This is a rush transcript from "The Beltway Boys", October 27, 2007, that has been edited for clarity.

MORT KONDRACKE, FOX CO-HOST: Coming up on "The Beltway Boys", the Clintons, their marriage and their political partnership back in the spotlight this week. Is that good for the Hillary campaign?

FRED BARNES, FOX CO-HOST: The Republican primary fight is quickly turning into a two-man race. We'll tell you why.

KONDRACKE: The U.S. puts the economic screws to Iran over its nuclear program. One step closer to war? We'll take a look.

BARNES: The White House shows it learned from the mistakes of Katrina.

KONDRACKE: That's all coming up on "The Beltway Boys". But first, the news headlines.

(BEGIN VIDEO CLIP)

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: I think we should celebrate 60 wonderful years and because of what she wants to give, those kinds of years, every child in this country and every child in the world that we can reach, we love you. And I'm so proud of you, happy birthday. Come up here.

[Applause]

Thank you so much, honey. I love you so much, oh.

(END VIDEO CLIP)

KONDRACKE: Well, I'm Mort Kondracke.

BARNES: I'm Fred Barnes.

We're "The Beltway Boys".

KONDRACKE: You're gag.

BARNES: No, but I came close.

KONDRACKE: The first hot story of the week is the dynamic duo and there they were.

BARNES: There they were.

KONDRACKE: That was Hillary's 60th birthday party in New York, where she raised $1.5 million for her presidential campaign. Politically, she is on a roll. The latest FOX News poll shows that Hillary is beating Barack Obama nationally by 17 points and beating all of her rivals in the early states, although Obama is within striking distance in Iowa.

We've discuss before whether the marriage and the idea that Bill will be around, he's around on the campaign trail, and will be around in the White House, is a good — is good for her or bad for her?

Among Democrats it's clearly good for her, because Democrats adore Bill Clinton. There's a new book out, which we've talked about before by Sally Bedell Smith, which talks about the Clintons in the White House. And it confirms that she was virtually co-president during Bill's administration. And it confirms that there's always been a plan between the Clintons that he would be president for eight years and then eventually she would be president for eight years as well.

Now, there are no bombshells, scandal bombshells, as I'm sure were you hoping for, in this book, you know, which will derail her presidential campaign.

Here is Sally Bedell Smith talking how it was and how it will be. Watch.

(BEGIN VIDEO CLIP)

SALLY BEDELL SMITH, AUTHOR: I think if Hillary were to win and they were to have both houses of Congress he would want to be back in the engine room helping to figure out what the policies were going to be and what the strategies were going to be in the West Wing. And then he we would see that dynamic that was so vivid during those eight years being played out all over again with their roles reversed. They are almost co-dependent. They are so reliant on each other.

(END VIDEO CLIP)

KONDRACKE: Well, co-dependent or whatever it is, it is a very strange relationship.

BARNES: Yeah.

KONDRACKE: When Hillary Clinton gave an interview to "Essence" magazine, she was asked by Isabelle Wilkerson if Bill is, quote, unquote, "She, Hillary, hesitates for longer than is conformable, the she says, 'Oh, he's so romantic. He's always bringing me back things from his trips. He brought me a giant wooden giraffe from Africa. Oh, he bought me this watch,' she said, holding out her left wrist to show a Chanel watch. It's a bracelet made of white cubes shaped like elegant dentures. 'I had dental surgery and he said it reminded him of teeth.'" That's really romantic.

Now, she also said to Ms. Wilkerson, she described her marriage to him as a quote, "partnership, as a deep abiding friendship, and as a marriage worth investing in." She did not use the L-word.

BARNES: Love, love?

KONDRACKE: Strange.

That's the word I was referring to, yes.

BARNES: You remember that famous interview where Hillary Clinton, describing her relationship with Bill said, we have love. Have love?

By the way, Bill Clinton brought more romantic gifts back to Monica Lewinsky.

KONDRACKE: Oh, please.

BARNES: Yes he did, too. Don't you remember from Martha's Vineyard?

KONDRACKE: You wouldn't like a giraffe from Africa?

BARNES: I have one.

Here are a couple of things I wanted to mention. One is I didn't know you were an avid reader of "Essence" magazine. How about "Elle"? "Marie Claire"?

I once did an article for "Vogue", but don't tell anybody.

I'm glad you brought in the state polls because the national poll — everybody takes the poll the ones with the FOX News polls — but the national poll means nothing, it's the state polls that matter because if you win in the early states, then your national number goes up.

And it's a dynamic process and those polls are interesting. Because they did show, actually what you mentioned, that Obama's still in the ball game. He's certainly not ahead, but he's very much in the game in Iowa and South Carolina. And then of course, if he beat her in Iowa he'd do very well in new Hampshire as well or even if he came close.

His problem is he hasn't been able to come up with an issue in which he could tie her in knots, her Iraq vote and her Iran vote, more recently, he keeps hammering away at those and those don't help.

Hillary is formidable, but some of things you've talked about that are helping her in the primaries are not going to help her in the general election. Nuumber one, her husband, Bill Clinton. I don't think a majority of Americans want to have another co-presidency. They don't want Bill hanging around the White House. A global envoy to the world? So, he's outside America, that's one thing, but hanging around the White House is something else.

And then there are the socially conservative issues that are popular with the huge chunk of Americans. I mean, Democrats hate them Republicans love them.

And you know, Mitt Romney, the candidate for the Republican nomination, is getting a head start using these issues. Watch.

(BEGIN VIDEO CLIP)

MITT ROMNEY, (R), PRESIDENTIAL CANDIDATE: One of the ways that you instill, if you will, family values is by having a White House be a place that demonstrates family values.

UNIDENTIFIED FEMALE: I agree.

ROMNEY: And I think during the last Clinton presidency the White House did not demonstrate them in a way that was helpful for our nation's culture.

(END VIDEO CLIP)

KONDRACKE: Obviously, the Republicans are going to revisit Monica Lewinsky and Whitewater and all that of this before the campaign is over and that's a reference to it.

But Americans know all about that stuff. Unless there's some new evidence, I think they have put it aside. I mean, during the Monica Lewinsky scandal, Bill Clinton's approval rating was 66 percent and guess what? The latest "Washington Post" poll, in September anyway, shows that his approval rating is still 66 percent. People look back on the Clinton administration fondly. And that's not just Democrats, but people all over the country.

And there's another poll, which I frankly find appalling, which is a Gallup poll that asked who were the greatest presidents in the United States and Bill Clinton actually finishes fourth, but behind Abraham Lincoln, Ronald Reagan, John F. Kennedy, then Bill Clinton. And you don't get to George Washington until 9th. I'm appalled because that shows how little Americans know about American history.

BARNES: Let me ask you a question. Do you think a Clinton White House with the normal staffing, you know, chief of staff and domestic and foreign policy advisors, could actually function with Bill Clinton working in the background, second guessing all of their decisions and advice?

KONDRACKE: Well, functioned with Hillary Clinton lurking in the background.

BARNES: Very very, very poorly.

KONDRACKE: Not really.

BARNES: Commenting up, the GOP presidential race and how we think the field is narrowing.

And in a few minutes, we'll tackle the $64,000 question. Will President Bush launch a military strike against Iran as he leaves office?

We'll be right back.

(COMMERCIAL BREAK)

BARNES: Welcome back to "The Beltway Boys".

Hot story number two, two-man race. And, in effect, it is what we have now, a two-man race for the Republican presidential nomination between Rudy Giuliani and Mitt Romney. They're the ones that have the political strength to win in the early primary and the money that you will need to carry your campaign through to this Super Tuesday of all Super Tuesdays on February 5th where they're what, 20-plus primaries. And that's the big day and the last big day of the campaign.

Now, you look at these polls because I think it's— it shows you what I mean. It shows Giuliani head and shoulders above the Republicans in the national poll with Romney lagging in single digits. That's not the important one.

Take a look how well Romney is doing in the early primary and caucus states, leaving Giuliani in Iowa and New Hampshire and nipping at Rudy's heels in South Carolina, as is Fred Thompson.

Look, I'm the last guy to say that Fred Thompson and John McCain and even Mike Huckabee have no chance. As I've always said, the future of politics is never a straight line, projection of the president, but their chances are not very good. These long shot people, McCain, Thompson and Huckabee.

I mean, McCain gained a little in New Hampshire, as that poll reflected, but he doesn't have any money to carry through the primaries after that.

Thompson, as far as I can tell, is nowhere despite that — the poll nowhere in Iowa and New Hampshire and he's not going to win Michigan in the next one and South Carolina. I don't know maybe, but Florida? I don't think so. It's hard to see how he's going to do it. There's not a credible scenario there and so, who do we have? We've got Rudy and we've got Mitt.

KONDRACKE: Yeah, well, I'm rooting for a McCain comeback to make a contest of it, but I've got to say that immigration is becoming such a wedge issue among Republicans that I don't — you know, that's going to hurt him if he ever begins to emerge again.

Here is the little exchange between Fred Thompson, who's going after Romney on the immigration issue and Romney. Watch.

(BEGIN VIDEO CLIP)

FRED THOMPSON, (R), PRESIDENTIAL CANDIDATE: In 1996, we passed the bill when I was in the Senate that outlawed sanctuary cities. Mayor Giuliani went to court to defeat that law. And fortunately, he won and — but there's still, across the country now, still many sanctuary cities which are in violation of the law.

RUDY GIULIANI, (R), PRESIDENTIAL CANDIDATE: Some of the others have never done anything at the dimension of bringing about immigration reform. Some of the others never had the safety and security of other people on their shoulders so they're kind of new to this endeavor.

(END VIDEOTAPE)

KONDRACKE: Sorry, I said Romney. Obviously, I meant Rudy. There was Rudy.

BARNES: Fred Thompson didn't take your advice on who to go after.

KONDRACKE: Look, I predict when there is a Republican nomine, unless it's Giuliani, that the Republicans will use immigration against the Democrats as a big wedge issue in the fall. And it is one of the few issues that people favor the Republicans on as opposed to economics and health care and even foreign policy.

And after a Republican came pretty close to wining a special election in Massachusetts recently, using the immigration issue, the A-word, Rob Emmanuel, the Democratic leader says this is becoming the third rail of American politics,

I can see the Republican Party all over the country in the 2008 election neglecting the message of 2006, yelling A-word, the way some southern bigots use today use the N-words to try to beat Democrats.

BARNES: Mort...

KONDRACKE: They can't avoid demagoguery.

BARNES: Overall, I agree with you on immigration and favor a comprehensive bill and a pathway to citizenship and all that. But the candidate there in Massachusetts, he didn't use the A-word. What he talked about is the issue, a tamer issue on immigration, the Republicans are using now. It's benefits for illegal immigrants. In other words, driver's licenses, in-state tuition for college and so on. And those are the ones Republicans don't have to be strident on that particular issue. It's not like the N-word or anything, but it's an effective issue. And you'll hear a lot more of that.

KONDRACKE: The A-word, it means amnesty.

BARNES: No, no, it's not— it has nothing to do with amnesty.

KONDRACKE: They use it. It's demagoguery.

BARNES: Well, in that Massachusetts race, the candidate didn't.

KONDRACKE: Coming up on "The Beltway Boys", the California wildfire sparks a political brush fire in Washington. We'll tell you all after the break

(COMMERCIAL BREAK)

KONDRACKE: Welcome back to "The Beltway Boys". Times for the "Ups and Downs" for the week. Up: California Governor Arnold Schwarzenegger. He cements his transition from action movie star to serious politician with crisis management of the California wild fires.

Well, you know, he cut a dramatic profile being everywhere in the state during these fires and, but the — and gained a lot politically from it. But the real performance was in the preparation because the California disaster relief effort was really superb.

I was with a liberal Hollywood movie producer last weekend who said that he's been a great governor and had even made the state bipartisan. And that, I doubt. There's still a lot of partisanship in New York, but he is the best argument I know for a constitutional amendment permitting people who are foreign-born to be president of the United States.

BARNES: No, I'm for that amendment. The Democrats will never let it pass so long as Arnold Schwarzenegger could run and be elected president. They fear him, but maybe in the long run we'll get that. It certainly needed.

The lieutenant governor, John Garamendi, and left wing bloggers complained that part of the California National Guard is in Iraq at the moment, that you know, that would be a huge problem and so on. You know, it wasn't a problem at all. I think he may have taken Arnold — I mean, the governor — may have taken lessons from Jeb Bush, who has gotten — when he was Florida governor for eight years got so good at handling emergencies when there were hurricanes there.

You know what helped Arnold the most? The winds died down. That helped him a great deal and good for him. But he did, he did do a great job. He was all over it, no Katrina there.

Up: President Bush. Casualties are down in Iraq and the White House is finally getting tough with Iran. And for starters, take a look at the Iraq numbers. Violence in and around Baghdad, down 59 percent, car bombs - - Mort listen to these now — car bombs down 59 percent, casualties from roadside bombs down 80 percent, and casualties from enemy attacks down 77 percent.

Those really are just incredible numbers. And they show two things in particular, one, the civil war is over. The Sunnis now are — they want to sign on with the government and the U.S. And they'll play a big role with it.

And, two, al Qaeda is — al Qaeda terrorist groups are never finally defeated, but they are certainly on the run. And I think you could say we're winning in Iraq. We haven't won, but we are winning.

And then the sanctions imposed unilaterally by President Bush against the Revolutionary Guards and their banks in Iran are strong sanctions that also send a message to President Ahmadinejad, but also to the Europeans. They say, look, get on board with the sanctions. Let's really push the Iranians so they don't go ahead and build a nuclear bomb because, if these don't work, remember what's on the table, the military option.

KONDRACKE: Do you think that president Bush actually will bomb Iran if the — if the sanctions don't work?

BARNES: I certainly think he's willing to do it and should be.

KONDRACKE: I don't think he should do it. I think...

BARNES: We've said this many times.

KONDRACKE: ... until, until — there's got to be — one, there's got to be a full debate in the United States about it. Two, there's got to be great intelligence so we know where those targets are.

BARNES: We already know that.

KONDRACKE: Well, we don't know where all of them are.

BARNES: They're buried. They're burned. And furthermore...

(CROSSTALK)

KONDRACKE: There's got to be a full debate about the consequences. Now, one thing that I...

BARNES: I don't think we have to turn to Barbara Boxer for advice.

KONDRACKE: I'm not talking about Barbara Boxer, but I'm talking about a full national debate before you engage in preemptive war against another country. Deterrence has worked with other country.

BARNES: Mort, the world would be mad for a week and then they'd be grateful.

KONDRACKE: I think they'd be mad longer than a week.

Down: Senate Democrats. Former Nebraska Senator Bob Kerry says he'll not run for the seat left vacant by Republican Chuck Hagel, sending Democrats scrambling for a replacement.

BARNES: The Republicans got a break with Chuck Hagel leaving. Surprisingly, you know, what he did, he said he'd serve two terms and he served two terms and kept his word. A lot of politicians do not keep their word about term limits and it looked like if Bob Kerry came back to run, I think he'd be the favorite. That would be another seat that Republicans lost. Heavens knows they've had enough open seats where they've had retirements where — New Mexico, Colorado, Virginia and I'm probably leaving out a couple. This is the first help they've gotten.

KONDRACKE: Yeah, look, I think this scotches any chance — it was slim to begin with — that the Democrats could pick up enough seats to break filibusters. They've need 60 votes. They've got 51 now. It's out of the question.

I think that's good because it means, when Hillary Clinton becomes president, she will have to negotiate with Republicans and mover to the center to get their programs passed instead of rolling the Republicans with a left wing program.

Hang on to your hats. "The Buzz" is up next.

(COMMERCIAL BREAK)

BARNES: What's "The Buzz," Mort?

KONDRACKE: One of the most disgusting performances I've seen recently from Congress was the Senate's defeat of a bill called the Dream Act to allow young illegal immigrants brought to this country as little kids to gain legal status. They broke no law themselves. They were brought here. If you combine that with the president's veto of SCHIP, the Republicans come off as anti-Hispanic and anti-child. And I don't know how you can win a general election that way.

BARNES: Easy, because you're against the growth of government and you're going to cut back on spending, that's why. That doesn't apply to the immigrant thing.

Rudy Giuliani, world greatest Yankee's fan? Now, he's for the Red Sox in the World Series. But I think it makes perfect sense. One, he's an American League fan and goes to the Red Sox. And then there's one of the biggest groups in America, Red Sox nation. They're everywhere and vote.

KONDRACKE: There's also New Hampshire.

BARNES: That's it for "The Beltway Boys" this week. Join us next week when the boys are 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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