This is a rush transcript of "Special Report With Bret Baier" from October 21, 2009. This copy may not be in its final form and may be updated.


RAHM EMANUEL, WHITE HOUSE CHIEF OF STAFF: What will the afghan government d o or not do? Where are we on the police training? Who would be better doing the police training? Could that be something the Europeans do? Should we take the military's side?

Those are questions that have not been asked. And before you commit troops that are — not irreversible, but put s you down a certain path — before you make that decision, there is a set of questions that have to have answers that is never been asked.

And it's clear after eight years of war that is basically starting from beginning that those questions never got asked.


BAIER: Well, in just a few minutes, former vice president Dick Cheney will deliver a speech at the Center for Security Policy in which he will answer that charge specifically.

He will say in this speech, we're told exclusively, that in the final months of the Bush administration, that administration launched a full-scale review of Afghanistan policy and assembled a team to travel to Afghanistan, look at every aspect, according to the vice president, and presented a briefing to then President-elect Obama and his team.

Quoting now from this speech, Vice President Cheney will say "They asked us not to announce our findings publicly, and we agreed, giving them the benefit of our work and the benefit of the doubt.

The new strategy they embraced in March with a focus on counterinsurgency and an increase in the numbers of troops bears a striking resemblance to the strategy we passed to them.

Now they seem to be pulling back and blaming others for their failure to implement the strategy they embrace. It's time for President Obama to do what it takes to win a war he has repeatedly and rightly called a 'war of necessity.'"

Let's bring in our panel, Steve Hayes, senior writer for the Weekly Standard, Nina Easton, Washington Bureau Chief of Fortune magazine, Mort Kondracke, Executive Editor of Roll Call.

Steve, the speech, what do you think?

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: I think it is a pretty devastating speech having seen the transcript of what he is going to say.

But the key point is this point on Afghanistan that you brought up. The members of the former administration, the Bush administration, are incensed that Rahm Emanuel said what he said on CNN and that they're being charged with not having asked these tough questions, when, in fact, what they did was conduct a two-month review, October and November of 2008, asked every conceivable question, got answers to the questions, and took that and presented it to the Obama transition team.

The Obama transition team specifically asked Jim Jones, incoming national security advisor, specifically asked that the review not be made public, that it be held.

The Bush administration discussed this, decided not to make it public so that the Obama administration might adopt the recommendations that were, in fact, part of the Bush administration plan.

This request from Jim Jones to Steve Hadley was very specific. He asked not to do it. The Bush administration gave them the choice and they didn't do it.

And now you have the Obama administration out saying basically none of these questions were asked. They bungled this.

In March when the president gave his speech, he, in fact, adopted many of these recommendations that were in the original report. And as you reported earlier, Bush administration officials are saying, look, the only thing that was different here was the font size, or it was a cut and paste job. This is basically the same strategy.

BAIER: Nina.

NINA EASTON, WASHINGTON BUREAU CHIEF, FORTUNE MAGAZINE: I'm told this report was conducted under General Petraeus, and it was, as you say, very extensive, and really did form the basis of the president's remarks on Afghanistan early on.

BAIER: President Obama in March?

EASTON: Excuse me, yes, President Obama in March.

And what's interesting, we should all remember when Rahm Emanuel, White House chief of staff, says "We started from scratch." Actually, on any of the military policy, they didn't really start from scratch, even from this, because they inherited Defense Secretary Robert Gates, the first time an administration has ever take and defense secretary from the other party when they went in.

They inherited most of the command team. Yes, they replaced the guy on the ground in Afghanistan, but they did it specifically, it sounds like, to move towards where this report was going.

The one thing that I would disagree with somewhat in the Vice President's Cheney's speech is that he says the president is caving in to the angry left on Afghanistan.

I do think that there is pressure from the left and the drop in popularity among average Americans, independents, for the war does have some political impact, but the other thing is to remember that this White House is very shaken by the level of fraud in the Afghan elections, and that's actually fed into this sort of back and forth on Afghanistan.

BAIER: But there was a little pushback from Defense Secretary Gates saying we need a decision on the military side.

MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: And the word leaking out is that Obama may make his decision, may not announce it, but may make the decision before the election. So it looks as though Gates won that battle with Rahm Emanuel and John Kerry, but look...

BAIER: But let me ask you this. The former vice president says "we are hearing a drumbeat of defeatism, the same air of hopelessness we heard about Iraq before the surge." Talking about this administration, he says the administration is "dithering."

KONDRACKE: I agree. The administration is dithering. It ought to make up what it is going to do. The longer it waits, the more doubt there will be among our allies and stuff.

But you have to say this about Cheney — look, the Bush administration forgot about Afghanistan. It went into Iraq. It paid no attention to Afghanistan. The Taliban made its recovery.

It's nice that the Bush administration studied the issue in October and November and December of 2008, but what about the two years before that while the Taliban was recovering and making all this headway with opium and stuff like that?

Furthermore, the Bush administration allowed Pakistan, the Taliban, to develop in Pakistan and backed President Musharraf to the hilt. Pervez Musharraf took our money and spent it all on tanks to fight India. He never developed a counterinsurgency strategy of his own. He didn't build any schools. And, you know, and then we handed off this mess to Obama.

So I think Cheney has a lot of the story straight but he is leaving a lot out.

BAIER: Steve?

HAYES: Well, I think if you're making the point that the Bush administration could have done more on Afghanistan, you are not going to get an argument from me.

However, I think that's only part of the story here. The fact of the matter is when they were pursuing the surge in Iraq, they obviously were focused on Iraq. They needed to be focused on Iraq. And I don't think anybody would have recommended that they pursue both Afghanistan and Iraq at the same time.

What the Obama administration, though, is doing is taking a policy position that then candidate Obama articulated in 2002 that Afghanistan was the most important war, was the good war. He articulated that as a Senate candidate. He articulated it as a senator. He articulated it as a presidential candidate.

He then became president and adopted the Bush administration's policy proposals, and then went out and trashed them and now seems to not know what he is going to do.

There was an article in "Politico" today that he's struggling to come up with a timeframe for his decision. So he's indecisive about his indecisiveness. This is getting to be like, as somebody said to me today, like a "Far Side" cartoon.

BAIER: We will discuss the move to take $250 billion in Medicare payments for doctors out of the healthcare legislation. That is coming next.



SEN. DEBBIE STABENOW, D-MICH.: And I believe this is honest budgeting because we know we're not going to allow those cuts to take place, so we should just do away with this process that even proposes these cuts every year are and we lay the foundation for real physician payment reform, which is in the legislation.

SEN. JUDD GREGG, R-N.H.: It's almost a Bernie Madoff — it is a Bernie Madoff approach to funding. I mean, basically this is an entire scam.


BAIER: Here is the explanation — $250 billion in Medicare payments for doctors taken out of the healthcare package overall, just added to the deficit. That was the vote that was put on the Senate floor today to take care of it for ten years, these payments. The Senate Majority Leader Harry Reid said today "I'm not going to bring anything to the floor unless I think I have the votes." Well, 13 Democrats joined a unified Republican opposition to vote against this proposal. It's called "The Doctor Fix."

We'll get a little bit into the weeds here, but what does this mean politically and what does it mean for the healthcare reform package? We're back with our panel — Mort?

KONDRACKE: There is no question that the Republicans were right that this was a huge gimmick designed to take $250 billion out of the cost of the healthcare reform, put it off to the side, thereby reducing the cost of healthcare reform.

And meanwhile, this $250 billion would go to the doctors over a ten-year period and not be paid for. There was no pay-for for that. So that's why the 13 Democrats voted against it and caused a huge embarrassment to Harry Reid.

I have to say, it is worth noting that when the Republicans were in charge, they passed the Medicare prescription drug bill — remember that, Part D, and it cost something like $395 billion over ten years, not paid for, never complained about not paid for.

And furthermore, the Republicans have been resorting to this old Democratic trick of scaring seniors about any Medicare cuts, you know —oh, you're going to lose Medicare Advantage, you're going to lose this and that.

BAIER: But Mort, there is $404 billion in the Medicare cuts in the Senate Finance Committee bill, which is the compromise bill.

KONDRACKE: The Republicans have been complaining about it. They have been scaring seniors, telling them that these cuts that are going to be imposed on Medicare providers are going to come out of the services that seniors get.

I mean, that's what the Democrats always do. Whenever there is an entitlement reform that the Republicans propose, and the Democrats always say that the seniors are going to get trashed, and now they are doing the same thing.

HAYES: Do you think that it is true that there are going to be cuts to services? I thought virtually everybody acknowledges that.

KONDRACKE: There want to bring Medicare under control.

HAYES: So they are telling them what it is and the seniors are scared on their own.

KONDRACKE: Please. The seniors are always scared, they are always scared of losing something, and the Republicans are stimulating their scaredness in order to defeat the bill.


KONDRACKE: That's exactly what the Democrats did with Social Security reform under Bush.

BAIER: The politics of this, with the $250 billion being taken out, the president says he is not going to sign healthcare reform legislation if it's not deficit neutral. In other words, if it doesn't add to the deficit, he's not going to sign it.

EASTON: Let me go back to this point. I think this strange procedural vote today kind of revealed two big things.

One is that this whole idea of cutting Medicare costs or containing them by cutting reimbursements to doctors is a joke and doesn't work. Doctors drop senior citizens, and that's where we get into a real fear for senior citizens when you touch that issue. It is a very delicate issue. What they do is cut them and then add them back.

Secondly, on a political level, this was the first big procedural vote in the Senate on the floor on a healthcare reform bill, and you have 13 Democrats bail on Harry Reid. That doesn't bode well for any kind of healthcare legislation that is going to come through the floor of the Senate.

BAIER: Quickly, Steve, where do you think we stand overall in getting this getting passed or not?

HAYES: I think Nina's point about the politics of this is the key point here.

You have 13 Democrats who are bailing on Harry Reid. They are the deficit hawks. They are the ones who have said all along we don't like the public option. We need to contain costs. We don't want to blow up the deficit. And they're basically registering their discontent now.

The question I think you have now is how he is going to massage all of these different factions behind closed doors in his office. It's unclear that he will be able to pull it off.

BAIER: We will have much more on this topic and many more on our online show right after this broadcast show.

That's it for this panel.

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