This is a rush transcript of "Special Report With Bret Baier" from May 18, 2009. This copy may not be in its final form and may be updated.

BRET BAIER, "SPECIAL REPORT" HOST: Recapping our top story, after meeting for more than three hours in the White House, Israeli Prime Minister Benjamin Netanyahu and President Obama agreed that peace talks with the Palestinians and ending Iran's nuclear threat are the two most important issues in the Middle East.

But the two leaders seemed to disagree on which is issue number one.


BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: The worst danger we face is that Iran would develop nuclear military capabilities. Iran openly calls for our destruction, which is unacceptable from any standard.

PRESIDENT OBAMA: If there is a linkage between Iran and the Israeli-Palestinian peace process, I personally believe it actually runs the other way.

To the extent we can make peace with the Palestinians, between the Palestinians and the Israelis, then I actually think it strengthens our hand in the international community in dealing with a potential Iranian threat.


BAIER: So let's bring in our panel, Fred Barnes, executive editor of the "Weekly Standard," Juan Williams, news analyst for National Public Radio, and syndicated columnist Charles Krauthammer.

Your thoughts on the meeting and the events of today, Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: There were two new, important elements. One was overt and one was implied.

The new element that I think was stated openly was that, for the first time, Obama stated that his negotiations with Iran are not open-ended. He set not a deadline, but a timeline.

The timeline is that he set openly was that if by the end of the year there is no indication of significant movement with Iran, it's over, and he will turn to strong sanctions. And that's new.

Secondly, they both implied that the negotiations will not be just between Israel and Palestinians. A two-way will become a three-way.

The premise here is that the Palestinians are too weak. Abbas, the leader of the Palestinian Authority, has no authority to negotiate. And Hamas, the other element among the Palestinians, is a war-making entity. It's not going to make peace. So there is no real interlocutor that Israel has.

So what is going to happen is you will see Israel start to make small concessions. And the response will come from the Arab states, not in the form of sending ambassadors, but of gestures of warming of relations.

So they're going to have, in essence, a dance between Israel and the Arab states, and the Palestinians, who are the weaker element here, are going to make small gestures. But you're going to see all of these things happening on the ground, gradually, but not in the way that we have envisioned them in the past as simply between Israel and the Palestinians.

BAIER: Juan?

JUAN WILLIAMS, SENIOR CORRESPONDENT, NATIONAL PUBLIC RADIO: I think they were — I mean, this is such an initial step. This is two men getting to know each other, I think measuring each other much as fighters in the first round of a big bout, because you have a right-wing government now in Israel, and you have Barack Obama who comes to the scene with new views of this relationship, and someone who has, in fact, you know, been open to the idea that Israel is harsh in its treatment of the Palestinians.

In fact, today, he made it a point of saying we cannot have further settlements. And he made it also a point to say there must be a more humanitarian approach to the treatment of Palestinians in the Gaza Strip.

So he is saying very clearly this is the way I see the world. And what we just saw in that tape, where he goes on to add that there must be a sense of peace there and a two-state solution.

And today, Netanyahu did not buy into this notion of a two-state solution. He said clearly the Palestinians first have to acknowledge that Israel's right to exist, which then eliminates right of return, and all that.

BAIER: Juan, you know, a lot has been made of that two-state, and he didn't say it. But, I mean, there isn't really a second state yet. You have Hamas in Gaza, and you have Fatah split.


BAIER: So to have Netanyahu say it, is that an important event from today's meeting?

WILLIAMS: It would have been an important event, because, remember, going back to Annapolis, Bret, that was the solution that, at the time, Israeli leadership bought into it, that that was the goal.

It's not to say that it can be an immediate achievement, because as you rightly point out, you have a dysfunctional Palestinian — I don't know if you call it a government. What would you call it?

But the idea is that's our goal. That's where we're going with this conversation. And what Netanyahu is doing now, I think, is setting up obstacles to negotiations.

BAIER: Fred?

FRED BARNES, EXECUTIVE EDITOR, "THE WEEKLY STANDARD": Charles is a little more optimistic than I am. I'm not optimistic at all. I thought when you saw in their availability after the meeting, when reporters asked questions, you saw Obama and Netanyahu saying things that I don't think they believe.

It had a hugely unrealistic quality to me. It was just unreal. You had Netanyahu saying Obama is one of the greatest leaders in the world. And Obama saying they had extraordinarily productive talks they had just had.

I don't believe that for a minute. And the reason is, and the reason I think, for what Charles is talking about, where the response will come from the Arab states to anything Israel does rather than the Palestinians, is that the Palestinians, as Juan, as you said, they don't even have a state.

I mean, you have Gaza, and it's a bunch of terrorists who want to destroy and kill — destroy Israel and kill all the Israelis. And then you have the Palestinian Authority on the West Bank, and they're completely feckless. They're weak and corrupt. So there's nobody at all for Israel at all to deal with. And I don't care whether the Arab states can respond favorably. It comes down to whether Palestinians can actually do something, and they can't.

BAIER: Charles, on the background here, before you continue, you had reporting that the CIA director, Leon Panetta, traveled to meet with Prime Minister Netanyahu to say that the is Israelis need to tell the U.S. before they would attack Iran. And, obviously, no one is talking publicly about that meeting. Do you think the Israelis are happy with what they got out of today, on Iran, especially?

KRAUTHAMMER: No one is talking publicly about it, and no one will talk about it privately. This is the most secret and opaque element of this relationship. I never got anything out of the Bush administration. You won't get anything out of Obama or the Israeli team. Obviously, the issue is, will Israel let America know in advance if and when it attacks, which would likely happen next year if there were a breakdown of negotiations between Israel — between America and Iran.

And the answer is, nobody is saying. And the reason is that if Israel were to attack, you want to have a cover story where America was not told, because otherwise — everyone will assume America was told. But you don't want to admit that, whether it's true or not, because the retaliation will be against the United States.

So on that issue, anybody who says he knows, I think, is lying.

Look, on one issue about Israel and responses coming out of Arab states — you may not care, but the Israelis do. No more relations with Saudi Arabia means a lot.

And you have to have a process. Everybody understands that even if it's a sham.

So if you are going to have a process, have one in which Israel makes concessions and they receive something, and the Arab state responds and it will at least be something.

BAIER: Republicans are pushing House Speaker Nancy Pelosi to back up her allegations against the CIA or back down.


JOHN BOEHNER, (R-OH) HOUSE MINORITY LEADER: I do believe that the ball is in her court. And she has to either put up or have an apology and move on.


BAIER: So what will she do? The all-stars predict when we are return.



BOEHNER: And if the speaker is accusing the intelligence community of lying to her or purposefully misleading her, then she ought to present that evidence, turn it over to the Justice Department, and have them prosecuted. And if that is not the case, then I think she owes our intelligence community an apology.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I appreciated the opportunity to get involved in this on Friday, and I declined. I haven't changed my mind on Monday.

QUESTION: Does the president have confidence in Speaker Pelosi?

GIBBS: He does.


BAIER: The White House isn't biting on the House Speaker questions, the whole back and forth about what she knew and when she knew it, and whether she will issue and apology to the CIA for saying they lied to her in those briefings.

We're back with the panel. Juan, where does this go from here?

WILLIAMS: Well, I think there will be continued attention on Nancy Pelosi. Clearly you have a character, who is not a very popular character if you look at her approval numbers across the board, and I think people like John Boehner, the minority leader, sees an easy target.

And it is an easy target because Republicans want to focus on Nancy Pelosi and what she said or didn't say, and the potential that, one, she is either lying — because if you listen to Porter Goss, the former CIA director but also a former member of Congress who said he was in the hearing, the CIA did tell them that they were using enhanced interrogation techniques.

The other, more charitable interpretation of what happened with Nancy Pelosi is she was under a lot of pressure. It was in the aftermath of 9/11, and she really didn't pay attention. And therefore she is subject to being criticized by Democrats who say you could have done something to stop this early on.

Her response has been now to say it's really the Bush administration's failure for not directly saying to her we're using techniques that could be interpreted as torture.

But if you're asking me what happens from here, I think the Republicans continue to stir it up and hope that this pushes out the door any possibility o a further truth commission or probe into the handling of these things, while the Democrats, I think, if they are going to stand on principle, persist.

BAIER: The chairman of the House Intelligence Committee, Sylvester Reyes, has said "It is wrong to release these memos despite the fact that Speaker Pelosi is calling for this stuff to come out."

Sylvester Reyes saying "When you are asking to declassify material that has been classified for a very good reason, that's the height of irresponsibility."

He tags Republicans with that, Charles. This is a back and forth even among Democrats on the Hill.

KRAUTHAMMER: Well, he's serving the Speaker in stopping the release of these documents. I imagine if they were exonerating Pelosi, you would see him tomorrow morning. So he has his finger in the dike on this.

I think the process is at a standstill right now. Two things might happen — a, a forcing of the release of documents, which is up to Reyes.

If he doesn't, I suspect there are people in the CIA who are rather angry about being accused of lying, felonies, the kind of a treason in lying to Congress about all of this, who are upset. And if the documents are not released officially through Congress, you might have a leak or two of stuff about the briefing in which she says she was told there was no waterboarding. If that is so, that would be devastating.

So I suspect it will be quiet now. There will be an argument over release. If not, I suspect you will get a leak or two strategically done.

BAIER: Fred?

BARNES: You know, Nancy Pelosi can go look at that memo. Members of Congress can go. Senior staffers can go and look at it. She doesn't want to go look at it, because of what it is going to say.

Look, Juan, either way, you have two options there. Either way she is lying in what she is saying now. She's not saying "Well, I wasn't paying attention. Sorry. Next time I'll stay awake." So she is simply not telling the truth.

The other thing is, she may not be popular, but she's very, very powerful. And I'll have to say she is one of the most powerful House Speakers in a long time. It surprised me, it surprised the Republicans, who aren't the issue here —

BAIER: And you don't think she is in trouble?

BARNES: I think she is in trouble.

BAIER: Her leadership.

BARNES: You know what this spectacle is? This is a spectacle of a powerful Washington politician self-destructing. And she's putting the fuel on the fire. Republicans are just there on the side criticizing her.

And they got a critical assist from Leon Panetta. That's why you had Mitch McConnell reading on the air on Sunday.

BAIER: The president made his much anticipated appearance at Notre Dame Sunday. The panel reviews his performance and the issue of abortion.



OBAMA: While we know that the views of most Americans on the subject are complex and even contradictory, the fact is that at some level the views of the two camps are reconcilable. Each side will continue to make its case to the public with passion and conviction. But surely we can do so without reducing those with differing views to caricature.


BAIER: President Obama at Notre Dame this weekend. As you see, a new FOX News opinion dynamics poll shows 49 percent of Americans now say that they are pro-life versus 43 percent pro-choice. A Gallup poll actually has pro-life at 51 percent, relatively close — a shifting tide of those numbers over time.

We're back with the panel about the president's performance and about this issue — Charles?

KRAUTHAMMER: It's a brilliant speech and a brilliant handling of this issue on which, as you show, Americans are so split.

Obama — other politicians have a way of fudging irreconcilable issues. Obama has a way of transcending them, hovering above them. As we saw in that byte, he sort of — he takes a sort of objective, outside, Socratic stance, in which he says I shall respect. Each side has its views. And he in a way almost mediates between them.

It's a real sleight of hand, because, as a politician, especially on abortion, he isn't only in one camp. He is about as partisan as you get. His views on abortion are about as radically anti-restrictionist as almost any American president.

And yet he presents himself — and I think in a brilliant way and politically a brilliant way, as evenhanded and objective. And in doing so, I think he won over young, moderate Catholics, which was his objective. And he succeeded I think extremely well in doing that.

BAIER: Juan?

WILLIAMS: Well, I think the president — as Charles said, I think it was a very effective speech. I think when you think about the moral and spiritual dimension of a decision such as abortion, I think you make it very clear in a house of God, like Notre Dame, that you understand exactly why people would object to the use of abortion in this country.

And when he goes on to speak about Notre Dame as, you know, a crossroads and a lighthouse, helping people to understand, and that there doesn't need to be some caricaturing of the other side, I think it's very effective.

Let me say about those poll numbers that you just suggested — there is much more to those poll numbers. It is new that more Americans are saying that they clearly oppose abortion in the country. But if you then go in and say should women who want an abortion not be allowed to have an abortion, again the numbers go over 60 percent. People say yes, allow women to have abortions. But in terms of people's personal feelings, I think that's where you see a shift in the numbers.

BAIER: Fred.

BARNES: Yes, but you also see whenever you go into these polls that the vast majority of Americans want to have severe restrictions on the right to have an abortion. Not to ban abortions completely, but they do want some severe restrictions which Barack Obama as president would undo because he favors the Freedom of Choice Act, which would eliminate all these restrictions.

I want to differ from Charles again. I think this transcending of the issue consisted of one thing — breathtaking hypocrisy on the part of Obama.

Here he is acting like he's the guy seeking common ground. He's not seeking common ground. His policies go, as Charles correctly said, they are going in the direction of taxpayer-subsidized abortions and promoting abortions overseas.

Every one of his policies would increase the number of abortions, not find any common ground between those who oppose and those who are in favor of abortion.

And contrary to Obama, it's not a complex issue at all. It's a very simple issue.

WILLIAMS: But wait a minute, he says he wants to reduce unintended pregnancies —

BAIER: Charles, last word?

KRAUTHAMMER: All I'm saying is he pulled it off.

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