This is a rush transcript of "Special Report With Bret Baier" from February 18, 2010. This copy may not be in its final form and may be updated.


ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I think the reports again conti nue to demonstrate the failure of the Iranians government to live up to its international obligation.


BAIER: White House Press Secretary Robert Gibbs aboard Air Force One commenting on an IAEA report that we found out about today. In this report the IAEA for the first time says this, quote, "Evidence collected by IAEA officials raises concerns about the possible existence in Iran of past or current undisclosed activities relate to the development of a nuclear payload for a missile.

These alleged activities consist of a number of projects and sub-projects covering nuclear and missile-related aspects run by military- related organizations."

Now, the State Department said this was Secretary Clinton was saying earlier in the week. We looked back and found this sound bite. Take a listen.


HILLARY CLINTON, U.S. SECRETARY OF STATE: I certainly welcome any meaningful engagement, but we don't want to be engaging while they are building their bomb.

And, therefore, we think the time has come for the world community to take a position which perhaps will penetrate into all of the decision-making arenas that exist now within Iran and cause some reconsideration, not of their peaceful program, which I know the Iranian people support and have every right to have, but of their nuclear weapons military program.


BAIER: "Of Iran's nuclear weapons military program," largely overlooked by everyone.

Let's bring in our panel, Fred Barnes, Executive Editor of The Weekly Standard, Nina Easton, Washington Bureau Chief of Fortune magazine, and syndicated columnist Charles Krauthammer.

Charles, how big a deal is this for the IAEA to say this and the administration response?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I think it shows that the IAEA is under new management. It had been under the leadership of Mohammed Baradei, who was known to be sympathetic to Iran and quite unsympathetic to the United States and especially Israel. He had been — there has been a lot of information suppressed, not coming out of the IAEA over time.

And now that he is gone as of the first of December, we're getting a lot of real hard stuff. What we're getting is the IAEA reporting that the Iranians are working on weaponization, which has really advanced stuff. We know that Iranians are working on missiles.

We have seen that a few weeks ago, they launched into orbit a few animals, including a mouse. And at the time I remarked that they are not known for their advanced rodent research. They were showing their reach in being able to reach intercontinentally across the globe with their missiles.

We know they're enriching uranium. What the IAEA here talking about is the marrying of the enriched uranium as a weapon on to a missile — weaponization.

Let's remember, in 2007 the National Intelligence Estimate here in the United States had reported that Iran had essentially stopped its weaponization, which was not so. It's a report that is yet uncorrected. It stopped our efforts. It hindered the Bush administration efforts to do anything serious about Iran.

It needs to be rewritten, withdrawn, and a new estimate issued. We are now to the left of the IAEA in talking about Iran's capacities, and that is really quite absurd.

BAIER: Nina?

NINA EASTON, WASHINGTON BUREAU CHIEF, FORTUNE MAGAZINE: I don't know. I thought the IAEA report was actually carefully couched, and you can find more clues about what is going on when you listen to administration officials like Hillary Clinton, who, by the way, was tougher on the question of Iran during the campaign than was Barack Obama.

Still — and she is talking about the time has come. There is, clearly engagement seems to be moving off the table based on those comments.

But we also have the Joint Chiefs of Staff, Mike Mullen saying that the option to attack Iran is still on the table. You have the national security advisor Jim Jones saying sanctions could possibly lead to regime change.

And I think, you know, the next step becomes, you know, is there something — is there a way to think outside the box beyond sanctions, which I think have a limited effect because this regime doesn't care about accommodation with the west and proves itself quite able to deal with sanctions in the past, and, you know, an attack by Israel.

Is there a way to feed a — feed the citizens that we see in the streets, the revolutionary — the citizens who are fighting this regime very courageously. And Senator Cornyn and Senator Brownback have introduced legislation to directly feed that movement.

So I think you are going to see more thinking along those lines, certainly out of Capitol Hill and from a lot of Republicans.

BAIER: Fred, even today the State Department is saying that they don't know why Iran is not back at the table. Yet, Secretary Clinton saying we don't want to be engaging while they are building their bombs, referring to Iran's nuclear weapons military program. It seems like she is out front in this administration.

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: Iran wants to be a nuclear power and she seems to be the only one that's saying that close to frankly.

I mean, this notion that somehow — remember that we're puzzled. Why would they not respond to — we're being nice to them? The president has extended an open hand to them and yet they are still building nuclear weapons.

And it's not puzzling at all. The Iranians or the Mullahs believe that they will have more sway, more power, if they have nuclear weapons. And they look at North Korea, in particular, and see how gingerly they are treated, and they want to be like that, that they will be off limits from anybody in the west and the United States really taking them on.

What's disappointing — you asked about the response. What's disappointing is when at the White House they are talking about a new sanctions package, and I agree with — you want sanctions. I mean, the Iranians are never going to be changed in their path toward a nuclear weapon on sanctions, aren't going to do it.

And then so when you do that, it is deja-vu all over again. Some report, and this one the most alarming we have had in a long time about what they're doing. And then there is a talk about sanctions.

And I was — there are two words that Secretary Clinton said that I think are disappointing, and those words were "world community," that the world community is going to come together and do something here. There is no world community, and if there were, it's not going to come together.

And what I'm afraid is they will talk about sanctions, they will argue about them, and maybe they will pass some new sanctions and the Iranians will be totally unimpeded.

BAIER: Does this change the timetable at all, Charles, quickly, for somebody like Israel? Obviously they had their own intelligence. They have been speaking out about this for a long time. But now that the IAEA is saying what they are saying, does it change the dynamic?

KRAUTHAMMER: I'm not sure it will change Israel's dynamic because it has its own information independent of the IAEA. It always knew that under the previous leadership IAEA was protecting Iran. But it could help change our timetable, which remarkable is the lassitude, the reluctance of this administration to say anything strong.

I mean, Hillary said even on Sunday, we don't want to be engaging while they are building their bombs. Well, that's been our policy for the last year and one month. Does anybody imagine anything other than that which is actually happening inside of Iran?

And the president said almost nothing in the state of the union address. None of this is coming from him. There is no sense of urgency. I suspect it will be more of the same, which is essentially nothing.

BAIER: The president has established a commission to look into the national debt. Will that make any difference? We will ask the panel in three minutes.



PRESIDENT BARACK OBAMA: I'm asking them to produce clear recommendations on how to cover the costs of all federal programs by 2015.

ERSKINE BOWLES, FISCAL RESPONSIBILITY AND REFORM COMMISSION: If we get the facts out there, if you look back at history, look at your Rock study commission, most of those recommendations end up getting implemented. If the American people know the facts, they are pretty smart. They'll get it, and we'll get something done.

BAIER: Critics are our saying he is the president. He should make the recommendations and put it in the budget and make it happen. Why do you need a commission to do that?

ALAN SIMPSON, FISCAL RESPONSIBILITY AND REFORM COMMISSION: Because nobody will do anything? Why should he step over the cliff?

BAIER: Social Security? Medicare? Medicaid?

SIMPSON: You bet. That's what the hell this is all about.

BOWLES: Everything is on the table.

SIMPSON: We are not into foreign aid and waste, fraud and abuse. That's the sparrow belch in the midst of this typhoon. That has nothing to do with it that's peanuts. We are talking about Social Security.


BAIER: Whenever you can get sparrow belch in there, that's always good. Those are the co-chairs of the president's new commission to tackle the national debt and the deficits. Democrat Erskine Bowles and there you see former Republican Senator Allen Simpson.

So what about this? We're back with the panel. Nina?

EASTON: A, I love Alan Simpson. You don't not get a good interview with Alan Simpson.

I think on one level, on the spending level, it can provide useful political cover. And Simpson is right. It's not just about waste, fraud, and abuse. You can do a lot just about doing sensible stuff like raising the retirement age for Social Security and pegging the increase in benefits to wages rather than prices. You can make enormous impact on the deficit.

What I fear with this commission is that you are going to see the usual handwringing about painful cuts on all sides that have to be made and painful tax increases. We're going to hear the whole thing about tax increases.

What do tax increase does? They impede economic growth. Even Christina Romer, the president's chief economic advisor when she was an academic completed a study saying that.

They are in danger of putting — we have already got $1.4 trillion of proposed taxes in this president's budget. You start talking about more taxes through this commission, you put taxes on the economy, you hobble the economy, and then you don't — you don't end up closing the deficit because you decrease revenues.

You grow the economy, you grow revenues.

BAIER: Fred, here is what the Washington Post editorial said today about President Obama — "His promise not to raise taxes on anyone making less than $250,000 a year was irresponsible when he made it and even more irresponsible now with the economy cratered and the debt engorged.

The commission may give Mr. Obama cover to wiggle out of campaign promises."

BARNES: Among other things the "Washington Post" editorial writers love tax increases, but then that's what this tax commission is set up to do. And I am sure it will want to tax people making less than a quarter of a million dollars a year.

First you have to stop and think how do we get in this fix right now? What has President Obama done so far to help reduce the deficit or impede spends that he can't handle on his own now and so he needs a commission? What's he done?

He has, in his first budget, 2011, it increases by nearly two percent of GDP the amount of spending. He is spending like a madman and won't do the things that he could do on his own.

He could take the TARP funds that are used to bailout banks and so on, the money given bank and the stimulus money not spent. This would be $600 billion to $800 billion. He could use that to apply to the deficit. That makes a lot of sense. It would be easy to do.

And instead he wants some commission that will report after the election, and the fear that I have and I think others do is that it will have a big tax increase in it. And there will be some phony crisis that, you know, our bond sale almost failed. And we will get the lame duck Congress to pass this.

And my understanding is that Democratic leaders have said they have a vote on these recommendations in the lame duck Congress.

BAIER: Charles?

KRAUTHAMMER: This is all about politics and nothing about real cuts in spending, because the Democrats have control of the White House, and the Senate and the House. And they are the ones who radically increase spending in the last year.

They have increased domestic discretionary spending by over 80 percent. And if you exclude stimulus, it's still over 20 percent. It's huge increases.

And now they want the Republicans collaborating new cuts out of this high baseline. They are the ones that have the radical increase in this deficit.

This is all about cover. Obama needs it because is he going to have to break his pledge about taxing those who make less than a quarter of a million. He wants Republicans on board.

He jacked up spending $1 trillion dollars on stimulus and $1 trillion dollars on the health care he still is attempting to pass and the TARP which he is not using as refunds. He is not using as a way to reduce deficit. He wants it spent.

That's his spending. He needs the reduction, and Democrats ought not collaborate and take the blame for Democratic overspending.

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