This is a partial transcript from "The Beltway Boys," on July 1, 2006, that has been edited for clarity.

Watch "The Beltway Boys" Saturday at 6 p.m. and 11:30 p.m. ET and Sunday at 2:00 a.m. and 6:30 a.m. ET.

MORT KONDRACKE, CO-HOST: Let's check out our "Ups and Downs" for the week.

DOWN: Hamas. The military standoff with Israel provides a moment of truth for Hamas: not only give up that Israeli soldier, but move toward recognizing Israel or face total collapse.

I mean, this is rapidly developing into an utterly hopeless situation. I mean, and it's a tragedy. The Palestinian people — if they could elect a government that would recognize Israel's right to exist and be fiscally responsible — would have aid pouring in from the entire world, and they would have a prosperous society. They could flower. Instead they've elected a terrorist government, which refuses to recognize Israel's existence and is being starved economically by the rest of the world until they do.

Now they've kidnapped an Israeli soldier. The Israelis have arrested half of their cabinet. There could be all-out war for all we know. And the result of it is that the Palestinian people are going to suffer even more.

FRED BARNES, CO-HOST: You know what? It's already chaos in Gaza before this because after the Israelis pulled out their troops and turned over the entire Gaza to the Palestinians — what erupted there? Orderly government? Not at all. Chaos. I mean, it really is chaos. Now the Israeli troops are there after what I think was an act of war, where Hamas terrorists crossed the border, killed two soldiers and then kidnapped the one that you've talked about. You know, Hamas may be democratically elected. But the truth is, they simply can't govern. They don't know how to — you know, pass incentives, generate an economy and safety for the citizens there or and stuff like that. They go around with a tin cup and expect Europeans and Americans and Israelis to send them money so they can govern. Terrorism isn't a governing philosophy. I mean, it simply isn't. I think no good will happen between Israel and the Palestinians until Hamas is out of power. And that may not be for several years.

All right. DOWN: The New York Times. From one end of Pennsylvania Avenue to the other, the gray lady is taking a big-time beating for disclosing details about a secret government program tracking terror funding. Here's President Bush taking a whack at a fundraiser Wednesday night.

(BEGIN VIDEO CLIP)

PRESIDENT BUSH: This program has been a vital tool in the War on Terror. Last week, the details of this program appeared in the press. There can be no excuse for anyone entrusted with vital intelligence to leak it, and no excuse for any newspaper to print it.

(APPLAUSE)

(END VIDEO CLIP)

BARNES: You know, Mort, there might have been justification for The New York Times and the other papers that disclosed this program if, one — they had exposed illegality, an illegal program, or, two — they found abuses in the program, invasion of people's privacy or something like that. But they didn't find those at all; those weren't there. So The New York Times comes and explains it — Bill Keller, the editor of The New York Times explains it and says, "Well, we did this in the public interest." You know, that's vague. I don't think that's good enough, particularly in the face of not only Democratic and Republican elected officials, including the president and the Treasury secretary, urging them not to run the story — or simply the heads of the 9/11 Commission, one Republican and one Democrat. In the face of that — people saying this program is crucial and working — for them to say we did this for the public interest, that's not a compelling reason.

KONDRACKE: Yes. Well, I wish that more Democrats, and very few, would come out and criticize The New York Times, the Los Angeles Times and the others for printing that kind of story. They, you know, some of them did urge them not to print it. I think that they ought to be out front and center. Because, you know, we may have a Democratic president one of these days, and that president is going to fight a War on Terror. And to have the newspapers spilling secrets about how we do it — into the public is going to hurt that effort as well. Now it may be that the Democrats think, Well, The New York Times and the rest of them will give us a pass and let us do what we want to do. I'm not sure that that's the case. But, you know, they might be right.

Anyway, UP: the King. I mean Elvis. It was a presidential first: President Bush accompanied Japanese Prime Minister Koizumi Friday to a pilgrimage at Graceland, home to the legend of rock and roll.

BARNES: You know, I'm not sure what it is with the Japanese, and Prime Minister Koizumi in particular, and Elvis, but there's something there. And President Bush seems to have been an Elvis fan. Not quite like Richard Nixon was when, you remember when you were covering the White House; you're old enough. I wasn't old enough then. But when Elvis actually visited the White House when President Nixon was in.

KONDRACKE: You think - you think Nixon really listened to Elvis? I don't know about that.

BARNES: Somebody told him about Elvis. But, you know, the stories coming out of this summit — if you could call it that — I think Koizumi and Bush were there singing a duet together of "I Want You, I Need You, I Love You." I think they were wise to do that not in public. And then — you know, but they seem to like the early Elvis in particular — you know, back in the mid-50s. You remember that, don't you, Mort? I do as well. And Koizumi and Bush then they went to Graceland, and Elvis' former wife was there and his daughter.

(LAUGHTER)

BARNES: This is strange.

KONDRACKE: Well, you know — did you notice who was invited to the White House official dinner for Koizumi?

BARNES: You mean that list of.

(CROSSTALK)

KONDRACKE: Representatives of The New York Times and The Los Angeles Times, the two papers that blew the secret about the banking. I think somebody has gone wobbly at the White House to reward those papers.

BARNES: Who might that be? I mean, in the past I think it was up to the press secretary to decide who from the press was invited there.

KONDRACKE: I believe so — our old friend Tony Snow, I think, is trying to make nice.

OK, UP: billionaire Warren Buffet. He announced this week that he's giving $37 billion to the Bill and Melinda Gates Foundation. This was an enormous act of generosity. And I don't mean to dismiss it or demean it all, but it does demonstrate how unequal incomes have become in the United States. I mean, these guys are so fabulously rich — I mean, the fact is that the top 1 percent of income earners in the United States make 17 percent of all the income in the country, which is the same as it was in the 1920s. And CEOs are now making 300 times the salary of their workers, which is way out of line with historic tradition.

BARNES: Well, I kind of agree with you about CEOs, particularly in publicly traded companies. But the truth is, Mort, you want the middle-class people to make more money. But you — on the other hand, you always want to raise their taxes. And that's not the way to give them more money. The truth is, personal income is rising. If you cut their taxes, it would rise more.

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