This is a rush transcript of "Special Report With Brit Hume" from January 11, 2008. This copy may not be in its final form and may be updated.
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FRED THOMPSON, PRESIDENTIAL CANDIDATE: You have the direction of governor Hu ckabee would take us in. He would be a Christian leader, but he would also bring about liberal economic policies, liberal foreign policies.
MIKE HUCKABEE, PRESIDENTIAL CANDIDATE: The Air Force has a saying that if you're not catching flak, you're not over the target. I'm catching the flak. I must be over the target.
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BRET BAIER, GUEST HOST: That was former Senator Fred Thompson and former governor Mike Huckabee last night from the Republican debate here on FOX — interesting exchange. We'll talk about the debate, and also shift to the Democrats, what's happening on that race.
For some analytical observations on both, Fred Barnes, executive editor of The Weekly Standard, Mort Kondracke, executive editor of Roll Call, and syndicated columnist Charles Krauthammer — FOX News contributors all. They're here.
Fred, let's start with the debate. Thompson, it appeared, had a very good night.
FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: He came alive — stepped out of the grave. We all thought after 1 percent in New Hampshire, which is pretty pathetic — and he's not an unknown guy. People know him from television and so on.
But he was very good in the debate, very aggressive. Some people thought that the aggression might be aimed at McCain now that he is the front runner and won in New Hampshire. Not Thompson, he aimed at Huckabee.
But Huckabee did very well. I thought if anybody can win a debate, I thought Huckabee probably did. He was great when he got the religious question, and, said, gee, if I have to talk about religion, I would like to pass the plate to the audience here. My campaign needs the money.
So, look, Michigan is next Tuesday. Thompson is not playing there, so it didn't help him there — that is all aimed at South Carolina. But in Michigan, McCain seems to be ahead, as best we can tell. Nothing in the debate changed that.
BAIER: Charles, last night you said Thompson was dead. We got a lot of e-mails about that after this debate. Would you like to reconsider?
CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, watching Thompson last night, I tell you, Bret, I'm Jewish, but I'm prepared to keep an open mind on resurrection. That was an amazing performance.
He came out with his guns blazing on the first question — it was a sleepy question about economic stimulus, and he just unloaded on Huckabee. I thought he did well.
Thompson's problem is not that he is unlikable or that he is not a real conservative. He really is the one in the field that fits the bill. All the others have apostasies: Giuliani and McCain and Huckabee and Romney. He would have been the Reaganite candidate.
But he played it very laid back. And in a field of five, in these debates, if you're laid back, it is not going to work. It can work in one on one, but not in five.
Huckabee had shown in earlier debates that with energy and humor and some aggressiveness, you can stand out and get noticed, which is how he rose. But I think Thompson understands it's South Carolina or nothing. He has got a shot. It's going to be hard because Huckabee has a huge base of evangelicals, about 2/3's of the Republican electorate, and he is extremely strong there.
But Thompson has a good attack, and if he fights it out, he's got a chance.
BAIER: Mort, what about Mitt Romney? He said today that if he can't win in Michigan, he can't win anywhere. This is Mitt Romney, this is not pundits saying you have to win Michigan. This is the candidate.
MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: I frankly don't agree with that. It would seem to me that Michigan is a state that he ought to win, and he needs a win and all that. He needs a victory besides Wyoming.
But this is another state where Independents and Democrats can vote in the Republican primary, which benefits McCain. You would think that Romney would hold on until there is one of these closed primaries someplace on Super Tuesday, or possibly Florida, where he would have a shot to be the regular Republican candidate. He's vying with Thompson for that distinction.
Thompson is running fourth in South Carolina. I'm not sure that one debate performance, lively though he was, is going to succeed in vaulting him into the top tier.
It seems to me that Romney is the guy, and Romney has manufactured himself, retooled himself, into being a regular conservative Republican, even though lots of people don't believe him. I don't, certainly, and lots of conservatives don't, but nonetheless, he is trying to do that, and I don't know why he would give up after Michigan.
BAIER: Let's talk Democrats. Today Senator Hillary Clinton came out and said she has an economic proposal, a stimulus package. Let's take a listen.
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SEN. HILLARY CLINTON, D-N.Y., PRESIDENTIAL CANDIDATE: I am calling on the president and the Congress to work together to come up with some quick action to be able to prevent the slide toward recession.
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BAIER: So, a $110 billion economic stimulus package. Fred, timing of it, sniffing a recession? A political move?
BARNES: It probably is. At least it will appeal to Democrats where you are just throwing money at it, and, you know, "The Wall Street journal" said today, you know, flying with a helicopter, just drop money around the country. That's basically what hers is.
I, frankly, don't think it would help much in the short run. You need to do that. There are lots of things you can do, particularly through the tax system, which I think the president will do.
And she — look, if she can propose $110 billion, there has to be something that the president will agree to and Democrats will agree to. And that plan isn't it.
KONDRACKE: Look, I think, politically, it's a wise thing. If Barack Obama has a "where's the beef?" problems, she's demonstrating that she is thinking in policy terms about an urgent problem. Whether this, in detail, is the exact thing that ought to be done is another question.
There was a panel at the Brookings Institution yesterday where Martin Feldstein, who is one of the leading conservative economists in the country, was talking about $100 billion stimulus package just to offset the increase in energy prices that people are paying as a tax.
So the idea of throwing money around is not limited to the Democrats.
KRAUTHAMMER: Which is why her move is so politically smart, because she is the first. You got Pelosi and Reid, as you said earlier, approaching the president and saying hold off on the stimulus package until we negotiate.
And the reason is that the Democrats know the administration is looking at a recession, and in an election year, is of course going to have its own package. It's going to come down at the end of this month. That's going to be the story at the end of this month — how much, what kind.
But Hillary can now say "I was the first. I had a plan earlier. Where was Obama." It shows experience, et cetera. I think it was a very smart move politically.
BAIER: All right, that's it for this topic. When he we return, the panel weighs in on the president's historic Middle East trip and the bold prediction of an Palestinian-Israeli peace treaty this year.
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MAHMOUD ABBAS, PALESTINIAN PRESIDENT: We have great hopes that during 2008 we will reach the final status in a peace treaty with Israel.
EHUD OLMERT, ISRAELI PRIME MINISTER: I certainly am encouraged and reinforced about the possibilities.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES OF AMERICA: I believe it's possible — not only possible, I believe it's going to happen, that there will be a signed peace treaty by the time I leave office.
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BAIER: Well, there you hear it, the Palestinian president, the Israeli Prime Minister, and President Bush all predicting a peace treaty, a major peace treaty this year before President Bush leaves office.
So what about that? What about the prospects? We're back with our panel. Charles, it all sounds good on this trip, the president's trip. What do you think?
KRAUTHAMMER: Well, I don't think it is impossible, but it hinges on one thing. It hinges on what has held out peace for 60 years, which is will the Arab states and the Palestinians accept a Jewish state.
On the Israeli side, the issue is not territory or settlements. The Israelis eight years ago offered to give up 95 percent of the territories, evacuate all settlements, nobody is left behind. We saw a couple of years ago in Gaza evacuation of 100 percent.
The Israelis are ready to do it. Everybody knows that. The issue is — what the president is trying to broker is a deal where the Israelis agree to that officially and the Arabs accept a Jewish state.
And that means that they have to drop the demand that the five or six million Palestinians living in Lebanon or Syria or elsewhere end up in Israel, which of course, would destroy Israel as a Jewish state.
The problem is that at Annapolis and in these negotiations, you did not hear a word out of the Palestinians or any of the Arab states deviating from the older position that every Palestinian has to have a right, so- called right of return. And unless you hear any give on that, even an acknowledgment of a change in that, nothing is possible.
If there is an acceptance of that on the part of the Arabs and the Palestinians, peace will be rather easy.
BAIER: Mort, isn't the big question whether Abbas can deliver, especially with Hamas?
KONDRACKE: Of course. That's a big problem — 40 percent of the Palestinian population in Gaza is overseen by Hamas, and Hamas would be only too glad to torpedo everything if it possibly could.
And there are people in Israel who don't want any kind of a deal, because they're legitimately afraid of Hamas, and also they're, you know, having been through the whole Arafat experience, they don't trust the Palestinians, and they don't think that Abbas can deliver either.
What the president was proposing yesterday was compensation, by the way — it said a right of return on the part of the Palestinians — that the Palestinians be compensated for their losses, their land losses.
It seemed like a good idea to me, but the Palestinians have got to accept it. And whether they will or not is an open question.
BAIER: Fred, President Bush often says that he does a lot of foreign policy talks based on his personal relationships. Are there incentives for Olmert and Abbas to make this deal happen with President Bush?
BARNES: Well, there are just huge problems that have to be overcome. I think there probably are incentives. They would like to do it. He's committed to it, and he's going to come back in May. And, yes, I think they'd like to.
Whether they can do it or not is another thing. I think they probably can't. We talked about these refugees returning. These are not refugees who are actually there in Israel. These are people who are the descendents of the Palestinians who may have left the territory that is now Israel many, many years ago, and they're two, three, four generations later.
If it gets around to paying the money, we know who is going to pay it: the U.S. will pay it. That's where the money will come from. And there would be a big fight in Congress over that, but Bush would propose it.
I think there are so many problems here. I think with Hamas and Hezbollah and Iran and Syria and the international jihad movement that would like to bar any treaty or screw it up if it happens, that we're not going to see peace in the Middle East at any time soon.
BAIER: And there are a lot of doubters, but there is still a little hope, right, Charles?
KRAUTHAMMER: The president could have a legacy if he got some agreement by the Arab states or the Palestinians on accepting compensation and Palestinians' return into Palestine, not into Israel.
If you have a change on that, the Israelis will give a lot, and then the table is set for opening a settlement in the future after this presidency.
BAIER: It will be interesting to watch. Thanks panel.
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