This is a rush transcript from "Special Report," October 5, 2010. This copy may not be in its final form and may be updated.



GOV. HALEY BARBOUR, R-MISS., REPUBLICAN GOVERNORS ASSOCIATION CHAIRMAN:  The po litical environment for Republicans is as good as I've ever seen it in my lifetime. I’d be disappointed if we don't get to at least 30 Republicans governors out of the 50.

GOV. JACK MARKELL, D-DEL., DEMOCRATIC GOVERNORS ASSOCIATION CHAIRMAN:  We'll put more into these races in October than we spent in all of 2006. Make no mistake about it. The DGA is on offense and we plan to win.


BRET BAIER, HOST OF SPECIAL REPORT: 37 governor’s races across the country this election season, and they are very important. To tell us why, to break down a couple of those races, let's bring in our panel tonight, Steve Hayes, senior writer for the Weekly Standard, Mara Liasson, national political correspondent of National Public Radio, and syndicated columnist Charles Krauthammer.

Mara, let's start about why they're so important.

MARA LIASSON, NATIONAL POLITICAL CORRESPONDENT, NATIONAL PUBLIC RADIO: Governors races are incredibly important especially two years before a presidential race. Governors are often the field from which presidential nominees are taken. A lot of governors become the nominees.

And also this year we have a lot of contested races, races that might switch from "D" to "R" in very important electoral states in the Midwest, Florida and California, big electoral prizes. Governors control a lot of the electoral political machinery in their states and they can really help or hurt a nominee.

BAIER: Redistricting for Congressional districts also happens coming up, Steve, and you have in some places state legislatures that would change hands as well as the governor's office depending how it shapes up.

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: Yeah, absolutely.  Mara is exactly right. It's governing, it’s redistricting, and it's the politics of 2012. It's also setting the political environment.

To a certain extent we look at things from a national perspective, but in the states, when you are talking about states with severe budget crises, how a governor approaches these can help set the political environment for the president election in 2012 in a crucial way.

BAIER: Let's look at a couple of races. At the bottom of our list is Ohio. That race, John Kasich, the Republican, former congressman and former FOX News contributor, he has a lead over Democrat Ted Strickland.  There you see it. It appears to have closed in the latest polls a little bit, but this race in Ohio important. The president, the vice president had visited there 18 times in the past 18 months.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: They have been there so often that either of them could take out a driver's license in Ohio. Ohio is an absolutely critical state. If you are a Democrat, you probably can't win the presidency if you lose Ohio. The presidential election six years ago hinged on Ohio. So they know it.

And it's interesting because Obama and the vice president, as you say, have been there. In the polls about the how people want to vote in the governorship, they asked independents, likely independent voters, who incidentally are going to Republican heavily, would an Obama visit increase or decrease your chance of supporting the Democratic nominee Strickland? Increase -- six percent. Decrease -- 39 percent.

So it gives you an index of how much the Democrats do not want to nationalize this election and how it may not actually help to have Obama in the state and Wisconsin, for example, in the senatorial race. Russ Feingold won't be seen within 100 yards of Obama.

BAIER: Although he went to on the last one.

KRAUTHAMMER: He went to the last one, but he sort of had to because after sitting out the couple of them, it becomes really obvious and it looks really bad.  Generally speaking you want a local race.

I think with Kasich he actually in the latest poll he has a nine-point spread.  It looks to me as if the states like Ohio and Michigan, and the Midwest, which are hurting economically, I think the Democrats have a really, really tough road.

BAIER: I should point out these are the Real Clear Politics average of polls, the recent polls. There are new polls that may have moved races a little bit.

Let's go to Florida, Mara, and this race is really interesting down there.  Rick Scott is the Republican nominee. He appears to be opening up a lead.  He is spending a lot of his money on this campaign against Democrat Alex Sink.

LIASSON: You know it’s funny.  This is a potential pick-up for Democrats.  And they were very very hopeful about Florida, a very important electoral state. Rick Scott won the nomination of his party in a very bitter, divisive primary, and the Democrats are hoping that some of the wounds wouldn't be healed and that Alex Sink would have a chance.

Alex Sink is doing very well down there. This is a close race, closer than a lot of people thought. Now lately it does seem that Scott has pulled ahead of it. But Alex Sink has been making a run for it. And I can't think of another state in the country where a Democrat has a chance to pick up the governorship.

BAIER: And talk about the White House wanting to focus on one race -- Florida, when it comes to presidential possibilities, when you talk about electoral votes --

LIASSON: You can't think of anything much more important than that.

BAIER: Than Florida.

OK, let's turn to California, Steve. In this race, we have seen a lot of news about it. We’ve saw Meg Whitman under fire for this housekeeper she hired. Now today a story out about Jerry Brown possibly going illegally to Cuba and drinking mojitos with Fidel Castro.

His campaign had this response -- "Makes me wonder if Meg knows she is not running for governor of Florida," from his press secretary, saying it was not an illegal trip. But yet the accusations are flying in California.

HAYES: It's amazing when you look at the serious budget crisis in California that we are having a debate that’s basically over a nanny and a potential trip. It sort of gives you the indication of the state of play in California.  If you look at the last week, if you analyze just a week, certainly Meg Whitman's campaign has been thrown off-stride by these accusations, there is no question. They had to spend time not being on the offense and not talking about the state of California where she made a good case on her own behalf.  A case that she was the one to come in and clean it up. Instead she’s been talking about this nanny, and now we may be talking about trips to Cuba.

KRAUTHAMMER: I'm sure in parts of San Francisco, having a beer with Fidel is a plus.

BAIER: Let's turn now to New York, and interesting race there. The Real Clear Politics average in New York has Andrew Cuomo with a lead, the Democrat 14 points over Carl Paladino, the Republican. Charles, what about this race?

KRAUTHAMMER: Well, Paladino at the beginning of the general election had an outlier poll which showed him only six points behind. But then he had that meltdown on camera with a reporter which sort of reinforced the image of a guy who is not quite contained, a guy who is slightly out of control. And it didn't help him. I'm not sure he can recover.

This is after all, a very heavily Democratic state. Cuomo is the heir to a political dynasty. The father of course was governor. He's been the heir apparent. I think this is one state where it’s going to be really hard.

There is one thing the Republicans did. -- Rick Lazio, Paladino’s opponent among Republicans, was taken off the ballot. He was on the conservative line. Had he stayed on it, it would have split the vote a little bit and it might have had an effect in a close election. But he's now off the ballot and it looks as if it not going to be a close election anyway.

BAIER: But four weeks is an eternity in politics.

Last race, Mara, Michigan. This looks like a blowout in the making.  The Republican there Rick Snyder is up by 21 points, and this is the average of recent polls over the Democrat. Michigan has a high, high unemployment rate there.

LIASSON: I don't think any Democrat thinks they have much of a hope.  Michigan is like New York State.  No Republican is hopeful about New York and no Democrat is hopeful about Michigan.  Michigan is interesting, because it's one of the states in the Midwest, we could have put Pennsylvania in the same category and Ohio. These are important, a very important region for Democrats, that whole kind of Great Lakes region where they build their presidential hopes on the electoral votes. And it looks like one Democratic governor after another is falling.

HAYES: And Snyder is an interesting candidate because he is a businessman, running as a businessman. He said I was a successful businessman. And he's not unlike Rick Scott in Florida; he’s not unlike Ron Johnson in Wisconsin. There is sort of an interesting prototype for Republicans who are running as outsiders saying this is what we did in business and this is why we'll succeed in government.

BAIER: He says he is "one tough nerd."

HAYES: One tough nerd.

OK, logon to the homepage FOXnews.com/specialreport for a web exclusive by Colonel Oliver North for new systems designs to keep our troops in Afghanistan safer.

Up next, White House goes solar, and the return of cap-and-trade?



STEVEN CHU, ENERGY SECRETARY: As we move towards a clean energy economy, the White House will lead by example. I'm pleased to announce that by the end of this spring there will be solar panels that convert sunlight into electricity and a solar hot water heater on the roof of the White House.

DAVID KREUTZER, ENERGY ECONOMIST: If the White House is setting policy based on this symbol, the policy is going to make the electricity much more expensive for consumers in the United States. They have to pay the bill.  The president doesn't.


BAIER: Critics say the Department of Energy under this administration says that solar electricity is four times more expensive than conventional forms. Yet as a symbolic gesture, the White House is installing, the administration is installing solar panels on the first family's living quarters by the end of next spring.

Now, about climate change legislation, in the recent Rolling Stone interview the President said this, quote, "One of my top priorities next year is to have an energy policy that begins to address all facets of our overreliance on fossil fuels. We may end up having to do it in chunks as opposed to some sort of comprehensive omnibus legislation, but we are going to stay on this because it's good for our economy, it's good for the national security, and ultimately it's good for the environment."

We're back with the panel. Steve, solar panels, climate change legislation?

HAYES: I think the solar panels are certainly symbolic of what the White House is trying to do, and I think in some way they're symbolic of what the White House intended. They're saying this is good and we should be doing this. In some ways it's symbolic in the way the White House didn't intend, because they cost more. They are, in a sense, a waste of money.

This is a political move. The White House was being pressured by environmentalists a little more a month ago to do this. They initially reacted coolly, didn't agree to do it, and after an outcry that I think most people didn't hear but certainly those on the left heard loud and clear, the White House caved. I don't think it's much more complicated than that.

But looking forward into next year the president wants this to -- he wants to drive the policy debate on energy. He has lost that opportunity.  He didn't do it initially. He didn't do it well initially. And I think it's far more likely that we're going to be talking about drilling in Anwar this time next year than we will be talking about cap-and-trade.

BAIER: Mara, legislatively cap-and-trade is dead.

LIASSON: Yes, and he didn't say it wasn't. In other words he's talking about doing something on energy next year. He even said to Rolling Stone maybe we do it in smaller chunks. But I don't see solar panels on the White House as being anything signaling something wrong. As a matter of fact George W. Bush had some solar energy at the White House.

The Republican policy on energy used to be everything. Let's do everything -- let's drill, let's have nuclear, let's do green energy, let's do everything we can to reduce our reliance on fossil fuel.

And there was a time -- I think cap and trade proved to be the wrong way to go, but there was a time when people thought there could be a compromise if you put all those things together.

BAIER: On the Rolling Stone interview, he also said this -- "It is very hard to make progress on these issues in the midst of a huge economic crisis, because the natural inclination around the world is to say, ‘You know what, that may be a huge problem but right now what’s a really big problem is 10 percent unemployment, or “What’s a really big problem is that our businesses can't get loans. That diverted attention from what I consider to be an urgent priority."

LIASSON: I hope that's an acknowledgment that the economy has to come first and next year his legislative agenda had to put the economy number one at all times.

BAIER: Is this a tough message, this quote, Charles, for moderate Democrats ahead of an election in November?

KRAUTHAMMER: It is, because Obama has done precisely the opposite of putting unemployment and the economy ahead of these issues on drilling, for example.  He has imposed moratorium on drilling in the Gulf that was destroying what was left of the Gulf economy, and it's gratuitous. It's not helping us in terms of cleaning up the air. It's simply harming our industry.

He reverted. Remember, he made a small opening before the spill to have a slight relaxation of the moratorium on drilling in the Atlantic and Pacific and in Alaska. And of course all of that is retracted as a result of the Gulf spill. He took advantage of that and he's governing in exactly the opposite way.

Our problem is that we are -- it's a national security issue and it's also an economic issue. We are shipping a third of $1 trillion overseas on imported oil, which we don't have to do because we have oil here.

But Democrats have insisted for two decades and more on not drilling.  That's Anwar in Alaska, the national petroleum reserve in Alaska, drilling on the coast, natural gas and nuclear energy. And this administration, Democrats, are wedded to a policy of solar and wind, which are sweet and nice and theoretical, but they're extremely uneconomical.

BAIER: So you're pro-solar panel on the White House?

KRAUTHAMMER: I'm not against it. It's a nice accoutrement, but not a solution for our energy problems.

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