This is a rush transcript from "The Journal Editorial Report," April 7, 2007.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," President Bush goes on the offensive, telling congressional Democrats to stop playing politics on Iran, and start funding the troops.

Plus, Nancy Pelosi on the road to Damascus: The House Speaker tries her hand at shuttle diplomacy and stumbles.

And Rudy's revelations: The former mayor of New York is grabbing headlines these days, sometimes for the wrong reasons. Will it hurt his presidential bid?

Our panel weighs in, after these headlines.

(NEWSBREAK)

GIGOT: Welcome to the "Journal Editorial Report." I'm Paul Gigot.

President Bush threw down the gauntlet this week in the battle over Iraq war funding, calling congressional Democrats irresponsible, and more interested in fighting political battles in Washington than giving U.S. troops what they need on the ground.

(BEGIN VIDEOTAPE)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: So my attitude is enough politics. They need to come back. Pass a bill. If they want to play politics, fine. If they continue to do that, I will veto it. But they ought to do it quickly. They ought to get to the bill to my desk as quickly as possible. And I'll veto it. And then we can get down to the business of funding our troops without strings and without withdrawal dates.

(END VIDEOTAPE)

GIGOT: Just what message is the debate here at home sending to the rest of the world? Here with some perspective is syndicated columnist Mark Steyn, author of the book "America Alone." He joins me from Chicago.

Mark, great to have you here with us again back on the program.

Let me ask you about the outcome of the British hostage dilemma. The London Times said that relief at the release of the hostages was tempered by dismay at the humiliation that Britain was -- endured as a result of this crisis. Do you think Britain was humiliated?

MARK STEYN, SYNDICATED COLUMNIST & AUTHOR OF "AMERICA ALONE": I think to be humiliated you have to feel you have got something at stake. And I think the reality is there was an enormous shrug by the British public.

Basically the British public did not get outraged by this. And I think that, in itself, communicated profound weakness to the world. So I think to be humiliated, you have to have some kind of residual national pride, feel there's something is at stake. And clearly, it is not just the Royal Navy, not just the government, but large numbers of the British people gave up on this.

GIGOT: Well, what does that tell about the British public mood. Have the British people finally become a lot more like the rest like Europe in their views toward terrorism in the Middle East?

STEYN: I think so. I think in Washington, in a few years, we're going to be holding a lot of conferences on who lost Britain. I think there has been a profound psychological deterioration in one of America's last remaining serious allies.

And you have to recognize that Iran correctly identified the junior partner of the alliance in Iraq as the soft underbelly of the great Satan, and managed to prod it quite effectively. Another six British troops were killed in southern Iraq just in the wake of this release.

So Iran clearly understands that this is the weak pressure point in the alliance.

GIGOT: What about the argument, looking more broadly, that some people are making, that this release of the hostages shows that there is a debate inside their government between moderates and the more radicals Ahmadinejad faction. And that the way the West should respond here is to engage those moderates in discussion and try to turn Iran towards more moderate and reasonable behavior. Does that make any sense to you?

STEYN: No, that's just Iran doing a kind of bad cop-worse cop routine. And I don't think that gets us anywhere.

You know, power is only as great as the perception of power. And that's particularly true in the Middle East.

You know, diplomacy was famously summed up by Lester Pearson, the Canadian prime minister, as the art of letting the other fellow have it your way. That's fine in a nice self-effacing 19th century way, where the self effacement is backed up by hard 19th century power. It is not so effective when these trans-national institutions, like the E.U. and the U.N., and even NATO are no longer willing to use hard power or even soft power.

GIGOT: Let's talk about the debate here between the president and Congress over Iraq funding. The volume is being picked up this week. President Bush challenging, as we heard on that clip, the Congress to finally fund the troops.

From your vantage point in Chicago, how it is that debate playing in the rest of America?

STEYN: I think we have this curious situation. Up mentioned Chicago and I see this huge sign when I go to the airport, in and out every week, basically saying, above the interstate in huge letters, "Support our troops. Bring them home." And I think the Democratic Party is getting very close to embracing this position, at heart, but lacks the will to embrace it politically. And so, in a sense, they are being completely contemptible.

Harry Reid says effectively that he has checked out of this war. He doesn't believe in it. But if he doesn't believe in it, he as an obligation to act on that, and to vote accordingly.

And instead, the Democrats think they can portray this as the Republicans' war. And half the Republicans in Congress, and certainly in the Senate, think they can portray it as George W. Bush's' war.

The fact of the matter is, around the world, it is seen as America's war. And it will see it as America's defeat if Congress succeeds as inflicting a defeat on America.

GIGOT: If you read the polls, it looks like the Democrats have the public on their side. Most of the public is frustrated by the way the war as gone. And the majority -- well, little more than a majority is saying, "Look, we should come back."

What do the Democrats have to lose by behaving this way politically? I mean, just thinking about it cynically, politically?

STEYN: Well, I think if you put it that way, you don't know how that would play out in the long run. I think it would be Vietnam squared.

I think Vietnam showed that psychologically this country does not lose wars well.

We were talking about Britain earlier. In the 1960's Britain abandoned Aden, which is now a part of Yemen, after a couple of centuries there basically, and shrugged it off without a thought.

America did not slug off Vietnam without a thought. It was a kind of psychological meltdown that led, in part, to the Iranian hostage crisis of 1979, because of the perception of America as an effete, soft as a superpower.

And I think, this time around, it would be that, squared. And once the American public realize that, I don't think they're going to be supporting the men who enable that, such as Harry Reid.

GIGOT: So the Democrats could be courting some long-run political problems, just as they did in the 1970's?

STEYN: I don't have a great investment in the health of the Democratic Party. But I think America would be courting a lot of long-term problems and so would the world.

GIGOT: All right, Mark Steyn, thanks so much for being here.

When we come back, Democrats do away with the Global War on Terror. We'll explain.

Plus, Majority Leader Harry Reid throws his support begin Senator Russ Feingold's plan to start retreating immediately from Iraq. The details are ahead, when the "Journal Editorial Report" continues.

(COMMERCIAL BREAK)

GIGOT: Senate Democrats escalated their confrontation with President Bush this week, with Majority Leader Harry Reid announcing that he has joined Senator Russ Feingold, one of the leading opponents of the war, in drafting legislation that would require a full troop pull out by March 31, 2008.

Reid promised a vote on the new proposal if President Bush vetoes the Iraq supplemental spending bill that cleared the Senate last week.

Joining the panel this week, Wall Street Journal columnist and editorial page deputy editor Dan Henninger, editorial features editor Rob Pollack and editorial board member Dorothy Rabinowitz.

Dan, we have the Harry Reid move, as I just said, and then Speaker Pelosi's trip to Damascus. What are they trying to accomplish here?

DAN HENNINGER, WSJ COLUMNIST & EDITORIAL PAGE DEPUTY EDITOR: I think they have a larger strategy in mind here. Let's set aside all of this foreign policy stuff for a moment. I think fundamentally what they are trying to achieve is a diminished executive, a weakened presidency. And I think they have a long-term strategy in mind.

They now control Congress. I think, if they get a diminished, weakened executive, it will allow them to do what they would like to do on the domestic side as well, on things like tax policy and on spending priorities, not only for the next 18 months. Keep in mind that Nancy Pelosi and Harry Reid don't intend to just being running Congress for another year and half. Then expect to run it for eight years. And that includes either has Democratic or Republican president. We are looking at Congressional government now.

GIGOT: Let me read you a quote here on that point, from Tom Lantos, who is the House Foreign Affairs Committee chairman. And he was on the Pelosi trip with the speaker. He said, "We have an alternative Democratic foreign policy. I view my job as beginning with restoring overseas credibility and respect for the United States," unquote.

That sounds like they are trying to run foreign policy from Congress. But you can't do that, can you?

ROB POLLOCK, WSJ EDITORIAL FEATURES EDITOR: That's essentially right. You don't even have to be a briefer in a strong executive to see something objectionable here. I mean, Congress itself passed a long time ago a law called the Logan Act, which essentially forbids exactly the kind of private diplomacy that Mr. Lantos and Speaker Pelosi were doing over there.

GIGOT: But we've never really enforced that, not for 200 years.

POLLOCK: No, it's never been enforced, no.

DOROTHY RABINOWITZ, WSJ EDITORIAL BOARD MEMBER: It's time.

(LAUGHTER)

But, you know, don't you see that this kind of thing shouldn't scant the ideological self hypnosis that's gone on all these years. These people are also saying what they gall themselves into believing.

Did you know when Nancy Pelosi was up there talking to a group of journalist in Riyadh, yesterday, she said, "Oh, I didn't criticize the kingdom over the lack of opportunity for women in politics." She said, "By the way, we have never had a speaker in the United States before this." She took the opportunity in short to criticize the United States government, not Riyadh.

GIGOT: Well now, Congressmen, women go overseas all the time on these fact-finding missions. And Republicans, let's face it, have gone to Damascus as well and met with Assad. Why is this different, this trip that she's making, any different than those trips.

HENNINGER: Because the role she was playing was more significant than the one they were. The president is the primary agent of foreign policy in the United States. She was going over there as an agent of our foreign policy, not merely somebody on a fact-finding truer.

This division of authority rolls all the way back to the Continental Congress in 1777, which tried to run the Revolutionary War. It was a fiasco.

They decided then that it would be better to have the executive in charge of negotiating with foreign powers. And, by and large, that's the way we have run foreign policy.

GIGOT: A lot of the Democrats are -- some people are comparing this to the 1990s dispute, on the other side, between Newt Gingrich and the Congress and Bill Clinton as the president. But Ron Emanuel, who's a leading Democrat said, "No, no, no. This is different. President Bush's approval ratings are down in the low 30s. And the war is very unpopular. So we're going to win this battle over time with the president of the United States."

Rob, how do you respond to that? Who do you think is going to win this battle?

POLLOCK: That's hard. I don't know. But it is interesting that you bring up the 1990s comparison, because, at that time, the Republicans essentially did stay back. They didn't object too loudly when Clinton went into...

GIGOT: On foreign policy.

POLLOCK: On foreign policy, yes.

GIGOT: Gingrich was asserting his power on domestic affairs, not foreign policy.

POLLOCK: Exactly. The Republicans conceded presidential authority on foreign policy, unlike what the Democrats are doing now.

GIGOT: Dorothy, who do you thinks going to win this political battle. Because if you look at it, the White House was on the offensive this week. The president clearly thinks that, in funding the troops, he has something of a rhetorical advantage, never mind his poll numbers.

And Dick Cheney went on the offensive against Nancy Pelosi and accused her of engaging in bad behavior.

Is this the path the White House may have to restoring some kind of credibility in foreign policy?

RABINOWITZ: Absolutely. It's then maintained their view, which I think is consistent with innards of Americans, which is you don't go abroad to make foreign policy. All of these truths about our experience and history, I think, in the end, will come to roost on the side of the Republicans.

HENNINGER: Well, and I also think that the American people themselves do not want a weakened executive. We are, in fact, living in a dangerous world. The Iranian crisis just displayed that.

And I think he was actually pretty bad timing for Speaker Pelosi to be over there talking to the Syrians at the time when the Iranians were proving to us we live in an extremely dangerous world, which needs a president to lead a country.

GIGOT: A point we made often during the Clinton presidency when it was very weak and the Republicans were attacking him on Kosovo. You do need a strong executive in this world.

RABINOWITZ: But your point is well taken. You need this countervailing strong voice from the White House pointing this out regularly. This combat is necessary from the White House now.

GIGOT: All right, thanks, Dorothy.

We'll be back after this short break. Still to come, Republican presidential frontrunner, Rudy Giuliani says his wife Judy would be welcome at his cabinet meetings. Is the country ready for another two-for-one presidency? Our panel weighs in when the "Journal Editorial Report" continues.

(COMMERCIAL BREAK)

GIGOT: Republican presidential candidate Rudy Giuliani is making headlines these days, but it may not always be a good thing. In addition to recent revelations that wife Judy has been married three times instead of two, the former New York City mayor raised some eyebrows last week when he told Barbara Walters his bride would be welcome to sit in on cabinet meetings.

What do you think of that? Smart move?

RABINOWITZ: His bride, his bride. Well, I'll think about what we all thought at the same time. We all cringed universally. And it was not nothing, because it reminded us of a lot of things about Rudy Giuliani, one of which, is his complete lack of ease with the press.

You don't have to answer a question like, "Will your wife sit in on cabinet meetings?" You can say, "We will see if I'm elected."

But the thing is, in his answer, it showed he has a characteristic tin ear. If she is interested -- as though Mrs. Giuliani could see a banquet before her, American policy, in which she will just go and pick and choose.

GIGOT: Tax cuts.

(LAUGHTER)

RABINOWITZ: When you have this kind of ear, it is very dangerous. And the fact that this was a lingering upset about her, doesn't add to the magic of this couple.

GIGOT: Does it reflect, Dan, something of a rookie mistake? He has never run for national office, where the scrutiny is so much greater even than it is -- even in New York, where it is pretty great -- but where everything is subject to scrutiny and, therefore, you have to be disciplined and focused.

HENNINGER: Yes, I think so. That's true of all the candidates. There is a left of rookies out there running. Even Hillary Clinton has never run in a big time, hard election.

And that argues for a long campaign. As much as I personally hate the long campaign, but we need to find out about these people.

And one thing we have to find out about Rudy Giuliani is the quality of his judgment. The guy has a distinctively adversarial personality. He's basically a prosecutor.

And I think one question you want to ask yourselves, are we electing a president or are we electing a guy who may be better off as attorney general?

GIGOT: Well, Fred Siegel, his biographer -- and an admiring biographer, who really does like Rudy, calls his personality operatic.

POLLOCK: Well, look, to be fair, the guy did get the bureaucracy of New York City to work. That's a pretty impressive achievement.

GIGOT: That's right. But what about running for president? That kind of achievement, he does have that. There is no question. But he also comes out of that New York political culture.

And we have already seen his ties to Bernard Kerik, the man he appointed police commissioner, come back into some front-page stories, because Rudy was briefed on his troubles, it turns out, even before he was named as police commissioner.

How much is this New York political culture going to become an issue in the presidential campaign?

HENNINGER: I think it is definitely going to become an issue. The New York political culture, like San Francisco's, is operatic. It is baroque. It's yeasty. People do weird things.

But I think what we're going to find out here is whether Rudy's ace, terror, is going to overwhelm all of these other subjects.

Right after 9/11, 71 percent of people thought we would we would be attacked again.

Late last near 67 percent said we would be targeted again.

So Rudy Giuliani, just this past week, goes on television and says, "I support the Patriot Act. I support electronic surveillance. I support aggressive interrogation of suspects -- everything the Democrats oppose. This is an issue that distinguishes him from the rest of the pack and...

GIGOT: But it doesn't distinguish him from the rest of the Republican pact, Dan. Most of the Republicans are for that.

What about this New York political issue? Is that going to be a liability or an asset for Rudy in the campaign?

RABINOWITZ: I think if it's right. I think Kerik is a very, very bad story. There is another Judy in his life. And that's the Judy who is the publisher -- Reagan, he an affair with in an apartment that is supposed to be for workers in 9/11. All of this stuff's going to come pouring out the way it came pouring out when he was nominated to be commissioner -- the Homeland Security Commissioner.

GIGOT: Of Homeland Security. It's secretary.

RABINOWITZ: But the point Dan raised is really crucial. Every time I see Giuliani rushing ahead in the polls, and I realize that the country has its eye on the main thing, which is the terrorist struggle.

The question is whether Rudy will be able, you know, to match up to the statue that this imposes upon him.

GIGOT: I think a lot of Republicans will also remember President Bush and then Governor Bush, running in 2000, where he didn't disclose early enough his DUI, driving under the influence. It came out right at the end of the campaign. And it almost cost him election.

And I think a lot of Republicans are saying, "Look, let's get it all on the table early." And any of the candidates have an obligation to get that out now in advance.

POLLOCK: I don't think run-of-the-mill New York scandal is going to hurt Rudy. I think that's been largely discounted by the public.

GIGOT: All right, thanks Rob.

We have to take one more break. When we come back, our "Hits and Misses" of the week.

(COMMERCIAL BREAK)

GIGOT: Winners and losers, picks and pans, "Hits and Misses," it's our way of calling attention to the best and the worst of the week.

Item 1, news of Barack Obama's robust fundraising figures elicits hits from two of our panel members, but for different reasons.

Dan, you're up first.

HENNINGER: Well, Barack raised $25 million in the first quarter, virtually matching Hillary Clinton's $26 million. This is great.

What it means is Barack's going to be able to compete with Hillary. And competition in politics is good. He'll go head-to-head with her. Some idea of what their thoughts are on policy are going to emerge because, up until now, Barack has been running as Casper the Friendly Ghost. Hillary's been running as the anointed.

We are electing a president. And I think, with this money, Barack can press her. And we'll get a better idea whether either one of them deserves to be president.

GIGOT: All right.

Rob, you have a different take on this story?

POLLOCK: Slightly different. I mean, my reaction is bye-bye campaign finance reform. I mean, look, you've got -- at least in so far as anybody actually thought this McCain-Feingold law was going to get money out of politics, you have got the first really open presidential contest since the law was passed. And you're got more money raised earlier by more candidates than ever before.

Look, that's fine. Money is an essential enabler of political speech. And the candidates are acknowledging that through their actions, if not through their words.

GIGOT: All right, Rob.

Finally, Rosie O'Donnell's rants may be good for ratings, but they're taking a toll on boss Barbara Walters' reputation -- Dorothy?

RABINOWITZ: Yes. Every time Rosie O'Donnell, queen of the political fever swamps, gets out there and issues another one of her psychopathic screeds against the U.S. government, it is another nail in the coffin of Barbara Walters's reputation.

This one is Barbara's baby. Rosie O'Donnell has got up there to say the United States, implicitly she says it, had something to do with a breakdown of Building 7. And she has called George Bush regularly a war criminal. And somehow in this political self hypnosis that all of these people have at ABC, and Barbara Walters, this is about the First Amendment.

You know, in Barbara Walters' world, in the world of that kind of journalism, you seize the moment. It is always everything of the moment. Get the buzz going. Get the ratings going.

Well, what a moment for this to end on in the twilight of a career.

GIGOT: Do you think she should be fired -- Rosie?

RABINOWITZ: Yes, of course, I think -- and I can say, not only should she be fired, but Oprah Winfrey, when she was caught with a guy called Fry, who completely one of the books she'd invested so much in, Oprah Winfrey had the guts to go on television and say, "You, get out of here."

(LAUGHTER)

GIGOT: You are saying Barbara Walters should do the same thing?

RABINOWITZ: Yes, absolutely. Well, not only that, but it showed guts on Oprah's part.

GIGOT: All right, Dorothy. We will see.

That's it for this edition of the "Journal Editorial Report." Send your e-mail to jer@foxnews.com. And visit us on the web at www.foxnews.com/journal.

Thanks to Dan Henninger, Rob Pollock and Dorothy Rabinowitz.

I'm Paul Gigot. Thanks to all of you for watching. We hope to see you right here next week.

Content and Programming Copyright 2007 FOX News Network, Inc. ALL RIGHTS RESERVED. Transcription Copyright 2007 Voxant, Inc. (www.voxant.com), which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon FOX News Network, Inc.'s and Voxant Inc.'s copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.