This is a partial transcript from The Beltway Boys, June 15, that has been edited for clarity. Click here to order the complete transcript.

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FRED BARNES, CO-HOST: Can we go to the Ups and Downs now? I have a feeling...

MORT KONDRACKE, CO-HOST: Go, go.

BARNES: ... we're going to talk about this Catholic thing again.

Up: Secretary of State Colin Powell

BARNES: President Bush seems to be coming around to Powell's thinking that the creation of a Palestinian state with certain required reforms is a key part of a Mideast peace plan.  Here's Bush Thursday.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I'm going to lay out my vision at some point in time that we must build the institutions necessary for the evolution of a Palestinian state which can live peacefully in the region and provide hope for the suffering Palestinian people.

(END VIDEO CLIP)

KONDRACKE: Well, you know, everything about this is, is in the details, which have yet to be announced, and Bush is going to presumably make a speech next week or sometime this month at least.

If Bush proposes to create this interim Palestinian state, subject to major reforms in the Palestinian Authority, that is, new leadership and a security force that will really control terrorism, it's very possible that Yasser Arafat, who's always wanted everything right away, will, will reject the plan, and again, the onus will be on Arafat.

BARNES: Well, I'm sure if he rejects the plan, they'll come up with one that is a little sweeter to him, because that's always what happens.  Look, it's not just in the details. Here we have Arafat, the guy who either won't or can't stop terrorism against Israelis, getting still one more chance. I mean, this must be his umpteenth last chance.

Here he is being rewarded, even though he's the guy who is the — he is the chief impediment to peace between Israel and the Palestinians. And he gets this reward, a provisional government. I mean, I, I think that's...

KONDRACKE: You're — are you losing faith in George Bush?

BARNES: No, I'm losing faith in Colin Powell, and I think Bush be made — just may be making a mistake in this and trying to appease, not so much Arafat as Saudi Arabia, Egypt, and Jordan, who have never done anything to curb Yasser Arafat. OK.

Down: Tyco International CEO Dennis Kozlowski

KONDRACKE: Move over, Ken Lay. Dennis Kozlowski, recently indicted for tax evasion and subject to an SEC probe, emerges as the new poster boy for corporate greed.

BARNES: Well, he is exactly that, but he's also the poster boy of this trust crisis, which is one of the reasons why the stock market is in, in such a funk. We've had Enron, we've had ImClone, now we have Tyco, these companies, where you can't trust what they say about their earnings or debt or anything else coming from them, and, and investors are obviously saying, Gee, we can't trust these companies, we're not going to invest in, in them, and investments are way down, people are putting their money somewhere else.

That's one reason for the funk. And the second reason, of course, is unresolved questions about terrorism. We don't know what Iraq's going to do, we — there are terrorist alerts, and that really curbs capital investment.

KONDRACKE: Well, there's a big opportunity here for the Democrats in the, in this continuing corporate scandals. One is to, to remind everybody that the Republicans and Bush are, are cozy with corporations, you know they are. And when it comes to proposing reforms, the Republicans are always in favor of something weaker in terms of corporate governance or, or, or pension reform than the Democrats are.

And secondly, you've got — everybody's losing money in their 401(K)s, you know, so that the idea that the economy is recovering is — which would benefit the Republicans is, is — you don't see it when the mail comes.

BARNES: What, you're a strategist for the Democrats now? You know...

KONDRACKE: No, I'm just...

BARNES: ...their chief aim now is to destroy the pharmaceutical industry...

KONDRACKE: Well...

BARNES: ... and they're well on their way, and you know it.

Down, California...

KONDRACKE: And I'm against, and I'm against that.

Down: California Governor Gray Davis

BARNES: Dogged by low job approval ratings and barely holding his lead against Republican rival Bill Simon, Davis is forced to go negative early. Check out Davis's latest ad.

(BEGIN VIDEO CLIP, DAVIS CAMPAIGN AD)

ANNOUNCER: Bill Simon inherited a fortune. But how has he managed on his own? When he directed a savings and loan, the thrift made bad loans, went belly up, and was seized by the federal government. Simon's mismanagement cost depositors millions, and the bailout for his mistakes cost taxpayers $90 million.

Bill Simon. If he can't run an S&L, how can he run California?

(END VIDEO CLIP)

KONDRACKE: I was out in California this week, and, and on the basis of a conversation with not very many voter, but some, Davis obviously has to go negative, because even Democrats that I talked to are disgusted by the fact that Davis is after one thing only, and that's amassing huge amounts of campaign contributions, and the scandals that have attached to that.

BARNES: This was a scientific poll.

KONDRACKE: Not very.

BARNES: Yes.

KONDRACKE: Not very.

BARNES: You know, the other problem Davis has is, the press is concentrating on him and not on Simon, and, and Gary South, his strategist, is trying to, you know, steer the press in the other direction.

Up: Los Angeles Lakers star Shaquille O'Neill

KONDRACKE: Shaq ties Michael Jordan as the only player to win three straight finals MVP awards. The seven-foot-one, 360-pound center dominated throughout the playoffs, leading his team to a third straight championship.

BARNES: Well, Mort, I'm going to explain this in terms that you can understand. Shaq is to basketball what the United States is to the world, that is, the lone superpower. And when anything comes up, any game comes up, the question is always to the other team, Who do you have who can stop or guard Shaq? The answer is, nobody.

When the question of what the U.S. is going to do in the world comes up, it's always, who is going to stop the U.S. from regime change in Iraq?  And the answer is, nobody.

KONDRACKE: That is the, that is the longest stretch from sports to politics that I've ever heard.

BARNES: Just wanted you to understand.

KONDRACKE: Yes, my problem with basketball, pro basketball, is the morals of the players, not necessarily including Shaq. They are not exactly a model for the world.

BARNES: Well, that's true. All right.

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Content and Programming Copyright 2002 Fox News Network, Inc. ALL RIGHTS RESERVED. Transcription Copyright 2002 eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.), which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Fox News Network, Inc.'s and eMediaMillWorks, Inc.'s copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.

 

BARNES: You know, the other problem Davis has is, the press is concentrating on him and not on Simon, and, and Gary South, his strategist, is trying to, you know, steer the press in the other direction.

Up: Los Angeles Lakers star Shaquille O'Neill

KONDRACKE: Shaq ties Michael Jordan as the only player to win three straight finals MVP awards. The seven-foot-one, 360-pound center dominated throughout the playoffs, leading his team to a third straight championship.

BARNES: Well, Mort, I'm going to explain this in terms that you can understand. Shaq is to basketball what the United States is to the world, that is, the lone superpower. And when anything comes up, any game comes up, the question is always to the other team, Who do you have who can stop or guard Shaq? The answer is, nobody.

When the question of what the U.S. is going to do in the world comes up, it's always, who is going to stop the U.S. from regime change in Iraq?  And the answer is, nobody.

KONDRACKE: That is the, that is the longest stretch from sports to politics that I've ever heard.

BARNES: Just wanted you to understand.

KONDRACKE: Yes, my problem with basketball, pro basketball, is the morals of the players, not necessarily including Shaq. They are not exactly a model for the world.

BARNES: Well, that's true. All right.

Click here to order the complete transcript.

Content and Programming Copyright 2002 Fox News Network, Inc. ALL RIGHTS RESERVED. Transcription Copyright 2002 eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.), which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Fox News Network, Inc.'s and eMediaMillWorks, Inc.'s copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.