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


JOE MILLER, SENATE CANDIDATE, R-AK: I would encourage people to go to the transcript that ’s online, and, make that decisions themselves. I will tell you what I heard was appalling.

SARAH PALIN, FORMER ALASKA GOVERNOR: The CBS reporters, the affiliate in Alaska, conspired to make up stories about Joe Miller. Those are corrupt bastards, Chris. That is what is wrong with the media today.


BRET BAIER, HOST OF "SPECIAL REPORT": Almost made you spit out your coffee this morning on Sunday morning. That was some of the exchange about this event in Alaska: CBS affiliate KTVA, a conversation ended up being recorded on the Miller campaign voice mail from a phone call that did not end. It didn't get hung up, basically, didn't disconnect, and recorded what TV station staffers thought was a private conversation. We'll take a listen to one clip of that right here:


BAIER: OK.  That is one of the clips. Let's bring in our panel, Steve Hayes, senior writer for The Weekly Standard, Kirsten Powers, columnist of the New York Post, fox news contributor Juan Williams, and Brit Hume, Fox News senior political analyst. The august panel tonight.  Brit, what about the controversy in Alaska and Joe Miller's response to it.

BRIT HUME, FOX NEWS ANCHOR: I thought Joe Miller was smart to soft pedal it the way he did and say let people make up their own minds, let them listen to it. And that obviously, it takes us out of the category of his thumping the tub over it and making a big deal out of something that while it doesn't sound very good, it's not utterly conclusive. So it seems to me he handled it sensibly.

BAIER: Juan, does this affect the race this late, two days out?

JUAN WILLIAMS, FOX NEWS CONTRIBUTOR: This is one of the most curious races in the country. Not only is this late in the game, but, I mean, the whole business of Lisa Murkowski getting back in the game, having been defeated by Miller, whether or not people who write her name in can write it in with misspellings. And then, of course, the whole idea that, in fact, you might have Miller and Murkowski set each other off, and you would have a Democrat win. That's been the latest talk in political circles, is the chances that a Democrat could gain that Alaska seat. So it’s very peculiar.

BAIER: The Democrat Scott McAdams.

HUME: How far behind is he? 

WILLIAMS: He's pretty far behind. Remember, Murkowski is now in the lead in the polls in Alaska.

HUME: Isn't he way behind both of the Republicans.

WILLIAMS: Yes, he is.

HUME: Thought we would mention that.

BAIER: Kirsten, you are from Alaska.

KIRSTEN POWERS, FOX NEWS CONTRIBUTOR: I am from Alaska. It’s curious is a nice way to put it. It's definitely going to go down as the wackiest race this year. And I think that what ended up happening was Lisa Murkowski was much better as an underdog. She became very scrappy. And pretty much as soon as she got into the race, everyone I was talking to up there said she's going to win the race. This is before Miller started to implode.  Then Miller started to implode and there were all of these different things, which have been widely covered. And he has just been going down.  And it has turned into a lot of people, including Republicans, being kind of afraid of him.  And, so I think right now, the -- they are pretty much tied in the polls. Murkowski, of course, has to overcome this problem of being a write-in. But you have to remember, in Alaska it is almost 100 percent name recognition, Murkowski. So that probably isn't going to stop her.

BAIER: That was a CBS story, all of this, about a CBS affiliate.  There was an ABC story that was discounted today that the GOP has turned its back on Joe Miller. Steve, what’s this bottom line here? Aren't Republicans happy if either Miller or Murkowski win?

STEVE HAYES, THE WEEKLY STANDARD: Yeah, I think so. Though, by all accounts, they are happier if Joe Miller wins. They threw in behind Joe Miller when he won the primary; he won it fair and square. And they went and backed him.  I think it is unlikely that the Democrat squeaks in. The high water mark for Scott McAdams is 27 percent in the polls that have been taken in the past six weeks. So he never gets higher than 27 percent, where you have got Murkowski and Joe Miller in the mid 30s, depending on how the write-in works.  But it looks like, in one way or another, a Republican or a Republican/earmark appropriator is going to win the race.

HUME: Remember this, Bret, that when Murkowski entered the race as a write-in candidate, there was a lot of talk that the Republicans were mad at her and they were going to strip her of her committee assignment. It was reported they were going to do that, but they never did. That ABC report said they did, but they never did. So they have been careful to protect their flanks with her. And she will line up with the Republicans if she wins.

WILLIAMS: Let me just say quickly, the question is whether or not this is too late. This is a pretty good story, you know? The media against the Republican and against the Sarah Palin candidate and Sarah Palin coming out and saying these are the corrupt bastards.

Thank you.

But the question is, is it too late? And it may be too late, because Murkowski is up by ten in polls as a write-in.

POWERS: But the people who are going to be energized over that story are already his supporters. His problems are the people who are Republicans who are just not quite comfortable with him and they're trying to decide whether they want Lisa. And --

HUME: There's one great imponderable in the race, Kirsten, and none of us really knows the answer to it. And that is how big a factor is it that she is a write-in? Write-in candidates rarely win anything.

POWERS: It is a factor, except they are now allowed to hand out lists. The court ruled that you can hand out a list of names. So that brings us to the next --

BAIER: There are 160.

POWERS: Which is, yes, the conservative radio host urged everybody to go in and sign up as a write-in. Now there are 150 write in people. But presumably, you know her name starts with M. Go you can go to M on Murkowski on the list.

HUME: Can you carry the list in to the voting booth with you?

POWERS: They can hand the list to you, if you ask for it. They also have wristbands and tattoos, little --

HAYES: But the bottom line is a lot has to happen for her to win and for her to come anywhere close to what she is polling right now. I mean, I still think -- I don't think this necessarily moves voters to Joe Miller, because I agree with what Kirsten says. They were probably already there and probably already motivated before this episode happened. But I think he handled it in the right way and it certainly going to raise his profile yet again.

BAIER: Quickly, I want to go down the line. President Obama was in Ohio campaigning today at an event, a final event with Vice President Biden. And you can take a look at a still shot of the crowd in what looked like a pretty empty facility. There are about 8,000 people there; I guess it held about 13. Here's how the New York Times described it. The New York Times, quote: "President Obama wrapped up a weekend of last minute campaigning in Ohio on Sunday, addressing Democrats in an indoor arena that, in a sign of the enthusiasm gap that the president is working so hard to close, was a little more than half full."   Brit?  Mean anything.

HUME: Well, I never thought --

BAIER: It's on a Halloween Sunday morning.

HUME: The president is not on the ballot. While the election is a lot about him, I don't think that his going out is going to help these candidates very much. The one thing he can do, that any president can always do, is help to raise money. He may get a few people to the polls, but he's more of a problem in many respects than he is an asset. So I think it is a very mixed deal with him. And the last time I saw a president do this -- Bill Clinton did it in 1994, campaigned very hard in the closing stages of that race, to absolutely no avail.

BAIER: Juan, that governor's race is the real one they want to affect. John Kasich is still up in the Real Clear average polls over Ted Strickland, the Democrat, and by about three points, the average. That is what they want to move the ball, because the Senate race --

WILLIAMS: The Senate race is gone. So my sense is that they are doing this -- of course, they want free media. So it will get lots of coverage in that marketplace, and hopefully make people more aware, especially the voters, Democratic voters, that the president was there.  But you know what?  It is such a contrast. It is such a contrast to '08, when President Obama, then candidate Obama, held a rally, you couldn't get near the door. And a lot of the -- no offense intended -- teeny-bopper young people would just come out and there would be shouting and going crazy. You aren't seeing that, even for the people who are there.

BAIER: Quickly, Kirsten.

POWERS: This is his twelfth trip there. Maybe they are all filled up on Obama. I don't know. I think that he -- basically, I think this is probably leaning a little bit toward Kasich, even though Strickland -- they're claiming in their internal polls that he's up about four. But I think that it is a very, very difficult environment. And when it is this close, considering the national environment, you have to give it to the Republicans.

BAIER: Steve?

HAYES: Does President Obama actually make a difference in a race like this? I think the jury is out, but there are suggestions that he does not.  And the other question is, will late-deciding voters go for an independent in a bad economy, in a party that is not well liked, at the last minute?  I think it is a stretch.

BAIER: Tell us how you think the election will turn out. Vote in our online poll at our home page, FoxNews.com/SpecialReport.  Next up, the terror alert and the election.



BRENNAN: When I look at the information that we received from Emirati (ph) and British authorities about the IEDs and the sophistication and construction of them, it has all the hallmarks of al Qaeda on the Arabian Peninsula. And we know that AQAP has been quite vocal in threatening attacks against U.S. interests. And they have tried to attack the home land. And these two packages were destined for the home land.


BAIER: U.S. officials working with Yemeni authorities, still trying to track down the suspects responsible for those bomb packages. U.S. officials now saying they believe it is the same person, the same bomb- maker behind the Christmas day bomber -- that's Umar Farouk Abdulmutallab.  That, of course, did not detonate on that plane, you will remember. The -- also the Saudi counterterrorism chief was severely injured in a bombing back in the summer of 2009. They think it is all the same bomb-maker.


BRENNAN: There are very strong similarities of those three events that suggest to me that they are the work of an individual or individuals who are responsible for all three of those devices.


BAIER: So what about all of this, the search and also its potential effect on the election? We're back with the panel. Steve? 

HAYES: I think the administration overall have handled this reasonably well, primarily because they haven't down played the seriousness of the potential attack, like they have in previous attacks. One thing they don't want to talk about, though -- and I think they were a little bit late to the game on this -- is the lethality, of al Qaeda in the Arabian Peninsula. Remember, the administration -- it was a policy of the administration at the beginning of the administration to send Gitmo detainees back to Yemen. More than 50 percent of the detainees that were there from Yemen were going to be sent back.  That was a mistake. I think they underestimated. And the reason that the Saudis were able to provide this intelligence to the U.S. government on al Qaeda in the Arabian Peninsula is because the leadership of that group came through Guantanamo Bay. So it should spark a conversation about what we do with the rest of the people in Gitmo now.

BAIER: Kirsten?

POWERS: I think it will have probably zero impact on the elections.  And it says a lot about where we are right now, that the economy is, A, so bad, and, B, that we have sort of a false sense of security. I think that people even in light of this think, well, we stopped it, and, you know, if something happens, we probably don't have to worry about it. And I would be shocked if it in any way played into the elections.

BAIER: Do you agree with that, Juan?

WILLIAMS: Yes, I mean, it helps the whole notion of commander-in- chief. You might think it would lower the Republican advantage on national security. But national security is really not the issue. And I think people like Peter King, the Republican from New York, who is so involved in national security said, you know, the administration did a fine job. They shared intelligence. Everybody from homeland security to FBI just did a good job on this.  So the Republicans haven't made an issue. And I don't think the Democrats are going to benefit from it. I think, though, that if you are looking towards the issue itself, it is quite curious to me. They think it’s the same bomb maker in all of these cases, using the same materiel, this PETN material. And I wonder if it is, again, one crazy guy with the al Qaeda on the Arabian Peninsula? Are we making too much of the broader notion, as opposed to saying we should go get this guy.

HUME: Yemen is a hotbed. And while this is really basically a success story, as Steve and everyone else has suggested. The administration deserves credit. The intelligence agencies deserve credit.  The Saudis certainly deserve credit for helping, which is something they haven't always done at all times.  We are safer than we were before 9/11. And we're safer perhaps than we were before the Detroit bomb attempt. After all, that got almost into the continental United States. These bombs never made it that far. These devices never made it that far.  The question I have, though, how aggressive now will this administration be prepared to be in trying to crush al Qaeda in Yemen? Or will we be treated to a familiar Democratic party refrain, which is, uh oh, we are taking the eye off the ball. This is not the real al Qaeda. This is some other al Qaeda. Remember, we heard that in Iraq. Let's see what happens.

BAIER: But they did learn, the administration did, from the Christmas day bomber, at least on the communications side.

HAYES: They certainly seem to have. I think Brit is exactly right.  In addition to how much we go after al Qaeda in Yemen, generally, how tough are we going to be with the Yemeni regime, with the Yemeni government, who has, at the very least, looked the other way in previous attacks, in some cases even maybe facilitated previous attacks? I think they have to be tough and I think they need to be publicly tough with them.

BAIER: You get the sense they will be, Kirsten? 

POWERS: Yes, I don't see there would be an expectation that they wouldn't do that. And I think that, you know, Obama I think has gotten a lot more aggressive probably behind the scenes and also publicly he's been much more aggressive. And I think we saw that in the way that he responded to this, in a very different way than he has responded in the past.

HUME: John Brennan said we will not rest until the situation with the Yemenis is taken care of. I’d like to hear that from President Obama.  Perhaps we will and perhaps in the kind of strong language Steve would like to hear.

WILLIAMS: I just worry that you guys are, again, making this into now we have to go to war in Yemen. I just don't see it. I don't see it at all. You know, we’ve been in Iraq. We've been in Afghanistan. And we have to stop --

HUME: Negotiate with the enemy.

WILLIAMS: No, we should identify the people, apparently very small group of people who are building these bombs, perpetrating these acts against us --

HUME: And have our diplomats make a citizen’s arrest.

WILLIAMS: No, we'll send you and me and go get them, Batman and Robin. But I'm saying, no. I mean, let's --

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