This is a rush transcript of "Special Report With Brit Hume" from October 8, 2007. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI, SPEAKER OF THE HOUSE OF REPRESENTATIVES: The American people support this overwhelming, and nearly two to one of Republicans support our initiative and oppose the president's veto. And editorially across the country there is almost unanimous support for it.

MIKE LEAVITT, HEALTH AND HUMAN SERVICES SECRETARY: We're not looking to help poor people who have insurance now, government insurance, we're looking for opportunities to help children who are poor and don't have any insurance at all to have private insurance.

(END VIDEO CLIP)

BRIT HUME, HOST: Well, that is a sense of the debate that is going on now in Washington over what is called the State Children's Health Insurance Program or for short S-chip.

Some thoughts on this controversy now Fred Barnes, executive editor of The Weekly Standard, Mort Kondracke, executive editor of Roll Call, and the syndicated columnist Charles Krauthammer, FOX News contributors all.

Well the president has vetoed the bill. At the moment it is probably fair to say there are not enough votes in the House and Senate to override it. The Democrats have postponed any vote to override by two weeks to give them time to round up support and put pressure on the Republicans, which they are doing.

So Mort, where are the equities in this proposition?

MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: Well, I think the equities are all on the side of expanding S-chip by the amount a bipartisan group in Congress wanted to do.

I think the administration has made both a policy blunder and a political blunder by vetoing this bill, but it is going to be sustained. The Republicans are digging in. Nancy Pelosi —

HUME: You think will be sustained?

KONDRACKE: Yes.

HUME: Two weeks of commercials running against these guys?

KONDRACKE: Everything I hear is that the Republicans are digging in. Nancy Pelosi says they need 14. So far there are two votes that have switched in favor.

One, incidentally, is one of Fred's heroes, Bobby Jindal, Republican Congressman from Louisiana. Incidentally, another of your heroes, Matt Blunt of Missouri, whose father is the House Republican whip fighting against this, is also in favor of the program.

HUME: Did he vote for it the first time or has he switched?

KONDRACKE: Matt Blunt is the Governor of Missouri, but he —

HUME: So he doesn't have a vote?

KONDRACKE: He doesn't have a vote.

HUME: Enough about him, Mort.

KONDRACKE: OK, look, 90 percent of the kids who will be benefited by this are under 200 percent of poverty, right, which is about —

HUME: $40,000.

KONDRACKE: $40,000 a year. They are the people for whom this was intended — 90 percent of them. What the administration is throwing around is the figure $83,000. There is one state that contemplated raising the amount to that level for New York, and it was rejected by the administration.

New Jersey, which has 350 percent of poverty, was permitted to do it by this administration. So the amount of disinformation that —

HUME: Is there a compromise available that would knock out the 10 percent that are way, way over the poverty line and get a bill?

KONDRACKE: I don't think so. I think what is going to happen —

HUME: Fred, let me let you talk here.

FRED BARNES, EXECUTIVE EDITOR, WEEKLY STANDARD: Au contraire, Mort. The president has said he would add to his bill to pay for any of these people under 200 percent of poverty to make sure that nobody who is on insurance loses their insurance. And the Democrats say no, they don't want to do it.

Look, Mort, why not cover — if it is only 10 percent that you're going to add over twice the poverty line, and the president's vetoing that bill, why not say OK, we will take out the 10 percent and we'll try to come up with something where we can find private insurance for them, and you could pass the bill if you just do it 20 percent poverty and under, which is kids that aren't even poor.

That is all the Democrats have to do. And the Republicans are blocking it for one reason — they don't want to have middle class welfare, which is what Mort demands.

HUME: We'll let Charles weigh in and you can rebut that.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: In Europe when you want to nationalize something, steel or rail or health care, you wake up in the morning and you nationalize it. Here you say "Oh, for the children."

So you start with Medicaid, which is a good idea. It pays for the health care of the poor children. And then the Republicans 10 years ago in Congress decide let's help the working poor, so we'll go to double the poverty line.

HUME: For children's health insurance.

KRAUTHAMMER: For children's health insurance, you go —

HUME: So these are people —

KRAUTHAMMER: Beyond availability. They can't get Medicaid.

HUME: They are too well off for Medicaid.

KRAUTHAMMER: They are too rich for Medicaid.

HUME: But they are still working poor people.

KRAUTHAMMER: And that is why the Republican Congress voted on it. This extension would go from 200 percent of poverty to 300 percent, which is $62,000 a year nationally.

The median income is $48,000, and for a family of four it is somewhere in the mid 50's, which means you now have a program designed to subsidize the health insurance of people you know are in the top half of earners in America.

Now that is nationalizing health care. If you want to do that, let's have an honest debate and do it. If you are talking about poor kids, let's cover all of those under the 200 percent mark.

HUME: Mort, you're up.

KONDRACKE: Nationalizing health care — the health insurance industry, which is utterly against any single-payer plan or anything like that is in favor of this bill, and so are the pharmaceutical companies —

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: Mort, those are lobbyists.

KONDRACKE: Just a minute. I am not talking about lobbyists, I am talking about the health insurance industry.

BARNES: Defend the program.

KONDRACKE: I will defend the program. The initial program that is being reauthorized now had no limit. It wasn't 200 percent, it wasn't limited to 200 percent. How do you think the states got up to 300 percent and 350 —

HUME: They had to get waivers.

KONDRACKE: They had to get waivers, and they got waivers —

HUME: It was limited, but they had to have waivers.

KONDRACKE: And who gave them the waivers? The Bush administration. They thought it was good policy to do this. Now, suddenly —

HUME: Aren't they saying it was on an experimental basis?

KONDRACKE: What George Bush is trying to do now is to get good with the conservative base by starting to veto bills. He never vetoed a farm bill, he never vetoed —

BARNES: Mort hasn't heard — George Bush is not running again. He doesn't have to get good can conservatives.

They think mistakes were made mainly by the former secretary of Health and Human Services in giving the waivers.

HUME: Last question — who wins politically on this? It sure looks like the Democrats win.

BARNES: They are now. But I bet if you ask people in a poll, and when you say are you in favor of more health insurance for children, people say yes. Are you in favor of extending free government insurance into the middle class, giving it to kids who are already on private insurance? I think most people would say no. And that is what this bill does.

KONDRACKE: Nancy Pelosi is exactly right. There is a poll by Fabrizio and McLaughlin, a Republican polling firm — two to one Republicans favor the bill.

BARNES: Have you read the question? What does it say?

HUME: Hold it — let Charles have the say here.

KRAUTHAMMER: The Republicans are going to get slaughtered on this. It is a bad idea —

HUME: Charles you under estimate your own influence.

KRAUTHAMMER: but the demagoguery here is unlimited.

HUME: When we come back the top U.S. commander in Iraq has a serious allegation against a key Iranian diplomat. More on that next.

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MAJ. GEN. ROBERT SCALES (RET), FOX NEWS MILITARY ANALYST: Petraeus is also raising the Iranian involvement in Iraq very publicly because he wants to send a message to the Iranian leadership. He is saying very simply I know who you are, I know what you're about, I have the evidence, and I'm going it make the rest of the world aware of what you're doing.

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HUME: So what is General Scales talking about from General Petraeus? What General Petraeus has said over the weekend was that the Iranian ambassador to Iraq now is a member of the Al-Quds force, which is part of the Iranian Revolutionary Guard. These are not friends of America, and these are certainly not diplomats.

So what about this — Fred?

BARNES: The more Petraeus says about this, and the more President Bush says about this, the more they head toward actually doing something about it. So far they haven't.

HUME: Doing something about what?

BARNES: Doing something about the Iranians, the weapons they are sending, all the things that Petraeus talked about — the training of the troops, the training of Iraqi terrorists, the arming of them, the sending of the IEDs, and so on, the weapons.

I think the figure, I'm not sure, but Petraeus has used it, but of the American casualties, 75 percent of them are affected someway by something the Iranians did, mainly the weapons that they send in the there. You can't just keep complaining about this and not do anything about it, if the Iranians are playing as big a roll as it looks like they are.

And I want to add one more thing — while the British are taking about 2,500 of their 5,000 troops, Gordon Brown, according to the Sunday Telegraph, anyway, has agreed to air strike on the Iranians if there is another incident or something that would warrant that, and it wouldn't take much.

KONDRACKE: The question is what are we going to do? We doing stuff. We have arrested Iranian so-called diplomats who are Al-Quds members. We are clearly trying to resist the aid that they are giving to various militias.

Somebody has gotten Muqtada al-Sadr to pull his troops out of combat, his militia, so that what the groups that the Iranians are aiding are renegade Shiite militiamen in the south. But they are doing a lot of damage, and they are sending in a lot of stuff.

The question is, Sy Hersh had an article in last week's New Yorker, saying that planning is afoot for air strikes inside Iran, and maybe Special Forces —

HUME: Do you believe it? There is always planning —

KONDRACKE: Planning? Of course there is planning underway. The question is whether they will pull the trigger.

Mowaffaq al-Rubaie, who was the National Security Advisor to every president of Iraq that we have had so far, every leader of Iraq, including Maliki, now — I asked him would you favor such a raid, and he said a big fat no because the response of the Iranians inside of Iraq would cause too much trouble.

KRAUTHAMMER: I think Petraeus is preparing the ground psychologically six months down the road. Right now —

HUME: For?

KRAUTHAMMER: For a change in the focus of the American effort.

Right now he is having remarkable success against one of our two enemies, the Sunni extremists, meaning al-Qaeda, by enlisting the tribes in Anbar, which a Sunni area, and also in mixed areas like in Diyala.

Assuming that this continues, by the end of the surge, by the spring of next year, and the Sunni insurgency is essentially controlled, then the American war machine, the turrets swings over against the other enemy, which is the Shiite extremists.

HUME: Backed by Iran.

KRAUTHAMMER: Backed by Iran. It looks as if the scales indicate conducted and controlled by Iran, which is even a more dangerous issue. It becomes a question of if we are going to have success in the end of the war, and you addressed one enemy, how do you address the other?

Ultimately it will require action against the Shiite extremists and it will require action against their Iranian patriots.

HUME: And you think it is coming?

KRAUTHAMMER: I think had it will come in the spring.

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