This is a rush transcript of "Special Report With Bret Baier" from August 7, 2009. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: Today, we're pointed in the right direction. We're losing jobs at less than half the rate we were when I took office.

(END VIDEO CLIP)

WALLACE: President Obama in the Rose Garden today noting some relatively good economic news for a change.

Let's bring in the panel, Steve Hayes with the "Weekly Standard", Kirsten Powers from the "New York Post," and syndicated columnist Charles Krauthammer.

Well, let's look at the numbers today — 247,000 people lost their jobs in July. While not good news, that is the fewest in a year, and the unemployment rate dropped from 9.5 percent to 9.4 percent, and that's the first monthly decline in 15 months.

So Steve, let me start with you. How important are those numbers in terms of the economy, how important are those numbers in terms of the president's political standing?

STEVE HAYES, SENIOR WRITER, "THE WEEKLY STANDARD": They're good for the economy and they're good for the president. I think they are very important for the president, politically.

It's a moment at least that he can stop and say, look, the stimulus is working. They have been making this argument now for months. I think it is a dubious argument. I think they have little they can point to and say this is what is causing the economy to turn around.

But given these numbers, unemployment is the one area where things continued to slide. If we saw all the other indicators where the economy was not continuing to decline, unemployment was one area that wasn't happening.

This at least, even if they're just treading water, which I think is what this number indicates, that's good news for the White House.

WALLACE: And Kirsten, I do want to point out, though, that the White House was being careful today. In his briefing, Press Secretary Robert Gibbs said the unemployment rate could still go up over 10 percent. Why do you think they were being so cautious?

KIRSTEN POWERS, FOX NEWS CONTRIBUTOR: Well, because it could, and also they're managing expectations, very smartly. They let — Gibbs let people know yesterday essentially what was going to happen.

WALLACE: Actually he said it may tick up a couple of points.

POWERS: Right, again, it was managing the expectations so that it was better than what he said it was going to be. And I think that really, at the end of the day, what this is mostly about is not so much about what the stimulus is doing specifically. It's about confidence. It is about people feeling confident in the economy.

And as long as they can have good news, as small as it might be coming out, then that will help Americans feel a little more confident, a little more safe about spending money.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: It's good news, but there are caveats. The reason that the rate went down is because the denominator, the number people who are looking for jobs had decreased. People have given up. There is a high level of discouragement. If you take those people out of the equation, then you get a drop in the unemployment number.

And secondly, it's within statistical because it's from a survey.

WALLACE: But still, 247,000 people, well certainly not good news and a terrible tragedy, for them, is a lot better than 600,000 who were losing jobs.

KRAUTHAMMER: That's true, but if you look inside the numbers, as they say on sports center, the number of those who have been unemployed for a short time is dropping a lot, which means that the shedding of jobs in private industry is decreasing and it's going to plateau.

However, the number of people who have been unemployed over 15 weeks is the highest ever. Ever means the last 61 years when they started recording this. And you have got over a third of the unemployed have been unemployed for over 27 weeks. That implies that the precipitous drop in employment, which had occurred earlier in the year, is leveling off. However, those people are not getting their jobs back. And what we could have is a chronic unemployment on a European scale, which we have not seen in America for a long time.

WALLACE: We have a couple minutes left in this segment. And I want to pick up what you raised in the beginning, Steve, and that is the question — and certainly the White House made that point today about the president and Gibbs — does this show that the stimulus is starting to work, the $787 billion stimulus?

You had Christina Romer saying that it added 2 percent to economic growth, so it was minus 1 rather than minus 3 in the second quarter.

HAYES: Right. I think it is just a very hard argument for them to make. There is very little they can point to that was actually stimulative.

This was the criticism of the stimulus when it was crafted, was that it is not stimulative. It's a giveaway to Democratic special interests, and it's not stimulative.

So the fact that so much of it is back loaded and that they spent so little of it thus far makes it very difficult for them to say this was stimulative, this is a cause for the turnaround, not to mention the fact you have TARP and all these other things that are really responsible for stabilizing the credit markets.

WALLACE: Real quickly, Kirsten.

POWERS: I think there is an element of truth to that. I wasn't the most stimulative bill that they could come up with. But I really do think did is a lot about the psychological aspect, that when people feel that something is happening, that the government is doing something, that it restores confidence and makes people more confident in investing in the stock market. It makes people feel more confident about America.

WALLACE: We have to step aside for a moment. Opponents try to shoot down health care reform and the U.S. blows up a really bad guy. The Friday lightning round is next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. DICK DURBIN, (D) ILLINOIS: These folks are there about YouTube. That's why they're he showing up. They want to get a little clip on YouTube in an effort to disrupt a town meeting and to send the congressmen running for his car.

(END VIDEO CLIP)

WALLACE: Illinois Democratic Senator Dick Durbin giving his analysis of what those opponents of the president health care reform plan are up to at town hall meetings.

And we're back now with the panel. So Charles, the congressional town hall meetings continue, and so does the controversy.

KRAUTHAMMER: Look, Democrats are out of control on this. Under Bush, dissent was the highest form of patriotism in American, and now it's a form of Nazi insurrection.

Last year the community organizing was such a high calling that the Democrats elected him to the highest office in the land, and now if you organize a community it's called a mob. Give me a break.

POWERS: I have to say it is strange messaging for the Democrats to be attacking citizens. I don't think that's usually a good way to go, and to complain about the poor little congressmen getting yelled at. I don't think most Americans are going to get upset about that.

But I do think there is a lot of evidence that these are being organized by Republicans, and there's nothing wrong with that. I think the idea that an antiwar group organized an anti-war protest is fine, and the fact that conservatives are unhappy with health care and organizing people to go to town halls is also fine.

I just think that they need to be a little more civil.

WALLACE: I was going to ask, Steve, any problem if the protestors become disruptive.

HAYES: I think the protestors should be respectful.

By I don't have a problem with Democrats doing this. That's what politicians do, they make phony arguments to get people ginned up.

My problem is with the media. This is the White House talking point here. This is the Democratic National Committee, they literally running ads about these things accusing people of being a mob.

And the media, instead of looking to seeking to understand what is frustrating so many people millions and millions of Americans, is obsessed with the mechanics of who is putting together protests? It is really, I think, disgraceful.

WALLACE: Charles, growing reports that a U.S. missile took out Baitullah Mehsud, the top Taliban man in Pakistan and the purported mastermind to the Benazir Bhutto assassination. There are still about 15,000 to 20,000 Taliban fighters in Pakistan. So how important if we did take out the top man?

KRAUTHAMMER: Knocking out one guy is not in and of itself important. He will be replaced in a week.

However, it sends a message, we know where you live, and we have the predators to kill you. And that means they're going to have to go underground and disrupt, hide communications, which will make their operations more difficult and less efficient. And that's at least some success.

POWERS: I think it says a lot about what is going on in Pakistan that the people basically have gotten fed up. And that was a problem, much like what happened in Iraq, when it took finally people in Iraq getting upset and saying we don't want you in our country.

The Taliban has overplayed their hand. They overplayed their hand in Swat Valley. There was this YouTube video of the 17-year-old girl getting flogged, and a lot of the elites and even regular people said we don't want the Taliban doing this across the country.

And I think that now you saw more coordination going on to get rid of this guy.

HAYES: It's always better to have those guys dead than alive, but this tells us a bigger story. I don't think things are turning around in Pakistan. I don't think it will have ripple effects in Afghanistan. Things there are as bad as we read in the press report and worse.

WALLACE: Less than two minutes left, and I should point out that Charles and Brett won. There is no clock in the lightning round, much to my disappointment. Having said, that Charles?

KRAUTHAMMER: I believe in civility and logical and quiet discourse.

WALLACE: I believe in time, and also tension.

The House and Senate are now home for their August recess. President's six months in office — the report card for Democrats on both ends of Capitol Hill?

KRAUTHAMMER: Any Congress that passes the stimulus package, the largest piece of pork in American history, can't get a grade low enough.

However, the fact that Congress is entirely stymied, inactive, incompetent, and unable to do anything important on health care is a plus. So it goes from execrable to merely appalling.

POWERS: I would give them an incomplete. And I think I have a different approach on the health care. I think they set that out as their number one objective. They didn't meet the deadline. They have done a handful of other things, yes, but this is what everyone was looking at them to get done.

HAYES: If you look at what they have done tactically, basically the president decided he was going to outsource this domestic policy agenda to Congress. They haven't done well. They passed the stimulus, but they can pass anything. They have the numbers. There is no challenge there.

They're struggling on cap and trade. They're struggling on health care. His domestic agenda is in peril, and they're to blame. You want me to keep going?

WALLACE: No, that's fine. That is it for the panel.

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