The following is a transcribed excerpt from 'FOX News Sunday,' September 19, 2004:

CHRIS WALLACE, FOX NEWS: With new concerns about what's going on in Iraq, we want to get a reality check from Republican Senator John McCain, who joins us now from Las Vegas.

And, Senator, welcome. Always good to have you with us.


WALLACE: Let's start with that New York Times report that U.S. commanders are planning a drive by the end of the year to take back control of the areas now held by insurgents. In fact can they wait until the end of the year?

MCCAIN: Oh, I think every day that goes by that we don't remove these sanctuaries in Fallujah (search) and other places in the Sunni triangle, the more expensive it's going to be at the time we take this out.

I would never have allowed the sanctuaries to start with. And allowing those sanctuaries has contributed significantly to the difficulties that we're facing, which are very, very significant.

WALLACE: Let me follow up on that. How serious a mistake do you think it was to allow our enemies to have safe havens inside the country?

MCCAIN: Chris, we made serious mistakes right after the initial successes by not having enough troops there on the ground, by allowing the looting, by not securing the borders. There was a number of things that we did. Most of it can be traced back to not having sufficient numbers of troops there.

But let me emphasize, things always go badly in wars. That's one of the reasons why we try to avoid them. The key is to correct our mistakes.

In the Fallujah issue, our general in Baghdad said we were going to go in and capture or kill those who were responsible for the deaths of Americans. And we went in, and then we pulled out.

As Napoleon said, if you say you're going to take Vienna, you take Vienna.

And so, we, by allowing these sanctuaries — and Fallujah isn't the only one; there's a number of them particularly in the Sunni triangle — then they were able to establish bases where they can equip, train and harbor people who are coming across the border from Syria and others contributing to this very serious challenge that we face.

And let me emphasize, we can and must win. I mean, it's not a question of not winning, because failure, in my view — and we need more of this debate in this presidential campaign, by the way. We cannot afford to lose this, in my view. We must win. And the consequences of failure are enormous, and the fruits of success will also be incredible.

WALLACE: I want to pick up on the exit strategy (search) in just a moment, but let's talk about the situation right now. Another bloody week in Iraq: an average of 50 attacks a day against U.S. or coalition forces. Iraqi police and military are special targets.

Some have suggested that what we're seeing, to use a Vietnam analogy, is a kind of rolling Tet offensive to try to break the will of the American and Iraqi people and to play a role in defeating President Bush.

Do you think that's what's going on there now?

MCCAIN: I don't think they're interested so much in defeating President Bush. But I think that they see a period of vulnerability here during a presidential campaign that perhaps they could weaken American will.

I don't think they know President Bush from Senator Kerry. But I do think they're smart enough to know that American public opinion can be more easily swayed and national policy could perhaps be more easily impacted during a period of a run-up to elections. And I think they're smart enough to realize that.

But I don't think they have a candidate in the race. But they'd love to see a repeat of the Madrid bombing, which changed the government.


WALLACE: The media this week, Senator, revealed that the president has had a National Intelligence Estimate since July that forecast that through the end of next year, through the end of 2005, at best, we're going to have the violence that we have right now, and at worst, a civil war.

How seriously do you take that National Intelligence Estimate?

MCCAIN: I take it very seriously. I'm not privy to those. But the situation has obviously been somewhat deteriorating, to say the least.

And we've got to go in there. We've got to take out the sanctuaries. We're going to have to sustain, tragically, some more casualties.

And we grieve for every young man or woman who is wounded or killed in this conflict. But theirs, in my view, is a noble cause.

I think it's going to be very tough, and particularly between now and the election. But I also think we have both the will and the ability to prevail.

WALLACE: Following up on that, Senator, I want to play for you some comments that President Bush has been making about Iraq recently. Take a look.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We will help new leaders to train their armies and move toward elections and get on the path of stability and democracy as quickly as possible.

BUSH: In Iraq, there's ongoing acts of violence. This country's headed toward a democracy. There's a strong prime minister in place. They have a national council. And national elections are scheduled for January.


WALLACE: Senator, you made your reputation talking about straight talk. Is the president being straight with the American people? Is he leveling with them about just how tough the situation is in Iraq?

MCCAIN: Perhaps not as straight as maybe we'd like to see. Although I've been with him when he has told audiences that this is a very tough struggle that we're in and made them aware of the difficulties.

But look, airstrikes don't do it; artillery doesn't do it. Boots on the ground do it. That's one of the fundamentals of warfare.

And the longer we delay with these sanctuaries, the more difficult the challenge is going to be and the more casualties we will incur and the Iraqi people will suffer because they will be able to operate out of these sanctuaries obviously now with somewhat of impunity.

But it's not satisfactory to just use airstrikes or artillery. You've got to send our troops in there on the ground. And that, of course, means the most difficult kind of fighting.

I think the president is being clear. I would like to see him more clear, because I believe the American people, the majority of them, know what's at stake and will support this effort.

WALLACE: In the interest of straight talk, of leveling with the American people, what would you think of issuing a declassified National Intelligence Estimate so voters, before the election, can make up their own minds about the situation in Iraq?

MCCAIN: That would be fine. But I think it's also more important that we just tell the American people.

So I think we should have hearings in the Senate and House Armed Services Committee on the issue to explain exactly what the plans are and how we're going to improve this situation, which, to any objective observer, is very tough now, and correct the mistakes that we have made.

Chris, I don't — I know we're on a short program. But in the Korean War, General MacArthur told President Truman the Chinese would not invade. You know, I mean, mistakes are made in every conflict. The key is, recognize those mistakes, correct those mistakes, and prevail.

WALLACE: So let's talk about the future. If, as you said, failure is not an option, what do we do? Do we need more troops? What do we do between now and getting our troops out?

MCCAIN: We need to get into the sanctuaries quickly and soon, not only in the Sunni triangle but in other parts of Iraq, as well.

Second, we need to make plans for an enlarged Army and an enlarged Marine Corps. It may be as many as 70,000 Army and 20,000 to 25,000 Marines.

Because if you accept the reality that we're going to be there for a long time — which, by the way, is not terrible if you keep the casualties down. We've been in Kosovo. We've been in Bosnia. We've been in South Korea for more than 50 years.

So the key is to get this military action initiated as quickly as possible, recognizing we'll be there for a long time, enlarge the size of our regular forces so we can reduce the enormous strain on them and on our Guard and Reserve forces. The Guard and Reserve forces were never designed to have this kind of sustained and repeated deployments.

WALLACE: Now, Senator Kerry said the other day, as I'm sure you're aware, that the administration has a secret plan to call up more Reserve and National Guard right after the election. He did not offer any proof.

But should the president say flat out what he plans to do, whether he has plans to call up the Reserve, the National Guard, whether he even plans to increase troop levels in Iraq?

MCCAIN: Well, I think it's clear that we already have significant Guard and Reserve, thank God, presence there. Around 40 percent of the forces in Iraq are Guard and Reserves. And some of them are in very, very key kinds of positions, like civil affairs, linguists and other very essential jobs.

I'd like to see more of an overall plan articulated by the president.

And also, by the way, again, congressional hearings are very good at getting answers to questions. And I think we'll be having at least one or two in the Senate Armed Services Committee.

WALLACE: How confident are you that the Iraqis, in fact, are going to be able to hold those elections, those national elections, in January as scheduled?

MCCAIN: Twice you referred to straight talk.

We're not going to have those national elections until we get rid of the sanctuaries. Or at least they're not going to be effective.

WALLACE: And do you think we can get rid of the sanctuaries by January?

MCCAIN: I do. I do. I do. I believe we can do it. And again, I believe the American people, when told what's at stake here — and most of them appreciate that already — would be very supportive of it, as we grieve the terrible loss and wounding of America's finest.

WALLACE: Senator, you're pretty — I want to change subjects with you — you're pretty sophisticated about the media. What advice...

MCCAIN: Who, me?


WALLACE: What advice do you have for Dan Rather and CBS News about those memos on the president's National Guard service?

MCCAIN: Get to the bottom of it. Get to the bottom of it quickly, and get it behind you.

It's like any other scandal that takes place in our nation. And that is, you've got to get all of the information out, get it out as quickly as possible, and get it behind you. You cannot stand the sustained kind of situation like this is.

WALLACE: Now you say it's a scandal. Do you, in fact, believe that these documents are forgeries, from everything that you've been able to read?

MCCAIN: I have no idea. I really don't.

I'll tell you what I regret though, Chris, is that we now have the bizarre situation where we are refighting a war that was over 30 years ago. It seems to be the focus of our attention, while, as our discussion today, some young American is probably going to be severely wounded or killed in Iraq.

And instead of figuring out how together we can fight this war and how we can prevail and having the different presidential views, we're going back and re-opening the wounds of a war that I spent the last 30 years trying — by the way, sometimes working with Senator Kerry — trying to close those wounds.

I cannot erase a single name that's inscribed in granite on the Mall in the Vietnam War Memorial. And to re-open these wounds I think is disgraceful, and it's a heck of the commentary on the state of American politics and the control that consultants and pollsters have.

WALLACE: Senator, let me ask you about another aspect of that though. Is it true that you warned Senator Kerry some months ago not to make Vietnam and his service there such a big issue in the campaign?

MCCAIN: Well, I don't like to discuss my private conversations. But the fact is, yes, I think that it was well known to most Americans that Senator Kerry served honorably — and I emphasize, honorably — as did President Bush in the National Guard; that John Kerry served honorably in Vietnam.

And sometimes, when you highlight it, I didn't think the impact — so much the impact as it has today, but it's just, it makes sense to let other people talk about it, since it's a pretty well-known fact.

WALLACE: Well, given that, though, Senator, didn't, then, Senator Kerry contribute to all of this? Didn't he open the door to the situation that gave the Swift Boat Veterans so much attention?

MCCAIN: I think, certainly, by bringing it up, it made it more for a legitimate discussion. But his service in combat was honorable.

If you want to debate other aspects of Senator Kerry's political career, that's fine. But if we're going to go back and reexamine every medal and citation that every Vietnam veteran got, we're in one heck of a mess.

And again, you know, when I came home, Chris, from the war, I was astonished at the divisions within American society. Eighteen-, 19-, 20-year-old kids served honorably, came home, were not well received.

Look, we've all made our peace with ourselves, as to how we conducted ourselves during the war, including me. And to reopen all these and to rip it open, this is really unfair to those veterans, particularly those who have had difficulty coming all the way home.

WALLACE: Senator, thank you. Thanks for being with us.

MCCAIN: Thank you, Chris.

WALLACE: See you again soon.

MCCAIN: Thank you.