This is a rush transcript from "Special Report With Bret Baier," September 17, 2010. This copy may not be in its final form and may be updated.


CHRISTINE O'DONNELL, U.S. SENATE CANDIDATE: Some have accused of being just an aging crowd of Reagan staffers and home schoolers.


They're trying to marginalize us and put us in a box. They're trying to say we're trying to take over this party or that campaign. They don't get it. We're not trying to take back our country; we are our country.


We have always been in charge. This is America.


BRET BAIER, ANCHOR: Christine O'Donnell at the Values Voters Summit here in Washington today. She is one of the candidates who was backed originally and supported by Sarah Palin, self-proclaimed "mama grizzly." Here are the others -- Sharron Angle in Nevada, Carly Fiorina in California, Nikki Haley in South Carolina, of course, Christine O'Donnell, and Kelly Ayotte in New Hampshire.

The big question is about Sarah Palin -- will she run for president?


SARAH PALIN, FORMER ALASKA GOVERNOR: If the American people were to be ready for someone who is willing to shake it up and willing to get back to time-tested truths and help lead our country towards a more prosperous and safe future, and if they happen to think that I was the one, if it were best for my family and for our country, of course I would give it a shot.


BAIER: Powerful conservative female candidates, let's bring in our panel about this topic -- Steve Hayes, senior writer for The Weekly Standard; K.T. McFarland, Fox News national security analyst, and Mort Kondracke, executive editor of Roll Call.

K.T., you look at the list and you see the impact that Sarah Palin has had in supporting and contributing really to these candidates.

K.T. MCFARLAND, FOX NEWS NATIONAL SECURITY ANALYST: I think it's terrific. You know, and what, inside the Washington beltway bubble -- I mean, I'm from New York, OK, and I realize that Washington just can't get it. And whether you're Republican or Democrat, the attitude in the country is low all the bums out. They've screwed up the economy, they've screwed up the country, let somebody else have a turn.

And I think that's what she represents. I think that's what the mama grizzlies have tapped into. And the fact that they're strong, conservative women, even better.

BAIER: Mort?

MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: Look, the public is furious with Obama and the Democrats for not solving the unemployment problem and spending gazillions of dollars and building up the national debt. And the Republicans are going to do very well.

But let's remember, Sarah Palin's favorability rating in the country among all people is 31 percent. The tea party is 30 percent. Barack Obama's favorable rating whether people like him is 47 percent. So the country is not, you know, permanently on this wicket.

And some -- Palin has a lot of pizzazz and a lot of smarts and a lot of potential, and some of her grizzly ladies are, you know, are common sense conservatives like Carly Fiorina, and Kelly Ayotte, and some of them are nuts, like Sharron Angle.


I have a litmus test -- they're whackos, they're extremists. I have a litmus test -- my litmus test is you want to get rid of the Department of Education. This country -- go see the movie "Waiting for Superman" -- this country ranks 26th in math and science. That's what local control of the schools has done for it and George Bush and Barack Obama are trying to change that.


BAIER: Well, obviously she's tapped into a lot of things because the Real Clear Politics poll in the Reid-Angle race has the race essentially tied.

KONDRACKE: Yeah, she may win.

BAIER: So there are people in Nevada who don't agree with you, Mort.


KONDRACKE: No, lots.

MCFARLAND: And let me say, who elected you god, OK?

KONDRACKE: Nobody elected me god. But, I have an opinion -- I have an opinion, I've been watching politics for a very long time. The Republican Party is headed as far to the right as the Democratic Party is now perceived to the left and maybe further.

MCFARLAND: For you to sit here and in a democracy where the guy who wins the most votes is the guy who gets the nomination, is the guy who wins. And for some people in Washington who feel that they know better than absolutely everybody else in the country to say that's a whacko, that's somebody who doesn't deserve to be elected to office.

I think you ought to get outside of the beltway -- not you personally -- but Washington beltway bubble. But the country is angry.



STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: Look, I mean the relevant question would be if we ranked 26th now with the Department of Education, what did we rank before the Department of Education was established? So I don't think it's necessarily whacko at all to talk about.

When you're talking about a government that's going broke, when you're talking about the kind of big picture issues that are animating this movement -- and it is a movement, it is outrage. When talking about those things and it's not at all out of bounds to go back to first principals and ask yourself, is it proper for the federal government to have dominion over education nationally? Are we doing better now with the federal government in charge than we were before the federal government was in charge?

I think you can ask those questions; I thought that Sharron Angle handled those questions from Bret very well about the Department of Energy, about other things. We should be looking to decentralize. It's one of, I think -- not only one of the things that the framers would have envisioned for the country, what they'd want us to be doing now, it's also I think something we would need to do for -- in terms scaling back the government to the size that we can handle in Washington.

MCFARLAND: And the reality is, every municipality and every state in this country is broke except for a few, and so you're going to be forced to put those expenditures and those policies down at the level levels.

BAIER: Mort, you have to concede, don't you, that there is this wave out there that it's not working in Washington -- either party, Republican or Democrat, and that there is had a sense -- as K.T. mentioned, perhaps -- of throw the bums out.

KONDRACKE: There's no question but what there's a wave and it's going to break and it's going to be big. I'm worried about the long-term consequences.

The Democrats are going to go because they're going to lose their moderates further to the left, and the Republicans, you're going to have Jim DeMint in command, and Jim DeMint basically says, you know, close down the government. I don't care.

So, how are we going to solve the immigration problem, the debt problem, the energy problem? How are we going to solve it, if the two parties are at loggerheads all time on everything?

MCFARLAND: The fact that it's the two parties that have gotten us and the people in Washington have gotten us into this mess, so I don't think we count on those guys to get us out of the mess.

BAIER: Quickly, Lisa Murkowski is going to run as a write-in candidate in Alaska despite she was beaten by Joe Miller, supported by the Tea Party, but Alaskan Republicans elected Joe Miller in that primary. Lisa Murkowski saying she will do a write-in campaign. What about that, Steve?

HAYES: I think she's clueless and I think it reflects a level of stunning arrogance that speaks to exactly what we're talking about here, people in Washington who think they're entitled to remain in Washington when somebody like a Joe Miller, well qualified, well spoken, articulate, makes a good case on behalf of conservatism, won the primary.

KONDRACKE: I'd like to see Mike Castle run as an independent.

BAIER: Wow, I bet you would.


MCFARLAND: Look, the people are speaking all around the country and the people who are most sort of shocked every time it happens, whether it's in New Jersey, whether it's in Nevada, whether it's in Delaware, whether it's in New York State, whether it's anywhere in the country, and everybody watches so shocked this is happening. Well, get out and smell the roses.

BAIER: Do you think the Tea Party-backed candidates are helping the Republican establishment, or the Republican establishment is now helping the Tea Party candidates? Logon to our home page, foxnews.com/specialteport and go to our online poll. The Friday lightning round, it will be fiery, next.


BAIER: Every week on FoxNews.com's "Special Report" homepage viewers vote on what top we should discuss first during this, the Friday lightning round. This week, Charles Krauthammer's wild card pick won by a landslide.

But we made a little mistake -- he's off for the Jewish holiday. He called in tonight saying he's at synagogue atoning for his sins, referring to his wild card pick, which was, quote, "If you supported Mike Castle over Christine O'Donnell, you are, as three fourths of my e-mail suggests, an enemy of humanity? Charles' answer -- no. Atoning for his sins, he says, in synagogue.

BAIER: We're back with the panel. The first topic is, however, the DREAM Act and Senator Reid's efforts to attach it to the Defense Authorization Bill:


SENATE MAJORITY LEADER HARRY REID, D-NEV.: The DREAM Act is very simple. It says if you've been in this country for five years, you came before you were age 16, you should be able to go to a state school.

SEN. JOHN MCCAIN, R-ARIZ.: This is turning legislation related to our national defense and military preparedness in a vehicle to force a partisan agenda through the Senate.


BAIER: What about the DREAM Act? We're back with the panel. Steve?

HAYES: There are three problems with it. The first is that it's attached to the Defense Authorization Bill, which you shouldn't do.

The second is that it doesn't mention anywhere enforcement. It has nothing to do with enforcing current laws.

The third is that it's all politics. This is Harry Reid and he wants to turn out the Hispanic vote; this allows him to go out and say he pressed to do so.


MCFARLAND: And it's another example of the sort of extreme arrogance of somebody who is so desperate. Now, if he cared that much about the DREAM Act, where was he two years ago with the DREAM Act? Why is he all of a sudden pulling it out of a hat?

BAIER: Mort?

KONDRACKE: Well, look, it does have something to do with the military. It would allow these kids if they want to serve in the military to be able to get a green card and serve their country. And so, it is relevant.

Shame on John McCain. He used to be pro-immigration reform, and he's now skittered away from it. So, you know, this is a waste of human potential. These kids are, you know, have lived here for years, they want to serve in the country and go to college, they want a good life. The Democrats are playing politics, no question about it, but so are the Republicans, lockstep against it, you know, all they're doing is trying to pander to the anti-amnesty crowd.

BAIER: Second topic, Afghanistan -- tomorrow is the Afghan parliamentary elections. President Hamid Karzai urging people to come out despite the Taliban warnings that doing so will result in death.

What about that, Mort?

KONDRACKE: You have to praise the people of Afghanistan who are willing to risk death and destruction and dismemberment in order to come out and vote. They are real heroes.

And they're doing it in spite of the fact that corruption is rife. They don't know that they're going to elect their -- the right people. And then you've got the Taliban shipping in apparently millions of phony vote cards, so I don't know what the consequence is going to be. I hope it's -- I hope it's good.


MCFARLAND: Yes, I was in Afghanistan a year ago and the conclusion I reached was that this is a corrupt and incompetent government and a country of people who didn't really feel that they were going to die to fight to keep that government in place, and that the U.S. policy was all over the place. There was no clear strategy and no clear matching of resources to achieve whatever strategy there might be.

The Afghan elections, they'll go, they'll probably have some violence, but I don't know think they'll be particularly significant one way or the other. The significant time though is going to be December when Petraeus has to report whether he's made any progress.

BAIER: Steve?

HAYES: I think whenever you have 2,500 candidates for 249 seats, that's a good sign. But I agree with K.T., I don't think they are going to be significant in the outcome, and they still won't matter because of the deadline. That's the one area in which U.S. policy is very clear and it's clear in a negative way.

BAIER: Quickly, Republican gubernatorial candidate New York, Carl Paladino, has put out a mailer, and Paladino has essentially stinking up the joint because the mailer shows Democrats who resigned because of corruption or allegations and the thing actually smells -- like garbage.


BAIER: What about that, as a tactic, Steve?

HAYES: I certainly wouldn't have wanted to have gotten it and I'm not sure I would advise candidates -- other candidates -- if I were advising them to do it. On the other hand he's trying to make a big point and he's getting lots of attention. And what he wants to say is all Albany stinks and I'm the guy to fix it. That's not a bad way to do it.

MCFARLAND: And the other thing is -- I'm a New Yorker, and he's just taken on the New York Republican establishment and turned it on its head. And so he's got $10 million to spend, we're talking about his campaign commercial right now, he got something like 93 percent voter approval in western New York, which is where all the Republicans are. I think he's doing a terrific job and I wouldn't underestimate him.

KONDRACKE: He sends out pornographic e-mails and says that the -- in which the president is portrayed as a pimp and the first lady as a prostitute. I don't think he's qualified on character grounds to be governor.

But he's right, you know, Albany does stink. And Andrew Cuomo better step up and make the corruption issue, issue number one. It is on his website, but I'm not exactly clear he's crusading.

BAIER: So you're endorsing the smelly mailer tactic.


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