This is a partial transcript from Hannity & Colmes, December 12, 2003, that has been edited for clarity.

SEAN HANNITY, CO-HOST: We get right to our top story about the news and the political news of the week with our guests, former New York Senator Al D'Amato, former vice presidential nominee Geraldine Ferraro.

Good to see you both. Thanks for being here. Happy holidays. Happy holidays to everybody.

After months of bashing the president by your party on the issue of the war, things have -- the bleeding has stopped. Public opinion has turned around.

Fifty-nine percent of Americans now this week in a Gallup poll say that, all in all, do you think the situation in Iraq was worth going to war over or not? Fifty-nine percent of Americans get it, that we had to do it. They support the president. It was the right thing to do.

Now with the economy turning around, and now this poll, what does that mean for Democratic presidential candidates?

GERALDINE FERRARO, FORMER VICE PRESIDENTIAL NOMINEE: Well, I have to tell you, if we were going to win based upon things going miserably in Iraq, I don't think that that's a criteria for any election.

But I have to tell you, though, people might have said that doing -- that they were behind -- that doing the Iraq war was a good thing and what was accomplished was good.

I think the follow-up question is, what do you think about how we're now maintaining the peace?

HANNITY: You're starting your polling --- You're starting your own polling company?

FERRARO: What was the support for that? So I assume there are more pieces to that polling than you've told us, because that's the piece that we're still worrying about.

We're still worrying about how are we going to get that country reconstructed and pull our military out of there so that they can be here and be safe in this country?

HANNITY: But here is the reality of the political situation that you and your fellow Democrats find yourselves in. And we'll have Neil Cavuto on here in a minute, and we're going to talk about the economy, Dow now topping out at 10,000. Every -- we've had economic growth unprecedented in 20 years.

FERRARO: I think that's great.

HANNITY: So on the economic front you don't have an issue. And on...

FERRARO: Wait, wait. It's still 10 months before the election, at least 10 months, 11 months before the election. In addition to that, tell me where the jobs are. There's still three million lost jobs. We still don't have people...

HANNITY: Three consecutive months of job growth in this country.

FERRARO: But how many have they lost over the period of time that they've been in office in three years?

HANNITY: They did inherit the recession. They did inherit the recession. We got out of the recession. We've had two tax cuts for the American people. Always, Senator D'Amato, the lagging indicator in any economic recovery...

AL D'AMATO, FORMER NEW YORK SENATOR: Jobs.

HANNITY: ... jobs. Now we see that number coming down.

D'AMATO: The fact is that the economy is really posed for the kind of recovery that people can see and understand.

And jobs are there. Companies are beginning to hire for the first time. We see manufacturing, which has been a lagging indicator, up.

FERRARO: Where.

D'AMATO: That means jobs...

FERRARO: Where?

D'AMATO: Manufacturing, in the past, in the past two quarters we see manufacturing beginning to pick up.

FERRARO: Those are the jobs that are non-existent. The manufacturing industry.

D'AMATO: Let me say this to you, and it has nothing to do with Republicans or Democrats. You have to go to where you can make money, and you see in the service area, in the technological area, those are the areas where we're going to create jobs.

HANNITY: But...

D'AMATO: We're not going to create them in old manufacturing areas.

FERRARO: Those are out of the country.

HANNITY: Let me go to -- Neil Cavuto, our economic expert, is coming up. We're not going into...

HANNITY: Here is the question I have for you.

D'AMATO: Politically we're well voiced.

HANNITY: But that's the point, because peace and prosperity, senator, they drive elections.

D'AMATO: That's right.

HANNITY: And with the economy showing unprecedented growth for the best growth we've seen in 20 years. And now this poll on Iraq, the Republicans -- how do the Democrats make the case that we need, to quote one candidate, regime change in America?

D'AMATO: Well, they're going to point to Iraq and they're going to say look how much it's cost us. They're going to say that we've lost our influence worldwide, that some of our traditional allies, the French, the Germans, et cetera, have broken with us.

And they're going to -- as Geraldine has indicated, that there are three million fewer jobs.

The job picture is going to change. The stability in Iraq is going to be difficult to achieve, because every terrorist group throughout the world is flocking to Iraq, and the Republicans are going to say better to take them on there, and remember the Cole and remember the World Trade Center and remember a country that was afraid to take on the totalitarian regimes...

ALAN COLMES, CO-HOST: Senator -- Geraldine and senator...

D'AMATO: ... and that's the battle.

FERRARO: Alan...

D'AMATO: And I think we're going to win it.

FERRARO: Alan, you've got to...

COLMES: Senator, Geraldine, it's Alan and I'm in D.C. tonight. Thank you for being with us.

Look, this could be the same argument that at the end of the Clinton administration we had prosperity, we had peace, and the argument could have been made, well, why should there be, to use Kerry's phrase, regime change in the United States now?

Things were going pretty well, but the American public decided they wanted a change, and they voted Bush into office.

D'AMATO: You had, Alan, a scandal that rocked America, and they should not -- and it left a kind of repugnancy, a moral repugnancy.

And take a look how close that election was, because the economy was well, because we did have peace, because of just the things that you said, it was a whisker election.

And so I think that if we have those ingredients, a good economy, relative peace, relative peace, and we've got to get Iraq under control a little better, I have to tell you that.

COLMES: But let me...

D'AMATO: Bush is going to be a tough guy to beat.

FERRARO: Can I say -- Yes...

COLMES: Geraldine, we have another thing here. Bush is an incumbent, which we didn't have last time. You have the power of the incumbency. You have, for example, the conference board today projecting that the GDP gross is going to rise 5.7 percent next year.

Does Sean and does Senator D'Amato have a point, that we Democrats are going to have a big problem trying to get back into power at this point?

FERRARO: Yes, I think they do, and I think you do have -- I mean, the economy, thank God, is moving. And people are now going to hopefully get back to work.

But the issue, there are several issues that I can't let go by without making a comment about what Senator D'Amato said.

For one thing, one of the wonderful things that we now have is instead of the huge budget surpluses that President Clinton left us with, we now have these huge deficits that we're going to be facing into the future. And I have to tell you as a grandmother, I worry about the fact that my grandchildren are going to be paying for all the spending, including military spending, that has gone on and the tax cuts that have come through. Now that's No. 1.

But let me also say something else. I have never heard anybody until tonight say that one of the reasons that we're in Iraq -- and it seems to me that that's what you're saying -- is that this would be a perfect center to get all the terrorists in there. That isn't why we went there.

COLMES: It's absurd.

FERRARO: That is a result of the fact that we did not have a plan for how to maintain the peace. We were so shocked by how fast that war went that President Bush did not have a plan, a peace plan. And that's why we have as many military being killed now after the war as we had before.

COLMES: Senator D'Amato, I've got to ask you a question.

D'AMATO: Wait a minute, Alan. I do make the point that it has now become that battleground against terrorism throughout the world. That may not have been our initial reason for going in.

FERRARO: We're still the only ones fighting that battle.

D'AMATO: And let me tell you something. Those allies who failed to join us will regret it. They're making a mistake.

Better to take them on now, beat Al Qaeda, beat the other, the Fedayeen, the other terrorists. And I'd rather take them on there than here.

COLMES: Senator, I've got to ask you a question. How can you say we've liberated 50 million people in Iraq when, at the same time, you're saying Iraq is now the center of terrorism? Terrorists have gone there. American soldiers are dying every day. How can you say that at the same time?

D'AMATO: We crushed one of the most brutal dictators...

COLMES: Answer my question. How can you say that and at the same time say they're liberated?

D'AMATO: Alan, you forgot the hundreds of thousands of people who were slaughtered. You forgot the instability that he created. You did not mention the fact that he did support terrorist activities throughout the world, and even against the U.S. interests, et cetera.

And so our taking him on was an absolute necessity. Now the fact that terrorists throughout the world see this as an opportunity to defeat the United States, we have to be -- and every Democratic candidate, even those who opposed us going in, now say we just simply can't cut and run. We've got to win this battle, and we will. We have to win the peace.

COLMES: Senator, you talked about scandal. You said that that was one of the reasons -- you're probably right -- that Al Gore is not president of the United States right now. That certainly had an effect on the election.

We have situation now of great controversy about whether or not countries who did not participate in the war should be allowed to participate in bidding.

We also find out that Halliburton (search), front page of the Washington Post today, Halliburton, which was given a no bid or no compete contract in Iraq for billions of dollars, is now being accused of overcharging.

Maybe it's not the same kind of scandal we had during the Clinton years, but isn't this something that's going to cause -- you know, taxpayers' dollars are being spent there. We're not competing with every country we should be.

D'AMATO: That's the thing. No. 1, Halliburton. Certainly, if they've overcharged they should be whacked and whacked good, but the idea that the vice president somehow is involved in this, whether they got contracts because of him, that's nonsense.

No. 2, I think you're going to find the facts where, and they already preliminarily have indicated, that Halliburton itself was overcharged from someone who they were buying oil from, et cetera, so that will be worked out.

When we talked about the election, and a scandal type situation, there's none there. And it is absolutely not the case.

Now you asked one other point. What was your other point there? I want to get to it.

COLMES: Well, we were talking about that, but I'd like to move on.

D'AMATO: You made two points. Halliburton and the other one.

COLMES: Well, I was talking about Halliburton and I was talking about the issue of no bid, of countries who are bidding in Iraq.

D'AMATO: There is no way -- There is no way that we should permit Germany, France, the countries, Russia, who absolutely not only had a difference of opinion, that's one thing, but who worked assiduously, the French, to embarrass the United States, to hurt our efforts, who cost us the ability to achieve, I think, an even more dramatic victory and maybe avoid the war.

Because these guys, the French were telling Saddam, "Don't worry, the United States isn't going to come in here." And now to give them taxpayers' money for these contracts? No way. We should give them to our allies and to U.S. companies. That's U.S. taxpayers' dollars.

HANNITY: Do you agree with that?

FERRARO: Well, let me say this. I think that what you can do is if you're looking at the big picture, which is the reconstruction of Iraq, and why do you want to do that, you want to make sure you can get the people in place, the infrastructure in place and get our military home.

I think that's our goal, because that's what the president is talking about doing. He's talking about getting them out within a year.

HANNITY: Without the French and the Germans. They are...

FERRARO: Let me get to that. What I'm saying is this. In order to get that reconstruction done, we should allow people who can help us get that reconstruction done fast, on time, no matter where they're from.

However, what I would do is I would tie that in to having the Frenchmen say you want the contracts, how much of the debt are you going to forgive that's outstanding already?

HANNITY: All right.

FERRARO: Because that's also a major part of it.

HANNITY: That would be...

FERRARO: So that should be done.

Let me also say something about Halliburton, because although very possibly Vice President Cheney, who was former chair of Halliburton, had nothing to do with Halliburton getting the sole source contract, let me suggest to you that it does smell. And that the thing is that the perception is terrible...

HANNITY: I want to ask you one last...

FERRARO: ... and the fact that they're overcharging is horrendous.

HANNITY: Let me ask you one thing. Our good friend Bill Kristol has a column, how Dean can win. Can Howard Dean win this election?

D'AMATO: Absolutely, and I think if Republicans take the Dean nomination as making it easy, they're making a mistake.

He's well organized. He has a very powerful constituency of young people, et cetera, all ready to go out there and work. It should not be underestimated. He's smart. No one ever thought that he would get to where he's going to get, and he'll move to the center.

HANNITY: All right. Gerry?

COLMES: Senator, we thank you...

FERRARO: I have to tell you, yes, he can. And the thing about it is, when people like Republicans are around saying, "Gee, we'd love him because he's so a softie, so far to the left. I remember in 1980 that I actually prayed that Ronald Reagan would win the Republican Party." Just shows you how smart I was at that time.

COLMES: All right. Thank you both very much. Thank you both very much for being with us.

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