This is a rush transcript from "Special Report with Bret Baier," February 7, 2018. This copy may not be in its final form and may be updated.


SENATE MAJORITY LEADER MITCH MCCONNELL, R-KY.: I'm pleased to announce that our bipartisan, bicameral negotiations on defense spending and other priorities have yielded a significant agreement. No one would suggest it is perfect, but we worked hard to find common ground and stay focused on serving the American people.

SENATE MINORITY LEADER CHUCK SCHUMER, D-N.Y.: The budget deal doesn't have everything Democrats want. It doesn't have everything Republicans want, but it has a great deal of what the American people want.

DEFENSE SECRETARY JAMES MATTIS: I am heartened that Congress recognizes the sobering effect of budgetary uncertainty on America's military and on the men and women who provide for our nation's defense.


SHANNON BREAM, FOX NEWS: Let's bring in our panel to talk about that: Byron York, chief politics correspondent of the Washington Examiner; A.B. Stoddard, associate editor at Real Clear Politics and host of "No Labels Radio" on Sirius XM; Mollie Hemingway, senior editor at The Federalist. Welcome to all of you on this we think we may have averted a shutdown Wednesday. Byron, I'll start with you. So there's a lot of money for defense for the Republicans, a lot of domestic money for the Democrats. What is this doing to the budget deficit though in the long term?

BRYON YORK, WASHINGTON EXAMINER: Well, it makes the budget bigger and the deficit bigger. There's no doubt about that. I think what it shows is that a lot of lawmakers, Republicans and Democrats, they don't want another government shutdown and they are tired from just staggering from one continuing resolution to another. The government is going to shut down in three weeks and then I two weeks after that. There's just no way to do it. Republicans have been wanting to get more money for defense. They are going to get a lot more money for defense. Democrats have been wanting more money for domestic spending. They are going to get that. And the budget hawks are going to get mad. And then they will stage protest votes against this, and then everybody will make a deal.

BREAM: A.B., this is something that Republicans have talked about for decades. They don't like big government and spending lots of money, but it sounds like that's what they had to do to get this deal done today.

A.B. STODDARD, REAL CLEAR POLITICS: Yes, I like the parties coming together. I host "No Labels" Radio. Where this ends up we have no idea. But it is true, the parties never agree on fiscal discipline. They agree on spending more. When it gets too hot in the room, they go, OK, let's just throw money at it and walk out. That is the makings of a deal. The super committee of 2011 was a joke. It led to the sequester. Now there is not going to be no sequester, no mandatory across the board spending cuts because they can't agree on where the budget should be shrunk.

It is going to be tough for Republicans politically. They want to turn out their base of support in this fall's midterm elections. Their voters are happy about the tax reform bill, but it did affect the deficit. They are going to be looking at a two-year period of time where they let the budget bust even more. And it's going to be -- it's very frustrating to fiscal hawks. They will be overruled and a deal will be made, but it is an issue sort of at the grassroots level because it's what they promised they would attend to.

MOLLIE HEMINGWAY, THE FEDERALIST: It's not just those two years. For two years you get an extra $150 billion. But then that creates this new spending level, and so everything will be based off of that baseline. So you talked about that tax cuts at $1.5 trillion over 10 years. This is going to work out to be the exact same thing. So bipartisanship is a very great way to bust deficits and increase debt.

BREAM: First of all, real quick, I know you think that Schumer actually came out pretty good in this deal.

HEMINGWAY: This type of spending is serving him well. And also being able to get out of an immigration deal at the same time, I think he understands the numbers are very bad for Democrats with immigration and he was able to avoid that, get a bunch of spending, so good for him. Not good for fiscal conservatives or people who care about the fiscal health of the country.

YORK: But for a lot of Republicans, this president doesn't really care about fiscal discipline all that much. He wanted to have this deal. The White House is going to be OK with this bill. President will campaign for whatever candidates who would help wherever he's welcome as we approach November. So there's really no problem with this.

And the big thing as far as our recent fights is there is no DACA in it. Donald Trump sees that as a victory, and a lot of Democrats and the leftist based see that as a real loss because they have given up leverage once more. And by the way, it has a debt ceiling clause in this which is going to get the debt ceiling past November so nobody can use the debt ceiling for leverage. And this is just a win for the White House.

BREAM: It's got to go to the House though, now, A.B., and there are going to be critics on the left and the right who are unhappy about this package.

STODDARD: Right. That's where they're going to have to work some more wonders behind closed doors because that's right. The House has the Freedom Caucus that is supposed to stand up and object to this on budgetary reasons. And then you're going to have this roaring left saying we didn't get an agreement on a DACA fix so we can't vote for anything.

Again, I don't know -- I think you can probably see a situation where Donald Trump gets on the phone and bends enough ears and minds among those fiscal hawks in the Freedom Caucus to get the numbers to where they need to be, and then they lose the liberal Democrats on the House side but they get it through. Maybe that's an optimistic scenario but that's where I see the map going.

BREAM: And with that playing out today, we saw Nancy Pelosi, the House minority leader, take to the floor for eight hours. And just moments ago we saw a picture of the shoes she was wearing. If those are the shoes that she was wearing, regardless of where you are on the positions that Nancy Pelosi hold, I have to take my hat off to her. She's wearing those four- inch stilettos the entire time on this eight hours, that's a sacrifice.

HEMINGWAY: And just long speeches in general are admirable. It's something you used to see a lot in the Senate and see in the House. And people have stopped talking through issues or advocating for their beliefs. So it is admirable to see someone giving an eight hour speech. At the same time it does feed into these problems the Democrats have right now which is they care more about noncitizens than citizens and they are willing to do a lot of work on behalf of noncitizens without thinking through the people who will actually be eligible to vote for them.

BREAM: They want some of those folks to be eligible to vote for them.

YORK: The problem for Pelosi is that a lot of her base thinks this is just show anyway. She was part of this deal. She was part of the leadership that came to this deal. And they said it's really nice that you go out and give an eight-hour speech, we're glad you're on our side. But you are just going to agree to it when crunch time comes. So this was really a very, very long virtue signaling from the minority leader telling the key constituent groups that she's on their side even though they are about to just put DACA off to the side.

BREAM: OK, let's talk about the news texts that we're seeing more of today put together by Senator Ron Johnson. Some of these have been released between, again, Peter Strzok and Lisa Page. One of them comes on September 2nd, 2016, and says "TP for D," apparently making a we think, talking about talking points for Director Comey, Page said, "Yes, because POTUS wants to know everything we're doing." There was some speculation that was about the Hillary Clinton email investigation, but now there is talk that that was about the Russia potential collusion investigation, A.B. But it's now raising more questions and more criticism for these people who were so intimately involved with both of those investigations.

STODDARD: Right, but the Wall Street Journal reported this afternoon they think from their reporting they have concluded that Senator Johnson is incorrect and that this was a president asking for intelligence on Russian meddling because he was going to face Putin in person in the coming days. I think Peter Strzok and Lisa Page have had their -- everyone is made up their minds about what they were doing. We don't know the answer to the question what the insurance policy is that they discussed in Andy's office, and that is the office of Andrew McCabe. He has since left, the deputy FBI director. There are a lot of questions that I have, but I think I'm going to with the Wall Street Journal reporting on this until further notice.

HEMINGWAY: That is what's interesting about the Wall Street Journal reporting. Initially some people thought it had to do with the old Hillary Clinton email investigation, learning that it's in fact about Trump-Russia meddling election is far more interesting. When was Obama first briefed on the Trump components of that investigation? When did he first learn about the dossier? I think a normal press corps would be very interested in getting answers to that.

And this is again just a tiny part of a much large scandal that also news break about Senators Grassley and Senator Graham did a criminal referral of Christopher Steele that verifies a lot of what that Nunes memo last week said, that there was the use of this unverified, salacious dossier, that they didn't tell the court that this was bought and paid for by Hillary Clinton and the Democrat National Committee, and that they didn't corroborate this in any meaningful sense. So having that corroboration not just from the House but the Senate that there are problems with our surveillance authorities is also big news.

BREAM: Byron, why do you think that that memo didn't get a lot of attention yesterday when it came out? Because what essentially Grassley had done is they sent this for a criminal referral back in January, but what they essentially asked the FBI do is to un-redact it as much as possible so that they could release the memo. This is prepared by different people, a different body than Devin Nunes, and it does, as Mollie said, seem to lay out many of these same claims, almost exactly as we saw in the House memo.

YORK: I think it didn't get as much attention because a lot of people, certainly all Democrats and a lot of people in the press had already pronounced the House memo a dud. So it's all over. This was, you're right, a separate investigation coming to this conclusion separately, and certainly people in the House committee are frustrated today that this is not getting more attention because they do feel it is corroboration for their findings.

On the dossier, one of the themes we have been seeing in recent months on this dossier is that we are learning every day that knowledge of the dossier went up higher and further around in the Obama administration that we previously knew. It went out higher in the FBI. It went up higher in the Justice Department. Just recently, a top Obama State Department official said she knew about the dossier in July which was really early. There'd only been one or two installments of it at that point. So the idea of asking whether they were talking to the president about that on September 2nd is not a crazy idea at all.

BREAM: Well, we will see because something tells me this is not the last batch of texts that we're going to see. All right, panel, thank you very much.

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