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Special Report

Will Washington Reach Debt Ceiling Deal?

This is a rush transcript from "Special Report," July 1, 2011. This copy may not be in its final form and may be updated.

BRET BAIER, HOST: Before the break, we asked you will a debt ceiling deal be reached before August 2? And 73 percent of you said no, 27 percent said yes in our unscientific poll on our homepage. You see by our voting there, this was what was chosen for the Friday lightning round. Debt ceiling was what won this week. We're back with the panel. Steve, deal, no deal? Where are we? What is the status?

STEVEN HAYES, SENIOR WRITER, THE WEEKLY STANDARD: I am increasingly skeptical. You heard Chuck Schumer last night, who is by all accounts a leader of the Democratic Party. Certainly a leader of the Democrats in the Senate, say that Medicare and Medicaid were off the table. So if drivers of our debt, the two things that are probably doing more along with Social Security than anybody else to create the $14.3 trillion debt we face and the long-term problems are of the table. You just can't have a negotiation if that is the case.

BAIER: Democrats, Rick, would say the opposite, you can't have the negotiation if taxes are off the table.

RICK KLEIN, ABC NEWS: That is right. We have seen both sides grow further apart in the last couple of months. It's not like we have outline of consensus here. The likeliest scenario is a short-term deal, between the yes or the no we won't get to August 2 without a debt limit increase but it won't be as big as the one they're talking about. The idea of a $2 trillion grand bargain where the taxes are part of it, Medicare is part of it, entitlements and all of that, I don't see it happening. I don't think either side sees political incentive. But no one sees the political incentive in us defaulting on our debt either.

BAIER: See, that is the question. As more days go by, it seems like more and more people up on Capitol Hill say wait, we're never going to default. We talk about it here. You can pay the bills, make priorities. It seems that is gaining momentum on Capitol Hill?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: It is. But there are choices in the priorities and the choices will be in the hands of the president is what scares Republicans. Obama exploited that. If you heard the press conference where he mentioned several times about how you've got to choose corporate jets and critical research. Meet inspections, if you withhold that you shut down the farm stake, which will scare a lot of Republicans.

He is saying, look, I have this in my hands. I can hold it back. I think this is why Schumer is so arrogant saying we're not going to talk about entitlement is that the pressure is on their side.

BAIER: Brit Hume talked to a Republican senator who said just that, if it comes to farm inspections and meat inspections and it closes down the industry, I'm out.

KRAUTHAMMER: And the president mentioned twice specifically as a way to telegraph, which isn't done, to tweet his intentions.

(LAUGHTER)

BAIER: Charles, the strategic petroleum reserve, big move to 30 million gallons, may have a short-term effect. Now we are seeing the oil prices go up heading to the Fourth of July weekend.

KRAUTHAMMER: It's a farce and a stunt. The amount we released accounts for one-third of one day of world consumption, which means by the time we wake up tomorrow it will all be gone, poof. It had no effect on prices.

HAYES: I think some people thought it as a political move. I find it hard to understand politics of it. It seemed late. Obviously, it has little impact as even President Obama thought. It's more signaling to the world markets, OPEC in particular making noise of manipulating the market. I think White House wanted to show that. Charles is right, it hasn't had much impact at all on gas prices, period.

KLEIN: You're both right. It was a political move but it was a stupid one, because it didn't have that impact. It was predictable it wouldn't have it. Some people here predicted it would haven't much long- term impact.

I think this was panic from the White House there are things you can do if you want to increase or take some pressure off. You can lift the moratorium and allow drilling in ANWR, expedite permitting. They haven't done any of them.

BAIER: Next up, last topic, Dominique Strauss-Kahn, the former head of the IMF released on his own reconnaissance. It appears that the case is falling apart. What about this, Steve?

HAYES: What do you make of it? The reports from the last 24 hours are stunning there is reason I think that the legal team is excited about this. The fact that the woman alleged to have legal problems doesn't mean the assault didn't take place.

KLEIN: The case is going on, but it's hard to imagine that successful prosecution given the ways the credibility has been raised here. From the point of view of the prosecution, if they knew they had the problems they need to get out in front of it and made a move today. So he is a free man heading to the holiday weekend. But I agree it's an absolutely stunning development, given how sure everyone seemed to be of his guilt a couple of months ago.

BAIER: You are not surprised to hear you are hearing from the French media.

KRAUTHAMMER: The United States ought to pray this man does not become the president of France. We are still nominal allies. I'm not sure we will be if he is the president. This has the whiff of the Duke lacrosse case, and from the evidence that we have seen up until now, the odds are that the sex was consensual, or perhaps transactional, as it were, but not felonious. Got to be careful when you --

(LAUGHTER)

BAIER: I was going to give you extra time to make sure that you --

KRAUTHAMMER: No, I'm stopping right there.

(LAUGHTER)

BAIER: We'll leave it right there in the holiday weekend. That's it for the panel.

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