This is a rush transcript from "The Beltway Boys", December 29, 2007, that has been edited for clarity.

MORT KONDRACKE, FOX CO-HOST: Coming up on "The Beltway Boys", the countdown to Iowa begins. The first voting in this long presidential campaign is just days away.

FRED BARNES, FOX CO-HOST: We'll give you our predictions on who will win, place, and show in the Hawkeye state and what it means down the road.

KONDRACKE: We'll tell you how the assassination of Benazir Bhutto is playing out on the campaign trail.

BARNES: And what the chaos in Pakistan means for the War on Terror.

KONDRACKE: All that's coming up next on "The Beltway Boys", but first, the headlines from New York.

(NEWSBREAK)

BARNES: I'm Fred Barnes.

KONDRACKE: And I'm Mort Kondracke. We're "The Beltway Boys."

The first stop story is December shock, and that, of course, refers to the assassination of Benazir Bhutto in Pakistan, the Democratic opposition leader. We'll talk about what it means for foreign policy later, but first, the impact of this on the presidential campaign, which is obviously now heading into the home stretch in Iowa.

David Yepsen will join us in a couple minutes to talk about what's happening in Iowa.

Every candidate who possibly could, seized upon Benazir Bhutto's death to make a point about his or her presidential campaign.

In the case of Hillary Clinton, it was the experience point, and here she is talking about it. Watch.

(BEGIN VIDEOTAPE)

HILLARY CLINTON, PRESIDENTIAL CANDIDATE: I have known Benazir Bhutto for a dozen years, and I knew her as a leader. I knew her as someone who was willing to take risks to pursue democracy on behalf of the people of Pakistan.

(END VIDEOTAPE)

KONDRACKE: That is to say I knew Benazir Bhutto. That was the key message.

The senior advisor of the Obama campaign said on Thursday, quote, "She," Hillary, "was a strong supporter of the war in Iraq, which we would submit was one of the reasons why we were diverted from Afghanistan and al- Qaeda, who may have been players in this event, so that's a judgment that she'll just have to end." That's David Axelrod.

I'd be persuaded that that was a salient point if Obama were out proposing a specific strategy for how to deal with Afghanistan and Pakistan, but I don't think we've had any such thing.

In the meantime, John Edwards managed to get Pervez Musharraf, the president of Pakistan, to actually call him. That was his bid into this I'm influential in all this.

Here's Barack Obama's comments on his own. Here you go. Watch.

(BEGIN VIDEOTAPE)

BARACK OBAMA, PRESIDENTIAL CANDIDATE: The truth is you can have the right kind of experience and the wrong kind of experience, and mine is rooted in the real lives of real people and it will bring real results if we just have the courage to change.

And I believe deeply in those words. But you know what? They're not mine. They were Bill Clinton's in 1992 when Washington insiders questioned his readiness to lead.

(END VIDEOTAPE)

KONDRACKE: I would just point out to Barack Obama that Bill Clinton, as a new president committed some major rookie mistakes in foreign policy. There was Somalia, for example, where we got involved with war lords in combat and the Blackhawk incident occurred. We pulled out and were going to confront rebels in Haiti, but there were people waving sticks on the shore, and the flotilla turned around. That was pretty embarrassing, too. The mistakes in Pakistan, if confronted with a crisis, are going to be much more serious.

BARNES: Mort, you're right about that. Pakistan, in nothing else, is a nuclear power. They have nuclear weapons.

I think most of the candidates in Iowa did look at the assassination of Benazir Bhutto as a tragedy, but also as an opportunity, a political opportunity, and I think all but one of those candidates, of Republicans and Democrats, that came off pretty poorly in trying to seize that opportunity. I mean, Mike Huckabee, I thought, was way out of his depth when he was talking about foreign policy in Pakistan. And he sent his apologies to Pakistan. I don't know what he was apologizing for.

John Edwards, arranging to have a phone call from Musharraf, pure stunt of no really intrinsic value.

David Axelrod is a great political consultant and has helped Barack Obama enormously, but that idea that somehow Hillary Clinton's vote on Iraq in 2002 and in favor of the war has somehow led to Benazir Bhutto's assassination in 2007? That's a little tortured. I mean, it was — it was more than just a stretch.

Then Rudy Giuliani went back — no matter what happens, he always mentions the same thing. Watch.

(BEGIN VIDEOTAPE)

RUDY GIULIANI, PRESIDENTIAL CANDIDATE: For me, this is a particularly personal experience because I lived through September 11th, 2001 and then I lived through the attack in London a few years later. Each one of these events that happens reminds me that we have to do everything we can to prevent these terrorist attacks.

(END VIDEOTAPE)

BARNES: You know, there it was. You know, 9/11 again. People know about his role there now.

The candidate who I thought had something to say was John McCain, the Republican candidate. Watch him.

(BEGIN VIDEOTAPE)

JOHN MCCAIN, PRESIDENTIAL CANDIDATE: I knew Benazir Bhutto. I know Musharraf very well. If I were president of the United States, I would be on the phone right now and meeting with the National Security Council, and I would be seeing ways that we could help restore order or maintain order or restore order, whichever is the case in Pakistan. I know the players. I know the individuals. And I know how — the best way to address this situation.

(END VIDEOTAPE)

BARNES: You know, McCain went on to mention something that's important, that, you know, he was a voice in the wilderness on Iraq saying we need to change our policy. We need to send more troops. We need to have a counterinsurgency there. And it was adopted and is working in Iraq.

I'm not sure how much the Bhutto assassination will affect things in Iowa, probably not much at all, but I give McCain some credit.

KONDRACKE: I suspect that the next president of the United States early on will be tested by some adversary of the United States, that it may be terrorist in Afghanistan or Pakistan or maybe an attack on the United States. It could be Putin, but something is going to happen early enough. And I insist that experience, knowing what the powers of the United States are, knowing where the levers are, knowing who the players are, does count for something. It ought to be weighed by voters in the consideration.

I mean, when you look at the candidates — I mean, Hillary Clinton has a "New York Times" piece that showed she was basically a by stander for eight years. But she has been a senator and on the Armed Services Committee for eight years; Obama for three. Giuliani, Romney, and Huckabee have limited foreign policy to no foreign policy experience.

The one guy who, as you say, was right about the Iraq war, at least how to win it, and was dedicated to winning it was McCain

BARNES: Here's something more important than experience, and it showed when Ronald Reagan was president. He didn't make working mistakes as Clinton did because he knew what the big goal was for American foreign policy, which was to win the Cold War, and he had a plan for getting there, Star Wars and tough talk, scaring to the Soviet military and everything. He finally met with Gorbachev when the time came.

What's the problem in the world? It's Islamic jihaddism, the War on Terror. And McCain has a good idea on how to win it

Coming up, the Dean of Iowa political journalism, David Yepsen, of course, joins us from Des Moines, with his perspective on what's happening in the first-in-the-nation caucus state.

(COMMERCIAL BREAK)

BARNES: Welcome back to "The Beltway Boys." Our next guest has covered every Iowa caucus since 1976. He's David Yepsen, political columnist for the Des Moines Register. He's reached rock star status in Iowa.

We should call you the Mick Jagger of Iowa journalism.

KONDRACKE: We're glad to have you hear.

BARNES: I'll start with the Republicans that race. Has Mike Huckabee peaked?

DAVID YEPSEN, POLITICAL COLUMNIST, DES MOINES REGISTER: No. He has certainly done well, but he's still moving, Fred.

BARNES: OK. Well, I'll follow that up with Mitt Romney who led early on. Is he - is he still gaining ground, too, or is he stalled?

YEPSEN: I think Mitt Romney has stalled out some, and his people are worried about it. They're counting on their organization to make up the difference now that exists in the polls, but Mitt Romney has had some troubled gaffes and stumbles on the campaign trail. He can't seem to get his motion going again

KONDRACKE: Which are those?

Which mistakes has Romney made?

YEPSEN: I'm talking about his changes of position.

KONDRACKE: Oh, I see.

YEPSEN: I'm talking about things that really caused heartburn to the social conservatives inside the Republican Party, and he sort of topped out at 30 percent and couldn't go any farther, whereas Mike Huckabee has been rallying the social conservatives. They're a formidable group, and he continues to attract media attention, to attract support from them. And really the big question is who is going to finish in third place. Rudy Giuliani is out here. Fred Thompson is out here. And John McCain has come back. There's still something to be had for wining third place in Iowa heading into that New Hampshire primary?

KONDRACKE: Famously, the Iowa caucuses depending on being able to get people to the polls. Huckabee wasn't thought to have much of one, but does he have one? And how does the Romney organization measure up?

YEPSEN: I think Romney has a better organization, but Huckabee has grafted himself onto existing organizations, social conservatives, home schoolers, the Fair Tax people. These are networks that already existed and Mike Huckabee has tapped into them well.

BARNES: One more question. You know, third place for John McCain, given his strength in the next event in New Hampshire on January 8th, if he came in third in Iowa, wouldn't that give him a substantial boost?

YEPSEN: I think it would. And I think up until now Giuliani and McCain, and to a lesser extent Thompson, have been staying out of Iowa in order to let Mike Huckabee have a clean shot at Romney, figuring if he can take him out here, it will cost him problems in new Hampshire. Now there's some interest in third place, so Thompson, McCain, Giuliani are coming back in the end game trying to get the third place showing.

KONDRACKE: Do your bones tell you anything about who is going to win on the Republican side?

YEPSEN: Mort, what are you asking me for? Four years ago I thought Howard Dean was going to win, so I'm not going to rise to that bait. You've got to look at the polling numbers and say that Mike Huckabee is comfortably ahead here right now.

KONDRACKE: OK. Does the Pakistan — does the death of Benazir Bhutto count among anything to Iowa voters?

YEPSEN: Oh, yes. I think you had it right. It's a brief story but it underscores the need for experience. In both parties, the experienced candidates haven't been having a rough time. It's the populists. It's the outsiders. It's the fresh candidates who have been doing well.

Once again, this episode brings home the notion that, hey, we might want to have a president who has some experience in dealing with this stuff.

KONDRACKE: So on the Democratic side, that helps Hillary? I mean, she had been sort of sliding and Obama seemed to be rising. Is that still going on?

YEPSEN: No. I think that's true. I think it does put a little bit - - Hillary Clinton's already getting the voters that are looking for experience. What she needs to do is get more voters to start looking for experience here at the end, and she's been working very hard to do that. I think on the margins it underscores the need to have a president who knows what they're doing

BARNES: David, when you were talking about the Republicans, it sounds like you regard momentum and who is generating some and some enthusiasm as more important than organization. Well, it looks like Obama has a pretty good organization, or at least I've read. You can comment on that, but he has the momentum as well in Iowa.

YEPSEN: Well, he does a good back and forth. It's so close. You look at these polls, and a lot of this stuff within a margin of error. Hillary Clinton was up a few points in some of the latest ones. We're down to things now, Fred, like does Barack Obama get out a lot of young people who traditionally don't turn out for caucuses, many of whom are on holiday vacation.

Another issue is going to be Hillary Clinton. She's going after older women, and trying to get them to turn out for caucuses. The Clinton people I was talking to last week were very excited. The weather forecast in Iowa for Thursday is high of 41 degrees and sunny. That means it's going to be very easy for people to get around. Older women won't be worried about falling down and breaking their bones. They're excited that their task of turning out older women will be much easier so it will come down to a lot of little things like this on caucus day.

KONDRACKE: What about Bill Clinton? Is he a plus or a minus for Hillary?

YEPSEN: In a Democratic caucus fight, he's a big plus. He draws a big crowd. He's a persuasive speaker. There's always controversy about people who don't like him, but Democratic activists love him. He gets huge crowds. He makes a tough pitch for his — for that crowd to sign Hillary Clinton's supporter cards.

His only problem is sometimes he can get off message. He starts talking about other things and sorts of steps on the message of the day, but on balance the Clinton people love having the former president out here. They wish they could get him more.

BARNES: You know, it may be Washington political myopia that Mort and I have from time to time that has led us around to asking about John Edwards who seems to be in the hunt in all the polls. Does he have as good a chance of winning, do you think, as Hillary or Obama?

YEPSEN: Yes. By the numbers, he does. He's always had a good organization in this state. He's been campaigning here for years. His wife jokes that somebody could stop her and she could give them directions around Iowa. They're well regarded among party activists. Most of their supporters are traditional caucus goers, so he's still in the hunt, particularly with this populous message, this message of change that he delivers. It really resonates with a lot of caucus goers here.

KONDRACKE: David, thank you so much. We'll see you soon.

YEPSEN: OK. Thanks.

BARNES: Bye, bye.

KONDRACKE: Coming up, chaos in Pakistan and what it means for the United States and the War on Terror. Stay right with us.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We stand with the people of Pakistan in their struggle against the forces of terror and extremism. We urge them to honor Benazir Bhutto's memory by continuing with the democratic process for which she so bravely gave her life.

(END VIDEOTAPE)

BARNES: Welcome back to "The Beltway Boys." The second hot story of the week, Pakistan panic. Now, obviously the assassination of Benazir Bhutto created panic and chaos in Pakistan, and it produced a lot of alarm in Washington. Of course, in Pakistan her funeral the day after she was killed didn't do anything to quiet things down, that's for sure. But to an American policy toward Pakistan — I'm trying to think of the right word for what her assassination produced — disaster, catastrophe, merely a setback? You know, it has certainly been incredibly harmful.

You know, I give the Bush administration credit for engineering the return of Benazir Bhutto — I mean, it was not against her wishes — in hopes that when she got back there that it could produce an alliance with the president there, the former army commander, Pervez Musharraf. And they have been rivals for a long time, of course, but you could have an alliance. She would be the prime minister and he would be the president. And she would be more powerful than he would, and it could produce some stability there in Pakistan, and democracy because you have an election, and even a crackdown on the terrorists, the Islamic extremists in the northwest and around all of Pakistan.

Well, gone. That didn't work. I think it was a long shot anyway. And there's no way that Musharraf can have an alliance with the alternative, who is not going to take part in the election, whenever that happens. And besides, it just wouldn't work with him. American policymakers are very dubious of him because of ties he has to Islamic extremists.

So what do you do here? What's the best thing that can happen here in Pakistan? That, I think, would be for Musharraf to do actually what Benazir Bhutto was proposing to do, and that is move in a Democratic direction. Obviously, they're not going to have the election in a few days in Pakistan. They'll have to delay it, but not cancel it. And then really do have this crackdown that is promised all these years, a crackdown on the Taliban, al-Qaeda, and other terrorist groups which have now spread all over Pakistan and are probably — and some of them have claimed they're the ones that killed Bhutto.

KONDRACKE: So far, it looks as though Benazir Bhutto's party, the PPP, is going to contest the elections. They somehow think they can produce a leader, and they can produce the power that would — riding a sympathy vote for her would take them into power.

I think the problem with the Bush approach was that what they really wanted Benazir to do was to put a democratic face on essentially Musharraf/army rule. The Bush administration really was relying on Musharraf and the army to provide the stability and eventually to get around to finally taking on the terrorists and trying to defeat them. And the problem was is that Musharraf never did. I mean, Musharraf made deals with them. Musharraf allowed — was allied with the Islamic factions in the country. He never shut down madrasas' and so on.

Benazir Bhutto told me in an interview last year that Musharraf was playing the United States like a fiddle, you know, pretending to be the only alternative to a jihaddist country, and that she would crack down on the terrorists and that she would help Hamid Karzai in Afghanistan. And Musharraf has done nothing to help Hamid Karzai in Afghanistan. So...

BARNES: Let me ask you a question.

KONDRACKE: Although the loss here is profound, as you say. And I think what the Bush administration ought to do is really lean on Musharraf to have genuinely free and fair elections and really become a democracy, which is the only way to make that country stable.

BARNES: You know, the Bush administration, they love the things that Bhutto was saying about cracking down on the terrorists and the Islamic extremists and al-Qaeda and the Taliban and so. They didn't know whether to believe her. Should they have?

KONDRACKE: Yes, I think they should have. I think she was a modernist. She was willing to risk her life for it and she lost her life for it. She was killed by people who didn't like a modern democratic Pakistan headed by a woman.

BARNES: Stay right there. Our Iowa predictions are coming up.

(COMMERCIAL BREAK)

KONDRACKE: Welcome back. It's predictions time. Here's how I think it's going to shake out in Iowa on Thursday night. Among the Democrats, I think Hillary Clinton will win. Barack Obama will come in second and John Edwards third.

Fred?

BARNES: You know, your guess is probably as good as mine, but I think Obama is going to win with Hillary Clinton second and John Edwards third.

Let's go to the Republican side and we can chat about these for a moment. You know, you and I both agree on this one, Mort. We think Romney wins, Mitt Romney, followed by Mike Huckabee and John McCain coming in an important third.

KONDRACKE: Yeah. I think in both cases that it has a lot to do with organization

BARNES: Uh-huh

KONDRACKE: It has a lot to do in the Democratic case with experience finally emerging as the key item, and the weather's going to be good, so that will help who ever can get their voters out. I think in the case of Clinton, it's the old ladies.

BARNES: Huckabee's done an amazing job, but at the end of the day I'm not sure enough people will think he's presidential. He's likeable. He's witty, but presidential? That's something else.

All right. That's it for "The Beltway Boys" this week. Join us next week when the boys are in the grand state, New Hampshire.

Happy New Year.

KONDRACKE: Happy New Year.

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

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