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David Axelrod on "Fox News Sunday"

David Axelrod on "Fox News Sunday"

Fox News Sunday - April 5, 2009

WALLACE: I'm Chris Wallace. North Korea defies the world, firing a long-range rocket, next on "FOX News Sunday."

President Obama takes his place on the world stage.

(BEGIN VIDEO CLIP)

OBAMA: It is very important for us to be able to forge partnerships, as opposed to simply dictating solutions.

(END VIDEO CLIP)

WALLACE: But is this humbler approach producing new answers for the world's economy and security? We'll ask David Axelrod, senior adviser to the president, who is traveling with Mr. Obama.

Then, how should the Republican Party rebrand itself as it contends with a popular president and Democratic controlled Congress? We'll find out from Governor Mark Sanford of South Carolina and former speaker of the house Newt Gingrich.

Plus, President Obama's excellent adventure -- was there substance beyond the photo ops? We'll ask our Sunday panel about the president's first trip overseas.

And our Power Player of the Week -- a tough politician reveals her very private fight for life, all right now on "FOX News Sunday."

And hello again from Fox News in Washington. It has been a dramatic day on the world stage. While most of us were still asleep, North Korea made good on its challenge to the world, firing a long- range rocket over the Pacific -- this just hours before President Obama announced an effort to reduce and eventually eliminate all nuclear weapons.

We begin our coverage with Fox News senior White House correspondent Major Garrett, who is traveling with the president and joins us from Prague.

Major?

GARRETT: Well, good morning to you, Chris. The White House says this North Korean missile launch was a failure, but it doesn't mean, as far as the White House is concerned, that it wasn't an act of provocation and wasn't an act of defiance.

And just moments ago here in Prague, the European Council, with whom the president is meeting as a part of a summit with the European Union, issued a statement with the United States calling this launch a threat to international security and peace, all of that part of the U.S. appraisal that this launch is a violation of a 2006 United Nations Security Council resolution then punishing the reclusive communist government in North Korea for testing a nuclear weapon.

Earlier today, at the heart of Prague Castle on Hradcany Square, the president was greeted by 20,000 cheering fans, many of them screaming, "Obama, Obama," as he outlined an ambitious agenda here to abolish all nuclear weapons across the planet.

Now, of course, the United States expected this launch from the North Koreans, and the White House has studiously tried to downplay its importance so it doesn't overshadow what the president said here, in part because they expect the north to defy, as it has in the past, every other international action to sanction it.

Nevertheless, here's how the president took note of North Korea's actions.

(BEGIN VIDEO CLIP)

OBAMA: North Korea broke the rules once again by testing a rocket that could be used for long-range missiles. This provocation underscores the need for action not just this afternoon at the U.N. Security Council but in our determination to prevent the spread of these weapons.

(END VIDEO CLIP)

GARRETT: The president's ambitious agenda to end nuclear weapons does not call for immediate U.S. disarmament. He said the United States will keep its stockpiles ready while the stockpiles internationally decrease.

He also says the United States will now back the Comprehensive Nuclear Test Ban Treaty and convene a summit in Washington in a year to stop the spread of fissile material that could be weapons-grade and transmitted or translated, Chris, into nuclear weapons, possibly that would fall in the hands of terrorists.

Back to you in Washington.

WALLACE: Major Garrett, reporting from Prague.

Major, thank you.

Before the North Korean missile launch, we spoke with the president's senior adviser, David Axelrod, who's also traveling with Mr. Obama.

(BEGIN VIDEOTAPE)

WALLACE: Mr. Axelrod, President Obama wants new limits on nuclear weapons with the long-term goal of eliminating all nukes. But on the other hand, mutual assured destruction, the fact that several nations have arsenals, has kept the peace for the last 60 years.

And if the major powers disarm, then don't you run the risk that a rogue state or a terrorist group that gets a nuke suddenly has all the power?

AXELROD: Well, obviously, Chris, that -- we need to involve the entire world in this -- in this regimen, but it's hard to do that if you don't lead by example.

We're not going to disarm and leave America vulnerable, but we want to -- we want to set ourselves on a path so when the president met with President Medvedev last week in London, they agreed to begin talks to reinitiating the START treaty to reduce nuclear warheads.

And he will announce -- he is going to pursue a series of other measures, the -- pursuing ratification of the test ban treaty, which has languished, renewing the nuclear proliferation treaty, getting a treaty that will control fissile materials that can be used to make bombs, and -- so that countries can get the materials to have peaceful nuclear programs but not for weapons programs, and of course, locking up the loose nukes. This is something he's been working on for years.

He wants in the next four years to lock up the loose nuclear weapons that are scattered around Eastern Europe that could fall into the hands of terrorists.

And of course, that is the big threat. That's why we have to step up the pace. This represents an existential threat, and we need to meet it.

WALLACE: But, Mr. Axelrod, if the president wants to cut nuclear weapons, shouldn't he spend more, not less, on missile defense to protect the United States?

AXELROD: Well, I think that missile defense -- the missile -- the president has said that he is -- he is willing to embrace, wants to embrace, missile defense if it's necessary, if it's cost-effective and if it works. And he's never taken that off the table.

Right now, we have the issue of the potential for a missile defense system here in the Czech. Republic to protect Europe from Iran, but the better answer would be for the world to put pressure on Iran to stand down and not pursue their nuclear ambitions.

And that is what he talked with President Medvedev and the other leaders he met with this week about.

WALLACE: So it is fair to say that he has an open mind, and perhaps even some skepticism, about the effectiveness of missile defense.

AXELROD: Well, I think he has an obligation not to deploy systems that don't work, but he's not taking it off the table.

But our goal should be a world in which you don't need those systems because the weapons have been eliminated, and we have to start down that road. That is his -- that is his goal with the initiatives that he's announced.

WALLACE: All of which makes the facts of what's going on right now in North Korea more interesting. As we speak, North Korea is prepared, apparently, to launch a long-range rocket. The U.S. does have the capability. Why not shoot it down?

AXELROD: The real question is for the North Koreans -- why do you want to isolate yourself further from the community of nations?

It would be violating U.N. edicts. It would -- and it would set back the six-party talks that have been going on to try and usher North Korea into the community of nations. This would be a -- this would be a terribly bad mistake.

WALLACE: Having said that, though, Mr. Axelrod, Defense Secretary Gates was here on "FOX News Sunday" last week, and he said that the six-party talks have made no recent headway with the North Koreans.

Is President Obama -- if the North Koreans defy the world's will, is he prepared to push for tough new economic sanctions? And do you have any promise that the Chinese will go along?

AXELROD: Look, I think that there's no doubt that there must be consequences if they take that step. The president will -- has and will confer with our allies, will go to the U.N. Security Council, will pursue a tough response.

WALLACE: During this trip overseas, President Obama has tried to repair relations with Europe, even in one of his speeches in France saying that America has at times been arrogant and dismissive.

But the Europeans, despite all these best efforts, have refused to increase their stimulus programs, government spending. They refuse to send combat troops to fight alongside Americans.

And some critics here in this country say that the president is pandering to the Europeans, running down America on foreign soil and getting nothing for it.

AXELROD: Well, if they're -- if they say that, then they haven't read the speech, and they haven't watched closely, Chris.

What the president said was there have been problems in our relations, some of them emanating from us, some of them emanating from the Europeans. And he made the point that there are those in Europe who think despite all the good that America does, they can only emphasize things to criticize, and he was very blunt with the Europeans about that.

But I disagree with the other parts of your statement. There's been an enormous amount of spending on economic stimulus, and -- you know, in the -- in the trillions of dollars, and there was an agreement to do more in the way of -- of dealing with our financial crisis at the G-20. It was a very productive meeting, and the level of cooperation was very high on -- on expanding the International Monetary Fund and providing funding for countries that need it to get through this crisis, and on regulation, so that...

WALLACE: But, Mr. -- Mr. Axelrod...

AXELROD: ... countries upgrade their -- so that countries upgrade their regulation so we don't have financial crises like this that envelope the world.

WALLACE: But Mr. Axelrod, if Al Qaida and the Taliban are the threat to the west, not just the U.S., that the president says they are, why didn't our NATO allies agree to send more troops -- they're -- they are sending more troops, but not combat troops, to fight alongside the U.S. in southeastern Afghanistan and along the Pakistan border?

AXELROD: First of all, our NATO allies do have troops in Afghanistan.

WALLACE: I said more troops.

AXELROD: And there was a tremendous -- there was -- there was a -- well, we're getting more -- more assistance. There was a tremendous response to the president's new strategy in Afghanistan.

One of the problems we've had in Afghanistan is we haven't had a focused strategy, and therefore it was hard to sell that strategy. The president a week ago unveiled his strategy. We had a very productive meeting at The Hague this last week with Secretary Clinton and the foreign ministers.

And then at NATO, the -- his plan was unanimously embraced, and nations stepped forward with expressions and offers, tangible offers, of support -- thousands of military personnel to help secure the election on August 20th, which is the next big hurdle we have to clear in Afghanistan, thousands more personnel to train police and the Iraqi -- and the -- I'm sorry, the Afghan army.

And so there's a -- and cash, as well, to help pay for the development of the Afghan army, and half a billion -- half a trillion dollars in commitments to help rebuild -- half a million, I should say, to help rebuild the Afghan economy.

So there was enormously positive reaction to the president's plan there, and now we have a unified front. Every NATO nation acknowledged the fact that we have a joint concern and a joint interest in repelling Al Qaida and in making -- making this mission work.

WALLACE: I want to switch to the domestic economy, Mr. Axelrod. There was more bad economic news this week, as you well know -- 663,000 more Americans lost their jobs in March. The unemployment rate is 8.5 percent. It was just two months ago that the President's Council of Economic Advisers projected that the unemployment rate for all of 2009 would average 8.1 percent.

Aren't we, in fact, headed -- isn't there a real chance we're headed for 10 percent, double-digit, unemployment? And given that your forecast was so wrong, don't you need to do more?

AXELROD: Chris, I'm not prepared to say that's where it's going to go. But the president was very clear -- and the reason that we pushed for an economic recovery act -- that we were going to have a very difficult year this year.

And unemployment -- employment is the last thing that follows growth. So it's going to be a while for us to do -- to turn upwards on these jobs numbers. But that's why we needed an economic recovery package.

That's why we were in Europe this week talking to the allies about joint measures to stimulate the world economy, so there are markets for our companies to sell products. All of this is part of a coordinated strategy to get our economy moving again.

We inherited a terribly difficult situation, and we have to work our way out of it. It took years to get into it. It's going to take more than months to get out of it.

WALLACE: Mr. Axelrod, we're running out of time, so I'm going to try to invoke the lightning round rules, with quick questions and quick answers.

First of all, there's a report that the Obama administration is structuring its new bailout initiatives to allow companies that participate to get around congressional limits on executive compensation.

When taxpayers are putting up most of the money and taking more of the risk, why would the Obama administration allow some of these executives to get even richer?

AXELROD: Chris, understand that we are -- we are very committed -- the president has a tough set of standards that we are refining to deal with this question of executive compensation. It's an issue he's talked about long before this crisis.

But here's the point. On some of these programs, we're asking financial companies to come in and help solve this problem by providing more lending, by buying up toxic assets and so on. We don't want to create disincentives and undermine the program.

So we have to look very closely at this, making sure that we're not rewarding people for irresponsibility, that people -- that firms that get extraordinary help aren't getting -- aren't giving out huge bonuses.

But we do need these financial companies to help -- who aren't in great distress to help lead us out of this and partner with taxpayers to get lending going again.

WALLACE: And finally, Mr. Axelrod, the administration got into the car business this week. You fired Rick Wagoner as the head of G.M. The president announced that you're going to have government guarantees of car warranties.

Does the president think that General Motors could survive a bankruptcy? And if so, why not just go there right now?

AXELROD: Look, Chris, first of all, we didn't get into the car business. Understand the car companies came to us. Chrysler and General Motors actually came to the last administration and said in order to continue they needed help from the American taxpayer, and they were given a certain amount of time to come up with a plan to restructure.

Those plans were found wanting. They don't -- they did not project viability for these firms. And what we're saying is we want these -- this to work, but you're going to have to do better, and it's going to involve significant restructuring to build firms that can compete in the 21st century.

And we want these to be going concerns, not wards of the state. So whether it comes through some sort of structured bankruptcy or another process, there is no doubt that for General Motors to survive and prosper, as we all want them to, they're going to have to do serious restructuring.

And the same is true with Chrysler and Fiat. We -- Chrysler cannot stand on its own now, but they have partnership negotiations, merger negotiations, going on with Fiat. That, too, will involve a rationalization of that company.

WALLACE: And real quickly, sir, when you talk about restructuring, are you talking about even your friends in the union movement, at the United Auto Workers -- that they're going to have to take a severe haircut, too?

AXELROD: Well, Chris, first of all, they've already taken a haircut. They've been sitting at the negotiating table making huge concessions. They have -- every stakeholder, whether it's creditors, company executives or workers on the line, are going to have to make sacrifices.

What we shouldn't do is ask the sacrifices of the workers to be disproportionate. But there's no doubt that everyone who has a stake in the future of this company is going to have to make sacrifice.

WALLACE: Mr. Axelrod, we want to thank you so much for talking with us, taking the time on this busy trip, and safe travels on the rest of your trip and back home here to Washington.

AXELROD: Thanks, Chris. I appreciate it.

WALLACE: Up next, with Democrats in charge of the White House and Congress, how do Republicans rebrand? We'll ask two GOP leaders with a lot to say about what their party needs to do. Back in a moment.

(COMMERCIAL BREAK)

WALLACE: With Democrats controlling the White House and Capitol Hill, how do Republicans stay in the game and position themselves for a comeback?

For answers, we turn to the governor of South Carolina, Mark Sanford , and former speaker of the House, Newt Gingrich.

And, gentlemen, welcome back to "FOX News Sunday." Let's start with today's news.

Mr. Gingrich, before today's launch, you said the North Koreans should not be allowed to fire a missile and that the U.S., quote, "should take whatever preemptive actions are necessary." Are you saying that "President Gingrich" would have taken out that missile on the launch pad?

GINGRICH: Yes, I'm saying if you look at the new book by my co- author Bill Fortune called "One Second After," and you look at electromagnetic pulse capabilities, which can take out -- one weapon could take out a third of the electric generating capacity of the United States.

We do not appreciate the scale of threat that is evolving on the planet, and North Korea is a totally irresponsible dictatorship run by a person who is clearly out of touch with reality, and I think to say, you know, we're now going to have another meeting at the U.N. to have another paper resolution that has meaningless effect is very dangerous.

I think both with Iran and with North Korea, you have countries which could decide at any morning to try to actually use their weapons.

WALLACE: So you're saying that "President Gingrich" would have taken out that...

GINGRICH: There are -- there are three or four techniques that could have been used, from unconventional forces to standoff capabilities, to say we're not going to tolerate a North Korean missile launch, period.

I mean, the world's either got to decide that North Korea is utterly dangerous -- and again, I'd recommend -- look at electromagnetic pulse, which changes -- which we've known about since 1958. It changes every equation about how risky these weapons are.

WALLACE: Governor Sanford, would you also have taken preemptive action? And do we really want to get into a shooting war with the North Koreans when they have a million-member army stationed just across the DMZ about 30 miles from the South Korean capital of Seoul?

SANFORD: I would always defer to my former boss, if you will, as I was a pup freshman as he was speaker, on issues of foreign policy.

But what I would say is in the countryside of South Carolina, at some point you've got to back up words with action. And as the speaker just pointed out, there have been a long series of missteps, intentional steps, on North Korea's part and little in the way of action from the standpoint of either America or international community.

GINGRICH: If I could, Chris, one last point. We have been talking about this since the Clinton administration, and they have been building nuclear weapons and building better and better missiles while we keep talking.

And one morning, just like 9/11, there's going to be a disaster, and people are going to look around and say, "Gosh, why didn't anyone think of that?" Well, I'm telling you the time to think about it's before the disaster, not afterwards.

WALLACE: Well, do you think that we can do anything in the U.N.?

GINGRICH: I will be -- I'm looking with great interest to see the president's promise of hard action, toughness, come this afternoon. I have yet to see the United Nations do anything effective with either Iran or North Korea.

WALLACE: Let me, Mr. Gingrich...

SANFORD: Well, but may I just follow up on that thought, which is there is something fundamentally wrong with an administration that says tough action, and a secretary of defense who says, "We absolutely have the capacity to shoot this thing down," and no action.

WALLACE: Mr. Gingrich, what do you make of the president's speech today in which he called for new limits and, in fact, the elimination, eventually, as a goal, of all nuclear weapons at the same time, as I discussed with David Axelrod, that he wants a cut in missile defense?

GINGRICH: There's a fascinating analysis of Jimmy Carter's Notre Dame speech when he spoke at the commencement in 1977. And that was the moment in which Carter's fantasy view of the world became clear, and the beginning, I think, of the end of his -- of his administration. The president's in a world where Hamas is firing missiles every day into Israel, Iran is building nuclear weapons, and the North Koreans today during -- basically during his speech fired a missile, and he has some wonderful fantasy idea that we're going to have a great meeting next year.

With who? I mean, who's coming to this meeting? The Pakistanis? The Indians? The Chinese? The Russians? And what are they going to promise? And why would you believe them?

I just think that it's very dangerous to have a fantasy foreign policy, and it can get you in enormous trouble, just like giving -- you know, we don't have a war on terror anymore. We don't have terrorist attacks anymore. So now homeland security has manmade disasters.

I'm somehow not comforted with the thought that 9/11 was a manmade disaster but not a terrorist attack, and I'm not comforted with words instead of serious systematic policies.

WALLACE: Governor Sanford, you heard my discussion just a moment ago with David Axelrod about the president's trip overseas and the issue as to whether or not he has been pandering to the Europeans. Let's take a look at what he actually said in France. Here it is.

(BEGIN VIDEO CLIP)

OBAMA: There have been times where America's shown arrogance and been dismissive, even derisive. But in Europe, there is an anti- Americanism that is at once casual but can also be insidious.

(END VIDEO CLIP)

WALLACE: Governor, the Obama team says the president just recognizes there are faults on both sides and that we need to rebuild our relationship with our European allies.

SANFORD: I would say there's a bigger message for me taken on that front, which is he seems to be approaching his conversations with the Europeans with very much a contrite heart of we don't know it all, here we are, America.

What I'm seeing in terms of domestic policy is we know it all, and let us take over this industry and this industry and this industry, and spend more.

If there's any consistency that I saw between the European approach and the domestic policy approach, it's with spending, because he's going to come back and ask for yet another $100 billion to be spent on stimulus efforts.

And you had Sarkozy and Merkel both coming back and saying, "Wait, I don't know that more spending is the answer. Let's look at regulation." So the consistent theme to me would be spending. The inconsistency would be a bit of a more contrite heart in international affairs that I've seen domestically. WALLACE: Let me get to the subject that we actually invited you both here for, and that's to talk about the future of the Republican Party and how you rebrand yourself.

Mr. Gingrich, you said the other day that you see the real possibility that some conservatives will split off from the GOP and form a third party by 2012. I know that nobody would ever accuse you of this, but are you just being provocative?

GINGRICH: No, I'm trying to say very clearly, particularly to those Republicans who continue to insist, for example, on earmarks, continue to insist that they like big spending, continue to insist that they don't have to pay any attention to the great vast majority of Republicans, that people are not trapped into a -- into a system.

I think that where Congressman John Boehner and his team with Eric Cantor and others have done is very helpful. I think their effort on the budget with Paul Ryan as lead has been very helpful. I think the Senate amendments offered this week under Mitch McConnell 's leadership is very helpful.

But Republicans need to understand that there is a country which did not like the big spending of the last administration, didn't like the interventionist policies of the last administration, and the country at large would like to see a genuine alternative to the Obama strategy of basically trying to run the entire economy from the White House and basically trying to increase government, I think, by 36 percent this year, which is the largest single increase outside of war in American history.

WALLACE: Are you suggesting that if the Republican Party as it now exists doesn't get that message that you would be part of a third party, you would...

GINGRICH: No. No. Look, I lived through watching Ross Perot run in 1992 and split the conservative movement in two. The reason we won in 1994 and the reason Mark and others were so successful in that -- in that Congress was that we managed to offer a contract with America that brought everyone back to the table, and we had the largest one-party increase in American history.

If the Republicans decide to be a genuine reform party focused on America, not focused on the Republicans, but focused on America's solutions, we will, in fact, create a much larger party, probably as early as next year.

But we have to be committed to being a genuine reform party, not just the right wing of big government.

WALLACE: Governor Sanford, let's talk about conservative principles. You reluctantly accepted on Friday federal stimulus money for your state, but you say that you will not spend the $700 million that's earmarked for education and public safety unless your state legislature agrees to take that same amount of money to pay down the state debt. Now, South Carolina, I don't have to tell you, has the second highest unemployment rate in the country, 11 percent. The speaker of the House, who is a Republican himself, says without the $700 million in government stimulus, they're going to have to fire up to 5,000 teachers and close some prisons.

Is that your image for the Republican Party?

SANFORD: Well, first of all, that was called the so-called chaos budget. It was designed by the head of Senate Finance, and it was designed to scare people to death, to put political pressure on me to change my position. It was not a real budget.

I think that what we're talking about is this age-old tug-of-war between is simply more money the answer, or can you reform other pieces of government and come up with the same savings to pay for teachers and health care and all the other associated things of government.

That's the tug-of-war that's taking place in South Carolina. And it's that whole larger notion of grandmother or grandfather's idea of moderation in all things. Ninety percent of the stimulus money would be spent in South Carolina. But what we've said is let's take 10 percent, in essence, with state funds, not fed funds, state funds, and pay down debt, and wouldn't there be dividends going forward in doing so.

WALLACE: But just real briefly....

SANFORD: Absolutely there would be, yeah.

WALLACE: ... you're saying that you're prepared not to -- if the legislature doesn't pay down the debt, in the middle of a recession you're saying you're not going to spend $700 million for teachers and public safety?

SANFORD: No, because I'll go back to -- use G.M. as an example. What we were told some months ago by G.M. was if you just give us billions of dollars, we'll make reforms, we'll become more competitive in the global climate, we'll go off to the races.

They didn't make the reforms. Now the president of the United States has come in and fired the chairman of G.M., and we've lost billions and we've lost time. Any economic crisis allows for changes in the world of politics that would not be possible in rosier times.

And so what we're saying is there are a whole host of outdated governmental programs that ought to be reformed and ought to be changed, and you can redeploy those moneys.

It is not stimulative to simply go in and take federal dollars to keep bureaucracies that don't work up and going. And what we're saying is let's use this chance as a chance to do just that.

WALLACE: We've got less than two minutes left.

Mr. Gingrich, you have been a Baptist most of your life, and last Sunday you converted to Catholicism. Why, sir?

GINGRICH: I'm not talking about this much publicly, but let me just say that I found over the course of the last decade, attending the basilica, meeting with Monsignor Rossi, reading the literature, that there was a peace in my soul and a sense of well being in the Catholic Church, and I found the mass of conversion last Sunday one of the most powerful moments of my life.

WALLACE: You have -- it's no secret -- been married and divorced twice. Will you be able to participate fully in communion and all the other rites of the Catholic Church?

GINGRICH: Yes, we have done everything within the law of the church, following all of the rules of the church over the last 10 years. And it's been a process. It's been a very long process and something which was deeply affected, in part, by Pope Benedict XVI's visit and the opportunity I had to sit in -- as you know, my wife, Calista, sings at the basilica every Sunday, and I was allowed as a spouse to be there as part of the vespers program when the pope came. It's been a long process.

WALLACE: And if I might ask, just briefly, what is it about the pope's visit that led to this?

GINGRICH: I really believe, first of all, seeing the joy in his eyes, listening to his message, and I really believe that his basic statement, Christ our hope, is right. And I think much of what's wrong with our country and with the western world is a function of looking inside ourselves, not just looking at money or looking at our wallets.

WALLACE: Mr. Gingrich, Governor Sanford, thank you both. Thanks for coming in.

SANFORD: Pleasure.

WALLACE: Please come back, both of you.

Up next, our Sunday group weighs in on North Korea's launch of a long-range missile while President Obama talks about arms control. Back in a moment.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: Now is the time for a strong international response, and North Korea must know that the path to security and respect will never come through threats and illegal weapons. All nations must come together to build a stronger global regime.

(END VIDEO CLIP)

WALLACE: That was President Obama in Prague this morning condemning the North Koreans for firing a long-range missile.

And it's time now for our Sunday group -- Bill Kristol of The Weekly Standard, Mara Liasson of National Public Radio, and two first- timers, Rich Lowry from National Review, and Jim VandeHei of Politico.

And, Rich and Jim, welcome to the festivities. You've made a big mistake.

(LAUGHTER)

Bill Kristol, what do you make of this dramatic series of events today with the North Koreans firing that long-range missile just hours before the president calls for new limits and the eventual elimination of nuclear weapons?

KRISTOL: Well, the North Koreans did something real, and the president gave a speech about a nice future that might happen 50 years from now. And the question is what is the president of the United States going to do about a successful North Korean test.

They failed 2.5 years ago in the test of a long-range missile. This one seems to have succeeded. The first stage fell into the Sea of Japan. The second and third stages seem to have gone into the Pacific, as they were supposed to.

WALLACE: They did not apparently, though -- according to NORAD, they did not put a missile in orbit, so it was not a success.

LIASSON: Satellite.

KRISTOL: Well, they didn't put a satellite in orbit, but...

WALLACE: Satellite, rather. A satellite. (CROSSTALK)

KRISTOL: But if it was really a missile test, they don't need to put anything into orbit. And anyway, they've made progress while we've all talked. And as a friend of mine put it, who's in the government, this is also a very good demonstration for their sales brochure.

North Korea -- the frightening thing isn't just, "Gee, North Korea might do something." North Korea was proliferating to Syria as recently as two years ago. North Korea and Iran cooperate.

So this was a nice demonstration of their capacity, and this test, in a sense, is a de facto Iranian test, and it makes more immediate the threat of the North Korean and Iranian nuclear programs.

WALLACE: Mara, as Bill rightly points out, this is an old pattern -- American presidents, not just Obama -- Clinton, Bush -- huff and puff. The North Koreans ignore it and go ahead and do whatever they're going to do. What can we do? What should we do?

LIASSON: Well, you know, we're going to go to the Security Council, and I'm sure the Security Council will say -- wag their fingers and say, "You should -- you know, you should abide by the rules that we've already laid down," and there already are sanctions against them and it doesn't seem to make any difference.

Without china's cooperation, and it doesn't look like, from the initial Chinese response, that they would go along with anything tougher, I can't see what else we could do.

I think where the world is headed, at least where it looks like right now, is to a new status quo. The effort used to be stop places like Iran and North Korea from getting nuclear weapons. Now it's going to be stop them from using them after they already have them. North Korea does, and Iran will shortly.

I think that's where we're headed. I don't see what Obama can do to change that dynamic.

LOWRY: Yeah, Chris, when dealing with this threat, there are really three options. You can ignore it and not take it seriously, which I don't think is really a real option. You can preempt it, which isn't going to happen. Or you can develop a robust missile defense system.

And unfortunately, here the Obama administration is falling down because they seem so eager to give away this third missile defense site we want to -- we have been talking about developing in Eastern Europe in a deal with the Russians, and they're probably going to let the rest of our sites kind of atrophy on the vine.

And if you just look at the North Koreans here, they're nuclear armed. They increasingly can threaten Japan. And they've been bribed by the world throughout the process while they've done this. So they have played a very weak hand in a perversely brilliant way. VANDEHEI: And this is the last thing that the Obama administration really wanted. I mean, they -- they set up this big speech in Prague to talk about this new promise to get rid of nuclear weapons from the entire face of the earth, and Obama, by his own admission, says it probably won't happen in his own lifetime.

And I think this has become the big issue that we're talking about, and I think if you look at this overall trip that he's had, I think there was a criticism that in the beginning he wasn't able to get France and Germany to provide the stimulus that he wanted on the economy.

I think the bigger setback has been the failure to get more buy- in for foreign troops into Afghanistan, because right now we have about 38,000 troops. Allies have about 19,000. By the time we increase our troops, we're going to have almost 70,000 troops over there. This is going to be Obama's war, and this is going to be the thing by which he'll be measured on foreign policy.

WALLACE: Let's talk about the whole trip, bill, because clearly this president has been at pains to make -- set a bold contrast with the last president, and especially with the so-called cowboy diplomacy of Mr. Bush's first term.

Has it worked? Has he gone too far in his sort of mea culpa rhetoric? What do you think?

KRISTOL: I don't know if the rhetoric matters much. I mean, in Afghanistan, to his credit, he has followed in the path of -- I don't think it's Obama's war. I think it's America's war, and the Europeans are of limited use, and the president has decided correctly that we have to win the war.

And I think he should decide, in my opinion, that we can't tolerate these North Korean launches, and we can't tolerate an Iranian nuclear program, and act accordingly.

But the notion that getting the international community together or the U.N. Security Council together to help is not going to work. If it makes the Europeans feel better to talk a little bit that way, I suppose you can argue it doesn't do much harm, unless it distracts him and his own administration from being serious about the real threats out there.

WALLACE: But, Mara, I want to get back to this point, because the president really has gone out of his way to sort of advance a humbler foreign policy, a more cooperative foreign policy -- we're here to be partners, not to dictate.

And yet as Jim points out, whether it's the G-20 refusing to add more government stimulus, whether it's the NATO refusing to send combat troops -- they're sending 5,000 troops, but not combat troops -- to fight alongside the U.S., they seem pretty prepared to thumb their noses at us.

LIASSON: Well, look. The humble part was supposed to get us more cooperation from our allies. He's got the humble part down great. I think he gets 100 -- you know, A-plus for that. He hasn't gotten anything back.

He hasn't been able to use the leverage of his incredible personal popularity in Europe to actually get what he wants. Obviously, Afghanistan is going to be America's war. The European allies are not going to give us any more troops. I think, in a way, that's the way it's going to be, and I think Americans can probably handle it.

I think on Iran, which is much -- which I don't think we can do by ourselves -- we absolutely have to have European cooperation if we're going to have these tougher sanctions that he talks about, and I just think that he hasn't figured out how to leverage that yet.

You know, it's really interesting. The White House made a big deal out of the two great private accomplishments that Obama had in private meetings. He brokered a deal on tax havens between the Chinese and the Europeans, and then another time he kind of brokered a deal -- he mediated this conflict about the U.N. Secretary General. Those are very small potatoes.

Now, if they're just a warm-up act for brokering a great deal on Iran, that will be great. But if not, I think he has a lot of work to do.

WALLACE: Gentlemen, I -- we'll get you in the next panel. But we've got about a minute left, and I want to say, folks, this is not being sexist, but when we discussed this in the panel before, and there was only one member of this panel who showed any interest in this last question, and that is the theatrics of the Obama trip.

And let's put up some tape -- the visit with the queen, Michelle Obama treated like royalty by world leaders and the media.

All right, Mara. How have they done in terms of style points? And does it make any difference?

LIASSON: They -- yes, it actually does make a difference with the European public, who is absolutely gaga over them, and especially Michelle. Sure, it's incredibly interesting. I mean, I can tell you that, you know, if you're talking about Michelle -- or are you talking about both of them? Because she's been incredible, and everything she wears is fascinating. Whether you like it or not, it's...

WALLACE: Well, how has she been incredible?

LIASSON: I think she's just a beautiful, strong presence over there. People are absolutely -- I would say more than fascinated. Sometimes they're obsessed with her and what she does, and what she wears, and what she looks, and the dynamic between her and Carla Bruni, and her and the queen.

I mean, that's what celebrity is. That's what being an icon is.

LOWRY: We're so offended that you didn't ask us this question, Chris.

WALLACE: Well, I was going to say, if you guys had shown more enthusiasm for this, we would have asked you.

Do you have something you'd like to say, Richard?

LOWRY: No.

(LAUGHTER)

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

But when we come back, from failing car companies to bad unemployment numbers, we'll look at a week's worth of economic news. Stay tuned.

(COMMERCIAL BREAK)

WALLACE: On this day in 1969, there were demonstrations across the U.S. demanding withdrawal from Vietnam. In New York, protesters wore the number 33,000, the total of Americans then killed in the war.

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

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: My first task is to restore the economy of the United States but in concert with other nations to restore global economic growth. That's my number one task.

(END VIDEO CLIP)

WALLACE: That was President Obama defending his plan to get the economy back on track while working to win the confidence of the international community.

And we're back now with Bill, Mara, Rich and Jim.

So let's start with those bad unemployment numbers -- 8.5 percent in March, another 660,000 Americans lost their jobs, and the unemployment rate still climbing.

Rich, as I discussed with David Axelrod, that's already higher than the White House forecast for all of 2009, which was just 8.1 percent. To paraphrase the movie "Jaws," are we going to need a bigger boat?

LOWRY: Well, look. The unemployment numbers were dismal. Every aspect of them was dismal. But they are a lagging indicator, and they're probably reflecting the terrible last quarter in 2008 rather than what's happening right now.

And there are, indeed, as Larry Summers has said, some green sprouts showing up in the economy. You've had consumption ticking up a little bit. You've had auto sales, of all things, ticking up a little bit. So it's still possible we could have a third quarter here that's going to show positive GDP growth even as the unemployment numbers continue to slip.

And if the economy does start growing in that time frame, Chris, it will set up an argument forever about whether it was the Federal Reserve that did it or the stimulus that did it, and historians will never agree, but if it happens in that timing, politically it will be perfect timing for the Obama administration to argue it was the stimulus.

WALLACE: Jim, let's switch to another aspect of this, which is the Congress passed a budget this week that, while there were some cuts in the president's budget, basically followed his outline.

But there was a lot of pushback, even from Democrats, especially in the Senate, on the question of carbon cap and trade or, as Republicans like to call it, a carbon tax. Is that or any parts of the Obama agenda in real trouble?

VANDEHEI: Oh, definitely, and they know that. Privately, White House officials will tell you that they're reckoning now with reality. They sort of set these broad goals knowing they were never going to get all of it.

And the way they -- what they tell us is essentially they think, at best, they can get two of three -- health care, re-regulation of the economy and energy. They're telling us they do not think they're going to get cap in trade this year and, in all likelihood, will probably have to take an incremental approach to health care.

And they feel as long as they are showing progress and that sort of the machinery of government is moving, that he -- that he is getting a small victory. Remember, despite all the resistance that we sort of talk about coming from Democrats to the budget, he got a lot of what he wanted.

They only lost about 20 -- I think it was 20 House Democrats and two Senate Democrats. He still has tremendous leverage, and the party still wants to give hem what he wants. So I think he does have a lot of power. He plans on using a lot of it.

But the reality is Congress is not that good at doing even one thing at once, much less trying to do five big things in one year.

WALLACE: Bill, do you agree with that in terms of where you see this budget battle headed? And was the Obama administration smart to put so many things out there that Congress could cut some stuff back and they still would get an awful lot?

KRISTOL: But it wasn't a crazy strategy, and they may end up winning -- they're not going to win on energy, I think, on cap and trade. They may win on health care. I think that could be the big fight now this summer, since the energy plan seems to have receded.

I'd say the price they paid for this is they have allowed the Republican Party to unite. There was not a single Republican vote in either house for the budget, and there'd been, what, only three senators who voted for the stimulus.

And the Republican Party is united in a principled way. I don't think people can look at it -- independent voters can't look at the Republicans now and say they're just being opportunistic or, you know, knee-jerk anti-Obama.

They object in principle to this massive expansion of government's role in the economy, taking over the health care system, et cetera. And I think it allows -- I think he's allowed the Republican Party to recover more quickly than one would have expected and conservatives, actually, to recover more quickly than one might have expected after the 2008 elections.

WALLACE: You know, Mara, so much is happening so fast with this president that it's almost easy to forget that it was just in the last seven days that the White House and the president got into the car business.

They forced out the head of General Motors. We have government guarantees of car warranties. Do they deserve praise for refusing to give Detroit another bailout, or do they deserve criticism for stepping even more into the private sector?

LIASSON: Look, they said, and you heard David Axelrod say, they don't want to be in the car business, they're not in the car business, this is kind of a way to get a fast-track, perhaps, orderly bankruptcy, if that's what it's going to take, of the car companies.

I think the bigger issue that was raised this week in terms of the auto industry is why did they get a kind of shove towards bankruptcy, where the Wall Street bankers get bailed out?

And when you read this week about the huge payouts that a lot of these Obama administration officials are getting from Goldman Sachs or from other hedge funds and banks where they worked before they came into the administration, and other complaints from some hedge funds that feel they're being cut out of the public-private investment funds that they're setting up to take the toxic assets off the balance sheets because they don't meet these very strict criteria that the administration has written that seem to allow only Goldman Sachs and Blackstone and some other hedge funds to apply, I think that cronyism is going to be something that they have to -- that's a potential problem for them.

WALLACE: Let's go back, Rich, to the question of the -- of the car -- the dealing with the car companies. You know, I mean, you could argue that they got tough with Detroit. They didn't give them any money. They basically said, "Your plans aren't working. Get rid of the CEO. You're going to have to restructure or bankruptcy."

The flip side of it is a lot of people, a lot of conservatives, say this is the government getting even more into the private enterprise.

LOWRY: Yeah. Give them credit, because it would have been easier just to paper over the problems in these viability plans, and they didn't do this.

But this is a huge step towards industrial policy. You know, they say, "We're not running the car companies," but Fritz Henderson, the new CEO of G.M., says he considers the auto task force his boss.

So this should be -- happen in the bankruptcy process. It's the way it should have happened five months and $20 billion ago. It's a huge vindication for Senator Corker and those other Republicans who stood up and said that when this debate first started and took so much flack for being supposed tools of Toyota and other foreign automakers. WALLACE: I mean, Jim, when Rich talks industrial policy, what he's basically saying is the idea that government is going to step in and pick winners and losers in the free market. Is that what's going on here?

VANDEHEI: Well, absolutely, that's what's going on. It's what's happening with the banks. It's what's happening with AIG. It's what's happening with the auto industry. And it's coming at a huge price.

The reason you have some pushback -- this sort of relates to the budget. The reason you have some pushback from Democrats is the concerns about the deficit numbers and the accumulated debt that Obama -- by his own projections, would be, what, $23 trillion by 2019, and all we're doing is taking this on, and you're going to continue to have to pump it out.

I mean, AIG, which I guess we're not talking about this week, we're going to be talking about again when they have another terrible quarter and they're going to require, most likely, another infusion of money from the federal government. They're not alone.

There's others out there, and they've made the commitment that they're going to prop up some of these companies.

On autos, it's going to come down to the tough question -- we'll find out how tough he's going to be -- is will he really let Chrysler fail if they can't get this deal with Fiat. Will he let G.M. go into bankruptcy? Will he let that company get split into tiny little parts if they cannot come up with their own (inaudible)?

WALLACE: They're sure talking a tough game.

VANDEHEI: They certainly are. And one could assume that based on that they will let that happen.

LOWRY: And Henderson himself -- Henderson himself, in contrast to Wagoner, is talking about bankruptcy.

WALLACE: Okay. Thank you all. Thank you, newcomers. See you all next week.

And don't forget to check out the latest edition of Panel Plus, where our group keeps arguing, on our Web site, foxnews.com/fns, shortly after the show ends.

Time now for some mail. And many of you commented on our interviews last week with Defense Secretary Robert Gates and Canadian Prime Minister Stephen Harper.

Joe Danys, from Fort Wayne, Indiana, spoke for many. "Both articulated their positions and, in doing so, reflected a reasonable approach lacking from so many of your political guests who sound like broken records, repeating the same answer regardless of the question. Thanks for the breath of fresh air."

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

Up next, our Power Player of the Week.

(COMMERCIAL BREAK)

WALLACE: In a town full of leaks, it's tough to keep a secret in Washington. But it turns out for the last year, one of the capitol's more prominent politicians went through a private struggle almost no one here knew about, and she's our Power Player of the Week.

(BEGIN VIDEOTAPE)

WASSERMAN SCHULTZ: You know, I just -- I just dealt with it. I -- I'm not someone that -- I don't know. I just dealt with it.

WALLACE: Debbie Wasserman Schultz has blazed quite a path since coming to Congress four years ago. The South Florida Democrat rose in the House leadership, then became a leading campaigner for Hillary Clinton and, after she lost, for Barack Obama .

As I was researching your career, the phrase that keeps coming up over and over again -- rising star.

WASSERMAN SCHULTZ: I -- I really have never paid much attention to that label. I'm just -- I'm a very focused person. I'm a give-me- the-ball kind of person.

WALLACE: Which made what happened two weeks ago even more startling.

WASSERMAN SCHULTZ: I didn't find my tumor early because of luck. I found my tumor early because of knowledge and awareness.

WALLACE: It turned out while Wasserman Schultz was traveling the country last year, she was fighting a secret battle with cancer that led to a double mastectomy and having her ovaries removed.

WASSERMAN SCHULTZ: ... without thanking my wonderful husband, my family, my friends, doctors, nurses and staff who have supported me throughout this journey. I'm so sorry.

WALLACE: It started in December of 2007 when the then-41-year- old found a lump in her breast.

When you got the diagnosis, how tough was that?

WASSERMAN SCHULTZ: It was devastating. It's a call that every woman dreads. It's one that in a million years I never thought it would happen to me.

WALLACE: Then a genetic test revealed a high risk she would get ovarian cancer or a recurrence of breast cancer.

WASSERMAN SCHULTZ: I have 9-year-old twins and a 5-year-old and a wonderful husband who I wanted to be around for for a long time.

WALLACE: In all, how many surgeries did you have?

WASSERMAN SCHULTZ: In all, I had seven.

WALLACE: But remarkably, almost no one knew. She scheduled a major operation nine days before she hosted a fundraiser for Nancy Pelosi .

WASSERMAN SCHULTZ: I had a drain taped to my body and a pain pack coming out of my chest, which we hid in a purse, and I just hugged people gingerly.

WALLACE: Walking around the capitol, she would have a staffer carry her briefing books.

WASSERMAN SCHULTZ: I really stressed out about it, because it made me -- to me, it made me look like a prima donna, and that's just so not me.

WALLACE: Why did you decide to hide it?

WASSERMAN SCHULTZ: I didn't want it to define me, not " Debbie Wasserman Schultz , who's battling breast cancer."

WALLACE: Now she has turned her challenge into a cause, pushing for a new campaign to teach women and doctors about the risk of breast cancer to those under 40.

WASSERMAN SCHULTZ: We need to ensure that every young woman in America can rely on more than just luck.

WALLACE: How has this experience changed you?

WASSERMAN SCHULTZ: It's made me not sweat the small stuff as much. If my kids need me to test them for a social studies test on the phone, and I'm going to be a little bit late to a speech, they're going to come first.

(END VIDEOTAPE)

WALLACE: The congresswoman says since she's gone public, she's had an outpouring of support from colleagues of both parties, but she says she's anxious to get back to work on her old issues and her new cause.

This evening be sure to check out Hulu.com for our entire show or your favorite segments.

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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