This is a rush transcript of "Special Report With Bret Baier" from July 27, 2009. This copy may not be in its final form and may be updated.


PRESIDENT OBAMA: The Cambridge police acted stupidly.

I am surprised by the controversy surrounding my statement.

I could have calibrated those words differently.

We just heard today that while we may not be able to get the bill out of the Senate by the end of August or beginning of August, that's OK. I just want people to keep on working. Just keep working.


BRET BAIER, "SPECIAL REPORT" HOST: No matter who you talk to here in Washington, they will all come to the consensus that it's been a pretty tough month for President Obama.

Here is the latest tracking poll from Rasmussen Reports, and this is the presidential approval index. Basically you subtract the strongly approve from the strongly disapprove, and it's a negative 10 rating. That's going in the wrong direction from the White House point of view.

Let's bring in our panel, Fred Barnes, Executive Editor of The Weekly Standard, Mara Liasson, national political correspondent of National Public Radio, and syndicated columnist Charles Krauthammer.

Charles, your thoughts?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, the president has a problem, and that is that charisma is a wasting asset. And he is wasting it. He is out a lot, much too much. Presidential aura is something that you husband and you watch very carefully, and he has been spending a lot of it.

The other problem is even if he weren't accelerating the dissipation of his charisma and that aura, it would happen anyway when he enters into the presidency because he has to do real stuff. And what's defeating him is reality over his rhetoric.

Three things — stimulus, cap and trade, and health care. Stimulus, he blew a hole in the budget that is a trillion dollars wide. There is nothing to show for it. And it created a panic in the country and in the Congress about deficits.

So as a result, when he comes along with health care, there's an obsession, I think a correct obsession, with revenue neutrality — how much is it going to cost and what is it going to do? And there's no way to make the numbers work on health care.

On cap and trade, he's got a monstrosity on his hands. He presents a bill in which you want to auction off pollution rights — you can argue it's a good or bad idea — and create a market. Instead, his people in Congress give away almost 90 percent of the permits as patronage and political favors.

So he's got a disaster on his hands as a result of reality of what is in the bills. You can hide it all in rhetoric, but once it gets in legislation, you can't hide anymore.

BAIER: At the same time, China and India, on the cap and trade issue not helping because they're not signing on to any agreements there — Mara?

MARA LIASSON, NATIONAL POLITICAL CORRESPONDENT, NATIONAL PUBLIC RADIO: Yes, I think that usually the irony is that usually success breeds success. In other words, he passes things. He passed the stimulus bill and got cap and trade through the House, not the Senate yet. He has passed various pieces of legislation. That should make it easier to pass other things.

Instead, ironically, kind of ironically, it has made it harder because of what happened to these bills when they went through the Congress.

It wasn't his original idea, as Charles points out, to have 85 percent of the pollution permits given away for free. It was supposed to be a revenue maker. They were supposed to be paid for in these auctions.

The same thing with health care. The president laid down two bedrock principles. It had to be deficit neutral and it had to bend the cost curve down. Those are two different things.

But the House bill, which was scored by the CBO as doing neither of those things.

BAIER: We have talked about this before, handing the keys over to Congress at the beginning.

LIASSON: That's what, I think, was one of the key miscalculations.

Look, they learned some very important lessons from the Clinton team. Don't send stone tablets up to Congress. Let Congress write the bills and you lay down your principles.

But there is a big middle ground between sending up stone tablets and giving them this incredible deference, stepping aside while they actually make mincemeat out of your principles.

I think now the president is trying to inject himself, but a lot of the damage has been done because people look at the bills and how they have been — the report card from these bills from the CBO, and they say, gee, that's not what the president said we would get.

BAIER: Maybe not stone tablets, but a few post-it notes would help here and there?

FRED BARNES, EXECUTIVE EDITOR, "THE WEEKLY STANDARD": I don't think the people who voted for Barack Obama voted for Nancy Pelosi and Harry Reid to write all the bills. Of course they didn't.

And it was a mistake for him to do that. There needed to be middle ground, because what the Clinton people didn't work on either when they did it in secrecy and then just thrust it to Congress, their health care bill, 15 years ago.

Charles is right. President Obama is overexposed. Franklin Roosevelt, a great communicator as president, remember, would give these fireside chats over the radio every five or six months. And the audiences, people waited for them. The audiences were eager to hear, a huge audience.

And Obama, we see his ratings going down when he is on television now. People are getting tired of him already, I think, and they're losing interest in him.

There was a question before whether — remember, I guess a month ago or two months ago, when Obama's numbers were pretty high and his approval ratings were high, but the ratings for his policies on health care and cap and trade, they were 15, 20 points lower.

And the question was, well, will Obama pull those numbers up on his policies and make them more popular or will they drag him down? We know the answer. They dragged him down. That's exactly what has happened.

I can't think of a single example — but maybe there is one — where Obama has given a big speech, he's gone on television, he's had a major pest conference where he blabs for the first 15 minutes on his own where, he has actually jacked up the numbers on anything.

For the last week and a half he has been talking on health care, and what has happened to the health care numbers have catered. But his numbers have gone down —

BAIER: Is the thinking changing in the White House about that, Mara?

LIASSON: Look, first of all, to compare him to FDR, there is no doubt that I think he is overexposed. But you can't compare the era of FDR when there were not 18 million sources of information.

BARNES: The principle is the same. The principle works.

LIASSON: But there is something else going on. He is not saying anything new. In other words, if he had gone in the last press conference and made news like "I would like Congress to stay in until they finished," something like that, that would be different.

What he has done is he has kind of repeated these talking points and he doesn't seem to be kind of advancing the argument.

BAIER: He has had four primetime news conferences. President Bush had four primetime news conferences over eight years.

KRAUTHAMMER: But it is not only the tactics. It is the substance. He ran as a centrist, he's governing as a leftist. Leftism in America doesn't work, and that's what he's discovering.

LIASSON: He didn't really run as a centrist.

KRAUTHAMMER: He ran a center left. He was not scaring anybody. He never announced he was going to revolutionize health care, revolutionize energy, and spend a stimulus in the first month or so of $1 trillion on nothing.

BAIER: Last word.

BARNES: In an odd way, he is a uniter, not a divider. He has united Republicans in a way that I didn't think they would be this united. And who is divided on cap and trade and health care and so on? Democrats.

BAIER: One person who may soon be after the president's job, we'll see, just got rid of her old one. What's next for Sarah Palin, when we come back.



SARAH PALIN, FORMER ALASKA GOVERNOR: It is because I love Alaska this much, sir, that I feel that it is my duty to avoid the unproductive, typical, politics as usual, lame duck session in one's last year in office. How does that benefit you?

With this decision now, I will be able to fight even hard for you, for what is right, and for our truth.


BAIER: Now former governor Sarah Palin, there you see the latest FOX News opinion dynamic poll and you can see her favorability rating has dropped.

As you look at this next poll, however, the 2012 presidential nominee run, you can see that her prospects have increased since May, up to 17 percent in this poll.

What about Sarah Palin, her exit speech, and where she stands now? We're back with the panel — Fred?

BARNES: I had initially thought that her — if she wants a future career as a national political player, that stepping out as governor was a mistake. But I have changed my mind on that.

Look, I don't know how far she will get in national politics, but there was nothing else for her to gain, and it was just going to be stagnating anyway between the legislature and her. So there wasn't anything for her to gain politically or otherwise by staying in the governorship.

Now she can be a national political player. She is free to do it. I think she needs — and then she is free to have time to learn more about issues, to hire a good speechwriter.

And she can't just keep going around and doing what Mara said about President Obama on health care, just saying the same thing over and over again. She will have to give speeches on different subjects. And she can be a national player with tremendous clout.

The press is always going to cover her, because she's a star. You can't underestimate how important it is to be a star. And she will be all over the country. I don't know what she will do for Alaska, but she will be with us for a long time as a national political player of real clout.

LIASSON: I think she is definitely a conservative folk hero. I don't know how far. I bet she will run. I don't expect that she will get that far for the 2012 nomination. She certainly has a lucrative and promising career ahead of her in the media and giving speeches.

But I do think the big question is, and Fred raised this, is she willing to do the homework that is necessary on domestic and foreign issues to kind of get up to speed and become a real player? I mean, she has to have something to say on these things.

And what I always expected her to do when she went back to Alaska after the McCain campaign was to kind of bone up on this stuff, and she didn't. Now maybe without being distracted by her duties there, she will. I think that remains to be seen.

BAIER: Charles, we have proven many times that there is a Palin derangement syndrome for some in the media. She spent a lot of this speech going after this press and how she has been covered. What about that move?

KRAUTHAMMER: Well, it's absolutely true that she has been terribly treated by the media, unfairly, on a scale rarely seen.

Nonetheless, I don't think it's productive for her to attack the media. A, it's not going to change anything.

Secondly, her coverage is what — the oxygen that she lives on. She will be covered all the time the way no one else is. Has there ever been a losing vice presidential candidate who got a tenth of her coverage? The answer is no. It is a love-hate relationship. But it benefits her in a way.

And thirdly, when she complains about it, it has a whining quality like Nixon in '62 in which he said to the media "I won't — you're not going to have Dick Nixon around to kick around anymore."

So she doesn't need that. She is a political star. She really is a phenomenon.

And I repeat again and again, and I know it sounds condescending — she needs the discipline to study up on stuff if she is going to be a major presidential candidate. She has her constituency. It will be there, but it isn't enough.

And it is not a matter of becoming a philosopher or speaking like Obama in all kinds of complexity. It is simply studying the major issues. If she could do it, she really could be a strong candidate.

BAIER: And she will make a lot of money.

BARNES: She will.

There is a way to deal with the press and that's the way Ronald Reagan did. He didn't attack the press. He teased them and made fun of them, made jokes about them, embarrassed them. It was great. People loved it, and it didn't have that edge, that whiny edge, which you always want to avoid.

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