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Thune: We are at an impasse because Dems are blocking border wall funds

Incoming Senate Majority Whip John Thune reacts to the looming deadline to avoid a partial government shutdown.

This is a rush transcript from "Your World," December 18, 2018. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: Wow, Shep, I don't know what to say here -- so many unknowns and so little time.

Welcome, everybody. I'm Neil Cavuto, and this is "Your World."

We have got coming up Kentucky Republican Senator Rand Paul on a general who has to wait another few months to find out his fate and whether he's going to do any prison time at all.

And then Democratic Senator Chris Van Hollen of Maryland on if a deal to avoid a government shutdown might be closer than you think, that they actually might agree on something.

First, FOX team coverage with Ashley Webster market rally that looked like it was winding out of gas, until it wasn't, and Catherine Herridge on a Russian probe that could be getting more steam, even though a lot of folks are wondering exactly where it's going.

We connect, you decide.

First with Ashley on why stocks were doing a 180 and back again, I think something like that -- Ashley.

(LAUGHTER)

ASHLEY WEBSTER, CORRESPONDENT: Exactly. Exactly right. Volatility, Neil.

Look, the market staged modest rebound today, after a miserable run for stocks. But let's face it. Wall Street continues to battle plenty of volatility; 2,000 stocks have hit that lowest levels in a year.

So the question is, what is spooking investors? What's it all about? Well, there are persistent fears that a struggling global economy could indeed wash up on U.S. shores, dragging us down right along with it.

There are also persistent fears, jitters over a trade war with China. And underneath all of this is the prospect of the Fed raising interest rates, making borrowing costs more expensive. That in turn has fueled many tweets from the president urging the Fed not to raise rates.

Now, critics say, he shouldn't be doing that. But the administration says, guess what? He has every right. Take a listen.

(BEGIN VIDEO CLIP)

SARAH HUCKABEE SANDERS, WHITE HOUSE PRESS SECRETARY: He's been very clear about what his position is. While at the same time he understands that the Fed is an independent agency, that doesn't take away the president's right to state his opinion on a particular matter.

(END VIDEO CLIP)

WEBSTER: So, Neil, let's put it this way. All eyes will be on the Fed tomorrow. Investors do expect a quarter-of-a-percent rate hike for this month.

But it's the language about potential hikes for next year that are going to be oh so dissected. All the tea leaves are going to be read. And the market hopes that the overall tone will be dovish. If not, we could see the selling pick up speed again -- Neil.

CAVUTO: Oh, boy. All right, Ashley, thank you very, very much.

WEBSTER: Sure.

CAVUTO: I don't know whether I liked you better when you were in London or reporting on what's going on here in New York. Thank you, my friend.

(LAUGHTER)

WEBSTER: This is as good as it gets.

CAVUTO: There you go. I hear you.

All right, now to the sentencing that wasn't. And believe it or not, this did have an effect of the markets. More on that in a second.

To Catherine Herridge in Washington on why one Michael Flynn has to wait now quite a while to determine whether he is ever going to jail -- Catherine.

CATHERINE HERRIDGE, CORRESPONDENT: Well, that's right, Neil.

The former national security adviser arrived with his wife by his side and his legal team earlier today. The federal Judge Emmet Sullivan laid down on marker at the outset, telling the core -- quote -- "I cannot recall any incident where the court has ever accepted the plea of someone who has maintained he wasn't guilty. And that's not going to start today."

On multiple occasions, federal Judge Sullivan asked Flynn and his legal team whether he wanted to withdraw his guilty plea of lying to federal agents or challenge the circumstances surrounding the January 2017 FBI interview where Flynn was discouraged from having a lawyer and not formally warned that false statements could be prosecuted.

A key moment came when Flynn told the court that he knew when the FBI asked him about the Russian ambassador and a December 2016 conversation about sanctions that his lies would be criminal and punishable.

After confirming the guilty plea, the judge seemed to chastise Flynn for making false statements in the West Wing, including lies about the conversation to members of the transition team, the vice president, as well as the FBI.

He said -- quote -- "You sold out your country," the judge said, adding he could not rule out incarceration.

The judge also questioned the basis of the case, asking the special counsel lawyer the Flynn phone call with the Russian ambassador was in fact criminal. And after a long pause, the government lawyer said it might be a violation of the Logan Act, which the judge seem to laugh, saying, isn't that the act that no one has been charged with?

So there will be a status report in this case, Neil, in 90 days. And this will give Flynn an opportunity to cooperate further with the special counsel in an effort to mitigate any jail time that he may face. But the judge said today that he wouldn't rule out incarceration.

As a final note, separately, in the last hour, we have had the transcript released from the former FBI Director James Comey's testimony on Capitol Hill yesterday. One of the interesting headlines that I have identified is an exchange with Congressman Jim Jordan asking him when he felt that he had concerns about the national security adviser, Mike Flynn, and why he didn't share that information with the president.

That's important because of one of the jobs for the FBI director is to be looking out for the national security interests of the Cabinet, as well as senior political appointees. But, in this case, Director Comey chose not to advise the president and allow it to mature into a criminal investigation.

And folks can home can decide what they think the motivation there may have been, Neil.

CAVUTO: He said that he didn't deal it was proper and right to share that information with the president.

I'm just wondering, for those who like to see something potentially festering beyond Flynn and whether the president had knowledge of it, this shows, at least at that stage, we're going back to the spring of 2017, the president didn't seem to have any idea, because it was something that Comey then, still technically the FBI director, didn't share.

HERRIDGE: He didn't share.

And what I would say -- and this was certainly a criticism of the inspector general and the actions of the FBI director -- was this tendency to keep things on close hold with the bureau that in the case of some of these investigations should have been shared with the Justice Department.

And folks at home can reach their own conclusions over whether he should have notified the president he had concerns on a national security basis. He decided not to do that. And then it matured into the criminal investigation and prosecution, if you will, or guilty plea for Flynn.

CAVUTO: All right, thank you, Catherine.

HERRIDGE: You're welcome.

CAVUTO: What a wild ride.

Now we know kind of why we heard Comey saying what he did yesterday.

Now, enter the unknown and how this sort of fits in with a pattern of behavior here. We don't know if we're going to get a government shutdown come Friday. We don't know the implications of a potential rate hike on the part of the Federal Reserve come tomorrow. We don't know what's going to happen to Michael Flynn come three months from now, when he's back before presumably the same judge on sentencing.

Markets abhor uncertainty, which is why they were kind of all over the map today, and all of this is playing on your money and your pocketbook in more ways than you know.

Let's go to market watcher Scott Martin. We got Ted Weisberg, Danielle DiMartino Booth.

Ted Weisberg, to you.

As a veteran of these type of events, where the political and financial intrigue sometimes intersect, did they intersect today?

TED WEISBERG, PRESIDENT, SEAPORT SECURITIES CORPORATION: Well, in a word, Neil, uncertainty equals volatility. Obviously, we closed on the plus side yesterday -- today -- excuse me. Yesterday was...

CAVUTO: Today, yes.

WEISBERG: Yes, yesterday, pretty negative.

The markets can deal with just about anything. The U.S. economy is in pretty good shape. Corporate earnings are in good shape. Inflation's under control. Wages are rising. That's all a positive. And the markets should be reacting positively to all that.

The problem we have is tariffs, good cop, bad cop. What are we doing? The Fed. The Fed seems to have lost its way. We will probably get a little more direction from them tomorrow, and it'll be the message, not so much what they do.

But it comes down to uncertainty and there's just so much uncertainty in so many quarters, that, quite frankly, the market just has trouble dealing with it.

CAVUTO: Yes, I think you're right about that.

It's interesting, Scott Martin, because you don't want to read too much into one event. So that's why I tend to look at intraday chart of the markets. And I found it interesting that with the delay in finding out whether Michael Flynn was going to be sentenced -- and ultimately he wasn't sentenced and it was put until March -- on top of the back and forth on a government shutdown, it was as if the markets just were sort of saying, we don't know. We don't know how to deal with this.

SCOTT MARTIN, KINGSVIEW ASSET MANAGEMENT: Yes.

Neil, these days, you don't have to find one event, because you can find many. I mean, really any given day, like Teddy pointed out, the market is finding ways, Neil, to be angry about things or less sanguine, let's say, than we were just a couple months ago, when, frankly, a lot of these things were out there already.

I mean, the China wars were going on. The Democrats were going after Trump. We had some slowing economic data. But now the market seems to care. And it really seems to care big time ahead of what I consider to be one of the biggest Fed meetings we have seen in many, many years, all the way back to say when a young Janet Yellen was raising interest rates for the first time, after keeping them at zero.

So, to me, this is a big like headwind potentially now with what the Fed is going to do tomorrow, because I think the market is telling them to take a pause.

CAVUTO: You know, Danielle, I'm wondering.

The Fed notwithstanding, I have a theory -- and I could be wrong -- and you know I have been wrong on many such theories -- that it used to be that the Mueller probe, what would happen to Flynn, where is it going, was just outside noise to these guys.

They didn't pay much attention because they didn't think it was amounting to much. Then the mystery and intrigue builds up, and then a canceled sentencing hearing, on top of the government shutdown stuff and whether the Fed's overdoing it.

And all of a sudden, the Mueller thing gets a little bit more influence than we have given it before. Is it among the things you worry about? Or is it just a variable that you just factor in?

DANIELLE DIMARTINO BOOTH, FORMER FEDERAL RESERVE ADVISER: Well, I think one thing that investors have rightly begun to be concerned about, Neil, is the fact that what happens in Washington, D.C., makes a difference for the economy. It makes a difference for the markets.

Obviously, the economy and the market are so intertwined at this juncture. And, as your first guest mentioned, it's all about the confluence of different levels of uncertainty that are battering away at this market.

But, again, we have had Teflon markets for a decade now, a decade now.

CAVUTO: No, you're right.

DIMARTINO BOOTH: It doesn't matter what happens, where it happens, where in the world, if in D.C. or out of D.C.

We're in an -- we're at the opposite end of the spectrum right now, where every single thing makes a difference, and the markets pay attention to every single tweet that comes out of the White House.

And I would like to bring up something about what President Trump tweeted out this morning. He's recognizing that the Federal Reserve is not just raising interest rates, but that it is also pulling liquidity out of the system to the tune of $50 billion a month.

There are many things that are buttressing these markets. And everything - - yes, everything does matter.

CAVUTO: You know, Teddy, much has been said about whether we're in a bear market. You have to be 20 percent off your highs to do that. We're about in the vicinity of 12 to 13 percent when it comes to the Dow and the S&P, maybe in the vicinity of, what, 16 or 17 percent when it comes to the Nasdaq.

But, as you have reminded me, underneath that, a lot of these issue stocks are well into bear market territory, and then some. But does that make you worry that the -- if so many of the Indians are selling off into bear market territory, it's just a matter of time before the chiefs do?

WEISBERG: Well, Neil, I think we have to keep things in proper context, if we will.

We went through a period of zero interest rates for seven or eight years.

CAVUTO: True.

WEISBERG: Where the Fed -- the Fed was completely accommodative. So there was this underlying bid for equities. Simply, if nothing else, it was the court of last resort, because there was, quite frankly, wasn't a lot of other places for folks to go.

So now we have gone through this normalization period, which has been well- telegraphed by the previous Fed and the current Fed. And so you had a stock market that went from the trading lows, if you want to use that, of March of 2009, when we were 6500 on the Dow, to, what, 26000.

And so, yes, we're giving a little back. And it's nice to be philosophical about losing money. Nobody likes to lose money, but we have been on one heck of a roll for seven or eight years. And trees simply don't grow to the sky.

CAVUTO: I remember that.

We showed a picture of you as a young man.

(LAUGHTER)

CAVUTO: You haven't aged a bit.

WEISBERG: Yes, thank you.

(LAUGHTER)

CAVUTO: But, Scott, I mean, real quick, do you get a sense that the fact that the market came back today, albeit down from the 300-point gain we were looking at, is a constructive sign?

MARTIN: Well, it was, until it sold off. And then it did come back. You're right.

CAVUTO: It did, yes.

MARTIN: But I will tell you, Neil, I mean, we were watching the tape pretty closely here around 1:00 or 2:00, and there were some heavy sellers coming in.

And Teddy knows this do from being -- being down on the floor. I mean, these machines are having a field day of fun with some of these markets. And it's not fun if you're an individual investor, but you got to hang on through these bad times just to wait for the good ones.

CAVUTO: Danielle, bullish or bearish? And does the Mueller investigation have anything to do with your thinking?

DIMARTINO BOOTH: It does factor into my thinking. And, unfortunately, I am bearish these days, namely because I don't think that the Fed can make the right decision at this point that's going to satisfy these markets.

We have started to see some disruption due to higher interest rates, onshore, offshore, you name it. And I just don't know that there's going to be a silver bullet at this juncture. I think we might have to get through this period of volatility before we can see a true clearing.

CAVUTO: All right, guys, I want to thank you all very, very much.

Well, yesterday, you might recall Ron Paul was here talking about the fact that the Federal Reserve is screwing up big time.

I wonder how his son feels. You know him pretty well, Rand Paul, the senator -- next.

(COMMERCIAL BREAK)

CAVUTO: All right, a couple of things we could know tomorrow, whether the Federal Reserve went ahead and hiked interest rates, and, by Friday, whether the United States government will stay fully open. It's looking like a partial shutdown now, if they can't reach agreement on that wall funding for about $5 billion.

First to the prospect of the Federal Reserve. If it goes ahead, as expected, and hikes interest rates again, it would be another move up that has a lot of people, including the president, unnerved.

Wonder if my next guest feels the same way, Republican Kentucky Senator Rand Paul.

Senator, good to have you.

SEN. RAND PAUL, R-KY.: Thank you. Thanks for having me.

CAVUTO: Your father was here yesterday, Senator, saying it's a tough kind of a corner that the Federal Reserve has backed us all into here.

Do you agree with that, that it has just created this bubble and now it's trying to find a way out?

PAUL: Yes.

And I would say, in more general terms, that I'm just sort of against price controls, whether they're on consumer goods or on money. And the fact that the Federal Reserve is so involved in -- with determining what the interest rate is, inevitably, it leads to misallocation in the marketplace.

I think the whole real estate boom had to do with the Federal Reserve keeping interest rates below market. But also quantitative easing and control of the interest rates, I think, has led to the stock market boom. So I think there will be a correction.

It's always been, to my -- to my mind, a question of -- that it's taken this long for the marketplace to decide that, as quantitative easing gets less of an easing, that there will be a correction. And I think that's where we are now.

CAVUTO: Do you think, Senator, if we do not see the Federal Reserve raise rates tomorrow, it would be because the president made it very clear that that would be a big mistake? And is there a danger in that?

PAUL: I think they're just worried about us having a good Christmas, frankly, Neil, and they don't want to hurt the stock market anymore right before Christmas...

(LAUGHTER)

PAUL: ... when we're trying to have Christmas cheer around here.

So, no, I don't know if they are that influenced by -- their positions are long-term positions. People worry about the political arm, the president and Congress beating up on the Fed. I think they're fairly independent. I can't imagine -- I'm not a big fan of the Fed or their policy or that they control so much of our economy.

CAVUTO: Right.

PAUL: And yet I do think that they actually don't respond to us as much as we could.

I think we could have more influence. Like, the whole idea of us auditing them, they're sort of afraid that we would somehow have oversight over the Fed.

Well, my goodness -- oh, my goodness, that would be a great idea to have more oversight of the Fed. But it'd be even better if the Fed weren't so involved and weren't so powerful, actually.

CAVUTO: If you don't mind switching gears, sir, and one concern is this idea of a government shutdown maybe as soon as Friday, and this view that the two parties can't find some common ground here.

Yet we see, on criminal justice reform, they can, you can. You have lead that effort. So it's possible, right?

PAUL: Well, people worry about the government shutting down. And I can understand that. But they should also worry about keeping the government open.

I mean, if you keep a government open that borrows a trillion dollars a year, are there problems to that? Is there an ultimate underpinning that is eroding away for the whole country, when we accumulate a $22 trillion debt, when we borrow more than a million-and-a-half dollars a minute?

So I think both -- both are a problem. We shouldn't willy-nilly shut the government down, but we also shouldn't just keep it open and keep spending money like there's no tomorrow.

CAVUTO: A lot of people fear that even a partial shutdown could be a problem. You don't seem to think that's a big deal?

PAUL: No, I think shutdowns are more hype than reality.

I think the thing that should upset the American people is that it actually costs more to shut it down, because we always pay the people for not working. So they will declare 80 percent of the people up here unessential, meaning they don't have to show up for work, but we always pay them. I don't understand that. They're unessential. We keep paying them, and we keep them employed.

(LAUGHTER)

PAUL: I'm for, if you're unessential, maybe that's an argument for making government smaller.

CAVUTO: Yes.

It must be -- hurt a lot if someone tells you, you're unessential, you don't have to come in. But that's another issue.

(LAUGHTER)

CAVUTO: Let me get your take on -- I know you don't like to wade into these Mueller matters, but the -- we had the Michael Flynn situation, where sentencing was delayed, and an idea that it hangs as noise for the markets that this isn't resolved, that it could drag on a while.

Regardless of what you think of the Mueller probe, are you worried this drags on and on and on?

PAUL: Yes.

And I think the interesting thing about the Mueller probe and about -- with General Flynn in particular, is, I have always been a critic of the idea that you can listen to someone's phone call without a warrant. And that's what they did to General Flynn.

I think it basically was entrapment. I think what they did should be illegal, if it isn't already illegal, what they did to him.

But then, on the other issue, the other issue to me is a little unseemly, the idea of people lobbying for foreign governments. In fact, I'm toying with the idea and contemplating and in discussions of whether, well, we should just make a law that you can't do lobbying for foreign governments, because it really does appear to be divided loyalty.

Whether you're in government or not, I don't like the idea that Saudi Arabia spend tens of millions of dollars every year hiring people for their interests. Their ambassador should come to our capital and tell us what the interests of Saudi Arabia are, but we shouldn't have people -- think about Ukraine.

You got pro-Western Ukraine, pro-Russian Ukraine.

CAVUTO: Yes.

PAUL: Should they all hire million-dollar lobbyists to come over here and talk to us? No, I think that's unseemly.

And a lot of people could potentially be hired that aren't working in our country's interests.

CAVUTO: So, real quickly, though, General, it's -- or Senator -- it's clear the general did lie, though.

PAUL: Well, the thing is, he lied about something that the government shouldn't have even been listening to the phone calls.

CAVUTO: All right.

PAUL: The original FBI said they didn't even think he was lying.

CAVUTO: OK.

PAUL: So, no, I think it's a terrible idea that you would have the government listen to all our phone conversations, and then they try to trip you up on whether or not you remember your conversation correctly you had on the phone.

So I think what they did to General Flynn, in talking to the ambassador, was terrible, entrapment, and shouldn't happen.

CAVUTO: All right, we shall see. Many legal minds disagree with that.

We will have a lot more after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

QUESTION: Would you like to revisit your comments earlier today that the FBI ambushed Flynn here?

HUCKABEE SANDERS: No. I -- we still firmly believe -- look, the things that may have taken place, again, that's for the judge to make that determination, whether he engaged in something inappropriate.

What we do know that was inappropriate, by own self-admittance of James Comey, is that the FBI broke standard protocol in the way that they came in and ambushed General Flynn, and in the way that they questioned him, and in the way that they encouraged him not to have White House Counsel's Office present.

(END VIDEO CLIP)

CAVUTO: All right, now, that echoes a familiar theme here that General Flynn himself dismissed today speaking before the judge in court before his sentencing was delayed, that he did in fact lie.

Now, the White House today saying pretty much what the former Whitewater prosecutor Robert Ray was telling me on my Saturday "Cavuto Live" show. Take a look.

(BEGIN VIDEO CLIP)

ROBERT RAY, FORMER INDEPENDENT COUNSEL: I don't know Michael Flynn personally.

CAVUTO: Yes.

RAY: But they were out to get him.

CAVUTO: But he did lie.

RAY: Well, right. And so I think I disagree with some people who say, well, that's entrapment. It's not legal entrapment.

And I also agree that there's no question that Michael Flynn and someone his position should know better and knows the consequences of not telling the truth to an FBI agent, so I don't condone the conduct, and I'm not trying to excuse it.

But I -- but I do know that it was a trap for the unwary. And I do know if someone like Jim Comey had pulled a stunt like that in my administration, that would have been cause to get rid of him.

(END VIDEO CLIP)

CAVUTO: All right, now,the White House is standing by that claim that General Flynn was in fact ambushed by James Comey.

John Roberts at the White House right now, the premise being that even though the general said he had in fact lied, that this was a push?

JOHN ROBERTS, CORRESPONDENT: Yes, I mean, at the very least, the FBI, according to the White House, wasn't completely forthcoming about what this was all about, saying, you don't need an attorney, and, if you do get an attorney, well, that's going to force us to escalate, and let's just come on over there and interview you.

And also, as James Comey has admitted, they didn't follow the typical protocols when the FBI wants to interview a White House official. And they didn't do that because they thought that the Trump White House in the early going was in such a chaotic mess that they could probably get away with just -- quote -- "sending a couple of guys over."

But the White House is surprised as everybody else about this 90-day delay in the sentencing, but seemingly unconcerned about the potential implications of it, because the three months that Flynn got in abeyance of his sentencing is to allow him to cooperate in a case involving two of his former business partners in the Eastern District of Virginia and has nothing to do with the president.

Listen to what Sarah Huckabee Sanders said earlier today.

(BEGIN VIDEO CLIP)

HUCKABEE SANDERS: Not when it comes to things that have anything to do with the president. The activities that he has said to -- and I will -- again, we'll let the court make that determination -- to have engaged in don't have anything to do with the President.

Let's remember what the whole thing that this started is supposed to be about: It's whether or not Russia influenced the election, and whether or not the president had anything to do it.

(END VIDEO CLIP)

ROBERTS: So, there doesn't seem to be a trail of bread crumbs leading back to the president.

But, certainly, what Judge Emmet Sullivan said about Michael Flynn today, that he sold out his country, creates a perception problem for the president, because the president has stood by Michael Flynn, says that he has been treated unfairly, even went so far this morning as to wish him luck.

Again, Sarah Sanders.

(BEGIN VIDEO CLIP)

HUCKABEE SANDERS: Again, we're going to let the court play that out. And they will make a determination on whether or not he engaged in something right or wrong.

It's perfectly acceptable for the president to make a positive comment about somebody while we wait to see what the court's determination is.

(END VIDEO CLIP)

ROBERTS: So, Sarah keeps on saying the determination as to whether he did something right or wrong.

And, Neil, as you pointed out, the determination has already been made that, yes, in fact, he did do something wrong. He lied to the FBI. And when he was asked by Judge Sullivan today if he wished to retract his guilty plea, he said, no, let's -- let's go ahead with it.

So I'm not sure what determination there is to make, other than whether or not Michael Flynn will go to jail. And that determination will be made in March -- Neil.

CAVUTO: Yes, you wonder if his legal team might have overplayed their hand here. But I'm no lawyer. Maybe you are, but I'm not.

ROBERTS: No, I'm no lawyer either.

CAVUTO: All right.

ROBERTS: I don't even play one on TV.

CAVUTO: You make too much sense.

All right, John Roberts, thank you very much to the White House.

All right, so you have the Comey situation, the General Flynn situation, the House Judiciary and Oversight Committees releasing a transcript of closed-door testimony with Mr. Comey.

There are some real unusual little exchanges in there, particularly when it came to the former FBI director and his views of Michael Flynn.

Peter Doocy on Capitol Hill with more -- Peter.

PETER DOOCY, CORRESPONDENT: And when it comes to the bigger Mueller investigation too and its possible origins, Neil, James Comey told Congress why he didn't alert the Trump campaign about the existence of a so-called dirty dossier until after the election happened.

Jim Jordan, Republican from Ohio, asked him: "Were you concerned at all but the president might get the wrong impression, that maybe, in fact, you were -- you had this important information, that some way you could hold that over the president's head? Were you concerned about that? And did you convey it in such a way as to make sure he didn't go away with that impression?"

Comey said: "I was very concerned that he might interpret it as an effort to pull a J. Edgar Hoover on him."

Comey also explained why agents asked General Michael Flynn about telephone conversations with the Russian ambassador that they had already eavesdropped on.

So, Comey said: "If there were other communications, other phones, other means of communication, we wouldn't know about that. But we had clear transcripts of the conversations that we had."

Trey Gowdy asked him: "So if there were calls between Flynn and the Russian ambassador that were missed, I don't think anybody expects you to know the contents of those calls. But the call in question you knew exactly what he said."

Comey said: "Yes."

There was also talk about why the FBI didn't tell or encourage General Flynn to have a lawyer present when they went to talk to him at the White House.

So, Comey said: "I had never worked in a transition time before, but my understanding was that, in a more established administrative environment, you wouldn't get away with just calling a witness and saying, can we come talk to you?"

Trey Gowdy said: "And you followed that protocol with Presidents Bush and Presidents Obama?"

Comey said: "I don't remember having an occasion like this with either of those presidents."

Still, though, Neil, some lawmakers on the Republican side upset that Comey didn't remember some important questions -- Neil.

CAVUTO: Or that FBI inquisitors were on the White House grounds doing all of that.

All right, Peter Doocy, thank you very, very much.

All right, you think we're going to have a shutdown and it's inevitable come Friday?

Fair and balanced, a look at a Republican senator and a Democratic senator -- after this.

(COMMERCIAL BREAK)

CAVUTO: So you think the government's going to shut down late Friday night? What if I told you it's not a given?

We have got a Democratic senator and a Republican senator who says there's more common ground than you think. And that sound you're hearing is frost melting.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CAVUTO: If we do have a shutdown, and with many of your colleagues in the House not coming back until, I think, Wednesday...

REP. KEVIN BRADY, R-TX: Yes.

CAVUTO: ... how long do you think it lasts?

BRADY: You know, I hope not long, and I hope it doesn't happen at all.

And I really don't think it needs to. And I know this from the White House. Look, the president's been insistent our border is not secure. He's exactly right. And I think he's given ground, so -- in order to try to reach a solution. And I hope that continues.

(END VIDEO CLIP)

CAVUTO: All right, that was House Ways and Means Committee Chairman Kevin Brady telling me on Saturday's "Cavuto Live" that he is hoping, hoping to avoid government shutdown.

And in case you're dismissing that, there are some things percolating that bear watching.

Let's go to Chad Pergram, who is following all these developments.

Hey, Chad.

CHAD PERGRAM, CAPITOL HILL PRODUCER: Well, what we're hearing right now is maybe the only option is a short-term spending bill, a C.R., in Washington, D.C., parlance, which stands for continuing resolution, which would keep the government open sometime through early in the year.

Now, they would still have to move this through the House and the Senate, and the president would have to sign it.

Now, here's the big question right now. Why would Nancy Pelosi, the incoming House speaker, want to accommodate that? Mitch McConnell says there isn't going to be a government shutdown. But he has a big question about why Nancy Pelosi wants to fight this fight come January.

Listen.

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL, R-KY., MAJORITY LEADER: My impression is that the upcoming speaker feels she doesn't have the latitude to settle this.

Now, I must say, if I were in her shoes, I would rather not be dealing with this year's business next year.

(END VIDEO CLIP)

PERGRAM: But what this does is, it gives Nancy Pelosi the opportunity to fight with President Trump and ingratiate herself with skeptical Democrats. She still has to win that speaker vote early next year.

Now, something we have been hearing about is maybe they could take existing money and move it around, reprogram it -- that's another Washington, D.C., term -- to fund the wall.

One of the things bills that's already been passed into law is the military construction VA bill. And what you could do, with a blessing by Congress, is move money from the Army Corps of Engineers and ask them to basically pay for the wall.

I asked House Minority Leader Nancy Pelosi earlier today if she would go for that.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI, D-CALIF., HOUSE MINORITY LEADER: They have to have congressional blessing for most reprogramming, but the -- right now, what they offered, we have not accepted. And I don't know what the path might be out, but it might be a C.R., a shorter-term C.R.

(END VIDEO CLIP)

PERGRAM: Now, Neil, at the end of the day, this entire impasse is going to be decided by the most important people in Washington, D.C., not the lawmakers, but the spouses of the lawmakers, because they want to get everybody home for Christmas.

And they're kind of whispering in their spouse's ear, hey, pass this, get home, trim the tree, buy the gifts, decorate the mantel. Let's get this done by the end of the week -- Neil.

CAVUTO: All right, well, we will see, fair and balanced, how a Republican and Democratic senator react to that spousal pressure.

Chad, thank you very much.

Senate Budget Committee member Democratic Senator Chris Van Hollen with us.

Senator, obviously, many in your family would prefer you be home with them than there trying to sort through a government shutdown. Do you think we're going to have one?

SEN. CHRIS VAN HOLLEN, D-MD.: Well, Neil, first of all, it's good to be with you.

CAVUTO: Same here.

VAN HOLLEN: And I hope we can avoid a government shutdown, for all sorts of reasons, but, most importantly, it would create unnecessary havoc throughout the country.

We're working hard to avoid it. But we need to have a partner in the White House. And I think the whole country heard the president the other day when he said he would be proud to have a government shutdown if he doesn't get his way 100 percent on the wall.

This is not about whether we need border security. We need border security. It's about not wasting a lot of taxpayer money on something most people think is ineffective.

So, I'm hoping we can bridge these differences. I'm hoping the president will agree it's a bad idea to shut down the government. But we will see in the next 24, 48 hours.

CAVUTO: He seems to be a little more flexible than he appeared earlier with Nancy Pelosi and Chuck Schumer, in that he might look at a number of other things, maybe not $5 billion, maybe reappropriating funds, let's say, that were coming out of, I don't know, the Defense Department, and allocating them to this.

Would you be against the latter?

VAN HOLLEN: Well, I'm certainly not in favor of taking money away from our troops to build a wall that the president said that Mexico was going to pay for.

The other issue here, Neil, is the president doesn't have this unlimited authority just to use the Defense Department budget as a slush fund for the Department of Homeland Security and the wall. So that's not going to work.

We have had bipartisan agreements down here on Capitol Hill on the most effective way to achieve border security. And I hope that the president will listen to what a bipartisan group of members of Congress has come up with.

CAVUTO: There is some confusion, Senator, about where Democrats stand on this issue. They were open to funding a wall or something therein earlier this year, now universally against providing anything more than the $1.32 billion to $1.4 billion allocated.

Is there a middle ground here between what the president wants and what you want, because a better-than-$4 trillion government hangs in the balance, right?

VAN HOLLEN: well, there are two things, Neil.

One is, earlier in this appropriations process, there was agreement between Republican and Democratic senators not to spend money on a wall -- that was clearly agree that that was effective -- but on a funding level.

But the president has rejected that. He says he wants this additional slush fund. There was -- there were talks, as you know, about six months ago that would have addressed immigration reform more comprehensively, would have put a path toward legalization and eventually citizenship for dreamers who played by all the rules.

CAVUTO: Right.

VAN HOLLEN: And, as part of that package, there had been proposed a significant increase in funding for border security. And border security is something everyone supports.

You may recall that the president and the Department of Homeland Security pulled the rug out from under that bipartisan agreement. And that's why we're here where we are.

CAVUTO: But border security was obviously interpreted by different parties different ways. Border security to the president meant a wall or something like it. To some of your colleagues, sir, it meant a reinforced fence or something like that, or electronic.

But, basically, you were more on the same page than you are now. So what happened?

VAN HOLLEN: Well, what's happened is, the president now has just said it's his way or the highway, it's his way or he's going to shut down the government.

The reality is, during the summer, the president, I think people remember, had that meeting at the White House. He said he wanted a -- quote -- "bill of love" to address the problems and challenges with the dreamers.

People went to work on Capitol Hill. We got a bipartisan agreement here. It got over 55 votes. But it didn't get to the magic number of 60, largely because, after asking Congress to come up with a bipartisan agreement, when they did, the president pulled the rug out from under that proposal.

So now we just want to focus on trying to resolve this issue, not shut down the government. One way to do it would be to have a short-term continuing resolution.

CAVUTO: Right.

VAN HOLLEN: It's not my preferred result. I would prefer us to get our work done on all the appropriations.

CAVUTO: But it keeps the lights on for a little while. All right.

VAN HOLLEN: But at least it doesn't shut down the government over the Christmas holidays.

CAVUTO: Yes, and no one -- no one's family is fighting.

VAN HOLLEN: Right.

CAVUTO: Senator, thank you very much.

Merry Christmas, if we don't chat again.

VAN HOLLEN: Yes. Merry Christmas to you.

CAVUTO: All right, fair and balanced now, the incoming Senate majority whip, John Thune, the Republican view of this -- after this.

(COMMERCIAL BREAK) 
CAVUTO: All right, I want to stress here, if the markets are worried about a shutdown, they have a funny way of showing it.

We gained today. This is very low on their priority list, maybe because we have gotten so used to this. Look at this under various presidents, from Gerald R. Ford, who had them. Jimmy Carter had five shutdowns. Ronald Reagan had eight. George Bush Sr. had one. Of course, this would be the third under this president.

The fact of the matter is, they're not unprecedented. The one with Bill Clinton, of course, during the Gingrich era was a very different one and went on for a while. And it caused a political tumult.

But the fact of the matter is, we have gotten used to this.

Now, we just talked to Democratic Senator Van Hollen, who says, this is avoidable and we -- and there's still a way we can all enjoy your holiday.

Let's get the read from his Republican counterpart, the incoming Senate majority whip, John Thune, who joins us right now.

Senator, it seemed, from what Senator Van Hollen was saying, that this -- this is avoidable, because there might be more common ground than we appreciate. Is there?

SEN. JOHN THUNE, R-S.D.: I hope that's true, Neil.

And good afternoon, by the way.

CAVUTO: To you as well.

THUNE: My hope would be that, by this end of the week on Friday -- and, of course, the government funding resolution runs until midnight on Friday -- that sometime between now and then, that cooler heads will prevail.

But, at the moment, we are at an impasse. And we're at an impasse because the Democrats have rejected and blocked funding for border security, for a border wall, something that the president has been very committed to and passionate about, and that there is widespread support for among Republicans in both the House and the Senate.

So...

CAVUTO: But is the $5 billion figure ironclad to you, Senator?

In other words, the president says $5 billion for that wall, or I'm shutting the government down. Are you of same mind-set, that it's $5 billion or bust?

THUNE: Well, I don't think that the president has -- has even said that.

Now, the president wants $5 billion. And, frankly, the Department of Homeland Security, that's what they need. And that's what we ought to be approving.

But, earlier today, I think, as you know, the president and the Republican leadership advanced a proposal that would use the $1.6 billion that's already been approved by the Senate Appropriations Committee, and then another, a billion or so, that would -- that would go toward border security, not to include a wall, very reasonable.

I mean, the White House, in my view, on this has been eminently reasonable. And I think what you're getting from the Democrats right now is a very cold reaction because they're under so much pressure from their political base not to agree to any funding for border security.

But it does contradict...

CAVUTO: All right, so this is -- this issue that Van Hollen was raising with us, Senator, was whether that represents funding partly through a slush fund, which he was dead set against.

You're saying that wouldn't be the case. Are you of the mind-set that reallocating funds from another department, let's say Defense, is a wise strategy, or would that be rejected out of hand?

THUNE: I'm not a big fan of moving money. I think Defense ought to -- we ought to be building airplanes and ships and all the things that we need to do to defend the country.

But there are -- there are always dollars in budgets that you can move on around, and in the Homeland Security budget, for example.

And that's the way that the appropriators came up with a mechanism that would allow another roughly billion dollars to be used for border security, but limited to border security measures other than a fence, other than a border wall, which is what the Democrats have been advocating for.

CAVUTO: Right.

THUNE: So, it seems to me, at least right now, that they are being entirely unreasonable in this discussion, Neil.

I hope that they will come back around, because they have all voted for this stuff in the past. You go to back to 2013.

CAVUTO: All right, now, they have a distinction with that. And I don't know who is right, Senator. You follow this stuff more closely than I.

That, in the past, they have agreed to comprehensive reform that would also call for tightening security the border, not, as Van Hollen was just telling us, for building a wall, per se.

It all might be semantics at this point, but is it your sense that the $5 billion figure isn't ironclad, that it could be a lesser amount, as long as it stays within rough budgetary guidelines?

THUNE: Correct.

And I think that's exactly the -- what, again, Republicans, I think, and the president have been very reasonable in advancing ideas that they view as being middle ground.

CAVUTO: But the president hasn't always said that. Earlier on, he was pretty stuck on that $5 billion.

And you're arguing now -- and my interpretation might be wrong -- that he is flexible, and that $5 billion isn't a drop-dead figure?

THUNE: I think that he is -- I think the president -- I can't speak for him.

CAVUTO: Sure.

THUNE: But my view is that, if we -- if the Democrats would even meet him halfway, there's a deal there on the table.

And just to your point, I mean, the Democrats did vote in 2013, every Senate Democrat, Neil, voted for 700 miles of wall, so -- as part of the immigration bill that was considered that year.

So, this -- when they say that this can't be for the wall, and we have never voted for the wall, that's not true. They have those votes in the past.

CAVUTO: They call it security along the border. They don't call it a wall.

(CROSSTALK)

CAVUTO: I have no idea.

THUNE: And, frankly, whatever you want to call it.

CAVUTO: Yes.

THUNE: But the point is that this is -- now all of a sudden, they have concluded that they're not going to be for border security.

And that seems a little bit ironic, given the threats that we face at the border and how important it is from a national security standpoint that we put border security in place.

CAVUTO: Does your family put pressure on you to get a deal done because they want you home for Christmas?

(LAUGHTER)

THUNE: Well, I can say my wife would certainly like to see me home for Christmas. At least I like to think she would like to see me home for Christmas.

CAVUTO: Right.

THUNE: But -- and I would much rather be spending my Christmas with her than with Chuck Schumer and Mitch McConnell, just to be clear.

(LAUGHTER)

CAVUTO: My wife says, if you have to work, fine. Treat yourself. Have a great time.

(LAUGHTER)

CAVUTO: All right, Senator, well, hopefully, it all works out.

I hope you have a merry Christmas, regardless. Thank you very, very much.

THUNE: Same. Same to you. Thanks, Neil.

CAVUTO: All right.

So, hope springs eternal that maybe they can avoid a shutdown. But, if they can't, it's one thing that the markets are kind of used to, sadly. Maybe, so are you.

(COMMERCIAL BREAK)

CAVUTO: All right, Michael Flynn leaving a courthouse in Washington today.

He was supposed to be sentenced. That ended up not happening. He is still going to cooperate with the Mueller probe. That could take a final sentencing decree some time in March, next March, to decide whether he goes to jail or what.

Former DOJ official Berkeley Law Professor John Yoo.

Professor, the one thing that occurs to me is whether his own legal team hurt him. What do you think?>

JOHN YOO, FORMER DEPUTY ASSISTANT ATTORNEY GENERAL: Well, could see why you might think that, because they tried to make the case, in order to justify that he shouldn't serve any jail time, that General Flynn had somehow been tricked into trying to the FBI.

And if you look at the transcript of the former FBI Director Jim Comey before the House, the House members, Republican members, were trying to press the same idea in their questioning. Was General Flynn somehow set up?

Because he wasn't really testifying in any kind of criminal investigation. He was advised that he didn't need to have a lawyer present. He wasn't told he was a subject or a target of any kind of crime.

CAVUTO: But, bottom line, he willingly and willfully lied, right? So I mean, we can talk about whether someone's set up or not.

And I understand where you're going there, Professor. But what I would like to know is, when the judge came around and asked him if he -- to explain his presence there and whether he believed -- did he lie, he lied, he said, yes, I lied and all and I'm OK with it and move on, but that he was pinned into a corner, ironically, this time by his own legal team, where -- making it impossible for the judge to sentence him, right?

Or no?

YOO: Well, first, I think the judge overreacted. He said several things in the hearing which I think are just flatly untrue.

CAVUTO: The treasonous thing was over the top. And he even had to dial that back afterwards, right?

(CROSSTALK)

YOO: Yes, he thought -- I mean, General Flynn was a private citizen.

CAVUTO: Right.

YOO: The worst he did was, he didn't register as a foreign agent for the Turkish government, which I think was wrong.

And he also -- but you look at the transcripts of all these hearings, General Flynn did not -- there's a good question whether he was willingly trying to deceive these FBI agents or not in a criminal investigation.

But I do think you're right. I think General Flynn's lawyers might have gone too far trying to pretend the General Flynn didn't really lie and that he was set up. But he did -- as you say, he still did tell a lie to the FBI agents.

CAVUTO: So, what I'm asking, I guess, Professor, is now, come March, I mean, is there anything that -- bad seeds planted here that would get the judge say, next time I see you in March, and I know you're talking about cooperating with the Mueller probe and all, you are going to spend some time in jail?

YOO: Well, I think that's not clear.

I think the judge, as you pointed out, he realized he went too far. He pulled back and he retracted several of his statements. But several things the judge -- I think, if I were General Flynn, I would be worried because this judge is clearly against him. He said, I'm disgusted with you. I have disdain for you.

CAVUTO: Yes. Yes.

YOO: That's very rare for a trial judge to actually say to someone in sentencing, a retired decorated general like General Flynn.

So if you were Flynn, you're his lawyers, you would say, you better cooperate a lot with Mueller and hope the Mueller investigation comes to the court and says a lot of great things about your cooperation.

CAVUTO: What if I'm the president, Professor? I mean, would I be worried by any of these developments today?

YOO: Well, first, I think President Trump may be hurting General Flynn's case, more hurting it than helping it by tweeting about it at all, because every time President Trump tweets about it, this judge, given what we have seen of him already, he's going to be suspicious.

CAVUTO: Right.

YOO: So, I think this doesn't help President Trump at all to get tangled up further and further in what happens with General Flynn.

CAVUTO: But it doesn't indicate any involvement on the part of the president of the United States prior, though, right? So that's still an open question.

It just means that Flynn, in the meantime, has to stew a while, right?

YOO: Well, that's right, Neil.

If you look at the documents, President Trump's not involved at all. In fact, what Jim Comey says is, the reason we sent the agents over to talk to Flynn in the first place is, we thought Flynn was lying to Vice President Pence, might have been lying to the president.

CAVUTO: True.

YOO: But there's nothing here that involves President Trump doing anything or having been involved in this violation.

CAVUTO: Professor, it's always good catching up with you. Thank you very, very much.

YOO: Oh, sure. My pleasure, Neil.

CAVUTO: All right.

So, that, we won't know until next March, right, what happens to General Flynn.

What if I told you there is something we will know, like, tomorrow, having nothing to do with that, having everything to do with interest rates and the cost it takes you to borrow money?

Tomorrow, the Federal Reserve will announce by mid-afternoon whether it's going to hike interest rates yet again. The betting seems to be that, if it doesn't hike, the markets will panic; if it does hike, the markets will panic.

It's weird.

"The Five" is now.

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