This is a rush transcript of "Special Report With Bret Baier" from June 19, 2009. This copy may not be in its final form and may be updated.


ROBERT GATES, U.S. DEFENSE SECRETARY: The ground based interceptors are clearly in a position to take action.

So without telegraphing what we will do, I will just say we are — I think we are in a good position should it become necessary to protect American territory.


WALLACE: That was Defense Secretary Gates announcing steps he's taken in response to intelligence North Korea may test fire a long-range missile towards Hawaii.

Let's bring in the panel, Steve Hayes of "The Weekly Standard," Juan Williams of National Public Radio, and syndicated columnist Charles Krauthammer.

Steve, let me start with you. Gates has announced the U.S. is not only moving missile interceptors to Hawaii, also radar in the region. This after reports from Japanese intelligence that as soon as July 4 the North Koreans might launch that long-range missile towards Hawaii.

What do you make of this?

STEVE HAYES, SENIOR WRITER, "THE WEEKLY STANDARD": On the one hand, you don't want to overreact, because North Korea has had some trouble in sending their missiles — or getting them close to the targets in the past.

On the other hand, when was the last time we took defensive measures to protect against a possible missile strike? It's been a while.

And in that sense, I think this is quite a big deal. You have the defense secretary out on public air waves talking about the need to protect American territory.

We've underrated or underestimated Kim Jong Il's capabilities in the past. We didn't know he was going to be able to explode a nuke in October of 2006. He did even though it was a crude device.

So I think it's better to be safe in this case than sorry, and it turns out that this is probably, the events of the last week are probably the best argument for missile defense that we've had in a decade.

WALLACE: Let me throw something else into this, Juan, and that is Jennifer Griffin's report the USS John McCain, a Navy destroyer, is tracking a North Korean ship in Chinese waters that we think may be carrying contraband weapons in violation of the U.N. resolution.

Now, the U.N. resolution is kind of odd, because, on the one hand, it says we can stop the ship, we can inspect the ship, but we can't use force. So what do we do?

JUAN WILLIAMS, NEWS ANALYST, NATIONAL PUBLIC RADIO: Well, technically, we can ask to board the ship, Chris, and of course then we will be denied that, and this would be viewed, according to the North Koreans, as a provocative act, an act of war, which then leads us back to what you and Steve were discussing about the possibility that Kim Jong Il would act aggressively towards the United States.

And apparently his aggression would take the form of launching one of these missiles he's been testing, however un — misguided they've been, but launching something in the direction of Hawaii.

But the intriguing factor here we have not discussed is China, because China clearly has the greatest influence on North Korea, their supplier of food and energy. China has been reluctant. They were the ones in the U.N. that said they did not embrace the idea of a military response if the North Koreans refused to have their ships inspected.

So the question is, what will China do here? Is China willing to allow North Korea to continue down this path, or is China now saying they are willing to take action, or are they willing to simply act as a silent partner and allow the U.S. to enter their neighborhood and take action against Kim Jong Il.

WALLACE: Charles, we've been waiting a long time for China to get North Korea to do the right thing.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Godot will arrive before the Chinese do on this one.


Look, what's puzzling here is not the behavior of the Chinese, but of the United States. The Defense Department said, as we heard in an earlier report, said this is a delicate situation with the interception, that nobody wants confrontation.

Well, if you're going to stop the ship at sea, that is the definition of a confrontation.

And if the Chinese have said that the U.N. resolution doesn't authorize the use of force, and we don't think that we are going to do that, why are we intercepting? We are going to ask if we can board. They are going to say no. We'll say please, and they'll repeat no. And then what?

If we're not going to use force, which I think we should not, we are not in a position to go to war right now, then we ought not engage in any of this, because it's going to be a humiliation. It's going to look as if the resolution is toothless, which it is. But America also is toothless.

I'd rather let it go without a sham confrontation in which we back down than have this confrontation and be embarrassed and look very weak.

WILLIAMS: I think the Obama administration has the feeling right now that they have given enough time and they've acted with sufficient patience with Kim Jong Il, and they are ramping up. I don't think they're ready to back down, Charles.

KRAUTHAMMER: Do you think they're going to board against the will of North Koreans?

WILLIAMS: I think they have to lay down a marker here. And it's not only for the North Koreans but it's for others who would challenge U.S. authority at this point.

Because from the position of the administration, the people I've spoken with, it's not only about North Korea gaining nuclear weapons, it's also about proliferation, which is what that ship will be —

WALLACE: I'm glad to see that Juan Williams is the hawk in this and Charles Krauthammer is the dove.


KRAUTHAMMER: As you know, I believe in peace and brotherhood.

WALLACE: There you go.


A government watchdog fights back after President Obama fires him. It's all part of our Friday lightning round. Fasten your seat belts, next.



GERALD WALPIN, SUSPENDED AMERICORPS IG: I got fired because I was doing the job of criticizing and analyzing what the corporation was doing, and finding those things that were fraud, waste, and abuse.


WALLACE: That was former Inspector General Gerald Walpin, who claims President Obama fired him for doing his job. And it is just one subject on our Friday lightning round.

So let's start, Steve. Gerald Walpin, the inspector general for National Service Programs fired last week very quietly. He then made a fuss about it and said he was fired because he had found some misspending of funds by a former Obama — or an Obama supporter, the mayor of Sacramento.

And then the White House forced, I think to some degree, to say why, said it was because Mr. Walpin at a board meeting was disoriented and confused.

What do we make of this?

HAYES: The White House, if they had a good reason, one assumes they would have given it by now. They don't have a good reason, and they said, as you pointed out, that he was confused, disoriented, and unable to answer question.

WALLACE: Well, that's a good enough reason, isn't it?

HAYES: No, it's not a good reason. And if it were, then Robert Gibbs should be afraid for his job given what he said today on Iran.


KRAUTHAMMER: Can't top that. Give it a shot, Juan.

WILLIAMS: That was pretty good.

I think this is a lone moment for the administration, I really do. I don't agree that that's a legitimate reason to fired Mr. Walpin.

WALLACE: I'm saying if it were true, it's a good reason.

WILLIAMS: Even if it were true, there's a staff, there's an entire history here. If he had a bad moment in a meeting because of his age or something, it does not constitute a firing offense.

Make the case. Make the case that in fact what he has said is wrong, or that he's trying to recover the funds in an improper manner. But to do this is simply the politics of a personal destruction and a low moment for the administration.

KRAUTHAMMER: Once again against Juan I rise in defense of Obama. If this guy was disoriented, incoherent in a meeting, that's an empirical issue. It's true or it's not. Let's hear from a witness or two who was there.

If he was and he showed up drunk or stoned, he ought to go. If he didn't, all of this is a lie, and then Obama and the administration's action is wrong.

WALLACE: Time for a Congressional hearing, hear, hear.

Steve, let's go to Iran. The Ayatollah Khamenei today at Friday prayers talked tough, first of all said that Ahmadinejad won an absolute victory, and second said, no more protests, and if you do, face the consequences. Where are we headed?

HAYES: I think we're headed to a confrontation, because there's a large rally that is likely to take place tomorrow. And he basically preemptively blamed Mousavi for the bloodshed if there is to be some, which I think suggests that there probably will be.

WILLIAMS: And he's also said that Mousavi lost. And I thought they were going to have some kind of recount and the Supreme Council was going to look.

So it looks to me like this more of stage politics, selection, not election.

KRAUTHAMMER: This could be — tomorrow could be a Tiananmen Square. It could be a bloody massacre, or if the troops, the Revolutionary Guards don't attack the demonstrators, it could be a collapse of the regime.

Now, it's possible, also, they're going to negotiate tonight and perhaps have a compromise and co-opt and give certain posts to the government and to the opposition leaders.

But this could be a huge event in human history. The regime hangs by a thread tomorrow. It will likely retain its power, but it is actually in danger of falling.

WALLACE: Health care, Steve Hayes — Democrats have gone back to the drawing board. It's been a bad week for health care reform on the hill, with the CBO projecting one Democratic plan would cost at least $1 trillion over 10 years, another $1.6 trillion.

How much trouble is it in?

HAYES: These may be low-ball estimates, too.

I think it's in real trouble. And you saw the White House backpedaling again just this afternoon. One of the lines that then candidate Obama and now President Obama has said for more than a year is that if you like your health insurance, you'll be able to keep it.

The White House today told the Associated Press that that was not meant to be taken literally, which is a backtrack.

WILLIAMS: I think they're going to get a deal. In fact, the Democrats are backtracking because of the cost issue and because of the CBO report. But don't be fooled, Republicans want a deal here, too.

KRAUTHAMMER: Any deal will have to exclude a public option because if it stays in the plan, it will not pass the Congress.

WALLACE: You each have about 10 seconds for your own lightning you had round — Steve?

HAYES: Most under-covered thing in this past week was a comment by a Mousavi spokesman last night that the people rallying are against nuclear weapons, which puts the president by not speaking out on their behalf in a bad situation.

WILLIAMS: We are going towards a weekend of high tide for kowtowing to the Obama administration. He's all over CBS this weekend, and then he's going to be all over ABC. I don't know what's going on with big media in this country.

KRAUTHAMMER: Good provision in the financial reform package reform — if you issue a mortgage, you can't turn around and sell all of it. You've got to keep a piece of it, which will keep you honest and interested in having a real repayable mortgage. It could help us in the future.

WALLACE: Got it all in? Thank you, gentlemen.

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