>> bret: i'm bret baier in for chris wallace. the debt ceiling deadline is looming large. but now there is strong new optimism that a deal can get done. with time running out to forge a deal, we'll get the white house view of where things stand from gene sperling, the director of the national economic council. then from capitol hill, key members of congress are working to craft a compromise. we'll get the latest from two key senators. republican jon kyl and democrat dick durbin. we'll hear from the house majority whip, republican kevin mccarthy. also, the recovering economy takes another hit.

we'll ask our sunday panel if the debt ceiling standoff has made things worse or if a deal might ease the economic pain. we look back to what a roller coaster of a week it was in washington. all right now on "fox news sunday." hello again from fox news in washington. after a tension-packed day on capitol hill, filled with bitter partisan sniping, both republicans and democrats are now saying significant progress has been made toward a deal that would avert a government default. we'll take a look at the framework of the compromise with two senate leaders and a top house g.o.p. official. but first we begin with the white house view. and gene sperling, the director of the national economic council. director sperling, welcome back to "fox news sunday." >> thank you, bret. >> bret: saturday, the debt ceiling negotiation shifted back to the white house. here is what we are hearing, reporting about a potential deal. a debt ceiling increase of about $2.4 trillion in to

2013, but in two stages. spending cuts up front, roughly $1 trillion. special committee to recommend cuts of $1.4 trillion with a total of the debt ceiling increase. committee must make recommendations before thanksgiving recess. if congress does not approve those cuts by late december, automatic across-the-board cuts go into effect, including medicare, but lawmakers would then vote whether significant defense cuts or tax increases would also be included. is this accurate? >> well, bret, there is no question we're approaching the time hour. and there is no question as the president has said repeatedly, if there is a will, there are multiple ways to get there. if you look at what senator reid proposed and what speaker boehner proposed, the president said repeatedly if there is a compromise, we can get there. the thing to really recognize is that what the president has asked for, and what we're trying to achieve is an agreement based on three basic ideas. one, that we should have a

down payment on deficit reduction, and that that down payment can focus on spending cuts. secondly, that we need to come back for a second round of deficit reduction, more serious deficit reduction that has to have a combination of serious entitlement reform and tax reform that we'll ask those who are most well off to contribute. and that third, we should have an action-forcing event, we should have something that forces all of us to get our work done. that enforcement mechanism should not be threatening the default of the united states of america. so as you know, the president has said that for a deal to take place, we can't have that cloud of uncertainty either hanging over our heads now, or just a plan that would kick it down the road to christmas and have us going through all of this again in such a short time. >> bret: i know things are fluid, but does that framework sound accurate to you? >> you know, i have been so happy to be on the show, but i

can't actually negotiate the details on the show. >> bret: how about this? a lot of talk about the trigger. >> right. >> bret: the joint committee of lawmakers who would be designed to get more cuts, significant cuts. if they don't find those cuts, it's possible that tax increases or revenue increases will not be part of the trigger or penalty. is the president okay with that? >> well, here is what i can say. the president has absolutely supported the idea that majority leader reid has had of having a commission that has a goal of reaching more significant amount of deficit reduction through a combination of entitlement and tax reform. he has supported that. he would like those who appoint members of that commission to appoint people who will try very hard to get the kind of bipartisan agreement. and he supports having some kind of a straight jacket on all of us that says if you don't get your work done, there will be action taken to

make sure we get deficit reduction. here is the key. whatever that enforcement mechanism is, it has to give both sides an incentive to compromise, to come to the table, work something out. there is more than one way to come up with deficit reduction to give them incentive to compromise. >> bret: that the most fluid part of the deal right now? >> there are important details that need to be worked out. but there has been serious discussions going on with the leader of the republican and democratic party and the white house in the last 24 hours. as we learned repeatedly, don't want to sound like yogi berra, but it ain't over till it's over. >> bret: so we're not going to down that road further on specifics. what is the contingency plan if this does not come together or whatever compromise happens doesn't get through the house of representatives?

>> i will tell you while the department of treasury is no question working on a contingency plan, and while i think every american can rest assured before we come to a point where we have missed our deadline, we will brief people on what the impact would be on failing to raise our debt limit by the deadline of august 2. but right now, our focus is on this agreement, because the key thing to understand, bret, is that we have $500 billion of debt that comes due and has to roll over in august. we have $100 million checks that go out -- 100 million checks that go out to medicare, social security recipients, soldiers. while there are contingency plans being done, there are no good options. they are all very, very dire, and that's why the focus has to be on finding a bipartisan agreement as quickly as possible. >> bret: for the first time in american history, the u.s. is on the verge of a credit downgrade. do you think the administration could have done anything over the past 18 months to try to prevent this

crisis? >> well, i don't know how much harder this president could have tried to get a bipartisan agreement than he has. five days after we finished the budget in april, he put forward a $4 trillion deficit reduction plan over 12 years. as you know, he has either convened or personally led bipartisan negotiations with the leadership of the republican party. >> bret: that plan was voted down 97-0 in the senate. >> no, no. this is -- >> bret: the budget plan, the original budget plan. >> but bret, the framework he put out on april 13 was not what was voted down. that was a $4 trillion deficit reduction plan over 12 years, which he put forward as a basis to enter bipartisan negotiation. as we're seeing right now, having specific dueling plans that just reflect the ideal preferences of either party when you have divided government is not how you get the agreement that helps us protect our credit. what protects our credit, and

prevents us from getting downgrade is the confidence that divided government can actually work to bring the deficit down. that only happens when you forge a bipartisan compromise. >> bret: in may, austan goolsbee, chair of the counsel of economic advisors, called tieing the reduction of the deficit to the debt limit "quite insane." the administration was pushing for clean debt limit with no strings. on thursday, official with standard & poor's said, "4 trillion, depending whether it's front-loaded or back-loaded is not going to do the trip to stabilize the government debt to gdp ratio. $4 trillion would be a good down payment. we thought if policy makers could deliver the goods on that, that would be a strong sign." all signs point to deal of roughly $2.5 trillion, well short of $4 trillion. wasn't the country already heading for a downgrade possibility, credit downgrade even before the debt ceiling increase? >> no. i think it has been the recent

crisis that has really provoked the greatest fears of the downgrade. you're right on the following: we as a country need to not only lift our debt limit and take away the speckor of default, the heavy cloud of uncertainty created by default on the economy. we also need to engage in a serious deficit reduction plan. that's why the president -- >> bret: do you think substantial cuts, deficit reduction would have happened without tying it to the debt limit, debt ceiling increase? do you think it would have happened without this cliff that we're now facing? >> you know, bret, as you know, in the '90s there were three deficit reduction agreements. 1990, '93 and '97. i was happy to be part of two of those. we were able to do three deficit reduction agreements to take us from high deficit to balance. guess what? we didn't need the threat of the constitutional amendment. we have didn't need the threat of default to do that. we did what the american people wanted. we showed that divided government didn't have to be dysfunctional government. people of different views could compromise for what is

necessary for their country. so no, i don't think you need the threat of default to make people work together. i don't think that's what people at home expect. and since you mentioned standard & poor's, they explicitly said that having multiple loads on the debt limit, multiple votes that raise the speckor of default is a negative in making a decision by them as to whether to downgrade the united states from historic triple-a credit rating. >> bret: i'd like to ask about the u.s. economy overall. friday, the new gross domestic product number came out, the gdp, the best measurement of how the economy is doing. the economy grew at a weak 1.3% in the second quarter. most analysts predicted highe higher. when healthy and creating jobs the economy grows at 3%. analysts say more troubling were revision to previous quarters. first quarter adjusted from 1.9% to .4% growth. growth in past quarters, you can see on the chart, it's difficult, tepid, flat,

anemic. your colleagues in the administration says it shows the recession was far worse than first thought. two-and-a-half years in the president's first term, does it also show that his policies, including the stimulus, have not worked? >> no. quite the opposite. what that revision showed is that what the president inherited was actually the worst six months of growth since franklin d. roosevelt inherited the economy in the great depression. so what you saw was what the president inherited was a much deeper, recession than anyone projected. yes, the hole the president inherited was much deeper. we have made a lot of progress. not enough, but just remember, that first quarter that the president was in, the first three months, our economy lost 2.3 million private sector jobs. over the last 16 months, we have gained 2.1 million private sector jobs. certainly we have had head

winds. we have had head winds that hurt the economy, higher oil prices, supply chain disruptions from historic earthquake in japan. >> bret: understood. >> but those are things outside our control. what is inside our control is not add the cloud of uncertainty that comes from the american public thinking we are on the verge of default. that has hurt confidence and hurt our economy over the last few months. no question. >> bret: ten days ago the president said in an interview the economy was on a good trajectory. after this gdp number, the revisions, the unemployment rate rising for past flee months, 9.2% now, consumer spending flat, retail sales stalled, manufacturerring with the weakest quarter since 2009, is there anything to back that statement up? >> well, i think most private sector forecasters, bret, still believe that we could have growth in the second half at 3% growth or above. but most of those forecasters will say that one of the head winds that hangs over our economy was the uncertainty created about whether our country was going to default

for the first time in our history. >> bret: wait a second, you're tying all of this negative to the debt ceiling debate? >> i'm not tying all of it. as i said, and i just said very clearly, the head winds we faced from higher gas prices to the unrest in the middest -- >> is it a good trajectory, gene? >> the supply disruption in auto in growth, auto production in the second quarter, absolutely were a major factor in the lower growth number. what i said is those are things that are outside of our control. when we allow the uncertainty created by whether our country is going to go into default, to create uncertainty for investors, for job creators, that's a self-inflicted wound. that is something that we can correct. you saw a lot of economic forecasters saying that if you could take the cloud of uncertainty off of our economy, the chances of us having 3% growth in the second half of this year were significantly higher. >> bret: so you're not worried about a double dip? >> i am not worried that we are going to have a double dip

recession. but i think it's imperative on all of us to do everything to reduce even the smallest chance of that. and to increase the chance that we get the rebound in growth that many private sector forecasters are still projecting, if we can take the speckor of our nation's first default, take that pot of uncertainty off the economy. >> bret: mr. sperling, thank you for the time. >> thank you, bret. >> bret: joining me now with perspective from the republican leadership in the house, house majority whip kevin mccarthy from california. congressman, thank you for the time. >> thank you for having me. >> bret: senator mcconnell, republican leader in the senate, said they are very close to a deal. he feels confident that the debt ceiling will be increased without raising taxes. he is saying it's a $3 trillion deal. he is close to recommending an agreement to lawmakers in his party, and he expects significant percentage of sign-on to this plan. now, you heard the outlines of this compromise. can this get through the

house? >> first up, we look at the details. remember how far we've come. three months ago this president laid out he wanted a debt ceiling with no cuts whatsoever. short time ago, he just wanted more $1 trillion stimulus. now we're talking something much different. many cuts before you get to raising. the idea of no tax increases that the president wanted. so it's moving in the right direction. it looks as though people are talking about in a framework which pass the house. what is so ironic here, this chamber in congress with the new republican majority is the only one that passed two bipartisan bills off the floor. it looks as though the framework could be there, but we'll wait to see the details. >> bret: if a balanced budget agreement vote is promise of a vote and not a requirement tied to the debt ceiling increase, is that something that you can push? will that fly in the republican caucus in the house? >> again, that is one element. we have to look overall. we laid out a clear framework, no tax increases, no increase

in the debt limit without the cuts equal to that. we want to see a balanced budget. bret, we want to see a balanceed budget. think for a moment, 16 years ago we came one vote short in the senate. imagine what this sunday show would be about today. i wouldn't be about a debt limit increase. it would be what we'd be investing in america. we realize you have to have cuts today, you've got to have spending controls, because discretionary spending under this president has gone up 84% in the last three years. and we want to make sure the future we're not back here again. we'd like to see a balanced budget. >> bret: can speaker boehner pass this bill, whatever it ends up being, with more democrats than republicans and still retain his speakership? >> well, first, let's think about this. you are asking if this bill is what the democrats wanted. the democrats wanted tax increases, and a debt limit improved. that's what the democrat offered with no cuts. instead of spending trillions, we're now cutting trillions. speaker boehner has been the leader on this of changing

washington. first and foremost now we're cutting. before we were spending. the president to me has been somewhat -- look, you cannot be the leader of the free world and sit on the sidelines and tweet and think you are going to get the job done. we have been out front, negotiating, talking, but we have laid out clear set of principles we are going to bring accountability back and change the way washington works. >> bret: there has been considerable grumbling from republicans about speaker boehner spending so much time on a grand deal. that the president spent too much time with a president that was unlikely to give him what he wanted. did he spend too much time on the front end? >> because the speaker was willing to work with the president? >> bret: i'm talking about what house members in your caucus has been saying. >> i think there is grumbling around the country because of the joblessness. there is grumbling and we hear them and we want them to speak louder because we want help to change washington. we have a big direction where we are changing so it far and we need more help to go the

other direction. this clearly shows why. because obama is still president. and he still wants tax increases, and he still wants to spend more. the speaker tried to lay out a framework that stuck to our principles, but would create jobs with new tax reform and would also lower the spending in washington. >> bret: this is what the "wall street journal" editorial page said saturday about house republicans. "a g.o.p. faction is fixated on a balanced budget amendment. after thursday's stall, the new boehner plan will only authorize the second tranche of debt if two-thirds pass it in the senate and send it to the states for ratification. this will not happen. republicans are not looking like adults to whom voters can entrust the deficit." how do you respond to that? >> why do you believe it could not happen? i believe in this country. i believe this country is worth fighting for. if 16 years ago if we had that one more vote, we wouldn't be in this problem today. so yeah, we're looking at how to solve the problem right now. but also, looking for the future to our children. we think the best days are still in front of us and we realize 49 states either have

a balanced budget or statute to it. this country should have it as well. we listen to the american people. the american people support the idea of a balanced budget. so we're going to continue to fight for it. in the end, we will win. >> bret: understood. but to try to pin you down, if this compromise does not have a balanced budget amendment vote on the front end, and it somehow ties in this trigger and it's just a vote, it's not it has to pass, which was what was in the speaker's bill, can you get that through as whip of the republican caucus? >> look, members come in with everything in the deal but if not having a vote on that, it will be a hard way. harry reid will never allow the senators to take up a balanced budget. why? because the american people want it. he has his whole leadership on the line because they're up for election and they're taking the wrong election. >> bret: you know there are different versions of the balanced budget amendment. >> there are different versions. >> bret: your version has

two-third majority to get taxes to be increased. >> we're a broad spectrum in the republican party. we have a lot of versions out there i'd like to see the democrats stand for any version. i think the american people want to see a balanced budget. that's where we stood and what we'll fight for. >> bret: was speaker boehner weakened politically by the process? >> i don't know. if you look at the leaders, the president stood on the sideline and tweeted, harry reid hasn't produced a budget in two years, has not produced a debt ceiling, any type of bill off the floor. you know what speaker boehner has done? produced a budget in four months that changes the direction and also moved two bipartisan bills off the floor of congress that cut the spending, did not raise taxes, and made sure that this country would be able to have resources to continue forward. that is a fundamental difference. i would compare that to any other leader and i think only one has stood out. >> bret: the most recent poll to ask the questions was thursday, cnn orc poll found 63% believe that republicans were not acting responseably. 51% said republicans would

bear the bankrupt of the blame if the debt ceiling was not raised compared to 30% who would blame president obama and 15% would blame both. do you think you have lost some of the political capital that you had after the november 10 election? >> it's only in washington do you get rewarded for doing nothing. sometimes when you lead, you get shot at. we did not get elected to worry about the next election. we got elected to worry about this country. we're going to do what is right. right. that is what we're setting out. maybe we'll ruffle feathers but we're tired of the gimmicks and the budget tricks no more broken promises. the american people have the right to know the truth. that's what we are doing and we'll ruffle feathers to do it. >> bret: the past two weeks, past month has been about the debt ceiling, national debt. critics say republicans are not focused on the most important thing; that's, creating job. especially with the latest gdp number. would you characterize house leadership focused op a growth agenda, job creation? how do you answer the democratic critics who say where are those bills? >> well, we can look right on

the floor and see they have passed the house. if you score counting how many jobs our bills would create we're in the hundreds of thousands of jobs that sit on the senate like everything else, nothing moves off. the number one place you have to look is small business. i created my first business when i was 20, entrepreneur. the difference between an entrepreneur and someone who takes a job is all we do is create. we have don't take one from somebody else. if you look at the last process, just in the last year, lowest job creation in 17 years. if you look at under the president. we do, we have lost jobs. this is an opportunity to focus and change. the republican plan we have through small business growth, through lack of not raising the taxes to hurt the job creation, but actually create jobs is a fundamental difference than where obama is going. >> bret: congressman, thank you very much. you may have to order a lot of pizzas. >> i think we're going to make real change in washington. >> bret: thank you very much. up next, two of the senate top

party leaders on what is behind the overhead optimism about a possible debt ceiling deal. i love that my daughter's part fish.

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to read and consider carefully before investing. >> bret: joining us now are the two senate whips whose job it is to round up the votes of their res speculative parties. senator dick durbin, a democrat from illinois, and senator jon kyl, arizona republican. welcome back to you both. >> thank you, bret. >> bret: let's try to characterize at this point where this compromise is. senator mcconnell has just said he is very close.

as you see it, how do you characterize it? senator durbin? >> i would tell you i a much more positive feeling than i did 24 hours ago there is active negotiation underway. i think some of the things that are coming forth hold promise. key elements are still being resolved. i know gene sperling was in a painful position earlier on your show. we have want to move this forward. we want to avert this economic disaster that would occur if we default on the national debt for the first time. >> bret: senator? >> i agree with what dick just said. republicans have also been very focused on ensuring that we do not get in to a position where we can't pay our bills, where the things that the miles per hour people rely on will still get to them in time. as a result, leaders in both parties were fixed on the august 2 date. too bad we had to get this closed session to it but at least we are getting closer to what it will take to resolve

the situation. >> bret: is it your understanding that the broad outline is pretty much locked in, and that there is some negotiation on the trigger? this thing that the second stage of the funding would be tied to, the joint committee? >> that has been the sticking point for quite a few days. initially it was whether or not we'd do the debt ceiling in two phases. the president said absolutely not. and our position was absolutely not. that's why the boehner approach that was sent to the senate was rejected by a bipartisan role call, 59-41. >> bret: although this looks a little bit like boehner with the key element. >> we're not returning to this before christmas. we are going to do this in a way so that the economy is not in suspense and doubt about our future. but in terms of where we're going, down payment, agreed. we're going to make some down payment on the deficit, a significant one. secondly, establishment of a joint committee to move forward and find longer deficit reduction and the trigger, which is the enforcement mechanism for

those who aren't following it too closely. that has been the toughest part. >> bret: so if it doesn't include tax increases, revenue increases in that trigger, are you okay with that? >> i think it's bad policy. i sat on the bowles-simpson commission and with the gang of six and we came to the conclusion if you are serious about real long-term deficit reduction, put everything, underline everything, on the table. keeping revenues off the table is a serious mistake. >> bret: if it includes serious defense cuts in that trigger, are you okay with that? >> that would be a real problem for republicans. if i could go back a moment and set the stage for where we have come, three months ago the president insisted on a clean debt ceiling extension. clearly, we will have a significant amount of spending reductions in this proposal. the second thing was he insisted on revenues, as he called them tax increases. there will not be tax increases in this proposal. third, both sides agreed that we needed to have some mechanism for moving forward

in the future. so that we could look at entitlement side and discretionary side of spending and make recommendations to the rest of congress about how to provide accountability for the future. that is embedded in what i understand would be the key part of this agreement. the republican principles i think will be significantly advanced by this proposed agreement. >> bret: is there a balanced budget amendment vote? >> i think it probably will involve the opportunity to include a balanced budget amendment. but it would not be an essential element to move the agreement forward. >> bret: senator kyl, when you hear the president say this is no way to run the government, that we'll likely also face another standoff at the end of september when the continuing resolution runs out and government funding, we're up against another government shutdown. former white house chief of staff rahm emanuel once

famously said, "never waste a crisis." do republicans now risk becoming the party that is always pushing up to the cliff? always using that cliff to try to extract concessions? i mean do you fear the american people will have crisis fatigue if they don't already and it will hurt your party? >> you mentioned the possibility of a continuing resolution. why would congress have to pass a continuing resolution? because the senate democrats now for the third year in a row will not have passed a budget. that is their job. the house republicans have passed a budget. senate democrats said no to that budget. so i think it's very unfair to suggest that republicans are responsible. we don't have the votes in the u.s. senate. but where they do have the votes, house of representatives, they've done their job. >> bret: why haven't the senate democrats passed a budget? >> it's called 60 votes. what it boils down to, we have 53 democrats. >> there is 51. >> but i can tell you when we get through the procedural

tangles that we face getting through the budget resolution, it's not just a matter of finding agreement, but getting it executed on the floor. the point i want to make is this. this, as i understand it, the negotiation we're talking about will include budget targets for the next fiscal year. we won't revisit the crisis politics when it comes to the spending bills for next year. >> bret: do you think this deficit reduction that is happening this week, whatever this deal ends up being, would have happened without linking it to the debt ceiling increase? >> i understand the brinksmanship that is necessary to sometimes bring this matter forward. let me say the president did create a deficit commission. i sat on it. a bipartisan commission. and voted for it. and i had at least two, maybe three republican senators that joined me in that vote. >> bret: but it didn't make the needed vote to bring it to the. >> that's exactly right. we tried to follow up with a gang of six, again, a bipartisan effort. there has been a commitment from president as well as many

in the senate -- i can just speak for senate -- to move forward in responsible bipartisan way to work on the budget. >> bret: there are many people think if it wasn't linked to the debt ceiling vote it wouldn't be happening. >> i can tell you, if we have to risk our economy, a weak economy with so many people unemploy and businesses facing higher interest rates which is bound to happen because of the brinkmanship we're engaged in here, that is not a good way to run the nation or the economy. if that is the strategy coming from the house republicans, it's not good for the long-term economic growth. >> bret: your colleague senator john mccain read from a "wall street journal" editorial this past week on the senate floor, speculating about the thought process for tea party republicans in the house who refuse to raise the debt ceiling and believe the blame would fall to president obama. >> then democrats would have no choice but to pass a balanced budget amendment and reform entitlement and the tea

party hobbits could return to middle earth defeating more lore. this is the crack political thinking that turns sharon angle and christine o'donnell to senate g.o.p. nominees. >> bret: do you agree with that characterization? >> the tea party folks in the house who say they are standing on principle not to raise the debt ceiling remind me a lot of senator barack obama who did the same thing, voting against the debt ceiling increase when he was in the senate. sometimes people are just so firm in their beliefs that they think they have to vote against the debt ceiling increase, even though the majority of us in the republican and democratic parties believe it would be a mistake. that is to extent the debt ceiling so we don't get in the economic problems that economist if we didn't. i would disagree a little bit with my colleague dick durbin here. while it's true that it's not a good thing that we use the debt creeling to focus the debate on reduced spending, it

has resulted in a change in the president's attitude from a clean debt ceiling, no spending reductions at all to an agreement where we have over $1 trillion in spending reductions now. in the future another $1.5 trillion at least. >> bret: let me go back to 2010 quickly, senator durbin. senator majority leader harry reid had many opportunities to raise the debt creeling with a democratic senate, democratic house and a democratic president. at the end of 2010, when it would have been sure to pass. he was bankrupt thahe was bluntt politics. here is what he said about raising the debt ceiling. >> once the republicans have bye-in on the debt, they will have a majority in the house, they should have a buy-in on the debt. shouldn't be a heavily democratic senate, heavily democratic house and democrat president. >> bret: was that a mistake? >> it reflected the reality of the situation. let me give you an example of what we face many of the conservative

members of congress on the republican side, house and senate, have been urging us to stay in afghanistan, to continue to spend $10 billion a month. we know we borrow 40 cents for every dollar we spend. $4 billion of the $10 billion each month they want to us spend needs to be borrowed. then the president comes in and says here is the debt ceiling. we have the borrow the money to continue the war. that's one example that you're in favor of. they're saying we're not going to touch it. we're opposing the debt ceiling. harry reid siz if you stand for policy to spend the money, responsibly stand up and vote for extension of the debt ceiling. >> bret: sure, but when you are upset about the situation you're in now and look back to december 2010, you could have taken care of it then. >> maybe. i don't know if it could have been part of the grand deal that extented the tax cuts across america and unemployment compensation benefits. that is monday morning quarterbacking. >> bret: one last thing. you think this deal, whatever is it, can get through the house? >> you're asking me? i don't know the answer to that. i can tell you that the president is reaching out the both political parties and we

hope it's bipartisan in the house and the senate and will allay fears people have across america that the weakened economy will be hurt more if we continue to show down. >> bret: senator kyl? >> it's important to extent the debt ceiling and it's important to look at detail of the agreement. that's what our constituents want to us do and we'll do in the next several days. >> bret: good luck, senators. >> thank you. >> bret: coming up, our sunday group on the debt negotiations and the bad news this week about the struggling economic recovery. back after the break. chloe is 9 months old.

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the only way we are going to get an agreement before tuesday is to have an agreement with the president of the united states. i think we have a chance of getting there. >> negotiations are going on at the white house now on a solution to avert catastrophic default on the nation's debt. there is still a distance to go before an arrangement can be completed. >> bret: the leaders signaling a debt deal could be reached. time for the sunday group. bill kristol of "the weekly standard." charles lane from the "washington post." steve hayes from "the weekly standard." fox news political analyst juan williams. the politics of this compromise. bill? >> assuming it happens, i think republicans will have to say to their constituents and the country, you negotiate the debt ceiling agreement with the president and this is the best we could get and the responsible thing to do, but

do not oversell it. it's not a great deal in my opinion. adequate deal perhaps, if defense isn't gutted too much it doesn't fundamentally deal with the debt problem we have or economic problems we have. republicans should probably, will have to take the deal that is being negotiated today but they should not make it seem as if it's a great victory. they need to say we need a different president in 2013. >> bret: congressman mccarthy, chuck, probably has his work cut out for him as the whip in the white house, whatever comes over from the senate. >> absolutely. just look what happened to the first boehner bill there was a mini rebellion and quite a few republicans wouldn't vote for that. they had to postpone it. there will still be the issue of whether the deal will be accept to believe a certain number of house republicans. then there will be the additional complication whether they'll try to do it with democratic votes that nancy pelosi might have to supply. so even though i think what mitch mcconnell is trying to do in this is come up with something that in his view will be accept to believe republicans.

but those guys are unpredictable. >> bret: steve? >> i think the guys are unpredictable. one of the key part of the potential compromise that your interview raised this morning mg is the question of defense cuts. the word coming out of capitol hill this morning is if these triggers after this committee, if the triggers have to go into effect, one of the things that will be cut most is defense. up to potentially 50% of the across-the-board cut could come from defense. medicare cuts would be capped, other cuts would be capped and defense would not. i think republicans in the house and potentially in the senate might have a hard time swallowing that even if they understand that the alternative is voting for a bill that could lead to default. i think default still at this point is unlikely. but the defense cuts if they are as word is coming from capitol hill last night and this morning, i think it could be hard for republicans to swallow. >> bret: juan, the president it appears is actively involved right now, but he has spoken about the debt ceiling

increase, no less than a dozen times over the past month. various addresses, news conferences. yet his approval rating continues to drop. the gallup daily tracking poll on friday had him at 40%, the lowest of his presidency. pew research center for the first time, majority of independents, 54% disapprove of president obama's performance. so we hear about the tea party republicans and the public relations hit they've taken but is the stalemate hurting the president? >> it is hurting the presidents. the numbers are very real and the numbers could get worse, bret, because i think if the economy goes over some cliff, i don't think there will be any oh, gee, i don't like democrats or republicans. the general public would say apox on all your houses. we had a series of wave elections where we keep throwing out the bums, i don't think there is a question that obama would be one of the bums if the economy went in the tanks. quickly i'll say the story of the last week is the fight between the oval on the

republican side and some of the young guns like kevin mccarthy who you had here and i think that the challenge has been for the old bulls, mr. bill kristol being one of them, who says i'm going to change everything right now and put the economy at risk. it is because they sense republicans are being blame and could be given responsibility for the economic troubles of the country. the economic troubles that republicans want to foist on president obama in the course of the 2012 election. >> well, they should voice those on president obama as they pursued the policy with a democratic congress for two years and they haven't worked. the economy is slowing. weren't the policies supposed to lead to healthy rebound, not slowing rebound? >> bret: speaking of that, gdp friday was 1.3% for the quarter. but more telling was perhaps the revision of previous quarters there you see, .4% for q-1. and that is a telling graph. you heard gene sperling trying

to talk about that. >> what struck me about what mr. sperling said also is he seems confident that once you got the debt ceiling cloud removed, the economy would really pick up. i hope it does for the sake of the country. if it doesn't, though, the president has no excuses. these are his policies. i saw one study, the federal reserve study where we had two quarters in a row of below 2% growth. since 1947, half the time we have had a recession within a year. i the not want a recession. the numbers are scary. what is happening in europe is scary. as a political matter, there are policies we could argue about, how to avert the recession if it's still a vertical. i'm not sure it is. a lot of the stuff is already happening. the republicans need from a political point of view and substantive point of view that president obama pursued his policies with the democratic congress and it's his economy. >> bret: chuck, do you sense if there was the political will that this administration would be pushing another stimulus?

>> absolutely. that is their preferred setting. one of the big victories that the g.o.p. won through this is to completely move the debate in the direction of spending cuts. they're still at risk of snapping defeat from the jaws of victory overplaying their hand and insisting on their way or the highway. the difference i think is the hit that the g.o.p. is taking from this, as your polls have shown, is probably more transtory. obama has still got to run on the national economic situation in 2012. he can't escape that. for him it's not debt number, it's the unemployment number. that is the risk. his loss is shallower than the g.o.p.s but they're longer lasting. >> bret: steve? >> he got an argument. one thing that the white house wanted out of the debate is the republicans are really putting the economy at risk. you are seeing this, you saw

it in gene sperling this morning. this is becoming the main democratic talking point. they are trying to get republicans to own part of the economic difficulty we're in. i don't think it will ultimately succeed. but for the first time i think the white house thinks they have an argument. they can't defend the stimulus and they can't defend 1.3 gdp, and given the other revisions downward might be optimistic at this point. they can't defend the performance of the economy so they have to try as hard as they can to shift blame to republicans or get them to own it. a tough argument. >> i don't think it's hard in a situation where republicans seem as if they're unreasonable in the course of negotiation. that's why, you know, we talk about president obama declining numbers. there was a poll showed public approval of congress is 6%. historic low. people are sick of this kind of fighting and paralyzeed politics. >> the slowdown started five quarters ago. january of 2010. >> let me just say, when you have two wars you don't put to

books and pass medicare prescription "d" and don't fund it as happened under a republican president and we enter a recession and say it's this president's policies, it drives people crazy. if republicans had good ideas for improving the economy, let's see them. >> bret: juan, do you think the president owns this economy? >> owns it? i think at this point, many of his policies have been in place for a sufficient time for americans to judge it. is it the case he inherited a good economy and say it's just his fault? no. >> bret: panel, we have to take a break right here. when we come back, how the faltering economy and debt deadline negotiations will play out on the 2012 campaign trail. back in a moment.

check out foxnewssunday.com for behind-the-scenes features, panel plus and the special monday preview of the week ahead. you can find it at foxnewssunday.com. be sure to let us know what you think. we'll be right back with more from our panel.

i can't support any plan that begins with the assumption that we have to raise the debt limit. and yet doesn't offer a fundamental restructuring of government spending habits. >> the president has shown no leadership. he doesn't have a plan on the

table. my opponents in this race haven't even come up with what they support. >> bret: two g.o.p. presidential hopefuls offering their views on the debt ceiling debate. we're back now with the panel. thousand this plays out on the 2012 campaign trail, juan? >> right now, i think most of the republicans are playing to the base and the idea that gee, you know what? tea party brought to us the party here. got us control of the house in 2010, and they are afraid to say, you know, we need to be responsible here and have some kind of compromise. >> bret: steve? >> what is interesting that republican candidates as a class haven't really come out and laid out their own plans for addressing this debt ceiling. they haven't come out with something, but their lack of eagerness to do that on this issue is a striking contrast between of their timidity of the paul ryan plan, where they held it at a distance. didn't want to run out and embrace it. the lasting impact is likely to be the administration's

effort and obama's political effort to get republicans to own some of this to shift blame for faltering economy on to this debate itself. >> bret: almost all of them were for "cut, cap and balance," the first, that came out of the house. but as far as the nuance here, chuck, there hasn't been a lot of speaking about it. >> well, michele bachmann's statement, which we just saw to me is a declaration of nonseriousness as the national candidate. it might play well in iowa caucuses but to be the only major candidate position as being against voting for debt ceiling even, you know, practically under any circumstances is not a winning play. if she ever got the nomination, that would come back to haunt her a little bit. again, i keep coming back to how it works out in november. i think while it will have a big impact on the senate and the congressional races, when it comes to picking the president the number that matt jers gdp and unemployment. if a republican makes it through this process, able to

hammer on that, he might have a chance. >> bret: n.f.l. is back in. many fantasy football teams will start forming season. will bill kristol's fantasy g.o.p. ticket was in action over the past couple of days. >> let's pass a bill to cover the moon with yogurt that will cost $5 trillion today. and then let's pass a bill the next day to cancel that bill. we could save $5 trillion. >> i do not understand how an issue of this magnitude, of generational importance, the president of the united states has not offered a plan. if someone has seen the president's plan, please, send it to me. >> bret: bill, is it rubio ryan for you or ryan rubio? >> i think it should be ryan rubio, but if he is hesitant to seize the moment, marco rubio will have to do it and make paul ryan his vice president. >> rubio-ryan would be a strong ticket. spectacular speeches on the floor of the house on thursday night and floor of the senate by rubio yesterday.

>> bret: any chance it happens? >> yes. >> because the presidential candidate, michele bachmann is against any deal. jon huntsman is for any deal. the rest of them are ducking or we say in the obama era leading from behind. i think the republican primary voters would welcome a ryan-rubio ticket. >> bret: thanks, panel. we'll see you next week. don't forget to check out panel plus where the group picks up with this discussion and that discussion on the website, foxnewssunday.com. we'll post the video before noon eastern time. up next, the week that was in the great debt divide. you could save a bundle with geico's multi-policy discount. geico, saving people money on more than just car insurance. ♪ geico, saving people money on more than just car insurance.

>> bret: there were primetime addresses, dueling news conferences an fiery floor speeches in the house and the senate. all in all, there was plenty to talk about in this week in the great debt divide. ♪ ♪ >> the american people may have voted for divided government. but they didn't vote for a dysfunctional government. >> the president has often said we need a balanced approach, which in washington means we spend more, you pay more. >> the power to solve this is in our hands. on a day when we have been reminded how fragile the economy already is, this is one burden we can lift ourselves. >> i stuck my neck out a mile to try to get an agreement with the president of the united states. a lot of people in this town can never say yes. >> the president knows what i

put forward is good for the country. the president will sign my legislation. my friend says he wants something that the president will sign. let sign this. he will sign it. >> he is the leader of the democratic party, the president of the united states. he needs to indicate what he will sign. and we are in those discussions now. >> spoken to the white house, quite a few times this evening. they have asked me to give everyone as much time as possible to reach an agreement if one can be reached. >> bret: we'll see that is it for this show. have a great week. i'll see you on a special sunday edition of "special report," 6:00 p.m. eastern on the fox news channel. chris wallace returns here for the next "fox news sunday." captioned by closed captioning services, inc