This is a rush transcript of "Special Report With Bret Baier" from June 18, 2009. This copy may not be in its final form and may be updated.


SPEAKER OF THE HOUSE NANCY PELOSI, D-CALIF.: It has always been a source of, yes, I'll say frustration for many of us in the Congress that the CBO will always give you the worst-case scenario on one initiative and never a best-case.

SENATOR MINORITY LEADER MITCH MCCONNELL, R-KY.: We should not be rushed into enacting so-called reforms that costs taxpayers trillions and could increase premiums to consumers.

FORMER SENATE MAJORITY LEADER TOM DASCHLE: We're concerned that the ongoing health reform debate is beginning to show signs of fracture on the public plan issue.


BRET BAIER, HOST: There you have the sights and sounds of the health care debate. The last one really caught some people by surprise. The former Senate Majority Leader Tom Daschle, who was going to be the administration's health care czar, if you will, pushing forward this reform plan. He didn't make it there because of tax issues, but he is saying a public plan now should be off the table to try to move things forward.

That's a big deal.

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

Very few reporters picked this up, Mara. You were one of them, of course.

MARA LIASSON, NATIONAL POLITICAL CORRESPONDENT, NATIONAL PUBLIC RADIO: I went to this event. It was really interesting. Three former Senate majority leaders — Howard Baker, Bob Dole, and Tom Daschle — had gotten together and basically made a compromise of their own to show the current leadership in the Senate how it might be done.

If they had the political will, were willing to compromise, here is something they believe would pass, a bipartisan bill.

And Daschle said while he personally preferred a Medicare-style public plan, he agreed in this compromise plan to not have a federal public plan at all, but to allow the states, which they currently allowed to do, to set up public plans of their own. And several of them already have them. They get some assistance from the federal government in setting these up. But that would be the alternative.

Bob Dole, the Republican, said although he had real problems with mandates, he agreed as part of this compromise to have a pay-or-play requirement put on employers. In other words, either insure your workers if you are over a certain size, or pay some kind of a fee into a fund.

Also, Tom Daschle did something else that a lot of Democrats hate, which he said that employer-provided benefits will have to be taxed, and that is worth agreeing to for Democrats even though it means taxing the middle class because it is worth it to get this thing passed.

BAIER: Now, we are giving Daschle a lot of focus here, but do you think he is the messenger for the administration?

LIASSON: I asked him that and he said no, he is on his own here. But I don't think that Tom Daschle would be putting something out there that the White House felt was — would hurt the process of getting them the bill they want.

As a matter of fact, after this plan was produced, the White House issued a statement that was very, very praiseworthy of it.

BAIER: Fred, the bottom line is there is some trouble up on Capitol Hill for the Democrats pushing this bill.

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: There is absolute trouble. Any Democrat who adopts this Daschle plus two Republicans' plan, it will split the party right down the middle, because at least half of the Democrats in the House and probably not that many in the Senate, are in favor of a public plan run by the government.

And that's what they want, and many of them — and some of them, anyway, are frank about saying well, this will lead to a single-payer system and that is what we would like to have anyway. So this will strike the Democrats, who already have trouble.

Look, Bret, when Nancy Pelosi is now in a fight with the Congressional Budget Office —

BAIER: The nonpartisan Congressional —

BARNES: Nonpartisan — look, she never complained about some of the findings that they would make about President Bush's budget or things Republicans were doing. But now she is upset about it. But she is upset for the right reason, because what's killing the health care plans of Obama and Democrats are how much it costs. And it comes after a time that voters are already terrified by all these spending plans of President Obama. You have the stimulus, you have $9.3 trillion in increased debt over the next 10 years, and on and on and on, all this expensive stuff.

And, they basically, the public is not buying, nor should they, the argument that somehow we are going to provide more health care coverage and it will cost you less. I mean, that just doesn't stand to reason.

BAIER: Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: That's the big setback this week, was one number, the CBO number that came out, which estimated the Obama plan, or at least the one coming out of Congress —

BAIER: Ted Kennedy's bill.

KRAUTHAMMER: The Kennedy plan would add $1.6 trillion in deficit spending.

The reason it is devastating is because it put a real number on the essential contradiction of the Obama fiscal idea. His idea, a correct idea, is that the way to control exploding deficits with all of the programs he's proposing is to bend the curve to lower the cost of entitlements, particularly the Medicare and Medicaid.

He's right. If you do that, it would save so much it would even allow for all the trillions thrown away on stimulus and other stuff.

The contradiction is that when you look at the health care, the real plan in the real world as proposed now, it bends the curve upwards to $1.6 trillion additional spending and that explodes the whole idea of a fiscally responsible plan.

BAIER: And it's important to point out that these CBO numbers are only partial and it's not a completed bill, both for Kennedy and Baucus, two different bills —

LIASSON: When the Senate Finance Committee got its initial report card from the CBO that it was going to cost $1.6 trillion, they went back to the drawing board, because they have to get it under $1 trillion. That's what Max Baucus wants.

One way to do that is to —


It is still a lot, but one way to make it cost less is to get to universal coverage more slowly. In other words, roll out the expansion of coverage more slowly.

What means is you are putting all the pain up front — the mandates, the taxes, and the spending cuts — but the goodies, everybody getting health insurance, is delayed. And that's politically really risky, because you could have a backlash against the pain before people are grateful to the government for the good stuff.

BAIER: The crazy part about the CBO numbers and the House Speaker saying that she is frustrated with the CBO — if the CBO completed the entire analysis of the plan once the bill is finished, the number really is going to be a lot higher.

BARNES: It only covers something like 16 million of the supposed 46 million —


BARNES: That what I'm talking about — 16 million of the supposed 46 million people who have no health insurance.

You know the McCain plan last year, which I think the CBO looked at, or somebody, and somebody cost it out. You got — you covered about 8 million people without insurance, and it cost zero.

KRAUTHAMMER: But look, the Pelosi complaint which came right after that sound-bite, was that the CBO had left out the vast savings from wellness and prevention.

I'm sure there is a lot of wellness in San Francisco, her district, a lot of yoga, a lot of breathing through your eyelids, a lot of, you know, thinking like a tree. It gives you a buzz. Everybody's happy. But it doesn't save you money.

Prevention, in the end is a good thing. It saves lives and families. But death is cheaper. That's why our health care today, with all of our diagnostics, is more expensive than it was 50 years ago.

BAIER: Putting you on the spot, Mara — does this move before the end of summer, the August recess?

LIASSON: I think it still has a chance to do that. I mean, Max Baucus is in there working with Chuck Grassley. He thinks he can gets something out. That is the committee to watch, more important than any other one.

BAIER: The finance committee.

LIASSON: Yes, I think it still has a chance of doing that.

BAIER: OK. Is the honeymoon over for President Obama? Brand new polls show there is increasing unease over his handling of the economy. The FOX All-Stars read the tea leaves, next.



FORMER PRESIDENT GEORGE BUSH: Government does not create wealth. The major role the government is to create an environment in which people take risk to expand the job base of the United States of America.

WHITE HOUSE PRESS SECRETARY ROBERT GIBBS: I think we have had a debate about individual policies. We had that debate. In particular, we kept score last November and we won.


BAIER: Former president speaking out, the White House responding.

Some interesting polls just out suggest some interesting things about how the Obama administration is handling the economy.

First of all, NBC/Wall Street Journal, how much has the federal intervention in the economy concern you, quite a bit or more than that? 69 percent there. Then you have this NBC/Wall Street Journal poll — budget deficit down versus economy recovery — budget down, deficit down 58 percent. CBS/New York Times poll, dealing with the budget deficit, how is Obama doing? Not clear, 60 percent. CBS/New York Times poll, reduce the deficit or stimulate the economy? Reduce the deficit, 52 percent. Some interesting numbers that the White House is looking at, Fred?

BARNES: They're interesting numbers. But this is normal for a president who hasn't done anything egregious that has gotten him in trouble. Jimmy Carter was even a little more popular in his early days about this time in his presidency, what, 30 years ago.

So President Obama is still well-liked.

BAIER: But are his policies —

BARNES: — they have slipped.

But here's the problem for him, and that is, I call it the persuasion gap. And it is a big gap. Obama is wonderful at selling himself. He's great. People like him. Charles thinks he's charismatic. I don't.

But in any case, he sells himself very well. He just can't sell his policies. Nobody agrees with him on Guantanamo, on the auto takeover. They don't agree with him on the stimulus.

It is a great thing to have him getting way less than a majority, even on health care, less than a majority thinks that he is doing a good job. The public is terrified about spending and the deficit, and so on, and he hasn't been able to persuade them otherwise.

I can't think of a policy on which Obama going on television, and he is on all the time, has persuaded the public, has moved the numbers in a positive direction. It just hasn't happened.

LIASSON: Some of those — The New York Times poll did show that health care was still — a majority still was in favor of what he was trying to do.

The problem for the president is the question about the deficit and spending. Those are his big Achilles heels.

That's why you see almost every week at the White House the president doing some kind of fiscal responsibility event, whether it's proposing pay- go rules or showing how responsibly the stimulus money is working.

BAIER: Which is why the health care problem is what it is on Capitol Hill.

LIASSON: And, also, he's trying to sell health care as a cost containment effort, not as a moral imperative to cover everybody. But this is the way we can solve all our fiscal problems, because Medicare is the worst problem that the federal budget has.

I just think that's numbers mean that it is going to be more pressure to do health care in a fiscally responsible way, and he is going to have to really do something about the deficit, whether it's having a Social Security commission the minute he passes the health care, if he does.

He has to convince people that he is serious. He talks about deficit reduction and entitlement reform all the time. I think he has to show them that he means it.

KRAUTHAMMER: All of these deficit events are theatre. I think the real, the drama of Obama presidency is the contest between charisma and reality. And he is the most charismatic, in fact, some Democrats and some of the press think of him as messianic, but at least charismatic president since Reagan and Kennedy, and perhaps more so.

But you have the reality, and you see it in the gap between his own popularity and his policies.

The ones that I think the Democrats ought to have anxiety over are the deficits, the auto takeover and Guantanamo, because each of them is a symbol.

Deficits is the old bugaboo about Democrats as free-spending liberals.

Autos is the idea of Democrats who want to expand the regional authority of government.

And Guantanamo is a double effect, soft on crime — you get those pictures of Uighurs in paradise swimming on the beach in swim trunks in Bermuda — and secondly, soft on national defense, the idea of having terrorists in America. Cheney capitalized on that, and he won in that debate.

On those three items, there is a real gap opening up, and Obama will be able to carry those issues on personal popularity, but only so far. In the end, reality is going to bite him.

BAIER: Quickly, Fred, can Republicans capitalize on what appears to be a focus on the deficit by the American public?

BARNES: Yes, I think they can. And we will see where we are next year.

Ultimately it will be on whether Obama does something about the deficit, as Mara said, and whether the economy is moving at all next year. If it is, and rather crisply, Obama will be in good shape. Otherwise, it will help Republicans.

Actually, what they say now doesn't matter much.

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