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January 20, 2008

Mitt Romney, Charles Schumer, Roundtable

Fox News Sunday

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

Six states are in the books and the Republican race is still wide open. Mitt Romney found new life in Michigan, but what now? We continue our series "Choosing the President" with Romney. It's a "Fox News Sunday" exclusive.

Then, the economy.

(BEGIN VIDEO CLIP)

BUSH: We can provide a shot in the arm to keep a fundamentally strong economy healthy.

(END VIDEO CLIP)

WALLACE: What will Washington do to prevent a recession? We'll speak with the chairman of the Congressional Joint Economic Committee, Senator Charles Schumer.

Plus, Bill boils over. Is the former president's temper hurting his wife's chances? We'll ask our Sunday regulars -- Brit Hume, Mara Liasson, Bill Kristol and Juan Williams.

And our weekly look at the thrill of victory and the agony of defeat on the trail, all right now on "Fox News Sunday."

And hello again from Fox News in Washington. Well, Republicans voted in three states this week. On Saturday in the Nevada caucuses, former Massachusetts governor Mitt Romney got more than half the vote, this after he scored a big victory Tuesday in his home state of Michigan.

And last night John McCain won the crucial South Carolina primary by a narrow margin over Mike Huckabee.

We continue our series "Choosing the President" now with Mitt Romney, who joins us from the campaign trail in Florida.

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

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: Thanks, Chris. Good to be with you.

WALLACE: After the split decision yesterday in South Carolina and Nevada, it seems that you and John McCain are now the frontrunners in this scrambled GOP field. What's the choice for voters between you and McCain?

ROMNEY: Well, I think if people want somebody who has been in Washington all their life and understands Washington's ways and has been part of the Washington scene for a quarter of a century, then John McCain will be their person.

If they want somebody instead who's been in the real economy over the last 25, 30 years, who understands why jobs come and why they go and understands what it takes to grow an economy, then I think I'll be their person.

And I anticipate that given the challenges we face in our economy right now, I'm going to get the nod.

WALLACE: Governor, you got into a dust-up with a reporter this week over your comments that you don't have lobbyists running your campaign and, as you just suggested, that you would change Washington. Here's what you've been saying.

(BEGIN VIDEO CLIP)

ROMNEY: I intend to deal with the fact that Washington is broken and that is by cutting through the partisanship, and the bickering, and the score settling, and all the politicians with all their connections with all the lobbyists that have been there for years.

(END VIDEO CLIP)

WALLACE: But, Governor, Ron Kaufman, who's a D.C. lobbyist, is one of your advisers. Another lobbyist, Vin Weber, is chairman of your policy committee. And lobbyists have reportedly donated hundreds of thousands of dollars to your campaign.

So, Governor, don't you have close links to this very same Washington establishment that you say you're going to shake up?

ROMNEY: There's no question in a campaign of 200 staff and probably 100 advisers that you're going to have a number who are registered lobbyists. I have a former senator, for instance, who's a registered lobbyist.

But my campaign is run by my team from Massachusetts and some other folks that we brought in. And this is very definitely an outsider's campaign, let me tell you. It's not inside the Beltway. And my life has not been spent inside the Beltway.

And I'm very proud of the fact that, you know, I've lived in the private sector. I understand jobs. I understand how the economy works. I've been traveling throughout the world over the years, negotiating, running businesses in some cases, and that's taught me a lot about what it takes to build a strong economy.

And I just don't think that somebody who has spent their life inside Washington, that has lobbyists on every elbow, that's been chairman of one committee or another, and has all those connections, all the favors that are owed and are owed in return, all of the scores to settle -- I just don't think that's going to get Washington fixed.

Washington fundamentally is broken, and people in this country want to see change in Washington, and that's not going to happen by somebody who's been there, for whom Washington is a way of life. WALLACE: As you talked about, the economy is now job one, issue one, for voters. Politicians are scrambling right now to announce, each of them, their own economic stimulus package to avoid a recession.

You announced yours yesterday -- a number of tax cuts for individuals and businesses, and the price tag for your plan would be $233 billion, which is much bigger than the plan that President Bush announced on Friday.

So are you saying that his is too small to do the job?

ROMNEY: Well, I like mine better. I'll tell you that. And there are two reasons. One is mine has a very large dose of long-term growth incentives. It's not just designed to be a short-term stimulus, but rather a long-term growth boost.

And that's not only by allowing capital expenditures to be expensed over these next two years, but also lowering the corporate tax rate so that we can get more businesses to stay here and grow here.

And then, something I'm particularly fond of, it says for anybody in the workforce 65 and older, neither the company nor the individual is going to have to pay Social Security payroll taxes -- FICA, if you will.

And by virtue of that elimination, you're going to have more people stay in the workforce. That's going to help grow our economy. So I'm proud to have a number of pro-growth features that will build our economy long term.

So you really have to divide my incentive plan between those things that are long-term in nature and those things that are short- term and stimulative. And I think it probably divides about 50-50.

WALLACE: Democrats say that your plan and also President Bush's don't give any money to the 50 million Americans who at this point don't pay taxes.

And according to the Democrats, not only could those 50 million Americans use it, but they're also more likely to spend the money, which is the whole point of a rebate system.

ROMNEY: Well, my system is primarily based on trying to create jobs, not handing out cash to individuals. I do lower the lowest income tax bracket from 10 percent to 7.5 percent. And that helps, of course, people at the low economic level.

But also for individuals 65 and older, the fact that they're not going to be paying any Social Security or Medicare taxes anymore, no more payroll taxes, means that that's going to be a break for them.

But the heart of what I'm doing is trying to get businesses to become more active, buying capital equipment, trying to get businesses to grow in this country and to create more jobs, because the best -- obviously, the best antidote to having an economic slowdown is growth in the business sector, creating jobs, putting more people at work and, of course, that generates more income for everybody.

WALLACE: But what about those 50 million -- or perhaps it would be less with your Social Security break -- who don't pay any taxes? Nothing for them?

ROMNEY: Well, it's jobs. It's focused on jobs. And certainly, what you want to do is provide the incentives to help companies to be creating new jobs.

I think the number of 50 million strikes a little high. But for those that are not paying any taxes at all, simply writing a check doesn't seem to me to be the right course to follow.

WALLACE: You won in Michigan this week, among other things, pledging to offer a $20 billion package to help out the auto industry with energy research and new technology.

Conservative columnist Cal Thomas didn't like this idea much, and here's what he had to say. "Is that what a Republican should do, bail out a private industry rather than endorse capitalism, free enterprise, and encourage Detroit to build the kinds of cars that people want?"

Governor, are you going to offer billions of taxpayer dollars to every industry that's in trouble in this country?

ROMNEY: Well, let me get it quite straight here so we can be talking from the same fact base. We spend about $4 billion a year right now on energy research to try and help us become more energy -- or less energy dependent on foreign sources.

Some of that is on developing new sources of energy, some is on developing efficiencies in automobiles, in homes, appliances and so forth.

And I think over the coming years we need to increase our investment to become energy independent from about $4 billion a year to about $20 billion a year.

And that, obviously, has got to grow gradually because there are not a lot of places now that do the kind of research we need to do to get ourselves energy independent.

But that's not just to bail out the automobile industry. That's not what I have in mind. I'm not looking for a bailout at all. Instead, it's saying that where we invest, we tend to do very well.

We invest in defense technology, and we lead the world in defense products. We invest in health care technology as a nation, about $50 billion a year or more, and we lead the world in developing cures and, of course, in health care technologies.

And then we develop -- or put a lot of money into space, and that has some spinoff of various kinds, into the private sector as well. I think we have to make a far more substantial investment in becoming energy independent. We send over a billion dollars a day to countries outside this one to buy energy from them. And it's time for us to start spending here on research so that we can free ourselves of dependence on foreign oil.

And that's, of course, going to benefit the auto industry along with many, many others. But most importantly, it's going to benefit this entire country economically, from a foreign policy standpoint, and I think it will help our environment as well as we find ways to become more energy efficient.

WALLACE: As you push your record as an economic manager, people are taking a closer look at what you did as governor of Massachusetts.

The Boston Globe looked into this and they said that job growth during your years in office was the third lowest of any state in the nation, and manufacturing employment declined more than 14 percent -- again, the third worst in the country.

Governor, why should voters think that you're going to do any better for the country's economy than you did for your own state of Massachusetts?

ROMNEY: Well, the record is much better in the own state of Massachusetts, and so I'll take exception with the Boston Globe.

When I came into this state, not only were we facing a $3 billion budget shortfall in state revenues, but we were losing jobs every single month, month after month after month.

And Massachusetts is a high-tech state, as you know, and a capital goods state. And that's a sector of the economy that responds very slowly to turnarounds, and so we worked very hard to re-stimulate the economy there and to encourage job growth.

And I was very pleased that by about 2.5 years into my administration, we were able to turn that job decline around and we started adding jobs. Virtually every single month we saw good job growth.

And something else I'm proud of -- even though when I came in there was virtually no pipeline of companies trying to think about coming to the state or expanding in the state -- we had, I think, less than a dozen companies that were working with the state to try and consider ways of moving there.

By the time I left, we had over 200. And some of the most notable successes -- for instance, Bristol-Myers Squibb building, I believe, the largest biotech center, biotech manufacturing facility, in the country -- that was awarded during my term.

We fought very hard for it and got it. But they haven't even completed construction yet. So those jobs are going to continue to come year after year after year. And my expectation is you'll see Massachusetts continue to perform very well for a number of years to come, in large measure because of the work that I and the legislature did together to build a strong base for our economy.

WALLACE: But, Governor, a lot of states -- first of all, when you came in, there was a national recession, so everybody was losing jobs and a lot of states had their own problems.

But the fact is that across the country during the four years you were governor, jobs grew by a rate of 5.5 percent, but in Massachusetts they grew by one-half of 1 percent, and that was the fourth worst record.

The only states that did worse than Massachusetts during the four years you were governor were Michigan, which everyone says had a one- state recession because of the auto industry; Ohio, which has lost a lot of manufacturing jobs; and Louisiana, which was hit by Hurricane Katrina. Then Massachusetts came fourth.

ROMNEY: Well, we'll do it again. Let's go back and take a close look, and that is that I came into a state that had no pipeline, no sales force -- believe it or not, they had literally no sales force that called on companies and encouraged them to come into the state.

There was no activity of any significance to bring jobs to the state. And we went to work, legislature and I, to try and change that. It took us a while to get all the incentives in place.

We put in place a permanent investment tax credit. We put in place a manufacturing credit that said if you brought in medical manufacturing jobs, we'd give you a very substantial tax incentive.

And these features began to work, and I was very pleased that by the time my term had ended after four years that we'd been able to dramatically change our pipeline, bring in some key new industries -- or some key new players into the state and began to grow jobs.

But I also note that because we're a capital goods economy, a high- tech economy, we responded more closely -- or, excuse me, more slowly to the reversal in the overall national economy.

But look. Massachusetts is doing real well. Every year we saw surpluses in our budget that I was in office. We grew our pipeline of companies considering coming to the state, and many of those won. And we're continuing to see success.

And I'd also note that the entire region benefited from the success of Boston and the growth of Boston. Places like New Hampshire saw a great deal of growth during that term as well.

WALLACE: Governor, we have less than two minutes left. You also talk about your experience in private business.

You were an enormously successful businessman in the '90s as the head of Bain Capital, a private equity firm. Your critics point out that you took over a company called American Pad & Paper. That company ended up closing two plants and laying off 385 workers.

Bain also bought a company called Dade International, which ended up laying off some 1,900 workers. You didn't save those jobs, Governor.

ROMNEY: No, there's no question that if you're in the business world and you're trying to save a business that's in trouble, that you're not going to be successful 100 percent of the time.

And I'm very proud of the fact that we were successful many, many times. We grew jobs quite dramatically in many settings. But oftentimes, when an enterprise is in real trouble, you have to try and cut back to save it.

And I'll tell you, when you look at Washington and how badly broken Washington is, you're going to have to have somebody who can go there and say, "You know what? There are too many bureaucrats. There are too many employees in government. We're going to have to cut back in Washington."

I know how to do that and get Washington back on track. This is fundamentally, I believe, an election about changing Washington, about doing to Washington what has to be done to get America back on track so that we can regrow our economy.

And I'll tell you one thing, Chris, the only way you're going to have somebody who understands how to rebuild an economy is to have somebody who's been in the economy, who knows what it's like to see jobs come and go, who's fought to try and build businesses and build jobs.

We're competing around the world now with China and India, tougher competition than we've ever faced before.

It's going to be helpful to have a president who, when we're looking at agreements to work out with other countries on trade -- that knows what impact those agreements will have on American jobs, who knows, for instance, when there are tax incentives put in place, how it's going to change jobs in this country.

I am intimately familiar with how our economy works. I'm working very hard to make sure that the workers of this country have a brighter future. And I will never accept the idea that jobs are gone in America. I'm going to fight to bring back jobs and to grow this country.

WALLACE: Governor Romney, we want to thank you so much for talking with us. I hope to talk to you again soon, sir, and good luck on the campaign trail.

ROMNEY: Thank you.

WALLACE: Coming up, what kind of deal are congressional Democrats willing to make with President Bush to jump-start the economy? We'll find out from a Senate leader after this quick break.

(COMMERCIAL BREAK)

WALLACE: President Bush said Friday the slumping economy needs a shot in the arm to the tune of $145 billion. But will congressional Democrats go along?

For answers, we turn to Senator Charles Schumer, chairman of the Congressional Joint Economic Committee, who's in our New York studio.

And, Senator, welcome back.

SEN. CHARLES SCHUMER (D), NEW YORK: Good morning.

WALLACE: As we say, President Bush announced his stimulus package on Friday, $145 billion in tax breaks for individuals and for businesses. We'll get to the details in a second.

But just give us a quick overall picture. What do you like and where are Democrats going to insist on changes?

SCHUMER: Well, we like a number of things, and I'm optimistic we can get a package done, signed and ready to go by March 1st.

First, that the president called for a package -- many of us had been asking for this for a while.

Second, that he took the permanent tax cuts off the table. They wouldn't start till 2011. And they would have created a brouhaha that would have made it very difficult to pass.

And third, when Senator Reid asked him not to put out the specifics of a plan -- when each side puts out its specifics, there's a lot of jockeying, and it makes it harder to get things done -- the president didn't.

I think both sides have of Pennsylvania Avenue, both parties, realize our economy is headed south in a significant way and we need relief.

And if you ask Ben Bernanke or economic experts, Chris, they say speed is number one, getting the money into the economy. So partisan fights and dithering could only make whatever recession we're going to have worse.

WALLACE: So let's get to the specifics. Let's break down the elements of a possible plan. First of all, tax breaks for individuals -- will Democrats insist on an income cap that individuals making over a certain amount of money won't get the tax rebate?

SCHUMER: Well, first of all, it's very good that the president and we Democrats agree that the centerpiece of such a plan should be tax relief particularly aimed at middle income people.

And you know, we don't have to get into the details of whether there should be a cap or not, but it does have to be balanced.

To say someone making $30,000 or $35,000 gets nothing and somebody making $200,000 gets the whole rebate doesn't make much sense. It's not fair. The person making $35,000 probably needs the help more.

But aside from that, every economist up and down the line will tell you that the person making $35,000 will spend the money more quickly because he or she needs to, whereas the person making $200,000 may delay doing anything with that money for a while.

So just from the point of efficacy, getting money to the middle class is the most important thing we can do to stimulate this economy.

And I'm not going to draw any lines in the sand, but I think an unbalanced package that says to those making $30,000, $35,000, $40,000, even $50,000, "You get very little or nothing," and somebody making $200,000, $300,000, $400,000, "You get the whole rebate," doesn't make much sense from either a fairness or economic point of view.

WALLACE: Well, you talk about fairness. This is obviously going to be one of the issues here. The 50 million estimated Americans that I talked about with Mitt Romney who don't pay any taxes - and it seems under the president's plan would not get any tax rebate -- and Secretary Paulson, Treasury Secretary Paulson, said on Friday, you know, it's simply fair that you only give tax rebates to people who pay taxes.

SCHUMER: Well, you know, there's a point to that Chris, but what about payroll taxes? In other words, somebody making $35,000 or even $50,000 or $60,000 pays a lot of federal taxes, but most of those go into the FICA tax.

And if we did the rebate based on the payroll tax, it would hit a lot more people at a lower end of the spectrum. And so to just say income taxes are the only taxes we're considering that people pay is unfair.

Ask the average working family. They pay more in FICA than they pay in income taxes. WALLACE: Senator, will the Democrats accept the president's idea of tax breaks for businesses to spur investments and thereby create jobs?

SCHUMER: Well, as I said, Chris, there's a real spirit of compromise in Washington right now, a spirit of let's get together, put away the bipartisan differences, because the economy is in poor shape.

And there are many Democrats, frankly, who would rather not have business tax cuts. But again, no one's drawing a line in the sand.

And for instance, if you could look at a balanced package, the centerpiece would be a tax cut for the middle class and working families, and the bookends might be some business tax cuts as well as some spending stimuli for, say, people who are unemployed because they lost their jobs recently for no good and increasing unemployment. And you could have a balance there that would work.

I would say this on business taxes, Chris. The key, again, is speed. Business tax cuts that get money right into the economy quickly are far better to get our economy jump-started to either avoid a recession or at least avoid a severe recession than long-term business tax cuts.

WALLACE: Now, you brought something else into the equation that the president doesn't have, and that's the idea of spending increases.

Are you talking simply about things like extending unemployment benefits, extra food stamps? Some Democrats are talking about a big public works program -- infrastructure -- and the same experts you cite say that doesn't get money into the economy fast enough.

SCHUMER: Well, again, I mean, the main thing we're looking at are things that just mainline money into the economy.

Let me give you one example. The extension of unemployment benefits, it's estimated by non-partisan economists, get $1.73 into the economy for every $1 we spend. Even the middle class tax cut gets about $1.17 into the economy. That's good, but not as good as the unemployment benefits.

So I think that's going to be a criteria we will use. Public works is very good in terms of creating jobs. It's very good and very needed in the country. But if it can't be done quickly, then I think it's going to be a problem.

And let me just say this again. I don't think anyone is drawing lines in the sand. Again, when Senator Reid asked the president not to put out the specifics of a plan, the president acceded, and that showed a good deal of good will.

And I think similarly, we Democrats are not going to draw a line in the sand and say, "If it doesn't have this, we're out," or, "If it does have this, we're out." There's going to be a negotiation starting Tuesday. I think both sides want to come to an agreement quickly, and I think the goal is to have a package signed, sealed and delivered by March 1st so the money can start flowing into the economy.

Ben Bernanke, someone I've talked to a lot, and Hank Paulson -- both say speed is of the essence here. If we don't have money flowing into the economy till June or July, it may be too late.

WALLACE: One specific the president did make, though, or did give, was the size of the package he's talking about, $145 billion.

Now, you're talking about adding payments to the 50 million taxpayers who at this point would not get them, the ones -- rather, the people who don't pay taxes. You're also talking about a spending program.

So are you talking about a considerably bigger stimulus package than the president?

SCHUMER: No. I think this is all open to negotiation. I think that, you know, the president's package is about the right size. It's about 1 percent of GDP, which is what the economists tell us is about the right measure.

But where the specifics are will be negotiated, and hopefully it will be negotiated in a bipartisan way without each party sort of throwing down the gauntlet and saying, "It's this or nothing."

WALLACE: You know, let's talk about the bigger picture here, Senator, because the fact is that the White House and Democrats in Congress have been talking about a stimulus package all week, and all week the stock market has gone down and down, even after the president announced his plan on Friday.

Investors don't seem to be persuaded that this plan is going to be quick enough or do enough to turn around the economy.

SCHUMER: Well, let me just say a couple of things here. First, the economy is in difficult shape right now.

You had the housing crisis at the center of this, and that made housing prices go down, and now consumer spending is down, and there's a credit crunch. People can't get loans for things they need, businesses and individuals. So it's pretty severe.

And I think most people think you need a multifaceted approach. You need a spending stimulus package. You need Chairman Bernanke to do something more on interest rates.

I would also say that many of us feel that doing something that -- doing something to aim at the bull's eye of the crisis, which has been housing, would make a great deal of sense.

And in a stimulus package, we could probably put some things together that both sides agree upon -- money for counselors to help people avoid foreclosure and raising some of the loan limits temporarily that Fannie Mae and Freddie Mac now have. Secretary Paulson agrees that the administration thinks these are good ideas.

And I think one of the things the markets want us to see -- to do is deal with the fundamental issue of housing. And the good news is there are a few things, not everything, we can agree upon quickly.

WALLACE: Senator Schumer, we're going to have to leave it there. Quick action in Washington -- that would be a shocker.

SCHUMER: Well, let's hope it's a metaphor for change. And one more thing, Chris, go Giants!

WALLACE: Now we're going to have to give equal time to somebody else. Thank you so much, Senator, for coming in today.

SCHUMER: Thanks. Bye-bye.

WALLACE: Up next, all those recent outbursts from former President Clinton -- are they helping or hurting his wife's campaign for the White House? We'll hear from our Sunday regulars when we come back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

B. CLINTON: So when you ask me that question, your position is that you think the culinary workers' vote should count -- A, it should be easier for them to vote than for anybody else in Nevada that has to work on Saturday.

(END VIDEO CLIP)

B. CLINTON: Give me a break. This whole thing is the biggest fairy tale I've ever seen.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

CHARLIE ROSE: Are you unhappy with anything...

B. CLINTON: No, so...

CHARLIE ROSE: ... about the way the campaign...

B. CLINTON: Let me finish. You started this, so let me finish.

(END VIDEO CLIP)

WALLACE: Been there, done that. That's Bill Clinton unplugged on the campaign trail recently.

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, we'll get to Hillary Clinton's victory in Nevada in a second and what that does to the race, but a lot of attention being paid this week to Bill Clinton, who's had a number of outbursts -- you saw just some of them there -- on the campaign trail recently, so many that even the mainstream media is paying attention.

The question: Is this helping his wife, getting attention only a former president can for various issues, or is it distracting from the campaign? Brit? HUME: Well, I think it's, at best, a mixed blessing for her. That is Bill Clinton at his least attractive. You know, this is an extremely charming man and with an enormously winning personality.

There isn't anything particularly winning about those little snippets that you showed there at all. They make a lot of news when they happen. They get played over and over and over again. And it is a reminder, I think, to people across the country of what they may have liked least about the Clinton presidency.

On the other hand, of course, you know, his attacks on Obama may have stuck in some way, and Hillary Clinton therefore didn't have to make them because Bill was out there making them.

And of course, the other note that has to be mentioned is that, you know, the guy draws crowds and he helps with fundraising. So those things all are factors.

WALLACE: Mara, there's an interesting article in Newsweek coming out...

LIASSON: Yes.

WALLACE: ... today that indicates that at least some of the top Democrats in the party are getting heartburn over this, and it reports that Ted Kennedy and Rahm Emanuel, who was one of the architects of the House victory in 2006, have both advised the former president -- Rahm Emanuel, of course, worked in the Clinton White House -- to cool it.

LIASSON: Yes. I think that Democrats that I talked to this week are of two minds.

First of all, they say the attacks definitely helped her in the short term. He is raising doubts about Barack Obama in a way that no other surrogate can, because he gets so much attention when he does them.

However, there is a long-term cost not only to his own reputation and lofty position as an ex-president, but also what Democrats are worried about is that the attacks on Obama are getting so intense that it's going to be hard for Bill Clinton, for Hillary Clinton, if she's the nominee, to get this party back together again.

And not only is it causing problems with the African American community, although, of course, Hillary Clinton tried to kind of ratchet that down a notch this week, but that this is the kind of battle, this kind of insurgent versus establishment battle, that this party has not seen really since Carter and Kennedy, and that those rifts can be very, very deep and hard to heal. You know, on a bigger level, that's what some Democrats are worried about.

As far as Bill Clinton, yes, a lot of Democrats wish that he would do things a little bit more decorously, even though they understand why he's doing it.

KRISTOL: Why is he doing it? I mean, really?

LIASSON: To help her get elected.

KRISTOL: Yes, but it's really unseemly, and I think it hurts her. I mean, short term, he has been pretty effective in attacking Obama.

An ex-president of the United States to be in petty squabbles about Nevada caucus rules, and then the spouse kind of having to make the fight for the one who's running for the office -- I think it diminishes her. I think it will hurt her.

He may have helped her a tiny bit in the short term in New Hampshire and Nevada. I think it hurts her claim to say, "Well, I'm going to be president of the United States."

Greg Craig, who ran Clinton's impeachment defense -- not exactly someone who's...

WALLACE: This is a big white-collar criminal lawyer here in Washington.

KRISTOL: Right. And he was in the State Department for Clinton and then ran the impeachment defense, successfully, I suppose, in 1998 and 1999, who's now supporting Obama -- is quoted in Newsweek as saying, "If Hillary can't control Bill now, what's she going to do with him when she's in the White House?"

And that's not a Republican saying that. That's a Democrat.

LIASSON: And Republicans will be saying that in the general election. You can be sure of that.

WILLIAMS: You know, but I think the fact is that Bill Clinton has managed to help push Obama off message and change the tone of what Obama is doing on the campaign trail -- much less of the revival atmosphere out in Nevada, much more now trying to respond to attacks coming not only from President Clinton but from Senator Clinton.

Here we're thinking about what Mrs. Clinton did on abortions, making it out that he was soft on abortion -- again, the same tactic that had worked in New Hampshire -- making it out that he was tied into a company that was supporting, you know, storing nuclear waste at Yucca Mountain, just making it out so that there's lots of bad blood now building between the Clintons and the Obama campaign.

And you know, I would add this, that Mrs. Clinton went on -- I think it was Tyra Banks' show this week to talk about the fact that -- how did she deal with infidelity. This is very effective stuff that sometimes I think gets under the radar for most political reporters, but women hear about it. Women around the country talk about it.

And so what you see yesterday in Nevada is she again -- I think it was 13 points. Is that right, Bill? Something like that -- 13 points victory among women. She does very -- she's doing now tremendously among white Democrats, and she'll do well among white Democrats next week in South Carolina.

But 60 percent of black people are with Obama. And the fight is over Latino voters right now, and overwhelmingly two-thirds of them went with Mrs. Clinton yesterday. When they come to California, Colorado, Arizona, you can expect this again.

This is a real problem inside the core of the Democratic constituency, the coalition that will go forward for November.

WALLACE: Well, let's talk about Senator Clinton's narrow victory in the Nevada caucuses yesterday. Here was her reaction.

(BEGIN VIDEO CLIP)

H. CLINTON: I want to say that we will all be united in November to beat the Republicans.

(END VIDEO CLIP)

WALLACE: That, of course, is part of the issue, Brit. But where is the Democratic race now post-Nevada as they head to South Carolina, which is next Saturday, and then, of course, Super Tuesday on February 5th?

HUME: This was a significant win for Senator Clinton, in my view. It's a state where Obama had real strength and a real chance. He got some major union backing and it wasn't enough.

Now, South Carolina is a different picture, of course, a state extremely hospitable, I think, to Obama because of the size of the African American population down there and the great likelihood that it will go overwhelmingly for him, and he may, indeed, win there.

But if you look beyond South Carolina, out of Nevada, there are not that many states where Obama will have the kind of natural strength that he has.

And if Hillary Clinton can win with white Democrats, with Hispanics, and win broadly with them, it will be difficult, it seems to me, for Obama to overtake her. So I think, you know, this was a revealing situation out there yesterday.

WALLACE: I mean, we shouldn't overstate it. She got 51 percent of the vote and Obama got 45 percent.

But the fact is, Mara, he got these endorsements from the biggest unions. It didn't help him as much as I think he was counting on, and it does raise this question about the Hispanic vote, which is going to be very important as we get to California.

LIASSON: Yes. I think the Nevada results showed that she has a lot of strengths, strengths that, as Juan said, she can use going forward -- women, Hispanics, et cetera.

However, you know, Democratic contests are not winner take all, most of them, and he's going to do well. He's going to get some New York delegates. You know, he's going to do well in California.

I think South Carolina -- of course, he's running against expectations. They're very high and people are going to discount a win for him there because, oh, everybody knew it was going to happen.

But look. This is the strongest challenger we've ever had in the Democratic party. This is an extraordinary race. The Clintons never expected this. That's one of the reasons they're reacting with the tactics that they have.

I think he is a very, very strong challenger. Yes, you'd have to give her an edge, maybe a small one. I do think that over time, if he continues to do as well as he's doing, the pressure is just going to build and build and build for him to be the vice presidential candidate if she's the nominee.

KRISTOL: Yes, I don't give her the edge. I think I give him still the slight edge. He'll win South Carolina, I think, and if you really go look at the 22 states on Super Tuesday, I think it's quite plausible that he will get more delegates than she or be very close behind Senator Clinton.

They'll both come out of Super Tuesday with a little over 1,000 delegates, probably. You need 2,000 to win the nomination. I think going forward he has some strong states. I actually like his chances.

WALLACE: You have 30 seconds to break the tie.

WILLIAMS: Well, I mean, if you had to just look at it from a purely strategic point of view, you'd have to say that Mrs. Clinton is positioned right now to do very well.

They're starting buys already right now in California and some of those western states, so they're already in there. She's been in to California, and again, that Latino vote just proves so critical.

I think that -- when I think about the problem here for Senator Obama, it's to get back that sense of being bigger than the black candidate, you know, not just the black guy, not just that.

And what the Clintons have done is in a way reduced him again to being the black candidate. And I think a lot of people are going to hold that against them. I mean, why use race inside the Democratic Party? That's just painful to me.

WALLACE: All right. We need to step aside for a moment for our sponsors.

But up next, all these Republican candidates can claim at least one victory so far, but which one now has the best chance to win the nomination? Our panel has some answers when we come back.

(COMMERCIAL BREAK)

WALLACE: On this day, January 20th, the president is inaugurated into office at noon every four years. The practice began with Franklin Roosevelt in 1937 when the ceremony was moved from March.

Stay tuned for more panel and "On the Trail."

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MCCAIN: You and I are aware that for the last 28 years, the winner of the South Carolina primary has been the nominee of our party for president of the United States.

(END VIDEO CLIP)

WALLACE: Well, that was John McCain last night celebrating a hard- fought victory in South Carolina.

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

So let's sift through the results in South Carolina last night. McCain won. Huckabee lost narrowly in a state where more than half of the Republican voters identify themselves as evangelicals.

Brit, what does that mean for both of them?

HUME: I'd say it's a significant win for McCain. It gives him a real edge going forward. But I think it's a bigger loss for Huckabee than it is a win for McCain.

I think Huckabee now has to, you know, kind of scrounge around looking for places where he can do as well again. It doesn't look so good for him in the big states that are coming up on Super Tuesday.

It doesn't look so good for him in Florida, although he has plenty of ammo, I think, to stay in the race and he can continue to get a significant portion of the vote.

But it's hard to see where he begins to gather the momentum to get to nomination. I think this may be, you know, kind of the -- he may have peaked here.

LIASSON: Yes, I agree with that. I think, you know, barring Florida, and we have to wait to see what Giuliani can do there, this is going to be possibly a two-man race, McCain and Romney. Now, like I said, we have to wait for Florida. We want to see if Giuliani can get back in the mix.

But I think this was a must-win for Huckabee and he didn't win it. McCain had to win South Carolina to be viable, and he did. Now he faces a whole different terrain. He's finished with the states where independents can vote, pretty much. He's facing a whole lot of closed primaries.

He's not going to be able to get the -- he needs to get more support from regular Republicans. That's what all these results show, that he just doesn't do as well as he should or needs to among Republicans, and that's what he's facing in the February 5th states.

Also, of course, you need a lot of money. Romney has the edge there. So I think he's got a tough road ahead, but he's in a better position now to get the nomination than he has been for ages. And for somebody who definitely once almost wrote him off, I have to say this is an amazing comeback.

WALLACE: Bill, talk about McCain and Huckabee, but let's also throw in Mitt Romney, who, as we pointed out when we talked to him earlier, won Nevada, finished fourth in South Carolina, but also won Michigan.

Where does he fit into this equation?

KRISTOL: Well, he's formidable, and he's got plenty of resources, and he'll go forward. I think he may have made a terrible tactical mistake by pulling out of South Carolina, by flying to Nevada -- totally pointless. He was going to win it anyway. Then he gets to sort of -- he boosted his victory by a few extra points.

If you look closely at the exit polls, it looks to me as if Romney dropped off there. When it was announced that he was leaving South Carolina, some number of South Carolinians took offense and moved from Romney. It looks like a lot of them moved to McCain.

He did very well in those couple of days when Romney was leaving the state and in the areas where Romney was strong, the coastal areas, Charleston, Hilton Head, Myrtle Beach kind of areas.

It would be ironic if this tactical decision by Romney to sort of glory in his Nevada victory put McCain over the top against Huckabee. Romney would have benefited much more by a Huckabee victory in South Carolina, which would have greatly weakened McCain.

McCain now is formidable and it might become a McCain-Romney race. But a Huckabee victory would have been much more in Romney's interest and in Giuliani's interest, if I can mention someone else, who also pulled out of South Carolina.

These guys, I think, are running tactically foolish campaigns. They needed to weaken McCain. Giuliani and McCain are exchanging votes, it looks like, if you look at the data. And Giuliani pulled out of South Carolina.

Giuliani and Romney allowed McCain to win South Carolina and they may have allowed him to win the nomination.

WALLACE: Well, let me have you talk about McCain, Romney and Giuliani and Huckabee, but also let's put in Giuliani, who has basically stayed out of these contests, or made an early stand, blown a couple of million dollars and then has waited now for the campaign to come to him and the candidates to come to him in Florida.

But now Romney and McCain come into Florida with some considerable momentum.

WILLIAMS: I think it's terrific momentum and I couldn't agree more with Bill. I think that the strategists made a terrible error here. And the fact that Romney, who put so much money into South Carolina, then decides to get out -- I think that's a sign of weakness.

And Giuliani -- I just think this strategy is foolhardy to not be in the game at this point. I don't understand.

I think McCain right now, according to go some polls, is even in the lead in Florida. So he's been there -- this is Giuliani -- and invested again a great deal of money. McCain is now coming in with momentum, and I imagine there's going to be some rallying around him.

But let me just, on this point, say there still isn't really a definitive leader among the Republicans because McCain is, as I would put it, nobody's child.

You listen to Rush Limbaugh, you listen to Sean Hannity, you read George Will -- Tom DeLay was on Fox News Channel this week just dumping on McCain. They don't like McCain.

And the idea that he's now the leader in terms of the Republican pack I think is -- I think the Republicans must be pulling their hair out, because there is not this reassembling of the Reagan coalition, which is the way most Republicans talk about.

I just think there's not a connection between the grassroots, the evangelicals that have responded to Huckabee, and the Wall Street types who are all focused on tactics. I don't think they believe in Romney's business with Michigan bailouts. Come on. That's not a Republican message.

LIASSON: You know, we...

HUME: I don't think you can rule out the possibility that Giuliani will win Florida. They've already started voting there. As Fred Barnes pointed out last night, they've been voting for some time.

And that reaches back to the time when he was at his strongest and riding high in the polls. This has been the year of no-mentum, when you win a state, and you go to the next state, and -- look at this week. I mean, Romney wins Michigan. It makes not a particle of difference in South Carolina that we can even discern.

And I'm not sure that this -- I mean, I think McCain needed to win. I agree with that. But I'm not sure about how much carryover there is into Florida for him, even though he may be up in the polls there. That's also turned out to be something that changes very rapidly.

And then, of course -- you know, and if Giuliani wins there, then who knows where we'll all be?

But I agree with Juan on this point. There is a big part of the Republican constituency that has been very resistant to John McCain, and I don't see that changing.

LIASSON: Yes, and now Mitt Romney is going to lead that coalition of McCain haters. And then you've got Giuliani hammering on him about taxes in Florida. You know, McCain thought South Carolina was tough? Wait till he gets to Florida.

WALLACE: Let me ask you about that, Bill. Do you think that the resistance among the regular Republican Party to McCain has softened at all? And is there anything McCain can do in the next couple of weeks to try to soften it?

KRISTOL: Yes, there's a lot he can do to reach out to grassroots conservatives. Some of the opinion leaders, rightly or wrongly, have their -- their hearts are set against McCain. Their minds are set against McCain. He probably is not going to change their minds.

There's a lot he can do to reach out to grassroots conservatives and to regular Republicans. He's got to say, "I want to lead a united Republican Party that can win in November, that can defeat the Democrats in November."

And in the polls, it's just clear he is the strongest Republican. He's got to remind people he has -- he's been pro-life for a long time. He was pro-life when Mitt Romney wasn't pro-life. He was a Reagan Republican when Mitt Romney was making money and Rudy Giuliani was endorsing Mario Cuomo.

I mean, he has a lot to say to grassroots conservatives and to regular Republicans. He will not totally do away with the hostility and suspicion. There are some who are just never going to be OK with him.

But I think it's a dynamic campaign, as Brit said, you know, and he has a big chance now, I think, to become the leader of the Republican Party and the leader, albeit not an entirely comfortable leader, of the conservative coalition.

WALLACE: Let's talk about one last name in this conversation we haven't, Fred Thompson, who made his stand in South Carolina, came in a distant third. Is there any room for him to go forward?

WILLIAMS: Well, I think that the air has been taken away. Clearly, he was trying to be the social values candidate among the Republicans. I think Mike Huckabee has taken that mantle.

And I think Mike Huckabee is the one who has some chance to go forward in terms of the contests coming up in places like Arkansas, Missouri and the like, where you have evangelical social values people. But as I heard it last night, Mr. Thompson went home to visit his mom, and I think that that's -- you know, he didn't go to Florida. He wasn't exactly saying, you know, "I'm fighting. I'm in there." No, I think he was retreating, and, you know, happy trails.

WALLACE: Brit, 30 seconds. If Thompson does pull out, and we say if, who does that help?

HUME: Well, it would have helped -- I suspect it would have helped Huckabee in South Carolina if he hadn't been there, and that may have been what cost him. But I think it's an imponderable who it helps in the states going forward. It's very hard to calculate.

WALLACE: I know that campaign chairman Ed Rollins for Huckabee thinks it would have helped a lot to have Thompson not in the race.

We're going to have to leave it there. Thank you, panel. See you next week.

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