'All-Star' Panel on Bernanke's Warning to Congress About National Debt

This is a rush transcript of "Special Report With Bret Baier" from April 14, 2010. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: The deficit at the end of 2020 would be nine percent of GDP and the federal debt would balloon to more than 100 percent of GDP.

TIMOTHY GEITHNER, TREASURY SECRETARY: I didn't see his remarks. Of course that would be unsustainable. But that's not going to happen if Congress adopts the policies the president has laid out. He has laid out very comprehensive, detailed set of policies to bring our deficits down dramatically over the next few years and get them closer to the point of living within our means again as a country.

But of course, everybody recognizes right now that we're living with unsustainable deficits.

(END VIDEO CLIP)

BRET BAIER, "SPECIAL REPORT" HOST: The treasury secretary reacting to the Federal Reserve chairman's remark on Capitol Hill. The last time the GDP, the nation's output — or rather the national debt equaled or surpassed the GDP, the nation's output, was just after World War II.

But the thing that caught everybody's ears is the interest in 2020 potentially could be $1 trillion a year, just to pay the interest on the national debt.

What about all of this in context? Let's bring in our panel, Tucker Carlson, editor of TheDailyCaller.com, Juan Williams, news analyst for National Public Radio, and syndicated columnist Charles Krauthammer.

What about this? It was a bit of a bombshell, Tucker.

TUCKER CARLSON, EDITOR, THEDAILYCALLER.COM: Pretty remarkably direct and terrifying and worth taking seriously, and unacceptable.

Basically there are two options — we'll go bankrupt or raise taxes, because I think based on the recent history we know Congress won't attack these entitlements with any seriousness.

The only taxes capable to raise the money you need to lower the debt are not taxes on the rich but are some kind of VAT, sales tax or consumption-wide tax. The White House is claiming we're not taking that seriously and not considering doing that. But they are.

BAIER: Juan, how big of a problem in this administration is this announcement, is this fear about the nation's debt as you look towards programs that are adding up to it?

JUAN WILLIAMS, NEWS ANALYST, NATIONAL PUBLIC RADIO: Well, there's no question they're fearful, because if you look at the numbers, the poll numbers in the country, right after unemployment is the deficit and debt. People are very uncomfortable with it, and it has the power to suggest that what we're involved with here is the explosion of government, and of course big government, the idea of intrusive government is associated.

So this becomes the ball of wax that's the case against President Obama. From the White House perspective, their argument, as you heard from Geithner, they have policies in place that are intended to reduce this overtime. And if you really want to do it, what you have to do is not only potentially raise taxes — of course, the body politic will reject that at some point. Americans are allergic to tax hikes. But you have to talk about potential cuts to entitlement program. We're not cutting defense spending at this moment.

So what entitlements would you cut? That is a very difficult case.

BAIER: On the tax issue, there's a lot of talk about the Bush tax cuts expiring, but they will have to become Obama tax cuts if he will continue some of them. The legislation will have to be rewritten and a new bill. That will get messy as well.

WILLIAMS: And he so far has extended the Bush tax cuts. If they become the Obama tax cuts — and remember, we're still struggling to get out of a recession. And it may be that he perceives it as necessary, I think this will be a point of tremendous pain, because guess what, it drives up the deficit.

BAIER: Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I'm interested in the timing of all of this. It seems as if now that health care is behind us with all the smoke and mirrors and deception that went in the numbers that made it look OK, honesty has broken out on Capitol Hill.

So all of a sudden we're going to hear from the chairman of the Federal Reserve and others how deep in debt we are, because remember, health care added $2 trillion to our deficit.

And now the numbers that Bernanke is talking about are numbers that are scrubbed of the absurd assumptions that the CBO had to make under instructions from its boss, the Congress.

So the CBO had lower numbers because it assumed that the AMT, the alternative minimum tax, will not be fixed, which, of course, it will be. So that is going to add on to the deficit. It had to assume that all of the Bush tax cuts are going to expire, but, of course, Obama promised it will only expire on the rich. So as a result, the real numbers are we'll have, as we heard, nine percent of GDP as deficit in 2020 and a debt over 100 percent of the GDP, which puts us in the territory of a country like Greece, which means the only way out is hyperinflation, because no country can support $1 trillion in debt service. So we're going to have to start thinking about taxes and entitlements, and you will hear about it after the November election.

CARLSON: If you want to know what driving the tea party, this is it. This is core message of the tea party and why they exist, because debt — there was a recent Gallop survey that said people fear debt more than terrorism. In some sense they're right to fear it more.

This will, if it continues, unless Congress shows real evidence of willingness to address entitlement and cut them back dramatically, and it shows no evidence ever of willing to do that, this will spawn I think possibly a third power, a powerful political movement to challenge both parties.

BAIER: And there will be a tax party get-together in Washington tomorrow, Tax Day, April 15.

Tucker, what about this battle that always happens on this tax issue? How much can you tax the wealthy without impacting the revenues that those businesses and those businessmen and women provide?

CARLSON: Well, the projections are that in order to do the job, you would need to get the rates up to 98 percent rate on the richest of the rich. That's not possible. They'll leave. They'll go offshore. So really you need a broad-based tax. That's why the VAT — I think this is a story that has been underplayed.

BAIER: Charles talked about it —

CARLSON: Well-covered — of course. But I think the rest of the press ignored this. You know, the brain trust behind this administration, the Center for American Progress, has been pushing a form of VAT for a long time. I think the Obama people really see it as on the table though they are not telling the truth about it.

BAIER: A value-added tax, we should point out. Juan, you think it's real —

WILLIAMS: It's been on the table, and Kent Conrad of the banking committee says it is on the table and can't be ignored. People like Nancy Pelosi have said you have to look at it given our financial circumstances.

But let's come back to something here. Tomorrow is April 15, Tax Day. And I think the argument is made that 50 percent of Americans respect paying taxes, the low-income. So the people who are paying taxes and those benefiting from the economy therefore are overtaxed.

But in fact I don't think that's the case. Raising taxes on upper income Americans, especially those like the guys on Wall Street who benefited from all of these, doesn't seem to me that's a point of political risk at this juncture.

KRAUTHAMMER: The reason why this story was underreported was because it got in the way of health care, which liberals were pushing, especially liberals in the media.

It doesn't only add a new entitlement, but it takes $1 trillion of what otherwise would be deficit reduction, half a trillion in cuts in Medicare and half a trillion in increase in taxes. Instead of applying it and reducing the debt, it applies it to a new entitlement, so it's now unavailable, which makes our debt even worse.

BAIER: Next up, the attorney general says he still does not know where he will try 9/11 suspects. Don't forget the online show at the top of the hour. Logon now and get ready for the webcast coming up.

(COMMERCIAL BREAK)

ERIC HOLDER, ATTORNEY GENERAL: New York is not off the table as a place they'll be tried, though we have to take into consideration the concerns that have been raised by local officials and by the community in New York City. We expect that we will be in a position to make that determination, I think, in a number of weeks.

SEN. JESS SESSIONS, (R-AL) SENATE JUDICIARY COMMITTEE: As you know, I supported your nomination, but your actions have shaken my confidence in your leadership at the Department of Justice.

REP. PETE KING, R-N.Y.: This is again, just an absolutely disgraceful decision by Attorney General Holder. This is a liberal ideological view he's taken.

(END VIDEO CLIP)

BAIER: Attorney General Eric Holder up on Capitol Hill today, a lot of questioning dealing with where terror suspects will be tried, whether they be civilian court in New York or elsewhere, or military commissions.

You heard Congressman King. Here is New York Senator Chuck Schumer, a Democrat, saying: "We know the administration is not going to hold the trial in New York. They should just say it already."

We're back with the panel. Charles?

KRAUTHAMMER: Schumer is right. You have to ask yourself why is Holder delaying this? I mean, we have known for weeks it's not going to happen here. Here he is, he returns after weeks and weeks of deliberation, and he still doesn't have an answer and he says it will be a few more weeks.

And he also said, I thought it was remarkable what he said today, that deciding whether to try Khalid Sheikh Mohammed in Manhattan is a close call. It's not a close call.

It's not even the expense of shutting down of Manhattan or the united opposition of everybody, Republican, Democrat in office in New York. It's the fact that you don't reward the greatest mass murder against Americans in our history with a trial in the media capital of the world where he gets all of the, he gets the biggest stage on which he can perform, which is what he is all about.

So I can't understand how anybody thinks it's a close call. On Guantanamo, they obviously are totally stuck equally on Guantanamo because even though it's the worst of all facilities, except for all the others. It fits the bill. It's an island, it's secure, it's in operation. It's well-run. It has secure, not only holding cells but also areas where you can hold trials. It's offshore, so technically it isn't in the United States.

Yes, we all would like it closed, but there is no superior alternative. So it's hard to understand why they are persisting in this. The best they could do is to have a Guantanamo inside the United States at huge expense. And it's entirely unnecessary.

BAIER: Thompson, Illinois, they are looking at it.

Juan, do you think there is doubt in the president's mind about the decision? When you have a Democrat like Chuck Schumer out there saying what he said, there are others, that doesn't really play well for the decision-making process on this issue, right?

WILLIAMS: No. But you see there is a dynamic behind what is going on here, Bret, which is this. The administration feels they are being unfairly assailed by Republican critics in specifics with every decision they make with regard to anti-terrorist activities in this country.

And so you get Eric Holder, the attorney general, saying of course I reserve my right to make this decision, and New York is not off the table. He may have said to Chuck Schumer and others, New York radically declined in terms of the possibility, but he is not going to say, you know what, you guys are making the decisions here. I'll let the critics make the decision and tell us what to do.

BAIER: But isn't it President Obama's decision ultimately?

WILLIAMS: It is. But he is the attorney general here and the attorney general is the lead actor here. Certainly it is to President Obama's credit or default that this decision is made, but it comes at the initiative of Eric Holder.

Let me say also with regard to Guantanamo Bay that Charles is talking about. Guantanamo Bay is a bigger issue having to do with our stance in the world, the world's view of Guantanamo Bay, what is going on there, and efforts to close Guantanamo Bay.

And so it is a much bigger issue, and you can say that's convenient, why don't we keep that open? It has to do with our reputation in trying to gain allies in our constant struggle against terrorism in the world.

CARLSON: I understand Juan's theory, except the White House already signaled New York is off the table and said as much through cut-outs to us in the press weeks and weeks ago.

So what is to be gained by bringing it on the table again? Clearly there is a strategy behind this. It's not clear what it might be. The net message is chaos inside Justice, and that's a bad message to send.

The second point I'd make is of course Gitmo is a sticky question, but not for the left. One reason this president campaigned on a promise made again and again, I watched with my own eyes, to close Guantanamo Bay is this is a very hot button issue on the left.

And yet they haven't said anything. There are more than 200 prisoners still held on Guantanamo Bay. Where is the ACLU, Amnesty? Where are these people living up to their own ideals and principles? They ought to be hammering the administration on this in public, and they're not.

BAIER: Because the president doesn't want to talk about the indefinite detentions that will have to come with the decision to close Guantanamo, because there are terrorists there who will not be able to be tried but have to still be held.

KRAUTHAMMER: Exactly right. Gitmo is not a question of geography. It's a question of our policy. You're right, it remains detention without trial. It has to be. There is no other way. In every war, you keep a prisoner until it's over. Al Qaeda hasn't called off this war, so it's indefinite detention. It could be in Gitmo, Illinois, it won't matter. The Left hates indefinite detention, and changing the venue doesn't change the policy.

BAIER: That is it for the panel, but stay tuned for the latest product that may soon fly off the shelves.

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