This is a rush transcript of "Special Report With Brit Hume" from October 13, 2008. This copy may not be in its final form and may be updated.


SEN. BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: We can't wait to start creating new jobs. We can't wait to help struggling communities and homeowners. We can't wait to provide real and immediate relief to families who are worried not only about paying this month's bills but their entire life savings.

SEN. JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: If I'm elected president, I won't spend nearly a trillion more of your money on top of the $700 billion we just gave the Treasury Secretary as Senator Obama proposes that we do.


BRIT HUME, HOST: Well, senator Obama doesn't propose all that in the plan revealed today. It is a four-point plan that would cost, I guess with all the spending with it, between this and the stimulus package that he's supporting, you're talking about something in the neighborhood of $160 billion. No bargain there.

It would involve four things — temporary tax credit to companies that he create jobs in the U.S. over the next two years, penalty fee withdrawals from IRAs and 401k's over the next year so people won't have to sell at the bottom here, a 90-day foreclosure moratorium for homeowners acting in good faith — I don't know how you would determine that — and the establishment of a facility to lend to state and municipal governments.

This is the Obama campaign's latest plan.

Well, Mort — excuse me. I need to introduce these ladies and gentlemen — Mort Kondracke, Executive Editor of Roll Call, Mara Liasson, National Political Correspondent of National Public Radio, and the syndicated columnist Charles Krauthammer, FOX News contributors all.

Mort, what do you think? How does this plan strike you?

MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: John McCain — politically speaking, John McCain said that Barack Obama is measuring the drapes in the Oval Office already —

HUME: We will get to that.

KONDRACKE: — as if he was sitting on his lead. He is not sitting on his lead. He is clearly still producing new ideas to try to get votes as well as to presumably to solve problems.

It is a kind of typical Democratic response, targeted tax credits, you know. We will decide where we're going to put the tax credits into business. Those employers who are willing to hire new employees in the United States get a $3,000 per employee tax credit.

The Democrats give out tax credits for specific reasons that they think and deem important.

And they're going to give aid to state and local governments and so on and so forth.

I think that the idea behind this is that even though we had a thousand-point surge in the stock market today, that we're still in the midst of a recession, that unemployment is going to go up. So he's going to give money to the folks as well as to the banks. And the folks are the ones who vote and the banks don't vote.

HUME: Go ahead, Mara.

MARA LIASSON, NATIONAL POLITICAL CORRESPONDENT, NATIONAL PUBLIC RADIO: I agree. I think this is a politically popular proposal. The first question in that debate in Nashville was what specifically will you do to help people like me, or something like that.

And that's what people want to hear. And they are going to look at this and say, I can take more money out of my 401k without a withdrawal penalty. And if I'm a small business, I will get a tax cut if I hire somebody. And I will be able to stay in my home more.

I think it's a pretty typical Democratic solution. However, people might be open to that right now since they like the idea of the government spending money and cutting taxes as much as possible to stimulate the economy.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I think the brilliance of this is that Obama understands that the economic meltdown has helped him in two ways. First of all, obviously, it makes people want to throw the incumbent rascals out and bring in Democrats.

But, secondly, because the government has passed a package of $700 billion, which is a huge number and which is impressed itself in the national consciousness, everything else seems like lunch money.

So here he is proposing $60 billion in spending that in ordinary times you would have an argument about. People would say you are exploding the deficit.

You would have a debate about each of these elements, all of which are the traditional Democratic, liberal tax and spend stuff that you would expect in a pending or looming recession, including not only the elements we have heard, but a 10 percent rebate from the government. It pays 10 percent of your mortgage, extending up unemployment insurance, relief of property taxes for municipalities, all kinds of goodies.

And $25 billion extra thrown at the auto companies. We already had a piece of that $25 billion a week or two ago that nobody noticed, again in the shadow of the $700 billion.

So he is using that in a time of national emergency in which the $700 billion was really an exception, but using it cleverly as a way to cover handing out the usual goodies to Democratic constituencies on the eve of an election.

Normally it would be called a pander, and now he calls it a national rescue.

HUME: Well, you have told us what you think about it politically — brilliant. What do you think about it economically?

KRAUTHAMMER: It is money thrown in the wind and will have no effect.

HUME: Do you agree with that, Mara?


HUME: It will have an effect politically.

KRAUTHAMMER: I think it has an effect politically. It is too small.

If you really want to do massive pump priming thing, you have something much, much bigger. but this is something that I think is largely political.

KONDRACKE: This is the new stuff. The $60 billion is the new stuff today. This is on top of $115 billion that he previously proposed for infrastructure, developing a whole second stimulus package —

HUME: The whole thing comes out to be about $160 billion more.

KONDRACKE: Right, a stimulus package including infrastructure building and handouts of $1,000 per family to people disguised as a tax cut.

One thing he did not say today is that he would suspend his plans to raise taxes on people over $250,000, who include successful small businesses. He said at one point that he was going to suspend those tax increases if we were in hard times economically, and we are in hard times economically.

HUME: John McCain is trying a new approach, basically embracing the role of underdog, and suggesting that that's just where he would like to be. We'll talk about that next.



BILL KRISTOL, EDITOR, THE WEEKLY STANDARD: McCain is an impressive character, Palin is an attractive and impressive character. Why isn't Sarah Palin on this boarding (ph) instead of Rick Davis? It is ridiculous. It is malpractice.

MCCAIN: My friends, we have got them just where we want them. What America needs in this hour is a fighter, someone who puts all his cards on the table and trusts the judgment of the American people.


HUME: Well, there are two decidedly different views of the state of the McCain campaign, although not perhaps of the state of the race. McCain acknowledges he is down. He said in the same comments he is down six percentage points. Some polls have it higher or lower a little bit.

But Bill Kristol reiterated his argument that the McCain campaign deserves to be fired in "The New York Times" this morning, and later again here today on FOX News.

So what about this? Mort, your thoughts on this condition of the McCain campaign, which, by the way, appears to be trying to link Barack Obama in a way he previously wasn't doing to the none too popular, at least nationally, leaders of the Democratic Party in congress.

KONDRACKE: I'm amazed that — Fred Barnes — calls them the "three amigos," Obama, Pelosi, and Reid. And going after them, it seems to me, is a perfectly logical thing to do because there will be a lot more trial lawyer, union free running than there has been in the past.

Bill Kristol is clearly right about Sarah Palin. Why they are containing Sarah Palin, locking her up or putting her out only on the stump speeches, I do not know.

But this idea that McCain fire the whole campaign, what would that look like? That would look like desperation. It would look like a Hail Mary. It would look irascible and all that. So that's not going to work.

What we saw today was the happy warrior John McCain. And he will come out tomorrow with more economic proposals, and that's the positive vision that he has needed all along. I hope that could bring him back — that, plus a few more days of a thousand point rallies on the stock market, maybe.

LIASSON: To give Bill his due, he was actually proposing something even more radical — not just fire the campaign, but just go back to this incredibly — change his whole tactics, have town meetings everyday and answer questions from the press.

It's frustrating. What McCain has been trying to do, and he has been trying to do a lot of things, just hasn't been working.

Now it is possible against this incredible tsunami of bad economic news which favors the Democrats, nothing would work, but certainly what he has been doing hasn't.

And maybe he has to throw his cards up in the air, which he has proved perfectly capable of doing more than once, and just do something completely radical, and instead of hammering away at Obama's associations, which might be legitimate, but they still aren't working, maybe try something different.

It's hard for me to imagine what exactly he could do to turn this around.

KRAUTHAMMER: I disagree. I think he swerved and he flinched. It is a Democratic year. The way you are going to win against an unknown newcomer is to run as he did originally, on leadership and character, and on being the one who represents country.

And that implies the other guy is not as good of a leader, the other guy has a flawed character, and the other guy puts ambition ahead of country.

That's what he said in St. Paul, but now he got intimidated. There were a couple of yahoos in the crowd, three or four or five in crowds of ten thousand, who yelled epithets. The press has picked it up and all of a sudden associated McCain with that, accused him of inciting hatred, et cetera, and he flinched.

Here is a press that accuses him of guilt by association with people he has never met and says that any association of Obama with Jeremiah Wright or Rezko or Ayers, with whom he has a close association, is illegitimate and, in fact, is a sign of racism and low politics.

And McCain has bought that. He shouldn't.

HUME: What about this effort to, and it's happening in the ads now, you're seeing, though no on the stump speech so much, of linking Obama to the other two amigos to quote Mort quoting Fred?

KRAUTHAMMER: It's legitimate.

HUME: Do you think it will work better than what he has been doing? Do you think it will work better than linking him to Rezko, Ayers, and Wright?

KRAUTHAMMER: Well, linking him to the congressional leadership, I think, ought to be added in the recipe.

But the idea of not challenging Obama on character and on associations, unsavory associations, is a mistake. And McCain has unilaterally disarmed on this.

LIASSON: Yes. I think that this might be one of the few times where you could tap into America's tendencies to like divided government. It would be a tough call, but it does mean the Democrats will control all three branches —

HUME: If Obama counts and links McCain to Bush, it would seem to be fair play for McCain to link him to Reid and Pelosi.

LIASSON: Not only it is completely fair — but the question is would it have an effect? And it might.

HUME: That's it for the panel.

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