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Special Report

Economy and the Midterms: Can Democrats Change the Conversation Before Election Day?

This is a rush transcript from "Special Report With Bret Baier," August 27, 2010. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

REP. CHRIS VAN HOLLEN, D-MD, DEMOCRATIC CONGRESSIONAL CAMPAIGN COMMITTEE CHAIRMAN: I can assure you that despite political summer chatter, reports of the House Democrats' demise are greatly exaggerated.

Nobody is satisfied with the slow pace of growth. America is facing a very stark choice. Do we continue down the path toward recovery and a more stabilized economy and efforts to support the business community and putting people back to work or do we return to the economic policies that resulted in catastrophic job losses and brought our economy to the brink of collapse?

(END VIDEO CLIP)

BRET BAIER, ANCHOR: Democratic Congressman Chris Val Hollen talking about the Democrats' chances and talking about the economy and how Democrats may run on it heading into the midterm election.

Some bad news today on the economy. The GDP for the second quarter was revised downward from 2.4 percent to 1.6 percent. This was described as Ben Bernanke as "unexpected slowing, disappointing, sharp deterioration."

He also said this, "The painfully slow recovery in the labor market has restrained growth and labor income, raised uncertainty about job security and prospects and dampened confidence."

However, the markets seemed liked this quote from Bernanke, "Should further action prove necessary, policy options are available to provide additional stimulus. Any deployment of these options requires a careful comparison of benefit and cost." As you look at the market, the market went up about 165 points in the Dow and across the board.

What about this, again, the politics and the policy of the economy? Let's bring in our panel: David Drucker, political reporter for Roll Call; Juan Williams, news analyst for National Public Radio, and syndicated columnist Charles Krauthammer.

David, what are your thoughts about Democrats and what they're facing and what you heard Congressman Van Hollen talking about?

DAVID DRUCKER, ROLL CALL: Well, I understand where the congressman is coming from. He can't talk down his own election prospects. But if you look where we are economically and with all the macro numbers that at one time were looking good, we're one week from the Labor Day and that's when things start to harden. And I think Democrats are in real deep trouble and I think Congressman Van Hollen knows it. He's a very smart operator.

But similar to President Bush before the surge in Iraq, when he wasn't going to talk down the war and yet they knew something was wrong, something is wrong here. And unless something really big happens to turn things around, they are on course to lose a heck of a lot of seats. Now I'm not convinced yet they are going to lose the majority, but I think we're looking somewhere in the neighborhood of 30 to 35 seats.

And I'll tell you that in talking to Republican pollsters who are polling House races they're seeing numbers so incredible that they started to overweight their own Republican numbers because they want to try and get what they think is a little bit more of an accurate picture and they do expect eventually some Democrats will come home. But it's just not looking good right now.

BAIER: And there are predictions out there of 60-65 --

(CROSSTALK)

DRUCKER: I think that's a little overblown, but it's not going to be good.

BAIER: Juan, the president has obviously on vacation. He's and coming to the end of the vacation at Martha's Vineyard and played golf a bunch of times. The White House has been talking about the economy. A White House official tells ABC News, I should say, "We know he needs to be out there talking about the economy next week and we haven't yet figured out the way he's going to do that."

He will talk about hurricane Katrina this weekend. He has a speech about Iraq on Tuesday. Then he deals with Palestinians on Wednesday and Thursday.

So what about president and talking about the economy?

JUAN WILLIAMS, NEWS ANALYST, NATIONAL PUBLIC RADIO: This is part of the problem the president has had with the messaging on the economy. From the Democrats' point of view, it's just been weak.

Why aren't you making the case to the American people, for example, that the CBO numbers that came out this week have added jobs and prevented unemployment going even beyond nine percent --

BAIER: CBO says "saved or created."

WILLIAMS: Correct. So it has added jobs right now.

BAIER: We have been around this block. Saved or created, added jobs -- but since the stimulus 2.6 million have been lost.

WILLIAMS: Yes, but in other words, these are jobs that have put additional people to work. And specifically, with school about to start, think about your child's school, there are additional teachers that would be out of work. We are seeing dire stories on front pages about the fire houses closing even with the additional help coming from the Obama administration.

That's part of what the Democrats are saying, why aren't you talking about these things and what is happening with GM and the fact that the auto industry is back on its feet. Why is the administration so loath to say this?

Now, I don't know how he will go about this next week. He's got to find a slot. But to my mind, that's secondary to having actual policy that helps people. And I think part of this is that the administration has allowed Republicans to say, no -- not only say no in terms of legislation and unemployment benefits and the like, but actually to say, you know what, this is all the president's fault, even as they haven't come up with any great ideas that would have stimulated the economy to give the American some options, some real options, in terms of how we can get our economy and more jobs back in place.

BAIER: Charles, I will let you respond, but if you add up the stimulus spent, Juan, $600 billion, and you assume that 3 million jobs were saved or created, that's roughly about $200,000 per job.

KRAUTHAMMER: And secondly, a lot of these jobs are jobs that will disappear. They are one or two-year jobs. How long are you going to prop up the state governments to prevent the big cuts that will come because the budget is out of control? A year or two, but then you'll have to return to reality.

These are not real jobs created in industries that will flourish and bring the unemployment rate down in a significant way in the future.

(CROSSTALK)

BAIER: So are you saying that's why the Democrats aren't talking about it?

KRAUTHAMMER: Because it's not plausible. Everybody understands -- a lot of these are make-work and they are going to disappear.

I think the real issue here is that when the news is this lousy, and the numbers are quite shocking -- housing numbers -- and Bernanke, you know, he's got to be circumspect, he can't speak too ill of the economy or it will crash, even he is saying really negative stuff about the -- everybody understands at what point we are. There is no way Democrats can actually argue that their policies have worked.

What they're going to have to do, I think, and what we heard the Van Hollen argument was, it's a choice between the old stuff that drove us in a ditch, all that other stuff, and what is happening today. And what does he say about what we're doing? We are on a path toward recovery. Who believes that after all of these numbers? And what they're going to do, he added, efforts to support small business. What they're going to do is in September when they return they will have a bill that's going to ostensibly to help small business and reduce its capital gains tax, as if -- that is a drop in the ocean for the administration that will raise taxes on small business in January.

So I think they are going to try a class war argument. The Republicans are not helping us in the small business. They love Wall Street, protecting Wall Street and they want tax -- low rates for rich.

(CROSSTALK)

BAIER: Hold on. David, really quickly, the tax cut argument is going to be the argument of the fall.

DRUCKER: Correct.

BAIER: And how do you think it's playing? Already some Democrats are weak-kneed it appeared about not extending all the tax cuts.

DRUCKER: I think this is going to be a big fight. And the thing is both Democrats and the Republicans think they're in the right. Democrats think they can paint Republicans for supporting tax cut for the rich that will blow up the deficits. Republicans think if you want to oppose an extension of tax cut in recession with 10 percent unemployment, be my guest.

I think what is going to happen is this is going to go to January and expire and the next Congress is going to end up trying to work on it to make it retroactive. But they won't agree because Republicans won't support a partial extension for "middle class" quote-unquote, and the Obama administration will not allow this thing to go through for all tax income brackets.

BAIER: Ten seconds.

WILLIAMS: If the Republicans are successful in saying this is about the tax cuts period and saying to the American people don't think about it as a tax cut for rich, then Republicans win.

BAIER: That was nine.

(LAUGHTER)

To read more about the sluggish economy and Democrats' strategy ahead this November, visit Show Notes section at the homepage at foxnews.com/specialreport.

Up next, the Friday lightning round.

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