This is a rush transcript from "Special Report," December 1, 2010. This copy may not be in its final form and may be updated.

BRET BAIER, HOST OF "SPECIAL REPORT": A bit different format for the show today, since that World AIDS piece ran. Now we're going to bring in the panel, but first a little back-and-forth on lame duck session of Congress and the priorities. Take a listen.


SEN. MITCH MCCONNELL, (R-KY) SENATE MINORITY LEADER: I delivered a letter to Senator Reid signed by all 42 Senate Republicans. It says that every Republican will vote against proceeding to any legislative matter until we've funded the government and protected every taxpayer from a tax hike.

SEN. HARRY REID, (D-NV) SENATE MAJORITY LEADER: The true effect of this letter is to prevent the Senate from acting on many important issues that have bipartisan support. With this letter, they have simply put in writing a political strategy that the Republicans pursued this entire congress, namely, obstruct, delay.


BAIER: The Senate majority and minority leaders there. With that, let's bring in our panel, Jonah Goldberg, at large editor of The National Review online, Julie Mason, White House Correspondent for The Washington Examiner, and syndicated columnist Charles Krauthammer. Jonah, this back and forth and the Republican stand insisting you have to do these two things first.

JONAH GOLDBERG, THE NATIONAL REVIEW ONLINE: Yes, I think it makes complete sense. We really shouldn't even have serious legislative lame duck sessions anyway. And the Republicans read the tea leaves of the last election and they know they have a better hand coming after the new Congress. And they think they have the high hand politically, and I think they're right on that.

They're only what, 17 working days we heard in the package before left. And that's not even going to be all filled up. And so I think Obama would be smart if he's going to cave at all just to simply cave now, because I think there is a trade on the START treaty, as much as I have reservations about the START treaty, a trade to be made on that if they get the tax stuff out of the way.

But the Dream Act and "don't ask, don't tell," that's doomed.

BAIER: Julie, tomorrow they vote on tax out extension for $250,000 and less. This is what Nancy Pelosi is pushing and apparently Republicans are not going to be able to have what is called a motion to recommit to adjust or have their own version. So what about that and how that sits?

JULIE MASON, THE WASHINGTON EXAMINER: Yes, but still, I think Jonah makes a good point. I think Senate Republicans are giving us a good preview of the next two years. Even if the House passes it, even if the house goes ahead with preserving tax cuts for the middle class, it doesn't mean it will go. That's not the end of the conversation.

Where I think Obama is wrong right now, sending Geithner up to negotiate the deal. It shows his seriousness of purpose by sending the treasury secretary, someone of that stature. Republicans can't stand Geithner. They make quarterly demands for his resignation. It's sort of a misplay. So it's hard to see how he will persuade anybody on the house or Senate side.

BAIER: Charles?

KRAUTHAMMER: I think the House action tomorrow is the last act of high-handedness on part of the current speaker, Pelosi. It will have no effect because the Senate has spoken. I think McConnell has very wisely in a timely way played the trump card he's been holding, which is he has enough senators to block anything, and he will unless the tax cuts are done.

I'm not sure it matters who the representative of the president is in these negotiations. The fact that he chose the representative I think gives him the space and the distance to concede to the Republicans an extension on the Bush tax cuts because he'll say my negotiation, that my negotiators met with the Republican negotiators and we came to a compromise, so it's going to look very congenial, and I think it'll help him. It's a way for him to distance himself and I think it will work.

BAIER: We'll cut this panel in half. More on the Dream Act, "don't ask, don't tell" repeal. We'll pause there and be back with the same panelists on the same topic after a short break.


BAIER: Still working there on Capitol Hill. We're back with the panel. Some other things in the lame duck session, extension of unemployment benefits, Julie.

MASON: These two gentlemen might disagree with me, but I think it's too bad the unemployment benefits will expire. And it would have been good for Obama to use some of his diminishing political capital --

BAIER: Technically, it already expired.

MASON: Right, but they could still come back to do something. Obama is using political capital on START, which seems to have stopped, instead of doing something about these unemployment benefits.

BAIER: Do you think it's going to be part of the negotiation, or the Democrats will tag it on to something else?

MASON: Yes, but the Republicans will just stop it. They're not interested in doing that.

BAIER: Charles?

KRAUTHAMMER: On START, I think the administration is trying to do everything it can to appease the Republicans and their objections. The problem is that the Russians aren't really helping. The speech from the president of Russia, a couple of days ago in which he threatened to develop new offensive weapons if we don't behave on defensive weaponry, where we are ahead, and where Republicans senators are worried that the negotiations between the Obama administration and the Russians on constraints of our defensive systems, which we don't want. It's our great advantage and it's going to be the weapon system of the future.

So there's some suspicion, but I think the administration is trying to allay the fears by showing what they have been negotiating with the Russians. And that I think may work.

I think on larger issue of start, one other problem, and that is the Russians have been moving their tactical nuclear weapons, the short range ones, in Europe, near to our allies as a way to intimidate them. And these tactical short range weapons are not included in START. So it's a way, I think, of provoking us unnecessarily at a time when they are trying to get agreement on the long range weapons.

Again, it's not going to help and I think the chances of passage at least in the lame duck session are rather small.

BAIER: Anecdotally staffers on up the Hill will tell you that the White House is bending over backwards.

KRAUTHAMMER: They see it as their greatest achievement in foreign affairs of this year. Now ask yourself, if this is their greatest achievement, what does it say about what the rest of the two years have been like?

GOLDBERG: If that is their greatest achievement, that's like saying the best Oktoberfest is in Orlando. It's a low bar.

MASON: But it's the legacy. This is the building block to a legacy that he sees on disarmament, which he'll be remembered for.

GOLDBERG: What I think that is interesting in all this is we are starting to see Obama start to pull away from the gravitational pull of the Democrats and seem more presidential and seem -- I don't know if it's full- fledged triangulation yet, but I think he enjoys the fact that Pelosi and Reid are going crazy about the Dream Act and "don't ask, don't tell" and all the rest because it gives him room to say, hey, I'm not as left wing as those guys.

BAIER: You bring up the Dream Act. There is a lot of concern on the right about this act and providing the education benefits to children of illegal aliens provided the kids attended college or serve in military. What about that, Jonah?

GOLDBERG: Well, you know, the Dream Act is, you know, why is it age 16 is the cut off? That is supposedly the age that if you were born in another country, and you came here before the age of 16.

And basically what a lot of people on the right will argue is this is basically the camel's nose toward the larger amnesty argument. They bring out all of the wonderful and impressive poster children for, you know, the accomplishments of illegal immigrants in America.

Again, I think this is ultimately a way for Reid to fulfill his promises that he was making endlessly, appease the left. I don't think they think they are going to get it. And again, I think it's a crazy thing to bring up in the lame duck except as symbolic issue.

BAIER: There are 17 days left. He was going to call for cloture, we heard, to bring discussion to an end. But Julie, you think the Dream doesn't have a chance in lame duck?

MASON: Certainly not. Obama had the Hispanic leaders to the White House recently and made no promises, but said we're interested in doing this. But even then it was clear it wouldn't happen. The longer it goes and closer to the end of the session, the clearer it gets that it's not going to happen. It's strange we're still talking about it.

KRAUTHAMMER: It's a gesture, a pander, and it won't work.

BAIER: There you go. Tonight's online poll asks which of the debt commission proposals do you most dislike? Logon to our homepage at FOXnews.com/specialreport. Tell us what you think.

When we come back, World AIDS day.


BAIER: Looking live at the White House there, that big red ribbon to commemorate World AIDS day today. This is also a day activists like U2's lead singer Bono say it's a time to remember that the American taxpayers are dramatically changing the situation, especially in sub-Saharan Africa on this World AIDS day.

We're back with the panel for thoughts on this. If you saw the show, a large section of it about the peace, the interview with Bono and former president George W. Bush. Charles?

KRAUTHAMMER: I think there are two wonderful stories here. One is American generosity and the other is American science. Generosity is what the president has done on behalf of the American people, spending billions of dollars in Africa which dramatically altered the course of the disease.

And even though President Bush implied strategic interest, there was none. This was entirely an act of compassion and generosity on the part of America, really unmatched in the world.

But secondly, underlying it is not only we gave the drugs away, it's that we developed the drugs. The great story here is that virus emerges in the early '80s. We have no idea what it is. The viruses are traditionally extremely hard to find, identify, and tame. We can do it with bacteria, but with the viral illness it's much harder.

And in three decades we turn a death sentence into a chronic condition. It's an amazing story of mostly American science yoked with American generosity, and it saved millions of lives.

BAIER: Julie, Bono and others point to bipartisan effort. President Obama continuing with what President Bush launched with the funding of global AIDS efforts.

MASON: It's true. I thought it was interesting how Bono was very circumspect with his praise to Obama. President Obama, that red ribbon today was so striking at the White House. But the same time, the global AIDS alliance has given President Obama middling grade on the AIDS program saying yes, he made the first ever presidential multi-year commitment on funding.

But at the same time, they feel like it came up short of the money that America should be giving, which I think reflects the economic condition.

BAIER: Jonah?

GOLDBERG: I agree entirely with two legs of Charles' stool about this, but I think there is a third leg he left out, which is American business. These pharmaceutical companies, which are consistently demonized by Democrats and demonized by the left as these horrible, rapacious institutions are the ones who carried -- a lot of generic government-funded research, but there was also amazingly nimble response by the free market to produce these things. And we're one of the only countries in the world that can do this kind of stuff.

And so I think, I'm a softy on the foreign aid stuff. I think that what Bush did was to be celebrated and we should do more of that kind of thing.

But I was talking to a colleague of mine American Enterprise Institute, Roger Bade, about this, and he makes a point at the end of the day, the pills just aren't the solution to this until at least there is a cure, prevention needs to work. You need to spend a lot more money on prevention, because treating millions and millions of people with the expensive drugs works in the west, but it doesn't necessarily work in sub-Saharan Africa.

BAIER: Charles, what struck me was the timeline here, as you look back at the years and the chronology. And at the same time this is making a huge impact, there is a lot of talk about America's image in the world being poor, horrible, some folks talking about. Do you think it has changed based on what America has done in Africa?

KRAUTHAMMER: Actually I don't think so. Generally speaking, look at how the American people and the government and the military responded with the tsunami, it was a rescue of a scale unseen anywhere in the world, again purely humanitarian.

We get a couple of weeks of good press with AIDS. I'm sure there are individuals in Africa who acknowledge this and we get a rock star who does. Overall I think our image in the world is unrelated. People sort of expect it and they discount it. America does that.

I'm not sure it alters our image, but I don't care. I think it's the right thing to do. In some ways it alters or reinforces the way that we think about ourselves, and that I think is more important.

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