• This is a rush transcript from "The Journal Editorial Report," July 21, 2007.

    STUART VARNEY, FOX GUEST HOST: This week on the "Journal Editorial Report,"


    FRAN TOWNSEND, HOMELAND SECURITY ADVISER: It hasn't worked for Pakistan. It hasn't worked for the United States.


    VARNEY: A new intelligence report says Al Qaeda regrouped has along Pakistan's border, citing Pervez Musharraf's hands-off approach to rooting it out. Should the U.S. continue to back the Pakistani president?

    Democrats in Congress are quietly lay groundwork for a government take over the health care system. It is Hillary Care on the installment plan. And we'll tell you who's paying for it, after these headlines.


    VARNEY: Welcome to the "Journal Editorial Report." I'm Stuart Varney, in for Paul Gigot.

    The national intelligence estimate released this week warned that al Qaeda has regenerated finding safe haven in the north western tribal region of Pakistan. That's a country that President Bush sees as a key ally in the war on terror. The news comes as the Pakistani government scrambles to salvage a peace accord with tribal leaders and as violence and unrest elsewhere in the country raise new questions about the stability of President Pervez Musharraf's military government.

    Max Boot is a senior fellow at the Council of Foreign Relations. He's also the author of the book "War Made New," which comes out in paperback in August.

    Max, if there were regime change in Pakistan, for any reason, would we get an Islamic government, would we get another military dictatorship or would we get some form of democracy?

    MAX BOOT, COUNCIL OF FOREIGN RELATIONS SENIOR FELLOW & AUTHOR OF "WAR MADE NEW": I think the best bet in Pakistan is, in fact, democracy because this is a country that has a tradition of democracy. Musharraf, himself raises the specter if he is gone, he will be replaced by some kind of fundamental Islamic regime. But I think that's unlikely given the fact that, in the previous election, the Islamists parties only received 11 percent of the vote.

    I don't think this is a situation like the Palestinian Authority where if you open it up to elections, all of a sudden, the Islamists take over. I think, in fact, the secular opposition parties are much stronger in the case of Pakistan.

    If Musharraf holds elections, as he should, I think there is a good chance we will get a more moderate secular government in his place with more democratic legitimacy.

    VARNEY: So it is your opinion that this would be the best outcome and it is also the likely outcome?

    BOOT: I think it is the likely outcome if free and fair elections are, in fact, held.

    VARNEY: Are we going to get those elections?

    BOOT: I think we should. And I think the United States should insist on it. We have leverage with Musharraf. Because we have given him over $10 billion in aid since 9/11. And we should be asking him to transition back to democracy as he has repeatedly promised to do. But he has always broken his word.

    I think we have made our best that he is our best guarantee of keeping the Islamists at bay, but what we've seen in the last few years he is not keeping the Islamists at bay. He is not truly fighting the terrorists.