This is a rush transcript from "Special Report," December 31, 2010. This copy may not be in its final form and may be updated.


REP. PAUL RYAN, R-WIS.: This bill is a fiscal Frankenstein.  It's a government takeover. It's not Democratic.

REP. NANCY PELOSI, D-CALIF.: We have to pass the bill so that you can find out what is in it away from the fog away of the controversy.


SHANNON BREAM: Oh I’d say a lot of the fog has cleared.  Of course we are talking about the massive health care reform law that was enacted. Let's talk about it. This is one of the big developments of 2010. Lets' bring in our panel, Steve Hayes, senior writer for the Weekly Standard, Nia-Malika Henderson of the Washington Post, and syndicated columnist Charles Krauthammer. Welcome to you all.

Steve, we'll start with you. Obamacare, the biggest story of 2010 at least here on Capitol Hill?

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: Yes, it's the biggest story of 2010 anywhere. It was clearly a policy triumph for the White House and it's been a political loser for the White House, if you look at the 2010 elections and the fact we're likely to be talking about it in 2011 and 2012. It's a story that's going to continue and they are going to have to continue to defend it and I don't think it will help them.

BREAM: Nia, we heard the speaker say and we've heard Senate majority leader Harry Reid say again when the controversy settles people will like it more and we'll like what we see. Yes or no?

NIA-MALIKA HENDERSON, WASHINGTON POST: That was the bet they made in the spring when it passed. Republicans -- after it passed, Republicans essentially said they're going to fight it and repeal. They thought that was all just talk. But it lasted and has legs and litigated in the court so far. That'll continue to happen. You better belief in 2012 every Republican will run on repealing healthcare.

BREAM: And they had a couple of wins in court. The last one on the individual mandate in the federal court in Virginia was not good one for them, Charles.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Ultimately it will end up in the Supreme Court, it's probably less than 50/50 that the court will overturn it. If the law stands it will be historic. If nothing else happens in the Obama presidency it will remembered for this historic event. It's like the New Deal, revolutionizing a sixth of the economy. The vice president was right. It is a big deal.

BREAM: OK, so the administration started the year on a high having it pass, but by November it was a little different. Here's the president.


PRESIDENT OBAMA: I'm not recommending for every future president they take a shellacking like I did last night.


I'm sure there are easier ways to learn these lessons.


BREAM: Nia, another big story was November 2, the midterm elections.

HENDERSON: Yes, historic losses for Democrats, especially in the House and turning in the GOP hands. In some ways, Obama made the best of that situation. He immediately came out and said he took a shellacking.  He very much turned it around in the lame duck and had a bunch of victories in the last week of Congress, pushed through the START treaty and repealing "don't ask, don't tell." He was able to see bipartisan and liberal base that were so affected by a lot that went on.

BREAM: Steve, there were so many who said there was a message behind this, the GOP even admitting not necessarily endorsement of them, but unhappiness with the policies of this administration. But as Nia points out, he had a great lame duck and he got a lot accomplished. Is there a lesson there or not?

HAYES: I'm not sure what lessons he has learned. I'm not one that doesn't think the lame duck was as great as he thinks it is or people at this table think it is. He got a third rate arms control treaty he mentioned once in his state of the union last year. He got that passed with a former enemy. He got "don't ask, don't tell," repealed, the omnibus was killed, and the tax compromise was something Republicans had been pushing for two years. I'm not sure he is in a better position than he was November 2.

KRAUTHAMMER: I think it is midpoint in a really epic four-year debate the country is having on the size and scope of government. I think Americans were surprised by the ideological ambition of the Obama administration and the Congress, doing the Obamacare, financial reform, stimulus of trillion dollars, really I think overreaching. There was an overreaction expressed on Election Day.

But the debate on whether we want smaller numerated powers or not is what the presidency was about and answer comes on Election Day in two years.

BREAM: We'll watch every step of the way. Looking back on 2010, we asked all of you to talk about your best winner and biggest loser this year.

HAYES: My winner is conservatives. You can call them Tea Partiers or free marketers, whatever. They are a clear winner. Look at November 2.  My loser is an American child that is born today is born with $45,000 worth of debt because of the irresponsible spending of his or her elders. I think that's a tragedy.

BREAM: How will the two possibly work together or be a contrast? We have these conservatives say restraint is number one thing. Any chance for the American child to turn it around in 2011?

HAYES: It depends how optimistic you are that they will follow through on the promises. I think House Republicans are coming with good intentions and want to get these things done. They're facing a democratic Senate or president or 100 years of history to change the way Washington works.

BREAM: It is not an easy nut to crack. Nia, your winner and loser for 2010?

HENDERSON: For my winner I went outside of Washington and chose Corey Booker, the mayor of Newark and with the storm understood what constituents about digging out and delivering hot chocolate. He is in a good position for 2014. Frank Lautenberg, the senator there, will be like 85 by then, and might not seek reelection. And by making himself so prominent and prevalent and tackling the snowstorm, I chose him for winner.

For the loser, back to Washington. I chose Charles Rangel. He had difficult year with the censure. He didn't handle it well and it will be a surprise if he runs for reelection.

BREAM: He had decades of service before the ethics charges kicked in.  How do you think history will treat him in the long-term?

HENDERSON: The first, not to go forward too much but the first words of his obit will be the censure, because so few Congress people have been censured over these past many centuries. It's like 20. He did a disservice fighting this instead of going quietly and accepting blame early on.

BREAM: Charles, your winner and loser?

KRAUTHAMMER: Chris Coons, luckiest man on earth. Delaware Democrats nominated him to be the sacrificial lamb who would 100 percent lose to Mike Castle, the Republican who had won 12 consecutive statewide elections.  Well, Delaware Republicans in their wisdom nominated instead Christine O'Donnell and the rest is history, and Coons will be sworn in as senator next week.

BREAM: Your loser?

KRAUTHAMMER: Mikhail Khodorkovsky, who was sentenced this week to the maximum, another six-and-a-half years in Russia. He was a former tycoon who challenged Putin. It marks a complete decade of Putinism, his control of Russia, the hollowing out of a democracy that he was given at the beginning of this decade. He hollowed it out and turned it a Thug-ocracy and a dictatorship with him as the undisputed leader. It's quite a land mark.

BREAM: Did you originate "Thug-ocracy," copyright?

KRAUTHAMMER: There is also a kleptocracy. It's one or the other. Actually in this case, it's both. He's an extremely rich man, Putin.

BREAM: All right, thank you for look at 2010. We have to take a break but when we return we look ahead to 2011 with a New Year's version of the Friday lightning round. Stick around.



REP. JOHN BOEHNER, R-OHIO HOUSE MINORITY LEADER: There is a lot of tricks up our sleeves in terms of how we can get this, kick it, slow it down, and make sure it never happens. And trust me; I'm going to make sure this healthcare bill never ever ever is implemented.


BREAM: That is the presumed speaker in waiting John Boehner talking about healthcare and dismantling it. Is it the GOP's top priority going into 2011? Let's welcome back our panel to talk about. Charles, is that the number one deal this year?

KRAUTHAMMER: It is. It's important because it was the issue theme of the election. Secondly, it will be cutting spending. It will be entirely negative, meaning an agenda of stopping the liberals.

But on the positive side, one thing they ought to propose will be tax reform, radical tax reform in 1986. It will be seen as forward-looking agenda and be a great idea.

BREAM: Nia, how important is it that they have something that they are attempted to pass versus blocked?

HENDERSON: That's very important. In addition to dent healthcare and look at the deficit, one of the things they'll have to do is try to defeat Obama in 2012. So over the next two years they have to have an agenda to sell to American voters.

One of the challenges for Democrats and Republicans is to come up with some narrative where Americans feel good about the country again. They talk about the wrong track and the debt our children will have. That is a real challenge.  BREAM: Steve, as the polls continue to show us that more people now have unfavorable view of the healthcare law that was passed, is that still a good meal ticket for the GOP to start off?

HAYES: Absolutely. And I think they should talk about it as much as they can. There is not a lot they can do. They need to send a message that we heard you in 2010 and we're pushing forward. They need to make progress and do the things they said they would do.

BREAM: Another issue is debt and deficit, something both sides of the aisle are talking about. Take a listen.


SEN. TOM COBURN, R-OKLA.: What most of America doesn't understand if we don't put our house in order we'll look like Greece and Ireland or Spain and Italy which are coming, or ultimately Japan.

REP. FRANK PALLONE, D-N.J.: We clearly have to get the debt under control. The question is, as you say, where are the cuts going to be? I think we can work it out on bipartisan basis.


BREAM: Nia, first question, can they work it on bipartisan basis? Do you think Americans understand sacrifice is coming? Not just the guy across the aisle. It may be all of us.

HENDERSON: I think so far on both sides, people are content to talk about small ball, earmarks and reducing one percent of spending and haven't yet been able to talk about the real cuts that need to happen with entitlement and raising the retirement age.

And I think whoever is able to really have these conversations honestly, they are going to come away looking like the grown-up in the room. Everybody in each party has an opportunity to do that.

BREAM: Charles, is there anybody, folks you think will rise to the top in the debate?

KRAUTHAMMER: They would have to be -- look, the money is in entitlement reform. All the other stuff is small ball. You can't have a deal on Medicare and Medicaid because of the Obamacare, because it locks spending in. Unless it's repealed there is not a deal in that.

However, there can be a deal on Social Security, I think. The Democrats and the Republicans could agree. That would require a behind the scenes negotiations between Obama and leading Republicans who will announce jointly they like the tax cut deal. It's possible. Anything else is impossible.

BREAM: Steve, we see Tom Coburn at the forefront of this for the Republicans. Who could be key players?

HAYES: He could. Paul Ryan with the roadmap and others, people on Democratic side that are serious about the issues. But the likely outcome at the end of 2011, we will have more political rhetoric about debt and deficit about any time in recent memory and the debt would have gone up $1 trillion. Very little is going to happen. I think there is no chance we will have any serious compromise, certainly not on Medicare or Medicaid, and I think very unlikely we'll have one on Social Security either.

BREAM: Another big event we have been looking forward to in 2011, withdrawal of troops at Afghanistan. The president said at one point July of next year as a deadline. It seems to be moving. We heard speculation from officials. Charles, how do you think we'll do in Afghanistan next year?

KRAUTHAMMER: I think more of the same. In July, there will be a few token ostentatious withdrawals, removal of troops, in areas that extremely secure where the Afghans take over. There will be a lot of cameras. It won't change anything. The fight will continue in the south. It will progress and we'll make some, some success in expanding the zone of control in the south and be in a better position in 2012.

BREAM: Nia, the vice president said 2014 come hell or high water.  There's a big difference between 2011 and 2014.

HENDERSON: It's obviously an extension of time. They said withdrawals will be conditions based. But I agree with Charles that there is a feel of the war where it feels like Groundhog Day every year. There is some progress but movement back. This year will look like the same with some withdrawal, but in some ways it will not make much difference on the ground.

BREAM: Steve, what role do you see Pakistan playing next year?

HAYES: Pakistan is huge. In many ways Pakistan is more important than Afghanistan. It's why the July, 2011 deadline is so important. The president has an important decision. Does he want to police the liberal base pulling people out in July to 2011 and sticking to the deadline symbolically? Or does he want to win the war?

BREAM: Because we have you here and we're talking about 2011, I want to talk about a prediction or a resolution. Steve, start with you.

HAYES: I'll give you both. I predict Eric Holder a year from now will not be the attorney general. My resolution is watch less sports on TV in this next year. But I will start by watching Wisconsin Badgers tomorrow, the Washington Capital in the winter classic, and then the Green Bay Packers on Sunday.

BREAM: Watching less sports on TV, does it mean attending more in person?

HAYES: That is one way to resolve it. But it won't get off to a good start. That's a goal.

HENDERSON: Keeping with a sports theme, I will make the prediction the Duke Blue Devils will again win it all for basketball. I'm wearing my Duke blue tonight. I'm a big fan, alum. That's my prediction.

My resolution is to have more fun with reading. I read a lot, you know, in a magazine, newspaper but I want to run fun novels. That's my resolution.

BREAM: All right, Charles?

KRAUTHAMMER: My new year's resolution -- be concise. I'm starting now.


BREAM: You can't because we still have 20 seconds left. Continue on.  Any other resolutions?

KRAUTHAMMER: If you insist.


Letting out the kinder, gentler Charles, although first I have to find him.

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