This is a rush transcript of "Special Report With Brit Hume" from December 29, 2008. This copy may not be in its final form and may be updated.


GORDON JOHNDROE, WHITE HOUSE SPOKESMAN: In order for the violence to stop, Hamas must stop firing rockets into Israel and agree to respect a sustainable and durable cease-fire.

BENJAMIN NETANYAHU, ISRAELI OPPOSITION LEADER: They also have to remove the future threat of such missiles, because what happened last time is we ostensibly had a cease-fire . Hamas used it to smuggle in more weapons.


JIM ANGLE, GUEST HOST: Comments today about the conflict between Israel and Hamas, which rules Gaza.

Now some analytical observations from Mort Kondracke, executive editor of Roll Call; Jeff Birnbaum, managing editor digital of The Washington Times, and syndicated columnist Charles Krauthammer — FOX News contributors all.

Well, a cease-fire ended between these two — not that it has mattered much, because we have had lots of rockets, about almost 3,000 in the last year. But the cease-fire ended on December 19.

Since then, Hamas has fired some 340 rockets and mortars at civilians in Israel. Israel didn't respond until this weekend.

What is going on here, Charles? What is Hamas? It would seem to be idiocy to fire rockets into Israel when you know that they have a superior militarily and that at some point they are bound to respond.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: It's ideology and commitment. Hamas lives for permanent war with Israel. Its intent is to destroy Israel, it's method it to kill Israeli civilians randomly, as many as they can, and to provoke an Israeli attack knowing it will be on world television so that many Palestinians will die.

The irony is that on the day that Israel attacked, it sent thousands of automatic cell messages by phone to Palestinians in Gaza who were living in or near military depots of equipment, where Hamas had put them, hoping to produce Palestinian casualties.

Here you have one side, Hamas, that lives for dead Israelis and Palestinians, each of them if advantageous. And the Israelis are unbelievably scrupulous in their retaliation. They are using precision weapons and are trying to avoid civilian areas.

Hamas' objective is to win the way Hezbollah at the end of the war in 2006 in Lebanon, winning by staying alive, remaining in place, thwarting Israel's objectives.

The Israeli objective here is to get a cessation of hostilities where there are strict conditions on Hamas that were not in the past. And, secondly, to try to destroy or weaken the Hamas infrastructure, which is going to be a lot harder.

ANGLE: It's very difficult, Jeff, to go in by air. We have had the same problem in various places, including Afghanistan. No matter how accurate the strikes are, you are bound to hit civilians. And Hamas is known for locating its strategic positions in populated neighborhoods.

JEFF BIRNBAUM, MANAGING EDITOR DIGITAL, THE WASHINGTON TIMES: And there have been a lot of civilian casualties, as well, caused by the Israeli attacks, which have been unrelenting.

I think there are some tactical reasons that this is going on right now — that is, that both sides are trying to angle for a better cease-fire situation. Hamas declared the cease-fire over, essentially, would not extend it anymore, and then began to attack the Israelis to try to get a better position in the cease-fire.

And the Israelis are fighting back in order to get a cease-fire that is more to their advantage when all this is over by taking on as much of the military might of Hamas as they can possibly.

So I think that all of this is just yet another series of battles on the way to another temporary lull in the fight.

And the Israelis, even though they're now amassing on the border of Gaza, I don't believe that they're going to — they may, in fact, go in, but only strategically, to take over some military positions of Hamas in order so that they can actually secure a slightly longer peace. But that's all we're dealing with, because fundamentally I agree with the notion that war will continue. It's just the Israelis want a better chance at peace longer, and that will be the result here.

MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: I think that the one thing you can't ignore here — the ferocity of the Israeli response has something to do with the fact that there is an election on February 10.

We saw Benjamin Netanyahu, who is the hawk, and who is in the lead, and who obviously on the basis of what he said there wants to pound on Hamas and really drive it into the ground is possible.

And the existing government, the Kadima government, Tzipi Livni, who is now the foreign minister, has been accused of not being tough enough. So now there are demonstrating before this election that they are really though by 300 air sorties so far against Hamas targets and also a possible ground invasion.

The fundamental situation — I don't know what Hamas is, frankly, up to, whether they expected this or not. But what the Israelis are trying to do strategically is to — and they he could do it better with Hamas than they could against Hezbollah — is to really pound leadership targets, infrastructure, tunnels that lead from Egypt into Gaza, in order to set Hamas back.

ANGLE: Just one very quick point — on domestic politics here, Charles, there doesn't seem to be much distance between Republicans and Democrats on this.

Obama, this summer, visiting one of the areas often hit by rockets, said if somebody was sending rockets into my house where my two daughters slept at night, I would do everything in my power to stop that.

You have Steny Hoyer in the House today, a Democratic leader, who also voiced essentially the same view. Not much distance between different parties here on this.

KRAUTHAMMER: As of now. Obama said that as a candidate.

The Bush administration has set an extremely high standard of how scrupulous it has been in respecting Israel's right to defend itself. It backed Israel entirely in this war because it is a just war.

I hope the Obama administration will carry on that same level of support. The Bush administration is not asking for simply a cessation of hostilities. It asked for sustainable and durable, which means new conditions so that the continuous attacks that you have mentioned over the last three years into Israel cease.

ANGLE: That's it for this panel.

Coming up, a top Obama advisor says the president-elect will keep his pledge of lowering taxes for the middle class, but what about President Bush's tax cuts for upper income folks? President-elect Obama and taxes next with the all-stars.



DAVID AXELROD, OBAMA ADVISER: We promised a middle class tax cut. This package will include a portion of that tax cut that will become part of the permanent tax cut.

The question he is on the Bush tax cuts for the very wealthiest Americans, and it's something that we plainly can't afford moving forward. And whether it expires or whether we repeal it a little bit early, we will determine later. But it's going to go. It has to go.


ANGLE: OK, there is a key Obama adviser saying yes, the middle class-we're going to get some of it early, but perhaps not all of it, and eliminating the tax cut that Bush had in place for wealthier taxpayers will definitely be eliminated, but not necessarily now.

What is going on here, Mort? If it is for equity that you give a tax break to the middle class and raise taxes on the wealthy, why not just go ahead and do it?

KONDRACKE: Because they understand — Larry Summers and sophisticated, moderate economists understand that you don't raise taxes on anybody in the middle of a recession.

ANGLE: Why don't they just say that?

KONDRACKE: I don't know why they don't just say that.

I suspect one of two things. Either it is ideological with some of the liberals that are in the Obama camp, and maybe Obama himself, for all I know, who are just determined that rich people are going to get whacked at some point, and that they don't want to say that they're not going to be. That's Axelrod.

Or it's a bargaining chip of some sort, or it's going to be seen when Obama says of course we're not going to raise taxes on upper income people in a recession, that that will be seen as a gesture to the middle played at the right time.

But this whole economic approach here really raises the question of really is Obama a pragmatist or is he an ideologue? What Franklin Delano Roosevelt did during the Depression was spend a lot of money in order to create jobs, which Obama plans to do. But he also raised taxes on the rich out of ideological reasons.

Now if Obama repeats that pattern, he will have the same result as FDR did, which is to say no recovery from the Depression.

ANGLE: Jeff, what do you make of this?

BIRNBAUM: I think there will be a tax cut that is temporary, meaning $500 rebate, in effect, for individuals, $1,000 for couples, that will just be two years long. That will be a down payment on a bigger tax cut.

It will be targeted to the middle class, those people who make less than $250,000 a year, families of that size. But there will not be a tax increase without any question.

ANGLE: You don't think so? You don't think it will happen, period?

BIRNBAUM: It will happen, because the Bush tax cuts expire on their own.

ANGLE: You mean they're going to let it expire?

BIRNBAUM: That's a real tax cut — I mean, a real tax increase. It's just that Obama will not have to put his fingerprints on it. And he's hoping that by then the economic recovery will be in full swing, and he can merely take credit for it without reducing economic growth.

ANGLE: Well, why not take credit for it, Charles? They made it a point in the campaign. They've said this is the right thing to do for equity. You would think that there would be a bold move to go out and tackle this thing rather than just sort of let it disappear into the night.

KRAUTHAMMER: There may be a faction in the Obama team that wants to spend a lot, thinking it will help getting out of our recession or create more jobs more quickly. But I think on the issue of raising taxes, I think Mort somewhat overestimates Obama's own ideology here. Remember in the debates he was asked about cutting capital gains taxes, and he said he was against it. And Charlie Gibson said, but what if it increases the revenues the government will take in? He said I'm still against it, it's not fair.

So even if it starves the government and the rich, he would be against the tax cut.

I think he is committed to raising the taxes, the marginal rates on the richest, he calls them. And I think, you're right, he's going to let it happen as it expires. It's not going to be an action of his own. It will an expiration of the Bush cuts.

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