This is a partial transcript from The Beltway Boys, July 19, 2003, that has been edited for clarity. Click here to order the complete transcript.

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FRED BARNES, CO-HOST: If you know politics, then you know our next guest, Michael Barone. He's just published his 2004 Almanac of American Politics, which I'm going to read. Michael is a senior writer for U.S. News and World Report, a FOX News contributor, and one of our favorites here on The Beltway Boys.

Welcome back, Michael.

MICHAEL BARONE, U.S. NEWS AND WORLD REPORT: Well, it's very good to be with you, Fred, thank you.

BARNES: Well, you know, just a little earlier on this show, Mort mentioned five warning signs about, about Bush's reelect ability in 2004, Iraq instability, Medicare (search) troubles, credibility questions, sluggish economy, growing deficit. Can you foresee any combination of those five causing Bush to lose next year?

BARONE: Well, you…theoretically, sure you could. I think the biggest threat to him would come from Iraq instability, and one you really haven't cited, though perhaps it's implicitly there, and that's unforeseen developments in the war on terrorism that could make the people conclude that this administration is not really keeping them safe against terrorism.

That sort of thing, obviously, could hurt Bush, and of its nature, we can't tell what it would be or when it would happen.

MORT KONDRACKE, CO-HOST: OK, but...

BARNES: ...but not the economy.

BARONE: I think…well, one of the things, Fred, and one of the points I made in my Almanac of American Politics introduction for 2004 is that in the economy, the political effect of economic issues depends more on wealth than on income these days.

Most American voters accumulate significant wealth in the course of their lifetime, and this was highlighted by the testimony last week by Alan Greenspan (search), where he looked in detail, not at the incomes of people, but at the increase in wealth, because of mortgage refinancing and everything, household wealth has increased 4.5 percent in the first half of 2003.

That's helping to keep consumer-spending going and to keep the economy growing.

KONDRACKE: OK, let's, let's go back to the foreign policy issue here. The, the one circumstance, we don't have to speculate about this, is that we have Americans beings killed at the rate of one or two a day in, in Iraq. Now, if that continues into next year, isn't Bush in trouble?

BARONE: Well, that's one of the reasons I said Iraq instability, what happens over there. I think one of the things that the press has gotten wrong in recent weeks, we've had this intensive discussion of what are the intelligence sources for a 16-word sentence in President Bush's 2003 State of the Union address.

We've had much less coverage of this new 25-member Iraqi council that was appointed by the administrator, L. Paul Bremer. I think that's a terrifically important development, and one that, that has very great positive implications, and, and, and is a basis for hope there.

Their first act was to declare April 9, the day the statue toppled in Baghdad, as a national holiday. And Jalal Talabani, the leader of the Kurdish areas, who's one of the members there, and in the Kurdish areas they have developed the democratic politics, the rule of law, he was asked a question by a reporter for the British Broadcasting Corporation, and he immediately attacked the man for their slanting...the news and slanting it against the American-British effort...

KONDRACKE: Well, that...

BARONE: ... to liberate Iraq. Mr. Talabani has his head screwed on right, and I think a lot of Iraqis do too.

KONDRACKE: OK…the question was about the casualties. I mean, doesn't this have to stop at some point, or are Americans going to turn against the Bush administration? That's the question.

BARONE: I think Americans don't turn against a military effort just because there are casualties. We've reelected presidents in two of the highest casualty years in American history, 1864 and 1944.

What Americans want to see is that we're making progress towards achieving a goal that's worthwhile. What President Bush will hope to show Americans, and he will hope that events justify it, is that Iraq is moving towards a democratic rule of law type government, and that we've helped to set up a counterexample to all these evil, intolerant regimes that exist in the Middle East.

BARNES: Mike, of the Democrats running for the presidential nomination, do you see any one or two or three of them who are campaigning in such a way that they are grooming themselves to win the presidency if Bush slips?

BARONE: Well, I think that the Democrats have got a big problem right now, and that's the fact that half…about half the core constituency of the Democratic Party really has a withering contempt and hatred of President Bush. They dislike him intensely. And what they want to hear from candidates, and they've been getting it most of all from Howard Dean, the former governor of Vermont, is vitriolic denunciation of George W. Bush.

So you have candidates like John Kerry, who voted for the Iraq war resolution last October, nonetheless...denouncing Bush. He's trying to catch up on the tone of Dean's comments and compete for that electorate.

The problem is that the views of that core Democratic constituency are not shared by most American voters, and in fact most American voters find them very off-putting. So the Democrats have this, have this significant problem, how do you...

BARONE: ... appeal to the core, and then appeal in the general election to the broad, broader segment of the electorate?

KONDRACKE: So do you hold with the Karl Rove thesis that this is looking to be a close election, or the Bill McInturff-Fred Barnes thesis that there might be a Bush landslide?

BARONE: Well, Bill McInturff, the Republican pollster, predicted a…his prediction of a landslide was 54-44, which is a lot less than the 59 percent Ronald Reagan got in '84 or the 61 percent Lyndon Johnson got in '64 and Richard Nixon in '72.

I think that is a possible outcome. I think one of the things that I've seen, and I put it in this Almanac of American Politics, Americans are separated nearly down the middle on cultural issues, between the liberal cultural issues and the, and the conservative ones. Those…edges have been softened since 9/11, but they're still there to some extent.

So I don't think Bush can get the kind of percentage that Johnson, Nixon, and Reagan did.

KONDRACKE: Thanks, Michael.

BARONE: Thank you.

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