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All-Star Panel on Continued Times Square Terrorism Investigation, Rep. David Obey's Retirement

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

(BEGIN VIDEO CLIP)

SIB KAIFEE, ISLAMABAD, PAKISTAN: On July 7th, 2009, Faisal Shahzad along with this man who is a friend of Faisal Shahzad's traveled to Peshawar to meet a militant group. He is — according to investigators he is a former member of Jesh-e-Muhammad, serving now for the Pakistan Taliban. What his designation is we don't know that yet.

But he is a person that could have linked Faisal Shahzad to the master suicide bomber trainer in North Waziristan where according to Faisal Shahzad's statement to the U.S. investigators, this is where he is, he learned how to make the bomb.

(END VIDEO CLIP)

BRET BAIER, ANCHOR: That is Sib Kaifee. He is a reporter on the ground for us in Pakistan doing some investigation about the ties of this Times Square suspect now in custody, Faisal Shahzad. The man he was talking about there is a friend, one of many arrested in Pakistan.

And that is tied to northern Waziristan, the place that Shahzad told authorities according to U.S. authorities that he trained and learned how to make bombs.

How does this tie in to the Pakistani Taliban? What about the red flags that may have been missed here? Let's bring in the panel — Bill Kristol, editor of The Weekly Standard; Erin Billings, deputy editor of Roll Call; and syndicated columnist Charles Krauthammer.

Bill, what about the connecting the dots as the story continues to unfold?

BILL KRISTOL, EDITOR, THE WEEKLY STANDARD: The first day it was reported that the Pakistani Taliban attempted e-mail. It was a friend of mine that I talked to today, he gets up Sunday morning and goes down and has an e-mail from the Pakistani Taliban, which obviously he forwarded to the law enforcement agencies.

It seems this e-mail said "here is a link to the YouTube video," and it was a video of Mehsud saying we're retaliating for the death of his father who was an Al Qaeda affiliate in northern Pakistan. Remember it was dismissed by everyone. It's not the Pakistani Taliban.

BAIER: Out of hand.

KRISTOL: Ridiculous. It turns out that video was put up, filmed ahead of time. The website was put up, the YouTube the day before the bombing. Maybe they were coon d coincidences. They put up the video the day before the bombing and he tries to set off a bomb the next day in New York.

BAIER: He tries to set it off.

KRISTOL: It looks like there was close coordination until the last minute between this fellow in the U.S. and the relevant terror group in Pakistan. Then there is a second e-mail to Bill, saying here we are again and we're taking responsibility for this. This is retaliation for the killing of Mehsud.

So the resistance to believing that this guy was sent over from northern Pakistan to try to carry out a terror attack in New York is pretty stunning.

BAIER: Erin, is there an inclination by the administration or lawmakers to downplay it, do you think?

ERIN BILLINGS, ROLL CALL: I don't think there is an effort to downplay it now. Obviously, we are seeing quite the, I don't want to say an overreaction, but clearly they are reacting in many ways.

You know, Bill and I were talking earlier about the number of reactive measures that we're seeing from changing the no-fly list to possibly banning paying for cash for flights. You know, we have Senator Lieberman tomorrow announcing his legislation that would allow the U.S. to strip citizenship from folks they suspect are tied to terrorist organizations.

So the connecting of the dots is what we do after these things happen. The question I have is how did we get here?

BAIER: What red flags were missed along the way?

BILLINGS: That's right.

BAIER: Charles, Erin mentioned Senator Lieberman's bill he will bring up to strip citizenship from those known to be working with the terrorist groups overseas.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Look, it's part of a huge updating of the laws of war that we have to do. Almost all of our laws of war were drawn up in days where the enemy wore all red coats and they carried a flag and they marched in unison. That doesn't happen anymore.

We don't even declare war anymore. In the old days if you have an army in the old days and you joined it, in the Civil War, you forfeited your citizenship.

It makes eminent sense in days of terror wars where people don't wear identical uniforms and aren't carrying flags that if you find Americans making war against the United States by being associated, affiliated with or working on behalf of, attacking Americans on behalf of terror organizations, it makes eminent sense to apply the same idea and strip them of citizenship.

The reason it would be important is because if you are a citizen, as is Shahzad, you get a lot of protections you wouldn't ordinarily have if you were a non-citizen, and which is why I suspect he got his Miranda rights and protection of civilian trial he will probably get.

If you strip them of their citizenship, you expose them as somebody who's not an American citizen, forfeit all the rights involved, and you can treat them more easily as enemy combatant. I think it's a good idea and I hope it passes.

BAIER: Bill, our own contributor Judith Miller put up a link that questions — ten big questions about Shahzad and Times Square. She says how did the FBI surveillance team tracking him in Connecticut manage to lose him before he drove to the airport? How long did they lose him?

There's a whole list we have a link on foxnews.com, you can check it out.

Then he gets on the plane. He is on the no-fly list and he gets on the plane and the plane is turned around. Are the red flags that the system did not pick up, despite the fact they eventually got the guy? Are there inherent problems?

KRISTOL: Yes. There have been various snafus and breakdowns. One of the Connecticut papers went to his house in Norfolk, Connecticut, I suppose, walked in the backyard, the reporter did, and found all kind of documents, including his Pakistani passport in 2000 that was missed by the first search team that searched the house. He called them back and they did another search. So there were law enforcement failures.

And I think it's worst focusing on the big picture, the reluctance of us to take seriously the fact that there is a terror conspiracy, terror evident against us. Charles raised a naturalized citizenship point. He may have gotten himself naturalized to be a more effective terrorist.

He was naturalized in April of 2009, quits his job two months later, and one month after that disappears from his house with his family and goes to Pakistan to a terror training camp. Unless something happens between becoming a naturalized citizen and going to Pakistan, he knew being naturalized he wanted to go to Pakistan and be a terrorist.

BAIER: And you call that person homegrown if they are tied to some organization in Pakistan and perhaps planted here?

KRAUTHAMMER: Good point. The ultimate issue of connecting the dots is that overall connector is jihadist ideology. That's what connects them and makes them interlinked in the end, and ideology of uniting these people.

And the administration will not use the word "Islamist" as if it is going to incur the favor of people abroad. I think on the contrary, if you are a Pakistani, now involved in a civil war internally against its own jihadist and your people are dying and you're a moderate who opposes it, and America refuses even to identify what the cause of all of this is about and why all of the attacks are happening then you have to wonder if we aren't dishonoring those in the Muslim world who are on the correct side of what is an internal war by not even mentioning what the war is about.

BAIER: Very quickly, Erin, there was a thought that there could be additional screening for certain countries that was pulled off. Remember, after the Yemen, the Christmas day bomber. Should Pakistan and Yemen be put on a separate, you know, let's look at the people coming in from there?

BILLINGS: I think that is a conversation that needs to take place. When Obama took office he said that Pakistan was going to be under the lens. I don't know if we have seen major steps in that direction. I think we'll see them now.

BAIER: Go to the home page at foxnews.com/specialreport to vote for your choice online topic of the week. Up next, the panel talks politics with a surprise retirement in the House.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

REP. DAVID OBEY, D-WIS. HOUSE APPROPRIATIONS COMMITTEE: There is a time to stay and a time to go, and this is my time to go. Frankly, I hate to do it. There is so much that needs to be done. But even more frankly I am bone tired.

REP. JIM MORAN, D-VA. HOUSE APPROPRIATIONS COMMITTEE: It just seems like so many things happen in such a short period of time that it's hard to get a grasp on the implications of them. This is a very consequential event in terms of the United States Congress and the country.

(END VIDEO CLIP)

BAIER: The retirement of David Obey, congressman from Wisconsin. He had been first elected to Congress in 1969. He is the chairman of the house appropriations committee, a huge, powerful committee. And it took Democrats by surprise today.

We're back with the panel. Erin, how big a deal is this? What are the implications perhaps for the message being sent for the midterms?

BILLINGS: I think it's a big deal because it's part of a trend. Now he is the 17th Democrat I think to announce retirement. There are 20 Republicans.

But look, there is a survival tactic on the Hill right now. Democrats are fearful. And I don't think that David Obey and these other retirees, they don't have the stomach for a really tough race.

And Obey has been here for 40 plus years. I think he decided let me go out on top.

And there is also the possibility that Democrats aren't going to keep the House. I think a lot of the guys are look down the road saying...

BAIER: I don't want to be a ranking member.

BILLINGS: When I held the gavel do I want to hand that off? I want to go off on top. So that coupled with the fact I don't think the people have the stomach for the tough races. We are seeing the conservative, blue dog Democrats getting out because they don't want to fight.

It's obviously the winds are against the Democrats in November, and they know it.

BAIER: Bill?

KRISTOL: I think that's right. Obey had a tough race in Wisconsin. He might have lost his seat but he also probably he will lose the chairmanship if the Democrats lose the House.

What this tells me, if he thought he'd be chairman for another two years and able to advance the liberal agenda which he has believed in devoutly and advanced relentlessly for 40 years I believe he would go raise $100 billion from every business that deals with the appropriations committee, which is every business in America.

And go up on the air in Wisconsin and try to save his seat to be the chairman for one more term with a majority in the House and the democratic president. How often does a member get to do that? What this tells me is Dave Obey thinks that Democrats will lose the House and he will not be chairman. That's significant.

BAIER: It's also interesting, Charles, he didn't tell any of his democratic colleagues, he didn't tell the caucus. The announcement came out while they were meeting today. It was a surprise on Capitol Hill.

KRAUTHAMMER: That's like when Senator Bayh in Indiana also decided he wasn't going to run, that was a surprise as well. That was also a bombshell. Senator Dorgan of North Carolina was not announced in advance.

I think the analysis we heard is right. It's not that he thought he would lose his seat. I think he thought he won 25 in a row and he had a god chance to win again. But this is a signal high-level Democrats who think they will lose the House.

If he runs hard and wins and on the same night his party loses the House then he is going to end up losing the power of the chairman, he is not going to resign that night. It doesn't look good. So he'd be stuck two years.

I thought it was interesting how the press spun the Republican elections last night. For instance, Dan Coates in Indiana won the primary for senator but less than the 40 percent of the vote. It's being attributed to how the Republicans are split by the tea partiers.

But that is a complete misunderstanding. I think they are not extreme, they are not on the right as people imagine. They are a constituency of fairly centrist Republicans who believe in smaller government, upscale, more highly educated than the general public.

They will be easy to bring back in, in the general election. Not like you appeal to the George Wallace constituency, which would jeopardize repeal in the center. I think they will be easy — yes, they might have supported more libertarian candidates, but it's not as if it will be a hard time roping him in.

I think they will be an asset in November and not a detriment if you are a Republican.

BAIER: Quickly, Erin, anything in the primary results that raised your eyebrows at all? Turn-out? Anything?

BILLINGS: Turn-out was interesting. The Republican turn-out was far superior to the Democratic turn-out, and I think that is going to raise eyebrows for Democrats. They have to get this get out the vote effort underway now or they will have even worse problems come November 2. They are looking at that.

I also think that the numbers really do tell. We talk about the Coates race, he got less than 40 percent of the vote. There is an anti- establishment feeling out there. Obviously, that is going to benefit Republicans.

Democrats will have to figure out how to galvanize their folks and get them out. I don't know how they'll do it. Maybe they will bring up the base issues.

BAIER: Interesting.

BILLINGS: It is interesting.

BAIER: Erin, thank you very much. That is it for the panel. But stay tuned for another interesting call for help.

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