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This is a full transcript from "The Beltway Boys," on March 3, 2007.

MORT KONDRACKE, CO-HOST: Coming up on THE BELTWAY BOYS, Democrats promise big changes when they struck into office two months ago, especially on Iraq. We'll tell you why their agenda has been going nowhere fast.

FRED BARNES, CO-HOST: The U.S. gets ready to meet with Iran and Syria over the next steps in Iraq.

KONDRACKE: Forget China's currency market. Is Alan Greenspan to blame for this week's free fall in the stock market?

BARNES: And social conservatives continue to swoon over Rudolph Giuliani.

KONDRACKE: All that's coming up on THE BELTWAY BOYS. But first, the headlines.

(NEWSBREAK)

KONDRACKE: I'm Mort Kondracke.

BARNES: I'm Fred Barnes. And we're "The Beltway Boys". Hot story number one, Mort, Dem doldrums. Not Republican doldrums, Democratic doldrums.

KONDRACKE: For a change.

BARNES: Well, for a change, but it's a new year. It's 2007 now. Item number one, there's division over the Democrats' vaunted first 100 hours agenda. The House passed this list of items in their self imposed first 100 hours, give or take an hour, but every single measure is stuck in the Senate. Now a couple of them will pass, for sure. One is the minimum wage. Another is, you know, money for energy research on alternative fuels, but those will be changed and then perhaps drastically. A number of the other ones aren't going to pass at all.
And the main thing is these things are bottled up in the Senate for now, all six of them, after Democrats in the House were promising how fast they'd get everything through, remember?

KONDRACKE: Yes, well, look, the Democrats have only been in charge for two months.

BARNES: Yes.

KONDRACKE: .so I mean, don't declare that this is a disaster yet. You know, and as you point out, the minimum wage is going to pass. There will be a bipartisan energy plan. There will probably a bipartisan Homeland Security plan eventually that passes.

BARNES: Yes.

KONDRACKE: Stem cell research is going to pass the Senate. It's going to vetoed by President Bush, but that's his problem, not the Democrats' problem. And it's a long term problem for the Republicans I think as well. So you know, we'll see how bad it is and when it all works out in the end.

BARNES: Mort, I did not call it disaster. I called it doldrums. That's not the same thing. Give me a break. Item two, there's no consensus among Democrats over steps to end the Iraq War. Check out what Harry Reid, the Democratic leader in the Senate, was saying. Watch.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D), SENATE MAJORITY LEADER: There's not yet been determination made by Democratic caucuses how we will finalize our legislative approach to this. There are a number of different ways we can go.

(END VIDEO CLIP)

BARNES: Boy, not yet decided? They're completely (INAUDIBLE). They have been.You know, first their resolution was filibustered because they wouldn't allow a second Republican resolution to be voted on continued funding for the troops in Iraq. Then they had - then they got filibustered again. Now they want to change the war resolution or whatever. They don't know what they're going to do. In the House, they did pass an anti surge resolution, you know, one opposing the increase in troops and the new strategy that Bush has in Iraq. But then they started turning things over to John Murtha, the congressman from Pennsylvania, who came up with some, you know, micromanagement scheme, where he was—and it sounded like he was going to be commander in chief. And that created rebellion by House Democratic moderates and even anti-war Republicans. And now, I think, I personally think Murtha is an albatross for Democrats. And his plan is killed. They don't know where they're going to go. So it is - it is—the D-word applies, `disarray.'

KONDRACKE: Yes, well, look, both Houses have demonstrated that they have a majority of members who are against the surge. They've said that.
Now going beyond that, there is trouble. And I'm glad there's trouble.

BARNES: Yes.

KONDRACKE: I mean, the John Murtha resolution, which was totally responsible to cut off funds for the troops is dead. The latest wrinkle on this is that they're going to have some sort of benchmarks for readiness of troops, but it's waiveable by the administration.

BARNES: Yes.

KONDRACKE: They want to put the onus on the administration. But what I think the Democrats ought to do, they made their point, right, that they don't like the surge. Now let Bush play out his plan and hope that it works, for heavens sakes.

BARNES: They should do that, but they can't. They're being pushed so hard by the left.

KONDRACKE: That's right.

BARNES: Or they're lefties in the beginning. All right, thirdly, Democrats voted Thursday to make it easier for labor organizers to unionize workers, but didn't get enough Democratic support that could sustain a promised veto. There's not going to be a veto. We will be filibustered in the Senate. It's a terrible piece of legislation, enormously unpopular. 90 percent of the American people oppose it because what it would do is deny workers a secret ballot election to decide whether they want to be in a union or not.

KONDRACKE: Yes.

BARNES: Because you know the truth is, practically nobody wants to be in a union anymore. So Democrats and labor have to come up with these ways to get around that.

KONDRACKE: Yes, you know, I mean, it's pathetic, actually. Practically every single Democrat in theHouse of Representatives has voted for this, including moderates, new Democrats, supposedly pro-business blue dogs. They all voted for it.

BARNES: I know.

KONDRACKE: Why? Because they're scared of the labor unions.

BARNES: Yes.

KONDRACKE: That's why.

BARNES: Indeed they are. And another reason why Democrats are tied in knots. A good defense on the part of Republicans, especially on the Senate side. And I would, of course, have to sing about Mitch McConnell, the Republican leader in the Senate, who is the master of using minority rights, of which there are a lot in the Senate for sure. But using it to maximize the power of the minority. And he's got 49 Republican votes. And on Iraq, of course, he had Joe Lieberman, too. And he has made the most of it.

KONDRACKE: Yes. But look, the measure of this performance of this Congress for both Republicans and Democrats ought to be accomplishment.

BARNES: Yes.

KONDRACKE: Not gridlock. And there's some good news on this front. Kent Conrad, Democrat from North Dakota, and Judd Greg, Republican of New Hampshire, have been trying to put together a working group to solve the long-term entitlement program, along with the administration. The deal is struck. They're actually - they're going to start negotiating with Hank Paulson of the Treasury Department. And something could happen.

BARNES: Well, we'll see. But one more thing, Mort, look, the onus to achieve some accomplishments is with the majority in the Senate, not the minority, the majority. That's who it sticks with.

KONDRACKE: Everything takes bipartisan deals with a Republican administration.
Coming up, with North Korea and now Iran, we'll tell you how the new pragmatism is driving the Bush foreign policy. Stick around. Hot story number two is straight ahead.

(COMMERCIAL BREAK)

KONDRACKE: Welcome back to THE BELTWAY BOYS. Hot story number two is neo-realism. I want you to watch this exchange that took place in the White House briefing room withTony Snow. Watch.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Could it be that you're concerned if you do - if you are seen as embarking on a new policy, is the concern that the old policy was wrong?

TONY SNOW, WHITE HOUSE PRESS SECRETARY: No, the concern is you guys are getting it wrong. And I don't know how to get you to get it through your heads that it's not new. I mean, it's just—it's just not new. What's going on here is something that has a long set of precedence. There are multilateral forums, where if the Iranians are there, we're not going to walk out. The Iraqis, we have always said, if they invite us to this regional forum, we will be there. They invited us, we're going to be there.

(END VIDEO CLIP)

KONDRACKE: Well, you know, in a sense what Tony Snow said is true. Just a second now. Just a minute. For the purposes of this particular regional conference that Iraq invited us and the Iranians and the Syrians to, you know, there is—this is not a break of precedent that we're going. And we're not—Tony Snow says we're not going to go and have one-on-one talks with the Iranians and the Syrians.

On the other hand, there has been a significant change in American foreign policy in the second Bush term from the first. Condi Rice is presiding over something that's much more diplomatic, much more multi-lateral than the Cheney/Rumsfeld neo-con unilateralism of the first term. And it's produced some results, like the de-nuclearization agreement with North Korea. Now a lot of hawks say that this is all weakness. But it's worth noting that this is not the same foreign policy that you get the kind of negotiating strategy that Democrats and Europeans tend to favor, where you bring your hat in your hand and you're willing to divide up, you know, give up half of your assets. This is muscular, coercive diplomacy. Neo-realism is not my term for it. It was something applied by The Wall Street Journal, but I think it's true. It's—what we did with North Korea was that the Chinese applied muscle. We applied muscle. And the North Koreans have buckled under. Now what we're trying to do with Iran is to do the same thing. We've got a lot of military pressure on them, economic pressure, political pressure, diplomatic pressure. And we're trying to get them to stop uranium enrichment. We'll see if that works.

BARNES: Yes, unfortunately, there's no China there that would have great influence on the Iranians. Look, I like muscular coercive diplomacy. The more muscular and the more coercive, the better. But it does have.

KONDRACKE: Beats war.

BARNES: Yes, it does, yes, but it has to be backed up, this diplomacy, by the threat of the use of force. And you have to be willing at certain times, as in Iraq and Afghanistan, to actually use force. And then the threat becomes credible. Who in the past week, Mort, has been the man who has carried out, I think, very strongly and very visibly exactly what you're talking about? Muscular, coercive diplomacy? It's Vice President Dick Cheney. First, when he made it clear to the Iranians, not that he was talking to them, but through the press, that the military option to take out the nuclear facilities in Iran is still on the table. It wasn't a threat, he just said it was there. Good for him. And then he went to Pakistan, of course, and talked to Pakistani President Pervez Musharraf, telling him look, you got to do something about what you're letting happen in northwest Afghanistan, where you're letting the Taliban and al Qaeda forces regroup and train. That can't continue. We'll see what Musharraf does. All right, coming up, he's been divorced twice, he's pro-choice, and pro-gay rights. So why do social conservatives like Rudy Giuliani? We'll talk about it, after the break.

(COMMERCIAL BREAK)

KONDRACKE: Welcome back to THE BELTWAY BOYS. Let's check out the ups and downs.
Down, Alan Greenspan. He's no longer head of the Federal Reserve, but his doomsday prediction of a possible reception may have been enough to muck up the markets.

BARNES: You know, Alan Greenspan really should have known better, I mean, about talking about a possible recession. The markets still pay enormous attention and he has so much credibility that obviously his words did not help at all. He never would have said anything like that had he still been Fed chairman. Well, the Fed chairman now who replaced him, Ben Bernanke, handled - and I think handled the whole fallen markets very brilliantly. In the first place, he was calm. There was great body language. And he was clear that a financial crash wasn't about to happen. And he also, I think, indicated without actually saying so that the Fed would step in, if necessary, to prevent a crash by providing the money necessary for financial markets. This is what Ben Bernanke should have done. He did it well.

KONDRACKE: Well, except that the markets have still been skittish even after that segment. Look, I mean, it's strange. I mean, Greenspan, when he was Fed chairman, was utterly - you know, you couldn't understand what he was saying. Now that he's being paid $150,000 a speech, I guess he has to say something that's reasonably clear. But you know, we don't know whether it was Greenspan that triggered this, or the Chinese—crash of the Chinese market.
But the lesson of this is that if we Fed chairman, you couldn't understand what he was saying. Now that he's being paid $150,000 a speech, he has to say something reasonably clear. We don't know if Greenspan triggered this or the crash of the Chinese market. The lesson is that if we start imposing protectionist measures against China, and it causes them not to be able to export, we're going to suffer for it, too.

BARNES: Indeed. You're absolutely right. OK, up, Rudy Giuliani. He's padding his lead against his main rival, John McCain. He's now 20 points ahead of McCain in the latest FOX poll, an eight point jump since last month. The main reason for the surge? White evangelical Protestants coming over to Rudy's camp. Now look, Giuliani, you'll have to admit Mort, is the hot candidate right now.

KONDRACKE: Absolutely.

BARNES: Now among Republicans, no question about that. And he's expanding his lead over McCain. Even if you take the polls lightly, as I do, it still - it means something, don't you think? I mean, Rudy's doing better than McCain is right now.
But the big test for Rudy is coming, and probably a lot earlier than we thought with this campaign starting so early. And that's when he has to go through the gauntlet of criticism about his social liberalism, and also about, you know, these personal issues, to put it mildly, that have characterized his career and in his private life. Already, the first—I think the first shot is this one a couple days ago by Mitt Romney, saying that Giuliani supports gay marriage. Well, he doesn't exactly support gay marriage. He supports civil unions, which is sort of gay marriage light. But Mort, he's going to - there's going to be thunderous attacks on him.

KONDRACKE: Yes. Well, but what the McCain people say is that they would rather have a candidate to their left than strong than a candidate to their right. I mean, they're sort of happy that the Mitt Romney boom hasn't developed really.
And they point out that for the Republicans to nominate Giuliani would be like for the Democratic party to nominate somebody who is pro-life, pro-gun, and anti-gay rights. You know, it doesn't usually happen that way.

BARNES: Yes, that's not quite right, but it's a fair point.

KONDRACKE: Yes.
Down, the Army. It gives the boot to the two star general, who was in charge of the Walter Reed Army Hospital, but the scandal over how injured troops were treated at the facility is becoming a political football. Now look, I think that this has echoes of Katrina, actually. You know, if - there is just no defending the idea that our troops coming back wounded from overseas aren't getting top rate care. Now by all accounts, they do get top rate inpatient medical care at Walter Reed. But then they go onto these rundown facilities for outpatients and sort of second-rate treatment at Veterans hospitals. That simply should not happen. There's enough money for us to provide first-rate absolute best care in the world for the people who have gone out and risked their lives. And anything less than that is negligence. In addition to which, you know, you've had a report indicating that 90 percent of National Guard units are not ready for use. Now it's true, we're in a war. Things get difficult, but this can't be. I mean, whatever it takes in terms of talent and energy and money ought to be devoted to these service people. Now Mort, do you want to hear me defend what's going on at Walter Reed?

KONDRACKE: I know you won't.

BARNES: I know. You're right—it's indefensible what's going on there. But I do - I don't see echoes of Katrina there, unless you're referring to the—what happened in New Orleans that was the fault of the mayor of New Orleans. It sounded to me like you were trying to somehow.

KONDRACKE: It's worse (INAUDIBLE) - no it is. This is a federal responsibility to take care of your own troops.

BARNES: I know it is, I know it is. And I say kudos to The Washington Post for bringing this up in three front page stories, which galvanized President Bush, who stepped in immediately and assigned the Defense Secretary to do something about it. I mean, they have moved quickly. Now it's inexcusable. But when you're fighting a war, cracks in the system do occur. And you want to find them and repair them. And it is - it's inexcusable, but understandable that things like this happen. All right, up,Arnold Schwarzenegger, Mort's new hero. He was my hero, now he's Mort's. He says he wants to usher in an era of what he calls `post-partisanship.' Mort swooned when he heard it. The California governor, who once referred to Democrats as girlie men, is urging lawmakers from both parties to stop the bickering and the back biting. And he wants President Bush to bring them together.

(BEGIN VIDEO CLIP)

ARNOLD SCHWARZENEGGER, GOVERNOR, CALIFORNIA: Post partisanship, however, is not just simply Republicans and Democrats each bringing proposals to the table and then working out their differences. Post-partisanship is the concept of Republicans and Democrats giving birth to new ideas together.

(END VIDEO CLIP)

KONDRACKE: I love it! I love it! You know, look, and it works, too. Now look, this is a guy who when he, in his girlie man phase, when he was beating up on the Democrats, got clobbered in the election in referendum. He has not given up his principles. He is still in favor of electoral reform. He's still in favor of lower taxes in California. And yet, he got himself elected in the bluest of blue states by almost 60 percent of the vote. And what he's trying to do now is to put over a bipartisan mandatory health insurance plan. Now - and to cover incidentally even illegal aliens in the state.

BARNES: Right.

KONDRACKE: It's a big, tall order. There's going to be a lot of negotiations about it. I don't know whether it's going to work or not, but I think, you know, it is a model for what ought to happen in Washington.

BARNES: Well, I don't think so for this reason. And it's particularly wrong that he uses car insurance analogy. You know, mandatory health insurance, just like mandatory car insurance. It's very different. Car insurance you can buy anywhere. You can buy it out of state. But with health insurance, you have to buy it only in your state. You can't go to some state which has cheaper health insurance and buy it there. And again, there are other differences, as well. You can't buy in California, you can't buy some shaved down, merely catastrophic insurance policy. You got to buy this heavy coverage you don't even need, Mort. So there's a big difference. I hope his healthcare plan loses, but I'm with him as long as he doesn't raise taxes.

KONDRACKE: Stay right where you are. "The buzz" is up next.

(COMMERCIAL BREAK)

BARNES: Here's "The buzz", Mort. A British historian, Andrew Roberts, was the talk of Washington this week. President Bush actually read his book, "The History of the English-Speaking Peoples in the 20th Century," sent Roberts a letter saying drop by if you're in Washington. Drop by he did. The president hosted a luncheon for him at the White House.

KONDRACKE: Great. My latest bouquet to bipartisanship is that 10 senators, led by Ron Wyden, a Democrat of Oregon, plus a bunch of conservatives, including Jim DeMint of South Carolina and John Thune of South Dakota, wrote a letter to the president calling for universal health insurance coverage.

BARNES: All right, that's all for THE BELTWAY BOYS this week.
Join us next week when the boys will be back in town.

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