This is a rush transcript from "Special Report," November 1, 2011. This copy may not be in its final form and may be updated.

BRET BAIER. ANCHOR: We are starting our panel a little early tonight with our "Center Seat" segment featuring Republican presidential candidate, Herman Cain. Tonight's panelists, Steve Hayes, senior writer for The Weekly Standard, A.B. Stoddard, associate editor of The Hill, and of course, syndicate columnist, Charles Krauthammer.

Mr. Cain, thank you very much for being here.

HERMAN CAIN, R - PRESIDENTIAL CANDIDATE: It's my pleasure. Thank you.

BAIER: It's been a busy week.

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CAIN: Yes.

BAIER: You've been dealing with these allegations.

CAIN: Yes.

BAIER: And you've talked, really, a lot about them in various interviews. So far, the story has developed into more of a process story than a substance story.

CAIN: Right.

BAIER: However, tonight, the Washington Post is moving a story that says that one of the accusers wants to tell her side of the story but is barred by a confidentiality agreement according to her attorney. So, I guess, the question is, will you call for the National Restaurant Association to waive the details of this agreement so the women involve can speak freely about the events as they rose?

CAIN: I can't answer that now, Bret, because there are legal implications. If the Restaurant Association waives that -- I just found out about this today. There are legal implications associated with that that I'm not totally familiar with it yet. So, I can't give you a definitive answer on that until we consult with our legal attorneys and also talk to, you know, some others. We can't answer that right now. It's too soon.

BAIER: I guess along those lines, are you certain that over the past couple of days in the way that you've answered questions about this, that you haven't already violated the terms of that confidentiality agreement for those women?

CAIN: Absolutely, because I never used their name. One of them I didn't even know the name. And the one that I was familiar with, I never mentioned the person's name whatsoever. So, I don't believe that I have.

BAIER: On the questions of process, Charles.

CAIN: Yes.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Yesterday early in the day, you said that you were not aware of any settlement. Later in the day, on the Greta show, you were aware of the settlement. You actually went into some detail about the nature of the settlement. How do you explain that contradiction?

CAIN: The way I explain that contradiction is because when I first heard the word "settlement," I thought legal settlement. And my recollection early -- my recollection later was that there was an agreement. So I made an assumption about the word settlement that was legal, and I didn't think that there was a legal settlement but an agreement.

Remember, this happened 12 years ago, and so all day in the middle of my regular schedule I'm trying to piece the pieces together. And so, as I indicated earlier today, the best recollection of what happened was represented on Greta. I didn't intend to contradict myself. It's just been difficult trying to recollect many of the pieces that happened 12 years ago.

KRAUTHAMMER: But both in the morning and on Greta show you used the word "settlement." And there are many people who will say the reason your candidacy is so attractive is because you are not a politician and you are not a guy who dances around words, you shoot straight. And when you make a distinction between a "settlement" and an "agreement," it sounds Clintonian. It sounds like you are explaining, well, it depends what the word "is" is. So how does Herman Cain end up parsing words in such a Clintonian, legalistic way?

CAIN: Well, it wasn't intended to be Clintonian. It was simply using the word "agreement," which in business organizations that I have run, whenever there has been an employee leaving, whether voluntarily or involuntarily, we would generally call it an agreement. So that was the perspective from which I got around to that after trying to recall what was happening 12 years ago.

BAIER: A.B.

A.B. STODDARD, ASSOCIATE EDITOR, THE HILL: OK, but Mr. Cain, this story was not an ambush. You did have almost two weeks in which to formulate your response. But you find yourself in this public relations disaster. And I'm interested in what you blame it on. Is it a poor memory, a lack of political experience or lack of staff? What is your answer for why you're answering all these questions about all these conflicting responses when you had time to prepare one?

CAIN: Well, let's go back to why 10 days ago we made a conscious decision. We're not going to chase anonymous accusations. Secondly, we didn't know what was going to be in that report. We were given a heads up that they were thinking about releasing a story. But you don't go out and defend something when you don't know what you are trying to defend. And thirdly, we could have been better prepared. I absolutely agree we could have been better prepared, and in the future we probably will be. So mea culpa on not being better prepared.

STODDARD: You were not informed there were two allegations of harassment against you when you were originally contacted about the story?

CAIN: No, no, we were informed that there were two. Yes. But we made a conscious decision. I, as the candidate and the CEO of the Herman Cain campaign, I was the one who made the final decision. We are not going to go chasing anonymous accusations.

STODDARD: Ok.

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: Let me ask you if you are happy with the way that the National Restaurant Association has handled this. You've had these allegations and you say they are baseless, they are not true on the substance of it. And yet there was a settlement. Are you happy with how it was handled by the association?

CAIN: Yes, I am, because having been the past chairman of the association and having been the CEO of the association at the time, the one allegation that I know of - remember, I also said I wasn't even aware of a second allegation. The one allegation that I was aware of, yes, it was handled in the course of the normal employee relations when an employee leaves. That's why it was not considered a big deal because we never got into a legal spat or anything like that.

BAIER: Charles?

KRAUTHAMMER: Mr. Cain, when Clarence Thomas was near to achieving position of high authority, he was hit with a sexual harassment charge. You, contending for presidency nomination, the office of highest authority, leading in the polls for the Republican nomination, all of a sudden get hit with a sexual harassment charge. Do you think that race, being a strong black conservative, has anything to do with the fact you've been so charged? And if so, do you have any evidence to support that?

CAIN: I believe the answer is yes, but we do not have any evidence to support it. But because I am an unconventional candidate running an unconventional campaign and achieving some unexpected unconventional results in terms of my, the poll, we believe that, yes, there are some people who are Democrats, liberals, who do not want to see me win the nomination. And there could be some people on the right who don't want to see me because I'm not the, quote/unquote, "establishment candidate." No evidence.

KRAUTHAMMER: But does race have any part of that? Establishment, maverick, yes. What about race?

CAIN: Relative to the left, I believe that race is a bigger driving factor. I don't think it's a driving factor on the right. This is just based upon our speculation.

BAIER: Last thing on this topic, and then we are going to move on to domestic issues, foreign policy. You were asked specifically, one of the few details in that original political piece was whether you asked one of these women to a hotel room. That was one of the allegations that was in the piece. You said to PBS last night, "I absolutely do not recall. I have no recollection of that." If you knew these were the only two allegations, do you have -- are you sure you hadn't done that?

CAIN: I am sure I hadn't done that, absolutely sure.

BAIER: We have many more questions about domestic policy. We have thousands of people typing in about 999 and foreign policy.

CAIN: Good.

BAIER: Will in Indiana wrote into our chat room. He wants to get something on some other topics right away.

(LAUGHTER)

BAIER: Thank you, Will.

The panel returns after a short break.

(COMMERCIAL BREAK)

BAIER: We're back with our "Center Seat" segment and our guest, Mr. Herman Cain. Mr. Cain, a lot of talk about 999.

CAIN: Yes.

BAIER: And in the last debate in Las Vegas you were pressed on this, about the national sales tax portion. You said comparing the state sales tax to the national sales tax is like apples and oranges. And it developed that people were asking, is the national sales tax on top of the individual state sales tax as it stands? And wouldn't that increase the overall number? Explain that for us.

CAIN: The current tax code on top of the state sales tax. So we are simply replacing the taxes raised with the current tax code with that nine percent national sales tax. So yes, it is on top, but so is the current tax code. That's why I said it's apples and oranges. The state sales tax has nothing to do with nine-nine-nine just like the state sales tax has nothing to do with the current tax code.

BAIER: But the current tax code is progressive. The sales tax in a state is not. A national federal sales tax would not be. It would add together. So people, for example, on a fixed income are concerned about the two of them together and a sales tax.

CAIN: Well, they should be concerned until they learn more about it. And secondly, I invite them to do the math for their situation. The mistake that a lot of people make is they assume it is a one-size-fit-all when you actually do the numbers a little different. But, no, it is not correct -- it is not correct to discuss the sales tax in the same breath we are talking about 999. Just like it's not correct to talk about the state sales tax in the same breath you talk about the 82,000 page current tax code. We're replacing that, taking out invisible federal taxes and replacing it with a visible nine percent sales tax.

BAIER: Charles?

KRAUTHAMMER: But let's say you are a senior. You're living on a fixed income, you live on your Social Security. And you are going to pay minimal income taxes, you're gonna have a low level of revenue. The corporate taxes won't affect you. But you live in a state that has say, a seven percent sales tax. And along comes President Cain and when you buy loaf of bread and you're gonna have a seven cents on the dollar state sales tax you're gonna have nine cents on the dollar Cain tax. You're gonna pay 16 cents. So it may be apples and oranges, but it adds up to 16 cents if you're a senior on a fixed income.

CAIN: Several things. First of all, in our 999 model seniors don't pay tax on their Social Security benefits. Secondly, if they're receiving income from some capital gains, no tax on capital gains because we're replacing all of those.

But here's the one that is the hardest for most people to really get their head around, and I realize this is a tough sale, but I believe this strongly in the 999 plan. The hidden taxes in that loaf of bread are gonna be taken out over time and replaced with that nine percent. Most economists understand how these embedded taxes are gonna come out. But I understand how people are wrestling with that. But in essence they're not going to be paying nine percent.

KRAUTHAMMER: So what you're saying is that under the Cain plan we're gonna have a deflation?

CAIN: We're saying that the price of goods are going to go down.

KRAUTHAMMER: That's deflation.

CAIN: Yes. Yes, the price of goods are gonna go down, and they will pay that nine percent national sales tax.

BAIER: A.B.?

STODDARD: Ok, Mr. Cain, we've heard your clarify your position on abortion, stating that you are pro-life from the moment of conception.

CAIN: Yes.

STODDARD: Though you had previously stated that abortion is a decision best left to a woman and her family. Should women be legally prohibited from having an abortion?

CAIN: Let's correct what I said. That statement where people said that it should be left to a woman was taken totally out of context. I believe that abortion should be illegal. I've always felt that way. I believe life begins at conception, life begins at conception, and I do not believe in abortion.

The point I was trying to make is that legally, I don't believe abortion should be allowed. But the point I was trying to make, if a situation exists where they may consider some other alternative, then how will the law prevent that? That was the one point I was trying to make.

STODDARD: You said it was best left to the woman and the family. What are you describing? A situation that they would --

CAIN: An extreme situation, a very extreme situation.

STODDARD: Involving an abortion...

CAIN: And I can't describe all the details. First of all, these extreme situations we can never say never relative to extreme situations. I go back to --

STODDARD: Do you have any exceptions for rape or incest?

CAIN: No, I do not have any exceptions for rape or incest, no, I do not. I go back to -- I believe I'm pro-life from conception. The statement that I made has been taken out of context in order to confuse people as to where I stand.

BAIER: Ok, last question --

HAYES: One of the things that Republican primary voters are looking for is boldness. And Ron Paul has offered a plan that would eliminate five federal government agencies, the Department of Housing and Urban Development, the Interior, Education, Commerce, and Agriculture.

CAIN: Right.

HAYES: If there were a President Cain, would you keep any of those agencies he's proposed eliminating, and if so, why?

BAIER: Again, HUD, Interior, Education, Commerce, and Agriculture.

CAIN: The difference would be how I would go about making that determination. To say that he would eliminate those just on the surface I wouldn't say that. I would use an approach to go in to each of them and determine which chunks we need to eliminate. And in some instances there may not be anything left. So I don't want to categorically go in. I believe that's irresponsible. You go in and you look at the programs, you make the tough calls to figure out how much of it should be left. So there may be some pieces left.

HAYES: So you would stay and you would keep them as they are.

CAIN: Not necessarily. Not necessarily. I would approach it in a more systematic way to determine how much of those agencies are cut and whether or not they would still be around.

BAIER: More with Mr. Herman Cain and our panel in just a minute.

(COMMERCIAL BREAK)

BAIER: Back with Mr. Herman Cain in our "Center Seat" segment. We've been asking you to submit questions. Thousands coming in. Tom would like to know, would you stop sending taxpayer money for foreign aid, because we're suffering enough here at home?

CAIN: First, let's start with what my philosophy is, which is peace through strength and clarity, which is an extension of the Reagan philosophy. We need to clarify who our friends are, clarify who our enemies are, and, yes, stop giving money to our enemies. We lack clarity relative to foreign policy.

BAIER: Charles?

KRAUTHAMMER: A few weeks ago on Greta you were asked about the Iranian attempt at a terrorist attack on the U.S., what you would do about it. And you responded "I would have acted preemptively ahead of time by placing Aegis cruisers near Iran." How does placing Aegis cruisers affect Iran's determination to use terrorism against the United States?

CAIN: It won't deter their intent to use terrorism, but what it would do is it would let them know that we are serious if they fire a ballistic missile toward us, although right now they're not supposed to be able to fire that far, or if fire toward any of our friends like Israel, and to let them know that we have this capability. We're the only country in the world that has this capability, capable of ballistic missile defense at sea.

And what I would do also is double our fleet. We could double it and not only put them strategically in that part of the world but also protect our shores to defer them from feeling like they really want to fire a ballistic missile.

KRAUTHAMMER: But the Aegis is a defensive weapon. It intercepts a missile in flight. Iran doesn't have any they could actually hit the United States now. And moreover, a defensive weapon in no way deters an aggressive action. It could deter a launch of a missile. But it is not going to deter a terrorist campaign.

CAIN: No, it's not. It wasn't intended to mean that it's going to deter a terrorist campaign, not in the least. My point -- the point that I was trying to make was I'm concerned about their march toward having a nuclear weapon, a march toward having more ballistic weapon capability.

KRAUTHAMMER: But I don't see how Aegis affects even that at all.

CAIN: Well, the Aegis warships do have the capability with missiles to be able to detect and destroy them if they're detected early enough.

Two things -- here is what needs to happen. The land-based systems already have more advanced capability than the sea-based system. They need to be upgraded with the minimal amount of technology upgrade. This is what we have to do first in order to make it much more capable.

BAIER: Steve?

HAYES: Iran has been actively harboring senior Al Qaeda leaders for a decade and supporting, financing, training, and equipping terrorists who are killing American soldiers in Iraq and Afghanistan. Are those acts of war?

CAIN: I believe that they are acts of war.

HAYES: And how would a President Cain respond to those "acts of war"?

CAIN: First of all, I don't agree with President Obama's approach in Iraq and Afghanistan. First, I would talk to the commanders on the ground. I've gotten the sense based on reports that his plan to reduce the troop level in Afghanistan, the commanders acted surprised, the same thing in Iraq. It's gonna leave a huge power vacuum. So I would have listened to the commanders on the ground first.

And secondly, I wouldn't have announced it to the enemy when we were going to leave.

The other thing I would have done differently is to make sure that it was clear what our mission was and it was clear what the definition of victory is. I would approach those decisions a whole lot differently than the current administration.

HAYES: But if Iran is already trying to fill the power vacuum that you suggest and they're doing it in ways that you are saying, were acts of war --

CAIN: -- is an act of war

HAYES: -- does that require military response?

CAIN: Not necessarily alone. The other thing that I would do, and we are already working on an energy independence plan. As soon as the United States gets serious about energy independence, it's going to put pressure on the price of oil and it's going to go down. Iran does not want the price of oil to go up. And simply by having a serious energy independence plan, we will put pressure on their economy. This is how we begin to get Iran in check economically as well as letting them know what our military might is.

BAIER: A.B.?

STODDARD: This is actually continuing on the same theme. Do you have any specific criticisms of the president's foreign policy except now that you've talk about Iraq and Afghanistan that you can share with us and possibly on the war in Libya? What mistakes you think he might have made in situations that you would have handled differently.

CAIN: Take Libya. It wasn't clear why we got involved. And now $1 billion later, it's a mess. Secondly, the people now running the country are our enemies. So I don't believe that it was clear why we went in to Libya. Take Iraq, back to this power vacuum. That's a specific example where I would not have agreed. We need according to some of the commanders on the ground, we need to leave troops there for a period of time.

STODDARD: You would not have been involved in the intervention in Libya?

CAIN: No, I didn't say I wouldn't have been involved. I might -- would have been involved in a different way. Once we clearly identified who's side we were on and who we were trying to help, then you determine whether or not you provide aid or you provide weapons or whatever the case may be. It wasn't clear why we were there or whose side we was on.

STODDARD: Well, I think there was a group effort to dispose Qaddafi at which they succeeded.

CAIN: Yes.

STODDARD: And it was a mess even if we had -- it was getting to be a bigger mess if we had not gone in. Do you agree with that?

CAIN: I would agree with that. But it goes back to my fundamental philosophy -- peace through strength and clarity. Every one of these situations we have been in has lacked clarity.

BAIER: Here's a quick one, Lisa Brown. "If you could have lunch with anyone dead or alive, who would it be and why?"

CAIN: Martin Luther King Jr., because he was one of the greatest leader of our time and in history.

BAIER: Mr. Cain, we really appreciate your time. Thank you for coming in to "Center Seat"

CAIN: Glad I survived this --

(LAUGHTER)

KRAUTHAMMER: Inquisition.

CAIN: Inquisition, yeah. That's the word I'm looking for.

BAIER: And we have one more treat for you. One more treat, a special kicker coming up right after this break.

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