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David Petraeus, Joel Osteen, Roundtable

Fox News Sunday

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

In Iraq, the surge is working. Now the question is how fast can U.S. troops come home. We'll talk with the commander of U.S. forces in Iraq, General David Petraeus. It's a "Fox News Sunday" exclusive.

Then, how does one man's words of inspiration and hope touch so many? As we continue our "American Leaders" series, we'll sit down with preacher Joel Osteen.

Also, what's ahead in '08? We'll look at sports, entertainment, the economy and, of course, politics with our Sunday gang -- Fred Barnes, Nina Easton, Bill Kristol and Juan Williams.

And our Power Player of the Week finds a special way to honor veterans during the Christmas season, all right now on "Fox News Sunday."

And good morning again from Fox News in Washington. We begin today with the war in Iraq, the progress by U.S. forces this year and what will happen in 2008.

Joining us from Baghdad, the architect of the troop surge, commanding General David Petraeus.

General, the Pentagon issued a quarterly report on Iraq this week with all sorts of numbers, but the bottom line was that violence there is down roughly 60 percent since the troop surge took full effect in June.

As we head into 2008, where do you see the war, sir?

MAJ. GEN. DAVID PETRAEUS, U.S. ARMY: Well, as you noted, indeed, just about every category, every trend that we watch, is down, roughly about 60 percent -- civilian deaths, numbers of attacks -- thankfully, and touch wood, our casualties down substantially as well.

And as we go into the new year, we clearly want to build on the momentum that has been achieved by our forces working closely together with Iraqi forces.

And they have had a surge going on this year as well, by the way. They've added well over 110,000 new Iraqi soldiers and police, and that has been very, very important in enabling much of the progress that has been received.

WALLACE: But, General, that success is leading to new demands that you pull U.S. troops out faster. Take a look at this report this week in the Washington Post. "With violence on the decline in Iraq but on the upswing in Afghanistan, President Bush is facing new pressure from the U.S. military to accelerate a troop drawdown in Iraq and bulk up force levels in Afghanistan, according to senior U.S. officials.

General, are you getting nudges to draw down faster? And are you going to resist that?

PETRAEUS: We're not getting nudges. We are certainly aware of the strategic context in which we are operating. And obviously, we want to reduce the strain on our ground forces as much as we can, while recognizing that what has been achieved here remains tenuous and is still fragile in a number of areas.

We've been asked to look to the future. As you know, we have laid out the plan that will take us through the end of July and will result in the reduction without replacement of about one-quarter of our combat forces.

We're now looking beyond that. We're just starting the analysis, and we're looking at a scenario in which trends continue in a positive manner, in which there are some setbacks, and then something in between.

And that's what we'll focus on over the course of the next several months as we lead up to presentations to the Central Command, the Joint Chiefs, secretary of defense and the president, and then as I make a recommendation to them.

WALLACE: Well, let me ask you about that, because you are due to come back to Washington and report again in March.

Defense Secretary Gates said this week that if the conditions continue to improve that you could end up with only 10 brigades -- that would be about 100,000 troops -- in Baghdad -- in Iraq, rather, by the end of next year. How likely is that, sir?

PETRAEUS: Well, that's what we're looking at right now, Chris. As I mentioned, we've literally just finished the process of getting all the back briefs from the commanders after we revised the joint campaign plan in response to the recommendations that were made back in September.

We're now carrying out that plan. And we are now just beginning the analysis that can help us determine the rate and the pace of possible reductions post-July.

WALLACE: And again, Secretary Gates made this very conditional. He said if security keeps improving. Is that kind of number, 100,000 by the end of 2008 -- if security keeps improving, is that possible?

PETRAEUS: Well, I'd rather not get linked to such a number. In fact, I think he said in his press conference the other day that he did not want to mention numbers. I think it was sometime back, actually, that he did that.

But he was just out here. We had a very good one-on-one conversation. And he is very clear that this is conditions-based. And so what we're doing now is examining the possibility of various conditions and what might be possible in terms of further withdrawals based on the various conditions that obtain.

WALLACE: General, while there has been substantial military progress, that quarterly Pentagon report also said that there's been very little movement toward national reconciliation by the central government in Baghdad.

When you testified before Congress in September, you said that it would be hard to stay in Iraq if there were not substantial progress by the Iraqi politicians within a year. Let's watch, sir.

(BEGIN VIDEO CLIP)

PETRAEUS: We have very real national interests that extend beyond Iraq. They are true American national interests.

On the other hand, there clearly are limits to the blood and treasure we can expend in an effort.

(END VIDEO CLIP)

WALLACE: General, three months later, do you stand by that statement? And can you understand why people are losing patience with the Iraqi government?

PETRAEUS: I certainly do stand by it, and I can understand the impatience. In fact, it is shared by Iraqi leaders.

I don't think you could ask any Iraqi leader about this and find one who would say that he or she is satisfied with the pace of their progress.

Having said that, were Ambassador Crocker here right now, I think that he would point out that there has been some progress in recent weeks -- in particular, recent month or so, the passage of a pension law that was little noted but is quite significant in terms of national reconciliation, because it extends pension rights to tens of thousands of Iraqis who are denied those rights because of various policies implemented after liberation.

There's also the 2008 budget which distributes revenue very, very equitably and very much in line with the draft oil revenue distribution law.

We believe that there will be voting on that budget and, even more significantly, on a bill called accountability and justice, which is the de-Baathification reform law, within a couple of weeks of the council of representatives, the Iraqi parliament, returning from the recess for the Hajj and the Eid.

And there is also a discussion ongoing on some of the other legislation that had been focused on, rightly so, in the past.

As well, the U.N. Security Council resolution was approved by the U.N. after a request by Iraq, by the submission of a letter by the Iraqi government.

And as you know, there's also been agreement between the government of Iraq and the government of the United States on an enduring security relationship that will be determined over the course of this year.

So there has been some. It's been halting progress, but there has been some. And there is -- I think that, again, Ambassador Crocker would counsel that we should wait and see what does materialize in the course of the next few weeks literally when the council of representatives returns and embarks on the new year.

WALLACE: But, General, let me ask you about an area of continued stalemate. One of the keys to the decrease in violence in recent months are these so-called awakening councils, about 70,000 cities, many of them former insurgents who have come in from the cold and joined what are, in effect, neighborhood patrols.

But just yesterday, the defense minister, Obaidi, said, "We categorically reject them," the neighborhood patrols, "turning into a third military organization." He meant alongside the army and the police.

General, the government wants these patrols disbanded over time. Isn't that going to hurt your efforts to bring in the Sunnis?

PETRAEUS: Well, we absolutely agree with Minister of Defense Abdul- Qadir. He's a Sunni Arab, by the way, and he is stating government policy.

And it's important to understand that all of us, Iraqi and coalition alike, want to see these neighborhood watch organizations, so-called concerned local citizens, either incorporated into the legitimate Iraqi security forces -- as is already the case in Anbar province, where well over 20,000 of them are serving in the police and the army alone.

As you get closer to Baghdad, it does, indeed, become much more challenging and problematic because of issues between Sunni and Shia.

These groups really started out being Sunni because, of course, that's where Al Qaida was, and that's where the associated insurgent groups were that needed neighborhood watches to help keep these areas clear after the sanctuaries were clear, because there were no Iraqi security forces in these areas.

So everyone wants to see them, and we expect -- the projection is that some 20 percent to 30 percent of those serving in the concerned local citizen groups will eventually be incorporated in the Iraqi police or the army.

And even with respect to Baghdad, I believe we're up to about 6,000 names now that have made their way through a fairly bureaucratic process, a series of checks by intelligence agencies and so forth, and have been signed up by the minister of interior alone. And they'll be in a probationary period and eventually be able to go to the police academy and become full-fledged members of the police. Others will go into various job training programs.

I just got a briefing today, in fact, on a variety of different initiatives that are being undertaken by the coalition with the full support of the government of Iraq and others being carried out by the government of Iraq.

So this has been a very difficult issue because, again, it involved largely Sunni Arabs, although I now point out that about 20 percent of those in the concerned local citizen groups are Shia, some in mixed elements, some in Shia-only elements.

Because you see signs of the Shia population also wanting to reject extremism -- in this case, militia extremists who were seen as useful, I guess, back when Al Qaida was a very, very lethal threat, but who are much less appreciated as the threat of Al Qaida violence has receded, particularly in the Baghdad area.

Although I want to caution that Al Qaida remains a very dangerous and very lethal organization, and it is one that will continually try to reconstitute and one we must pursue tenaciously and relentlessly.

And that is what we and our Iraqi partners are doing.

WALLACE: General, it seemed to us that you haven't been in the news much recently, which probably is a good thing from your point of view, since you came back from Washington in September.

But we decided to check it out, and the Media Research Center says that the three evening network evening newscasts did 178 stories on Iraq in September when you were here. But in October, as the surge took hold, there were 108 stories. And in November, that dropped to just 68.

General, any thoughts about why success in Iraq isn't news here at home?

PETRAEUS: Well, clearly, there are other more newsworthy items -- the political campaign issues in the states, understandably; challenges in Pakistan and other places.

And so as you note, probably this is a sign of progress, that, in a sense, no news is good news. In fact, actually, there was one nightly news show a week or so ago that said the news from Iraq is that there is no news, that there were no attacks in a certain area or something like this.

So again, we're not reluctant to see that. The only reluctance would be that America continue to remember its soldiers, sailors, airmen, Marines and civilians who are serving out here in this very important endeavor.

WALLACE: Finally, and you just mentioned it, General, the presidential primaries are about to begin. Some pundits have suggested that perhaps just like General Dwight Eisenhower in the early '50s, that you might at some point take off your uniform and run for president. Any interest in that, sir?

PETRAEUS: None, Chris, at all. Thank you. I have great respect for those who do choose to serve our country that way. I've chosen to serve our country in uniform.

And I think that General Sherman had it right when he gave what is now commonly referred to as a Shermanesque response when asked a similar question.

WALLACE: So are you giving a Shermanesque response -- if elected, you will not serve?

PETRAEUS: I am, Chris. And I don't think it would ever get to that point anyway.

WALLACE: General, we want to thank you so much for taking this time to talk with us.

And to the men and women under your command, we wish all of you a safe and merry Christmas. And you can rest assured Americans have not forgotten about any of you, sir.

PETRAEUS: Well, thanks very much, Chris, especially at this season. I think we all should be grateful for what those great young men and women are doing and for the sacrifice of their families who are enduring separation back home.

It is a privilege to serve with America's new greatest generation here in Iraq.

WALLACE: Thank you, sir.

Up next, our "American Leaders" series continues with the country's most popular preacher, Joel Osteen. We'll be right back.

(COMMERCIAL BREAK)

WALLACE: Now, we continue our series of interviews with American leaders.

(BEGIN VIDEOTAPE)

(BEGIN VIDEO CLIP)

OSTEEN: ... I get out of my comfort zone and believe I could do it and believe I'm equipped.

(END VIDEO CLIP)

WALLACE: Joel Osteen has been called the most watched inspirational figure in the country. Almost 50,000 people attend his Lakewood Church in Houston every weekend, and his sermons are broadcast to millions across the nation.

He offers a message about personal growth and positive thinking, which may explain why he's now pastor of America's largest congregation.

(BEGIN VIDEO CLIP)

OSTEEN: Today I will be taught the world of God.

(END VIDEO CLIP)

WALLACE: Joel Osteen, welcome to "Fox News Sunday."

OSTEEN: Thanks, Chris. My pleasure to be with you.

WALLACE: You preach in a former basketball arena that seats 16,000 people. You're the most popular preacher on T.V. Your books are best- sellers. What do you think it is about your message that people want to hear?

OSTEEN: I don't know if I know exactly, but I think the fact that it's positive, it's hopeful, and I talk about everyday life.

On Sundays when I speak, I hopefully give somebody something that they can use the next day at work or at home. So I think that's part of it.

And, too, I think, Chris, there's a lot of negative things trying to pull people down, and I think people respond when you tell them that hey, there are good things up ahead.

WALLACE: Now, you've written a new book, "Become a Better You," in which you say the central message is don't get stuck where you are, keep growing. How do you do that?

OSTEEN: Well, I think it's a decision you have to make because it is easy to get stuck. It's easy to get complacent and think, "Well, I've done pretty good in my career," or, "This is as good as my marriage is going to go."

But I think you do it by making a decision to develop better habits, to have better relationships and just, you know, to keep the enthusiasm for life.

WALLACE: And can you just will that?

OSTEEN: I don't think you can will it, but I think you can -- with your will, you can make changes in your life and you can say, "I'm not going to -- I'm going to be a better parent next year than I am right now," or, "I'm going to take an extra step in my career and not just be satisfied where I am."

So I think it has a lot to do with our will, but also, you know, it takes a -- it takes our own -- you know, we have to work as well.

WALLACE: Your show comes on right after us in Washington. I have to say as soon as -- after I'm finished doing politics, I turn you on.

And I was watching you recently talk about the voice inside yourself and making sure that your inner conversation is positive. I was really struck by that. Explain what that means.

OSTEEN: Yeah, I think it's a problem that a lot of people have, and it keeps them back. It holds them back in life. And it's, I believe, in our subconscious, or in our thinking, that we have a conversation going with ourselves -- or I call it a recording playing.

And a lot of people -- their recording is negative. You know, I have friends, they'll preach a great sermon and they'll drive home thinking, "Boy, I didn't do good today, and if I'd just done it a little bit better."

But I try to teach people that I believe God wants us to be positive toward ourselves, meaning that, you know what, I like the way I look, I like the way I sound, I'm happy with what I'm doing in my career -- and not always be beating ourselves down.

I think that's just -- you know, I see people -- they won't be negative toward other people, but inside they're negative toward themselves, and I think that holds us back.

WALLACE: But you know -- and I have to say I'm guilty of that as much as anybody else, where you have those seeds of doubt -- you know, I could have done better, or what did they really think, or whatever.

And how do you turn that conversation so instead of hearing seeds of doubt, you're hearing blossoms of encouragement?

OSTEEN: I think you have a train yourselves. I found that in my own life -- because I would do the same thing. When I'd get through with a sermon, I'd think, "Man, I'm not as good as my dad, and I don't know how to minister like other people."

But just little by little, I started -- you know what? I think it starts from knowing that God loves you and God accepts you, but I think you just train yourselves to say, "You know what? I'm not going to beat myself up. I did the best I can do, and so I'm going to believe that -- I'm going to believe good things about myself."

WALLACE: Now, as with most successful people, you have critics who say that what you offer is gospel "lite," the prosperity gospel. They say you're more a motivational speaker than you are a pastor. How do you answer that?

OSTEEN: Well, a couple things. When I became a pastor eight years ago when my father died, I didn't change -- this is who I've always been. I've always been -- you know, my personality is motivating and encouraging. And so I'm just being who God made me to be.

About it being "lite", I mean, every week we deal with people that are going through divorces and that are facing life-threatening illnesses, and I'm giving them hope. And to me, I don't think there's anything "lite" about that.

I think sometimes the critics want me to beat people down, and that's not in me. I want to lift people up.

WALLACE: But your critics, again, say you don't talk much about sin. And a lot of great preachers -- Billy Graham used to talk about sin.

OSTEEN: Sure.

WALLACE: You don't go deeply in your sermons into scripture. Again, why not?

OSTEEN: Yeah. Well, I think -- I do talk about sin at the end of every one of our services back at home and at the end of the broadcast, but just, you know, as a pastor, I'm not trying to get everybody to -- and that's not my main calling, like Billy Graham's.

He was an evangelist. He went out and tried to win everybody to Christ. And I am ultimately trying to do that, but I'm trying to teach people how to live their everyday lives, and so I do focus on it, probably not as much as some people would like.

WALLACE: One of the other things you say -- and it has been noted that your book, "Become a Better You," -- that there's no mention of God. It doesn't mention that you're a pastor, although the book -- the text itself is filled with references to God and scripture.

And one time, I heard you say you want to get out beyond the church walls.

OSTEEN: Yes, exactly. That's part of our -- our whole message is it's easy to just keep preaching to the church and people that already come. But that's why we air on broadcast stations that are not necessarily Christian stations. It's because I want to try to reach people that -- maybe they went to church 20 years ago, or maybe they just think, "You know what? I'm not a religion person. This doesn't have anything to do with me."

I'm trying to make God more relevant in our society. And I think talking in everyday terms and making sure people can understand it -- I think that's important.

WALLACE: Someone said, "You know, Joel Osteen has not had much formal training as a pastor." And your response was you said, "Neither did the 12 disciples of Jesus."

Are you comfortable with that comparison?

OSTEEN: Well, I think I am. It's just I'm all for education, and I have, you know, friends that have been through seminary and gotten their doctorate and all. But it just so happened with me. I know this is right for me.

And I think so. I mean, I know, you know, back in Bible days, there were these famous schools of the prophets, but some of the ones Jesus chose didn't come through that route -- and not to say that they weren't good, but I'm comfortable.

WALLACE: So are you saying that anyone can be a preacher?

OSTEEN: Well, really, I think you have to be -- I think every person can, maybe not in front of a lot of people, but I believe we're supposed to -- I like to call it a minister, but I believe -- I teach our congregation every week, you know, you need to minister to the people around you, where you work at.

You see somebody down, that's lonely, take them to lunch. Encourage them. To me, that's part of it. That's not, you know, public speaking like I am, but I think you have to be called, number one. You have to feel it in your heart, this is what you're supposed to do.

And you know, ideally, I think it's good to be trained.

WALLACE: Religion is playing a big role in this presidential campaign. Should voters consider a candidate's faith, what he believes? Is that a legitimate issue in a political campaign?

OSTEEN: Well, I think it plays a role in it. I mean, I like to know what somebody believes. I think that knowing that somebody shares a belief like me, I think that -- you know, that helps me to know what they stand for.

But I believe, also, you need to look at a person's character and what they've stood up for. And so I don't think it should be the only thing, that, "Hey, I'm going to vote this person because, you know, they share my exact beliefs," but yet they're not very good in the political world. So I think it plays a role.

WALLACE: So in that sense, what do you make of Mike Huckabee, a Southern Baptist pastor who's doing so well and, in effect, using his faith as part of his platform?

OSTEEN: Well, you know what? I like Mike Huckabee. I've never met him. My brother's from Little Rock and he knows him and says he's a fine man. And so I like what he stands for.

From what I've seen, I don't think he's overdone it. I think he's just -- you know, he's a Baptist pastor. That's in him. And I think he's just standing up for what he believes in.

WALLACE: And what about Mitt Romney? And I've got to ask you the question, because it is a question whether it should be or not in this campaign, is a Mormon a true Christian?

OSTEEN: Well, in my mind they are. Mitt Romney has said that he believes in Christ as his savior, and that's what I believe, so, you know, I'm not the one to judge the little details of it. So I believe they are.

And so, you know, Mitt Romney seems like a man of character and integrity to me, and I don't think he would -- anything would stop me from voting for him if that's what I felt like.

WALLACE: So, for instance, when people start talking about Joseph Smith, the founder of the church, and the golden tablets in upstate New York, and God assumes the shape of a man, do you not get hung up in those theological issues?

OSTEEN: I probably don't get hung up in them because I haven't really studied them or thought about them. And you know, I just try to let God be the judge of that. I mean, I don't know.

I certainly can't say that I agree with everything that I've heard about it, but from what I've heard from Mitt, when he says that Christ is his savior, to me that's a common bond.

WALLACE: Unlike a lot of preachers, you don't -- and I can sense a little discomfort on your part -- you don't get involved in politics. You don't talk a lot about abortion and gays and the so- called social issues. Why not?

OSTEEN: Well, it started back with my father. He never did. And I just don't feel comfortable as well. I don't feel like that's my main gifting. And I feel like when I stay focused on encouraging people, and giving them hope, and helping them live their everyday life, I think that's where I can have the most impact.

And I even heard Billy Graham say this, and I think it's true. Sometimes when you take strong stands, if you're not called to do it, you're dividing the audience you're trying to reach. I'm trying to throw a big net out there to say to anyone that God loves them and he's in control. And I think the moment -- even our church is so diverse. We have Republicans, Democrats, independents.

And I think the moment I start saying, "Well, go this route," well, this group's going to just say, "I'm not going to listen to him because of the political stance."

WALLACE: Occasionally, some well-known televangelist -- you know, and it's true of every profession, but obviously it's bigger news when it becomes a televangelist -- gets caught up in scandal, and there's all this talk about hypocrisy, being corrupted by fame and fortune. Why do you think that happens?

OSTEEN: Well, I think it can happen in any profession. I think sometimes, you know, you just lose your focus, and I think that's easy to do when you start getting, you know, more fame, more money, more power.

But I don't think -- you know, I don't think it has to happen and, you know, like you said, there are millions of great ministers. And I think in every field some people kind of get a little off balance.

WALLACE: And you know, obviously, you are making an enormous amount of money with the television show, with these best-selling books.

How do you personally -- how does Joel Osteen keep himself safe, guard against being corrupted by all the temptations that must surround you?

OSTEEN: Yeah. I think there's a couple things. One, I like to start my day off every morning, take the first half hour and just search my own heart, see if I'm on the right course, try to be honest with myself -- am I doing this for the right reasons?

Two, I have good family around me that I think can speak into my life. And the other thing is, you know, I'm -- I realize that as quick as you go up, you can really come down that quick. And we've seen it happen with others.

So I just try to not really think about it. I don't feel any different than I did eight years ago.

WALLACE: I'm curious. When you have that morning sort of checklist, do you ever find yourself saying -- you know, because of the fact -- you're a big deal. You're a national and international figure.

Do you ever find yourself saying, "You know, wait a minute, Joel, I'm losing my way here?"

OSTEEN: Well, I don't. I don't. I can't say that I necessarily have yet, because I've tried to do this a little at a time. And I'm not saying that I'm perfect. But there are a lot of decisions we pass up on because we think, "You know what? That's just going to build -- you know, maybe that's going to build me and not build the ministry and what I'm trying to do." So we pass up on a lot of opportunities.

And again, I'm not perfect, but I think that I've done good to stay focused on what I'm called to do.

WALLACE: Christmas will be here in two days. With all the parties, all the commercialism, all of the gifts, it's kind of easy to forget what this holiday is really all about.

OSTEEN: It really is, and it's gotten -- it seems to get, you know, worse and worse, you know, with all the consumerism. But you know what? We just remind people to let's celebrate, you know, the birth of Christ.

And you know, I really don't like to get caught up in all the gifts. And I know that gifts are fun and we, of course, buy them for our family and things. But to me, just not taking people for granted, not just at Christmas, but all through the year.

And I encourage people in a lot of my messages that you've got to make the most of every day. And you know, to me, these are the good old days. Sometimes we look back and 10 years from now. We think, "Boy, those were great old days." Well, you know, we're living in the good old days.

So I think we should enjoy our families and everyone that we love right now, you know, each day.

WALLACE: And beyond that, is there a message you would like to give our viewers before they watch your show, as they're watching our show, a message this Christmas?

OSTEEN: Oh, my message is that -- you know, that God is a good God, and that he's on our side, and that he has great things in store and, you know, I believe that as we receive the forgiveness that Christ came and was born and died to give us, then we can live a great life.

WALLACE: Joel Osteen, thank you so much for coming and visiting with us. And merry Christmas, sir.

OSTEEN: Same to you. Merry Christmas.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

WALLACE: Coming up, "You Decide '08." Are the candidates being naughty or nice this holiday season? We'll look at both races 11 days out from the Iowa caucuses with our Sunday team when we come back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CLINTON: Where did I put universal Pre-K? OK. Ah, there it is.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: So from our family to yours, I'm Barack Obama, and I approve this message.

OBAMA'S DAUGHTER: Merry Christmas.

OBAMA'S DAUGHTER: Happy holidays.

(END VIDEO CLIP)

WALLACE: That was a sampler of holiday campaign ads for Hillary Clinton and Barack Obama.

And it's time now for our Sunday group -- Fox News contributors Fred Barnes of The Weekly Standard, Nina Easton of Fortune Magazine, Bill Kristol, also from The Weekly Standard, and Juan Williams from National Public Radio.

Well, those two Christmas messages couldn't have been more different.

Fred, what do they tell you about the different ways that Obama and Clinton are trying to reach out to voters?

BARNES: Well, I think it tells you Barack Obama is a normal person. And you know, there's sort of a sweetness to that ad that comes through with his wife and kids there. I think it's a very good ad.

About Senator Clinton, it says that she's a political obsessive. I think it shows the worst of Hillary and the best of Obama.

WALLACE: Is that a little harsh?

EASTON: It's a little harsh. I mean, she's a policy wonk. That came through. But it's also part of this two-pronged attack that they're going after Obama with, which is she's got the experience but they're also trying to humanize her on the campaign trail.

So you've got her out there as the Hillary I know with her daughter and her mother, and at the same time you've got Bill Clinton out on the campaign trail portraying her as sort of a co-president during his term, saying that she was central to the children's health insurance program, that she was even involved in the peace negotiations in Ireland, et cetera, et cetera.

So she's trying to do this sort of I'm a human, I'm also extremely experienced.

WALLACE: Let me ask you about that, Bill, because I think that Nina is actually being -- making the Clinton message seem a little more coherent than it is. It seems to me she's kind of bouncing around.

This week, just recently, her latest thing is she's talking about sort of restoring the Clinton legacy. But over the last few weeks, she's been jumping from being the most experienced candidate to being the agent of change, from the soft, human Clinton to kind of the attack dog on Obama.

What do you make of these variety of messages? And what do you think voters tame from it?

KRISTOL: Well, what I make of it is there is no core rationale for the Hillary Clinton candidacy except that it's her turn, and her husband was president, and she's supposed to be the inevitable nominee.

The Hillary Clinton ad is the worst ad I have ever seen in national politics. It is unbelievable. It's queen Hillary giving the populace these gift of universal health care, pre-K education. It's so inappropriate in a democracy for her to sit there as if she's giving us these gifts. It's queen Hillary of the nanny state.

I really think it's a mistake by them. I mean, who knows how many voters will actually see the ads? But the contrast is startling -- Barack Obama, his wife, his little kids, a normal, nice, pleasant Christmas message, and Hillary Clinton bestowing her favors on the American public.

WILLIAMS: Well, I don't think that. I mean, obviously, the nanny state line I think is representative of your political views. I mean, you're a strong Republican.

But I mean, I think that for most people, the idea that we would have something like universal pre-K is not radical. It's an idea like yeah, maybe we should do something about our children in this country, and make sure they have an opportunity for a good education.

But I think if I look at the ads, the two things that strike me, Chris, is first of all, because of the front-loading of the system, we've never had Christmas ads like this before. I mean, it's almost like, you know, would Jesus approve.

What is going on here? You know, Ron Paul said -- in response to one of the Huckabee ads, he said, you know, when fascism comes to this country, it will be wrapped in the flag and carrying a cross.

And you know, it's like everybody's now got to embrace religion in such a forward bearing manner. I think it's a little obnoxious.

And I think that's why the Obama ad was so important for Obama. It's all the talk about is he Muslim, about his middle name being, you know, Barack Hussein and all that -- here was Barack Obama sitting with family in front of a Christmas tree as a clear statement of his Christian beliefs.

KRISTOL: And he says at the end of the ad, very cleverly -- one of the cute little kids says merry Christmas, and the other says happy holidays.

(LAUGHTER)

WALLACE: Covering all their bases.

KRISTOL: Covering all the bases.

WALLACE: All right. Let's go to the Republicans, who have been offering their own Christmas messages for the holiday season. Here are two of them.

(BEGIN VIDEO CLIP)

HUCKABEE: At this time of year, sometimes it's nice to pull aside from all of that and just remember that what really matters is the celebration of the birth of Christ.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MCCAIN: One night, after being mistreated as a POW, a guard loosened the ropes binding me, easing my pain. On Christmas, that same guard approached me and, without saying a word, he drew a cross in the sand.

(END VIDEO CLIP)

WALLACE: I have to say we had to cut that ad short, Fred. I mean, that McCain ad is so powerful. You find yourself tearing up when you see that, obviously.

BARNES: Indeed.

WALLACE: It makes a reference -- the McCain ad -- to his five years in the Hanoi Hilton.

Those are the two candidates making late moves in this race, Huckabee and McCain. Where are they now?

BARNES: Well, obviously, Huckabee is either going to win or come in second place in Iowa. He's had a huge surge there. He may have plateaued now under attack from Mitt Romney in particular.

And John McCain's still in this race. You know, we all wrote him off last summer. He has a chance in New Hampshire. He's not playing in Iowa seriously.

If he wins New Hampshire, he's in the hunt and has as good a chance as anybody to win the Republican nomination. What he needs is Huckabee to hurt Romney in Iowa first.

Now, both of those ads were good. And I agree with you, when you watch the McCain ad, it's hard not to choke up. But the Huckabee ad is very good, too. And you know, there's a word he uses that makes a lot of people -- the word is "Christ" -- that makes a lot of voters say, "He's one of us."

EASTON: Yeah, he's appealing to Christian conservatives, which is a huge piece of that block in Iowa.

Full disclosure: My husband is a Romney adviser.

But I think Huckabee -- the surge has sort of crested. The attacks on immigration and the pardoning of criminals and so forth has had an impact, but he still has a real connection to that core of voters that I think is going to help him.

WALLACE: Bill Kristol, let's talk about McCain. I'm fascinated. This is a guy who was left for dead, I would say, this summer -- out of money, out of campaign staff, reviled by the Republican base for his support of comprehensive immigration reform.

It looks like he's making a comeback.

KRISTOL: Well, he was right on one awfully big issue, which is the surge. You know, we're fighting a war in Iraq. He was the -- without him, the surge would not have happened.

I was a very minor advocate of it, and John McCain was the absolute key advocate of it internally, privately with the administration, and defending it publicly in the Senate and among Republicans.

So McCain was right on the war. I think he's having a big comeback. He is doing a little more in Iowa than people think. I think he could snatch a strong third in Iowa. Then he could win New Hampshire. And I think he has a good chance to be the nominee.

WILLIAMS: He's a very likable guy. Obviously, the reason he got the endorsements in Iowa and the Boston Globe endorsement is because people see him as someone who's experienced and rational and stable. But the party has rejected him on such key issues as immigration and even campaign finance reform. And I don't think there's any getting away from that or the idea that people look at him and say, "You know, this is a -- he's looking old." And he's older now. He's an older man.

And I just think it's evidence of the fact that Republicans don't have a candidate yet.

WALLACE: Yeah, I was going to say I get the feeling they're shuffling through, and they took a look at all of them, and now they're coming back to McCain, and maybe he looks better the second time.

Now, we've got to take a break. But coming up, some fearless predictions for '08, from the economy, to sports, to entertainment and politics. A look ahead when we come right back.

(COMMERCIAL BREAK)

WALLACE: On this day in 1823, the poem known as "'twas the Night Before Christmas" was first published in a New York newspaper. It gave us our modern-day version of Santa Claus' round belly and beard white as snow.

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

(COMMERCIAL BREAK)

WALLACE: It's a tradition here at "Fox News Sunday" that our panel offer predictions for '08 on a range of topics. And our motto is often in error but never in doubt.

So with that fair warning, let's hear from Fred, Nina, Bill and Juan.

And, Fred, first subject, sports, and you lead off.

BARNES: The Boston Red Sox win their third World Series in five years. The Red Sox have obviously Manny Ramirez and David Ortiz. They have a half a dozen of the best young players in baseball.

But they also have the new Mr. October. That's Josh Beckett, the pitcher who wins everything in the playoffs and the World Series.

You know, people thought the Red Sox fans would have trouble -- you know, they're used to wallowing in defeat all those years -- would have trouble adjusting to success. Not at all. It's been very easy. And I say to Yankee fans, "Get used to it."

WALLACE: Yeah, I loved the young Red Sox fan I heard about who said, "Gosh, we haven't won the World Series in three years."

Nina, sports.

EASTON: Well, first of all, that's the first Fred prediction I would like and agree with.

Mine is the kickoff of the Olympics, the 2008 Olympics in Beijing, is going to make China the issue in the presidential campaign this summer.

You think we're hearing it now on safe toys, on free trade, on all these reasons we don't like China. Just wait till they light that torch in Beijing.

WALLACE: I'm not sure that's a sports prediction, but you did get the word Olympics in there.

Bill Kristol, sports?

KRISTOL: The Washington Nationals will open a new stadium here in April. Parking will be a nightmare. But the Nationals will win the National League championship. They will. They will.

And I'm saying this partly because Stan Kasten, the president of the Nationals, is a very loyal viewer of "Fox News Sunday." And I'd like some upgrade on my seats, you know.

(LAUGHTER)

WALLACE: Stan?

Put the camera on me.

Stan, we would all like that.

Juan?

WILLIAMS: Yeah. Well, I hope you're right. Boy, do I ever.

But I think the big prediction is going to come early in the year, and that is that the New England Patriots do not win the Super Bowl.

I think that, in fact, they may not go -- have the perfect season. But even if they do, it's just inevitable. They're going to get upset, and then everybody's going to be upset.

WALLACE: Have you got a pick instead who's going to win the Super Bowl?

WILLIAMS: Well, you know what? I think the Seattle Seahawks are coming on real strong.

WALLACE: Out of his mind.

Economy. Fred?

BARNES: President Bush will take on congressional earmarks -- you know, that wasteful special spending that members of Congress stuff in the budget. And here's what he can do. He can nullify thousands of them because they're not technically a part of the budget. They're separate from it. He's going to do it.

WALLACE: Nina, the economy.

EASTON: For the first time in its history, Starbucks is actually going to be hurt by the economy. The economy is going to sputter. We're not going to go into recession.

But people are still going to order caramel macchiatos, but they're going to be ordering grandes and not ventes.

WALLACE: What does a vente go for these days?

EASTON: Close to $4.

WALLACE: For a cup of coffee.

EASTON: Yeah, $4.

WALLACE: Wow.

BARNES: Oh, it isn't that much. I buy it. It's only a little over $2.

WALLACE: Well, you won't be in the new year.

Bill Kristol?

KRISTOL: I think China's economic bubble might finally burst with all kinds of unanticipated consequences of instability and tension in East Asia over the next few years.

WILLIAMS: You know, I think the big news is going to be on the economic front that we're not going to have a recession. We might have a slowdown, but I think the fed will have the appropriate rate cuts. And actually, the big fear might be inflation.

But I don't think that the recession is going to hit in the way that people anticipate right now. So there's a reason for good cheer this holiday season.

WALLACE: And as you look at that, will the stock market at the end of 2008 be up or down from where it is right now?

WILLIAMS: Well, actually, I think the market's going up. And I tell you why the market's going up.

KRISTOL: Sell. Sell.

(LAUGHTER)

KRISTOL: I have my broker on the phone.

WILLIAMS: I think the market's going to do better because I think that the real estate subprime crisis is not going to have the impact people anticipate.

WALLACE: That's worth whatever you want to take for it.

Let's talk about entertainment.

And our entertainment maven, Fred Barnes.

BARNES: Cate Blanchett wins an Oscar for portraying Bob Dylan in the movie "I'm Not There," a very unusual movie where there are six separate characters who play Bob Dylan. Five are men. And then there's Cate Blanchett.

WALLACE: So does she win best actor or best actress?

BARNES: I hadn't thought of that. That's a good question. It's a very unusual movie.

My wife and I, who have been fans of Bob Dylan for years, understood it. We took our 26-year-old daughter to see this movie. She was totally mystified.

WALLACE: Nina?

EASTON: Oprah Winfrey, who went on the campaign trail with Barack Obama and I loved it -- my prediction is she's going to get hooked and that whoever is the nominee, whether it's Obama or Edwards or Clinton...

WALLACE: The Democratic nominee.

EASTON: Excuse me, the Democratic nominee -- she'll be out on the campaign trail. She'll be attacking Republicans and the war, and it's going to fracture her base.

Prediction number two, though, is she won't care.

KRISTOL: Hollywood gets tired finally of making anti-American and anti-military movies and, in 2008, Hollywood goes patriotic.

WALLACE: So you're saying that Hollywood would actually -- money would trump principle? I'm shocked to hear that about Hollywood.

Juan?

WILLIAMS: I think it's sort of political entertainment news, Chris. I think Fred Thompson goes back to acting. I think that there, demand will meet supply. He's a good actor.

And people are going to absolutely be thrilled to have him back, and I know my wife, who is a big fan of "Law & Order," will be thrilled to see him there.

WALLACE: Yeah, but first they've got to settle the writer's strike...

WILLIAMS: Well, yeah, exactly.

WALLACE: ... to get new T.V. shows and movies. All right.

Let's get to an area that we actually may know something about.

Fred Barnes, politics.

BARNES: President Barack Obama. And I base this on a simple calculation that the Democratic nominee, whoever that is, will win the presidency over any Republican, based entirely on the fact that Democrats have so much more enthusiasm, so much more money.

And Barack Obama would be a very good candidate as well, and he has the best chance of winning the Democratic nomination, I think, now; therefore, the presidency.

WALLACE: And you think Americans are ready to vote for an African American president?

BARNES: Oh, sure. WALLACE: Nina?

EASTON: This sort of feeds the Democrat victory scenario, I guess. I predict that Mike Bloomberg will throw his hat in the ring as an independent, and his advisers are already out kind of laying the groundwork and seeing whether past advisers are available.

He has said -- just in the last couple of days has complained that neither party stands on principle. I think he's gauging the odds of whether he can actually do it. And I think he'll jump in, and it will hurt Republicans.

WALLACE: And he's got $1 billion of his own money to run. He doesn't need to go to anybody for campaign fundraisers.

Bill, politics?

KRISTOL: A deadlock Republican convention turns to the most qualified Republican of them all to be president on the fifth ballot, Dick Cheney.

(LAUGHTER)

And he wins in a landslide in November.

WALLACE: And his slogan is no more Mr. Nice Guy, huh?

KRISTOL: Yeah. Right. Bush was too compassionate, let's forget about all that.

Contrary to Fred, I think Republicans win in November. And if it's not Dick Cheney, McCain-Romney, McCain-Lieberman. There are some very good Republican tickets.

WALLACE: And, Juan?

WILLIAMS: You've been having a lot of that holiday cheer last night.

No, I think Republicans -- I think the big surprise is Republicans don't have a candidate after February 5th and actually the race gets more intense. It heats up.

And the whole money race, which is so critical, and an area where McCain is lagging, becomes that much more of the edge. Who has the money after February 5th becomes determinative.

And in general, I think, agreeing with Fred, it's going to be a great year for the Democrats. They pick up seats in the House. They pick up seats in the Senate.

WALLACE: And briefly, Juan, when you look at the Republicans, who of the five frontrunners now ends up in that final spring march?

WILLIAMS: Oh, I think that right there it will be Huckabee and Romney. WALLACE: Huckabee and Romney.

WILLIAMS: Yes.

WALLACE: Thank you very much. We'll keep the tape and see how you all do as 2008 -- I don't think you did very well, but we'll see.

Coming up, our Power Player of the Week.

(COMMERCIAL BREAK)

WALLACE: Last Christmas, we told you how one man found a new way to enjoy the holiday spirit. So now, again, a remarkable story of gratitude and generosity and patriotism. Here's our Power Player of the Week.

(BEGIN VIDEOTAPE)

MORRILL WORCESTER: We wouldn't have the opportunities if it wasn't for the people that fought for us.

WALLACE: It's that plain-spoken wisdom that has driven Morrill Worcester these past 15 years on a mission that has touched America's heart.

This week, Worcester was placing wreaths at Arlington National Cemetery, and more than 1,000 volunteers were there to help him.

WORCESTER: I think a lot of people think like I do. They just want to -- you know, they appreciate the veterans and they want to show it.

WALLACE: This story begins back in 1962 when Worcester, then a 12- year-old paper boy from Maine, won a trip to Washington.

What impressed him most was Arlington, its beauty and dignity and those rows and rows of graves.

WORCESTER: Every one represents a life and a family and a story. They're not just tombstones. I mean, those are all people.

WALLACE: Thirty years later, in 1992, Worcester was running his own wreath company in Harrington, Maine. But as Christmas approached, he had a bunch left over.

WORCESTER: These wreaths are real fresh and right -- are just made. And I just didn't want to throw them away.

WALLACE: He thought of Arlington and all those graves. When the cemetery approved, he and a dozen volunteers drove the wreaths down and laid them on the headstones.

And so it continued for 14 years, until last Christmas when an Air Force sergeant took this picture, which ended up on the Internet.

WORCESTER: It kind of struck a nerve, and people e-mailed it to each other, and it really went around the world.

WALLACE: We were there last year as he and his workers at the Worcester Wreath Company loaded up 5,265 wreaths. Then they embarked on what Worcester calls the world's longest veterans parade, a 750- mile journey that at some points attracted more than 100 vehicles.

And when they got to Arlington, so many people wanted to participate.

(BEGIN VIDEO CLIP)

ANNOUNCER: The ceremony you are about to witness is an Army wreath- laying ceremony to be conducted for the Worcester Wreath Company.

(END VIDEO CLIP)

WALLACE: People have offered to help with the expense, but Worcester says no, he's got it covered. And he wants to do even more.

Last year he started Wreaths Across America, sending some 1,300 to cemeteries and war memorials around the country. But he will need help to reach his new goal.

WORCESTER: I think there are around 2.7 million graves, and that's a tall order to decorate 2.7 million graves, so...

WALLACE: But you'd like to do it, wouldn't you?

WORCESTER: I really would. You know, some time, I don't know how, but, hey, you know...

WALLACE: How long are you going to keep doing this?

WORCESTER: I'm going to keep doing it for as long as I work. And then I know my family is going to continue. So it will be here for a long time.

(END VIDEOTAPE)

WALLACE: Worcester and his crew were at it again last week. They place many of their wreaths in older sections of Arlington where they figure families of the veterans may no longer be around. They want to make sure none of these men and women are forgotten.

And that's it for today. Have a merry Christmas, and we'll see you next "Fox News Sunday."

For more visit the FOX News Sunday web page.

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