Updated

This is a rush transcript from "Special Report," January 4, 2012. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

RICK SANTORUM, R - PRESIDENTIAL CANDIDATE: What wins in America are bold ideas, sharp contrasts, and a plan that includes everyone, and a plan that includes people from all across the economic spectrum.

I think there is nothing to be ashamed of, everything to be satisfied and be ready and raring to move on, on to the next stop, which is New Hampshire.

MITT ROMNEY, R - PRESIDENTIAL CANDIDATE: Rick did a heroic job going across the entire state, devoting his energies to the state of Iowa. During the same time period, I have been building a national campaign team.

NEWT GINGRICH, R - PRESIDENTIAL CANDIDATE: You take Santorum and Perry and Bachmann and Gingrich, you get a sense of what a small minority Romney really represents.

(END VIDEO CLIP)

BRET BAIER, ANCHOR: The sights and sounds after the Iowa caucuses, now obviously heading to New Hampshire Tuesday.

We're back with the panel. Charles, in Iowa, Santorum really had the late deciders, the most evangelicals, Tea Party supporters. He had a lot of support there. He really showed that the retail politics paid off.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: He does. And he also shows that in the end, the system can really work. Look, Iowans have at one point or another taken a look at and supported at least in a plurality a lot of other candidates who weren't up to snuff. And with Santorum, I think they whittled it to a quite a worthy conservative opponent for Romney. This is a guy who was overlooked because he had a catastrophic last run for the Senate where he lost by 17 points.

But by winning now in Iowa, showing he can do it, even though it wasn't winning, he essentially tied for Iowa, he shed the loser image, and I think he showed that he showed he can be strong. And now people are having a look at him.

He is a guy with a lot of experience, wide knowledge. He showed it in the debates. He is an articulate guy. Character is stable, and ideologically consistent and sincere. He has all the characteristics you want in conservative opponent of Romney. And I think this sets up a very strong two-man race.

BAIER: Mara, last night, Texas Governor Rick Perry said he was going back to Texas to reassess the campaign. A lot of people said this is the beginning of the end. Then a tweet came today from Governor Perry's account saying this -- "And the next leg of the marathon is the Palmetto State...Here we come, South Carolina." And attached to that tweet is this picture where he went for a run and gave a thumbs-up. He is going on to South Carolina it appears.

MARA LIASSON, NATIONAL PUBLIC RADIO: He is. And I think he's made the decision that he is a southern governor. The south was always supposed to be where he would do well and he might as well get there, even if he ends up getting out after that. You don't want to get out after Iowa, after a very disappointing finish there. You want to go to a place where you can do well.

I think this race wants to become a two-man race. It appears that it's a Santorum-Romney race. And who would have thought that Rick Perry would be one of Mitt Romney's allies? In other words, now Rick Perry staying in, splits the anti-Romney vote, stops Santorum from consolidating that, and helps Romney in South Carolina.

BAIER: There is still the chance, however, Jonah, that there is coalescing. With Michele Bachmann dropping out, those supporters go somewhere. And if some prominent conservatives come out and get alongside Rick Santorum, that could make a difference.

JONAH GOLDBERG, AT LARGE EDITOR, NATIONAL REVIEW ONLINE: It could. Although I'm gonna disagree with the both of you and Charles about how this vindicates Rick Santorum's retail politicking in Iowa. I think of all the things that Charles said about Santorum being a serious guy are all true. But my sense is basically since Santorum was the last and least plausible anti-Romney left standing after Gingrich was destroyed and everyone flocked to him and his timing couldn't have been better. And I don't know that everyone all of a sudden decided that Rick Santorum was the best guy to go up against Romney. It was just a game of musical chairs and the music stopped and it was time to vote.

BAIER: So wait a second.

KRAUTHAMMER: Compared to Herman Cain?

GOLDBERG: Compared to Herman Cain maybe. But compared to --

KRAUTHAMMER: Compared to Rick Perry after his performances in the debates?

GOLDBERG: We can look at the relative merits of Santorum versus all of those candidates. I'm talking about the thought process that was going through the voters. I do not believe the voters were suddenly through the crucible of the incredibly enlightened and civic spirit of Iowa politics said, oh my gosh, how could we have been ignoring this guy who has been hiding in plain sight all this time?

LIASSON: Some of that --

(CROSSTALK)

BAIER: -- last week, I tell you, there was a lot of --

LIASSON: But Jonah, you're saying that if the race had gone on another week, Rick Perry would have come back and had another moment?

GOLDBERG: No, I don't know that you come back from all these things. But my point is that you had a lot of people saying, I just don't want -

(CROSSTALK)

GOLDBERG: -- my point is to get here although I'm fine with beating up on Iowa, because I think Iowa is the most overrated political event in politics these days. But I think that the reality is simply that there is a Newt is basically right, there is a huge constituency that just doesn't want the vote for Romney. That constituency is hardening, rather than softening. And they look to Santorum. I'm not saying he didn't deserve his victory, he worked for it, but he was also very very lucky with his timing.

KRAUTHAMMER: Look, he had a loser label because he was an ex-senator who had a disastrous last campaign. All of the others got a shot and they all I think were not of presidential stature. When they at last had a look at Santorum, he was a guy with experience, again articulate, he knows the issues, unlike a couple of the other pretenders. And he's a serious guy with a track record. I think that, in the end, the system worked. Yes, haphazardly but that is how America works. Churchill once said America always ends up doing the right thing after it's tried everything else. Well, that's how Iowa worked.

BAIER: So then does South Carolina become this real conservative battle now with Perry in the game and Santorum? It looks like Newt Gingrich, that is his firewall.

LIASSON: Yeah. He's yet another southern politician. I think New Hampshire is going to be discounted to a certain extent because it's Romney's second home state. I think there is a high bar for him now. He cannot play the expectation game in New Hampshire. He either does as well as he is polling, more or less, or he looks like he didn't hurdle the bar.

But I do think South Carolina is the last battle for an alternative to Romney to challenge him. And we haven't seen Romney challenged, we'll see who can put together the resources to do it. Rick Perry staying in allows that hope to stay alive. Rick Perry is the only guy who has raised the money who can put the ads on TV against Mitt Romney.

KRAUTHAMMER: Perry is not in New Hampshire.

LIASSON: I'm talking about South Carolina.

KRAUTHAMMER: Santorum in New Hampshire, if he beats Paul and if he beats Huntsman, and ends up a strong second.

LIASSON: Yes, he gets some momentum for South Carolina.

KRAUTHAMMER: He'll get his ticket to South Carolina.

BAIER: So with the discounting of retail politics, does Huntsman factor in to New Hampshire?

GOLDBERG: There are a lot of conservatives out there, who are looking at him thinking that, you know, like those posters that you stare at long enough, the picture emerges. That if they stare at him for the 50th time, that all of a sudden they will see something that they like. But I think Huntsman is doomed and I'm not upset about it.

BAIER: OK, a bold Jonah Goldberg tonight.

(LAUGHTER)

Next up, the president's appointment of a consumer watchdog over the objections of Congress.

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