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Special Guests: David Beers, Rep. Paul Ryan, Bill Miller, Tim Pawlenty

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The following is a rush transcript of the August 7, 2011, edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

CHRIS WALLACE, ANCHOR: I'm Chris Wallace.adsonar_placementId=1502157;adsonar_pid=150758;adsonar_ps=-1;adsonar_zw=198;adsonar_zh=170;adsonar_jv='ads.adsonar.com';

A military helicopter is shot down in Afghanistan, killing U.S. Special Operations troops. We'll have a report.

And America's credit rating is downgraded for the first time ever.

Here sit Wall Street and Main Street. We'll talk about the hit Washington took Standard & Poor's in an exclusive interview with David Beers, head of the agency's government rating unit.

And with the U.S. deeply in debt, what can and should Washington do to boost the economy? We'll ask Paul Ryan, Republican chair of the House Budget Committee, and Bill Miller, head of Legg Mason Capital Management.

Then, it's showdown time in Iowa. We'll talk with a candidate who's got a lot riding on the first caucus state, Tim Pawlenty.

And from the Thursday FOX News debate to the crucial Saturday straw poll, the stakes are high. We'll ask our Sunday panel who has the most to win or lose in Iowa.

All right now on "Fox News Sunday."

And hello again from Fox News in Washington.

Before we get to the economy, we want to bring you the latest on that terrible story out of Afghanistan. Insurgents shot down a U.S. military helicopter Saturday, killing 38, including 22 Navy SEALs, most from the same unit that to took down Osama bin Laden.

FOX News correspondent Conor Powell has more from Kabul -- Conor.

CONOR POWELL, FOX NEWS CORRESPONDENT: Chris, this is a devastating blow to the very small, tight-knit community of Special Operations forces here in Afghanistan. It is a single deadliest day for American troops since the war started nearly 10 years ago. The military is still investigating the cause of the crash. But the Taliban were very quick to claim responsibility, saying they shot it down with a rocket-propelled grenade.

Now, details are sketchy, but it appears that this force was beginning to launch a raid on the Taliban compound in Wardak province just southwest of Kabul when a Taliban rocket did take this helicopter down.

Now, in recent months, the U.S. military here in Kabul has been fond of saying that they wrestled the momentum away from Taliban, but this attack, this very deadly attack is all the more evidence that the Taliban are still capable of launching attacks against U.S. and Afghan forces, and, Chris, this war is nowhere near game over.

WALLACE: Conor Powell reporting from Kabul -- Conor, thanks for that.

Now, the U.S. economy.

Standard & Poor's has downgraded the U.S. credit rating Friday night for the first time ever from AAA to AA-plus. That means U.S. treasury bonds are no longer considered the safest investments in the world.

Joining us now, David Beers, head of S&P's government debt rating unit.

Mr. Beers, what's the practical effect of your downgrading. If the U.S. debt is now riskier, does that mean that investors can and should demand higher interest rate to buy U.S. treasury bonds?

DAVID BEERS, STANDARD & POOR'S: Well, I guess there two parts to that. One is that in lowering the rating one notch to AA-plus, what we actually are saying is this, that a mild deterioration in the U.S.'s credit standing relative to AAA and we'll find out tomorrow what the market makes with that. But based on historical experience, we wouldn't expect that much financial impact in terms of higher interest rates for example.

WALLACE: Well, let me ask you, though, about the markets. The Tel Aviv stock market, one of the few that is in operation on Sunday morning, closed -- rather opened 6 percent down and then they had to close it for a while because of the volume of trading.

Can we expect the same kind of very strong downward pressure in Asia tonight and in the U.S. markets tomorrow?

BEERS: Well, you know, I'm no better than you in forecasting the stock market. But I think it's important to put this in perspective for your viewers -- because a lot of what's worrying the markets is the unfolding story in Europe and also a perception from a global economic perspective that the world economy may be slowing down.

So, I think the markets are reacting to a lot of factors, not just what S&P said on Friday.

WALLACE: Your downgrade -- and I read it -- focuses much on the political gridlock in Washington as it did on the economic situation in this country. Do you hold Republicans or Democrats more responsible for dysfunction here? And any compromise that they end up coming up with it, do you need to see a mix, a combination, of both entitlement reform also revenue increases?

BEERS: Well, Chris, you know, in this country, Congress and the administration are jointly responsible for the conduct of fiscal policy. And -- so, this is really not about either political party. It's about the difficulty of all sides in finding, you know, a consensus around fiscal policy choices, now and in the future.

WALLACE: But do you need to see the mix? Does any compromise have to have both entitlement reform and revenue increases to be credible? BEERS: Well, we think credibility would mean that would -- any agreement would command support from both political parties because, of course, the composition of Congress and, of course, the administration could change from 2012 onwards. But the key thing is -- yes, entitlement reform important because entitlement is the biggest component of spending and they are the part of spending where the cost pressures are greatest.

WALLACE: The White House, as you know, is not happy with this decision and, in fact, they have accused S&P of amateurism. They say when they went through your numbers, they found a $2 trillion overstatement of what the debt would be. And when they pointed that out to you, they you simply changed the rationale but continued to downgrade the debt.

BEERS: Now, of course, that's a complete misrepresentation of what happened. And here, we're talking about highly technical assumptions about projecting, you know, budget base lines far into the future. And when we made the modifications that we did after a conversation with the treasury, it doesn't change the fact that in our estimation, that even with the agreement of Congress and the administration this past week, that the underlying debt burden of the U.S. government is rising and will continue to rise most likely over the next decade.

WALLACE: I got about a minute left and I want to ask you two questions. So, I'm going to try to get my questions brief and I'll ask you to do the same with your answers.

S&P is widely seen as one of the villains in the housing bubble for the strong rating that you gave for the subprime mortgage securities. Some people are suggesting that this downgrading is an effort to get your reputation back?

BEERS: Yes. Well, that's completely untrue. And as a matter of fact, the group that rate, the one that rates government ratings has an excellent track record in terms of what ratings are designed to do, which is to provide a meaningful indicator of credit risk.

So, as far as the track record of our ratings are concerned, we think they are very robust. Other people think they are robust, too. And we think that will continue to be the case.

WALLACE: And very briefly, Mr. Beers, given the economic and the political situation in the U.S., which will we more likely to see -- an upgrading of U.S. debt back to AAA or further downgrades?

BEERS: Well, we have a negative outlook on the rating and that means that we think the risks currently or the rating are to the downside.

WALLACE: Mr. Beers, we're going to have to leave it there. We want to thank you so much for coming in and talking with us today, sir.

BEERS: Thank you, Chris.

WALLACE: The S&P downgrade was one more blow in a week when the Dow Jones fell almost 6 percent. And the latest jobs report showed unemployment still over 9 percent.  Print  Email  Share    Recommend Tweet

continued...

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August 07, 2011

S&P Chief Explains Credit Downgrade; Rep. Paul Ryan, Bill Miller Talk Economic Policy; Tim Pawlenty on Iowa Chances

July 31, 2011

Gene Sperling Gives White House View of Debt Talks; Rep. McCarthy, Sens. Durbin, Kyl Talk Compromise ADVERTISEMENT Follow Fox News Sunday

Follow us on Twitter to get exclusive updates and announcements from the show!

Fox News Sunday is on Facebook! Coming Up on FNS: August 14, 2011

ADVERTISEMENT Wallace Watch

August 07, 2011

Pawlenty on His Chances to Win Iowa Straw Poll

Ahead of next Thursday's Fox News GOP Presidential Debate in Ames, IA, and next weekend's Iowa Straw Poll, ...

Reaction to US Credit DowngradePanel Plus: August 7, 2011On this Day: August 7, 1964 Connect With FNS FacebookTwitterEmailFree PodcastBlogHulu On This Day

August 07, 2011

On this Day: August 7, 1964

Congress passed the Gulf of Tonkin resolution, giving President Lyndon B. Johnson broad powers in dealing with reported North Vietnamese attacks

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The following is a rush transcript of the August 7, 2011, edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

CHRIS WALLACE, ANCHOR: I'm Chris Wallace.

A military helicopter is shot down in Afghanistan, killing U.S. Special Operations troops. We'll have a report.

And America's credit rating is downgraded for the first time ever.

Here sit Wall Street and Main Street. We'll talk about the hit Washington took Standard & Poor's in an exclusive interview with David Beers, head of the agency's government rating unit.

And with the U.S. deeply in debt, what can and should Washington do to boost the economy? We'll ask Paul Ryan, Republican chair of the House Budget Committee, and Bill Miller, head of Legg Mason Capital Management.

Then, it's showdown time in Iowa. We'll talk with a candidate who's got a lot riding on the first caucus state, Tim Pawlenty.

And from the Thursday FOX News debate to the crucial Saturday straw poll, the stakes are high. We'll ask our Sunday panel who has the most to win or lose in Iowa.

All right now on "Fox News Sunday."

And hello again from Fox News in Washington.

Before we get to the economy, we want to bring you the latest on that terrible story out of Afghanistan. Insurgents shot down a U.S. military helicopter Saturday, killing 38, including 22 Navy SEALs, most from the same unit that to took down Osama bin Laden.

FOX News correspondent Conor Powell has more from Kabul -- Conor.

CONOR POWELL, FOX NEWS CORRESPONDENT: Chris, this is a devastating blow to the very small, tight-knit community of Special Operations forces here in Afghanistan. It is a single deadliest day for American troops since the war started nearly 10 years ago. The military is still investigating the cause of the crash. But the Taliban were very quick to claim responsibility, saying they shot it down with a rocket-propelled grenade.

Now, details are sketchy, but it appears that this force was beginning to launch a raid on the Taliban compound in Wardak province just southwest of Kabul when a Taliban rocket did take this helicopter down.

Now, in recent months, the U.S. military here in Kabul has been fond of saying that they wrestled the momentum away from Taliban, but this attack, this very deadly attack is all the more evidence that the Taliban are still capable of launching attacks against U.S. and Afghan forces, and, Chris, this war is nowhere near game over.

WALLACE: Conor Powell reporting from Kabul -- Conor, thanks for that.

Now, the U.S. economy.

Standard & Poor's has downgraded the U.S. credit rating Friday night for the first time ever from AAA to AA-plus. That means U.S. treasury bonds are no longer considered the safest investments in the world.

Joining us now, David Beers, head of S&P's government debt rating unit.

Mr. Beers, what's the practical effect of your downgrading. If the U.S. debt is now riskier, does that mean that investors can and should demand higher interest rate to buy U.S. treasury bonds?

DAVID BEERS, STANDARD & POOR'S: Well, I guess there two parts to that. One is that in lowering the rating one notch to AA-plus, what we actually are saying is this, that a mild deterioration in the U.S.'s credit standing relative to AAA and we'll find out tomorrow what the market makes with that. But based on historical experience, we wouldn't expect that much financial impact in terms of higher interest rates for example.

WALLACE: Well, let me ask you, though, about the markets. The Tel Aviv stock market, one of the few that is in operation on Sunday morning, closed -- rather opened 6 percent down and then they had to close it for a while because of the volume of trading.

Can we expect the same kind of very strong downward pressure in Asia tonight and in the U.S. markets tomorrow?

BEERS: Well, you know, I'm no better than you in forecasting the stock market. But I think it's important to put this in perspective for your viewers -- because a lot of what's worrying the markets is the unfolding story in Europe and also a perception from a global economic perspective that the world economy may be slowing down.

So, I think the markets are reacting to a lot of factors, not just what S&P said on Friday.

WALLACE: Your downgrade -- and I read it -- focuses much on the political gridlock in Washington as it did on the economic situation in this country. Do you hold Republicans or Democrats more responsible for dysfunction here? And any compromise that they end up coming up with it, do you need to see a mix, a combination, of both entitlement reform also revenue increases?

BEERS: Well, Chris, you know, in this country, Congress and the administration are jointly responsible for the conduct of fiscal policy. And -- so, this is really not about either political party. It's about the difficulty of all sides in finding, you know, a consensus around fiscal policy choices, now and in the future.

WALLACE: But do you need to see the mix? Does any compromise have to have both entitlement reform and revenue increases to be credible? BEERS: Well, we think credibility would mean that would -- any agreement would command support from both political parties because, of course, the composition of Congress and, of course, the administration could change from 2012 onwards. But the key thing is -- yes, entitlement reform important because entitlement is the biggest component of spending and they are the part of spending where the cost pressures are greatest.

WALLACE: The White House, as you know, is not happy with this decision and, in fact, they have accused S&P of amateurism. They say when they went through your numbers, they found a $2 trillion overstatement of what the debt would be. And when they pointed that out to you, they you simply changed the rationale but continued to downgrade the debt.

BEERS: Now, of course, that's a complete misrepresentation of what happened. And here, we're talking about highly technical assumptions about projecting, you know, budget base lines far into the future. And when we made the modifications that we did after a conversation with the treasury, it doesn't change the fact that in our estimation, that even with the agreement of Congress and the administration this past week, that the underlying debt burden of the U.S. government is rising and will continue to rise most likely over the next decade.

WALLACE: I got about a minute left and I want to ask you two questions. So, I'm going to try to get my questions brief and I'll ask you to do the same with your answers.

S&P is widely seen as one of the villains in the housing bubble for the strong rating that you gave for the subprime mortgage securities. Some people are suggesting that this downgrading is an effort to get your reputation back?

BEERS: Yes. Well, that's completely untrue. And as a matter of fact, the group that rate, the one that rates government ratings has an excellent track record in terms of what ratings are designed to do, which is to provide a meaningful indicator of credit risk.

So, as far as the track record of our ratings are concerned, we think they are very robust. Other people think they are robust, too. And we think that will continue to be the case.

WALLACE: And very briefly, Mr. Beers, given the economic and the political situation in the U.S., which will we more likely to see -- an upgrading of U.S. debt back to AAA or further downgrades?

BEERS: Well, we have a negative outlook on the rating and that means that we think the risks currently or the rating are to the downside.

WALLACE: Mr. Beers, we're going to have to leave it there. We want to thank you so much for coming in and talking with us today, sir.

BEERS: Thank you, Chris.

WALLACE: The S&P downgrade was one more blow in a week when the Dow Jones fell almost 6 percent. And the latest jobs report showed unemployment still over 9 percent.  Print  Email  Share    Recommend Tweet

continued...

< 1 2 3 4 5> adsonar_placementId=1493988; adsonar_pid=1373767; adsonar_ps=-1; adsonar_zw=612; adsonar_zh=240; adsonar_jv='ads.adsonar.com'; FNS Transcripts

August 07, 2011

S&P Chief Explains Credit Downgrade; Rep. Paul Ryan, Bill Miller Talk Economic Policy; Tim Pawlenty on Iowa Chances

July 31, 2011

Gene Sperling Gives White House View of Debt Talks; Rep. McCarthy, Sens. Durbin, Kyl Talk Compromise ADVERTISEMENT Follow Fox News Sunday

Follow us on Twitter to get exclusive updates and announcements from the show!

Fox News Sunday is on Facebook! Coming Up on FNS: August 14, 2011

ADVERTISEMENT Wallace Watch

August 07, 2011

Pawlenty on His Chances to Win Iowa Straw Poll

Ahead of next Thursday's Fox News GOP Presidential Debate in Ames, IA, and next weekend's Iowa Straw Poll, ...

Reaction to US Credit DowngradePanel Plus: August 7, 2011On this Day: August 7, 1964 Connect With FNS FacebookTwitterEmailFree PodcastBlogHulu On This Day

August 07, 2011

On this Day: August 7, 1964

Congress passed the Gulf of Tonkin resolution, giving President Lyndon B. Johnson broad powers in dealing with reported North Vietnamese attacks

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A military helicopter is shot down in Afghanistan, killing U.S. Special Operations troops. We'll have a report.

And America's credit rating is downgraded for the first time ever.

Here sit Wall Street and Main Street. We'll talk about the hit Washington took Standard & Poor's in an exclusive interview with David Beers, head of the agency's government rating unit.

And with the U.S. deeply in debt, what can and should Washington do to boost the economy? We'll ask Paul Ryan, Republican chair of the House Budget Committee, and Bill Miller, head of Legg Mason Capital Management.

Then, it's showdown time in Iowa. We'll talk with a candidate who's got a lot riding on the first caucus state, Tim Pawlenty.

And from the Thursday FOX News debate to the crucial Saturday straw poll, the stakes are high. We'll ask our Sunday panel who has the most to win or lose in Iowa.

All right now on "Fox News Sunday."

And hello again from Fox News in Washington.

Before we get to the economy, we want to bring you the latest on that terrible story out of Afghanistan. Insurgents shot down a U.S. military helicopter Saturday, killing 38, including 22 Navy SEALs, most from the same unit that to took down Osama bin Laden.

FOX News correspondent Conor Powell has more from Kabul -- Conor.

CONOR POWELL, FOX NEWS CORRESPONDENT: Chris, this is a devastating blow to the very small, tight-knit community of Special Operations forces here in Afghanistan. It is a single deadliest day for American troops since the war started nearly 10 years ago. The military is still investigating the cause of the crash. But the Taliban were very quick to claim responsibility, saying they shot it down with a rocket-propelled grenade.

Now, details are sketchy, but it appears that this force was beginning to launch a raid on the Taliban compound in Wardak province just southwest of Kabul when a Taliban rocket did take this helicopter down.

Now, in recent months, the U.S. military here in Kabul has been fond of saying that they wrestled the momentum away from Taliban, but this attack, this very deadly attack is all the more evidence that the Taliban are still capable of launching attacks against U.S. and Afghan forces, and, Chris, this war is nowhere near game over.

WALLACE: Conor Powell reporting from Kabul -- Conor, thanks for that.

Now, the U.S. economy.

Standard & Poor's has downgraded the U.S. credit rating Friday night for the first time ever from AAA to AA-plus. That means U.S. treasury bonds are no longer considered the safest investments in the world.

Joining us now, David Beers, head of S&P's government debt rating unit.

Mr. Beers, what's the practical effect of your downgrading. If the U.S. debt is now riskier, does that mean that investors can and should demand higher interest rate to buy U.S. treasury bonds?

DAVID BEERS, STANDARD & POOR'S: Well, I guess there two parts to that. One is that in lowering the rating one notch to AA-plus, what we actually are saying is this, that a mild deterioration in the U.S.'s credit standing relative to AAA and we'll find out tomorrow what the market makes with that. But based on historical experience, we wouldn't expect that much financial impact in terms of higher interest rates for example.

WALLACE: Well, let me ask you, though, about the markets. The Tel Aviv stock market, one of the few that is in operation on Sunday morning, closed -- rather opened 6 percent down and then they had to close it for a while because of the volume of trading.

Can we expect the same kind of very strong downward pressure in Asia tonight and in the U.S. markets tomorrow?

BEERS: Well, you know, I'm no better than you in forecasting the stock market. But I think it's important to put this in perspective for your viewers -- because a lot of what's worrying the markets is the unfolding story in Europe and also a perception from a global economic perspective that the world economy may be slowing down.

So, I think the markets are reacting to a lot of factors, not just what S&P said on Friday.

WALLACE: Your downgrade -- and I read it -- focuses much on the political gridlock in Washington as it did on the economic situation in this country. Do you hold Republicans or Democrats more responsible for dysfunction here? And any compromise that they end up coming up with it, do you need to see a mix, a combination, of both entitlement reform also revenue increases?

BEERS: Well, Chris, you know, in this country, Congress and the administration are jointly responsible for the conduct of fiscal policy. And -- so, this is really not about either political party. It's about the difficulty of all sides in finding, you know, a consensus around fiscal policy choices, now and in the future.

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