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Senators McCain and Schumer on "Fox News Sunday"

Senators McCain and Schumer on "Fox News Sunday"

Fox News Sunday - January 25, 2009

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

President Obama and Congress. What does the White House need from Republicans to get its agenda through on Capitol Hill? We'll ask Senator John McCain, the president's election opponent who may now be a key ally on tough issues. John McCain -- only on "Fox News Sunday."

Then, what are congressional Democrats doing to fix the economy? And will they make good on their promise to work with the GOP? We'll ask a top Democrat, Senator Charles Schumer.

Plus, the curious case of Caroline Kennedy. Her Senate bid comes unglued and some New York Democrats trash her. What happened? We'll ask our Sunday regulars -- Brit Hume, Mara Liasson, Bill Kristol and Juan Williams.

And a look at the sights and sounds of the first days of the Obama presidency, all right now on "Fox News Sunday."

And hello again from Fox News in Washington. President Obama has made it clear in his first days in office his top priorities are fixing the economy and changing how the war on terror is fought.

And for help, the new president has signaled he will turn to his campaign rival, Republican John McCain, who joins us here today.

And, Senator McCain, welcome back to "Fox News Sunday."

MCCAIN: Thanks, Chris. Thanks for having me on again.

WALLACE: Let's start with a speech that you made on the Senate floor this week warning Republicans who were delaying a confirmation vote on Senator Hillary Clinton. Here it is.

(BEGIN VIDEO CLIP)

MCCAIN: The message that the American people are sending us now is they want us to work together and get to work.

(END VIDEO CLIP)

WALLACE: Given that belief, what do you see as your role towards President Obama?

MCCAIN: I view it as the loyal opposition -- help and work together where I can, and stand up for the principles and the party and the philosophy that I campaigned on and have stood for for many years.

And again, I don't have to tell anybody in America, this president faces probably greater challenges than any president going all the way back to Abraham Lincoln.

We are in two wars. We have an economic crisis of monumental proportions. We have the breakdown of financial institutions that Americans once had great trust and confidence in. We have scandals like the Madoff scandal that you couldn't -- you couldn't write a book because nobody would read it.

And so there is a very full plate. Americans have lost a great deal of confidence. To rebuild that trust and confidence, we have to work together. But that does not mean that as the loyal opposition that I or my party will be a rubber stamp.

WALLACE: Well, let's talk about the nature. The president -- the new president is clearly reaching out to you. The night before the inauguration, he came and spoke and embraced you there at a dinner honoring your bipartisan service.

The day of the inauguration, he sought you out at the congressional lunch after the ceremony specifically. How do you think you can help President Obama?

MCCAIN: Well, I think I can help in devising a strategy for Afghanistan. The hard truth is that the Afghan war has deteriorated.

The situation in Afghanistan is more complex in some ways than Iraq. It is very difficult. It's going to require a long-term commitment and all of us working together.

There's the continued Russian belligerent behavior. We now have the North Koreans saying all kinds of bizarre things, which is not unusual, but continue to be tensions there.

And of course, as the world economy is affected, you will see more -- not governments in turmoil, but certainly pressures on governments and dissension at a very high level.

And so we've got a lot of work to do, particularly in the national security area.

WALLACE: Well, let...

MCCAIN: And there was a long time where people worked together on national security issues.

WALLACE: Let's talk about the economy. We'll get to national security in a moment.

The president is pushing an economic stimulus package of $825 billion that raises some of the issues that were at the heart of your campaign against Barack Obama -- $275 billion in tax breaks, including money for people who don't pay income taxes; $550 billion in spending, including $200 million to re-sod the National Mall, $360 million to fight sexually transmitted disease.

As that package now stands, can John McCain vote for it? MCCAIN: No. We need to make tax cuts permanent, and we need to make a commitment that there'll be no new taxes. We need to cut payroll taxes. We need to cut business taxes.

We need to have a commitment that after a couple of quarters of GDP growth that we will embark on a path as we'll say -- called Gramm- Rudman - - to reduce spending to get our budget in balance.

We're going to lay an additional 2 trillion, basically, dollars of debt on future generations of Americans. Is there going to be a point where foreign countries such as the Chinese stop buying our debt?

Look, we've got to eliminate the unnecessary -- there's got to be some kind of litmus as to whether it will really stimulate the economy and whether it will in the short term.

Some of the stimulus in this package is excellent. Some of it, frankly, has nothing to do -- out of those projects and others that you just mentioned -- 6 billion for broadband Internet access. That will take years.

There should be an end point to all of this spending as well, say two years. If we need to stimulate the economy in a short period of time, let's enact those provisions which will...

WALLACE: Well, you're talking about a major rewrite of this -- of this plan as it now stands.

MCCAIN: Well, the plan was written by the majority in -- a Democrat majority in the House, primarily. And so, yeah, I think there has to be major rewrites if we want to stimulate the economy.

There's the...

WALLACE: As it stands now, though, you'd vote against it.

MCCAIN: Well, look. I mean, I am opposed to most of the provisions in the bill. As it stands now, I would not support it.

WALLACE: Would you filibuster it?

MCCAIN: Well, let's -- I mean, I want us all to sit down and negotiate. The Republicans have not been brought in to the degree that we should be into these negotiations and discussions.

So far, as far as I can tell, no Republican proposal has been incorporated. Maybe there has been. I just may have missed it. But clearly, we need to have serious negotiations.

We all recognize that the economy is in deep and serious trouble. But there's a Japanese example where they tried to stimulate their economy with the wrong kinds of projects and the wrong kind of spending. It didn't help their economy.

WALLACE: So... MCCAIN: We've got to stimulate the economy and jobs. We're losing sight of what the stimulus is all about, and that is job creation. If it doesn't create jobs, then it's just another spending project.

WALLACE: So given what you're talking about, which is a major reworking of the bill, is the -- is the deadline that the president is talking about, Presidents' Day weekend, mid-February -- is that unrealistic? That's like three weeks from now.

MCCAIN: Well, I think we can sit down in three weeks and work hard and negotiate and come to some agreement, hopefully. I will continue to hope that we will and will continue to dedicate myself to that proposition.

Republicans will have proposals as part of the stimulus package. I hope they are considered and I hope they're adopted...

WALLACE: Let's...

MCCAIN: ... if it's going to be truly bipartisan.

WALLACE: Let's turn to foreign policy. President Obama also moved in that area this week, announcing that -- a process to start closing Guantanamo Bay within a year, to review all of the interrogation and detention techniques.

Some critics are saying that he is ending the war on terror and turning this into a law enforcement matter again. Do you think that's fair?

MCCAIN: No, I don't think that's fair. But I believe that announcing the closing of Guantanamo without addressing the other really difficult aspects of this issue -- look, Guantanamo has become a symbol and it should be closed, in my view.

It's Abu Ghraib. It's mistreatment of prisoners. It's all the things that have damaged America's image in the world.

But we need to have a process that is -- replaces the military commissions. By the way, the military commissions were finally beginning to function, and so I'm sorry they're put on hold.

We need to decide what you do with people that we can't return to the countries that they came from. We need to decide what to do with people we know if we release them they will go out, as we've just seen -- a recent example of a guy who became a high-ranking member of Al Qaida. We can't continue to release people who are going to be leaders of Al Qaida.

So we've got to work through that. And to just announce the closure of Guantanamo without addressing these other issues, I think, is not the best way to approach it.

But finally, where are you going to send them? Where are you going to send them? That decision I would have made before I'd announced the closure, because I don't know of a state in America that wants them in their state. It's going to -- you think Yucca Mountain is a NIMBY problem? Wait till you see this one.

WALLACE: I've got a couple of other issues I want to get through.

MCCAIN: Sure.

WALLACE: And let's try and move...

MCCAIN: Sure.

WALLACE: ... through them...

MCCAIN: More shorter answers is what you're saying. Yes.

(LAUGHTER)

WALLACE: It's amazing how you picked that up, Senator.

The president's choice for attorney general, Eric Holder, said the other day at his congressional hearing that waterboarding is torture, and he left open the possibility that lawyers or CIA officers who participated in some of these activities could be liable to criminal prosecution.

How do you feel about that, the idea of the possibility of investigations and even criminal prosecution of people who were doing what they were told to do during the Bush years?

MCCAIN: I think it's time to move forward. I believe that waterboarding is in violation of the Geneva Conventions, and I've said it for years. But it's time to move forward.

Let's enact policies that make sure that America's image in the world is never damaged again.

But to go back and to prosecute people, in my view, who were carrying out the instructions that they were given -- some of the toughest jobs in the world are being members of our intelligence services. People put their lives on the line every day.

I would not like to damage the morale of those brave Americans who serve at not very high pay and not a lot of compensation under the most difficult of circumstances.

WALLACE: President Obama announced this first week tough new rules on lobbyists and then promptly announced a waiver for Bill Lynn, a lobbyist for Raytheon, to be deputy secretary of defense.

Will you support an exception for Mr. Lynn?

MCCAIN: I don't like it. I think it's a bit disingenuous to announce strict rules and then nominate someone with a waiver from the rules that you just announced in one of the most important jobs in Washington, the number two person at the Defense Department. I have asked to see which areas that Mr. Lynn will be recused from. But I think we need to probably move forward with his -- with his nomination.

WALLACE: Finally, let's talk about John McCain, and I'm going to ask you not for one-liners, which I know that you sometimes use...

MCCAIN: OK. Yeah.

WALLACE: ... but for some straight talk. After working so hard to become president and believing that you could lead the country in a way only a president can lead, how painful (inaudible)?

MCCAIN: Oh, look. I know that it's hard to understand for some people. I have been honored to serve this country, as President Obama pointed out many times during the campaign, for over a half a century.

Every day I am humbled by the experience. Every day I'm proud to have the opportunity to serve...

WALLACE: But you're a competitive...

MCCAIN: ... the people...

WALLACE: ... guy. It's got to hurt to lose.

MCCAIN: Of course it hurts to lose, and the easiest thing to do, and I enjoy it enormously, is to feel sorry for myself. But the fact is I am humbled and honored to have the opportunity to have served this country.

I'm grateful for every day. I want to work with this president to address the challenges that face this country, and there is no time to look back and -- with either sorrow or regret. I'm proud of our campaign and I'm proud of what we were able to achieve.

WALLACE: I do want to ask you -- and you may call this looking back. You were very honest in the last few years about saying that your one big regret about the 2000 campaign was trimming on your views about the Confederate flag in South Carolina. What's your biggest regret about this campaign?

MCCAIN: You know, I don't have a lot of regrets about it. I think we ran an honorable campaign. I'm proud of the people around us. I'm proud of everything we were able to do.

And so I'm sure that, you know, there's a myriad of books being written right now. I'm sure they will point out the mistakes that were made.

WALLACE: Any second thoughts about Sarah Palin?

MCCAIN: Oh, no. I -- listen, I think the world of Sarah Palin. She energized our party. She has a bright future in our party. I'm pleased to have known her and her wonderful family.

WALLACE: Finally, after a lifetime of service, how do you view what lies ahead for you?

MCCAIN: A chance and an opportunity to continue to serve, and I think that there is one beneficial result of our campaign, and that is perhaps I can have -- be more effective here in Washington in these very difficult times.

I cannot overemphasize how difficult and challenging these times are for America and for all of us to try to work together.

WALLACE: Senator McCain, thank you. Thank you for coming in today. And you are always welcome here, sir.

MCCAIN: Thanks, Chris. Thanks for having me.

WALLACE: Up next, we turn to the Democrats' plan to save the economy. We'll get the latest from one of their point men, Senator Charles Schumer, after this quick break.

(COMMERCIAL BREAK)

WALLACE: Job one for President Obama and congressional Democrats is jump-starting the economy, and our next guest is at the center of that effort.

Charles Schumer is one of the Democratic leaders in the Senate and vice chair of the Joint Economic Committee, and he joins us from our Fox News studio in New York.

Senator Schumer, let's start with the...

SCHUMER: Good morning.

WALLACE: ... Democrats' $825 billion economic stimulus package and President Obama's calls for bipartisanship.

Have you heard anything from Republicans in these meetings over the last few days and weeks where you say, "All right, we'll take that out," or, "We'll put that in?"

SCHUMER: Oh, yeah. I mean, the president-elect and many of us are trying to work very closely with the Republicans, and I think it's going to make -- I think we're going to have a very good package.

A third of the package is tax cuts. That's generally the way the Republicans prefer to jump-start the economy. We prefer -- we think that tax cuts are probably not the most efficient way to do it, but in effort to compromise, there is a significant chunk of tax cuts in there.

I do worry. Now every business group is coming to lobby for their little tax cut or another little tax cut, and we have to be careful about that.

But overall, the air of bipartisanship is in the air, and that's been set by President-elect Obama. But even Senator Reid last week said we're going to allow Republicans to offer amendments on the floor as long as they're relevant.

And it's a different -- it's a different era. It's a much more bipartisan era.

WALLACE: Well, you say...

SCHUMER: And President -- the president deserves credit for that.

WALLACE: Well, you say that, Senator, but you heard Senator John McCain say that yes, the Republicans got to vote, but the Democrats basically wrote the bill, and so far that it's primarily a Democratic bill that he says he can't support.

Let me ask you specifically about one part of it. The non- partisan Congressional Budget Office did a review of the $355 billion that's going to be the spending that's going to be primarily for the infrastructure, and they say that less than half of that $$355 billion would actually be spent in the next two years while the recession is at its worst.

SCHUMER: Right, but they...

WALLACE: How do you respond to that?

SCHUMER: ... do say -- they do say that 75 percent of the whole package...

WALLACE: No, they don't say that.

SCHUMER: ... the whole 825 -- yes, they do.

WALLACE: No, they don't.

SCHUMER: Of the whole package.

WALLACE: That's what -- that's what -- that's what Peter Orszag, the head of the budget office...

SCHUMER: Yes.

WALLACE: ... at the White House, says. The CBO only analyzed the $355 billion and said more than half of it won't be spent in the next two years.

SCHUMER: OK. I believe that the analysis that they've done and everyone else done -- because much of the other package is for direct spending.

And let's just talk for a minute. There are three goals of this package, each very important. And I think Obama has wisely put these together. The first is to get the economy moving right away, to get money into the economy, because it's headed south. It is in deep recession.

And if we go over the line and head into a deflationary spiral downward, almost no one knows what to do. So last week we had a Democratic caucus meeting and two conservative Republican economists, Martin Feldstein and Mark Zandi, said the package isn't big enough. So you have to get money into the economy right away.

The second part of the package is creating jobs. The president has wisely promised to keep or create 3 to 4 million jobs, and that's very important at a time when we've been losing over the last two months half a million jobs a month.

But the third, and this is the most interesting part of the package, and it relates to your question, is to make sure we improve the efficiency of this economy so that, God willing, when we get out of the recession, we have something to show for it.

So completing our power grid and making it more energy efficient; having I.T., information technology, in health care -- those are things that are not going to be spent immediately, but they're going to improve the efficiency of the economy in the long run.

And what we want to show, unlike the last stimulus package, after the package is over we have something to show for it -- new roads, new bridges, I.T. So I think that it's a well balanced package...

WALLACE: But -- but -- but here's...

SCHUMER: ... in terms of where it goes.

WALLACE: Senator, if I -- if I may ask a question here, let's assume that the...

SCHUMER: Please.

WALLACE: ... CBO is right when they say the 355 billion in spending, primarily for infrastructure -- more than half of that won't come in the next two years.

Then you've also got the budget chief for Barack Obama, Peter Orszag, who's saying 75 percent of the total package will be spent in the next 18 months.

SCHUMER: Right.

WALLACE: That would seem to indicate that you need -- that the tax cuts are the part that's going to come out in the next 18 months and it's the spending that won't come out. So maybe you need more tax cuts and less spending.

SCHUMER: No. In fact, what the economists say, Chris, is tax cuts get into the economy more slowly than spending. And in fact, the major criticism of the last stimulus package was it was only tax cuts and it didn't have much of an effect.

So for instance, money that gets the economy pumped up right away to make sure the states don't either raise taxes or cut back; money that goes into immediate programs, some of the infrastructure and helping increasing unemployment benefits and things like that, will get -- that's the number one way to get the economy going right now, and that's not tax cuts.

The tax cuts probably kick in at the middle level. In other words, the first thing that would kick in would be the spending. The second would be the tax cuts. And the third would be some of the infrastructure that's long range.

WALLACE: Well, then, Senator, you're not...

SCHUMER: But I would say this, Chris. Just one point here. The long-range infrastructure, the energy stuff, some of which is tax cuts, some of which is spending, the I.T., some of which is tax cuts -- I proposed making it easier for middle-class people to keep their kids and put their kids in college.

That's a little long term, but you don't want to see a kid drop out of college because even though they deserve to be in college they can't afford it. Those are getting broad bipartisan support.

WALLACE: Well, Senator, I mean, when we just heard from John McCain - - what you seem to be saying is, "Sure, we're going to vote. We'll let you offer your amendments. We'll let you vote and mark up the bill, and we're going to beat you, and we're going to put out basically the package that we have right now."

SCHUMER: I think you're going to find a large number of Republicans voting for this package. There has been a lot of input. I regret that Senator McCain has said he's not going to vote for it.

But you know, bottom line is a package that is a third tax cuts and about a third infrastructure and a third pumping money into the economy -- almost every economist that I have talked to says it's the right balance. And most -- as I said, some are conservative economists -- say it's too little on the spending side.

WALLACE: All right. I want to...

SCHUMER: Martin Feldstein said...

WALLACE: Senator, Senator...

SCHUMER: ... to us the other day...

WALLACE: ... I want to...

SCHUMER: ... he said spend quickly. That's your number one goal.

WALLACE: Senator, let's move on, if we can, to the financial...

SCHUMER: Sure.

WALLACE: ... bailout, the so-called TARP bailout. There's increasing talk that the $700 billion financial rescue package isn't enough, that the banks are in such trouble that you're going to need even more money. Do you support that idea?

SCHUMER: Well, we'd have to see how the money was spent. Obviously, there's a lot of disquietude about the first TARP, the first 350 billion, and now the president has promised to put much more controls on how the money is spent, to have much greater transparency and, very importantly, to put a significant amount in putting a floor to the housing market and dealing with the mortgage mess. So if we need more money, it's something we'll all give a careful look, but not without controls and conditions. That was the regret of the first package, the first part of the package, that those were not there.

WALLACE: Let's turn, if we can, to foreign policy. We were talking with John McCain about this question about investigating what went on the last eight years.

Speaker Pelosi told me last week that Congress doesn't have the right to ignore what went on the last eight years, if there was law breaking. As we said, the attorney general-designate is leaving that possibility open.

You heard John McCain just say that's the worst thing we could do, look back towards the last eight years and try to second-guess what a bunch of people in the intelligence field did. What's your feeling on this issue?

SCHUMER: My feeling is generally that of President Obama, that we should be looking forward, not backward. How do we correct the mistakes of the past and how do we keep ourselves secure and preserve vital liberty?

If there are egregious cases, I don't think you can say blanket no looking back, no prosecutions. If there are egregious cases, yes, you have to look at them.

But overall, the tone of Barack Obama and of Attorney General Holder - - I've spoken to him privately on this, as well as what he said at the hearing -- is not to spend too much of our time, a lot of our time, looking backward and pointing fingers.

It's, rather, going forward and making the policy better in the future.

WALLACE: Senator, what happened to Caroline Kennedy's bid for the New York Senate seat?

SCHUMER: Well, the bottom line is -- first, I would say we have a very strong candidate in Kirsten Gillibrand. Caroline Kennedy would have been a very good candidate. I thought so. She's a smart, hard- working person. She'd be an excellent senator. She would have been...

WALLACE: What happened?

SCHUMER: ... an excellent partner. What happened was that she decided, as she said, at the last -- at the end of the day, not to run because of personal and family reasons.

And I think we ought to respect her privacy and leave it at that.

WALLACE: You know that there's a big difference -- and we're hearing different things from the Democratic governor of New York, Governor Paterson, and from Caroline Kennedy's camp. Did she drop out or did David Paterson decide for a variety of reasons, including taxes and nannies, that she wasn't up to the job?

SCHUMER: No, I believe she dropped out. But I think the specifics of the conversation you ought to leave -- you ought to talk to Governor Paterson and Caroline Kennedy.

I'm not going to get into the details of their conversations between one another.

WALLACE: Are you satisfied with the way that Governor Paterson handled this process?

SCHUMER: Well, I think you can take the governor at his word. I know, because I talked to him regularly through this process, he was really -- it was a difficult decision, a weighty decision.

And just about all of our discussions were the merits -- who would make the best candidate, what are the pros and cons of each.

I think the one -- and that's a difficult decision and, you know, you don't always say, "Well, on day one here's what I think," and it's going to be the same on day 20 or day 40.

The one thing he said he did wrong is he called it the wrestling match, wrestling in his own mind with what -- who was the best candidate. He shouldn't have talked about that wrestling match publicly, and I think we can leave it at that. But that's hardly the most venal of sins.

WALLACE: The new senator, Kirsten Gillibrand, gets a 100 percent rating from the National Rifle Association. She was the only Democrat in the New York delegation, congressional delegation, to vote against the $700 billion bailout. Is she really the best choice to be the senator from New York?

SCHUMER: Well, I believe she's a great choice. There were many good candidates, and in my conversations with the governor I never said there ought to be one. We went over the pros and cons. And we had a very good and deep bench.

I'm very happy with the choice of Kirsten Gillibrand. First, she's a hard worker. She's a good legislator. She's sort of a go-to gal. In other words, you have a problem, you go to Kirsten, and you know there's going to be a lot of hard work, intelligence and ultimately success.

The district she represents is quite different than much of the state. It's very rural. In some ways, it's more like Montana than New York City. It has no large cities. And yet even there, she has a very Democratic record.

Her ADA rating, I think, was in the high 90s, strongly pro- choice, strong on gay rights. There are some issues where she would disagree with the majority of New Yorkers. Certainly with me, gun control is one of those. As you know, I was the sponsor of the Brady law and the assault weapons ban.

But let me say this. As Kirsten begins to represent the whole state, and she's already downstate listening, you learn that the -- you learn the damage that gun violence, for instance, causes in cities and that many of those guns come from out of state. So nothing the city or state can do on its own can stop that.

WALLACE: Senator Schumer...

SCHUMER: So let me just say this. She...

WALLACE: Well, no, Senator Schumer, let me ask you a question, because we've got about 15 seconds left.

SCHUMER: Yeah.

WALLACE: Just real quickly, can you say at this point that you would support her when she runs for election in 2010?

SCHUMER: I think she's going to be a great, great candidate, and we're going to work very hard in the Senate. I don't make endorsements in primaries two years in advance, but I have every expectation of supporting her, and I think she's going to be very well received throughout New York State.

WALLACE: Senator Schumer, we want to thank you, as always. Please come back, sir.

SCHUMER: Thank you. Nice to talk to you, Chris.

WALLACE: Up next, our Sunday regulars review the substance and ceremony of the first 100 days of President -- or, rather, the first days of President Obama. What did he do right? Were there any missteps? Back after the break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: What I think unifies this group is recognition that we are experiencing a unprecedented, perhaps, economic crisis that has to be dealt with and dealt with rapidly.

(END VIDEO CLIP)

WALLACE: That was President Obama in his bipartisan outreach to congressional leaders to pass an economic stimulus package.

And it's time now for our Sunday regulars -- Brit Hume, Fox News senior political analyst, 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, after listening, as we just did, to John McCain and Chuck Schumer, how us President Obama doing in his bipartisan outreach to try to create a compromise in this economic stimulus package?

HUME: Well, I guess he's, to some extent, kept his powder dry on the final contours of a stimulus bill, but clearly it will not enjoy in its current form in the House much bipartisan support.

It will be rewritten, at least to some extent, and perhaps to a large extent, in the Senate, and my guess is that along the way he will go along with whatever comes out of there. And I think that's really sort of a secondary question.

And the primary question really, Chris, is whether what he's trying to do here will work. Now, we may never know, because when the economy recovers, people will claim that this did it, or that did it, or the likelihood is if the economy recovers, it will be because the Fed did it the way the Fed always does, by upping the money supply, lowering interest rates.

And it will take a while for that to filter into the economy, particularly with the banking system still, to some extent, really on hold. But I mean, I think that's the thing to worry about from the Obama corner, is whether this kind of -- it used to be, you know, you passed these stimulus packages, it took a while for the money to get spent. It got spent after the recession was over, but it was never big enough to do any real harm. This one is big enough to do real harm.

WALLACE: And, Mara, I was fascinated in the difference between McCain and Schumer on the contours and what they think will work in a stimulus package. I mean, it's the old Republican-Democratic argument. Democrats want more spending. Republicans want more tax cuts.

LIASSON: Well, I think that was one of the most interesting things that happened this week. You know, the CBO, as you pointed out, put out this report that said only 50 percent of it can be spent in the next two years or 18 months.

The White House said, "No, no, no, we have a different analysis. We think 75 percent of it can be spent in 18 months," and they...

WALLACE: So they were at 75 percent of the total package.

LIASSON: Of the total package, and they said the reason CBO's numbers came out so low is because they didn't include the tax cuts.

Now, what I assume that means is they're going to defend -- they are insisting that 75 percent is the minimum of what has to be spent in the first 18 months, so that means they're going to defend the proportion of tax cuts that are currently in that plan.

Now, that's something that he's going to have to really do battle with Democrats if he's going to keep that. So the White House is, in effect, saying that in this case tax cuts, contrary to what we've always heard in the past, are stimulative.

WALLACE: And the other thing I found interesting in the argument that Charles Schumer made -- he, in effect, said, "Look, some of this is not economic stimulus. Some of it just spending that we think will help the economy in the long term," which, of course, begs the issue, why put it in an emergency economic stimulus package.

KRISTOL: Yeah, and I think Republicans actually should move to say, "OK, let's take the long-term stuff and let's have a normal legislative debate on it." That's why they have committees of Congress. Let's have appropriations bills for the different agencies and try to strip that out.

I actually am pretty amazed how badly as a political matter this debate is going so far for Obama and for the Democrats. I mean, I would have thought this would be a slam-dunk. We're going through a very -- we're in a pretty steep recession. It's going to get worse. Obama is a popular new president. The Democrats have big majorities.

I should have thought they could just have been dominating this debate and pretty much insist on what they want, and put Republicans in the position of feeling incredibly nervous to be critical of this bill, or someone like Senator McCain to be saying that he intends to vote against it.

And I myself sort of a month ago was saying to Republicans, you know, "Gee, I'd be a little careful here looking like the Herbert Hoover do nothing party."

But the stimulus has so much bad stuff in it, and Obama has lost control of the debates in the degree that, as Mara suggested, they're now the ones who are saying there has to be a lot of tax cuts in it, which is then confusing. You know, then why all this long-term spending?

And they've let the House Democrats get out of control, I think, in writing a -- sort of a pork-laden bill. I think actually it's not a terribly -- politically, the Republicans have more room to argue for changes, and ultimately, I think, maybe to vote against it without fearing the kind of political consequences I would have thought they would have feared a month ago.

WILLIAMS: I don't know. I have a different take on this in that I agree with you that the House Democrats are out of control. I think they think it's a Christmas tree and they're just trying to put a lot of spending on it.

But if you stop and think about the idea of attending to real need in the country at a time of economic crisis, people who are facing extended unemployment -- and we've seen jobs this week. Who can believe Microsoft laying off, you know, 5,000 workers?

I think there has to be attention to making sure that health care, education, in specific in the states don't go into large deficits, don't start increasing taxes on the state level, something that would drag down the national economy.

So you've got to have some spending that would shore up the social safety net, if you will, and one way to do that is to put people to work, and that's when you come to the infrastructure projects. That's when you come to things like Medicaid and education.

But the problem I see is that it's just as you said. I think the House Democrats are reacting to the partisanship that was put in place long ago by Republicans who felt that -- you know, Democrats felt they couldn't -- they didn't have any voice.

The big news...

WALLACE: It's the Republicans' fault?

WILLIAMS: This week the Republicans said to me, "Oh, you know, we were in this meeting with President Obama, and President Obama says I won," meaning that he -- you know, we're going to have here payroll cuts -- tax cuts, we're not going to go with individual tax cuts.

Well, I said, "Well, he did win. He did win the election," and that's -- part of what the debate was between John McCain and Barack Obama was about how you go about these things.

WALLACE: All right. Let's switch, if we can, to the foreign policy side of this, because President Obama made a lot of moves in that.

Particularly, Brit, he has started a process to close Guantanamo Bay within a year. He's going to review interrogation and detention procedures. What are the risks and the rewards for him in all this?

HUME: Well, the rewards, I guess, stem from the fact that you can't break all your campaign promises, and a great many liberals feel that by the -- by the nature of the selections he's made for his cabinet and senior advisors, that he's betrayed them on a number of accounts, by appointing mainstream -- some might say, to some extent, even conservative advisers.

So along comes these two matters, Guantanamo and prisoner treatment, interrogation. On Guantanamo, he announces an intent to close the base, but he hasn't worked out how it's going to happen. That will -- presumably, that will get done in the meantime, but it makes him look a little foolish that he has no place to put these prisoners.

And heaven knows, it will be mystery what would happen if we were to capture, as a number of people have pointed out, Osama bin Laden. We wouldn't know what to do with him. Where would we put him? Where would we house him?

And then, of course, there's this...

WALLACE: And how would we question him?

HUME: Exactly. Well, the questioning part is interesting, because there's a back door in that policy announcement.

He says, "We're going to go by the Army Field Manual, but perhaps we can adopt later some additional methods," not to say enhanced interrogation techniques, which I think in the fullness of time he and his team will come to realize really did help over these past seven years and will likely be needed again.

WALLACE: Let's, Mara, just step back, in the couple minutes we've got left in this segment. Beyond the specific actions, the early days of a presidency are obviously about symbolism, about sending a message.

How do you think he did in -- in sending the message he's about change and he's about openness?

LIASSON: I think he did really well, actually. I think the Guantanamo -- the three executive orders were big, sweeping, political messages. The directives on transparency and ethics, even though there were some very big exceptions -- you talked about John McCain -- with John McCain about one of them. You know, he made a -- he gave a waiver to somebody who was a lobbyist. Still, those things, you know, send an important message. I think, you know, trying to put everything on the Internet, even coming to the White House briefing room -- I think he's off to a pretty good symbolic start.

Look, the details are very, very difficult. And they might bedevil him later. But I think, you know, he has -- he has signaled change very, very clearly.

KRISTOL: I think the Guantanamo stuff is a huge mistake both politically -- for him to lead with that in his administration -- what is the left -- if he just says, "Look, we're reviewing this for 90 days," is the left going to scream and yell because he hasn't issued an executive order on day one?

HUME: Yes.

KRISTOL: I don't buy that. Well, maybe. Then let them scream and yell. That would have been good for him. Instead, he's saying, "We're going to close Guantanamo," at the same moment that reports...

HUME: In a year.

LIASSON: In a year.

KRISTOL: Well, but at the same moment reports are coming out that the Bush administration probably was too quick to release people from Guantanamo, because some of those people have come back onto the battlefield and fought against Americans. I think that was a mistake.

WALLACE: Real quick?

WILLIAMS: I think it was the right move. I think it's what he promised. Otherwise, he'd be going back on his promise.

The problem is how do you go about making sure that America is safe even as you keep to American values in terms of making sure that people have due process and their day in court.

One last thing. I'd say the banks need to get some action here.

And you know, Brit, the financial system needs to crack down on the banks. We give money to the banks. They don't lend money to the people. That's -- the Fed -- why doesn't the Fed do that?

WALLACE: Yeah, why not?

All right. Wait, wait, wait.

KRISTOL: Juan's having trouble getting a loan.

(LAUGHTER)

WALLACE: All right. We have to take a break here.

But coming up, New York gets a new senator, and it's not Caroline Kennedy. So what happened? We'll ask our panel when we come right back.

(COMMERCIAL BREAK)

WALLACE: On this day in 1961, John F. Kennedy held the first live televised presidential news conference. An estimated 65 million people watched the new president take questions from reporters.

Stay tuned for more from our panel.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

NEW YORK GOVERNOR DAVID PATERSON: I wish I had not showed all of you the wrestling match. I think that I may have, just in an attempt to be as transparent as possible, publicly gone through the back and forth of my decision.

(END VIDEO CLIP)

WALLACE: That was New York Governor David Paterson joining the criticism of the way he handled the appointment of Hillary Clinton's replacement.

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

So, Brit, how do you sort out the he said-she said of Caroline Kennedy maintaining she dropped out voluntarily and sources close to David Paterson saying no, he dropped her?

HUME: I think he dropped her, and I think she dropped out accordingly, and I don't think there's much more to it than that. I don't -- I think he decided he didn't want to pick her, that she had...

WALLACE: Why not?

HUME: Well, I'm not sure she's that strong a candidate. Her public appearances did not go well. And you know -- and I don't think he could see much political gain in doing so for himself, so he picked somebody else.

WALLACE: And what do you make of the spectacle, Mara, of the night of all of this happening, sources close to David Paterson, the governor, saying she has nanny problems, she has marital problems, she has tax problems -- I mean, trashing her?

LIASSON: Really, really lame and really unseemly. However, the moral of the story is there should be special elections to replace outgoing senators. I mean, I think that the story in Illinois comes to the same conclusion, even though, of course, in the end it was done in a less messy fashion.

But I mean, this is what happens when you have an audience of one. I thought it was handled just terribly. I think he ended up being hurt, even though maybe he did something that he thought was in his political best interests.

But I think in the end the governor comes out with a big black eye.

WALLACE: You know, there was a famous -- I guess it was a movie called "Garbo Speaks," and the idea that this famously silent person actually talks and people are underwhelmed is the lesson here for Caroline Kennedy.

Better to be America's silent princess?

KRISTOL: Yeah, I guess so. And I'll tell you, Republicans, who have been pretty -- you know, a little demoralized over the last few months since the election, have been cheered up a lot by Governor Paterson of New York, Governor Blagojevich in Illinois.

Apart from the sort of just mismanaging their offices or, in Blagojevich's case, something worse, they set up situations in two Democratic states where there are likely to be primary fights in the Senate races and in gubernatorial races where Republicans really have a shot at picking up one or both of those either Senate or gubernatorial seats.

And then in Delaware, they've appointed a place holder so Senator -- Vice President Biden's son can run. I'm not sure how popular that's going to be in 2010. And there's a popular Republican congressman, Mike Castle, who could run there.

So actually, despite the sort of general popularity of President Obama and general Republican disarray, some of these Democratic governors are helping out.

WALLACE: You know, Juan, a number of conservatives have been saying this week that this shows the double standard of the national media, the way they handled Caroline Kennedy, and although it got a lot of coverage in the New York papers, it didn't in the national papers, as compared to how they would have handled Sarah Palin had she dropped out in the middle of the night.

WILLIAMS: But wait a second. But Caroline Kennedy dropped out after the press gave her a rough going over. The New York Times, the New York papers, T.V. interviews -- when she's in upstate New York, people said she wasn't going out and talking to regular people.

WALLACE: So you don't think...

WILLIAMS: She stuttered. She...

WALLACE: Do you think she was treated as badly as Sarah Palin?

WILLIAMS: Well, I think Sarah Palin was in a national political campaign, so the intensity was a little different. But I don't think Caroline Kennedy got any easy treatment.

In fact, I think the anticipation was that she would be treated as the princess, as Bill described her. But... HUME: And then she talked.

WILLIAMS: Yeah. And all of a sudden...

HUME: Then she started talking.

WILLIAMS: ... the princess's tongue was not -- was not exactly fluid, you know? It didn't work well.

WALLACE: What do you think about that, Bill?

KRISTOL: You know, I think there's an advantage to trying to -- to letting politicians earn their way up -- as Sarah Palin did, incidentally - - instead of trying to pick, you know, scions of families or people with great name I.D. or something, and...

WILLIAMS: Did you say -- did you say earn her way up? You think Sarah Palin was the best pick for John McCain?

KRISTOL: Sarah Palin...

LIASSON: Well, she at least held office.

KRISTOL: ... became governor of Alaska by defeating an incumbent Republican governor.

WILLIAMS: Well, that's fine.

KRISTOL: She wasn't a wealthy person with a big name who was...

WILLIAMS: No, but I would...

KRISTOL: ... plucked out.

WILLIAMS: ... guess that 90 percent of Americans never heard of her.

KRISTOL: And the Democrats, unfortunately -- the Democrats, unfortunately, have now become the party of heredity and of...

(CROSSTALK)

KRISTOL: It's true.

WILLIAMS: Two terms -- Bush, Bush, or...

LIASSON: Just think how...

KRISTOL: Well, that -- Bushes are over. Now the Republicans are the party of the Sarah Palin struggling types.

LIASSON: Well, just think -- you know what? Just think how different it would have been if Caroline Kennedy said, "Not only do I want Governor Paterson to appoint me, but no matter what happens, I'm going to run in 2010 for this seat."

WILLIAMS: Yeah, that would have been interesting.

LIASSON: Yeah.

WALLACE: All right. Let's switch, if we can, because you did mention Illinois. And who would have thought that the appointment of Roland Burris...

LIASSON: That one looked pretty good, yeah.

WALLACE: ... would be handled more smoothly and in a more dignified fashion than what happened in New York?

But Rod Blagojevich faces a senate impeachment trial in Illinois starting tomorrow. And he had something to say about it on Friday. Let's watch.

(BEGIN VIDEO CLIP)

ILLINOIS GOVERNOR ROD BLAGOJEVICH: I'm not even getting a fair trial. They're just hanging me. And when they hang me under these rules that prevent due process, they're hanging the 12 million people of Illinois who twice have elected a governor.

(END VIDEO CLIP)

WALLACE: You know, you've just got to love this guy.

(LAUGHTER)

Brit, I mean -- and what makes this even more curious is they're going to have the impeachment trial starting at high noon in Springfield, Illinois on Monday. Is Blagojevich going to be there? No. Is he going to be defending himself? No. He's going to be in New York on "The View."

HUME: Well, it's probably a better forum for him. I'm sure it is.

I would also say this, that I think it would be nice if we waited until we'd actually heard some of the tapes. We've been told about them by a man with a penchant for exaggeration. I'm talking about Patrick Fitzgerald. That is all we have.

And I'm not saying that his excerpts weren't correct, but we don't have context. In other words, I think Rod Blagojevich is entitled to a little bit of fairness, and I'm not sure he's gotten any yet, least of all from the media.

WILLIAMS: Well, he's not going to be able to play the tapes at the impeachment hearing. And he's complaining...

HUME: I'm not talking about him. I'm...

WILLIAMS: Right.

HUME: They do have them. Presumably they will be played. WILLIAMS: Not the -- not the Senate. The Senate doesn't have them.

WALLACE: Apparently, I'm told that there -- that in the last couple of days there was a decision made that they will allow them to play some of the tapes.

WILLIAMS: Some, but they're not going to play the entirety. And in addition, the way Blagojevich...

WALLACE: Of course, that's not the only case against him. There are other issues besides...

WILLIAMS: Right, there are other issues. But Blagojevich is complaining that he is not going to be allowed to present all of his witnesses, and that's why he's not going to participate.

I think it's a -- you know, it's an appeal, I think, to the grand -- to the jury that he's eventually going to face in northern Illinois when Patrick Fitzgerald brings this case.

WALLACE: Well, let me ask you about that, because that's one of the things that we keep hearing. He knows he's going to get removed from office, and so he's really working the jury pool.

Do you think holding these news conferences, do you think going on "The View," helps him with the -- helps him with the jury pool?

WILLIAMS: Oh, sure. He's making himself into a victim. He is -- not only is he making himself into a victim, he's now making himself into a champion of the people.

He's saying he's suffering political attacks from a state legislature that doesn't want to help people with various programs that he's put in place to help veterans and the elderly, and of course that he's the guy who appointed a black man, Burris, to the Senate.

I mean, this is -- to me, this is theater. And yet so many people are falling for it. I just can't get it.

KRISTOL: It's great. You know, Rod Blagojevich in Illinois, Eliot Spitzer in New York, Jim McGreevey in New Jersey -- what is with these Democratic governors?

WILLIAMS: Oh, stop.

KRISTOL: I'm serious. If you had said four years ago three Democratic governors in major states are all going to be forced out of office because of scandals -- it's not the -- anyway, Republicans are looking for some silver lining here in -- in a Democrat...

LIASSON: Because they have so little otherwise.

KRISTOL: Exactly.

(LAUGHTER) LIASSON: Because they have so little otherwise.

KRISTOL: And Blagojevich is -- you know, Spitzer and McGreevey is gone. Blagojevich is still there. We've got to enjoy it while we can.

WALLACE: Do you -- Mara, do you see any possibility of this -- I mean, you know, in a criminal trial, all you need is one person.

LIASSON: Oh, he could -- he could -- he could get through. He could come out -- yes, he could not be convicted. Or you're talking about the actual trial, not the impeachment.

HUME: Yeah. You know, he's going to be -- he's going to be...

LIASSON: Oh, no, I think he's going to be impeached. You're talking about the actual trial.

WALLACE: I'm talking about the criminal trial.

LIASSON: Yes, I think he could -- he could make it through.

WALLACE: And also, as Brit rightly points out, you know, particularly in the case of the criminal case, and Patrick Fitzgerald, we don't know what we don't know. Thank you all, panel. See you next week.

Up next, the sights and sounds of President Obama's first week on the job. Stay with us.

(COMMERCIAL BREAK)

WALLACE: Packed into President Obama's first few days in office were high profile meetings on the economy and the war on terror, an inauguration do-over, and some slip-ups in White House stagecraft.

But it started with a moment for the history books.

(BEGIN VIDEO CLIP)

OBAMA: ... so help me God.

CHIEF JUSTICE JOHN ROBERTS: Congratulations, Mr. President.

(APPLAUSE)

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: Enjoy yourself. Roam around. Don't break anything.

(LAUGHTER)

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

BIDEN: My memory is not as good as Justice Roberts', Chief Justice Roberts'. Does anyone have the -- no, I...

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

H. CLINTON: Well, I am absolutely honored and thrilled beyond words.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: I've given you an early gift -- Hillary Clinton.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

CHIEF JUSTICE JOHN ROBERTS: ... that I will faithfully execute the office of president of the United States.

OBAMA: ... that I will faithfully execute the office of president of the United States.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

GIBBS: What started today was a process that the president committed to during the campaign to close the detention facility at Guantanamo Bay.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: We can abide by a rule that says we don't torture.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: ... create 3 to 4 million new jobs. That is going to be absolutely critical.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

BOEHNER: ... how you can spend hundreds of millions of dollars on contraceptives -- how does that stimulate the economy?

(END VIDEO CLIP) (BEGIN VIDEO CLIP)

PELOSI: Yes, we wrote the bill. Yes, we won the election.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

QUESTION: Are you using the BlackBerry a lot, Mr. President?

OBAMA: You know, I've won the fight, but I don't think that, you know, it's actually up and running yet.

QUESTION: OK. Well (inaudible).

OBAMA: All right, guys.

QUESTION: Thank you, sir.

(END VIDEO CLIP)

WALLACE: 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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