Obama Adviser Jim Jones, Minority Leader McConnell

Obama Adviser Jim Jones, Minority Leader McConnell

By Fox News Sunday - August 9, 2009

CHRIS WALLACE: And hello again from Fox News in Washington. With a number of global hot spots to discuss, let's get right to it with our first guest, President Obama's national security adviser, General Jim Jones.

And, General, welcome to "FOX News Sunday."

JONES: Thank you, Chris. Good to be here.

WALLACE: Is Baitullah Mehsud, the leader of the Taliban inside Pakistan, dead?

JONES: Well, we think so. The Pakistani government has believed -- believes that he is, and all evidence that we have suggests that. But there are reports from the Mehsud organization that he's not. But we think -- we think that it looks like he is.

WALLACE: Let me ask you to clear up another matter. There were reports yesterday of a gun fight between two leading contenders to replace Mehsud and that one where both of them had been killed in a gun fight.

But this morning, one of those two people who was allegedly dead reportedly called Reuters news service to say that he's alive and well and there was no fight. What do you know about that?

JONES: Well, we've heard -- we've heard stories about that. We can't -- I can't confirm it. But it certainly is -- appears to be that there was some dissension in the ranks. That's not a bad thing for us.

And it goes to show that I think the strategy that we're engaged with with Pakistan is actually having some effect. And that's good.

WALLACE: Well, I was going to ask you, assuming that Mehsud is dead, what does it say about the president's war on terror?

JONES: Well, I think in terms of Pakistan, it means that the Pakistani government and the army is -- and our relationships with the army are having good effect, and I think that we're moving in the right direction.

Mehsud is -- was a very bad individual, a real thug, responsible for a lot of violence, a lot of innocent people losing their lives. And I think that if there's dissension in the ranks and that if, in fact, he is, as we think, dead, this is a positive indication that in Pakistan things are turning for the better.

WALLACE: Well, let me ask you about that. Regardless of who's in charge, there's still up to 20,000 Taliban fighters inside Pakistan. Is this a key moment for the Pakistanis to go after them? And are we pressing the Pakistani government and military to do just that?

JONES: Well, for the last several months, Chris, we've had a very, very good engagement with the Pakistani government. The Pakistani army has acquitted itself quite well in the SWAT region, showing sensitivity for refugees as well.

We have a growing relationship in terms of intelligence sharing, and I think the relationships between the two -- the two countries are on the -- certainly very positive right now -- and also the relationships with Afghanistan.

Don't forget this is a theater-wide engagement. This is an important moment. I won't say it's a tipping point, but it certainly shows that we're having some success.

When you can take out a leader like Mehsud, you do show -- you do have some dissension in the ranks, and it reduces their capability to organize, regardless of how many they have.

This is a strong message. Pakistan deserves to be -- to be credited for its role. And we hope that we continue the pressure and we don't -- we don't let up.

WALLACE: Afghanistan -- you say it's a theater-wide issue. Afghanistan is scheduled to hold national elections on August 20th. With the Taliban active in about half of that country, will that election go off? And what are the chances of serious disruptions?

JONES: Well, all indications right now are that the elections are going to go off, that they're going to be fair. They're going to be secure in most parts, secured by lot of Afghan forces, with international forces forming the outer ring of security. We are paying a lot of attention to that.

It looks like they're having a good debate going into the elections. And so the signs are positive now. We're quite sure that there will be -- there will be some efforts out there to disrupt them, but we hope to keep that to a minimum.

WALLACE: The new U.S. commander in Afghanistan, General Stanley McChrystal, reportedly wants more U.S. troops sent to Afghanistan.

But according to the Washington Post, you told our top brass in late June that the president was done sending additional troops. And I want to get to the quote. "If there were new requests for force now, the president would quite likely have a Whiskey Tango Foxtrot moment."

Everyone in the room caught the phonetic reference to W-T-F, which in the military and elsewhere means "what the expletive."

JONES: Right.

WALLACE: General, did you say that?

JONES: I did say that, but in the context of the overall strategy. We -- this is not, Chris, simply about the number of troops.

This -- I have been involved in Afghanistan for the better part of six years of my life, initially as a NATO commander. And in my two years of retirement, we conducted a major study about Afghanistan. And now I'm back into it.

What is not lacking in Afghanistan is a comprehensive strategy. We have published the strategy that not only is agreed to here by everyone in the nation's capital, but also by lot of our international allies.

Essentially, there are three prongs to the strategy. There's a security prong. That is -- that is about troops. But economic recovery and cohesion with the security strategy is important. And better governance and rule of law, from Kabul all the way down to the local townships is extremely important.

So my point in saying what I said was that it is not simply about troops. Now...

WALLACE: But are you ruling out more troops for Afghanistan?

JONES: As you know, as you mentioned, General McChrystal is doing a comprehensive assessment, which is what any military commander does when they take over a significant job.

And the secretary of defense has heard his preliminary report, has asked some questions. It will come up through the chain of command, and then we'll see what...

WALLACE: But if he asks for more troops, you're not ruling it out?

JONES: Not ruling it out at all.

WALLACE: OK. There have been a flurry of recent reports, including a comment over the last couple of days from the new British army chief of staff, that to secure Afghanistan will take at least -- at least -- another decade.

First of all, do you agree with that? And secondly, is the president prepared for that kind of long-term commitment?

JONES: Well, I know Sir David Richards quite well. He was the commander of ISAF when I was his senior commander at NATO.

And I think that what we have in place right now is a comprehensive strategy. We have yet to go past the first milestone of evaluating it.

But I think the strategy that the president has agreed to and announced that all allies have agreed to, that emphasizes the three prongs that I just mentioned -- our -- and also, it also emphasizes more role for an increased capacity in the Afghan army and also the Afghan police.

If we do that, I think we will -- we'll see indications very quickly that we're turning in the right direction. And I think that the Afghans will be able to control their own destiny much quicker.

WALLACE: Do you want to give us a time line for that?

JONES: I don't want to give -- I don't want to predict a time line, just like we couldn't predict a time line in Iraq. But you get to that tipping point. If you -- if the pieces are all organized correctly, you get to that tipping point a lot quicker, and then it becomes irreversible.

WALLACE: President Obama has made it part of his policy to try to reach out to Iran. Are we still prepared to negotiate with President Ahmadinejad after what seemed to be widespread reports that he stole the election?

JONES: In the context of the international P Five -- what we call the P Five-Plus One negotiations, we have -- we have extended an open invitation to Iran to join the talks, which we would -- we strongly hope they do.

They have not responded to that invitation. That's been on the table since April. We hope that they do. The...

WALLACE: The fact -- let me just ask -- you say we hope they do. The fact that we -- that...

JONES: We hope that they respond.

WALLACE: But the fact that Ahmadinejad may have stolen the election makes no difference?

JONES: Well, the fact of the election really makes a difference to the people of Iran. They are the ones that have to decide on the legitimacy of it.

We have to deal with this -- the -- whatever the central authority is. If it turns out to be the same individuals, then that's who we have to deal with.

But the issues on the table are so important, in terms of nuclear weapons -- I might say North Korea as well -- that when they respond, if they respond, we'll have to deal with them. That's just the fact of life. WALLACE: A report this morning that the Revolutionary Guard in Iran wants the political candidate, presidential candidate who lost, to go on trial for unrest after the elections. How would we regard that?

JONES: With regard to Iran, there's obviously some internal difficulties in that country. We have basically taken the stance that since we can't, obviously, affect it one way or another, nor should we, that we will deal with the Iran as this thing shakes out.

But it is obvious that there's some internal difficulties. We'll just watch and see what happens.

WALLACE: General, what have you learned from President Clinton's trip to North Korea this week to bring back those two journalists? Did Kim Jong-il or any of the other top officials in their meetings indicate they want a new relationship with the U.S.?

JONES: Well, as you know, Chris, this was a private mission and one that the -- I think the -- we're all grateful to the former president for taking it on. Certainly the families -- the joyful reunion was something we all celebrate.

And by the way, we would like to see the same kind of reunion in South Korea with the detainee that the North Koreans have, and also with the Japanese abductees that are still in North Korean prisons.

But the former president and the leader had about a 3.5-hour discussion. Reportedly, they discussed the importance of denuclearization in terms of weapon systems of the North Korean Peninsula -- of the Korean Peninsula, and -- in addition to, you know, talking about other things that the former president may have wished to discuss.

WALLACE: But did -- in that meeting -- as you say, it was over three hours. Did the North Koreans indicate they want a new relationship with the U.S.? And did they specifically ask for direct talks rather than going back to the six-party talks?

JONES: North Koreans have indicated that they would like a new relation -- a better relation with the United States. They've always advocated for bilateral engagement. We have put on the table in the context of the talks we would be happy to do that if, in fact, they would rejoin the talks. So we think the...

WALLACE: We would have -- be willing to have bilateral talks in the context of the six-party...

JONES: Within the context of the -- of the six-party talks.

WALLACE: What did we learn about Kim's health and his hold on power from the Clinton trip?

JONES: Well, we're still very much debriefing the party that went with President Clinton. But preliminary reports appeared that the -- that Kim Jong-il is in full control of his organization, his government. The conversations were respectful and cordial in tone.

WALLACE: But he's still in charge?

JONES: And he certainly is -- he certainly appears to still be the one who's in charge.

WALLACE: Can you assure the American people that all that the North Koreans got from this trip in exchange for the two American journalists -- that all they got from this trip was the photo-op, that there were no secret concessions from the United States?

JONES: I can do that with absolutely a straight face. There was no official message sent via the former president, and there were no promises, other than to make sure that the two young girls were reunited with their families.

WALLACE: A couple of final questions. Will the president meet his deadline for closing the prison at Guantanamo Bay by next January?

JONES: Well, we have every intention of doing so, and there's a lot of work going on every single day to make sure that we find the right solution. And I'm confident that we'll be able to meet that deadline.

WALLACE: Finally, let's talk a little bit about Jim Jones, because I think it's fair to say that you have been lower profile than some of your predecessors as national security adviser, particularly Henry Kissinger and some of the others.

But you're not seen in public all the time hovering right next to the president. You're not seen as the gatekeeper who controls all the foreign policy types who get in to see the president. Do you have a different view of your job?

JONES: I do. I think this is also a different century. And I think the national security adviser runs an organization that deals from everything starting with climate change and energy all the way to cybersecurity, including the normal threats that we associate with the job.

So it's very complex. We have economic issues that we're concerned about. And so I think...

WALLACE: But particularly in terms of your role.

JONES: I think -- I think, first of all, there's no problem with me seeing the president on any matter that he wants to discuss or I want to discuss. That is -- that is not a problem.

I believe that there's a -- there's a new way of doing business, to tee up the issues that are very complex and span a huge, huge array of subjects that each day the president has to deal with.

And I think that getting the right people in to see the president at the right time to brief him on a daily basis on these issues is the right thing to do. It's just... WALLACE: And you're not threatened that...

JONES: I don't -- I don't -- at the principal's level, with Secretary Clinton and Secretary gates, we talk every day. We talk with Susan Rice up at the -- up at the U.N. We have a very collaborative team. There's no dissension. There's no -- there's nothing but trust and confidence. And that's the enjoyable part of the job.

So I don't -- I want to make sure that the president gets the best advice he can. If I need to put my particular spin on it, I have -- I have no problem doing that.

I just -- I just think that I serve the president better by presiding over an organization that tees up the issues in the right way. We have a good process, I think, to make sure that the president gets the advice that he needs, that -- we vet it. We tear it apart. We fight over it if we need to.

But when we come to see the president, we have a -- we have a -- he gets -- he gets the pros and the cons. And if I -- as the national security adviser, if I need to say something either privately or with my colleagues, I do so. I don't have any problem with that.

WALLACE: General Jones, we want to thank you so much for coming in today. Please come back, sir.

JONES: I appreciate it. Thank you, Chris.

WALLACE: Pleasure.

JONES: Thank you.

WALLACE: Up next, some good news on the economy -- more shouting about health care reform. What's the Republican response? We'll find out from the GOP leader in the Senate, Mitch McConnell , after this break.


WALLACE: Joining us now to discuss the economy, health care reform and more is the Republican's top man in Washington, Senator Mitch McConnell .

And, Senator, welcome back to "FOX News Sunday."

MCCONNELL: Glad to be with you.

WALLACE: Let's start with the relatively good economic news recently. The unemployment rate declined in July for the first time in 15 months. Two hundred forty-seven people lost jobs, as compared to 741,000 in January. The stock market is up 49 percent since March.

Question: Does President Obama deserve any credit for turning the economy around?

MCCONNELL: Well, I certainly hope that the economy is turning around. And there are some good signs.

You do have to wonder, though, whether the stimulus has had any impact at all. Only 16 percent of it has been spent. We've run up an enormous debt. And it was sold to us as holding unemployment at 8 percent or under, and now it's 9.4 percent.

I don't think the actions of the administration have had a whole lot to do with this. But look. If the economy is getting better, we're all happy about that.

What I think the administration would be better off doing at this point, rather than running banks and insurance companies and automobile companies and student loans and now trying to get into health care, would be to do something about this massive national debt we're running up.

We're going to have a million -- a trillion 800 billion dollar deficit this one year, Chris. That's more than the last five years combined.

At the rate we're going, if their budget is carried out, we'll double the national debt in five years and triple it in 10. This is not an appropriate direction for our country to take.

WALLACE: You say that the president's stimulus plan has been -- your phrase -- short on job creation. But both White House and private economists say that it saved or created half a million jobs in the second quarter, including thousands of jobs in your state of Kentucky.

Do you really think we would be better off without any more stimulus?

MCCONNELL: Yeah, I do. Only 16 percent of the stimulus has been spent. There's nobody who credibly believes you can estimate a job that was saved, that -- what caused a job to be saved. There's no way to estimate that.

What we do know for sure is we're running up these massive debts. And I think we ought to reconsider whether we really want to spend all of this roughly trillion dollars over the next three or four years if the economy's coming back as a result of the ingenuity of the American people.

Do we really want to add this kind of money to the debt?

WALLACE: Well, let me ask you about one stimulus program, and that was "cash for clunkers." At the start of this last week, there was some talk from some Republicans, including Jim DeMint and John McCain , about filibustering it.

But in the end, you guys let it sail through. Seven Republicans voted for the $2 billion extension. In effect, didn't the GOP cave on "cash for clunkers?"

MCCONNELL: Well, I think "cash for clunkers" certainly demonstrates that if you pay people to buy TVS or refrigerators or that sort of thing, you know, it'll -- people will go out and do it. If the government pays them to buy things, they probably will.

WALLACE: But why didn't you put up more of a fight?

MCCONNELL: Well, we didn't have the votes to stop it.

WALLACE: Would you have -- I know you voted against it.

MCCONNELL: I don't think it was a good idea. I mean, I think, clearly, if you provide this kind of generous bonus to Americans to purchase consumer items, they probably will.

I mean, some would argue they'd be foolish not to, if the government's going to give you $4,500 to do it. Whether that's good government policy is another matter. I opposed it because I don't think it's a good thing to do.

WALLACE: You talk about focusing on the deficit. At a time when this economy still is in a recession, at least until we have indications that it isn't, and we're still losing hundreds of thousands of jobs, would you really want to cut government spending right now in the next year?

MCCONNELL: Well, we shouldn't -- certainly shouldn't make it any worse. I mean, they're trying to pass a trillion-dollar health care proposal which the Congressional Budget Office says is not deficit neutral. And their spending plans, as I just outlined, are just astronomical.

WALLACE: What are the prospects for the president's health care reform plan at this point?

MCCONNELL: I think it is in serious trouble, for good reason. First of all, Americans are very skeptical about putting the government in charge of all of American health care.

They're also skeptical as to whether it will be paid for. The Congressional Budget Office says it's not paid for.

And even if they become convinced that it's paid for, then you have to look at how it's being paid for. And about half of the estimated cost of this is being underwritten by cuts in Medicare, which may explain why you have an awful lot of angry people showing up at these town meetings already, and my suspicion is that will probably happen throughout August.

WALLACE: All right. I want to talk about the town halls in a second, but I do want to ask you one more question about the process on health care reform.

The so-called Gang of Six, which is three Democrats and three Republicans who are members of the Senate Finance Committee -- and they're up on the screen there. They have been meeting to discuss a bipartisan compromise.

But there have been reports that the Republican leadership in the Senate -- and that certainly would include you -- don't want Republicans to make a deal. True or false?

MCCONNELL: We'd like to make a deal, but we'd like to make the right kind of deal. I mean, this is not about embarrassing anybody politically. This is about getting it right.

This is one-sixth of our economy. Health care is an enormous issue. It affects every single one of us. And we want to get it right.

WALLACE: Well, let me ask you a couple of specific questions that seem to be the basis for a possible compromise. Would you accept nonprofit cooperatives instead of a public plan as part of health reform?

MCCONNELL: Well, it sounds a lot like Fannie Mae and Freddie Mac to me. We know what ought to be done.

WALLACE: A separate agency, but it's basically...

MCCONNELL: Well, but it...

WALLACE: ... funded and guaranteed by the government.

MCCONNELL: Yeah, but it would have government money in it. It would be guaranteed by the government. It's just going to be kind of a -- as I say, a kind of Fannie Mae or Freddie Mac.

WALLACE: So you'd be against that.

MCCONNELL: Yeah. No, that's not acceptable.

WALLACE: Would you accept taxing high-premium private insurance plans?

MCCONNELL: I think that's going to be very controversial as well.

Let's talk about what we ought to do. You're asking me about the various things the Democrats would like to do.

WALLACE: Well, I mean, those are things that the Republicans are talking about, too, in the Gang of Six.

MCCONNELL: Well, they're talking about lot of other things, too, like about doing something about lawsuits against doctors and hospitals; doing something about incentivizing wellness programs like the Safeway Corporation did, targeting obesity, smoking, high cholesterol, high blood pressure and lack of exercise.

They've actually been able to bend the cost curve by incentivizing their employees to improve their behavior.

Chris, equalizing the tax code, so that an individual who purchases health insurance gets the same tax benefit a corporation does -- those are the kind of things that would actually have an impact.

WALLACE: OK. Let's talk -- you brought up the town halls. As we all know, Democratic members of Congress have gone back to their districts. They're meeting with their constituents, and there have been some very loud and angry town halls.

Democrats say -- some of these have been quite loud and quite angry, the complaints about the plan. Democrats say that conservative organizers are employing mob-style tactics and even Nazi-style tactics. Your reaction, sir?

MCCONNELL: Well, look. I think attacking citizens in our country for expressing their opinions about an issue of this magnitude may indicate some weakness in their position on the merits.

And I also think it's particularly absurd for the Democrats, who have over an $8 million e-mail list over at the DNC called Organize America, to be criticizing citizens for being organized.

Frankly, the truth of the matter is we don't know who's organized and who isn't. The point is the issue, the substance. They need to deal with it. Americans are concerned about it.

I suspect that a lot of these people, Chris, who are coming to these meetings are elderly people who are concerned about half-a- trillion-dollar cut in Medicare to pay -- not to make Medicare sustainable, but to start a new program for other citizens.

WALLACE: Let me show you -- and let's put up on the screen -- some of these town hall meetings, because they've been pretty impassioned.

Have -- from what you've seen -- and you haven't had any yet, but you -- you've certainly watched them on TV. Have some of the protesters gone over the line? And when you read that some organizers give people instructions -- pack the hall, stand up and shout, rattle the members of Congress. Should they back off?


MCCONNELL: Look, I don't think either side ought to be trying to engage in disrupting meetings, either the Democratic side or the Republican side. We ought to focus on the issue.

And to demonize citizens who are -- you know, who are energetic about this strikes me as demonstrating a kind of weakness in your position -- in other words, you want to -- you want to change the subject, and rather than talk about the half a trillion dollar in Medicare cuts, let's talk about somebody at some town meeting who misbehaved. It strikes me that's missing the point.

WALLACE: Well, I'm going to ask you one more question on that subject. What do you think of the White House asking its supporters to forward any e-mails or any claims they get that they think are, quote, "fishy" to the White House?

MCCONNELL: Well, it strikes me as the potential compilation of a -- of a list of people that you don't like. It's reminiscent of previous administrations.

I think -- look. We need to stop all of this effort and concentrate on the substance. This is an enormously important subject. Of course American citizens are concerned about it. And many of them are upset about it.

It's not just the town hall meetings, Chris. All the public polls indicate that support for what the administration is trying to do on health care is declining.

WALLACE: In the time we have left, which is a couple of minutes, let's do a lightning round of quick questions and quick answers. I know you always enjoy this exercise.

Is the Obama energy plan, cap and trade, dead for this year in the Senate?

MCCONNELL: I hope so.

WALLACE: Do you think so?

MCCONNELL: I hope so. I think it goes entirely in the wrong direction to put clamps on our economy when you know the Indians and the Chinese are not going to put clamps on their economy.

WALLACE: Do you think that there is -- well, let me ask you a different way. What are the chances that the president will have something to sign this year -- and I'm asking you not what you hope, but what you think as a political observer -- that he'll have something significant to sign this year that he can genuinely call his version of reform?

MCCONNELL: Well, I think if we -- if we made a strong bipartisan improvement in the health care system, I would love for him to be able to sign such a bill, and I'd love to be there with him.

WALLACE: Is there any way the president can meet his January deadline to shut down the terror detainee prison at Guantanamo?

MCCONNELL: He should not shut down Guantanamo. Guantanamo is a couple-of-hundred-million-dollar state-of-the-art facility with courtrooms for military commissions. This is a program that is not broke and doesn't need fixing.

WALLACE: But you just heard General Jones say he believes they can still make that January deadline. Whether you like it or not, do you think they can?

MCCONNELL: I think Congress will be, on a bipartisan basis, aggressively opposing the closing of Guantanamo, particularly when there's no plan to move them anywhere else.

WALLACE: Finally, I want to put up a poll this week, the Quinnipiac poll. When asked how they think congressional Democrats are doing, voters disapprove of the Democrats by a margin of 20 points. But when asked about Republicans, the margin is minus 30 points.

Senator, where do you think the GOP is now in terms of rebounding from 2006 and 2008 and winning back the support of the American people?

MCCONNELL: Well, I think the best evidence of that is candidate recruitment. We're going to have the best set of candidates in next year's elections than we've had in a long time.

These candidates would not be coming forward if they didn't think they had a great shot at winning. And they're also coming forward, Chris, because they're disturbed about the drift of this administration, particularly on the domestic side.

WALLACE: Senator McConnell, we want to thank you. Thank you, as always, for joining us. And please come back, sir.

MCCONNELL: Thank you, Chris.

WALLACE: Coming up, our Sunday group on those boisterous town hall meetings. Is it Republicans disrupting Democrats or citizens practicing good, old-fashioned democracy? We'll take a fair and balanced look in a moment.



(UNKNOWN): Under the Obama health care plan which you support, this man would be given no care whatsoever!



(UNKNOWN): We're not going to stand for this (inaudible) anymore.



(UNKNOWN): (Inaudible)


WALLACE: Well, that's just a sample of congressional town hall meetings on health care reform that have turned rowdy and even, in a few cases, violent.

And it's time now for our Sunday panel -- Paul Gigot of the Wall Street Journal, Mara Liasson of National Public Radio, Stephen Hayes of The Weekly Standard, and Ceci Connolly of the Washington Post.

So, Paul, what do you make of these town halls? Grass roots, exercise of First Amendment rights or political AstroTurf? Legitimate political dissent or over the line?

GIGOT: It's a little of both (AUDIO GAP). Some of it's spontaneous. Either way, freedom of assembly -- people are passionate.

But if your government says I'm going to rearrange 17 percent of the U.S. economy, shouldn't you be passionate?


So yes, some of it's organized. There's no excuse for violence. But those incidents have been very, very rare.

WALLACE: But let me -- let me just bring up with you, Mara, as I discussed with Senator McConnell -- and I think everybody agrees that there's no difference between the right organizing in this case or the left organizing against George W. Bush and the Iraq war.

But conservative groups have been putting out instructions on the Internet about how to take over the meeting -- stand up, shout, rattle the Congressmen. Anything wrong with that?

LIASSON: No, there's nothing wrong with it. What it means is probably for members of Congress the town hall becomes a less useful vehicle to find out what their constituents are thinking.

I do think that even though there is real anger out there at what people perceive to be the bill, which right now is just the House bill, and the support -- the supporters of the president's health care effort have been remarkably unorganized -- and I think there's a reason for that.

I think the White House is the victim of its own strategy. I mean, this is why they wanted two bills by now. Right now there's only one bill. It's the House bill. And it has the public option in it.

There's no alternative to that, and the public option is what's driving a lot of this anger. It's kind of the stand-in for what they call socialized medicine. And the defenders aren't defending anything specific. And that, I think, is one of the problems.

I do think another result of all this, especially this month -- and a lot of the anger is being directed against moderate Democrats who are not for what's in the House bill. This whole effort is going to get pushed to the right.

I think that once the Senate Finance Committee comes out with something, you're going to have a centrist alternative to the House bill, and that's where this effort is going to head.

WALLACE: Before we get to the substance, I just want to talk -- one more -- one more question about the politics, because now you do have the Democratic Party putting out an ad comparing these -- the organized efforts here to a mob. And let's take a look at that Democratic ad.


NARRATOR: Now desperate Republicans and their well-funded allies are organizing angry mobs just like they did during the election. Their goal? Destroy President Obama and stop the change Americans voted for overwhelmingly in November.

(END VIDEO CLIP) WALLACE: Steve, who's winning the political battle here, Republicans on the attack or Democrats crying foul?

HAYES: Well, I'd say in this past week Democrats, actually, because they've managed successfully to change the subject. They're not -- we're not talking about the substance of the plan so much as we're talking about angry town halls, which is exactly what the White House wanted to do.

I think they've led the media around like a puppy to cover these kinds of things rather than focus on the substance.

But overall, I think there's a huge intensity gap between Republicans who oppose the plan and average citizens and Democrats. And I think this is one way that Democrats are trying to gin up their supporters, particularly the Obama administration and the DNC, to fight Republicans and to sort of equalize that intensity gap.


CONNOLLY: Well, I would agree that this past week it's made it much easier for Democrats. Keep in mind, over the past six weeks President Obama's support in terms of handling the health care issue has been really falling.

And so I think that you're right. It at least changes the subject a little bit while Democrats try to come up with a better strategy for moving forward.

The interesting thing here, though, is that for all that you hear from Republicans about that they think there are problems in the health care system and things that need to be addressed, we're really not having a debate about how to fix America's health care system.

We're having this odd sort of yelling match which is not about the U.S. health system.

WALLACE: But let -- I want to get back to the question now that Mara raised, Paul, and that is how is the anger and the debate -- and you know, even if you want to say half of this or a third of this is orchestrated, the fact is, as Senator McConnell pointed out, a lot of people, and especially a lot of seniors -- very upset about what they see as the possibility that this is going to come out of their hide.

How is this affecting the battle in Congress? Is this moving votes one way or the other?

GIGOT: I think it's moving the debate to the right, as Mara said. I mean -- interesting here, the Democrats have used cuts in Medicare for decades against Republican plans on tax cuts and other things.

This time the argument on Medicare's cutting the other way, because the Democrats are saying, "In order to fund universal care, we're going to have to reduce -- bend the cost curve on Medicare." And that's what Peter Orszag, the White House budget director, is saying. That's what the president himself is saying. Seniors look at that and say, "I get it. That means I don't get the hip replacement. That means I'm last in line for the knee replacement. That means in the last six months of life people are going to make -- have to make tough decisions about my care."

And that's hurting the Democrats in this debate.

CONNOLLY: There are, of course, though, some things in the bill, in the proposed House bill so far, for -- specifically for seniors. A big one is that coverage gap that's known as the "donut hole" gets closed and eliminated over a period of years.

They're also going to do away with any co-payments on preventive services. Doctors are going to get a nice raise if this legislation goes forward under Medicare. So they've tried to put in some sweeteners as well in terms of the Medicare program

HAYES: Until doctors become civil servants down the road when we...



LIASSON: But that gets back to this public option. I really think that what caused us to be in the situation is that group of conservative Democrats in the House who expanded the Democrats' majority put on the brakes.

And I don't think there's a single liberal Democrat in the House of Representatives who will lose their job if there's a -- if there's not a public option in the final bill. But there are moderate Democrats who might lose their job if there is a public option in the final bill.

And I think that that's all kind of gotten out of the White House's control, and that's why we're in the position we're in now.

WALLACE: So, Ceci, as our resident health care expert who watches this virtually full time, as you look at this now, what do you think are the chances that the president is going to get something to sign this year that is real reform?

CONNOLLY: I think that the chances are still decent for some legislation being enacted. I think it's also more likely -- growing more likely that it may be a more modest effort, that it won't cover all of those 46 million uninsured anytime in the near future.

WALLACE: So give us a sense of what shape it will take. What do you think is in the most trouble in terms of what the president and Democrat -- Democratic leadership is proposing?

CONNOLLY: Well, I agree with Mara that the public option is probably in jeopardy. But I'm not entirely certain that the White House feels as passionately about that...

LIASSON: Oh, I agree with you.

CONNOLLY: ... as some of the liberal...

LIASSON: I don't think they care.

CONNOLLY: Exactly.

LIASSON: Yeah, they'll take...

CONNOLLY: So it's in...

LIASSON: They'll take the co-ops. Yeah.

CONNOLLY: ... jeopardy, but that may not break President Obama's heart.

LIASSON: Oh, no. No.

GIGOT: But the problem is when has the president actually opposed the -- his liberals on anything so far? Has he done it on the stimulus? No. Did he do it on cap and trade? No. Is he going to actually do it this time?


LIASSON: Well, wait a minute. something has to get through both houses of Congress.

HAYES: He has to do it this time. He has to do it this time because he needs something...

LIASSON: Something -- yeah, something -- but something...

HAYES: ... just to point to.

LIASSON: ... has to get through.

CONNOLLY: Right. But we'll wait until the 11th hour.

LIASSON: Yeah. Yeah.

WALLACE: And what do you think, Ceci, is going to end up being the tax plan to pay for it?

CONNOLLY: If there is a tax component, it is more likely to be targeted in some way to the wealthy, so I think that...

WALLACE: Oh, what a surprise.

CONNOLLY: ... that the discussions on the Senate Finance Committee around those -- they're called "Cadillac" health plans, maybe on the order of 20, $30,000 health policies that some people now have, could be looking at a tax.

WALLACE: But not the income tax surtax that the House is passing.

CONNOLLY: No, I can't imagine that that could ever go through the Senate.

WALLACE: OK. We have to step aside for a moment.

But when we come back, with stocks up and unemployment numbers down, is the worst of the recession behind us? We'll put that question to the panel after this break.


WALLACE: On this day in 1974, Richard Nixon resigned as the 37th president. Minutes after Nixon left the White House with his trademark wave, Vice President Gerald Ford was sworn into office.

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



OBAMA: This month's job numbers are a sign that we've begun to put the brakes on this recession and that the worst may be behind us.


WALLACE: That was President Obama on Saturday playing up what turned out to be some surprisingly good unemployment numbers.

And we're back now with Paul, Mara, Steve and Ceci.

So when you look at all the economic data the last few days, where are we in this recession?

And, Steve, I'll put the question to you that I put to Senator McConnell. How much credit does Barack Obama deserve for perhaps starting to turn things around?

HAYES: Well, I think it's entirely possible that we are out of the recession. You've seen economists -- an increasingly number of economists say that we are perhaps no longer in recession and maybe came out as early as June.

I don't think that the president deserves much credit for this, but I think, politically speaking, they've been very smart about this. You saw them throughout the spring talk about the stimulus working. They've been just saying, "The stimulus is working. The stimulus is working."

And at the time, people were looking around saying, "You've spent 5 percent of it or 10 percent of it. How can you make such a claim?" And there's very little evidence, economic evidence, to back up such a claim.

But what they were doing, clearly, is setting themselves up for the coming recovery and for five quarters of $100 billion per quarter of spending in the future.

So if we see any turnaround, which I think was inevitable, and we've probably seen -- or seen the beginnings of it, they are going to, I think, claim credit for it. And it's going to be very difficult for Republicans to say, "No, no, no, this had nothing to do with it," because people won't feel that. WALLACE: Ceci?

CONNOLLY: Well, sure. I think there's a tendency to both blame Washington more for the economy than it deserves to be blamed and to give the credit as well. These things are cyclic, as you point out.

It's striking because the numbers have certainly improved for the administration. Everybody was bracing for 10 percent unemployment. It actually dipped down a tiny bit to 9.4 percent.

But you know, as I walk around downtown Washington, it's striking me how many more homeless people I seem to notice, how many more people I see lining up for food or -- I see a sight lately of people with tables set up where they're selling everything from socks to soap right there on a folding table, which reminds me more of when I lived in Mexico, sort of the underground economy.

So I think out there in the real world, it's still a very difficult time.

WALLACE: Paul, where do you think we are in this recession? And if things are beginning to turn around, why?

GIGOT: The natural healing tendencies of the economy. I mean, when you go down as often -- as long -- as far as we have and as long as we have, you're going to bounce back up, and the...

WALLACE: Don't you think that -- forget the stimulus. Don't you think the trillions of dollars that the Fed has injected...

GIGOT: No question, the Fed has been the major stimulus. I don't think you can give the fiscal stimulus a lot of credit because it -- the money hasn't even been spent yet, most of it, as even the White House -- Larry Summers, economic adviser, would concede most of that's going to be in 2010.

The Fed has provided enormous stimulus, however. That has helped banks' balance sheets.

You've got inventories, production inventories, stripped down to the nub. Those are going to have to bounce back up.

You have consumers getting a little flusher themselves because they've been saving more. So they're ready to spend. You see it in the "cash for clunkers." They've got money to spend if they have confidence that -- "I'm going to keep my job. And you know what? I think I can spend a little more here instead of hoarding it."

So I think we're probably at the bottom. I think we are going to see some growth. That's terrific to see. The question going forward is how much job creation is there really going to be. And that's -- nobody knows that -- the answer to that.

I'm a little worried because of all the uncertainty being created in part by Washington. We don't know how high taxes on payroll are going to be. We don't know if there's going to be an energy tax. We don't know how intrusive the regulation on health care is going to be. All of that is hanging over decision-makers and risk-taking by private actors.


LIASSON: Yeah, not to mention the fact that unemployment is always a lagging indicator. It always is the last thing to turn around. And they need to it turn around well before November of 2010 if the White House is going to survive the midterm elections.

I think one of the problems is even though economists say that the stimulus probably did make things a little bit better than they would have been -- in other words, it could have been worse -- that's a very unsatisfying political argument to make -- "Things would have been worse if we hadn't done it."

WALLACE: On the other hand, if the -- if things are improving, it doesn't matter who's responsible.

LIASSON: That's right.

WALLACE: The president gets the credit.

LIASSON: That's right.

WALLACE: I want to turn -- switch subjects, because there was a genuinely historic moment at the Supreme Court this weekend as they televised for the first time a justice taking the judicial oath, and also Sonia Sotomayor, the justice, becoming the first Hispanic on the court. Let's watch.


SOTOMAYOR: ... as an associate justice of the Supreme Court of the United States...

ROBERTS: ... under the Constitution and laws of the United States...

SOTOMAYOR: ... under the Constitution and laws of the United States...

ROBERTS: ... so help me God.

SOTOMAYOR: ... so help me God.

ROBERTS: Congratulations and welcome to the court.



WALLACE: Steve, your thoughts about Sotomayor joining the court and how this whole nomination process played out?

HAYES: Well, it's a moving moment, obviously, for her personally and for her family. I think what we saw in the confirmation hearings was that Republicans questioned her respectfully -- aggressively, but respectfully, ultimately didn't end up voting en masse for her.

I think you had just nine Republicans who voted in favor of her confirmation, which is more opposition than we've seen from Republicans historically going back to Breyer and Ginsberg.

Interesting to see if this is setting up for the next Supreme Court nomination, if Republicans are going to be more critical of this new empathy standard that we've seen with her nomination.

CONNOLLY: You know, so much has been made, rightly so, of her being the first Hispanic. But I still think it's quite significant to have that third woman now appointed to the Supreme Court, and also coming from a very different class background than most of the justices that we've had.

And I think that those closed-door private conferences are going to be fascinating with her now in that room.

WALLACE: Paul, your thoughts?

GIGOT: A Supreme Court justice once told me that you can't really fully appreciate how much even a single new justice can change the dynamics inside the court. And it's going to be fascinating to watch and see how that happens.

WALLACE: Now, why would you say that? Because I mean, I think most people think, "Well, she's replacing Shouter. He was a reliable liberal. She'll be a reliable liberal. It still is 4-4 with Kennedy in the middle."

GIGOT: Because it's an organization of nine people, and -- with a lot of clerks. And the interpersonal dynamics matter. You have some people who are coalition builders. You have other people who want to draw that big, bright line and say put the flag up and follow me.

The judges have a different interpersonal reaction, and that matters on how some of these cases turn out.


LIASSON: Yeah, I think it was a big, big historic day. It's hard to exaggerate the significance of the first Hispanic on the court.

I do think you're seeing a more polarized confirmation process. I think that's not going to get better. It's probably going to get worse.

I think that she probably -- this is probably the high-water mark for Republican folks for an Obama nomination. I can't imagine him sending somebody up who's going get more.

But I agree with Paul. We'll see how she affects the dynamic on the court. I can't imagine she's going to affect the actual way the votes break down.

WALLACE: All right, panel. We've got to leave it there. Thank you all so much. See you next week.

And don't forget to check out the latest edition of "Panel Plus" where our group continues the discussion shortly after the show ends on our website,

Time now for some comments you posted on our new blog, "Wallace Watch." Ronald Hollingsworth on health care reform -- "I would like to know if the insurance plan for senators is government-run and what is the cost to taxpayers. I sure don't hear any complaints about their plan. Why can't we just have their plan?"

And many of you visited our blog to find out about a semi-private concert I got to see last weekend. Penny Quinn writes, "Your great article about Paul McCartney and the Beatles has transcended partisan politics. Thanks so much."

Please keep your comments coming. You can find us at

And up next, our Power Player of the Week.


WALLACE: Earlier this year we told you about a place here in Washington that makes you feel more grateful and more humble than just about anywhere else. The operation is run by our Power Player of the Week.


HAWLEY-BOWLAND: We take care of the wounded of all the services -- the soldiers, the sailors, airmen, Marines. And so we call them warriors.


HAWLEY-BOWLAND: It's hard, but you're doing great.


WALLACE: Major General Carla Hawley-Bowland is the commander of Walter Reed Army Medical Center, which just celebrated its 100th anniversary.


HAWLEY-BOWLAND: It'll all work. It just takes lots of practice.


WALLACE: The general showed us the care they are giving now to warriors who lost limbs in Iraq and Afghanistan. HAWLEY-BOWLAND: Instead of just, you know, the old wooden leg that people used to get in the old day, we now have power knees that assist them in going up stairs.

WALLACE: Wounded warriors walk around a track in a harness to get used to their prosthetics or learn to climb a moving wall.

HAWLEY-BOWLAND: The record on this wall is an hour and a half, which would tire me out...

WALLACE: What, somebody was able...


WALLACE: ... to climb it for an hour and a half?

HAWLEY-BOWLAND: ... with a prosthetic, and climbed it for an hour and a half.

WALLACE: And remarkably, 25 percent of the amputees return to active duty, some to the battlefield.

HAWLEY-BOWLAND: We send them with extra prosthetics so that if the prosthetic gets injured again they've got a spare in the trunk.

WALLACE: That has been the tradition at Walter Reed since it opened in 1909.

HAWLEY-BOWLAND: It started out as a state-of-the-art hospital. It had an electric elevator, indoor plumbing, electricity and an x-ray room. That was state of the art back then.

WALLACE: It was named after an Army doctor who discovered during the Spanish-American war that yellow fever, which was killing more soldiers than battle injuries, was transmitted by mosquitoes.

HAWLEY-BOWLAND: War is one of those catalysts to come up with new treatments to save the wounded. Vascular surgery -- the beginnings of that were in the Korean war, as well as Vietnam.

WALLACE: During World War I, the hospital expanded from 80 beds to 2,500 by building long wooden barracks.

What is it like for a commander in chief when they come here and see the soldiers they've sent into battle back home?

HAWLEY-BOWLAND: They'll come back teary-eyed out of the room. You know, we let them go in the room privately with the soldier and their families. But it's always an uplifting experience for them. And they love to come visit the soldiers.

WALLACE: Two years ago, there was a scandal at Walter Reed when it was revealed that outpatients were in housing infested with mice and mold and were getting lost in the bureaucracy.

HAWLEY-BOWLAND: It was very painful morale-wise. WALLACE: Hawley-Bowland took command later and says the problems have been fixed. As Walter Reed celebrates its first 100 years, one thing above all drives the staff -- the courage of the warriors recovering from their wounds.

HAWLEY-BOWLAND: I speed walk for my P.T. test, and these guys pass me. And then they'll turn around and go, "Oh, hi, ma'am." And I'll go, "Yeah, carry on. Carry on." They are what we come to work for every day. And they're the ones that create the memories that we will treasure forever.


WALLACE: Walter Reed shuts its doors in September of 2011 as part of the Pentagon's base-closing program. But when it combines operations with Bethesda Naval Hospital it will keep the name Walter Reed.

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


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