what we have to support our candidates. That's because of the fact that we have a lot of energy on our side.

And when I think our Republican colleagues thought we would be playing defense going into these next elections, in fact, we've been very much on offense. We're not just consolidating our gains. We've put more than 40 Republican seats in play.

WALLACE: I'm going to let you respond to that, but I'm going to throw one other thing into the mix, Mr. Rove.

Let me show you another set of polls that we have. The president's job approval is now down to 36 percent. But Congress' is even lower, as you can see there, 26 percent.

So -- and let me start with you, Mr. Rove, and you can respond to this and that -- which is a bigger burden, Mr. Bush for the Republicans or the Democratic Congress for the Democrats?

ROVE: Well, the Democrat Congress will be on the ballot. President Bush won't be. And look. They've got momentum. I grant you that.

They have momentum that went from very high ratings immediately after the 2000 elections to that record low number today.

And it's because they have proposed big taxes, big spending, have failed to support our troops in the war, are undermining our intelligence collection efforts, have shut the Republicans out of any meaningful discussions to move the country ahead as they had promised to do during the campaign, and have demonstrated an utter lack of fiscal responsibility by recommending $205 billion in additional spending over the next four years and two of the biggest tax increases in American history -- the repeal of the Bush tax cuts, which is over $1 trillion in tax increases, and then a tax reform plan from the Ways and Means Committee chairman which is $1 trillion in additional taxes.

That's why they have gone from very high to very low. That momentum is going in the wrong way. Now, you may have more money than the Democratic Congressional -- than the Republican Congressional Campaign Committee today, but the RNC has more money than the DNC.

And let's see where the individual candidates are when it really matters next September or October. And I'm confident...

(CROSSTALK)

ROVE: And I'm confident the Republican candidates are going to have enough money to make enough damage out of this record to make gains in the Congress.

VAN HOLLEN: Look. Look. The fact of the matter is the new Congress has done lots of good things. We understand there are a lot more things to do.

We have made college more affordable. I know they don't seem to apparently care about that on the Republican side. They cut federal support for college by $13 billion when they were in charge. We did something.

We increased the minimum wage. We've finally enacted the 9/11 Commission recommendations. We've done a host of things. We are cutting taxes for the middle class. They left hanging -- the Republican Congress left -- a tax tsunami hanging over the heads of the American people.

Now, here's what's going on on those numbers. The fact of the matter is people are frustrated that we haven't made more change. We haven't been able to enact the SCHIP legislation, children's health. We haven't been able to enact stem cell research to look into cures for diseases that plague every American family. And most of all, we have not been able to change direction in the president's disastrous policy in Iraq.

But the American people are smart. They understand who is blocking change in those areas. They see that the president vetoed SCHIP, that he vetoed stem cell research, and that he vetoed a change in direction in Iraq.

The president and his Republican allies represent the status quo. The American people want to see a change in direction. And the frustration with Congress is that things haven't moved more quickly, but people understand who's responsible.

WALLACE: Let's -- because there's a lot of stuff out there, so let's hone in on a couple of things, and let's talk, first of all, about the economy, spending, taxes.

Congressman, all the Democratic presidential candidates, as Mr. Rove points out, talk about letting the Bush tax cuts expire. The Democratic chairman of House Ways and Means, Charlie Rangel, is proposing an income surtax on couples making more than $200,000 a year.

Won't people like Karl Rove be able to say, as they've said over and over again, your party will raise taxes, his won't?

VAN HOLLEN: We will not raise taxes, and if you look...

(LAUGHTER)

No, no, no. If you look at...

ROVE: Oh, no, no, no, no. Wait a minute.

VAN HOLLEN: Wait. You tell me -- wait, wait, wait, wait. Karl, wait. No, no, listen. The question was to me.

Look. The Joint Tax Committee made it very clear -- they did an assessment of the Rangel proposal, and it doesn't raise one penny in revenue. What it does is say, "We're going to give broad middle America a tax cut." That's what it says.

ROVE: Well, it raises...

VAN HOLLEN: We're not going to -- we're not going to...

ROVE: ... $1 trillion in taxes...

VAN HOLLEN: ... we're not going to spend -- no, but it doesn't...

ROVE: ... on people...

VAN HOLLEN: ...it doesn't increase the... ROVE: And look.

VAN HOLLEN: ... deficit one penny.

ROVE: Oh, come on. Come on, Chris. Come on.

VAN HOLLEN: Karl, that's the number from the...

ROVE: I'd be happy -- I'd be happy to answer your question...

VAN HOLLEN: Karl?

ROVE: ... if you'll give me a chance.

VAN HOLLEN: Well, the question came to me. And the fact of the matter is...

ROVE: Well, you've asked a question to me, and...

VAN HOLLEN: ... under the Rangel proposal....

ROVE: ... I'd be happy to answer it.

VAN HOLLEN: ... which is...

ROVE: You have -- your party is...

WALLACE: Wait, wait, wait, wait. OK. Let's talk -- wait.

Congressman, I think you made your point. Let me let him just talk about -- I promise you'll get another shot.

ROVE: Your party is in favor of -- your chairman of your committee said there's not a single one of the Bush tax cuts worth preserving.

That means that everybody in America who has a child is going to pay $500 more when that child tax credit goes away, $500 more per child. That means the bottom rate, which is 10 percent, is now going to go to 15 percent.

It means that all the small tax breaks -- small business tax breaks are going to go away and the average small business is going to pay $4,000 more a year.

And in addition to that, your Congress this year has not been able to take care of fixing the AMT. We have 25...

WALLACE: That's the Alternative Minimum Tax.

(CROSSTALK)

ROVE: We have 25 -- we have 25 million Americans who are at risk of paying $2,000 more a year in taxes.

WALLACE: All right. That's it. ROVE: We had the IRS...

WALLACE: Congressman...

(CROSSTALK)

WALLACE: Wait, wait, wait, wait.

Congressman Van Hollen, you're up.

ROVE: ... the IRS say that $87 billion in tax refunds are waiting for you all to act.

VAN HOLLEN: And why is that? It's because the Republican Congress...

ROVE: Oh, come on.

VAN HOLLEN: ... left town with a...

WALLACE: Wait, wait. Let him finish.

VAN HOLLEN: ... a tax tsunami...

WALLACE: Karl, let him finish.

VAN HOLLEN: ... a tax tsunami about to crash down on the heads of the American people. The AMT is going to hit 24...

ROVE: And you've had a year to fix it.

VAN HOLLEN: ... 24 million...

ROVE: You've had a year to fix it.

VAN HOLLEN: ... and we will have it fixed before the end...

ROVE: We have proposed -- we have proposed...

VAN HOLLEN: You left...

WALLACE: Wait, wait, wait.

Mr. Rove?

(CROSSTALK)

WALLACE: Wait, wait.

(CROSSTALK)

WALLACE: Mr. Rove?

(CROSSTALK)

VAN HOLLEN: Listen up here. Listen up here just for a minute. You guys spent six years providing great tax relief for the people at the highest end of the economic income ladder, the richest people in America.

We are proposing tax relief for the broad middle America. Under that plan, 93 million American families will get a tax cut. One and a half million will have some tax loopholes closed. And we are in favor of extending the child tax credit...

WALLACE: Let me...

VAN HOLLEN: ... and dealing with...

(CROSSTALK)

WALLACE: Gentlemen. Gentlemen. I am going to...

(CROSSTALK)

WALLACE: Congressman? Mr. Rove? I'm going to pretend that I'm in control of this situation.

I want to ask you about a different aspect of that, which is the economy, because one of the things that I think you'd agree the Republicans have had going for them for the last seven years has been a strong economy.

Now you've got high gas prices. You've got a housing slump. You've got a credit crunch. Ben Bernanke, the Federal Reserve chairman who was a Bush appointee, keeps talking about a significant economic slowdown.

If you have the economy getting worse plus a continuing war, aren't you guys doomed?

ROVE: No. Look. The war is going better. And look. The economy -- people understand that when you have a Democrat Congress intent on spending more and raising taxes that that's not good for the economy, and they'll understand that it's the answers proposed by the Democrats of more taxes, more spending, more government regulation, and less support for our military that's bad for America.

WALLACE: OK.

VAN HOLLEN: Look. They had six years to get it right. They saw the problems on the economy coming down the pike. They did nothing about it.

When you're talking about the war...

ROVE: Chris, you really need to...

VAN HOLLEN: Karl, Karl, I do hope -- I do hope...

ROVE: Do you really need to...

VAN HOLLEN: I hope you'll take this opportunity, though, to retract the outrageous statements you made suggesting that the Congress pushed the president to vote on the Iraq war resolution during the election, because I was running in 2002.

And I was opposed to the war from the beginning. I didn't think we should give the president a blank check. The president was out there saying to candidates and incumbents leading up to the election, "You guys got to support this resolution." And it was in the context of the election.

Now you've tried to suggest and revise history here. Clearly, things have not gone right in Iraq, and you have tried to revise history and suggest that the Congress got ahead of the president on the Iraq war resolution.

ROVE: Well, no, that's not what I said. What I said was that the general conventional wisdom is that the president was the only person pushing the Congress to vote on the war resolution before the November election.

And that's simply not true. Tom Daschle in June said there's broad support for regime change in Iraq.

WALLACE: That's in June of 2002.

ROVE: June of 2002. The question is how do we do -- and when do we do it.

On July 31st, in a news conference, by which time he'd already signaled he wanted a vote in the fall, he said, "I would also say that I think it would be a big mistake for the administration to act without Congress' involvement."

On September 16th, he goes on CNN and says, quote, "I think there will be a vote well before the election, and I think it's important that we work together to achieve it."

WALLACE: Gentlemen...

ROVE: And then goes on...

WALLACE: Do we really think when we're talking about 2008 that we need to go back and rehearse...

ROVE: Well, I'd like...

WALLACE: ... what happened...

ROVE: ... I'd like...

WALLACE: ... in 2002?

ROVE: ... I'd like a chance to set the record straight. Mr. Van Hollen had adequate time to make his charge. I'd like just a few more seconds to make the point.

He then said I'm going to meet with the president on Wednesday morning. The next day, Tuesday, he goes on the air and says, "Look, I called the White House and urged them to work with us so we could have a clear understanding of what their strategy is."

The administration has made clear that they have made -- that it has made it clear that they have made no decision about it, he told Gwen Ifill.

He then went on...

WALLACE: All right. All right.

(CROSSTALK)

VAN HOLLEN: If I could just have one quick rebuttal.

WALLACE: Wait, wait.

VAN HOLLEN: Look.

WALLACE: Wait.

VAN HOLLEN: Look. Let me just read what Ari Fleischer said. He was obviously the press secretary.

WALLACE: One quote.

VAN HOLLEN: It was definitely the Bush administration that set it in motion and determined the timing, not the Congress. I think Karl, in this instance...

ROVE: I disagree.

VAN HOLLEN: ... just has his facts wrong.

ROVE: I disagree with my colleague. And the fact of the matter is I suspect Ari is not aware of and was not privileged...

WALLACE: All right.

ROVE: ... in this conversation...

(CROSSTALK)

WALLACE: Gentlemen. Gentlemen.

(CROSSTALK)

ROVE: And I was in the middle of the White House and saw these comments...

(CROSSTALK)

WALLACE: Gentlemen, let's move to where the war is now. And Congressman John Murtha, one of the top Democratic war critics, just came back from Iraq and said the surge is starting to work.

Doesn't your party run the risk that the war by next November will either look pretty good or just not be as big an issue?

VAN HOLLEN: Well, look. We obviously hope things go well in Iraq. And the fact that there's been a reduction in violence is a good thing.

The problem from the administration's point of view and all of our perspective is that that has never been the goal of the surge.

The goal of the surge was to create the political space for the Iraqis to make the political reconciliation that is necessary for what every general on the ground has said can only be a political solution, not a military solution.

That's why General Sanchez, who was the guy on the ground, supported the position the Democrats have taken, which is we can't say to the Iraqis, "We're going to be there forever."

We have to make it clear to them that they have to make the political compromises that are necessary to achieve stability in Iraq.

WALLACE: Mr. Rove, the recent poll found that the number of Americans who think the war is going well is up sharply.

On the other hand, that same poll found that a sizable majority of the American public still wants the troops home faster than President Bush is calling for it.

Isn't the war, no matter how it goes, going to be a drag on the Republican Party?

ROVE: No. And incidentally, that same poll that you're referring to also found that the position of Democrats like Van Hollen -- get out precipitously -- drew a very small minority of the American people.

That's why, frankly, when they brought up the Democrat war policy in the McGovern amendment, they got 171 votes in the House. Fifteen of the freshmen Democrats whom he helped elect in the last election voted against the Democrat position of the leadership on precipitous withdrawal.

The war in Iraq is vital to the security interests of the United States of America. And the American people will support that war policy as long as it is succeeding, as long as that policy is aimed toward victory, and as long as they have the assurance that as we succeed, we're going to be able to return combat brigades.

And that's exactly what's happening now. Fifty-seven hundred combat troops will be out of Iraq by the end of the year because it's succeeding. And when it's succeeding...

(CROSSTALK)

WALLACE: Congressman Van Hollen?

VAN HOLLEN: The two biggest winners in the war in Iraq have been Osama bin Laden and Al Qaida because we just got distracted in Iraq. We never finished the job.

It is now six years, seven years after 9-11-2001, and we have still not gotten the guy who perpetrated the attacks. That's one of the reasons the Republicans have lost credibility on national security.

The other big winner has been Iran. Now, the Democratic proposal does not call for precipitous withdrawal. We say, "Mr. President, here's the funds to begin a responsible and safe redeployment of forces with the goal of getting U.S. combat troops out of Iraq by December of next year...

WALLACE: Gentlemen, I want to finish up...

VAN HOLLEN: ... and leaving antiterrorist forces...

WALLACE: I want to finish up by going back to the polls.

VAN HOLLEN: ... training forces and other forces for critical missions."

WALLACE: Let's put up on the screen the Rasmussen Report's national tracking poll. It now shows that Clinton, Senator Clinton, is leading Barack Obama by just nine points. This is the national poll.

She's been up by double digits for a long time. In New Hampshire, she leads by just 7 points. And in the latest Des Moines Register poll, she's actually losing in Iowa by 3 points.

On the Republican side, Rudy Giuliani down now nationally to 24 percent, and he isn't leading in any of the first three states.

Let me ask you both, and start with you, Mr. Rove, are both frontrunners in trouble now? ROVE: I think they could be. And I think both of them are going to face difficulties in Iowa. And the question is going to be for both parties is whoever wins Iowa, if it's not the frontrunner, are they able to carry that through to the following primaries, have a bandwagon effect.

And it's going to be very troublesome for both parties' frontrunners, because we're in uncharted territory. There's very little time between these primaries.

You have a caucus on Monday, a primary on Tuesday, a primary on the following Tuesday, a primary on the following Saturday. These things are going to happen just like that.

On the Republican side, between the 2nd of February and the 5th of February, there are going to be 22 contests. Twenty-two states are going to choose their delegates.

WALLACE: So do you think Giuliani is in trouble?

ROVE: I think it's going to be interesting. You can make the case conventionally that both parties' incumbents are in trouble, because before what has happened is...

WALLACE: The frontrunners.

ROVE: Yeah, both parties' frontrunners are in trouble because if they lost, then that would give whoever beat them a chance to get some momentum in the states because there was distance between those primaries.

What happens when they're all close together? Do they have the same opportunity to gain national momentum? And frankly, I don't know.

WALLACE: Congressman Van Hollen?

VAN HOLLEN: Well, I think the situation is very fluid. I mean, this is something we can probably agree on. I mean, the situation is very fluid in the early primaries. You can see that in the polls in Iowa. You can see it in New Hampshire. Things are bouncing around.

It's unclear what kind of bounce people will get in this compressed schedule.

WALLACE: Do you think that Senator Clinton, who has been inevitable for so many months -- that that crown is being knocked off her head a little bit?

VAN HOLLEN: No, I don't know if it's being knocked off. Again, she is leading the national polls. The question is what happens when you get down to things like the Iowa caucuses and people go into the living rooms of people.

ROVE: Real quickly?

VAN HOLLEN: And again, I think it's just a very fluid situation.

ROVE: Yeah, real disturbing for Clinton has got to be that the Iowa polls are starting now to show that Obama is taking a lead in Iowa. And if I were her, I'd be concerned about that, because there are real difficulties.

If Obama knocks, you know, the cap of inevitability off of her, which is what she's built a lot of her candidacy on, then she could have a real race.

WALLACE: All right. We're going to have to leave it there. Would you guys come back?

VAN HOLLEN: Be happy to.

ROVE: As long as he doesn't keep touching me like this.

VAN HOLLEN: I don't know, we're just trying to make sure we keep you constrained and in check.

WALLACE: Thank you both for coming on -- please come back -- and helping us game out the campaign. This was fascinating.

VAN HOLLEN: Thank you.

WALLACE: Up next, his company revolutionized part of the U.S. economy. Now what can this American leader do to help make the federal government work better? We'll hear from the head of FedEx when we come back.

(COMMERCIAL BREAK)

WALLACE: We continue our ongoing series "American Leaders" now where we reach out beyond the Beltway to talk with some of the country's most interesting and innovative people.

We're joined by Fred Smith, the founder and CEO of FedEx, the company that radically changed how the world ships packages.

And, Mr. Smith, welcome to "Fox News Sunday."

SMITH: Thank you very much.

WALLACE: Let's start with a clip from Republican presidential candidate Mike Huckabee who, on the campaign trail, brings up FedEx in the context of the government's failure to track the 12 million illegal immigrants around the country. Take a look.

(BEGIN VIDEO CLIP)

MIKE HUCKABEE, FORMER GOVERNOR OF ARKANSAS: We've got a government that says we don't know what to do and how to keep up with people. If necessary, we ought to outsource this whole issue to FedEx and UPS. They seem to have a better way of keeping up with packages than our government does with people.

(END VIDEO CLIP)

WALLACE: Now, I don't know if you consider that a serious proposal or not, but when you look at the government as a business executive, do you see practices and principles that you think could be applied to government to make it run more efficiently?

SMITH: Well, of course. I think that the industry of the United States has proven, just like Governor Huckabee mentioned, that using information technology is possible to handle very large problems.

There are structural issues inside the federal government that prevents it from doing so, but technologically, it's very feasible.

WALLACE: I mean, are there things that as you sit down there in Memphis and you look at here in Washington that you just shake your head and go, "Man, if I were running that agency or that operation, I could change it?"

SMITH: Well, I don't think that I'm that...

WALLACE: I'm not asking you if you're running for office today.

SMITH: Yeah, but of course. I think anybody that's in the private sector understands that there is a lot of built-in inefficiency in government, and that perplexes a lot of people.

WALLACE: Give us an example.

SMITH: Well, the procurement system in the Department of Defense is built around not making a mistake, not having someone make money from the federal government that shouldn't and so forth. It's very risk averse.

And I think in the private sector, you would see a structure that's much more cost-effective rather than trying to prevent error. And those end up with having radically different results.

WALLACE: FedEx handles, and I was amazed when I read this yesterday, more than six million shipments around the world every day.

As you chart that these days, can you get a sense of how the U.S. economy and the world economy are doing?

SMITH: Of course. I think FedEx is a very good indicator of the economy around the world. We have this enormous global system. And we do have a very good insight on that.

WALLACE: So tell us what you see, because you've cut your profit forecast for FedEx recently. How much trouble is the U.S. economy in? And how much are you depending on increased growth from countries like China and India?

SMITH: Well, the U.S. economy has clearly slowed down. In 2002, the country spent about 3 cents out of every dollar on petroleum. And this year, it will be well over 6 cents. That means we're sending about $400 billion a year offshore that we weren't before. That's clearly cut into the ability of the American consumer, particularly the paycheck-to- paycheck consumer, to buy products in this country.

So the economy is slower, but I don't think that it's going to go into some precipitous decline. FedEx is a global company, as you mentioned, and we are seeing robust growth in other parts of the world.

WALLACE: When you talk about -- I mean, I think we all know that high oil prices, energy prices, are bad for the economy. But do you see it as the CEO of FedEx? I mean, is there -- what do you see slowing down in this country? Are there fewer shipments of packages?

SMITH: Well, there are growth rates that are not as strong as they were before. I mean, we're still growing, but just not to the same degree that we were before, which points to the strength of the American economy.

But the financial crisis around housing and the automotive decline -- they'll sell about a million cars less in this country over the 12 months that we're in than the year before. That's a lot of production and economic activity because of the run-up in fuel prices.

WALLACE: I want to talk with you -- and it's the whole point of the "American Leaders" series, to pick your brain and the brain of people like you -- about how you create a corporate culture.

You started FedEx as the world's first overnight express delivery system in 1971. You show up regularly now on lists of the world's most admired companies.

You have something that you call the "purple promise" to try to get maximum effort by your 280,000 workers. What is that? And how do you make that work every day?

SMITH: Well, the "purple promise" is very simple. It simply says I will make every FedEx experience outstanding.

We're trying to get all of those 280,000 team members to focus on the customer, to do their part of our daily job exactly the way the customer would like to have it done.

And on the other side of the coin, we spend an enormous amount of time trying to look after our folks. We are routinely noted as being a wonderful place to work, and our philosophy of putting our people first is integral to meeting those customer expectations.

WALLACE: But give us a couple of specifics. How do you do that? I mean, everybody has -- we want everybody to have a good experience in our company. But how do you do that to make sure that the employee is invested in that mission?

SMITH: Well, we do it in a lot of ways. First of all, virtually everyone has some of their compensation related to how well the company is doing, either directly related to the number of shipments that we are carrying or the company's profitability.

Secondarily, we offer promotional opportunities to all of our employees. The heads of many of our business units started off as package handlers, you know, years ago, and now they're corporate executives.

We try to instill a sense of equity and fairness in the workplace. We try to communicate with our folks and keep them involved. We spend a lot of time working on that culture to keep that "purple promise."

WALLACE: You also say -- and you mentioned before that one of your problems with government is you think it's too conservative in its business principles.

You say a successful company has to engage in constant change. Don't be afraid of risk and even of some failures. Explain.

SMITH: Well, in business, the record is very, very clear. The riskiest strategy is to try to avoid risk altogether.

Two thousand years ago, the Romans were talking about the inevitability of change, and the private sector in our country has been able to embrace change. That's been one of the strengths of our economy.

Government finds it very, very difficult to change in accordance with changed circumstances.

WALLACE: And don't be afraid of change?

SMITH: Well, you cannot be afraid of change, because if you are afraid of it, then inevitably, something bad will occur because you didn't change.

WALLACE: Finally, you are -- and this is not as well known -- a co- owner of the Washington Redskins football team.

On a personal level, your thoughts about the tragic death this week of football player Sean Taylor. And as an executive, how do you manage an organization, an enterprise, that is rocked by this kind of senseless tragedy?

SMITH: Well, it's been an enormous burden on the team. Sean was a wonderful young man, beloved by his teammates.

I think Dan Snyder, the majority owner, has expressed that, has done a wonderful job. And Coach Gibbs has tried to deal with this tragedy in the best possible way. It's just enormous, the loss of such a fine young man.

WALLACE: But I'm sure you've had tragedies with a huge worldwide company at FedEx. How do you keep a company going? How do you keep people -- help them deal with grief, but also keep moving when you have this kind of tragedy that rocks an organization? SMITH: Well, I think the most important thing is to focus on the fact that the individual, like young Sean Taylor, was dedicated to the Washington Redskins.

In fact, his father was gracious enough to come up and talk to the team and tell them how committed he was to the Redskins and how much he enjoyed being in Washington, being a Redskin.

And that's what you've got to focus people on when there is tragedy, you know, to go forward, just like President Reagan did after the Challenger disaster.

I mean, you've got to focus on what the people gave their lives to and focus on the future.

WALLACE: Mr. Smith, we want to thank you for coming in today and giving us a perspective we don't often get. Thank you so much, sir.

SMITH: Thank you.

WALLACE: Up next, we'll go out on the campaign trail where the frontrunners in both parties have hit some potholes. We'll hear from our Sunday panel when we come right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GIULIANI: It was a typical political hit job with only half the story told, not that second part told, that every single penny was reimbursed, that all this was public.

(END VIDEO CLIP)

WALLACE: That was Republican frontrunner Rudy Giuliani defending how his security detail was paid for when he used to visit his girlfriend as mayor of New York City.

And it's time now for our Sunday panel, Fox News contributors Fred Barnes of The Weekly Standard, Mara Liasson of National Public Radio, Bill Kristol, also from The Weekly Standard, and Nina Easton, from Fortune Magazine.

So, the story broke just hours before the Republican debate this week, Politico.com reporting that Giuliani went to visit his then girlfriend, now wife, Judith out in Long Island in 1999 and that expenses for his security detail ended up being paid by obscure city agencies.

Bill, I have come to the conclusion that any story that begins presidential candidate and girlfriend are not good.

BILL KRISTOL, WEEKLY STANDARD: No, and when the follow-up story in the New York press is that, in fact, New York City police chauffeured around Judith Nathan when she was Rudy Giuliani's girlfriend or mistress, but certainly not yet married to him, in 2000 and 2001, that's not good either.

No, it was a tough week for Rudy Giuliani, and I think his path to the nomination is very problematic. He's fourth in Iowa, third in New Hampshire, falling a little bit in the national polls. He's five points ahead of Huckabee now in the Rasmussen national poll and he's not ahead in the first two states.

WALLACE: Let me just say that I got a call from Anthony Carbonetti, perhaps the aide closest to Rudy Giuliani, last night about 6:30. Two things about it. First of all, it indicated to me how worried they are, because I don't get calls from Mr. Carbonetti at 6:30 on Saturday nights.

What he said was somewhat persuasive about the idea that they were not hiding this. This is more about bookkeeping. And if I can explain it real briefly, apparently the mayor's office had a regular account with American Express.

They would pay these bills and the New York Police Department would reimburse them. At the end of the fiscal year, they would look around and see any city agencies that had extra money because, God forbid they would turn the money back to the city treasury.

They would just take that money and send it to American Express as a pre-payment to get a credit.

And when I asked him specifically was there any effort to hide these in these obscure city agencies, he said absolutely not.

Having said that, Mara, you know, the rest of the country is not going to have Anthony Carbonetti on the phone for 20 minutes.

MARA LIASSON, NPR: I think that the Giuliani campaign has a good explanation for this, but I agree with Bill. I think that any time it reminds people of his kind of checkered personal past, it's not good for him.

And he was slow to respond. The initial comments from the campaign were all "no comment." I don't think this is a huge scandal, but it adds to all those other things that are out there and that Mitt Romney has yet to start spending millions of dollars in negative ads telling people about. And I think that's what we're waiting for.

WALLACE: Fred, as I watched the Republican debate this week, I thought -- and I have to say for the first time -- that when you add his having to explain his position on immigration, having to explain his position on gun control, plus all the personal stuff, does this guy -- does Rudy Giuliani just have too much baggage for Republican voters?

FRED BARNES, WEEKLY STANDARD: Well, he's got a lot of it, and all the bookkeeping stuff aside, this flap right now is all about having an extramarital affair fairly recently in Rudy Giuliani's case.

I think that's what comes through to people and not all the questions about an American Express card and all that stuff. It's about that affair. And that hurts him.

What Rudy Giuliani needs is one thing right now, and that's for Mitt Romney not to win in Iowa. If Mike Huckabee, who is now running ahead of him in Iowa, at least in the Des Moines Register poll by five points -- if Huckabee can knock off Romney, that will help Rudy, because he's going to do better -- he's been planning on doing better in the later primaries.

He desperately needs that now, for Romney to lose, because he's the biggest threat to Romney winning the nomination. I don't think Huckabee can win the nomination, so -- but Rudy Giuliani needs his help.

WALLACE: Nina, let's turn to the Democratic frontrunner, Hillary Clinton. Everyone says that Bill Clinton is a huge asset, especially among Democratic primary voters.

But he showed the other side of that with a comment this week, and let's watch.

(BEGIN VIDEO CLIP)

BILL CLINTON: Even though I approved of Afghanistan and opposed Iraq from the beginning, I still resent that I was not asked or given the opportunity to support those soldiers.

(END VIDEO CLIP)

WALLACE: Now, it turns out that there's plenty of documentation that back in real time in 2002, 2003, Bill Clinton supported the Iraq war when it started -- at least said he did.

But the real issue -- and I wonder if this becomes a bigger issue as the campaign goes on. Are the American voters going to be comfortable with two presidents in the same White House?

NINA EASTON, FORTUNE MAGAZINE: Well, going back to this first question about Iraq, he is actually trying to slice it more narrowly. He has said in the past that he supported the resolution to go to war, but he thought the inspectors should be given more time.

Now he's saying that he actually opposed the war from the beginning but didn't want to, as an ex-president, challenge a sitting president.

All that said, look. This has been a political partnership that goes back decades, and when you look at it, you look at both sides of it. Hillary was a problem for him early in his term, whether it was "Travelgate" or the health care plan.

Now you flip that around and President Clinton will bring both the good and the ill of this partnership that they have.

The good side is brilliant political instincts. The downside is that his comments will be parsed, his record will be parsed, and she'll have to take a position on that.

It's a political partnership, though, I have to say, where she brings a focus to his sort of relentless -- focus and discipline to his energy, and he brings a sort of passion and sort of political brilliance to her.

So they've been together in this partnership for decades. WALLACE: I want to bring Bill, who's shaking his head, into this conversation. And as I do, let's take a look at the latest polls and -- we referred to it briefly -- the Des Moines Register poll.

This is probably the best poll in Iowa of likely caucus-goers. And there you see Obama now -- now, it's within the margin of error, but it's a three-point lead, Obama over Clinton, Edwards two points behind. Very interesting.

Let's look on the Republican side -- Huckabee now 5 points ahead of Romney, with Giuliani trailing.

Let's particularly focus on the Democratic side there, Bill. How much trouble is Hillary Clinton in?

KRISTOL: She's in trouble. Frontrunners sometimes lose. And they're going to lose, in my opinion, this time. They're more likely than not to lose. Obama...

WALLACE: Wait, you think that both Clinton and Giuliani will not get the nominations?

KRISTOL: Absolutely. Missouri and West Virginia lost last night, the number-one and number-two rated teams in college football, and the number- one rated people in each campaign could easily lose.

Obama could beat Hillary Clinton. I now think it's about a 50/50 proposition. He's got momentum.

WALLACE: You're not talking Iowa. You're talking for the nomination.

KRISTOL: I'm talking nationally. He's gaining a little bit in the national polls. And I actually -- just on the Republican side, Huckabee could win, McCain could win, Thompson could win. It is a wide-open five- way race.

The idea that the people are just going to anoint these frontrunners - - I was in New York last week, and everyone in New York is still obsessed with their candidates, Giuliani and Clinton.

But the rest of the country gets a vote, and I'm not sure the rest of the country really -- I'm not sure the rest of the Democrats in the country want the Clinton restoration in the White House. I think they would like a fresh start, someone who excites them. That's Obama.

LIASSON: That, I think, is the biggest problem in terms of the Bill and Hillary thing. It's that it's not new. It's old, even if it does bring certain advantages for her.

But there's a big difference between the challenges to the frontrunners on the Republican and Democratic side. On the Democratic side, you've got a challenger in Barack Obama who can go the distance. He has the money. Huckabee cannot do that even if he beats Romney in Iowa. BARNES: Well, the problem with Bill Clinton campaigning for Hillary is simply this. A cartoon that I saw a couple days ago captured a great big Bill Clinton and a little Hillary Clinton standing on his shoulder.

He completely overshadows her. He gets all the press attention. She can't control what he says, as is obvious now, and he distracts from her campaign and completely overshadows it. He does not help.

EASTON: I just want to disagree with Bill. I just think that she is -- Iowa has always been problematic for Hillary Clinton. And she's been ahead in all the other states. She maintains her lead there.

WALLACE: She's losing her lead in New Hampshire now. She's up, but by seven points.

EASTON: I still think she's -- I think that race is -- she's so much more firmly the frontrunner than -- and I think the Republican race is far more fluid.

KRISTOL: That's true to some degree, but I will buy you dinner if Hillary Clinton loses Iowa and then wins New Hampshire.

If Obama wins Iowa, he's going to win New Hampshire.

WALLACE: And let me just tell you, for this guy to be offering to pay for dinner -- I've never heard that before. That's really quite extraordinary.

All right. We have to step aside for a moment. But coming up, big elections today in Venezuela and Russia. Are democracies in the process of turning in dictatorships? We'll get some answers when we come back.

(COMMERCIAL BREAK)

WALLACE: On this day in 1954, Republican Senator Joe McCarthy was condemned by the Senate for conduct unbecoming. The Senate found his investigations of communism in government had little merit.

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

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

HUGO CHAVEZ: Let the United States know that if the so-called Operation Pincer is activated this Sunday, this Monday, or whenever, there will not be a single drop of oil for the United States.

(END VIDEO CLIP)

WALLACE: That was Venezuelan President Hugo Chavez trying to rally supporters against an alleged CIA plot as the country votes today whether to make major changes to the constitution.

And we're back now with Fred, Mara, Bill and Nina.

Well, if this referendum passes today -- and Venezuelans are right now in the process of voting on the referendum to change the constitution -- Chavez could seek reelection again and again. He says that he will be president until the year 2050. He would have more power to turn Venezuela into a socialist state.

Fred, what happens to that country if these constitutional changes are approved?

BARNES: Well, he becomes a dictator. He can rule by -- he can declare an emergency whenever he wants and again have full dictatorial powers, which he's quite capable of doing.

The good news there is that his coalition is fracturing because he's spending so much money on the military and not giving it to poor people, and there are food shortages in the grocery stores, and the coalition -- and the opposition has really grown tremendously.

The problem, of course, is that he could steal the election because he controls the whole election process. One test for a fair election is whether the opposition gets on T.V. or not, and he has a monopoly. They're not getting on T.V. at all, of course.

LIASSON: And the other thing is the last election he actually had international monitors watching this...

WALLACE: As he does this time.

LIASSON: He does?

WALLACE: He does, yeah.

LIASSON: Well, I've heard that he's let them have a lot fewer access. Look. Venezuela is losing foreign investment. Its middle class is moving out of the country.

And if he does cut off oil to the United States, he's going to have to find another number-one customer, because we are the biggest customer for Venezuelan oil.

WALLACE: Bill, let me ask you, because as Fred points out, early on it looked like he was going to win this referendum easily. Some recent polls -- and you wonder about the validity of polls in a country like Venezuela now -- show that it could be a close election.

What's your confidence that if it is close that he won't just steal it? And if he were to steal it, is the opposition strong enough to do anything about it?

KRISTOL: We don't know. I mean, I hope he loses. I hope he can't steal it. And I hope we can do enough to pressure him and others in the neighborhood can do enough to pressure him to make it hard for him to steal it.

The good news in Latin America is Chavez-ism is not sweeping Latin America. The two big countries there are Mexico and Brazil. They're on a pretty good path -- really, better than we would have predicted 15 years ago.

Colombia, a neighboring country, has been a huge success story. The single best thing the U.S. could do regardless of the outcome of this referendum would be for the Congress to pass the free trade agreement with Colombia, which would bolster a democratic regime next door to Venezuela, and a major country that is defeating drug lords and wants to be a friend of ours, being held up by the Congress for totally very narrow, self- interested reasons -- really, a disgrace.

President Bush should ask that Democratic Congress to pass the free trade agreement with Colombia this week, depending on what -- no matter what happens in Venezuela, the single best thing we could do for our Latin American policy.

WALLACE: Meanwhile, Nina, they're holding parliamentary elections in Russia today, and they're voting there as we speak, and the only question is how big a victory will Vladimir Putin's party win.

You see him there actually voting. These are parliamentary elections, not for president. He can't run for reelection as president since he's had two terms.

But the question is, "Is democracy dead in Russia?"

EASTON: And he wants 70 percent of the vote, as he got last time, and he's put out that dictate, and that's what the regional administrators are expected to meet. He's cracked down on the opposition. You know, George Bush looked him in the eye in 2001 and saw the soul mate of democracy. Well, I think we've learned since then that that's not the case.

And the administration faces the question of this is not a friend or an ally, but you have to be careful not to make them an outright adversary either. You need their help on Iran and keeping the nuclear program -- stopping it, halting it.

You need their help on Middle East peace process, which they have agreed to host the second step of, possibly direct talks between Syria and Israel.

You need their help just broadly on nonproliferation and counterterrorism issues. So it becomes this real conundrum for the administration about how you kind of jawbone at least about democracy but not make them an outright adversary.

WALLACE: Bill Kristol, is democracy dead or ailing, or what, in Russia now?

KRISTOL: Severely ailing, and I think we should have done much more to put pressure on Putin. And Russia is a much more serious problem than Venezuela, because Russia is a geo-strategic problem in the Balkans, in Russia's near abroad, in Ukraine and Georgia.

I don't think there we don't need -- they're not helping much in the Middle East peace process or anything like that. We should be tougher on Putin.

And the big danger is that China, Russia, even Venezuela, the model is being -- is developing, and it's unfortunately successfully developing, of successful autocracies with economic growth, often oil.

So the whole notion that everything is trending in the direction of democracy and that, you know, we can just sit back and sort of -- this natural historical movement's going to happen -- that's not the case.

And they now have in China and Russia -- a lot of other countries in the world unfortunately have models of autocrats who are getting away with it.

WALLACE: So, Fred, is there anything we can do about it?

BARNES: Well, Bush does have a very close relationship with Putin, and it all comes down to how that works. The only question in this election...

WALLACE: How can you say he's got a close relationship when we see opposition parties being -- people being thrown in jail, all the opposition parties get no coverage in the national media?

BARNES: I said he had a close relationship. I didn't say he had a lot of influence with Putin. Obviously, he doesn't now. And the only question in this election -- the aftermath of this election in Russia is where Putin -- is whether Vladimir Putin will rule from behind the scenes or whether he'll make himself prime minister. I suspect he'll be prime minister.

WALLACE: But in any case, he'll be in charge.

BARNES: He'll be in charge.

WALLACE: All right. We've got to leave it there. Thank you, panel. See you next week.

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