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Rep. Jane Harman, Rep. Peter Hoekstra, Leon Panetta, Ken Duberstein, Roundtable

Fox News Sunday

CHRIS WALLACE, HOST: I'm Chris Wallace. Iraq's new prime minister promises fast action on a new government, next on "Fox News Sunday".

New concerns about America's ability to stop a terror attack. Is the government doing all it can to keep the country safe? We'll ask the leaders of the House Intelligence Committee, Republican Pete Hoekstra and Democrat Jane Harman.

In with the new, out with the old. Will personnel changes turn around President Bush's fortunes? We'll ask two former chiefs of staff, Leon Panetta, who worked for Bill Clinton, and Ken Duberstein from the Reagan years.

Plus, gas prices skyrocket. Who's to blame? We'll ask our Sunday regulars, Brit Hume, Mara Liasson, Bill Kristol and Juan Williams. And our Power Player of the Week, an all-star as an athlete and a man, all right now on "Fox News Sunday".

And good morning again from Fox News in Washington. Let's start with a quick check of the latest headlines. Iraq's new prime minister says he'll move quickly to form a new government. Jawad al-Maliki also says he's prepared to crack down on insurgents and those responsible for sectarian violence.

In a new audiotape that officials believe to be recent and authentic, Osama bin Laden says the West's decision to cut off funds to the Palestinian Authority is part of a crusader war against Islam. Bin Laden also called for a boycott of the West for showing cartoons of the prophet Mohammed.

And in New Orleans, Mayor Ray Nagin won the mayoral election but without enough votes to avoid a runoff. Next month he faces Lieutenant Governor Mitch Landrieu, who finished second.

The nuclear threat from Iran, a political breakthrough in Iraq, and the ongoing worry about Osama bin Laden -- all good reasons to talk with our first guests, the chairman of the House Intelligence Committee, Republican Pete Hoekstra, and the ranking Democrat, Jane Harman. And they both join us from their home states.

Congressmen, welcome to "Fox News Sunday".


REP. PETER HOEKSTRA (R), MICHIGAN: Thank you, good morning.

WALLACE: Let's begin with this new bin Laden tape that we're talking about today in which he allegedly calls for boycotting the West and also appears to justify more attacks on civilians in the West.

Starting with you, Chairman Hoekstra, what do you make of it?

HOEKSTRA: Well, I think it's part of their ongoing and very sophisticated communications effort. Al Qaida is very sophisticated in the communications, the words that it uses and the techniques that it uses. It's very, very good on the Web, the Internet.

It recognizes that much of this war, this the battle that we're fighting, is about winning the hearts and the minds of moderate Islam, and they are focused on that. We need to be focused on it.

We're probably going to have a hearing early when we get back on exactly the techniques and the sophistication of the methods that Al Qaida is using.

WALLACE: You speak about it with such evident sense of how powerful it is. Are they beating us, in fact, Chairman Hoekstra, in that war for the minds of moderate Islams?

HOEKSTRA: I've seen what they're doing on the Internet. It is very, very good. It would make a politician proud. They use the right words. They use instantaneous response. They are quick in getting new messages up on the Net.

And the quality of the materials, the quality of the marketing -- the message is very, very good.

WALLACE: Congresswoman Harman, your reaction to the tape and exactly this point that Chairman Hoekstra was making about their P.R. offensive, if you will.

HARMAN: Well, the tape reminds us that four years after 9/11, Osama bin Laden is still at large, the subject of the largest manhunt in history, and we haven't been able to find him. Part of the reason is because we've been bogged down in Iraq.

But I agree that he is very sophisticated, and it's not just about Al Qaida. It's about copycat organizations. Those are the ones that attacked in London and Madrid and so forth. So the world remains dangerous.

Our challenge is to project America in such a way that we diminish this call to arms. Our values have to be out there. We have to govern by the rule of law. We can't send messages that make us look as bad as those who would attack us.

WALLACE: Congresswoman Harman, let's switch, if we can, to Iraq. More than four months after national elections there, the Iraqis have finally chosen a new prime minister, Jawad al-Maliki, designated him as the prime minister to form a new government. Congresswoman, what do you know about Maliki, and what will you be looking for to see whether or not he's the right man to lead Iraq now?

HARMAN: Well, what I know is they finally agreed on someone, which I take as some good news. But having two officials in this government is not a government. They have 30 days to pick the other cabinet officials, and then their cabinet has to govern.

I think that if the lights don't go on by August when it's 130 degrees out there, which was the case last August as well, I don't know that they will make it.

And oh, by the way, with gas prices as high as they now are and oil at $70 a barrel, I think their first task should be to stand up oil production and have Iraq pay for the reconstruction of Iraq. I don't know how many more $100 billion checks the Congress of the United States is going to write for this.

WALLACE: Congressman Hoekstra, what do you know about Maliki? He's got a reputation, apparently, as a hard-line Shiite. Are you worried that he may not be able or may not be willing to reach out to the Sunnis and Kurds?

HOEKSTRA: Well, I think the first indications are that he is willing to reach out to the Sunnis. It looks like the head of the parliament is going to be a Sunni, perhaps, with some ties to the insurgents who has already told the insurgents that it's time to lay down arms, it's time to bring this country together, and it's time to move forward.

What we really need now is we need action. We need action on the security front, on the economic front and the political front. Not any one of these steps is a magic silver bullet that says okay, we're now successful in Iraq. Each one is one more step forward in a very difficult and what we're finding is a long process.

But this development in the last couple of days is a very, very positive step forward.

WALLACE: Congressman Hoekstra, let's turn, if we can, to Iran where we seemed to get mixed messages this week from the administration. The top arms control official at the State Department said that Iran has got its foot on the accelerator and is approaching the point of no return in its ability to be able to produce nuclear weapons.

On the other hand, the defense chief, the chief of national intelligence, Negroponte, also spoke and offered a different perspective. Let's take a look at that.


JOHN NEGROPONTE, NATIONAL DIRECTOR OF INTELLIGENCE: We believe that it is still a number of years off before they are likely to have enough fissile material to assemble into or to put into a nuclear weapon, perhaps into the next decade.


WALLACE: Congressman, how close is Iran to actually developing a nuclear weapon, or don't we really know?

HOEKSTRA: I'd say we really don't know. We're getting lots of mixed messages. Obviously, we're getting lots of different messages from their leadership, the stuff that they are saying in public.

It all points out the fact we need to do much better in rebuilding our intelligence community, reshaping it, transforming it, making sure that we give public policy -- that we give policymakers the information that they need so that we can make better decisions.

We've got a long way to go in rebuilding our intelligence community. We're focused on this in a bipartisan basis, and we're going to keep trying to build the intelligence community that we outlined in the reform bill that we passed a couple of years ago.

WALLACE: But, Chairman Hoekstra, I mean, almost everyone agrees this is the major foreign policy issue or challenge facing this country today, and you're saying we really don't know what's going on in Tehran?

HOEKSTRA: Hey, sometimes it's better to be honest and to say there's a whole lot we don't know about Iran that I wish we did know, and we as public policymakers need to know that as we're moving forward and as decisions are being made on Iran, we don't have all of the information that we would like to have.

And that's nothing more than being honest, being honest with the American people of saying in some of this stuff, we wish we had the information, but right now we don't.

WALLACE: Congresswoman Harman, you've also been quite critical. You say the information we have on Iran is thin. You've said some of it may be, in fact, Iranian disinformation.

How can we be talking about what to do, how soon to do it, the possibility of military strikes, if we really are that much in the dark?

HARMAN: Well, I hope the White House is listening to what Pete Hoekstra just said. We don't know. Our intelligence is thin. I don't think we have enough sources. I don't think our analysis is sharp enough.

I'm not comfortable that even if we knew more that the White House would be listening clearly to the intelligence case. They apparently did not in Iraq. It was not a very strong case.

But those who tried to speak truth to power were shut out. This is not a time to be saber-rattling in our government, talking about the military option. We don't know enough. And my view is at our peril, we risk any good outcome if we don't join with the world, especially China and Russia, and try to help the U.N. or at least the group of concerned nations isolate Iran if we don't have full transparency into its nuclear capabilities.

Just the fact that the Iranian government is making a lot of noise doesn't prove their capability. Remember, the Iraqi government made a lot of noise, and they had nothing.

WALLACE: Congresswoman Harman, let's change subjects. I want to talk to you about leaks, because the CIA dismissed a senior officer this week, apparently reportedly a veteran named Mary McCarthy, for leaking classified information to reporters including material about secret U.S. prisons overseas for terror suspects.

Congresswoman, after it came out that the president had authorized the disclosure, partial disclosure, of the National Intelligence Estimate about weapons of mass destruction in Iraq, you had the following to say, and let's put it up on the screen. "The president is revealed as the Leaker in Chief."

Congresswoman, do you really see any comparison between these two actions?

HARMAN: You bet I do. I don't know this woman, and I do not condone leaks of classified information. However, while leaks are wrong, I think it is totally wrong for our president, in secret, to selectively declassify certain information and empower people in his White House to leak it to favored reporters so that they can discredit political enemies.

That is wrong. That is unprecedented. I've never, ever heard about that happening in another administration, and it's a double standard.

WALLACE: But, Congresswoman Harman, isn't there a big difference? She was breaking the law. He wasn't.

HARMAN: Well, he wasn't breaking the law because the president claims to have power that no one else has. And he should be reminded that the Constitution starts with Article I, not Article II.

The inherent powers of the presidency are not unlimited. He's been ignoring Congress. He's been refusing to brief the full Intelligence Committees on the NSA program. I think that's a violation of law.

Presumably he's doing that because he's afraid we will leak, and yet he and his administration are the ones who leak selectively. And so I am not condoning what this woman allegedly did in the CIA. Of course, I'm not condoning that. But I think having a double standard is absolutely wrong.

WALLACE: Congressman Hoekstra?

HOEKSTRA: Well, it's clearly not a double standard. The president, the executive branch, but especially the Office of the President -- the courts have clearly said they have the responsibility and the authority to decide what is classified and what is not classified.

This person in the CIA thought that they were above the law. They thought that the law did not apply to them. They have put America at risk. They have put our troops on the front lines at risk because they broke the law.

That is exactly -- you know, you're exactly right. They broke the law. They're above the law. It's wrong. You know, and the country and our troops are at greater risk because of the decisions that this person made.

WALLACE: Finally, and we have less than two minutes left, your committee issued a very critical report. This week is the first anniversary of the creation of the director of national intelligence.

And your committee, as I say, issued just a couple of weeks ago a very critical report in which you said that Director Negroponte, if he continues on the path that he is -- and let's put it up -- will create another layer of large, unintended and unnecessary bureaucracy.

Starting with you, Chairman Hoekstra, what's the problem?

HOEKSTRA: Well, Jane and I both have a passion for creating a quick and nimble and effective intelligence organization where the Office of the DNI is a chief executive officer directing the agency and directing long- term strategic planning.

We've got a passion for getting this right. We're going to monitor it. We're going to work with the director to make sure that it's not a new level of bureaucracy, but it makes the entire intelligence community more effective because that's what we need against the threats that we have out there today.

It was a shot across the bow to Director Negroponte, saying we're watching, we need to work together, we've got a lot of challenges, let's move and let's move together.

WALLACE: Congresswoman Harman, we've got about 30 seconds left. Bottom line, is our intelligence in the war on terror today better or worse, sharper or, you know, more in the dark, about what's going on than it was a year ago?

HARMAN: It is not good enough. And the concept behind intelligence reform was to create a unified command structure, much as we have in the military, a command structure across 15 agencies, not a bureaucracy.

We've said that Mr. Negroponte should stop calling himself ambassador. He's a director. In order to change cultures, you have to lead. You have to make some people mad at you. You have to send new signals.

We've got to have better intelligence on Iran. We've got to have better intelligence on the battlefield in Iraq. We've got to know more about what China and Russia are up to. It's a very dangerous world, as this new UBL tape makes very clear, and we are still behind the curve, and it worries me very much.

WALLACE: Congresswoman Harman, Congressman Hoekstra, thank you both so much for joining us today, and please come back.

HOEKSTRA: Great. Thank you.

HARMAN: Thank you.

WALLACE: Coming up, the new White House chief of staff, Josh Bolten, starts making changes. We'll talk with two men who were asked to bail out their presidents. Stay with us.


WALLACE: In his first week as White House chief of staff, Josh Bolten showed there's a new sheriff in town. Take a look. Karl Rove lost the policy coordination part of his job as deputy chief of staff. Press secretary Scott McClellan stopped down, and Rob Portman went from U.S. trade representative to the director of the Office of Management and Budget.

What will these and likely other changes mean for the Bush White House? We turn to two men who helped revive other presidents, Leon Panetta, who served as chief of staff for Bill Clinton, and Ken Duberstein, who was Ronald Reagan's chief of staff at the end of his second term.

And, gentlemen, welcome to "Fox News Sunday".



WALLACE: Thank you, Mr. Panetta. As we said, Josh Bolten has made a number of changes in this first week.

Mr. Panetta, let me start with you. What strikes you about what he either did or failed to do?

PANETTA: Well, I think it was an important step for him to come in, to take charge. If anything, I think Ken and I both agree that there should have been some changes made in the staff probably after the first term so that everybody would have been in place as you go into your second four years.

But better late than never, and I think he's made some changes. He's put some new people in place. I think it's the kind of thing you have to do. But ultimately, the real test is going to be whether or not they can impact on policy.

WALLACE: Yes, we'll get to that in a moment.

But let me ask you about the personnel shifts, Mr. Duberstein. Some are saying it is too late, as Mr. Panetta suggests, and also that it's too little. You're basically shuffling a bunch of people who were already within the administration.

DUBERSTEIN: Gee, I couldn't disagree more. I think this is refresh, reboot, re-energize. I think Josh this week has demonstrated, number one, he has the president's confidence. Number two, he's going to make change, but not change for change sake but, rather, where he thinks it is most necessary.

Look, an appointment of Rob Portman at OMB -- it is not simply OMB director, but also a trained, experienced congressional hand. Moving Karl, the administration's MVP, into just doing the politics for the campaign this November -- but remember, politics and policy always coexist in any administration -- putting a new face on.

They haven't replaced Tony Snow -- excuse me.

WALLACE: Freudian slip.

DUBERSTEIN: No, not at all.

WALLACE: But the press secretary.

DUBERSTEIN: The press secretary with Scott -- and perhaps it is Tony. But that's a new face on the administration. So I think it's been a very positive week. I agree with Leon, it should have been happening earlier, but better late than never.

WALLACE: All right.

Let's talk, Mr. Panetta, about what you are discussing, the fact that in the end it's policy, not personnel, that's going to make a difference. Let's look at the latest Fox News/Opinion Dynamics poll which shows that this president has really driven into a political ditch. Let's look at the numbers.

Mr. Bush's job approval rating, as you can see there, is now the lowest of his presidency at 33 percent. Why do people disapprove of this president? Almost half say the war in Iraq. A quarter say he's generally doing a bad job. And 22 percent say they disagree on issues.

Mr. Panetta, isn't that the real problem, the facts on the ground, whether it's the war in Iraq or at the gas pump? I mean, isn't it policy, not personnel, that's going to affect how people feel about this president?

PANETTA: Well, there's no question, it's a little bit like, you know, changing players on a losing team. It makes the coach feel good. It makes the fans feel good. But you've got to put points up on the board.

And this administration is facing, frankly, an unprecedented series of crises that really threaten to turn this country into a second-rate power. I mean, the fact is it's not just the war in Iraq. It's not just the threat that we face with Iran.

It's record gas prices. It's a record deficit. It's crises here at home in health care, immigration, other areas that confront the American people. If the president and the new team don't deal with those issues, then, very frankly, he's going to find it very tough to govern in these next few years.

WALLACE: Mr. Duberstein, I want to ask you -- and I'm sure you disagree with everything that Leon Panetta just said, but I want to ask you about one aspect of that, and that is Iraq.

I want to show you another poll number here. Only 35 percent of the American public now approve of the job that Defense Secretary Rumsfeld is doing. As a political matter, just to, in effect, get people to take a fresh look, would it help or hurt the president to remove Rumsfeld?

DUBERSTEIN: I remember a Rumsfeld rule from his book of rules. There's only one person in any White House, in any administration, who is indispensable, and that's the president of the United States. And so I think you have to follow that instruction.

WALLACE: Well, you kind of ducked it.

DUBERSTEIN: Not at all.

WALLACE: Well, are you saying, in effect, that you think that just to give people a fresh look, whether it's merited or not, in terms of policy, that...

DUBERSTEIN: No, what I'm saying is that only the president can decide. All of us can be kibbutzers on the side, but if the president is satisfied that Don Rumsfeld is important to stay, whether it's because of Iraq or working on the Pentagon reorganization, that's his decision.

But from a political matter, remember, the only person who is indispensable in any White House is the president, not the secretary of defense.

WALLACE: Let me talk to you, to try and get some historical perspective about what you did, you and Mr. Panetta, to bail out your presidents.

Mr. Duberstein, you came in with Howard Baker back in 1987 to help Ronald Reagan at the depths of the Iran-contra scandal. What do you think was the most important thing that you and Senator Baker did?

DUBERSTEIN: Well, I think there were several things, not just one thing. Number one, everybody was referring to Ronald Reagan as they are to George Bush, as a lame duck. In our case, they were also talking about Ronald Reagan being a dead duck. That was two years to go in the administration.

It was not only Howard Baker and me, but Frank Carlucci and a little known general at the time, Colin Powell. It was reestablishing not simply management at the White House, but get out of that bunker mentality with the press, start defining some ways you can win things on Capitol Hill, and focus your energies on the big things internationally -- in our case, the then-Soviet Union, and the Gorbachev summit meetings, INF treaty, tear down this wall. But I think what we brought was a measure not only of management, but also of credibility and trust that came from the Congress and the press which helped Ronald Reagan get back on his feet.

WALLACE: Mr. Panetta, you took over as chief of staff for Bill Clinton in June of 1994 when that White House was widely seen as being in disarray.

What do you think is the most important thing you did to try to get the Clinton White House back on the tracks?

PANETTA: Well, you know, it's the same thing, I'm sure, that every chief of staff is worried about. You basically establish a strong chain of command. You try to establish discipline. You try to establish focus so that the White House staff is working as a team for the president.

But let's not kid anybody. And I think it's true for Ken Duberstein as well as it's true for Leon Panetta, that in the end, it was the president who ultimately turns these things around.

Bill Clinton confronted a Republican Congress on the budget, was willing to draw the line with them. He was willing to invest in education, had a strong economy going for him, was willing to make other investments in our society.

It was those steps ultimately that won the presidency for Bill Clinton.

WALLACE: But let me follow up. We have less than two minutes left. Mr. Panetta, talk about the relationship between the chief of staff and the president, and what is it that Josh Bolten needs to be saying both in terms of substance and maybe also just in terms of their relationship when he's alone with George W. Bush in the Oval Office?

PANETTA: It has to be a relationship of trust. The president and the chief of staff have to be able to trust one another, and the chief of staff has to be willing to tell the president what he may not want to hear.

If the chief of staff isn't doing that, then, frankly, nobody else usually does that. I think they've got to have a very good relationship. They've got to have one of trust. And they've got to be willing to work together in order to ensure that both the staff as well as the president is getting the policies of the administration implemented.

WALLACE: And, finally, Mr. Duberstein, how unvarnished was the message that you were able to give to Ronald Reagan in 1987-88, and what does Bolten need to do with Bush?

DUBERSTEIN: I think Josh Bolten is well equipped to be a reality therapist to President Bush the same way walking into the Oval Office I had to tell the president not what he wanted to hear, but what he needed to hear. Now, I always joke that I used to be 6'4" before I became chief of staff. The answer is you have to tell it like it is. As Leon said, it makes sure that everybody else on the White House staff follows suit.

What I started with I want to end with. I think Josh Bolten demonstrated that when he opens his mouth, the voice you hear now is George Bush's. It is that level of trust and confidence even one week into the job that I think is really going to help Bush get back on his feet with Josh Bolten really managing the team.

WALLACE: Mr. Duberstein, Mr. Panetta, we want to thank you so much for joining us and giving us some historical perspective on the events of this week.

Coming up, our gang of Sunday regulars examines the political fallout of high gas prices. Can either party make it a winning issue? Stay tuned.



SAMUEL BODMAN, ENERGY SECRETARY: I wish there were a magic wand that I could wave that would cause prices to decline. There isn't one.



U.S. SENATOR CHARLES SCHUMER (D-NY): If nothing is done, it could go to $4 a gallon in the next three months to six months. And that, again, is bad news.


WALLACE: That was Energy Secretary Bodman and Senator Schumer commenting on the hot issue this week, high gas prices.

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

Well, let's look at the numbers. Here they are. The price of oil this week -- over $75 a barrel, the price of gas up 30 percent in the last three weeks to more than $3 a gallon in some places, and the politicians are running for cover, demanding investigations and calling for hearings.

Brit, we've seen this all before. What do you expect in terms of both politics and policy?

BRIT HUME, FOX NEWS WASHINGTON MANAGING EDITOR: I expect a lot of politics, not much policy, and I expect -- or I doubt that anything anybody in Washington does, least of all in Congress, will make a particle of difference in the price of fuel.

I don't know how many times we've been down this road, Chris. Investigations have been done over and over again to determine if there's some sort of collusion between the oil companies to keep the prices high, and they've all come out in the same place -- no, there's not. There's competition among the oil companies and enough of it so that that's not the problem.

We know what the problem basically is. You've got burgeoning worldwide demand. China's growing economy is sucking in fuel as never before. The United States continues to consume a huge amount of the world's fuel supply. And other larger countries -- India, to cite one -- are absorbing an increasing amount of it.

And neither in resources, raw materials, or in refining capacity has the world caught up with this surge in demand. It will over time. And if it doesn't, alternative fuels will come online to moderate the price.

WALLACE: Are you as pessimistic, Mara, or some would say realistic, about the fact that it's going to be all politics and very little policy?

MARA LIASSON, NPR: Well, certainly, in the short-term I would say that's true. I think Sam Bodman was correct. You can't wave a magic wand and make the prices come down probably before the market does, unless the market does before November.

I think that the real policy solutions are all long range. It's why the president talks about hydrogen cars. It's why he got up at the state of the union and said we're addicted to oil.

The Democrats in the radio response to his Saturday morning address this week are talking about raising the CAFE standards, raising the fuel economy standards. Well, Democrats have to agree to that, and there are a lot of Democrats from auto states in the Midwest who have been blocking that, too.

So a lot of these things are long-range solutions. I think something certainly can be done about the United States' dependence on foreign oil, and it doesn't mean that the price will be any cheaper, but that can be done in the long term.

In the short term, I think it's just going to be politics. You saw Senator Schumer. The opposition party is going to try to blame it on the administration, and the big question is who do voters think is to blame for their pain at the pump.

WALLACE: Well, let's pick up exactly on that, Bill Kristol. I was barraged this week by talking points from both sides, the Republicans saying hey, look, it's the Democrats who blocked drilling in ANWR in Alaska, the Democrats saying the Republicans and their energy bill gave the oil companies $15 billion in subsidies.

If it is just a blame game, who's got the better side of the argument?

BILL KRISTOL, WEEKLY STANDARD: The Democrats politically. The Republicans are in power. Bush and Cheney are identified with the oil business. They were both in that business. And oil prices are going up. It's not a very hard case for a Democratic -- it's not a hard issue for a Democratic challenger to demagogue.

Now, there are good policy responses to that, but where is the administration making them? I was interested to see the energy secretary, Mr. Bodman, on that little clip there, because I think it's the first time I've ever seen him, actually. I'm not being sarcastic. He's a very impressive guy, I'm told, on T.V. He's not on the Sunday shows today, is he? I don't know. I think we would have put him on, wouldn't we, if they had offered the energy secretary at a time -- they've got to make the case.

And if they don't, you're going to have Republican leaders in Congress, Frist and Hastert, also saying gee, we better be on the right side of this issue, so they'll denounce the oil companies, too, and everyone will be denouncing the oil companies.

WALLACE: They're already doing it.


WALLACE: They're calling for an FTC investigation, Frist and Hastert are, about price gouging. Hastert says that the hundreds of millions of dollars that the Exxon chairman, Lee Raymond, got is unconscionable. So they're already going after the oil companies.

KRISTOL: Yes, I agree. I wouldn't want to have to defend -- I wouldn't want to be a director of Exxon Mobil and defend to shareholders that particular compensation agreement for a CEO who is leaving, a $95 billion retirement package.

HUME: I doubt if the shareholders are all that upset about it, the way that guy's turned that company around. I think it's -- the consumers are mad about it because it seems like he's pulling it out of their pockets.

But that guy has turned that company around and done some very smart things. And I suspect that shareholders -- not all of them, but a lot of them -- are grateful.

WALLACE: But it is interesting...

KRISTOL: I bet there will be a shareholder challenge to it.

HUME: Oh, there always is.

KRISTOL: And I think it could get substantial support. I think that's a hard thing to defend.

WALLACE: All right.

But now to get back on track, Juan, here in Washington and not at the shareholders meeting of Exxon Mobil, do you agree that the Democrats have the best side if only because the Republicans are in power?

JUAN WILLIAMS, NPR: Well, I think the Democrats have the best side because not only is it the case that Republicans are in power, but when you look at what Republicans have done in terms of energy policy, it's exactly right when Democrats say it's about tax breaks and subsidies, and they pretend as if demand, which is what Brit's case was -- he said oh, the Chinese, and there's all this new middle class in India that makes demand on oil supply. The fact is oil supplies are at an eight-year high. I mean, it's unbelievable. There's no shortage of oil. What's going on here is speculation about futures in oil as a commodity, and people like Lee Raymond taking, you know, $400 million in retirement.

And so then all of a sudden everybody says well, you know what, the market will bear higher prices, and the prices keep going up, and the government refuses to get involved in any substantial way.

You don't see anything in terms of alternate fuel policy coming out of the energy bill that the Republicans passed last August. Nothing -- all about let's allow for exploration of the Arctic National Wildlife Refuge or let's give more tax breaks to the oil companies.

It seems to me that it's about everything but making sure that the oil -- that the prices at the gas pumps are moderated and that the American economy can succeed. The Bush administration says, you know, the economy is going great guns, why don't Americans understand it, let's fire John Snow.

Wait a minute. The reason is 59 percent of Americans -- I think it was in this week's Post-ABC poll -- said the economy is bad or not doing well, one of the two. And the principal reason is gas prices. Maybe they should notice.

HUME: That's economic glossolalia.

WALLACE: Okay. I admit it. And nobody here is willing to admit it. What does that word mean?

HUME: Speaking in unknown tongues.

WALLACE: OK. Well, you were.

HUME: I mean, Juan, you can't repeal the law of supply and demand. If, as you say, fuel supplies were large enough to accommodate the demand, the price of oil would not be sitting where it is today.

WILLIAMS: What I'm trying to say is that's wrong. There's an eight- year high. You can't argue that point. That's a fact.

HUME: I know, but if demand is running at much higher than that, it's going to force the price up. It's how it works in markets. It's simple. It's been true since the dawn of time.

WILLIAMS: I wish it was true, but what's going on here is that investors looking toward to future, saying oh, you know, look at what's going on in Iraq, look at what's going on in Iran, look at Middle East instability -- the prices keep getting pushed higher, and then the oil companies justify driving up the price. There is no relationship here between supply and demand.


KRISTOL: Well, that's ridiculous. It's an international market. It's a world market.

WILLIAMS: I agree.

KRISTOL: Oil prices on the world market have tripled and gas prices have gone up by almost as much. It's an absolutely inevitable economic fact. There's zero that the government can do.

The things you don't like -- the tax breaks -- they increase the supply of oil. If you repealed those tax breaks, oil prices would be higher, not lower, incidentally.

WILLIAMS: No. What's the case here is that you have -- you know, you keep saying the same thing and I keep saying the same thing, but it's true. You have a supply at an eight-year high despite the international demand.

KRISTOL: Look, what are Exxon Mobil's -- how much of the $3 in gas is corporate profits?

WILLIAMS: I don't know.

KRISTOL: About 25 cents. About 25 cents. And you can cut that a little bit if you want to have a windfall profit tax.

WALLACE: They do have huge profits this year. The top four...

WILLIAMS: Huge profits.

WALLACE: ... companies have $80 billion.

KRISTOL: Right, but Exxon Mobil's profit is about 9 percent, which is not that high by corporate standards. I'm not going to defend the Raymond severance package.

But the notion that you can -- I mean, the Democrats will demagogue it and they'll probably succeed to some degree. But the truth is it's purely a function of supply and demand.

The oil companies are not making nearly as much of a return on their investment as an awful lot of other companies are. But as a political matter, you know, the Bush administration has to get out and explain this.

HUME: And the other thing is if you -- remember this. The price of oil can only rise so far and stay there only for so long, and the reason for that is that it is a paradox of the energy market that the price determines the supply to some extent.

And at a certain level of price, all sorts of fuels, including even oil itself, which remains in old wells, hard to bring to the surface, become economically viable, and that will restrain the price. This will happen over time.

We're not going to go back to the days of the '50s when gasoline was 29 cents a gallon, but these prices at this level will be hard to sustain over a long period of time. WALLACE: Mara, you've got, quickly, the last word.

LIASSON: I think the political bottom line is when somebody goes to the pump, fills up their car, it makes them angry and dispirited. Do they add that to all of the other things that they are unhappy with this current administration?

HUME: And the answer is yes.

LIASSON: And the answer is probably yes.

WALLACE: All right. That's it. We have to take a break here. But when we come back, the CIA fires a senior officer for leaking material to the media, material that won the reporter journalism's highest prize. Our panel weighs in on that after this break.


WALLACE: On this day in 1975, President Ford announced the end of the Vietnam War.


GERALD FORD, PRESIDENT OF THE UNITED STATES: America can regain a sense of pride, but it cannot be achieved by re-fighting a war that is finished.


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



PORTER GOSS, CIA DIRECTOR: I'm sorry to tell you that the damage has been very severe to our capabilities to carry out our mission.


WALLACE: That was CIA Director Porter Goss talking about how leaks to the media hurt national security. And on Friday Goss fired a senior CIA officer for disclosing classified information.

And we're back now with Brit, Mara, Bill and Juan. Well, the conventional wisdom in Washington is that leak investigations never catch anyone, but apparently at the CIA they caught this senior officer, Mary McCarthy.

And that, in and of itself, Mara, is very rare, catching and firing a CIA officer.

LIASSON: Yes, it's very rare, and some people even called it unprecedented. But since these leaks occurred, the administration has made a high priority, and especially at the CIA, to clamp down on leakers.

And they went out to give polygraph tests, directed polygraph tests, not just general ones, but specifically asking about this story, about -- this was the Washington Post story about secret prisons in different countries around the world to interrogate suspected terrorists. And they found Mary McCarthy and they fired her.

Now, there's also other investigations ongoing. The Justice Department is looking into who leaked another story -- possibly maybe it wasn't a leak, but if there was a leak at the source of the NSA warrantless wiretapping story.

So this is an administration that's clamping down on, quote, leakers. That doesn't mean that the garden variety leaks don't go on every day. This was a specific leak of classified information.

WALLACE: Bill, let me ask you about this, because after this dismissal, some former CIA officials were drawing a parallel between what Mary McCarthy allegedly did in leaking this story about the overseas prisons and what President Bush did in authorizing disclosure of the National Intelligence Estimate.

And you heard Congresswoman Harman today say yes, she thinks that there's a big comparison. What do you make of that?

KRISTOL: I think any administration, any CIA director, would have fired someone who was discovered to have leaked something this major, this sensitive and this classified. There's no comparison at all.

The president declassified most of the National Intelligence Estimates, as the media wanted him to, as he was entitled to, which was a retrospective look at Saddam's weapons programs or lack thereof.

This was leaking contemporaneous information about an ongoing secret program in the United States government. There's no parallel at all. There's no parallel at all with what Scooter Libby's alleged to have done, incidentally, which was all about past stuff about what the CIA said two years before about Saddam Hussein and this leak.

So for me, it's -- obviously, she should just be fired. They'll have to decide whether there's a criminal offense here. But I think the president right now should say -- I mean, what it shows is how -- what a nucleus of people there were in the CIA and elsewhere in the U.S. government who are hostile to Bush, Kerry contributors.

This woman Mary McCarthy was, and a Democratic National Committee contributor in 2004, close friend of Rand Beers, who left the NSC to work for Kerry, and Richard Clark, who wrote that book during the campaign that denounced Bush.

There were a bunch of people in the CIA who were out to get the Bush administration, and a lot of the leaks over the last two or three years come from that group of people, I suspect, directly or indirectly, and the Bush administration's had a tough time dealing with that.

WILLIAMS: Well, I mean, I think there's no question when Porter Goss, now the CIA director, took over in '04, it was widely seen that there was a war in terms of intelligence between White House and the CIA.

But now you have a situation where I think Porter Goss is going after people like Mary McCarthy in a very political way. And that's the analogy with the president. The president's leak was politically expedient. He was trying to make a political argument for going to war in Iraq.

And here you have his opponents, some of them in the CIA like McCarthy, making a political leak very much intended to say that the administration's policy is off base and taking us down the path of secret prisons that violate our principles as Americans.

So you come to the whole idea that she was trying to defeat this administration because she felt what their activities were doing was hurting the American -- hurting America both at home and abroad in terms of our ideals. Porter Goss says it hurt us, hurt our relationships with...

WALLACE: And she was elected by whom?

WILLIAMS: She wasn't elected by anybody, but she's an American citizen. She has a right to speak out.

KRISTOL: She doesn't have to right. She does not have a right.

WILLIAMS: Oh, she's not a citizen?

KRISTOL: She does not have a right to speak out. Maybe you're not aware that when you join the CIA -- when I went to work in the U.S. government...


KRISTOL: ... I signed forms saying I would not release classified information. If I had released information like this, I would have been fired. I should have been fired. And let me tell you something.

WILLIAMS: You just said a minute ago...

KRISTOL: The Clinton administration would have fired her if this had happened in the mid '90s.

WILLIAMS: I don't have any...

KRISTOL: This is an outrageous leak of national security information.

WILLIAMS: She can take a risk, but you're telling me that you don't leak -- you've never leaked information?

KRISTOL: Oh, come on. People do not leak information.

WILLIAMS: People leak every day in this town.

LIASSON: Juan, we're talking about classified information.

HUME: Juan, there's an important distinction between disclosing information which the government has not chosen to put out yet or may never, and the unauthorized disclosure of classified information.

That's not to say that all information that is classified should be. However, there are people who are authorized to declassify information and then authorize its release, and there are people who are not. This woman palpably was not such a person.

In addition, she signed, as Bill pointed out, a statement when she joined the agency in which she swore that she would not do that. So she was honor-bound not to do it. The law restricts the ability to which someone can do that. And she went ahead and did it.

Juan, that is manifestly not speaking out. That is not an exercise simply of First Amendment rights. This was a violation of her oath and her responsibility.

WALLACE: All right. I'm going to...

WILLIAMS: Let me -- no, let me...

WALLACE: No, no, no. No.

WILLIAMS: Let me just quickly respond.

Brit, she took a risk. She was very aware of what she had signed. She is now bearing the cost of having broken that pledge.

WALLACE: So this is an act of conscience?

WILLIAMS: And so in that sense, yes, I do believe it's an act of honor.

WALLACE: And if it's an act of conscience, then why did she do it surreptitiously?


WALLACE: Why did she do it surreptitiously?

WILLIAMS: She did it because she wanted to get the word out.

HUME: Why didn't she just walk out, stand on the street corner, and pass it out?

WILLIAMS: She could have, but she had a reporter...

HUME: But she didn't.

WILLIAMS: ... that she had a relationship with.

HUME: I know why she didn't. She didn't because that way she would have become known. She wanted to do it and not get caught. That's why.

KRISTOL: Look, let's take Rand Beers, who was -- Rand Beers, to be fair, quit the National Security Council, left his job, very publicly did so, and then criticized the Bush administration, without releasing, however, highly sensitive classified information.

She could have quit. She could have said I think Bush is doing...

WILLIAMS: She could have.

KRISTOL: ... a bad job, he's ruining the CIA. Many other people have quit and said that. No one can defend what she did while being on duty in the Central Intelligence Agency and releasing not just secret but highly, highly sensitive and classified material.

WALLACE: You don't really believe that there's any justification for what she did. You don't really.

WILLIAMS: Yes, I do. What are you talking about? The United States should not be engaged -- I mean, you can have the argument about what we need to do to combat terrorism.

But the establishment of secret prisons -- and if she felt that this was a violation of our principles as a country and was untenable in terms of her conscience working for the U.S. government, why shouldn't she act?

KRISTOL: She should quit.

HUME: Well, she should quit, then.

WILLIAMS: Well, I don't know what she did -- what her decision was...

HUME: She didn't quit. She just got canned.

WILLIAMS: It doesn't have to be that she could quit. She could say you know what, I just want to get this information out any way I can. And she did, and now she's in trouble for it. She's bearing the cost, there's no question.

WALLACE: Please address all of your letters to Juan Williams.

One real quick thing. We've got about a minute left, very quickly. Mara, the -- while she was fired for breaking -- for leaking this information, a couple of newspapers, the New York Times and the Washington Post, won Pulitzer Prizes, the most prestigious award, for printing leaks. What do you make of that?

LIASSON: Well, I think those are really two different things. I think the press is always going to be in tension with an administration. The press's job is to ferret out information and provide it to the public.

Sometimes the press makes a decision to hold a piece of information at an administration's request because of national security, which is what happened, at least for one year, with the NSA warrantless wiretap story, not necessarily with this one, the secret prisons.

But I don't think that -- I think this is going to go on, and I think the administration has a right to try to protect its secrets, and the press has a job to try to get them out.

WALLACE: Brit, real quick?

HUME: Well, I think we do live in a country where we've made a decision as a nation that we're going to leave this level of responsibility in the hands of members of the news media. One hopes that it will be exercised responsibly. In neither of these cases, in my judgment, was it.

WALLACE: And, Bill, your reaction to the fact that papers were honored. Do you see anything wrong with that, I mean, that the responsibility of government officials is to keep secrets, but it's not the responsibility of papers?

KRISTOL: Yes, I do. I think newspapers have to make a serious decision when they print material like this, whether they are hurting ongoing U.S. government operations. And I'm not sure the Post made the right decision in this case.

WALLACE: All right. Thank you all, panel. See you next week. I just ask the questions. I don't give the answers.

For more visit the FOX News Sunday web page.

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