Following is a transcribed excerpt from Fox News Sunday, August 4, 2002.

TONY SNOW, FOX NEWS: Hamas strikes again in Israel. Saddam reportedly is peddling bio-weapons to terrorists. Meanwhile, a partisan battle erupts in the U.S. over homeland security. Senator Joseph Lieberman will give the Democrats' side.

Target: Iraq. Is it time to roll? We'll get an insider look from one of Saddam Hussein's nemeses, Iraqi National Congress leader Ahmed Chalabi.

And our panel: Bill O'Reilly, Mara Liasson and Juan Williams put everything in perspective.

This is the August 4 edition of Fox News Sunday.

Good morning, and welcome to Washington. Here's the latest from Fox News. Another deadly day of terror in Israel. A homicide bomber linked to the terrorist group, Hamas, detonated a bomb aboard a crowded bus in northern Israel, killing and injuring dozens. In a separate attack, three are dead, including the Palestinian gunman, in a shooting incident in Jerusalem. And yet a third attack has taken place.

Fox News correspondent David Lee Miller has the latest on these stories. David?

DAVID LEE MILLER, FOX NEWS: Good morning, Tony. That's right.

Let's start with the blast. It happened at about 8:45 here at Maron (ph) Junction, just outside the city of Saffat (ph) in northern Israel. The bus was on its way from the northern Israeli city of Haifa. It stopped here to pick up some passengers. Suddenly, eyewitnesses say, there was a horrific blast. They saw a huge fireball. The explosion tore off the roof of the bus.

There are at least nine people, at this hour, dead; three of them, we are told, Israeli soldiers. Thirty others have been wounded, 10 of them serious. Many of those who were wounded were taken by helicopter to hospitals in the region.

The bus, at the time, was packed with passengers. This is the beginning of the work week here, and it happened, as I said, during end of the rush hour here. Many of those on board were thought to be uniformed members of the military. This area is home to Israel's Northern Command.

Hamas has taken responsibility. It said that this was the handiwork of a suicide bomber. Hamas has vowed retaliation for an airstrike that recently killed the commander of its military wing and 14 civilians. They also took responsibility for the bombing earlier last week at Hebrew University that took seven lives, including five Americans.

And yet, in more violence today, a Palestinian gunman opened fire outside the walls of the Old City in Jerusalem. He was shot dead. An Israeli security officer and a Palestinian bystander were also killed. We're now getting word that the Al-Aqsa Martyrs Brigade, which is linked to Yasser Arafat's Fatah movement, have claimed responsibility for that incident.

And there's also been a third attack this morning. Three Israelis, we are told, were wounded while driving on the West Bank. It happened near the city of Tulkarem. Authorities say they are investigating and have no further details.

But the question on so many minds at this hour, will the latest bloodshed here affect scheduled talks between Palestinian and Israeli ministers aimed at at least improving the security situation on the ground?

I'm David Lee Miller in northern Israel, and that's the latest from Fox News.

SNOW: Another bloody Sunday in the Middle East. Meanwhile, the Bush administration is accusing Saddam Hussein of developing biological weapons, and the Times of London says he's trying to share them with terrorists. And here in Washington, there's a pitched battle over whether the Department of Homeland Security should carry a union label.

Joining us from New Haven, Connecticut, to discuss these topics and more is Senator Joseph Lieberman.

Senator Lieberman, about today's violence in the Middle East, Hamas has claimed responsibility not only for the bombing that killed at least nine today but also a bombing earlier in the week that claimed five American lives. The president has said he's going to go after those responsible for killing Americans.

Should the United States go directly after Hamas?

SEN. JOSEPH LIEBERMAN, (D-Conn.): I think the president has made a correct decision here, Tony, that our allies in Israel can carry that fight for us.

But I do think that the main fact to acknowledge here is that the enemies of peace, the terrorists in the Palestinian community, have taken over leadership of the Palestinian movement. And their goal is not to have a Palestinian state and an Israeli state. Their goal is to destroy Israel. And as long as they are in charge, there will be no prospect for peace. Because, obviously, Israel will not accept its destruction, nor will the United States.

I think, while the Israelis are responding as they must, as we would, particularly the killing of five Americans at Hebrew University last week, we ought to be doing everything we can to cut off the flow of support to Hamas and other Palestinian terrorist groups that's coming from Iran, Iraq, Syria and, I fear, Saudi Arabia. And our allies in the Arab world ought to be helping us to do that.

These Palestinian terrorists, they're not operating alone. They're getting financial and material support from other centers of power in the Arab world, and that has to stop. And that, we can do something about, and the Bush administration particularly can lead us in doing something about that.

SNOW: Let's talk about exactly what they can do. You just mentioned especially Syria and Saudi Arabia are theoretically partners in the war against terror. Saudi Arabia is supposed to be our ally. What should we do to the Saudis?

LIEBERMAN: Well, we have to be consistent with our principles. I mean, President Bush said it very clearly: You're either with us, or you're with the terrorists. And that's true of the Saudis, as it is of everybody else in the world.

SNOW: Are you saying the Saudis are with the terrorists?

LIEBERMAN: I'm saying that there's very ample evidence that, from Saudi Arabia, Hamas and other terrorists groups claiming credit for bombings such as those have occurred this week, including those that killed five Americans, have sent money from Saudi Arabia to these terrorists groups.

LIEBERMAN: That can't go on anymore if there's going to be peace. We can't have normal relations with countries that do that.

Syria is a very unusual situation right now. They are beginning to help us with some information about terrorism. On the other hand, they're still hosting terrorists groups and supporting those terrorist groups and allowing arms to travel through Damascus to southern -- south into Lebanon, which further destabilizes the situation.

So I'd say that the U.S., together with our allies in Europe and in the Arab world, ought to be choking off the supply of arms and aid to the terrorists. That's part of our worldwide war on terrorism. We're lucky that the Israelis are there to respond to Hamas, which did just kill five Americans. But we have a larger role to play in opposing terrorism.

SNOW: Senator, let me return to the situation in Israel. There are reports that the United States may have given Israel a green light to go ahead and expel Yasser Arafat. In your opinion, would it be appropriate now to expel him?

LIEBERMAN: I don't know of any validity to that story. My own feeling...

SNOW: Well, then, what is your personal opinion on it?

LIEBERMAN: Right. My personal feeling is that Arafat has been a profound failure as a leader of the Palestinian people and missed several opportunities to create a Palestinian state, which Barak and Clinton offered him.

Nonetheless, he is an important symbolic figure. And my own feeling would be that there would be more to be lost than gained by expelling him.

The best thing to do is to continue with the talks that are ongoing now for a new constitution in the Palestinian areas, for democratic elections and for moving Arafat essentially out of the picture and up to some honorific position, while a new prime minister comes in who is prepared to help the Palestinian people achieve what they want, which is a better life and peace. And that can only be done with Israel.

SNOW: Given what has happened, Colin Powell has scheduled a meeting with Palestinian Authority leaders in the few days. Should he cancel that meeting?

LIEBERMAN: No. Obviously it depends on who he's meeting with, but I presume he will not be meeting with Arafat. Consistent with President Bush's statement, he'll be meeting with people like Saeb Erekat and others in the Palestinian government.

They have some very able people who I think want to have peace with Israel. And it's in our interest and the Israelis' interest to continue to talk to elements in the Palestinian leadership that offer us some hope of getting out of this terrible cycle of violence, which gets nobody anywhere good.

SNOW: There were hearings in the Senate Foreign Relations Committee this week about the possibility of attack against Iraq.

Senator Joseph Biden said that the administration has given him assurances that there would be no attack before election day, no October surprise. Is it wise for the administration to bind its hands in such a way?

LIEBERMAN: Well, I was surprised about that notification, not only for the administration to bind its hand in that way, but to give any kind of signal to Saddam Hussein about what and whether we're planning anything.

I did think that the hearings that Senator Biden conducted were constructive. It's important that members of Congress and the American people begin to confront the evil that Saddam represents and what we ought to do to stop it.

I think we're at a point where it's critically important for the president, as commander in chief, to take hold here. He's got obvious disagreement within his administration from what it seems to me clear what he wants to do.

And I think he's right, which is to get Saddam out of power. Because every day Saddam remains in power with chemical weapons, biological weapons, and the development of nuclear weapons is a day of danger for the United States of America.

SNOW: This...

LIEBERMAN: I hope that the president and I hope the leadership of Congress will, before the end of this year, schedule a debate in which we will grant President Bush authority to take action to remove Saddam Hussein. Leave it to the president as commander in chief and to our military when and how to do that. But that is American policy in law, and it is clearly in the security interests of the American people.

SNOW: Would you recommend doing that as soon as Congress resumes its business?

LIEBERMAN: I'd recommend -- of course, the first thing I want to do is make sure that we adopt a bill creating a Department of Homeland Security so we can protect ourselves from another September 11th-type attack.

But right along side that, I would say, and I think it ought to happen before this session of Congress recesses, ought to be a congressional debate on whether or not to authorize the president as commander in chief to take military action to remove Saddam Hussein. I will support that resolution. I will do anything I can to convince my colleagues to adopt it, because I feel it is so critical to our security.

All the stories coming out about Osama bin Laden before September 11th -- what we knew about him, what we thought he would do, and the debate's about whether or not we should do anything to take him out -- just deepen my feeling more than a decade after we let Saddam remain in power in Iraq, that every day that he remains there is, as I say, a day of danger for the American people.

We have the strength to remove him. We can put together a plan to replace him with a unified Iraqi government. Let's get on with it, and let's give the president the authority to do what we elect commanders in chief to do.

SNOW: Let's talk about the Department of Homeland Security. First, I want to play a quote from President Bush yesterday reacting to a proposal by you and other Democrats that there be union protections for anybody who works in the Department of Homeland Security. That's a source of controversy. Let's hear what the president has to say and then get your reaction.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I will not accept a bill that doesn't allow me to adequately manage people and resources to better protect the homeland. The Senate must not protect their own turf, they must work to protect the American people.

(END VIDEO CLIP)

SNOW: Now, Senator, every president since Jimmy Carter has retained the ability to get rid of employees when it seems to be in the national security interest. Nevertheless, the administration has said that people can still do collective bargaining in the Department of Homeland Security. The whistleblower statutes all apply. The same pay and benefits apply.

So why not let the president have what he wants? What's so important about maintaining a union label when all of those protections still apply to the workers?

LIEBERMAN: You know, I don't get this debate, Tony. We have given the president about 90 percent of what he asked for, and it's really the important part of the homeland security bill. It's what we support. It's what the bill that Senator Arlen Specter, my Republican colleague, and I put in last October while the president was opposed to a Department of Homeland Security, and we continue to support. Reported out of our committee in May, and finally, the president came on board in June.

But he threw on these proposals that are irrelevant to our homeland security, to give the new secretary powers over federal employees that no secretary has had before. And I just think that's wrong. And it's going to end up delaying the creation of a Department of Homeland Security, which is so critically important.

SNOW: Well, the administration's arguing that the Democrats, in order to be kind to unions, in fact, are going to delay it, because this is something the White House argues that every president has had since Carter, so why not let him have the same power?

LIEBERMAN: There's two parts to this. The first part is that the president put on the table something that nobody thinks is central to protecting homeland security, our borders, our critical infrastructure, our combination of intelligence that we didn't have together before September 11th. And that is to give the secretary power to remove civil service protections for federal employees, including union employees, as they move to the new department. That was his initiative, and it's totally unnecessary. I've appealed to the administration for months now, don't put this on the table. It will delay what we all want to do.

Secondly, the president has the right in law, including after our bill is passed, to immediately suspend any employee that does anything that the administration feels compromises national security, and to take jobs that come into the new department that have previously been unionized, and if those jobs are changed in a way that the president contends, no longer are consistent with both national security and being members of a union, he can remove their right to be union members.

The fact is that the firefighters, the police officers, who we all celebrate for their heroism on September 11th, are all union members. Believe me, they didn't think about benefits when they surged into those burning buildings. They didn't think about their union rights when they surged into the burning buildings and risked and gave their lives for us no more than the Border Patrol and Customs inspectors...

SNOW: We understand the heroism of those union members.

LIEBERMAN: Well, that's the point.

SNOW: Senator, I want to cover a couple of areas quickly here.

LIEBERMAN: OK.

SNOW: First, there's a proposal, or actually the FBI wants to submit some members of intelligence committees to polygraph tests, because it seems to have been established that somebody in Congress leaked classified information to the press in violation of federal law.

Now, all those staffers have been polygraphed and a number of others have been polygraphed. All of a sudden members say they don't want it. Senator John Kerry says he thinks it ought to happen.

SNOW: What do you think? Do you think senators ought to submit themselves to polygraphs, so we can figure out who leaked this information to the press?

LIEBERMAN: I do. There's much too much leaking going on in Washington. And at a time when leaks can lead to death, that's serious. There's too much leaking from within the administration about potential war plans against Saddam Hussein. And you can't have a functioning and congressional committee overseeing intelligence if folks in the intelligence community come and report things to members of Congress and then they're out in the media.

This investigation was called for by the co-chairs of the Intelligence Committee, and I think they're absolutely right. And I do believe that our colleagues ought to submit to the polygraph test. I know polygraph tests are not 100 percent accurate. But everything we can do to send the message that no one, members of Congress included, certainly staff, should compromise personal and national security by leaking information publicly that is classified, and we ought to do it.

SNOW: Senator, I want to get a clarification. The other day on the Imus program, you seemed to indicate that you think that the public has a right to see the records in Robert Torricelli's Ethics Committee investigation, even though you don't think the committee is going to turn that information over. Senator John McCain also says that he thinks these ought to become public record.

What is your position?

LIEBERMAN: The well-known "I-man" asked me if I agreed with John McCain's contention that the records in the Torricelli case that the Ethics Committee has ought to be made public. And I said, yes, in the sense that I always believe that anybody in public life ought to have more disclosure than less disclosure.

I also said that I didn't think the Ethics Committee would release any more information because they've essentially concluded their investigation, by severely admonishing Senator Torricelli and closing their files.

I gather, since I made that statement, that they have grand jury records in the Torricelli case that they accepted with the understanding that they would never make them public. So this is now up to Bob Torricelli and the voters of New Jersey, and as you know, he's apologized to them for his conduct.

SNOW: Does it bother you at all that it seems to have taken him a decade to reach the conclusion that it was improper to receive gifts from a contributor and also to promote the man's business while there was a diplomatic meeting between North Korea and South Korea?

LIEBERMAN: Well, he was severely admonished, and he's apologized. And now the rest is up to the voters of New Jersey.

SNOW: Final issue, Al Gore has an op-ed in today's New York Times. Let me read to you a quote from it. He says, "A suggestion from some in our party that we should no longer speak the truth, especially at a time like this, strikes me as bad politics, and worse, wrong in principal. The struggle between the people and the powerful was at the heart of every major domestic issue of the 2000 campaign and is still the central dynamic of politics in 2002."

He's taking a poke at you.

LIEBERMAN: Well, I think he's taking a poke at a point of view that a lot of people hold and, I think, pretty effectively making his case.

Look, my feeling -- and this came up at an informal gathering with the press last Sunday night. My concern about the so-called "people versus the powerful theme" in 2000 was that is was too subject to misunderstanding and not representative either of the extraordinary prosperity that had occurred under Clinton and Gore, which grew the middle class and 22 million jobs created by business, and also not expressive of the fiscally responsible pro-growth, grow-the-middle- class campaign we were running.

I guess I would have added a word or two and said that we believe in a government that will stand up and fight for the people, for the public interest against powerful, private interests, including business, if they treat the public unfairly.

SNOW: OK.

LIEBERMAN: And that's, I think, where Al's indictment of the Bush administration in this article today is absolutely right.

SNOW: OK. I...

LIEBERMAN: Over and over again, this administration has -- it's regulators have sided with those they're supposed to regulate instead of with the health and safety of the American people.

SNOW: OK. Now, The Democratic Leadership Council, behind the scenes, a lot of people were saying that we think Al Gore was a wreck as a candidate, and there were a lot of people bad-mouthing him.

The question is, you say that you want to be the New Democrat candidate. You want to be the New Democratic candidate. Is Al Gore a New Democratic candidate? And if not, does that mean that you have the potential for running for president yourself?

LIEBERMAN: Well, as you know, out of gratitude and out of friendship for the extraordinary opportunity that Al gave me to run with him in 2000, I've said that I will not run if he runs, and I will not.

Al's whole record is consistent with New Democratic values, which is growth and fiscal responsibility. Boy, the program we ran on in 2000 looks pretty good, when you...

SNOW: OK.

LIEBERMAN: ... think about a year and a half after President Bush took office, the economy is in the ditch and our national budget is going into debt.

SNOW: OK.

LIEBERMAN: So I think, on his record, Al Gore is a New democrat.

SNOW: All right. Senator Lieberman, thanks. We covered a lot of ground. I appreciate your joining us.

LIEBERMAN: Thank you, Tony.