This is a rush transcript of "Special Report With Bret Baier" from March 4, 2009. This copy may not be in its final form and may be updated.


ANNOUNCER: Who was the leader Republica ns hailed as the leader last weekend? Was it Sarah Palin?

GOV. SARAH PALIN, R-AK: No, no, no

ANNOUNCER: Bobby Jindal?

GOV. BOBBY JINDAL, R-LA: No, no, no.

ANNOUNCER: Michael Steele?


ANNOUNCER: Mitch McConnell?

SEN. MITCH McCONNELL, R-KY.: No, no, no.

ANNOUNCER: Then who? Not Rush Limbaugh?




HOUSE MINORITY LEADER REP. JOHN BOEHNER, R-OHIO: This is nothing more than a distraction created by the administration to take people's attention away from the fact that they're trying to raise taxes and grow the size of government.


BRET BAIER, HOST: There is a lot of focus on Rush Limbaugh this week by the White House, by top Democrats after a little dustup with Republican National Committee Chairman Michael Steele.

Let's talk about all of this with our panel: Juan Williams, senior correspondent of National Public Radio, Nina Easton, Washington bureau chief of Fortune Magazine and syndicated columnist Charles Krauthammer.

Juan, your take?

JUAN WILLIAMS, SENIOR CORRESPONDENT, NATIONAL PUBLIC RADIO: Well, you know, to me, I think Congressman Boehner is right. It's a distraction.

It's a very entertaining distraction, because you have today Rush Limbaugh on his show inviting President Obama to come on. If the White House thinks he's so important, why won't President Obama come on and debate him. That would be entertaining, too, Bret.

So a lot of that is going on, but, behind, what is really at stake here is the future of the identity of the Republican Party that, at the moment, it is in somewhat of a crisis in terms of identity. Is it shrinking? Is it growing?

You can't offend Rush Limbaugh, as Michael Steele did over the weekend by calling his remarks sometimes ugly and incendiary, or Phil Gingrey, the congressman from Georgia did a while back when he said that Rush Limbaugh is just an entertainer.

You can't do that because Rush Limbaugh goes right into the mainstream of American conservatism. It's a huge audience every day for three hours.

And if you do that, then you risk alienating the base of the party. That doesn't make sense. You have got to find a way to grow the party at the same time that you keep the base in place.

And that's the challenge that you have in terms of a leadership on the Hill. When the leadership on the Hill, talking here about Boehner, talking about Mitch McConnell, Eric Canto — people who actually deal with politics — look at Rush Limbaugh and say, "Well, he's not going to run for election. He can't get elected on a national ticket of any kind. We have to actually do that. We need moderate and independent voters. Rush doesn't appeal to those voters. So how do we manage that balancing act?

NINA EASTON, WASHINGTON BUREAU CHIEF, FORTUNE MAGAZINE: The most telling piece of this whole episode, to me, was less Rush's comments. It was that Republicans criticized him, and then backed off. They had to say they were sorry.

And it's very telling about their feeling incredibly embattled. They don't feel like they have a leader, Republicans and they don't know quite where the balance is.

They want to reach out. Michael Steele, for example, wants to reach out to independents and that's why he criticized him in the first place — that's why he criticized Rush Limbaugh. But then he had to apologize. And in his apology, he said "I didn't mean to diminish Rush's leadership."

You know, Rush Limbaugh's job — and Rush has my e-mail and he can complain to me if he wants to if I say this — but he is incendiary. That is part of his job as a talk show host.

But he's not a leader. He's not a leader of the party and to suggest that it's his leadership, that he's a leader of the party, he's not. He represents a large piece of the party, but he's not the leader.

BAIER: Nina, a lot has been made about this dustup with Steele and Rush. On substance, they are not different on the topics that Republicans care about.


BAIER: It's on style, on how they are going to go after voters and attract them, right?

EASTON: Steele has been extremely outspoken about the spending and in fact is extremely outspoken about President Bush's TARP plan, the bank rescue plan. He called it a bailout.

So, yes, that's exactly right. They're not that far apart on those issues.

But on the rhetoric, and how you present the party, they're in — they have very different roles.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I don't think there is anything deep or ideological or even significant about this little dustup. I think it is something that arose because of a misstep by Michael Steele in a radio interview. And it was exploited by the White House. It wasn't invented by the White House, but it was exploited because it is amusing. I mean, nominating Rush as the leader of the Republican Party is a clever little ploy. I must say, for my part, that if I have to choose between him and Jindal, I would go with Rush.

But that's not really what's at stake. Republicans are now at sea. They don't have a leader and they don't have a direction, or even an ideology. They are recovering from two thumpings at the polls, and it will take them a year or two to reorient themselves.

And they don't have to have a leader or ideology until November of next year. That's why elections are spaced two years apart.

In the meantime, what has really happened here is that Michael Steele, who is a rookie at his job, has had a misstep. He insulted Limbaugh at the beginning and inadvertently, I think, goaded into it.

Then he groveled, which made it even worse. And, in the end, I think the real offense was in the same radio spot in which he did. He was with a host. The host actually spoke of the Republicans as Nazis, I think, because — it was indistinct, I think, but because he was attributing it to the fact that it is heavily racially white.

And Steele, who heard this, didn't protest or argue against it. That was, I think, his real offense.

All of this, I think, is rather trivial and will pass.

WILLIAMS: I want to say quickly that I think the White House is delighted. They are absolutely reveling in it. They are encouraging it. Rahm Emanuel is making statements about how Limbaugh is the leader of the party —

BAIER: But could that all backfire?

EASTON: Not if the Republicans buy into it. I mean, Rahm put out the bait.


EASTON: And Steele and others jumped on it.

They need to not be baited by the White House. That's rule number one.

BAIER: Of course, one of Limbaugh's big criticisms of the president is about massive spending, and some Democrats think that applies to the government funding bill.


SEN. EVAN BAYH, D-IND.: The voters did go for change, and, unfortunately, this bill is sort of government spending on autopilot.


BAIER: Some Democrats are bailing on the bill now. The panel will discuss this when we come back.



SEN. RUSS FEINGOLD, D-WIS.: I'm not voting for this. I don't — I have typically not voted for omnibus bills because they always end up like this. And, you know, the president should veto it.

SEN. JOHN MCCAIN, R-ARIZ.: If it's last year's business, then the bill would have been signed into law if it passes by President Bush. This is this year's business. This is this year's spending. This is this year's pork-barrel project.


BAIER: Carl Cameron is reporting tonight that top Democrats are increasingly worried they will not be able to get to the 60 votes needed to pass the $410 billion spending plan, and that could be a huge embarrassment for the president.

We're back with the panel. Charles, there is at least a chance— a number of Democrats are talking that they are not going to vote for this thing.

KRAUTHAMMER: It shouldn't and it would be the first roadblock in an administration that has been spending promiscuously and promises to, as far as the eye can see.

The president holds a session today in which he ostentatiously announces a curb on contracting, which will save a bit of money. At the same time he is backing a bill which, as we heard from McCain and Bayh, has got earmarks in it between 8,000 and 9,000 — it's almost uncountable.

I started out this administration agitated by its hypocrisies, but now I'm reaching a Zen-like serenity. I'm merely amused because it's so comical.

This is a president who holds responsibility on fiscal affairs, a fiscal responsibility summit, a week after he signed the largest spending project in American history.

And then two days later, he submits a budget which into the out years has deficits of trillions of dollars.

The worst example of this, I think, is when he made that speech in Congress in which he spoke about how we can't have our wars hidden in the budget. It's got to be on the budget now. The Iraq war is going to be on the budget.

So what does he do? He includes it in the years 2011 until 2019, at which time practically all Americans are out of Iraq, simply as a way of then claiming a stating of $1.5 trillion because the war in Iraq is not continuing.

BAIER: Nina?

EASTON: Of course, on these earmarks, the White House thinking was just let it go. We don't want to enrage House Democrats because we want to — we want to ally with them later on. We're just going to let this one go.

But the fact is that this president, first of all, as you mentioned, he had this whole contracting speech today. He's going to find waste and fraud in government contracting. He said we must turn the tide on the era of fiscal irresponsibility. Then he lets this go.

It also raises the question, you have to stand up to the Democrats in the House, the liberal Democrats, not the conservatives who are opposing this now. But if he's not going to stand up to them on earmarks, how is he going to stand up to them on benefit cuts for Social Security, which needs to be done if you're going to have entitlement reform?

How is he going to stand up to them on these ag subsidies, which is another big — he's counting on cutting the ag subsidies and gaining savings off that.

But you have to stand up to some powerful people in your own party to do that.

So I don't think this bodes well for his ability to get done real savings.

KRAUTHAMMER: "Ag" meaning agriculture?

EASTON: Agriculture, yes.

WILLIAMS: Look, here's the problem. Can you go home — can you go home to your state or to your district and make the case, yes, this much spending is necessary to get us out of an economic quagmire, or it's important for the budget?

At some point, you break. At some point you say it's hard to make the case.

And Republicans, if there is one line of argument that has worked against President Obama so far, it's that he's a tax and spend liberal. This is typical Democratic Party politics.

So far they have been insulated from it by the fact that everyone says crisis, crisis, crisis, the sky is falling.

But as people now settle in, that argument is not working, and instead, the big pork spending — this ad about Jesus and from the day Jesus was born if you spent a million dollars, you wouldn't have spent as much as we're going to spend now.

People are listening and I think it's going to have some effect.

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