This is a rush transcript of "Special Report With Bret Baier" from December 4, 2009. This copy may not be in its final form and may be updated.


PRESIDENT BARACK OBAMA: Today's report is another hopeful sign that these steps that we took, difficult steps, have helped turn the tide. But we've got a lot more work to do before we can celebrate.

HOUSE MINORITY LEADER JOHN BOEHNER, R-OHIO: One of the concerns we have are the number of people who quit looking for work, people who dropped out of the labor force. You know, if you want to look at the real effective unemployment rate, it's about 15 percent.


BRET BAIER, HOST: Well, employers shed only 11,000 jobs in November according to the new reports, and that made for two-tenths of a percentage point in the unemployment rate.

So what about this, the politics of it and what's behind it? Let's bring in our panel: Fred Barnes, executive editor of The Weekly Standard; Jeff Birnbaum, managing editor digital of The Washington Times, and syndicated columnist Charles Krauthammer. Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, it looked like the jobs summit worked in one day. Maybe I was wrong about Obama. Perhaps he is a bit of a god.


Look, these numbers are good, but they are to be looked at skeptically. We were going to have a plateau of unemployment at some point. The good news is we might have achieved a plateau a year, a year and a half ahead of when we thought it would happen.

But the caveats are these — A, these numbers have a lot of noise in them. We had a large readjustment of the numbers in September and October. We will likely have a readjustment of today's numbers in a month or two, so we aren't sure.

Secondly, what you get with these rates is, as we heard a little earlier, it excludes people that are so discouraged that they drop out of the labor force so that artificially it depresses the number. If you were to include them, you would have had a slight increase in unemployment.

And lastly, if you look inside the numbers, the main increase in growth in jobs was in healthcare, education and government work. The last two of those are essentially all government work, which means that we haven't seen a real sharp recovery at all in the private sector.

BAIER: Jeff, the White House is clearly not trumpeting or celebrating this. It realizes the numbers are still tough looking forward.

JEFF BIRNBAUM, MANAGING EDITOR DIGITAL, THE WASHINGTON TIMES: I think that's right. I think this is yet another indication that the worst of the recession may be over, but there is still tough economic times ahead.

The banks are still not lending the way they should be. Consumers don't feel like they should go out and spend. The malls are filled, but sales still are not robust.

And so if you look at the major prognosticators of the economy, most of them expect double digit or near double digit unemployment rates through next year. So, there are real problems with the economy.

The president does believe a second stimulus package in effect needs to be passed, and he will be talking about that next week, laying out some of these things. But he has a real dilemma. He needs to get job growth moving despite this new number today, but he doesn't have a whole lot of money to spend to do so.

The bigger problem is the gigantic federal budget deficit that will restrict what he needs to do or would like to do in order to get the economy really revving up again.

BAIER: Fred?

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: I really didn't think I would be the most optimistic person about this.

BAIER: Who knew?

BARNES: Who knew? But it really is good news. If they are repeated it again next month it would be great news, and it would show that the economy we have hit bottom and would come to the point of whether what caused it. Obama thinks it is the stimulus package. There is no even to believe that.

I say never underestimate the resilience of the American economy. It's an amazing and dynamic organism the way it rebounds from the worst of circumstances.

The hard part comes now in the hiring, because so many companies have learned that by shedding jobs that they can get by and make a profit with fewer employees.

And then there is this wall of disincentives that President Obama has erected with the tax hikes and the protectionism and if the health care bill passes and cap and trade, that will make it even worse.

So actually, getting 3.3 millions to get back to where we were just in January, it will take years to get there.

BAIER: Jeff, you mentioned a second stimulus and possibly some jobs creation bill. There was talk today about using TARP funds for that, the bank bailout funds. Senator Judd Gregg was ballistic about it. What about that?

BIRNBAUM: There is more than $200 billion still out there to be spread around. And the last thing that the president wants is to dip into some other funds. So he needs money, and using TARP funds would be completely breaking the rules.

BAIER: Because the actual legislation says it goes back into the Treasury.

BIRNBAUM: It was supposed to go back into the Treasury, and it's supposed to be used to help banks originally, remember, to get rid of those toxic assets, the loans they couldn't unload. Well, that kind of legerdemain is likely to be attempted by Democrats who want to spend money, but I'm not sure they can get away with it.

BARNES: Oh, I think they will.


KRAUTHAMMER: It is a travesty, but it's an act of political genius because, as you say, there is no money anywhere. We are absolutely out of cash, except all of a sudden it looks as if there is going to be some left over in TARP.

Now, the way that Democrats will sell it is to say well, this is money that the Bush administration had said ends up in the pockets of the bankers, the rich fat cats on Wall Street, and we — the Democrats — will redirect it to Main Street. It will be an unbelievably easy sell. It will be astonishingly cynical, and I think it will be successful politically. They will get the money and it will look good.

BARNES: And they can do it without going back to Congress. They can just spend it. Jeff, they won't...

BAIER: That's the thing. There is not a honey pot here in Washington with a bunch of money in it.

BARNES: And the banks are paying back the money, Bank of America is, faster than expected. There is a pot of money.

BAIER: Sort of.

The Friday lightning round featuring your choice online, the topic of the week and a new feature to that — coming up next.


BAIER: All this week on FoxNews.com every week the "Special Report" page, viewers voted on what topic we should discuss first during this, the Friday night lightning round.

As of 4:00 p.m. Eastern this afternoon, more than 1,400 of you had weighed in and more 40 percent wanted the first topic to be: "Krauthammer's Wildcard," and there it is, the "wildcard." We're going to alternate panelists and people can vote if they want the wildcard.

So, Charles, what is it?

KRAUTHAMMER: Let me start and say how honored I am by the trust that the people have put in me, and how moved I am by the margin of victory. I'm told it is a landslide.

BAIER: It was a landslide.

KRAUTHAMMER: Over such worthy competitors as Copenhagen and "Whither is the stimulus?"


It's an honor only to be considered in their company. But I'll cut short my acceptance speech. It's going to be the estate tax.

The House voted this week to extend it permanently. The history is that at the end of December of this year it was going to expire and become zero. The catch was because of a quirk in the law, a year later it would reemerge at 55 percent and to eliminate this yearly gap in which, as The Washington Post put it, people would have had incentive to throw mama under the train and also, to retain the government's grip on your cold body when you die, that Democrats have reinstated it, made it permanent, and it will be now, I think, 35 percent for all estates over $3.5 million.

BIRNBAUM: It is 45 percent.

KRAUTHAMMER: It's 45 percent over $3.5 million, and $7 million if you're a married couple.

Now, the Senate hasn't acted. And if it doesn't, there will be a few weeks in January when rich uncles will sleep uneasily in their beds. But it will inevitably act and I think it will probably end up somewhere around $3.5 million and roughly half the money ends up in the hands of Uncle Sam.

BAIER: Quickly, do you want to weigh in on this one?

BIRNBAUM: I agree. What is added here is a big exemption, the $3.5 million and $7 million, which makes it less bad, but this is proof that there are consequences to elections. Democrats take over and the estate tax is reinstated.

BARNES: Well said, because the wrong word you used Charles was "permanent." Look, if Republicans win a lot of seats, as expected, in the election next year for Congress, they'll change it. They'll go at it and get some Democratic votes and reduce it to, say, 25 percent for estates over $10 million. Really.

KRAUTHAMMER: But Bush had a majority and he didn't abolish it.

BARNES: Well, I don't know. Well, look, it isn't going to stay this high, I will tell you that.


KRAUTHAMMER: Well, I hope not, because I'm not feeling that well.

BAIER: We've got to speed it up. Climate change, the president is now going at the end of the U.N. climate conference. Charles?

KRAUTHAMMER: Well, I knew he wanted to make a show of the fact that he is serious. If you go at the beginning when nothing happens, it looks like show. I think he is going to imply he has accomplished something, but I'm rather skeptical anything of importance will come out of it.

BAIER: As the U.N. is investigating the climate-gate scandal, the e-mails?

BIRNBAUM: Yes, I'm not sure there is really a connection between climate gate and the next fact, which is Copenhagen is not going to produce a treaty. I guess there might have been hope a long time ago. There will just be individual pledges by countries that could lead to a permanent climate treaty next year if they're lucky.

BAIER: But Fred, there was some thought that the president wasn't going at the end because he didn't want to look like it had failed, but now he is going at the end.

BARNES: Maybe there will be a later word on this. The smart thing to do is say, "I would like to come, but our economy is bad. I have to be home and working on it."

BAIER: OK, we have one minute left. Bring your own comment.

BARNES: The U.S. lucked out today when they drew for the brackets for the World Cup soccer, and the U.S. got in the bracket with England, Algeria and Slovenia. Slovenia has a pretty good team, but they avoided Spain, France, Germany, Holland, Argentina, Brazil. Those are the teams that kill you in the first round and you don't advance.

BAIER: Jeff?

BIRNBAUM: I think Democrats will be increasingly upset with the president's Afghanistan build-up because that pullout date in the middle 2011 looks to be flimsier and flimsier from their point of view. The president will have a real revolt on his hands among Democrats.

BAIER: And finally, our wildcard.

KRAUTHAMMER: A final stick in the eye: Iran on nukes. It announced this week that it will enrich uranium 20 percent, which is in violation of everything it had done in the past. This is after announcing that it's going to expand its enrichment facilities. At what point will Obama understand that he has been given a no?

BAIER: OK, we got through it. That's it for the panel, the Friday lightning round.

Content and Programming Copyright 2009 Fox News Network, LLC. ALL RIGHTS RESERVED. Transcription Copyright 2009 CQ Transcriptions, LLC, which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Fox News Network, LLC'S and CQ Transcriptions, LLC's copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.