This is a rush transcript of "Special Report With Bret Baier" from March 5, 2010. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: It shows that the measures that we're taking to turn the economy around are having some impact. But even though it's better than expected, it's more than we should tolerate.

REP. KEVIN BRADY, R-TEXAS: The employment rate remains unchanged. It's not moving down as was promised with the passage of the first stimulus.

(END VIDEO CLIP)

WALLACE: President Obama and Republican Congressman Kevin Brady with sharply different reactions to the mixed economic news today. Let's bring in our panel, Steve Hayes, senior writer for the Weekly Standard, Juan Williams, news analyst for National Public Radio, and syndicated columnist Charles Krauthammer.

Well, as we said earlier, the unemployment number for February came out and stays steady at 9.7 percent, 36,000 jobs lost, but that is fewer than had been predicted by the economists, particularly given the huge snow storms up and down the east coast in February. You look at all of that, where do you think the economy is, Steve?

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: It seems like we are in sort of a pause moment right now. We are not shedding jobs the way that we had been. We are certainly not shedding them the way we were a year ago. But we are not seeing a dramatic increase in jobs either. So I think we are in this in-between moment.

And the question now that I think everybody wants an answer to is, what comes next. Are we at risk going into a double dip recession where the unemployment numbers lag, which I think they are likely to do whether or not there is a double dip recession? Or are we going to see actual real recovery and some jobs added?

WALLACE: Juan, let me throw something else in the hopper, and that is the House and the Senate have now passed different versions that it looks like they will get it together on the $15 billion jobs bill, tax credits, payroll tax credits for small businesses who hire people who have been unemployed.

When you take the stimulus that's going to come this year and you take, I think, some jobs bill, is that going to make a difference this year?

JUAN WILLIAMS, NEWS ANALYST, NATIONAL PUBLIC RADIO: Hopefully it will make a difference. The thing is, you can't predict. It looks on the basis of these numbers that we saw today, unemployment numbers, plus as compared to last year when we were talking like 750,000 jobs being lost in one month period, plus if you look over the last six month period, again, you see a slight decline in people who have been unemployed for six months, I should say.

These are all good news, harbingers of good things to come. But the need for additional stimulus, the needs for the jobs bill, and the need for some kind of, sense of, you know, the government acting and continuing to support the economy, I think is clear. And so that's why I think the Republicans and Democrats are going to act here.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I think the key phrase here is "sense of the government acting." I think there is great fiction in our politics that the presidents command the economy like King Canute and the tides.

This is a $15 trillion economy. The bill you mentioned, the jobs bill, is $15 billion. That's one tenth of one percent of the gross domestic product. It's not going to have any serious effect on the economy. The economy is largely autonomous and it's cyclical. It looks like we are at the bottom of a cycle for unemployment. It looks like we are at a plateau in unemployment, the bottom of the cycle of the recession, and the direction will likely be up. Republicans ought to be careful. If you blame the administration for all of the negative news over the last year in the economy, you are going to have to praise the administration when the inevitable swing happens. And it will inevitably swing. The one time the federal government affects the economy is like in '08 when you have a systemic crisis and the banks are about to go under, credit is drying up and everything will seize over and collapse. Then federal action, as we had in '08, the bailouts, in which Obama did in '09, is going to have an effect. But these bills, the jobs bills are worthless. The only thing you can say for sure is about last year's stimulus is that it's going to leave $1 trillion hole in the Treasury. That's all.

WALLACE: We are talking about the jobs and the economy today. After Scott Brown's victory in Massachusetts in January, and then the president's State of the Union address, and supposedly the focus was supposed to be exclusively jobs, jobs, jobs. That's what Congressional Democrats were saying. Let's get off this health care and talk about jobs.

But despite the fact that we are focusing on it today, Steve, it seems clear with the president's push that we're going to be focused almost exclusively on health care reform through the end of March, maybe even early April. Mistake for the president?

HAYES: It's hard to tell at this point. I mean, I think their gamble is, look, we're going to work on health care. We need this accomplishment, and then we can focus on jobs almost exclusively to the election. By the time November rolls around, voter will have forgotten that we spent as much time focused on health care as opposed to economy as we did.

The risk obviously is that voters want to talk about the economy right now. Health care still ranks down fairly low in poll after poll of issues that voters want the government to address. He is talking about things people don't care about.

KRAUTHAMMER: But the problem is, if you pivot and say I'll do jobs and the economy, what do you do? That's the problem.

I think Obama is rather smart about this. Why not work on something you might have effect? You can certainly affect health care, and something he believes in. But if he pivots, what's he going to do? Another $15 billion for a jobs bill which is not going to have any effect?

WALLACE: Wait a minute. I'm going to throw the word back to you. You talked about "the sense of." So maybe at least you give people a sense of.

KRAUTHAMMER: What you do is you dance all year and pretend that you're helping the economy and do stuff on jobs. But I'm not sure anybody will believe it. If $1 trillion whack last year had little effect in the stimulus, is anybody going to believe --

WILLIAMS: That's not true, Charles. You ask any governor in this country and they will tell you that they were able to hold on to the size of their staff, their government, government workers because of stimulus spending, that Medicare and -- Medicaid, I should say, on the state level, that those budgets were going to explode unless you had some supplementary funds coming from the federal government.

So you can say it didn't create jobs, I would listen to you on that. But you can't say it did nothing.

And the second thing to say is Americans are anxious about jobs. And a politician's job is to speak to the spirit of the country. and it's important that he -- the president is making a mistake here.

KRAUTHAMMER: In the year of the stimulus, unemployment rose to 10 percent.

WILLIAMS: Yes.

KRAUTHAMMER: That's what people see and they feel. Our numbers show today that one in six of all Americans is underemployed. So you can have a governor happy about saving a few jobs here and there, but the economy and unemployment has gone way down south with stimulus. So if you are talking about perceptions, it's obvious that the stimulus has had very negative effect, if anything, on perception.

WALLACE: All right, I have a feeling we have to leave and I have a feeling we are not going to settle this disagreement now anyway.

What do you think the most important number was from today's jobs report? Go to our homepage at FOXnews.com/Special Report and vote in our online poll.

And up next your online choice for the topic of the week in the Friday lightning round. Stay tuned.

(COMMERCIAL BREAK)

WALLACE: Every week on the FOXnews.com "Special Report" page, viewers report on what topic we should discuss first during the Friday lightning round.

Well, as of 4:30 eastern this afternoon Charles Krauthammer's wild card pick clear winner, big winner, 70 percent of the votes. So, Charles, as you like to say, what's your question, and the correct answer?

KRAUTHAMMER: First, I want to commend my opponents, they ran a clean campaign.

(LAUGHTER)

There were no personal attacks, so I want to congratulate them.

OK, here is the question. You are the president. You bring in the wavering Democrats on health care. What's the political, not the principled argument you make to sway them?

And the correct answer is that as of now the perception of the bill is completely negative. If it never enters into law, it will remain negative. It will be a millstone around your neck forever.

The only hope of changing the perception of how bad the bill is to enact it, have history take place, have people experience it, and perhaps perceptions will improve. Otherwise, you will never escape the downside.

WALLACE: Juan, do you have something to add to that.

WILLIAMS: I like that argument very much. I think the natural extension of that logic is that if you don't support the bill now, you lose in November.

But you need this bill and you need it to have a more positive perception when it's available to people and you can say the insurance industry is now being regulated and you are protected against their excesses in order to make voters say, you know what, I want more Democrats.

WALLACE: But Steve, isn't that a tough argument to make when Pelosi and the president have said we have got to do the right thing, not the political thing?

HAYES: The argument essentially is vote for this bill now because it's unpopular. That doesn't work.

Look, I think I would make a long-term argument like the one that was made before the 1993 health care debate, which is to say create a middle class entitlement. Democrats are the protectors of this new middle class entitlement. Voters don't like to get rid of entitlements once they are there. They'll be doing a favor for the Democratic Party in the long term.

But, remember what the president said in the state of the union. He, himself said that this wasn't good politics, as you pointed out. That's a hard argument for him to make now.

WALLACE: All right. Second issue in the lightning round -- Karl Rove has a new book out called "Courage and Consequence." It isn't officially out yet, but everybody has -- seems to have a copy of it as I'm sure it's already a bestseller.

Start with you, Steve, what's your favorite nugget from the book?

HAYES: The nugget that I found most interesting is Rove's admission -- he takes responsibility for not fighting back more intensely in the summer of 2003 when weapons of mass destruction were not found against the claims by Democrats that President Bush lied us into war.

A lot of us were saying at the time, and the Bush White House was critical to us at the time, so it's nice to hear him say it now.

WILLIAMS: Karl writes about the president after the events of 9/11 than being taken out of Florida, and he talks about going up in the airplane.

And to me this was the most human and interesting part, because he says once in the air, Air Force One then stood on its tail to get as high as possible as rapidly as possible. I had never been in a jet at such a steep incline.

I think given the pressures of that moment, although he said President Bush was naturally calm, Karl admitted to being anxious. But given all that was happening and to have a jet go straight up in the air it, must have knocked your socks off.

WALLACE: Literally.

KRAUTHAMMER: There is a footnote to the election of the year 2000. Remember there was a DWI arrest Bush had had in 1975. It was leaked on the final weekend and it hurt Bush. Rove blames himself. He knew about it. He thought that if he had insisted on it being revealed earlier, Bush might have had control.

The story would have had less of an effect and we may not have ended up with a tie and with the Bush presidency having the taint of illegitimacy as a result of the recount.

WALLACE: And it was reported first by FOX News' Carl Cameron.

Quickly, less than two minutes left. Start with you, Steve. Iraqi big elections this Sunday. How important for the -- that country and how important for the U.S., the withdrawal?

HAYES: Well, they are huge. They have the chance to solidify Iraq as a democratic state. You have elections in which there are some 6,000-plus candidates running for 325 seats, that have featured presidential debates on television that have been watched not only in Iraq but around the Middle East, and were so compelling that Hosni Mubarak called into an Arabic language network and praised the debates.

WALLACE: I can just see it now on Larry King, Hosni from Cairo.

(LAUGHTER)

WILLIAMS: Who are Iraqi voters? Do they want to go back? Do they want another Saddam Hussein? Do they want an authoritarian leader? Do they want Mullahs? Do they want some kind of religious rule for their country? Exactly who are they?

And the big issue for us is, the Americans is, do we have to stay? If they have a solid stable democracy after this election, if they're able to form a government, the United States can say bye-bye.

KRAUTHAMMER: It's a great day, but it's a shaky process. Two questions. Now will there be a lot of attacks on the polling stations? And second, will the Sunnis turn out after many of their candidates have been tossed out?

But the real issue starts after Election Day in trying to form a government. Remember, after the election of 2005, it took 156 days. And that was very damaging. If that happens again, we will make things extremely difficult.

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