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Special Report

President Obama Promises More Help for Economy, Walks Back 'Ground Zero Mosque' Walk-Back?

This is a rush transcript from "Special Report With Bret Baier," August 30, 2010. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIPS)

PRESIDENT BARACK OBAMA: There is currently a jobs bil l before Congress that will do two big things for small business owners: Cut more taxes and make available more loans.

It would help them get the credit they need and eliminate the capital gains taxes on key investments, so they have more incentive to invest now.

Holding t he bill hostage is directly detrimental to the growth.

DOUGLAS HOLTZ-EAKIN, FORMER CONGRESSIONAL BUDGET OFFICE DIRECTOR: The Senate bill totals $26-$30 billion. It's $14 trillion economy. In contrast, the Bush tax cuts would affect about $500 billion worth of business income. So you have to first compare what are big versus small policies. The Senate bill is a small policy. It's not going to move thing very much. And you also have to be wary of targeting in the environment.

(END VIDEO CLIPS)

BRET BAIER, ANCHOR: Well, President Obama speaking about the economy in the Rose Garden today. This is of course after some bad numbers last week, specifically the Commerce Department downgrading -- or revising -- the GDP, the gross domestic product, for the second quarter from 2.4 percent, revising it down to 1.6 percent. Pretty anemic grown, still growing, but pretty small. And that is raising some questions about what is next and what is the White House going to do.

Let's bring in our panel, Fred Barnes, executive editor of The Weekly Standard; Mara Liasson, national political correspondent of National Public Radio, and syndicated columnist Charles Krauthammer.

OK, Fred, there was a lot of talk by the president today about the Senate bill, the small business bill, they're calling it. We heard from Doug Holtz Eakin about the size of it. What about this -- this statement by the president?

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: It is a small bill. And it's a bill that had bipartisan support when it was a just tax break for small business. Then they added in this $30 billion lending facility, which will -- government money that could then go to banks, and so on. And the Republicans oppose that, even Olympia Snowe. When you lose Olympia Snowe, you're gone.

And so all they have to do is remove the lending facility and the tax breaks will get through right away. That may not make Harry Reid happy or President Obama, but look, it's not going to do much in the short run.

There is a perfect example out there in world of what has worked so much better than what the president has done. And that example is called Germany. And we know what Germany did. What Germany did was reduce their unemployment benefits for one thing. They cut spending and cut their deficit and they loosened up on the labor market, on hiring and firing and so on, which is very strict in Europe.

And what happened? In the second quarter, 9 percent growth, unemployment is down to I think 7.6 percent. Compare that to the Obama administration that did the opposite of all of those things. And what do we get here -- 9.5 percent unemployment, 1.6 percent of growth. And the ultimate embarrassment may be, and I think this will happen, you know the so-called Summer of Recovery will probably wind up with net loss of jobs in June, July, and August, a net loss of jobs in the Obama administration so-called Summer of Recovery.

BAIER: Mara, there weren't a lot of specifics today. Obviously, he focused on that Senate bill. Robert Gibbs, the White House press secretary, said the president would come forward with some economic ideas in mid-September, but no big stimulus package, right?

MARA LIASSON, NATIONAL POLITICAL CORRESPONDENT, NATIONAL PUBLIC RADIO: The president said my economic team is hard at work to identify additional measures to make a difference in hiring in the short term, increasing competitiveness. He's going to, you know, tell Congress to pass them when they come back.

I would just say that this speech today and the Gibbs briefing had the feel of a placeholder; he doesn't have a whole lot of time to come up with something kind of big and bold that could pass and that's going to be pretty hard, and that will actually have an effect in the short term. I mean I can imagine some kind of package of a payroll tax holiday and something else to entice Republicans on board.

But right now, this has the look and feel of a lot of other speeches he has given which is a small, narrowly targeted bill being held up by Republicans in the Senate, and he is out there asking them to drop their opposition.

BAIER: In fact, Gibbs said, quote, "There is only so much that can be done" today in the briefing.

Quickly, do they think it's a political winner to keep talking about the Senate bill?

LIASSON: I think, as Fred said, the Senate bill is not that controversial. There might be some aspects that are. This is what they thought was passable. This targets the small business, that's the heart of the Republican constituency.

BAIER: Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Look, it may be a place- holder, but it's classic Obama.

First of all, it's about targeting tax cuts. What he's saying is -- this is how liberals operate. You raise the rates across the board and then the government will deign to return some of the money on a targeted tax cut. Meaning: If you do exactly as they say, which means, for example, if they favor, say, high-tech investment and they'll give you a cut on capital gains and you have a business in which you don't need that, but you need to spend on marketing, the government thinks it know how to redirect your capital in a superior way.

So that's number one, it's a classic liberal way to operate, whereas Republicans want lower rates across the board and eliminate the targeting of the tax cuts as you had in the '86 tax bill, the Reagan- Bradley bill.

But secondly, what you've got is the way that Obama dealt with this, he said Republicans have to consider whether they want to act in the national interest or pursue political interest in November. This is how he treats every issue. He never will credit the sincerity or the logic of an opposition argument. In this case, I think the bill is small, insignificant and will hurt the economy, but he won't even recognize that. It's only he stands in favor of the national interest and Republicans are always acting out of a partisan basis.

It's an appalling way to make arguments, but he does it on every single issue.

BAIER: Fred, the big fight this fall obviously will be over the Bush-era tax cuts and what happened there. So far, everything we are hearing from the administration is they are going to stop the top tier tax cuts, right?

BARNES: No, they can do it because they will lapse automatically in January. I think that's what they want to do, of course.

But just think, Bret, if President Obama stepped out tomorrow and said: I've changed my mind, you know. I think we do need to raise taxes on the wealthy in this country, they haven't paid their fair share. But for the next two years, I think we need to keep those tax cuts in place. The economy has not recovered sufficiently enough and we're going to keep them in place.

I think you would see a boom in the stock market for one thing, the economy would improve. Obama would become more popular. It would have many, many benefits for the economy and for President Obama himself and maybe even for Democrats running for office. But he is too ideologically rigid that he can't go there.

LIASSON: Well, but he would have to do something more populist attached to that. If he did -- and that's not an unimaginable compromise to let them all go for two years. But I think he would have to do something else, some kind of safety net thing, maybe a payroll tax holiday, something for the people on the lower end if you're going to do that.

KRAUTHAMMER: I'm not sure it's entirely ideological. I think part of this is pure narcissism. I don't think I have ever heard him say I changed my mind or I was wrong. And if he does, it would be --

LIASSON: Why does he have to say I've changed my mind? Why can't he just say I accepted an idea from the other side? He's done that.

KRAUTHAMMER: Because he would be changing his mind.

(CROSSTALK)

BARNES: It would be a switcheroo for sure, but a smart one.

LIASSON: He's done that. He's done that.

BAIER: We'll leave it there....

Up next, the latest on the planned mosque near Ground Zero. Keep it here.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: If you can build a church on that site, if you can build synagogue on that site or a Hindu temple on that site, then we can't treat people of the Islamic faith differently.

(END VIDEO CLIP)

BAIER: The president talking to NBC News, asked about the mosque and community center near Ground Zero. Not coming out definitively for the wisdom of that site, about talking about the Constitution and the rights there.

Meantime, the spiritual leader of that development, Imam Feisal Rauf, continued his State Department goodwill tour of the Middle East. In an interview with an Abu Dhabi newspaper, he blamed the whole controversy on politics, saying there is no doubt that election season has had a major impact on nature of the discourse and said the critics are only a tiny, vociferous minority.

We're back with the panel. Charles, what about the president's statement and this whole deal?

KRAUTHAMMER: The last statement that we heard from Rauf is false. We would have had exactly the same tempest argument or anger had it happened in mid-June or January. It's not election related. It's a dodge.

On the president, I think he is walking back his walk-back. At the beginning remember, at the dinner held, I think, a week ago Friday, to a Muslim audience he had said he supports the mosque. It was understood as a support of the mosque. Later, a day later, after there was a lot of reaction against that, he said he wasn't speaking about the wisdom, only about the defending rights.

Now it looks as if -- what we heard today in this statement -- it looks as if politically he decided he's been placed in camp of supporters of the mosque one way or another, despite his alleged ambivalence or agnosticism on the issue or whether it's wise or not. So he might as well jump in whole hog and he gave the impression of again supporting it.

This is a guy who has been generous in giving advice of wisdom, everybody from the Cambridge police to the Honduran supreme court, so it's is odd that on this issue he husbands his idea about the wisdom and the mosque. He might have been asked about that. It's a pity he wasn't.

BAIER: There was not a follow-up.

Mara, he does say in the interview, how can I say, speaking about the dinner to Muslim Americans, "How can you say to them somehow their religious faith is less?" Critics of the project say no one is saying that.

LIASSON: Right, but critics of the project do have a responsibility to say where in Manhattan it would be OK, because there is a mosque four blocks from Ground Zero, currently. Would they like that one moved?

If it's just the location, and it's not the fact that a mosque is being built, where would it be OK? I mean does it have to be on Staten Island? Does it have to be on the Upper West Side? Where would it be OK? Because there have been other anti-mosque demonstrations elsewhere around the country that are very far from Ground Zero.

So I think it's important for the people against this to be extremely clear about exactly what they're against.

BAIER: Although the president hasn't been extremely clear in his support --

LIASSON: There is no doubt he made an unforced error politically. First of all, if you are going to wade into this controversy, like Charles said, you might as well embrace it and go for it all the way.

I think for him to say the day after the Iftar dinner that oh no, I wasn't really talking about the wisdom of doing this, I think, kind of made him look weak. And I think that they thought better -- the White House thought better of that, and that's why he wants to say no, I was clear on this.

BAIER: Fred?

BARNES: I want to go back to the president's statement where he said if you're building a Christian church or a Hindu temple or a Jewish synagogue there that would be fine. So -- we're denying a Muslim mosque the rights -- and then the Muslims rights that the other people would have.

But here's what is wrong with the statement. If you had a Jewish terrorist for instance, hypothetically, had attacked the World Trade Center two blocks away, then you couldn't build a synagogue there or a Christian church if it --

LIASSON: Wait a minute. A Jewish terrorist?

BARNES: Look -- obviously, they didn't. I'm talking hypothetically.

If Jewish terrorists, in the name of their religion or some perverted version of it, had attacked the World Trade Center, then you couldn't build a synagogue. You'd have opposition to that, or a Hindu temple. If Christians had become terrorists -- a group of them -- and attacked the World Trade Center in the name of Christianity or some perverted version of it, then you wouldn't want to see a church a couple blocks from it.

LIASSON: Why do terrorists get to decide how Islam should be interpreted? They don't speak for Islam. Jewish terrorist killed Rabin.

BARNES: Of course they don't.

LIASSON: And he doesn't speak for Jews.

BARNES: Of course he doesn't.

But it has created this enormous sensitivity about putting that mosque there. If you don't understand that, then I don't think you understand the issue and the opposition.

LIASSON: What about the mosque in Tennessee?

BARNES: I don't know what is going on in Tennessee, except there were shots fired.

LIASSON: Well, no there were protests.

(CROSSTALK)

BARNES: On the other hand we have more than 1,000 mosques in America. They're all over the place.

KRAUTHAMMER: If someone suggested a synagogue at Sabra and Shatila, I can assure you the well-spoken people in the country here would be appalled and oppose it.

Look, on the issue of where do you draw the line, people imply that it's the critics of the mosque that made a connection between it and Ground Zero. In fact, the founders of the mosque have explicitly said they chose it because of the proximity. They wanted it to be a statement about the attack on the World Trade Center.

LIASSON: And that they condemned it.

KRAUTHAMMER: But they are the ones that created a connection. And to say it's the opponents who have imposed upon it is wrong. It was a deliberate attempt to establish a mosque in a place near it. And their interpretation is one which I would dispute extremely strongly.

BAIER: We'll probably be back to this topic.