This is a rush transcript of "Special Report With Bret Baier" from August 6, 2009. This copy may not be in its final form and may be updated.


ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I expect we'll see several hundred thousand jobs lost. I expect that we'll see an uptick in the unemployment rate come tomorrow.


CHRIS WALLACE, FOX NEWS HOST: That was White House Press Secretary Robert Gibbs today getting people ready for some bad economic news.

Let's bring in the panel, Steven Hayes of the "Weekly Standard, Jennifer Loven, chief White House correspondent for the Associated Press, and Jeff Birnbaum of the "Washington Times."

We do get, as Gibbs said, Steve, those new unemployment numbers for July, tomorrow morning, Friday morning. Unemployment is now at 9.5 percent and most people speculate it is going to up, maybe not to 10 percent, the politically toxic double digit, but up a couple of tenths of a point.

With this mixed news — obviously, we heard that recession seems to be leveling off, but unemployment perhaps going up. How do you expect people to process it?

STEVE HAYES, SENIOR WRITER, "THE WEEKLY STANDARD": I think it is a hard argument for the White House to make. They were smart at this point to get in front of it. Christina Romer, head of the Council of Economic Advisers, gave a speech today saying that the stimulus was actually working.

They're making an aggressive push, and I think a smart political push, to try to say, look, this is all working. You will get this bad news, and it won't look good when you see the unemployment. But that doesn't mean we're not starting to emerge from the recession.

WALLACE: Jennifer?

JENNIFER LOVEN, ASSOCIATED PRESS: I agree with Steve. They spent the whole week — you know, the president had an event earlier this week in Elkhart, Indiana, which there was a lot of talk about that he was going back to a place he visited early in his presidency and is doing more poorly and in fact more poorly now than at the beginning of his presidency.

Vice President Biden was out. Cabinet members were out. So there is this aggressive push to talk about how the stimulus is working, but to be sensitive to summary fact that there is this lagging indicator of jobs, that there is still a lot of pain being felt out in the country with folks who don't have jobs yet and might not for quite some time.

WALLACE: Do you think that's a case in a practical sense, Jeff, that the White House can make to voters? Unemployment is a lagging indicator. The economy is going to get better. As Christina Romer said, you can start taking the antibiotic pill and the fever still may spike, but that doesn't mean you are not headed in the right direction.

JEFF BIRNBAUM, MANAGING EDITOR DIGITAL, "THE WASHINGTON TIMES": I think the White House has no choice but to lower expectations because this unemployment numbers that's coming out tomorrow is going to be bad news.

But they are also connect that even though there are real signs that the recession is bottoming out, that things will begin to turn around in a purely economic sense soon, none of the reasons for that turnaround are actually felt by consumers.

We've discussed already unemployment. That's a lagging indicator that. That means employment will not improve until the gross domestic product actually begins to grow and grow substantially, 2 percent or more, and that may not happen until next year.

Housing is also a lagging indicator, and people feel the value of their house very personally. And so if housings doesn't improve and won't improve very much, that's a problem.

Also, income does to not turn around.

And so in a political sense, meaning the way consumers feel things, there is no turnaround whatsoever, and that is dragging down the president's job approval rating, and that's why we see the polls the way they are.

WALLACE: I want to pick up, Steve, on this question of the stimulus. Christina Romer, the head of the President's Council of Economic Advisers in her presentation today, she thought that the stimulus had already made a 2 percent difference in growth, in GDP, that the second quarter it contracted — the economy contracted by 1 percent. If without the stimulus, it would have contracted by 3 percent. And she also believes it added — or, you know, reduced the decline of 485,000 jobs. Are you per persuaded that the stimulus had any effect?

HAYES: No, I'm not, and I think there are a lot of economists who are not persuaded the stimulus has had any effect. And I think there are other economists who will say we just can't know right now.

But I think it is difficult for them to make a substantive case on the economics that the stimulus has worked. It is not any surprise that White House economists working with Christina Romer would find that the stimulus actually did work. It was the least surprising announcement in a long time. But they're smart to make the case. Politically, I think it makes sense for them to make the case, because what we're likely to see with this coming flush of stimulus money, you know, $100 billion per quarter over the next five quarters potentially, is some uptick.

I mean, you will start to see some uptick. I think the economy is in recovery anyway. And then they're going to be able to say, see, we told you it was working. It wasn't obvious then, but look at what's happening now, even if the stimulus at that point still has dubious stimulative effects.

WALLACE: And meanwhile, Christina Romer also raised the possibility, and I must say in a very muted way, gee, if things aren't good, we could have a second stimulus. Is that really a practical possibility?

LOVEN: No, it's not, for a couple different reasons.

One is the White House isn't interested in it. They're not interested in selling it. They're not interested in fighting that battle in Congress. They have got many other battles that they want to fight with lawmakers and not spending billions or potentially hundreds of billions more for a stimulus.

Another reason is because the timing won't work. I mean, as Steve talked about and Jeff talked about, the economy is starting to turn around, and some of the economic indicators, it probably will, that those lagging indicators probably will start doing better next year, which means that by the time you could get a second stimulus, it could potentially be over.

WALLACE: We have about 30 seconds left in this segment. Jeff, I want to ask about the cash for clunkers program. It looks like whether it's today or tomorrow, it is going to get through, $2 billion more for the programs.

Some Republicans particularly McCain and DeMint, were talking in the beginning about trying to filibuster this, which might have been an effective tool given the fact that they are up against the August recess.

Why did they cave, why them and the GOP in general cave and basically say fine, have your Cash for Clunkers?

BIRNBAUM: Two words — free money. That's what I think the Cash for Clunkers is. And it is a testament for how skeptical the American public has become to government expansion, that even free money like the Cash for Clunkers program has enough opposition to it that Republicans, the opposition party, was considering even filibustering it,

But they realized that it is far too popular. Up to $4,500 per car, per clunker. That's a huge subsidy that it would turn on its head the politics as we know it if politicians, elected representatives would actually say no to such a thing.

WALLACE: "Free money" — magic words.

All right, we have to take a break. The Supreme Court will have a different look this fall. The panel weighs in on the confirmation of Sonia Sotomayor and the political fallout when we come right back.



PRESIDENT BARACK OBAMA: The Senate has affirmed that Judge Sotomayor has the intellect, the temperament, the history, the integrity, and the independence of mind to ably serve on our nation's highest court.


WALLACE: That was President Obama this afternoon commanding the Senate after it voted to confirm Sonia Sotomayor as the first Hispanic justice to the Supreme Court.

We're back now with our panel. So let's put up the numbers that he show how Sonia Sotomayor did, and we'll show you in comparison to the two previous Supreme Court nominees.

You see she got 68 yea votes, 31 nays, and the 68 yeas included nine Republicans who voted for her.

Now let's look at Sam Alito and John Roberts. Alito got 58 yeas including only four Democratic votes. Roberts, Chief Justice John Roberts got 78 votes, including 22 Democratic votes. So, Steve Hayes, it looks like that Sonia Sotomayor got a little bit better bipartisan support than Alito but not nearly as much as Roberts.

HAYES: Right. And sort of that's the trend. If you look historically really going back 15 years, 20 years, you can see that Republicans generally defer to Democratic president picks and stage less ferocious confirmation hearings than Democrats have.

What's interesting to me in this case, Republicans, I think, questioned her aggressively but respectfully. I don't think anyone would say she had a difficult confirmation process. But at the end, they voted in numbers greater they have historically in opposition to her nomination.

I think there were two reasons. One of them was substantive reason. She sounded like a federalist society board member when she was actually testifying in the hearings. She sounded like, you know, a conservative, a strict constructionist. But her history of speeches, mainly, some of her decisions suggest that she is not that certainly. And then two, I think Republicans, for Republicans, this is something they will go back and they'll be judged on as conservatives wanted to have been on the opposite side.

The politics ran both ways, Jennifer, because on the one hand, as Steve suggests, voting for what I think they believe to be a liberal justice could end up hurting them — excuse me — with their conservative base.

On the other hand, and you had some Senate Democrats, especially New Jersey Democratic Senator Bob Menendez saying, that Hispanics won't forget that the GOP voted three to one, 31-9, against Sotomayor.

Is there a fallout? Republicans have had troubles with the Hispanic vote over the last four years. Is there trouble that they voted in such numbers against a Hispanic Supreme Court justice?

LOVEN: Well, I think we'll have to find out. I think it's hard to tell at this point whether they suffer for those votes. My guess is no, and that's probably the reason that they made the calculation they did to vote against her in such large numbers.

There is a sense that this whole confirmation process, and the voting as well is, a little bit about road test, a practice, if you will, because — Steve described some Republicans' problems with Judge Sotomayor. And in essence, that's a problem with Obama's empathy qualification that he's looking for in a judge.

And I think they wanted to do is sort of practice their argument against that for the next time when his pick of the justice actually could change the ideological balance on the court, which it is not now.

WALLACE: You know, Jeff, you talk about this whole process. I mean, it seems to me that Sonia Sotomayor, as she presented herself in the court, was almost identical — I not talking about her speeches or decisions, but as she presented herself during the confirmation hearings was almost identical to Alito and Roberts. They all kind of said nothing.

Is there a better way to do this?

BIRNBAUM: Not in the modern era where these nomination hearings are warfare. This was relatively modern relative warfare. The next time will be trench warfare. It will be a bloodbath, because then the makeup of the court and its substantive findings might very well be changed.

Not in this case. She is substituting for Justice Souter, who is liberal. In fact, in some ways she may be more conservative because she is pro-business. The U.S. Chamber of Commerce actually supported this nomination. But no, until things change, there will never be real answers coming from a nominee for the Supreme Court.

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