This is a partial transcript from The Beltway Boys, December 28, that has been edited for clarity. Click here to order the complete transcript.

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DONALD RUMSFELD, SECRETARY OF DEFENSE: We are capable of fighting two major regional conflicts, as the national strategy and the force sizing construct clearly indicates. We're capable of winning decisively in one and swiftly defeating in the case of the other. And let there be no doubt about it.

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MORT KONDRACKE, CO-HOST: I'm Mort Kondracke.

FRED BARNES, CO-HOST: And I'm Fred Barnes, and we're The Beltway Boys.

KONDRACKE: Hot story of the week, Kim "Wrong" Il -- I mean, his name -- official name...

BARNES: Right.

KONDRACKE: ... is Kim Jong Il...

BARNES: Yes.

KONDRACKE: ... But, but he is wrong.

BARNES: I'm glad you explained that to me.

KONDRACKE: Yes, he's -- you know, his people are starving, but he's building a nuclear arsenal.

What Don Rumsfeld said was meant to keep our adversaries at bay, but the fact is that we cannot fight both in Iraq and North Korea at the same time, which is why we're handling the crisis in North Korea diplomatically, trying to get the Chinese and the Russians and the South Koreans and the Japanese to somehow intervene with Kim Jong Il to get him to not build these nuclear weapons.

But it's not working. Kim wants to talk to us and us alone. And my guess is that we will eventually start talking to him, even if secretly, and at least for as long as it takes us to get done with our battle with Iraq, and we can turn to him and somehow we're going to have to figure out how to disarm North Korea before he starts selling these nuclear weapons that he's developing to terrorists.

BARNES: Indeed, and we're going to have to get our allies, which are not helping much -- China, they're not helping at all -- get them all together, including that Jimmy Carter of South Korea, the president-elect, Noh Mu-huyn, get them all on the same page in negotiating tough new agreement with North Korea, one that says no nuclear weapons program, you have to reduce the size of your army, particularly the troops right on the border with South Korea, no selling of weapons overseas, and no long-range missile programs, anything like that, and if you don't do it, well, then, we're going to economically blockade your entire country, and that might bring them to their senses.

Now, there's another hot story as well, and that's wish list, as in President Bush's wish list for Congress in 2003. And you know the stuff on it. You'll wince when I tell you some of these things --

KONDRACKE: Indeed I will.

BARNES: ... like, like a tax cut.... The White House is already out and ahead on this tax cut, negotiating with members of the Senate in particular to get a bipartisan bill. And I think a tax cut, like other things that President Bush wants this year has a much better -- they have a much better chance of passing in 2003 than his legislation did in 2002, if only because the Senate is now narrowly in Republican hands.

So we have the tax cut, we have a prescription drug benefit in Medicare, Mort, you could have -- Democrats could have had one last year if Majority Leader Tom Daschle had not blocked it. They could have had one, they'd have gotten credit this year. Bush will get some credit.

Then there's the leftovers, you know, the faith-based initiative, renewing the welfare reform program, the energy bill, with -- which may be split up with ANWR, the Alaska area that they want to drill in...all as separate bills.

And then one big idea, and that is Social Security reform, you know, those individual accounts and so on, which the president, I think, will talk about and stir debate and discussion about, but not a vote.

KONDRACKE: And he can't afford them anyway.

Look, what I find intolerable about the, the Bush agenda is that that...

BARNES: I can't wait to hear this.

KONDRACKE: Yes, yes, is that there, that fiscal responsibility comes into the picture only as to one set of programs, and that is domestic discretionary spending. You know, Bush can't even pay for his own education initiative. Here you have the states out there, which are starving and having to cut back on all kinds of, all kinds of services. The federal government ought to have the, the, the money to help them.

And in a subject I know really well, that is medical research, the, the, the NIH budget, National Institutes of Health budget, has been rising at 16 percent per year, a great investment that we're going to make. The new Bush budget that's being discussed right now would bring that down to less than 1 percent increase a year, which means that labs are going to have to close, scientists are going to get fired. And the progress that we've made toward curing these terrible diseases will, will halt.

And it's all because that we have to have these, these gigantic tax cuts. It's, it's, it...

BARNES: I mean, I'm, I'm still waiting for you -- for people like you and Democrats in particular to say, Well, here are the programs that I want to cut, things that we don't need to do now...

KONDRACKE: Corporate welfare.

BARNES: ...spend it on medical. I'm for that...

KONDRACKE: ...corporate welfare, all right, all right.

BARNES: Let's do it.

KONDRACKE: Well, I don't see Bush doing that...

BARNES: But I think...

KONDRACKE: ...either with...

BARNES: ... you're right about medical research. The other stuff, of course, you're all wrong about.

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