This is a rush transcript of "Special Report With Bret Baier" from February 12, 2009. This copy may not be in its final form and may be updated.


SEN. JUDD GREGG, R-N.H., FORMER COMMERCE SECRETARY-DESIGNATE: I have alway s led my own team, so to say, I have always been myself.

It just became very clear to me in the context of what was going on this week, and in the context of what I saw coming, that it would be virtually impossible for me to do this job, because for me to be myself would have been — I would have challenged to be myself.


BRET BAIER, HOST: Senator Judd Gregg today pulling his name from the commerce secretary nomination that President Obama wanted him in that spot, citing that the economic stimulus bill as well as partisan disagreements over how to run the census as the reason for pulling that nomination.

Here is what the White House had to say late in the day — quoting Robert Gibbs: "Senator Gregg reached out to the president, offered his name for secretary of commerce. He was very clear throughout the interviewing process that despite past disagreements about policies, he would support, embrace, and move forward with the president's agenda.

"Once it became clear after his nomination that Senator Gregg was not going to be supporting some of President Obama's key economic priorities, it became necessary for Senator Gregg and the Obama administration to part ways. We regret he has had a change of heart."

In that press conference, Senator Gregg said he did not reach out to President Obama.

Now some analytical observations from Mort Kondracke, executive editor of Roll Call, Nina Easton, Washington bureau chief of Fortune magazine, and syndicated columnist Charles Krauthammer — FOX News contributors all.

Mort, this has been a bumpy ride, and it just got bumpier.

MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: You know, the tick-tock on this, the blow-by-blow is going to be fascinating about who said what to whom and when. But the basic outline seems to be that the White House, after appointing Gregg, seemed to expect him to fall in line, be a team player, either recuse himself or not vote on the stimulus package, or vote with the president on it, and Gregg voted "no." Now, why Gregg would take this job in an administration that was clearly going to be liberal Democratic on economic policy, I do not understand to begin with.

But then you have the added fill up of the census issue. Now, after Gregg gets appointed, the White House says that he is not going to be fully in charge of the census, the 2010 census, that the White House is going to be partly involved with it, which is a slap in the face to him, as though he is not capable of conducting a fair census.

And it looks terrible for the administration. Here is the Democrats were assailing the Bush administration for politicizing the Justice Department, and now it looks like the White House is politicizing the census, which, arguably, is equally pristine and should be done by civil servants and on a fair basis.

BAIER: Nina?

NINA EASTON, WASHINGTON BUREAU CHIEF, FORTUNE MAGAZINE: Senator Gregg did say, though, the census wasn't the main factor or a huge factor. He actually cited budget issues.

And I think this is a huge blow for the administration. Let's step back a second. You had the passage of the first stimulus plan in the House with not a single Republican supporting it. You had three senators on a procedural vote, Republican senators, supporting it.

This is a president who came to town promising a spirit of bipartisanship. They reached out to Judd Gregg, who is a serious Republican. This is a budget hawk, a free trader, a very thoughtful guy on these issues.

And this is a great loss, and I think the sad thing is it probably could have been avoided. I think if a stimulus plan had come out of Obama's shop rather than sending it to Congress and losing control over it, basically, I think you could have possibly kept a Judd Gregg onboard.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, he has been saying it wasn't the census, but I'm not sure I believe him. That was a real humiliation.

After all, commerce has only two things to be said for it. One is it runs the census, which is one of the few jobs the constitution gives the government. The constitution is all about the stuff that the Congress ought not, should not, or shall not do.

And the other nifty thing about that commerce is that it has aquarium in the headquarters in Washington. Once they took away the census, he was going to end up feeding fish in the aquarium.

It was a complete embarrassment and a humiliation, and I'm sure that was the main issue. And, of course, on the stimulus, he is a budget hawk. And here he is teaming up with an administration with a stimulus that has spending completely out of control.

What I don't understand is how Judd Gregg could have imagined that he could be a member of that team knowing what the Obama agenda was going to be. It isn't as if the stimulus was a secret at the time he took the job.

BAIER: Talking about the tick tock, Mort, the Associated Press is now reporting quoting White House Chief of Staff Rahm Emanuel as saying that the president met with Gregg in the Oval Office on Wednesday, and that there were no hard feelings. "It's better we figured this out now. It's unfortunate. There is a disappointment." So, saying that the announcement was made to the president on Wednesday. However, you look at some of those senior aides, they were clearly flatfooted this afternoon, didn't know that this was happening.

KONDRACKE: Well, if they decided on Wednesday that he was going to withdraw, why didn't he withdraw on, you know, Wednesday, right away?

BAIER: It doesn't really make sense.

KONDRACKE: I can't believe that there weren't some hard feelings on somebody's part, on Rahm Emanuel's part, or somebody saying "Are you are a member of this team or aren't you a member of this team?"

BAIER: And we should point out this is the second Commerce Secretary to withdraw. New Mexico Governor Bill Richardson pulled his name out as well.

EASTON: I was just going to say, I think this is a very last- minute decision by Gregg. We at Fortune took his photo earlier this week to be part of a team thing on the economic team, Obama's economic team, and he agreed to do that.

So earlier in the week, he thought he was going to be part of the economic team.

KRAUTHAMMER: It turns out that "No drama Obama" has a lot of drama. This isn't a divorce. It isn't and annulment. It is groom not showing up at the wedding. Everyone is upset and everyone is embarrassed. BAIER: Speaking of divorce, he said "irresolvable conflicts," so it kind of sounded like a divorce, didn't he?

KRAUTHAMMER: Get a lawyer.

BAIER: It appears the stimulus bill will be voted on soon.


NANCY PELOSI, D-CALIF., U.S. HOUSE SPEAKER: The bill is one that we're all very, very proud about, that has bipartisan support, at least in the Senate.


BAIER: The panel looks at the fine print after the break.



REP. CHRIS VAN HOLLEN, D-MD.: At the end of the day, I think everybody is, overall, happy with the bill. Again, not a perfect bill from anyone's perspective, but something that will finally move us into the right direction.

MITCH MCCONNELL, R-KY., SENATE MINORITY LEADER: Everyone wants to help Americans get back on their feet, but we need to do it smartly.

In my view and in the view of my Republican colleagues, this is not a smart approach. The taxpayers of today and tomorrow would be left to clean up the mess.


BAIER: Two very different takes on the economic stimulus plan, the package, the actual legislation is being printed up as we speak tonight. A vote is expected on this tomorrow.

We're back with the panel. Charles, the process and what has developed?

KRAUTHAMMER: The process is ugly. This is as ugly as sausage making gets in Washington. And there has been a lot of anger between the House and Senate Democrats over the way it was ultimately resolved.

But, look, in the end, the winner is Obama, and the reason is that in Washington, you win if you pass legislation, particularly something as huge, complex, especially sprawling, and ugly as this. If he can pass a bill as ugly as this, he's strong, and he's got momentum.

Now, he will be judged later on whether it worked. But I think in the end, even a year or two down the road, we're never going to know if it worked, because it will be a minor element, with trillions thrown at the credit market, and also with tens of trillions that coarse through the markets every day.

So if the economy is strong in 2010, everybody will say it was the stimulus. It will be a victory. If it's not, whether or not it had a negative effect, it will be a loss.

And what happens with this is Obama, as of now, as soon as he signs it, he takes ownership of the economy. He blames Bush for another three or six months, but after that it's done. It's all on him.

EASTON: They're actually looking for the economy not to turn around so much as to be less bad.

So, for example, Austan Goolsbee, one of his top economic advisors, said to me, look, if unemployment at the end of this year is more like eight percent as opposed to the 11 percent, the extreme negatives, then, actually, this is probably working. And that's what they're hoping for.

And likely, again, the money is going to start kicking in mostly later in the year, some now, mostly later in the year and in the years going forward.

And they are still confident that they got it out fast. They put a premium on speed. It was all about catching the business cycle, doing enough early on, and that's their theory. Whether it — historically, fiscal policy hasn't gotten us out of recessions. So we'll see if they caught it, and if things are less bad, not that they are necessarily good. There is a lot of other stuff coming down the pike that will affect the economy.

KONDRACKE: It was early — it had to be early and it had to be big. And Obama has not been in office a month, and he's going to sign this $800 billion bill, which he says is going to save or create 3 million jobs. So it's a political success on his part, messy though it was.

But the other big part, $2 trillion to $3 trillion is this program that Tim Geithner, the Treasury Secretary announced earlier in the week, which just bombed because he had no — he didn't have details on how he is going to help mortgage — homeowners to keep their houses, and he doesn't know how he's going to buy up the toxic assets.

That was also an exercise in speed, but it was not done with enough preparation so that he couldn't explain exactly how it was going to work, which everybody was waiting for. So the market tanked.

BAIER: Charles, the president got three moderate Republicans in the Senate, no House Republicans on the first vote. We don't know yet on the second vote.

Does this say is something about how tough it's going to be on the big issues like healthcare, or if he tries to tackle entitlements, how tough it may be for this president?

KRAUTHAMMER: Well, he is now lashed to the mast of his own party. He was not able to get any significant Republican support. It bodes ill for him because, as of now, he is really a captive of his party, and which, in the congress, is a party of the left, and he may not like that.

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