'Special Report' Panel on President Obama's Letter to Russia, Cap and Trade Proposal

This is a rush transcript of "Special Report With Bret Baier" from March 3, 2009. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: What I said in the letter was that, obviously, to the extent that we are lessening Iran's commitment to nuclear weapons, then that reduces the pressure for the need for a missile defense system.

SEN. CHARLES SCHUMER, D-N.Y.: The president's gesture to Russia is the kind of smart, targeted diplomacy our dangerous world needs.

(END VIDEO CLIP)

BRET BAIER, HOST: What is that gesture? They're talking about a not-so-secret letter now from President Obama to Russian President Dmitry Medvedev in which the U.S. would essentially abandon ballistic missile sites in Poland and the Czech Republic in return for Russia's effort to get Iran to abandon its apparent pursuit of nuclear weapons.

What about this? Let's bring in our panel: Juan Williams, senior correspondent of National Public Radio, Nina Easton, Washington bureau chief of Fortune Magazine, and syndicated columnist Charles Krauthammer.

Charles, you're take?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: This is smart diplomacy? This is a debacle. The Russians dismissed it contemptuously.

Look, if we could get the Iranian nuclear program stopped with Russian's helping us in return for selling out the Poles and the Czechs on missile defense, I'm enough of a cynic and a realist to say we would do it the same way that Kissinger agreed to de-legitimize and de-recognize Taiwan in return for a large strategic opening with China.

But Kissinger had it done. He had it wired. What happened here is it was leaked. The Russians have dismissed it. We end up being humiliated. We look weak in front of the Iranians and we have left the Poles and Czechs out to dry in return for nothing.

The Czechs and the Poles went out on a limb, exposed themselves to Russian pressure and we have shown that Eastern Europe is not as sovereign as it appears if the Russian influence is there and we will acquiesce in what they consider their own sphere of influence.

This administration has prided itself, flattered itself on deploying "smart diplomacy." Smart diplomacy is a meaningless idea, but if it has any meaning at all, it is not ever doing something as humiliating, amateurish and stupid as this.

A strong letter to follow.

NINA EASTON, WASHINGTON BUREAU CHIEF, FORTUNE MAGAZINE: Well, methinks Charles exaggerates, especially at the Russian response, which one official called it, said they weren't going to take it up as if was a quid pro quo. But they called it a "sensational outreach."

It's not — I don't think it is a debacle. It could become a debacle. The big question about this missile system was always is it aimed at the Middle East, i.e., Iran, as we have all claimed, the U.S., as well as Czechoslovakia and Poland, or is there, as the Russians seem to think, more aimed at the Russians. And that's why they threatened to counter it.

But I think Obama smartly called Russia's bluff, saying OK, it really is about Iran and the threat from Iran, and if you help halt that nuclear program, then the problem of this missile system starts to go away.

The problem is that there is not a lot of evidence that Russia is likely or can do much to stop Iran's nuclear program. And then where does that leave Obama? And that's where it could become a debacle, if he decides not to deploy those missile systems anyway, because he was quite lukewarm about them during the election, or during the campaign season.

BAIER: Juan?

JUAN WILLIAMS, SENIOR CORRESPONDENT, NATIONAL PUBLIC RADIO: I happen to think it's very creative diplomacy. I think it's the kind of thing that we should have been doing long ago. And I think Bob Gates, the secretary of defense, said that he in fact had laid just such a scenario more than a year ago when President Bush was in the White House. But that now that President Obama exercised to do this in some sort of direct way from the top of government to the top of government, because you have Medvedev in place.

And I suppose the caution I would have here is, is President Obama dealing with Medvedev or is he dealing with Putin?

If he is dealing with Putin, who I think still harbors a lot of the kind of insecurities that have come with the breakup of the former Soviet Union and is concerned about the strength and the image of the former Soviet Union, then I don't trust Vladimir Putin and I think that you have to be cautious about that dealing.

BAIER: But isn't there also a question of whether Russia can really deliver on stopping Iran from making nuclear weapons? I mean, if Russia has that kind of influence over Iran? There is a lot of question whether they do or not.

WILLIAMS: Correct. But there is no question that Russia has major dealings, oil dealings and the like, with the Iranians. And so they have more influence than the European powers that have been seeking to try to impose some limits on the proliferation of nuclear devices in Iran.

BAIER: And what does this say about this administration's perception about missile defense overall?

KRAUTHAMMER: Well, it is obvious that it is willing to give it up.

But I think the way it was handled was incredibly amateurish. If you want to explore this deal, what you do is you send a secret envoy, like Kissinger in China. You feel them out and you see if you have a deal in advance. You have it wired. The Shanghai Communique in China was written in advance.

Then you get the president exposing himself as Nixon did. You don't have a letter by the president, which is leaked, which is rebuffed in a contemptuous way, the way that Medvedev did today in Italy, in a way that humiliates the president. You never expose him that way.

This is very amateurish and it ends up as a black eye.

WILLIAMS: Charles, let me ask a quick question. I thought that Hillary Clinton was supposed to talk with the Russians about this later in the week. I didn't know it had been rebuffed.

KRAUTHAMMER: It was leaked at a point where it is a presidential initiative. If you have a secret envoy, you can always deny it if it ends up that the deal isn't made. Now you can't.

It is not going to happen. The Iranian nukes are going to go ahead. The Russians are not going to help us. And the Poles and Czechs are left out to dry.

BAIER: Last word here.

President Obama wants to make big business pay for its carbon emissions, but the consumer would also be hit with the bill.

(BEGIN VIDEO CLIP)

HOUSE MINORITY LEADER JOHN BOEHNER: Let's just be honest and call it a carbon tax that will increase taxes on all Americans who drive a car, who have a job, who turn on a light switch.

(END VIDEO CLIP)

BAIER: The panel discusses cap and trade when we come back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: Under my plan of a cap and trade system, electricity rates wouldn't necessarily skyrocket.

Whatever the plants worth, whatever the industry was, they would have to retrofit their operation. That will cost money. They will pass that money on to consumers.

REP. DAVE CAMP, R-MICH.: And my question is, what Americans won't end up paying more for virtually every item they purchase because of this higher tax on energy?

(END VIDEO CLIP)

BAIER: Well there you hear candidate Obama on the campaign trail talking about cap and trade policies and some sound from a Republican today about that, concerns for what it will mean for the average American with utility prices going up.

We're back with the panel. Nina, explain this for people sitting on the couch and how it would affect them at home.

EASTON: Cap and trade basically means heavy polluters would be capped, and people who are less polluting would be able to purchase — I'm not saying this correctly — would be able to sell permits to the heavy polluters.

So it would cost less for a lower polluting industry to operate than it would for an expensive coal, for example, would be an industry that would be hit hard by this.

BAIER: And the bottom line being that they would turn it around to consumers of energy.

EASTON: And the bottom line being that you turn it around — the cost, as Obama has acknowledged, will trickle down to consumers. And, in fact, his budget director as well conceded that. And that is why they have some money in the budget to make it easier on low-income people in particular.

They have also tied it to this tax credit to middle income households. For people who aren't part of those two segments the cost would be enormously high and would not be offset.

I think, of all of the budget items in the Obama budget, that this one is really going to be a political fight, a really — it's going to be ugly for a couple of reasons.

One is that it's going to hit hardest the industrial belt, and it's not just Republicans. It's Democrats.

And, secondly, when you look at voters, they react to energy prices. When the gas prices went up at the pumps, people got enraged at the previous White House. It is an enormously energizing event for people. It's something that Republicans can really latch onto and generate a lot of opposition to.

So I think that even though the Obama people say they want to move quickly on this, and there are some Republicans — keep in mind John McCain supported it — there are some Republicans who will support it, but I think it is going to be a real ugly battle in Congress. And he's not ready for that.

BAIER: And Juan, it could wipe out, essentially, some of these tax cuts that the president is talking about.

WILLIAMS: It could.

But I just have a different view. I think it is an incentive to reduce the emission of greenhouse gases and it's an incentive in the sense that you're not putting a limit on it. You're not saying you can't do business because you're too big a polluter in our country and you're dirtying the air for us all.

No. To the contrary, you're saying you can do business, but you have got to do business in a way as to trade with people who are doing it more efficiently and more cleanly and, as you do that, it may cost you money.

But you have incentives, therefore, to retrofit or refit your devices that create this pollution so that you don't have to pay the tax. In other words, you don't have to pay this added fee and you don't have to pass it on to consumers.

And if you believe in a market-based capitalistic society, people who do it more efficiently will be able send their products to market at a lower rate, and therefore we are in fact encouraging non-pollution. And I think that a good thing in this era.

EASTON: When the economy is tanking?

KRAUTHAMMER: It is an ill-disguised tax on the production of carbon. It will be a blow to American industry, particularly in the heartland, to the American economy. Particularly in our economic distress, it makes no sense at all.

The only purpose is the reduction of global warming, which in and of itself is speculative. And even if it were not, the fact that India and China are not in on this means that any of our savings on that, which are going to add a huge expense to our economy, will be swallowed up entirely by increased pollution by India and China.

India this week has said it will not cooperate on a regime of enforced carbon reduction. We will get nowhere on this except really injuring our economy.

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