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January 27, 2008

Huckabee on "Fox News Sunday"

Fox News Sunday

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

The president and House Democrats agree on how to boost the economy, but will the deal get through the Senate, and is it enough to prevent a recession? We'll ask Treasury Secretary Henry Paulson.

Then Mike Huckabee looks for a win in Florida. How does he need to do to stay in the race for the White House? We continue our series "Choosing the President" as we sit down with Huckabee.

Plus, the Democrats battle in South Carolina. What do last night's results mean for Clinton and Obama as they head for Super Tuesday? We'll ask our Sunday regulars -- Brit Hume, Mara Liasson, Bill Kristol and Juan Williams.

And our weekly look at the ups and downs on the trail, all right now on "Fox News Sunday."

And hello again from Fox News in Washington. Well, the Bush administration and the House have come to terms on a $150 billion deal to boost the economy. But the checks to more than 100 million Americans are not yet in the mail.

Joining us now is the president's chief negotiator with Congress, Treasury Secretary Henry Paulson.

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

PAULSON: Chris, it's good to be here.

WALLACE: As we said, you've got a deal with the House, $150 billion in tax cuts to businesses as well as individuals, but now you've got to get it through the Senate. And there, both Senate Republicans and Democrats want to make some changes.

Take a look at a list of those changes. They're talking about adding on extended unemployment benefits, more for food stamps, money for heating assistance, more aid to the states for Medicaid, some infrastructure projects and some other ideas as well.

Mr. Secretary, is there anything on that list you just saw that's a deal breaker?

PAULSON: Well, Chris, the way I look at it is the American people have got to be pleased by the bipartisanship that was exhibited this last week. It was on display.

And they've got to be pleased that we reached an agreement quickly. I don't think the Senate is going to want to derail that deal. And I don't think the American public is going to have much patience for anything that slows down this process of getting money into our economy.

WALLACE: Are there some ideas that we saw in that list that would derail the deal?

PAULSON: Chris, the key here is keeping the deal simple, keeping this simple. Complexity is our enemy right here. Once you start adding things, it's a slippery slope, and the process could quickly bog down and screech to a stop here.

WALLACE: Let me ask you about this in a political sense, though.

PAULSON: Right.

WALLACE: Given the political momentum behind the deal, everybody wants this package to pass.

PAULSON: Right.

WALLACE: Won't the president have to sign whatever comes out of the Senate? Wouldn't a veto be politically impossible?

PAULSON: Listen, I don't want to cast a shadow on this rare bipartisan moment here, but I'm going to look at it the other way.

I'm going to look at it and say, "We've got something that has got support on both sides, a bipartisan agreement, an agreement that will get money into our economy quickly."

And I believe that the House leaders were very decisive at keeping it simple, and I believe and I'm optimistic that the Senate leaders will be so -- do the same.

WALLACE: But are there some lines? In other words, if you put any spending in the bill, does that gum up the works?

PAULSON: As I said, I don't want to cast a shadow on this bipartisan moment. I really don't. But remember, this is a slippery slope here.

This deal has got balance. It was able to get the support of both sides of the aisle in the House. And trust me, I looked at that list you put up on the screen of all these ideas. Those are not new ideas.

They're the same ideas we saw in the Senate -- excuse me, in the House -- the same ideas. And some of them have got virtue. Some of them have got some merit to them.

But I will tell you, this was a carefully crafted agreement. And once you start adding to it and making it look like a Christmas tree, it's going to slow down the process, and it's going to slow down what the American people want, something that's going to work quickly.

WALLACE: Let me ask you about another aspect, not those specifics, but just overall. The package that you agreed to with Congress is $150 billion. The Senate clearly wants more. Is there an upper limit? Is there a point at which you would say that this package is too big and too inflationary?

PAULSON: Well, I think we've got an optimum size here, because we've got a package that's big enough to make a difference in our economy this year, and it's not so big that it flies in the face of some of the longer- term priorities and very important long-term priority of balancing the budget.

This is a fiscally responsible package, but the one that will make a difference this year in the economy.

WALLACE: Now, one part of the deal that you admit that you don't like, even though you agreed to it, is allowing government-backed mortgage finance operations like Fannie Mae and Freddie Mac to make loans, bigger loans on bigger mortgages, without reforming the way that they do business.

Let's take a look at what you said about that.

(BEGIN VIDEO CLIP)

PAULSON: I got run down by a bipartisan steamroller. I mean, Republicans and Democrats were united on this.

(END VIDEO CLIP)

WALLACE: Question: Isn't there a danger that with this reform, with allowing Fannie Mae and Freddie Mac to take on bigger mortgages, that U.S. taxpayers could end up having to bail out and foot the bill if some of these mortgages go into default?

PAULSON: Chris, that's why it's very important that we get reform of Fannie and Freddie, and one of the things...

WALLACE: But there's no reform in this package.

PAULSON: No, there's no reform. Remember, this package is short term, and this is something that's stimulus.

But I will say Barney Frank is very committed, as is Chris Dodd, in the Senate to getting GOC (ph) reform. My concern was that if you took out the temporary increase in the loan limit, which -- for the viewers, just to explain, what this does is would allow Fannie and Freddie to securitize mortgages above conforming mortgages, $417,000.

Now, that is inconsistent with their mission, which is aimed at affordable housing, and that's high-end housing. But I...

WALLACE: They're now going to be able to go all the way up to $700,000.

PAULSON: Yes. And I don't question that there is an advantage to doing that right now, because that market is not performing as normal. So this would be a temporary increase, only until December 31. But my concern was that if you took that out of the reform process, we might not get reform. Now, I was encouraged because, you know, Barney Frank and the House already have legislation...

WALLACE: Head of House Banking.

PAULSON: Yes, House Banking, that would -- legislation that will work, and the -- you know, the Senate Banking Committee, I think, has been very constructive recently, and Chris Dodd assured me last week that he's going to work toward reform there.

But you're right. The risk you cited is a risk.

WALLACE: The risk that the U.S. taxpayer could end up having to...

PAULSON: The risk that if we separate raising the loan limit, even for a temporary period, from reform, we may not get the reform, and that reform is essential, I believe, to protect the U.S. taxpayer.

WALLACE: Let's take a bigger look, beyond the package, at the state of the economy. Martin Feldstein, who is one of the Republican gurus on the economy, said this week -- and let's put it up -- "I believe that the probability of a recession in 2008 now exceeds 50 percent. If it occurs, it could be deeper and longer than recessions of the recent past."

Is Professor Feldstein overstating the situation?

PAULSON: Listen, I've got a high regard for Marty Feldstein. What I've said is that the U.S. economy has slowed down rather significantly at year-end. It grew, as you know, at 5 percent in the third quarter.

I believe that the rate of growth is going to be much slower, but I believe the economy is going to continue to grow.

But again, rather than debating this, we all acknowledge the risks are to the downside, and the cost of doing nothing is too great. That is why it is so important that the Senate move very quickly to pass this bipartisan agreement.

WALLACE: If you get this package, if it goes through and is signed by the president by March 1st, what impact do you think it will have on the economy in terms of growth, in terms of jobs and, going back to your former life, the effect on the stock market?

PAULSON: Well, let me start off and say I hope it's passed by the Presidents' Day recess. That's a goal that Senator Reid has set.

But again, if it's passed very quickly by the Senate, I think we're going to be able to move quickly and get the money out into the economy by May, and I think that's going to make a very big difference.

Starting in May, a lot of this -- the checks available to people by midyear -- and I think that will boost jobs, boost GDP growth, make a difference in the economy this year.

And what I think will be important to the markets will be to see one in a row, you know, to see everyone coming together working quickly to get something done in Washington.

Bipartisan agreement implemented, I think, will show the American people that Republicans and Democrats are putting the economic security of the American people ahead of their own political interests.

WALLACE: The conservative editorial page of the Wall Street Journal dismissed the stimulus package on Friday in an editorial called "Re- election Stimulus."

And I want to put up at some length what the Wall Street Journal editorial said. "We doubt it will help the economy much, if at all, but then the real point of this exercise is to stimulate voters into absolving the political class of any blame for a recession."

The editorial goes on, "The most this temporary tax cut will do is goose consumer spending for a quarter or two this year. Since the IRS is saying it won't be able to cut the checks until midyear, any recession might well be over if it even begins. The money to pay for these rebates has to come from somewhere, which means from other taxpayers or from bondholders who lend money to the treasury."

Mr. Secretary, other than that, the Wall Street Journal loved the plan.

PAULSON: Right. Well, I'd like to respond in a couple ways here. First of all, this is temporary. We're dealing with making a difference this year, helping and supporting the economy this year.

If the Senate passes a program quickly, we will be able to do something that will make a difference this year. And it will add to jobs this year. It will add to confidence this year in the markets.

Now, I understand that the Wall Street Journal and many conservative economists -- and I agree with them -- believe that the most important thing we can do, intermediate and long term, are keeping taxes low, doing things that make a fundamental long-term difference.

You know, I came to Washington hoping to have a chance to really make progress on some major structural issues -- Social Security reform, Medicare reform. Those are all very, very important -- doing things that are going to increase the savings rate of Americans.

But what we're talking about here is something that's very different. It's something that's on a separate track. And it's something that can make a difference this year to our economy and help cushion the impact of the housing downturn in our economy, high oil prices on our economy, keep the economy growing and create jobs.

WALLACE: The Bush administration is also getting hit for being late in dealing with this problem in the first place. Here's what you said starting just four months ago. Let's watch.

(BEGIN VIDEO CLIP)

PAULSON: U.S. economic fundamentals are healthy, unemployment is low, wages are rising, and core inflation is contained.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

PAULSON: I have said repeatedly that I believe that this economy is going to continue to grow.

(END VIDEO CLIP)

WALLACE: Mr. Secretary, weren't you slow to realize that -- just how much of a drag the subprime situation and the credit crunch would have on the economy?

PAULSON: Chris, I don't mean to sound offensive here, but I still believe the economy is going to continue to grow. That sound bite you played was very accurate.

I think this administration has been all over this situation, beginning in -- quite early this summer with a program that was very proactive in dealing with the housing situation and the drag that puts on the economy.

Matter of fact, when I talk with economists, many of them make exactly the opposite point. They say, "Why are you pushing so hard for a stimulus package when it is not at all clear that this economy is going to stop growing?"

WALLACE: Well, that's a good question.

PAULSON: We don't have the evidence.

WALLACE: Why are you?

PAULSON: I'm saying because we see the risk to the downside and we're trying to do something that is unprecedented, which is move quickly to get ahead of this situation.

Fiscal stimulus is not a precise tool, and so what we're doing is doing everything we can to minimize the risk.

WALLACE: Finally, and I know this predates your time in Treasury, but shouldn't Washington -- and I'm not just saying the White House; the White House, the regulatory agencies, Congress -- shouldn't they have stepped in years ago when the housing bubble started to restrain the sale of risky mortgages to people who didn't understand them?

PAULSON: Chris, hindsight is 20/20. What I want to do is leave history to the historians and look forward. And my focus is on two things. First of all, when we look at housing and we look at what's going on in the capital markets right now, do things that are going to minimize the spillover to the real economy and protect Americans from as much of the downside as possible.

And then we need to be thinking about how to put policy actions in place, regulations in place, that minimize the likelihood of that happening again.

And I will tell you I'm working very hard on this right now with the President's Working Group on Financial Markets, looking at the mortgage origination process and how to change that, looking at the process that determines how mortgages are securitized and figuring out how to change that, looking at issues involving the rating agencies.

WALLACE: I didn't mean to cut you off.

PAULSON: That's OK.

WALLACE: But I want to thank you so much for coming in today, telling us where things stand. And as this continues, please come back, sir.

PAULSON: I look forward to it. Thanks.

WALLACE: Thank you.

Up next, from back of the pack to frontrunner and now back again to underdog, Mike Huckabee talks about what he needs to do in Florida and beyond to stay competitive in the race for president. We'll be right back.

(COMMERCIAL BREAK)

WALLACE: As we continue our series "Choosing the President," we are joined by former governor Mike Huckabee, who comes to us from the campaign trail in Florida, which holds its primary on Tuesday.

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

HUCKABEE: Well, Chris, it's good to still be on my feet and still plugging away and great to be back with you.

WALLACE: Let's start with the two frontrunners in Florida. John McCain says that Mitt Romney once supported a timetable for U.S. withdrawal from Iraq. Romney says McCain is being, quote, "dishonest." Who's right?

HUCKABEE: I've never known John McCain to be dishonest. He and I disagree on some issues, certainly on immigration and how we ought to build a border fence by a time certain, which I believe. I support a human life amendment. He does not.

But dishonest? I've never seen John McCain say something that was just blatantly untrue. The reason that I'm aware of Mitt Romney's statement about the secret timetable is because that was originally proposed by a senator from my state, Senator Mark Pryor.

And there are published reports that I've witnessed and seen, more than one, in which Mitt Romney did, in fact, talk about support for not a public timetable but a secret timetable that would be held by administration officials, members of Congress.

WALLACE: Governor Romney says that with the economy now the top issue in voters' minds that he's the most qualified to fix it because of his long career in business, but I understand that you are not quite so impressed by his record in the private sector.

HUCKABEE: Well, not only not as impressed with the record in the private sector, but also think that it's more important to be able to run the public sector to run a government, which I did longer than anyone running for president, Democrat or Republican.

And I steered a state through good times and bad times. We went through a recession. I saw our state go from a $200 million deficit to an $850 million surplus.

I also presided over the largest job creation in the history of my state as well as a per capita income increase of 50 percent during my tenure.

That's the kind of record people want you to be able to bring to the table when you're president of the United States. So I would argue and contend that I've really got probably the best preparation to lead this country during a time like this.

And I would also remind people that when Mitt Romney and other Republicans a few months ago in Dearborn, Michigan at the debate were talking about how great the economy was -- I was jeered and sneered, but I was the one who said, "Well, it may not be that great," and I said, "You're talking only to the people who are like you on this stage, who are at the top of the economy."

I said then, "If you'll talk to people who are driving the trucks across the interstates of America, if you talk to the people handling the bags and serving the food, they'll tell you a different story of the economy."

We often hear about trickle-down economics. Well, there's a sense in which there is a trickle-up effect of a recession. It starts and hits hardest at the people who are just making it from paycheck to paycheck.

It takes a while for it to get to Wall Street, but it hits Main Street pretty hard, and it hits them early. And I was understanding that, seeing it and predicting it. People were laughing at me then.

Now they have to admit I was right. And I think that that's the kind of president we need, is someone who's in touch with all sectors of the American public, not just the people at the top.

WALLACE: On the other hand -- and you have been critical of Romney for the fact that he laid off people when he was at Bain Capital -- you've been much kinder to John McCain, although, as you did at the top, you pointed out some differences with him on some issues, but so much kinder that some people have suggested that maybe you're trying to help McCain beat Romney in order to get a position either as vice president or cabinet official in a McCain White House.

So you can put that to rest right here right now, Governor, if you want to slam John McCain.

HUCKABEE: I don't have to slam John McCain. I think that presidential politics can be civil. I think people can have mutual respect for each other.

John McCain and I have entered into this race both looking for the same job. I'm not looking to be on his ticket. I don't think he's looking to be on mine.

I think that the issue is that we have a civil approach to the presidential process. Neither of us have sought to win the office by cracking the kneecaps of the other. We've talked about what we want to do.

And what I've focused on is that I think my experience as an executive of a government -- I think my experience both in the private and public sector give me the right kind of understanding of how to lead this country not only in issues of economics, but also in terms of national security, understanding America's got to be strong, and also being a person who has clarity when it comes to wanting to do some things that would really change the economy of the nation, like getting rid of the IRS, implementing the fair tax, which really would give us a completely different dynamic, focusing on things like infrastructure when nobody else has been talking about it.

But I also am a person who believes very strongly that at the centerpiece of our culture and civilization, we need to be a culture of life. We need to respect human life and its worth and its dignity.

That's brought people to the campaign, not just evangelicals, but Catholics and even people who aren't people of faith but people who do believe that if we go wrong on how we treat each other as human beings, then everything else can't be right.

WALLACE: Let's talk a little bit, if we can, about the horse race, Governor. According to the latest polls, you're running a somewhat distant fourth in Florida, which is winner take all.

So why waste your time and money in Florida? Why not focus on states that you might have a better chance in, such as Super Tuesday?

HUCKABEE: We are spending some time in the Super Tuesday states. We also are doing quite well in those states. If you look at our numbers in Alabama, Georgia, Tennessee, Arkansas, Oklahoma, Missouri, we're going to have a good day on Super Tuesday. I don't think...

WALLACE: Yes, let me just interrupt...

HUCKABEE: ... we've wasted time in Florida.

WALLACE: ... you for a second if I can, and let's put up...

HUCKABEE: OK.

WALLACE: ... a map we have of what's called the so-called southern strategy of Mike Huckabee. And this is seven states, border states and southern states. Those are where you're going to be focusing on Super Tuesday.

But aren't you going to get swamped if you're focusing in those states and not competing actively in New York, New Jersey, Illinois and California?

HUCKABEE: You know, a lot of polls I've seen -- we're second in California. We probably aren't going to win New York, although, you know, we've been in some states where we didn't win.

But you know what, Chris? People are forgetting I'm second in delegate count. And the last polls that came out this week, that -- where the Wall Street Journal NBC polls had me second nationally, a pretty strong second, in fact, significantly ahead of Mitt Romney and Rudy Giuliani.

So when people say, you know, "How come you're not doing well in," I say, "Wait a minute, back up and look at this. This is a national election. And at the national level, I'm doing quite well."

And particularly if you look at the fact that we're doing it with volunteers. We're doing it with people who go to MikeHuckabee.com, meet each other in these meet-up groups. In all 50 states there are people gathering on their own. They're buying their own materials, their own yard signs.

We have hundreds and hundreds of truck drivers who are putting magnetic signs on their trucks driving across America campaigning for us. It's a pretty remarkable story. And it's being driven not by, you know, a handful of folks writing big checks.

It's being driven by ordinary people like the janitor I met last night in Birmingham, Alabama who has a wife who's disabled. He's giving us $20 a month because he's just convinced that I'm the kind of person who will represent him and his family, and I think that's the remarkable story of our campaign.

WALLACE: Governor, I know you're pretty busy with the Republican race, but I wonder whether you've had time to notice what's going on with the Democrats and the way that Bill and Hillary Clinton are tag- teaming Barack Obama.

HUCKABEE: I do pay attention, because, after all, you've got to remember, I'm the only person running for president who's faced the Clinton political machine before. I understand it better than anybody else running for president.

And I can certainly watch with some sense of, I guess, maybe educated perception about what's taking place.

WALLACE: Well, let me ask you about that. Are you at all surprised by the way Bill Clinton is going after Barack Obama?

Some say he seems more like a vice presidential hatchet man than he does like a former president. Are you surprised by the way he's going after Obama? And how do you think a Clinton White House would work? Would they share power?

HUCKABEE: Well, Chris, you know, because we've talked before, I have great respect and have a cordial and civil relationship with the Clintons, even though we've been on opposite sides of political races every time I've ever run or every time they've run.

But I understand there are not two people who are better at street fighting politics than Bill and Hillary Clinton. And I've been telling people a long time, "Don't underestimate the scrappiness with which they'll approach this race." So no, I'm not surprised.

And in fact, I think the one thing you have to keep your eyes on is that tactics will change, but the goal will never, ever fade, and that is win, whatever it takes to do it.

And they didn't get to where they are, either Bill or Hillary Clinton, by sort of just mapping out a plan and saying, "That's what we're going to do regardless of the results."

If the results start changing, as they did in South Carolina, look for different tactics. They'll do what they think it will require in order to win.

WALLACE: Governor, we have less than two minutes left, and I want to get into one last area with you.

You surprised some people at the last Republican debate when you said that Saddam Hussein may, in fact, have had weapons of mass destruction when the U.S. invaded in 2003. Let's take a look at what you said.

(BEGIN VIDEO CLIP)

HUCKABEE: Now, everybody can look back and say, "Oh, well, we didn't find the weapons." It doesn't mean they weren't there. Just because you didn't find every Easter egg didn't mean that it wasn't planted.

(END VIDEO CLIP)

WALLACE: Governor, the Iraq survey group looked around Iraq for months after the invasion, could find no evidence that Saddam Hussein had an active program, a WMD program, when he was ousted, any active stockpile of weapons.

Do you have any evidence for that contention?

HUCKABEE: Oh, I don't have any evidence. But he was the one who announced openly that he did have weapons of mass destruction. He was also the one who had used similar weapons in the past.

I think let's remember, too, that both Democrats and Republicans and our intelligence agencies believed that he had them.

My point was that, no, we didn't find them. Did they get into Syria? Did they get into some remote area of Jordan? Did they go to some other place? We don't know. They may not have existed.

But simply saying, "We didn't find them, so therefore they didn't exist," is a bit of an overreach. And the bigger point is that at the time we went into the war -- and that was really the question, should we have gone in.

If we had not have gone in and he had unleashed weapons of mass destruction, then everybody would be second-guessing the president and saying, "We should have taken action. The president was derelict in his duty."

So it's so easy. It's like sitting down Monday morning at breakfast with your buddies and talking about why the quarterback of the NFL team didn't get the winning play.

But you know what? If you've been on the NFL field and you've taken a couple of hits from 300-pound linemen, it's a little, I guess, maybe different perspective in what you should have done.

So I think let's give the president some credit for taking action that he thought would, in fact, help America. And Democrats agreed with him. And now it's easy to second-guess, but I'm grateful that the president was willing to take what actions he thought would make America safer.

WALLACE: Governor Huckabee, we're going to have to leave it there. Thank you so much for coming in today. Always a pleasure to talk with you, sir.

HUCKABEE: Thank you, Chris.

WALLACE: Coming up, Barack Obama takes South Carolina. What does it mean for the Democratic race as the candidates head toward Super Tuesday? We'll hear from our Sunday regulars when we come back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: After four great contests, in every corner of this country, we have the most votes, the most delegates...

(APPLAUSE)

... and the most diverse coalition of Americans that we've seen in a long, long time.

(APPLAUSE)

(END VIDEO CLIP)

WALLACE: That was Barack Obama celebrating his sweeping victory last night in the South Carolina Democratic primary.

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

Well, let's look at the final results from South Carolina and put them on the board. Obama won 55 percent of the vote. Clinton was next with 27 percent. And South Carolina native son John Edwards finished third with 18 percent.

The exit polls show just how racially polarized the vote was. Among blacks, Obama beat Clinton 78 percent to 19 percent, but among white voters, Edwards actually won, beating Clinton narrowly while Obama was a distant third.

Brit, when you look at all the numbers, what do you make of it all?

HUME: Well, that's not such a terrible showing among white voters by Obama, 24 percent in a three-person race in South Carolina.

Obama has shown that he can appeal to white voters. He appealed to white voters, men and women alike, in Iowa. He appealed to white male voters in New Hampshire.

And of course, he is overwhelmingly now appealing to black voters, and I think his appeal to black voters has been greatly enhanced by the behavior of the Clintons, and particularly the former president, toward him in South Carolina.

So the question now is going forward, can he show again enough ability to attract white voters to keep himself from being marginalized somehow as simply a candidate who appeals to a minority.

WALLACE: Mara, as we focus on South Carolina, let's take a look and try to answer the question, if we can, about did the attacks from the Clintons help her or hurt her and help Obama.

Let's take a look at this exit poll. This was among voters who decided in the final three days. And this was the point at which the attacks by the Clintons against Obama were at their height.

Half of the voters who decided in the final three days went for Obama, 27 percent went for Edwards, and just 21 percent, one in five, went for Clinton. Do you think that the Clinton attacks backfired?

LIASSON: I do think they backfired in South Carolina. Of course, the Clintons have their eyes firmly fixed on the next round of contests where they think these attacks are actually helping them. It's interesting. That's the reverse, by the way, of New Hampshire where the late deciders went with Hillary.

Look, I think that they did backfire in South Carolina. Does that mean that their whole strategy is going to be rethought? Maybe they'll tweak it around the edges.

The interesting thing is the Obama campaign put out a press release last night where they showed the vote in all the places Bill Clinton went to, the actual precincts and cities, and that vote was overwhelmingly for Obama.

He doesn't seem like he did a lot of good for her locally in the places he visited, but I don't think you'll find some diminution of Bill Clinton's role at all.

KRISTOL: They need to diminish Bill Clinton's role. It's been a disaster for Hillary Clinton, and not just on the race issue. It just diminishes her.

It's ridiculous to have your husband out there being as prominent as you are when you're running for president of the United States -- especially inappropriate when he's an ex-president who's been demeaning himself, if he could demean himself -- but in any case, demeaning the office of the ex-presidency, you know, with these nasty attacks on Obama.

But I think he hurt her chances in South Carolina and I think he will have to step aside or he will hurt her a week from now.

WILLIAMS: Well, the numbers don't back it up, because what the numbers show from the exit polls is that people who said that Bill Clinton was an important factor in the race -- about half of them went for Hillary Clinton, about 40 percent for Obama.

And remember, you're dealing in largely in black communities where the thought was that Bill Clinton has some special standing. And Bill Clinton still draws large clouds.

When you go out on the campaign trail, people react to Bill Clinton. I mean, you know, he's, in a sense, the politician of the generation. So I don't think that's the case.

It is the case that I think that Bill Clinton and Hillary Clinton surrogates have racialized this campaign, and they've made Barack Obama into the black candidate. That's what Mara is talking about going forward.

The question is if you look at, for example, you know, Latino voters, Jewish voters, especially in the big states, and of course, white voters in general, how are they going to react to Barack Obama now that he's no longer seeking to transcend race?

KRISTOL: He is seeking to transcend race.

LIASSON: Of course he is.

HUME: Did you hear his speech?

KRISTOL: This is totally unfair to him.

WILLIAMS: This is not unfair. He is seeking to transcend -- and what he did last night was he went back to the uplift message and transcending race.

But when he was in South Carolina, the fact -- I mean, look. He played for the first time as a black candidate to a black constituency. That's what happened in South Carolina.

LIASSON: They tried to make him that way.

KRISTOL: That's just unfair. He was resolute in not playing that card. Now, the Clintons tried to make him that. What's he supposed to do, say I'm not black or something like that?

WILLIAMS: No, no, no. Not at all.

KRISTOL: He has run the most race-blind campaign of any candidate, black or white, in modern times.

WILLIAMS: I think he's exceeded expectations. He lifts my heart. And the speech last night was spectacular. I wish we could play the whole speech.

But you have to understand that in South Carolina, a place where he was being posited as not black enough, where the senior black politicians were either standing on the sidelines or literally taking walking-around money from the Hillary Clinton campaign, he had to establish himself as a black person.

That's why he put his face on those posters. In Iowa, there was no black face on the posters.

WALLACE: Mara, I want to get back to the point you made, saying that what the Clintons did may have hurt Obama -- or helped Obama and backfired in South Carolina but might help them going forward.

LIASSON: Yes.

WALLACE: Explain that. Why could this strategy of making this a more racially polarized race help them on Super Tuesday?

LIASSON: I think that Super Tuesday is a wide variety of states. Now, in some southern states where there are big black populations in the Democratic primary electorate, like South Carolina, I think that Barack Obama's going to do very well.

But in states where there are big Hispanic populations, I think the Clintons feel -- even their own Hispanic pollster, Sergio Bendixen, has said it's just a historical fact that Hispanic voters haven't shown an affinity for voting for black candidates. I think They're counting on that.

A lot of these states are -- have much smaller proportions of black voters. Now, look, I think that Obama does transcend race. I think the Clintons have been trying to make the point that no, he's just like Jesse Jackson, you know, he's a black candidate, not a candidate who happens to be black.

HUME: Even Bill Clinton made that point, that Jesse Jackson had won South Carolina.

LIASSON: And other primaries and didn't go on to -- he didn't have to say this -- didn't go on to be the nominee.

HUME: I wonder what the long-term consequences are for the polarization we now see between Hispanics and blacks, who a decade ago tended to vote all the same way. This is different now. We saw it in Nevada, clearly, how that plays out going forward.

I have a sense, however -- we looked at a race that looked like it was 10 points or 12 points. We ended up with a race that was 28 points or 27 points. And something happened there.

And I think that the alienation of the African American community in South Carolina by the behavior of the Clintons in that state will carry over into other states, and I'm not at all sure that white voters were much impressed with it either.

WALLACE: I was going to ask you, Bill, looking forward now to Super Tuesday -- last week, you said that you thought, even before South Carolina, that Obama was in a stronger position than Clinton to win this nomination. Do you feel that even more strongly today?

KRISTOL: Yes. I mean, look. Obama -- Clinton beat Obama among white South Carolinians 3-2, 36-24, if one assumes the Edwards voters were to split according to that, it would have been 60-40.

Obama needs to do a little better on Super Tuesday among white voters. I think he can, because I think voters in some of those Super Tuesday states might be more sympathetic to his message than South Carolina white voters. I want to follow up one thing Brit said. He alluded to Bill - - Bill Clinton said -- Bill Clinton was asked, I think it was on Saturday morning, isn't it unfair that it's two on one, you and Senator Clinton, against Obama. He said "Oh, that's just spin, you know, and he was always going to do well in this state. Jesse Jackson won this state in 1984 and 1988."

What is the propriety, the appropriateness, of that comment? Obama isn't close to Jesse Jackson. He wasn't involved in the Jesse Jackson campaign. He's not running to carry Jesse Jackson's message. That is a racial comment.

WILLIAMS: Of course it is a racial comment.

KRISTOL: If a Republican said that...

WILLIAMS: I agree.

KRISTOL: If a Republican said that, there would be total outrage because the man...

WILLIAMS: You should be outraged.

KRISTOL: ... has black skin, you get to dismiss his victory because Jesse Jackson, 20 years before, a man with whom Obama has no particular connection and who he doesn't claim to be carrying on the heritage of, won the state. I mean, that is...

WILLIAMS: It is an outrage. I don't know why you have to limit yourself. You should be outraged, because it's racial code language.

And I say that, you know, almost personally, it hurts me that the Clintons have decided to do this. They think they can go ahead and do this, and they did it, and this is specific to South Carolina.

But the larger point -- I don't know why you think Obama has an advantage going forward. The national polls indicate Hillary is up 41-33 nationally and, among women last night, especially among white women, 44- 22.

Among black women, who were 35 percent of the vote, he did very well, 80 percent. But it's just not there nationally.

WALLACE: All right. We'll see you next week. We'll be previewing Super Tuesday then.

But coming up, it sure looks like a two-man race in Florida between McCain and Romney. Who's got the edge in these final days? More from our panel after this quick break.

(COMMERCIAL BREAK)

WALLACE: On this day in 1973, the Paris peace accords were signed in an effort to end the Vietnam War. The agreement halted direct U.S. military involvement and temporarily stopped hostilities between the north and south. Stay tuned for more from our panel and "On the Trail."

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MCCAIN: I think everybody knows the difference between leadership and management. You can hire managers all the time.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

ROMNEY: More recently he said this, in December of '07, "The issue of economics is not something I've understood as well as I should." Now, I think that's straight talk, all right?

(END VIDEO CLIP)

WALLACE: Those are the two Republican frontrunners slugging it out in the final days before the Florida primary.

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

Well, it sure looks like it's going to be a close two-man race between McCain and Romney this Tuesday.

Brit, how do you handicap it?

HUME: Well, one question is whether McCain has succeeded in changing the subject of the debate there by talking -- by making this accusation, really, about Romney that Romney was in favor of a timetable for troop withdrawal, which amounts to a considerable stretch of what Romney actually said, although McCain is out defending it this morning. If that's...

WALLACE: Well, let me interrupt you for a second, because we actually have the tape, and let's just briefly explain. McCain says that in April of 2007, Romney supported a troop withdrawal from Iraq, very much as the Democrats do. Romney is saying that that contention is dishonest.

Here's what Romney actually said in April of 2007.

(BEGIN VIDEO CLIP)

QUESTION: Do you believe that there should be a timetable in withdrawing the troops? ROMNEY: Well, there's no question but that the president and Prime Minister al-Maliki have to have a series of timetables and milestones that they speak about. But those shouldn't be for public pronouncement.

(END VIDEO CLIP)

WALLACE: Mr. Hume continues.

HUME: Well, that's a statement basically against a public timetable for withdrawal, which is what the Democrats were calling for. And you know, he's -- and I think that for McCain to claim that is dishonest, not straight talk.

WALLACE: Any more dishonest than Romney saying McCain says well, I'm not an expert on the economy?

HUME: Well, McCain did, in fact, say that.

WALLACE: Well, Romney did, in fact, talk about timetables.

LIASSON: Private timetables.

WALLACE: Well, so what? I'm just saying that, you know, it's a campaign and both sides are doing what they're doing.

HUME: Part of our job as journalists is to state things with clarity, and words matter.

WALLACE: I don't think either of them said it with much clarity, and I think that both have used comments that they wanted to make to their advantage.

HUME: Well, a better analogy would be the -- what Romney was saying when he was making those accusations against McCain and had them in the T.V. ad.

You'll recall that, and McCain -- and Romney then denied it was there, and it turned out it was in his ad. I can't remember the details. That was dishonest.

WALLACE: That was about amnesty.

LIASSON: Amnesty. Amnesty.

HUME: Amnesty, that's right. That's right. That was about amnesty. That was dishonest. McCain is engaging in something similar here.

LIASSON: Look, I think that McCain and Romney are in a real tight race in Florida. I mean, I have no idea which way it's going to go. He did get an important endorsement yesterday -- Charlie Crist, very, very popular governor there, and he has the senator, Mel Martinez, too.

But Romney has had the money to build an organization. He's inherited a lot of the Jeb Bush apparatus, which is a pretty formidable apparatus to have. And I don't know which way it's going to go down there.

But you can see both of these guys are now really battling it out. I do think this is a two-man race. I think Giuliani, Huckabee are negligible. And whoever wins Florida gets a very, very big boost for February 5th.

WALLACE: You know, Bill, some people would say that the question as to whether or not what Romney said about McCain or McCain said about Romney is less important than the fact, as Brit originally pointed out, that McCain has succeeded, at least for yesterday, in changing the debate from the economy to national security, which is to McCain's strength.

KRISTOL: It is. And we don't know how much he's succeeded in changing the debate on the ground in Florida. I've talked to our guys who are down there from The Weekly Standard. I mean, you can't turn on the T.V. without seeing a Romney ad. Those are economy focused.

McCain has been able to afford a pretty big buy this last weekend. Very close race. I don't know that it matters quite as much as Mara thinks who wins, actually. I mean, it will be 36-33, or something like that. They both go to Super Tuesday.

McCain has the advantage of being ahead in most of those states right now. On the other hand, Romney has more money and is trying to consolidate conservatives behind him. If McCain has a narrow victory, Romney isn't going away. If Romney has a narrow victory, McCain isn't going away.

I think they go on to Tuesday the 5th in a genuine two-man race, with Huckabee, I guess, hanging in, concentrating on Georgia, trying to win one state. It's kind of pointless, in my view, but he'll probably hang in and take a few southern congressional districts.

Giuliani, I assume, gets out, if he gets about 15 percent of the vote in Florida. So we are down to a genuine -- in both parties, now, to a two- man race.

WALLACE: And before I turn to Juan, you apparently have some information about a late endorsement for Mitt Romney.

KRISTOL: Well, both campaigns have been going after Fred Thompson supporters.

Liz Cheney, who is the daughter of the vice president, obviously, herself an important spokesman for Republican conservative foreign policy views, who was a national co-chairman of the Thompson campaign, will endorse Mitt Romney, which will help Romney, I think, maybe not so much in Florida, but it will help actually blunt this charge by the McCain campaign that Romney isn't reliable from a hawkish point of view on foreign policy, because Liz Cheney is a very prominent spokesman for the Bush-Cheney foreign policy.

WALLACE: Let me ask you, Bill, do you think that secretly, or maybe not so secretly, the Bushes and the Cheneys support Romney?

KRISTOL: Honestly, I don't know. I don't know.

HUME: I think some of the Bush family do support Romney. I think that's pretty clear.

WILLIAMS: I think what you're talking about is the party establishment. The party establishment, if we're down to a two-man race, as we've just heard, you know, articulated here, really can't stand McCain.

WALLACE: Well, wait a minute. Governor Crist has come out for McCain.

WILLIAMS: Governor Crist, yes.

WALLACE: Senator Martinez has come out for McCain.

WILLIAMS: Yes, and I think those are -- I think that's people on the ground in Florida.

But if you're talking about national stature -- and of course, if you're talking about the talk radio show universe where Rush Limbaugh says that he would consider just not voting at all if McCain was the candidate, I think you see an indication of the kind of antipathy that exists for John McCain at this moment.

And you know, the attacks that came earlier in the week were all about the economy -- why didn't McCain vote to make the Bush tax cuts permanent and the like.

But I think that by shifting the discussion, the terrain, back to the war, as McCain has done, and getting the Crist endorsement, I think it gives him the edge going forward.

And I think the idea that he is now battling the Republican establishment may appeal to some people, although the Florida race, of course, is limited to Republican voters.

WALLACE: Let me throw one other thing in the hopper here that McCain may have going for him, and that's the electability argument.

Take a look at these match-ups from a new poll just out this week from the Wall Street Journal. McCain beats Hillary Clinton by two points in a match-up, while Romney and the other two lose to her by wide margins, Romney by 16 points.

Brit, is that something that Republicans are likely to care about?

HUME: Some will, but it's never been decisive in primaries. People tend to vote for the person who's most closely aligned with what their views are.

I think we ought to be clear, though. The Republican establishment -- the conservative establishment may rally behind Romney at some point, but that's not just the -- that is not the Republican establishment entirely.

In the Senate, you see this extraordinary split with members of the Senate -- Tom Coburn, who is nothing if not a conservative, supporting McCain, and there are a number of others.

So McCain has his share of establishment support, and I think, you know, he remains -- I think he's the man to beat at this point, and I don't think -- you know, while I think this claim he made about Romney was dishonest, it's kind of a minor, you know, kind of battlefield transgression that can be quickly forgotten by everybody.

WILLIAMS: But I think it's getting lots of attention and again helps to shift the terms of the debate.

And I think for McCain to have Crist -- and again, that have had those numbers, where it suggests that he is the best candidate going forward for the Republican Party at a time when the party is at sea in terms of its identity -- I think really, all of a sudden, McCain becomes this leading figure.

You will react to McCain, I think, much more. And the only hope that Romney has, really, is to play on the experience card to suggest that he is someone who knows how to manage economic issues.

And once you start getting into his record of job creation and the like, he might be a multi-millionaire, but he didn't do such a great job of managing the economy of Massachusetts.

KRISTOL: On the margin, Wednesday night when they debate in California, if McCain makes the electability argument strongly, I think that can sway wavering Republicans who probably prefer McCain on national security, prefer Romney on the economy, have problems with both of them, admire both of them.

And if they think McCain can win and Romney probably can't, they could go for McCain.

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

Time for some mail about the presidential races in both parties.

Jennifer Perkins from Little Rock, Arkansas, sent this about the Democrats, "I think that Oprah was the one who made Obama the, quote, 'black' candidate. I was a pro-Obama supporter until her speeches at overcrowded stadiums. Oprah turned me against Obama. She removed him as a candidate that cared about me, as my candidate, and made him the 'black candidate.'"

As for the Republicans, R.C. Escue from Kansas City, Missouri writes, "I'm watching your interview with Governor Romney in which he implies that Senator McCain spent his life in Washington. Unless I'm mistaken, Hanoi is outside the Washington Beltway."

Be sure to let us know your thoughts by e-mailing us at fns@foxnews.com.

Up next, another eventful week on the trail.

(COMMERCIAL BREAK)

WALLACE: The Democrats brawled while the Republicans jabbed in another wild week on the trail.

(BEGIN VIDEO CLIP)

H. CLINTON: Barack, I did not...

OBAMA: You just spoke...

H. CLINTON: ... I did not say...

OBAMA: You just spoke for two minutes.

H. CLINTON: ... anything about Ronald Reagan.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

B. CLINTON: They're feeding you this because they know this is what you want to cover. This is what you live for.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

H. CLINTON: Well, I'm here. He's not.

OBAMA: OK. Well, I can't tell who I'm running against sometimes.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

(UNKNOWN): Are you going to vote on Saturday?

(UNKNOWN): Yes, I am.

(UNKNOWN): Great, thank you very much.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

ROMNEY: Bill Clinton back in the White House with nothing to do is something I just can't imagine. I can't imagine the American people can imagine.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

EDWARDS: I think I can go everywhere and compete head to head with John McCain.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

H. CLINTON: I am better positioned and better able to take on John McCain.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: We've been sort of like John McCain.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MCCAIN: I want them to keep talking about me, what a great American I am.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

NORRIS: But he's been under pressure that I just don't think he even has the stamina to put up with it.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MCCAIN: Now that Sylvester Stallone has endorsed me, I'm sending him over to take care of Chuck Norris right away.

(LAUGHTER)

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

DAVID LETTERMAN: Let me just mess your hair up a little bit.

EDWARDS: Do you want to?

(LAUGHTER)

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: Well, tonight the cynics who believe that what began in the snows of Iowa was just an illusion were told a different story by the good people of South Carolina.

(APPLAUSE) (END VIDEO CLIP)

(BEGIN VIDEO CLIP)

H. CLINTON: And I can't imagine any place I'd rather be than right here in Nashville as we kick off the next 10 days.

(END VIDEO CLIP)

WALLACE: And now the mad dash begins, the final nine days before Super Tuesday.

Time now for a program note. Be sure to tune in to the president's state of the union speech tomorrow night. Sheppard Smith and I will report on this Fox station while Brit Hume leads the coverage on Fox News Channel.

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

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