This is a rush transcript from "Special Report," January 4, 2019. This copy may not be in its final form and may be updated.


PRESIDENT DONALD TRUMP: We had a productive meeting today.

REP. NANCY PELOSI, D-CALIF, SPEAKER OF THE HOUSE: We just completed a lengthy and sometimes contentious conversation with the president.

TRUMP: I thought it was really a very, very good meeting. We are all on the same path in terms of wanting to get government open.

CHUCK SCHUMER, D-N.Y., SENATE MINORITY LEADER: He said he would keep the government closed for a very long period of time, months or even years.

TRUMP: Absolutely I said that. I don't think it will, but I am prepared. It really could open very quickly.

I've designated a group, and we're going to be meeting over the weekend, that group, to determine what we are going to do about the border.


BAIER: Negotiations are continuing. The president seems helpful. Different perspective, perhaps, or a look at that same meeting from the Democrats out on the driveway in front of the West Wing. The president also saying today this.


TRUMP: We can call a national emergency because of the security of our country, absolutely. No, we can do it. I haven't done it. I may do it. I may do it. But we could call a national emergency and build it very quickly, and it's another way of doing it. But if we can do it through a negotiated process, we are giving that a shot.


BAIER: Saying a national emergency to build the border wall with or without Congress. So what about all of this? Let's bring in our panel, Byron York, chief political correspondent for the "Washington Examiner," Karen Tumulty, opinion writer for the "Washington Post," and national security analyst Morgan Ortagus. Byron?

BRYON YORK, CHIEF POLITICAL CORRESPONDENT, WASHINGTON EXAMINER: The president has been talking about those military option for a while now. It is totally unclear how much money out of the military budget he might be able to use. I don't think anybody thinks it's a big amount, and it's certainly not $5 billion. But it's something that could end up being tested.

And I think another interesting thing to think about it here, this is unusual and new situation for Nancy Pelosi, too. She's been speaker of the House before, but she was speaker of the House for four years between 2,007 and 11 when Democrats had the majority in the Senate, for the last two years when they had a really big majority in the Senate. And in 2011 when Republicans took over the House, the new House GOP passed a lot of stuff that went nowhere in the Democratic Senate with a Democratic White House. I think we could be in for quite a long standoff.

BAIER: Karen?

KAREN TUMULTY, OPINION WRITER, WASHINGTON POST: I do think the emergency powers that he is talking about do need to be defined a little more clearly. The Constitution certainly does get the president emergency powers, but if you take that too far, you may be actually hitting the tripwire, the other great topic of conversation today, which was impeachment, whether it becomes abuse of power. And that's something that I think -- and he himself said they are trying to get some clarity on how far he can go with this.

BAIER: Yes, and whether it is moving money from one pot to another or whether it is actually having the military build a wall, there's a lot of questions about what exactly that would mean. But he is clearly indicating that he wants to do negotiate a way out.

TUMULTY: But also, what constitutes a national emergency? It's these emergency powers that are really sort of murky here.

BAIER: Here is a Senate minority leader and the majority leader today.


CHUCK SCHUMER, D-N.Y., SENATE MINORITY LEADER: We made a plea to the president once again -- don't hold millions of Americans, hundreds of thousands of workers hostage. Open up the government and let's continue the discussions.

MITCH MCCONNELL, R-KY., SENATE MAJORITY LEADER: The package presented by the House's new Democratic leaders yesterday can only be seen as a time-wasting act of political posturing.


BAIER: Morgan?

MORGAN ORTAGUS, NATIONAL SECURITY ANALYST: So I think if you look at the dynamics of where we are right now, you have a very energized Democrat party. They came back into power, they've taken over the House, and just the dynamics in Washington I think are in our favor.

So what could the president do to not -- to make the party more demoralized? That would be to cave on this. So he really I think has to stick to his guns, where he is. And if he sticks it out, I think for me, the breaking point, what I am looking at is, what happens when things like TSA workers started to walk, or what happens for the people who are up for 2020, moderate Republicans, when do they sort of say, enough is enough. I still think that the president is in good standing with his base especially after what happened in December, but how long can you keep this coalition together is my question.

BAIER: Some TSA workers are apparently calling in sick in pretty big numbers. The real deadline may be, Byron, next Friday, where the next round of paychecks are scheduled to go out, and that is kind of an internal deadline.

BRYON YORK, CHIEF POLITICAL CORRESPONDENT, WASHINGTON EXAMINER: It is. I still think semantics are going to play a role in the way it is resolved somehow. The Democrats have been so strong against a wall, Nancy Pelosi again called it an immorality. But they are not so opposed to, quote, what they call "enhanced fencing." There has got to be a way that they could come together on enhancing the fencing, either extending the 405 miles of pedestrian fencing that currently exists on the border, or strengthening some of the shoddy fencing that exists in places.

BAIER: And apparently Senator Lindsey Graham is working with others to cobble together something dealing with the Dreamers, dealing with something else, a lot of questions about that today as well.

You mentioned impeachment. The president said during this meeting that Nancy Pelosi told him, quote, "We are not looking to impeach you." He went on to say you can't impeach people who are doing such a great job. But there are people obviously in the Democratic caucus looking to impeach the president, one of them a freshman congresswoman who caused a stir.


REP. RASHIDA TLAIB, D-MICH.: We are going to go in there, we are going to mother --


PELOSI: I don't think we should make a big deal of it. Words weigh a ton. And the president has to realize that his words weigh a ton, too. And some of the words that he used has a direct impact on people's lives. My colleague's comments do not have an impact on people's lives.

TRUMP: I thought that was a great dishonor to her and her family. I thought it was highly disrespectful to the United States of America.


BAIER: Congresswoman Rashida Tlaib tweeted, "I will always speak truth to power, unapologetically me. This is not just about Donald Trump. This is about all of us in the face of this Constitutional crisis, we must rise." Karen?

TUMULTY: Well, she's discussing the issue of impeachment and in doing that, she managed to use sort of the queen of all vulgarities. And so I think that this is probably a learning experience for a freshman congresswoman, which is that the cameras and the recordings are always out there.

But Nancy Pelosi has an issue here, too, in that she wants to tamp down this impeachment talk. Anyone who lived through the last time this city went through impeachment knows that this was something that ended up really biting the Republicans. And the public tolerance for that is -- the public belief that it should be used in very, very rare circumstances and not as a substitute for election results.

BAIER: There is a fight in this Democratic caucus on this very issue, and if the speaker did say that the president, we are not looking to impeach you, there would be some pushback on the progressive side of her party.

ORTAGUS: Absolutely. That is where the energy is. And if there was a test today in terms of what will the Democrat Party take in terms of their tone and rhetoric going into 2020, Nancy Pelosi failed that test in that she didn't condemn one of the worst and loudest voices. Elijah Cummings, congressman, did. He did condemn this on Twitter and said this is not the kind of language we should be using. And if you actually want to prevent the sort of impeachment talk, you should be taking the Elijah Cummings route, not making the same mistakes Nancy Pelosi did today.

BAIER: But let's not sugarcoat it. The president uses salty language quite a bit. And he's not exactly holier-than-thou when it comes to his rhetoric.

YORK: Sure. There were two parts of the issue. One was just the vulgarity, and the other was the actual issue of impeachment. On the vulgarity, the Republicans kind of stood up and clutched their pearls and acted all hurt, like this was the worst thing anybody said. But on the Democrats, we have polls, a lot of polls showing that 75 plus percent of Democratic voters, of the base, want the party to impeach Donald Trump right now. There was a test vote on it last year on a procedural vote on impeachment articles -- 66 members of the House voted yes. Don't you think that would be more now?

BAIER: That is one of the big political stories of this year, and it's going to be a big year, I promise you.

Next up, the Friday lightning round. We'll see what we get in.



TRUMP: We've all seen the incredible job growth, 312,000 jobs, 3.2 percent wage growth, labor participation rate increased to 63.1. From the time of my election, the stock market has gone up very close to 30 percent.

LARRY KUDLOW, NATIONAL ECONOMIC COUNCIL DIRECTOR: It doesn't get any better than this, and I really would urge people to reconsider their pessimism.


BAIER: Reconsider the pessimism, a good day today, especially on Wall Street, the Dow was soaring today. There you take a look at the highs. Obviously, this has been a wild ride on Wall Street, but if you look at the numbers since the president took office, we often put these up, real GDP growth, unemployment rate, consumer confidence jumping up, average hourly earnings jumping up as well, and obviously the president touting all of that in the Rose Garden today. What about the U.S. economy? We'll start there. Morgan?

ORTAGUS: I think the jobs number was certainly what the administration, what all Americans should want to hear. But really the news of the day that probably excited the president most was the conference, the public conference with the Fed chairman, Powell, and his notes that for next year that the Fed would be looking at perhaps may be slowing interest rate hikes, which I think is what the president and both what the market wants.

So we've had a pretty bad week of news, so to have the jobs numbers along with the Fed chairman statements today I think was the shot in the arm that the markets needed. They are still a lot of positive things, especially when you look at geopolitical uncertainty in China and Europe, in the Middle East. We are starting to look like that bright and shining hill again.

BAIER: The China part is really the big unanswered question. The president was asked about that today as well, Karen.

TUMULTY: And because the big development that we saw this week out of China was the effect that it has had on the earnings of one of the most successful companies, not only now, but particularly in history, Apple. And that is something that I think may be one of the bigger storm clouds on the horizon is how much these tariffs are affecting economic growth in China and how much that bounces back then on American companies that are counting on China as a market.

BAIER: New negotiations, I guess, continuing negotiations in coming days and weeks. Byron?

YORK: Job numbers look great, but the bigger number really is wages. I mean, 3.2 percent up since December of 2017. This is something that has been stagnant for so, so long, so to see this number means that employers are trying to keep their workers, wages are going up. That's a really healthy sign.

BAIER: OK, quick winners and losers. When our first, Byron?

YORK: The new military veterans in Congress are my winners, some of whom were seriously wounded. Representative Brian Mast welcomed the new representatives Dan Crenshaw, Jim Baird, with the picture of the three men together, five eyes, five arms, four legs, all American. That was great.

BAIER: Loser?

YORK: Mitt Romney is the loser. Even some Trump critics were rankled by Romney's decision to use his arrival in Washington to take a shot at the president. But they knew it would receive positive press coverage. They were reminded when Jon Huntsman called Romney a, quote, perfectly lubricated weather vane.

BAIER: Winner and loser?

TUMULTY: I think, as Byron said, it's the spectacle of the peaceful transition of power this week. So certainly Nancy Pelosi, whose reelected to the job of speaker is a historic one would be the winner. And 800,000 federal employees who are currently in danger of not getting their next paycheck are the losers.

BAIER: Winner and loser?

ORTAGUS: So for the pet lovers out there, there's a new California law that is requiring pet stores to only sell cats and dogs from animal shelters. So this is effectively putting an end to puppy mills where the breeding conditions can just be terrible for animals. So as a dog person myself, I think this is a great.

Loser, of course the new Congresswoman Rashida Tlaib. So much for when they go low, we go high. But in addition to the colorful language she used yesterday, I think Democrats, especially Democrat Jews should be concerned about her stance on Israel, some of the anti-Semitic comments of the past, and really where she's leading her party at it relates to the Middle East and Israel.

BAIER: We made it around the horn. You all are winners in my book.


BAIER: When we come back, a very special "Notable Quotables."


BAIER: Finally tonight, tomorrow marks 10 years since I took over anchoring this show from my mentor and friend Brit Hume. And it has been quite a ride. I've been blown away this week as the SPECIAL REPORT staff surprised me by collecting messages from friends and colleagues, soundbites that have run on the show all week. And now I'm told they have a final surprise, capping the week with a look back.


BAIER: You may have noticed, after 2,851 shows as SPECIAL REPORT with Brit Hume, this show has a new name.

Welcome to Washington. I'm Bret Baier, and this is a special edition of SPECIAL REPORT.

He is a killer. He is clearly executing people.

It's not just Washington punditry.


BAIER: You guaranteed they are not going -- they are going to keep their doctor.

OBAMA: Bret, you've got to let me finish.

BRIT HUME, POLITICAL ANALYST: Bret has a mastery of tough thing, and that is the task of being interesting and being fair. He is not just some TV personality. This is a journalist.

BAIER: At times you thought it would be a model for the nation.

SEN. MITT ROMNEY, (R) UTAH: You're wrong, Bret.

BAIER: No, no, I mean --

ROMNEY: Bret, this is an unusual interview.


ROMNEY: All right, let's do it again.

BAIER: I have heard others say neither you nor your lawyers have been apprised that you are a target of the investigation. Is that true?


BAIER: Current or former staff?

CLINTON: Absolutely not.

BAIER: You and your staff deleted 32,000 e-mails.

CLINTON: Let me clarify this.

BAIER: You don't remember?

UNIDENTIFIED MALE: Dude, this was like two years ago. We are still talking about the most mundane process --

BAIER: Dude, it is the thing that everybody is talking about.

How is your relationship with President Trump, now? It was a little rocky there for a while.

Do you think that you have the confidence of president Trump?

How do you and how do America's other Arab allies view U.S. leadership in the region now?

UNIDENTIFIED MALE: Difficult questions.

BAIER: That got the English response.

HUME: This interview with James Comey in this very studio was as good an interview on television as I have ever seen in my life. I have never seen an anchor more prepared. I've never seen an anchor cut through nonsense more politely or but more firmly.

BAIER: Someone is not telling the truth here. Is it the former attorney general or you?

JAMES COMEY, FORMER FBI DIRECTOR: No. Actually I think we are both telling the truth.

CHRIS WALLACE, ANCHOR: One of the special qualities that Bret has is his ability to create a special moment. For instance, in the first primary debate in Cleveland when he asked all of the candidates --

BAIER: Can I see hands who is unwilling tonight to pledge your support to the eventual nominee of the Republican Party, and pledge to not run an independent campaign against that person. Mr. Trump?

WALLACE: That was Bret's moment.

DOUG ROHRBECK, SENIOR EXECUTIVE PRODUCER: The thing about Bret is he wants to be where the action is. He wants to talk to people on the ground, he wants to see what is happening in person, and relay that information for the viewers.

BAIER: We are just a few feet away from North Korea. This is the DMZ.

It's about two hours by Royal Saudi Air Force prop plane from Riyadh to the southern border with Yemen.

Just yesterday a rocket was fired from here, landing somewhere out here.

From the Amman, the capital of Jordan.

That's it from the SPECIAL REPORT from the White House.

Fair, balanced, and unafraid.

KATY RICALDE, ADMINISTRATIVE ASSISTANT: Bret is, honest to God, one of the most genuine human beings I have ever met. A lot of people say, hey, don't you want to move on? And I say if you worked for Bret, you'd want to stay here, too. It just is such a fun boss.

STEPHEN COLBERT, TALK SHOW HOST: Here he is pumping mustard into a bottle. Why is Bret Baier hoarding mustard?


BAIER: Have you ever seen the movie "Caddyshack"?

The last dance at the last ball was 69 seconds for President Obama. So obviously, he is in to busting a move.

How are you still awake? This is what, 26 hours?

TRUMP: I don't have a chance because you want to do an interview.

BAIER: If you had a reality TV show like Donald Trump does, what would it be?


GEORGE W. BUSH, FORMER U.S. PRESIDENT: Baier made me sweat.


BUSH: One look at him and I started sweating.



BAIER: Wow, that was awesome. Thank you so much. Many different weight classes in that video there over 10 years.


BAIER: Doug Rohrbeck, my executive producer, has been here from the very beginning. Can we show the control room, real quick? Doug, along with an amazing SPECIAL REPORT team, correspondents, producers, editors, technical folks, all working really hard every day to make this show work to cover news here and around the world.

When I took over for Brit, he said two things to me. One, it's not about you. And two, let the news drive the show. And it's an equation that has worked. I just added on to what Brit built here. So I don't make a lot of predictions, but I guarantee you this -- there will be a lot of news in 2019. And we will continue to cover it here, fair, balanced, and unafraid.

Thanks for inviting us into your home tonight, every night, and hopefully for years to come.

"The Story" hosted by my good friend and colleague Martha MacCallum in New York starts now.

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