This is a rush transcript of "Special Report With Bret Baier" from May 7, 2009. This copy may not be in its final form and may be updated.

BRET BAIER, "SPECIAL REPORT" HOST: So what of the "Keep Terrorists out of America Act," its prospects, and the prospe cts of closing Guantanamo Bay?

Let's bring in our panel, Bill Kristol, editor of the "Weekly Standard, Kirsten Powers, columnist of the "New York Post" and syndicated columnist Charles Krauthammer — Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, I lo ve the name of the bill. Imagine if you have to vote against the "Keep Terrorists out of America Act."

And, you know, the mainstream media portraying this as Republicans desperately seizing on an issue as a way to embarrass the Obama administration. Well, that's what an opposition does. And it isn't as if terrorists running around in America is not a serious issue.

But I think what is really interesting about it, and the reason it is going to get traction, is because it symbolizes the degree to which Democrats were hypocritical and irresponsible in attacking the Bush administration and all the measures it took in keeping us safe in the War on Terror.

For example, the wiretapping, which it attacked as a trashing of the constitution, is now being continued. We have the rendition policy, an attack on human rights, is also being continued. The military commissions, which Obama himself had said had been a failure, all of a sudden the Obama administration is resurrecting it.

And Guantanamo is the biggest symbol of them all.

Obama's idea is we are safer if the world likes us, and that's why you have to close Guantanamo and do all these other nice things. Now we're going to see whether the closing of Guantanamo is going to reduce the recruiting of terrorists, is going to make our allies help us in Afghanistan and elsewhere, and will make us more safe.

BAIER: Kirsten?

KIRSTEN POWERS, FOX NEWS CONTRIBUTOR: Well, I think we have to remember that it just wasn't Obama who wanted to close Guantanamo. Of course, George Bush wanted to close it. John McCain wanted to close it during the campaign. So this has become sort of a mainstream issue.

I completely agree about the hypocrisy, however. And we see a lot of Democrats coming out now and saying "Not in my backyard. I don't want them coming here." Well, where do you want them to go? The flip side is that the Republicans are sort of acting like Barack Obama is going to hand them a Greyhound ticket and a wad of cash and send them on their way. And let's face it, that's not going to happen.

BAIER: The attorney general said as much today, Eric Holder.

POWERS: Yes. They are not going to be released — there is only a handful that are being talked about actually being released, and the rest will go into maximum security prisons, which we have people, you know — we just had Molly talking about we have terrorists who we have in maximum security prisons. We have people like Charles Manson.

We have all sorts of horrible people who are in prisons. And really, it's not quite the same thing as just letting them go in the community. We are able to have these people in prisons and keep Americans safe.

BAIER: Bill, the title of this bill is "Keep Terrorists out of America Act." And for Democrats, the semantics here are a little bit tough. Republicans put out this little clip today. Take a look.


UNIDENTIFIED MALE: I think we can use the code of military justice, and the military courts, which is are very much a home court advantage, and we can hold up to the rest of the world that we're giving these detainees the same due process we give our own troops when they are brought up on court-martial charges, nothing more and nothing less.


BAIER: "The same due process as U.S. troops." Republicans obviously pounced on that.

BILL KRISTOL, EDITOR, "THE WEEKLY STANDARD": Yes, they did. The Democrats are giving Republicans a lot of gifts on this whole complex of issues, the detainees, the enhanced interrogation techniques, Guantanamo.

Kirsten's right. There are a lot of horrible people in U.S. civil prisons. All of them have been convicted in criminal trials. These terrorists can't all be convicted in criminal trials. As Eric Holder has said, he will end up having to detain some of them just as the Bush administration has done.

Which means why not keep Guantanamo open? Holder has said it's a safe place, it's a decent place. They are not doing any more of the enhanced interrogation techniques that the Democrats find so offensive. Some who should be released, should be released from wherever they should be released. Those who can have military tribunals or, conceivably, criminal trials, should have military tribunals and criminal trials.

There is no argument anymore. Literally, on substance, there is now no argument for closing Guantanamo. It is entirely symbolic. Obama has shown he symbolically would like to. The Europeans love him. They can't love him anymore, you know. He should reverse himself.

And the Republican position should now be not just to embarrass the Democrats. Republicans should say it is a ridiculous waste of money, and a little dangerous, incidentally, to now close what has turned out to be an extremely effective, well-run facility.

POWERS: Well, they're essentially just going to move them to someplace else and call it something else. It's just not going to be Gitmo.

KRISTOL: They've got to spend tens of millions of dollars, you know. And we need to tighten our belt in this recession, Kirsten.

POWERS: And I think the argument for that is, and I'm not saying it's necessarily one that I buy, but the argument for that is that Gitmo has become such a stain on America's reputation that you just need to close, wipe our hands clean of it, and move on.

But the reality is, like you just said, they are just going to be somewhere else. They are not going to be free. They are not going to be tried.

KRAUTHAMMER: As soon as Gitmo is closed, the world will turn and attack us on the Bagram prison. And all of a sudden of sudden —

BAIER: In Afghanistan.

KRAUTHAMMER: — in Afghanistan, where we are also holding detainees, some of whom have now been declared in our courts as having rights of appeal, habeas corpus in federal courts.

So if you want to appease international opinions, it is endless, and we're going to have to end up opening and emptying all of our prisons holding bad guys all over the world.

At some point we're going to have to say "No," and we're going to have to stand up for our own principles and our own system of justice.

BAIER: Is it a winning issue for Republicans?

KRAUTHAMMER: A slam dunk.

POWERS: No, I don't think it is.

KRISTOL: Yes, and more is coming out. Today we just learned that Nancy Pelosi was briefed in 2002 on the enhanced interrogation techniques used on Abu Zubayda.

It just now broke that national intelligence sent to the Senate Intelligence Committee a document, which has now been released, which shows the name of the briefers, and it shows the two people briefed — Porter Goss and Nancy Pelosi, then ranking minority member on the House Intelligence Committee.

So I think the Democrats have lots of embarrassments still to come on this issue.


The president is taking a very small knife to the federal budget. We'll find out if this panel thinks he is chopping enough when we come back.



PRESIDENT BARACK OBAMA: The 121 budget cuts we are announcing today will save taxpayers nearly $17 billion next year alone. And even by Washington standards, that should be considered real money.

Earmarks account for one half of 1 percent of the total federal budget, and they need to be eliminated. But it's not going to solve the problem.


BAIER: President Obama and candidate Obama talking about roughly the same amount of money in the budget, different tones today and back then.

Before we talk about the budget, because it was shoehorned in there at the end of the last panel, Bill, what you mentioned about Nancy Pelosi and these meetings and this document, it essentially contradicts what the House Speaker has said about those meetings on the intelligence briefings on waterboarding.

KRISTOL: Right. She was ranking minority member on the House Intelligence Committee, got these very select briefings from the CIA at the time.

And there were reports that she had been told about waterboarding and enhanced interrogation techniques and that she denied it, and there was this sort of hearsay of what had happened at the meeting.

But now the director of national intelligence has sent an official report to Capitol Hill to the different intelligence committees, which has been released, and there was a briefing on 9-4-02, I guess, September 4, 2002, briefing on EITs — that's enhanced interrogation techniques — including use EITs on Abu Zubayda. He was the first guy they used the techniques on.

"Background on authorities" — I guess that's the legal stuff — and a description of the particular EITs that had been employed.

BAIER: "Had been employed."


BAIER: The semantics that she used was that they talked about it, but hadn't done it.


BAIER: This document says differently.

KRISTOL: Seems to, yes.

BAIER: OK, we're going to follow that one, definitely.

Let's go to the budget. Kirsten, the talk about $17 billion, and it's big money in Washington, and then back on the campaign trail, it's not a lot in earmarks.

POWERS: Well, I think that this is just basically something he's trying to do, sort of a good faith effort, to say I'm trying to cut some spending. But the reality is that I think he wants to spend a lot of money. And the philosophy is — the philosophy that conservatives disagree with but that FDR spent our way out of the Great Depression — not on the social spending, but with the war spending is essentially what did it. And that's the philosophy.

You have to remember, Paul Krugman is the leading liberal economist. He says we're not spending enough. And that's the kind of push that Obama is getting from the left is that, actually, you're not spending enough to get us out of this.

And so, I don't have any inside information on it, but it would appear to me that he's not really trying to cut that much spending. And in the end, he didn't really cut spending. He just shifted priorities. It's not less spending. It is just that some things were cut, and now it will be spent on other things.

KRAUTHAMMER: It's that shift that is so interesting, because you're right. He is throwing trillions around on social spending, a lot of which he has admitted will be wasted, because it's just in the essence of it. But look at where he actually cuts. He takes off a billion dollars of missile defense at a time when Iran and North Korea are developing missiles that are going to threaten us and the world. And half of these cuts of the $17 billion are out of defense.

Again, you know, if he is going to spend billions everywhere on everything, why would he shut down the assembly line for an F-22, which is already ongoing. Talk about shovel ready, it is ready and going.

So his priority is cut defense and spend everything on anything everywhere else. And that, I think, tells us a lot about what he wants to accomplish.

BAIER: More on the budget, the specifics, and what this administration is trying to do with Capitol Hill when we come back.


BAIER: Looking live at the White House. The proposed budget cuts coming out of the White House today account for less than one half of one percent of the president's $3.6 trillion budget.

And one of them raised a few eyebrows here in Washington, cutting in half the benefits program for the families of slain police and safety officers from $110 million to $60 million. What about that, Bill?

KRISTOL: I don't know the details of the program. I guess the White House says this money won't be needed. They will be able to pay all the benefits that are due families without that — with $60 million, not $110 million.

That's fine then. But then it's not really, of course, a cut. It's not really a saving. It just happens that the program churns out that amount of money that's needed this year.

BAIER: It's unfortunate next week is National Police Week, and Attorney General Eric Holder is attending ceremonies there, so —

KRAUTHAMMER: And if I could wade into on the weeds on these cuts. There is one other that caught my eye, which is all the money being removed for Yucca mountain, which is where the nuclear waste of the country was projected to be stored. In the absence of that, you have nowhere to put nuclear waste.

So you have an administration which is imposing a carbon tax which will kill oil, coal, and natural gas. It has no place in which it's going to put nuclear waste. All that leaves us with is to bet the entire economy on solar and wind. Try putting a sail on your car and see how you get by with that.

BAIER: Kirsten, what about the messaging around this day and about this administration trying to sell this as a big deal?

POWERS: I think they got a lot of pushback on it, actually. And I think they also realize how popular Obama is, and that he can come out and say, you know, this is what I think we need to do. I have changed some priorities. But, essentially, I want to keep money pumping through the system to keep the economy going.

I think most of their cuts, again, they are not really cuts. They are cutting and moving the money somewhere else. But most of them are pretty defensible.

I don't really agree with missile defense cuts, for example. I might be a little predisposed to it because it's in Alaska, my home state. But I do think that, despite the fact that it's a controversial program, it's still something that they could deep developing. And considering the threats we have, I wouldn't necessarily do that.

BAIER: And the other issue is that the Bush administration proposed a number of these cuts, some 18 of them, and had pushback from Capitol Hill. Essentially their proposed cuts, they don't mean they are actually going to be cut.

POWERS: That's exactly right. That's the other thing — we don't even know what the Congress is going to do with this, whether they will even accept any of these cuts.

KRISTOL: There are always these cuts that people propose because it's good government cuts, redundant programs. Congress has strong backers of the programs and they usually keep them.

I just — the original point Charles made, and the big, big picture here — massive increases in defensive spending. And in real defense spending, when you add up the supplementals in the core budget, it's absolutely flat over '08, '09, and '10.

President Obama thinks we're spending plenty on defense. The world is not getting more dangerous. We don't have to increase that at all. And then we have massive increases in defense spending.

KRAUTHAMMER: Most of the cuts are reruns, the usual suspects. And the other stuff is defense stuff, which actually ought not be cut.

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