This is a partial transcript from The Beltway Boys, June 29, that has been edited for clarity. Click here to order the complete transcript.

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FRED BARNES, CO-HOST: Are you ready for the Ups and Downs?

MORT KONDRACKE, CO-HOST: I'm ready, I'm ready.

DOWN: PLO chairman Yasser Arafat

BARNES: President Bush steps up his effort to persuade the Palestinians and the global community that Arafat must go and says he'll hold up financial assistance if he doesn't.  Here's Bush at the G-8 summit Wednesday.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I've got confidence in the Palestinians when they understand fully what we're saying, that they'll make right decisions as to how we get down the road for peace. The status quo is simply unacceptable, and it should be unacceptable to them.

I can assure you, we won't be putting money into a society, which is transparently corrupt. And I suspect other countries won't either.

(END VIDEO CLIP)

KONDRACKE: Well, the positive side of this, this Bush offer to the Palestinians, is that if they do get rid of Yasser Arafat, they get a state, they get peace and security, and they get billions of dollars in, in international aid.

Unfortunately, it looks as though once again the Palestinians are incapable of accepting a generous offer that's made to them, and they're — they prefer to put their bets on terrorism and Yasser Arafat as, as the, as the way to go in the, in the future, which is a total tragic loser for them.

BARNES: Indeed, indeed. Well, I have three quick points, if I can remember all three of them. But the first is, I want you to look at this piece of tape that shows when President Bush made his announcement this past Monday, of his speech, look who's there, Mort, is somebody on a — for a foreign policy announcement surprisingly there, Donald Rumsfeld, the defense secretary, who had a lot more to do with shaping this decision by Bush than Colin Powell, the secretary of state.

KONDRACKE: Kept him from going wobbly.

BARNES: Yes, he did keep him from going wobbly. I thought he was going to go wobbly, I was wrong.

Secondly, Bernard Lewis, the great Middle East historian, says asking Yasser Arafat to give up terrorism is like asking Tiger Woods to give up golf. And that's one of the reasons why Yasser Arafat has to go.

And lastly, you know, Bush has demanded democracy among the Palestinians and an election. Well, now, Arafat's going to have one in January. But remember, there are elections and then there are real elections. Milosevic was elected and reelected in Serbia, you had Robert Mugabe in Zimbabwe, you had just an election in Pakistan where your buddy Pervez Musharraf was reelected again in a phony election.

What we need in this election is a real opponent and a real campaign, neither of which Arafat wants.

DOWN: Ninth Circuit Court of Appeals

KONDRACKE: Considered the nation's most liberal court, it declares the Pledge of Allegiance unconstitutional because of the phrase "one nation, under God."

Here's the atheist who brought the case and the president's response.

(BEGIN VIDEO CLIPS)

MICHAEL NEWDOW, PLEDGE OPPONENT: Sure, I think that we have God infused in our government by politicians all the time, and I think it should all be gone.

BUSH: America is a nation that is a nation that values our relationship with an Almighty. Declaration of God in the Pledge of Allegiance doesn't violate rights. We need commonsense judges who understand that our rights were derived from God, and those are the kind of judges I intend to put on the bench.

(END VIDEO CLIPS)

BARNES: Indeed. I mean, look...

KONDRACKE: If he could get them.

BARNES: ... if it weren't such a serious issue, and the flag really is a serious issue and the whole church-state thing is serious, this ruling would be laughed out of court. I mean, Mort, this is...

KONDRACKE: And it will be.

BARNES: No, it'll be overturned, I don't know about laughed at. Of course, this is liberal judicial activism in the extreme, and indeed, as we just saw President Bush argue, it is a good argument for conservative judges who interpret the Constitution and just don't make up laws that they think would be nice...

KONDRACKE: Yes...

BARNES: ... which is what happened in this case.

KONDRACKE: Now, look, look, it — this was a wacko decision. It is opposed by 95, 99 percent of the political class in the country, except for the, the very farthest left. And it is no, it is no excuse for Bush to be able to nominate more Antonin Scalias and Clarence Thomases, who don't even — who, who think that mentally retarded people ought to be executed.

BARNES: Now, Mort, that — in that mentally retarded case, what they said was is, the, the junk sociology and the public opinion polls that were cited by the majority in striking down a precedent was why they couldn't go along. A precedent only about, about 13 year old — 13 years old. If conservatives had done the same thing, that, that same sort of thinking, you'd have been dancing on the table here.

Anyway, in anger.

DOWN: Amtrak president David Gunn

BARNES: Gunn threatens to shut down the beleaguered railroad until he gets yet another infusion of federal money, but then balks when new reforms are proposed to help make Amtrak more efficient.

Mort, there is a solution here. Keep the efficient parts of Amtrak in the Northeast corridor and around Chicago, get rid of the ones that are wasting money and no one and no one rides.

David Gunn says the whole system has to stay. He's even threatening to shut down commuter systems that Amtrak happens to run. This is not the way to go. He has to be resisted.

KONDRACKE: I'm for an orderly bankruptcy proceeding where there's no, no quick, quick shutdown and reorganization of the, the new union contracts and, and so on. But, investments in those, new investments in those lines that are, that are viable.

BARNES: Mort, I agree.

UP: Former U.S. Attorney Artur Davis

KONDRACKE: He ousted incumbent Congressman Earl Hilliard in the nasty Democratic runoff in Alabama this week.

The key to Davis' success, a large war chest funded largely by out-of- state pro-Israel voters. The cash helped fund a series of TV ads including this one that linked the pro-Arab Hilliard to terrorism. Watch.

(BEGIN VIDEO CLIP, DAVIS CAMPAIGN AD)

ANNOUNCER: In the weeks following September 11, the children of Alabama saw firefighters from Heflin to Montgomery travel to ground zero.

At the same time, their congressman, Earl Hilliard, was writing a law that would force the U.S. to drop sanctions against terrorist states, drop all sanctions against countries that support and finance international terror networks. Not one member of Congress supports this law.

(END VIDEO CLIP)

KONDRACKE: Yes, well, Hilliard, Hilliard...not only that, but Hilliard famously went cozying up to Moammar Ghadafi of Libya and got himself in ethics trouble. Good riddance.

BARNES: Now, I thought Hilliard was going to win, but he didn't, and that now gives encouragement, I think, to the opponent of Cynthia McKinney in the Georgia runoff. She has the same views as Hilliard. All right.

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