How will the market meltdown impact the big picture economy?

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This is a rush transcript from "Special Report with Bret Baier," February 5, 2018. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIPS)

PRESIDENT DONALD TRUMP: When you see what happens to our country, because people can feel it. Billions and billions of dollars are being poured back into the United States.

The stock market has added more than $8 trillion in new wealth. Unemployment claims are at a 45-year low, which is something.

After years of stagnation the United States is once again experiencing strong economic growth. The stock market is smashing one record after another.

The stock market is up since my election almost 50 percent.

(END VIDEO CLIPS)

BRET BAIER, ANCHOR: The president talks about the stock market a lot. He did not talk about it in a speech today. One of the reasons was what you are seeing on the screen. Today the stock market dropped almost 1,600 points before regaining and finishing at about almost 1,200 points down on the Dow. And there you see the rest of the markets.

But as the president notes and the White House put out late this afternoon, since the election the Dow specifically has seen a major increase, and obviously today you see the top of the mountain fall off and many people say this won't be the last time in a volatile situation. Today was the single biggest one-day point drop ever but not the single biggest percentage drop in the markets.

So what about all of this? Let's bring in our panel: Guy Benson, political editor at Townhall.com; Mo Elleithee, executive director of the Georgetown Institute of Politics, and Kimberly Strassel, a member of the editorial board of Wall Street Journal. Kimberley, let me start with you. Your thoughts on this as you look at the big picture of the economy and what happens on a market day like this that obviously jars a lot of people who are in the markets.

KIMBERLEY STRASSEL, WALL STREET JOURNAL: I think the important thing to remember, Bret, is that the economy has not materially changed from Friday until Monday. So there isn't necessarily an economic reason behind this or for any reason to panic.

More likely people have been talking that the market was potentially a little overvalued and due for a correction. Last week also we saw some rising bond yields. That makes people think inflation, that makes them think higher interest rates. That makes the stock market look a little less attractive. Some of this might also have been the machines taking over. At a certain point when the market drops enough, they have all these algorithms that kick in and that could have exacerbated it.

But I think the important point is that the economy itself is still very strong, and it gets to the lack of wisdom of the president using the stock market as an indicator of that health.

BAIER: Sometimes, Mo, politicians often try to stay away from using the market because of just this reason. That said, if you think about it that sometimes the increase of confidence in an economy can actually cause some fear about what the Fed is going to do as far as interest rates.

MO ELLEITHEE, GEORGETOWN INSTITUTE OF POLITICS: I think a lot of people are concerned about that, and I agree completely with the point that Kimberley just made. This president, you live by the sword, you die by the sword. You put it out there is the single greatest indicator of your economic prowess, then when you take a hit, when the stock market takes a hit, you have to answer for that. And so I think he is facing that now too.

Is it going to change the political dynamic heading into the midterm year at all, this single day drop? Probably not. I do think the economy is going to be the single biggest catalyst of what happens politically in the midterms moving forward over the course of the next year, but it's not going to be fought on this ground unless we continue to see many more days like this one.

BAIER: Guy, if that is true, and what Mo is saying and the economy becomes, as it often does in elections, the biggest thing, the White House is saying for all of those workers who have the $1,000 checks or the workers who see increase in their paychecks as of this month, that's changing the dynamic.

GUY BENSON, TOWNHALL.COM: It is changing the dynamic and I think the Republicans should be hammering at this every single day. And the Democrats have taken a strange approach to this good news for the American people and for millions of American workers. They are demeaning in many cases the crumbs that people are getting in the form of bonuses and enhanced benefits, 401(k) matches, expanded operations, and even what people are seeing in their paychecks, these pay bumps as a result of the tax cuts that Democrats themselves had argued hysterically in many cases would never materialize under a bill that was Armageddon and the end of the world.

The proof is now in the pudding in the form of paychecks, and I think for Democrats to try to very quickly pivot from this is a terrible bill that will hurt working-class and middle-class people to the good news for working-class and middle-class people really isn't good enough news, it's just crumbs and they need to understand they shouldn't get too excited, that's a tough adjustment to make I think rhetorically.

ELLEITHEE: I think Democrats actually have plenty of room here to go after this tax law. I agree with you, trivializing the benefits as crumbs probably wasn't the smartest way, but there's plenty of data out there in plenty of anecdotes. The president is fond of putting out all these anecdotes of bonuses people have received. But there's plenty of anecdotes of layoffs, corporations that took the tax windfall, closing down factories, laying workers off. Since the bill became law, 40,000 of love lost their jobs and $9 billion have been invested in corporate stock buybacks.

And so for Democrats to be able to point out the growing disparity there, the consequence of people, these CEOs laying workers off in order to line their own pockets is a much I think more potent strategy for them to have this fight then trivializing the thousand-dollar bonuses that some workers are getting.

BAIER: Kimberley, if that was accurate across the board, I think you wouldn't see some of the polls who are seeing. For example, Monmouth has a new poll out about the tax law, and the question is your view of the tax reform plan. And you look at the poll now as opposed to what it was in December of 2017 and the disapproval has been erased and it's essentially approve, disapprove. And that matches almost every poll. And then you look at the generic ballot between Democrats and Republicans. It's now down to two points in most polls.

STRASSEL: This is the best thing the Republicans could have done. This was the biggest complaint about the Obama economy is that it wasn't horrible horrible, but it didn't really offer a lot of inspiration. There was not a lot of good news. It just bumped along.

And there's always going to be an anecdote here or there of some layoffs or something, but overall the question is are people generally benefiting from the spell. And this is why the president has so much he could be talking about, not the stock market. Even though stock market -- people don't tend to feel that immediately anyway. Yes, they like to see their 401(k) going up, their 529s for their kids. But it's always something that's in the future or mostly in the future. What they care about is the day-to-day paycheck. And the fundamentals are so strong and getting stronger. And we are only a month into this, too, by the way, Bret. We are not even beginning to yet see some expansion that different companies have promised in investments that they are going to make.

So those are the things Republicans, if they continue to hit on that, it's going to be the strongest ammunition that they will be able to talk into the midterms. Nothing else will compare.

BAIER: Panel, thank you. I want to put up one more graphic before I go on this topic, and that is the Dow since 1924, this just gives you a perspective of where things have been and if you've been in the market a long time. You can see what happens. You have made money. And it just has always continued to go up with the dips. But look how tall it is now. That's for the folks who can take a deep breath perhaps in the long-term.

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