This is a partial transcript from "The Beltway Boys", Dec. 25, 2004, that has been edited for clarity.

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FRED BARNES, CO-HOST: I’m Fred Barnes.

MORT KONDRACKE, CO-HOST: I’m Mort Kondracke. We’re "The Beltway Boys."

Well, the hot story of the week was bad week. That is, in Iraq. There, there was this suicide bombing at the tent in Mosul, previously thought to be a fairly safe city, killing 22. Suicide bomber got in there somehow. We don’t know how.

Second, there was a shooting in wide, in wide-open daylight by unmasked gunmen of election workers.

Three, there was the, this ACLU report based on e-mails from the government, indicating that harsh treatment at Abu Ghraib (search) and at Guantanamo might have been high-level policy, and also harsher than previously expected.

All that, you know, a downer for support for the president’s war efforts.

Here’s the president talking about the attack on the, on the tent.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: No question about it, the bombers are having an effect. You know, these people are targeting innocent Iraqis. They’re trying to shake the will of the Iraqi people, and frankly, trying to shake the will of the American people. And, you know, car bombs that destroy young children, or car bombs that indiscriminately bomb in religious sites, are effective propaganda tools.

(END VIDEO CLIP)

KONDRACKE: But the good news is that by a 58 to 39 percent margin, according to The Washington Post-ABC poll, Americans think that we should stay in Iraq, even though 56 percent don’t think that the war was worth fighting in, in the first place.

I mean, basically what this means is that Americans know that we cannot leave precipitously and let the country descend into chaos, that we’ve got to stick it out.

And the good news also is that 48 percent think that we are making good progress toward a democratic Iraq. The election is January 30. And that will be a crucial moment when Iraq acquires a legitimate government.

Now, we can’t even leave after that. We cannot leave until an Iraqi security force is in place that can control its own country.

BARNES: You know, I think the suicide bomber there in Mosul, at least the group that claimed responsibility for it, said he had worked there for four months. He was actually an employee there at the camp in Mosul (search), which is scary in itself.

Now, the terrorists and the Ba’athist, I think, are trying to achieve three outcomes. The president sort of suggested this. One, of course, is to stop the election from happening, and that, another is to stir civil war between the Shi’ites and the Sunnis. That’s why they bombed in Karbala and Najaf, the Shi’ite holy sites. And lastly, they want America to cut and run.

Now, I don’t think I’m Pollyannish in saying that they’re not achieving any of those goals. The election’s going to go ahead, U.S. isn’t going to cut and run. I don’t think they’re going to have a civil war.

But there’s no reason to sugarcoat the situation. They’re going to have this election with a high level of violence, at least in the triangle, or the Sunni triangle, or whatever you want to call it, in the middle of, of Iraq, which includes Baghdad.

But things are getting better. People are moving back into Fallujah (search). And Mort, you’ll remember that all the people, all the skeptics, all those people who were skeptical about whether you could carry off a real democratic election in El Salvador, and then more recently in Afghanistan, I think are probably the same people who are skeptics about doing that in Iraq. And they were, they were wrong in those earlier cases, and I think they’re wrong this time.

Now, hot story number two is road to reform. This is the road to Social Security reform. And the president has started his campaign in favor of it. I think he’s making some headway, a little headway. I don’t want to, I don’t want to over credit him, but I think he is making some headway.

He’s really making two points in all these speeches and summits and everything that he’s going through. One is that Social Security faces a financial crisis. And the other, of course, is the joy of having your Social Security payroll tax used to invest money in one of these personal accounts.

Here’s the president touting the accounts.

(BEGIN VIDEO CLIP)

BUSH: I will try to explain how without negotiating with myself. People can set aside a negotiated amount of their own money in an account that would be managed by that person under, you know, serious guidelines. As I said, you know, you can’t use the money to go to the lottery, or, you know, or take it to the track.

(END VIDEO CLIP)

BARNES: Sorry, Mort, you can’t use it at the track.

Now, I want to talk about polls a minute, because I think they tell a story, but it’s not the whole story. The Washington Post poll shows 53 percent support for the idea of allowing people to invest some of their Social Security money in the stock market. But that support drops when respondents were told about the nearly $2 trillion it would cost to implement this program. And 62 percent said they wouldn’t participate at all if their benefits would go up or down depending on the stock market.

And that’s the heart of Bush’s plan. Well, you know, of course you invest, they go up.

But those poll numbers, and I could dispute some of the questions, particularly the one about the $2 trillion, but we’re going to have in this country in 2005 a huge national discussion on Social Security and, and what we need to do, very similar, I think, to the health care debate we had in the United States in late ‘93 and in 1994, when Bill Clinton had his plan.

And it’s up to Bush to sell his program. He’s got to be the leading salesman, and he’s getting a little better at selling it, because the forces of reaction and the status quo are arrayed against him in Washington. And you know who I mean, the AFL-CIO, the AARP, liberals, Democrats, and most of the media, except The Washington Post.

KONDRACKE: Yes, you’ll remember that Bill Clinton lost his his health care battle.

BARNES: Yes.

KONDRACKE: This is uphill, even though, look, the basic plan makes all the sense in the world, that I think younger workers understand. If you average out what markets do, stocks and bonds, stock and, stock bond markets, you get a 4.7 annual return on your money, 4.7 percent.

Investing your Social Security money you get 1.8 percent. Now, the difference is something that ought to be available to workers and younger workers who are used to participating in 401(K)s understand what’s going on.

Now, I think Bush could help his, his purposes here by doing three things, one, ‘fessing up right away that what we need to do is to adjust the cost of living adjustment basis from wages, which is higher than in, ordinary inflation to price inflation. You know that results in a slightly lower benefit.

BARNES: Right.

KONDRACKE: But then you could guarantee that that benefit will be available to you even if there’s a depression in the United States, so that you’re not really playing the market. You’re not going to lose. But if the market surges, then workers ought to be get, get a little bit, bit extra money, because they are taking some risk with their, with their money. And they ought to be able to, to benefit from the, from the added return.

Now, if he explains those three things, I think he’s on his way to winning this fight. It’s not going to be easy, but I think he could help himself a lot.

BARNES: I’m going to call the White House, tell them you’re on board, Mort.

(LAUGHTER)

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