Where Do Debt Talks Go From Here?

This is a rush transcript from "Special Report," July 22, 2011. This copy may not be in its final form and may be updated.

CHRIS WALLACE: And we're back now with our panel. Well, guys, despite the inflammatory rhetoric coming from the president and pretty sharp rhetoric coming from Republicans, especially House Republicans, these guys have got to sit down and they're gonna sit down at 11:00 a.m. tomorrow, all of the congressional leaders with the president. They gotta work something out, and it will be 10 days and counting. What do you see happening?

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: Well, it's hard to say. The president clearly embraced McConnell, the McConnell plan tonight, briefly -


HAYES: -- said I don't want to do it but I'll do this if we have to. I think this actually presents a tremendous opportunity to House Republicans to put together something, whether it's a short-term plan with a trillion cuts or something longer, something maybe that pushes back the date of default to September 30 by selling bonds is being discussed in Congress in the House side right now. This gives Republicans an opportunity to present a plan to say here is 218 votes. We have passed this. You didn't want a cut, cap, and balance. This is yet another plan from Republicans, Mr. President.

WALLACE: Short-term cut in spending matched by equal increase in the debt limit?

HAYES: Exactly.

WALLACE: Charles?

CHARLES LANE, WASHINGTON POST: Well, I think there's going to be --

WALLACE: Let me just say, the president has already said he'd veto that, but ya know, as Charles Krauthammer says, dare him. Anyway...

LANE: McConnell and Reid have been working on something that would be like a McConnell version with a $1.5 trillion spending cut attached, that may now get a second look.

I just want to say something about cut, cap and balance. This may be a specific plan. It's not a very serious plan. There was never going the pass the Senate. They knew that all along. If the president may have been posturing today, that plan has been posturing all along. And furthermore, it's not a solution to the budget deficit because those balanced budget amendments are full of loopholes that could have been gotten around anyway.

WALLACE: Charles, I know that you, and you wrote another interesting column today, in which you advanced this idea of a short-term increase. But let's go to the McConnell plan, if -- because that does have a lot of buy-in from Republicans and Democrats in the Senate at least. Increase the debt limit, let the president take the haul; maybe have a $1 trillion that the Biden group had already agreed to. What do you think of that?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I think it's what will ultimately pass, unless the Republicans in the House pass something short-term, cuts only, and adjourn and go home, which I'm sure Obama could not veto given the catastrophic events he predicts if there is a debt default. So that is option one if you're a Republican.

But if the Republicans aren't going to take that chance, show themselves at least open to a short-term extension half a year, I think we're going to end up with the McConnell plan and I'm sure that everybody will agree on it in the end. The president said explicitly here, he will accept it. It's a way out, it's a parachute, it defers everything until after Election Day, and in a sense it's democratic, in the sense that it puts the issue to the country on Election Day in November, which way do you want to go?

WALLACE: Alright, we have to take another break. We'll be back with more coverage, and we are also waiting, as we told you, for House Speaker John Boehner to come forward and give his response to the president's very pointed remarks today. Back in a moment.

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.