This is a rush transcript of "Special Report With Bret Baier" from March 1, 2010. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI, D-CALIF., HOUSE SPEAKER: And in a matter of days, we will have a proposal. It will be a much smaller proposal than we had in the House bill because that's where we can gain consensus, but it will be big enough to put us on a path of affordable, quality health care for all Americans that holds the insurance companies accountable.

SEN. LAMAR ALEXANDER, R-TENN.: I'm afraid that they are aiming toward what is a political kamikaze mission.

(END VIDEO CLIP)

BRET BAIER, "SPECIAL REPORT" HOST: Well, the president will come out, we're told, Wednesday with a new plan, but how new will it be, and what exactly will it include as Democrats are talking about this process, reconciliation. Some call it the nuclear option.

The Associated Press is doing the head count right now. They say in the House, to start this process, there are 10 Democrats who voted no last time who will vote yes this time.

So, where are we on all of this? Let's bring in our panel, Bill Kristol, editor of The Weekly Standard, Nina Easton, columnist for Time and Fortune magazines, and syndicated columnist Charles Krauthammer.

Bill, we have been in the weeds for the past week, so we might as well stay there. This process starts in the House because they have to pass the Senate bill that passed on Christmas Eve.

The Associated Press is doing their own head count. We're trying to add it up, talking to conservative Democrats who voted no and might be willing to vote yes. How realistic is this House vote to start this whole process, do you think?

BILL KRISTOL, EDITOR, THE WEEKLY STANDARD: The House is key. I have talked to a couple House members in the last few days and they think if public opinion does not change substantially in favor of the Obama bill, Speaker Pelosi can't go to her members and say we bottomed out, people are coming back. The president can sell this bill over the next few months, then if that doesn't happen they think the bill is bad.

If that happens, if he gets a bump in public opinion, it's possible, possible that she might be able to twist arms and promise jobs to retiring members and that sort of thing, and they might get to 216, 217 votes in the House. I don't believe it, but it's possible. I don't think it's likely, but it's possible.

BAIER: She said this weekend, Bill, that it's not the job of lawmakers to be elected perpetually and we should focus on the American people, essentially saying you could lose your seat.

KRISTOL: Well, that's fine. I think people should do the right thing even at the risk of losing their seat.

But I think the more debate there is, this has been the pattern for months and months and months, certainly since the president gave his speech on September 9th. The more debate there is, the more people dislike the bill.

And I welcome it. Let's have another four weeks of debate. Look what is happening in Massachusetts, probably the closest thing to Obama care at the state level. Governor Devol Patrick is busy touting the Massachusetts plan and he is very close to President Obama.

In Massachusetts, state insurance premiums are the highest than in any state in the nation. They have been skyrocketing. The governor had to impose price controls the other day to try to keep it under control. The whole thing is in total meltdown.

In Indiana, the Republican governor, Mitch Daniels, who has put into place Republican ideas, health savings account, the rate of increase of health care cost is lower, the state is saving money on these health savings accounts, and people are very — the government employees who get them, about 30,000 employees, are happy with them.

So let's just have this debate and compare two actual states, one liberal Democrat governed by Governor Patrick, close to President Obama, Massachusetts, and Indiana. Those are real world results embodying the two different visions of health care reform.

BAIER: Mitt Romney had a role in that health care system in Massachusetts too.

Nina, let's go to you, the politics here. What's about this as Democrats start going down this road, and it's clear that's the road their going down?

NINA EASTON, WASHINGTON BUREAU CHIEF, FORTUNE MAGAZINE: It's interesting, because the Democrats today are saying it's going to be a more narrow bill, and there is some noise they are going to incorporate Republican ideas like on tort reform on medical malpractice.

But there is no evidence that they are actually trying to bring Republicans onboard. So I think what you are going to have is the Democrats going alone on this, the Senate bill that Republicans didn't support going through the House. And as Bill mentioned, it's going to be problematic even with Democrats, some Democrats on abortion, for example.

But I think the language that comes out from Nancy Pelosi and her top aides suggests that it's sort of a case study in liberal-think, which is we are doing good. We are on the side of goodness versus evil, bad Republicans, and that therefore we have a duty to go forward with this, and that the public will come along with us.

And they are going to try to link it to the economy to say the economy can only get better with this. That came clear in strategy sessions that that's going to be part of it. They are going to claim that it brings down costs. You have got Warren Buffet today suggesting he doesn't think it's going to bring down costs.

So I think they have got — I think it's a kamikaze mission for them.

BAIER: Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I think it's, first of all, easier for her to say to her members we are not here to perpetuate ourselves in offices. They are going to lose their seats and hers is a safe seat. Obama, also easy for him to say. He in office for an extra two years where he can repair his standing. But I think philosophically it's interesting to note Nancy Pelosi of San Francisco is now a disciple of Edmund Burke of Bristol, England who famously spoke about whether the job of a representative is to represent or to be a delegate, to reflect the views of the constituents or to act and what he perceives as the common the good or what we call today the national interest. I'm glad that her view is the Burkean view that it should be the national interest. And I think Republicans ought to be careful about just attacking the bills on the basis of its low standing in the public opinion polls. That ought to be an element. Even Burke had said that the opinion of the constituents ought to inform your view, but it shouldn't dictate it. I think the argument ought to be on the merits, and they ought to court Warren Buffet who said the bill is not a good one because it doesn't contain costs. He does add, which I believe that we have an obligation to insure the uninsured. However, if the system is insolvent and you don't fix it, you are not going to help the uninsured. In fact, you're going to end uninsuring the insured because those who depend on Medicare and Medicaid are going to be left with a system that is broke.

BAIER: Nina, you mentioned bipartisanship and Senator Chris Dodd from Connecticut, a Democrat, says he is reluctant to support this effort towards reconciliation and pushing this through rout a Republican vote. He said to The New York Times in an interview: "The issue trumps the process. Would you drop doing health care all together because you do not like the process? I don't think so." Well, here is what he said back in 2005. Take a listen.

(BEGIN VIDEO CLIP)

SEN. CHRIS DODD, D-CONN.: I have never passed a single bill worth talking about that didn't have as a lead co-sponsor a Republican. And I don't know of a single piece of legislation that's ever been adopted here that didn't have a Republican and a Democrat in the lead.

That's because we need to sit down and work with each other. The rules of this institution have required that. That's why we exist. Why have a bicameral legislative body? Why have two chambers? What were the framers thinking about 218 years ago? They understood, Mr. President, that there is a tyranny of the majority.

(END VIDEO CLIP)

BAIER: Put reconciliation aside, nuclear option aside. That's an impassioned speech, Bill. There is a lot more tape like that.

KRISTOL: It was deeply moving.

And you know the funny thing about Nancy Pelosi taking this Burkean position, as Charles said, is that, fine, then she should really release all of her members to do what they think is best. You can't have a party whip and party discipline and threats and promises on the one hand and then say hey, no politics here. Just do what's right for the country.

And believe me, I believe if all remembers were released to vote as they think right, honestly is this still good for the country given what we now know after a year of debate, given with a what we now know about Massachusetts and Indiana, this bill could not pass the house or the Senate.

BAIER: Quickly.

KRAUTHAMMER: Dodd is right about the democratic spirit and legitimacy. The constitution says that for a very important issue, like a treaty, you have to have a two thirds majority, or a constitutional amendment, a big majority, three quarters of the states.

You can legally have health care, which is going to reform a sixth of the American economy, on one winning by a single senator. But you shouldn't. In a democracy it ought to be done with a large majority, and it ought to include some the opposition.

BAIER: Logon to our home page for the latest about the health care reform and other stories. You can also see web exclusive reports on there, all kinds of interesting features.

We will talk about one senator's effort to make pay-as-you-go a reality in Congress when we return in three minutes.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. JIM BUNNING, R-KY.: If we can't find $10 billion to pay for something that we all support, we will never pay for anything on the floor of this U.S. Senate.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: Hundreds of thousands of people who have lost their job and lost their health care because of that, and their unemployment benefits, all of that is threatened because — because one person has decided to stop the entire process.

(END VIDEO CLIP)

BAIER: A lot of focus on Senator Jim Bunning from Kentucky, who has blocked for a couple of days a temporary measure to keep the federal money flowing to extend unemployment benefits among other things.

There is now an effort on Republican and Democratic sides to have a more permanent fix that starts and would be retroactive so no one thinks that unemployment benefits won't be there in the long haul.

What about back and forth and the focus on Senator Bunning on unemployment benefits? We're back with the panel. Nina?

EASTON: I think Bunning is sort of touching on the — we think Social Security is the third rail of politics. Unemployment benefits are. And he got just a taste of that.

What's really interesting about unemployment benefits is we keep extending them, and in some states they are up to 99 states that people get them in this recession. They are skimpy. They are not a great cushion, but they are a cushion.

And economists found out, who study this stuff historically, find that it — continually to extend them contributes to high unemployment rate because people wait to the last minute. They wait until their benefits are about to run out before they take a less desirable job, before they decide to move, before they decide to, you know, go to a job that they wouldn't otherwise take.

Again, it's not — you know, these aren't great. It's not a great cushion. It has bipartisan support. But there is some evidence that this is keeping unemployment high.

The big layoffs came last year. What's keeping unemployment high are people who are remaining unemployed. Yes, jobs are hard to find, but the unemployment benefits are a factor and nobody wants to talk about that.

BAIER: Bill, Bunning's point they pass pay-go, pay as you go for elements in Congress, but largely ignored it, and they are not paying for things as they go on Capitol Hill. But he is now the focus on a lot of talking points of Democrats, saying Republicans are obstructionist.

KRISTOL: And he is retiring and they will pass the bigger bill that includes the unemployment extension, so I think it will go away as short- term issue.

But it is an interesting case. It's been politically suicidal to oppose extension of unemployment benefits for years, for decades, for all of our time in Washington, even though serious economists, nonpartisan economists, as Nina says it think it does — you shouldn't extend them forever.

There is reason they are temporary. Otherwise why don't we just pass legislation saying permanent unemployment benefits, which is another way to say permanent welfare bad idea, which we thought was a bad idea and repealed in 1996.

On the other hand, it's harsh to say in a very bad recession we're not going to extend unemployment benefits.

How different is the mood now? How serious is the country about the spending? How serious is the country about the fact that you can't have these — you can't have entitlements just go on — expand forever. You can't be as nice or compassionate as you would like to be to everyone forever because there are real consequences in the real world in the real economy for the federal budget.

And in this respect I think the Bunning incident is a tiny test case of sort of have the politics change. Could you run for president or senator or Congress in 2010 or 2012 for president on a much tougher stance towards government than having everything tough you want to do being trumped by appeals of compassion?

KRAUTHAMMER: I think the answer to that is no. And that's why the only guy who is doing this is a senator who is retiring. You don't even have a guy who is going to be in office after the election in November. And it's also the only guy who is doing this is a pitcher who used to throw at batter's heads, so the guy who is known to be mean.

(LAUGHTER)

I think what is he doing here is exposing the incredible hypocrisy of Democrats who have spoken about deficits and debt. The president spoke about it in the state of the union address. He touted the pay as you go system, which, of course is a farce. You run up against a small expenditure like this, a third of one percent of the spending in the government, and you can't raise $10 billion? He is exposing it here.

The Democrats, who have the House, have the Senate, have the presidency, if they want to attack the debt should cut spending. Instead they come up with structural tricks. The pay-go and the deficit commission, which is a way to kick the can down the road. It's all procedure. Nothing is happening in substance.

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