This is a rush transcript of "Special Report With Bret Baier" from August 13, 2009. This copy may not be in its final form and may be updated.



ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: Polling is a snapshot in time. The debate continues. And we will see whether numbers move or change as a result of the continuing debate.


BAIER: Well, here is the latest snapshot from the FOX News opinion dynamics poll. And there you see health care reform legislation, in favor of up 34 percent, a little drop from July. Oppose rises two points to 49 percent.

The highest priority for the government right now, 57 percent in all categories say reduce the deficit. You see how it breaks down by ideology there.

Let's bring in our panel. Peter Morici, an economist from the University of Maryland business professor, Kirsten powers, columnist with the "New York Post," and syndicated columnist Charles Krauthammer.

Peter, welcome, first time on the panel.


BAIER: What do you think as the polls show that the debate seems to have shifted, what this means for the White House and where this stands now?

MORICI: Well, the president is in a lot of trouble. He really hasn't addressed the basic problems of health care, malpractice insurance being one, high drug costs.

He seems to be cutting deals with the principal players but not making a lot of headway. Citizens suspect this will be very expensive and they will end up dumped into national health care.

BAIER: Kirsten Is the White House treading water here? Are they concerned?

KIRSTEN POWERS, COLUMNIST, "WASHINGTON POST": If they're not concerned, they should be concerned, I think. I think once you have the president having to try to convince you he is not going to kill your grandmother, you're in trouble. And that's where he has gotten.

And I think that they underestimated what was going to happen from the conservative side. To me it's very similar to immigration, frankly, immigration reform, where there are real fears out there, and conservatives really tapped into them and were able to stop immigration reform through talk radio essentially.

Now this time they are doing it through town halls, and they are going out and really making a lot of tubal for the White House. And I don't think they were anticipating it.

BAIER: So was it a strategic error to talk about the town halls as they did from the podium and how they have handled this up until now?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, I think they tried to exploit the fact that there was rowdiness, and I shared the view that that would actually hurt the opponents of health care reform as presented by the Democrats. But the polling has shown the opposite. It has shown that the reaction that people see in the town halls has strengthened opposition.

And that tells you that even though the Obama team is very good at street fighting, at one-on-one hand combat and campaign style, which they showed last year, when they're up against the fury of ordinary Americans, that doesn't work the way it does when you're up against the Clintons.

POWERS: Well, the USA today poll had 57 percent saying, including six in ten independents, that a major fact behind the protests were concerns that average citizens had. And that was a big mistake the Democrats made by trying to turn this into something that — is it true the people who are there are conservatives? Probably. But look, I think most Americans think it is good when you go out and protest the government and you show up and you actually care enough. When they protest the war, they certainly think it is a good idea.

BAIER: Peter, the other question is what the president is saying out on the stump, if you call it the stump, in that he says he is not going to sign anything that increases the deficit. However, the bills we have on the table so far do just that.

MORICI: Well, they are certainly going to cost a lot of money and his credibility is hurting. For example, his budget projections assume a 4 percent growth rate. No private economist would sign onto that.

Over and over the president behaves as though he is campaigning. And the campaign facts only have to be colorable. When you are president, people research what you do. The Congressional Budget Office runs the numbers, and they don't add up to this president.

So he is in a lot of trouble. He wants to spend too much of the peoples' money with too little results.

BAIER: Another issue is what he's saying about doctors. Take a listen to this from the town hall this week.


PRESIDENT BARACK OBAMA: If a family care physician works with his patient to help them lose weight, modify diet, monitors whether they're taking their medications in a timely fashion, they might get reimbursed a pittance. But if that same diabetic ends up getting their foot amputated, that's $30,000, $40,000, $50,000 immediately the surgeon is reimbursed. Why not make sure we're also reimbursing the care that prevents the amputation, right? That will save us money.


BAIER: That is not sitting well with the AMA American Medical Association, a group that the president cites as supporting his health care reform. Here surgeons are not paid $30,000 to $50,000 to amputate a diabetic's foot. Medicare pays a surgeon on average $541 to $708 for one of two procedures involving a foot amputation.

The American College of Surgeons says that remark was ill-informed and dangerous, as well as a remark a couple of weeks ago about taking children's tonsils out.

So Charles, what about this, and how much this has hurt him.

KRAUTHAMMER: Well, when the president is off in talking about the fee for an amputation, off by a factor of at least 30, he's got trouble, and it makes people worry about all his other so-called facts.

Remember, he has been selling here a free lunch. He says the way I'm going to solve the problem is prevention. We will put a lot of money in prevention. It will save a lot of money overall.

In fact there was a letter from the head of the CBO to a congressman last Friday which explicitly looked at prevention issues and said that, in fact, overall, when you pour money into prevention, it increases the cost of medicine.

And the reason is you have to screen and treat millions of people who don't end up with that disease, and there is a very small number that are helped. So even though it helps the individual, it saves on the individual, as a society it has been shown in a couple of studies, major studies, this prevention is a fantasy.

It's a good thing to do, but it does not save any money.

BAIER: From the other point of view, Kirsten, if you are in the White House, how do you turn this around?

POWERS: I think I have said this before, I don't know if they can turn it around. But there are people I talked to who think they can. And they say, look, all the major players are still at table. You have pharmaceutical companies. You have the AMA. You have them at the table still. You still have the numbers in congress.

BAIER: Although you have the AMA putting out statements like that, that doesn't really help.

POWERS: But still supporting reform. People who were completely against it before who are now spending money actually to try to get this passed.

So I think there are a lot of people who think that he can basically ram it through. You know, I just feel like you get one bite of the apple usually. And you know, now they are having to clean up and come back around and I think it remains to be seen what is going to happen.

BAIER: Peter, do they get a bill in the fall?

MORICI: They will get some kind of bill because they won't let their president fail. But it may be very scaled back. If it is what they have now it will be a classic case of elitism overwhelming the will of the people. Folks just don't have confidence in this program.

It will be a terrible mistake on the part of the Democrats to push through something big.

BAIER: OK, we'll look at where we are with the president's stimulus package when we come back.


BAIER: You're looking live there at the White House. And they are essentially saying that the Recovery Act is working again and again.

But here's the polls from today. When people are asked with the remaining stimulus money what would you do to boost the economy, there you see all, 72 percent, said return the money to taxpayers.

This other poll, the U.S. economy, is the worst over or yet to come? And there you see in August, it's over 44 percent, yet to come, 49 percent. And that has changed significantly.

We are back with the panel. First question, Peter — so is the recession over? We've talked about this over the past couple of days. And is the stimulus package working?

MORICI: Well, the job loss data indicates the recession is not over and not likely to be over until the fourth quarter, if then.

The stimulus package, they have had trouble spending the money. They have $100 billion out there, most of it to taxpayers in the form of rebates, the balance to state and local governments.

The president claims he has saved hundreds of thousands of jobs. Well, I ran some numbers. Up until the time of the stimulus package in February, state and local governments added 128,000 jobs. Since the stimulus package, they have shed 18,000 jobs.

BAIER: They've lost 18,000?

MORICI: 18,000 jobs they've lost. So if they're hiring people under there, they're hiding under tombstones.

BAIER: And about the recession, the biggest growth sector is the government.

MORICI: Exactly, and they're having trouble getting money spent. For example, they have $100 billion for infrastructure. So far they have contracted $1 billion of it. They can't get bulldozers moving in a forward direction.

BAIER: Kirsten?

POWERS: Well, I think that is one of the problems with the stimulus package like this. There isn't an infrastructure set up to get things moving. That's the problem with this whole idea of shovel-ready projects. It is just a misnomer. They don't really exist.

BAIER: So as White House officials continue to say, and we saw the vice president say again and again, it is working. Christina Romer, it is working.

POWERS: I think you can talk to other economists who think that it is working and that it is just going to take time. They got the first little batch of money out, and then the money is going to start moving faster now that they have more of an infrastructure set up, that there is very much of a psychological aspect to this in terms of jobs that there are lots of states, take Maryland, for example, they were going to lay off people, but now they're not going to lay them off because they know they are getting this money.

So I think this are a lot of economists who think there was an overreaction. People fired a lot of people that they didn't necessarily need to fire. Well, the states aren't having to do that because they know they will be getting this money.

BAIER: If the economy turns around cyclically on its own, does the administration get the benefit by saying simply that the Recovery Act is working?

KRAUTHAMMER: It will be — of course the president will get all of the credit. That's how it works in our politics. It makes no sense, but he will be king of the world and be hailed as a genius — not only a messiah but a genius, a double combination.

Look, what is happening here is that when you say is it working, what is working is what the Fed has done over the last year, which is pump an unbelievable amount of money into the economy, and what the Bush administration started and the Obama administration continued, which is to bail out the banks and to keep Wall Street and credit open and going.

And what's happened is the panic is over. And the recession isn't over, but the panic is. There was a time at the end of last year when people were worried that the dollar and the economy was going to explode, and we would be hunting and foraging. People were sticking their dollars under mattresses.

Well that is over as a result of the Fed, Paulson, and Bush and Bernanke and Obama, and his team. The stimulus is having a negligible effect in the real world.

However, in the political world, it is the issue out there, because it is the largest spending in the history of the galaxy, and that's why everybody will judge it whether it is stimulus or not.

If the economy improves, Obama will get the credit, but I think it is going to improve extremely slow and he is going to be in political trouble all through until the elections next year.

BAIER: Peter, when the first review of the stimulus came out, the administration said over the next 100 days, 750,000 jobs will be saved or created. Then they said 150,000 jobs were saved or created. There is 600,000 apparently — we're at day 100 from the first review, although that continues to slip.

It is impossible to measure saved or created jobs.

MORICI: It is absolutely impossible. But if you look at the trends in the job data themselves, it looks like a recession that's coming to an end under its own natural process.

But it is a very deep and long recession. And it is unlikely that we are going to add through the stimulus package anywhere near the jobs that we have lost.

Since 1998, the private sector has failed to create a single job in net effect because of this recession, and we're likely a decade away before we catch up again.

BAIER: And quickly, when people look at the stock market and they see it going up, there are companies that have shed jobs and cut their bottom line, and so they're doing better.

MORICI: Exactly. They have got their bottom line pushed down so far that they can make money in a smaller economy.

What's more, Asia is recovering. And a lot of the boost is the banks. And the Fed loaned them $2 trillion at near zero interest rates. Any fools can make money borrowing at zero and lending at five.

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