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Special Report

Politics of Stimulus, Economy and the Ground Zero Mosque

This is a rush transcript of "Special Report With Bret Baier" from August 18, 2010. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIPS)

PRESIDENT BARACK OBAMA: The economy is getting stronger, but it really suffered a big trauma. And we're not going to get all eight million jobs lost back overnight.

But what we're trying to do is create sort of a virtuous cycle where people start feeling better and better about the economy. And a lot of this is sort of like recovering from an illness. You get a little stronger each day.

MARK MELLMAN, DEMOCRATIC STRATEGIST: The problem is people don't feel better. They look around, they don't see an improvement in their own lives. They don't see improvement in the lives of their friends and relatives, and that leads them to think the economy is still in bad shape. That sets an important context for these elections in 2010.

(END VIDEO CLIPS)

BRET BAIER, ANCHOR: The president of Ohio today and a Democratic strategist there talking about the economy. The president traveled for the ninth time since taking office to Ohio. The vice president heads back for his eighth visit to Ohio next week.

Let's take a look at the latest polls. The presidential approval number in Gallup today stands at 41 percent. Then the president's handling of the economy, approval 41 percent, disapproval, 56 percent -- this is a record in this poll. And is the economy in better shape than it was 18 months ago? Better, 38 percent, then you see worse or about the same, 29 and 32 percent.

What about all of this, the politics heading to the midterms? Let's bring in our panel, Bill Kristol, editor of The Weekly Standard; Julie Mason, White House correspondent for Washington Examiner, and syndicated columnist Charles Krauthammer. Bill, thoughts?

BILL KRISTOL, EDITOR, THE WEEKLY STANDARD: I guess 17 visits by President Obama and Vice President Biden to Ohio. I read that Ohio lost about 160,000 jobs during the Obama-Biden administration. They are losing 10,000 jobs a visit. Maybe they should ask the president and vice president to stay away and the job loss might halt.

The economy is hurting President Obama badly. He went to Ohio with the Democratic governor, Ted Strickland, and there's a big gubernatorial race to succeed him. If you listen to Mitch Daniels, the Republican governor of Indiana, speak, one of his big talking points is Indiana is doing better than its neighboring state Ohio. Incidentally, West Virginia which has a Democratic governor is doing better than Ohio. Ohio's unemployment rate is two percent higher than West Virginia's, which is pretty startling.

Anyway, contrast his policies in Indiana with the Democratic policies of Ohio which have been like President Obama policies, which Daniels says, at the national level.

I think Ohio will be interesting. If Republicans win the governorship and the senatorship in Ohio, that's a real, as you say, President Obama and Vice President Biden going there so much, it becomes a real referendum because it has a Democratic governor in addition, a real referendum on Democratic economic policies.

BAIER: Julie, other candidates -- Democratic candidates -- are having a hard time with the economy and the message perhaps. Richard Blumenthal in Connecticut, candidate there, a Democrat, said this about the stimulus, quote, "I believe that the stimulus was wrongly structured because it failed to provide jobs and paychecks to ordinary Americans. It unfortunately was inadequately designed to invest in infrastructure and roads and bridges and schools."

He said he would vote against it as it was structured. That's an interesting talking point from a Democrat.

JULIE MASON, THE WASHINGTON EXAMINER: It is. And it's certainly a theme that emerging in this campaign. You don't see the Democrats running very hard on the stimulus.

And even today, what struck me about today's event, Bret, watching the president, how much new stagecraft the White House is doing. We saw in the AP poll, he got a 41 percent approval rating for the economy, but his overall approval rating was 49 percent. And the gap -- the difference is people still like him personally. So we see him in his shirt sleeves in a kitchen and then out in a yard, and it was very deliberate by the White House. There was a picnic table and a tree-house. And you see the president really playing up his likability factor more than the specific message of the economy.

I think we will see more of that from the White House.

BAIER: Charles, but the White House is defending the stimulus saying it created or saved 2.5 or 3.6 million jobs is the line we've heard from Vice President Biden many times.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, that's not going to help and the tree-house is not going to help and the short sleeves aren't going to help.

Look, he bought the economy when he did the stimulus. He was a month into the presidency. This is a $1 trillion bet he had the American people buy on to. And it failed, at least the overwhelming perception is.

Democrats think it's all politically toxic. They are not the ones who bring it up. It's Republicans who bring it up. And when you bet $1 trillion dollars and you know you added $1 trillion to the debt and no results, in fact, negative results, you own the economy.

And so he does, you know, the routine where he says the Bush drove us in a ditch, you want to give him the keys? That's kind of worn -- it's not going to work. Eighteen months in, you own it, and if you had a policy at the beginning, like Reagan with the tax cuts, he bought it as well. And they were hurt badly, the Republicans in the midterm election in '82, as a result of a weak economy because he owned that economy.

I think what is really interesting is that there's an axiom in politics that by mid-summer people's perceptions of the economy is fixed and that carries into the Election Day. Even if the numbers between now and then change a bit, it's not going to alter perceptions.

We heard earlier there is a poll, only 12 percent of Americans think the economy improving. It was twice as high a year ago. And that's perfect reflection of the real economy. A year ago, the growth in GDP was twice what it was in the quarter that has just passed. That's the impression that is settling in and it's unchangeable between now and November. And that's why Democrats are going to lose.

BAIER: Bill, it was interesting to hear Mark Mellman, the Democratic strategist, talk as openly as he did about Democratic issues on the economy.

KRISTOL: I know Mark. I was wondering, you know, when his phone was ringing, Rahm Emanuel on line one. "Mark, you're not supposed to say that."

Look, it is a big problem. The perceptions are bad. And to pick up on what Charles was saying, economy rallied pretty strongly in the fourth quarter of 2009 -- I think it was plus 5.7 percent. It was down to about plus 3.4 percent in the first quarter; I think 2.7 or something in second quarter. And it's going to be, I'm told, revised down --

(CROSSTALK)

BAIER: Under two.

KRISTOL: Maybe one, 1.5 as the new data coming in. That is a big problem.

I mean, they did the stimulus, they got the bounce. But to have it peter out this quickly is terrible politically.

With Reagan, we went through tough times the country did in 1982. Reagan said stay the course. But he can say plausibly, the tax cut's coming on January 1, 1983. We're going through these tough times, but better times are ahead. And luckily for Reagan, better times were ahead.

But the trouble that Democrats have, what is their narrative? What is going to get it going in 2011? A tax hike? I don't think so. More regulations? Where is their growth package?

BAIER: Log on to the home page at foxnews.com/specialreport to get ready for tonight's online show starting at 7 ET.

Up next, House Speaker Nancy Pelosi goes after critics of the planned mosque near Ground Zero.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SPEAKER OF THE HOUSE NANCY PELOSI, D-CALIF.: I look to my colleagues in New York, some of them have different views on the subject. It's up to them to work it out. But there is no question that there is a concerted effort to make this a political issue by some and I join the -- those who have called for looking into how is this opposition to the mosque being funded?

REP. PETE KING, R-N.Y.: For Nancy Pelosi to suggest there's going to be an investigation of these people is absolutely outrageous, it's disgraceful and, to me, the speaker was really out of line on this.

(END VIDEO CLIP)

BAIER: House Speaker Nancy Pelosi weighing in for the first time on the mosque controversy. She later thought to clarify her first public comments, saying that she thinks the funding for actual mosque project should be looked in to as well.

Now we have the president weighing in, saying he has no regrets about his statements after being asked in Ohio. And this just in, this afternoon, former Vermont governor and former presidential candidate Howard Dean weighed in as well, telling WABC radio, "This is something we ought to be able to work out with people in good faith. I think another -- I think another site would be a better idea. I would look to do that with the cooperation of people who are trying to build the mosque," saying another site may be better.

So what about all of this and the politics, the policy? We're back with the panel.

Julie, let's start with you.

MASON: Well Bret, you hear all this lamenting about this, turning this in to a political issue. It's too late -- it's a political issue. Someone needs to step up. We heard Obama kind of parsing middle distance on this over the weekend and today saying no regrets but not really going any further than that.

This is a terrible issue for the Democrats. Someone needs to step up and clarify where the party stands on this.

And meanwhile, Republicans are fighting with each other, too. Pat Buchanan said that Newt Gingrich went too far on the issue. So now we have gone in a parallel universe.

(LAUGHTER)

BAIER: Bill?

KRISTOL: I'm still getting my head around that parallel universe.

Howard Dean also says building the mosque where it is going to be built with the intention behind is it a real affront to the people who lost their lives on 9/11. I am happy to agree with Howard Dean.

BAIER: You agreed with Senator Reid and Howard Dean.

MASON: I feel like I don't know you.

KRISTOL: I'm a bipartisan kind of guy.

(CROSSTALK)

KRAUTHAMMER: Well, are you a liberal or are they neo-cons?

(LAUGHTER)

KRISTOL: I like the idea of Howard Dean becoming a neo-con. He really dislikes Obama, the truth is, and he's happy, I think, to take a little bit of a shot at the Obama administration and lay the groundwork for his primary challenge to President Obama a year from now.

BAIER: Now Bill --

KRISTOL: You heard it here. Don't you think Dean would love to primary Obama?

In any case, he'll be anti-Afghanistan, anti-the war and anti-the mosque, so it will be the best of all worlds in the Democratic primary.

Look, when Obama said no regrets today, it was a funny thing to say. It almost sounded -- it's the kind of thing you say when you lost. You know? It's finished. It's over, but no regrets. "Je ne regrette rien" -- that great Edith Piaf song. I won't sing it here for you --

BAIER: Thank you.

KRISTOL: Disappointing to the viewers. Wonderful song, though.

And I do think deep down the Democrats know this is over and I would suspect they're going to put some private pressure now on the imam and on the developer to pull the plug on this over the next week or so, I should think.

BAIER: Charles?

KRAUTHAMMER: Well, I spent the afternoon wrapping my mind around Pelosi's remark about looking into the finances of those who oppose the motion. I want to join with others. I'd like to know who the others are. Are any of them non-institutionalized?

And then I'm trying to decide if the statement was out of malice or sheer lunacy. And being the generous soul I am, I go with lunacy. I mean, after all, the implication that Debra Burlingame, the sister of one of the pilots who died on 9/11, would have to be secretly paid to express her anguish over the establishment of a monument to Islam in a place where 3,000 were massacred in the name of Islam is obscene.

Look, looking into the financing of the mosque is logical. We know there is a history in this country of fake charities which are funneling money to terrorist organizations. They've been investigated. We've had -- this is a real issue. It's not a hypothetical, it's not a can-be.

But the idea that those who oppose the mosque are some kind of conspiracy or funding ought to be looked at is absurd. Look, I oppose the mosque. No one has offered me a penny. What am I, chopped liver? I need a new roof.

(LAUGHTER)

BAIER: Julie, you mentioned Republicans split on this. Is it, do you think, a powerful political issue heading 70-plus days in the midterms?

MASON: Well, it almost is, but I think we're to the point people are overplaying their hands on the issue. It's just gone just a little too far. So it could have been, but now it's kind of gone a little crazy. And the Democrats don't know what to do. The Republicans are kind of screwing it up. So it's hard to see who gets the benefit.

BAIER: And last thing, prospects of actually moving this site, David Paterson, the governor of New York, others saying they are negotiating or trying to.

Bill?

KRISTOL: I think the developer who has real money at stake will decide at some point he doesn't need all this. And it's nice that Imam Rauf has made a big splash here with his provocative decision to try to build a mosque right near Ground Zero, but I think he will pull the plug on it.