This is a rush transcript of "Special Report With Brit Hume" from October 20, 2008. This copy may not be in its final form and may be updated.


SEN. JOE BIDEN, (D-DE) VICE PRESIDENTIAL CANDIDATE: Mark my words. It will n ot be six months before the world tests Barack Obama like they did John Kennedy.

The world is looking. We are about to elect a brilliant 47-year- old president of the United States of America.

Remember I said this as much as anything else I said. Watch. We're going to have an international crisis, a generated crisis to test the mettle of this guy.

And he's going to have to make some really tough — I don't know what the decision is going to be, but I promise you it will occur. As a student of history and having served with seven presidents, I guarantee you it will happen.

I can give you four or five scenarios from which it might originate.


BRET BAIER, HOST: That's Senator Joe Biden, Democratic nominee for vice president, talking at the second of two fundraisers in Seattle, Washington, to a group, and predicting there will be an international crisis under a President Obama within the first six months.

As you can imagine, the McCain campaign jumped all over that.

Now some analytical observations about the state of the race from Fred Barnes, Executive Editor of The Weekly Standard, Juan Williams, Senior Correspondent of National Public Radio, and syndicated columnist Charles Krauthammer, FOX News contributors all.

Charles, were you surprised that Joe Biden would go into that detail on an international crisis within the first six months of an Obama administration?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, this is an amazing gift he has handed the McCain campaign. What he's saying — he used the word "generated." He is saying if you elect a president as young and untested as Obama, this will precipitate a crisis intentionally by some actor in the world.

In other words, that by electing a president so untested we are inviting, and Biden guarantees it will occur, inviting a crisis internationally that would not otherwise happen if you had a McCain in office whom the bad guys might not want to test.

Now, if Republicans had raised that and said electing an untested, new, young president would invite a crisis and even precipitate and cause a crisis, it would be called "fear mongering" and "scare tactics."

This is the vice presidential candidate of the Democrats insisting on this, and the reason it's an amazing gift is because it's hard to see how McCain attacks Obama. He has tried everything. He has tried the kitchen sink.

You expect there might be a tightening of the race for one reason — people at the last second may have qualms about electing an unknown newcomer untested. And here is the argument made in the name by Joe Biden.

I think it's an opportunity. We saw in the clip earlier how McCain had answered. Unfortunately, he flubbed it not once but twice in attributing this statement to Obama instead of Biden.

But if he can recover and use this, it is a very strong argument. It's a closing argument against Obama.

BAIER: Juan, in the statement that John McCain didn't flub, he said "We don't want a president who invites testing from the world at a time when our economy is in crisis and Americans are already fighting in two wars."

So talking about foreign policy 15 days out is a gift.

JUAN WILLIAMS, SENIOR CORRESPONDENT, NATIONAL PUBLIC RADIO: It is a gift because it can be interpreted, as Charles did.

I interpret it a little differently, which is to say, remember that one of the problems that the American people have with John McCain in all of this is his temperament. The sense is that John McCain is a guy who's quick to fly off the handle go ballistic.

And so the sense is there that anything might spark John McCain to become more involved militaristically in war than we already are.

But this is a legitimate point. I think it is why it's made by Obama's vice presidential nominee in saying that the world is going to test this young man, because they want to know exactly what the world's one remaining superpower is able to do and willing to do.

BAIER: The Obama campaign shoots back that the endorsement this weekend shields them from some of this, General Colin Powell with his endorsement of Barack Obama this weekend. Do you buy that?

WILLIAMS: Well, to a certain extent. It shows that there are senior people around — what we're talking about is for the voters who have yet to make up their minds, a very small group, but they are people who are Reagan Democrats or conservative Democrats or moderate to liberal Republicans, independents, and Powell does have some sway with that group, especially as former Chairman of the Joint Chiefs.

So it does speak to it. But when you hear this from Biden, Biden is right there. He is in the game. Powell is not.

BAIER: Fred?

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: This trumps any effect that Powell had. Powell is a beltway creature anyway. You think he would have been on "Meet the Press" if he were going to endorse McCain? Of course not! This was widely expected.

But, look, Biden, who is a wrecking crew, actually — if you remember his debate with Sarah Palin where he set records for inaccurate comments and whoppers in a presidential or vice presidential debate.

But, in any case, he cites the JFK example. Well, the JFK example is one where he was tested in 1961 in, I guess, Vienna when he met with Nikita Khrushchev and failed. Khrushchev concluded this guy is a weakling, I can push him around. And first we have the Berlin Wall and then the Cuban missile crisis. That's not a good analogy.

Think of Ronald Reagan when he stepped in. He didn't have a lot of foreign policy experience. What was the first thing that happened? The Iranians sent back the American hostages immediately because they didn't want to go up against Ronald Reagan.

It would be — look, this is a mistake. I think there are more voters out there — I don't know whether it is 10 percent or 15 percent, who are up for grabs here in the last week. And we have seen over the years these tremendous gains. Al Gore in 2000 gained about five points in the last week. And others have.

So McCain is behind, but it's still winnable.

BAIER: Charles, in the last piece of this statement to this group at this fundraising group, Senator Biden said that he means that Senator Obama will need support from this community, the supporters, as president because during this international crisis, quote, "It's not going to be apparent initially. It's not going to be apparent that we're right how we're responding to it."

Some people are saying "Why?"

KRAUTHAMMER: Biden is obviously a Republican plant. He could not have been invented. What he is saying is precisely what people would worry about.

The world is not going to mess with a John McCain, but they are going to mess with a new, untested president who might not even get it right.

That's what people are worrying about, and that's what I think is an opening that would not have existed. And if McCain has any chance, he is going to have to exploit this.

BAIER: Coming up, will a second economic stimulus package actually stimulate the economy? We'll put that question to the panel when we come back.



BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: With the economy likely to be weak for several quarters and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate.

REP. JAMES MCGOVERN, (D) MASSACHUSETTS: We need to provide them with direct support, especially for Medicaid, for food stamps, for unemployment benefits, and for infrastructure projects that are ready to get up and running, which will provide jobs, income, and revenue.

REP. PAUL RYAN, (R-WI) HOUSE BUDGET COMMITTEE RANKING CHAIRMAN: The Democrats have already come out with their preferred option-a bloated $300 billion spending stimulus package.

The advertised intent of this package is to get the economy back on track. We all want that. Yet we should not be under any illusion that this stimulus package will address the core problems of our current financial crisis and our economic weakness.


BAIER: There you see Fed Chairman Ben Bernanke testifying before the House Budget Committee today and two lawmakers, one from either side of the aisle, talking about a second economic stimulus package anywhere from $150 billion to $300 billion.

The White House says it's open to looking at a second package, but wants to see the details.

We're back with the panel. Fred, it seems like it's gaining steam, like there is going to be a second package, but the president has concerns that it might be too packed with other things.

BARNES: Other things? No. It's the whole package. The president may have concerns. I doubt if there they are as great as the concerns I have.

This is designed purely to stimulate Democratic liberal interest groups, particularly labor, but others. I mean, what you get when you extend unemployment, you get more unemployment. Infrastructure, there's not going to be enough.

We have seen this year after year when we have done this, you know, the infrastructure projects come on when the economy has already recovered.

Aid to states? Look, these states overspend in the good years and now we're supposed to bail them out. There's something these states could do-it's called cutting spending. They can do that. Why do they need a federal bailout? They don't.

And now they are talking about maybe another rebate. Remember we had one earlier this year, a rebate where you send out checks to people, and we know now. The empirical evidence is in. It didn't work. It stimulated practically nothing.

And we know there are things that work. You want to grease the credit markets and stir more investment. And what they're talking about wouldn't do any of that.

BAIER: Juan, Democrats point to the Fed Chairman, saying that it could be a good idea for the economy.

WILLIAMS: If you look at what John McCain proposed just last week, it was things like cuts in capital gains taxes.

The idea is extending unemployment benefits. I differ with Fred on this. I think there are people who, in these difficult times, we see unemployment rising, legitimately have a need for that extension.

If they are people who are taking advantage of it or corruption or fraud, then address that, but don't take away from people who are in genuine need.

Is there a need for a second stimulus package? I think it is very political at this juncture, but I do think that there are steps that can be taken to stimulate the economy.

Now, again, a sort of a capital infrastructure project after what happened in Minnesota, I don't see that that is wasteful. That is good to build up America's infrastructure.

I think that is a good investment in America.

BAIER: But it would take time.

WILLIAMS: Of course it would take time. But that's not to say that this is a bad time. This is actually a good time.

Fred's point was it will take a while to get started and the recession or whatever we're in might be over by then. Even so — good investment.

KRAUTHAMMER: Whatever happens, it will be a riot of earmarks. It will be a Christmas tree. It will be every gift everybody ever wanted in his district.

But the Democrats will point and say, look, Bernanke, who's the head of the Fed, who's supposed to be a reasonable guy, is in favor of this. So, obviously it's a good idea.

But Bernanke has a history here. In 2002 when he was still a Fed Chairman, he spoke approvingly of Milton Friedman's idea, how to counteract deflation is to get in a helicopter and drop dollar bills. Bernanke has been called "Helicopter Ben" ever since.

And his idea is in a recession, which we are obviously headed into, he wants to avoid deep recession. You get in a helicopter and drop the money. He is not that particular about how the money is dropped as long as it is dropped everywhere and a lot of it.

But I can assure you that because of his endorsement it's going to happen.

Now, I'm not sure it's going to happen in the lame duck session because Republicans will still resist, the White House will resist, and Democrats won't get all the stuff they want. If they're smart, they will wait until they have big majorities in the House and the Senate, perhaps Obama in the presidency and then they're going to spend like hell.

BAIER: So, yes, a second package?

KRAUTHAMMER: A second package is going to happen. It's only question is if it will be moderate.

WILLIAMS: Yes, but all Republicans won't resist. I don't agree with that.

BARNES: I wish they would. Something will probably pass.

Bernanke is not endorsing this package. And he knows how to spread the money around. He can increase the money supply. He doesn't have to throw out aid to the states.

KRAUTHAMMER: He's given his good housekeeping seal of approval.

BAIER: That's it for the panel.

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