'Special Report' Panel on Barack Obama's Tax Plan

This is a rush transcript of "Special Report With Brit Hume" from June 10, 2008. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, PRESIDENTIAL CANDIDATE: Under senator Obama's tax plan, Americans of every background would he see their taxes rise — seniors, parents, small business owners, and just about everyone who has even a modest investment in the market.

SEN. BARACK OBAMA, PRESIDENTIAL CANDIDATE: What we're trying to restore balance, put some money in the pockets of working families, in the pockets of consumers. That, actually, I believe, will be good for business.

(END VIDEO CLIP)

BRIT HUME, HOST: Indeed, Senator Obama says that 95 percent of the people in this country would get a tax cut under his program.

So the debate is now joined between him and McCain, at long distance so far, but we are likely to hear more of it. Some thoughts on it now from Fred Barnes, executive editor of The Weekly Standard; Mort Kondracke, executive editor of Roll Call, and the syndicated columnist, Charles Krauthammer — FOX News contributors all.

So what about this debate? It is clearly joined, it is going to be central to this campaign. Who has the high cards, whose doing better, whose argument holds more water, Fred?

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: I think McCain's does, but that doesn't mean he's winning the debate now. And so far it's a draw.

I think he's going to have to deal with this claim by Obama that he would reduce income taxes, anyway for 95 percent of Americans. When you add in all the other tax increases, all the tax increases in Obama's proposal, I think that is highly unlikely, but McCain has to examine it and make the case.

The biggest problem I have, and I think most people who in favor of a strong economic rebound, is that Obama does not understand capital gains. Remember when he was asked about the capital gains tax rate in that debate by Charlie Gibson on ABC?

He was at sea when Gibson said, look, when you raise the rate on capital gains in recent years, it has reduced the revenues that have come in, and when you reduce the rate, as happened in the Clinton administration, you get more revenue.

That seemed to be a revelation to Obama who then said that at one point, well, maybe we have to raise it because of fairness. It would be harmful to the economy if you raise the capital gains rate, but he would do it for fairness and hurt the economy and jobs, and so on? I think that's where McCain particularly has a vulnerability and he needs to seize it.

HUME: Has a vulnerability in Obama?

BARNES: Yes.

MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: All of that's true. Obama said he's not a tax and spend liberal, but he is. I mean, he does want to spend an awful lot of money. I was on a conference call today with his economic advisor —

HUME: The word is "invest."

KONDRACKE: Wait, now that you're raising the issue, the country does need some public investment. And you never hear John McCain talk about. That is a bone I have to pick with McCain — no mention of infrastructure needs which we have to supply, no mention of public education investments, no mention of preschool education, that kind of stuff. Those are legitimate investments.

You got me off on this track — and all McCain wants to do is cut discretionary spending. This country will not advance in the world. But the problem is when Republicans add up all the spending and investment proposals and tax cuts that Obama is proposing, it comes to something like $3 trillion over a ten-year period, whereas, if you raise taxes on people over $250,000 a year, it comes to something like $1.5 trillion. That's a big gap, and it will only add to the deficit and the national debt.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: McCain is OK at making this case with a teleprompter, but when he's on his own, all he does is he slogans. He says that Obama is a tax and spend liberal as in the '60's and '70's.

I wouldn't really bring up '60's and '70's, because nobody under 50 remembers the '60's. in fact, there are a lot of people over 50 who don't remember the '60's either for other reasons.

And, secondly, the '60's was a time of prosperity. And the '70's, Republicans were in office until January of '77. So it's a hard argument to make.

And then he says Obama will be the third Carter campaign. Well, that doesn't really ring a lot because the last Democratic administration was not Carter, but Clinton, and his economy was relatively strong.

I think McCain has to get away — look, he'll fight Obama to a draw on taxes. But he has to do a bold thing, and I think he can win the economic argument in going after energy and gas. That's what's hurting. That's why Americans are angry — high gas prices.

He ought to say, two years ago, with gasoline at $2 a barrel(ph), I was against drilling. Conditions have changed, I have changed. Obama isn't a guy who changes. He is stuck in the past. We have to drill in the artic, we have to drill domestically.

And every American understands if you get an American supply, we will be energy independent, and the price will come down. It is a case he can make, the Republicans are making it in Congress, but McCain has disarmed himself.

HUME: Do you think there is any chance McCain would switch on that issue?

KRAUTHAMMER: He's got to.

BARNES: If he has a chance to be president, he might switch.

If you had united Republicans in Congress with the presidential candidate saying exactly what Charles is saying, that Republicans might thwart the cycle and do better than the otherwise would.

HUME: You think it will take that, though?

BARNES: I think it will.

HUME: Do you agree with that, Mort?

KONDRACKE: Yes. One interesting populist note is McCain is tougher on CEO pay than Obama actually is. McCain actually wants stockholders to approve the CEO's compensation package, whereas Obama just wants to have an advisory vote by stockholders.

So McCain has the populist ground on that one.

HUME: When we return with our panel, Barack Obama says he will not replace one of his advisors over issues about his mortgages. We'll discuss that further in a moment.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: I am not vetting my V.P. search committee for their mortgages. It is a volunteer, unpaid position. And they're giving me information, and I will then exercise judgment in terms who I want to select as a vice presidential candidate. So these aren't folks who are working for me.

CARLY FIORINA, MCCAIN CAMPAIGN ADVISER: Well, first, I find Barack Obama's statement today that Jim Johnson doesn't work for him naive at best. Of course Jim Johnson works for him.

(END VIDEO CLIP)

HUME: Carly Fiorina, a McCain surrogate, responding there to what Barack Obama said today when he had a question put to him about Jim Johnson, whom we spoke about yesterday.

Jim Johnson is, of course, the former Mondale campaign chairman and long-time senior Washington Democrat, highly respected man of discretion, and generally believed to be a man of great integrity, headed the search committee, in addition to what he did for Mondale, also for John Kerry a few years ago.

He was for a number of years, of course, the head of Fannie Mae, at time in which he made a tremendous fortune. And while he was doing that, one of the companies that Fannie Mae did a lot of business with was Countrywide Mortgage, a company Barack Obama has repeatedly and specifically blamed for the nation's mortgage ills and has specifically singled out the former CEO of that company for his criticism.

It turns out Jim Johnson received some friendly terms loans from that company, Countrywide, and did so because he was a friend of the CEO. So the question arises is he the right guy to be vetting the candidate, and the real question is, are the answers that Barack Obama given to the questions that have been raised about Jim Johnson, someone we all know and have generally liked and admired over the years, are the answers sufficient — Charles?

KRAUTHAMMER: I don't think it's a Johnson problem, I think it's an Obama problem. Johnson, there is no evidence to date that he has done anything either illegal or improper.

HUME: I know, but is it proper for a guy who is a head of a company, who is farming out business and doing business with another company, to receive loans courtesy — special loans under a program courtesy of the CEO of the company?

KRAUTHAMMER: But we don't know that there were any conditions that were unusual or favorable. Until that is established, then there is no impropriety.

HUME: OK, got it.

KRAUTHAMMER: The Obama problem is this — he is the guy who has two affectations. The first is he rises above politics. He is not a guy who is going to do business, he is going to clear the temple of all the insiders. Well, Johnson is an insider, and, by his own standard, he is getting somebody to help him who is what he has been demonizing for the last six months.

His other affectation, which he shares with other Democrats, is that when you have a national problem, you blame it on corporations and on individuals in those corporations. Senate Democrats are blaming oil prices on the oil companies and gouging. And Obama, he identifies the crisis as a matter of unfair practices by corporations, and he names them, including Countrywide.

So he is the one who claims that this large issue, which have to do with a lot of other causes, is a matter of misconduct on the part of corporations. Then, by his standard, he shouldn't be having somebody in his employ who has associations of any kind with those corporations, and specifically with the one corporation that he has demonized.

KONDRACKE: He said today in his statement that Jim Johnson was not somebody that he was putting in his administration.

Now, I think that's significant. Jim Johnson is somebody who has been talked about as a possibility for Treasury Secretary, and he certainly does have the qualifications as somebody who knows the financial markets very well to be Treasury Secretary. But if this kind of association is off limits in the Barack Obama administration, then he can't get people who have got any kind of taint at all connected with them. And this cozy deal with an insider that is a pariah now with Obama could be disqualifying.

What's more, the fact that —

HUME: So is his answer going to hold up?

KONDRACKE: Obama's? I don't think. I don't think he will have to get rid of Johnson, but he will have to come up with a better explanation than he is just doing this discreet job over here and I have nothing to do with it.

HUME: He doesn't work for me.

KONDRACKE: Yes, exactly. BARNES: And this is, of course, the biggest decision that Obama will make as a candidate, picking his running mate.

HUME: At this stage, anyway.

BARNES: And at this stage Johnson is running that.

This story is going to die, and, by the way, we don't know how much under market these loans might have been. We do know they were in a special program of Countrywide, the friends of the president of company, got the special treatment.

But the only way for this story, I think, to continue — it takes one person to step up and talk very strongly about it, and that's John McCain. His response yesterday was pathetic, and, I mean, he farms out Carly Fiorina. That's not enough.

McCain has to take it up. If he does, it will have legs. If he doesn't, it's gone.

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