This is a rush transcript of "Special Report With Brit Hume" from August 4, 2008. This copy may not be in its final form and may be updated.


SEN. BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: We should sell 70 million barre ls of oil from our Strategic Petroleum Reserve for less expensive crude, which, in the past, has lowered gas prices within two weeks.



I do not believe that we should use the Strategic Oil Reserves at this point.



It does include a limited amount of new offshore drilling. And while I still don't believe that that's a particularly meaningful short- term or long-term solution, what I said is I'm willing to consider it if it's necessary to actually pass a comprehensive plan.



More drilling is just going to leave us in an oil deficit. And we're still going to be sending billions to foreign nations.


BAIER: There you see Senator Barack Obama today and Senator Barack Obama in a couple of different speeches over recent weeks about the energy issue. He gave a big speech about it today, as did John McCain.

How about this issue and where it stands now? Some analytical observations from Fred Barnes, Executive Editor of The Weekly Standard, Mara Liasson, National Political Correspondent for National Public Radio, and syndicated columnist Charles Krauthammer, FOX News contributors all.

Fred, what is your take of the speech today and the back and forth?

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: Well, Barack Obama does change his mind, that's for sure--and in rather short order--on taking some oil out of the strategic reserves.

Look, this windfall profits tax he is proposing is amazing on several grounds, because, one, I mean, it is really cheap political demagoguery. We're going to take money from the oil companies and we're going to give it to people--exactly the kind of politics that Obama has said over and over again he doesn't play. It is politics at its crassest possible form.

And then, of course, it's bad economics and bad policy.

Look, there's a simple--there's only one thing you have to understand about this windfall profits tax. When you tax something, you get less of it. When you subsidize it, you get more of it.

I mean, this is why I suppose he voted for these tax breaks for the oil companies back in 2005--ones that McCain voted against, by the way-- and we got more. Now we will get less with this windfall profits tax.

And his goals--the one that I found the most--most of these goals he set are literally fantastic--in other words, they're fantasies. But he says we'll eliminate the need for oil from the Middle East and Venezuela within ten years.

Look, I've talked to a lot of people about this, where we can go, how much oil and gas we're going to need, and so on, and that's just not going to happen.

BAIER: Mara, who is winning this debate?

MARA LIASSON, NATIONAL POLITICAL CORRESPONDENT, NATIONAL PUBLIC RADIO: I think up until now, the energy debate was kind of the silver lining for the Republicans in an otherwise gloomy economic debate where they were losing to the Democrats generically by 20 points, except for on this issue.

Offshore drilling is popular, and it looked to people that they had a better energy proposal, which was to do more of everything--solar, alternatives, conservation, plus drilling and nuclear. And now I think...

BAIER: Although John McCain says that, as well. He has says he is for all those alternatives.

LIASSON: That's what I'm saying. Up until now, McCain has been winning on this argument.

I think Obama was smart politically to kind of blunt the advantage that McCain had on drilling by saying as part of a compromise, I'm happy to do that. He's not a rigid ideological politician. He's willing to make a deal.

I think the windfall profits tax--I agree with Fred. On that one it seems like a gimmick. It's symbolic. It is a populist measure.

But he is the one who stood pretty firm against this "gas tax holiday" during the primaries with Hillary Clinton, and he really stuck to his principles on. It was a hokey, symbolic idea that would not bring down the price of gas. I think this is the same thing.

BAIER: To release 70 million barrels from the Strategic Petroleum Reserve, most experts say it wouldn't bring down gas prices quickly, or that long, and wouldn't do too much for a long period of time. Is that different than the gas tax holiday in some way?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: The gas tax holiday was hokey and cheap, and this is hokier and cheaper, because to take from the Strategic Petroleum Reserve is to jeopardize our national security. It really is for supply interruption, which would be a catastrophe for our country.

To take stuff out is going to have negligible effect on price, it will have an effect for a day or two. The amount he wants to take out is about a week's worth of imports. It's absurd.

And if you wanted to remove from the Strategic Petroleum Reserve, at least you should be in favor of drilling so that, domestically, in a few years, we will have essentially new strategic reserves in the Arctic or offshore, which would substitute for draining the reserves we currently have.

So his position is contradictory, cheap, and political.

And the stuff he said only a week ago in Missouri on Wednesday of last week, if we only inflated our tires it would substitute for all the oil that the Republicans want to drill for is a towering absurdity.

The amount we would save in our tires generously calculated is about 1/200 of what you get from offshore oil alone, and the amount of oil shale is in the West would give us 10,000 years worth of the gasoline saved by inflating our tires.

The problem with the Democratic position is they always say 'let's do x' instead of drilling. What the American people understand is you do x, y, and z, and everything.

But the reason not to drill is untenable. You drill as well, and that will help us as well.

BAIER: Mara, last thing. For the McCain campaign to send out these tire gauges and say this is the Obama plan, is that--

LIASSON: This is not the whole Obama plan.

I think, as Fred always says, he loves a good political stunt. This is a good political stunt. They get to send out the little props.

Then, of course, the Obama campaign answered with e-mails from NASCAR and all sorts of other people who actually say that inflating your tires is a very good idea--maybe not the answer to the oil energy crisis, but it's a good idea and it will save some energy.

BAIER: So inflate your tires.

KRAUTHAMMER: It is not even a tenth of a hundredth of the solution

BAIER: All right, last word on this topic.

The president heads to China for the Olympics while China deals with some Olympic-sized problems. We'll talk about that when we come back.


BAIER: President Bush and the first lady, you'll see her in a bit, taking off on the final trip, likely to be the final trip to Asia, the Beijing Olympic games the centerpiece of that trip.

But, of course, the politics surrounding all of this, the protests, also Internet monitoring in Beijing, all a topic of conversation as he heads to Asia. We will talk a little bit about that trip, and perhaps the implications of it.

Back with the panel. Charles, as the president heads there, there are a lot of questions about how Beijing will handle these games.

KRAUTHAMMER: Look, if you are going to have Olympics in a dictatorship, you have to expect stuff to happen, and it's happening. The curtailment of the internet, the putdown and protests.

And what we saw, the protesters in the street today are women, mostly older people who are -- a million driven out of their homes-- to make room for the plush hotels that westerners will be staying in, and athletes will be staying in.

That's what happens in a command economy, in a command society that's run by Leninists. So you have got to expect that.

But look, this is a political event. When the Olympics were given to countries like Italy, Japan, and Germany in the 60's and 70's, it was a way to welcome them back into the international community after the second World War.

It's also a way of anointing a country as a great power--Nazi Germany in '36, the Soviet Union in '80, although it went awry because of Afghanistan, Seoul in '88, and now China. This is a coming out. It is an announcement of her status as a great power. That's what all of this is about.

As long as it isn't a catastrophe, the Chinese will have succeeded in doing this.

BAIER: The president, Mara, says that it's about the Games. The administration says they make points all the time with the Chinese about human rights. There are still a lot of people who say he shouldn't be there.

LIASSON: It's not just about the Games.

And there's two ways the Olympics can be a reward or an incentive, as Charles said. For some countries it's a reward for joining the community of nation and living up to all their standards. In this case it isn't that. It's an incentive.

The theory was that this will promote openness in China, and also, maybe, shine a spotlight on all of China's failures so far to live up to the international standards, and they certainly have so far in terms of just pollution and repression and Internet access.

I really wonder at the end of this how many stories journalists who are over there to cover the games will be able to do about other things that are going on in China. It's going to be pretty hard for them.

But I still think, in the end, China could end up with a black eye, not just a triumphant week.

BAIER: What's your take?

BARNES: I don't care how many other stories they do that are not about the athletes. I don't want to read them! I don't want to hear them!

Look, it was a terrible idea to give these games to China. The Chinese are going to run them like Hitler ran them in 1936!

But here is what matters. Here is what I want to see. -- I want to see the American basketball team, see if they are as good as the greatest basketball team ever, the "Dream Team" in 1992 with Barkley and Jordan. I want to see the women's soccer team. I want to see the track and field.

That's what I want to see. I want to get--look, horrible politics there. As Charles says, what do you expect out in a dictatorship? But let's concentrate on the athletes.

BAIER: There you go. Fred has the last word for this panel.

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