This is a rush transcript from "Special Report With Bret Baier," September 21, 2010. This copy may not be in its final form and may be updated.


PRESIDENT BARACK OBAMA: I know people are frustrated and they are angry, and they're anxious about the future. And I also know in a political campaign, the easiest thing for the other side to do is not to put forward any specifics, not to put forward any plans, but just try to ride that anger and fear all the way to Election Day. And that's what's happening right now.


BRET BAIER, ANCHOR: President Obama in Pennsylvania campaigning for Congressman Joe Sestak, the Democrat in that race. We have new polls out tonight in a number of races. First in that Pennsylvania race, there you see Sestak trailing Republican Pat Toomey by eight points now in the FOX poll. In Nevada, the Senate race there, Senate Majority leader Harry Reid trailing by one to Sharron Angle, the Republican nominee, very close.

In Ohio, the Democrat trailing, Lee Fisher trailing Rob Portman, opening up there a number of points between the Republican and Democrat this poll. California, Barbara Boxer, the incumbent, up by one, within the margin of error, over Carly Fiorina. And in Delaware, the Democratic nominee Chris Coons over Christine O'Donnell 54-39 percent in the latest polls.

What about these polls, those races, and the bigger picture about the economy and politics? Let's bring in our panel, Juan Williams, news analyst for National Public Radio, Julie Mason, White House Correspondent for The Washington Examiner, and syndicated columnist Charles Krauthammer. OK, Charles, which race? Delaware?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, Delaware is the race of the moment. And it's rather remarkable. You would expect someone who win wins the primary election to get a bump. Christine O'Donnell, Republican nominee, was down 11. And now in this poll she is down 15.

And what is ironic about this is they ran a poll against the Republican whom O'Donnell had defeated, Mike Castle. He would have been up 15. That is a swing of 30 percent which tells you how much of a long shot she is.

And even more remarkable I think is the fact that if you ask people about how sure they are and how they will end up voting, Castle who is way ahead, 91 percent of his supporters want saying -- I'm sorry, Coons, the Democrat, has nine out of ten saying they will support him.

So it looks like they are very small number of undecided. It's hard to see where she gets the numbers she needs, O'Donnell, in order to pull an upset.

BAIER: Her supporters would say perhaps there is not a lot of focus on Chris Coons and some of the things he said in his early life, including this paper, "The Making of a Bearded Marxist" and other things, and perhaps over time those negatives would go up.

KRAUTHAMMER: It might. But if you ask people who is the one who has resume to be a senator, he gets about 60 percent. She has only 30 percent. Again, a 30 percent swing in a state that like Delaware where I think ideologically is such a blue state that Mike Castle, the liberal Republican, is as right wing as you can possibly get and win an election.

BAIER: Julie Mason, Pennsylvania. This race is tight but it seems like Pat Toomey has opened up a little bit of a lead.

JULIE MASON, WASHINGTON EXAMINER: Yes, a pretty solid lead. It's interesting, Bret, when you look at 2008, Obama won Pennsylvania. That was a big win for him. Now he has got a 37 percent approval rating. In Pennsylvania, we really see the dynamic playing out where the leader of the Democratic Party is proving to be a political drag on the statewide Senate candidate.

So it's hard to see how Sestak is going to close that gap and even open a lead before November.

BAIER: Juan, we talk about polls a lot. Nevada, it is as tight as it can be.

JUAN WILLIAMS, NEWS ANALYST, NATIONAL PUBLIC RADIO: Right, but I think this is evidence, that, and actually I think when you look at the race in Pennsylvania, the race that Charles is talking about in Delaware, what you are seeing here seems to me to be evidence that some of the Tea Party stuff has backlash attached to it.

If you look at Sharron Angle, I think she is emblematic of this. I don't think there is any way that any of us who follow politics intensely in this room would say that Harry Reid is going to win his reelection in Nevada given his negatives.

It took Sharron Angle to keep him afloat. And when we say the race is close now, I think that if you look at the money he has on hand, there is going to be onslaught of advertising. He has largely kept his punches to himself right now, he is going to unleash that as we get into this. So I think the dynamic is shifting and I would watch a place like Nevada to see what is happening. In fact, today, when you look at what Harry Reid was trying to with the so called DREAM Act for immigrants, he is trying now to energize his Hispanic base in such a way that, again, Angle has no chance with that base. The question is, do they turn out for Harry Reid and that again is critical in all these races we have been discussing.

BAIER: The only thing is, Juan, is that early in this when she won the primary, everyone wrote her off and said she's toast, much like Christine O'Donnell. In early polls that Reid was up big against Angle and now she is up by one.

WILLIAMS: She is within the margin of error. I think you make a very interesting point. But my retort would be this. If you consider the energy of our political seasons come from the Tea Party folks and those who say throw the bums out, I can't think of bigger bum in Republican eyes than Harry Reid, unless you say Nancy Pelosi. And the idea he's tied is what I am suggesting, is different from what we predicted a few months ago, and going forward he has some advantage.

KRAUTHAMMER: There's a fly in the ointment of the argument, which is that the two other candidates that Sharron Angle ran against who had leads early on, those leads have shrunk and dried away by Election Day. So she is probably in a position where the other Republicans would have been. It's not because it's her, because Reid has had something of a comeback.

And if you look across the board, these are two races which are problematic if you are a Republican. But if you look at Rubio in Florida, Miller in Alaska, you look across the board at others, they're very strong candidates written off early on. I think as a net plus, it will be shown that the energy injected was something that really helped Republicans.


BAIER: I want to go back to yesterday, to this town hall meeting and the stark questions of some of these questioners, one of them becoming what some are calling an iconic moment on this campaign season for President Obama. Take a listen.


UNIDENTIFIED FEMALE: I'm one of your middle class Americans. And quite frankly, I'm exhausted. I'm exhausted of defending you, defending your administration, defending the mantle of change that I voted for, and deeply disappointed with where we are right now.

My husband and I have joked for year that we thought we were well beyond the hot dogs and beans era of our lives. But quite frankly it's starting to knock on our door and ring true that that we might be headed there again. And quite frankly, Mr. President, I need you to answer this honestly. Is this my new reality?


BAIER: Now, here is how the White House, the White House Press Secretary Robert Gibbs responded to a lot of questions in the briefing today about that.


ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: The notion that people that supported us would be immune to that frustration when the president himself is frustrated I don't think is something that the president believed.


BAIER: Julie, what about this?

MASON: I think it's tough for the White House because they can't come out and say the economy is getting much better because until people start feeling like the economy is getting better, that message doesn't work for them. So you see them fall back on the default message of empathy, saying, yes, it's really bad.

And Obama never really answered that woman's question at the town hall yesterday. She said afterwards that she was a little disappointed with his answer. I don't want to say he was glib, that is too much. He just seemed a little rote in his answer for her.

BAIER: And Juan, now we learn that Larry Summers, the chair of the economic council is leaving at the end of the year. We expected that would happen, but word came out today.

WILLIAMS: I was surprised to tell you the truth because he is such a good inside fighter. He's a knife fighter from the old school and I thought he would stay for a long time.

One last quick point on that iconic image that you showed. I think the fact she was a black woman speaking to President Obama, and his rating among African-Americans is still at 90 percent, really was a cutting difficult moment, to see black America confront first African-American president in such a way as to say you know what, we're out here fighting for you buddy, but you are not carrying your weight.

This I think has tremendous impact. Not only black America, but white people may not have known the sentiment existed inside black America.

KRAUTHAMMER: I think it's iconic in a separate way as well. She said "I was a believer in you. I believed all that stuff about hope and change and how you would alter the course of our country." And this was in a minute-and-a-half a deflation of his entire candidacy of Barack Obama and I think a reality check, which is a word she used.

I think it was extremely important. It was an iconic moment because it came from somebody who believed in him.

BAIER: Up next with the panel, the Senate slams the door on "don't ask, don't tell" changes, at least for now. We're back with that.



GIBBS: The president believes the policy is unfair and should and will be changed.

SEN. JOE LIEBERMAN, I-CONN: It's unfair, unjust. It's not consistent with America's most fundamental value of equal opportunity.

SEN. MITCH MCCONNELL, R-KY: It's our hope that we will take up the Defense Authorization Bill in a normal way and in a formal process.

SEN. JOHN MCCAIN, R-ARIZ: This is a blatant political ploy in order to try to galvanize the political base of the other side which is facing a losing election.

UNIDENTIFIED MALE: The motion is not agreed to.


BAIER: Well there you see the vote, 56-43. Democrats failed to get to the 60 votes needed to move defense authorization bill forward. It included two amendments, the DREAM Act dealing with illegal immigrants, and also changes, a repeal to "don't ask, don't tell," the military policy about openly gay members.

All the Republican members voted against that as did two Democrats. Senators Lincoln and Pryor. What about all of this? Here is what a former Clinton administration official said about this whole deal with "don't ask, don't tell" changes, quote "The whole thing is a political train wreck. If it was a priority for the Democratic leadership, they would get a clean vote on this. There are a lot of gay activists who are very upset today."

We're back with the panel. Julie?

GIBBS: Obama campaigned on this issue, on repealing "don't ask, don't tell." He brought it up in the State of the Union and then since then his marshaling of the issue has been muted. He hasn't gone out there for it and he really disappointed his gay constituency on the issue. And it's a disappointment for him and them. It could have galvanized the base and help the Democratic Party, but it's tough for an election year.

BAIER: Juan, is this badly miscalculated, as some officials wonder?

WILLIAMS: You know, the president felt he had to be careful about it. We remember what happened with Bill Clinton. But, of course, the opinion in America has shifted with regard to gay rights radically since the Clinton era.

But he wanted to go slow on it because he didn't want to make it cultural fight, a wedge issue, and take his time. But this calculation to this extent, as Julie just indicated, the gay community believed in him and supported him aggressively and wanted some payoff, everybody does in politics, and they're not getting their payoff.

The other half of this comes from the White House today and says hey this is the party of no, it's the Republicans that blocked it.

BAIER: And two Democrats.

WILLIAMS: Exactly right, that's a good point. And the party of know continually obstructing. And if they're not going to try to shut down business, all legislative activity very quickly so nothing can happen before the election.

The question is, will the White House be able to make Republicans pay for this in the way that Bill Clinton made Newt Gingrich and the Republican majority in the Congress pay for it back in '95. At that time, Republicans were in majority. This time Democrats are in majority.

BAIER: Charles, there may be a shift in the poll about gay rights and "don't ask, don't tell." But at the Pentagon and with the military leadership, there is still real concern.

General Jim Amos testified at a hearing and he said "My primary concern with the proposed repeal is the potential disruption to cohesion that may be caused by significant change during a period of extended combat operations."

Despite the fact that Defense Secretary Gates and others, Admiral Mullen have said we should study this, get a study in December, we are for it, there is still a lot of pushback at the Pentagon.

KRAUTHAMMER: There are a lot of splits on this. But what is important about the vote here is it was not a vote on substance. It was not as if the administration calculated incorrectly. It didn't want a bill. It wanted an issue.

That's why the three items authorizing defense, the gay rights issue, and the DREAM Act on immigration were all yoked together. The reason the Republicans oppose it is not because they oppose all these elements. It's because they wanted a vote on each separately.

You get Susan Collins who voted against it.

BAIER: The Republican from Maine.

KRAUTHAMMER: That's right, and she explained that's exactly why she opposed it. Richard, Lugar, who is the most sober, middle of the road Republican around, who is a cosponsor of the DREAM Act which would legalize two million illegal immigrants who arrived in the U.S. as children, he voted against the bill today because he wanted it separated and he said he had 15 other objections on the other issues.

What the administration wanted on this was an election issue so it could accuse Lugar and others like him being against immigration, and against the gay rights. It was purely framing of a political issue, deeply cynical, legitimate and legal, but it was done in a way where all they wanted was a political issue out of this.

BAIER: Julie, with Democrats in control of the White House, the Senate, and the House, and likely going to diminish in numbers after this election, how frustrating is this for Democratic activists, and people who were looking for --

MASON: Incredibly frustrating. As we talked about before, it's not just Obama gay constituents. It's environmentalists and other groups who feel he has done very little for them. You see why they're --

BAIER: It's bubbling up.

MASON: It's bubble up, for sure.

BAIER: Julie, panel, thank you.

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