This is a rush transcript from "Special Report," November 18, 2011. This copy may not be in its final form and may be updated.


REP. JEB HENSARLING, R-TEXAS, DEFICIT REDUCTION COMMITTEE CO-CHAIR: We're painfu lly aware of the deadline that is staring us in the face. We have 12 good people who have worked hard since this committee has been created to try to find sufficient common ground for an agreement that would simultaneously address both our nation's job crisis and the debt crisis.

JOHN KERRY, D-MASS., DEFICIT REDUCTION COMMITTEE: If you are going to ask every average American who drive a car, goes to work, struggles each day to pay their bills, and they're going to somehow be part of the solution, to have something on the table that does not ask the wealthiest people in the country to share in it would be unconscionable.


SHANNON BREAM, GUEST HOST: All right, one of the Republicans, one of the Democrats, both on the Super Committee talking about what progress they have or haven't made. Let's talk about it with the panel, Steve Hayes, senior writer for The Weekly Standard, Charles Lane, editorial writer for The Washington Post, and syndicated columnist Charles Krauthammer. Happy Friday to you, gentlemen. Good to see you all.

Steve, can I start with this issue about deadlines, because we’re hearing conflicting reports from the Hill about when they really, truly have to get a deal done. We’re hearing from Senator Kyl and others that it's Sunday night to get it to CBO to be scored. Others are saying Monday night. That's even less time than it sounds like they had.

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: It is. And these are moving deadlines, flexible deadlines, and ultimately they were arbitrary deadlines. They originally came up with November 23 because, why? Because they wanted to do it on November 23.

So I don't think these deadlines actually mean that much. If you want to have it scored, you have to get it to the CBO in time to meet this November 23 deadline.

But look, I don't think the deadlines here are the issue so much as the fact that both, people in both political parties, the basis of both political parties have come to the conclusion now that this going to be a bad deal, that whatever comes out of the Super Committee is not a good thing, both on substance but more importantly on politics.

You have Democrats making an argument now that they don't want this to pass because they don't agree with the kinds of potential entitlement reform that it could involve. You have Republicans saying we don't want real tax increases that the Democrats are insisting on. In effect, the same exact arguments we had at the time of the debate over whether to raise the debt ceiling in the first place are surfacing again here.

The big issue for me is that you now have the White House, which thinks it's in their political interest for this to fail; many Democrats think it's in their political interest for this to fail, and many Republicans. If you have that many people with the same political calculation, I think it's unlikely to produce something.

BREAM: Charles, do you think they reach agreement or do you think there is too much undone and too many force with an interest in thinking something can't get done?

CHARLES LANE, EDITORIAL WRITER, WASHINGTON POST: I'm always an optimist. I was the optimist who said they were going to get a deal to raise the debt ceiling and I was sort of right.

But I have to say I agree with Steve. This committee embodies the polarization in Washington. It's made up of the most conservative and the most liberal people they can think of. And the theory is if you get the most conservative and liberal people to agree, then you can get an agreement. But instead what it has turned into another arena where both sides can campaign for 2012 and drive home the message. We just saw John Kerry doing it, talking about taxing the rich. That is a talking point coming out of the Democrats on the committee. So I think it's on to sequestration.

BREAM: And that's the next question, because Pat Toomey, senator out of Pennsylvania, is one who has seemed to suggest in his comments here on "Fox News Sunday" and other places that if it got to sequestration, there are members of Congress who would be willing and expecting to possibly try to find a way to maneuver around it, because of course it kicks in cuts for a number of things including defense. Charles, do you think they would get away with something like that? The president said he would veto a plan like that.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, these cuts, especially the defense cuts, will only kick in, in 2013. So the president may be a bystander at no point. And I think there is no way, even if you were in office, that the Congress will not reject that huge cut in defense spending.

You've got a Democratic secretary of defense saying its irresponsible, would destroy the military, and of course Republicans oppose it as well. So a way it will be ultimately found that will undo it.

And that’s one of the reasons why the pressure is off. The triggers, everybody understands, are not real. Congress can do whatever it wants. It can undo the padlock. It can disarm this pistol aimed at itself.

I think, however, I would not be as even-handed in the portioning the blame here. We heard from Toomey and Portman, two conservative senators on the Republican side. They're willing to increase net revenues, which is what the Democrats have demanded, but not tax rates. They want to broaden the base, eliminate the loopholes, then you can lower the rates or keep them the same.

And what you get is Democrats refusing to take yes for an answer as we saw in what Kerry said. All he cares about is the argument that Republicans are protecting the rich because they won't raise tax rates. This isn't about rates. It's about revenue. What we are trying to get is revenue to decrease the deficit, and you do it by tax reform. You lower the rates, you eliminate the loopholes, which essentially the rich are paying, and you get tax reform, lower rates, higher revenues.

BREAM: Let's talk about the sequestration issue if that happens. You feel confident they would go around it if it happens. Buck McKeon, a Republican congressman with the House Armed Services Committee, he wrote a letter to the co-chairs of the Super Committee saying if sequestration were to occur the impact on our national security, our men and women in uniform, and the Department of Defense, would be immediate, dire, and some cases irrevocable. Steve, do you think they take the point in hand?

HAYES: He’s making valid point. His argument in effect is the military is required a budget what’s in front of them. And if what is in front of them is a massive reduction in budgets, they have to plan accordingly. So either they spend time planning for budgets that they’ll never actually see, or they will have to see the cuts. In either case, they are wasting a ton of time or dramatically weakening our capabilities. In both cases that’s a very bad outcome.

So I think he raises completely valid points, and it's one way, although I agree with what Charles is saying, of undoing the sequestration down the road. It's an area that would be an immediate negative impact that would be unfortunate.

KRAUTHAMMER: I'll concede it would be a waste of time to plan for a sequestration that’s not going to happen. But it's a lot less damaging than actual sequestration, which even a Democratic secretary of defense has said publicly it would be devastating.

BREAM: Quickly, I want to mention today the House voted down balanced budget amendment. Charles that included some Democrats who voted yes back in '95 when it was a big issue. Why the flip in votes this time?

LANE: Well, Steny Hoyer, who is exhibit A, said he has learned in the interim that three-fifths could not be mustered to get out of the deal, as he once thought in 1995. But don't forget, there was one important Republican Dave Dreier who had supported in the past who is now against, and I think for good reason, one of many good reasons that it would start to turn every budget into a federal lawsuit. And the courts would get involved in what is an outlay and what is a receipt and so forth. And I think, frankly, I agree with Mr. Dreier about, that this kind of a gimmick and everybody knows it.

BREAM: Well, each day we find something new to disagree about. Gentlemen, we’ll leave the discussion there. Up next, the Friday lightning round.


BREAM: Every week, viewers vote for your choice online in the Friday lightning round poll. This week, should Justices Kagan and Thomas recuse from the healthcare case won with 33 percent of the vote. We're back with the panel now to talk about it. And we'll start by listening to a little bit of the newest justice Elena Kagan's testimony during her confirmation hearings on this point.


ELENA KAGAN, SUPREME COURT JUSTICE: I would recuse myself from any case in which I’ve been counsel of record at any stage of the proceedings, in which I signed any kind of brief. In addition to that, I said to you on the questionnaire I would recuse myself in any case in which I’ve played any kind of substantial role in the process.


BREAM: And today there is a brand new letter from the top Republican in the Senate, Mitch McConnell and also Jon Kyl, Senator Jon Kyl reaching out to Eric Holder in the Justice Department demanding to know more about Elena Kagan's involvement with potentially coming up with defenses for the healthcare law when she was then solicitor general working within the administration. Steve, have you had a chance to look at the letter? And what’s your take on whether there are new legitimate objections to Kagan?

HAYES: I have read the letter. I think it's interesting. If you had to go based on what we know right now I would say no, she probably doesn't have to recuse herself. However, they raise two additional things that I think present some problems, and they challenge most importantly her characterization of the need to recuse if she had a substantial role. And they say that is not what the law says.

They raise two things. She was CC-ed on a number of e-mails parts of discussions among Justice Department personnel, about how they would defend the healthcare statute. This is number one. She said she wanted her office to be a part of discussions. Whether she was herself, we don't yet know, but the Justice Department isn't providing the information that the Senate Republicans are seeking.

BREAM: And some documents have been turned over but apparently they are looking for more.

Charles, what do you make of this? People say if you are talking about Justice Thomas or Justice Kagan those asking for recusals are doing so purely for political reasons to influence the outcome of the case?

LANE: It won't surprise you to learn I think they are doing it purely for political reasons. This issue is really hot with the base of the Democratic Party about Clarence Thomas and vice versa on the Republican Party. Boy, it's just red meat to the party faithful that say you have bankrupt justices on one side or the other. I think they've been sending fundraising efforts out about Clarence Thomas for a while. Neither one of them should have to recuse. The issues are tangential. And at the Supreme Court level, there’s a strong presumption against recusal because it's the court of last resort. And I don't think either will recuse. And furthermore, the votes will cancel each other out in this case anyway, so it wouldn't change the result.

BREAM: Yes, I don't think either steps down from it. Charles?

KRAUTHAMMER: I hardly endorse chuck's cynicism. I think the Kagan criteria are correct and there’s no evidence she had substantial role. With Thomas, the idea that a spouse would make you have to recuse yourself, spouse's activities I think is insulting. If the sexes were reversed and he were a woman because of a husband's activity, it would said a justice had to recuse him or herself it would be called sexism. I think these are dismissible objections.

BREAM: All right, and we are talking about the work that Ginny Thomas, Justice Thomas' wife, has done with groups that oppose the healthcare law.

Moving to the next topic, Newt Gingrich, he is having a good week. Let's talk about some of the polling numbers out there and then we will break them down. The last Fox News poll looking at the GOP presidential nominee preference, Gingrich is one percentage point ahead of Romney at 23 percent.

And now let’s look to Iowa, the first key caucus state. A new poll out from Rasmussen reports really, we don't know if it's an anomaly. We'll let you guys hash it out, but it has Gingrich at 32 percent, Romney at 19 percent. That stands in contrast to what we had from the beginning of the week from Bloomberg out of Iowa, which was basically a four-way tie between Cain, Paul, Romney, Gingrich.

And then we look to New Hampshire. These are new numbers out from Magellan strategies. There they’ve got Romney at 29 percent, Gingrich at 27 percent. That's by far the closest poll there, although when you look over the last month or so of polling from New Hampshire there is a broader spread in favor of Romney. But this is the latest polling number out of New Hampshire. Steve, what do you make of it? Is Gingrich going to be able to maintain the momentum to peak in six weeks when it counts?

HAYES: We should be clear, it is momentum. Whether the individual polls are accurate or not, Newt Gingrich has momentum. He has it nationally and it appears he has it in the key states. The most important and the most interesting potential poll there is the New Hampshire poll where he was not even really registering in the significant numbers until the past couple of weeks. And now if he is actually within let's say five points or eight points of Mitt Romney there, given the amount of time and attention that Mitt Romney has paid to New Hampshire that changes the dynamic of this race.

BREAM: Charles?

LANE: Well, obviously those people who left Gingrich's campaign last summer to join Rick Perry's campaign because Newt didn't have a chance are probably eating their hearts out right now. Its incredible how one candidate after another surges as the candidate of the week of the Tea Party/conservatives who are looking desperately for an alternative to Mitt Romney.

We’ll see if it holds up when they hear more about Newt's pseudo- lobbying activity, his insider status in Washington, et cetera, et cetera. And I assume the only reason that Romney hasn't said more about that his opposition research was focused on other people all this time, but they’ll get around to it.

BREAM: But Gingrich ride the wave, Charles?

KRAUTHAMMER: I think so, but I have seen the report if you study attacks of candidates on each other to debates, all of them sustained a lot of attacks. Gingrich has had none directed at him I think because of the bad start he had and people had assumed he wasn't going to be a factor.

Well, now it starts and, you know, you have the stories about his business activities. And I think there are also stories about his ideological inconsistencies over time. And we'll see when these hit, we're going to see whether it has any impact at all, or it could have no impact at all. But these numbers are I think on polls taken before a lot of this information had come out.

BREAM: Yes. It's been a busy week news-wise for him.

Gentlemen, thank you very much. That's it for the panel. But stay tuned. Life on the campaign trail can be grueling, so tiring that it makes answering even the simplest question a challenge. That's after the break.

Content and Programming Copyright 2011 Fox News Network, LLC. ALL RIGHTS RESERVED. Copyright 2011 CQ-Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of CQ-Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.