This is a rush transcript from "Special Report," November 3, 2010. This copy may not be in its final form and may be updated.


PRESIDENT OBAMA: I'm doing a whole lot of reflecting, and I think there will be area s where we will have to do a better job. With all that stuff coming at folks fast and furious -- a recovery package, what we had to do with respect to the banks, what we had to do with respect to the auto companies -- I think people started looking at all of this and it felt as if government was getting much more intrusive into people's lives than they were accustomed to.


BRET BAIER, HOST OF “SPECIAL REPORT”: President Obama talking to reporters in the East Room at the White House today. He called the election a "shellacking" for Democrats. But he did say he wanted to negotiate with Republicans and try to get things done.

Let's bring in our expanded panel, Steve Hayes, senior writer for the Weekly Standard, Fox News contributor Juan Williams, Mara Liasson, national political correspondent of National Public Radio, and syndicated columnist Charles Krauthammer. OK, Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: It was interesting.  His demeanor was subdued, which is Obama's way to approximate humility.  That's about as close as he gets because he's not really good at the real thing.

But the content of what he said was quite strange. He's in denial.  He said people thought I misunderstood and I was trying to expand the government because I was in a hurry to do stuff. But there was no hurry or demand on healthcare. There was no emergency on healthcare. In fact, he and other Democrats said openly the way they were attempting it, because it would be historic because they attempted it ever since Harry Truman and they looked at it as an historic obligation.

Now on cap and trade, which is energy, which is unbelievable intrusive into every enterprise, essentially attacks on energy, which affects in the market, there was no hurry on that. There was no emergency.  No clamor.

So the main items in which people respond and reacted, and when he was asked about three times at the beginning of the press conference, do you think people were repudiating you or voting against the healthcare plan? And he acted as if he was being questioned about the natural order of stuff, as if the reporters were questioning the elliptical orbit of the planets. He couldn't understand how anybody could not see the magnificent of the plan.

BAIER: Mara, he said numerous times if unemployment rate had been five percent and not 9.6 that the electorate would have reacted differently Tuesday.

MARA LIASSON, NATIONAL POLITICAL CORRESPONDENT, NATIONAL PUBLIC RADIO: That's possible. The unemployment rate is a factor in a pretty important factor in this whole election, and I don't think any Republican would deny that. But the exit polls were split, about half and half.  People said their vote was a vote to overturn it and people who didn't want to.

I think the president missed an opportunity to set a new tone in Washington and to embrace the results and turn the table and invite Republicans to fill in the blanks not yet on spending and the deficit.  That being said, I think you can find seeds in this press conference of he's giving up cap-and-trade. He said it's just one way of skinning the cat.

BAIER: That was dead anyway.

LIASSON: That was dead anyway, but he said that. He said he will negotiate a solution to the expiring Bush tax cuts. He did not say let's not extend the rate for the ones for the top earners. He didn't say that today. He said we'll negotiate.

He said nothing can get done unless we both agree, which is a backdoor way of saying we're in a new situation in Washington where we share power.

BAIER: Juan?

JUAN WILLIAMS, FOX NEWS CONTRIBUTOR: I think everybody wants to say, gee, did the president get it? From the president's point of view, he got it. What he gets is that he's taking political heat and political losses for having done what he considers to be the right thing.

I think the most telling part of the press conference today when he is talking about people who lost. He said they’ve called him and he had conversations with them, and not one of them he says indicates any degree of regret.

To the contrary, they say, you know what, we feel we did the right thing and go on to do other things. He said these are good public servants and hope they continue in public service.

I think the Republicans were hoping to hear from him that he was chastened and that he was going to be a different person. And that is just not this president. He is not going to be a different person.

But it is clear that he is willing to negotiate. He said he will negotiate on the Bush tax cut, he says he'll do that. And it's clear that he understands that the independent voters that are critical for him going forward and toward 2012, especially women voters are concerned number one about more jobs, two about deficit spending, and three then about tax cuts.

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: He wasn't chastened. He was plainly annoyed today he had to go through this exercise.

I think what he said was beyond strange. As Charles put it, it was borderline outrageous and insulting to the voters who thought they had sent a message. You have the president who days ago called the political opponent enemies and he suggested that the Republicans don't like Hispanics.

He misrepresented the fact that the Republicans have voted for global AIDS funding. He said the Republicans don't care about the unemployment and they only care about the rich people. That's a close paraphrase if not an exact quote.

And then you have that same guy today saying he wants an open and honest debate. Are you serious? People are not that stupid. Voters are not that dumb. They get this.

LIASSON: They want to debate with him; they've called him bad things, too.

HAYES: Of course, and they won the election, as he said immediately after they won last night.

LIASSON: He won one and they won one and now they’re going to have to work together.

HAYES: It's a total crock. The idea that he is saying now he is open to compromise. He also said he is willing to talk to Republicans or consider what their proposing if they have any ideas. Really? Does he really think that Republicans don't have any ideas after two years of having this debate?

WILLIAMS: The Republicans over the last two years are pursuing a successful policy of obstructing president Obama.

HAYES: Sure, but President Obama in the middle of the healthcare debate said the exact same thing using the exact same language. If the Republicans have any ideas, I'm willing to listen. So we went through the exercise at the White House. He went up to see them in Baltimore. He listened to their ideas and summarily rejected all of them.

BAIER: Let's listen to President Obama asked about healthcare specifically.


OBAMA: There are going to be examples where I think we can tweak and make improvements on the progress we made. That is true for any significant piece of legislation.

When it comes to preexisting conditions, is this something you are for or against? Helping seniors get their prescription drugs, does that make sense or not? And if we take that approach, which is different from campaigning, this is now governing, then I think that we can continue to make some progress and find some common ground.


BAIER: There’s not a lot of common ground between tweak and repeal, Charles.

LIASSON: He's talking about the 1099 provision.

BAIER: He did. That is one point.

KRAUTHAMMER: He talks about now he is governing. He is saying exactly what he said for the last few weeks on the campaign trail. He says people are up upset because while there’s been improvement, it hasn't been rapid enough. And they're upset. That is what he said in August, September and October.

He gets the incredible landslide against him and the policies and he believes it's the same idea that the progress isn't rapid enough. He just had a reputation of two years of his agenda and ideology, and he pretends as if nothing has happened.

And he says one of the messages he gets, and it's all about what does he get, is that people want him to work with Republicans on things like natural gas and electric cars. Is that why he lost 19 state houses, because he hadn't had enough discussion on electric cars and natural gas with Mitch McConnell? I think not.

BAIER: Mara, there is this disconnect between the messaging they continue to say they didn't get the message out about healthcare. We went back. There were more than 50 speeches, there were news conferences.

LIASSON: They talked a lot about healthcare. They clearly failed to convince majority of people that the bill was a good idea.

Now, healthcare is complicated thing. The Republicans, we talk about them next, I know, but they have to be careful, because the exit polls were I think shockingly mixed for this election, where 61 seats flipped and healthcare came out even in the exit polls? I was stunned at that.

It shows that there are some things in this bill -- people don't like the law overall, but there are some things people like. And Republicans as they all are saying are going to tread pretty carefully as they go about defunding, dismantling, whatever it is they want to do to it.

BAIER: So Steve, we can see more Andy Griffith ads soon?

HAYES: That would be great. I think we're all looking forward to that debate.

WILLIAMS: If you look at the exit polls, the voters blame Wall Street, number one for the economic problems in the country, and then President Bush before they get to President Obama.

So again, the economy, and jobs are the number one and the voters even voters -- as they say throw the bums out, because most of the bums are Democrats or the incumbents are saying we have problems with Wall Street and Republicans.


HAYES: It's not just because they're there. And 73 percent of the voter expressed anger or dissatisfaction with the federal government and what it's doing, 73 percent.

WILLIAMS: And Republicans are part of the federal government.

LIASSON: No doubt that the anti-government sentiment trumped anti-business sentiment. Otherwise, why would John Kasich and Dan Coats and all these people who worked on Wall Street they didn't have a problem because of that.

KRAUTHAMMER: It was any Democratic government. The Republicans lost exactly three seats and they gained almost 66 or 67. This is a landslide. And you’re pretending its incoherent opposition to incumbents? It was a message and it was very clear.


LIASSON: This is the third president in a row that has lost one or both houses of Congress, and it's the third election in a row where we've had these huge swings. Now these huge swings can be misinterpreted by victors as a mandate for the program.

BAIER: I want to explain one thing. Single sponsor doesn't mean we have to talk louder. It just means we have more time.


OK, tell us how you feel about the election. Logon to our homepage at FOXnews.com/specialreport. You can vote in our online poll.

Up next, we’ll get our panelists reactions to Tuesday's voting.  That's another extended panel. We'll keep it down a little bit. This special edition of "Special Report" continues in 40 seconds.



BOEHNER: What we need to do is listen to the American people.  They sent a very loud message last night. It's pretty clear the American people want a smaller, lost costly and more accountable government here in Washington, D.C. And if the American people see us doing things that they’re telling us to do, I think we’ll do just fine.


BAIER: The man expected to be the next speaker of the House, John Boehner from Ohio, talking about what’s ahead. We're back with the panel with the GOP agenda. Steve?

HAYES: Well, I think the big reality coming out of the election is nothing significant will get done in the next two years. For those living through the last two year who didn't agree with what happened, that in and of itself is great news.

I think it will be interesting to see what happens over the next couple of weeks. One thing Republicans should do is take away the argument that is inevitable. It is coming, that they are obstructionists.

The President made that argument and made it repeatedly when it was mathematically impossible for the Republicans to have been obstructionists. So you know in spite of all this language about compromise and Kumbaya, you know he will make the argument in six months, eight months, and certainly in the 2012 campaign that the Republicans are blocking everything and they're the problem.

So tactically, Republicans should do things now and present ideas and let them -- the House Republicans, and let them be killed in the language, let the White House fight them so at least they can make a counterargument that it's the White House and the Senate and Democrats that are blocking these things.

BAIER: Juan, the president says they want to reach out to Republicans and talk about deficits and cutting spending. He has his deficit and debt commission coming out December 1st. Is there a common ground there on that issue for Republicans and Democrats to get together on?

WILLIAMS: Yes, there is. Potentially you can look at the entitlement spending, and of course the big item there would be Social Security. And you can have a discussion about where we can accomplish limits in terms of when people qualify to get Social Security and talk about the raising the cut-off and how much people pay in with the payroll taxes for  Social Security.

BAIER: Boy, before the election you couldn't talk about that.

WILLIAMS: This is a problem, and this is why Steve says you won't see much get done and why everybody is predicting paralysis.

You have fewer people in the middle now. And you also have a presidential election coming. There is a lot of posturing. Mitch McConnell in this program in the interview with you said of course, it's like gambling in Vegas. Everybody knows that he wants to stop the president having a second term and everybody knows the president wants a second term.

When it comes to something like Social Security, you don't have to politicize that. It is politicized.

On the other hand if the Republicans say we care about the deficit reduction and are we're willing to take a risk, they can put the onus on President Obama to also take a risk and grandfather in some of the people who are now getting Social Security and impose cuts and higher taxes on people who are the other end of the age spectrum.

BAIER: Mara, the GOP agenda?

LIASSON: The Republicans have been really masterful in focusing on all the things people didn't like -- debt, deficit, spending, taxes, too much government.

Now they've got control of the House and they are going to have to provide specifics how they're going to bring down the debt and cut spending. And this is going to be a fascinating exercise. And if the Republicans really want to do something about the debt and the deficit, I think they can.

BAIER: Wait a second; you are putting the onus on the Republicans --

LIASSON: No, the President is going to have to do the same thing --

BAIER: He still drives this bus.

LIASSON: Yes. And the question is, are they going to say we want to litigate this in the next election or get something done? Neither party has a functional majority now. If the deficit problem will be solved both have to come together and negotiate.

This is a Republican issue, debt and deficit, and the fact that the president appointed this commission and says he wants to do it, why don't they call his bluff and take him up on it?

BAIER: Charles?

KRAUTHAMMER: If neither side has operating majority, nothing of importance is going to get done. The only issue there will be is on the Bush tax cuts because it's very easy to see a compromise in which you get the Republicans and the Democrats to agree, to extend indefinitely the cuts for 98 percent and for say a couple of years for those in the upper brackets.

That I think is going to happen. And I think for Obama it's important because however ideological he is, if he wants to win a reelection he will have to have a strong economy. And I think even he knows if the cuts expire and you have this huge increase in taxes, also on dividends and capital gains and everything else, the economy will be stopped in his tracks and he will be hurt in 2012.

On that, you can have agreements. You have might have agreements on peripheral issues like nuclear energy. You might have agreements on peripheral issues like some of the ridiculous item in healthcare like that 1099 for every small transaction.

But on the major issues, the Republican ought to use the House to pass stuff they know will be stopped in the Senate and the White House, repeal of Obama-care, restoration of the remaining stimulus money to the treasury, which is a big amount of money, and stopping any EPA regulation of carbon which is a backdoor way to do cap and trade. Those are the three major items and the House will do it.

BAIER: I asked Senator McConnell about the vote to raise the debt ceiling. For Republicans that’s going to be an interesting vote.  What about that, Steve?

HAYES: It will be. There will be a divide in the Republican caucus. The Tea Party candidates and people who identify with Tea Partiers are not likely to go along with that.

BAIER: We're coming to a point where it looks like we have to as a country raise debt ceiling or the government essentially has to shut down.

HAYES: No, I think that's one area where -- the other question inside the Republican issue is where do the Tea Party Republicans and the establishment Republicans split? How long does it take us to get to that point?

You saw Jim DeMint with an op-ed in the Wall Street Journal counseling the new elected conservatives; don't be overtaken by the establishment. I think you are to see these things manifest themselves, and that might be an issue where it comes up quickly.

KRAUTHAMMER: Even Jim DeMint won't stop the raising of the debt - -

LIASSON: Yes, he is. I talked to him today. He said he won't vote for it and none of the freshman will.

KRAUTHAMMER: Of course he will cast a vote because he knows it will pass anyway.

LIASSON: Who votes will pass it, the Republican votes?

KRAUTHAMMER: Yes ultimately. And the way it will be done, and McConnell spoke about this in the interview, he said it depends on what conditions are attached.

For example, if Republicans demand discretionary spending returned to levels of 2008. That will be a very strong reduction that will be meaningful. And if you tie it into raising the debt limit, you have achieved a lot. It has to be raised anyway or America becomes Greece.

WILLIAMS: Would it satisfy the Tea Party? Because Boehner says he won't shut down the government. I think a lot of people, especially Tea Party types, are of the attitude maybe it's good to shut down the government and make a show of it.

But all of that grandstanding is out the door the minute you have to govern. And I think for Republicans the key here is to show they have some ideas and can get something done if they want to be successful going forward.

Content and Programming Copyright 2010 Fox News Network, LLC. ALL RIGHTS RESERVED. Copyright 2010 CQ-Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of CQ-Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.