This is a rush transcript of "Special Report With Bret Baier" from December 22, 2009. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

SEN. BEN NELSON, D-NEB.: It's not a special deal for Nebraska. It is, in fact, an opportunity to get rid of an unfunded federal mandate for all the states. Let me repeat that — for all the states. There's nothing special about it, and it's fair.

SEN. LINDSEY GRAHAM, R-S.C.: I think it stinks. I think it's sleazy. Now, if you disagree with me and you think it's good politics, come on some show and say it's OK with you.

Go back to your state and tell the people in your state, our Medicaid bills are going to go up. Your taxes are going to go up, but we had to do this to get Nebraska onboard. Is that ok with you? Do you think that's fair? I hope they get laughed out of the room.

(END VIDEO CLIP)

BRET BAIER, "SPECIAL REPORT" REQUEST: Well, some of the back and forth today in the Senate about the sweetheart deals that are buried in this Senate health care reform bill that we now know will be voted on, finally, if it can get over another hurdle on cloture, the final vote will be Christmas Eve morning at 8:00 a.m., we're told.

Here is the latest polling on what people know about this and how do you feel about the current health care reform plan proposed — 55 percent oppose, 41 percent favor.

So let's bring in our panel, Steve Hayes, senior writer for the Weekly Standard, A.B. Stoddard, associate editor of The Hill, and syndicated columnist Charles Krauthammer.

A. B., so there you heard Senator Nelson defending on the floor this special deal he got put in for Nebraska, but there's some news developing about this over the past day.

STODDARD: Well, let's call it what it is. It was a permanent exemption from Medicaid expansion. The bill is expanding Medicaid. The states can't afford, a permanent exemption for Nebraska.

He is now blaming the Democratic leaders who are trying to chop his vote saying he expressed concern shared by his own Republican governor back home about expanding Medicaid and that the states are broke and they can't afford this and it was the leadership who decided to give him this massive carve-out. It wasn't really something that he sought.

He is considering asking once the bill is conferenced for it to be removed later, but he will talk to his Republican governor who is upset about this and said he never asked for a special deal for Nebraska.

And so I think while the senator thought he was going to be popular at home, it has created something of a stampede. He has colleagues coming up on the Senate floor saying we will get ours, too. So it has become a big political problem for the leadership.

BAIER: But in your sense, this won't create a stampede for other senators who want things put in that threatened the last 60-vote, last cloture vote to get it to final passage?

STODDARD: No, no. I think they will seal this up this week. I think what the problem is going forward as you see liberals in the House threatening over abortion and public option.

Once you talk about two bills merging from the two chambers, the possibility that people will seeking special deals like this and carve-outs presents more problems down the road.

BAIER: Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: There was a moment for about a half-hour this afternoon when Nelson had publicly offered to rescind the break that Nebraska had gotten, the exemption from having to contribute to the expansion of Medicare until the second coming.

When we heard that, I thought really this was a unique event. This was a Christmas event where an iota of shame had depended upon a senator, something not seen in years. But then, of course, he went ahead on the floor as we saw and defended this corrupt deal, and pretended it was intended for all other states. Of course it wasn't.

BAIER: It's impossible. We couldn't afford it if that provision was in for every state.

KRAUTHAMMER: And if you read it, it's Nebraska and nobody else, but perhaps he thought nobody is going to read it.

And the reason he offered that is because he did about seven or eight talk shows in Nebraska home state yesterday, and his constituents were up in arms partially about the way it makes Nebraska look, largely because in his own state the opposition to the health care proposal, the bill, is 70 percent against and he's going against the tide. So I think it was going to be a great day in the history of the Senate. Unfortunately, we're back to lack of shame, as usual.

BAIER: Steve, it's not only Ben Nelson. Bill Nelson got an exemption in there for Florida residents that they can keep their Medicare Advantage at the current price that they have it while other places lose it. These sweetheart deals, Lindsey Graham is going after them for the constitutionality of these deals. There are also questions of constitutionality about the mandate that's in this, Senator John Ensign leading that charge, and Senator DeMint from South Carolina is also leading a charge about a provision that essentially says you can't undo what they have done. There is some big questions here.

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: There are some big questions here. Still, ultimately I expect it will pass.

But what is fascinating about this is if you take the time to call people on the Hill, call around and ask questions, what does this provision do, what does this language mean in the bill, if you take the time to read the bill and call people and ask, you can get 100 different answers. You can call all these people. Nobody has any idea what some of these provisions do. So you've got a bill that starts out unpopular with a sweeping reform that nobody wants, few people want, judging by the polls, and that's changed from the beginning of the year until now. You take that, and you layer on top of that the thing that makes independents and conservatives, Republicans, most angry, and it's pork government waste, government inefficiency, and sweetheart deals, the smell of corruption. You layer that on top of this — this is the worst possible outcome I think for Democrats and the president, and they're going to pass this in such a way that you're going to have anybody who moderate or in a swing district have to vote for it holding their noses and worried for the near future about their political life.

BAIER: And then we have legal challenges down the road, likely. A. B. we hear that this is a rush, we have to get it done by Christmas Eve, and then we hear from the Senate majority leader today that they're not coming back until January 18. I mean, what happened to the calendar?

STODDARD: They're going to be tired. The Democrats have a lot to figure out about actually getting together and conferencing the two bills.

They do have a goal of getting it signed by the president before his state of the union address at the end of January. It's obviously very ambitious.

But at the same time if you look at the whole legislative calendar for next year, it's going to be much more relaxed, very — far fewer days in session than this year, and I'm not surprised to hear, after keeping the Senate in until the 24th, that they would take a few weeks in January.

BAIER: For a bill that the spending starts in 2013.

KRAUTHAMMER: Exactly. Olympia Snowe said what is this absurd we're rushing precisely to finish on Christmas for a bill that's not going to take effect for four years?

Obviously it is a political window. It's not as if the health care system will collapse on the first of January if nothing happens. It's working with its own inefficiencies, but it is a political window.

The administration knows if it remains an open issue like in the summer with the town halls and people learn about all the corrupt deals hidden in the bill, it will become a firestorm, and they want it over by Christmas day. And that's what they're going to get.

BAIER: We'll go down the road here. We assume it gets past the Senate this week. Do they then have no trouble with confirming with the House and get something passed?

KRAUTHAMMER: They will have a lot of trouble, but in the end, it is inconceivable that — they will empty the treasury in order to buy off the necessary senators and members of the House.

STODDARD: I agree with Charles that even on the issue of abortion, I think in the end they're not going to derail this bill over that and they will pass something.

HAYES: I think Bart Stupak will fight as hard as he can and he's going to try to bring other pro-life Democrats along with him. He may bring some, but ultimately you're seeing the collapse of the left and you will see people like Raul Grijalva, who has been fighting this forever, say today that it is a tough bill to swallow, but he seemed to indicate that he will vote for it.

BAIER: OK, Iran's president says he doesn't care about deadlines concerning his nuclear program. So how does the U.S. respond? We will ask the panel in a couple minutes.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

IRANIAN PRESIDENT MAHMOUD AHMADINEJAD: They have to know that the Iranian nation and all other nations have resisted and will resist until the complete disarmament of America and all the arrogant powers of the world.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: The decision for them to live up to their responsibilities is their decision. We have offered them a different path. If they decide not to take it, then the American — our delegation with the P-5 plus One will move accordingly.

(END VIDEO CLIP)

BAIER: Well, it appears Iran is not taking that deal. President Mahmoud Ahmadinejad is saying today that the year-end deadline set by the Obama White House, he is just disregarding it until the U.S. and Israel disarm. OK. We're back with our panel. Charles?

KRAUTHAMMER: The Iranian leadership reacts, as we saw there, with utter contempt for our deadlines, and the presidential spokesman that responds with a fecklessness and a fatuousness which is embarrassing.

Look, it is not just that we have lost a year with this pursuit of engagement with a regime that has no intention and has repeated it over and over of giving up its nukes, absolutely none. The sanctions idea that was negotiated with Chinese and Russians is a sideshow and a farce.

It's not just that we lost a year — we lost this year. This was a unique year in the history of Iran. A revolution was occurring in the middle of the streets in the middle of the year. It was not our doing, a spontaneous revolution. It holds out the only hope of giving us nuclear safety in that region.

We have tens of thousands of anti-regime demonstrators in the street who are not asking for a new election, who are asking for a removal of the regime of the revolution, shouting slogans about the dictatorship, mourning the death of an ayatollah who issued a fatwa against the acquisition of nukes.

This is our hope for achieving a solution not only on the nuclear issue but Iran's assistance to insurgents who are killing Americans in Iraq and Afghanistan.

All of this is at stake, and this administration for this year in this revolutionary year in Iran has been aloof, has not lent its support, has bolstered the legitimacy of a regime which is oppressing its people and pursuing nukes to the point where there is graffiti in the streets of Iran which says "Obama, Obama, are you with us or with our oppressors?" It is a disgrace that graffiti like that should appear anywhere in the world.

BAIER: A.B., President Obama and his administration spent this year trying to engage Iran. It didn't work. They even went to face-to- face talks. At what point do they say this just didn't work at all? Are we there?

STODDARD: Well, we have a week. His self-imposed deadline was the end of the year. He was engaging. I don't think the administration knows how to begin to make moves to undermine and ultimately overthrow a regime in Iran.

They had negotiations on the table they hoped would work. It is going to expire as of today if there is no viable deal, no hope left for a deal for the uranium exchange, then the administration really has to move past talk like we offered them a different path and they need to act accordingly.

They need to spell out specific terms in the coming days once this deadline is coming on December 31, a new year, what it means for Iran, what kind of sanctions they are talking about, what our allies are going to do to help, and what the end of engagement means.

BAIER: Steve, because Robert Gibbs was saying that same sentence months ago.

HAYES: It's silly. This is what we have heard from them the entire time.

And if you go back to the president's inaugural address that he had a section that was pretty clearly addressed to Iran and talked about reaching out and if nations who oppress their people unclench their fist — the response to that speech from the spokesman for Iran's supreme leader is that Obama is the hand of great Satan up a different sleeve.

We have known what they thought. It was silly to go through this. Charles is absolutely right. We lost a year.

But let's address this on President Obama's terms. What should he do now? He said he gave them to the end of the year. What should he do now?

I worry that an Israeli strike is inevitable, but in the meantime, he needs to make good on the threats that he has said repeatedly would follow with this kind of behavior from Iran. He needs to have tough sanctions. He needs to come out strongly in favor of the Iranian opposition.

There should be no ambiguities. He should say we are on your side. We will do everything we can to take these oppressors away from you.

BAIER: Quickly.

KRAUTHAMMER: We will not effectuate a revolution, however, we are actively working against it conferring legitimacy of a regime which has none internally, but by engaging with them, we are bolstering the legitimacy and strength of the regime.

And secondly, dissidents need to hear that the world outside supports them. Soviet dissidents had said that and Reagan gave it. Obama is not.

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