This is a rush transcript of "Special Report With Brit Hume" from August 20, 2007. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

SEN CARL LEVIN, D-MICH., CHAIRMAN OF THE SENATE ARMED SERVICES COMMITTEE: For the Iraqi army, it has gained in strength and confidence and capability. At the present time, 10 of the 12 Iraqi divisions that they need have been trained. And by the end of this year, they will have trained over 11 of the 12 needed divisions.

(END VIDEO CLIP)

BRIT HUME, HOST: That remarkably positive assessment of the progress by the Iraqis in getting stronger comes from none other than the Chairman of the Senate Armed Services Committee, who, with his ranking member, Republican Senator Warner of Virginia, has just been to Iraq.

They came back and put out a short written statement today in which they described "tangible results in making several areas of the capital more secure" — this is from the U.S. troop surge, and also spoke of continuing positive results in al-Anbar Province.

It should be noted, however, that neither man spoke of much confidence about Nouri al-Maliki, the Iraqi Prime Minister, and it should be noted that Levin said that he hoped that the Iraqi parliament would throw him out.

So some thoughts on all this now from Fred Barnes, Executive Editor of The Weekly Standard, Juan Williams, Senior Correspondent of National Public Radio, and the syndicated columnist Charles Krauthammer, FOX News contributors all.

Well, we heard if first from think tank sources, we've been hearing it from some Republicans and from some generals. How much does it add to the sum of our knowledge into the weight of this news that is now coming from these two gentlemen?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, if you get it coming from the mouth of Senator Levin, who's a Democrat, has been a real critic of the war, it's very important. It shows that the perceptions here are beginning to catch up with the realities on the ground. The realities on the ground is that there has been a change. The surge has had some success.

Levin is right about the Maliki government, and I would agree with him that it would be good if the assembly would change the government — perhaps, either by rearranging it and having a new coalition, or by having new elections.

However, I think he's wrong, because he concludes after all of these positive steps that, nonetheless, we ought to think of withdrawing, because of the failure of the government in Baghdad.

It's mistaking ends and means. The reason that we want reconciliation out of the government in Baghdad is as a way to tamp down the Sunni insurgency and to defeat Al Qaeda.

But that is happening in the absence of any steps of conciliation out of the government. It's happening on the ground in the provinces with us working with the tribal leaders. So you don't want to conclude that because we're achieving this by other means that we ought to give up and withdraw.

HUME: Juan?

JUAN WILLIAMS, SENIOR CORRESPONDENT, NATIONAL PUBLIC RADIO: Well, you've got 162,000 Americans on the ground, Charles, and the military is stretched to the breaking point. So the option is, as you're describing it, well, we could put more people on the ground, and we could do an even better job, because the surge is having, apparently, some success, even by the gauge of an outright critic in Carl Levin. So let's take that at his word.

But then, looking forward, if you can't increase the size of this, and you can't even maintain the size of it beyond next Spring, then you have to start thinking, as I think news reports today suggested, about how we go about pulling down those forces, how we go about moving out into a more secure position that would allow and put pressure on al-Maliki to arrange some kind of a negotiation, political settlement among the divisions within Iraq.

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: You know, Juan, what you're describing is what the plan was all long. This is a surge. This is not a years-long strategy to have these extra troops there.

And General Petraeus and others have talked about — we may be able to begin soon, in the next few months, withdrawing some of some American troops from the areas in the city of Baghdad and around Baghdad, where the Iraqi troops can hold it well enough on their own.

Look, I think Carl Levin's statements are extraordinarily important, because he's such an important Democrat. He's the Chairman of the Armed Services Committee. I would say on military issues, he may be the single most important Democrat. He's smart, respected. And so his kind words about the surge, I think, are very important.

But we see now great division among Democrats. We see people like Carl Levin and Brian Baird, the liberal Congressman from the state of Washington, is saying some of the same things as those two guys from The Brookings Institution, Mike O'Hanlon and Ken Pollack did when they went there, that progress is being made in Iraq. They worry about the political side. OK, that's one group. Then there's another group that says the war's lost. That's Harry Reid, the Senate Majority Leader. That's even Senator Hillary Clinton, who says, well, the surge may be making some progress, but it's too late. It can't really be successful.

And so what I think this means is the surge is going to continue easily to the end of the year, and into next year. And it's going to have a chance to succeed.

I can't imagine Republicans being anything but unified if there is strong testimony by General Petraeus next month saying that we're making serious progress there.

HUME: Will the president be in a stronger position politically in dealing with Congress on the war, at least for a time, after this Petraeus report in your judgment, Juan?

WILLIAMS: It depends on what General Petraeus has to say. But I think General Petraeus will reflect what we've just heard from Carl Levin, that things look a little better right now on the ground.

But once he says that…

HUME: Does that buy the president some time to the next year?

WILLIAMS: I don't think so. Fred was talking about divisions among Democrats. I see divisions among Republicans, not in a way they've voted so far, but they've been home, and I don't see any change in terms of the American public's perception. The American public says it's time to get out.

KRAUTHAMMER: I disagree. In July, people assumed there would be a collapse of Republican support on the war. What's changed on the ground has affected that. That collapse is not going to happen, and divisions are going to happen on the Democratic side.

HUME: When we come back, Karl Rove has some sharp things to say about Hillary Clinton. She responds by saying Rove is obsessed with her. We'll look at all of that in a moment.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

KARL ROVE, WHITE HOUSE DEPUTY CHIEF OF STAFF: And the fact is, she is known. People know her. She's been around for 16 years. It's really hard, once you jump up on to the stage, and have been on the stage that long to do much to change people's attitudes about you.

And she's going in with more people having an unfavorable opinion than having a favorable opinion.

SEN HILLARY CLINTON, D-N.Y.: Well, I don't think Karl Rove's going to endorse me. That becomes more and more obvious. But I find it interesting he's so obsessed with me. And I think the reason is because we know how to win.

(END VIDEO CLIP)

HUME: Well, there you go, a little exchange between a prominent political figures Rove, who's on his way to a different life, and Hillary Clinton, who hopes to be on her way to a different life in the White House.

What about this little dust-up? And what about, also, Rove's point about her, which is her negatives, he says — that is to say, whatever people say who support her, however many of them there are, there's a very large cohort of the American public, according to opinion polls, who think ill of her? What is the political meaning of that?

BARNES: Well, by the way, that was a good response by Hillary.

HUME: Yes.

BARNES: The crowd chuckled, that was good.

HUME: It was smart.

HUME: On the other hand, what Karl Rove said was exactly correct. If you've seen the latest gallop poll, it shows 49 percent of Americans have an unfavorable opinion, and 47 percent have a favorable opinion.

There have been polls that have shown as high as 52 percent say they'll never vote for her. That's a majority, by the way. If I were a Republican, I wouldn't base my campaign on that poll. But the truth is, she's a very, very polarizing figure, and she has been around a long time. That means it is harder to her change her image.

And the truth is I don't really think Karl's obsessed with her, but he certainly gets asked about her a lot, and he is ready to answer.

Now, I don't know whether he thinks that Obama would be a stronger general election candidate, but I suspect he does, and I agree.

WILLIAMS: Well, what's interesting to me...

HUME: What about that proposition, Juan, about Hillary being the Republican' nominee of choice for the Democrats? What do you think? Do you think that's baloney, or do you think that's real?

WILLIAMS: Well, I think that's real. I get that sense.

I get the sense that lots of — there's fear and loathing in either direction. But I get there are a lot of people who think she comes with so much baggage, and the playing field, the landscape right now, according to the polls, is so favorable towards the Democrats that they're looking for somebody who has baggage, somebody who has negatives that they have to drag in, and then you can attack the negatives.

And so Hillary has those negatives, apparently. But, let me just say this, I have for the longest time thought the negatives, the baggage, had to do with Bill Clinton.

And when you look at the numbers, they don't. They have so do with her. They have to do with the fact that people say that she's cold, that they think she is calculating, and over-weaning in his political ambition, and that she is going to have to, somehow, reinvent the way that she presents herself to the American people.

I must say that when people get to know her, or have face-to-face interaction, I think she does much better. But Hillary Clinton standing in a debate, Hillary Clinton standing in public to make a speech, or on a TV show, apparently does not come across as a warm, welcoming figure.

KRAUTHAMMER: What's interesting is we have another figure in our recent history who was also seen as old and calculating, who was probably the least liked, personally liked of presidents in the last 80 years. Also somebody who had baggage of 16 years, eight years in the White House, eight years out of the White House — Nixon in 1968.

And he had all the baggage. He was not exactly the guy you'd want to have a beer with, and he won the presidency. So it's not an insurmountable obstacle.

I think it's interesting how Democrats are interpreting the Rove opinion about her. Since they assume everything about Bush and rove is evil, cynical, and twisted, they're assuming he believes the opposite, thinks of her as the strongest of candidates, and thus Democrats ought to support her, which interestingly ends up with Democrats doing exactly what Rove had intended, but not because of his cunning, but because of their stupidity.

WILLIAMS: But the question is why Rove decided that, given his moment in the sun as he's leaving, that he's going to say something about Hillary Clinton?

BARNES: Because he believes—

(CROSSTALK)

WILLIAMS: Yes, I know, but he volunteered.

No, no, when he was leaving, when he was talk to Paul Gigot, he was volunteering this stuff.

BARNES: I don't think so. I think Paul asked him that. He said she was fatally flawed.

I don't think she's fatally flawed, I think she's just flawed.

But, in any case, Karl — look, he gets asked about it, and he is ready to answer. There's no question about that. He knows what he wants to say.

WILLIAMS: Well, it sounds to me a little bit like what Brit was saying—maybe he would prefer that Hillary be the candidate for the Democrats.

BARNES: Yes, I think he probably would. But I'm guessing. He hasn't told me that.

KRAUTHAMMER: But he essentially said that in saying that she was a flawed candidate with baggage. And it's going to be a Democratic year — you'd want to have an opponent who's like that.

WILLIAMS: But it helps Senator Obama, don't you think?

KRAUTHAMMER: Sure.

HUME: That's it for the panel.

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