This is a rush transcript of "Special Report With Brit Hume" from November 23, 2007. This copy may not be in its final form and may be updated.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: I saved about $80 so far.
UNIDENTIFIED FEMALE: I haven't gone shopping yet, but the lines are crazy, so I don't know if it's worth it.
UNIDENTIFIED FEMALE: I have nine stores I have to hit up before 6 a.m.
UNIDENTIFIED FEMALE: It is kind of fun. We have never done it this early, and we just thought who needs to sleep when you can shop.
UNIDENTIFIED MALE: You make sacrifices for things, and these are items that I will enjoy with my family for a long time to come.
(END VIDEO CLIP)
BRET BAIER, GUEST HOST: All right, there is the hysteria from today. That last guy, by the way, was standing outside Best Buy yesterday to try to be the first one in line.
Some of these pre-dawn discounts today — this is black Friday. What does it mean for the U.S. economy? Some analytical observations from Fred Barnes, the executive editor of The Weekly Standard, Jeff Birnbaum, a columnist for the Washington Post, and syndicated columnist Charles Krauthammer — FOX News contributors all.
You saw some of the hysteria there, Jeff, of people rushing to get to the stores. I wouldn't get up at 4:00 a.m. to do it, but some do. What does this tell you about the U.S. economy? The predictions were that this is not going to be a great year for retailers.
JEFF BIRNBAUM, COLUMNIST, "WASHINGTON POST": That's exactly right. The Retail Federation is estimating that this Christmas season will be about 4 percentage points higher than the last Christmas season — up 4 percent, rather.
Other predictions are a little less than that. Maybe this Christmas season retail sales — best guess is one or two percentage points below what it is normally.
And that can be a very serious problem, because most retailers' profits come in this one period. Consumer spending, in general is, the real engine behind U.S. economic growth, and if consumers continue to take a hiatus, as they have for the last few months in this very important part of the year, then the economy will really be slowing, and that is what economists are predicting, Bret.
It is that the economy is slowing down. There are a number of economists who believe, especially if consumer spending slows enough, there may actually be a recession. So this is a very important time.
That hysteria at 4:00 in the morning is a good sign — maybe a recession is not what's coming, merely a slowdown that will not be disastrous.
BAIER: Because, Charles, the euphoria takes these retailers into the Christmas season. The question is whether they can sustain it.
CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, I thought the hysteria that we saw on the air just now was rather tame because it was missing the pictures we normally have of the fist fights in the toy section and matrons knocking each other over the head, which bodes ill for the coming season.
If that's not happening, then maybe consumer spirit is a little bit lower than it ought to be.
Look, there are two things overhanging the economy. The first is the housing collapse. When housing was going up by 10 or 15 percent a year, everybody — we had what was called "the wealth effect." It was a psychological effect. You know your house is worth more. You're not going to sell it, but you feel richer, so it's a little easier to go out and spend.
That's gone, and, actually, it is in reverse now. People really understand the equity in their house is less. So that's a psychological effect.
The second is the real effect, the one you feel at the pump. That's where there is a huge tax on the American consumer every time he goes out and gets gas. He's paying a dollar or two higher than he would have 10 or 15 years ago, and its ending up in the hands of the worst people on the globe.
But in terms of their own budget and spending, it is a huge drain on people's willingness to go out and spend.
BAIER: Fred, there is a potential third element here, and that could be this China element. Take a look at this FOX News poll about holiday shopping. "In the light of toy recalls, are you more likely to buy toys no matter what?"
Thirteen percent avoid Chinese-made toys, 26 percent don't buy toys at all — buy something else, 45 percent. How about that?
FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: How about that. I'm going to choose to ignore that, and I'm going to choose to ignore the predictions by the National Retail Federation and everybody else.
Look, this is a hearty perennial of the press. We go through this every year. Now, there may be more grounds for saying there won't be as much Christmas spending this year than there have been in other years, but we always do this, and then it barely leaks out after Christmas that it was a new record was set — spending was bigger than ever.
So, to start out with a negative story anyway, why is this called "Black Friday"? It sounds worse. Most people, you know, you think Black Friday, you think the world is coming to an end. It's not coming to an end.
And let's wait until after Christmas and find out, because I bet we're going to find out that there was a lot more spending by consumers than people are talking about now.
BAIER: Jeff, let's wrap it up with you. On the campaign trail, how does the economy play? It seems that a lot of Democrats are playing against the economy.
BIRNBAUM: That's right.
It depends on who you're going to vote for in the primaries, basically. Democrats tend to think the economy is worse because they think it would be better for their candidates if the economy was going down. Republicans tend to think the economy is OK.
But, in fact, nobody thinks, so far at least, that the economy is major issue, which is surprising to me. I think most people would think that the economy is a bigger issue because of the reasons Charles said. But, in fact, the economy, so far, is low down on the priority list.
BAIER: That's it for this issue on the panel. When he we come back, what are the hopes for next week's the Middle East peace conference just down the road in Annapolis, Maryland? Can President Bush actually do something his predecessor couldn't? Stay with us.
(BEGIN VIDEO CLIP)
MAHMOUD ABBAS, PALESTINIAN PRESIDENT: Now the Arab brothers are in negotiation. And I hope we can be together at the Annapolis conference, one hand(ph) as Arab countries, and we can talk about Arab problems — Palestinian problems, the Syrian-Israeli pacts, and the Lebanese-Israeli pact.
SALLAI MERIDOR, ISRAELI AMBASSADOR TO THE U.S.: I think that the success will be in the level by which the Arab states really give support in very concrete terms to peace, reconciliation, spirit of compromise, and recognition.
BAIER: There you heard the Israeli Ambassador to the U.S. and the Palestinian president both talking about the Middle East peace conference, U.S. sponsored, being held just down the road in Annapolis, Maryland. What exactly are the real expectations to come out of that conference?
We are back with our panel. Charles, today we hear that Saudi Arabia and the Arab League signed on to coming. How big of a deal is that?
KRAUTHAMMER: That is a big deal because that's what the conference is all about.
The idea is that the Palestinians are two weak alone to make concessions, but they might, if they had the sense that the Arabs were behind them and were fair to accept concessions the Palestinians might make.
The one concession, and the only one that matters, is the ones that the Arabs have refused to for 60 years, which is accepting Israel as a Jewish state. It has never happened. In fact, next week is the 60th anniversary of the U.N. resolution creating a Jewish state in Palestine, which was responded to by the Arabs at the time by an invasion of Israel and an attempt to destroy it.
Those 60 years the world has been in the waiting now. But the Arabs showing up is not acceptance.
But on the agenda — the idea of the conference is that in the end, the Arabs might accept accepting a Jewish state, which would mean that the Palestinian refugees would not return to Israel but to Palestine. A return into Israel means the end of Israel as a Jewish state.
If the Arab states accept that, and the Israelis accept essentially a return to the 67 lines, giving up of all the conquered territories with small adjustments on the border, then you might have the basis of a deal.
That's what the conference is about. It's not going to happen on Tuesday, but it's the beginning of a process in which we hope the Arabs will end up accepting as a collective Israel's existence as a Jewish state.
BAIER: Jeff, is the Bush administration managing expectations well for this conference?
BIRNBAUM: Well, to the extent they played down the expectations, then they are managing them well, because, in fact, not much at all is expected from this, it's fair to say.
The invitation list wasn't even complete until today. We didn't know who was coming. The Saudis are coming because the Arab League is coming, but the Saudis really don't want to be there. They don't want to even have any pictures of them shaking hands with any Israelis. That's how far apart they are.
The best that can be hoped, clearly, is that this is the beginning of more talks, because both the Palestinian government and the Israeli government are too weak to make any concessions. If they make any concessions, they may fall just because of those concessions.
So this will be a very brief conference, and to the extent that the Bush administration has made clear that this is not expected to produce much, not even much rhetoric, then they are managing those expectations correctly.
BAIER: Fred, President Clinton tried very hard at the end of his second team to make this Middle East peace process move forward. Is President Bush now essentially trying to do the same thing?
BARNES: Not quite. Then it was a different situation. And President Clinton thought that Yasser Arafat, who got this incredible offer, better than anything the Palestinians had ever been offered, was going to agree to it at Camp David. He called him into the White House a few days in January 2001 to make an even a better offer, and Yasser Arafat said "no."
Now you have the Palestinians — at least he was the leader of the Palestinians. Now you have Palestinians that are divided. They couldn't govern a state if you gave them a state.
You have Hamas, which runs Gaza and shoots rockets into Israel. And you have Abbas in the West Bank and his Fatah has a terrorist element as well. I don't think they are people you can reach an agreement with.
But here is what will come out of this summit. One day the U.S. will be blamed for not leaning on Israel enough and not trying hard enough, and President Bush for not spending days an days with the Arabs and the Israelis, and the Israelis will be blamed for not making enough concessions.
And it will be said that they hung Abbas out to dry because he came and they didn't give him anything when he was offering nothing.
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