This is a partial transcript from The Beltway Boys, June 21, 2003, that has been edited for clarity. Click here to order the complete transcript.

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(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The international community must come together to make it very clear to Iran (search) that we will not tolerate the construction of a nuclear weapon. Iran will be dangerous if they have a nuclear weapon.

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MORT KONDRACKE, CO-HOST: Well, the hot story of the week is Iran around. That is to say that Iran is now moving up the, the agenda to the top, where, where it belongs. The, the, the mullahs (search) who run the place are as dangerous as Saddam Hussein ever was.

They are working on nuclear weapons on a couple of different tracks. They have well-established ties to Hezbollah (search), the one -- arguably as bad a terrorist group around the world as, as Al Qaeda. They have a terrible domestic regime, human, human rights situation. They are meddling in Iraq and Afghanistan, where we're trying to -- we're, we're trying to bring order.

What the Bush...seems to be doing is working multilaterally on the, on the nuclear situation through the E.U. and the, and the U.N. and the, and the IAEA, and that, of course, is satisfactory to Democrats. Here's Nancy Pelosi sort of cheering the president along.

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REP. NANCY PELOSI (D-CA), MINORITY LEADER: It simply must stop. No country has the right to endanger the rest of the world by acquiring these weapons of mass destruction. I applaud the president for making this a priority.

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KONDRACKE: I'm not sure how far, you know, support for, for his policy will go with, with the Democrats, but we'll see. What, what Bush has not done, I mean, there are student demonstrations, and Bush has encouraged them and said that they should keep working on democracy. He has not used the magic words "regime change," yet we're approaching a crisis.

July 9 is the fourth anniversary of massive demonstrations in the country, and if there is a Tienanmen Square in Tehran, I don't know what the administration does.

FRED BARNES, CO-HOST: Well, they probably don't do anything. I, I would be surprised if they, if they actually intervened when it's just a, a democratic protest being violently suppressed.

But regime change has to be the policy, and force, military force, should not be ruled out by the Bush administration, and I don't think it has. John Bolton, State Department, it's -- explicitly said it has to be - - see it as a possible policy.

You know, overthrowing the mullahs would drive a stake through the heart of the Islamic extremism around the world that has brought us terrorism in the United States on September 11 and so on. But for now, promoting democracy loudly has to be the Bush policy, and through covert action. I think that can be extremely helpful as well.

Now, but if you do get a new regime that is being tried -- a new democratic machine -- regime that the mullahs then try to overthrow, then we do have to intervene militarily. I don't think there's any way around that. OK.

Hot story number two, bouncing back, and I'm talking about the economy, and you probably read very little of it in the press Mort, or, or, or seen it on television, because the press has not been covering this story well, but there are strong signs that the economy is beginning to recover, along with some anecdotal evidence, and I'm going to outline it for you, Mort.

First, the leading economic indicators are up sharply. The stock market, which you've been following, you know, of course, it's up about 20 percent this year. IPOs, you know, initial public offerings...

KONDRACKE: ...yes, yes.

BARNES: ... I thought I'd spell it out for you there, up.

KONDRACKE: Yes, yes.

BARNES: Housing starts are up. And The Financial Times, which is a very smart paper, says the U.S. is now appears to be on course to a very strong recovery. Now, you know, Democrats and probably you will cite unemployment. That is the classic lagging indicator. It'll go up when the economy starts to boom, even. That's what a lagging indicator does.

And then, the interesting one is public sentiment, which is the ultimate lagging indicator. And yet, if you look at this Fox News poll, it shows that while the majority is still worried about the economy, the trend is moving toward optimism, 37 percent think the economy's getting stronger, that's still a minority, but that's up 11 points since last September.

So even one of the lagging indicators is getting better.

KONDRACKE: Well, listen, if it, if it all happens that way, Bush will probably get reelected without, without much problem. It's -- it would be terrible for the Democrats.

But, you know, unemployment, leading, lagging indicator though it is, is only, is still at 6.1 percent.

BARNES: Right, yes.

KONDRACKE: And the Fed is meeting next week, and it thinks that it still has to cut interest rates...

BARNES: Right.

KONDRACKE: ... which suggests that the Fed is not convinced that the recovery is self-sustaining. And furthermore, if President Bush wants to get the front page, put the recovery on the front page, all he has to do is declare that there has been one, and, and the president has not done that. He's still talking in terms of, you know, he wants -- I care is what he, is what he's saying.

BARNES: So the press's lack of coverage of the signs about a recovery is Bush's fault.

KONDRACKE: No, no. But the president could help it along....And you know he can.

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