• This is a rush transcript from "Your World with Neil Cavuto," April 9, 2008. This copy may not be in its final form and may be updated.

    NEIL CAVUTO, HOST: All right, you're looking live at the House Armed Services Committee, America's top general in Iraq getting grilled for a second day. Democrats in the House once again pushing for a withdrawal, and asking why it took so long. Is that a smart move?

    With us now, former Israeli Prime Minister Benjamin Netanyahu.

    Mr. Prime Minister, do you think this debate on Iraq and when we get out is a healthy one?

    BENJAMIN NETANYAHU, FORMER ISRAELI PRIME MINISTER: You know, every time I get on the program, on your program, in recent months, Neil, you try to snare me into jumping into the gushing waters of American politics...

    (LAUGHTER)

    Click here to watch the interview with Benjamin Netanyahu

    NETANYAHU: ... during an election year. I'm not going to do that.

    It has become an internal political debate. I can tell you, from our experience, that, when we left the Sinai in a peace treaty with Egypt, everything has been stable since. When we left Lebanon and Gaza unilaterally, without a peace treaty, we have had 8,000 rockets fired on us.

    So, it really depends on what you leave behind. And that is the real question for Americans to debate and decide for themselves.

    CAVUTO: All right.

    Now, most Americans, as you know, Prime Minister, are of the view that, the sooner we get out of Iraq, the better. I am just wondering, since a lot of polls indicate you have a very good shot at becoming prime minister again in Israel, whether that is a security concern for you, for Israel, for the region.

    NETANYAHU: Obviously, everything is — is — that happens in our region is connected.

    But I would say that the question — what you decide to do in — about Iraq — and I think every American probably wants to leave there as soon as is possible — but what you decide to do there is actually of secondary importance, compared to the biggest issue in that region, the biggest region in the world, the biggest issue of our time.

    And that is whether Iran will succeed — Iran, which is right next door to Iraq — succeeds in acquiring nuclear weapons, because one of the things that will happen is that, if it does, ultimately, it will take over Iraq. And it won't take them very long to roll over the entire Middle East, threaten my country, try to get the oil reserves of the world, and launch a new kind of terrorism that we have not seen.

    You know, they have just killed one of the terror masterminds of Al Qaeda, who was an expert bomb-thrower. Imagine that Iran makes available to Al Qaeda or any other terrorist group an atomic bomb. You can understand how serious and how dangerous this is for Americans, for Israelis, for Europeans, for Arabs in the Middle East, for everyone.

    I mean, this is the biggest development of our time. And I think that it is going to tower and overshadow anything that happens in Iraq.

    CAVUTO: Let me ask you, if you don't mind my switching gears, Prime Minister, these growing protests over the — China hosting the Olympics. In San Francisco right now, they have already cut the — the torch tour, as it's known, in half, just for security reasons. This follows pretty violent demonstrations in both London and Paris.

    There is a growing global concern about China even hosting these things. What do you think the world should do?

    NETANYAHU: This is a tough one. It's a tough one between engagement and other forms of action. I don't know. I think about it. I haven't been confronted with the situation. One thing I have learned is to think before you talk.

    CAVUTO: That never stopped me, Prime Minister, ever.

    Could I get your sense of..

    (LAUGHTER)

    CAVUTO: Could I get your sense of just this whole issue of security?

    In our country, as you know, sir, it seems to have taken a backseat to our domestic economy and concerns about a slowdown. You know how that goes. In Israel, if things are going well, you know, they focus on the economy and everything is great. You did a lot, as finance minister, to improve that dramatically.

    But, if security becomes an issue, security is front and center. Security is not front and center right now in the U.S. Should it be?

    NETANYAHU: Yes, for the reason that I said before, because I think that we have always — not always, but especially in our times now a real issue that we should understand.

    Yesterday, Ahmadinejad, the president of — the leader of Iran, said that — boasted another 6,000 centrifuges that he said came into the system. So, again, if you have a terrorist regime that sponsors terrorists, that could use this weapon itself, if it develops such a weapon, it would be a pivot of history, Neil.

    It's hard for people to imagine what the world will be like that it would not change incrementally, that it could at once change, and that the terror picture that plagued the United States so — so dramatically and so tragically six years ago, on September 11 — seven years ago — that this could — this could happen again in dimensions that we can't even imagine.

    But this is, as I said, I think, the primary concern, not only for Americans, but for any citizen of the free world. We should be concerned with this development more than we are.

    CAVUTO: OK.

    NETANYAHU: As far as the economy is concerned, I can tell you that I look at — I look at it somewhat differently, because we had an experience here a few years ago, five years ago. We were in a great economic distress. And I thought, at the time, that we should use — we should use the crisis to enact reforms and do — take steps that everybody pretty much across the political aisle was agreed that we should do.

    But no one really did it. And, so, crises sometimes — or turbulent economic times sometimes allow you to correct distortions in your economy and use it for — for renewed growth. And that is essentially what we did in Israel. And I suppose that is what I would try to do in the United States, and try to get people across the political aisles to do, for the betterment of the U.S. economy.

    CAVUTO: But you are reminded of terror on a fairly regular basis in Israel. Our recollection, even as dramatic as it was, Prime Minister, is September 11. And that's some years back.

    How do you get people to be always on guard?

    NETANYAHU: I don't know that, in the democracies, you can get people to — to be continuously awake.

    Churchill said in the '30s in — I think in 1935 — in a very powerful speech in the House of Commons, he said that there is something called the sleep of democracies. They...

    CAVUTO: All right.

    NETANYAHU: They sleep.

    And when they can take action when it's relatively easy, they don't.