This is a rush transcript of "Special Report With Brit Hume" from January 8, 2009. This copy may not be in its final form and may be updated.


PRESIDENT-ELECT BARACK OBAMA: There is no doubt that the cost of this plan wi ll be considerable. It will certainly add to the budget deficit in the short term.

But equally certain are the consequences of doing too little or nothing at all. For that will lead to an even greater deficit of jobs, incomes, and confidence in our economy.

SENATE MINORITY LE ADER MITCH MCCONNELL R-KY: Well, given the deficit numbers, it really out not to be a trillion dollar spending bill. I think we can start by saying that.


BRET BAIER, HOST: The Senate minority leader reacting to President-elect Obama's speech today on the economy, a speech that was short on details but big on urgency for Congress to act fast on this massive program, whatever the figure is. You heard the Senate minority leader saying it shouldn't be the "T" word — "trillion."

Some analytical observations from Jeff Birnbaum, managing editor digital of The Washington Times, Mara Liasson, national political correspondent of National Public Radio, and syndicated columnist Charles Krauthammer — FOX News contributors all.

Jeff, your thoughts on this day?

JEFF BIRNBAUM, COLUMNIST, THE WASHINGTON TIMES: I have to say, we've heard President-elect Obama talk about dire predictions of the economy. We have heard him speak about it several times.

But not a major address like this. It really was a stark wakeup call. He used the word "crisis." He warned that unless a major stimulus package isn't passed and a very large one, that the consequence could be recession for years to come and double digit inflation and all sorts of terrible things.

If he was trying to instill confidence, which he said he was what was needed to try to help turn the economy around, I think that he did a lot more fear mongering in this speech than he did confidence building. And I think that his rhetoric, which can be soaring at times, probably needs to be adjusted so that it gives more confidence.

There's no question, though, that this kind of speech has galvanized congress, and Republicans and Democrats both agree now that there needs to be a very large economic recovery plan.

What was not clear from this speech but which is now happening all over Capitol Hill is that there is a tremendous battle over where that money will go, where will the $800 billion over two years go? How much of it will be taxes? How much will be business incentives? How much will go to education? How much to healthcare?

So there is $800 billion on the table —

BAIER: or more.

BIRNBAUM: Or more, but probably about $4 trillion worth of people who are interested in it, and that will mean that this will take longer and be a bigger fight than we're now expecting.

BAIER: Mara?

MARA LIASSON, NATIONAL POLITICAL CORRESPONDENT, NATIONAL PUBLIC RADIO: I think the reason why the Republicans are warning that this shouldn't get to a trillion is because a trillion is a kind of psychological threshold. It's little scary to spend a trillion dollars.

BAIER: But $800 billion is-

LIASSON: I know — $800 billion is pretty close. And originally I think the Obama team didn't want to propose something over a trillion. That is why they kept on saying 775.

But this thing is going to be over a trillion in the end, and that is a humungous amount of money.

And the big question is, when you have something this big, it is almost guaranteed there will be all sorts of stuff in it that doesn't meet the standards, the very high-minded standards that Obama has laid down. It really has to work. It has to actually stimulate the economy. It can't just be pork.

But the real question is, is what can the government spend money on that will really stimulate the economy or cushion the severest effects of the recession? And not everything in this package is going to do that.

The other thing, the heart of this economic crisis, is a credit crisis. And all of that money that has already been shoveled into the banks to improve their balance sheets has not made that go away. Banks still aren't lending. And that's the other part of this that Obama has to address.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: What's so interesting is how the father of the idea of the trillion dollar anything is Hank Paulson. He's the guy who out of the blue came up with $700 billion a year ago, which he got off the back of an envelope, that was five percent of GDP. And now anything less seems like lunch money.

What's really interesting about this speech that Obama gave today is that we are now living in an unprecedented time when we actually have two active presidents. Foreign affairs is entirely the Bush administration acting with a lot of authority on Gaza and other issues, and Obama staying entirely out, as he should, and he knows he has to until Inauguration Day.

On the economy, the Bush administration is entirely irrelevant, and we have a president Obama. He is our domestic president. The markets, the local governments, state governments, foreign governments are all looking to him and to the hints in his speech as to what's going to happen on the economy.

BAIER: Jeff, today, Senate Minority Leader McConnell pointed back to Nancy Pelosi's words saying back when they were originally talking about a stimulus package that it had to be "timely, targeted, and temporary."


BAIER: They're saying will this one be all three things?

BIRNBAUM: I think this is the week of big reversals, with Roland Burris first, and now on this. This will be a little later than expected. About half of it will not be temporary in any way. A lot of it will be for education, for roads that will be there for decades. And whether it will be targeted or not, it probably won't be by design, because no earmarks are involved. So I think a lot of these things will be reversed. I think the components here will be put together based on politics. That is, there will be a lot of trading. There will be geographic questions. There will be partisan questions.

I bet the $300 billion out there now for a tax cut is just a down payment, for example. You will need more than that to get enough Republican votes to pass this in a convincing way. And I think there will be less on public works projects as well.

BAIER: Quickly.

LIASSON: I am just saying "in a convincing way" is key there.


LIASSON: Obama wants a big Senate majority. He wants to pass this 80-20 in the Senate. He wants a real mandate.


An update on another story we have been talking about a lot on this show, and that is the Illinois House Committee has voted unanimously to recommend impeachment for Illinois governor Rod Blagojevich. We updated that from Steve Brown's reporting earlier as that vote was going on. Now, this moves forward. We'll continue on that story as well.

Next up, Israel took fire from Lebanon today as its offensive against Hamas rolls on. So what has been accomplished, and how much longer will it last? The panel discusses after the break.



ISRAELI PRESIDENT SHIMON PERES: The Israel Defense Forces responded immediately and will respond every time on the spot. We have no interest in raising the flames and no interest, on the other hand, to sweep it under the car at the carpet.

And this is how we will behave, and this will not change at all the plans and decisions need to eliminate once and for all the dangers coming from the south.

TEREK MITRI, LEBANESE INFORMATION MINISTER: The Lebanese stand is very clear. We do not want to give Israel an excuse to drag Lebanon into a war which is not in our interests.


BAIER: Today as the offensive in Gaza continues rockets came into Israel from the north, from Lebanon. You heard Israeli President Shimon Peres saying they will always fire back. They did fire artillery back. And the Lebanese saying this is not — they don't want to be dragged into another war with Israel.

But is it a new front in this dynamic going on in Gaza? We're back with the panel. Charles, what's the latest here?

KRAUTHAMMER: Well, potentially it is, but it doesn't look as if any of the parties are interested in making it a new front. This was undoubtedly a radical Palestinian offshoot that did this. Israel responded relatively restrained manner. Hezbollah did not respond.

It looks as if the radical Palestinians were interested in dragging in Hezbollah and starting a second front. It's not going to happen.

What this shows, a, is how isolated Hamas is. It has no support of any real kind anywhere in the world — a lot of words, but no action other than a volley of three rockets in Lebanon.

Secondly, it shows how useless the U.N. is. In an earlier report, we saw the U.N. guy from southern Lebanon whose job is to prevent any of these attacks, any of the rearmament, any of the rocket fire, express befuddlement about how all this had happened.

That's why there is a danger with what is happening now at the U.N. There is a huge effort to have Israel accept an arrangement in Gaza as it has in Lebanon. But what has happened in Lebanon is a huge rearmament of Hezbollah. There is no policing of what's happening.

If you get it in Gaza, you will get rearmament of Hamas. You will get a restoration of its weapons. And you're going to have a round in a year or two that's going to be even worse.

Israel has a chance now to break Hamas and to actually get it out of the power in Gaza if it continues in its offensive. I hope the United States doesn't join with the European Union in stopping this offense. You could have a decisive change of government in Gaza if Israel is allowed to continue, but I'm not sure it's going to be allowed to.

BAIER: Because, Mara, that resolution is moving forward in the Security Council.

LIASSON: Yes. And pretty soon it's going to be up to the Obama administration to decide what to do.

Right now, as Charles mentioned earlier, Obama is very comfortable, and I think quite happy, to not have to make these decisions and to say there is only one president at a time. He has been more reticent in this conflict than he was after the Mumbai attacks or even other things that happened when he was a candidate or president elect.

But pretty soon it will be up to him, and I think Israel's goal is not just to break Hamas but, better yet, to discredit it, to show that it was too weak to even protect its own people. I don't know if that can be accomplished, but I agree, so far it is striking that it hasn't gotten overt help from Iran or Hezbollah.

BIRNBAUM: That's so, but I think Israel is somewhat in danger of overplaying its hand here in trying to root out a lot of caches of weapons. It has to go into hospitals and to schools.

Today, for example, they blew up a U.N. convoy truck, and the U.N. is pulling out some of its forces from Gaza.

And I think world opinion could easily turn against Israel if it turns up too much heat on this subject. And that's the big danger that Israel faces.

BAIER: Always the question.

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