This is a rush transcript of "Special Report With Brit Hume" from October 17, 2007. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

REP. JOHN MURTHA, D-PA.: We need every ally we can get. They are important to our effort in Iraq. We have 160,000 troops in Iraq. This is important to the U.S. and Iraq, period.

(END VIDEO CLIP)

BRIT HUME, HOST: Well, that was Jack Murtha, famed ally and supporter of Nancy Pelosi. But in this issue he is resisting what the leadership wants to do. And what the leadership wants to do it is bring to the floor for action a measure that declares that the Turkish slaughter, the Ottoman Turks slaughter of a large number of Armenians a century ago during World War I was genocide.

The Turks are very sensitive about it and have resisted it. And the U.S. administration, and not the first administration, does not want it passed because the Turks, for example, when in past committee, have already recalled their ambassador for consultations.

This is not the only measure that the Democrats are working on with foreign policy implications. The other concerns the FISA, which is the court that — the law governing the authorization for surveillance of terrorists overseas.

There's a provision in that measure which basically says that you can surveil all the foreign terrorists overseas you want to without a warrant, but if one of them calls into the U.S. and starts talking to an American, you have to go get a warrant.

So let's talk about this, panel. First Fred Barnes, executive editor for The Weekly Standard, Mara Liasson, national political correspondent for National Public Radio, and Mort Kondracke, executive editor for Roll Call — FOX News contributors all.

Well, where does, first, this Armenian genocide matter stand, Mort?

MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: Enough Democrats, 40 of them, I believe, have come to their senses on the Armenian resolution, that this would undercut U.S. policy in Iraq, that the Turks might not allow us to use their facilities to transit supplies that our troops need in Iraq.

And this Armenian resolution is mischievous, and they are just not going to vote for it. So it looks as though —

HUME: This looks like an embarrassing defeat for the leadership. Steny Hoyer on Fox News Sunday, I was sitting in for Chris, he said unequivocally this is going to be brought to the floor.

MARA LIASSON, NATIONAL POLITICAL CORRESPONDENT, NATIONAL PUBLIC RADIO: Well, that's not the way they are talking now.

You said that the leadership wants to bring this to the floor. I would say they wanted to bring it to the floor, and today I am not sure if they still want to. Nancy Pelosi has said she is not sure now what is going to happen.

So I think what is happening is, as Mort said, cosponsors are dropping like flies, and people are reconsidering the timing of this. Everyone says it is a genocide, we would like to call it that, but this is a crucial time for an important ally —

HUME: Would you say based on what has happened that this thing is probably dead?

LIASSON: Yes.

HUME: All right. Now, let's talk about the other measure, which is the reauthorization of the FISA authority for eavesdropping by our intelligence agencies as part of the war on terror.

It appeared up until this afternoon that the votes were there to pass this with what the administration says is this unacceptable restriction, that you have to get a warrant in case anytime a terrorist that your surveiling without a warrant because it is overseas, calls into the U.S. and starts talking to someone in America. Where does that stand?

FRED BARNES, EXECUTIVE EDITOR, WEEKLY STANDARD: If that were part of the law, it would mean that you would just have to target and get a warrant for those terrorists overseas in the beginning because you would not know when they're calling the U.S. or not. You just have to assume they might and so you would need a warrant.

And this would be the first time this had happened in the 30 years of FISA. And the reason it ran into trouble was there might have been a lot of Democrats ready to vote for that.

On the other hand, all Republicans, and some Democrats as well, are ready to vote for a motion to recommit, which would send the bill back.

HUME: What is that?

BARNES: A motion to recommit — it means it does not go back for committee hearings, it means it goes back to work out to get the parts that are objectionable out of it.

HUME: Basically, a motion to recommit is nothing but a motion to rewrite the bill right then and there and bring it to a vote afterwards.

And a motion to recommit would have done what?

BARNES: It would send it to go back to negotiations, and they would have stripped out exactly the provision we were talking about, which would make the U.S. get a warrant to electronically surveil terrorists overseas.

And, of course, the president wants to put in it, this immunity from lawsuits against the telecom firms that have helped out in doing this surveillance.

I want to say one other thing about the Armenian bill. In 2000 President Clinton called Denny Hastert, then the House speaker, and asked him not to put a similar Armenian bill on the floor and vote for because it would harm relations with Turkey, and he agreed.

HUME: Hastert agreed.

BARNES: Hastert agreed. The responsible thing for House Speaker Pelosi to do would have been, after she got a call from President Bush on Monday, after saying on television she hadn't heard from him, that he called, would be to say OK, we're not going to bring this bill up.

This time, in 2007, the national security repercussions from passing this Armenian resolution are a lot worse than they were in 2000.

HUME: But everybody seems to agree that measure is dead.

KONDRACKE: Right. There is a difference here that you have a huge number of Democrats who have come to their senses.

And I might say that Rahm Emanuel, one of the leaders of the Democratic Party, was against this from the get go, and he deserves some credit for opposing it.

Anyway, that is not similar in this case, because the bulk of the Democrats still have not come to their senses on FISA, and they still want to pass this bill. They have just been blocked from doing so by this very clever motion to recommit, which the Republicans whooped up.

HUME: And, actually, as I understand it, the motion to recommit says something to the effect of nothing in this measure shall be construed to prevent eavesdropping on Usama bin Laden and other terrorist organizations bent on attacking the United States, right?

KONDRACKE: Which would have nullified what they —

HUME: But they know that if that were ever introduced and voted on it would pass.

KONDRACKE: They are still searching around for some way to get their bill passed.

HUME: So we think that the Armenian thing is dead, but what about the FISA thing?

KONDRACKE: It is not dead yet.

HUME: Mara, what it your view.

LIASSON: No, but I think it has a chance of being altered in some way to come to some kind of compromise.

BARNES: It will not come in to compromise. It will be wiped out in the Senate. If it not there, the president will veto it. The provision will not stand, I'll tell you that.

HUME: I know, but if it vetoed, doesn't the FISA authority then expire?

(CROSSTALK)

Who wins in the end on this, Bush or the Democrats?

KONDRACKE: I think, ultimately, Bush will win.

LIASSON: On this narrow issue, yes.

BARNES: On this big issue, yes.

HUME: All right.

When we come back with the panel, President Bush puts the screws to Congress over spending. We will look into that looming fight next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES OF AMERICA: The two Houses need to work out their differences on these bills and get them to my desk as soon as possible. They also need to pass the remaining spending bills one at a time, and in a fiscally responsible way.

(END VIDEO CLIP)

HUME: Now the last part of that is what the president was trying to get across today. He was talking about all the annual spending bills that have to be passed every year by Congress. Congress has not really passed any of them this year. What they have given him is a temporary stop-gap measure to keep things going.

And the president imagines that when the bills to pass, that they will be beyond his budget limits, and he will then veto all or any of them, and that will then provoke a fight, and possibly a temporary government shutdown, a fight that he and the Republicans think they can win, and a fight he is eager to have because he has developed a reputation even among Republicans as a big spender.

So what is likely to happen in all this, Mort?

KONDRACKE: Well, I think they're going to work out some arrangement on most of the spending bills as they go along. There may be some vetoes along the way, and then there will be continuing resolutions that will fund the government at current levels as we are in to the fiscal year right now.

Bush is absolutely right on the failure of the Democratic Congress to pass appropriations bills on time. But, of course, the Republican Congress did not pass them on time either. This is a longstanding failure on the part of Congress in general.

But the immediate fight, beginning tomorrow in the House, is over S- chip, and the president again repeated this canard that this S-chip Bill increases eligibility to $83,000, which —

HUME: Hold on a second — stop for a second.

S-chip, for those of you who have not been following this, stand for State Children's Health Insurance Program. It is a program of subsidies to states to allow working class children who are above the poverty line but nonetheless hardly rich to get health insurance because they do not have Medicaid available to them.

The administration has allowed the program to subsidize a health care for people above the poverty line. The president alleges, and Mort denies that the thing would take coverage up to families up to $83,000 a year.

KONDRACKE: Not only does Mort deny it, but Charles Grassley denies it — he was the author of the bill. And Pat Roberts, a conservative Republican from Kansas, denies it.

HUME: You are just trying to make you seem a larger player in the drama than you may want to be.

LIASSON: It does not encourage it to go up that. It also does not prohibit it. So both sides have something. Yes, you can get a waiver, conceivably, and New York has asked for it —

KONDRACKE: But they have been denied a waiver.

(CROSSTALK)

LIASSON: It terms of the politics of this battle, the first act, which is S-chip, I think goes to the Democrats. After that it is just downhill from there, because I think after that you are talking about spending pure and simple. The Democrats want $22 billion more than he does, and I think he is going to be on a lot firmer ground once S-chip gets over.

HUME: The White House has come up with language — it is a phrase or slogan that says "poor kids first." And that is what they are going to make the rallying cry for the veto that the president is expected to cast if this bill passes in its present form.

The universal belief has been, look, you are vetoing a bill that is going to give health care to poor kids and maybe to some other kids as well, but it is a political loser.

There is some polling data that suggests that the president's slogan may help. What about it, Fred? Mara suggests, and most people agree with her, that this is a political loser for the Republicans and the president. Is it?

BARNES: I thought so, and it was, maybe, at first, but I do not think it is for this reason — one, there was a poll earlier that showed two to one even Republicans favored this S-chip.

But I looked at the question — Brit you saw the question, even Mort saw it — and it had none of the information about how this would reach S-chip into the middle class, how would lure the kids on private insurance off insurance so they take this free government insurance.

Gallup went back and asked about those. And it turns out the public has a different opinion about S-chip when that influence is learned.

HUME: So you think that the Republicans might win on this politically?

BARNES: No. Here is how they do win on it. You know what Republicans need? They need to take some tough vetoes. They need to cut spending where people say they are being mean, they are cruel to children.

That is the only way — they have to take these tough stands. That is the only way they can revive in people's minds that they are the people with the impulse to hold down spending and hold down the size of government. That's their brand, don't forget that.

KONDRACKE: In the minds of their own base, this is an attempt to —

LIASSON: You have to start somewhere.

KONDRACKE: OK, but, look —

HUME: It appears tonight that they can get Fred, they cannot get to Mort, and Mara is neutral.

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