'Special Report' Panel Breaks Down President Obama's Budget

This is a rush transcript of "Special Report With Bret Baier" from February 26, 2009. This copy may not be in its final form and may be updated.


PRESIDENT BARACK OBAMA: We need to be honest with ourselves about what costs are being racked up, because that's how we will come to grips with the hard choices that lie ahead. And there are some hard choices that lie ahead.

HOUSE MINORITY LEADER JOHN BOEHNER, R-OHIO: The era of big government is back, and Democrats are asking you to pay for it.

UNIDENTIFIED MALE: Where is the restraint in spending?

REP. PAUL RYAN, R-WISC.: It's a budget that goes back to old ideas. Tax, borrow, and spend is not the way to secure prosperity.


BRET BAIER, HOST: President Obama's administration has laid out the budget, and it is $3.5 trillion. There is a lot to go through. We will try to break it down for you.

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.

Charles, there is a lot to go through. Your first impressions about what we have seen of this?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: The president used the word "honest." That's astonishing. Look, all budgets are fiction. This one is fantasia. Look, let's start with the projections in revenue. Obama has promised to cut the deficit by the end of the first term in half. He does it by pretending that in 2011 there will be a growth in the economy of about 5.5 percent, and in the next year it will be over six. Now, these are Chinese-level numbers, and even the Chinese aren't achieving them anymore. It is completely fictional, those numbers.

Next year he says we will grow at about 3.5 percent. Next year we could still be in negative territory. And then on the cuts, he speaks about the $2 trillion in savings. And, actually, in the speech he gave to congress, he spoke of $2 trillion in savings, and now he has amended it, and he says, well, budget reduction.

And that's because half of it isn't savings at all. It's tax increases. And the other half is a fictional saving of a projected spending on Iraq, which would go out to ten years at the current levels, and have us spending in 2018 at a level that we are today that nobody expects and nobody even imagines.

So it's a saving of about a trillion and a half of Iraqi spending that would never have happened in the first place. And that's how he gets his spending cuts.

BAIER: And on the growth numbers, you're saying this kind of undercuts the argument that we're in the greatest, the most dire recession since the Great Depression?

KRAUTHAMMER: Right. It would be the shortest depression in history, and one with the biggest bounce ever seen afterwards in the absence of a world war.

BAIER: Mara?

MARA LIASSON, NATIONAL POLITICAL CORRESPONDENT, NATIONAL PUBLIC RADIO: There is no doubt that some of what Charles is saying is absolutely correct. There are a lot of rosy scenarios in here — remember that, the rosy scenario? And, of course, he inflates the Iraq numbers so he can get the biggest bang out of reducing them. But he also does some things that even Judd Gregg in that same press conference was very happy about — cuts in agriculture subsidies and healthcare and some Medicare cuts. And there are areas in here that are real cuts that Republicans are actually happy about and will work with him on.

He also does raise taxes, there is no doubt about it. But interestingly enough, he raises taxes on what has now become an important part of the Democratic electoral coalition — all those high-income people that he is raising taxes on, and Medicare premiums, and reducing deductions, those are people that the Democrats now count solidly as their voters. They live in places like San Francisco and Boston and New York. So I think while, like every budget, yes, is fiction, and this budget has plenty of it, there also are some things that he has done that are more honest, that are more transparent. I mean, he doesn't do the AMT fiction that other presidents have done —

BAIER: Alternative Minimum Tax.

LIASSON: The Alternative Minimum Tax. He does put the cost of the war in there. I agree he inflates them. But, all in all, I think this is a big budget. It certainly signals a radical change in government, a new direction. But it's not 100 percent phony.

BAIER: Fred, $1 trillion in taxes on the wealthy, $1 trillion in taxes on the wealthy over ten years.


That is what I was most interested in is where does he get the $2 trillion in so-called savings. And, obviously, to President Obama savings are not the same as cuts, because they're mainly tax increases.

Even cutting back on what the people making over $250,000 can deduct for charitable contributions, saving — those are savings as well. But another thing he does is he counts in order to—I think Mara probably named every spending cut that he had in there, because there weren't very many, that's for sure. But he gets $646 billion from fees and taxes of companies through his cap and trade program that he counts on as having been passed. That's hardly going to help the economy.

And then, of course, all the tax increases on the so-called well-to-do.

I don't think when you're taxing everybody over $250,000 in income that those — that includes a lot of people that are Republicans, I think a lot more than just the limousine liberals you talked about in San Francisco who make zillions of dollars, and they can afford to pay this.

On Tuesday night, President Obama said that he does not believe in big government, and he said he resents people saying he believes in big government. This budget is big, big government, no question about it.

KRAUTHAMMER: And I would add to that that it is 88.7 percent phony.

And on the agricultural cuts, he announced it proudly. It is $20 million, which means that if you have a thousand of those, a thousand of those, it would be 1/10 of one percent of $2 trillion in cuts he has promised.

It is a matter of scale. The cuts he's talking about are miniscule and almost risible when you look at his promises. The big cuts are actually tax increases fictional Iraq savings.

BAIER: Mara, last word. Does it take it tougher for this administration to back up that we're going to cut the deficit in half by the end of the first term? When you look at the real numbers —

LIASSON: I think it is actually going to be hard for him to do that.

Now, on this thing he just submitted today, it actually comes out.

BAIER: And then goes back up.

LIASSON: And then goes back up.

But, look, and this is something that has been done by many presidents, including President Bush, who sunsetted his tax cuts in ten years—or in 2010, I'm sorry — precisely because he wasn't willing, he didn't have the guts to face the deficit implications of keeping them there.

BAIER: The president is hoping to save some money by getting U.S. troops out of Iraq, but so far there are few specifics.


OBAMA: I will soon announce a way forward in Iraq that leaves Iraq to its people and responsibly ends this war.


BAIER: The panel discusses the next step in Iraq when we return.


BAIER: You're looking live at the White House where President Obama is wrapping up a meeting with congressional lawmakers, talking about Iraq policy. The plan so far as we know it is to draw down over 19 months and leave a residual force.

Some top Democrats not liking even that. Senator Russ Feingold saying, quote, "I am concerned, however, by reports that tens of thousands of U.S. troops may remain in Iraq beyond August, 2010.

I question whether such a large force is needed to combat any Al- Qaeda affiliates in Iraq or whether it will contribute to stability in the region."

We're back with the panel. Fred, any clue how this is going to play out?

BARNES: Look, I'm encouraged that President Obama is leaving those 50,000 troops there that Senator Feingold and some other liberal Democrats are complaining about. I think that's the good news in what he is announcing.

On the other hand, I don't know why there is any — I don't know the reason for him announcing this pullout. This would be of the other, let's see, that would be 92,000 troops, because there are 142,000 there at the moment. Some scheduled for bringing them out faster rate than what the generals in Iraq would like.

Look, we know that America's deployment of troops there officially ends at the end of 2011 due to the status of forces agreement with the Iraqis. Now, something could be negotiated after that to leave American troops there, but it may not. There is no political pressure from in the U.S. or in Iraq to announce some withdrawal of troops there. There is still problems, another national election. And I think there is no reason to announce this.

But I'm glad at least he is leaving the 50,000 there.

BAIER: There is political pressure from the left.

BARNES: Not much. Oh, come on.

LIASSON: This was a big campaign promise, and the president wants to say he is fulfilling it, even if it's 19 months instead of 16 months. And I think to have Russ Feingold and all those other Democrats today who were saying we are really unhappy about the 50,000 troops is a great thing for the White House.

And it's helpful because there is some residual anger on the left about this. And you can have the congressional Democrats leading the charge for that. In the meantime, I think the White House has crafted a plan that will leave 50,000 troops, or maybe even more, if necessary, because the way this is defined, is he going to leave this residual force — might end up being bigger, if the generals tell him it needs to.

And I believe that when we get to that, you know, two years from now there is not going to be a big debate about how many troops are on the ground in Iraq so long as Iraq is stable and the numbers have been coming down in big measure.

BAIER: That's a big "so long." I mean, if things go the other way, there are a lot of questions.

KRAUTHAMMER: That's a whole different thing. But if the surge continues, and the surge was a great gift to Obama, it should be stable.

KRAUTHAMMER: Which is why I think that Odierno, the commander on the ground there, in the end prevailed. There is a big announcement of the 19 months, but I think, in the end, the president is not going to be foolish if it looks as if he has to slightly slow down. He will.

And the parameter is the end of 2011. That's going to remain the main parameter.

But what disturbs me is the way the president speaks about Iraq dismissively and grudgingly. He talks about leaving it and ending the war without ever speaking about what we have achieved.

He speaks about the courage and the sacrifice of our soldiers, but he never connects it with the soldiers' mission, meaning what they have created and done. He talks about the Iraq the way he did as a candidate who opposed the war. He is now commander and chief, and he is responsible for the troops and the war and its success.

And I think he needs to speak about achievements, establishing a democracy, and having the strategic ally in the region, and not speak about it as if it's a simple albatross he wants to unload.

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