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November 16, 2008

Sens. Dorgan and Kyl on "Fox News Sunday"

Fox News Sunday

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

Lawmakers brace for a lame duck showdown over a bailout for the auto industry. What will Congress do about that and a second economic stimulus package? We'll get answers from two Senate leaders, Republican Jon Kyl and Democrat Byron Dorgan.

Then, what's the path back to power for Republicans? We'll discuss the need for new ideas and emerging stars with Governor Tim Pawlenty of Minnesota and Michael Steele, Maryland's former lieutenant governor, now running to be head of the Republican Party.

Also, will President Obama's cabinet be a modern-day team of rivals that includes Secretary of State Hillary Clinton? We'll read the Beltway tea leaves with our Sunday panel -- Bill Kristol, Mara Liasson, Charles Krauthammer and Juan Williams, all right now on "Fox News Sunday."

And hello again from Fox News in Washington. The Senate returns for a lame duck session tomorrow with a proposed bailout for the auto industry and another stimulus package at the top of the agenda.

Here to discuss what's going to happen are two Senate leaders -- Jon Kyl, Republican of Arizona, and Byron Dorgan, Democrat of North Dakota.

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

DORGAN: Thank you.

KYL: Thank you, Chris.

WALLACE: Let's start with that proposal to give the struggling Big Three automakers a cash infusion of $25 billion.

Senator Dorgan, do Democrats have the votes to pass that kind of bailout in this lame duck session?

DORGAN: Well, we don't know at this point. We hope that we'll be able to make some progress on that. Let me just make the point that this is not just about an industry or three companies. This is about jobs -- 350,000 direct, probably as much as 3 to 5 million jobs in total reflecting that industry.

And I want to make a point. You know, the fact is the large financial companies in this country steered this country into a ditch. We've got a serious problem. It affects almost everybody in the country.

The auto industry didn't cause this problem of having a 30 percent reduction in sales last month. So you know, what is happening here is substantial numbers of jobs are at risk.

The question is do we want to put more people in the street, cause more unemployment, or do we want to use just a small fraction of that which has already been appropriated to help the financial services industry, just a small fraction, to try to save these up to 3 to 5 million jobs working on the automobile issue.

And one final point. I don't think you long remain a strong economic power in this world unless you have a manufacturing base. And we're talking about a significant part of that manufacturing base as well.

WALLACE: Well, we heard the arguments for it there, Senator Kyl, and the auto companies say -- and there's everything indication -- that they are close to bankruptcy.

Let me ask you. Do you think Republicans have the votes to block it? And you can already hear from what Senator Dorgan said, if you do block it, the Democrats are going to blame you.

KYL: Well, sure. It's a perfect political setup. And I wonder if that isn't really the point of the exercise this week, since it's pretty clear that it's not going to pass. Why wouldn't the Democratic leadership wait until next year?

But in any event, the arguments -- and I don't speak for every Republican, but I suppose most of us will oppose it as a very bad idea. This didn't happen to the auto companies overnight. For years they've been sick. They have a bad business model. They have contracts negotiated with the United Auto Workers that impose huge costs.

The average hourly cost per worker in this country is about $28.48. For these auto makers, it's $73. And for the Japanese auto companies working here in the United States, it's $48. So you've got huge costs there.

And the people who would be paying the bill for this, the average worker in the United States, I don't think should be burdened with bailing out the auto companies that have been sick for a long time.

The financial markets, which provide the credit for all of us, will get better as a result of the money that Congress has set aside. But there are companies all over this country that are going to be hurting because of the recession.

And I don't know how you distinguish between a company like DHL, for example, that had to lose 10,000 jobs in one Ohio city, as opposed to -- as opposed to the auto companies, so the question is...

WALLACE: So -- wait. Well, let me...

KYL: ... where would it end...

WALLACE: Let me be clear.

KYL: ... and how would you ever pay for it.

WALLACE: What do you do, then? Are you basically saying to the Big Three, "You're on your own?"

KYL: Well, we have laws to deal with companies who are having a hard time. And if they can't pay their bills, they go into a reorganization under what's called Chapter 11...

WALLACE: Bankruptcy.

KYL: ... of our bankruptcy code, and as a result of that, like the airlines have done and like a lot of other companies have done, they can restructure, reorganize, get rid of the contracts that are bringing them down, create a new business model and move forward.

But $25 billion -- what does it pay for? Maybe five or six months' worth of their bills, and then they're right back where they are, and the taxpayers have nothing to show for it.

This is not something that's going to be repaid, as opposed to the financial markets, where we expect to -- hope to get most of the money back that we're investing.

WALLACE: Senator Dorgan, I mean, the fact -- the fact is Senator Kyl's quite right. A number of airlines have gone into bankruptcy. That doesn't mean that they shut down or stop flying. They just restructure, reorganize and have a sounder business model.

Why not go that route with the Big Three?

DORGAN: Well, let -- but let me make a point on what my friend Senator Kyl just said. It's true, the auto industry has a lot to answer for, but they've been turning a corner, making better products. They've seen new contracts in which wages have come down. A lot of changes have happened.

But the fact is dealers can't sell cars. Consumers can't get loans for cars. We've got an industry that's in very significant trouble at this point.

And the question is whether you want to sit around and do nothing, you know, an imitation of a potted plant here, or do you decide to, on the heels of 1.2 million people losing their jobs -- 245,000 last month, half of the 1.2 million in the last three months -- on the heels of that, do we just decide one of the largest portions of America's manufacturing base, the source of up to 3 to 5 million jobs, doesn't matter, let them go? That makes no sense to me.

And let me make one other point, if I might, Chris. It was no holds barred to shove money to the financial services industry, the big banks, up to...

WALLACE: Which you opposed.

DORGAN: Between two and $3 trillion has now been offered up to those folks, $700 billion in a bailout. I did oppose that, because the -- and I hope we'll talk about that. They didn't have the foggiest idea what they were going to do with that money, and that's been demonstrated in recent weeks.

But my point is how about one small fraction of that, 1 or 2 percent maybe, to help a significant part of our economy preserve some jobs? How about speaking up for working people for a change?

WALLACE: Well, Senator Dorgan, if the money is needed so desperately, why not compromise with the Republicans both in the Senate and also in the White House, and take that $25 billion which was approved back in September to retool the industry?

The White House says, "We're all for letting you use that money." The Senate Republicans say, "We're all for letting you use that money." Why not use that $25 billion and bail out the industry with that?

DORGAN: Well, that money is not going to be made available very quickly. We've been through this process with those kinds of loans before. But the fact is the proposal is not new money.

The proposal is to take just a small fraction, 3 percent, of the $700 billion that has already been appropriated, say divert less than 3 percent of that to help a major industry.

The rest of it is -- you know, the treasury secretary says, "No, you can't do that. This all has to go to the big banks, the big financial services industry." What about workers? Is somebody going to speak up for workers who are losing their jobs, 245,000 last month? I mean, I don't see much concern about workers.

And one final point. The issue of whether we're going to pass a stimulus bill any time soon...

WALLACE: We're going to -- we'll get to the stimulus...

DORGAN: Yeah.

WALLACE: ... package, so let's wait on that.

But, Senator Kyl, let's finish up on this.

KYL: Two problems. The business model of the Big Three automakers, all experts have agreed, is a failing model. It's got to be changed. Just giving them $25 billion doesn't change anything. It just puts off for six months or so the day of reckoning.

The other problem that Byron mentioned is a real one, and that's the lack of credit, both for the dealers who take their cars on consignment from the companies and for the consumers. That was the point of getting money into the financial system, into the banks, so that they can loan it.

And the auto companies are probably the first to notice when credit is really tight. It is now beginning to loosen up as a result of getting the money into the banks so that they can loan it. That's how you help the consumers buy cars.

WALLACE: OK. Let's...

DORGAN: Chris, let me just...

WALLACE: No, no. Let me...

DORGAN: OK.

WALLACE: Let me just move on, if we can, to the stimulus issue. And you...

DORGAN: Sure.

WALLACE: It will be like a debate, Senator Dorgan.

DORGAN: All right.

WALLACE: You can -- you can answer the previous question when you answer this one.

The other big issue facing this lame duck session is whether or not to pass a second economic stimulus package.

And, Senator Kyl, there was talk about another $150 billion with big infrastructure projects, aid to states and cities that are now clearly struggling, with an economy that is clearly headed into a recession. Why are Republicans against that?

KYL: First of all, where does the money come from? Washington doesn't grow money on trees. It gets it from the American people. And when you take it from families, when you take it from small businesses, you're taking money right out of the area that we need -- where we need production, that creates jobs.

So -- now, you can borrow it and you can saddle future generations with more of the burden, or you can print money and inflate your way out of it, which, of course, nobody wants to do.

So when you think about bailing out -- for example, let's just take a county in Arizona, Pima County. Pima County has had an increase of over 50 percent of its budget in the last five years.

Why should -- what's the idea of taking money from Washington, where it came from North Dakota, citizens of North Dakota, citizens of Virginia, citizens in other states, and sending it to that particular county simply because they've spent beyond their means?

WALLACE: Senator Dorgan, there does seem to be a sense on Capitol Hill that at least in this lame duck session, all you're going to be able to pass is a much smaller plan, perhaps $6 billion for expanded unemployment benefits. Is that how you read it?

DORGAN: It appears that might be the case. I mean, we're going to try to do more. But you know, we've been through this. Will Rogers said back in the 1930s -- he said the unemployed around here haven't been eating regularly, but we'll get to them as soon as everybody else gets fixed up.

The question is what do you do about the unemployed. What do you do about the people that are about to lose their jobs? The number that I used earlier, 3 to 5 million jobs at risk as a result of the auto sector -- that's not my number. That's the Chamber of Commerce number, which very strongly supports something should be done.

But you know, my point is this. There is a time when you have to make significant investments, and those investments would produce assets -- building roads, building bridges, building schools, libraries, repairing all those things. All of that puts people to work immediately.

Now, last month there was an apoplectic seizure over the notion that consumer spending was down. Well, you know what? Consumer spending is not going to go up if people are out of work. You've got to put people back on the payroll. That's when you get consumer spending to drive the economy again.

So I don't -- we can't proceed without some sort of a significant stimulus plan, and when you finish that spending, you ought to have an asset to show for it. Marty Feldstein, top Republican economist, says we should. The Chamber of Commerce -- I mean, this is not a Democratic plan.

Most people believe that we ought to do something to put people back to work.

WALLACE: All right.

KYL: Marty Feldstein says we shouldn't. As a matter of fact, he testified before the Finance Committee in favor of the last stimulus package. He's now written that, of course, it didn't work. They never do.

WALLACE: All right. Gentlemen, we could -- we could debate this, and you will debate it on the floor of the Senate. I want to move to some other business.

There's growing speculation, Senator Kyl, that President-elect Obama is going to name Hillary Clinton to be his secretary of state. First of all, would she have any trouble being confirmed by the Senate? And what do you think of the choice?

KYL: I don't know whether she would. I think it would be a good choice, at least superficially. It seems to me she's got the experience. She's got the temperament for it. I think she would be well received around the world.

So my own initial reaction is it would be a very good selection.

WALLACE: Why would she have any trouble being...

KYL: I'm not saying that she would. I just don't know the answer to that.

WALLACE: Senator Dorgan, what do you think about Secretary of State Hillary Clinton?

DORGAN: I think she'd be a fine choice. And I don't think she'd have difficulty in the Senate. She's worked across the aisle, has good bipartisan relationships.

And I think -- you know, there have been three names out there, all of them very qualified, but you're asking specifically about Senator Clinton. I think she'd be an excellent choice, would have instant credibility around the world.

We have a lot of relationships to repair and a lot of work to do, so I think she'd be a fine choice.

WALLACE: Let's move to another piece of business here in Washington.

Senator Dorgan, you have to deal -- you and the Senate Democrats have to deal on Tuesday at your House -- rather, Senate Democratic Caucus about what to do about Joe Lieberman and whether or not you are going to strip him of his chairmanship of the Homeland Security Committee.

Back in September, you said that Democrats were, quote, "profoundly disappointed" with what he had done and his strong support for McCain over Obama in the election, the fact that he made a tough speech at the Republican convention.

Are you going to vote to strip him of his chairmanship?

DORGAN: Well, I'm not going to discuss -- and the -- our caucus won't discuss that on television programs. What I think will happen on Tuesday is Senator Lieberman will, I think, make a presentation to the caucus, and the caucus will by secret ballot decide what we might want to do.

And you know, look. Joe is a friend of mine. Joe sits next to me in the Senate. He sits at the desk to my right. He's a good American.

And so the question, though, is as a chairman of one of our significant committees in the Senate, not just going off and supporting a presidential candidate of the other side, but also criticizing the candidate on our side, and also involving himself in a couple of Senate races on the other side -- the question is, is that acceptable. And the answer is no.

The question I think mainly is what should happen as a result of it. And our caucus will decide that. We're going to decide that...

WALLACE: You used the word profoundly disappointed. Do you think...

DORGAN: I was disappointed, but I think...

WALLACE: Do you think there should be some action taken? DORGAN: I'll decide and I think our caucus will decide that on Tuesday. But you know, I think we will hear from Senator Lieberman and then we'll make a judgment.

WALLACE: And what about the concern that if you do get too tough with him, he'll leave the Democratic caucus and go over and vote as a Republican?

DORGAN: Again, these are decisions we'll make as a caucus on Tuesday, Chris. And I don't want to prejudge what might or might not happen.

But I was concerned and was upset about what happened earlier this year. But you know what? We turn the page. We'll make a decision about that on Tuesday.

WALLACE: Senator Kyl, I assume you'd be just delighted to welcome Joe Lieberman to your decide. Why should he make the jump?

KYL: Well, sure, we would. By the way, I think Joe Lieberman's going to vote on specific issues probably just as he always has. If he came over to the Republican side and organized with us, I don't think it would change the way he votes.

But it would, I think, signal that -- obviously, we're -- we would welcome him with open arms to be a part of our caucus, to come to our lunches, to plan things with us.

WALLACE: What do you think it would signal if he were to come?

KYL: Well, Joe is a very open-minded person. And people of both caucuses love Joe because he is a great American, as Byron said.

And he is a lot tougher on the national security issues -- on those issues, he's generally with Republicans. On a lot of the economic issues, he might still vote more with some of his Democratic friends.

But he would be welcome in our conference. We'd love to have him there, and I think since he was such -- of such assistance to John McCain in this last election, it would be good to have him over with us.

WALLACE: All right.

DORGAN: And let me -- Chris, let me just say, nobody -- nobody's going to suggest throwing him out of our caucus. That is not, I think, on the table. But you know, we'll make a judgment on Tuesday about the consequences.

WALLACE: All right.

Senator Dorgan, Senator Kyl, we want to thank you both for coming in and giving us a preview of what the Senate and Congress will do starting tomorrow. Thank you both again.

DORGAN: Thank you, Chris.

KYL: Thank you.

WALLACE: Up next, Republican leaders met in Florida this past week to discuss why they lost the election and where the party goes from here.

We'll discuss that with two men who intend to be a big part of the GOP's future after this quick break.

(COMMERCIAL BREAK)

WALLACE: Since Election Day, Republicans have been trying to figure out what went wrong and what needs to be done to start regaining power.

Joining us now, two rising stars in the GOP, Governor Tim Pawlenty of Minnesota, and Michael Steele, former lieutenant governor of Maryland, who's now running to be chairman of the Republican National Committee.

And, gentlemen, welcome.

PAWLENTY: Thanks, Chris.

STEELE: Thanks, Chris.

WALLACE: Governor Pawlenty, now that you've had almost two weeks to crunch the numbers and to think about it, what do you think are the larger lessons about the Republican loss on Election Day?

PAWLENTY: Well, two things. One is the Republicans lost their way. You can't be a party of fiscal discipline and have all these bailouts, have profligate spending in Washington, have corruption, and have the hypocrisy between what our party stands for and the actions particularly in Washington, D.C.

And then, number two, Chris, though, we have to be a conservative party, and we should be. But we have to apply those principles in the context of a changing country.

The demographics of the country are changing. The technology is changing. The economy is changing. The culture is changing. And we have to learn to do a better job of applying our conservative principles to this new marketplace.

WALLACE: I'm going to pick up on that with you in a minute, but let's...

PAWLENTY: All right.

WALLACE: ... bring in Mr. Steele.

What would you add to what Governor Pawlenty just said?

STEELE: Well, I think he hit it right out of the box. I think the other thing that I've found that's been lacking over the last four years, especially the last two cycles, '06 and '08 -- we don't know how to talk to people.

We've absolutely forgotten how to communicate a message, to firmly -- to -- what the governor says, to espouse those very principles in the context of people's everyday lives.

When you're talking about an economy that's slowing down, war that they're concerned about, not to mention health care and other issues, our party has to have a voice. It has to have a relevant voice that people can identify with.

We need to be that competing interest, if you will, for them so that they're not hearing just one side of the argument. But that's been the case, especially in this last election.

WALLACE: But, Mr. Steele, are you saying -- I mean, John McCain spent months and millions of dollars campaigning. Are you saying he didn't communicate...

STEELE: No, I'm not saying he didn't communicate. I'm saying the party as a whole didn't communicate. I mean, a campaign for presidency is not the same as the day-to-day ground gain that you see carried out in states all across this country leading up to and during a campaign for national office.

So you've got to have that back fill. You've got to have that back channel of noise, if you will, of communication, that furthers the agenda or the voice of the candidate for office.

But beyond that, going into the -- to the election, what was the voice of the party? Where were we very clearly stating those very principles that the governor talked about?

And I think that's one of the concerns especially among the grass roots of the party...

WALLACE: All right. Well...

STEELE: ... why we lose independents and others, because there's no connection.

WALLACE: Let's put meat on the bones of what do you do now.

And, Governor Pawlenty, I want to put up something that you said the other day. You said, "We've got a deficit with women. We have a deficit with Hispanics. We have a deficit with African Americans. We have a deficit with people of modest incomes. And I think the best thing we can do as a party is reach out to Sam's Club voters, folks who are just focused on bread and butter issues."

So, Governor, are you saying stop railing against earmarks and stop focusing so much on social issues?

PAWLENTY: No, I'm not. The Republican Party is a conservative party. It will remain a conservative party. But the challenge and the opportunity is how do you ply those principles in the context of our time with those groups and others.

That doesn't mean changing your principles or becoming more like Democrats. It's trying to be more effective at convincing Democrats to become Republicans.

WALLACE: So give us some specifics. What are you saying? How do you -- how do you -- Sam's Club Republicans is your contrast, and you coined the phrase, as compared to country club Republicans.

PAWLENTY: Yep.

WALLACE: So how do you appeal to them with conservative ideas?

PAWLENTY: Let me give you some examples. There's pressure on government to do more and more in terms of providing people with help with health care, with housing, with transportation, and the reason people can't afford to pay for that themselves, in most instances, is they lack a skill or an education to meaningfully connect to the economy of today.

So the Republican Party should be about education reform, education accountability. We should have been out leading a charge on performance pay for teachers.

We should be out leading the charge on making higher ed more affordable, more modern, more accessible and higher quality by driving online learning opportunities across the country.

We should have been on the front of renewable energy, not by showing how to subsidize it, by how to bring conservative principles to renewable energy.

We should have been out in front on hitting the drums really hard on health care reform, not by having the government take it over but by empowering patients and doctors, and on down the list.

We did not see those emerging issues soon enough and we were not aggressive and reform-minded enough to be out in front of it.

And lastly, Chris, we cannot be the party that has the ones that -- continues to enable this culture of death. We have to have a party that says, "Let's have a balanced budget."

We should get back to having a federal constitutional requirement, or at least a statutory requirement, that the federal budget be balanced. That's first and foremost for our party. And people in Sam's Club understand that. They have to live on a budget and they expect their government to as well.

WALLACE: Well, let's talk of -- one of the issues you talked about was energy and the environment, and let's talk about that, because there's a split in the party, and frankly, there seems to be -- maybe I'm wrong -- a split on this desk.

Mr. Steele, at the Republican convention, you came up with the phrase "drill, baby, drill..."

STEELE: "Drill, baby, drill."

WALLACE: ... which became a slogan for the McCain campaign and, in a sense, for the Republican Party.

Governor Pawlenty, you say "drill, baby, drill" is not an energy policy.

I'll start with you.

STEELE: Well, and "drill, baby, drill" is not meant to be an energy policy. "Drill, baby, drill" is a -- is a way to get your attention focused on the question of how we do energy in this country.

The last few energy bills have basically been a joke. How can you propose an energy bill and not have all the relevant players at the table? How do you not have a -- how do you not have a conversation with coal and solar and nuclear players at the table?

It's not just about oil. My...

WALLACE: But "drill, baby, drill" sounds like...

STEELE: Well, but again...

WALLACE: ... let's get more domestic oil production.

STEELE: Again -- of course, because it's right here, right now. But it doesn't preclude you from doing other things. It is an all-on- the- table, everything-included idea.

But it was to get you focused on the fact that we have the opportunity right here in front of us to begin to address some of the energy needs that we have and concerns that we have.

Look at what happened to the price per barrel when the -- when the president just lifted his executive order on his end. I mean, that began this tumbling that we saw. It was down like 14 bucks in the first week.

So there is a psychology to it as well as a momentum to energy policy, and what I was trying to do is draw people's attention to the fact that this is one of many things we should begin to do as a party and as a nation. WALLACE: Governor Pawlenty, whether Mr. Steele meant it or not, the -- as somebody covering the campaign, clearly the implication seemed to be that's the answer.

PAWLENTY: Well, what I've said in my speeches, and I think you're referring to this, Chris, is "drill, baby, drill" by itself is not a complete or comprehensive energy policy. So Michael and I agree on that point.

My point is this. Clearly, the Republican Party was slow to the draw, was lagging behind on what is a better renewable energy future. And there are conservative ways to advance those goals and that cause. And we didn't do it fast enough.

WALLACE: What about this lame duck session? And we just heard from Senator Kyl congressional Republicans are going to be against a bailout for the auto industry. They're going to be against a big economic stimulus.

I mean, does that appeal to Sam's Club Republicans, Governor, who are sitting there and very worried about staying afloat right now?

PAWLENTY: I think it does, for this reason. If you go to Sam's Club, or Target, or Costco, or Kmart, people are having to go there because they don't have more money to spend. You know, they're living on a budget.

And they look at the federal government. The federal government is broke. When they talk about stimulating or bailouts, you know who's largely doing that? Our children and our grandchildren, through the debt we're dumping on them, or, in some cases, the Chinese.

There is no more money. And so people understand if they have to live on a budget when they go to Sam's Club and are looking for better value, they expect those same principles from their government -- live on a budget and, by the way, get good value for the money they are paying. And that's not what's happening in Washington, D.C.

WALLACE: But isn't it sometimes -- and I know -- I'll get -- bring you in in a moment, Mr. Steele.

Isn't it sometimes good economics, particularly in a recession, to have some deficit spending -- not all the time, but in a serious recession, to give -- stimulate the economy, to give people jobs, even if they're in these infrastructure programs, to have a middle class tax cut, to put money in people's pockets so they can spend it?

PAWLENTY: Not if you're enabling a reckless and broken model -- for example, with the auto industry. General Motors, as an example, has run their costs up along with their labor.

You've got big government, big business and big labor concocting a deal that reflects an economic model that is broken, that is 20 years out of date, and it has to be unstructured.

They're not going to go away if they go into Chapter 11. They'll be restructured in a more modern, cost-efficient way. Sam's Club voters are looking at that and saying, "Why General Motors. How about -- how about my Hardware Hank in Eagan, Minnesota? Are they going to get bailed out? How about the person who's working down at the grocery store? Are they going to get bailed out?"

So it's a matter of principle. And who's next? The steel industry that's turned down? The iron -- the iron taconite mines in Minnesota? Are they going to get bailed out? So it's a slippery slope.

And it -- but more importantly, it violates a core principle. The federal government is broke. They should be -- who's going to bail them out, the Chinese? There is no more money. We have to live within our means.

WALLACE: Not just the auto bailout, though, Mr. Steele, talking about the economic stimulus in general, in a time of recession, don't you want to have -- I know we already had one stimulus, and some people will argue whether it worked or not, but do you not want to have some kind of spending to get people more money in their pockets?

STEELE: Well, I find this rather ironic that people have railed against the deficit that has been created over the last few years, and now everybody's talking about, "Yeah, it's good to do deficit spending."

You know, I think the quick point on the spending and the deficit side of it -- look, the stimulus packages, if you can put it in play, great, without -- without creating a great deal more harm to the economy, then do it.

But the reality of it is we've put $700 billion on the table which we shouldn't have. We're now trying to carve out an extra $300 billion to put on the table. My question is when does it stop. You don't want to keep feeding this trough here that folks on the Hill seem to want to be at.

The number two thing -- to the Republicans in the House and in the Senate, over this lame duck session, you can be against a whole lot of things, but you better be -- start to be about something and for something as well.

You can't just -- our party just cannot be in a position where we're sitting back going no to this, no to that, no to that, without any explanation, number one, and without some alternative proposal to put on the table.

WALLACE: All right. I want to ask you both about specific issues involving you.

Governor Pawlenty, you've got a dead even Senate race in Minnesota, and we'll put up the results which are really quite extraordinary, just a couple of hundred votes out of almost 2.5 million.

There have been allegations from some Republicans that Democrats are trying to steal this election for Al Franken. Do you have full confidence in the secretary of state, who is a Democrat, and also in the canvassing board, to which -- a five-member board to which you appointed two members?

PAWLENTY: Chris, in Minnesota we have a history of clear, transparent, accurate and fair and legal elections. That's going to happen again here.

The canvassing board is five people. They are invited by the secretary of state, not appointed by me. The governor doesn't have a role. But it's four judges, all of which have good reputations, and the secretary of state.

The canvassing board in the state of Minnesota will render a result. This process will be fair and appropriate. I can assure you of that.

WALLACE: Do you -- because there has been some talk in some Republican circles about ballots that were found in...

PAWLENTY: Sure.

WALLACE: ... people's trunks. I mean, is -- is there any sign that there has been any fraud? And two, if there is any fraud, will that be sorted out by the canvassing board?

PAWLENTY: There was a news report in Minnesota that the ballot- in- the-trunk story has now been retracted, that it wasn't accurate.

There are concerning patterns about the changes before the recount starting favoring Al Franken and some concerns that were raised, but we have to be clear on this. As of this moment, there is no actual evidence of wrongdoing or fraud in the process. If there is, it will get rooted out and identified aggressively.

But at the moment, there is no actual evidence of that occurring.

WALLACE: And finally, Mr. Steele, we've got a little over a minute left.

STEELE: Sure.

WALLACE: As we said, you're running to be chair of the Republican National Committee when they vote in January.

Where would you basically say -- and there are a number of state party chairs from Michigan, from South Carolina, from Florida who are also either running or thinking of running. What sets apart Michael Steele?

STEELE: Well, I think I bring a different experience to the table. I was a grassroots guy from day one. I started out here in my hometown of D.C. working the streets and knocking on doors.

I then worked the central committee in Maryland, in Prince George's County. I became chairman of the party there for six years, state chairman, an elected official, as governor -- lieutenant governor of the state of Maryland.

Now I'm chairing GOPAC, a national grassroots organization that is geared toward training and electing Republican candidates. So I think I bring a host of different perspectives to this table.

I'm a big techno wonk. I'm up at 2:00 at night blogging and checking out the world and seeing what's going on. I want to make our party relevant. And I think the experience that I bring to the table will help us do that.

You know, I'm tired of us sitting back with our head in the sand, complaining and finger-pointing and blaming. Let's get up, pick ourselves up, go out here and engage the fight. I want to be the loyal opposition in this -- to this incoming administration.

WALLACE: Mr. Steele, Governor Pawlenty, we want to thank you both so much for coming in today and talking about the Republican Party, and both of you, please come back.

STEELE: All right.

PAWLENTY: Thanks, Chris.

WALLACE: Coming up, our Sunday panel will give us their take on the possibility that Hillary Clinton is about to get a big new job where she'll have to answer those 3:00 a.m. phone calls. Stay tuned.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CLINTON: I'm not going to speculate or address anything about the president-elect's incoming administration. And I'm going to respect his process.

(END VIDEO CLIP)

WALLACE: That was Senator Clinton enjoying all the attention after reports she may be offered the job of secretary of state in the Obama administration, which brings us to our Sunday panel, Fox news contributors Bill Kristol of The Weekly Standard, Mara Liasson of National Public Radio, syndicated columnist Charles Krauthammer, and Juan Williams, also from National Public Radio.

Well, there had been some speculation, but I think it still came as a surprise to a lot of us when we got the word late Thursday, early Friday that, in fact, Senator Clinton had gone to Chicago and met with President- elect Obama, and may -- and repeat, may -- be offered the job of secretary of state.

Bill, do you think she'll end up with it, and do you think she's a good pick?

KRISTOL: I think she will end up with it. I think she is a good pick from President-elect Obama's point of view and from my point of view.

You know, she supported the Iraq war. She never apologized for it. She voted for the Kyl-Lieberman amendment designating the Iranian Revolutionary Guard as a terror organization. She's on the more hawkish side of the Democratic Party.

She was worried in the campaign what would happen if a 3:00 a.m. phone call came to...

WALLACE: Three a.m., but...

KRISTOL: -- 3:00 a.m. phone call came to President Obama in the White House, and now I guess that 3:00 a.m. phone call...

LIASSON: She'll be answering it.

KRISTOL: The situation room will have instructions to just direct it to the State Department. No problem at all.

WALLACE: They can actually do call forwarding.

Why do you think that she's going to end up with the job?

KRISTOL: Well, for her to fly up to Chicago, for them to have a meeting that was leaked, I mean, I think the offer -- I don't think they would go that far unless the offer was serious.

And I don't think they would let it go through the whole weekend as a possibility unless she was going to take it. So I think it's going to happen.

WALLACE: Mara, let me ask you -- and there are a bunch of questions I've got about this, and let me ask you the first one. Why would Mr. Obama want her, and why would she want to leave the Senate to take it?

LIASSON: Well, first of all, why she'd want to leave the Senate -- she's not going to be the Senate majority leader any time soon. She doesn't have the seniority to be the next Ted Kennedy, even, if she wanted to do that.

She would be a huge player on the world stage. So those are the reasons why she might want this.

In terms of Obama, I think he wants -- it would send a lot of important signals. Number one, she is hawkish, as Bill pointed out. He has to kind of put to rest this notion that he was naive, which, of course, came from her during the campaign.

And also, you know, he wants to assemble the most powerful team, you know, that he can put together. She'd be a very good pick. She's extremely capable.

Now, there is this notion, you know, the team of rivals. I think the phrase, you know, keep your friends close but your enemies closer might be more apt in this case. I think that he'd do well to have her.

It would send an important signal to her supporters. I don't think it's a completely political pick. It's a governing pick. But also there is a little bit of walking back that would have to happen.

Greg Craig, who's going to be the White House counsel, famously said during the campaign there is no reason to believe that she was a key player in foreign policy at any time during the Clinton administration. So I think there'll be, you know, some words being eaten if she is made secretary of state.

WALLACE: Charles, let me ask you another question that I have. What about Bill Clinton, who has been running around the world for the last eight years making speeches, sometimes in foreign countries, and being paid a lot of money by foreign entities?

Do you see a problem in terms of financial disclosure there? And two, what about just the Bill Clinton problem, that, you know, even if she's secretary of state, he is going to be out there making his own Clintonian policy?

KRAUTHAMMER: I'm not sure that the second would be an issue. He is who he is. He's an ex-president. He'll speak on his own. I'm not sure it would implicate her.

I think the first is a problem. He's had a lot of connections in -- involving the exchange of money with a lot of leaders abroad, especially a deal in Kazakhstan which remains obscure and troubling.

I'm not sure how much the Obama administration will insist on disclosure. I think if it insists on disclosure of all of his dealings, we may get a no deal here. But I'm not sure it would intrude on her effectiveness.

I think we're a little bit over scrupulous in this stuff. After all, it's not her, it's her husband. She is independent and she would act independently as secretary of state.

But I would add a bit of cunning in his calculation. It's not just that he thinks she'd be a good secretary of state. I think she probably would. It's that the Clintons are the only independent source of power outside of him in the party, independent in a way that might be unmanageable.

And by co-opting her and having her in foreign affairs, he's not going to have her as a rival on domestic issues in the Senate, for example, on health care, where he and she have had differences.

And secondly, it eliminates any source of challenge in renomination. And I know this is a long way away. But he remembers the Carter experience. If he has a weak, faltering administration, which is possible in these circumstances, the only credible source of rivalry would be her. If she is secretary of state, he eliminates that.

WALLACE: Just like Ted Kennedy was to Jimmy Carter.

KRAUTHAMMER: Precisely.

WALLACE: Juan, let me ask you the other question. What does this do to Joe Biden? I think everybody thought that Joe Biden would be the foreign policy guru as vice president.

In the Obama White House, how do you put all those pieces together on the chessboard, Obama, Biden and Hillary Clinton?

WILLIAMS: Well, I think Biden's in the White House. He's there every day, and he's there to consult, and he can go in on a crisis basis to certain situations.

But there clearly has to be some coordination with Hillary Clinton at State, because she's going to be a sensation as -- if she is secretary of state. She's a worldwide figure. She's much admired. She will have her -- she'll operate in an independent axis in some ways to the Obama-Biden White House.

And so they have to somehow deal a -- create a relationship with her that some have described as multi-layered, so that they can, in fact, bring it all together at some point.

She's going to have to be willing to talk in a way that we didn't see, for example, when you had Colin Powell and Dick Cheney in that position. There was much fighting.

I think that clearly, Obama says he doesn't like drama. And I think part of the buy-in here is no drama. We understand that Joe Biden is here and he has his expertise, and Hillary Clinton has hers.

A big problem may be if you have Hillary Clinton as secretary of state, how do you fire her? Is it possible to fire her? Is it possible to fire her without setting off fireworks inside the party and around the world?

That's a -- they must have come through some discussion about this and decided, "You know what, we can handle it." But I think I come back to this idea. I buy into exactly what Charles said. If Hillary Clinton is in the Senate, she is the leading Democratic point of opposition to Barack Obama.

And given all the expectations on him at this moment -- there are people who are going to insist that he have an aggressive policy, and Hillary Clinton, especially on health care, would be the leading player in that. I think she would be a huge power in the Senate.

WALLACE: I want to go back to something Mara said, Bill. And she talked about the book -- and it's gotten a big publicity boost; I'll bet it's soaring on Amazon -- "Team of Rivals."

This is the book that Doris Kearns Goodwin wrote back in 2005 about the fact that Abraham Lincoln, a president that President-elect Obama apparently models himself after, appointed all of the people that were his chief rivals for the 1860 Republican nomination, made them members of his cabinet.

As a matter of governance, is that a good idea to have people that were your political rivals in your cabinet?

KRISTOL: Yeah, it's not a bad idea. Look, I don't think Hillary Clinton is going to be some kind of rogue secretary of state. She -- her interest will be having Obama's foreign policy -- foreign policy succeed. His interest will be having a secretary of state who's a good messenger and good participant in the development of that foreign policy.

I do think the analogy is pretty good. Didn't Lincoln take Seward as his secretary of state, and wasn't Seward the senator from New York from his own party who had also been a contender for the Republican -- for the nomination, I think, in...

WALLACE: You covered that campaign, didn't you?

KRISTOL: I did. I haven't actually read the book personally, but I - - I vaguely remember some of the history. But I think that's right. Don't hold me to it.

But no, look. I think -- I think it's -- if it happens, and we don't know that it's going to happen, I think it would show strength. I think he will need to have a strong national security adviser in the White House, because you do worry about having a secretary of -- the State Department getting a little out of control.

WALLACE: We've got about 30 seconds left, and let me ask you one quick question, Mara, in this segment. And that is that some people are already beginning to mutter of the first 47 people that were picked either for the -- for the Obama White House or the transition, 31 of them have...

LIASSON: Yes.

WALLACE: ... strong ties to the Clintons, and some people are saying whatever happened to change.

LIASSON: Look, you can't have a cabinet that looks like a Clinton restoration. But where else are you going to get the expertise? And the whole Democratic bench -- most of them worked for Hillary Clinton or worked for the Clintons, the Clinton administration. There isn't an alternative universe.

Now, I think if you are going to have Clinton as secretary of state, it probably means that Larry Summers' stock just went down for Treasury. I mean, you can't have -- you can't have it look like a Clinton administration, even though, of course, you're drawing all your talent from...

WALLACE: All right.

LIASSON: ... the Clinton ranks.

WALLACE: We need to take a break here.

But coming up, we'll take a look at the deepening economic crisis and what ideas -- good, bad and indifferent -- Washington has to deal with it. Back in a moment.

(COMMERCIAL BREAK)

WALLACE: On this day in 1973, President Nixon signed the Trans- Alaska Pipeline Act, responding to the oil embargo. The pipeline was designed to transport oil from northern Alaska to a southern port 800 miles away.

Stay tuned for more from our panel.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: The best way to solve our problems and solve the people's problems is for there to be economic growth. And the surest path to that growth is free-market capitalism.

(END VIDEO CLIP)

WALLACE: That was President Bush at the conclusion of Saturday's Global Economic Summit here in Washington.

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

Well, there was a lot of bad economic news this week -- retail sales down, unemployment up, the stock market up then down.

Charles, Congress is, as we talked about with the two senators, coming back for a lame duck session tomorrow with a lot of talk about a bailout for the auto industry, a second economic stimulus package. Any of that make sense?

KRAUTHAMMER: Well, the auto industry bailout I think is a disaster, unless you get a restructuring. I think the problem with the bailout is that if you do it, it prevents a restructuring.

Everybody understands that unless you have a re-doing of the labor contracts, re-doing of the dealership system, all of which are unbelievably inefficient, the industry will die.

And all this will do if you bail it out without a change is prolong the agony, lose billions of federal money and not achieve anything. So it's not going to happen, certainly not in a lame duck session.

I think Obama and the Democrats, once in control, will do it next year, but I can't imagine it will be a blank check. It's going to have to be a profound change.

The other proposal, stimulus, I think is going to happen. It may not happen again in a significant way before Obama's swearing in, but we're going to have stimuluses all over the world.

The Chinese announced a 586 billion domestic stimulus. You've got to have some increase in demand. Otherwise, you're going to have a collapse of demand, possibly a deflation, which is what killed us in the Depression.

You've got to have artificial stimulus. And at this point, after you've appropriated almost a trillion, spending, you know, 50 billion on a stimulus or 100 is going to look like peanuts.

WALLACE: I never thought I would hear Charles Krauthammer say that 100 billion is -- what do you think a -- what do you think a...

KRAUTHAMMER: It's now real money.

WALLACE: Yes.

WILLIAMS: We're talking real money.

Well, you know, last night I saw Dick Parsons, who's the head of Time Warner...

WALLACE: Right.

WILLIAMS: ... and also an adviser to President-elect Obama, and he said to me -- he said, "You know, do you realize that if you just look at the car dealerships, it's like 13 percent of payroll in the U.S. goes through the car dealerships, all the people they employ and all they do." And I said, "I had no idea."

He said, "Well, it's going to drive up unemployment and possibly to an untenable rate, more than double-digit, possibly, in unemployment in this country, unless you do something to help the auto industry."

Now, the question that follows for me is, "Well, so where do you draw the line? Where do you -- what do you say to people who are in retail? What do you say to anybody -- you know, to American Express that wants a bailout, or anybody else, or the state and local governments?" And I don't think there is a fair answer to that.

So the question then becomes what can you expect. What do we need to do? Well, politically, I don't think there's any question, Obama wants to avoid a deep economic problem that gets his administration off on a bad foot. So there may be a political incentive for Obama to do something.

But if you're asking, you know, as a hardline question is it a good idea to start bailing out a failing industry that I think has been resistant to change and is locked into these terrible union contracts where they can't compete on an equal basis for labor, the answer would be no.

WALLACE: Bill, I mean, there are -- not only is it a terribly serious question and obviously affects millions of people's livelihood, but it's an interesting philosophical question as well.

Do you let the auto industries go into bankruptcy and restructure, as Senator Kyl suggested? If you bail out one industry, where do you stop? And if you bail them out, do we then have a formal industrial policy where we're going to begin to tell one industry basically how to operate? There's talk about an auto czar.

I mean, what are the answers?

KRISTOL: Well, one problem with the auto industry is we have been telling them how to operate an awful lot, you know, in terms of CAFE standards and other things, probably which should not have been most -- may have been the most -- not the most intelligent way to help that industry.

But look, I don't know. I think one has to intellectually make a distinction between financial services, banks and bank-like institutions, and everyone else. Everyone has always understood that banks are different. Money is different.

There was a Bank of the United States started in the 1790s by people who believed in capitalism. That's very -- so bailing out, if you want to use that term, the financial industry to make sure liquidity is available, credit is available, around the world is very different from picking different parts of the manufacturing base and saying, "We like this one. We don't like this one."

So I think you can intellectually make the case for some version of the original plan to make sure that we do not have cascading financial failures.

WALLACE: So what are you saying to the auto industry?

KRISTOL: I'm saying that there is a very viable U.S. auto industry. And if you go to Kentucky and Ohio and other places, you can find Toyota plants and Honda plants that are doing just fine. And the dealers will continue to exist, and parts -- the viable parts of G.M. and Chrysler will be bought by these other companies, or will be restructured in bankruptcy.

There are ways to structure, as I understand it, bankruptcy that allows for ongoing operations and makes sure that the whole thing doesn't come grinding to a halt.

WALLACE: But you know, it's an interesting thing. G.M., the heads of G.M., for instance, when people have mentioned the idea of bankruptcy, Mara, say -- you know, when the -- when the model is given about the airline industries and the fact that they have gone into bankruptcy and kept operations, it's a very different thing when you buy an airline ticket and your only relationship is are they going to get you from here to Cleveland than it is if you buy a G.M. car with the -- with the fear that in six months G.M. isn't going to be in business...

LIASSON: Right.

WALLACE: ... and they're not going to be able to service your car.

LIASSON: Right, right.

WALLACE: Bankruptcy's a big deal. LIASSON: Right. Bankruptcy is a big deal. Look. I think that you can argue that on paper it's -- it makes a mistake to bail out industries that aren't working, that have bad management, that don't produce appealing cars.

I think that the reality is that Barack Obama wants a bailout of the auto industry. So do the congressional Democrats. And they're going to do it.

I think the only question is what are the strings that are going to be attached. This industry is going to be restructured no matter what. Whether they go into bankruptcy or whether they go -- are bailed out by the Democratic Congress and president, they're going to be transformed.

And I think as Charles said, all that matters is exactly what the quid pro quo is going to be, what the taxpayers are going to get in return for bailing them out.

WALLACE: You know, Charles, with all the talk about this, with all the talk about this Global Economic Summit that was held yesterday, which seems to have come out with a bunch of platitudes and not much that you can hang your hat on, there was another fascinating development this week, and that was Treasury Secretary Henry Paulson holding a news conference and saying, "Remember the $700 billion that you gave me to buy troubled mortgage securities? Well, forget it. I'm going to take that money and use it for a completely different purpose, which is also in the law, but I'm going to give the money directly to the banks and buy equity shares."

KRAUTHAMMER: It tells you how big our crisis is, that that actually happened. And it was considered not a big deal -- the largest appropriation in the history of the planet, and he decides, "Oh, I changed -- I changed my mind how I'm going to use it."

Look, the conditions today are unprecedented. Paulson's had a hard job because nothing like this has ever happened. He zigged and he zagged. He saved Bear Stearns. He let Lehman go. One or the other is correct, but not both. And they're feeling their way.

He understood that the purchase of toxic assets, which he had original proposed, is not going to work. The British had proposed recapitalizing the banks. He did that. It's working. And he decided, "I'll stay with what's working."

You've got to hand it to him. It's a trial and error system, and we've had a lot of errors. And when a trial works, you stay with it. So I think you have to commend him for his candor but, on the other hand, be scared to death that these guys are winging it.

WILLIAMS: Yeah. Well, they are winging it. That's the problem. I mean, they don't inspire confidence in Wall Street. That's why Wall Street continues to go down. I mean, my feeling is, look...

KRAUTHAMMER: That's because we don't have a blueprint. WILLIAMS: We don't have any blueprint, and here's the -- here's the blueprint that exists as it looks to me. You give money to rich people and you say, "Oh, it's the financial system and we're going to take care of the rich, but when it comes to the auto worker and the middle class, we're not going to do it."

So then Paulson says, "Well, you know what? I notice that for car loans and student loans and consumer -- we've got to get the consumer -- so let's now shift back to the consumer." And that's what Barack Obama says, "Let's go back to the middle class and focus on the middle class."

And then you get these terrible decisions that I -- or at least you verge on terrible decisions about saving this industry that I think is dysfunctional, the auto industry.

KRAUTHAMMER: The difference is that a bank is a utility. You've got to have a utility or everything else will collapse.

WALLACE: All right. We're going to have to leave it there. Thank you, panel. See you next Sunday.

You're very lucky. I was going to ask you to explain what happened at the G-20 yesterday.

WILLIAMS: Well, I was going to go for it.

WILLIAMS: Well, now stepped on your own line. Well, write to Juan Williams, and he personally will tell you.

Time now for some mail. After our interview last week with Republican Congressmen Cantor and Pence, Doug Ross from Austin, Texas had some advice for the two young guns. "Mr. McCain lost because he was not a conservative. Mr. Bush was not a fiscal conservative. And the leadership of the Republican Congress were not conservatives. The Republican Party must stay true to those values that have made them winners."

And on the subject of a possible mandate for the incoming Obama administration, Jeff Offermann from Appleton, Wisconsin writes, "Democrats are now forced to go from carping about Republican decisions and criticizing to actually having to formulate, implement and take responsibility for decisions."

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

Some final notes in a moment.

(COMMERCIAL BREAK)

WALLACE: You may have missed it, but while President-elect Obama has been largely out of sight since the election, his running mate, Joe Biden, took it upon himself last night to address the nation.

(BEGIN VIDEO CLIP) JASON SUDEIKIS AS JOE BIDEN: I can be as entertaining as Sarah Palin. I can be sassy. I can be unpredictable. And you bet your buttons that Joe Biden can be off-message. The only thing I can't do is wink.

(LAUGHTER)

Nothing. Nothing at all.

Well, look. Here's my promise to you, the American people. I will be a better vice president than Sarah Palin, just like I would be a better president than Barack Obama. Woah! Woah! What? That's just -- that's just a five on the Biden blunder scale. Yeah, only a five? Yeah. Yeah.

(END VIDEO CLIP)

WALLACE: I'm not sure Sarah Palin or Tina Fey have to worry. That's it for today. Have a great week and we'll see you next "Fox News Sunday."

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