This is a rush transcript of "Special Report With Bret Baier" from January 11, 2010. This copy may not be in its final form and may be updated.


SENATE MAJORITY LEADER HARRY REID, D-NV: I've apologized to the president, I've apologized to everyone who was within the sound of my voice that I could have used a better choice of words. I'm not going to dwell on this anymore. It's in the book. I made all the statements I'm going to.

MICHAEL STEELE, CHAIRMAN, REPUBLICAN NATIONAL COMMITTEE: There is the standard where Democrats feel that they can say the things and they can apologize when it comes from the mouths of their own, but when it comes from the mouths of anyone else, it's racism.


BRET BAIER, "SPECIAL REPORT" HOST: All of this dust-up over something Senate Majority Leader Harry Reid said in the 2008 campaign, is reported to have said.

This is just moments ago, President Obama reacting to all of this. Take a listen.


PRESIDENT BARACK OBAMA: This is a good man who has always been on the right side of history. For him to have used some inartful language in trying to praise me, and for people to try to make hay out of that, makes absolutely no sense.


BAIER: Here is the quote from the book, which is "Game Change" by Mark Halperin and John Heilemann.

"He was wowed," "he" being Senator Reid, "was wowed by Obama's oratorical gifts and believed that the country was ready to embrace a black presidential candidate, especially one such as Obama, a light-skinned African-American with no Negro dialect unless he wanted to have one, as he later put it privately."

What about all of this? Let's bring in our panel, Steve Hayes, senior writer for the Weekly Standard, Mara Liasson, national political correspondent of National Public Radio, Juan Williams, news analyst for National Public Radio, as well.

Juan, your thoughts of the fallout, the comments, and what's being made of it.

JUAN WILLIAMS, NEWS ANALYST, NATIONAL PUBLIC RADIO: Well, I think that if you look at the comment in and of itself, it seems to me it's almost a rational comment. But I understand he used inartful language, especially when he starts talking about "Negro dialect." It makes you think the man is 70 years old, what is he talking about and what is in his mind?

It makes me suspicious as a black person, talking about the Negro dialect. And to step in controversy, black people talk about skin tone all the time. And it still is a very sensitive subject, has a deep history going back to slavery and the like.

But for him to suddenly step in there, even if what he was saying has justification in the sense that he thought Barack Obama had a chance to win as the Democratic nominee and become the first non-white male American president, and he said this is because he was of light skin, because he's mixed race and because he's someone who speaks very well.

All true, I don't have a problem with it. The problem is when he steps there and starts using this anachronistic or archaic language, "Negro," obviously inartful and he just tripped over his tongue.

BAIER: What about Michael Steele's comments this weekend that had Senate Minority Leader Mitch McConnell said something like this, even praising President Obama, that the backlash would have been huge and the media firestorm would have been immense?

WILLIAMS: There would have been — first of all, let me say Republicans in part are trying to use this to attack a very vulnerable Harry Reid and a man critical in terms of the larger Democratic agenda in terms of health care and very vulnerable in terms of his Nevada seat at the moment.

But if a Republican said there would be something of a double standard to this extent, Republicans, with very little black support in the country, are often viewed as being somehow antagonistic to black interests without even a proper examination of the issue.

So if a Republican says something he will not get the kind of support that Harry Reid saw coming from the black leadership across the country as well as the black elected officials, including Attorney General Eric Holder.

BAIER: Mara, it's not only Republicans calling for his ouster. The head, the founder of Daily Kos Markos Moulitsas said this on his Twitter page, "I want Reid to resign leadership and retire the Senate so he can hold the Nevada Senate seat."

MARA LIASSON, NATIONAL POLITICAL CORRESPONDENT, NATIONAL PUBLIC RADIO: The reason he's saying that is not just because Harry Reid said what he said. He is saying it because Harry Reid is in really deep trouble in Nevada. The polls show him trailing behind the possible Republican opponents. He has a very low approval rating.

This is not the first time he put his foot in his mouth. As a matter of fact, it's a common occurrence. And he's not saying because of these comments he should resign. He's saying this hurts him even more because it makes him look like he's even more of a loose cannon and shows bad judgment, and we might lose Nevada if he doesn't step down.

Now, you don't see the Democratic Party calling for his resignation, and I don't think you will.

Something else that people haven't talked about that I'm really curious about is — it's a little off the subject in terms of the content of what he said, but it says he put it privately. If he said this privately to these reporters, was this off the record, and why is it in quotes in the book?

I'm kind of confused by that. I thought when someone talks to you privately or off the record you can't quote them.

BAIER: Perhaps he was talking to someone else and they talked to the —

LIASSON: That's what I originally thought, but apparently that's not the case.

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: Yes, the authors said that they didn't conduct any interviews off the record, that it was all done on deep background and that therefore this was fair game.

If that's the case, I have misunderstood "deep background" for more than a decade and I'd like to go back and pull up a lot of quotes that would have made my story better.

LIASSON: Deep background means you can quote it, according to them.

HAYES: That is not my understanding of it. But that's sort of this internal journal debate.

LIASSON: But why say privately?

HAYES: I don't know. I think there is certainly a journalistic question there about its use.

On the broader question of race, I think Republicans are absolutely right of course that there is a double standard. It's a huge double standard. And if this had been Mitch McConnell, or pick your Republican, there would be a national outcry being led by the very people who are defending Harry Reid right now, Al Sharpton and others.

Having said that, I think the Republicans are making a mistake comparing what Harry Reid said to what Trent Lott said. They are different in substance. What Trent Lott said, the plain meaning of Trent Lott's words was offensive and it was racist. Now, people will make excuses for Trent Lott and say look, that's not really what he meant...

BAIER: Explain that.

HAYES: What Trent Lott said was, he had a birthday party for Strom Thurmond. He said the country would have been better off if the country would have voted the way that Lott's state did and elected a Dixie-crat, Strom Thurmond as president. We would have had, quote, "all these problems."

The clear meaning of that, even if he was joking, was offensive, I think.

What Harry Reid said, as Juan said, it's anachronistic. You wonder if the interview took place in 1965. It's just weird. Nobody talks like that, at least nobody our age. But it's not, it doesn't rise to the same level I think of Trent Lott.

And the other thing, importantly, is that they handled it very differently. Remember Trent Lott came out and at first said wow, people are miscasting this. And then he said, well, I apologize if you misunderstanding my comments about discarded policies.

He wouldn't even make a judgment about the policies, and then that led to another round of this. The responses were different.

BAIER: Trent Lott aside, you do see a double standard.

HAYES: Huge double standard.

BAIER: What about this apology that Senator Reid did today? The president accepting the apology, but there was a reporter at this press conference who said maybe you shouldn't be apologizing to the president or to the list of lawmakers but apologizing to the American people, because essentially you're saying that the American people inherently are racist and can't handle a dark-skinned black man in politics.

WILLIAMS: Brit Hume and I were just talking about this. And I must say look, we've never had a non-white, male president. So the idea that there was going to be this breakthrough, this new kind of adventure for the Democrats to nominate an African-American seemed to me significant.

Remember, Joe Biden, who's now vice president, said this is the first clean, bright, articulate black — I mean Colin Powell said, you know, in describing himself, I'm not that black. I don't shove race in the American people.

It's a white majority electorate and you had a black candidate. It seems to me almost a description of saying, you know what, this is possible. Hillary Clinton is making the case he can't win. He can win.

BAIER: All right, the president is trying to get organized labor on board with one of his healthcare proposals. Will it work? The panel weighs in on the Cadillac plans in three minutes.



RICHARD TRUMKA, AFL-CIO PRESIDENT: The Senate bill from our point of view is inadequate. It does not deserve the support of working men and women.

JOE COURTNEY, D-CONN., HOUSE EDUCATION AND LABOR COMMITTEE: What the Senate bill is doing is, in my opinion, putting at risk the political underpinnings for support for healthcare reform.

CHRISTINE ROMER, WHITE HOUSE ECONOMIC ADVISER: The important thing the president has said that he thinks that this excise tax on Cadillac plans is important.

He has been convinced by experts across the ideological spectrum that say this is one of the things that genuinely slows the growth rate of cost and anybody worried about the budget deficit knows we have to do that.


BAIER: Here is the issue. The nation's biggest labor unions go into White House for a bit of a showdown with President Obama over this Cadillac tax. This is a 40 percent tax on health benefit valued at 8,000 for individuals and $23,000 for families.

Unions say this affects a lot of folks that don't make a lot of money. And there is a battle over this. It's in the Senate plan. They are negotiating the two bills now.

We're back with the panel. Mara, what about this? How big of a problem is this?

LIASSON: I think it's a problem but I think it can be solved. Today at the White House they suggested that the president was open to adjusting it, not dropping it, but adjusting it — maybe the amount at which it would kick in. Instead of $23,000 it might be $27,000.

Maybe they exempt more unions, like firefighters, police officers, people in "dangerous jobs." Maybe they'd also lengthen the exemption for people who have existing contracts.

BAIER: But if you do that, you don't get the same amount of money to pay for the plan.

LIASSON: No doubt. Then you have to plug the hole somewhere else, and maybe then you borrow from the House plan and instead of having this millionaires' tax that the Senate doesn't like, maybe you have some kind of a mini-millionaire's tax.

The point is they have to do two things. If they change it, they have to find revenue somewhere else. But also, this has to stay in for a number of reasons. I think more important than paying for expansion of coverage is this is the only thing that is left in the bill that truly has a chance to reign in healthcare costs.

Now, all the other stuff are demonstration projects that might pan out over many years. This is the only thing that healthcare economists across the board say will actually bend the curve on healthcare costs.

BAIER: Juan?

WILLIAMS: I think the fear that the union leaders that met with President Obama today have is in fact that people won't pay this tax because employers and unions and state and city governments will drop the plan instead.

LIASSON: Then that is the same result.

WILLIAMS: So then they think, well, that means less coverage, so then it's going to be terrible.

But the fact is that all the alternatives that Mara just described are coming from the labor side. The White House knows they can't tinker with this deal or they will rip holding that 60-vote majority in the Senate. There is no getting away — that's the bottom line. There's no way.

You can talk about various strategies and possible deals with the House. The House is willing to do it. I don't think the Senate is.

BAIER: The cost here is the big thing, Steve. And you now have Senator Ben Nelson from Nebraska saying that his deal for $100 million of payoff for Medicaid in Nebraska he wants for all 50 states. That would add some $25 billion to the bill. You start talking a lot of numbers.

HAYES: You do, you do. And the question is how closely are people in the country paying attention to the numbers?

I think we have gotten the point where the debate is happening largely in Washington. The people who are against it are likely to stay against it. The people who are for it, the shrinking — what has been a shrinking group, are likely to be for it, and you have this debate among people.

But it's a narrow debate. You know, everybody assumes that this is going to pass. I still think it will pass. It's overwhelmingly likely to pass. But there are very, very difficult negotiations in the days ahead.

Nancy Pelosi, if you look at the numbers that she is dealing with, a vote margin of maybe three votes given the differences in abortion language between the two houses, and then you look at what she has to try to get her chamber to do on the question of the Cadillac tax, that's — she has a tough job.

And she and Rahm Emanuel are staring at each other right now trying to figure out who is going to blink.

BAIER: Senator Chris Dodd, who is retiring, Mara, said today in interview that healthcare reform legislation is hanging by a thread.

LIASSON: Well, this is one of the most important things. You also have abortion. Every single step of the way has been excruciatingly difficult, and now they're close to finish line, and they still have these make or break decisions.

BAIER: It passes, though?

WILLIAMS: I think it passes, and, it's interesting, the Democrats are the ones at this point who can stop it, and this kind of discussion doesn't help.

And the question is do the unions get so mad at President Obama and say you didn't live up to the promises you made to us on the campaign trail. You said this would help the working man, and in fact, this may in a very obvious way penalize working people in the country.

BAIER: OK, and before we head to break, we want to welcome our newest FOX News contributor. Former Governor Sarah Palin is joining the FOX News team as of today. The announcement came out from New York. Welcome aboard, and we'll see some of that commentary soon.

Content and Programming Copyright 2010 Fox News Network, LLC. ALL RIGHTS RESERVED. Transcription Copyright 2010 CQ Transcriptions, LLC, which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Fox News Network, LLC'S and CQ Transcriptions, LLC's copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.