This is a rush transcript from "Special Report," October 12, 2010. This copy may not be in its final form and may be updated


PRESIDENT BARAK OBAMA: Just this week we learned that one of the largest groups payi ng for these ads regularly takes their money from foreign corporations. So groups that receive foreign money are spending huge sums to influence American elections, and they won't tell you where the money for their ads comes from.

KARL ROVE, FORMER BUSH ADVISER: Does the president of the Un ited States have such little regard for the office that he holds that he goes out there and makes these kinds of baseless charges against his political enemies? This is just beyond the pale. How dare the president do this?


BRET BAIER: President Obama last week and the Democratic National Committee in an ad are alleging in part that the U.S. Chamber of Commerce is funding domestic political activities with foreign money, or suggesting that, at least. Senior adviser David Axelrod was asked about that this weekend.


BOB SCHIEFFER, CBS NEWS: But this part about the foreign money, that appears to be peanuts, Mr. Axelrod. Do you have evidence it's anything other than peanuts?

DAVID AXELROD, OBAMA SENIOR ADVISER: Well, do you have any evidence that it's not, Bob? Why not simply disclose where the money is coming from and then all of these questions will be answered.


BAIER: The New York Times says it's neither illegal nor unusual. What about this? Let's bring in our panel tonight, Jonah Goldberg, at-large-editor of National Review online, Juan Williams, news analyst for National Public Radio, and syndicated columnist Charles Krauthammer. Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, there is desperation and then there is reptilian desperation. And this is the reptilian variety. This thing just oozes of slime and innuendo.

This is McCarthy-like. You make an accusation that the other side is using foreign funds. You don't have a shred of evidence and you answer like Axelrod what is your evidence, which is what McCarthy did. You'd raise suspicions about someone. And the objective is not to actually make a case but to raise suspicions and leave them hanging out there.

Here are the facts -- the Chamber of Commerce has 110 overseas affiliates which give annual dues. And it is peanuts. It's one half of one-tenth of one percent of its budget.

Also, as The New York Times has written, not me and the not other right wing troglodytes, they have written that this practice of getting dues from the overseas association is not illegal, it's not improper, and it's not unusual.

As we heard earlier in the show, the Sierra Club and the AFL-CIO also had overseas affiliates which give dues and they engage in the political activity. The money from the overseas affiliates is segregated and not used in politics.

The accusation here is that the money is being used again without a shred of evidence. And the irony here is that Obama is a man who ran on hope and change, and this is a pure appeal to xenophobic fear.

Secondly, here is a man who said we have to be one with the world. He stands up in Berlin two years ago in a rally of swooning, cheering Germans, and what does he say? "I'm a citizen of the world." Now his use of the world is as a weapon, the sinister foreigners are influencing our elections in the secret way, again, without a shred of evidence.

BAIER: Juan, it seems the White House will continue to use this attack. The vice president just brought it up a few moments ago on the stump. Bill Burton, the deputy White House press secretary had this to say when asked about it, "The people who want to keep these donations secret are those with something to hide. It's an issue that he," meaning President Obama, "will continue to raise."

What about that as an issue? And would there be potentially some backlash for this as a tactic?

JUAN WILLIAMS, NEWS ANALYST, NATIONAL PUBLIC RADIO: Sure. And I think you're witnessing it as you just described, as Charles just described. The anger, you saw Karl Rove say how could he use the office of the presidency to make a specious charge?"

KRAUTHAMMER: I thought it was restrained.


WILLIAMS: Restrained? One point I would say to you Charles is it's illegal to use foreign money to influence American campaigns.

KRAUTHAMMER: There is not a shred of evidence --

WILLIAMS: But it would be illegal if they were doing so.

KRAUTHAMMER: It would be illegal if you shot somebody, but there's not a shred of evidence.

WILLIAMS: But I'm saying it's illegal for foreign money to influence a campaign.

But here's the larger issue I think from the White House perspective, which that if under these new super PACs you have unlimited corporate money coming into the campaign, they think that favors Republicans closer to corporate America.

Secondly, that under the 501C4s you do not have to identify the source of money coming in. If they don't literally come out and endorse a candidate, they can't coordinate with the parties or with the campaigns, but they can use the issue ads that favor one candidate or another.

And again, the White House feels this is favoring Republican candidates, although Democrats --

BAIER: Isn't that disingenuous? George Soros, unions, liberal groups, and then you go back to the 2008 campaign and online donations -- we still don't know where the online donations from President Obama --

WILLIAMS: Right, but I think we're in a political season and Democrats are using this as a scare tactic to stir the base. And they feel in terms of the anonymous donations made now legitimate with the Federal Election Commissions interpretation of the Citizens United case that they have something they can beat up the Republicans with and stir up the base.

BAIER: Jonah, don't they risk stirring up the base and losing even more independents? There has been a gallop away according to polls of independents from the administration.

JONAH GOLDBERG, NATIONAL REVIEW ONLINE: Yes. I think this is a disastrous move. This has a McCarthy-ite stink to it. And also I think when the New York Times raps you on the nose with a rolled up newspaper and says stop doing something and you keep going it, it makes that part of the establishment angry.

I think you are going to see it's amazing how this president managed to alienate not just his enemies but his friends. This is such a sad farcical display that we're seeing from the guys, where they know it's not true. It's like the president is sitting around reading the left wing blogs.

BAIER: It started on Think Progress, the left wing blog.

This is the latest Gallup poll, just out before if show. The Congressional generic ballot, the question, Republican high turnout, 53 percent, Democrats 41 percent. And if it's a low turnout scenario, 56 to 39. This is relatively unchanged from the last time Gallop asked the question, Charles, and these are huge numbers.

KRAUTHAMMER: Relatively unchanged and historically unique. We've never seen such a spread for Republicans. And it tells us it will be a wave election. The only question is whether in the last week or two there might be a slight reversal of this to save a few marginal Democratic seats. I think this is really telling and will tell you about the election.

If I could make one point about my anger -- you should hear the adjectives I left out in my riff.


WILLIAMS: Is that right? I didn't realize.

KRAUTHAMMER: I will give you a list after the show.

BAIER: Juan, last word. I haven't seen it aired but this Democratic National Committee ad is getting a lot of attention. It says twice "Can you believe secret foreign money to influence our elections," Republicans doing that. It says "It is incredible Republican benefiting from secret foreign money." That is the DNC.

WILLIAMS: I think it's a specious attack. I don't think there's any base for it. And it's all about those poll numbers that you cited a moment ago about like turnout. If Democrats sense they are at a tremendous disadvantage, they will use any tactic, including some that may not have any factual basis, to stir the base.

BAIER: Up next with the panel, New York politics and the state's tardiness in sending military ballots. But first, log on to our homepage at Foxnews.com/specialreport for a web exclusive from Claudia Cowen on how California unions are growing their memberships by supporting a move to legalize recreational marijuana.



MAYOR MICHAEL BLOOMBERG, I-N.Y.: If they have failed, it really is reprehensible. We send our young men and women overseas to fight and to die for us and we don't care enough to make sure they get the right to exercise their franchise. That's what they're over there fighting for as much as anything else.

ERIC EVERSOLE, MILITARY VOTER PROTECTION PROJECT: It takes up to 30 days for the ballot to be sent via mail from New York City to the front lines in Afghanistan or Iraq. And so these people, are our service members, are really on the brink of being disenfranchised.


BAIER: That is the first topic in the second panel. The New York State Board of Elections says that it may have missed the legal deadline for getting some of the ballots out to military members overseas. It says it's working with the Justice Department to make sure the ballots are delivered in time for the election, but that may mean extending when they can count those ballots coming in. As you heard, it take 30 days to get there.

We will start there and talk about New York. We're back with the panel. Jonah?

GOLDBERG: My sense is that this is incompetence more than skullduggery. I know we're going to talk about Paladino and the gays and all that kind of stuff, but this seems like the perfect Tea Party issue for conservatives and Republicans to make in New York. Through sheer incompetence and bureaucratic bungling the city and state of New York have disenfranchised troops at a time of war. That's seems to me perfectly symbolic of what a decrepit backward state and city New York has become politically.

BAIER: There will be people out there, Juan, who will say most of the large numbers of the military member vote Republicans and this is possibly an effort to squash those votes.

WILLIAMS: And they are right to make the claim right now because it looks as if something is being done to have a negative impact in terms of vote count.

What strikes me is there should be no question. The law is the law. They should be the right to vote. Their vote should be counted. It's just upsetting when you stop and think about it. I believe it's four years ago that half of the military ballots never got counted. That's crazy!

KRAUTHAMMER: I'm with Jonah on this. I think it's the first rule of politics. If you have to choose in explaining the screwed up behavior between incompetence and conspiracy, always choose incompetence. Conspiracy is hard to actually pull off. In this case I think it is sheer incompetence. It isn't as if it was passed yesterday. They had months of preparation for this.

BAIER: And they extended it.

KRAUTHAMMER: They got an extension.

The one extenuating circumstance is the parties had scheduled their primary elections late on September 14, in New York, so you don't know who is on the ballot. Nonetheless you still have a time to do it and you should go the night after that election and print and send it out.

BAIER: We broke the story. We'll stay on it.

Let's turn to races in New York, first the governor's race. The Real Clear Politics average in the governor's race, Andrew Cuomo against Carl Paladino. There you see a big spread with the average in the latest polls. Paladino is dealing with this statement he made on Sunday and the reaction to it.


GUBERNATORIAL CANDIDATE CARL PALADINO, R-N.Y.: : I just think my children and your children will be much better off and much more successful getting married and raising a family. And I don't want them brainwashed to think homosexuality is an equally valid and successful option. It isn't.

I review my remarks. I stand behind everything I did say. Schools have no business teaching children about moral questions. That's reserved to the parents.


BAIER: Cuomo issued a statement saying it's a stunning example of homophobia. Charles, what about this?

KRAUTHAMMER: As political tactics this is pure insanity. I think they will retire the cup with three weeks to go for the most suicidal candidate any race, anywhere in this year.

He comes out of the early election with a six-point deficit, which is small in New York State. Then what does he do in a state where the last elected governor resigned in a sex scandal, his successor had to not run again because of his own scandals, a state that in meltdown economically, high taxes, can't even get their ballots out on time, true anti-incumbent fervor in the state.

And what does he do? He talks about homosexuality. Whether you -- wherever you stand on the issue of gay rights and marriage, the idea of raising this in a year where it really is the economy, stupid, the incompetence is staggeringly bad political skills. And he will lose by the widest possible margins.

BAIER: Juan, he also criticized Cuomo for bringing his daughters to the New York Gay Pride Parade.

WILLIAMS: I'm trying to just give a thought to how -- you can say he is making a point. His point I guess was you children won't lead as happy a life if it turns out they are gay themselves. It gets you in all sorts of craziness. He is suggesting that people teach it now in the schools.

I just disagree totally. I do not think if my child was gay they'd automatically live a bad life or I should tell the child to lead that live, to hide -- he is going down a bad path.

I will say this, too. The Tea Party and conservatives at the moment are not going after the wedge issues. They are going after the big government, government corruption, overspending, deficit spending. I think Carl Paladino is off on his own and that's not effective to win the moderate and independent votes which is what he needs in New York, which is mostly Democrat.

GOLDBERG: I think if you want to read in a favorable light there is a lot of defensible thing he has to say. There are a lot of people who may have questions on gay marriages, including the president of the United States and most Democratic politicians in the country who at the same time don't want to discriminate against gays but don't like the importing of this conversation to very young children in schools.

That all said, I agree with Charles. When pandering to ultraconservative, ultra orthodox Jews, say no cameras.



KRAUTHAMMER: I have better advice -- talk about Israel.


BAIER: That's it for the panel. But stay tuned for a shocking revelation during a political speech.

Content and Programming Copyright 2010 Fox News Network, LLC. ALL RIGHTS RESERVED. Copyright 2010 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.