This is a rush transcript from "Special Report," December 27, 2010. This copy may not be in its final form and may be updated.


REP. JOHN BOEHNER, HOUSE MINORITY LEADER R-OHIO: I think it's important for us to l ay the groundwork before we begin to repeal this monstrosity and replace it with commonsense reforms that will bring down cost of health insurance in America.


SHANNON BREAM, GUEST HOST: All right, the Republicans have made no secret about the fact that when they're controlling the House. When they comeback in January they want to defund Obamacare, as they call it.

Let's bring in our panel to talk about it. We have Steve Hayes, senior writer for The Weekly Standard, A.B. Stoddard, associate editor of The Hill, and syndicated columnist Charles Krauthammer. Welcome to you all.

Charles, I’ll with you. Option number one is the House passes some kind of outright repeal. Probably doesn't survive in the Senate. Do they do it anyway for the symbolism of it?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Absolutely, for the symbolism and also for the message it sends that if you give us a Republican Senate and Republican in the White House, we will actually abolish this, which right now is a popular position. I think it has about a 10-point spread between those who want repeal and those who want to retain it in public opinion polls.

I think the second thing they ought to do is to attack the bill through hearings. I'm skeptical about taking away the funds because what it will do, it will poke holes in the system. It will make it more chaotic and allow some things to be enacted, other things to be more slowly or clumsily enacted.  In the end, if healthcare collapses or if it becomes utterly unworkable, the Democrats will have a way of saying, well it was all these injuries inflicted by the Republicans that made it not work.  I think the smarter approach it to simply expose to the American people what’s in the bill, all the arbitrariness, all the incredibly increased expenses, all the contradictions. Also the inherent corruption in it, the favoritism, the waivers all that’s in a bill where there is so much authority in regulation writing is vested in the administrative branch, especially in the department of Health and Human Services.  I think through hearings, which the Republicans can do now that they control, the House, you’ll expose that much in a better way, whereas if you try to take away the funds in the end, you’re not going to succeed, but you may end in the fall guy if it falls apart in chaos and incoherence.

BREAM: Steve, I see you shaking your head down there. We talk about the hearings exposing exactly what’s in the package, but all along Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi have said the more people learn about it, the more they will like it.

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: They have been wrong. History is not on their side. We saw it when the healthcare was a campaign issue and then introduced as an actual legislation. Then as we saw the debate take place. It turned out that in fact the more people learned about it, the less they like it.

I agree with Charles to certain extent. To the extent that the Republicans can shine a light on the politics of healthcare and on the regulation, on the rule making -- I talked to somebody the other day who said we could have out of the 2,200-page healthcare bill some 100,000 pages of rules. That is extraordinary. Think about that.

In those rules you are likely to find all of these things that people didn't know about and frankly that people who aren't paying attention to news on day-to-day basis are going to know about.

So you have coming up on January 1 this tax hike in effect with people set aside money for health savings accounts and flex spending accounts to buy their drugs, to do their out-of-pocket expenditures. You can no longer do that. You can no longer buy over the counter medicines without prescription, these non-prescription medicines without a prescription from a doctor, and it's not going to be -- you're not going to get a tax break for doing it.

When people show up at the pharmacy and try to buy these things do that, they will think, ‘What’s going on, ‘this isn't what I was told. Its highlighting things like that that helps the Republicans make their case to the public.

However, I think that defunding it at the same time is crucial.  I think you have to start kicking legs out of from the stool.  And if you don't, it allows them to start to fast track it in a way to mean that it is taking place, it's being implemented at a rate that Republicans can't repeal it back.

BREAM: A.B., where do you think will be the best opportunities to defund it? We’ve got folks like Representative Paul Ryan heading up the budgetary process. We have pledges from a number of top Republicans that that's what they’re going to do.

A.B. STODDARD, ASSOCIATE EDITOR, THE HILL: It's interesting because I think the opportunity for defunding has just opened up really exponentially and no one’s talk about it. The fact that the Republicans were able to kill off this big new spending package known as the omnibus we kept talking about ten days ago really means that over at the IRS right now and the SEC you are seeing, you know, regulations that were going to be put in work for the both financial services regulation and healthcare reform now at a halt. And you see this new spending bill only taking us to March 4.

A huge fight is going to come up in the first two months of the new Congress. The president is going, is going to have a battle royal with threats of shutting down the government, where he and the Democrats will have to defend shutting down the government over keeping the implementation of healthcare reform alive.

So, this is a new opportunity, and this is the big one.  There are ways to chip away at the other ones. I do think, as Charles said, symbolic, there’s a new CNN poll out today, and opposition is 54 percent and support for the lot, 43. That continues to grow. Those hearings will further erode the popularity of the bill.

But in terms of that symbolic vote, that will be a potent statement. And then you can actually, yes, it would fail in the Senate.  But you could bit-by-bit you could do defunding bills. There are harder to oppose incrementally.

So we know the 1099 reporting for small businesses provision will go away. The president himself said it's onerous on small businesses.  But those Senate Democrats, more than 20 up for reelection, will have a tough time when those things come out in incremental bills defending them.  That’s going to be very tough for them.

I think what Charles might be right that defunding is not a good idea, but they're not going to resist the temptation.

BREAM: The temptation’s going to be there.

All right, I want to talk about the other healthcare issue that bubbled up this weekend over the last couple of days, the piece in the New York Times that talked about the so-called "end-of-life discussions" and some called them death panels coming back.

They didn't pass as part of the law but now they're coming out via regulation issued by the head of CMS, Dr. Donald Berwick. Someone said rationing of care is matter of time. Charles what do you make? Is it an overblown scandal or a legitimate concern?

KRAUTHAMMER: I think what is scandalous is essentially the same idea was in provision of the original law, the original bill. I think it was article 1233, which was passed in the House and rejected in the Senate explicitly because of the uproar that was aroused by it.

I think there is a legitimate debate. It's not something that forces on you end-of-life discussion. But my experience as a doctor, if a doctor is engaged in a discussion with a patient, a doctor has incredible authority over a parent, particularly a suffering or dying patient, and even a suggestion of considering discontinuing treatment has an effect.

So I think there is a subtle push here. It is not a requirement, it is not an imposition, it’s not a death panel. But it clearly is for people who think about ultimately rationing in the end a first step on the road because it would suggest that people ought to consider doing away with measures.

To then enact it through Medicare, though administrative legislation unilaterally when the Congress had looked at it and rejected I think is an incredible example of administration arrogance and way going around what was clearly expressed as the will of the people. I think this is what you want to bring up in hearings for people know what is going on.

BREAM: And Steve, the response from the administration was this was something or some formulation of it existed under the Bush administration. But a number of people within the administration said that's not a case, and that's a mischaracterization.

HAYES: I think it is a mischaracterization. What they are trying to do is make it acceptable to the public when it was not acceptable to the Senate when it was held up to a vote. They didn't make the case and I think they didn't make it for a reason. These are such sensitive issues, these end-of-life issues.

The scenario that Charles presents is he's right to be alarmed by it. When you have the government involved, and I'm not talking about five years from now, I'm talking about 25 years from now, you have the government involved in these decisions and you have cost containment at the fore of everyone's mind in making these decisions, I do think they are real.

Whether you want to call them death panels or not, there are reasons that people should be concerned about who is making those decisions and why those decisions are being made.

BREAM: All right, we'll leave the healthcare debate there for now, though we know it's far from over. Panel, stick around.

Another important agenda item for Republicans is nation's spiraling debt. Go to our homepage at FOXnews.com/specialreport and tell us what you think Congress should do about it. We will share results following a fair and balanced report in tomorrow's broadcast.

Up next, is a White House shakeup in the cards?



VALERIE JARRETT, OBAMA SENIOR ADVISER: This is his biggest regret is that when he took office, because of the crisis that was presented to him; he had to spend almost every waking hour in Washington focusing very hard on solving that crisis.

And what he missed sorely was the engagement with the American people. He said it right before he left for vacation. He said "When I get back, I really want to figure out a way to spend more time outside of Washington listening and learning and engaging with the American people."


BREAM: Less time in Washington, will that work for the president as he works toward reelection in 2012? Let's bring back our panel, Steve, A.B., and Charles to talk about it.

All right, A.B., there is chatter that maybe his reelection effort moves to Chicago. He is a sitting president. How do you think that may work?

STODDARD: Well, his wife and daughters are here. So I don't know that he’s going to be wandering the halls of the campaign headquarters. But I can see how it would work. His inner circle is happy there. And I think that with flights and the internet, there is a way to do it.

And I think that he is trying in some way to run against the beltway and run against Washington. And so this is a way that they can sort of symbolically accomplish that.

The last thing I would say is that it's was so interesting to watch the presidential campaign because they were a very, very close knit group.  They didn't like to be around the press or the chattering strategists from the Democratic Party at large.

And they think that by leaving Washington this time, they’ll be able to do the same thing to protect themselves from that and hunker down.  That's how they won last time. It doesn't mean it will work again, but I think that's the goal.

BREAM: Can you cast yourself -- you're incumbent president in Washington who has passed massive legislation. Can you cast yourself as outsider? Is it possible to work in any way?

HAYES: It's one of those things when it comes up and it's written about and talked about and people stroke their chin and take it seriously and say, if he runs from Chicago, maybe -- come on! People are not that stupid. He lives in Washington. The guy has done more than any president since Franklin Roosevelt to accumulate power in Washington and shift power from everywhere else to Washington.

Of course it doesn't matter if his people are in Chicago or not.  And the only people who think it might matter or who come up with such an idea are the people in Washington who aren't in touch with the American people who don't see they look at this and think such an idea is preposterous.

BREAM: All right, there is talk of possible changes in the administration. Here is White House Press Secretary Robert Gibbs on potential shakeup ideas.


ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I don't expect, quite honestly, big changes. I think we’ve had a very capable and good cabinet that has helped move the president’s agenda forward. I think there is obviously a lot that has to be done, a Treasury to implement financial reform, an HHS to implement healthcare reform. And I think we have a very talented team.


BREAM: Charles, do they make changes? We heard for a long time Secretary of Defense Robert Gates may leave this year. There’s this rumor that Secretary of State Hillary Clinton could be leaving. Does he leave things in place?

KRAUTHAMMER: Well, my sources inside the White House are as good as my sources inside the inner circle of Kim John-Il. It appears to me that he is not a guy who likes to fire people, especially people near to him. I don't see anyone in the cabinet he is itching to get rid of someone.

He has weak cabinet members. Janet Napolitano has not exactly distinguished herself or the attorney general. But I think he thinks, the president thinks that a firing is in some way reflection on him and his judgment, how he picked the person. I think his self-regard is such that he would be less inclined than another president to fire member of the cabinet.

But if I could make a remark about this idea of running for reelection as an outsider, of course it's preposterous. When you heard Valerie Jarrett say he wants to go out to listen, engage with the American people, that is such a farce.

When a president leaves the White House, he leaves as a god in a bubble. And there is no engagement. The phony backyard talks or staged events. The idea he is somehow going to go incognito like ‘The Prince and the Pauper’ is absurd. This is all for show.

Also he makes another claim he has been working something hard on the crisis. That he couldn't go out and see Americans. Actually, what we see in Ohio about 30 times. I think the number of his domestic travels in the first year exceeded number of domestic travels by Clinton and Bush.  So it isn't as if he has been a recluse. He has been out there.

His problem is that he sold a message of expanding the government to help Americans. The results are the Americans on Election Day said that’s not what we want.

BREAM: A.B., he does have to make a change at least in replacing Larry Summers, somebody he is not letting go. Charles talked about the issue of looking like you're firing someone, but that’s a significant seat that will open up soon. Any idea where he may go with the choice?

BREAM: I just think that the world is he is going to pick through the old Clinton picks that is usually a good guess. So, Sperling and Roger Altman, the name floated right now from the last Democratic administration. That makes sense. It would not surprise me if he went with one of those people.

I do think that there is a chance for some kind of other surprise pick, maybe not chief of staff job that Pete Rouse is in, but maybe bringing in some kind of advisor from the outside, someone that we're not expecting, someone to bring him fresh perspective.

Obviously, the most shocking would be a Republican, but I'm not going to bet my paycheck on that. I'm just saying that I think there is still a chance that they are looking for some outside. I know David Plouffe is coming in to do the mind-melding but I think there is a chance that he breaks out from the inner circle without doing a firing. And actually tries to bring in some fresh blood.

BREAM: Steve, quickly I want to give you the last word on the secretary of defense issue. With operations in Iraq and Afghanistan, that is going to be a major pick.

HAYES: Yes. I think it would be a major pick. You have had the rumors for months about Chuck Hagel going there, to give him the Republican or anti-Republican-Republican as the case may be. That’s the most likely person he would pick for secretary of defense or chief of staff or something like that, somebody who allows him to say I pick a Republican but in fact isn't very Republican.

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