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Special Report

Will Liberal Democrats Scuttle President Obama's Tax Cut Compromise?

This is a rush transcript from "Special Report," December 8, 2010. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIPS)

PRESIDENT BARACK OBAMA: I think it is inaccurate to characterize Democrats writ large as feeling, quote/unquote, "betrayed." I think Democrats are looking at this bill and they've already had a bunch of them who said this makes sense. And I think the more they look at it, the more of them are going to say this make sense.

REP. ANTHONY WEINER, D-N.Y.: If the Republican Party and Republicans, every one of them, want to say no one who makes $60,000 a year can get a tax cut until we give one for people who make $1.6 million, I think we want to join that fight. You want to have that debate. I don't recall having that debate. I recall that we're going to zero and compromise in about 3.5 seconds. That's the problem here.

(END VIDEO CLIPS)

BRET BAIER, ANCHOR: Well, Democrats are outraged. And there you see Vice President Biden just a short time ago leaving a meeting with House Democrats as the White House continues to twist some elbows, if you will, up on Capitol Hill, about this compromise framework that the president announced this week.

Senate Majority Leader Harry Reid suggesting a bill may be ready to roll out this week. However, his caucus saying they'd like some changes first.

What about all of this?

Let's bring in our panel tonight. We welcome John Fund, columnist for The Wall Street Journal; Nia-Malika Henderson of The Washington Post; and syndicated columnist Charles Krauthammer.

John, we'll start with you. What's your take of the back-and-forth and where we are?

JOHN FUND, WALL STREET JOURNAL: Well, I think the president did a very smart thing today. He dispatched Larry Summers, his departing top economic aide, to go to Capitol Hill and tell the Democratic members who are in open revolt -- look, think about this carefully. If you vote this down, we could see a double-dip recession. And that kind of language gets people to sit up and take notice.

I think the majority of the Democrats may vote against this to appease their base, but this president is going to pass this bill. It will help the economy and therefore, it will help his re-election chances.

BAIER: You heard Congressman Weiner there about some of the push- back, that the president didn't fight hard enough, that this went from zero to compromise in 3.5 seconds in his words. Is that getting any traction from Capitol Hill?

NIA-MALIKA HENDERSON, WASHINGTON POST: It is getting some traction. But what you see from the White House is that they are very much going on offense on this. All day, they were flooding everyone's e-mail boxes with messages from the senators like Senator Kerry, governors like Governor Granholm out of Michigan, the mayor of Philadelphia, the mayor of Detroit, saying that they back this. So, that's very much what they're doing.

The keyword in listening to the president there, he said that Democrat s are writ large up in arms over this. Of course, there are some that are. Reid and Pelosi very much want to tweak this. But, ultimately, they are seeing some support. I mean, Senator Clinton. Some people are going to back this.

BAIER: Senator Durbin from Illinois, the number two Democrat in the Senate, said that the estate tax deal that may be the sticking point they may want to push back a little on that. If they do that, will Republicans relent on that issue?

HENDERSON: I mean, that could -- that could possibly happen. I mean, I think Democrats just want to have some sort of victory out of this. I mean, there are some things, obviously, that they get out of this, the 2 percent payroll tax hike, the extension of unemployment benefits. But they want to have their hand in shaping this so they can come out of this and be able to say that they sort of pushback -- pushback against the rich essentially and come out of here with some sort of compromise that makes them feel a little better.

BAIER: Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I think the Larry Summers argument shows the change in the substance of the administration's argument in trying to convince liberal Democrats. The point of this, they're actually saying, is forget about the fairness argument or the tax argument. This is a huge stimulus, the biggest in U.S. history. It's $1 trillion. Two-thirds of it are completely unrelated with the extension of the Bush tax cut.

And whereas Republicans come out ahead if you like on $100 billion, which is the cost of what the extension for the upper income folks will be, the Democrats get 3 1/2 times that. They get $360 billion in a whole set of incentive, breaks, tax cuts and unemployment insurance that the Democrats have sort of -- and a lot of these are extensions of the tax breaks, the tax credits that the Obama stimulus of 2009 had given.

Overall, it's pulling something out of a hat that nobody had expected. After the November elections, who would have expected an election that was run on the size of government, huge debt and shrinking government? Who would have expected that the Democrats would get the largest stimulus in galactic history a month later?

BAIER: What about the timing of all of this? It comes out to the deficit and debt commission, the president's commission, comes out with a dire warning about needing to deal with the national debt. And if we don't, we are in real trouble. And then turn around and this is what they're dealing with.

KRAUTHAMMER: That's why earlier in the show, you reported that the co-chairs of the deficit commission, Bowles, will be meeting with the president to read him the Riot Act on this. He's just coming in with a report that's saying we're going over a cliff.

(CROSSTALK)

KRAUTHAMMER: And the Democrats and Republicans are agreeing on $1 trillion of essentially unpaid new debt that's going to be added on to the problem.

BAIER: John?

FUND: The deficit commission has this wonderful report, all kinds of interesting ideas in it. But the crisis is down the road a little bit. A newer crisis arrived last Friday: 9.8 percent unemployment. That created this agreement, because everybody panicked and said, whatever we've done in last two years isn't working.

The most important thing of the stimulus package in addition to what Charles said is, this is an implicit rejection of what Obama is doing the last two years because it clearly didn't work. Just look at the unemployment number. So, they are moving in a different direction. Stimulus, but also extending the tax cut to try to increase the economic stability.

BAIER: But isn't this the kind of stimulus that the president, that his supporters envisioned? And by signing on to this, is he then changing his stripes about what potentially works to turn around the economy?

FUND: These are largely tax cuts or tax extensions of existing rates, not spending, because we just -- we tried all of that in early 2008 and it laid a goose egg.

HENDERSON: Yes. But, I mean, I think some of this is -- are extensions of some of the provisions of the stimulus act. And in that way, I think these Democrats are getting some of the things that they wanted. I mean, everyone --

(CROSSTALK)

BAIER: Wait a second. When the stimulus was being argued, those tax cuts in the tax credits were seen as sweetener for Republicans.

HENDERSON: Yes.

BAIER: I mean, are Democrats really getting it?

FUND: Everything is -- the debate has shifted completely towards the Republicans simply because of the underlying facts, the weak economy and nobody wants to run in 2012 with this kind of unemployment numbers.

KRAUTHAMMER: It's true that this is a Republican idea of what a stimulus ought to look like as opposed to a Democratic idea, which was essentially all spending, except that it's two years too late and it's going to add another trillion on the debt, in a country that is going over a cliff on this. I think it's really overreaching on the part of the Democrats and Republicans. And they're going to have to undo it quickly, probably within a year or two.

BAIER: Quickly down the line, does it mean, this anger from the left, that the president will see a primary challenge in 2012?

KRAUTHAMMER: It would be insane -- which means, normally, you would say no, but these are Democrats.

HENDERSON: We've got two years. A lot can happen in two years, but I'm going to say it's very doubtful. No primary challenge.

FUND: I think it will be driven by events in Iraq and Afghanistan. If situation is bad there, more Americans die, we're going to be still mired there -- I think there will be a left wing primary challenger and it will nick the president and damage him.

BAIER: Will the tax cut, unemployment benefits deal be approved by Congress? You vote. Let us know what you think buy voting in our online poll, FoxNews.com/specialreport.

Next up: President Obama's promises and what's being done on Capitol Hill now.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIPS)

REP. LUIS GUTIERREZ, D-ILL.: Their country, they love America. We want to give them a chance to integrate them. Once the Congress of the United States changes hands and the House of Representatives hands them to the Republican Party, I don't see any movement on comprehensive immigration reform.

SEN. JEFF SESSIONS, R-ALA.: The American people are exactly correct. They want to see the enforcement before we start doing the amnesty. This bill would put millions on a guaranteed path to citizenship. It would undermine our attempts to gain control of the border, and is the wrong step.

(END VIDEO CLIPS)

BAIER: OK. You're looking live at the House floor. They've just had a vote there on the rule that takes the DREAM Act into the debate phase. That passed narrowly, 211-208. So, now, the House is debating the DREAM Act.

This is the act that offers a way of legal residency for illegal immigrants brought to the U.S. before the age of 16 if they meet certain conditions. If they've been in the U.S. for five years, they must have a high school diploma or its equivalent and must enter institution of higher education or military.

Republicans are calling this simple amnesty and point out a lot of problems with the DREAM Act.

Let's start there. Back with the panel.

Senate is going to take it up tomorrow, we are told. John, what about the prospect of the DREAM Act in this lame duck Congress?

FUND: I think it may be the centerpiece of what Democrats do get to pass in this lame duck session.

But the real problem is the whole lame duck session which shouldn't exist at all. This is the kind of thing that makes voters very cynical about politics. The DREAM Act is something that at least should have been debated in the fall campaign, just as "don't ask, don't tell," just as a whole range of these things. Instead, they were swept under the rug, saved for the lame duck session.

And I think -- most of these are actually going to fail because these are attempts to basically buy off the Democratic base. I think Senate Majority Leader Harry Reid bears a lot of the responsibility of this. He refused to extend the unemployment benefits. He refused to extend the tax cuts. He saved this for lame duck session. We've had this chaotic thing.

Much of this is not going to pass because of him. I think he's one of the most incompetent majority leaders we've ever seen.

BAIER: Nia, it looks like it's going to be close in the House. And it looks like an uphill battle for Democrats in the Senate.

HENDERSON: Yes. I mean -- but it looks a little -- it looks a little like it has a better chance of passing. I mean, two or three weeks ago, it looked this thing was dead on arrival. It looked like Reid was bringing up mostly for symbolic purposes, mostly to appease the Democratic base, and mostly to, you know, give fig leaves to Hispanics who've been waiting on immigration reform for these last two years.

But, again, I think that the Democrats did gamble in pushing this stuff back to the lame duck. They really sort of pushed this stuff to the side, wondering about and kind of debating of the Bush tax cuts during the campaign. And so, now, you know, they're trying to rush it up or down.

BAIER: Republicans, Charles, are adamant about this. They do see this as the camel's nose under the tent towards amnesty. And the fact that it's in a lame duck is just irritating the right to no end.

KRAUTHAMMER: And it should because it really is not the way to do it. You want to do it with a legitimate Congress that's been elected in November and not with a ramp Congress representing people who are either retiring or been tossed out. I think it won't pass, even if it comes to a vote.

First of all, the delay in the argument among the Democrats over the tax compromise might delay it enough. Republicans in Senate have said they would not even accept anything, no vote on anything until the government is funded and the tax issue is resolved. So, it could end up pushing it to a point where there's no time.

If it comes to a vote, I think it will not to pass. It will not get 60.

And on the other issues, I think what the administration cares about, what Obama really cares about is START. That is the arms treaty with the Russians. He does have any accomplishment in foreign affairs in two years and this would be at least something he could say he did. So, I think that's the number one issue he wants. But I think he's going to run out of time. I'm not sure it's going to pass at all.

BAIER: So, START, yes?

KRAUTHAMMER: START I think not. But it will probably come to a vote.

BAIER: DREAM Act?

KRAUTHAMMER: No, it won't pass.

BAIER: DREAM Act?

HENDERSON: I'd say yes on START, no on DREAM Act.

FUND: Fifty-fifty on the DREAM Act; nothing on anything else.

BAIER: You're going to give me 50/50, the first time on the panel in a while? I'm just kidding!

(LAUGHTER)

BAIER: That's it. That's all he's got for me. All right, that's it for the panel.

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