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Govs. Granholm, Pawlenty, Rendell, and Sanford on "Fox News Sunday"

Govs. Granholm, Pawlenty, Rendell, and Sanford on "Fox News Sunday"

Fox News Sunday - February 22, 2009

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

The economic stimulus is law. Now what happens? How will hard- hit states spend the money? And what about the president's plan to save homeowners from foreclosures?

We'll ask four influential governors -- Democrats Ed Rendell from Pennsylvania and Jennifer Granholm from Michigan, and Republicans Mark Sanford from South Carolina and Tim Pawlenty from Minnesota. The state of the states, with Rendell, Granholm, Sanford and Pawlenty, only on "Fox News Sunday."

Then, race in America.

(BEGIN VIDEO CLIP)

ERIC HOLDER: In things racial, we have always been and we, I believe, continue to be in too many ways essentially a nation of cowards.

(END VIDEO CLIP)

WALLACE: We'll ask our band of Sunday regulars about the speech that has everyone talking, all right now on "Fox News Sunday."

And hello again from Fox News in Washington. Well, it was another wild week for the economy. President Obama signed the stimulus plan and offered help for struggling homeowners, and yet the stock market took another big hit.

The nation's governors are in town, and we've invited four of the leading voices to discuss how all this is affecting their states -- Democrats Ed Rendell of Pennsylvania, chairman of the National Governors Association, and Jennifer Granholm from Michigan, and Republicans Mark Sanford of South Carolina, chair of the GOP Governors Association, and Tim Pawlenty from Minnesota.

And, Governors, welcome back, all of you, to "Fox News Sunday."

Let's start with the stimulus plan. And as I ask you about it, we're going to put up some statistics from each of your states.

Governor Sanford, South Carolina has the third highest unemployment rate in the country. Under the package, you would get $8 billion that the White House says would create 50,000 jobs in your state, and yet you say you may not accept all of the money, including some of the money for unemployment benefits. Why not?

SANFORD: Two reasons. One, at times it sounds like the Soviet grain quotas of Stalin's time -- X number of jobs will be created because Washington says so. And that's not the way that jobs get created.

I would secondly say what we are looking at is, in many cases, the money that would come to our state comes with substantial strings attached that, frankly, undo a lot of what we're trying to do at the state level.

Take, for instance, unemployment benefits. What we would be required to do would be, for the first time, increase the level of benefit for part-time workers. In other words, right now, it's full- time workers -- increase it to part-time workers.

But this same fund had to go to the feds this fall to borrow $140 million, has come back to ask another $170 million from the fed. And so it becomes somewhat circular. We can't pay for the benefits already in the program, but to get the stimulus money, we've got to increase the program's size and scale.

WALLACE: All right.

Governor Granholm, unemployment in Michigan is 10.6 percent, which is the highest in the nation. And you say you're going to take every one of the $7 billion coming to your state. Why is Governor Sanford wrong?

GRANHOLM: Well, this, to me, is not about philosophical theory. This is about real people who, through no fault of their own, are laid off because of a recession. They need to be able to put food on the table.

So you better believe I'm going to take every dollar that is coming to Michigan. And if my colleagues here in Minnesota and South Carolina don't get -- don't use theirs, I'm going to be first in line to say for my people, for our citizens, to put people to work and to make sure that they can survive through this, I'll take their dollars, too.

WALLACE: Governor Pawlenty, you have criticized -- I'll get to you in a minute, Governor Sanford.

You have criticized the bill that Congress passed, but you say you are going to accept all of the $4 billion in the stimulus package that Minnesota would get.

Why don't you share your Republican colleague Governor Sanford's concerns about the long-term negative effects of this spending?

PAWLENTY: Well, I do. I don't like this bill, but it is now the law. It's not the bill that Mark and I would have crafted, but it's now our responsibility and opportunity to try to implement it.

In Minnesota's case, we are a major net subsidizer of the federal government, and that's unlike some other states. For every dollar we send in, we only get 72 cents back. So we're paying the bill either way. We're going to take our share of the money.

We also don't have some of the same impediments as some other states. In the unemployment area, this is a time to try to help unemployed people, and most of the enhancements that the federal government is requiring the states to undertake on this bill we did years ago. So it doesn't impinge us or hurt us in that regard in Minnesota.

WALLACE: Governor Rendell, Pennsylvania gets the most money of all your four states from the stimulus package, $16 billion.

Weigh in on this argument, but also, you say that you're not sure that this money is actually going to fix the economy. Why not?

RENDELL: Well, in the long term, I don't think anybody can be sure that any single thing is going to fix the economy. It has to be a number of things, attacking on all different sides of the problem. But I do think it will create jobs.

I mean, one thing I think we all agree on -- and I hesitate to speak for all of us -- is that the infrastructure dollars do produce jobs. There's no question about that. You fix a bridge and people have to work on the bridge.

You fix a bridge and orders have to go out, hopefully, to Pennsylvania, or South Carolina, or Michigan, Minnesota companies, factories that desperately need orders -- steel, concrete, asphalt, lumber. So there are aspects of this plan that are definitely job producers.

And in Pennsylvania, I think we'll net about the same amount of jobs we've lost since August, 60,000 or 70,000 jobs, by the time we're done. So there are elements of this that are terrific.

It's not all stimulus. I mean, part of it is relief, and I think Tim said something that was very important. I'm not sure that we can, over the long run, cope with the higher unemployment compensation standard that this mandates for states, but I don't care.

My people are suffering. My people are hurting. They need that extra money. And right now that's paramount in my mind.

WALLACE: Governor Sanford?

SANFORD: I guess my question would be wasn't it the same sort of short-term thinking that got us into this problem in the first place.

And so if we say tell you what, you know, the unemployment benefit that would be basically foisted on different states is not sustainable, they can't even pay for what they got, but they got to increase spending to -- to -- to pull down these federal funds, it goes to the heart of the bigger problem, which is, OK, you get a two- year window and then what happens.

You're going to substantially increase taxes to get yourself out of the problem then? Are you going to issue more debt?

And I think one of the real issues here is we have $52 trillion in accumulated debt in Washington, D.C. And we don't have a giant piggy bank that we can now raid now that times are tough. All this money is going to be borrowed from the future -- from future generations, from Social Security.

So in essence, we're digging yet another hole for ourselves with regard to unsustainable spending.

GRANHOLM: Except that the president has said that in the budget he's going to present, he will cut the deficit in half. And everybody recognizes you have to deal with that deficit over the long term.

But right now we are in a crisis. Right now we've got people who are hurting.

You've got people who are hurting, too.

(UNKNOWN): Absolutely.

GRANHOLM: And so putting them to work, giving them a chance to be retrained during this recession, giving them the ability to put food on the table and pay for, hopefully, their kids' tuition -- I think that is paramount.

I think, as Ed says, nobody wants to have this as a long-term commitment. But for the short term, to make wise, strategic use of this stimulus, not to grow the size of your state budget, but to make investments that will set you on the right path for the long term I think is a wise move.

SANFORD: I would only make this point. Is there any president who hasn't said they would decrease the deficit in the last 25 years? It's been a fairly consistent refrain.

RENDELL: Well, and the last one who did was a Democrat, and he actually got rid of it.

GRANHOLM: And he did it and left us with a surplus.

RENDELL: I want to follow up with a point that Jennifer made, because it's an excellent point. This is a stimulus, but we know it's a bridge. And hopefully it's a bridge that will be successful and help the country until the economy returns, until growth comes back.

So Mark's point is good. We worry about it. We all worry about it, because even though I won't be governor of Pennsylvania after the stimulus funds have stopped flowing, I worry about what happens to my predecessor. I worry about that deep cliff -- my successor, sorry.

And I worry about that deep cliff. But hopefully this will bridge us until growth returns, and with that growth we'll be able to absorb some of the things -- not all of them, but some of them.

WALLACE: Let me let governor Pawlenty in. Go ahead.

PAWLENTY: Well, just -- the unemployment part of the stimulus bill is 2 percent of the bill. Ninety-eight percent of it is other stuff. And each state is different as it relates to the unemployment part of it, Chris.

And so in -- the $25 increase, in our view, is clearly temporary under the face of the federal law. The other enhancements as it relates to improving eligibility determinations, part-time employment, the so-called trailing spouse requirement -- those vary from state to state.

So each analysis is different state to state. In Minnesota, we've already done most or all of those things.

WALLACE: Governor Sanford, Congressman Clyburn, one of the House leaders from your state, was so upset by your stating that you might not accept all this money, and it seems clear that you're not going to accept all the money, that he put in a provision that state legislatures can override governors.

He also slams you along with three other southern governors for refusing to take some of this spending. Let's watch.

(BEGIN VIDEO CLIP)

CLYBURN: These four governors represent states that are in the proverbial "black belt." I was particularly insulted by that. All of this was a slap in the face of African Americans.

(END VIDEO CLIP)

WALLACE: He says that you're being insensitive to the kinds of problems -- economic, social problems -- that hit African Americans especially hard.

SANFORD: I would just categorically say he's absolutely wrong on that one. I think that any of us as governors -- and we do have 50 different incubators of different ideas and trying to get it right within our respective states, trying to make the judgment as best they can.

But the idea that color would filter into that decision-making process is absurd. What we have looked at is, for instance, what the Congressional Budget Office itself has said -- is that as a result of this stimulus package, there will be less, not more, in the way of economic growth going forward.

And so we keep talking about a short-term window, but the long term of what Congressional Budget Office itself has said will be that there will less -- be less in the way of economic activity, and that impacts blacks and whites alike in my state.

WALLACE: I want to go down the line here. And we'll start with you, Governor Rendell, and just go down. How quickly do you plan or do you think you'll be able to start spending this money? How soon will it get out into the economy?

And secondly, President Obama made it clear that he is going to call out any mayor, any governor, who wastes this money, who spends it on political purposes. How are you ensuring in your state that's not going to happen?

RENDELL: Well, I've decided to devote most of the next two years, my last two years as governor, to be the stimulus enforcer in Pennsylvania. It always works best if the governor does that and doesn't delegate. And I think it's very, very important we get this right.

I think the infrastructure dollars -- we can have people working by May, because we're going to fix it first. We have so many deficient bridges, so much miles of roads to be resurfaced, we can go quickly on that because we don't have to do a right-of-way, we don't have to do environmentals. So as early as May people can be working.

WALLACE: Governor Granholm?

GRANHOLM: The exact same thing. I'm going to be enforcing this. We want to make sure that it's transparent, that not a single dollar is wasted.

Thursday and Friday of this past week, I went around the state to our planning organizations, the folks who decide where bridge and road money is spent. These are the professionals in the local communities.

We've got over $4 billion worth of asks of shovel-ready products as soon as the secretary of transportation allocates the money. And for Michigan, we anticipate it will be about $853 million. We can put people to work right away.

We've got so many shovel-ready -- I wish we had put more money -- even (ph) more money into infrastructure, because that really is a way for us to have a long-term investment and put people to work right away.

WALLACE: Governor Sanford?

SANFORD: I would say two things. One, I would argue that much of this money is already being wasted, that it is inherent in the bill itself, not stimulus, but spending, whether it's money for the Smithsonian, whether it's money for the Park Service, whether it's money for upgrade of digital television.

Secondly, I would say that what we've got to look at is at the end of the day, it's a lot of money, but it's 2 percent of our state economy. And so the idea that from top down we can direct completely what happens as this money gets filtered into the private system I think is at odds with reality.

WALLACE: Governor Pawlenty?

PAWLENTY: We're going to put it to work as fast as possible. Some of the infrastructure dollars can be turned over and ready to go this spring for sure. Other parts of it are going to string out over the next year or so.

But I concur with what Mark said. This bill was a missed opportunity on a number of fronts. One of the fronts is you saw Secretary of State Hillary Clinton in China a few days ago thanking, with great passion, the Chinese for continuing to buy U.S. Treasury debt instruments.

That's another indication of the risk that our country faces by going deeper and deeper and deeper into debt. And the day where the Chinese and the sovereign wealth funds start to stop buying our debt, they're going to have the government equivalent of the mortgage crisis and the savings and loan crisis and the tech bubble occur, because we are not coming to terms with the fact that we're spending out of control.

WALLACE: I want to turn to another subject. The president also announced this week a plan to stem home foreclosures.

Governor Granholm, Michigan has the worst problem of your four states. Almost 10 percent of mortgage loans are delinquent. What do you think of the argument that this is a program that's basically going to reward bad and irresponsible behavior?

GRANHOLM: No, there -- I mean, since November, as governor, I've received almost 200 notices of mass layoffs because of the recession.

People are going into foreclosure not because they are choosing not to pay their mortgage. They are going into foreclosure because of this recession, because they've either lost their job and the price of their home has declined enormously and, of course, all of the ridiculous adjustable rate mortgages, et cetera, that were entered into before.

The bottom line is we want to keep people in their homes. The banks want to keep people in their homes. They don't want to hold these assets. This is one step -- I mean, this is part of a three- legged stool.

The stimulus is one piece. This, with respect to foreclosures, is one piece. And of course, stabilizing the banking system is the third leg of the economic stool that the Obama administration is putting forward, in addition to cutting the debt.

The bottom line is we as Michiganians -- we want to keep people in their homes. This is a desperate time. And what this will allow people to do is to stay in their homes with a reasonable flat mortgage rate that allows the -- both the government and the bank and the person to take a haircut.

I think it's a shared responsibility and I think it's a good plan.

WALLACE: Somehow I have a feeling you haven't persuaded the governor to your left.

GRANHOLM: He hasn't heard all the details yet either, so...

WALLACE: Governor Sanford, home foreclosure?

SANFORD: I think it's a horrible idea.

GRANHOLM: I'm shocked. I'm shocked.

SANFORD: If you look at the numbers, the numbers I've seen are about 2 percent of all mortgages in this country are non-performing. About the other 98 percent -- but let's just make the math simple.

About 95 percent of folks are playing by the rules and struggling but still paying their mortgages. The idea that somebody down the street gets a different system I think is ultimately something that's going to undermine a whole lot of other folks with regard to paying their mortgage.

Secondly, the idea that a judge can go back in and redo a contract that was signed by two parties I think is incredibly dangerous for the precedent it sets.

And thirdly, I would say simply this. There are a lot of other ways of getting at this problem other than giving money back to Freddie and Fannie, who are two of the biggest culprits in causing this problem in the first place.

WALLACE: Governor Rendell?

RENDELL: Well, first of all, number one, Mark, judges do that already in bankruptcy with second homes, so don't be so concerned.

Secondly, are we rewarding bad behavior? No, Chris. I think we're rewarding people who made a mistake and sometimes were duped.

But compare and contrast them to these banking institutions and lending institutions. Are we rewarding bad behavior there? You bet we are. And that's bad behavior by people who should have known better, who weren't duped, were actually, in many cases, the dupers.

And why are we doing it? Because if we don't do it, the whole system collapses. Every economist -- conservative, liberal, moderate, progressive -- you name it -- says that we've got to do these bailouts, as bad as they are, because otherwise the entire system collapses.

WALLACE: And finally, Governor Pawlenty, for this segment, some people would argue that you're rewarding bad behavior, but you know what, you have to do it because if homes get foreclosed in a neighborhood, everybody's property values go down.

PAWLENTY: There's a better way to do this, Chris, and that is to make low interest rates available to people and allow them to choose to refinance. But this notion where the government's going to step in and forcibly reconfigure the terms of an existing contract should scare us.

In Minnesota and in many other states, there's a constitutional prohibition against impairing existing contracts, and there's a reason for that. You can't have the heavy hand of government come in and affect those rights retroactively.

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

But when we come back, we'll discuss the financial markets and the auto industry, and we'll ask the governors how Barack Obama is doing so far. Stay tuned.

(COMMERCIAL BREAK)

WALLACE: We're back now with Governors Ed Rendell of Pennsylvania, Jennifer Granholm of Michigan, Mark Sanford of South Carolina, and Tim Pawlenty of Minnesota.

In the last 13 days, Timothy Geithner, the treasury secretary, announced the outline of his financial rescue plan. The president signed the stimulus plan. He offered his foreclosure plan. And the markets kept going down and down and down, 900 points.

Governor Rendell, why isn't the financial community buying the Obama program?

RENDELL: Well, that's tough to say, Chris. And I think there's a general pessimism here in the country, and it's time for some people to step up.

I think -- look, are each of the plans perfect? Of course not. We hear attacks on the stimulus bill. I've been in politics 31 years and I haven't seen a perfect bill yet.

But I think the Obama administration is taking action, action to solve this country's problems. And contrast it to what went before with the Bush administration. It was absolutely paralyzed, did nothing.

I think action is important. I think these plans are headed in the right direction. Again, almost all of the economists who have looked at this say it's necessary. Mark Zandi, who was Senator McCain's economist, said you can't let the system collapse. And what we're doing on housing is important.

WALLACE: Governor Sanford, there is growing talk even from one of your senators, Lindsey Graham , about possibly nationalizing the banks, some of the most troubled institutions, if only as a temporary measure.

You talk about creative destruction, Adam Smith 's line. No circumstances under which the government should come in and take over on a temporary basis some of these really troubled banks, the biggest banks?

SANFORD: I mean, with all due respect to the federal government, the idea that the group that ran the Katrina rescue would come in and run the banking system of this country I think...

RENDELL: Well, that group's gone.

SANFORD: Oh, really?

GRANHOLM: Thank goodness. We've got a new group in town.

SANFORD: All right. Well, we've done the R&D (ph) thing here. But anyway, I just think that...

(CROSSTALK)

SANFORD: ... that it would be awfully, awfully tough, because, with all due respect, again, to folks in Washington, they don't have a whole lot of financial experience.

WALLACE: So what do you mean by creative destruction?

SANFORD: What I mean is there are literally thousands of small businesses that fail every year across America. And yet that process of discipline in the marketplace, of some making it because they meet a customer need or they have a great product, and some not making it, is part and parcel to the way that our system works.

And if you take that out for banks or for other folks, I think you have a much bigger problem. And I think that the real thing that the market has been signaling here is what they don't like is one series of ad-hoc after ad-hoc after ad-hoc stimulus and bail-outs, because effectively, what they've done is they've frozen up the biggest driver of our economy, which is private capital, because nobody has any idea what the rules are going forward.

WALLACE: Speaking of bail-outs, two of the Big Three, Chrysler and General Motors, came to Washington this week, Governor Granholm, and asked for another $21 billion in emergency loans.

The companies still haven't resolved all their issues with the unions and the bond holders. They still haven't shown a clear path to solvency. Why should the taxpayers keep them on life support?

GRANHOLM: First of all, let's be clear. This is a loan. It's a loan that -- they are attempting to prove viability so they can pay it back. When this happened with Chrysler before, Chrysler paid it back. The taxpayers actually won.

But they did present a very...

WALLACE: Of $1 billion.

GRANHOLM: Right, right, but it was a different time, too, and a different circumstance, and it didn't happen during the course of a major national meltdown.

This problem is -- the problem of the -- with the auto industry is layered upon the lack of consumer confidence. People are not buying cars, I don't care whether they're American cars or international cars. My pal here from South Carolina, who I think is a bit -- I mean, you'd have to say he's a bit of an outlayer [sic] in terms of economic theory. He's somebody who is more of a libertarian than the rest of us or most folks -- would say that this creative destruction would be good.

Every single country that has an auto industry is stepping forward to help that auto industry. Why wouldn't we help this industry, too? Because it needs 3.5 million jobs.

You talk about a stimulus that's supposed to save or create 3.5 million jobs. Well, we would just take that whole thing away. Communities all across the country, from Michigan to South Carolina to Minnesota, would be seeing devastation.

WALLACE: Well, let me bring in the outlier here, Governor Sanford.

You have a BMW plant in South Carolina which, as I -- I think is not asking for any federal help.

SANFORD: Right.

WALLACE: So tell Governor Granholm why residents of your state don't want to keep bailing out her companies.

SANFORD: One, I'd say I don't know that I'm an outlayer [sic]. I think I'm really more fitting with where Main Street is, because when I talk to people back home at a town hall meeting, what they overwhelmingly tell me is, "I'm not getting a bailout. I don't understand why everybody else is getting a bailout."

I would say with regard to automotive companies, there are some structural things that have to change for them to be competitive going forward, some things that the BMWs and other companies across this country and across this world have done that, with all due respect to G.M., they haven't done.

And the idea of throwing in money so you take away that pressure that would force the reform essential to their long-term survival I think is short-term in perspective.

GRANHOLM: You could make a generalization that they haven't done this. I'm telling you we are the poster child state for this reform that has been going on.

We have lost over 400,000 jobs in Michigan just from -- the vast majority of it related to the auto industry because of the restructuring that they have been undertaking. To say that they aren't doing that or that the plans that they have -- have you read them? You probably haven't read those plans. You don't know what they have taken on.

I am telling you that they have taken on enormous efforts to restructure. What they need during this recession is a bridge to be able to make them viable. And do we want in this nation to lose the backbone of manufacturing in this country? Do we want to be a nation that doesn't want to manufacture anything? Because this industry, with all of its...

WALLACE: Wait. I want to...

GRANHOLM: ... thousands of parts...

WALLACE: I want to bring in Governor Pawlenty, who's been sitting here very...

GRANHOLM: I'm just telling you...

WALLACE: Where do you come down on the auto bailout?

PAWLENTY: Clearly, the auto industry needs to be restructured. It cannot continue on its current platform in its current form. And the reason that the unions and the other stakeholders have not cut a deal with the automakers is because they...

GRANHOLM: They have.

PAWLENTY: ... believe the federal government -- not enough -- federal government is going to bail them out.

And so the best way to get...

GRANHOLM: All right.

PAWLENTY: ... this thing restructured, I believe, is in the bankruptcy court and to have the federal government...

GRANHOLM: I think that is...

PAWLENTY: ... continue to plow money into this...

GRANHOLM: ... utter baloney. I mean...

PAWLENTY: Well, Jennifer, let me just finish.

So the unions and the auto companies have been unable to put a deal together that fundamentally restructures the industry. It needs to get done. The only way it's really going to get done is in bankruptcy court. They should have done it six months ago. They should do it now.

GRANHOLM: Governor Pawlenty, have you read the report that they have just submitted? I bet you haven't.

SANFORD: No, but can I...

GRANHOLM: They have -- wait, wait, wait, wait, wait. Let me just respond to this, because the unions have made enormous concessions.

PAWLENTY: Not really.

GRANHOLM: They have -- starting wages have taken a 50 percent pay cut. Don't tell me that they haven't done that. And...

PAWLENTY: How about their...

GRANHOLM: Wait.

PAWLENTY: How about their...

GRANHOLM: Wait.

PAWLENTY: ... retiree health fund?

GRANHOLM: Well, and their retiree health fund -- so what do you want to do about this? Every other country is providing health care to their companies. We do not.

So we are already asking our businesses, not just the auto industry, but other industries that are competing in a global economy, to start 50 yards behind everybody else. Is that fair?

Let's get a uniquely American solution to the health care costs so that we're not asking our companies to compete in the global economy.

PAWLENTY: You want the government to take over the health care system.

GRANHOLM: I do want our government to provide a level playing field.

(CROSSTALK)

WALLACE: All right. I'm going to give Governor Sanford the last word on this, and then I want to move on.

Go ahead, Governor.

SANFORD: I'd just say this. If you look at how the textile industry was decimated in the south, if you look at how the furniture industry was decimated in the south, it didn't take a series of bailouts to restore them back to, again, in some cases losing pieces of businesses, in some cases actually growing market share based on change in the way that they were doing things.

I would also say this. There's one report that we can all look at with regard to the automotive companies and that's their share price. The markets have been saying what you're doing is not working, which is why the shares have continued to move south.

And what's interesting is they came just a couple of months ago and said, "Look, if you just give us this money, we'll get restructuring done and we'll be on our way to getting things right." Here they come back a couple months later asking for another (inaudible) billion.

WALLACE: OK. I want to go to another subject, the fiscal responsibility summit the president's going to be holding tomorrow in the White House. And he's also going to unveil his budget this week.

And we are told it is going to cut the deficit in half from where it is now to where it will be in 2013 from $1 trillion to $533 billion by letting the Bush tax cuts on the wealthy expire and by saving money by pulling troops out of Iraq.

Governor Pawlenty, what do you think of the plan?

PAWLENTY: You asked earlier why don't the markets like President Obama's plans, and you outlined the series of bailouts he's unveiled. Wait till you see the markets' reaction to what he unveils later this week, which is increasing taxes on a -- in the middle of a deep, deep recession. I don't think it's going to be favorable.

I also would concur with what was said earlier. If you believe they're going to take seriously the idea of cutting down the deficit when they are exploding spending at a historic pace, I've got some hunting land for you in northern Minnesota.

WALLACE: Governor Rendell?

RENDELL: Well, I guess it's amazing to me how we forget history. We heard these same arguments when Bill Clinton raised taxes on the top 2 percent of the richest people in America to get rid of the deficit. He got rid of the deficit.

And guess what happened? We produced 24 million new jobs. We had the eight years that were the most successful in the second half economically of the 20th century.

So this rubbish that raising taxes on the richest people in the country is going to hurt our economy is just that. It's rubbish and it ignores history.

This is important. It's the way we're going to reduce this deficit, as well as getting troops out of Iraq, as well as being fiscally sound. All of us announced budget cuts. I cut $1 billion out of the Pennsylvania budget. I closed down 20 percent of the operating lines and programs.

I think Senator Obama -- senator -- President Obama's going to do the same thing.

SANFORD: I, with due respect, say to my friend Ed that, you know, I happened to be a member of Congress back then. And was the president there? Yes. Were there headlines at that time reading is the presidency longer -- any longer relevant? Because at that time you did have a Republican House and Senate that I think had a lot to do with that balanced budget.

But what's interesting...

RENDELL: But so did -- so did raising taxes.

SANFORD: Certainly, and -- but what was interesting is no matter what was accomplished, it's simply the tip of the -- tip of the iceberg, because the operational deficit is a very small component of the larger deficit that this country has run with regard to Social Security, Medicare, and a whole host of different social programs.

WALLACE: OK.

Finally, and you know we're going to have to do some politics here, I have a group question for all of you.

Any of you willing to say that you absolutely, positively will not run for president in 2012? Please raise your right hand. This is a trick question.

I know you can -- are saying it because of the fact that you're Canadian born, so you can't run.

And you've got a president of your own party.

I notice that the two of you did not raise your hands.

Governor Sanford?

SANFORD: Just because I -- I would say this. My dad died of Lou Gehrig's disease when I was in high school, and the day you got's the day you got. It hit home for me how you take one day at a time.

So is it a plan? Absolutely not. Is it a likelihood? Absolutely not. But I've learned that you never say guaranteed on tomorrow when you don't know tomorrow.

WALLACE: Is it something -- because there's obviously been a lot of talk, and especially given the strong line you've taken against the budget -- against the stimulus package -- well, he's setting himself up for 2012.

SANFORD: Well, if you go back to those days in Congress, I took a lot of lonely votes back then tied to spending, and this is not exactly a new pattern for me.

WALLACE: Governor Pawlenty?

PAWLENTY: I'm going to make news right here on "Fox News Sunday" and tell you I am going to run for president of my Eagan youth soccer association.

(LAUGHTER)

WALLACE: For a second there I was really excited.

PAWLENTY: Actually, I'm thinking about running for reelection for governor in 2010, and all of us are focused on this crisis. We've got people hurting across our states. And I would speak for all four of us and say we're not thinking beyond that and shouldn't be thinking beyond that. WALLACE: But you're not ruling out 2012.

PAWLENTY: I'm first thinking about running for reelection for governor in the state of Minnesota, and that's my focus. And if I do, you know, people would expect you to serve out that term.

WALLACE: I will take that as a...

RENDELL: As a maybe.

WALLACE: ... as a maybe, a definite maybe.

(LAUGHTER)

(UNKNOWN): (inaudible) about that hockey association position.

WALLACE: Yeah. Well, just for a minute there, you got my heart started.

Governors, I want to thank you all so much for joining us today and discussing all these issues.

WALLACE: Later, our Sunday regulars discuss the growing controversy over the Obama plan to bail out homeowners. Does it reward bad behavior?

But first, our panel weighs in on the attorney general saying we're a nation of cowards. You won't want to miss this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ERIC HOLDER: Though this nation has proudly thought of itself as a ethnic melting pot, in things racial we have always been and we, I believe, continue to be, in too many ways, essentially a nation of cowards.

(END VIDEO CLIP)

WALLACE: Well, that was new attorney general Eric Holder startling a lot of people this week when he criticized Americans for failing to talk openly and honestly about race.

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

So, Brit, are we cowards for failing to talk more about race?

HUME: Well, I think it's true that we don't have honest conversations in this country about race, but I wonder if Eric Holder understands why. Just to cite two examples from this week, the New York Post publishes a cartoon taking off on the episode involving the chimpanzee attack on that woman.

WALLACE: Let's -- actually, I think we have that cartoon. Let's put it -- there it is.

HUME: All right. So it shows the police shooting this enraged chimp and somebody suggesting that they need somebody else to write the stimulus bill, which was, after all, written, as we know, in Congress.

WALLACE: Well, let me just point out, first of all, it was taking off on -- I'm not sure everybody knows -- there was a chimpanzee that went on a rampage and got shot this week. HUME: Yeah, I said that. Yeah. And Al Sharpton and others took this to be an attack on Barack Obama and racist because the picture was of a chimpanzee. I don't think anybody at the New York Post had that in mind, but it doesn't take much to trigger an attack on you for being racist.

Similarly, Governor Sanford, who was just your guest -- you showed the sound bite from...

WALLACE: James Clyburn.

HUME: ... James Clyburn of South Carolina, senior African American Democrat in the House of Representatives, who attacked him, saying that his reluctance to accept some of this stimulus money was, in effect, racist.

Now, in neither case, the New York Post or Governor Sanford, were these two people or entities talking about race. But even so, even without talking about race, they came under attack for being racist.

Under those circumstances, and in that atmosphere, who in the world in their right mind is going to pipe up about race in America?

WALLACE: Let me -- Juan, we were talking about this before the show in the panel room, and we were discussing the New York Post cartoon and whether it's racist or not, and you said...

WILLIAMS: I don't see how you can get around it. I mean, it's unbelievable to me. They say in the picture well, it's not necessarily the case that this chimpanzee represents Barack Obama , but then who does he represent?

I guess the idea is, oh, all politicians are a bunch of monkeys playing around with the stimulus package, or Congress writes the bill, not the president. But I think Barack Obama is identified -- he's the personification of the stimulus package in the country.

And to have this image of him as a monkey -- I mean, it appeals to -- it appeals to the most base racial stereotypes that we as Americans have gone through.

So the way it hit me was I wanted to excuse it. I wanted -- in my mind, because I think the New York Post is a fine, funny newspaper, and that cartoonist has every right to make fun of the president or anybody else, but it did strike me as racial.

WALLACE: It is fascinating, Mara, to see two smart people who have such a different reaction to the same cartoon.

LIASSON: Yeah, and neither of them are cowards, actually. But look. Getting back to the Eric Holder speech, I think that if he had to give this speech over again, he would have used a different adjective, or maybe he wouldn't have used the phrase at all.

I mean, look how much trouble Phil Gramm got into when he called -- you know, a nation of whiners. Calling the whole nation an adjective is usually a bad idea, and I think it did detract from what Holder was trying to say, which is that people should have more serious, open, frank conversations about race, and we have this kind of voluntarily socially segregated country, especially on the weekends, which echoed Barack Obama 's speech during the campaign about race, about how Sunday morning is the most segregated hour of the week in America.

And everybody's fixating on this one phrase, which I think was unfortunate -- you know, nation of cowards. I don't think we're cowardly. I just think it is difficult to have an open and frank discussion about race.

And I think that some of these -- you know, the fixation on the cartoon or on, you know, Clyburn assuming that these -- that by not taking certain amounts of stimulus money, they're going to be hurting the black populations of their states -- I think it really detracts from what I think is the most remarkable thing about the conversation right now.

It has almost nothing to do with race. We have a black president for the first time of the United States of America. He is dealing with...

HUME: Not to mention a black attorney general.

LIASSON: And an African American attorney general. They are dealing with crises beyond what we ever could have imagined, multiple ones, dozens of them every day, and we are not talking about this through a racial lens at all, which I think is a great thing.

KRISTOL: Here's the big deal, though. Sean Delonas is a cartoonist for the New York Post. Phil Gramm, who was widely denounced -- John McCain had to remove him from the campaign for calling the nation a nation of whiners -- was in the private sector, an informal adviser to John McCain .

Eric Holder is the attorney general of the United States. This was a speech given in his official capacity at the Justice Department. It is a total disgrace -- a total disgrace -- for the attorney general of the United States to stand up there and say in his formal prepared remarks that this is a nation of cowards. What could he be thinking?

I mean, he really should be forced to apologize. He, in fact, has gotten a total walk. Phil Gramm was denounced. John McCain had to say, "Oh, my God, my informal adviser said we were whining too much."

A nation of cowards? People really should read the speech, incidentally, to see what real liberal elitism is. It's a disgrace on many levels. He cites 18 African Americans in the next to the last paragraph of the speech as examples, and many of them are very impressive men and women -- not a single military person.

Now, one of the great things that African Americans have done in U.S. history, despite being discriminated against throughout, until very nearly the last couple of decades, is serve this country with great distinction in war. Not a single African American military hero is cited by Eric Holder.

WILLIAMS: Well, that's true. I mean, but he's talking -- he was, I think, focused there on civil rights history. But you make a very important point.

But I would say this, and I just wanted to start with something -- pick up on something Brit was saying. I don't think Eric Holder was trying to call anybody a racist, but I think that when you say things -- and especially in this country, when you speak about race, I think to white ears, oftentimes it sounds condemnatory, like you're saying, "Oh, you want a real conversation, so you're going to guilt- trip me, you're going to call me a racist. And if I say the wrong thing, then you're -- to you, especially given the power of liberal orthodoxy in this country -- if you say the wrong thing, we're going to punish you, and put you in a box and call you a racist."

And let me say that sitting here as a black person, if I say the wrong thing, they say I'm a sellout, and a Tom, and a -- I can't -- you wouldn't believe the kind of crap.

HUME: Well, it's two sides of the same coin, though, isn't it, Juan? I mean, the fact is you're somebody who has been remarkably even-handed -- heroically at times, I would say -- in the work that you've done in this area. And yet you are no -- you know, you're no favorite of the old civil rights establishment...

WILLIAMS: Never.

HUME: ... and there are African American leaders in this country who don't want to have anything to do with you. And it's -- isn't that the same phenomenon that whites face when they're...

WILLIAMS: Well, that's...

HUME: ... when they're afraid, as you suggest, that they say the wrong thing in some conversation about race or even sometimes not about race, they're going to be condemned?

WILLIAMS: Absolutely. But here's the thing. I mean, even -- you think about what Bill Cosby, who's been absolutely demonized for saying...

HUME: Right.

WILLIAMS: ... that black people have to take more responsibility, especially the black poor -- remember, but when President Obama spoke out about the need for black fathers to be more responsible, Jesse Jackson suggested he be castrated. Why is he having this conversation?

That kind of attitude is just so -- makes it so difficult to have an honest conversation about race.

WALLACE: I want to...

HUME: Wait a second, Chris. Do you think Eric Holder might have been referring to the Jesse Jacksons and the Al Sharptons? I think not.

WILLIAMS: Well, no -- actually, I hope -- I hope -- I don't know that he was or he wasn't, but I hope that he was, because that inhibits the free flow of conversation as much as anything.

LIASSON: Mara, I want to...

WILLIAMS: Let me just finish up -- that the -- I think that when you look at the disparities, though, in the country, if you look at the high level of continuing residential segregation; if you look at what, to me, is the greatest racial sin of our time, which is the public schools and the high level of segregation -- here in the District of Columbia, we have high segregation of public schools -- and the lower achievement of those black children, the high dropout rate -- they're not prepared to even go to college, much less hold competitive jobs.

And then we say it's about race -- there, it's about lack of education and lack of economic opportunity. But we have a difficult time having that conversation because then people say, "Oh, it's all about history and race, and they want to blame white people for everything."

And then there are other people who say, "It's your responsibility now. Don't -- you know, don't think that the larger society has any obligation."

WALLACE: Mara, we...

WILLIAMS: I think that's why it's difficult to have the conversation.

WALLACE: ... we've got about a minute left, Mara, and I want to ask you about one other aspect of this.

I talked to a senior White House official this week who said Holder was not speaking for the president, the speech had not been approved by the White House, which, it seems to me, raises two questions.

This is an attorney general who got into office by the skin of his teeth. And speaking about cowards, he was not exactly a profile in courage when he folded like an accordion to the Clinton -- Bill Clinton on the pardon of Marc Rich.

Is this really a conversation that Eric Holder wants to hold in his first days in office? And is he the right man...

LIASSON: Look, I'm...

WILLIAMS: ... to lecture America on courage?

LIASSON: Well, first of all, you know, you can make that analogy. Maureen Dowd, in her column today, you know, made the exact same point.

I think that it is perfectly appropriate for the attorney general of the United States to give a speech in Black History Month to his staff about race. I do think, again, that if he had to do it all over again, he wouldn't have said nation of cowards. And if he hadn't have...

HUME: This was no private speech, though, Mara.

LIASSON: And if he -- no, no, it wasn't private. It was public. But what I'm saying is it's OK that he gave the speech. I think that if he hadn't said nation of cowards, we wouldn't be here talking about what he said. You know, but otherwise, the speech was not...

WALLACE: There are a lot of comments that -- Roland Burris would be in a lot better shape if he hadn't said some things the last week.

LIASSON: Yes. But if you read the whole -- but if you read the whole speech, it really does track very closely with what Barack Obama did in Philadelphia.

WALLACE: OK. We have to take a break here.

But up next, the president's home foreclosure plan. Is the government picking winners and losers? Back in a moment.

(COMMERCIAL BREAK)

WALLACE: On this day in 1980, the U.S. hockey team upset the Soviet Union during the Lake Placid Olympics in what would become known as the "Miracle on Ice." The U.S. went on to defeat Finland and win the gold medal.

Stay tuned for more from our panel.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

RICK SANTELLI: This is America. How many of you people want to pay for your neighbors' mortgage that has an extra bathroom and can't pay their bills? Raise their hand.

President Obama, are you listening?

(END VIDEO CLIP)

WALLACE: That is CNBC's Rick Santelli, in a clip that has become an Internet sensation, berating President Obama's new housing plan for rescuing people who have been financially irresponsible.

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

So, Brit, what about the argument that Santelli makes and you hear a lot of people making these days that the home foreclosure plan is going to end up helping a lot of people who never should have been in those homes in the first place, who acted irresponsibly...

HUME: And may soon default again.

WILLIAMS: ... and is not going to help people who somehow found the money to put in for a down payment and are scrimping and saving to make their weekly payments, and they're not going to get anything?

HUME: It is a very sound argument. And at least you can say of the bailout of a bunch of these financial institutions that the government on behalf of the taxpayers took equity in, part ownership in, those companies. And loans were given at very high interest rates so that the government got something back for this -- for this bailout money.

In this case, it seems to me, the government gets nothing back. This is just pure taxpayer financing to, in effect, buy down loans that people can't pay.

And while it will undoubtedly help some people who were doing their best and really got caught in a downdraft, it's also going to help a lot of people, as you suggest, that shouldn't have bought these homes in the first place.

WALLACE: Mara, White House -- and you were, I assume, in the press room -- White House press secretary Robert Gibbs didn't like the Santelli rant one bit and, in fact, sort of shed his normal usual...

LIASSON: Yes.

WALLACE: ... good humor. What do you think of the argument the White House -- the counter argument the White House makes? And how concerned are they about a populist backlash against this?

LIASSON: Well, very. But the first argument, which is the argument that they make, which Barack Obama makes in every speech about this, is look, you know, when houses get foreclosed or abandoned, they bring down the housing values of everybody around them in the neighborhood, and that's why we're going to have to do something about this housing crisis, because it's not just affecting individuals, it's affecting, you know, whole groups.

In terms of how much they're worried about this populist backlash, I think they're worried, and rightly so. In this kind of a situation, you want to be dishing out the populism if you're the president. You don't want to be on the receiving end.

And he is trying to sell a very, very difficult package where we do have to bail out some bad actors like Wall Street bankers, like people who maybe did take on too much mortgage than they should have.

Now, he says that his housing plan is not going to reward people who fraudulently, you know, misrepresented their income to buy more house than they could, or some kind of rapacious banker who pushed these mortgages on people.

But as Sheila Bair, who's the head of the FDIC, said on Friday, it's going to be pretty hard to do the forensic analysis of each and every one of these individual mortgages being refinanced to make sure that they aren't one of those mortgages you don't want to subsidize.

So it's a difficult argument to make. And yes, they're at risk of being kind of overtaken by a real populist backlash, and that's why they want to get out in front of it. That's why Barack Obama early on put pay caps for bankers. And you're going to see a lot more populist measures coming from them.

KRISTOL: Well, Rick Santelli really hit a nerve, and that's why, of course, Robert Gibbs personally denounced it from the White House podium, I think, six times.

It's really a wonderful week for the White House. They're denouncing a guy who says what he thinks on a private T.V. network, and it happens to get some traders in the Chicago pit applauding him. They denounce the rest of us as a nation of cowards. They're really, you know, supportive of middle America there, doing its best.

I mean -- no, but I think they have a huge problem, actually. It's a foolish plan, the mortgage plan, as I understand it. You know what? Banks do do forensic analysis of each of the people's mortgages whom they hold, and they're pretty good at it.

And they have no interest in foreclosing if someone can renegotiate and keep the -- keep -- stay in the house and end up paying back the loan, and that's why you probably should try to help banks help people and not have this massive government program.

But I think the populist issue is very real. I mean, the degree to which Obama in the campaign was good at speaking for middle America -- and now you look at that administration, you look at Tim Geithner and his tax problems, and Eric Holder saying we're all a nation of cowards, and you think these are a bunch of liberal elitists who condescend to and disdain middle America.

WILLIAMS: But I have to say I'm a little surprised that this is being seen as elitist, because I think this was the Obama administration's response to the argument all you're doing is bailing out the big Wall Street bankers -- here we're going to try to take care of people who are in trouble on Main Street.

WILLIAMS: This is a good point, and I would say that there's also something in this for the elites, which is that you stabilize the markets by stabilizing the banks.

We've got bad assets which are bad mortgages, and you've got to deal with it in some fashion. I think that -- by the way, I think that the banks haven't been all that great at their forensics, because clearly, they're the ones that were trying to exploit the subprime market, and they had the collaboration of people who do the credit ratings apparently approve these people for these loans.

I think everybody was involved in a conspiracy of dunces that has led us into this economic collapse. So what we've got now, it seems to me, is a need to somehow stabilize the system, and that's why this money is being put forward.

It's not there to bail out people who shouldn't have had the mortgages in the first place. It's there to try to make sure that the banking system, the credit system, which is at the heart of this issue, gets resolved and loosened up so that credit is available for people who deserve it.

WALLACE: All right.

Let me turn to another big subject this week, Brit. As I discussed with the governors, the administration over the last two weeks has taken all kinds of steps -- the Geithner plan, if you can call it that, the president signing the stimulus package, his home foreclosure plan -- and the markets keep going down, down, down, 900 points in the last two weeks.

Is this a referendum on the Obama program or are there other factors here?

HUME: Well, I -- I'm reluctant to read too much into the fluctuations in the stock market over the short term. I think you still can say at least that these measures that have been put in place have not stimulated confidence in investors in the stock market.

And I think there are a lot of factors involved in that. I mean, all the continuing economic bad news that's coming out -- everybody's forecasts are being revised downward and so forth. All of that contributed to this.

But the idea that the country would get a lift and a sense of hope and a feeling that help is on the way out of these various plans I think is now out the window.

These plans are going to have to take effect and work together with what the Fed is doing, which nobody talks about, but which is probably the most important thing of all, these massive injections of liquidity into the economy which have seen little result so far.

But it takes a while, and the Fed doesn't usually fail. I think that's where the real hope lies. So far the Obama plans, it seems to me, have done very little, although, you know, they need a chance to work.

WALLACE: Mara, the biggest fall has been in the financial stocks, especially these big banks...

LIASSON: Yes.

WALLACE: ... like Citigroup and Bank of America, and one of the reasons is because I think a lot of people are concerned that the -- that the government's going to come in finally and have to nationalize and then all the shareholders will be wiped out.

LIASSON: Yes.

WALLACE: Gibbs gave an answer, I guess, on Friday that indicated, well, we want to -- what's the thinking inside the White House about -- are they going to have to nationalize some of these big banks?

LIASSON: I think that they might have to do something like that. Chris Dodd also made a comment that sent those stocks tumbling, because he suggested that for some brief period of time the government might have to come in for some banks, nationalize them, and then try to clean them up and sell them back.

But I think that the problem is -- is that the White House hasn't quite figured out what it's going to do yet. It's going to have these stress tests on these banks.

At the end of these tests, we're going to find out that several banks, probably some of the very biggest ones, maybe even Citi and Bank of America, are truly insolvent and they're going to have to be either taken over or let go bankrupt. I think that the problem is that nobody quite knows yet what the administration is going to do. The sooner they can figure this out, the better.

KRISTOL: Here's the one thing we do know. The administration's going to raise taxes on those who pay the majority of taxes in this country, on the wealthy and on those who take -- who have dividends and interest income -- dividends and capital gains income.

That is one of the stupidest things you could do in the middle of a deep depression, where everyone is pulling back and no one wants to invest. And for them to do -- to stick blindly to this in this sort of -- out of ideological -- with the ideological blinkers on is crazy, I think.

WILLIAMS: Well, don't you think that tax rates by -- tax cuts helped us in sustaining the economy through all that we've been through? Answer, look at where we are. I think you've got to say, "You know what? At this time, we must call for common sacrifice." And those of us who have something are going to have to sacrifice to make the country economically stable once again.

WALLACE: All right. We're going to have to leave it there. To be continued. Thank you, panel. See you next week.

Up next, a quick programming note, and we'll be right back.

(COMMERCIAL BREAK)

WALLACE: Now this program note. On Tuesday evening at 9:00 p.m. Eastern, President Obama addresses a joint session of Congress. I'll join Shepard Smith for coverage on this Fox station, and on Fox News Channel Bret Baier will handle things along with Brit, Juan and a bunch of other smart people.

But that's it for day. 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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