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The Race In Iowa, New Hampshire

FOX News Special Report With Brit Hume

CHRIS WALLACE, HOST: I'm Chris Wallace. Newt Gingrich says he won't run for president, next on "Fox News Sunday."

A showdown over children's health care. Congress moves to expand it, while the president promises a veto. We'll have a debate between two Senate leaders, Republican Trent Lott and Democrat Charles Schumer.

The presidential primaries and caucuses start in just over 100 days. We'll examine the first battlegrounds, Iowa and New Hampshire, with two insiders, the Des Moines Register's David Yepsen and the Boston Globe's James Pindell.

Then did this week's Democratic debate turn out to be a win for Republicans? We'll ask our Sunday regulars, Brit Hume, Mara Liasson, Bill Kristol and Juan Williams.

And our Power Player of the Week offers the heroes of the greatest generation a final salute, all right now on "Fox News Sunday."

And good morning again from Fox News in Washington. Well, after months of teasing the press and public, former Speaker of the House Newt Gingrich has announced he won't be running for president after all. Gingrich spoke first to Fox News.

(BEGIN VIDEO CLIP)

NEWT GINGRICH, FORMER HOUSE SPEAKER: We learned this morning that under McCain-Feingold's provisions, American Solutions, an organization I've helped launch and which just this weekend is having 35 workshops launched from Carrollton, Georgia, with over 2,000 sites across the country, would actually be isolated from any of my activities, and the penalties are criminal.

So unfortunately, the effect of the McCain-Feingold censorship act has been to weaken the middle class, to make it harder to have a middle class candidate, and to make it much, much harder to raise money.

And so I think you've got to be realistic about what it takes to campaign, and I wasn't prepared to abandon American Solutions even to explore whether or not a campaign was realistic.

So I think the other -- I hope the other candidates will look at the ideas we're developing. I hope some of them will become champions of those ideas. But I'm not going to endorse anybody. I'm going to try to offer ideas that hopefully all of them can look at.

(END VIDEO CLIP)

WALLACE: Newt Gingrich out of the race for president.

Meanwhile, the focus in Congress these days has shifted from the war in Iraq to spending and, first, how to expand the State Children's Health Insurance Program, or S-CHIP.

Joining us now to debate the issue are two Senate leaders, Republican Trent Lott and, from his home state of New York, Democratic Charles Schumer.

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

SEN. TRENT LOTT (R), MISSISSIPPI: Thank you, Chris.

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

WALLACE: In his Saturday radio address, the president repeated his veto threat, and speaking for the Democrats was a 12-year-old boy who was saved by S-CHIP. Let's listen.

(BEGIN AUDIO CLIP)

PRESIDENT GEORGE W. BUSH: Congressional leaders have put forward an irresponsible plan that would dramatically expand this program beyond its original intent, and they know I will veto it.

(END AUDIO CLIP)

(BEGIN AUDIO CLIP)

GRAEME FROST: I don't know why President Bush wants to stop kids who really need help from getting CHIP. All I know is I have some really good doctors.

(END AUDIO CLIP)

WALLACE: Senator Lott, in your home state of Mississippi, there are 60,000 children of working families who are eligible but not enrolled in S- CHIP.

How can you support a presidential veto which will continue to leave those 60,000 kids unprotected?

LOTT: Well, first, you need to know, Chris, that this program was created in the '90s when we had a Republican Congress, when I was the majority leader, and I voted for it, because I do believe that we need this health insurance program for the generally poor, low-income students.

I also think that the program needs to be increased. But this is a classic example of how in Washington no good deed goes unpunished. Well- intentioned, to be targeted at low-income, poor kids and to add even more - - that was the goal. Now it has been bumped up over and over again until now it's already covering kids from families with $62,000, and some states even have asked to go as high as $83,000 to be covered -- and adults. That's what really gets my goat. Hundreds of thousands of adults are now covered by the children's health...

WALLACE: We're going to get to all that.

Senator Schumer, let's talk about this proposed expansion which the president calls irresponsible. S-CHIP currently covers mostly children of families making 200 percent of the poverty level, which is $40,000.

But in New York, you have supported making it eligible for families that make twice that. Why should taxpayers subsidize families making $80,000 a year?

SCHUMER: Well, Chris, first of all, the bill does not go above 200 percent without the administration's OK. This is a program that's needed, and the average health care cost per family is about $1,500 a month, $20,000 a year.

There are people way above the poverty level who have a rough time affording $20,000 a year, and lots of kids go uncovered. And we're all hurt as a country when a child is not covered by health care and goes to school sick.

In one way or another, they lose out for the rest of their lives in many ways. So we think it's important to cover as many kids as we can.

The president could disapprove any waiver above 200 percent. He recently approved one as high as 350 percent for New Jersey. And so I don't think that's the real argument people are against it.

And second, we are very responsible on this. We pay for it. We Democrats have adopted a plan, which the Republicans never did when they were in office, called pay-go. Any new program has to be paid for.

This is fully paid for and will not increase the deficit. We do it by raising the tobacco tax.

WALLACE: Let's talk about this question of income limits, because I think it's something that is at the center of this argument, Senator Lott.

Routinely in this program, if it's expanded, it would go to people, families, making 300 percent of poverty. That's $60,000 a year.

And critics say, Senator Lott, that this means that a lot of families that already have and are paying for private insurance could simply go on the public dole and be subsidized by taxpayers.

LOTT: That's absolutely one of the biggest problems. They would move off of private insurance, and it forces them off, frankly. Why would you not do that if you can get over on a federally funded program?

But also, one of the things that really bothers me about what the Congress did, again, in a political gotcha move, was to say -- to take out a provision that the administration says look, for those states that want to go above this 200 percent of poverty, at least first make sure you've insured or you've covered 95 percent of the poor kids before you start going up the income ladder and including adults. That is taken out by this bill.

But one other thing. This bill has a typical Washington sleight of hand. It's got about a $40 billion shortfall over a 10-year period, and they fund it with a 61-cents-a-pack tax increase, bringing it to $1, and say, "By the way, that will discourage people from smoking." That's good.

But the problem is if people do stop smoking, you won't have the money and the program won't be paid for. Then you'll have to either cut the program or raise taxes somewhere else. Typical Washington -- now you see it, now you don't.

WALLACE: All right. Let me see if I can focus this back, Senator Schumer, on this question of income limits.

Families making $60,000 a year, already paying for private health insurance, and yet under this program they'll be able to get off the private sector program and basically have the taxpayers subsidize them.

SCHUMER: Well, again, Chris, not a single state can go above 200 percent unless they apply to the administration, the Bush administration, and they get an OK.

WALLACE: But it might be the Clinton administration in a year and a half.

SCHUMER: Well, the Bush administration is -- has approved, I think, 19 waivers going above 200 percent. And again, the cost of health insurance goes through the roof.

Ask your average middle-class person, ask your person in New York who makes $60,000, who's a police officer, or a salesman, or a schoolteacher, can they afford $20,000 a year for health care.

And as for them going off and going into private -- to private, two things. First, they have to take the whole family off, including themselves. They're not going to do that so quickly.

Second, the bill has incentives to encourage the private sector to stay with the people. We don't want people going off. The bill has strong incentives to encourage people to stay on if they have insurance.

But that is not a good reason to tell nine million children in America who are not covered that they can't get coverage. This is -- we are the only western country that doesn't do this.

We paid for it with a tobacco tax. The CBO says it will pay for the bill. And the American people are overwhelmingly for this. In fact, it had such support, Chris, that 18 Republican senators voted with us -- broad bipartisan support.

WALLACE: Senator, I'm going to get to that...

SCHUMER: Conservative senators like Senator...

WALLACE: Senator Schumer, I'm going to get to that in a moment. But let me just ask you about one other aspect of this, because I want to move on to another key point here.

As Senator Lott points out, it doesn't just cover children, although it's overwhelmingly children, about six million, but 700,000 adults are also covered by the program now, including some adults without children. Why should that be allowed?

SCHUMER: Right. It shouldn't, and the bill phases that out and puts strong incentives on the states to get the adults out of the program. It should just be for kids. And that's what the bill works for.

But let me tell you this. To do what President Bush wants to do, take a million kids off the rolls, not increase, not even stay the same, but decrease because 700,000 adults are covered, and that number's going down - - that's not fair to those kids.

LOTT: Hey, Chris, let me make two points right quick. First, Chuck is right. This administration and the previous administration, but especially this one, gave too many waivers to too many states. That is a part of the problem.

But here's my point. We do need to move the program up. We need to make it a better program. Now, we can fight. We can have a partisan political charge, counter-charge, or we can come together with a solution to make sure that low-income kids are really covered.

Do the Democrats want to do that, or do they want an issue? That's what's at stake.

WALLACE: Senator Lott, you talk about Republican alternatives, but some of your Republican colleagues, including conservative Senator Pat Roberts, say they haven't seen any alternatives. Let's watch.

(BEGIN VIDEO CLIP)

SEN. PAT ROBERTS, R-KAN.: I have yet to see a plan from the administration that can actually pass the Congress. In fact, I have yet to see an actual plan from the administration.

(END VIDEO CLIP)

WALLACE: Let me ask you -- this is Senator Schumer's question. Why did 18 of your Republican colleagues in the Senate join the Democrats in voting for this expansion of S-CHIP?

LOTT: Well, let me defend what they did, even though I strongly disagree. Some of them will tell you we were trying to keep it from exploding even higher.

They agreed -- OK, we'll go to $35 billion increase because we don't want it to be a $70 billion increase, typical of what Republicans do, you know -- OK, well, we're going to lose, just I want to lose half as much.

But I think there's some responsibility or credibility to doing that.

I have a plan. Republicans on the Finance Committee -- we were talking about going to, you know, $9 billion to $12 billion, maybe even as high as $15 billion above where we were to make sure that those low-income kids that were covered were continued to be covered and others were covered that had not been covered.

Clearly, there is ground for a compromise here and a solution that will really help the children. In fact, Congressman Joe Barton and I have already introduced a bill that would extend the program for 18 months and increase the coverage to get more kids.

WALLACE: Senator Schumer, getting back...

SCHUMER: Chris, let me just say one...

WALLACE: ... to Senator Lott's question, do you want an issue or do you want a compromise?

SCHUMER: Well, it clearly was a compromise. The senior Republican on the Finance Committee, Senator Grassley, hardly a free- spending liberal -- the number two senator on the Finance Committee, Senator Hatch, one of the most conservative Republican senators -- not only voted for this -- that's not the case -- they were involved intimately in the negotiations.

They were with Senator Reid and Senator Baucus, our two leaders on this issue, for hours, days, weeks, coming up with this program. They're proud of the program.

You can see it in their speeches -- not just Pat Roberts, but Senator Grassley said the president hasn't read the bill. Now, he doesn't usually talk like that about the president.

So this is a broad bipartisan bill with the broad support of the American people, 70 percent, 80 percent, and you do have a small number of Republicans who are very, very conservative on this, whose values, I think, are out of whack with America's values in saying that kids shouldn't get covered.

And they always come up with this reason or that reason not to support it. But this is a tempered, moderate bill.

WALLACE: Senator Schumer? SCHUMER: It's careful. And it's gotten broad bipartisan support.

WALLACE: Senator Schumer, let me ask you, what's going to happen if the president vetoes this and you can't override him? Will the Democrats keep voting and sending this bill to the president?

SCHUMER: Yes. We do have enough votes already to override the president in the Senate -- 51 Democrats, 18 Republicans, 69...

WALLACE: Yes, but not enough in the House.

SCHUMER: That's enough. We're somewhat short in the House. From what I'm told, there are some House members, mainly Republicans but a few Democrats, who might change.

But my guess is we will not have enough to override in the House. Speaker Pelosi has said, and I agree with this, that she is going to try and send this issue back to the president over again because it is so needed, so desperately needed, by our kids and with such broad support.

LOTT: That shows it's just totally politics. Now, the president's going to veto it. It's going to be sustained. We need to sit down and make some changes so that we can actually get broader support and the president can sign it.

That's the way it works here in this city. There's at least three parties to every negotiation -- the House, the Senate, the Republicans, the Democrats and the White House.

WALLACE: Let me ask you, Senator Lott.

SCHUMER: Hey, Chris, I have to say this. To say that this is politics when we feel the need so keenly...

LOTT: Well, why would they just send it back again and again...

SCHUMER: Can I just finish?

LOTT: ... when we can get an agreement that would be signed?

SCHUMER: Because we want -- because we want to get...

LOTT: Because what you want is an issue. That's what's involved here.

SCHUMER: Trent, you may have your policy. The president -- the only thing he has gone for is a plan that will cut a million kids off. That's not a compromise.

LOTT: Well, he's going to have to compromise...

SCHUMER: And we have to deal with that.

LOTT: ... and so are you, Chuck. SCHUMER: Well, he hasn't. I hope you'll get him to compromise. So far he's adamant.

LOTT: Well, I'd like to have a chance to try.

WALLACE: Well, let me ask you about this.

SCHUMER: Good. Well, godspeed.

WALLACE: Wait, wait, wait, wait, Senator Lott -- I mean, Senator Schumer, let me ask Senator Lott a question.

If they decide -- what you would say, play this game -- they send it up, he vetoes it, his veto is sustained and they send it up again -- are Republicans going to keep voting to sustain the president's veto?

LOTT: It depends on what's in it. Do they make changes?

WALLACE: No, I'm saying if it's the same bill.

LOTT: Oh, yes, he will. Yes. Look...

SCHUMER: Let me just say, Chris...

LOTT: ... the time has come where we begin to get...

SCHUMER: ... this bill has...

WALLACE: Wait, wait. I'm letting Senator Lott answer the question.

LOTT: ... begin to get some control on the insatiable appetite for Congress, Republicans and Democrats, to get control of spending across the board.

And you know, I think it's got to begin here. It's got to apply to the Defense Department. It's got to apply to transportation. Everything has to be scrutinized and controlled.

WALLACE: Senator Schumer, you get the last 15 seconds.

SCHUMER: Our budget has a smaller increase overall, even including the war in Iraq, than any one of the six Republican budgets. And in addition, we pay for it. We are responsible.

But we're not going to stop progress. When children are not covered with health care, and we find a broad bipartisan way to get that done responsibly, with large amount of Republican support, we're going to keep at it until we get it done. That's what the American people want us to do.

WALLACE: Senator Lott, Senator Schumer, we want to thank you both for coming in today and talking with us.

LOTT: Thank you.

WALLACE: Up next, the first major battlegrounds of the 2008 campaign. Two insiders will tell us the latest about Iowa and New Hampshire when we come back.

(COMMERCIAL BREAK)

WALLACE: After months of warm-ups, we're now in a sprint to the start of the 2008 presidential contest.

And to tell us what's really happening in the first two contests, we're joined by, from Iowa, David Yepsen, chief political correspondent for the Des Moines Register, and from New Hampshire, Boston Globe political correspondent James Pindell.

Gentlemen, let's start with the Republicans, and let's start in the first state, Iowa.

David, according to the RealClearPolitics average of recent polls, Mitt Romney has a commanding lead, beating Rudy Giuliani and Fred Thompson by 2-1. David, do you see -- how do you see the GOP race in Iowa?

DAVID YEPSEN, DES MOINES REGISTER: I agree with that. I think that Mitt Romney is way ahead. And I think there's a lot of Republicans who are trying to sort out who else either might be in the race -- Fred Thompson is now in. He's trying to sort of restart himself here a little bit in Iowa.

There's a lot of Republicans who are -- they're not happy with this field and they've been looking for another candidate. Now with Newt Gingrich out of the race, they're going to have to focus on this field that's here.

So I agree Mitt Romney is ahead.

WALLACE: Let's move on to New Hampshire, James, where according to the RealClearPolitics average of recent polls, Romney, former governor of the neighboring state of Massachusetts, has lost his big lead and is now just barely ahead of Giuliani.

James, what's going on in New Hampshire?

JAMES PINDELL, BOSTON GLOBE: Well, the bottom line is that we are in a very intense three-way primary, and the bottom line also is that if anyone tells you who's going to win the New Hampshire primary, they have no idea what they're talking about on the Republican side.

Just look at the candidates. You do have Mitt Romney, as you said, the former governor of the neighboring state. They're sharing the same media market. Most people in New Hampshire watching this show are watching it from a Fox Boston affiliate.

Then you have Rudy Giuliani. If there's any early state with a natural constituency for him, it would be a state very much concerned with taxes and not so much concerned about abortion or his own family life.

And then, of course, you've got John McCain, who could argue he won New Hampshire because he's already done it before.

So clearly, we're in a three-way, very hardcore battle here, and it's really a toss-up.

WALLACE: All right. Speaking of three-way battles, let's turn to the Democrats in Iowa and go back to the polls. They show a very tight three- way race among Clinton, Edwards and Obama.

David, take us behind those numbers. Who seems to have momentum among the Democrats in Iowa, and who's maybe losing some altitude?

YEPSEN: Well, I think John Edwards has lost some altitude, as you put it. He was at one point in the campaign -- he was ahead in Iowa. He did well here two years -- or four years ago. He finished in second place. So I think the Edwards people are kind of concerned about that positioning.

Senator Clinton, Senator Obama have moved up. But here in recent weeks, this race has been static. All these polls essentially show a statistical tie for first place.

And I think that's because the Democratic caucus-goers generally like their choices and they're really struggling to sort out who they might be.

I don't count out Bill Richardson, Chris Dodd or Joe Biden from this mix either, because all of them have got a good game going in this state.

WALLACE: Let's move on to New Hampshire and the Democrats where, again, according to the polls, Senator Clinton has moved on to a commanding lead, better than 2-1, over Obama.

James, is that the way you see it? Is Clinton that overwhelming a favorite now in New Hampshire?

PINDELL: That's right. The bottom line here for Democrats is that Hillary Clinton is dominating nearly every local metric you can have.

Even other campaigns concede that she has the most endorsements, the most powerful endorsements. She has the most experienced staff. She not only has a lead in the polls, but she's growing on that lead.

That said, there still is a chance for Barack Obama to come back, particularly in this state. And if everything goes well, John Edwards also has a shot.

WALLACE: Let's talk about Barack Obama, because as we've seen, he leads Democrats and has consistently led them in fundraising and also in attracting big crowds of people to his various rallies. But he's continued to lag in the polls.

David, the Obama camp says that he is tapping into new voters who haven't typically gone out to caucuses or primaries. Do you see any signs that he's under polling and, in fact, he's stronger than he appears to be?

YEPSEN: No, I don't. I mean, I know that's their spin, but historically, the caucus-goers in Iowa are older than many of these Obama crowds. The dynamic of the caucus is different, too. You've got to win delegates at a caucus.

And so you can turn out a rally of 7,000 people in a college town, but whether you win that caucus by 1,000 votes or by 10,000 votes, you still get the same number of delegates. So I think -- and Senator Obama recognizes this. This is why he's campaigning in a lot of small towns around this state.

Senator Clinton needs to start doing more of that.

WALLACE: James, what about you? Do you get a sense that Obama may be tapping into voters that aren't being reflected in the polls and, as his camp says, is actually stronger than we think he is?

PINDELL: Well, I think what's key to understand is that, of course, New Hampshire allows independent voters to vote in the primary.

And recent polls have suggested that two-thirds to 70 percent of these independent voters are likely to vote in the Democratic primary. And because of that, what we really see here on the ground is that it's almost like a general election race between Hillary Clinton and Barack Obama.

General election -- of course, Democrats try to drive out Democratic turnout. Republicans try to drive out Republican turnout.

In this case, it's Hillary Clinton really trying to focus and target a Democratic base, while Barack Obama has been really setting his sights on these independent voters and seeing that as his base.

WALLACE: Let's turn, if we can, gentlemen, to Fred Thompson, the late arrival in this race.

And let's go first to you, David -- your sense of how Thompson is doing on the stump and whether she's shaking the GOP race up.

YEPSEN: No, I don't think he's shaking the GOP race up at all. I think he had a bad rollout on his first big trip here. Even some of his own people weren't that happy. It was about a B-minus-type rollout.

He's back in the state now and trying to sort of redo this and get the thing jump-started a little bit. But conservatives were putting a lot of hope on him as someone who could unify and really lead them, the next Reagan, and so far he's not met that standard.

WALLACE: And, James, your sense of how Fred Thompson is playing up in New Hampshire?

PINDELL: Largely the same picture. You know, he was built up to be the next Ronald Reagan, and I'm not sure Ronald Reagan could live up to those expectations in '76 or 1980.

But on the ground, people were very excited for him to enter the race. And after they saw him, or met him or the campaign got started, they were just kind of shrugging their shoulders. They weren't saying negative things. They certainly weren't as impressed as they thought they were going to be.

WALLACE: Finally, let's look at the calendar, which is so important and has seemed so confused. What we hear is that when all the jockeying is done, Iowa is going to move up perhaps to Saturday, January 5th, or maybe a day or two earlier, and New Hampshire is going to vote three days later on Tuesday, January 8th.

David, first of all, is that what you're hearing? And secondly, if it does shake out that way, that Iowa is on an afternoon in -- a Saturday afternoon and New Hampshire is three days later, does that make Iowa more or less important?

YEPSEN: I do think that's the way it's going to shake out. I think it will be Thursday the 3rd or Saturday the 5th.

I think the effect of all these other states moving these contests up has just enhanced what's going on in Iowa and in New Hampshire. The candidates think that. I mean, look at the time and the money that they're putting into these two states.

And so I do think it has the unintended consequence of making Iowa and New Hampshire more important. A candidate simply has to do well in these states in order to play in the big contest later on.

WALLACE: And, James, your view on this compressed schedule with South Carolina and Florida, the Super Tuesday in rapid succession. What does that mean for the cloud of New Hampshire?

PINDELL: I agree with David. I think a year ago, smart people could disagree on this issue.

But now, if you look at where the campaigns are clearly spending their time and their money -- look, I was chasing five candidates in New Hampshire yesterday -- it's obvious that this is where the battlegrounds will be, and it's obvious that these candidates feel that Iowa and New Hampshire are more important.

WALLACE: Gentlemen, we're going to have to leave it there, but we'll check back with you as the campaign goes on. Thanks for talking with us today.

PINDELL: Thank you.

YEPSEN: Thank you, Chris.

WALLACE: Up next, what did we learn about the fortunes of both parties from this week's Democratic debate? Our Sunday regulars have some answers in a moment.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON, D-N.Y.: We will have an opportunity to designate it as a terrorist organization which gives us the options to be able to impose sanctions on the primary leaders.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

FORMER U.S. SENATOR JOHN EDWARDS: You cannot give this president the authority, and you can't even give him the first step in that authority, because he cannot be trusted.

(END VIDEO CLIP)

WALLACE: That was Hillary Clinton and John Edwards arguing over Clinton's vote this week to designate Iran's revolutionary guard as a terrorist organization.

And it's time now for our Sunday gang -- 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, Bill Kristol, you wrote a column late Wednesday night -- it was posted at 12:24 a.m., right after the Democratic debate -- saying that after watching it, you are more confident than ever the Republicans are going to win in November of 2008. Why?

BILL KRISTOL, WEEKLY STANDARD: Well, because the Democratic candidates have more passion in conducting the war on smoking than the war on terror.

Most of them want to give up in Iraq. They don't want to do anything serious to stop Iran from going nuclear or from killing American soldiers in Iraq. They want to increase taxes. They don't want to be at all serious about illegal immigration.

I think the Republicans have a good shot in '08 running against that agenda.

WALLACE: But I mean, was there something particularly in this debate that set you off?

KRISTOL: Well, I hadn't watched any of the previous Democratic debates, and I kind of had assumed that the presidential candidates would be more responsible than the Democratic Congress.

But it turns out, with the partial exception of Hillary Clinton, who is trying some of the time to be a serious person, the rest of them are just like the Democratic Congress, totally irresponsible.

JUAN WILLIAMS, NPR: I don't think that at all. In fact, I think you're seeing more reason and attempt to sort of step back, not to have us postured as an aggressor on the world front.

It's not at all the case that anyone's saying, "Let's allow Iran to go nuclear." I think people are saying we have to do so in a thoughtful way that doesn't involve us in another war.

WALLACE: I want to show my favorite clip from the debate. A reporter asked Senator Edwards about a school in Massachusetts where the teacher has been reading or had been reading to her second grade class a story about a prince marrying another prince, and here was Senator Edwards' response.

(BEGIN VIDEO CLIP)

EDWARDS: I want my children to be able to make that decision on behalf of themselves. And I want them to be exposed to all the information, even in -- did you say second grade? Second grade might be a little tough, but even in second grade.

(END VIDEO CLIP)

WALLACE: Brit, I must have missed out on the memo where it turns out that parents don't get to decide sex ed for their kids in second grade.

BRIT HUME, FOX NEWS WASHINGTON MANAGING EDITOR: That was an astonishing statement, just astonishing, that kids should make up their own minds about what they learn in second grade, that the curriculum should be something that they choose, and if the school system were to impose on them stories about something that many of the parents might consider absolutely outrageous, that the kids should be the ones who make up their mind?

What in the world is -- what in the world is this man thinking?

WALLACE: Mara, I mean, the question here is -- and I think what Bill reacted to in the debate is a question of when you look at the Democratic candidates, while they're all speaking and appealing to the Democratic constituency, how will that play when that candidate and those sets of statements go up against a Republican next fall?

MARA LIASSON, NPR: Well, first of all, we don't know who the Democrat will be or who the Republican will be.

I thought something else interesting happened that night. The Democratic candidates had a chance to say that I promise to be out of Iraq by the end of my first term. Now, that seems to be the kind of promise that a lot of them would have made.

But all three of the leaders -- Edwards, Obama and Clinton -- refused to make that commitment, 2013. I thought that was extraordinary.

I thought there was an amazing consensus among the Democratic candidates that we -- whether or not you agreed with getting in, we are, in essence, stuck in Iraq.

We have national interests there that are precipitous. A hasty withdrawal would have consequences that are bad for the national interests of the United States. And they're not willing to make that commitment.

So I see a kind of big succumbing to reality, I guess you could call it, having an effect on the candidates.

WALLACE: So, Bill Kristol, does that mollify your concerns that these Democrats are a bunch of left-wing kooks?

KRISTOL: Not really. I mean, it would be so crazy to sort of take that position, that we absolutely could guarantee -- that a president could guarantee that there wouldn't be U.S. forces in a place like Iraq, where we currently have...

WALLACE: Five years from now? Wouldn't that be a safe promise...

KRISTOL: No.

WALLACE: ... for them to make?

KRISTOL: No, because it's not going to be true because, obviously, if we succeed in Iraq, there will be a friendly government that will need our help, as the government of South Korea and as other governments have needed our help.

And if, God forbid, we fail in Iraq, we'll probably have to go in to fight an Al Qaida terror base or an Iranian proxy there. So I agree that they deserve a little credit for recognizing reality.

But still, with the partial exception of Senator Clinton, I was a little shocked at how willing they were to simply be cavalier.

And look, they attacked Senator Clinton for voting for the resolution that -- the sense of the Senate resolution that the Quds force, the Iran revolutionary guard, should be designated a terror sponsor and there should be sanctions against them.

Seventy-six senators voted for that. A majority of Democrats voted for it. So most of the Democratic presidential candidates, with the exception of Senator Clinton, are to the left of the majority of Senate Democrats on dealing with Iran.

WALLACE: But, Juan, belying Brother Kristol's comments that the Democrats are disarmed and in terrible trouble in November 2008, let's take a look at the latest Fox News/Opinion Dynamics poll, which shows Hillary Clinton beating the Republican frontrunner, Rudy Giuliani, by seven points. And she does even better against other Republicans.

So, Juan, if she's the nominee, don't Democrats stand a pretty good chance?

WILLIAMS: Oh, I think any Democrat stands a very good chance. I mean, you could make the argument, Chris, in fact, that Hillary Clinton stands the least of the good chances because as the -- as her rivals on the Democratic side have been pointing out, she has a lot of history, including her husband, that people will use against her, and it energizes the Republican base like no other Democrat, so -- go ahead, Brit.

HUME: I was just going to say what Bill is pointing to is something that I think Hillary Clinton understands -- is that what has, in election after election after election, kept the Democrats out of the White House, going back many decades, has been a sense in the public that the Democrats are not to be trusted on national security, that they're too soft and they won't keep us safe.

Now, you see what's happening to this Democratic field. It is being pulled to the left by the most liberal, even radical, elements of the party which have a real say in matters.

I mean, even, you know, some of these organizations like MoveOn.org, which are out there where the buses don't run on a lot of issues, has real impact on the Democratic field and on the Democratic Congress.

And the result of this is that you have a bunch of candidates who are being pulled so far to the left that when it gets down to the general election, they may have a very hard time working their way back to a more centrist position on a lot of these national security issues.

Hillary Clinton seems to be trying, at least, to resist that.

WALLACE: I don't want to let this conversation end without discussing the other news on the Republican side which we found out yesterday, that Newt Gingrich is not, after all -- not going to run for president.

Mara, were you surprised?

LIASSON: In the end, I guess no, because he kind of waffled about it for so long. For a while, I thought he would get in if only to have a podium at the debate so he could influence the debate, because he is someone who would do that, because he's so full of ideas, and he is a visionary.

But I think at this point, the race is full. The race is full of candidates. There are choices for Republicans. I think Newt rightly understood he just wasn't needed.

WALLACE: Well, I've got to say I am a little surprised, Bill, and you and I talked about it after his appearance last week here, because he was talking about tomorrow he was going to have one of his top aides start this pledge drive, see if he could raise $30 million, and by the third week in October he'd have decided, and if it was that he had the $30 million, he'd have to run.

I find it hard to believe that yesterday he suddenly learned that he couldn't do that and still run American Solutions, his non-profit.

KRISTOL: Maybe it was a tease all along, you know? It's quite possible, I think. Maybe he never intended to run and just thought it would help get his ideas out to have it be thought he was running.

WALLACE: And what do you think, Bill, the impact is on the Republican field, his not being in the race? Who does it help? Who does it hurt?

KRISTOL: Well, I think it helps Thompson and Romney, who are competing to be the conservative alternative to the Giuliani, McCain alternative.

And I think the field -- as Mara says, the field is now complete, and one of the four frontrunners, possibly with the exception of Huckabee, is going to be the nominee. It's extremely fluid and dynamic.

WILLIAMS: Yes. I think there's no Republican nominee, to come back to that point -- and there's certainly nobody that appeals to the evangelical base, the grassroots base of this party at this time, and that's the problem.

And Thompson's tried to fill that slot, and Newt Gingrich wanted to fill that slot, and Thompson has been a disappointment, and Newt Gingrich has decided that he wants to get out.

And one last point to Brit on this thing about the Democrats and the far-left kooks, as you call them, Chris, let me just say this. What did Mara say? No, they understand America's interest in Iraq to the point that they are willing to say to their base, a base that wants to get out, "No, you know what, we may have to be there to protect American interests till 2013."

How is that playing, in any way appeasing, a base? That is being honest and responsible. That's the kind of leadership we want.

KRISTOL: I love it when liberals are concerned that the Republicans candidates aren't appealing to the evangelical base.

WILLIAMS: That's the truth, isn't it?

KRISTOL: No. The truth is the Republicans have very attractive candidates, at least three of whom -- Giuliani, McCain and Thompson -- have real crossover appeal.

And I think one of them could beat quite -- I would favor right now one of them to beat Senator Clinton or Senator Obama. HUME: You know what's getting overlooked in all of this? In both parties this time around, we have a lot of candidates. And in both parties, it is a very strong field.

WALLACE: We have to leave it there. We're going to come back in a moment and discuss the fact the president and Congress are facing off over expanding children's health insurance. What happens next? Our panel has some answers when we come back.

(COMMERCIAL BREAK)

WALLACE: On this day in 1990, then-President Bush broke his campaign pledge not to raise taxes...

(BEGIN VIDEO CLIP)

G.H.W. BUSH: Read my lips.

(END VIDEO CLIP)

WALLACE: ... by proposing a large tax hike. The tax was on items such as gas, cigarettes, alcohol and luxury goods.

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

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI, D-CALIF.: I reached out to the president this morning to say that I was still praying that he would have a change of heart and sign this legislation.

I think I have to pray a little harder, but I will not give up.

(END VIDEO CLIP)

WALLACE: That was House Speaker Nancy Pelosi this week calling on divine intervention to get the president to sign the expansion of children's health insurance.

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

Well, the radio addresses of the two parties this weekend said it all, if not about the substance, then about the politics of this debate, Brit.

The president repeated his promise to veto S-CHIP. The Democrats put up a 12-year-old kid who said, "Mr. President, please don't take my S-CHIP away." Can the Republicans and the White House fight that?

HUME: On the face of it, Chris, this looks like a classic Republican losing proposition in which the Republicans are going along with the existence of this program, they're going along with the expansion of this program, and they're willing to allow much of what the Democrats want, but not all.

And so we have the situation where the president says he'll veto the bill, and if he does veto the bill and no substitute gets passed, he will be the man who killed the program to provide health insurance for poor children and, as it turns out, some adults and many not so poor children.

It looks on the face of it, when you think of it, that's the argument they're likely to lose. However, I was struck by the discussion on this program earlier between Trent Lott and Chuck Schumer.

I expected that Senator Lott would have a tough time of it. In fact, he seemed reasonably able to defend the position.

And it may be that this president, who has not vetoed many bills, will find that vetoing this one works out better than it looks at the moment on the face as it will.

WALLACE: Do you buy that, Mara?

(CROSSTALK)

LIASSON: ... come up with something else that passes?

I actually do. I think right now the politics are on the Democrats' side. There's no doubt about that. You have people, Republicans, who form that veto-proof majority in the Senate. They don't have one in the House.

But people like Pat Roberts and Chuck Grassley -- these aren't endangered Republicans who are doing this just because they're worried about the next election -- or Orrin Hatch, for that matter.

So I do think that the president will veto a bill, and he'll be representing principles that a lot of Republicans agree with -- doesn't want to federalize or socialize health care -- and then after that, after everybody has scored their points, maybe they can tweak the bill a little and have an expansion of S-CHIP.

WALLACE: Yes, but, Mara, the Democrats say they're not going to just take no for an answer. They're going to press the issue, bring it up again, let him veto it again.

LIASSON: Once they get the political benefit of a presidential veto that they can cast as a heartless blow against children, maybe they will decide that it's better to actually expand S-CHIP in whatever way they can and get a bill passed. We'll see. I don't think that's the final word from Democrats.

WALLACE: Bill, let's talk about the substance of the actual Democratic bill as it is now proposed, which would raise from $5 billion a year to $12 billion a year, more than double in terms of spending, the Children's Health Insurance Program.

Is this a legitimate expansion of a good program or is it, in effect, creating a middle class entitlement?

KRISTOL: Well, first of all, whenever I hear anything described as a heartless assault on our children, I tend to think it's a good idea, so I...

(LAUGHTER)

KRISTOL: ... I'm happy that the president is, indeed...

WALLACE: I think a lot of our viewers would not be surprised to hear that.

KRISTOL: I'm happy that the president's willing to do something bad for the kids. You do wonder about the Democrats, if I can just say, putting a 12-year-old -- I mean, how pathetic is that, a 12-year- old kid giving a radio address, Nancy Pelosi pretending she's praying for the president? You really wonder how stupid they think the American people are.

Look. Poor children are covered by Medicaid. This was to cover children between 100 percent and 200 percent of poverty. The Democrats are now expanding it up to 300 percent of the poverty line.

There are two ways -- if you think you need to help children and families between 200 percent and 300 percent of the poverty line, which is already double to triple of poverty, you can do it two ways: Expand government insurance or make it easier for those families to buy private insurance.

Republicans want to try to make it easier through the tax code to buy private insurance. Democrats want to expand government insurance. I think it's a good philosophical fight for Republicans if they can explain the issue well enough that the Democrats can't simply get away with demagoguing it.

WILLIAMS: When you have 3.7 million uninsured children in America, you know you have a crisis, and that goes beyond politics. And it's time for somebody on either side of this issue to stand up and say, "Wait a second. Let's make a deal."

And what you've seen in the House is Democrats willing to compromise, to come down, to say, "You know, we're not going to cover immigrants. We're not going to cover young adults. We want to cover kids." Now, that's not a bad thing.

And I'm surprised to hear you say, "Oh, how dare use a child." What do Republicans do except use soldiers and everything else to bolster their arguments?

KRISTOL: Soldiers aren't children.

WILLIAMS: Oh, come on. Yes, just use the uniforms and everything else. In fact, put on -- politicians get in uniforms and jump on ships to talk about missions accomplished.

KRISTOL: Come on.

HUME: Chris, I think Juan has put his finger on the critical moment here, which will come after the veto is cast, and the question will be whether the Democrats will do as Senator Schumer suggested they would do, which was to send the same bill back to the president, in essence, and have him veto it again, or whether they'll compromise on something that he'll sign.

The compromise is lying out there to be had. They could get something passed, and it would be better, at least in their -- should be better by their objectives than what they have now.

And the Republicans might find an opportunity here, because the public loves compromise. The public loves people coming together. It's very popular.

And it seemed to me that one of the strongest moments in your discussion earlier was Senator Lott was making that point, so that will be the critical moment, and we'll see what happens.

WILLIAMS: And I think there's pressure here...

HUME: My guess is that Juan may be right, that they will -- that there will be a compromise, at which point this issue goes away.

WILLIAMS: Right, and there's pressure here for the compromise because you had those 18 Republicans break with the president on this.

I think you're going to see more in the House because, guess what, the Democrats see good politics in this and the Democrats are running ads in a lot of the Congressional districts of key Republicans on this issue, and those ads are going to push up the pressure, so you may see people breaking away from the White House.

This is not a good veto fight for the president to make. It's not good politics, and it will feed Democratic energy.

HUME: This also gives you an idea, perhaps, of why the president has been willing to veto so few bills. Vetoes are controversial. They stir passions. They awaken interest groups.

The Congress doesn't like them. After all, the Congress passes these bills. He blocks them. This is the kind of thing that happens. And it looks like we're going to have more of it, which will make for a lively season on Capitol Hill.

WALLACE: But, Brit, I guess I wonder, because you're exactly right. The president has made it very clear he is going to veto a bunch of these spending bills, is looking for a fight here.

But was S-CHIP the right battle? I understand it's the first bill that he got. But you would think that the White House would think that because of 12-year-old kids, this is not the first battle they want to fight on.

HUME: Well, that was what I was talking about earlier. On the face of it, it looks like a political loser. They may be able to win it yet, though.

WILLIAMS: Well, I just think it's -- on the budget issue, on the domestic side, this is a bad way to start. I mean, if you're in the president's camp, you want him to go ahead with the idea of deficit reduction, which is, you know, a big problem for conservatives.

This is not the place to start, not when you're talking about kids, not when you're talking about real issues like people being uninsured.

Health care is a kitchen-table issue for Americans, for swing voters going into the general election. This is just harming the party. That's why I think Republicans are breaking away from him on this.

KRISTOL: When Juan worries that the Republican Party is being harmed, I get cheered up. Look, a third of the additional children who will be covered by this expansion are already covered by private insurance.

They will drop -- their families will drop the private insurance and go for the free government-provided insurance. That is not an efficient use of government money and taxpayer money...

WILLIAMS: We as Americans should be proud because you can't count -- if you could count on the private insurance, we wouldn't have this problem.

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

Time now for some mail, and it's all about our interview last Sunday with Hillary Clinton.

Rex Reese from Virginia writes, "Hillary says she's stronger as a result of Republican attacks over 15 years. Her negatives are at about 50 percent and the gloves aren't even off for the 2008 election. Here's a girl who loves pain."

But Jim Varner from North Carolina has a different take. "Instructions to Hillary: Keep talking. Spread out your answers so Wallace can't get through his list. Hillary, 10. Chris, 0."

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

For more visit the FOX News Special Report web page.

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