This is a partial transcript from The Beltway Boys, August 17, that has been edited for clarity. Click here to order the complete transcript.

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MORT KONDRACKE, CO-HOST: Let's go to the Ups and Downs.

DOWN: California Republican gubernatorial candidate Bill Simon

KONDRACKE: Hobbled by an S&L scandal, dwindling campaign coffers, and sinking poll numbers, one private poll shows him behind 17 points. And Simon's political obituary is just being written.

Now, if there was a politician in America...

FRED BARNES, CO-HOST: Yes.

KONDRACKE: ... who was vulnerable, it was Gray Davis...

BARNES: Yes, yes.

KONDRACKE: ... the, the Democratic governor...

BARNES: Sure.

KONDRACKE: ... of California. He is a walking political finance scandal unto himself.

BARNES: Right, right.

KONDRACKE: But he is shrewd...

BARNES: Yes.

KONDRACKE: ... he is tough, and he is, you know, determined, and he's got a lot of money...

BARNES: Yes.

KONDRACKE: ... and so he is, he, he interfered in the Republican primary...

BARNES: Right.

KONDRACKE: ... and helped get Simon...

BARNES: Right.

KONDRACKE: ... nominated...

BARNES: Right.

KONDRACKE: ... now that Simon's nominated, he's out to destroy him, and he's succeeding.

BARNES: Yes.

KONDRACKE: Here's the Davis campaign ad.

BARNES: Yes.

(BEGIN VIDEO CLIP, GOVERNOR GRAY DAVIS COMMITTEE AD)

ANNOUNCER: Two of Bill Simon's businesses were accused of accounting irregularities. He's laid off hundreds of workers, many without notice.  The Chronicle reported he siphoned money from his father's charitable foundation. His Pacific Precision Metals is being sued for fraud.

And now, The Wall Street Journal reports Simon used offshore tax shelters to avoid paying taxes.

(END VIDEO CLIP)

BARNES: Yes, I'd like to use some of those offshore tax shelters to avoid paying taxes, but then I'm not running for office.

You know, let me make a couple of comments. One, Gray Davis has the guy who I think is the best single Democratic consultant, Gary South. He's brutal, he's very good. And that's, I think, an example of his work.

And secondly, you know, President Bush this coming week is going to be in California to do three private Simon events. You know what's not going to happen? A public — the picture with the two of them there. OK.

UP: New Jersey Senate candidate Republican Doug Forrester

BARNES: Forrester's benefiting big-time from Democratic rival Bob Torricelli's recent ethics flap. The latest independent poll shows Forrester beating the Torch by a whopping 13 points. Just three weeks ago the race was tied, and Torricelli's recent ad apologizing to New Jersey voters doesn't seem to be helping. Take a look.

(BEGIN VIDEO CLIP, TORRICELLI FOR U.S. SENATE AD)

SEN. ROBERT TORRICELLI (D), NEW JERSEY: Recently I was the subject of an ethics investigation into my relationship with a contributor I once considered a friend. Although I broke no laws, it's clear to me that I did exercise poor judgment in my associations and actions, which I deeply regret and for which I take full responsibility.

A United States senator should hold himself to a higher standard.  Ultimately you, my neighbors, will decide whether the battles I've fought and won for New Jersey outweigh these lapses of judgment.

(END VIDEO CLIP)

BARNES: Mort, what was that lamp doing there?

KONDRACKE: Do you suppose that was a gift from David Chang?

The thing is that David Chang is the businessman that he was apologizing about...

BARNES: Who got convicted.

KONDRACKE: Right, exactly. Look, the, the, the problem for the Republicans is that New Jersey voters have what we might call a high tolerance for ethical misconduct, historically.

BARNES: Yes, yes.

KONDRACKE: It would help the voters of New Jersey, actually if the Senate Ethics Committee would release the...

BARNES: Yes.

KONDRACKE: ... full body of their investigative material.

BARNES: Right.

KONDRACKE: But they won't.

BARNES: Yes, don't believe that 13 points. This race isn't over yet.  There'll be — become a time when Forrester will be heavily scrutinized by the press, under attack by Torricelli. He's going to have to personally stand up and withstand that. If he doesn't, he'll lose.

DOWN: Egyptian President Hosni Mubarak

KONDRACKE: President Bush warns Mubarak that he'll cut off future foreign aid unless Egypt stops persecuting human rights and pro-democracy advocates.

Now, there is a disconnect here. President Bush claims to favor democracy in the Arab world...

BARNES: Yes.

KONDRACKE: ... yet it's been weeks since Sad Ibraham, this Egyptian American human rights activist who's ailing was thrown into jail for criticizing Hosni Mubarak.

BARNES: Yes, basically.

KONDRACKE: And, you know, and the administration was silent until it was embarrassed...

BARNES: Yes.

KONDRACKE: ... into finally taking this modest step by basically New York Times columnist Tom Friedman.

BARNES: Mort, let me get this straight. In other words, Bush has done something of which you highly...

KONDRACKE: Finally, finally.

BARNES: Wait a minute, wait a minute, let me just say this my way.  He's done something of which you highly approve, and you're outraged by it.

KONDRACKE: It's timing.

BARNES: Mort, learn the value of positive feedback. You know, sometimes people will, you know, do more things you like.

KONDRACKE: Such as return my phone calls?

BARNES: The truth is, Hosni Mubarak is one of the most overrated people in the entire world. OK.

DOWN: Airline industry

BARNES: U.S Airways files for bankruptcy protection, joining Midway and Vanguard Airlines, and now two other major carriers, American and United, say they're on the financial ropes.

Look, two things are needed, they got to straighten out these exorbitant union contracts, poorly negotiated by the airlines, and the, and the Bush administration has to forget about antitrust and let these airlines consolidate. We don't need six failing national airlines. They can be consolidated into three easily.

KONDRACKE: Look, the airlines will restructure, and they will have labor contract, new labor contracts under Chapter 11, if may — if no other way. The fact is that they're going to turn into something like Southwest or JetBlue. They're going to be lean and they're going to be efficient, and, and, and their, and the United States will have a vibrant airline industry someday, because the public demands it.

BARNES: Yes.

KONDRACKE: The demand's there, the supply will follow.

BARNES: Yes, forgot one other thing that's necessary, some cheap fares.

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