Interview with Chris Wallace on "Fox News Sunday"

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

In what looks like a Democratic year, how do Republicans hold on to the White House? As our "Choosing the President" series continues, we'll ask the GOP's presumptive nominee, Senator John McCain, in a "Fox News Sunday" exclusive.

Then, the commanding U.S. general in Iraq briefs Congress this week. What kind of reception will he get from Democrats? We'll find out from one of their leading voices on foreign policy, Senator John Kerry.

Plus, with two weeks until the Pennsylvania primary, does Clinton or Obama have the upper hand? We'll ask our Sunday panel -- Fred Barnes, Mara Liasson, Bill Kristol and Juan Williams.

And our Power Player of the Week opens a museum for news, all right now on "Fox News Sunday."

And hello again from Fox News in Washington. We continue our series "Choosing the President" now with the Republican nominee-to-be, Senator John McCain.

On Friday, we met up with the senator at the National Civil Rights Museum in Memphis. He was there to speak at ceremonies marking the 40th anniversary of the death of Martin Luther King.

(BEGIN VIDEOTAPE)

WALLACE: Senator McCain, welcome back to "Fox News Sunday."

MCCAIN: Thank you, Chris. It's nice to be back.

WALLACE: Your advisers say that you are going to campaign in places that Republican presidential candidates usually don't -- inner city, rural Alabama, Appalachia. Do you plan to run as a different kind of Republican?

MCCAIN: I believe that the party of Abraham Lincoln and Teddy Roosevelt and Ronald Reagan -- that that's a tradition of the Republican Party, that we need to go all over America, and not just the specific places you're talking about, but compete hard in every section of the country -- for example, California.

California can no longer be written off, in my view. And that means going to all parts of that state and reaching out to Hispanic voters, independents, others.

I know that you know, Chris, that one of the recent trends which may not have been as understood as well as some other things is that there's this dramatic rise in the independent voter registration, whether it be in my state or all across America.

The independent voter will make an even larger difference, I think, in the 2008 election. So I have to energize our base, get the independents and the old and new, quote, "Reagan Democrats."

WALLACE: I think you might agree that Republicans have too often been portrayed, and perhaps too often acted, as the party of the haves at the expense of the have-nots.

You're here today at the Civil Rights Museum, but it has come to our attention that in 1983 you voted against the federal holiday for Martin Luther King. You voted in 1990 against civil rights legislation.

Isn't it going to be hard to reach out to all those groups given your history and the history of the party?

MCCAIN: Well, let me say in 1983 I was wrong, and I believe that my advocacy for the recognition of Dr. King's birthday in Arizona was something that I'm proud of.

The issue in the early '90s was a little more complicated. I've never believed in quotas, and I don't. There's no doubt about my view on that issue. And that was the implication, at least, of that other vote.

But I was wrong in '83, and all of us make mistakes, and I think nobody recognized that more than Dr. King.

WALLACE: Karl Rove, who now works with Fox News, does maps for us based on the average of recent public polls. You haven't seen these, but you might be interested.

And what they indicate is that traditional Democratic strongholds like Pennsylvania, like Michigan, like Minnesota are up for grabs this year. You talked about California. Is this not going to be a red state, blue state election?

MCCAIN: I don't think so in the traditional way. I think that all of these states, or most of them, are up for grabs.

You've seen a dramatic increase in Hispanic voters in my part of the country, but also many other parts of the country. In the southeast, the greatest population increase has been Hispanic voters.

We probably are going to see voters more activated, African American voters as well as Hispanic as well as others. And also, it's pretty clear that Senator Obama and Senator Clinton have energized the younger voters.

And I believe I have. And I believe I've got to compete on that grounds, too. That's why I go on shows that young people watch.

So I'm not sure that the old red state, blue state scenario that prevailed for the last several elections works. I think most of these states that we have either red or blue are going to be up for grabs. WALLACE: It's a 50-state battleground.

MCCAIN: I believe so -- if not 50, certainly the majority of them.

WALLACE: As a reporter, one of the things I've always noticed about you is you're not very good at hiding your true feelings.

This week you said Barack Obama, quote, "doesn't understand national security, has no background, no experience on these issues." A few weeks ago, you said he's deceiving voters with eloquent but empty rhetoric.

Putting aside your differences on issues, straight talk, is Barack Obama qualified to be president?

MCCAIN: If the voters decide that of America, absolutely. I believe that my talent and my background and my experience, which has led to my judgment, is -- I think qualifies me more, obviously, or I wouldn't be seeking the presidency.

Let me just say again that was in response -- when I said he was inexperienced and does not have the background -- to the charge of this, quote, "100 years in Iraq," and it was obvious when you read the whole quote -- and I hope that at some point we could see that -- where I was in an exchange with a voter in New Hampshire, a town hall meeting, the kind of exchanges that I enjoy most.

He said, "How long are you going to be there." I said, "It could be 100 years, but it's a matter of U.S. casualties, and we have presence in countries like South Korea, Japan," et cetera, et cetera.

So it's very clear. And Senator Obama and anyone who reads that knows that I didn't think we were in a 100-year war.

WALLACE: But I want to go to the bigger issue...

MCCAIN: Yes, sure.

WALLACE: ... which is that you said Obama doesn't understand national security, has no experience, no background on these issues.

I understand the voters are going to make up their minds. In John McCain's opinion, does someone who has no background in national security - - is he fit to be commander in chief?

MCCAIN: Again, I'm not ducking your question, Chris. You could make an argument maybe that Jack Kennedy was not, quote, "qualified" in 1960 as opposed to Richard Nixon. The voters decided on Jack Kennedy.

So I can't dictate what the voters will decide. All I can do is match my credentials and my knowledge and background up against Senator Obama's or Senator Clinton. That race is not decided yet.

And I will gladly stand not only on that background and experience, but my vision and my ability to lead this country in difficult times.

WALLACE: You gave a major economic speech recently in which you said...

(BEGIN VIDEO CLIP)

MCCAIN: It's not the duty of government to bail out and reward those who act irresponsibly, whether they're big banks or small borrowers.

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WALLACE: After that, Senator, one columnist compared you to Mr. Potter, the banker in "It's a Wonderful Life."

What would you do to help the thousands of Americans who right now are in the process of losing their homes? Or do you feel, as you said in your speech, that's not the duty of government?

MCCAIN: Look, Americans are hurting right now. Americans are sitting around the kitchen table as we speak trying to keep the American dream, and that is ownership of their own home.

They don't know if they have to get another job. They don't know if - - the challenges are enormous right now, and Americans are hurting.

The key to it is not to bail out people who speculated or people who engaged in unsavory practices. The key to it is get the lender and the borrower together. We know how hard that is because of identifying the lender, but there's ways to do it.

The key to it is to support this legislation which is going through the Senate right now which I think will move the ball forward down the field, such as individual deductions for and larger deductions for home loan mortgage payments, the purchase of mortgages which are bad by local authorities, increasing funds for counseling so that people who are in difficulty will better recognize what their options are.

Of course, there's a role for government, but it's not to -- it's not to reward greedy speculators. It is not to reward people who misbehave. And it certainly isn't a huge expenditure of taxpayers' dollars which, in the long run, could exacerbate the problems that exist.

On the issue of Bear Stearns, very quickly, every financial expert I know says that if it had failed, it would have rippled throughout the entire financial community and would have caused greater problems which eventually would have come down on the average citizen if our economy continues to decline the way that it's been doing.

So I'm ready to act. And I understand how terrible this is for so many millions of American families. And I understand the challenges and I'm prepared to meet them, and that is limited government intervention.

But where government is required, let's go ahead and do it. We passed a stimulus package. People are going to be getting checks in the month of May. Maybe they'll be able to help boost the economy a little bit. But there's no magic wand here that can be waved.

WALLACE: Let's turn to foreign policy. You acknowledge you were surprised by the recent Iraqi offensive in Basra. In the end, the Iraqi government failed to oust those Shiite militias.

Doesn't that raise serious questions about the continued weakness of the central government in Baghdad?

MCCAIN: Well, actually, when I say I was surprised, our authorities in Iraq were surprised, the State Department -- it was about a 48-hour...

WALLACE: Right. The whole government was surprised.

MCCAIN: Yes, about a 48-hour window. It's interesting. We have asked the government time after time to act effectively, that we want this government to act. They acted.

Now, obviously, the results were mixed. Obviously, there were problems. And Maliki, in my view, should have waited until we had concluded the battle of Mosul which is going on as we speak.

They do have control of the port of Basra now. That's one of the major economic areas of Iraq because of the oil that goes through there. It was al-Sadr that declared a cease-fire, not Maliki, and they continue...

WALLACE: It was brokered by the Iranians, who actually may have more clout with both al-Sadr -- I mean, let me just ask you the question from this point of view.

General Petraeus is coming to testify in the next couple of days. A lot of talk about the surge and how that's helped damp down the violence -- some would say because there was a spike of violence during this Basra battle, maybe al-Sadr's decision to hold the cease- fire is as responsible as the surge is, and if he changes his mind, we're back in the frying pan.

MCCAIN: Well, in respect, I don't think Sadr would have declared the cease-fire if he thought he was winning. Most times in history of military engagements, the winning side doesn't declare the cease-fire.

The second point is that overall, the Iraqi military performed pretty well. Six months ago, it would have -- or eight or nine months ago, it would have been unthinkable for Maliki to act this way.

WALLACE: We heard this week that 1,000 soldiers refused to fight or deserted.

MCCAIN: And there were many, many thousands who are fighting there. Compare that with two years ago when the army was basically unable to function in any way effectively.

Look, I didn't particularly like the outcome of this thing, but I am convinced that we now have a government that is governing with some effect and a military that is functioning very effectively. Up in Mosul where some of the best units are, they're functioning well.

I've always said, Chris, this is long and hard and tough. We're paying a huge penalty for four years of a failed strategy that I fought hard against, and I believe this strategy has succeeded and will succeed and can succeed. But it's long and hard and tough.

WALLACE: A couple of final questions I'm going to ask you, sir. You said this week that you have started putting together the list of possibilities for vice president.

Given that you call radical Islam the transcendent challenge of our age, fair to assume that your running mate must have firsthand foreign policy experience?

MCCAIN: I don't know if that's -- I think that the person -- the first and really major and overwhelming priority is a person who shares my principles, my values, my priorities -- as you know, priorities are very important in presidents -- and could immediately take my place. That's, I think, the overriding criteria.

WALLACE: So it could be someone who's, in effect, a foreign policy novice.

MCCAIN: Well, it could be someone who has a lot of experience and someone who doesn't on national security issues. And frankly, the process that we're in -- you know, it's so early in the process that, honestly, it's -- the sole criteria I'm looking at is not that.

It is who can best take my place and carry on the agenda and the vision that I have outlined and will continue to outline during this campaign.

WALLACE: Senator, I wouldn't ask you this question, but it did come out at a congressional hearing this week that you still do not have Secret Service protection.

MCCAIN: Yes.

WALLACE: As we sit here in the National Civil Rights Museum, which was the scene of the Lorraine Motel and the assassination of Martin Luther King...

MCCAIN: Yes.

WALLACE: ... why not?

MCCAIN: Because it inhibits, obviously, my ability to have close contact with people, but we'll be meeting early next week with the Secret Service and working out the modalities for Secret Service protection.

WALLACE: Do you think you'll take on Secret Service protection before the convention?

MCCAIN: Oh, no, we'll be setting it up early next week, so I would imagine...

WALLACE: You'll be taking it next week.

MCCAIN: Not as early as next week taking it, but I'll meet with the Secret Service and we'll set it up, and shortly thereafter we will have Secret Service protection.

WALLACE: So in the next few weeks.

MCCAIN: Sure, if not earlier, yes.

WALLACE: And because...

MCCAIN: Well, I think that it's important that as we get more and more visibility that we recognize the inevitable, and so we'll be talking with them early to arrange for, very soon, some Secret Service protection.

WALLACE: Finally, you are also known as someone who doesn't suffer fools gladly. You have written about your, quote -- in one of your books - - about your legendary temper, and I wonder...

MCCAIN: I shouldn't have written that book.

WALLACE: Well, that's right. But I do wonder -- being "John McCain, the maverick" is different than being "John McCain, president of the United States."

Do you think at all -- have you thought at all since you have become, in effect, the Republican nominee that if you do become president that you may have to change not your personality, but the way you act, if only because it's so hard for people to come into the Oval Office and say they disagree, say they think you're wrong?

MCCAIN: Chris, I've worked across the aisle more than -- I'll match my record of legislative bipartisan achievements with anybody.

You can't scare people or intimidate them if you're going to reach agreement with your colleagues and your contemporaries. And I've worked hard at that, and that's what the American people want.

Second thing is if I lose my capacity for anger, then I shouldn't be president of the United States. When we have corruption in spending that ends up with people in federal prison, I get angry.

When I see greedy people like a guy cashing in millions of dollars on the backs of this Bear Stearns takeover, I get angry.

When I see the waste and corruption in Washington, I get angry. And you know what? The American people are angry, too. Look at the polls. Look at the polls.

They are angry because there is spending and waste and corruption, and government is not responding to their hopes and dreams and aspirations.

So I'll get angry when I see somebody who's corrupt and ends up in federal prison. And yet at the same time, I have a proven record of working across the aisle.

I've known these leaders in the House of Representatives, in the Senate, for more than 30 years. I know how to work with them very, very well, and I will, for the good of the country.

And I believe I can appeal to the better angels of their nature and they'll work with me. I'm confident of it. And the American people want that now.

WALLACE: Senator McCain, thank you so much.

MCCAIN: Thanks, Chris.

WALLACE: Best of luck to you, sir.

MCCAIN: Thanks for having me on.