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Obama Transtion Chief John Podesta on "Fox News Sunday"

Obama Transtion Chief John Podesta on "Fox News Sunday"

Fox News Sunday - November 9, 2008

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

A moment for history, and now it's time to work.

(BEGIN VIDEO CLIP)

OBAMA: I'm confident that a new president can have an enormous impact.

(END VIDEO CLIP)

WALLACE: As President-elect Obama prepares to govern, what are his priorities? We'll find out from John Podesta, head of the Obama transition team.

Then, Republicans are reeling on Capitol Hill. What can they do to repair the GOP brand? We'll talk with two rising stars in the House who are poised to move into key leadership roles -- Eric Cantor from Virginia, and Mike Pence from Indiana.

Also, what campaign promises will be at the top of the Obama administration's to-do list? We'll look ahead with our Sunday regulars -- Brit Hume, Mara Liasson, Bill Kristol and Juan Williams.

And we'll show you the entire campaign in three minutes when we take a final trip "On the Trail," all right now on "Fox News Sunday."

And hello again from Fox News in Washington. Well, after a remarkable campaign and a sweeping victory on Tuesday, President-elect Obama begins the tough job of building his team.

Here with a look at how the Obama administration will get under way is John Podesta, the head of his transition team.

And welcome back to "Fox News Sunday."

PODESTA: It's great to be with you, Chris.

WALLACE: President-elect Obama made it clear in his Friday news conference that job one is the economy, but he left it unclear how active, how involved, he's going to get before his inauguration.

Will he give congressional Democrats clear direction about what he wants them to do in a lame duck session on economic stimulus?

Will he actively engage with the Bush administration on the financial bail-out, or is he going to wait until he takes the oath of office?

PODESTA: Well, we have one president at a time, as President- elect Obama said on Friday, so it's up to -- the job is up to President Bush to move that legislation forward and try to keep economic recovery moving today.

But I think what the president-elect wanted to do -- he sent a strong signal that we need an economic recovery program moving forward. He'd like to see the stimulus that's pending on Capitol Hill pass.

He wants to see unemployment insurance extended, aid to the states that are struggling with medical insurance -- and try to fix their problems and their own budgets so they don't need to lay people off, and try to get job growth going again.

He hopes that will happen during this lame duck session, that the -- that President Bush will cooperate. If it doesn't, it would be the first item of business when he comes back.

WALLACE: But for instance, on the financial rescue plan, there are some decisions that are going to be made over the course of the next two months on things -- various financial institutions, how to spend that $700 billion, even talk about appointing a permanent head of the -- to deal with the rescue.

If the Bush administration asked President Obama -- President- elect Obama, "What do you think of this? Will you sign off on this person," is he going to say, "Yes," or, "I'll wait?"

PODESTA: Well, I think that he's going to put his own people in place when he comes to office, and we're moving very aggressively to select both people at the top for cabinet secretary, treasury secretary in particular, but we're also looking at people below the level of cabinet secretary -- the undersecretary for domestic finance, the head of the TARP, the so- called TARP, et cetera.

So he's going to put his own team in place. In the meantime, he's designated Dan Tarullo as one of his senior economic advisors to -- to have discussions, to be fully informed, fully briefed, with what's going on right now.

Mr. Tarullo has reached out to Secretary Paulson. They've already spoken. They're meeting tomorrow. And we'll have other people who are available to be at the Treasury to understand the decisions that are being made.

But we have one administration at a time. And those are decisions that the Bush administration needs to make while they're in office.

WALLACE: Does the president-elect feel some pressure to name his treasury secretary and his economic team first and quickly to reassure the financial markets?

PODESTA: Well, I think across the board, whether it's national security, the economy, the senior leadership that will manage health care, energy and the environment, I think he intends to move very quickly.

And you know, he's beaten a lot of records during the course of the campaign. I think people probably don't know this, but with the exception of President Bush 41, which was an intraparty transition, no new president has named a cabinet secretary before December, going back through the Kennedy administration.

And I think we're moving aggressively to try to build out that core economic team, the national security team, and you'll see announcements when they're ready.

But again, I'll reference back to what he said on Friday. He said he wants to move with all deliberate haste, but he put the emphasis on deliberate. So he's deliberating what -- the strongest team that he could put in place to manage the very, very difficult problems the country is facing, and there will be announcements forthcoming.

WALLACE: Your transition team has reportedly already identified a number of areas where he could issue executive orders as soon as he takes office to demonstrate -- first of all, to solve problems that he thinks needs solving, but also to demonstrate quickly that change has come to Washington.

What's at the top of the list?

PODESTA: Well, I'm not going to preview decisions that he has yet to make. But I would say that as a candidate, Senator Obama said that he wanted all the Bush executive orders reviewed, and decide which ones should be kept, and which ones should be repealed, and which ones should be amended.

And that process is going on. It's been undertaken...

WALLACE: Can you give me an idea of a couple of areas that...

PODESTA: Well, I think across the -- I think across the board...

WALLACE: ... could be -- like, for instance, stem cell research, he could end the federal restriction on that by executive order, correct?

PODESTA: I think across the board, on stem cell research, on a number of areas, you see the Bush administration even today moving aggressively to do things that I think are probably not in the interest of the country.

They want to have oil and gas drilling in some of the most sensitive, fragile lands in Utah that they're going to try to do right as they -- walking out the door. I think that's a mistake.

But I think that we're looking at -- again, in virtually every agency to see where we can move forward, whether that's on energy transformation, on improving health care, on stem cell research.

There's a lot that the president can do using his executive authority without waiting for congressional action, and I think we'll see the president do that to try to restore the -- a sense that the country is working on behalf of the common good, that we're going to try to restore wages, give people the right kind of ways that they can build on their own lives, and when they work hard that they'll be rewarded for it.

WALLACE: On the big legislative initiatives, the things he's going to have to go to Congress for, such as the economy, and health care and energy, have any decisions been made?

And as a former White House chief of staff under Bill Clinton, do you have any thoughts on how many he can take on at once? And is there a danger of trying to do too many things at the same time?

PODESTA: Well, there's always a danger of trying to, I think, sort of, if you will, clutter the agenda.

But I think one of the things that Senator Obama, again, showed during the -- during the campaign -- and I think what we're trying to do during the transition is be very disciplined about the strategy to actually execute against the programs that he laid out, the promises he laid out, to cut taxes for the middle class, to provide health care for everyone in an affordable way...

WALLACE: But he's not going to try to do it all at once.

PODESTA: ... and to try to deal with energy transformation.

I think that he said that these -- these top-tier issues need to be addressed. They need to be addressed immediately.

The question that I think faces him now and Senator Biden -- and during the course of the transition -- is what's the strategy that allows you to tackle those problems in a way -- in a parallel fashion, simultaneously, so that we can improve the lives and well-being of the American people.

There's a big national security agenda, obviously, as well, and we'll have to -- and so that there -- there's a lot to be done, but I think he has the capacity to do a lot. And he's a transformational figure, and I think he's going to transform the way government acts as we move forward.

WALLACE: Does Mr. Obama feel he won a mandate in this election?

PODESTA: I think he feels like there was a strong vote for change. And I think that if you look at that from the perspective of where he won across the board, his appeal to independents, to Republicans, which I think will be reflected in the kind of government he builds -- and you saw not just red states turning blue.

You saw red counties turning blue. You saw young people embracing the Obama presidency in great numbers, a lot of people going to the polls and then voting for President Obama. Again, across the board, across the country, Democrats, independents and Republicans...

WALLACE: But the question...

PODESTA: ... voted for him. So I think that he feels like he has a real mandate for change. We need to get off the course that the Bush administration has set.

WALLACE: But the question, of course, is what kind of change. I want to put up something that the liberal economist Paul Krugman wrote in a column in the New York Times this week. Let's put it up.

He wrote, "This year's presidential election was a clear referendum on political philosophies, and the progressive philosophy won." Do you agree?

PODESTA: Yes, I do. I think that the program that that -- again, that was -- that -- that the Obama-Biden ticket put forth in the campaign focused on providing opportunity for everyone, focused on the common good.

And I think that's in the progressive tradition in this country. It was alive and well in both parties. It sort of got extinguished in the Republican Party over the course of the last couple of decades, but I think that that progressive vision of providing opportunity for people who work hard, providing for the common good, to helping people succeed in their own lives -- I think was what he laid before the American people.

It's in that great tradition of progressive politics in this country. And it's a tradition of reform. And I think he'll deliver on all those elements.

WALLACE: Let's talk about the transition process. Obviously, you didn't want to talk about this before the election, especially...

PODESTA: Right.

WALLACE: ... with Senator McCain hitting Mr. Obama for being presumptuous and measuring the drapes.

But how far along are you? What decisions -- what directions did he give you? And what lessons has he and have you learned from mistakes perhaps made, let's say, by the Clinton administration transition?

PODESTA: Well, we got -- we got started early. He asked me...

WALLACE: How early?

PODESTA: Well, we were up and working as early as early August. I talked with the White House chief of staff several times before the election. We had meetings at the White House.

We pre-cleared under the intelligence legislation that was passed in 2004 100 people who now have security clearances so they're able to go in the agencies and be fully briefed on the important national security matters facing the country.

We began building out a personnel file to be able to make choices rapidly during the course of this transition period. That was all guided by a diverse board of 14 people who were strong supporters of the campaign. And as we move into the new transition, we've now -- we have a Web site up. We have our space built out. We're -- we have space in both Chicago and Washington, and we're up and working and running.

WALLACE: What lessons have you learned from mistakes made by President Clinton and other administrations in terms of how to do this transition differently?

PODESTA: I think one of the most critical things is that it was -- that we focused on was it was important to name a White House chief of staff early and build a White House staff right from the beginning to go along with the cabinet's election process.

And that's why, as you saw, President-elect Obama named Rahm Emanuel chief of staff two days after the election. He's in the process of building out the White House staff. And as he does that, we'll turn over authority to him.

In the meantime, as you know, he and I are close friends and allies, so we're working cooperatively...

WALLACE: Are you making a conscious effort to look for Republicans in the cabinet? Are you making a conscious effort on diversity both in terms of race and gender?

PODESTA: Absolutely. And I think that you'll see, again, a cabinet that looks like the way President Obama ran his campaign. He brought millions of people in. They weren't all Democrats. He reached out to independents and Republicans.

And I think we want to see that reflected at every level of government. Sometimes there's a token Republican in the cabinet or token Democrat in a Republican administration.

I think his charge to us is that he wants a broad diverse cabinet, one that's built on -- first criteria is excellence. And that's what we're trying to produce.

WALLACE: There's always controversy. Your day job is -- you're the head of a liberal think tank, the Center for American Progress, and you have come under some criticism for not disclosing who your donors are. This is perfectly legal.

But can you understand where some people, given the fact that you're playing a key role in staffing this administration, would wonder who your financial backers are?

PODESTA: Well, you know, first of all, all of our major financial backers are out in the newspaper, and you can go read them. And the 58 foundations that support the senator are out there and available.

We apply the rule that -- that under the law -- we're fully compliant with the law. Most of the people who give us money are very well known, and I'm proud of what we've been able to build over the last five years. The Center for American Progress, I think, was an important institution in terms of developing ideas.

But I think the most important point, Chris, is that our work is public. When we do an analysis, it's not hidden. It's not secret. We publish it. It's on our Web site.

If you want to know what we think, it's right out there. And so you can criticize what our ideas are. You can argue that, you know, we're too left, we're too center. Very few people argue that we're too far to the right, but I think that...

WALLACE: Well, there probably are some now.

PODESTA: But what we do...

WALLACE: But let me just ask you...

PODESTA: ... what we do is open, plainly available. Go to our Web site, AmericanProgress.org, You see what we're -- you see what we're for and what we stand for.

WALLACE: It's been reported but never confirmed -- is billionaire investor George Soros one of your big contributors?

PODESTA: It's been -- it's been reported, and I've confirmed that. He was an early contributor. He's not our largest contributor. He's not -- but he was -- he was one of the people who gave us money at the beginning to get us started.

WALLACE: And finally, any chance that you will pull a Dick Cheney as the head of the search team and actually become a part of the administration yourself?

PODESTA: No, I've made it very clear to President-elect Obama and Vice President-elect Biden that I will be the most unpopular man in Washington come January 20th for having said no to so many people, and that I'll kind of ride off into the sunset at that point and go back to the center and try to do what we do well, which is to produce policy ideas and criticize the administration when we think they're doing the wrong thing.

WALLACE: Really? Mr. Podesta, we want to thank you for coming in today, and you're going to be one busy man over the next couple of months.

PODESTA: Thanks.

WALLACE: Up next, we'll hear from two young gun House Republicans on where their party goes next. Back after the break.

(COMMERCIAL BREAK)

WALLACE: And we're back now to talk about the future of the Republican Party with two rising GOP stars -- from Richmond, Virginia, Congressman Eric Cantor, who was in position to become the number two Republican in the House.

And here in studio, Indiana Congressman Mike Pence, who's set to move up to the number three spot.

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

PENCE: Thank you, Chris.

WALLACE: Congressman Cantor, you just heard John Podesta, the head of the Obama transition team, talking. He said that he believes that Election Day was a victory for the progressive philosophy. Is he right?

CANTOR: You know, I -- obviously, Chris, I disagree with that. And I think if you look at some of the indicators in the polling post the election, this was not some kind of realignment of the electorate, not some kind of shift of the American people toward some style of European social big government type of philosophy.

I think instead what has -- we have seen happen is a tremendous distrust on the part of the people in their government. We were, you know, associated with this government for the past eight years.

And you can look at some of the things that people are upset about, whether it was the latest in the financial crisis, whether it was the handling of the response to Hurricane Katrina, or whether it was the continued ratcheting up of federal spending in Washington.

All of these things, I think, led to the fact that we did not perform well in this election. We'll have to regroup. We'll have to come back to this notion that it really is not about left versus right. It's not about conservative versus liberal. It's about right versus wrong.

And we're going to have to take into consideration the fact that this country has grown more diverse, and -- but there is still yet a common element among the American people. And that is they want to see a government that works for them.

And we still believe very strongly that it is our common-sense conservative principles of a limited government, of lower taxes, of reining in federal spending that will provide the type of solutions to the challenges that face American people in their everyday lives.

And I do believe that this will be what our road map will contain going forward.

WALLACE: But let me bring this -- bring up something that you just said with Congressman Pence.

Congressman Cantor at the beginning said this wasn't a victory for big government and European social solutions. Now, obviously, the Obama campaign or the Obama camp now wouldn't call it that, but those were certainly the issues in this campaign -- questions of taxes. The idea -- the charge of socialism was brought up.

The American people didn't seem to buy it.

PENCE: Yeah. Chris, I do want to agree with Eric. I don't think this was a victory for -- a progressive or liberal victory. I think this was a victory for Barack Obama.

And I want to begin this morning by offering my sincere congratulations to the president-elect and to his team on running an exceptional campaign.

WALLACE: But forgive me, Congressman, he stood for some things in that campaign.

PENCE: Well, he stood for some things, and you know, I read Rich Lowry's column this morning where he pointed out that exit polls showed that only 22 percent of Americans embrace what is described as a liberal world view. That's the same as it's been the last four and eight years.

I agree with Eric. I don't think this was a liberal realignment. I think this was an enormously effective campaign run by the president-elect and his team.

But also, I'm not immune to the fact that this was an extremely moving and historical moment in the life of this nation.

You know, I grew up in a time when my heroes were John F. Kennedy and the Reverend Dr. Martin Luther King Jr. And I have to tell you, to see an African American president-elect walk out on that stage and say to the world, "My story would only be possible here in America," was deeply inspiring to me.

WALLACE: Well...

PENCE: And so I really do believe this was not a realignment. This was an extraordinarily compelling figure. And the fact that John McCain still came away with, I think, 46 percent of the vote shows the resilience and durability of common-sense conservative ideals.

WALLACE: Well, for all the good feeling, Congressman Pence, you have been quoted as saying that you feel your job over the next two years is to, quote, "Expose, dismantle and defeat..."

PENCE: Right.

WALLACE: "... the liberal Democratic agenda." So much for cooperation.

PENCE: Well, let me say -- look. You know, I'm a conservative, but I'm not in a bad mood about it, Chris. You know, the purpose of the opposition is to oppose, to oppose every time that we do.

And look, we're -- you know, I prayed for our president-elect this morning. I think Americans all want to see their president successful. We're going to get through an inauguration. It's going to be a historical moment.

But as Eric and I both know, having dealt with the Democrats on Capitol Hill, and knowing the policies of the president-elect, we're going to have some pretty vigorous disagreements, and they're going to be along traditional fault lines.

And we're going to cheerfully provide that loyal opposition.

WALLACE: Congressman Cantor, let's look at some of the exit polls from Tuesday night. Back in 2004, the same percentage of voters, 37 percent, identified themselves as Republicans and Democrats. Tuesday, Democrats had a seven-point advantage.

And look at these voting blocks. Mr. Obama did 14 points better among Hispanics than John Kerry did, plus eight among people making more than $100,000 a year, plus 12 among young voters.

Congressman Cantor, when you look at those numbers, when you look at the fact that you have -- are losing the West Coast, you're in the process of losing the Rocky Mountain West, and you now don't have a single House Republican member from New England, isn't the GOP in some trouble?

CANTOR: Well, listen, there's no question the numbers are startling. And if you do look at the turnout numbers and the responses of those interviewed, we have to demonstrate, number one, that we understand what people are going through. Our vision going forward has to be one of reform.

But look. There's no question, Barack Obama is an extraordinary communicator. The success of his campaign was largely based on a message that he was able to connect with a broad swath of the American people.

There's no question that the Republican Party has got to stop doing things the way they've always done them. We were doing things that we'd been doing for the last 10 years.

The incredible innovation and use of technology that the Obama campaign and the Democrats employed is stunning. We're going to have to change. The Republican Party will have to begin to adapt those innovations and that technology to make sure that we can reach out to the increasing diverse population of this country.

But at the end of the day, it is about a message of change. And what we're going to be faced with when we come back to Congress in January is a president who probably will be facing extraordinary challenges at a historic level.

If you look at, obviously, the roiling global financial situation, if you look at the fact that much of this country distrusts its government, if you look at the fact that we're still fighting in two wars, I think that the Republicans in Congress will stand ready to work with this new president.

But if he then says, "I'm going to pivot away from my campaign promise to raise taxes and find a solution where we can help families and small businesses create jobs and find some type of security again," then we'll support him.

If, in turn -- that he veers left and says, "No, the way to do this is to crank up the government spending machine and to raise taxes on families and small businesses," we're going to oppose him.

You know, and so there is going to be, I think, a willingness to try and get things done. But at the end of the day, I think you will see a Republican Party in Congress serving as a check and a balance against Mr. Obama's power and Speaker Pelosi's power.

WALLACE: But forgive me, Congressman Pence. An awful lot of what Congressman Cantor just said was what John McCain was saying, and the public rejected it. I mean, those were the issues on which this campaign was fought.

I don't think this was just all about the charm of Barack Obama. I think there were some issues involved here as well.

How do you come up with a new message that will resonate in the parts of the country -- and I'm talking about New England, the far west, the Rocky Mountain West -- where people are beginning to tune you out?

I had Karl Rove on on election night, and he said, "It's not enough to just go back and say, 'Well, we're the party of Ronald Reagan.'" He says you've got to come up with new conservative solutions to the problems that people face today.

PENCE: Right. But you build those conservative solutions, Chris, on the same time-honored principles of limited government, a belief in free markets, a belief in the sanctity of life and the sanctity of marriage.

You look at those social issues, Chris -- you know, there were three state referendums on marriage. All three of them carried -- I think in Florida, California and Arizona. You know, the vitality of the conservative movement around the country is very real. I don't think we should draw any broad conclusions, as Eric said, about a big realignment. You know, my...

WALLACE: So what do you do, as I say, to speak to people to say, "We can solve your problems..."

PENCE: Oh, I think that...

WALLACE: "... better than the Democrats?"

PENCE: Well, I think number one, I like your question because I think being in the minority in the House and Senate for two years, what we've learned is we've got to speak to the American people.

What we've learned is that a minority of conservatives in the House plus the American people equals a majority.

And last August, when House Republicans held the House floor for five weeks and demanded that Speaker Nancy Pelosi abandon her historic opposition to more domestic drilling, the American people mobilized, contacted their members of the House of Representatives, and the policy changed.

That's exactly the kind of approach you're going to see. It's going to be a cheerful opposition. We're going to carry those timeless principles of limited government, a strong defense, traditional values to the American people.

And we're going to invite the American people -- when the opposition is appropriate, we're going to invite the American people to join us in stopping any slide to the left by the Obama administration or Pelosi Democrats.

WALLACE: And finally, Congressman Cantor -- and we have less than a minute left -- how long do you see Republicans in the wilderness? Is this something that takes years, or do you think you could actually take back the House or the Senate in 2010?

CANTOR: You know, I think it's pretty unbelievable that we sit here today, given this date -- and four years ago the discussion was all about the Democrats unable to find their footing.

So I do think in this age of the 24/7 news cycle and the Internet world, we're going to have the ability to reach out to many supporters and many people across this nation and allow them to see very quickly the differences in terms of vision of where we want to take this country.

And I think our challenge going forward is to make sure that we're able to connect with the younger people in this country in explaining our vision and talking about the conservative principles that will be adapted to the everyday challenges that people face.

And I think that's our challenge, as you suggest, Chris, in the Northeast, in the upper Midwest. We will not be taking back a majority unless we are able to put in place a plan that does just that.

WALLACE: All right.

Congressman Cantor, Congressman Pence, we want to thank you both for talking with us. We'll be watching you both in action over the next two years, and we'll have you back often.

PENCE: Thank you, Chris.

WALLACE: Thank you.

CANTOR: Thanks.

WALLACE: Up next, our Sunday regulars read the first tea leaves from President-elect Obama and try to figure out what his administration will do. Back in a moment.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: Immediately after I become president, I'm going to confront this economic crisis head on.

(END VIDEO CLIP)

WALLACE: That was President-elect Obama in his first news conference making clear what his top priority will be once he takes office.

And it's time now for our Sunday group -- 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.

So, Brit, Mr. Obama gave us a few hints in this first few days since he was elected as to what he will do as President Obama, in his news conference, his selection of Rahm Emanuel as his White House chief of staff. What do you take away from all of that?

HUME: Well, I take a couple of things away. First of all, the appointment of Rahm Emanuel -- and then, of course, you have the head of the transition team being John Podesta. These are veterans of the Clinton White House, and there are a number of other veterans of the Clinton years as well.

And some people would say, "Well, how is this guy going to bring change to Washington if he's bringing back all the old people from two administrations ago?" I would disagree with that.

I think what you need in the White House, particularly with Obama being relatively new to Washington, having spent so much time of his brief Senate career campaigning for president -- what you need is people who know the town, know the White House, know the Congress and so forth.

And from his perspective, I think he's chosen wisely. And it's good to get experienced people in there. That's the most -- that's the most significant thing I take away from all this.

The announcements about priorities -- I don't think we're going to know what his real priorities are until he really comes to grip with the budgetary implications of what he's got, until he's had more of these foreign policy briefings, and he really sees what's facing him.

LIASSON: Yeah, I think the picks were strong. They show he's pragmatic, not ideological. These are not just veterans of the Clinton administration. They're effective veterans of the Clinton administration. There were people he could have chosen that weren't as sharp and savvy as Rahm Emanuel or John Podesta.

I think there's something else that really strikes me about this whole beginning of the transition. Number one, it's gotten off to a very fast start. He's clearly learned the lessons of Clinton, who didn't appoint any top White House officials till January 15th, five days before he was inaugurated.

There is more goodwill for this new president than I -- than I can even imagine another president, for three reasons. Number one, he did win a pretty decisive victory, brought in new members of the House and Senate who owe him.

Number two, just the historic nature of the fact that he's the first African American president.

But also, the problems are so big. The country -- and you can see it even in the tenor of the comments from Republicans, his opponents. They want this president to succeed because these problems have to be solved.

WALLACE: Bill, you know, the one thing -- and I agree, it was a fast start and a reasonably smooth start for President-elect Obama.

There was a bit of controversy over his choice of Rahm Emanuel as White House chief of staff. Some Republicans said he's hyper- partisan, exactly the wrong person to bring Washington together.

On the other hand, such conservative voices as Senator Lindsey Graham and the editorial page of the Wall Street Journal said they like the choice just fine.

KRISTOL: He's partisan, but he's an effective partisan. And I think he wants Barack Obama to be a successful president. And I think he -- I think Rahm Emanuel knows that you can't just be on the left -- you can't govern from the left wing of the Democratic Party and be a successful president.

The other really important thing about Rahm Emanuel's pick is this. How did Clinton and Carter, the last two Democratic presidents, go off the rails in their first few months? They got in unnecessary fights with the Democratic Congress.

I think in retrospect, people would say they both yielded to the Democratic Congress at times when they shouldn't have and picked silly fights with the Democratic congressional leadership which then ruined their -- or hurt their relationship.

Rahm Emanuel isn't just a veteran of the Clinton White House. He is a key member of the House of Representatives. Having him in the chief of staff's office gives Obama, I think, an ability to work with Congress, not to be led around by Nancy Pelosi.

This is a bad moment for Nancy Pelosi. Who is the most -- you know, Rahm Emanuel has personal relationships as much as she does with all the Democratic members of Congress. He helped a lot of them get elected in the last two cycles.

It's a way of diminishing a new president, Obama, a four-year senator, his sort of dependence, you might say, on the established old bulls in the House and the Senate. And I think it shows he wants to govern.

They're going to have a serious legislative agenda. They're going to set priorities, you know, and he's not just bringing in some -- Clinton's first chief of staff was who, Mac McLarty, I think, his kindergarten friend, who didn't know Washington. Carter didn't bring in Washington people at the beginning.

This means he's going to hit the ground governing, and I think they're going to be serious and tough-minded in dealing with the Democratic Congress. It's going to be Obama's agenda, not Nancy Pelosi's and not harry Reid's.

WALLACE: Well, one of the things that I think Bill brings up is there's some question -- you know, this isn't just Obama's victory. It's obviously a victory for the Democratic Party, and I'm sure the left wing of the party thinks it's a victory for them.

They are hungry after eight years out of the White House. What does Emanuel's pick -- and what is your sense of how President-elect Obama is going to treat the left wing -- big labor when they want to pass card check or those elements that are -- going to want to re- impose the fairness doctrine?

Is he saying, "You're going to have to be patient?"

WILLIAMS: Well, one thing to say about Rahm Emanuel is he's a moderate. You know, he's a moderate on things like trade. And so he might have to buck his own boss and buck the unions in terms of saying, "Listen, you know, free trade is a good thing for the American economy." And I think that's going to be a fight right from the start.

But Rahm Emanuel is moderate in terms of balanced budgets. He was key to that process in the Clinton years. And so I think that he is going to be a break on what you described, Chris, as the high expectations that the left has right now.

The left is already laying out, you know, this kind of agenda that begins with everything from gays in the military to closing Guantanamo Bay, stem cell research, undoing the gag rule on suggesting abortions to people overseas. All of this is right there.

Well, if the president-elect once he's in office begins with that agenda, he's in big trouble. And Rahm Emanuel is the brake on that because, just as Bill said, you know, I think everyone on this panel has probably had dinner with Rahm Emanuel. Rahm Emanuel knows every player in the House, and he is up there and he's going to be twisting arms and, in some cases, breaking arms on behalf of President-elect Obama.

WALLACE: One of the big questions -- and I discussed it with John Podesta, Brit -- is how involved does President-elect Obama get before Inauguration Day in the economic crisis?

The famous story is FDR. Apparently in the depths of the Great Depression in 1932, after FDR won, President Hoover wanted to get him involved in a lot of the economic decisions. Of course, then what was a four-month process between Election Day and Inauguration Day -- and FDR said, "No, no, I'll wait till I take office in March."

I got the sense from Podesta that President-elect Obama is not about to sign onto the Bush administration either.

HUME: No, I don't think he is. On the other hand, I think he's going to find something he may not have expected. He's beginning to get a sense of it, and that is a perhaps unprecedented level of cooperation in terms of the transition.

You know, the Obamas are going to the Bushes at the White House, and President-elect Obama will find there a gracious host, I think, and I think he will be pleasantly surprised at how he and his team are treated, and I think he will appreciate any consultations he gets.

The interesting question would be whether he can get Bush to go along with the idea of signing off on a new big spending package called a stimulus for the purpose of trying to revive the economy.

The stimulus packages have a long history, and it's not a very happy one, of whatever effects they have coming after the recession is over.

WALLACE: Mara, you know, the one last thing we have time to talk about is the Obama cabinet. Obviously, we don't know who he's going to pick, but I have to say what strikes me about all the names that are being mentioned -- it's very much an establishment group.

LIASSON: Absolutely, completely establishment, and I think that is the point. Everything Obama has done, you know, for the last six months has been to reassure the public and the markets. The pick of Joe Biden was reassuring.

Having Paul Volcker tower behind him, you know, right next to him in that tableau in the first press conference was reassuring. I think the treasury secretary is going to be a very reassuring pick. Everybody on the short list is.

Secretary of state is a little more mysterious to me, but I think that is his aim. And yes, they are very establishment, as is his intention.

WALLACE: All right. We have to take a quick break here. But coming up, after taking a drubbing on Election Day, how do Republicans turn things around? And the latest on Sarah Palin. We'll hear from the panel after this quick break.

(COMMERCIAL BREAK)

WALLACE: On this day in 1989, East German officials opened the Berlin Wall, allowing travel from east to west Berlin. Germans immediately began to tear down the wall, hacking out large chunks of the 28-mile barrier.

Stay tuned for more from our panel and "On the Trail."

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

RYAN: The problem is we went big government, and we've got to get out of that, and we've got to be the entrepreneurial Reagan party we were, take those principles, apply them to today's problems, and go straight to the American people with them.

(END VIDEO CLIP)

WALLACE: That was Republican Congressman Paul Ryan calling for a return to fiscal responsibility as one way the GOP can regain its footing.

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

Well, Bill, when you look at the overall picture, not just the Democratic victories for president and in Congress, but the loss of support which we pointed out for Republicans in various parts of the country and among key voting groups, how much trouble is the GOP in?

KRISTOL: It's in a fair amount of trouble. It's not in more trouble than it was in in '93 after the first President Bush lost to Clinton, or in '76 after Ford lost to Carter.

Actually, the Democratic majorities in the House in both those instances were considerably larger in the case of Carter, and about the same in the case of Clinton.

Two years after Clinton won, Gingrich led the Republicans to taking over Congress. Four years after Carter won, Reagan won the presidency. So these things can turn around very fast.

But there's been a lot of self-inflicted damage done by Republicans. Hispanics -- let's take one group. Some political scientist did some calculations and told me that if Hispanics had voted in 2008 as they had done in 2004, McCain would have carried Florida, Nevada and New Mexico -- totally self-inflicted wound by House Republicans, thinking, "Hey, let's be really tough on immigration, and let's demagogue, and let's not work with President Bush to pass legislation."

WALLACE: I can just hear a lot of our listeners saying they weren't demagoging, that's the way we should be. KRISTOL: Well, fair enough, but there was a real -- if you have a Republican president and a Republican Congress, people kind of expect you to get things done.

The good news for Republicans -- there's not a Republican president, there's not a Republican Congress. They've got to let President Obama govern for a while, and there will be chances to draw contrasts, I think.

WILLIAMS: Well, the problem is it's a shrinking party. That's the big problem. And it speaks to this Hispanic issue.

But much larger, it speaks to like -- when you lose a state like North Carolina, that's about people who are young, suburban, more than $100,000 in income moving in and bringing a different set of values and interests, and the Republican Party not speaking to them, instead speaking more in terms of being an exclusive party, and speaking to a base that is out of touch with people who have these larger concerns about things like jobs, health care and the like.

And you can't do that. You've got to -- the party has to reinvent itself in some ways. Now, I think going forward right now, the big agenda item here is a stimulus package in Washington. What kind of stimulus package could the Republicans buy into in this interim before Obama comes into office, at which point I think they could get something shoved down their throats?

And I don't know what it is that they would agree to. Like, take, for instance, the bailout of the auto companies. Will Republicans say, "Yeah, it's a good idea to give money to the auto companies?" Will they say, "It's a good idea to give money to struggling retailers?" I don't know.

But they have to put themselves in a position where they are responding to kitchen table concerns for the average American.

WALLACE: Brit, what do you think are the key debates that over the next year the Republicans need to have about the future of the party?

HUME: I think this is not the moment for the Republican Party to start trying to reinvent itself. The Republican Party's opportunities will grow out of what happens with an Obama administration.

And if Obama is shrewd, and so far he seems to be in the little -- in what little indications we have now, he won't try to pull the party and the country too far -- his party and the country too far to the left, or let his party pull him too far to the left.

But if he does, it won't be popular and it won't work. The programs won't work, even if they could be stuffed through the Congress. And the Republican Party will reap the benefit, just as the Democratic Party reaped the benefit here.

The idea that there's been an ideological shift is belied by the polls, and it's belied by one other symptom. You can see it time and again, and that is what does the liberal -- what do liberals call themselves these days? Do they call themselves liberals? No, sir. They still call themselves progressives.

This is a political philosophy that in America still to this day dares not speak its name. And until that changes, I think we can safely say that we -- it's a center-right country and the liberals know it.

LIASSON: You know, look. I think now it might not be the time to reinvent themselves, but pretty soon is going to be the time for them to reinvent themselves, because -- look.

What Paul Ryan said -- he's really talking about this back-to- basics Republicanism, which everyone -- Republicans seem to agree with. But it sounds like green eyeshade-ism.

You know, fiscal responsibility -- there are a whole bunch of issues that Republicans are going to have to come up with answers for. They were successful on taxes. Look at Obama. He ran as a tax cutter. They were successful on crime and welfare reform and strong defense. Obama wants to increase the size of the military.

But what about global warming? What about income inequality? What about immigration -- I mean, in terms of the importance of the Hispanic vote? There's a whole bunch of new issues that Republicans are going to have to come up with conservative solutions for and not just fall back on, you know, fiscal responsibility, low taxes.

I think they're going to need some new answers.

KRISTOL: Well, I mean, a lot of those conservative solutions are going to happen at the state level, let me just say quickly. That's always been the case when a party's out of power.

Bill Clinton was a pretty successful Democratic governor of Arkansas. Republicans have some good young governors -- Bobby Jindal, Sarah Palin, to mention two. And Mitch Daniels in Indiana -- think about this -- a state that Obama won -- Mitch Daniels reelected governor of Indiana, the Republican governor, by 20 points.

So they have some good stuff at the state level.

WALLACE: Well, Bill, you mentioned the magic name, because while the GOP looks to its future, there's still plenty of fallout from the campaign that just ended, and it centers around your friend Sarah Palin.

There were several leaks this week from the McCain campaign that Palin didn't know that Africa was a continent, she thought it was a country; that she didn't know what countries were involved in the North American Free Trade Agreement.

And here is how -- and let's put -- we'll put up how Palin fired back. Here it is.

(BEGIN VIDEO CLIP) PALIN: That's cruel. It's mean-spirited. It's immature. It's unprofessional. And those guys are jerks if they came away with it taking things out of context and then tried to spread something on national news. It's not fair and not right.

(END VIDEO CLIP)

WALLACE: Bill, you have sources in the Palin camp. What's the truth to all this?

KRISTOL: Well, I have sources in the McCain camp, which was -- it was one camp, you know? And these were McCain staffers...

WALLACE: Well, was it?

KRISTOL: Yeah. These were McCain staffers who worked for Palin. A couple of them, unfortunately, behaved like jerks after the election, or thought they could help themselves, by telling Newsweek -- of course, always on background.

Not a single person has stepped forward with a name, you know, to say anything negative about Palin. But on background, these stories -- I've talked to Steve Beegan (ph), who is a very well-respected Washington foreign policy hand -- never met Sarah Palin until he was -- they asked him to go work for her for the two months.

He was there at these briefings, and he's told me the truth about them, and it's so -- these stories have so little resemblance to reality that they're purely malicious and really false.

And frankly, reporters shouldn't print this kind of stuff unless they can get corroboration. And in this case, they could have called Steve Beegan (ph), who was in the room. They could have called others. They didn't.

So I think it...

WALLACE: Well, what is the truth about Africa or about NAFTA?

KRISTOL: The truth about NAFTA is she had a long day of briefings. She went through NAFTA, CAFTA. There was a lot of stuff going on. And at the end -- there had been distractions and stuff. She said, "Let's just go through it one more time. Now, what exactly -- what's the relationship of NAFTA, which countries are in CAFTA?" That's the Central American Free Trade agreement. I couldn't tell you which countries are in it.

"Which countries do we have free trade agreements with in Latin America? Is it Chile?" Perfectly sensible question at the end of a long day, just to get it clarified, and that makes it seem as if she doesn't know like what -- -- what's North America.

The Africa comment was she was doing -- apparently, Steve Schmidt was firing her rapid -- giving her rapid-fire questions and sort of debate prep, and she had actually gone through a long discussion with Beegan (ph) and others about Bush's Africa policy, the AIDS policy, what was happening in the Congo -- all of this.

And she began the answer by saying something like -- you know, it was a kind of practice thing, and they asked her the question, and she said, "Look, Africa's a country with a lot of problems." It was a slip of the tongue, you know? And then she went on to discuss what was happening in Africa.

This does not mean that she doesn't understand that Africa is a continent, not a country. So that tells you something about just the petty maliciousness, unfortunately, of a few staffers speaking on background.

Senator McCain, I'm told, called up Thursday from Arizona to his senior staff and said, "Stop it. Cut it out. This is totally outrageous."

Nicolle Wallace went on T.V. Friday morning and said, "It's over. We all liked Sarah Palin." And I think they've -- they've tried to end it.

WALLACE: And why was this happening?

KRISTOL: I don't know.

WILLIAMS: I can tell you, because there -- a lot of people right now in the midst of a loss want to avoid blame. And they have political careers coming, and -- but you know, let me just say this.

As someone who thinks Sarah Palin was inexperienced and -- you know, it's not a matter of Sarah Palin not being smart and capable. You can learn that stuff. And she wasn't on the national stage, and that's why she might not have been familiar with that stuff up front.

But just speaking, you know, in terms of defending a woman, gosh, I would think that feminists all over the country would be up in arms about the way Sarah Palin is being treated.

WALLACE: All right. We're going to leave it there, with Juan Williams' defense of Sarah Palin.

Let me just add that Sarah Palin is going to be Greta Van Susteren's guest on "On the Record" tomorrow might.

Now, a quick programming note. Starting next Saturday at 9 p.m., I'll be hosting a five-part series on Fox News Channel, "Television and the Presidency." Please be sure to tune in.

Up next, a final and very special "On the Trail."

(COMMERCIAL BREAK)

WALLACE: As the Grateful Dead once noted, what a long strange trip it's been. They weren't talking about this presidential campaign, but they could have been, and we have boiled it down to three remarkable minutes "On the Trail."

(BEGIN VIDEO CLIP)

OBAMA: I stand before you today to announce my candidacy for...

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MCCAIN: ... president of the United States.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

H. CLINTON: Let's talk. Let's chat.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: I know it's tempting to simply turn back the clock.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

B. CLINTON: This whole thing is the biggest fairy tale I've ever seen.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

H. CLINTON: I don't want to see us fall backwards, you know?

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

QUESTION: So can he then go on and become the nominee of this party?

ROBERTA MCCAIN: Yes. I think holding their nose, they're going to have to take him.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

EDWARDS: I am suspending my campaign.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

ROMNEY: I have to now stand aside.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

THOMPSON: You know, it's never been about me.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

H. CLINTON: Enough with the speeches and the big rallies and then using tactics that are right out of Karl Rove's play book.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

H. CLINTON: I am honored to be here with Barack Obama.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

NARRATOR: It's 3 a.m. and your children are safe and asleep.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

REVEREND WRIGHT: America's chickens are coming home to roost.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: I can no more disown him than I can disown my white grandmother.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

H. CLINTON: I remember landing under sniper fire. We just ran with our heads down.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

QUESTION: What is your number?

MCCAIN: Six two four seven eight seven.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MCCAIN: I'm a proud conservative liberal Republican -- conservative Republican. Hello?

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

BARBARA WALTERS: Well, we thought you were very sexy looking.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

H. CLINTON: The answer for me is to pledge my support to the next president of the United States, Barack Obama.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: I would be very interested in pursuing public financing.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MCCAIN: When it was in his interest to break his promise, he tossed it aside like it didn't mean a thing.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: People of Berlin, people of the world...

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

NARRATOR: He's the biggest celebrity in the world.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: Tonight I say to the people of America, I accept your nomination...

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MCCAIN: ... for president of the United States.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

PALIN: Well, you know, they say -- the difference between a hockey mom and a pit bull? Lipstick.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MCCAIN: The fundamentals of our economy are strong.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: The fundamentals of the economy are not strong.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

BIDEN: I mean, when the stock market crashed, Franklin Roosevelt got on television...

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MCCAIN: I'm directing my campaign to work with the Obama campaign to delay Friday night's debate.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: Presidents are going to have to deal with more than one thing at a time.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

BIDEN: How different is John McCain's policy going to be than George Bush's?

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

PALIN: Say it ain't so, Joe. There you go again, pointing backwards again.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

QUEEN LATIFAH AS GWEN IFILL: I would now like to give each of you a chance to make a closing statement.

TINA FEY AS SARAH PALIN: Are we not doing the talent portion? (END VIDEO CLIP)

(BEGIN VIDEO CLIP)

NARRATOR: When convenient, he worked with terrorist Bill Ayres.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MCCAIN: He is a decent person and a person that you do not have to be scared as president of the United States.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

JOE THE PLUMBER: Your new tax plan's going to tax me more.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MCCAIN: What you want to do to Joe the Plumber...

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

QUESTION: Anybody making over $250,000...

MCCAIN: Is going to pay more.

QUESTION: ... is going to pay more.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

BIDEN: You've got it. It's time to be patriotic, Kate.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MCCAIN: Now he's saying that if you don't want to pay higher taxes, you're, quote, selfish.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: By the end of the week he'll be accusing me of being a secret communist because I shared my toys in kindergarten.

(END VIDEO CLIP) (BEGIN VIDEO CLIP)

HUME: ... make Barack Obama, in our view, President-elect of the United States of America.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MCCAIN: I wish godspeed to the man who was my former opponent and will be my president.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: We have never been just a collection of red states and blue states. We are and always will be the United States of America.

(END VIDEO CLIP)

WALLACE: And we want to thank producer Matt Silberstein (ph) and editor Bob Allen (ph) for looking at hours of tape and putting that together.

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

For more visit the FOX News Sunday web page.

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