This is a rush transcript from "The O'Reilly Factor," December 2, 2008. This copy may not be in its final form and may be updated.

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BILL O'REILLY, HOST: Now for the top story tonight: two views on [anti-religion display in capitol building] from Washington state. Joining us from Seattle, attorney Anne Bremner, and David Goldstein, a liberal blogger.

All right, Mr. Goldstein, where am I going wrong here?

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DAVID GOLDSTEIN, LIBERAL BLOGGER: Well, first, I'd just like to say a very merry war on Christmas to you, Bill. And to defend the governor, of course, she's actually in Philadelphia right now, meeting with President-elect Barack Obama advocating for an economic stimulus package that will jumpstart critical infrastructure projects nationwide and put hundreds of thousands of Americans back to work instead of worrying herself over this annual tempest in a teapot, which is what this really is.

O'REILLY: So you have no problem with an anti-religious sign on the state capitol grounds next to the Nativity scene? You got no problem with that?

GOLDSTEIN: Well, you know, I wouldn't have worded it that way. Of course…

O'REILLY: You wouldn't have worded it that way. All right, well…

GOLDSTEIN: Yes, they…

O'REILLY: Now we're making a little progress here. We're making a little progress. It's an offensive sign.

GOLDSTEIN: Well, Bill.

O'REILLY: It's an anti-religion sign.

GOLDSTEIN: The final sentence is over the top…

O'REILLY: And hey…

GOLDSTEIN: ...and deliberately provocative, Bill.

O'REILLY: Absolutely.

GOLDSTEIN: And it worked. It got the subject on your show.

O'REILLY: Yes, well, if that's what the atheists want, they got it. But you know why it worked?

GOLDSTEIN: Well, I can only assume.

O'REILLY: Because the governor of Washington is a coward. She's a coward.

GOLDSTEIN: No.

O'REILLY: Yes, she is, absolute coward, because she wouldn't do it to Martin Luther King Day.

GOLDSTEIN: This is the law.

O'REILLY: No, it's not the law.

GOLDSTEIN: Sure it is.

O'REILLY: There's no law that says atheists have to have signs up denigrating religion during the Christmas season. You're crazy if you think that's the law. Let's go to our attorney.

GOLDSTEIN: Under the lemon test — look, freedom…

O'REILLY: The lemon test?

GOLDSTEIN: ...of religion also means freedom from religion, Bill.

O'REILLY: Oh, stop, stop. That's freedom from religion. My God, it's a federal holiday.

GOLDSTEIN: You can disagree.

O'REILLY: Have the holiday repealed, sir, if you don't like it. Have it repealed. What say you, Ann?

ANNE BREMNER, WASHINGTON-BASED ATTORNEY: Well, first, I'd say happy holidays, Bill, and Merry Christmas. But it's like senseless in Seattle. Do you have to have a ying and yang for everything, or an antidote? I mean, this is a non sequitur here, a Christmas tree vs. the atheists.

On Martin Luther King Jr. Day, do you say, OK, let's come out with KKK demonstrations? How about the Easter egg roll at the White House? Do you have people come by with signs that say "Godless," "God is dead"? It's absolutely ridiculous and shouldn't continue, and it is something that is important.

O'REILLY: All right. Let's get into why the governor of the state of Washington would allow this in her office building. She's there. So I'm not getting — I don't think this could happen. It might — it wouldn't happen in California with Schwarzenegger. He wouldn't permit it. It probably could happen in Vermont, but I don't think Douglas would even go for it. Massachusetts, it couldn't happen. They tried to throw the Christmas tree off the Boston Common and Mayor Menino up there said no. So, it's happening in Washington state. So what's wrong with this Gregoire? What's wrong with this woman?

GOLDSTEIN: Who are you asking the question?

O'REILLY: I'm asking Anne and then I'll get back to you, Mr. Goldstein.

BREMNER: Well, I know her. She's a wonderful governor, but you know, there's some mistakes here. And maybe when she comes back, she'll make this right because, you know, the tree's on the third floor of the capitol building up on a balcony with a Nativity scene tucked underneath. And this is just something that's wrong. And it's not manifest destiny.

O'REILLY: But you don't know why she would do this? You don't know why she would offend millions of Americans and bring embarrassment to her state? Because this is embarrassing. It doesn't happen anywhere else. It happens in Washington state. That's it. And I don't think…

BREMNER: You know…

O'REILLY: ...I'm trying to think of any other state this could happen, and I just can't think of any governor loony enough to allow it to happen. So you don't know. Why do you think she's doing this, Mr. Goldstein?

GOLDSTEIN: She's not doing anything. This is this atheist group that put that sign up that.

O'REILLY: You're not allowed to put it up without state approval. They have to get the approval of the state. She's the boss.

GOLDSTEIN: That's right. And any religious organization that wants to put up a display gets to put one up.

O'REILLY: That's not true.

GOLDSTEIN: This is the problem of having religious displays on public property. It's a free speech issue in the end. Once you allow one group to do it, then all groups get to do it. And in fact, I'm surprised that there's only three this year.

O'REILLY: OK, look, a religious display to you is a Christmas tree, right? That's a religious display to you? You think that's religious, right?

GOLDSTEIN: It's one kind of religious display.

O'REILLY: OK, but the Supreme Court has ruled it's not a religious display. It's a secular display. If you say that Jesus was a philosopher, and we admire his philosophy as most Americans do, doesn't have to be religious thing. That's why U.S. Grant signed the holiday into law, because it was honoring a philosopher of which — Jesus — our Constitution was based on a lot of his teachings. That's why it was honored into law. It had nothing to do with a church or anything else. You can be a secular Christmas person or a religious Christmas person, sir.

GOLDSTEIN: You can be. And look, the message, the actual message of these displays aren't really the issue.

O'REILLY: No, no, peace on earth…

GOLDSTEIN: You can be offended.

O'REILLY: …but all religion is bad. Peace on earth, but all religion is bad. This is so offensive and so stupid. But Anne, I'm surprised at you. You know this woman, this governor, this is insane.

BREMNER: Well, but this is also the place we have, you know, naked bicyclists out here. We have, you know, all kinds — maybe it's the rain. I don't know. But we've got, you know, sea turtles protests and everything else. But the fact is it's almost easier to be tolerant and to let this happen, I think, out here on the West coast, at least in Seattle.

O'REILLY: No, not going to be easier for me. And we're going to get the governor whether she comes in or she doesn't. We will ask her directly. And we appreciate you, Mr. Goldstein, for coming in and Anne as always.

GOLDSTEIN: Well, thank you.

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