This is a rush transcript from "Special Report," October 28, 2010. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

PRESIDENT OBAMA: I look over the last 18 months, and I say we prevented if second great depression, we stabilized the economy, an economy that is shrinking is now growing. We have done things that some folks don't even know about.

JON STEWART, HOST OF,”THE DAILY SHOW”: What have you done that we don't know about?

PRESIDENT OBAMA: No, no, no --

STEWART: Are you planning a surprise party for us? Filled with jobs and healthcare!

OBAMA: Larry Summers did a heck of a job trying to figure out how to --

STEWART: You don't want to use that phrase, dude.

OBAMA: I was -- pun intended.

(END VIDEO CLIP)

BRET BAIER, HOST OF “SPECIAL REPORT”: Well, the president on the "Daily Show" on Comedy Central. That last clip you saw there, Larry Summers, the senior advisor, economic advisor to the president who just recently left.

He was referring to Larry Summers' job in the White House and making reference to a heck of a job. That goes back to the Bush administration. You remember former FEMA director when former President Bush said, "Brownie, you're doing a heck of a job."

Then you saw the phrase "Dude" from Jon Stewart. The Washington Post had this to say about that exchange. Dana Milbank writing, quote, "Dude, the indignity of a comedy show host calling the commander-in-chief dude pretty well captured the moment for Obama. Going on, Obama didn't try to connect with his youthful audience. He was serious and defensive, pointing a finger at his host several times as he quarreled with the premise of a question."

What about this appearance and his role in this election? Let's bring in our panel, Stephen Hayes, senior writer for Weekly Standard, Juan Williams, Fox News contributor and syndicated columnist Charles Krauthammer. Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, Barbara Boxer grizzled when a general called her "Ma'am" and here we have Barack Obama grinning when a comedienne calls him "dude" and he's president, she's only a senator.

You know, one of the principal rules of governance is that if you are the prince, you are ruler. You should be husbanding your aura and doling it out in small doses. This is particularly important for a man like Obama who runs to the presidency on charisma.

I mean, on that aura. It wasn't on his record. It's wasn't on his achievements in the past. It was his persona. I don't think this diminishes the office.  It diminishes the man who's now holding the office.

Look, it's not the end of the world, but I think it's another anecdote, another incident, which gives you the trajectory between the kind of celestial character he made himself to be, you know, in that great Denver speech and the pillars around him hovering above everything.

And of course also in Berlin and now his with a comedian who calls him "dude." That’s quite a fall.

BAIER: Juan, White House Press Secretary Robert Gibbs today said the appearance was a success. He said if the president was worried about people calling him dude he would never leave the residence. They kind of blew off all this coverage in the Dana Milbank column. What about that?

JUAN WILLIAMS, FOX NEWS CONTRIBUTOR: Well, I think it was a smart move. It's a political move. We live in a very different media landscape.

BAIER: You mean the appearance to begin with?

WILLIAMS: Yes, the appearance was a smart move. I mean, some people call to mind Arsenio Hall with Bill Clinton playing the saxophone and the like.

It seems to me here you have a moment where the president is clearly trying to appeal to a specific demographic, younger people in America. And he’s having trouble with that.

Jon Stewart is a big outlet to reach to young America. He also has been on Univision, the Spanish language network for an interview. He was on MTV for an interview if you recall.

So it's very clear that he is reaching out to this demographic very aggressively. And I think you're going to see --

BAIER: When you saw Milbank say he didn't try to connect with his youthful audience, he was serious and defensive pointing a finger at Stewart numerous times about some of the questioning.

And it seems like the youthful audience didn't really get into the seriousness, they like the heck of the job and the joke after that, right?

WILLIAMS: Yes, but I think its humor. I think humor is a very effective mechanism in terms of communicating with people. I think he wants to communicate that he is every man to that audience, that he is their – he’s their guy, standing in there struggling to make it work and he knows that there is problems.

If you look at the New York Times poll this morning, my gosh.  He is losing women. He is losing independent voters. These are people who are the heart and soul of his base in 2008.

STEVE HAYES, THE WEEKLY STANDARD: Going on Jon Stewart doesn't solve that problem. I think the problem he faced last night is that the audience was laughing at him, not with him.

So he says, you know, Larry Summers did a heck of a job. The audience laughs. At one point, Jon Stewart said what are you going to run on this time? It was yes, we can in 2008.

What is it this time? Obama replies yes, we can, but -- and the audience just bursts out laughing. That is the last thing you want if you are trying to program the President of the United States five days before an election.

The bigger, I think, picture here is when President Obama went on the show back in 2008, at the end of that campaign; he drew 3.6 million viewers, the highest rated “Daily Show” ever.

This time he drew 2.8 million, which is a drop off of about 23 percent. I think that tells you in some senses everything you need to know about where that, quote/unquote, "base audience is."

BAIER: Charles, it was interesting that the questioning was coming from the left. I mean, very few people would look at the legislative agenda of this administration as timid.

KRAUTHAMMER: Well, but I think it reflects reality. One of the reasons that the base is upset with him is because I think they really misunderstand his historic achievements like on Obamacare.

They wonder about the promises you made in Guantanamo, gays in the military, et cetera, and his continuation of the interrogation stuff, which they are offended by. But when you compare it with what he has really achieved in changing the structure of American society, Obamacare and financial reform and the stimulus.  I think there is a deep and misunderstanding of what he achieved.

I think Stewart was reflecting that. I think it's a kind of juvenile leftism. That's what he attacked Obama with. He was OK in responding, you know, seriously, but again, it was a comedy show. He was not - I mean, humor works, but not if you are on the receiving end of it.