This is a rush transcript of "Special Report With Bret Baier" from May 6, 2010. This copy may not be in its final form and may be updated.


HOUSE MINORITY LEADER JOHN BOEHNER, R-OHIO: Yes, we have been lucky. But luck is not effective strategy for fighting the terrorist threat.

SPEAKER OF THE HOUSE NANCY PELOSI, D-CALIF.: The harder we work, the luckier we get.


BRET BAIER, ANCHOR: On Capitol Hill today, the politics of close calls when it comes to terrorist attempts. Meantime, we're finding out new information about the suspect, Faisal Shahzad, and that he may be linked in some way to another character, Anwar al-Awlaki, the radical cleric who's tied to the Fort Hood shootings, the Christmas Day bomber.

Based on evidence and interviews so far we are told that Shahzad is fan of Awlaki's CDS to promote the cleric's extremist ideology, and at this preliminary stage we haven't seen or heard of any e-mails between Awlaki and Shahzad. However, it raises a lot of questions as we've been talking about this investigation over the past few days.

Lets' bring in our panel: Steve Hayes, senior writer for the Weekly Standard; Mara Liasson, national political correspondent of National Public Radio, and syndicated columnist Charles Krauthammer.

I should point out this also adds to the investigation into the Pakistani Taliban connection and how Shahzad may have been a part of that. Steve?

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: Well, certainly the fact he was at the very least inspired by Anwar al-Awlaki is not significant. We heard this not only with the Fort Hood shooter with Umar Farouk Abdulmutallab on Christmas day who met with al-Awlaki allegedly, but we've seen this with the Fort Dix attackers. A number of people have been either directed by al-Awlaki or inspired by al-Awlaki. So it's not an insignificant development. It actually matters.

But what I think is very important that we have seen in the past couple days is the ties to a variety of Pakistani terrorist groups and suspicious individuals seem to be growing by the minute. Every hour we learn of some new meeting or some new liaison, some new discussion in addition to his having been trained in north Waziristan.

I think the question then is why again were the administration officials talking about this on the record and on background downplaying — almost dismissing — these foreign connections initially when we now see them in spades?

And the other point is I've talked to people who have been briefed about this by various members of the intelligence community. They are not providing — the intelligence community right now, law enforcement community — not providing details on these foreign connections to lawmakers on Capitol Hill or to others asking questions and certainly members of the media.

There is a real question why they are not going to do this. If it's because they're afraid they won't be able to prosecute him by briefing members of Congress and other folks, they need to explain exactly why that is going to affect the prosecution.

MARA LIASSON, NATIONAL POLITICAL CORRESPONDENT, NATIONAL PUBLIC RADIO: I think they're still in the process of collecting information of exactly what ties he had.

I do think the initial statements that it looks like he was a lone wolf or he acted alone. He might have acted alone but he clearly had some connections to other groups, he got training overseas, he was inspired by others. Now it's very possible he was on his own in terms of building this car bomb.

But I think that this time, though, unlike the Christmas Day bomber, the administration did respond more rapidly. They did not rule out terrorism, you know, they called it a terrorist incident pretty fast. And I think every time one of these things happens they're a little bit faster off the mark.

But sure, there are tons of questions. They have plenty of questions about the no-fly list, how it worked, why he got on the plane at all, why he was able to get on the plane at all.

BAIER: And how he flew back and forth from Pakistan after being a naturalized citizen.

How is this playing in the American public? A new Fox News Opinion Dynamics poll is out and shows was the failed Times Square bomb plot, was it a success for Homeland Security? And 47 percent say no, the car bomb left in Times Square, yes, bomber caught, no one hurt, 42 percent.

And then you look at the politics of this, quickly Charles, which party would do a better job on terrorism from the poll, an uptick for Republicans to 49 percent and Democrats at 29 percent. How does this all play how this is handled?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I think it's a very realistic reaction that we see in the polls. People understand that it was a failure in the sense that it was pure luck that nobody was killed. Pelosi says it was hard work. The president said it was the vigilance of people there and the authorities. That's rubbish. The guy didn't know how to put the bomb together and had he had, you'd have a lot of dead Americans. So that was pure luck.

The second part after the attempt and capturing him in two days was successful police work. And I think there is a lot of recognition of that.

The I think reason you see this huge spread in the polls of trusting Republicans or Democrats on this issue in general is precisely because of what Steve was talking about, the way the administration always instinctively wants to pretend, at least at the beginning, that it's a one-off the thing, which is what the secretary of Homeland Security initially said, as Obama said after the Christmas day attack. He said — what was it — it was an individual extremist. They don't want to talk about the overall structure of this, which is that it's part of jihad. They're all connected in the sense that they are adherents to a jihadist movement with a lot of tentacles and that is what is behind them.

And the fact they refuse to do it makes people worry about whether they really have a grasp on this, whether they're serious about this. What is war in Afghanistan about? What are the Predator attacks in Pakistan about? They are all connected with what is happening here and the administration refuses to make any connection because it will not use the word "jihad" or "Islamist."

BAIER: Mara, what about this? Is this a scenario this is death by 1,000 paper cuts for the administration after these red flags come out, these little connections, maybe not so little connections come out day after day.

LIASSON: I actually have a different interpretation of these poll numbers.

First of all, the Democratic numbers haven't changed much since July. And what this represents is an intensification of a natural advantage that Republicans have on this issue. They have had it for some time.

I think that there was a period when it got a little bit closer, but that was when the Democrats in general were riding high. The Democrats in general are very low right now. And a lot of times when a party starts dropping and there is tremendous anti-incumbent and anti-Democratic feeling, the other numbers go with it.

I don't think seven-point boost for Republicans from July to now and no change for Democrats is due to their reaction to these individual incidents.

KRAUTHAMMER: This is a 20-point spread. And Republicans —

LIASSON: Yes, but it has been around for awhile.

KRAUTHAMMER: Republicans don't a national advantage.

Two years ago on Election Day the Republicans had a president whose popularity was around Saddam Hussein's.

LAISSON: And that's when their advantage disappeared, but they have had a long-standing advantage on this issue.

HAYES: It's also cumulative —

KRAUTHAMMER: The numbers are declining as they remain in power and they are not dealing with it.

HAYES: It's also a cumulative effect. The president got high marks for handling of the Christmas Day bombing that many people in Washington, many counterterrorism officials believed that he botched.

The real question is how you define success. Is it a success, can the administration claim success and, as Robert Gibbs said yesterday, celebrate this achievement of law enforcement because the bomber failed and then they apprehended him? Or is success preventing attacks before they happen, which is the way the Bush administration defined them?

That is the key distinction and I think that is the debate we're seeing playing out in the media now.

BAIER: Shahzad told the custom agents, "I've been expecting you."

KRAUTHAMMER: Did he say he opposed health care reform?


BAIER: It's been a jam-packed news day. We hoped to get Shannon Bream's piece on the National Day of Prayer in the show tonight. Instead, you'll have to visit our homepage, FoxNews.com/specialreport, to see that full report.

Next, the panel's take on the Greek economy and today's wild wide on Wall Street.


BAIER: Thousands of protesters marching through the streets of Athens today after lawmakers there approved cuts needed to secure international loans. Basically, this is to help Greece get out of their debt crisis and there's a lot of skepticism that it might not even help, despite all these cuts, that the debt crisis might spread to Spain and Portugal and elsewhere.

Meantime, later in the afternoon, this happened in the U.S. market, the Dow Jones Industrials taking a dive nearly 1,000 points over just a few minutes. This is a time lapse shot. And it was found out that Procter and Gamble had a major trade error and this caused the immediate dive.

But there's a lot of jittery folks on Wall Street about the Greek crisis. We're back with the panel about all of this.

Mara, let's talk about Greece first.

LIASSON: And for a very long time we all thought Greece was the cause of that tumble.

BAIER: In part it may be.

LIASSON: But it was the background noise and the environment in which it happened, if it wasn't the proximate cause.

Look, Greece, whose debt is now, I think about 115 percent of GDP — ours is about 84 now — and they have to impose tough austerity measures, which means tax hikes and spending cuts and the people of Greece, as you can see, didn't like it one bit and rioted.

And this is something that could spread, kind of debt contagion could spread to Spain, Portugal, you know, Ireland. It's scary.

And there's a couple of things about it. Number one, the U.S. is concerned that it could have a spillover effect to us. But also this in a bigger way is our problem. We have unsustainable deficits that are going to have to be cured with something similar, maybe not as draconian, budget cuts, cuts in spending, and maybe some kind of tax hikes.

And I'm not saying that Americans will be going in the streets and throwing Molotov cocktails.

HAYES: They might. Just wait.

It's interesting — what is interesting about it, there was a report in The New York Times over the weekend —

BAIER: You're not endorsing Molotov cocktails, just to clarify.

HAYES: I'm not endorsing violence. If you want to protest spending, great.

There was a report in The New York Times over the weekend that was widely overlooked in part because I think the significant detail of it was buried. But the report said that in best part of the austerity rules that Greece agreed to in order to get the bailout from the IMF and from Europe, one of the things that they had to do was move to privatize their health care system. It was too statist, their health care system.

So at the same time that the IMF and others are demanding that Greece move to privatize or spin off part of the state run health care system in order to make it more efficient and liberalize the economy, we are moving in the opposite direction. There is a great irony there that adds to Mara's point.

BAIER: Not only that, but the International Monetary Fund is largely supported by the U.S. Now, of the $140 billion going to Greece, there is a smaller percentage, like 7 billion something — still $7 billion of U.S. taxpayer money to bail out Greece.

That doesn't sit well with a lot of folks.

KRAUTHAMMER: That's so. When Obama came in last year at the G-20, he wanted in one of his "We Are the World" moments he opened a hundred billion dollar line of credit for the IMF, and he threw a few billion more as a gift, his way of saying here we are. Love America again, and he thought it would help us in the foreign affairs. So I wasn't terribly happy about that.

Nonetheless, we have been the leader of the IMF since the founding in the early '40s and we have been the largest contributor and it's absolutely necessary. It has helped allies like Poland. You've got it as a backstop. Yes, there is a few of our billion in it and nobody likes the bailout of the banks, the autos or the Greeks.

Nonetheless, you have to do it. If this contagion happens, we're not an island. It would spread to Portugal, Italy, to Spain, and ultimately all of Europe and it takes us down with it.

In the way there was a huge reluctance to pass the TARP to bailout the banks, which was rather unpopular, it was the right thing to do, it saved our economy. Saving the Greeks by helping the IMF is the right thing to do.

BAIER: And you know the market today felt like that day that the House didn't pass the TARP.


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