This is a rush transcript from "Fox News Sunday," December 9, 2018. This copy may not be in its final form and may be updated.

CHRIS WALLACE, HOST: I'm Chris Wallace.

The White House chief of staff is out. Prosecutors tie President Trump closer to Russian interference and other crimes and doubts about that U.S.- China trade deal rattle Wall Street.

(BEGIN VIDEOTAPE)

PETER NAVARRO, WHITE HOUSE TRADE ADVISER: Everybody in Washington now agrees that China is a bad actor doing bad things.

WALLACE: We'll discuss trade talks, the arrest of the top Chinese executive, and what it means for the U.S. economy with one of the president's top advisors, Larry Kudlow.

Then, a week of dramatic revelations in Robert Mueller's Russia investigation. What to the court filings show and what does it mean for the president?

PRESIDENT DONALD TRUMP: I think it's all turning around very nicely. There's absolutely no collusion, which is very important.

WALLACE: Senator Angus King, a key member of the Senate Intelligence Committee, joins us.

Plus --

SEN. CHARLES SCHUMER, D-N.Y., SENATE MINORITY LEADER: We do not want to let a Trump temper tantrum govern our policies or cause the shutdown of the government.

SEN. JOHN KENNEDY, R-LA.: I don't think the president is bluffing.

WALLACE: We'll ask our Sunday panel if a government shutdown over President Trump's border wall is now unavoidable.

And our "Power Player of the Week".

UNIDENTIFIED MALE: The pilot said, we have to go. Tom, you stay here, you die. You join Jesse.

WALLACE: One American hero's act of devotion he'll never forget.

UNIDENTIFIED MALE: Tom shouted at the cockpit. He said, Jesse, we'll be back for you somehow, someday.

WALLACE: All, right now, on "FOX News Sunday."

(END VIDEOTAPE)

WALLACE: And hello again from FOX News in Washington.

The Trump administration is getting a makeover. On his way to the Army- Navy game yesterday, the president announced Chief of Staff John Kelly will leave by the end of the year. Meanwhile, uncertainty over the U.S.-China trade deal is casting a shadow over an economy that has been a bright spot for the administration.

Joining us now, President Trump's top White House adviser, Larry Kudlow.

Larry, welcome back to "Fox News Sunday".

LARRY KUDLOW, WHITE HOUSE CHIEF ECONOMIC ADVISER: Thank you, Chris. I appreciate it.

WALLACE: In July, just a couple of months ago, President Trump said that White House Chief of Staff John Kelly would remain on the drive through 2020. Now he says that Kelly is out as one of the top few White House staffers. What happened?

KUDLOW: Well, look, it's been a long two years for the chief, General Kelly. You know, he ran Homeland Security, has been running the White House staff. I think, by the way, he's been a very good chief, very orderly processes in the White House. As you know, it's not an easy thing to do.

General Kelly is a remarkable patriot. He has given such phenomenal service to this country, perhaps it is time for a rest. President Trump at our senior staff Christmas dinner Friday night had some wonderful, complimentary things to say about the chief. I heartily concur. So, I suppose it's time to move on.

WALLACE: Well, let me ask you two more quick questions. One, did Kelly resign, or was he forced out?

KUDLOW: I don't know, to be perfectly honest. I think it was very amicable, all right? That's what I understand. You know, again, the president saying good things about the chief. I've been in so many meetings. I mean, just so many meetings in my tenure, a little less than a year now.

I think a lot of the gossip is just wrong. I think they did get along. Everybody is going to have disagreements, that's the way life works.

But was he fired? I don't think he was fired. I wasn't privy to that final conversation, but the president had great things to say about him.

WALLACE: What do you think about Nick Ayers?

KUDLOW: I think quite a lot of Nick Ayers, actually. I've known him for a while. If the president, I guess, will let us know tomorrow or sometime early in the week who the next chief is going to be. In terms of Nick Ayers, Mike Pence's chief of staff, I think the world of him.

WALLACE: All right. Let's turn to your day job. The stock markets had a terrible week since President Trump and President Xi had dinner in Argentina on Saturday night. The Dow lost 1,100 points or 4.5 percent. The S&P 500 is now in the red for 2018.

Question, how much of this is because of confusion over just what the U.S. and China have agreed to?

KUDLOW: Well, I don't know. I mean, I will grant you that trade issues, China trade issues, haven't been all buttoned down yet. But, look, Chris, the first couple days after that dinner, I was down there, G20, Argentina, the markets did very well both in China and the U.S., as a matter of fact.

Since then, there have been some issues. The Huawei issue, that's a technology company that was violating Iranian sanctions, and Canada has taken them in and they will probably be extradited to the U.S. There have been some different statements here and there.

Look, I can just tell you right now we are on track. China has finally -- I mean, Wednesday and Thursday, China's commerce department issued some very positive, promising statements. Sometimes I think these things get lost maybe, the beautiful funeral of former President Bush.

But they said, look, they agree with the timetable, they agree with the deadlines. They expect to be moving immediately to take actions on key commodities, for example, by lowering tariffs and opening up export sales for us, things like energy, agriculture, industry. Something like 35 Chinese agencies and the Supreme Court are now working on new legislation to deal with the IP theft issues and other technologies.

WALLACE: Larry, the reason --

KUDLOW: So when you piece it together, Chris, there's a lot of good things out there. And I think that sometimes it gets lost in the shuffle.

WALLACE: Well, here's part of the reason why it got lost and why it took to Wednesday or Thursday for people to find out about it, because there are big differences between how the president and the White House is describing what was agreed to and with the Chinese are saying was agreed to.

And let me put a couple of them up. U.S. says China agreed to, quote, very substantial purchases of agricultural and other products. The Chinese say nothing specific about how make those purchases will be. President Trump says the Chinese will remove their 40 percent tariff on U.S. auto imports. The Chinese are ducking that one.

And then there's the difference between what you and White House trade advisor Peter Navarro had to say on Friday about that 90-day deadline for a suspension of tariff increases. Take a look.

(BEGIN VIDEO CLIP)

KUDLOW: The president has indicated there is good solid movement and some good action, he might -- he might be willing to extend the 90 days. We'll have to see on that.

UNIDENTIFIED MALE: If they're not resolved in 90 days, is this administration willing to walk away?

PETER NAVARRO, WHITE HOUSE TRADE ADVISER: It's not a question of walking away, it's a question of moving forward on the strategy.

(END VIDEO CLIP)

WALLACE: That led -- that contradiction between you and Peter Navarro led to a 500-point drop in the Dow on Sunday. Forget the Chinese, the White House can't seem to get its own story straight.

KUDLOW: Well, I don't -- with all respect, I don't think there's much daylight between Peter and I. We are focused right now on this first 90- day increment. Regarding what may happen in the future and presidential considerations, that will be up to POTUS, of course, working with President Xi. I really think that's an exaggerated point.

But, Chris, look, I understand people are looking for these issues. Let me just read very quickly. Here was the Chinese Congress department announcement I think it was Wednesday or Thursday.

China will immediately implement specific issues that have been agreed upon by agriculture products, energy, and automobiles. Automobile tariffs announcement is going to come from a state council tariffs commission.

As I said earlier, it was also announced that a number of Chinese government agencies and the Supreme Court are looking at new laws to prevent intellectual property theft.

These are very strong indications President Trump himself -- I mean, I remember he called me early Thursday morning to say did you see that announcement, did you see that announcement, and I did and I think it's very positive. Really, we are making more progress now on more specific issues than ever before.

Now, let me just add quickly, trust but verify. That's very important.

Ambassador Lighthizer will be looking very carefully at the course of his negotiations. He will evaluate. He will make sure there are enforcement mechanisms and timetable mechanisms. That's terribly important.

WALLACE: Right.

KUDLOW: Nothing in this game is done until it is absolutely verified to our satisfaction. So, that's a caveat.

WALLACE: OK, but let me --

KUDLOW: I don't want to lose that. However, having said that, the Chinese owned statements are really very positive.

WALLACE: OK. Well, except for instance the president tweeted 40 percent tariff on auto imports is lifted, the Chinese have not committed to that and there was a big bump in the road on Saturday night. President Xi and President Trump are sitting there having dinner together, you're at the table with them.

And suddenly, there's the arrest last Saturday of Meng Wanzhou, the chief financial officer of telecom giant Huawei, as you say, for allegedly violating U.S. sanctions on trade with China.

A couple of quick questions, one, did President Trump know about that arrest when he sat down to dinner with President Xi? And if not, what was his reaction afterwards?

KUDLOW: He did not know. He did not know and he had no reaction afterwards.

WALLACE: Well, the reports have been that he was livid. And frankly, just as an outsider, if one of the top businessmen in the other parts of the country was being arrested while I'm making nice at dinner, I'd be livid.

KUDLOW: He didn't know, OK? I will just state that unequivocally. He learned way later, by the way. Way later.

Look, regarding the Huawei prosecution, let me just say that's a law enforcement action. That's primarily Department of Justice. It is a very important issue because the evidence suggests, at least so far, the alleging suggests that Huawei did break the Iranian sanction through different financial channels.

We will see how that plays out. That's an enforcement channel, Chris, enforcement lane. We're talking about --

WALLACE: I just want to ask you one question about it plays out -- if I may, Larry.

KUDLOW: Yes.

WALLACE: Republican Senator Marco Rubio said this week after the arrest that Huawei, a telecom giant, is a bad actor. Here is Rubio.

(BEGIN VIDEO CLIP)

SEN. MARCO RUBIO, R-FLA., SENATE FOREIGN RELATIONS COMMITTEE: Knowing the history of Huawei and how it served as an instrument of Chinese espionage and influence, it's concerning. But, you know, if we have a case to be made, the right thing to do is to charge her and the right thing is for Canada to extradite her.

(END VIDEO CLIP)

WALLACE: But now, China is warning the U.S. and Canada, where she's being held, that there will be consequences if she continues to be held. And one of the top papers in China, "The Global Times", says that her arrest amounts to a declaration of war.

Can you guarantee me that as part of this negotiation, the president, the administration will not let her go?

KUDLOW: I can't guarantee anything. As I say, this is a DOJ/NSC law enforcement issue. I don't know how it's going to turn out.

I'm not an attorney. It's outside my lane. So we will see.

Look, the U.S. has laws about these things. The U.S. has a number of laws on the books now that protect a number of points. I mean, not only violations of sanctions, be it Iran or other countries.

We have laws about anything that was stolen. We are discussing loss. People can't do business in the U.S. or sell us goods, services, intellectual property that we think was stolen. So that's just being tough and protecting the family jewels, in my judgment and that's protecting the integrity of U.S. national security policy -- very, very important.

How this affects trade, Chris, I can't sit here and be absolutely definitive. All I will say is it seems to me there's a trade lane that we are discussing where you and I both agree the early returns from China are very positive and it looks like we will get new actions and there is the law enforcement lane. They are different. They are different and I think President Trump and President Xi and lower officials will generate or continue to keep that difference.

I might be wrong. I can't predict the future on this thing but there are different channels and I think they will be viewed that way for quite some time.

WALLACE: Larry, thank you, thanks for your time and we'll watch how the markets do this week.

KUDLOW: Thank you, Chris. Appreciate it.

WALLACE: Up next, we'll bring in our Sunday group to discuss the departure of White House Chief of Staff John Kelly and other shake-ups in the administration.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

TRUMP: John Kelly will be leaving at the end of the year. We'll be announcing who will be taking John's place. It might be on an interim basis. I'll be announcing that over the next day or two.

(END VIDOE CLIP)

WALLACE: President Trump announcing on his way to the Army-Navy game he is letting general John Kelly as White House chief of staff go amid a number of staff changes.

And it's time now for our Sunday group. Former Republican congressman Jason Chaffetz, Charles lane from The Washington Post, former Democratic Congresswoman Jane Harman, director of the Woodrow Wilson Center, and the co-host of Benson and Harf on Fox News Radio, Guy Benson.

Well, Congressman Chaffetz, President Trump announced yesterday that John Kelly is out, his likely replacement, and I discussed with Larry Kudlow, this fellow, Nick Ayers, very sharp political operative, now the vice president's chief of staff. Question, what happened to Kelly? And if, in fact, Ayers is taking over from Kelly, what does that tell us about where the Trump term presidency is headed over the next two years?

JASON CHAFFETZ, R-UTAH, FORMER CONGRESSMAN: Well, this country owes a lot to the Kelly family, the sacrifice he has made but also his son and the loss of his son. But he served two years with the Trump administration, the homeland security and the chief of staff. By all accounts, it's a tumultuous time in the White House. But we have a lot to thank there.

I think Nick Ayers has proven himself with the vice president. Very different approach I think than General Kelly.

WALLACE: In what way?

CHAFFETZ: Well, he seems to be a very disciplined person. He did cut his teeth early on on some of the campaign issues and as we transition to 2020, I think it's important to know that. Also think perhaps one of the names, Mick Mulvaney is also in the mix. It seems like Ayers is going to get, but Mulvaney, the president I think signaled that there might be an interim person in the place and I think --

WALLACE: But when you say he's political, is part of it that we are headed up towards 2020, we are going to have a Democratic Congress, you need a markup politically savvy person in that job?

CHAFFETZ: Yes, I think you're going to have to deal with a Democrat- controlled House of Representatives and you couple that with the 2020 election right on our heels. I think you need somebody who can bridge that gap and with the president's attention is going to be drawn towards.

WALLACE: Chuck, given how President Trump runs his shop, can anyone succeed as White House chief of staff? And Nick Ayers, who as I say, is a very sharp political operative. He was the executive director of the Republican Governors Association when they scored a lot of games there, he has his own critics.

CHARLES LANE, THE WASHINGTON POST: Yes, he does. He's thought to have -- maybe as part of being political, he's thought to have very sharp elbows. He's a young man in a hurry, is only in his mid-30s and that always draws a little resentment from the more experienced types. There are people in the mixer are Jared Kushner and the president's daughter, Ivanka.

WALLACE: When you say they're in the mix, they're not going to be chief of staff?

LANE: No, but they are known to involve themselves sometimes in the affairs of the White House and may have something to do with General Kelly's departure too. They have struggled all along for stability in their and at a certain point you say to yourself, well, is it the staff or is it the president?

And the president thrives, it seems, on conflict and instability. That seems to be what makes him comfortable. He likes, as I think he said himself, he likes it when people are in conflict around him and then he can deal with that.

So, you know, a best-case scenario for this White House is that they find somebody who can hold on for the next two years until the election. But that would be different from the previous two years.

WALLACE: Well, speaking of conflict and unfinished staff business, nine months after Secretary of State Rex Tillerson was dismissed, incidentally, by tweet. He finally got around to talking about what it was like to work for President Trump. Here's just a taste of that.

(BEGIN VIDEO CLIP)

REX TILLERSON, FORMER SECRETARY OF STATE: Doesn't like to read, doesn't read briefing reports. Doesn't like to get into the details of a lot of things but rather just kind of says this is what I believe. When the president would say, here's what I want to do and here's how I want to do it, and I would have to say to them, Mr. President, I understand what you want to do but you can't do it that way, it violates the law, it violates a treaty.

(END VIDEO CLIP)

WALLACE: Well, not surprisingly, the president fired back. Tweet: Rex Tillerson didn't have the mental capacity needed. He was dumb as a rock and I couldn't get rid of them fast enough. He was lazy as hell.

Congresswoman Harman, I guess that will be sending Christmas cards to each other this year.

JANE HARMAN, FORMER CONGRESSWOMAN: Well, I have no idea why Rex Tillerson did that interview. But let me just say --

WALLACE: We love that he did that interview.

HARMAN: Well, fine.

WALLACE: We like people airing their dirty laundry.

HARMAN: Congratulations on fair and balanced anchoring on the show, big deal. Really big deal.

WALLACE: Thank you. Thank you. I thought I was going to get through without that, but go ahead.

HARMAN: Well, you didn't. But now, back to this, I mean, I came of age when John Kennedy said, ask not what your country can do for you, ask what you can do for your country. We just buried a president where duty, honor and country where the theme of his service over his entire lifetime and I think Rex Tillerson came to Washington out of a feeling of duty, honor and country, and I think he was an excellent head at Exxon and I -- what went on --

WALLACE: He was not a very good secretary of state.

HARMAN: Yes, right. He had no experience at the State Department and certainly was a misfit with President Trump. But I think the latest tweet is a sad -- shows a sad lack of stability and respect for honorable people who come to serve --

WALLACE: How about -- and what Tillerson -- I mean, Tillerson punched.

HARMAN: Well, that's what I said. I think it's unfortunate.

WALLACE: So, they both --

HARMAN: Well, yes, I think the whole thing was unfortunate.

Just a comment on John Kelly absolutely gave his son, or his son gave his own life in Afghanistan to protect our country and we should really honor his service and I surely hope we are not going to see tweets like the Tillerson tweet after John Kelly leaves, his service for his whole lifetime, his military service was so honorable.

WALLACE: Guy, let's go back to my discussion with Larry Kudlow in the last section. How -- what do you make of the differences that we are seeing and how the U.S., the president, the White House is describing what was agreed to or even what's on the table in the discussions between the U.S. and China on trade and with the Chinese are saying about it?

Are the markets right to be concerned about those differences? And how big a monkey wrench did the arrest of this really top -- I don't think you can overstate how important this Chinese businesswoman is, what kind of a monkey wrench that throw into all of this?

GUY BENSON, CO-HOST, "BENSON & HARF": Well, I think, first on the arrest, it's one of the rare instances in D.C. where there was virtual unanimity that there were bad actors and something like this was due and important, given their sanctions violations, their espionage, their IP theft. I think there was bipartisan applause.

Maybe the timing was unfortunate given the broader context of the back and forth in these negotiations. But to your first question, I'm a big fan of Larry Kudlow, always have been. But I was not terribly convinced by his responses to your questions where you put up the full screen graphics.

Here's what we are saying, here's what the Chinese are saying, where do we go from here? And I think there was sort of a lot of let's wait and see in the markets are waiting and seeing and that's why we're seeing I think and witnessing the downturn in the jitters.

WALLACE: Congressman Chaffetz, I've got about a minute left. We've seen this movie before where there's talk about an agreement. They begin months of negotiations and nothing much concrete comes from the Chinese.

How worried are you? How worried should the markets be that we're going to see this again?

CHAFFETZ: I think the president is actually willing us in the right direction. Nobody is challenging and taking on China, and we've all know that they have been abusive in their intellectual property theft. They have been taking advantage of the U.S. markets.

The fact that the president is putting America first is exactly what he campaigned on. No doubt it's going to be tumultuous getting there but the president is pushing us in the right direction.

WALLACE: But are you confident that the Chinese are going to -- what the president says, keep their word and really change the way they act?

CHAFFETZ: Yes, I really do. I think the Huawei situation is going to be a distraction. I understand the timing is bad, but I can tell you, having set through a lot of meetings over eight and a half years I served, Huawei was always in a lot of those discussions.

WALLACE: Fifteen seconds.

HARMAN: Right goal, but wrong way to manage it. And I think people are skittish seeing the photo op on North Korea and seeing the photo-op with Russia that we're going to get yet another photo-op and no serious progress.

WALLACE: All right, panel, we have to take a break here. We will see you all a little later.

When we come back, what Robert Mueller's latest moves mean for President Trump. We will discuss the key takeaways from Friday's court filings with Senator Angus King, a member of the Senate Intelligence Committee. That's next.

(COMMERCIAL BREAK)

WALLACE: Coming up, former FBI Director James Comey gets grilled on Capitol Hill.

(BEGIN VIDEO CLIP)

JAMES COMEY, FORMER FBI DIRECTOR: One, we could have done this in open setting. And two, when you read the transcript, you will see that we are talking again about Hillary Clinton's emails, for heaven's sakes.

(END VIDEO CLIP)

WALLACE: We'll discuss it by the top member of the Senate Intelligence Committee, next.

(COMMERCIAL BREAK)

WALLACE: A flurry of court filings this week reveal new information about Robert Mueller's Russia investigation. And now, federal prosecutors are trying to connect the dots between President Trump, his campaign, his company, and the Kremlin.

Joining me now from Maine, Senator Angus King, an independent and a key member of the Senate Intelligence Committee.

Senator, the special counsel and federal prosecutors in New York issued court filings this week on Paul Manafort, Michael Cohen and General Michael Flynn.

Question, what, if anything, did you learn about possible criminal activity by President Trump? And where does this investigation stand out?

SEN. ANGUS KING, I-MAINE, SENATE INTELLIGENCE COMMITTEE: Well, I think the first thing to say is the Mueller filings on Friday with regard to Manafort and the district of New York talking about Cohen and also Mueller, I thought they were less interesting, if you will, or important than the Flynn filing earlier in the week. And what was interesting about that was what wasn't said, in other words, there were very large sections of the Flynn filings that were redacted, that we couldn't see what they were.

And the special counsel went out of his way to compliment General Flynn on the fulsomeness of his testimony and how helpful he had been and basically recommended no jail time. It was a kind of prosecutorial pardon, if you will, based upon a high level of cooperation.

The Mueller and Cohen filings weren't that -- I mean, I'm sorry, the --

WALLACE: Manafort.

KING: The Manafort and Cohen -- yes, Manafort and Cohen filings weren't as -- as revealing. Cohen's basically went over the information that has already been revealed in his -- in this plea arrangement about the payoffs.

WALLACE: But -- but, Senator -- Senator, let me drill down on -- on one point there.

KING: Sure.

WALLACE: On the illegal campaign hush money payments to two women, New York prosecutors write this, Cohen himself has now admitted, with respectable to both payments, he acted in coordination with and at the direction of individual one, who we know to be Donald Trump.

KING: Right.

How damaging is that to the president?

KING: Well, the president has a series of defenses if indeed that is charged to be a crime. I guess in one would be it wasn't willful and knowing, which was what the statute requires. And also the question is, it was his own money. A candidate can spend his own -- as much money as they want. There are no limitations. On the other hand, it wasn't disclosed. And that's one of the key factors here.

And the key word there is at the direction of, which directly implicates the president in what could be a felony. And -- and So that is a significant development, but that was really in -- in Cohen's guilty plea last August. This really sort of amplifies that.

WALLACE: Let me ask you about another thing in the Cohen filing by the special counsel, not the New York prosecutors. The special counsel says in November of 2015 someone who claimed to be close to the Russian government offered, quote, synergy on a government level to the Trump campaign. Cohen says he didn't follow up on that but he did have a series of other meetings with Russian officials. How significant is that?

KING: Well, I think it is significant because it -- it is just one more connection. It appears that that discussion is about the Trump Tower Moscow project, which we now know was underway and -- and being discussed -- not underway in the terms of being built, but certainly they were working on trying to develop such a project from the fall of 2015 into the middle of 2016, which is contrary to earlier reports that there were no relationships with the Russians, nothing going on.

And -- and here's the thing, Chris. If you want to build a big project in Moscow, you've got to work with the government. You've got to have permission. You've got to have a go ahead from the highest levels of the -- of the government, and that means Vladimir Putin. And so this establishes that there were contacts going on during that period and Michael Cohen was in the middle of it.

WALLACE: So, bottom line, at the end of this week, as opposed to if I had spoken to you last Sunday, is there anymore there there when it comes to the president?

KING: I don't think it -- it changes that, although -- well, yes, let me modify that answer. I think, yes, going back to my original comment. I think Michael Flynn, the Michael Flynn filing, was very significant. He met with the special counsel dozens and dozens of time and gave a great deal of information, a lot of which is redacted, which is suggestive that there's information we don't know. I think that's the most significant filing of the week.

I think the Manafort and Cohen finally gave us a little bit of additional information, but I think the Flynn filing, if I were in the White House, would be the one that would make me nervous.

WALLACE: I want to ask you about the president's reaction on Friday night. He tweeted this, totally clears the president. Thank you. Does it?

KING: No. I don't -- I don't see that at all. In fact, the Cohen finally, as you've already pointed out, implicates him in the commission of a felony. I wouldn't call that being totally cleared. Now, it doesn't speak directly to the issue of conspiracy with the Russians involving the 2016 campaign, although, again, the Cohen filing talks about relationships to people in Russia at the highest level with regard to synergy with the Russian government and the Trump campaign. So it's suggestive, but not conclusive.

Chris, there's a lot of talk recently about smoking guns. And in criminal prosecutions you rarely find smoking guns. It's a -- it's an accumulation of evidence. And then that's what's happening here. It's more of a drip, drip than an opening of the firehose. And it continues to develop in ways that aren't favorable to the president, but I think, as you suggest, in the filings this week, there's nothing definitive, but there's nothing that exonerates the president either. I was surprised by that tweet. I was wondering if he read the same documents I did.

WALLACE: The president had two other tweets this week that stirred controversy. I want to put them up. On Michael's Cohen seeking no prison time, the president wrote, he lied for this outcome and should, in my opinion, serve a full and complete sentence. But on Roger Stone, saying he will never testify against Mr. Trump, the president wrote, nice to know that some people still have guts.

Do you see those tweets, as some other people do, as evidence of witness tampering?

KING: I think it's troubling. And you -- you could add a third instance, and that is when he said last week that a pardon for Manafort is not off the table. I found that very troubling. That's dangling a pardon.

I used to be a governor, Chris, and I had the power of the pardon. And, to me, if I had thought about pardoning a criminal who had some ability to implicate me in some criminal activity, I can't imagine it, frankly. And -- and that's what we're talking about here.

So when you add those three things together, it's very troubling. Again, it's not definitive. It's not a smoking gun, but it's troubling when you're essentially saying, punish the guy who's given information against me, and let the guys off who aren't talking. That's -- that, I think, troubling is the word I keep using. I think that's the -- that's the best characterization of it.

WALLACE: Former FBI Director James Comey testified before two House committees on Friday for a total of almost seven hours and afterwards he had this to say.

(BEGIN VIDEO CLIP)

JAMES COMEY, FORMER FBI DIRECTOR: When you read the transcript, you will see that we were talking again about Hillary Clinton's e-mails, for heaven sakes. So I'm not sure we need to do this at all.

(END VIDEO CLIP)

WALLACE: Now, the Republican majority has contended, and what they were trying to find out and asked about four hours in this -- in this hearing was that there was bias both for Hillary Clinton in that investigation, and against Donald Trump in that investigation.

Did you see any evidence of that? Did they -- did they find that?

KING: No. And I think the -- there's a really important point here, and that is the investigation of Donald Trump was completely secret. It wasn't made public at all. There wasn't a whiff or a suggestion of it. Nobody ever even knew about it through the election until well after the election. So if -- if that investigation was undertaken for political purposes, it -- it had no result. It didn't -- it didn't affect the election whatsoever.

On the other hand, the Hillary Clinton investigation was very public and many people feel that Director Comey's statements about reopening the investigation in the later part of October, about a week or ten days before the election, was one of the things that sunk Hillary Clinton's campaign. So the -- the -- I understand the argument, but the conclusion doesn't -- doesn't support it.

WALLACE: Senator --

KING: If -- if the Trump investigation was a -- was political, they certainly didn't pull the trigger on it.

WALLACE: Senator, I've got about 30 seconds left. The Republicans are making a big deal about the fact that FBI Director Comey, former director, said, I don't recall, I don't remember over 200 times in his testimony. I know you probably haven't gone through the 235 pages, but do you think that indicates that he was dissembling or not being candid?

KING: I had probably 20 meetings in the Intelligence Committee with him over the course of five years and I never saw that from him. It would be very surprising to me. I wasn't there. I didn't see it.

But on the question of the political Hillary thing, the inspector general of the -- of the Justice Department did a very long -- I think 150 page analysis of that, concluded there were some judgment calls that they disagreed with, but it wasn't undertaken in any way for political purposes. And that's an independent investigation that was very thorough.

WALLACE: Senator King, thank you. Thanks for your time. Always good to talk with you, sir.

KING: Yes, sir. Glad to be with you, Chris.

WALLACE: Up next, President Trump signs a short-term spending bill to keep the government open through December 21st. What would you like to ask the panel about the end of year fight brewing over his proposed order will? Just go to FaceBook or Twitter @foxnewssunday and we may use your question on the air.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

TRUMP: Congress must fully fund border security in the year ending funding bill. We have to -- we have to get this done.

SCHUMER: So if President Trump wants to throw a temper tantrum and shut down the government over Christmas over the wall, that's his decision.

(END VIDEO CLIP)

WALLACE: President Trump and Senate Democratic Leader Chuck Schumer squaring off over whether the must pass government funding bill in two weeks will include money for the border wall with Mexico or not.

And we're back now with the panel.

Well, Congressman Chaffetz, President Trump is insisting on $5 billion for the wall in this bill that has to be passed by a week from next Friday, the 21st, four days before Christmas. Democratic leaders are now saying they won't even make a deal on DACA, on protecting the dreamers, if it means they have to fund the wall to $5 billion.

Does this mean that a government shutdown -- it will partial because they passed a number of bills already -- but a partial government shutdown is inevitable over Christmas? And, if so, who pays the political price?

CHAFFETZ: Well, I think it's a very real threat because I think the president's wanting his $5 billion. It's embarrassing, the Republicans weren't able to produce that when they had the House and Senate and the presidency. They spent $8 trillion over those -- over those two years and they couldn't come up with $5 billion. It's an embarrassment.

I think the president's serious about this, but I also think that all bad bills that pass, pass within seven days of Christmas. And that's what this is headed for.

WALLACE: And -- and if it -- if there's a shutdown, who take -- who pays the price?

CHAFFETZ: I think the president is on the winning side of this. They want to protect the security of the United States of America. And all these graphics and all these things you see of people coming north, I -- I think those -- Republicans will claim victory, but I think those in the middle will understand the president's trying to protect the United States.

WALLACE: We asked you for questions and we got this on Twitter from Leah Yamim. She writes, I thought Mexico was paying for the wall? And I misremembering the Donald Trump promise during his make America great rallies, or was he plain lying?

Congresswoman Harman, how do you answer Leah, first of all, and, secondly, does Nancy Pelosi have any choice on this? If she were to give any ground on funding for the wall, wouldn't that doom her as being elected speaker?

JANE HARMAN, DIRECTOR, WOODROW WILSON CENTER: Well, first of all, Mexico will not pay for this wall. Second of all, those who will pay the price are the people who live paycheck to paycheck who won't get a paycheck over Christmas. Real people get hurt.

I saw the movie. I was a member of Congress and the government shut down over Christmas for 27 days in 1995. It was a disaster. It was during the -- the reign of Newt Gingrich.

But at any rate, who else will pay the price? I think the president will. Nancy Pelosi should make a deal, in my view, and Chuck Schumer should too. And I hope they will. Put DACA in there. Put ending U.S. military assistance to Yemen, which is something on a bipartisan basis that the -- that the Senate wants. Those would be at least two. And -- and -- and border security is something, at least I strongly support, not -- not necessarily a physical wall everywhere, which is --

WALLACE: Well, wait, wait, wait, you say not necessarily for -- that's what -- that's the price of admission.

HARMAN: I know, but you can't put a physical wall through certain environmental areas and -- and along the coast of Texas, so --

WALLACE: Right, but you'd pay for a wall?

HARMAN: I -- I would find a way. But let -- but one more thing, hemorrhaging deficits. If we're headed for a recession, all these billions of dollars do add up and -- and with the Trump tax bill and other things, there's just no relief in sight. So I would return, if I could, some form of -- of this wonderful plan that was supposed to balance the budget and -- and cut spending in a responsible way, do tax reform and do entitlement reform.

WALLACE: Well, that isn't going to happen in two weeks.

Let me -- let me -- let me bring in our two other colleagues here.

Really quickly, because I want to get to another subject, Guy, how do you think this is going to play out?

GUY BENSON, TOWNHALL.COM: Well, I would just point out that even though the possibility of a shutdown is serious, and obviously we're here talking about it, and they'll be talking about it in the building behind you, I think, in the coming weeks, if there is a shutdown, it's always a partial shutdown of the federal government.

WALLACE: Right.

BENSON: It will be even more partial in this case because the Republican Congress has passed more appropriations bills through regular order --

WALLACE: Right.

BENSON: Than they've done in two decades, including defense. So I think the urgency in some of the scare tactics in a fight around a shutdown won't be available to the Democrats, although I think they'll get their licks in on the president if it is the wall as a sticking point.

WALLACE: Who -- who pays the price here?

CHARLES LANE, FOX NEWS CONTRIBUTOR: Well, this is the last stand for the wall with the Republicans in control of the whole government. I tend to think if they don't -- if -- if -- if there's a shutdown over the wall, I think the president will be rewarded, at least with his base, for -- for making that struggle. But if it goes on a lot longer than that, because there isn't a lot of support for the wall generally, then he will start to pay a price.

WALLACE: All right, meanwhile, for all the talk about -- by Republicans about Democratic voter fraud, there seems to have been another case, perhaps, in North Carolina where it was the Republicans who were involved in voter fraud. Let's put this up.

Republican Mark Harris has a 905 vote lead over Democrat Dan McCready in a race for Congress. McCready had already conceded, but now there are allegations of a GOP operative mishandling hundreds of absentee ballots, which may have been the difference. And the Democrat, McCready, has now unconceded.

Guy, what do you make of this and explain what's going on here?

BENSON: Yes. I mean it doesn't look good. And if you read into the details, I would not be surprised if we end up seeing a new election in North Carolina 9 because I think this shady character's fingerprints are all over this.

WALLACE: Well, tell what he did.

BENSON: So he was collecting ballots -- so, absentee ballots, and allegedly --

WALLACE: This is a Republican. It's not -- it's not Mark Harris, but it was somebody on his staff.

BENSON: Correct, someone who was sort of working for him.

WALLACE: Yes.

BENSON: And he has a long history -- he's worked for both parties and -- over the course of time and he has this amazing track record where his clients tend to outperform expectations by far when it comes to absentee ballots where they collect these absentee ballots from voters, something happens to them, some of them appear, some of them disappear, and then, boom, the outcomes tend to benefit his clients subsequently.

WALLACE: Yes. And we should point out that it's even got a name, which is vote harvesting. I've never heard that expression before. In North Carolina it's illegal. Either you have to submit your absentee ballot or a close friend --

HARMAN: Right.

WALLACE: Or somebody connected to you --

BENSON: A relative.

WALLACE: A relative --

BENSON: Right.

WALLACE: Has to -- has to submit the ballot. It can't just be somebody submitting hundreds of ballots.

BENSON: However, setting aside this particular case in North Carolina, what you just described, that vote harvesting scheme, it's actually perfectly legal in places like California. And there was a fascinating piece on NPR where they looked at, will this incident renew scrutiny for mail in voting states like Colorado, like Washington state, where this could be a widespread problem relatively speaking?

WALLACE: All right, here is the reaction from the Democratic -- Democratic Party chair in North Carolina.

(BEGIN VIDEO CLIP)

WAYNE GOODWIN, NORTH CAROLINA DEMOCRATIC PARTY CHAIR: North Carolina voters deserve to know the truth. And as more details come to light every day, it becomes increasingly clear that a full investigation must be completed before the election can be certified.

(END VIDEO CLIP)

WALLACE: And -- and that gets very interesting, Chuck, because there's going to be an investigation inside North Carolina about this, but ultimately who decides whether or not to seat a member to Congress? The Congress, the House. They decide whether or not to certify it or call for a new election.

LANE: And, by the way, next year that will be Mancy Pelosi and the Democratic majority will be deciding.

WALLACE: Right.

LANE: So my bet would be this gentleman, Mark Harris, will never be seated.

WALLACE: The Republican.

LANE: The Republican who ostensibly won this will never be seated, either because there's a new election, which he can't win with this cloud over him, or because the election is never certified, or finally because the Democrats never agree to -- to seat him.

And there's another --

WALLACE: In fairness, there's no evidence that Mark Harris know about this.

LANE: Correct.

But, you know, there's another factor here, which is, this gentleman was not the Republican Party of North Carolina's choice for this seat. Bob Pittenger, Robert Pittenger, the incumbent, was. This is an insurgent Republican candidate. So there's not a whole lot of love for him in the Republican Party.

WALLACE: And -- and it turns out that in the Republican primary, the same thing happened.

LANE: This may have happened as well.

BENSON: That's exactly right.

LANE: So just a final point on that, if I may, excuse me, that -- that I think there's very little incentive for the Republicans to go to the mats for this guy. It's only one seat out of a large minority conference. I think he's toast.

WALLACE: So instead of a 40 seat pickup, it could be a 41 seat pickup?

LANE: Yes.

HARMAN: I won in 1994 when the late absentee votes were counted. And in Los Angeles it was a requirement that your family had to bring in the absentee votes and I finally won by 811 votes in my election was certified.

WALLACE: Well, at least in the story I read, it now has changed and anybody can bring them in.

BENSON: Yes.

WALLACE: You can harvest votes. I like harvesting votes.

Thank you, panel. See you next Sunday.

Up next, our "Power Players of the Week." A story of devotion from two members of the greatest generation.

(COMMERCIAL BREAK)

WALLACE: As we heard this week in the farewell to President Bush, tales of heroism from World War II have become part of our national identity. But some members of the greatest generation volunteered for the three-year conflict in Korea, filled with heroes of its own, including our "Power Players of the Week."

(BEGIN VIDEOTAPE)

ADAM MAKOS, AUTHOR, "DEVOTION": Tom and Jessie were devoted to their country. They were devoted to each other. Devotion was just this overarching theme. And it was just fitting for -- for men going off to serve their country.

WALLACE (voice over): Adam Makos is the author of "Devotion," an epic story of heroism, friendship and sacrifice. And what a story it is.

Tom Hudner came from the country clubs of New England. Jesse Brown from the sharecropper fields of Mississippi. And when they met as pilots in the Korean War, Jesse was surprised Tom came over to shake his hand.

MAKOS: It was unusual for him that this Tom Hudner was so open to being friends with a black pilot. And so it took Jesse a little while to get used to the fact that he could trust this man.

WALLACE: By 1950, Jesse was the first black carrier pilot in the Navy, and he and Tom were flying combat missions over the Chosin Reservoir in Korea where 100,000 Chinese troops encircled 20,000 U.S. Marines.

MAKOS: The only way to find the enemy when you're seeking them out is to get low and slow. And, in this case, Jesse's plane was hit by a -- a random shot, a golden bullet, if you will.

WALLACE: Jesse saw a pasture on top of a snow-covered mountain. Somehow he guided his corsairs down to a hard landing.

MAKOS: The minute his plane hits, the clock is ticking. The enemy can see the smoke rising because the airplane is slowly catching fire. And they begin moving in that direction.

WALLACE (on camera): And what did Tom Hudner do?

MAKOS: Tom Hudner did something that has not been attempted sense. It had never been attempted before. He said, I'm going in. And he made an intentional crash landing in that same pasture alongside of Jesse's plane.

WALLACE (voice over): Tom shoveled snow into the engine to stop the fire, then try to pull Jesse from the plane. But he was trapped in the wreckage and had serious injuries.

MAKOS: And he almost practically held his hand and stayed with him as the darkness set in, as Jesse was fading. And then, finally, he took home Jesse's last words. And those were, tell Daisy how much I love her. A last message to his -- his wife.

PAMELA KNIGHT, DAUGHTER OF JESSE BROWN: He died with me and my mom on his mind and asked Tom to deliver a message of love to my mom and me.

WALLACE: Daisy was Jesse's wife and Pam was their only child, not quite two.

KNIGHT: To know that he had this great love for my mom that he -- that his last thoughts were of her, it just makes me feel that I have a legacy that is difficult to live up to almost.

WALLACE: A helicopter flew 13 miles behind enemy lines to rescue Tom, who didn't want to leave his dead wingmen.

MAKOS: The pilot said, we have to go. Tom, you stay here, you die. You join Jesse. Tom shouted at the cockpit, he said, Jesse, we'll be back for you, somehow, some day.

WALLACE: Tom thought he would be court-martialed for crashing his plane. Instead, he was the first member of the Navy to receive the Medal of Honor in the Korean War.

WALLACE (on camera): Did he carry the memory of Jesse Brown through his career, through his life?

MAKOS: He helped put Jesse's widow through college. When Tom was -- received a cash award from the grateful residents of his town, he sent that checked down to Daisy.

WALLACE (voice over): But one thing always bothered Tom, he never returned to get Jesse.

In 2013, Tom was 89. He and Adam went to North Korea to meet officials there.

CAPT. THOMAS HUDNER, JR (RET), MEDAL OF HONOR RECIPIENT: Well, we have great hopes that we can find the airplane.

WALLACE: But it was the monsoon season and they never got there. Tom died in 2017.

Back in 1950, a Navy reconnaissance flight found the two Corsairs and recent satellite images identified the pasture. But the two planes were likely salvage for scrap metal and Pam and Adam can only hope someone buried Jesse.

WALLACE (on camera): How much would it mean to you to get your dad's remains back?

KNIGHT: It would mean everything to be able to at least know my father has a final resting place here on this side, where we can go and visit, and also that we're keeping a promise to my mom.

WALLACE (voice over): Adam hopes as part of U.S. diplomacy with North Korea to keep Tom's promise to his friend.

MAKOS: He didn't see it as a very big, heroic acts. He didn't see it as -- as anything uncommon. He always would say, what's such a big deal of crashing the plane on the mountain to save a friend? Jesse would have done it for me.

(END VIDEOTAPE)

WALLACE: Last Saturday the U.S. Navy welcomed the newest ship in its fleet, the USS Thomas Hudner was commissioned in Boston.

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

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