This is a rush transcript from "The O'Reilly Factor," December 4, 2008. This copy may not be in its final form and may be updated.
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BILL O'REILLY, HOST: In the "Kelly File" segment tonight: We asked attorney and FOX News anchor Ms. Megyn to take a close look at the atheist anti-religion sign situation in the Washington state capitol to see if we're being unfair, to see if there's anything we can overlook that can excuse Governor Christine Gregoire's behavior. And here is Ms. Kelly.
OK. So the genesis of this case — genesis means the beginning.
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MEGYN KELLY, FOX NEWS ANCHOR: Thank you.
O'REILLY: You're welcome. Was the Alliance Defense Fund in Phoenix, a conservative group, saying to Washington state, "We want you to put the Nativity scene on the state capitol grounds." Correct?
KELLY: Correct.
O'REILLY: Take it from there.
KELLY: And they filed that lawsuit, and the state agreed. And they issued — they signed a settlement agreement saying, "OK, this is going to be the policy when it comes to public displays. They can go in the state capitol, and we won't discriminate based on viewpoint or religion, etc. They will all go in as long as they are consistent with the decorum and what we consider to be appropriate for the state capitol setting."
O'REILLY: OK. So that sets up the appropriate decorum debate.
KELLY: Right.
O'REILLY: Which we rightly pointed out gave the governor discretion in what she can permit and not permit. Are you with me so far?
KELLY: No.
O'REILLY: So governor has no discretion in decorum or appropriateness? None? Zero?
KELLY: Let me just — let me just say I'm coming at this from a purely legal standpoint.
O'REILLY: No, no.
KELLY: What I think...
O'REILLY: Come at it from what is permissible under the agreement.
KELLY: It doesn't matter that the government signed a settlement agreement or agreed to a policy if that settlement agreement or policy is unconstitutional. And under the First Amendment of the United States Constitution, courts take a very skeptical view of speech-based, content-based regulations. They don't like the government deciding what's appropriate speech.
O'REILLY: So let them slug it out. Let them slug it out in court.
KELLY: She could have done that.
O'REILLY: Of course she could have done that. That's why she's a pinhead. She didn't do it. She's a coward. Martin Luther King Day…
KELLY: Right.
O'REILLY: Big picture of Martin Luther King in the state capitol in Olympia, Washington, right?
KELLY: Right.
O'REILLY: Honoring a federal holiday honoring Dr. King. Klan comes in says, "Hey, I want to put a sign there that says, 'I hate blacks. We hate blacks. Blacks are bad.'" Are they allowed?
KELLY: That's a closer case.
O'REILLY: Why?
KELLY: Because certain categories of speech are not protected by the First Amendment, including — let me finish — including fighting words. And if it would...
O'REILLY: See, they worded it just as the atheist worded it, just as they did. Black people are bad. They are hard-hearted. The same wording, just take out religion and put black people in.
KELLY: They didn't say Christians are bad.
O'REILLY: They — but religion is bad.
KELLY: They said religion — there are no gods, no devils, no angels. Religion is but myth and superstition that hardens the heart and enslaves mind.
O'REILLY: OK, take out religion and put, "Dr. King is just a myth and superstition, and his words and ideas harden the heart and enslave minds."
KELLY: I think they'd probably wind up permitting that, because this is — the problem...
O'REILLY: She would never permit that.
KELLY: Listen, I'm not going to argue the policy because I don't defend this governor. I defend the law. And what I'm saying is unless it...
O'REILLY: Take it to the Supreme Court.
KELLY: What I'm saying is, unless it constitutes fighting words, which means you incite immediate violence, that's how inflammatory your words are, then it shouldn't be challenged.
O'REILLY: It's inappropriate — it's inappropriate in that setting to attack a religion.
KELLY: Inappropriate is not something we want our government deciding.
O'REILLY: That's what the settlement says. It has to be appropriate.
KELLY: It doesn't matter. It doesn't matter. Do you really want Governor Christine Gregoire to tell you what's appropriate?
O'REILLY: Yes, I do.
KELLY: Because you're on the side of the Christians in this case.
O'REILLY: There has to be standards in any settlement.
KELLY: No. But government doesn't decide what's appropriate speech. That is not the way this country works.
O'REILLY: OK. Then you've got...
KELLY: That's the bedrock of the First Amendment.
O'REILLY: You have to let the Klan in to denigrate Dr. King? You have to let them?
KELLY: Sadly, that's true...
O'REILLY: No.
KELLY: ...unless it crosses the fighting words line. Yes, Bill, the history of this country is if you don't like offensive speech, you walk away.
O'REILLY: Then every nut-cake group in the country can go into every state capitol and ruin every federal holiday with crazy signs like that.
KELLY: I'm sorry to tell you...
O'REILLY: Sorry, you're wrong.
KELLY: That's true if the capitol has invited groups in to make statements as it has here.
O'REILLY: There is a discretion in any legality and any settlement. This woman, this coward governor, has said, "I'm not going to" — is Pontius Pilate — "I'm going to wipe my hands of this, not use my authority and exercise discretion." Look, sure, litigate it, yes. Would they sue? Yes. Let them. Let them.
KELLY: Let me tell you what she could have done. I don't agree with your analysis of the law at all. But I can tell you that there are things she could have done that she didn't. The law does allow restrictions on time, place and manner. Did she have to allow the display?
O'REILLY: Next to the Nativity.
KELLY: No.
O'REILLY: Could have put it in the closet.
KELLY: Did she have to allow it to go up on all the same days that the Nativity is up? No. She could have restricted them. Could she have gone to the atheist group and said, "The language is somewhat inflammatory. I have no right to tell to you to change it. But for the sake of community standards we'd appreciate it."
O'REILLY: All right.
KELLY: Did she do that? No. Could she have said no and invited a legal challenge?
O'REILLY: Yes.
KELLY: She did none of that.
O'REILLY: That's what she should have done.
KELLY: She did none of that.
O'REILLY: There's a book you should read.
KELLY: Do not say that she doesn't have a legal leg to stand on, because she does.
O'REILLY: I'm saying she's a coward and should have done the right thing and didn't.
Now, I've got 30 seconds. This 8-year-old boy is getting a plea deal, who killed his father and another man. A plea deal, right?
KELLY: Right.
O'REILLY: What do you say about it?
KELLY: I think it's a good deal. I think that he should take it. I mean, I don't know exactly what...
O'REILLY: What does the deal say?
KELLY: Basically it says — reportedly that he's going to stay in the care of a either juvie or mental health facility until he's 18.
O'REILLY: And the lawyer for the kid says he did it because he was spanked, right?
KELLY: Well, there are reports being leaked out that he kept a journal saying on his thousandth spanking...
O'REILLY: You don't exactly buy that?
KELLY: I don't know whether that's true or not.
O'REILLY: The kid's age is so young.
KELLY: It does raise the — it does inject the question of whether there was abuse in this case.
O'REILLY: All right. You can e-mail Megyn Kelly. Do you have any?
KELLY: I analyze the law. That's it.
O'REILLY: Well, all right.
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