This is a rush transcript of "Special Report With Brit Hume" from December 24, 2008. This copy may not be in its final form and may be updated.


GREG CRAIG, INCOMING WHITE HOUSE COUNSEL: All these conversations were completely innocent, completely appropriate. No one was approached with any kind of deal.


BRIAN WILSON, GUEST HOST: Well, there is the official announcement from Greg Craig, the incoming White House counsel, as he looked into this matter about contacts between the incoming Obama administration and Illinois Governor Rod Blagojevich. That was his determination.

Let's see what other people have to say about it. Joining us now with their analytical observations, Fred Barnes, executive editor of The Weekly Standard; Mort Kondracke, executive editor of Roll Call, and syndicated columnist Charles Krauthammer — FOX News contributors all.

Gentlemen, it's good to have you here on this Christmas Eve.

The thing that we don't know is that whether or not there were any inappropriate contacts. There is nothing to suggest that there has been, and yet there was this investigation, this internal probe.

Greg Craig says everything is fine. But as we learn more about it, we find it was mostly just a discussion between lawyers and no real direct interrogation of the people who may or may not have had contact. Fred Barnes, your thoughts?


There's a great piece on FoxNews.com by Major Garrett who covers the Obama transition, he covered the Obama campaign, and he makes exactly that point, that Greg Craig has interviewed the lawyers for these various people and doesn't appear to have talked directly to them.

They have not made themselves available to the press. Obama is in Hawaii. Rahm Emanuel is in Africa. Who knows where Valerie Jarrett is. Obviously the reporters don't get the transcripts of these telephone conversations so we don't know what is there. They haven't been able to interview the governor or John Harris's, his chief of staff.

So there is just so much that is not known. And there clearly has not been an independent inquiry.

Look, if Republicans had done something like this, the press would have been on the rampage, would have gone berserk. But they just seem to be winking at it. There is a rush to absolve Obama and his whole team.

WILSON: Mort, on that point, it seems that many in the media have said that's fine by me. That's pretty much the end of it. They're willing to wash their hands and walk away and not do any further probing and poking on this story.

MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: I think that if there were a string dangling out here, you know, that you could pull, that people would be pulling it. They would be saying what about this and what about that?

And as Fred has identified a few of the procedural processes. Normally Fred thinks that process is not worth discussing, but here we're talking about the process is suspicious.

And I agree that they would have been wiser to have an independent investigation of that they would have — and put more things out, and they should have done it not at 4:30 on Christmas Eve, and stuff like that. And it does look suspicious, and if you were looking for suspicious activity, it's there.

On the other hand, Patrick Fitzgerald said that he could not find any evidence of any wrongdoing by the Obama people. He has been investigating. He has got the tapes. He is an authority. He is trusted, and so on.

And then Rod Blagojevich himself said on one of the tapes, you know, all these people offered me was appreciation, and blank, blank, blank them.

So the evidence suggests that if they're not guilty.

WILSON: I suggest this comes down to this issue though that the Obama administration talked about is they were going to be transparent. Charles, in your estimation, is this a transparent internal investigation?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: No. It's fairly opaque. But look, I'm old-fashioned here. I believe a scandal ought to have an underlying crime, or at least a corrupt act. And I don't see it. I'm with Mort.

You get the U.S. attorney, who has heard all the tapes, so he knows what's in there, saying there wasn't a corrupt act on the part of the Obama folks. And you get the bad guy here, Governor Klepto himself, saying in elegant language how all he had been offered in return was appreciation.

WILSON: So why not be more transparent about the investigation?

KRAUTHAMMER: I think the Obama administration has a lot on its plate. It's got to appoint 8,000 people, and it has a lot of crises coming in on it. It doesn't have to do this if there isn't a crime.

I assume there isn't one. If there is, it will be on the tapes, and all that is being said today is going to be contradicted, and we are going to have a scandal of a size that Obama has never seen before. But that is almost inconceivable.

BARNES: Look, I don't think the standard of conduct for the president-elect or the people who work for him ought to be — that they committed no felonies. I think there is a different standard. And Obama has even said it is whether their conduct was appropriate or not.

And I don't know the answer to that yet, but no felonies is not the right standard.

KRAUTHAMMER: There is no evidence of a corrupt act.

WILSON: Thank you very much, gentlemen.

Today's jobs report was enough to diminish anyone's holiday spirit. The all-stars weigh in on the sad state of the economy and ideas out there that may fix the economy. Stay with us everyone.



TONY FRATTO, WHITE HOUSE SPOKESMAN: There's absolutely no question the fourth quarter is going to be a very weak quarter.

PRESIDENT-ELECT BARACK OBAMA: These are also tough times for many Americans struggling in our sluggish economy. As we count the higher blessings of faith and family, we know that millions of Americans don't have a job.


WILSON: There you have it. Everybody in agreement — the economy is not so strong right now.

We continue with our panel. Charles, it does seem that after we come back from the Christmas break and Congress returns that they're going to begin work on a huge new stimulus package. The question that is starting to be asked in some quarters is can we actually spend our way out of this?

KRAUTHAMMER: Well, look, the Democrats believe that spending is the way to deal with a recession, is in large extent a result of a crash in consumer spending, as we see in the Christmas season.

Everyone has lost wealth either in the market or in housing, or whatever, and the instinct is to say America has gone from a zero savings rate to a rising one, but at a time where it wouldn't be a good thing. Normally, in the long run it is, but right now it's a disaster.

So the Democrats want to drop dollars out of helicopters, and they want the government involved. The problem here is that it will going to be down a trillion dollars out the window, quickly, with little oversight. There will be a festival of lobbying and corruption in the way this money is spent.

WILSON: Before we go any further, listen to this comment from Joe Biden just the other day.


VICE PRESIDENT ELECT JOE BIDEN: I know it's Christmas. I know it's the Christmas season, but President-elect Obama and I are absolutely, absolutely determined that this economic recovery package will not become a Christmas tree.


WILSON: All right. There you have heard it. They said that they will not let it be a Christmas tree, that although there are billions and billions of dollars about to be released into the economy, that there will be no pork.

KONDRACKE: Yes. This defies every precedent known to Washington from the founding of the Republican and even before.

Look, it is just impossible that it not be a Christmas tree. I mean, you've got members of Congress who have their constituents screaming and yelling at them that they are suffering, and they are, and they need help, and every congressman, in his own or her own political interest and in the interests of their constituents, is going to try to put something in there to benefit their district. That's known as an earmark.

And if the administration is going to rule out earmarks and not listen to members of congress, they are quickly going to have their honeymoon over, even with this Democratic congress.


BARNES: They will be serving, look, the interest groups of the Democratic Party — build infrastructure, satisfy labor, do something to create green jobs, whatever they are, and environmentalists will be happy, and so on. That's where the money is going to go—to state and local governments, the governors and mayors, who are mostly Democrats, will be happy with that.

There are two models, Brian. There is the Franklin Roosevelt model during the Depression, and the Ronald Reagan model during 1981 and '82, a very deep recession. One worked, the other didn't. FDR, the model that Obama seems to be following did not work. The economy was in terrible shape at the end of the '30's as it was in the beginning of the '30's.

Ronald Reagan cut taxes and engaged the one group that Obama doesn't seem to be interested in engaging the business community, corporations, entrepreneurs. And Reagan gave them tax cuts, and they built jobs like crazy that were permanent jobs.

WILSON: But there have been Republican presidents who have released money for infrastructure projects and building up highways and things like that.

BARNES: I remember when Gerald Ford did it, and those projects all started after the recession was over.

KONDRACKE: Yes, but this is supposed to be a long recession. Everyone figures it will be a long recession, so if it takes time to get up and running —

And, you know, Ronald Reagan was also a Keynesian. He cut taxes, but he also increased spending on defense and stuff like that. You build a tank or a ship or an airplane, and that has a long lead time, too. That's just like a road or bridge.

BARNES: Mort, that's not what happened, attacking the recession of 1981 and '82. That's not what he did. He did not increase spending. He cut spending.

WILSON: But you said you don't think it will be a long recession?

BARNES: I don't know. I don't know how Mort knows. I don't know. I don't know how long it will be.

KRAUTHAMMER: The thing about cutting taxes is that the people are now are in the saving mood, and they will likely save it rather than spend. That's why some economists are in favor of spending.

The downside of spending, of course, is corruption and waste and mismanagement, which we know is going to happen on a colossal scale.

WILSON: Just around this table, this holiday season, did you spend more or less this time around?



KRAUTHAMMER: Hoarding my dollars.

WILSON: All right. Thank you very much, guys. Good to be with you today.

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