This is a rush transcript of "Special Report With Bret Baier" from March 20, 2009. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

KENT CONRAD, D-N.D., SENATE BUDGET COMMITTEE CHAIRMAN: As you can imagine, when you've got a new forecast of this magnitude, you got to make hundreds of billions of dollars of changes to make it all work.

SEN. JUDD GREGG, R-N.H.: These numbers are not only startling, they're devastating. They're not sustainable.

It is as if you were on an airplane and the fuel light came on and said that you had 15 more minutes of fuel, but the pilots just kept flying on as if there was fuel for another hour.

(END VIDEO CLIP)

BRET BAIER, HOST: Well, they're talking about the Congressional Budget Office — the bipartisan CBO — that came out with new projections for the deficit over the next 10 years. Those projections, more than $2 trillion bigger than the Obama administration predicted a couple of weeks ago.

What does that do to the president's agenda? Let's bring in our panel: Fred Barnes, executive editor of The Weekly Standard, Juan Williams, senior correspondent of National Public Radio, and syndicated columnist Charles Krauthammer.

Fred?

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: The president said he was stunned — I think that was his word, "stunned" — when he saw the $164 million in bonuses going to AIG employees. What is he going to say when he sees this? Then he is going to be completely floored, staggered, whatever, because the numbers really are striking.

You know the most striking thing about it at all is the Congressional Budget Office, which has often been cool to president's budgets, it certainly was to Reagan's back 25 years ago. But they accepted, not quite, but almost the same numbers for economic growth, high numbers, over 4 percent a year in 2010 and 2011, and still comes out with these incredibly gigantic deficits.

I think, look, the people to watch are people like Kent Conrad, who you just had on, the chairman of the Senate Budget Committee, a moderate Democrat on some issues. And those are the people that Obama has to win over.

Look, the growth — by accepting pretty fast growth, it means that the only way to reduce these deficits is by cutting spending. Congress isn't good at that, and, look, they're going to have to start from scratch, I think, on this budget.

BAIER: Juan, to hear the White House react today, it didn't seem like they were pull anything off the table.

JUAN WILLIAMS, SENIOR CORRESPONDENT, NATIONAL PUBLIC RADIO: No. And, in fact, they said they might reassess. If you listen to Peter Orszag from OMB — the Office of Management and Budget in the White House — what he is saying, look, there are four key elements, and those key elements in terms of education, energy, doing something about health care and deficit reduction, those four principles in terms of the Obama budget will remain in place. He may have to reassess or redo them.

He made two other interesting points. One is what we're talking about is an estimate that is 0.3 to 0.4 percent higher — not 3 percent, but 0.3 or 0.4 percent higher — than what we have seen earlier coming from the Federal Reserve in terms of their estimates, coming from OMB in terms of their estimates.

But the numbers are so large that it then gives energy and ammunition to conservatives who are saying deficits are the problems. Were deficits the problem when President Bush was here we had a $9 billion deficit estimate and all that, much of it from the war in Iraq? Yes. But now in the midst of all this budget talk, I think it is being used as a cudgel against President Obama.

BAIER: Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: It gives arguments to anybody who can do arithmetic. You don't have to be a conservative.

These numbers are completely out of control. When the administration speaks about health care, energy and education and deficit reduction, it is like an SAT question in which of these series is wrong? You can't have the first three and have deficit reduction.

The word is that were those introduced in the Reagan era, which is "structural deficit." The Obama administration gave the impression that because of a steep recession, it will do stimulus — a temporary increase in expenditure, a temporary increase in the deficit, a temporary boost in spending — and then all of it will revert.

But, in fact, it builds in, with health care, with the energy program and with education, all of these incredibly ambitious ideas which essentially make America into a European-style social democracy.

They are hugely expensive here, as in Europe and it explodes the deficit. And what the CBO is showing is simply how the numbers work out.

As Fred indicated, these numbers are astronomical even if you accept the absurdly high estimates of growth that the Obama administration has offered.

WILLIAMS: I happen to be opposed to deficits. I think everybody should handle money like it's your family. You should pay your bills and you should be responsible about it.

But I will say this. If you think about what the Obama folks are saying is you need to deal with health care. It's a cost that is driving some of our companies out of business. We need to reform our education system. We need to deal with energy.

So if you put these pillars in place, doesn't that help our economy going forward? To me, that's money that should be spent.

KRAUTHAMMER: It bankrupts the economy in depression and recession. If you are flush with money, yes, you can start all kinds of new ambitious programs. If you're in a deficit where you have unemployment and huge runs on banks and on the government and you spend recklessly, you will end up destroying the U.S. currency.

BARNES: What you have to do is — what this means is, Juan, if you want all those things, you have to cut elsewhere — cut, cut other programs. You know, Democrats are not very good at that. Republicans aren't very good at it either.

WILLIAMS: I'm glad you said that.

BARNES: But that's what you have to do. Otherwise, this budget — and this budget is a problem not because the deficit is so big. It shows that the spigot has just been turned on is left running, period.

BAIER: Up next, presidential blunder, grand gaffes, congressional callouts.

The Friday lightning round is next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

REP. MAXINE WATERS, D-CALIF.: Obviously, there appears to have been some kind of agreement that they would protect the AIG from having to give those bonuses.

I don't know who said what and when. Chris Dodd said he wrote the language, but that he was pressured practically by Treasury. Maybe the president is not up to speed on what is going on, but I think it is going to have to be clarified.

(END VIDEO CLIP)

BAIER: California Congresswoman Maxine Waters talking about the AIG mess and who knew what when — and calling out the president and Senator Dodd.

We're back with the panel. This is the lightening round. First topic, Charles?

KRAUTHAMMER: It tells us how toxic it is. Up until now, no one would want to attack the president personally. Even the Republicans hate to do it. He is still too popular and on his honeymoon.

But everybody, especially Democrats are scared about this issue, and they want to blame Geithner and Treasury. But with Maxine Waters you have crossed the line where you have a Democrat implicating the president. It doesn't help. It's going to stop with her, but it's a mark against him.

WILLIAMS: I tell you what, Maxine Waters saying that the president is not up to speed. OK, I bet he didn't know this. I bet he didn't read the whole thing, and he wasn't involved in the negotiations with Dodd and Treasury.

But the way she put it made him seem like he is a dumkampf, like he's a guy who is just not in the game. I don't know why she would say it. I don't know if she has got some animus towards the president all of a sudden, but it makes no sense to me.

BARNES: Here's something I have never said before — I'm with Maxine Waters on this one, 100 percent!

(LAUGHTER)

BARNES: Geithner will be on Capitol Hill Tuesday with the House Financial Affairs Committee, or something like that. If they don't ask limb to be very specific about what happened, who talked to Dodd, had he talked to the president about this, and so on, then they're not asking good questions.

BAIER: OK. One sentence on Jay Leno. The president's appearance there caused a bit of a stir. Take a listen:

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: I bowled a 129.

JAY LENO, HOST OF "THE TONIGHT SHOW": Oh, that's very good. That's very good, Mr. President.

OBAMA: It was like the Special Olympics.

TIM SHRIVER, CHAIRMAN OF THE SPECIAL OLYMPICS: His main comment was that he was sorry. He apologized. He said that he did not intend to embarrass or humiliate anyone, that it was a poor choice of words, and that he regretted it.

(END VIDEO CLIP)

BAIER: Chairman of the Special Olympics there — Juan.

WILLIAMS: Fred and I at the ballgame, or Charles and I, and we were talking, OK. But the president shouldn't be making fun of the Special Olympics. He's got to understand the magnitude of the impact of his words.

BAIER: He apologized on the plane flight home — Fred?

BARNES: Well, 129 is not that bad.

(LAUGHTER)

Look, it was an unfortunate thing to say, but, you know, he wasn't making fun of Special Olympics. He was making fun of himself.

BAIER: Charles?

KRAUTHAMMER: Textbook case of how to correct a gaffe — immediate apology, and then absolution. You get a Shriver or a Kennedy to say you're OK, and then atonement. He will have a Special Olympian over who will crush him in a bowling match, and everyone will be happy.

BAIER: In fact, a top bowler for the Special Olympics says "I bowled a 129, I bowl a 300. I could beat that score easily."

(LAUGHTER)

So we'll see if he goes to the White House lanes.

KRAUTHAMMER: Within a week he'll be there.

BAIER: OK, House speaker on fighting coming immigration and the enforcement of it. Take a listen:

(BEGIN VIDEO CLIP)

HOUSE SPEAKER NANCY PELOSI: Who in our country would not want to change a policy of kicking doors in the middle of the night and sending a parent away from their families? It must be stopped. What value system is that? I think it's un-American. I think it's un-American.

(END VIDEO CLIP)

BAIER: Quickly, Charles.

KRAUTHAMMER: Shameless, reckless, lawless. Are we are a country of laws or of Democrats?

BAIER: Juan?

WILLIAMS: I think she is absolutely right and courageous for saying so. And I think it is to my mind much like people who were chasing slaves that were seeking freedom. There is no reason to break apart families, kick in doors in the middle of the night.

That's an unjust, wrongheaded law and you see people benefiting this economy, people who are struggling for American values absolutely being abused.

I think it is an outrage.

KRAUTHAMMER: Controlling our borders is un-American?

WILLIAMS: It is not about controlling our borders to knock in somebody's door in the middle of the night.

KRAUTHAMMER: You're enforcing a law.

WILLIAMS: Enforcing an unjust law, and they are right to challenge. She sees things as wrong.

BAIER: The e-mail address is Juan Williams at — Fred, end it here.

BARNES: I think the slavery analogy is a little over the top, Juan.

But we need to do something to, I think, to find a way to allow the illegal immigrants here in this country to live here legally. We have to find that, but you don't do it by demanding, you know, saying it's un-American to enforce the laws that are now on the book.

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