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Special Report

Tough Day for the President

This is a rush transcript from "Special Report," November 11, 2010. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: We need to make sure that over the next several weeks we are crossing the "t"s, dotting the "i"s, being able to make the case to both the Korean people and the United States population that this is good for both countries.

(END VIDEO CLIP)

BRET BAIER: South Korea free trade agreement hasn't been done yet. They say it could possibly get done in coming days or weeks, but the president unable to seal the deal over in South Korea as he is talking about that today.

Meantime, the U.S. Chamber of Commerce is putting the heat on, releasing a statement saying, quote, "Time is of the essence. American jobs are on the line. Since South Korea will soon implement a similar arrangement with the EU, American workers stand to lose 340,000 jobs with this agreement."

A couple of Michigan congressmen weighing in -- Senator Levin and also the ranking member Dave Camp of the Ways and Means Committee praising the president for slowing this down, saying it was essential for our government to deliver a strong message, insisting on a two-way street trade with South Korea.

What about all of this? And we'll talk tax cuts as well with our panel, Steve Hayes, senior writer for the Weekly Standard, A.B. Stoddard, associate editor of The Hill, and syndicated columnist Charles Krauthammer.

Let's start with this trade deal and the lack of it on this trip.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: The president walks into a room with another head of state and he walks out empty-handed he has a failure on his hands.

This was self-inflicted. With Obama it's becoming a ritual. This is a combination of incompetence and inexperience and arrogance. He was handed a treaty by the Bush administration. It was done. But he wanted to improve on it. So far, he has nothing.

And the EU has a treaty which is going to make it difficult. It will open up the market to them and it will remain semi-closed to us.

And this is a pattern with Obama. He thinks he can reinvent the world. With Iran he decides he has a silver tongue, he'll sweet-talk them into a deal. He gets humiliated over and over again. With the Russians he does a reset, he gives up missile defense, he gets nothing.

In the Middle East he proposes a ban on Jewish construction in Jerusalem, which is never going to happen. And what does it do after 17 years, it destroys any chance of negotiations.

Again, a combination of he comes in, I'll reinvent the world, I know everything, and arrogance. And the result, he gets zero results.

BAIER: A.B.?

A.B. STODDARD, ASSOCIATE EDITOR, THE HILL: It is definitely a huge disappointment for the administration. He did not -- Charles is right. He didn't want to negotiate this three weeks from now from home. He wanted to do it in Seoul. And this is obviously very frustrating for him to be coming on the heels of this election. And he was going over there to turn the page and change the conversation.

He really desperately needs a win, which is why I believe there is a still a chance for him to actually work something out. He will be under tremendous pressure from the labor unions and from the auto industry. But I think a trade agreement that he can pass without Democratic votes but with the Republican votes and really get a bipartisan across the aisle win this early is absolutely essential for his own best interest.

BAIER: Steve?

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: You want to talk about a place where there is common ground and do something with Republicans and demonstrate if there is going to be a new President Obama that we're seeing it in action, I think this would be an opportunity and it look like he's missed it temporarily.

I think the most troubling aspects are the complaints from the South Korean side they weren't provide U.S. demand in enough time to go over there and think about how they could reach a compromise. And if that is actually true, that is a devastating report, that if they didn't get them in time and they didn't know the details of what they'd be asking. That is why it fell apart, and that would be a problem.

BAIER: In the meantime, Charles, the U.S. is trying to affect China in what is called manipulation of the currency, but they're getting accused, the U.S. is, of manipulating our own currency with the Federal Reserve dump of $600 billion into the economy.

KRAUTHAMMER: And the accusation is correct. What we have essentially done is reduce the value of the dollar dramatically and drastically and you can see it in the drop of the price of commodities like oil and cotton and gold, of course, which is a way to measure it.

So what we have done is accuse the Chinese of devaluing, which in a sense they have, and to respond in kind. I think if it continues, the Germans and the others are right. If it continues you will end up in a worldwide currency war, like the tariff wars of the '30s, ultimately very destructive.

BAIER: In the meantime, there are some developments on extension of the Bush era tax cuts. This is what President Obama said a couple of weeks ago about this issue.

(BEGIN VIDEO CLIP)

OBAMA: I refuse to think it make sense to pay for a $700 billion tax cut for millionaires and billionaires.

And how that negotiation works itself out, I think it's too early to say.

(END VIDEO CLIP)

BAIER: Saying he is willing to negotiate. Now we get word from the senior advisor David Axelrod in an interview with the Huffington Post, saying, quote, "We have to deal with the world as we find it. I don't want to trade away security for the middle class in order to make that point."

All signals, A.B., that they're ready to negotiate on a temporary extension of the top earner's tax cuts.

STODDARD: Right. And this is obviously something that we always concluded would be the end game, but we just didn't know the end game was now on November 11.

Democrats hope still with polling showing a majority of Americans support sun setting the tax cut for the top wealthiest earners, just hoping for a little bit of a fight, just hoping that they cannot full tent today.

Yes, they don't have the votes. Republicans are dug in unanimous against any separation of those two groupings, any kind of permanent middle cut tax cut while you separate out one for the wealthy that they'd have to defend separately later on. But the Democrats are really, really upset with President Obama that he had to come out and make this concession now and just try to fight the good fight.

HAYES: And we saw the results of the Democratic complaints when the White House later in the day walked it back and said, no, no. What he meant is we have to have negotiations but we're not giving it quite away yet. The most important thing for Republicans at this point is they can't decouple the upper bracket rate cuts with the others.

BAIER: And just so we're clear, it's about keeping rates the same as they are currently.

HAYES: Right. And the language actually matters in this discussion. We've heard this over the course of several months. It is the continuation of the same rates that have been in place for a decade.

I think on the other, what Republicans need to do now or what the discussion of the Republicans doing now in terms of a compromise is looking at something that is not necessarily permanent but goes beyond the two years that Democrats seem at least behind the scenes ready to give.

BAIER: Three to five year.

Bret: Three to five years. And we could get to the point where five years is the actual negotiating point, because after five years, of course, there will be potentially a new administration. I think Republicans might be more comfortable with that as negotiating point.

BAIER: Charles?

KRAUTHAMMER: This is all the result of the shellacking. The reason that the endgame is coming in the opening gambit is the elections have results and they mean something.

Remember in 2009 at the beginning of presidency, Obama was in a discussion with the Republicans. And he got to the point in the debate he said "I won." Well, the Republicans won. As a result we get extension of the big cuts, and the Republicans will resist a decoupling, which is absolutely essential.

If that happens, it it's two years, three years or more, it doesn't really matter. It will be renegotiated and reargued, and there will probably be a whole debate about a whole new tax structure anyway.

BAIER: The bottom line, a bad day for president?

KRAUTHAMMER: Yes, as for the last week or so.

BAIER: Up next, Iraq tries to form a new government and questions about when U.S. can get out of Afghanistan.

In the meantime, visit show note section of the homepage at Foxnews.com/specialreport for an exclusive investigation in how some Muslims attending a Capitol Hill prayer group may have terror ties.

(COMMERCIAL BREAK)

BAIER: Two foreign policy stories -- one, Iraq forming a government, looked like it was a done deal but some develops late today when a section of parliament, a large section of the Sunni community walked out.

Also in Afghanistan, the White House focusing less on that the summer of 2011 date and more on 2014 when commanders are now saying the Afghan army should be able to take control of its own security. We're back with the panel. Let's start in Afghanistan. Steve?

HAYES: Look, I think it's better for people like Secretary of State Clinton, like Admiral Mullen, like Secretary Gates to talk about 2014 lather than talk about their commitment to get out in 2011 or at least beginning the draw down in 2011. That is a positive development. Ultimately, though, it doesn't matter unless the president says it. President Obama needs to say it. We can't play games or assume that people in the Afghan villages are going to understand the changes of policy because of the nuances from the secretary of state. It doesn't work that way.

The only way it works is if President Obama repudiates the deadline and does it in his own voice and does it in a strong way.

But to me it's what I think we're missing with the administration on this entire question. There hasn't been the kind of presidential level leadership that we have seen President Obama use on other issues, on healthcare, on the economy. Where is he making the case for this war that he says is crucial for the U.S. national security? He's not making the case.

BAIER: Members in Congress, Democrat members like Dennis Kucinich are going to offer amendments to funding and pull all troops out. John Boehner, the incoming House speaker, says he's going to allow all of the amendments, the votes when the new Congress gets in. It's Republicans who will be supporting this administration in Afghanistan.

STODDARD: It is true. And it will be interesting to see if the new-coming Republicans are against the libertarian Tea Party backed candidates are against sending more money to Afghanistan.

This is a war that is lost the support of the American public. I think though it's a reversal, the statements about 2014 are reversal from the stated policy of 2011 being a turning point. Even if he hasn't said it yet, and I agree he hasn't sold his support and commitment to the effort, I still think it's significant he could be turning against the war knowing it's so unpopular across the country and he's not.

He is doubling down in his commitment. I think that this 2011, that 2011 date was paralyzing the mission and they knew it. It was providing an advantage to the Taliban. We won't see the effects of this because the president is not saying it for months, but I think it actually might have an effect. And they should be given credit for trying to change course.

BAIER: On Iraq, a promise in that the Iraqi government was going to get itself together, late developments as Ayad Allawi and his supporters walked out. Where are we here, Charles?

KRAUTHAMMER: In Iraq, all good news is contingent and tentative. So you get national unity government and then you get walk over a peripheral issue.

I wouldn't put a lot of credit to what happened today. I think Iraqi politics are highly theatrical and occasionally hysterical. That's not the major issue. Already you have a speaker who is a Sunni and a promise for the Sunni's of a new council where Allawi, whose head of that bloc, is on the council.

Good news except, it's not clear if they will have real authority. If it doesn't, the Sunnis will walk out in a month.

And secondly, the other question how many of the ministries and which ones are the Sadrites, the followers of Muqtada al-Sadr, whose the pro-Iranian, anti-American cleric who's going to be in the government, how many votes is going to have, and are they going to be the security ones.

So that is why it's contingent. It depends power of the Sadrites and it also depends on whether Allawi and the Sunnis will accept the offices they will be given.

BAIER: That is it for the panel.

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