This is a rush transcript of "Special Report With Bret Baier" from December 9, 2009. This copy may not be in its final form and may be updated.


PRESIDENT BARACK OBAMA: The Senate made critical progress last night with a creative new framework that I believe will help pave the way for final passage and an historic achievement on behalf of the American people. I support this effort.

SENATE MAJORITY LEADER HARRY REID, D-NEV.: We hope and are confident based on the breakthrough we had last nig ht that we're going to be able to do the health care bill before we leave here.

SENATE MINORITY LEADER MITCH MCCONNELL, R-KY: They're busily behind closed doors trying to figure out how to get to 60 votes.


BRET BAIER, HOST: Well, there's a lot of confidence on the Democratic side of the aisle about what was a compromise according to the Senate majority leader, but we don't have many details about what the compromise was.

One thing is that the Office of Personnel Management would oversee some private insurance plans. The other thing was that people as young as 55 would be able to buy into Medicare. Those are some of the specifics we hear about.

What about this? Let's bring in our panel: Steve Hayes, senior writer for The Weekly Standard; Mort Kondracke, executive editor of Roll Call, and syndicated columnist Charles Krauthammer.

Mort, boy, they say they're confident but we didn't hear a lot of details.

MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: Well, the deal is not done because what they had was an agreement to ship off whatever they have agreed to to the Congressional Budget Office for a score.

But, as I get it, this non-public option managed by the Office of Personnel Management probably will get the votes that it needs. It will get Lieberman. It will probably get Susan Collins and probably get Olympia Snowe.

BAIER: Let's explain what this is, first: The Office of Personnel Management essentially oversees and negotiates with private health care companies now for federal employees. But they are insured by private companies but I guess it's administered by the Office of Personnel Management.

KONDRACKE: Yes, but it is private companies. It is not a public option — it is not Medicare. It is not a government-run option. So it's competition and negotiation among private companies. So it's not a public option, really. It's more like this exchange that the whole program is supposed to be like, because it's private.

So this will — this is not the slippery slope to a single-payer system that a public plan would be. However, this sticking point now is the Medicare buy-in proposal. So they're taking one step back from Canada with the first proposal and they're taking another step toward Canada with this, by allowing a huge number of potentially of people — 30 million maybe — into Medicare, which is a single payer system already.

So now, they selling it as only 3 million, but various providers like the hospitals are terribly worried that it's a slippery slope to Medicare for everybody starting at the age of 55.

BAIER: And that last provision, Charles, when you talk about 55 and older buying into Medicare, doctors have got to be shaking in their boots because some of them really are complaining about getting paid from Medicare right now and the solvency of Medicare long term.

KRAUTHAMMER: Well, everybody is going to be insolvent. Doctors today are already complaining because payments from Medicare are extremely low. Many doctors opt out because it is so low. You have to see so many elderly patients in order to make sort of a decent living that it is almost impossible to do good medicine.

On top of this, you are now going to add 20 million, 30 million people in Medicare at a time when the other part of the bill is calling for a cut of half a trillion in the payments into Medicare.

So how do you make that work? The numbers absolutely contradictory. So it's going to threaten the livelihood of doctors and hospitals. Secondly, it threatens the livelihood, the solvency of Medicare itself. Already the actuaries say that in half a decade it goes over a cliff and becomes insolvent. You're going to add now 30 million people potentially into an insolvent system and think it will be stronger? It seems to me like an act of desperation.

And the question is: If you really want to nationalize health care, you ought to do exactly that. Do Medicare for everybody. Then you could do a one-page bill. You don't have to have all these complications and you would have an honest proposal. This way, it is a mix and match that makes absolutely no sense.

BAIER: Steve, it is interesting how this is being rolled out at the end and we are not hearing a lot of details after all of the focus and all the hearings that we have had on health care reforms.

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: I think that's because they're at the stage that they're throwing anything against the wall in the hopes that it will stick and they can get to 60 votes.

At this point it's almost, and Charles has been saying for a long time, what matters most to Democrats and to the president is getting something that President Obama can sign.

So you can put anything in this bill and you're going to have the White House and Harry Reid try as hard as they can — and eventually Nancy Pelosi — try as hard as they can to get something the president can sign.

But it was clear right away that this so-called broad agreement was no such thing. I mean, you immediately had or almost immediately had one of the negotiators, Russ Feingold from Wisconsin, say that he has real reservations still about supporting something that would replace a public option. You have Blanche Lincoln saying in effect there wasn't a deal. You have Mary Landrieu saying the same thing.

What Harry Reid tried to do last night was project momentum and say there was consensus where there plainly is not consensus.

BAIER: Mort, is Nancy Pelosi and the Democrats who voted for a strong public option, they had watered it down a bit, but it is a public option, a government-run health care insurance option, are they going to swallow this Senate compromise to keep this boat afloat for both Houses to pass?

KONDRACKE: That's where the heavy lift by President Obama has to come.

He's got to convince them, the House Democrats, to eat whatever the Senate is serving up, because it's the only way they will get a bill. And if you have a public option in the bill when it comes back, you will not be able to pass it.

So the House is going to have to yield to the Senate if there is going to be any bill at all.

BAIER: Quickly.

HAYES: But if there is in fact a compromise, it is a compromise that single-payer advocates have already come out in favor of. You had Anthony Weiner say he likes what he sees. You've had other pundits who have been in favor of single-payer system...

BAIER: Because of the Medicare part.

HAYES: Because of the Medicare part and because of the restrictions, the regulations on the Office of Personnel Management part. This is something that I think they can sell to the left.

BAIER: Charles?

KRAUTHAMMER: The process here is bizarre. All of a sudden with the deadline looming, they're throwing in anything that will fit, anything that will get 60 votes, regardless of whether it is incoherent or contradicts other elements of the bill. And you ask yourself, why is the haste? Where is the deadline? It's not as if we were a year ago with the banking issue where there was a deadline. If you didn't act on TARP you could have a collapse of the economic system.

Here the deadline is entirely a political one. It is because the Democrats know with all this opposition in the public and with an election year looming, they have a very small window. It's not as if the medical system will collapse on January the 1st if nothing is done.

It is entirely artificial. And it is causing these new amendments and these new ideas to be thrown in untested, even unexplained at the last moment.

KONDRACKE: But this is not the first time you have seen action like this out of Congress. After all, when the Republicans were in charge, they passed the Medicare prescription drug bill and it was a scramble just like this and they kept the vote open for two and a half hours.

KRAUTHAMMER: But this is reforming one-sixth of the U.S. economy. It is not a targeted reform. It is a revolution in health care.

KONDRACKE: Well, Medicare Part D was the biggest addition to Medicare since Medicare was enacted.

KRAUTHAMMER: Absolutely, but this is an IED.

KONDRACKE: We'll leave it there.

The White House is playing hardball over environmental legislation. We will talk about that when we come back.


BAIER: Well, the day after the EPA ruled that carbon dioxide endangers the public's health, this is what a senior adviser to president Obama told reporters, issuing this warning to Congress that you remember the House passed cap and trade but the Senate has not yet:

Quote "If you don't pass this legislation, then the EPA is going to have to regulate this area, and it will not be able to regulate in a market-based way, so it's going to have to regulate in a command and control way, which will probably generate even more uncertainty.

"Continued uncertainty over what the country's energy and environmental policies will be is probably the biggest deterrent to investment of all. Passing this legislation so you're not in a situation where you have continuing uncertainty is key."

It sounded like a threat to us. We're back with the panel. Charles?

KRAUTHAMMER: A threat and an amazing admission. It admits, a, how bad the law in the Senate today that is being held up on cap-and-trade is in and of itself is going to kill jobs.

But secondly, if you don't do that, we will do something worse: Impose the EPA regulations, which is cap without trade. There isn't a market mechanism. You can't sell or purchase a permit to emit CO2.

So it's command and control, which is a polite way of saying Soviet control, meaning it's all regulation, it's all sort of arbitrary on the part of the EPA. And it is an amazing admission, and it is a kind of blackmail. Either you do this in the Senate and pass a bill or we will do it unilaterally.

The problem here is it really is constitutionally obscene. If you are going to revolutionize our economy, as you will by regulating and taxing carbon, we are a carbon-based economy, it will affect every aspect of American life.

You ought to do it in a way that is through the Congress as an expression of popular will and not by arbitrary administrative action. I think what Congress ought to do is to pass — a one-page law — amending the EPA, the original legislation which would say and restore its original intent, this law doesn't apply to CO2 and exclude it from the jurisdiction of the EPA and then the blackmail ends.

BAIER: Mort, we assume that these comments, these discussions happened behind closed doors, but to hear it being told to reporters is pretty stark.

KONDRACKE: Well, it was an ultimatum to Congress, that either you do what we want you to do or we're going to blow up the whole country.

BAIER: Or the economy fails.


I mean, here we are in the midst of a recession, and you're going to have the EPA now — what exactly the regulations are going to be like, we don't know. And Lisa Jackson, the head of the EPA, said she would be "sensible" about all this and it was not going to apply to small businesses and medium-sized businesses. So we don't know exactly how draconian she is going to be.

But this threat from the administration sounds very draconian, that they want the EPA to go full force — command and control — that kind of word. I mean, it is meant to be a whip on the Congress.

But what can the Congress do? I mean, they're bogged down in health care right now. The year is going to end. They won't be back until January. It is going to take forever for the Senate to pass cap-and-trade. So I don't know why they made this threat at this point.

BAIER: Exactly. What is behind this, Steve? The prospects politically on Capitol Hill for cap-and-trade legislation, climate change legislation right now are dim, at best.

HAYES: Sure. I think there was a domestic audience and an international audience. The domestic audience was Congress. The international audience is in Copenhagen.

And what they basically wanted to be able to say was, look, we are getting tough. We making threats to Congress and telling them they need to pass cap-and-trade legislation or else.

And Lisa Jackson, interestingly on Monday, she said we really wanted this finding before we went to Copenhagen so that we could sort of tout it there. And then today, in a speech today, she said, well, no, this is all just a coincidence. So they're not even clear on that.

But importantly on the actual threat, I think Republicans would be wise at this point to call their bluff. It takes so long to go from this kind of a finding to the point where these regulations would actually be implemented that there is no way they could do it within the next couple of years.

BAIER: Not to mention the lawsuits involved here.

Quickly, Charles, there is this disconnect between the president talking about jobs, jobs, jobs and how he is going to turn the economy around, and then a threat like this on Congress to act on something that even this administration official says could potentially threaten jobs.

KRAUTHAMMER: Yes — pass the bill I want or I will destroy the American economy. Interesting threat.

But look, all of these contradictions are happening in other areas as well. In the health care reform, in the Reid bill, you have an increase in the payroll tax in the middle of a recession while the administration is talking about on the jobs issue of getting a tax holiday payroll tax. So it's utterly contradictory.

It is that the administration had an agenda, it's health, education and energy. It knows the window is closing. It's got a whip hand today and it wants action regardless of its effect on the economy.

Content and Programming Copyright 2009 Fox News Network, LLC. ALL RIGHTS RESERVED. Transcription Copyright 2009 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.