This is a rush transcript of "Special Report With Bret Baier" from January 8, 2010. This copy may not be in its final form and may be updated.

BRET BAIER, ANCHOR: Right now the administration, the Obama administration is trying to fend off criticism about how it handled an effort to bring down a bomber, an airliner on Christmas Day:

(BEGIN VIDEO CLIP)

JOHN BRENNAN, DEPUTY NATIONAL SECURITY ADVISER: We had a strategic sense of where they were going, but didn't know they had progressed to a point of actually launching individuals here. And we have taken that lesson and so now we're full on top of it.

LEE HAMILTON, FORMER 9/11 COMMISSION VICE CHAIRMAN: It seems to me we have known for some time that Al Qaeda is recruiting and training, improving their skills in Yemen.

RICK NELSON, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES: We can recall the USS Cole attack in 2000 where 17 sailors lost their lives and numerous others were injured. And then again, Al Qaeda in Yemen attacked the U.S. embassy a few years ago. So the threat of Al Qaeda in Yemen is not something that is new.

(END VIDEO CLIP)

BAIER: Talking about Al Qaeda in the Arabian Peninsula the administration is saying is behind this attack attempt.

Let's bring in our panel: Juan Williams, news analyst for National Public Radio; Nina Easton, columnist for Time and Fortune magazines; and syndicated columnist Charles Krauthammer.

Juan, your thoughts on the fallout from all of this?

JUAN WILLIAMS, NEWS ANALYST, NATIONAL PUBLIC RADIO: I think the report today revealed some surprising, almost shocking level of failure in the system.

The number one shock to me was Brennan saying very clearly that the visa status of people who are suspected terrorists is not tracked by the U.S. government. To me, how can that be? Why wouldn't you be looking at where they can travel and whether they can get into the United States? That seems kind of obvious to me.

Number two, I was surprised that there is no single database that tracks all specific high-level threats against the United States. So on those levels it seems there was some shocking information today and, of course, Brennan saying he didn't, or the whole system, the whole intelligence network didn't understand how sophisticated Al Qaeda in the Arabian Peninsula was, a little bit of a shock.

I can understand, it's a small group of people, it's about 100, 200 people, and in a very poor country, the poorest country in the Middle East. And the thought was just not that sophisticated. Again, a real wake-up call.

But to me, the big surprise is some of the things that we had assumed were being done by our government had not been done.

BAIER: Nina, when you have Lee Hamilton, a prominent Democrat who is co-chair of the 9-11 commission saying, hey, listen, we knew Al Qaeda in Yemen was a problem a long time ago, that's fairly damning.

NINA EASTON, COLUMNIST FOR TIME AND FORTUNE MAGAZINE: I think it is. When John Brennan today, he said we thought the threat was "aspirational." In other words, we thought a direct threat against us wasn't something to be taken seriously.

I mean, you can read the newspaper and know that Al Qaeda is training operatives in Yemen. How can you not know that?

I think it goes to the question of we are at war and it's a war that does not end at the Iraqi and Afghanistan border. And the president has been reluctant to use the word "War on Terror."

He went to Cairo thinking that he could make a conciliatory speech and they would suddenly like us. They don't — nothing has changed. We're at war. And he did say we're at war against Al Qaeda yesterday.

But I think that has to be reflected by his advisers all the way down, from Brennan to Janet Napolitano, who yesterday said — she first said the system worked, and then of course yesterday the system doesn't work, as if it was an engine failure instead of a planned bombing on an airline.

They've got to use real language that speaks to the real threat that's coming at this country constantly.

BAIER: Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I think if you look back over the last two weeks, what is so surprising and so unsettling is not the individual lapses, the missed information here and there. I think it's the demeanor and the language of the president, a sense people have that he's disconnected.

He doesn't either want to or grasp the nature or depth of the threat. The way he waits three days after the attack to say anything, he reacts, you know, casually dressed, looking like he resents being taken off the golf course.

He speaks about as if he's giving a police report, speaks about the incident involving a suspect, an alleged attack, he speaks of him as an isolated extremist, as if this is a disgruntled postal worker attacking someone in the United States, the sense that it's not part of a larger effort.

And it took him the fifth attempt in the remarks he made yesterday to actually use the term, "we are at war" and to make it sound as if he believes it.

But when it takes a fifth attempt and your initial reaction, which is your truest reaction, is a way of looking at it in the benign and detached way, it's extremely unsettling. And that's why people are worried.

The mistakes were made. The Bush administration allowed the attack of Richard Reid, which we were lucky it didn't actually succeed. It can happen to any administration, a lapse here and there. But a disconnected and detached and affectless president is rather disturbing, and that's why I think that the reaction is extremely unsettled.

BAIER: Up next, the Friday Lightning Round, beginning with your choice online, the topic of the week.

(COMMERCIAL BREAK)

(NEWS BREAK)

BAIER: This week and every week on FoxNews.com's "Special Report" page, the viewers vote on what topic we should discuss first during the Friday lightning round. And you can see that poll on our web site halfway down on the right-hand side.

As of 3 p.m. today, about 40 percent of the almost 1,600 votes went to President Obama's executive order on Interpol. So that is where we begin.

Back with the panel.

Here is what this executive order says — "12425 designating Interpol as a public international organization entitled to enjoy certain privileges, exemptions and immunities." I guess, Charles, the immunities has people really concerned. What do we think about this executive order?

KRAUTHAMMER: I defer to no one in believing the U.N. ought to sink into the east river and disappear. But this is really benign. This basically is saying that Interpol has the same rights as the Swiss delegation, so it will not have to pay parking tickets.

Now, that may be a scandal, I think it is, but it's not a black helicopter landing in your backyard.

BAIER: Nina, no conspiracy here?

EASTON: I didn't see one from what I read. It seems like the Obama White House is simply extending the protections that go to the United Nations and other international organizations to Interpol, which finally opened an office in 2004, hadn't done so before.

And it basically protects its records from being shared with other countries and so on. It seems like a very straightforward. I don't see a conspiracy.

BAIER: The White House saying the immunities are less than diplomats across the board get, Juan. So it protects their offices and it...

WILLIAMS: From what I understand, Red Cross, World Bank, it's that level.

But here is the thing: They should act — Interpol — as a clearing house for information. We were talking earlier in the program about making sure that you are aware of threats.

The Al Qaeda threat, the terrorist threat is worldwide, and Interpol can be an essential part of our justice organization here in the United States, our pursuit of terrorists. We should be able to work and without fear of, and here is the threat posed by a lot of blogger, that that organization can arrest American officials for war crimes.

I think that's excessive and a little paranoid.

BAIER: And no superseding U.S. authority.

KRAUTHAMMER: No, absolutely not.

BAIER: OK. All right, that's the panel's thought on this. Next topic, the economy. The unemployment rate stays at 10 percent, but jobs lost, about 85,000, including UPS, Nina, dropped 1,800 jobs in an announcement today.

EASTON: The job losses were greater than economists had expected. It was not good news, and it shows that the unemployment rate, even if growth is at say three or four percent GDP growth in the next couple quarters, the unemployment rate is still going to stay well above nine percent.

BAIER: Charles?

KRAUTHAMMER: For Obama it bodes ill. Coming out of the Reagan recession, the growth rate was near eight percent. Obama will be lucky if he gets half or a third of that.

Reagan had a smashing reelection. Obama is going to be struggling along for several years with this. It will jeopardize and not only the Democrats in November in the midterms, it could be a real drag on the president in 2012.

BAIER: Juan, the president has wanted to pivot to jobs and trying to create jobs and talk about it more, but obviously he's talking all about terrorism and security in the past two weeks.

WILLIAMS: Right. And they had planned today to really try to focus on jobs. It wasn't good news. And as you say, they were distracted to some level.

The odd part of this is Wall Street had a really good week this week. Things keep coming along on Wall Street. It's just a very strong sort of striation between the two economies. If you're at that level, and Wall Street seems to be doing well, you just hope that's a sign that employers are going to gain more confidence, consumers will gain more confidence, and that will get our economy back in gear.

BAIER: Nina, since the stimulus was passed, almost 3 million jobs have been lost. That is a staggering number.

EASTON: And the impact of the stimulus impact is actually — it's been on GDP growth and it's going to lessen as the months go by.

The other interesting thing about the job numbers is that the unemployment rate is being held up because people aren't finding jobs. It's not that companies are increasing their layoffs. It's that people aren't finding or getting new jobs.

The president is likely going to try to extend unemployment benefits, and some economists are now saying that that's actually going to have a reverse effect because it takes the sting out of being unemployed and you're going to have people pushing harder to look for a job or to relocate for a job.

BAIER: Quickly.

KRAUTHAMMER: Stimulus has also added $1 trillion of debt and that's undeniable and we're going to have to unwind that. It will restrict the ability of this administration to address unemployment and recession in the future, unlike in the Reagan years.

BAIER: OK. It's a little different Friday lightning round because of the breaking news, but we'll do it again next week. That's it for the panel.

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