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Special Report

President Obama Makes His Case on the Economy, 'Ground Zero Mosque'

This is a rush transcript from "Special Report With Bret Baier," September 10, 2010. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: I just want to talk a little bit about our continuing efforts to dig ourselves out of this recession and to grow our economy.

And what I've got is the Republicans holding middle class tax relief hostage because they're insisting we've got to give tax relief to millionaires and billionaires to the tune of about $100,000 per millionaire, which would cost, over the course of 10 years, $700 billion.

(END VIDEO CLIP)

BRET BAIER, ANCHOR: President Obama in his first formal news conference since May in the East Room today. He spent a lot of time talking about the painfully slow economic recovery may cost Democrats in November. He spent a lot of time also talking about tax cuts and how he wants to let the top tier expire, essentially a tax increase for the top earners.

Republicans are pointing to something he said a year ago, and here it is, quote, "The last thing you want to do is raise taxes in the middle of a recession because that was just suck up, take more demand out of the economy and put businesses in a further hole."

What about all of this? We'll start with the economy in this panel. Let's bring in our panel tonight, Steve Hayes, senior writer for The Weekly Standard; Juan Williams, news analyst for National Public Radio, and syndicated columnist Charles Krauthammer.

Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, he made his argument about the tax cuts. Clearly this is what he wants to stake the election on he doesn't want to run on the state of the economy. He said it openly, if it's a referendum on the state of the economy we are going to lose.

But what is so obvious about this is how the issue was one not of economics but of politics. If it were an issue of economics, you would not have the OMB director, the guy who just resigned a few months ago, Peter Orszag arguing a long explanation in an op-ed piece that with tax cuts you either do all of them or none of them.

He wants to abolish all of them, which makes sense, because it would help the deficit in the long run. However, he says, you don't want to do it now. And there's a lot of consensus even among senior Democrats that it'd be catastrophic in a fragile recovery to have this huge increase in taxes.

So, what Orszag is arguing is you leave them all in place for two years and then you abolish them, which is an economic argument of an economist.

But Obama wants an issue. He wants a class war issue and this is the one he's got. And he pretends that the tax cuts that the Bush administration instituted are that the cause of our economic collapse, which is something that is really not a credible argument and I don't think any serious economist believes it.

BAIER: Juan, on the tax cut issue, there are a number of Democrats who come out and say they want at least a temporary extension. They include Senators Nelson from Nebraska, Senator Joe Lieberman from Connecticut, Senator Evan Bayh from Indiana. You have Senator Kent Conrad from North Dakota. There's the list and you heard Charles mention Peter Orszag, the former OMB director. This doesn't count the House Democrats speaking out about it.

What about this issue on the Democratic side of things?

WILLIAMS: Well, I think that this week, and this press conference sort of capped a week of the president becoming aggressive in terms of delivering an economic message, intended to counter what the message, the negative critical message that has been coming from the Republicans, I guess, since he took office, and I'm glad to see the president's finally engaged on the issue. It's time.

Now, what you're seeing from some of these Democrats, such as the ones you just put on the screen, Bret, is that they are reluctant at this point to try to fight the onslaught of Republican criticism on the whole idea of whether or not you should give a tax break to the highest earners in the country.

BAIER: But don't you think they're basing that decision, including the former OMB director, on a shaky economy and this is the wrong time, as the president said last year, to raise taxes on anybody, at least for the temporary timeframe?

WILLIAMS: No, I think it's politics. I think that what we're seeing here is that in the case of Orszag, I think Charles turned that argument around, Orszag is concerned about deficits. He wants to do away with the whole thing in two years.

Here's President Obama saying he wants it retain the tax cut at a very high cost, I might add, for 97 or so percent of Americans even for those who make more than $250,000. The first $250,000 they earn would be free of taxes under the president's initiative.

But again, the president has lost so much of this argument. I don't know if he can be heard at this point. I think that's why you see those folks jumping ship. I mean, when the president was asked today, what about your stimulus? We can't get anybody in the White House to say that it's a stimulus.

BAIER: Let's listen to this real quick.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: So this is a second stimulus?

(LAUGHTER)

OBAMA: You know, here is how I would -- there is no doubt that everything we've been trying to do, everything we've been trying to do, is designed to stimulate growth and additional jobs in the economy.

(END VIDEO CLIP)

BAIER: So that little laugh, Juan, was kind of yes. It's a stimulus.

WILLIAMS: But you notice, it was so, so silly. He couldn't say the word "stimulus." We want to be stimulative. Our entire agenda is to stimulate the economy, to add jobs, but he couldn't say yes, it's a stimulus. Believe me, it's a stimulus.

BAIER: Steve, Juan mentioned the cost of extending the tax cuts. As you put up the joint committee's cost of these things for the middle class, it's $3 trillion over 10 years to pay for that, and for the top earners it's $700 billion.

The president's spent a lot of time talking about $700 billion but hasn't said how he'll pay for the $3 trillion middle class tax cuts.

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: That's exactly right. And it's not just the Joint Tax Committee, it's the Congressional Budget Office which for the first 20 months of the president and the White House has relied on for the estimates also put the figure at $2 trillion for the quote-unquote "middle class" tax cut.

But what's interesting to me, you look back and the president's clearly having trouble making this argument because all of a sudden people who earn $200,000 in a year are millionaires. He's flailing; he can't make a sustained argument. He's contradicting himself on the question of raising taxes in recession.

But if you go back to the campaign, this is a guy who campaigned making an argument that the Bush tax cuts are for the wealthy. Now he's saying, well, really they weren't for the wealthy they're for 98 percent of the country and we'll keep those in place. We're just going to tinker with this at the margins, the wealthy, the two percent we think should have their taxes go up.

So it's a total reversal of the argument he made a year on the campaign trail.

KRAUTHAMMER: And he also has to take on it as slightly deceptive. He portrays it a cut in taxes on the idle rich, the millionaires who sit around. In fact, half of small business income in the United States will end up in this bracket. It will have its taxes raised by about five percent, which is relatively large.

And small business, as everyone knows, is the engine of hiring in the country as Obama himself has said. So it's exactly wrong --

(CROSSTALK)

WILLIAMS: But Charles, that's not what the White House says. What the White House says is -- I mean, you guys are saying, wait a minute, don't raise taxes at a time when the economy is on shaky ground. And then you say, oh, but in fact, he's endorsing what President Bush did. Well, yes, he's endorsing it at this time.

KRAUTHAMMER: It's not just raising taxes in the abstract. You're raising it on precisely the people in the economy who hire --

(CROSSTALK)

WILLIAMS: As the president said today, the stimulative effect of giving tax cuts to those folks has not been demonstrated that it will have greater benefit than giving tax breaks to actual --

(CROSSTALK)

HAYES: Small business are the engine of economic growth, and what the president is talking about doing is taxing them at a higher rate and then giving them these sort of, these tax cuts if they do the things that he wants them to do.

So if they buy new equipment, they can have the accelerated depreciation; if they act this way, they can get a tax break; if they do this get a tax break. This isn't his money. This is not the government's money. This is their money. Why not let them keep it and spend it the way they want since they're the ones who run the businesses?

BAIER: There is another panel that we have to get to. More on the press conference after the break, including the mosque near Ground Zero and the War on Terror. Stay with us.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: With respect to the mosque in New York, I think I've been pretty clear on my position here.

If you could build a church on a site, you could build a synagogue on a site, if you could build a Hindu temple on a site, then you should be able to build a mosque on the site.

We are not at war against Islam.

(END VIDEO CLIP)

BAIER: President Obama answering questions on the mosque as well as the Koran burning down in Florida; we're going to talk about that. This is supposed to be the Friday lightning round and Charles did win the votes.

(LAUGHTER)

KRAUTHAMMER: I did, but in the spirit of comity and respect for the office of the presidency, I yield the prerogatives I have to the Wild Card "Czar," and I yield the balance of my time to the president. In fact the whole damn segment --

(LAUGHTER)

KRAUTHAMMER: He can have the whole damn thing.

BAIER: With that we move on to, what about this, Steve, that he's been clear? I think there are some people who said, if anything, he hasn't been really clear about the wisdom of whether that mosque should be near Ground Zero.

HAYES: I don't think he's been clear. But I thought, actually thought that the answer he gave in response to the last question about the mosque was a very strong answer and at times, actually very moving.

He spoke about Muslim soldiers fighting alongside American soldiers. He spoke of Muslim school children going to school with the rest of the school children in America and why should they be treated differently. I think it's a very strong answer even though I don't agree with him at all on the substance of the mosque issue.

But I guess what troubles me is the obviously tension there is between what he is describing in the case of the mosque and what he is prescribing in the case of the Koran burning. In both cases, it's permissible, virtually everybody agrees it's permissible for the mosque to be built there or for the Korans to be burned.

But President Obama is weighing in on the Koran burning and saying, you shouldn't do this because it's insensitive. And he described, I think, quite eloquently who it's insensitive to.

What we didn't see from the president today is him making the same case on behalf of the victim's families of 9/11. Where was that passion? He was passionate about the effect on Muslims. Where was the same passion about the 9/11 families?

BAIER: Juan?

WILLIAMS: I think Steve is exactly right. I think that the president spoke eloquently about our national virtue, our idea of religious tolerance and the fact that there's a constitutional right for people to build this place, this mosque there.

He could have said that it wasn't quite at Ground Zero. He spoke about the extraordinary sensitivities of the people who saw their loved ones die on that day.

But I thought that he missed an opportunity here to say, you know what, in just the way that we've talked about this man who threatens the hideous act of burning Korans, we should talk about the Muslim community having some sensitivity to those -- it's not everybody who died, relatives died on 9/11 who feel this way, but some do feel that it's somewhat offensive, and maybe we should be sensitive.

I thought the president had an opportunity there to speak in a way you know what, healing is very important in this moment, just as important as anything else.

BAIER: Charles?

KRAUTHAMMER: I thought he was very subtle and clever the way he tapped into sentiment. I think that's the theme of this discussion.

What he did, he had spoken earlier about the rule of law, about the First Amendment and about rights. But then he added this element about imagine the feelings of Muslim-Americans. And I think he was cleverly countering the argument that the opposition made about the feelings of the 9/11 families.

There is a lot of emotion on that side of the argument and I think that by speaking about another set of Americans who have sensitivities, he was countering it in a way that I think was rhetorically effective.

I happen to think the argument about the sensitivity of the families of 9/11 is not one I would invoke. I think it has to stand on its merits. If the only people in the World Trade Center had been orphans who didn't have any families, I would have the same position about the mosque. I think it's a question of sanctity. I think it's a question of respect for the memory of the dead and the way in which they died. That, I think, is the main issue.

But with the opposition using sentiment, I think the president was smart to counter it essentially with an argument of sentiment of his own. And I think in that sense he really helped his side. Up until that argument, his was a cold and sort of constitutional one, which didn't have a lot of appeal.

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