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All-Star Panel: Inside the battles over jobless benefits, income inequality

This is a rush transcript from "Special Report," January 6, 2014. This copy may not be in its final form and may be updated.

(BEGIN VIDEO)

GENE SPERLING, NATIONAL ECONOMIC COUNCIL DIRECTOR: Perhaps when unemployment is at a low level, one can assume that most people should be able to find work. We have never over the last half century cut off emergency unemployment benefits when long-term unemployment was even barely over half the rate that we have right now. Now is not the time to start.

(END VIDEO CLIP)

BAIER: The U.S. Senate was set to take up this tonight, a cloture vote on a three-month extension of unemployment benefits, but because of the weather and some of the trouble some of the senators had getting back to Washington, they decided to postpone that by unanimous consent until tomorrow morning. So that will happen tomorrow morning.

The big problem for Republicans, it's not paid for, $6.4 billion for three months extension. And that's the back and forth right now. What about the politics and the policy of all of this? Let's bring in our panel, Steve Hayes, senior writer for The Weekly Standard, Mara Liasson, national political correspondent of National Public Radio, and syndicated columnist Charles Krauthammer, Fox News contributors all. Steve?

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: Well you know, I think you're right in the way that you describe the way Republicans are objecting to this. They make a very pragmatic, practical argument about deficit neutrality. We don't want to have any more spending. We don't want to borrow from China, as Rand Paul said, to finance continued unemployment insurance. I think that's a fine argument as far as it go.

But I think Republicans are being a little too wimpy on this. I think it's time to make a moral argument against extended unemployment insurance forever. And that's in effect what we're seeing. As Brit's commentary suggested, you can't have unemployment insurance that goes on forever. There has to be a cut-off date. And while the White House says that it will be three months, we have been hearing it would be cut off now for the better part of five years.

There used to be widespread bipartisan agreement in Washington that unemployment was sort of a last place to go, the last place that somebody who was down on their luck could turn. Now it's increasingly becoming a way of life.

And what's surprising to me is that Republicans aren't making a moral case about how often unemployment insurance that goes on forever leads to more unemployment. There's academic research that supports this. There was a National Bureau of Economic Research study that came out in October of 2013 that suggested as much. Make that argument beyond just the practical argument.

BRET BAIER, ANCHOR: Mara, there's one Republican who has signed on to this, and that's Senator Dean Heller of Nevada who obviously is dealing with a serious unemployment problem in that state.

MARA LIASSON, NATIONAL PUBLIC RADIO: He has very high unemployment He's actually a co-sponsor. There are two other Republicans, Susan Collins and Lisa Murkowski, who say that they will vote for it. They need five all together. If it was paid for, I think they could get five pretty fast because they have decided not to make a principled conservative stand against it, as Steve just sketched out.

But we're in the messaging phase of this debate. This is not about passing a bill. It's about scoring messaging points. It's $6.5 billion. If the Democrats wanted to find that somewhere to offset the cost, they could, and I predict that in the end they will and this thing will pass and it will be paid for.

BAIER: Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: That's why I think the Republican approach is the wrong approach. I agree with Steve. It shouldn't be about whether it increases the deficit or not. It's a fairly small amount of money, and that's not the core issue. The core issue is creating an entitlement. This has never been considered an entitlement.

And you go down this road, Sperling says now is not the time. Four and a half years into a recovery, at least as defined by the administration itself, is not the time? If not now, then when? What we're going to end up is a European level of unemployment, chronic unemployment, subsidized.

And the fact is that if you subsidize apples, you get more apples. It's subsidize unemployment you get more of it, and that's what the economic studies show. It's not that people are lazy. It shows that if you have unemployment insurance, then you can make choices which would allow you to turn down a job that perhaps isn't exactly what you want. The vast majority of the unemployed want a job. And the problem is the state of the economy. So I think what Republicans ought to do is to recognize that it's becoming an entitlement and they would oppose that.

On the other hand, it's still tough times. Unemployment is relatively high, and if we were to count the people who have quit looking, it would be 11 percent. So I think what they ought to do is say, we'll accept the short term, the three months, but only if you build into the bill an unwinding of this so it has an end date, so we all understand it isn't an entitlement. It's a way to help people temporarily. And that would be a good solution.

BAIER: But politically, doesn't it still carry a lot of weight? You can talk esoterically and from 30,000 feet about how it's, you know, a bad issue to keep on extending. But when you start talking about the mom who can't make the bills and they start talking about different stories, isn't politically that touching a chord, especially for the president's base and for the Democratic Party?

HAYES: I don't know. I don't think anybody really knows, although there's been significant polling done on that. I'm not sure that the counterargument isn't equally compelling. If you go to people in the upper Midwest, places where we're going to be seeing a lot of these battles for the Senate in the next year. Why not go there and make the argument, look, we want to be there to help when people are down. We don't want to make this a way of life. Just the same way Republicans framed the major debates over welfare reform in the 1990's, that I think actually really struck a chord.

Now, there's a pragmatic argument to be made that now is not the time to do that. Focus on ObamaCare. You don't want to get off into some philosophical argument. I understand that, but I guess I'm a little troubled that Republicans are so timid at this point that they're not even willing to make a principled conservative argument on something that to me is pretty clear on economics.

LIASSON: Clearly Democrats feel like this is ripe for them politically. Here is the Senate majority leader and Senator Marco Rubio.

(BEGIN VIDEO CLIP)

HARRY REID, D-NV: The rich keep getting richer. The poor keep getting poorer, and the middle class, they're under siege.  This country can't afford to let the gap between the fabulously wealthy and those who are barely getting by to keep their incomes going up, middle class going down, poor getting poorer. That's why Democrats will renew our efforts to address poverty and economic disparities this year.

SEN. MARCO RUBIO, R - FL: Instead of continuing to borrow and spend trillions of dollars on government programs that don't work, what our nation needs is a real agenda that helps people acquire the skills they need to lift themselves out of poverty and to pursue the American dream.

(END VIDEO CLIP)

BAIER: So politically, the income inequality, unemployment benefits extension, raising the minimum wage -- it seems like --

LIASSON: It's a good argument for Democrats. They're going to push this all the way up to the elections --

(COUGHING)

BAIER: Charles?

KRAUTHAMMER: I wish I could help her medically.

(LAUGHTER)

BAIER: I know. We'll let her get a drink. How about that?

KRAUTHAMMER: Hot tea.

Look, I think when you heard Harry Reid talking, it sounded as if the Democrats had been out of office and were railing against the current administration. The income inequality has increased radically under this administration. The Fed, with the blessing of the president, pumping $1 trillion a year into the economy, which goes right into the stock market, and into housing, which of course helps the rich and the people who already have. And the median income in the country has declined in this recovery, which is never happened before.

And so I mean, I think there's an argument against themselves. I think Republicans ought to make a case on the minimum wage, on unemployment, who wants -- we don't want to cut people off in the middle of winter, but we have to wind down the program. And that's a case you can win.

BAIER: At least you didn't cry. I had a "Grapevine" where I started to cry. Next up, more on politics of unemployment when we come back. 

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