This is a rush transcript of "Special Report" on October 20, 2021. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

JOE BIDEN, (D) PRESIDENT OF THE UNITED STATES: We're the only country in the world historically that has gone through a crisis and has come out at the other end better than we before the crisis.

KARL ROVE, FORMER GEORGE W. BUSH SENIOR ADVISER: If you look at almost any poll that comes out, and the president's numbers have dropped dramatically from where they were earlier this year, particularly among independents. The Democrats are in grave difficulty in 2022, no ifs, ands or buts about it.

JEN PSAKI, WHITE HOUSE PRESS SECRETARY: This is a really tough time in our country. Our focus is, yes, not exactly on the day to day up and downs of the polls. Our focus is on getting the pandemic under control, returning to life, a version of normal.

(END VIDEO CLIP)

BAIER: The normal version for polling has been the approval is down on a number of fronts. Our FOX News polls on the issues has the president down when it comes to taxes, the economy, border security, immigration. The overall approval on the economy really breaks down poorly on independents especially in our poll.

But if you look at the Quinnipiac poll, these numbers are really troubling for Democrats. The overall approval at 37 percent. And then you break it down by party, the independents at 28 percent approval. To Karl Rove's point, that is a key factor for a number of different Democratic constituencies, candidates to consider not only this year but next year. We're a long way from November, 2022, but these are big indicators.

Let's bring in the panel, Bill McGurn is a columnist for "The Wall Street Journal," Leslie Marshall, Democratic strategist, and Steve Hayes, editor of "The Dispatch." Steve, I can't remember seeing a free fall on specific numbers with independents and on the economy this fast for a long time.

STEVE HAYES, EDITOR, "THE DISPATCH": No, it is really precipitous. And I think it's explained by a couple of things, particularly among independents. If you look at what Joe Biden ran on, he ran on restoring normalcy to Washington, to bringing back some sense of organization, that things would be working, and that the economy would recover.

Well, we've seen Washington in chaos. All you have to do is pay attention to this show or any of the news shows on any given night. Washington is dysfunctional. It remains dysfunctional. He didn't improve it. He said he would be able to based on his long experience in Washington.

The other problem is he promised that the economy would recover. You had the Biden White House well into his administration suggesting that inflation was transitory, that this was in effect a shoulder slug. They went after people like Larry Summers who suggested that this was a longer term problem that needed to be taken seriously. And that is really coming back to bite them right now.

And the real problem, I think the big challenge, the long-term challenge is that people don't feel confident that the economy is going to recover, that things are going to get better. And that is because this is what they're seeing in their day-to-day lives. The poll that you showed earlier with 43 percent of Americans saying that groceries and day-to-day goods have increased significantly, 40 percent seeing that they've seen at least a little increase, that's 80 plus percentage of people that see that they're feeling this in their pocketbooks. That is rough ground for the Biden White House.

BAIER: We'll just put that up. It's the FOX poll, bills for groceries and everyday items, you're looking at 83 percent, to your point, that feel it. And that really affects things. If you look at the condition of the economy in that poll, excellent or good, now 26 percent. And that is seeing a drop, only fair or poor, 73 percent.

Leslie, that pitch, the messaging here at the ports of Los Angeles and Long Beach, that the supply chain problems are a good thing, that it means good things are happening, doesn't seem to be sticking for this administration.

LESLIE MARSHALL, DEMOCRATIC STRATEGIST: No, it doesn't. As a Democrat, I don't like to see falling numbers, but I also don't believe polls. Hello, Hillary, we can't forget that. And I also know that the president didn't say he was going to do this in a year or two. He has four years to do it. Any president does when they make their promises in any administration, in any party.

But let's look at the supply chain. The supply chain issues are global. They're not just here in the United States. We were buying more and more sitting home and we're buying differently, Bret. We were clicking rather than going into stores, buying things on shelves. We're buying things we don't see on shelves. And of course, as we see from right where you are, not far from me at the ports in Long Beach, the L.A. ports, we're seeing more boats that are stuck there, more containers. But we're also seeing more trucks not able to turn this around.

A lot of people think of this very simplistically. It is not a box goes from point a to point b. David Lynch wrote a great piece about this in "The Washington Post." This is like a relay. I hand the baton to you, you hand it to somebody else, that person hands the baton to somebody else. And that's what we are dealing with. As a matter of fact, we've had supply chain issues maybe not as bad as this, but not that far from this since the beginning of the pandemic. And we've continued to click, click, click, and buy, buy, buy, which is good and will be good for the economy. But obviously it has caused a clog in our supply chain, not just here in the United States but worldwide.

BAIER: Bill, when you hear financial pundits saying inflation is worse than we thought it was going to be, it is really something, because people are feeling it and telling others, hey, this isn't normal.

MCGURN: Yes, I think, look, I agree that some of the supply chain issues are not really Joe Biden's issues. But by the same token, the idea that the federal government in Washington can flip a switch and fix it or send in the National Guard and that is going to help. The supply chain is a very complicated thing. It's one of the reasons "The Wall Street Journal" always opposes tariffs, because it really interferes with that, with a lot of innocent people. And it's just so complex you cannot fix it with the government.

And yet the president sort of implies that he can do it. He just said if the private sector doesn't step up, we're going to ask them to act and get involved. That is the opposite way of thinking of it. We had a great story about how Home Depot and Target and Walmart, they are hiring their own ships. They have an interest in getting stuff on the shelves.

And I think, just to put it in context, the reason he's getting clobbered at the polls, especially by independents, has nothing to do with political ideology or labels. It's because he doesn't have a success to his name. Afghanistan was a catastrophe that everyone watched. People -- we know the border is a disaster because Kamala Harris is in charge and won't go anywhere near it. We know from Terry McAuliffe that Biden's unpopular so he's not that enthusiastic about having him there. I think what he's done in these months is just create an uncertainty whether he's up to the job and competent. And I think that is really reflected in the polls, which, to point out, are not just little drops, but very, very big drops.

BAIER: So the border issue, we continue to cover it. It's a major issue, especially for those states along the border, Steve, but also around the country as we had the story of the migrants being flown, the children being flown to different states around the country. Also, border arrests have now soared to an all-time high according to the Customs and Border Patrol. U.S. authorities detained more than 1.7 million migrants along the Mexico border during 2021 fiscal year that ended in September, and arrests by Border Patrol soared to the highest levels ever recorded according to this unpublished Customs and Border Patrol data. That does not include the number of getaways that we've talked about before with Rodney Scott and others from Border Patrol.

HAYES: No, that's right. And I think Bill makes a really crucial point here that applies both to inflation and the discussion that we're having about the economy, but also to the border. President Biden downplays these mistakes. He minimizes them. He makes it sounds as if they're not a big deal and that the government can come in and fix them, solve them very easily. And his rhetoric on inflation and on the supply chain I think is of a piece with what Bill is saying. He's suggesting that he can go and make things better pretty quickly. He is setting up expectations that when he's unable to do that will make him look even worse.

I think he did the same thing on the border. If you go back and you look at the rhetoric from the administration in the days, in the transition to the new administration in the early months of the Biden administration, he did the same thing. They downplayed the problem. They suggested that they could ease off of the Trump policies on the border and there would be little effect. And we've seen, in fact, something quite to the contrary. He's creating these problems for himself, and I think creating expectations that he can solve them when he can't.

BAIER: Leslie, I only have 30 seconds, but this new Monmouth poll out of Virginia has a tie. We've had very close polls, but Terry McAuliffe has always led. Is there increasing concern in Democratic circles about that race?

MARSHALL: We know it's a tight race and we knew it would be. I guess it really is coming down to a race between Joe Biden and Donald Trump in a sense, isn't it? And we know Virginia is a very different state in the north than it is in the south. That's what we're seeing. I'm not surprised. It is a reflection of Virginia of what we're seeing in our nation, which is pretty much a split between left and right. Except for some independents that are pulling the president down in these polls.

BAIER: Yes, we'll see who campaigns there. It will be interesting to see in the final days. That's a race that we're really covering closely. And education, obviously, is a big issue in that race. Panel, stand by, if you would.

When we come back to the Port of Los Angeles, tomorrow's headlines with the panel.

(COMMERCIAL BREAK)

BAIER: Five days to unload one of these things, pretty amazing, five to eight days. Finally tonight, a look at tomorrow's headlines. Bill, first to you.

MCGURN: If Terry McAuliffe loses his race for Virginia governor he can thank the National School Boards Association and Merrick Garland for suggesting that concerned school parents be regarded as domestic terrorists.

BAIER: Leslie?

MARSHALL: Wyoming Republican Liz Cheney announces she is switching parties after Republican leadership urge a no vote on criminal contempt for Steve Bannon.

BAIER: It's just a switching parties weak. Here we go, Steve?

HAYES: Mine is, Donald Trump says something to help the GOP. We don't know that he is going to do this, actually, but after days of beating up Liz Cheney and Mitch McConnell and Colin Powell and suggesting Republicans would stay home unless they relitigate 2020, it would be newsworthy if he did.

BAIER: All right, thank you, panel. Tomorrow on SPECIAL REPORT, Vice President Harris hits the campaign trail for Virginia gubernatorial nominee Terry McAuliffe. Please remember, if you are so inclined, to pick up my book, "To Rescue the Republic, Ulysses S. Grant, the Fragile Union, and the Crisis of 1876." It has just today debuted at number two on "The New York Times" bestseller list. So there's always number one, possible.

Thanks for inviting us into your home tonight. That's it for this SPECIAL REPORT, fair, balanced, and still unafraid. "FOX NEWS PRIMETIME" hosted by Will Cain this week starts right now. Hey, Will.

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