The following is a rush transcript of the January 10, 2010, edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.
CHRIS WALLACE, HOST: Well, a little more than a week into 2010, election politics is already in full swing.
On Saturday, Senate majority leader Harry Reid apologized to President Obama for racial remarks he made during the last campaign. Three top Democrats announced they won't seek re-election. But open warfare has broken out among Republicans over the GOP chairman.
Joining us now are the leaders of both parties, Michael Steele, the controversial head of the Republican National Committee, and Virginia governor Tim Kaine, chairman of the Democratic National Committee.
And, gentlemen, welcome back to "Fox News Sunday."
MICHAEL STEELE, REPUBLICAN NATIONAL COMMITTEE: Great to be with you.
TIM KAINE, DEMOCRATIC NATIONAL COMMITTEE: Great to be with you, Chris.
WALLACE: Before we get to the differences between your two parties, I have to ask you about difficulties going on within each of your camps. Governor Kaine, a new book on the 2008 campaign called "Game Change" says of Senate majority leader Harry Reid — let's put it up — he was wowed by Obama's oratorical gifts and believed that the country was ready to embrace a black presidential candidate, especially one such as Obama, a, quote, "light-skinned African- American with no Negro dialect unless he wanted to have one, as he said privately."
Governor Kaine, does that kind of language have any place in the leadership of the Democratic Party? And should Harry Reid step down?
KAINE: Chris, I do not believe he should. And I think Senator Reid did a very big thing yesterday by saying, you know, "I used language that, looking back on it, wasn't the right language."
The president made very plain in his discussions that he considers Senator Reid a great battler for equality and social justice and considers the book closed.
And so I don't — I don't think this is an issue that's going to affect his leadership at all. In fact, he's doing some very heavy lifting, wonderful lifting right now, to get this health care bill over the goal line, and...
WALLACE: Well, how — but let me ask...
KAINE: ... I think he will continue.
WALLACE: ... you, though, how — how is this any different from racial remarks that Trent Lott made about Strom Thurmond back in 2002 that forced him out as the Republican leader in the Senate?
KAINE: Well, I think if you look at the remarks, as I have, it was all in the context of saying positive things about Senator Obama and why he...
WALLACE: Negro dialect?
KAINE: ... might be a wonderful...
WALLACE: Light-skinned?
KAINE: Positive things about his candidacy and why his candidacy would be strong. And so I think, you know, again, while he said the choice of words was unfortunate, he stepped right up to it, acknowledged it and said, "Look, I said things that I shouldn't have or I should have said differently."
It definitely was in the context of recognizing in Senator Obama a great candidate and future president. And that's why they're working so well together and I know they'll continue to do that.
WALLACE: Mr. Steele, should Reid step down? And how objectionable do you think his remarks were?
STEELE: Well, I think — I think he should. I mean, if the standard is the one set by the Trent Lott incident, where he was wishing happy birthday to Strom Thurmond and talked about him as a possible president at the time, you know, 1948 or whatever, compared to calling a candidate for president, you know, light-skinned, Negro, the reality of it is this.
There is this standard where the Democrats feel that they can say these things and they can apologize when it — when it comes from the mouths of their own. But if it comes from anyone else, it's racism.
It's either racist or it's not. And it's inappropriate, absolutely. So if the standard is the one that we saw with Trent Lott as speaker — as a leader at the time, then I think this absolutely falls in that category.
It's more than just an apology here. It's a reflection of an attitude. Now, remember, this is the same leader who, just a few weeks ago, you know, was talking about health care in the context of slavery.
Clearly, he is out of touch not only with where America and his district are but where — how African-Americans generally feel about these issues.
WALLACE: Governor Kaine?
KAINE: Well, I would just go back to it. If you look at those comments, they clearly were in the context of praising Senator Obama as a...
WALLACE: But — but I have to...
KAINE: ... great candidate and a great — and a great president.
WALLACE: ... I have to take you up on this. Negro dialect, light- skinned — that's praise?
KAINE: Well, that — and it actually — if you look at the comments - - and you — and you...
WALLACE: But I'm asking about those — those specific words. That's phrase?
KAINE: Those particular — those particular words — the senator has said he regrets them and they weren't appropriate.
And the important thing is the president right away said, "This is a closed book, because I know Senator Reid's heart. I know the kind of person he is." And if — and as you read the comments earlier, I think they are a fair representation.
They were supporting the senator as a great leader and as a great president, and that's why Senator Reid and President Obama have worked so well together to get America really going back...
STEELE: Chris, all I know...
KAINE: ... the right direction...
STEELE: ... is that if Mitch...
KAINE: ... in the last year.
STEELE: ... McConnell had said those very words that this chairman and this president would be calling for his head, and they would be labeling every Republican in the country as a racist for saying exactly what this chairman has just said.
So if I sat here and said what he just said, if Mr. McConnell used those words, no one would find it to be credible. And it's — so if it's not credible for me saying it, it's certainly not credible for the Democrats to sit back and go, "Well, it was in the context of saying something nice."
It's a — it's an old mindset when you're using language in 2008 that harkens back to the 1950s and '60s.
WALLACE: Mr. Steele, let's turn to your problems, and you have a few.
STEELE: Problems?
WALLACE: Yep. GOP congressional leaders say they did not know that you were releasing a book, "Right Now: A 12-Step Program for Defeating the Obama Agenda," until they saw you selling it on TV.
And former GOP chairman say they can't believe that you personally are getting paid $20,000 for a speech at a time when your party is having such money problems.
STEELE: Well, a couple of things here. One, with respect to the leadership, I thought that that process had already been taken care of from within the party and the staffing and all of that, that they had been notified of that. And for that, I apologize. It was not trying to blindside anybody in that regard.
Number two, the book was written in 2008. It was delayed because of production and other things, and so that...
WALLACE: Well, let me — let me take you...
(CROSSTALK)
WALLACE: No, but let me take you up on that, because you keep saying that, and yet we went through the book yesterday, and there...
STEELE: Right.
WALLACE: ... was reference after reference...
STEELE: And the book was...
WALLACE: ... after reference...
STEELE: Right. The book was...
WALLACE: ... from 2009.
STEELE: The book was updated because of the delay. It was supposed to come out in early 2008, you know, March or April of 2008. It was delayed. And as it was delayed, I updated the book because of relevant things that were going on. Sarah Palin's book hit. It was pushed back further.
But this is the point. With respect to, you know — you know getting speaker's fees, which I — you know, I did 12 speeches last year, some of which I got paid for, some of which I didn't — is consistent with what chairmen in the past have gotten, outside income. It does not affect my duties.
I did over 400 events for the RNC. I raised $80 million last year. I won two governors' races. I won 27 out of 37 special elections last year. And I've got cash on hand to carry over into this year.
WALLACE: But wait, wait, wait. Wait.
STEELE: So it was a very good year.
WALLACE: But you had — when you came in, you had $23 million cash on hand. Now you have $8.75 million. And the bigger point, if I may, sir...
STEELE: Well, I mean, hold up. Chris, no, no, no, no, the bigger point...
WALLACE: I'm going to give you a — no. Let — if I may.
STEELE: OK.
WALLACE: Let me ask a question.
STEELE: All right. Go ahead.
WALLACE: Then you can answer it.
STEELE: All right.
WALLACE: Party staffers reportedly say they can't control you. Here's what you told Sean Hannity this week...
STEELE: Right.
WALLACE: ... when he asked you about the likelihood that the GOP was going to take back the house in November. Here it is:
(BEGIN VIDEO CLIP)
SEAN HANNITY: Do you think you could take over the House?
(CROSSTALK)
SEAN HANNITY: Do you think Republicans...
STEELE: Not this year. And, Sean, I'll say honestly...
HANNITY: You don't think so?
(END VIDEO CLIP)
WALLACE: And then on Thursday you had this to say to your critics:
(BEGIN VIDEO CLIP)
STEELE: I've had enough of it. If you don't want me in the job, fire me. But until then, shut up. Get with the program, or get out of the way.
(END VIDEO CLIP)
WALLACE: What a lot of Republicans are saying is you're a loose canon, and that at a time when the Democrats are having a lot of problems - - we haven't even gotten to the two retirements this week — that there's too much focus on you.
STEELE: No, there is too much focus on me, because that's what Washington wants to focus on. But when I'm out in the country they're focused on what's happening in Washington, as a matter of fact.
The bottom line is I'm very passionate about what I do. I'm very passionate about winning. I'm very passionate about defeating an agenda that is stripping away the ability of families to grow and businesses to prosper. I'm very passionate.
So I bring that to the table. And yeah, I get a little bit hot-headed. But the reality of it is it doesn't change the fact that right now we have health care being...
WALLACE: I'm going to give you an...
(CROSSTALK)
WALLACE: I'm going to give you an...
(CROSSTALK)
STEELE: But it's all a part of it.
WALLACE: I'm going to give you an opportunity to make a campaign speech. I'm asking you about — I'm asking you about the question of your standing within the Republican Party. Any thought of resigning?
STEELE: No, absolutely not. Why should I, Chris? I'm pushing the ball. I'm raising the money. I'm winning elections. I've got the base fired up. We're out in the country every day. We're doing the things that we should be...
WALLACE: Well, let me as you, though...
STEELE: ... doing to party-build.
WALLACE: But let me ask...
STEELE: And it's refreshing. It's exciting to be able to go out there and stir the pot up and push the party. We will...
WALLACE: But let me give you an example...
STEELE: Well, let me...
WALLACE: But let me give you an example...
STEELE: Let me make (inaudible) point.
WALLACE: ... of stirring the pot up, if I may, Mr. Steele. Some people say — Republicans — that one of the reasons that you have difficulty talking about racial slurs is that perhaps you made one of your own this week. Let's put up what you said on Hannity this week:
(BEGIN VIDEO CLIP)
STEELE: ... platform is one of the best political documents that's been written in the last 25 years, "honest injun" on that.
(END VIDEO CLIP)
WALLACE: Congressmen of both parties say that's a racial slur.
STEELE: Well, if it is, I apologize for it. It's not an intent to be a racial slur. I wasn't intending to say a racial slur at all.
The reality of it is that's not the same as what we were talking about before. That's not saying I'm some loose cannon and wild, you know, dog out here running around not being able to be controlled.
The reality of it is I'm trying to push our party to take its head and lift it up, point to the future and move forward. And the opportunity is here, whether you're talking about health care or any other issue of the day, to engage, engage America with conservative ideas and principle that really matter.
We haven't done that in a long time. And it's time we're starting to do it. And we saw the success of it when we do...
WALLACE: All right. Let's talk...
STEELE: ... in Virginia and New Jersey.
WALLACE: Let's talk, if we can, not about inter — intraparty fights but what's going on between the two parties.
Let's look at the political landscape entering 2010. The party that holds the White House, you both know, traditionally loses seat in the first congressional mid-term election — 16 seats in the House. I want to put up the latest RealClearPolitics average on the generic poll question, "Which party do you favor for Congress?" It now has Republicans up plus 2.8 points. Last year, the Democrats were up plus eight.
Governor Kaine, in addition this week — and we're finally going to get to it — you had two Senate leaders — Dodd, Dorgan — both trailing in their states by double digits, both deciding to retire. How much trouble is your party in for November?
KAINE: Well, Chris, let me tell you something. We know we're running up a hill. If you actually go back to 1900, the average president in their first mid-term loses 28 House seats, four Senate seats and governors' races. So we're running up a hill.
But the great thing about the Obama team is we don't mind running up a hill. We climbed Everest in 2008 and we're going to climb Pike's Peak this year. For three reasons, I think we're going to do better than some of the prognosticators are saying.
First, we've got a record of presidential success to sell. We're going to have a health care bill that is a historic effort that presidents since Teddy Roosevelt have tried. This president is going to make it happen.
We've taken an economy that was in free fall and turned it around. And we're not where we want to be yet, but we've cut job losses from nearly 800,000 a month down to less than 100,000 a month. And in November we actually saw jobs starting to grow again. We've got a lot more work to do. Presidential success is going to be our key theme this year.
Second, on the retirement side, we didn't want to lose those folks who've retired. I know them personally and they're good public servants. But on retirements right now, we've got the edge. Fourteen Republican members of Congress are retiring, 10 of ours. Six Republican senators are retiring, two of ours. Four Republican governors are retiring...
WALLACE: All right.
KAINE: ... two of ours.
WALLACE: Let me...
KAINE: We've got the edge.
WALLACE: Let me bring in Mr. Steele here.
And there was some bad economic news for this administration on Friday, because we found out that unemployment was 10 percent.
And one of the top economists in the country who, in fact, has been advising congressional Democrats, Mark Zandi — Zandi projected that unemployment would be 10.8 percent in October. How much of a burden is that for Democrats?
STEELE: Well, it's a huge burden, particularly when you have an administration coming in and saying that they were going to fix that problem, and that, you know, they wanted to us spend all this money so we wouldn't have 10 percent unemployment.
And yet what have we got as we're about to go into the one-year celebration of this administration? We have no jobs, no health care, $13 trillion worth of debt, and no sense of direction in terms of how we're going to create those jobs.
And so Americans are very concerned right now. When you look at last year's elections in New Jersey and Virginia, the reality of it is the message that the candidates were talking about — job creation, wealth creation, all of that — mattered to people and they responded. Right now in Massachusetts, Scott Brown is making that a close race. Why? Because...
WALLACE: That is a special election to fill...
STEELE: Special election.
WALLACE: ... Teddy Kennedy's seat.
STEELE: Right, to fill Teddy Kennedy's seat because he's talking to people about the concerns that they have about this administration.
WALLACE: But let me ask you about that, Mr. Steele, because Democrats say — the White House says — and I'll give you in a moment, Governor Kaine, an opportunity to respond — that they're going to make a hard pivot this year and that — a hard pivot to jobs and the economy and the deficit.
STEELE: Oh, yeah. And this is, what, the third pivot back to jobs? Remember, this administration came in saying, "We're going to deal with jobs," but then they pivoted to health care.
Then they pivoted from health care to jobs. Then they pivoted from jobs to national security. Then they pivoted back to jobs to — and now they're going to go back to — I mean, it's — you get confused in the process.
You either are going to create jobs or you're not. And this administration in a year has not. We've watched it go from 8 percent to 10 percent unemployment. And that's a real burden for the administration.
WALLACE: Governor Kaine?
KAINE: Chris, let me talk, and now, really, in my role as a governor. This administration has been about jobs from day one. The first thing the administration did was work to get a recovery act passed with virtually no help from any Republicans, two in the Senate. That recovery act has saved the ability of states and government, local governments, all over this community in terms of jobs.
WALLACE: But since the stimulus, 3 million jobs have been lost, sir.
KAINE: Well, but again, what I said earlier — the Republicans were standing by and letting American economy bleed 800,000 jobs a month one year ago. It's down to less than 100,000 this month. There was a slight up-tick in jobs last month.
So we've cut the job losses by 90 percent with no help from the Republicans. That's what the American public asked the president to do, and that's what...
WALLACE: But unemployment was...
(CROSSTALK)
WALLACE: We were told that unemployment was not going to go up over 8 percent with the stimulus. It's now 10 percent.
KAINE: Well, but again, the job losses have finally slowed. And the president's not going to rest till we — there's no losses and we're growing.
But you saw him on Friday lay out a series of plans with respect to small businesses, energy efficiency and additional infrastructure investments. Just like it's been jobs from the beginning with the recovery act, we're going to stay right on it, focusing on small business success.
In Virginia, we're seeing the results of the recovery act. Had that not passed, had the Republicans had their way, we would be hurting terribly.
WALLACE: We've got less than a minute left. Let me ask you for one prediction. You talked about the fact, Governor Kaine, that historically, if you go back to the beginning of the last century, 5.5 seats lost in the Senate by the party that controls the White House.
KAINE: Right.
WALLACE: Start with you. Is the 60-vote super majority the Democrats gone after November?
STEELE: It's gone. It's toast. Over.
KAINE: We're going to hold very strong majorities in both houses. I agree with what Chairman Steele said this week. The Republicans cannot take the House back.
STEELE: Oh, we will, but the question is, "Can they keep it?" Can they keep it? And right now, all signs are they can't.
WALLACE: You're saying that you think that the Republicans are going to take back the House?
STEELE: We're well on our way. Well on our way. We've already had the — what, the congressman from Alabama come over. Y'all come. There's more — there's more room.
KAINE: I agreed with what the...
STEELE: Come to the table.
KAINE: ... chairman said earlier this week.
STEELE: Come to the table.
KAINE: They're not going to take it back because they're not ready to lead.
STEELE: Oh, we are ready. Trust me. We'll be ready.
WALLACE: Gentlemen...
STEELE: More than ready.
WALLACE: ... would you both please come back?
KAINE: Thank you.
STEELE: Absolutely.
WALLACE: We would — there's plenty to talk about and we'll keep tracking it through November.
STEELE: All right.
WALLACE: Mr. Steele, Chairman Kaine, thank you both.
KAINE: Thanks, Chris.
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