This is a rush transcript from "The Beltway Boys", September 22, 2007, that has been edited for clarity.

FRED BARNES, FOX CO-HOST: Coming up on "The Beltway Boys", is the country headed for a recession? President Bush and Fed Chairman Bernanke try to calm a jittery public.

MORT KONDRACKE, FOX CO-HOST: Elizabeth Edwards accuses Hillary Clinton of stealing her husband's health care plan.

BARNES: Senate Democrats fail once to attach firm deadlines for getting troops out of Iraq.

KONDRACKE: And Jesse Jackson and Barack Obama tussle over race and the Jena Six controversy.

BARNES: "The Beltway Boys" are next, after the headlines.

(NEWSBREAK)

BARNES: I'm Fred Barnes.

KONDRACKE: I'm Mort Kondracke. We're "The Beltway Boys". The hot story, first top story of the week is the R-word, recession. And the danger seems to have been substantially abated this week by a Federal Reserve decision to cut interest rates by a half percent. Some thought it would be a quarter percent.

Here's President Bush discussing the possibility of recession at his press conference and Fed Chairman Ben Bernanke testifying before Congress. Watch.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: There's no question that there is unsettling times in the housing market and credits associated with the housing market. I'm optimistic about our economy. I would be pessimistic if the Congress has its way and raises taxes.

BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE: Our objective is to try to meet Congress's dual mandate of maximum sustainable employment and price stability. And we took that action with that intention. There's quite a bit of uncertainty, so we'll have to continue to monitor how the financial markets evolved and how their effects on the economy evolve and try to keep reassessing our outlook and readjusting policy in order to try to meet that dual mandate.

(END VIDEO CLIP)

KONDRACKE: Well, Bush...

BARNES: And that was in English. Unlike Alan Greenspan.

KONDRACKE: He said he might lower rate some more if necessary.

Bush is right. The fundamentals of the economy are good. Economic growth is not robust, it's 2 percent. But the economy is growing. Inflation and unemployment are low. The danger was that the subprime collapse, mortgage collapse and the credit crunch that ensued and the lowering of housing values would undercut the fundamentals and produce what you might call the panic of 2007.

So in steps, the Fed to reassure everybody, provide liquidity and promise more attention paid. Even your hero Alan Greenspan is saying the chances of a recession remain at somewhat greater than one in three. I say fine. That's a lot better than two in three or three in three.

BARNES: Alan Greenspan should not be doing odds making.

KONDRACKE: He's selling a book.

BARNES: But his opinions are taken so seriously by financial markets, that he ought to pipe down on that.

The biggest threat to the economy is not the subprime problem, which we are getting though, it's what President Bush touched on, tax increases. You know what fueled the economy in the first place after the stock bubble burst, a stock bubble that was partly -- for which Alan Greenspan was partly responsible, at least -- what fueled the economic recovery were the tax cuts of President Bush. In particular, the lowering to 15 percent the rates on capital gains and dividends.

Mort, your heroes, the Democrats, all want to increase taxes, get rid of the Bush tax cuts, but particularly those two, the 15 percent rate on capital gains. Hillary Clinton wants to get rid of them. Barack Obama wants to raise taxes on those two things. I'm sure John Edwards does. The more immediate concern, so does Charlie Rangel.

If they succeed, it would be horrible for the economy. The good news is, President Bush won't allow a tax increase to get through, but I worry about the next president.

KONDRACKE: The Democrats do believe that wages and capital should be taxed at the same rate. And I disagree. I mean, I basically agree with the Republican position that if people are going to take risks with their money, they ought to be rewarded more.

In 2001, as this recession was coming, or we were in it, almost everybody agreed, as Alan Greenspan said, that a tax cut is necessary. The problem is that the Bush tax cut was wretched excess. And we've had deficits and long-term deficit bigger than the short-term deficits. And we need things. We need more education spending, health care spending, we need border security. We need defense. Lord knows, we're in the middle of a war. And we've got to pay for it somehow. So there needs to be some tax increases. If it were up to me, I would increase inheritance taxes. I would not increase capital gains taxes.

BARNES: They'll be eliminated pretty soon -- in many states anyway.

KONDRACKE: Exactly, wrongfully.

BARNES: Well, I'm for it because it's the right thing to do.

The Democrats don't care about equalizing taxes on capital and labor. They want to raise more money to spend. That's all they want. They want to spend more money.

Bush's tax cuts were not excessive at all. They dealt with the huge problem of recession.

Remember what Greenspan complained about, as he's flacking his book. What he complained about is that spending was increased too much and the president didn't veto enough. And he's absolutely right about that.

Here's my point: before you go and spend a whole lot more money, why not look at the current spending and see if you can cut spending there. Why is your impulse, Mort, yours and Democrats, always to raise taxes first?

KONDRACKE: I say peel back some of the foreign subsidies that President Bush signed, okay?

BARNES: I'm all for that. And who wrote the bill? Tom Daschle wrote the bill.

KONDRACKE: Okay. Coming up, Jesse Jackson has some choice words for Barack Obama.

But first, Hillary Clinton takes another shot at health care reform. We'll tell you if she's learned from her past mistakes. Top story number two is straight ahead.

(COMMERCIAL BREAK)

BARNES: Welcome back to "The Beltway Boys". Hot story number two, the H-word. Not health care -- well sort of -- it's Hillary, Senator Hillary Clinton, wife of former President Clinton.

In any case, she announced her news health care plan a couple days ago, making the point it's vastly different from her health care plan she drafted back in 1993 when her husband was president.

Well, it's a little bit different. It's not fundamental change. It involves government more in the whole health care system.

KONDRACKE: You mean less?

BARNES: Please, Mort, you haven't read the plan. There are a lot of blank spaces.

KONDRACKE: Less than '93.

BARNES: But more than now.

KONDRACKE: Yeah.

BARNES: Okay, good. We're on the same wave length. Anyway, here's Hillary. Listen to her.

(BEGIN VIDEO CLIP)

SEN. HILLARY CLINTON, (D), PRESIDENTIAL CANDIDATE: I know my Republican opponents will try to equate health care for all Americans with government-run health care. Well, don't let them fool us again.

(END VIDEO CLIP)

BARNES: She ought to watch out with that whiney tone, it's not very appealing. I have a three-part test for people's health care plans. Does it make it more accessible? Does it make, in some way, health insurance and health care more accessible? Does it, in some reasonable way, restrain health care costs, which have been spiraling upward? And does it provide - - and does it maximize the choice for patients? She fails on two and three. There are no health controls and doesn't maximize choice. But it does make health insurance accessible to everybody by federal mandate.

Nonetheless, despite her past, she has a lot of credibility on health care with the public, to my surprise. When asked if Clinton's prior experience with health care reform helped or hurt her, 66 percent thinks it helps her. Are you in that group, Mort?

KONDRACKE: I am, actually.

BARNES: I thought so. That number jumps to 77 percent among Democratic primary voters.

KONDRACKE: This will help lower health care costs insofar as it's a mandate that covers everybody, including young single people who think they're now going without health insurance. You put them in the pool and it lowers the average cost of health care.

(CROSSTALK)

KONDRACKE: And secondly, there are a lot of choices available under her plan, a lot more choices than there were in 1993. The worry would be that one of her choices is a Medicare-style plan that you can buy into. Depending on how the plan is written, you could have everybody flooding toward there and then you would be heading toward government-run insurance.

But the fundamental problem is that we have 47 million people who have no health insurance, up from 38 million when President Bush took office. We have almost 39 million uninsured children, and the employer-based system is collapsing. And it's throwing people off of health insurance.

(CROSSTALK)

KONDRACKE: Wait a minute. And it's throwing people off of health insurance.

Wait a minute. And President Bush has been in office for almost seven years and has done nothing to make any kind of substantial debt in that problem. Meanwhile, costs are rising and he hasn't done anything about that either.

I think in a massive act of political stupidity, he is going to veto the SCHIP, children's health care expansion that would provide health insurance to more poor children.

Watch him at the press conference.

(BEGIN VIDEO CLIP)

BUSH: Their vision is expanding the eligibility so that people making up to 80 will be eligible for this program. I believe this is a step towards federalization of health care. I know that their proposal is beyond the scope of the program. And that's why I'm going to veto the bill.

(END VIDEO CLIP)

KONDRACKE: There are very few children around the country who are in the $83,000 bracket that are going to get SCHIP. There are people in a few states, and they were allowed to be in the program because the Bush administration allowed them to be there. His proposal, $5 million over five years.

BARNES: Billion.

KONDRACKE: $5 billion over five years, would now cover fewer children than are now covered. In fact, like 1.4 million less children will be covered under his proposal than are even now. And you know, he had in his budgets, a $2 million program in past years to expand coverage of kids under 200 percent of poverty who are not enrolled. It's not even in the budget anymore.

(CROSSTALK)

BARNES: More, under 200 percent of poverty, do you know what that means. It means they're poor. If they're over 200 percent of poverty, that means they're not poor. 200 percent is roughly where the median household family income is in the United States. And so above that, most of those children, the vast majority, are only covered by private health insurance. So what the proposal would do is lure them away from private health insurance, and put them on government health insurance.

One more thing. Did you note that comment made by Elizabeth Edwards, wife of John Edwards, the presidential candidate? She's acting out again, acting tougher than her husband, as usual.

This is what she said. "We would have expected her," -- meaning Hillary -- "to be the first one out of the box, not the last one out of the box with a health care plan. And then for her to come up with one that looks like John's, it's almost as if she hasn't been willing to have the courage independently to be a leader on these things."

Do you like that?

KONDRACKE: Why is he standing behind his wife? Why doesn't he say things like that, if that's what he thinks?

BARNES: There's a good answer there, but I'm not going to give it to you on national television.

Coming up: Coming up, race and the Jena Six controversies.

And Iran's president is coming to America. He may not be welcome at Ground Zero, but Columbia University is laying out the red carpet. More on that, next.

(COMMERCIAL BREAK)

KONDRACKE: Welcome back to "The Beltway Boys". It's time for the "Ups and Downs" for the week.

Down, Senate Majority Leader Harry Reid. One day after meeting with members of the anti-war left, Reid went back and forth on whether to compromise with Republicans on Iraq. Well, right now, he's in the position of deciding that they're going to try again to compromise and find some language that they can attract ten Republicans, which is what they need to do, get to 60 votes in the Senate in order to pass a restriction on Bush's running room on Iraq.

There are two big problems for the Democrats. One is, General Petraeus came back and reported success on the ground and also a promise that there would be a change in mission in Iraq, which bolsters Republicans in their willingness to stay with President Bush. And also, you had the left, moveon.org, attacking Petraeus and offending the Republicans and binding them even more.

The second big problem for Republicans is that the left keeps telling Democrats, don't vote for anything that is weak enough in their mind to attraction Republican votes. So you have Chris Dodd who won't vote for anything except a fund cutoff.

So it's not happening. They're not able to attract Republicans, and the more the Democrats are unable to, quote, unquote, "stop the war," the madder the far left get at the Democrats.

BARNES: The other problem is there are ten Republicans who don't want to join them on much of anything. They lost Republicans on the proposal about Senator Jim Webb, which would have been affected the tour of duty in Iraq.

President Bush was very tough in his press conference on Thursday on moveon.org saying that General Petraeus was betraying us. Watch.

(BEGIN VIDEO CLIP)

BUSH: Most Democrats are afraid of irritating a left wing group like moveon.org or more afraid of irritating them than they are of irritating the United States military.

(END VIDEO CLIP)

BARNES: I thought the whole flap over the moveon.org ad was going to fade away. And certainly the press and Democrats are happy to have it happened, but Republicans have been effective in keeping it alive now for a week and a half or something like that. I've been amazed. And you have the Cornyn resolution, John Cornyn of Texas. He came along with his resolution to condemn moveon.org. All the Republicans voted for it. It split the Democrats, 72-25 in favor of it. Senator Hillary Clinton voted no. I think Chris Dodd voted no. Obama ducked the vote.

I think John Edwards didn't get to vote since he's no longer in the Senate.

KONDRACKE: I think it's very damaging to Democrats and to Hillary.

BARNES: I think MoveOn could become an albatross for Democrats. It's not yet, but there's a slippery slope there.

Down, Jesse Jackson. He's had to backtrack after a South Carolina newspaper quoted him accusing Barack Obama of acting white, for not acting boldly enough in the Jena Six case.

Mort, I think there's political jealousy here. Obama is the first African-American to have a real chance of winning the nomination and also the presidency. And why he is able to do that? Because he thrills white liberals, many of them.

And Jesse Jackson, on the other hand, can only attract voters in the African-American community. I mean, Obama does there, too, but goes beyond that, and Jackson is envious.

KONDRACKE: This Jena Six is the mirror of Lacrosse case where you had white kids with wealthy parents and good lawyers -- were able to overcome prosecutorial excess.

BARNES: They were also innocent.

KONDRACKE: Of course. In this case, you've got prosecutorial excess. A charge of murder as an adult against these kids that would have put them away for 15 to 20 years.

But the fact is that the authorities in Louisiana seem to have tempered the charges. One of them got thrown out of court and another one reduced. So Jesse Jackson and Al Sharpton had to go in and make a federal case out of it because that's what they do.

Down, Mahmoud Ahmadinejad. Forget his name sometimes. New York City rejected his request to visit Ground Zero when he comes to the U.S. next week to speak to the United Nations. But Columbia University is welcoming him with open arms.

Well, I think it's entirely appropriate. Wait -- it's a propaganda visit to Ground Zero, but a university is a perfectly good place for somebody to make a speech and then, I hope, get grilled about his extremism and anti-Semitism by the students and faculty.

BARNES: I'm amazed at your naiveté here. They don't allow just anybody. They don't allow ROTC on campus, but they do allow Mahmoud Ahmadinejad. Here's a guy -- it's not just his believes that are the reason for denying him, it's his actions. His actions are killing Americans right now. And to have him on that campus as an honored guest when you're discussing issues like did the holocaust exist? Is that an issue to be discussed?

KONDRACKE: Grill him. Let him speak.

BARNES: Please.

"The Buzz" is up next, don't move a muscle.

(COMMERCIAL BREAK)

BARNES: Here's "The Buzz." Watch this, Mort.

(BEGIN VIDEO CLIP)

BUSH: I think I've got a "B" in Econ 101 and an "A" in keeping taxes low.

(END VIDEO CLIP)

BARNES: That was my favorite line. The Bush conference on Thursday. And do you know why? It makes all the liberals and the Washington establishment and all those people who want to raise taxes absolutely furious.

KONDRACKE: In my continuing campaign to encourage bipartisanship in Congress, I want to point out that overwhelmingly both houses passed a Federal Food and Drug Administration reauthorization that expands drug coverage, makes it faster and also creates alternatives when a medicine has bad effects on some people.

BARNES: That's all for "The Beltway Boys". Join us next week when the boys will be back in town.

Watch "The Beltway Boys" Saturday at 6 p.m. ET and Sunday at 1 and 6 a.m. ET

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