This is a rush transcript of "Special Report With Bret Baier" from March 22, 2010. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: Tonight, at a time when the pundits said it was no longer possible, we rose above the weight of our politics. This is what change looks like.

SEN. JOHN MCCAIN, R-ARIZ.: We will challenge this in the courts. We will challenge this all over America. And the will of the people will be heard. They do not like this process. They do not like this product. And we will prevail over time. I am confident of that.

SOUTH CAROLINA ATTORNEY GENERAL HENRY MCMASTER: Nowhere does it say that the federal government can require a private citizen to go out and buy health insurance or anything else.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I think there is pretty long standing precedent on the constitutionality of this. My advice from counsel is that we will win these lawsuits.

(END VIDEO CLIP)

BAIER: Reaction to the historic passage of the health care bill by the House of Representatives on Sunday night, the White House touting what's going to kick in right away, Republicans vowing to repeal it and challenge it in court. And now it moves on to the Senate to be fixed. Let's bring in our panel, Bill Kristol, editor of The Weekly Standard, Mort Kondracke, executive editor of Roll Call, and syndicated columnist Charles Krauthammer. No matter what side you are on on this bill, Mort, this was a big, big development for this White House and House Democrats.

MORT KONDRAKE, EXECUTIVE EDITOR, ROLL CALL: Yes, a tremendous victory. They pulled this back from the edge of defeat. It looked as though it was going to not get passed, and they managed to bring it across the line.

And the good news about it is if it goes into effect in 2014, if John McCain doesn't manage to stop it somehow on the beaches or in the air drones or wherever he is going to fight the battle of Britain, 32 million people who now lack health insurance are going to have health insurance. The problem is that it doesn't control cost. The deficit is going to balloon. The country is going to go bankrupt on paying entitlement cost. There should have been a better way to do this than the way they did it. But it's done, and it doesn't look as though it's going to be repealed. The Republicans, if they win the next election, are not going to be able to repeal it because Obama would veto the repeal amendment. So, and I hope that the Republicans will not campaign simply on repealing it but, as Paul Ryan said on "Fox News Sunday," repeal it and replace it with something that will cover the uninsured.

BAIER: Bill, what about that, the repeal movement?

BILL KRISTOL, EDITOR, THE WEEKLY STANDARD: I think the Republicans will run on repealing it and replace it. You have to repeal it before you can replace it. It can't be repealed in 2011 because President Obama will still be president. But most of it does not go into effect until 2014.

So we can run — the Republicans can run congressional elections and a presidential election against this piece of legislation, and I think they can make a compelling case that this legislation will bankrupt the government and bankrupt the country and damage American health care.

Decline is a choice. I think someone once said that. And I think Republicans and some conservative Democrats can go to the public and say, is this really the choice you want to make? Is this — building in these costs, damaging the health care system — the implications of it are so terrible with the debt we already have, I think the public could — I think this can be repealed.

BAIER: But yet within six months you are going to have the coverage can't be dropped because of illness, children can stay on their parents' plan until 26. These things — insurance would not impose lifetime benefit caps. These are things that people can feel immediately so Democrats can cash in on that within six months. True?

KRISTOL: Yes and no. Repealing it doesn't mean repealing every little thing in it necessarily. Parts of these were parts of Republican proposals. Republican are for risk pools to make it possible for everyone to be insured and not to be dropped because of preexisting condition. That's part of Paul Ryan's proposal and the House Republican proposal that was rejected.

But I think — two points. There's this too simpleminded view of the American public, that if you give them something and they won't ever think of the public good. They won't ever think it's bankrupting the country. They won't ever think it's a step on the road to decline and say I got this little benefit so I'm going to hang on to this whole terrible piece of legislation that is so bad.

And secondly, how many people really benefit from this? If one wants to go into this crude argument of self-interest. The reason that Medicare and Social Security could never be repealed and were so popular is they were universal benefits. Everyone got them. This does not universally benefit most Americans.

Obama himself keeps saying, hey, if you like your current health insurance, it's not going to change. Well, if it's not going to change with this, it's not going to change without it. So a lot of these benefits are very targeted to some individuals. I think there a ways the Republicans can argue to help these individuals without everything else that's bad in this bill.

So I think the repeal agenda is a real agenda and I think that's what Republicans are going to run on.

BAIER: Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: The first question is will the courts act on this. I think there is a very good case, a very strong case you can make that the Commerce Clause has never been used to force an individual to engage in a contract with a private institution, i.e. an insurance company here.

Although, so I think there is a strong case. But I cannot imagine that the courts will overturn a piece of legislation this large. So, just as a practical prediction on this, I think it's unlikely, although I'd love to see Justice Alito write the overturning opinion.

But then I think there is a larger issue here. I think ultimately Obama understands that he has just added an unbelievably large entitlement onto a country drowning in debt. He is not stupid. I think he's anticipated this, and I think he has, from the beginning, had a plan.

And the plan is he is going to use the deficit reduction commission, which will report only after November, and I'm absolutely sure it will recommend something new in American history, a national sales tax which is called a VAT in Europe.

All the Europeans who have the kind of entitlements America is now going to have, health care and all the others, need the VAT, because it's a gusher of income for the government. And once you have that, even at very small levels – a percent or two of national sales tax — that's how the liberals think they will be able to fund this new, very expanded entitlement state.

It's the way it's done in Europe. It's going to have to be done here. And that, I think, is going to be the argument in the president's election of 2012.

BAIER: Quickly Mort, now the bill, the reconciliation fixes that were passed by the House now head to the Senate, debate likely starting shortly after the president signs this bill into law. That potentially could get messy.

KONDRACKE: It could get messy. It's going to be long and drawn out. The Republicans are promising hundreds of amendments.

And also there is this question about Social Security being affected by the terms of the reconciliation bill passed by the House, and that's a no-no under reconciliation. So if a point of order is sustained on that, 60 votes, then the bill would have to be — would not be identical to the one that the House passed. So the House would have to pass the reconciliation bill again.

I cannot believe they wouldn't do that if they had to. I mean, they have marched over so many coals already that I cannot believe that they wouldn't do it one more time in order to get this accomplishment sealed.

KRAUTHAMMER: There is a scenario under which the vice president, who has the power to overrule the parliamentarian, would arbitrarily overrule him on this and, for example, allow a change in Social Security. I think that would be a terrible mistake.

BAIER: You've previously called that the thermal nuclear option.

KRAUTHAMMER: It was a hundred mega tons, because I think it will be the ultimate demonstration of high-handedness. And I suspect that even Biden would flinch from doing that.

BAIER: Does it get through the Senate?

KRISTOL: I think some bill will get through the Senate. It won't be identical to the House bill, so if will have to go back to the House.

And this debate will be useful, because even if you take the kind of low self-interest point of view about the American public that all they care about is immediate cost and benefits, there are a lot of immediate costs in this bill.

The Obama defenders keep saying oh, the American public is going to get this benefit and this benefit and fall in love with it. They will get tax increases next year, which the Republicans will highlight on the Senate floor. Medicare Advantage, which is a very popular program for seniors is going to be cut.

So I think even in the short-term this bill imposes, in my view, more pain than gain.

BAIER: There is much more on health care reform on our homepage Focnews.com/specialreport. You can tell us what your strongest reaction is to the vote by participating in our online poll on the right side of the screen.

We will be right back to talk about the U.S., Israel, and Iran in three minutes.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SECRETARY OF STATE HILLARY CLINTON: Let me be very clear. The United States is determined to prevent Iran from acquiring nuclear weapons.

(APPLAUSE)

Our aim is not incremental sanctions but sanctions that will bite. It is taking time to produce these sanctions and we believe that time is a worthwhile investment for winning the broadest possible support for our efforts.

But we will not compromise our commitment to preventing Iran from acquiring these nuclear weapons.

(APPLAUSE)

(END VIDEO CLIP)

BAIER: Secretary of State Clinton talking to Israel's largest U.S. lobbying group AIPAC today, talking about Iran. Meantime, Israel's opposition leader Tzipi Livni said this is time, waiting for China and Russia, that Israel does not have.

We're back with our panel. Charles?

KRAUTHAMMER: Those words we heard from the secretary of state — I have rarely heard emptier words issued with such phony emphasis.

I mean, "We have a commitment. We were not compromised on our commitment." They have done nothing in a year and two months. Last summer the secretary of state spoke about getting ready to impose crippling sanctions, and then here we are nine months later. They are talking about trying to organize a wide coalition to begin to talk about imposing sanctions.

They have had nine months and they aren't even ready. The Chinese have said no. The Russians are equivocal and not giving any encouragement.

To give you an idea how catastrophic is the state of this creating a coalition, she was in South America a few weeks ago and went to visit Brazil, which is on the Security Council, this session, asked for support on sanction and was told outright in a real slap at the United States, no.

So, it isn't even getting in the big great powers into this tent. She can't even entice a middle power like Brazil that's traditionally a friend of the United States. They are doing nothing and they are going nowhere on this.

BAIER: Secretary Clinton previously, Mort, said the U.S. is pushing for "crippling sanctions." Now they are sanctions "with a bite."

KONDRACKE: I think a bite, a nip at your ankles is a lot less than crippling.

And, you know, the idea that they are going to still persist in going to the United Nations after — she was just in Russia, and she took a few words that the Russians said time is running out for the Iranians as a big sign things are moving in our direction.

But at the same time the Russians said they are going to provide fuel for the shared nuclear reactor, which was a slap in the face at the same time which she never referred to in that speech.

I was there when she made the speech, and she was sort of, you know, kind of warmly received because she has good applause lines. But everybody I talked to afterwards said the rhetoric was great but — dot dot dot — we have got to see the delivery. And the delivery ain't there.

BAIER: The other issue, Bill, was obviously trying to smooth over the tensions with Israel. Earlier tonight we told you in Wendell Goler's report that the American pro-Israel lobby group AIPAC had issued and called on the Israeli government to: "immediately freeze new settlement projects in West Bank and Jerusalem."

AIPAC says it did not do that, issue that statement. The spokesman said someone faked his e-mail address and issued a false statement. We regret this error in Wendell's piece tonight and are correcting it here.

Bill, it was pretty detailed, this release.

KRISTOL: Yes. Someone went to the trouble of getting the name of the AIPAC spokesman and constructing a fake e-mail which he sent out to some list, maybe hijacked his press list, and some people were unfortunately fooled. Anyway, it's not the case.

BAIER: The bottom line is they tried to smooth over the relations over the settlement issue. Did she do it effectively?

KRISTOL: It would nice be a fly on the wall at the meeting between Prime Minister Netanyahu and President Obama tomorrow. I think they are both proud men who have strong views which don't coincide I would say on this issue. It will be interesting to see what the frank discussion is that they are going to have.

I guess they are not opening it to the press either at the beginning or the end. Usually, as you know, they bring in the press at the beginning and toss a question to each leader and get the "spray" I think it's called, the photos and the two of them sitting in the two chairs.

BAIER: Very good for a print guy.

KRISTOL: I worked in the White House and I vaguely remember complaining, the vice president, there is the press again knocking over the flower pots and all of that.

But they are not going to do that. It will be a private meeting between the two of them. And the bottom line is the U.S. government has wasted more time on the 1,500 housing units in a part of Jerusalem that's going to remain part of Israel under any conceivable agreement than in trying to get Iran to stop its nuclear program.

BAIER: Charles, you knew right away this AIPAC statement was not where they were coming from. Do you think that the administration has gone enough to sooth the initial reaction that they had to —

KRAUTHAMMER: The question is will they insist on no Jewish construction in Jerusalem. No government of Israel, left, right, or center, would ever accept that.

So if it insists on that, which appeared it might have been a condition that the secretary of state had given the prime minister of Israel last week during the furious phone call, if it was, this is — the entire process is at a halt. They are going to have to find a way to climb off that tree.

Israel wants negotiations. It's the Palestinians who have said no negotiations unless you have got a freeze, which has never happened in the 17 years of U.S. — of Israeli negotiations with the Palestinians.

Content and Programming Copyright 2010 Fox News Network, LLC. ALL RIGHTS RESERVED. Copyright 2010 Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.