The following is a rush transcript of the July 22, 2010, edition of "Special Report With Bret Baier." This copy may not be in its final form and may be updated.
(BEGIN VIDEO CLIP)
PRESIDENT BARACK OBAMA: Families a cross the country are cutting every frill and stretching every dollar as far as they can and they should expect no less from their government.
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: Even as the Federal Reserve continues prudent planning for the ultimately withdrawal of extraordinary m onetary policy accommodation, we also recognize that the economic outlook remains unusually uncertain.
(END VIDEO CLIP)
BRET BAIER, HOST: Translation from the Fed chair in the long testimony up on Capitol Hill that there will be continued high-unemployment likely, slow growth. In fact, many economists are redoing their analysis, revising downward their projections for economic growth. And the White House, we're told, will meet tomorrow to do essentially the same thing, saying the growth will be very slow.
What does it mean politically? What does it mean for the economy? Let's bring in our panel: Bill Kristol, editor of The Weekly Standard; A.B. Stoddard, associate editor of The Hill, and syndicated columnist Charles Krauthammer.
Bill, first to you.
BILL KRISTOL, EDITOR, THE WEEKLY STANDARD: Families across this country are cutting every frill and stretching every dollar, as the president said, and then he says "they should expect no less from their government." Has President Obama cut any frill or stretched any dollar in the entire federal government? It really is amazing he can say that. He's proposed huge expansion in federal spending.
BAIER: He signed legislation to cut billions in government overpayments.
KRISTOL: That's good. That's good. How about -- I think the Republicans should say that's absolutely right. We should just have a three percent across the board cut -- now. Not for next year's budget. Not for some budget resolution. Now. Let's just put it in effect right away. Travel budget, personnel budgets, have a hiring freeze, we won't hire people to replace all the people who were fired unless they're essential jobs.
I think really, voters look up and the private sector look up and they are cutting back. They are -- there are vacancies not filled and people are foregoing things they normally spend money on and the federal government isn't.
A.B. STODDARD, ASSOCIATE EDITOR, THE HILL: What is interesting in the politics of this and where the policies for stimulating the economy merge with addressing the fiscal crisis, Ben Bernanke advocated for continued stimulus and he said that he would oppose tax hikes or spending cuts. And it leaves the Democrats in Congress really paralyzed because there is no political will for stimulus spending, any additional stimulus. And they really can't do anything else.
Obviously there is a discussion underway about the extension of the Bush tax cuts, but the Speaker today put her foot down and said she would not extend them for the wealthiest Americans.
BAIER: Although there are some Democrats who are fighting her on that and there is a growing list.
STODDARD: That is true. I'm not saying she will win, I'm just saying she put the marker down. They are divided about the policy. They don't, are not going to find pay-fors for it.
They can't address the deficit or the jobs picture and they can't, you know, pass the stimulus. It's a frustrating picture for a party fighting for its life right now.
BAIER: Charles, the Fed chairman, "unusual uncertainty." It's in that cryptic economic jargon we often hear from the chairman, but as you listen to it, it's not a pretty picture when you put it all together.
CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: In fact, after he said it, a huge drop off from the cliff yesterday on the market, but a recovery today.
It looks like decade-and-a-half we have gone from "irrational exuberance" to "unusual uncertainty." And to translate from the Federal Reserve-ese, what was heard on Wall Street was him saying: I don't have a clue what is happening in the markets. I don't know what our economy is doing -- if it will expand, at what rate. But I stand ready to do anything I need to do, although I have no idea what that's going to be and whether I really have arrows left in the quiver.
Now when you hear that on Wall Street, stocks fall, as we had yesterday. There has been incredible volatility. Since the market hit its peak on April 20, more than half the days the market swung over 100 points one way or another. People are looking for any indication -- either positive or negative -- in today's news for a direction in the economy and without it you get large reactions.
But I do think politically one thing he did is indicate he would be against cutting spending or increasing taxes. That might give some support for those Republicans and Democrats who want to see temporary extension of the Bush cuts, because if you end them on January 1 you are essentially raising taxes.
BAIER: There was an uptick today in the people filing for jobless benefits. We have had seen a decline that week by week.
Bill, another development today politically. Climate change legislation, comprehensive climate change legislation, is essentially dead. They came out and said we are not going forward with the cap-and-trade bill. And that is a big development.
KRISTOL: The comprehensive climate change legislation was the key part of a tax increase, more burdens on the private sector. I think the death of that is partly due to some of the science was called into question on climate change, but mostly due to a fact in slow economy it's hard to justify new regulatory burdens and raising taxes.
And I really want to emphasize what I think both, I guess, A.B. and Charles were hinting at, I think the politics on tax increase issue may have changed so much that what was three months ago would have been unimaginable, the Republicans could get enough Democrats possibly to preserve the so-called Bush tax cuts -- the current tax law -- for at least a year, maybe two years, against wishes of President Obama, against wishes of Speaker Pelosi, against wishes of Majority Leader Reid.
I think we will now have a big fight on the prop -- I think Republicans are now comfortable saying in this economy we cannot raise taxes, and the Fed chairman said that.
BAIER: A.B., for Democrats it came down to numbers and the temporary senator from West Virginia who took seat of the late Robert Byrd, Carte Goodwin, when he talked about policy and the only thing he talked about was I'm voting against climate change. So there was the 60th vote for Senator Reid. They just didn't have the numbers.
STODDARD: It's a math game and they hoped even the oil spill would build some momentum for a comprehensive approach. What they'll be left with, because they don't have 60 votes, they will be left with a bill that involves addressing the oil spill oversight and regulation of offshore drilling, et cetera.
But they cannot get the carbon cap. It's ultimately a tax, and it was too much of a job killer politically, too much of a slogan.
KRAUTHAMMER: The large amount of political capital that Obama had on his inauguration was spent on Obama-care, financial regulation and the stimulus. It is spent. There is nothing in the bank. That is why there was no chance of getting anything comprehensive on climate change. There's no chance of getting restrictions on carbon emissions.
You might get a bill that means nothing -- attacking BP -- which is probably what Reid will produce and call it climate change.
BAIER: So for the Democrats hoping for trifecta of health care, financial regulation reform, and climate change --
KRAUTHAMMER: Two out of three, that's a lot. But climate change is completely off the table.
BAIER: Log on to the homepage at FoxNews.com/specialreport to see our online exclusive report from Jamie Colby about the hiring surge on Wall Street.
Next up, the president calls former agriculture department official Shirley Sherrod.
(BEGIN VIDEO CLIP)
SHIRLEY SHERROD, FORMER AGRICULTURE DEPARTMENT DEVELOPMENT DIRECTOR: I don't want to be the fall guy and have everyone think that I am responsible for ridding the agency of discrimination, because there is so much of it there and it's going to take a concerted effort -- a real effort -- by many, many people from the top down and some of them from the bottom up.
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BAIER: Well, Shirley Sherrod, she got another job offer from the agriculture secretary. It doesn't sound like she is going to take it. That's video we just got in from an Atlanta airport as she was heading home from a series of interviews she did up in New York today. She also got a call from President Obama today and he apologized on behalf of his administration. Apparently according to the press secretary, she accepted. Just some history here, tonight -- one year ago tonight -- was this moment:
(BEGIN VIDEO CLIP)
OBAMA: I don't know not having been there and not seeing all the facts what role race played in that, but I think it's fair to say, number one, any of us would be pretty angry. Number two, that the Cambridge police acted stupidly.
(END VIDEO CLIP)
BAIER: That led to the beer summit, of course. That was one year ago tonight.
We're back with the panel. Charles, what about all of this in context?
KRAUTHAMMER: I think the clip we saw of Ms. Sherrod today speaking about endemic racism in a department of this government is the reason that Obama was so ginger in his treating of her. He gave her seven minutes on the phone, but she did not have an invitation to the White House, there wasn't a beer summit. The administration is quite wary of her.
Look, she obviously was a victim, but that doesn't make her either a saint or a sage. She has indicated she wants to get back at people that might include Department of Agriculture and she might be a litigant. I don't think the president wants her on the world stage with him.
I think they're trying to keep her at arm's length. I think she will probably not end up the job and end up as a talk show host somewhere I'm sure. She's rather adept of that. But her 15 minutes as a political issue I think are on the wane. The administration wants it over with, and I think the brevity of the call is an indication of their wariness.
STODDARD: Well, I think the administration did what it had to do, which was to apologize and do it as quickly as possible. There is not much left that could be done. And it was nice he made a phone call after she said she would like to speak with him. But, as for -- and it's clear that politically this is very difficult. The administration reads the polls as we do and they know that President Obama is suffering a decline by the white voters, and that is just a fact. And I think they might have jumped at this for political reasons.
That being said, I think the expectation that Obama somehow promised us along the line that he was going to heal racial wounds in the country is completely false. And when he wanted to be post-racial, he didn't want to deal with it at all. He does not see himself as a bridge, as the first African-American president between these two periods in history. He knows he cannot please either side. He knows it is an un-winnable proposition. This is never something he wanted to do.
These events will go on when we next have a white president. They will. And the reporters will call former President Obama and we'll see if he gives interviews about it. But I don't think it's fair to impose expectations, and a lot of people, particularly on the left, do, that he is going to be the healer of the racial divide. He never said he was going to. He gave a speech in Pennsylvania in March of 2008 only because he had to because the Jeremiah Wright scandal had sort of exploded and he had to answer to it.
But this is not something that was on his agenda at all and I'm not surprised to see him keep a distance from this.
KRISTOL: I think Ms. Sherrod deserve a beer summit. Henry Lewis Gates because he's a professor at Harvard gets to have a beer summit. She is a federal government employee and has been mistreated. Tom Vilsack, President Obama's appointee, fired her precipitously and I think she and Tom Vilsack should be sitting around the Rose Garden with Obama and Vice President Biden.
The other thing is she is also a long-term employee of the department and says there is endemic discrimination there. You'd think that congressional committees would want to have investigations into Tom Vilsack's agriculture deparment. Why are they tolerating endemic discrimination in agency of the federal government?
Those are my two constructive suggestions, one for Obama White House and one for the Congress.
BAIER: Obviously, they watch a lot of cable news, so maybe perhaps they'll take that advice.
Charles, what about the fallout from all of this and how this has become a storm the past couple of days around the country?
KRAUTHAMMER: I'm not sure it's going to leave a residue. It was an overreaction and within a day or two the administration righted itself. I think she has been made whole. She lost her job for like a day and now she is being offered a new job -- higher job, speaks with the president, receives groveling apologies left and right. There isn't as if there's a permanent injury here.
I think it won't be remembered. I don't think it's going to leave an impact. And I agree with A.B. Our expectation of the first African-American president is too high. There is no way one man or president will change the course of history. It's a historic event and watershed, but it takes time. I don't hold it against him. I think he was rather innocent in this, personally. It was his administration reacting very, very quickly and overreacting because of its sensitivities.
BAIER: So you see it as a teachable moment?
KRAUTHAMMER: I don't believe in teachable moments. I don't think anyone in the end really learns.