This is a rush transcript of "Special Report With Brit Hume" from February 14, 2008. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES OF AMERICA: My attitude is if the Bill was good enough then, why not pas the Bill again? The threat hasn't gone away.

Secondly, they have had plenty of time to think about how to address the issue.

Thirdly, the Senate led the way. The Senate showed how to pas a good Bill with a bipartisan majority.

REP. NANCY PELOSI, (D) SPEAKER OF THE HOUSE OF REPRESENTATIVES: The president and the House Republicans refuse to support the extension, and therefore I think should bear the responsibility of any adverse national security consequences.

(END VIDEO CLIP)

BRET BAIER, GUEST HOST: There you see President Bush and the Speaker of the House talking about the Protect America Act. The Senate passed this Bill. This is to renew the Act that renews the Terrorist Surveillance Program as it existed, the Bill that passed the Senate.

The House, however, looks like it's not going to take up. They still have tomorrow, but it looks like it won't get done.

What about the political implications of all this and what it all means? Some analytical observations now from Fred Barnes, Executive Editor of "The Weekly Standard," Mort Kondracke, Executive Editor of "Roll Call," and syndicated columnist Charles Krauthammer, FOX News contributors all.

Mort, we will start with you. The House Republicans stormed out of the House today. They left the chamber, went out to the House steps. Why did they do it, and were they effective?

MORT KONDRAKE, EXECUTIVE EDITOR, "ROLL CALL": First -- so much for the happy bipartisanship of Washington that was established during the stimulus package. We are back to partisan warfare as usual.

And what -- the House of Representatives passed the Bill holding Josh Bolton, the White House Chief of Staff, and Harriet Miers, the former White House Council, in contempt because they wouldn't come up there and violate the principle of Executive Privilege to talk about why the U.S. attorneys got fired.

And the House Republicans were furious that, instead of that, they should have passed the FISA reform bill that the president was talking about.

BAIER: The Protect America Act.

KONDRACKE: Yes. The House Democratic leadership position is simply untenable, both procedurally and on the merits. Procedurally, the Senate, as the president said, 68 votes in favor of the Senate Bill, which would give immunity to the telecom companies that cooperated with the administration in the early days after 9/11. The Senate Intelligence Committee passed it 13-2.

There are enough votes in the House, if it would come up for a vote, to pass it, but the leadership doesn't want to do that because they want to mess around in a conference.

And just on the merits, if the telecom companies don't have immunity, trial lawyers will go after them. They will not cooperate with the government, and secrets might get disclosed.

I cannot believe that Steny Hoyer, who is normally a responsible guy, is saying "We need to have them sued to find out what's been going on." That's what the House Intelligence Committee is supposed to do.

BAIER: Charles, one of the political implications here, if this Protect America Act is not renewed by tomorrow, what are the political implications for Democrats and Republicans?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I don't think it will have an immediate effect. I think what it does have is a long-term effect.

As long as the issue is out there, Democrats are going to suffer. It's hard to argue in favor of a Bill that, as Mort indicated, has a large majority on both sides in the Senate, and that is actually a rather imperfect bill.

It concedes the principle. I mean, in the original law in 1978, it allowed for eavesdropping domestically, but you did not have to ask a judge if it was done abroad.

In the new law, which the president wants, there is a concession in that you have to get a blanket court order if you want to listen in on Al Qaeda abroad.

Now it applies for a year and it is a blanket Al Qaeda -- it is a blanket authorization, but it infringes on the principle that when you have spies abroad, our guys are allowed to bug them, listen in, and get all the intelligence it wants without a judge.

So even that is unacceptable to House Democrats. If you put that out to the American people, the Republicans are going to win this debate every time.

BAIER: You heard the House Speaker there, Fred, saying that the president is not agreeing to this short extension to allow the House to continue to work out the fine points of letting telecom companies have this liability, and, therefore, the onus is on the Republicans and this White House.

FRED BARNES, EXECUTIVE EDITOR, "THE WEEKLY STANDARD": Well, they'd liking to do that.

Look, it is just so hard for Democrats to give President Bush a victory, even on a Bill like this -- and it is flawed in other ways that Charles didn't mention -- a Bill in which the administration has given up a lot.

This isn't the president saying ratify my article two of the constitution powers to do whatever I want in terms of wiretapping people overseas or even in the United States, so --

And the thing that is so -- I mean, Democrats are going to go through this painful exercise and drag everybody else through it, and then the are going to vote for the Bill. We know they're going to do that, it's inevitable. They're not going to block it. Eventually, they'll sign it.

The speaker said they need more time. They don't need more time. This has been around for months. There was already one 15 day extension. It's been around for six months. They knew it was coming up. They don't have to bring up Josh Bolton and Harriet Miers and the phony U.S attorneys issue.

Mort said partisan warfare has broken out. It has. Mort, who has caused it? The answer is one word -- well, two words: "Congressional Democrats," not Republicans.

KONDRACKE: Look, the president could have agreed to an extension, but it would be one extension after another, probably. But for the sake of comedy at the moment he could have bought a little time.

But he wants a victory, too. He wants to stop the Democrats at this point.

But, look, on the merits, and at the end of the day, the Democrats are wrong.

BAIER: And Senator "Kit" Bond might have had the line of the day when he said if Al Qaeda was on steroids, the House would have picked it up?

BARNES: They would have dealt with it all day.

BAIER: Thanks, panel.

Next up, the one year anniversary of the troop surge in Iraq and recent signs of political progress there -- we'll be right back with that.

(COMMERCIAL BREAK)

LT. GEN. RAY ODIERNO, MULTI-NATIONAL CORPS-IRAQ COMMANDER: I went in Baghdad yesterday, and you can just feel a difference than what it was in December of '06 when we first got there. It is a completely different atmosphere.

It's a different atmosphere in Ramadi and Fallujah. It's a different atmosphere almost everywhere. And so I feel good about that.

But I do know there's a lot of work left yet. But I'm confident that the Iraqis can do this, and I just hope that we have the patience to stay with this.

(END VIDEO CLIP)

BAIER: That's Lieutenant General Ray Odierno. He is second in command in Iraq. He is actually handing over his duties, leaving Iraq, coming back home, talking about the situation post-U.S. troop surge, one year later.

Now, the House Speaker Nancy Pelosi was asked about the gains that had been made, and last weekend she was asked whether the gains that had been achieved over the last year might be lost, and is she worried about that.

She said "There haven't been gains. The gains have not produced the desired effects, which is reconciliation of Iraq. This is a failure, this is a failure." She went on to say a war without end that could last 20 years or longer.

We're back with our panel. Two very different accounts of what is happening in Iraq. Charles, what do you see the sense of the situation on the ground is?

KRAUTHAMMER: Well, the Pelosi response is really astonishing. We're in the middle of a war, and, as Joe Lieberman has said, the Democrats are invested in a narrative of defeat.

You look at the situation on the ground the year after the surge, and Democrats will say, "Oh, yes, there is progress in the military sense," meaning that they will concede that casualties are down, civilian deaths are down, suicide attacks are down, Baghdad is returning essentially to a normal status, Anbar is a haven for the United States, Al Qaeda is on the run.

All that is true, the Democrats will say. However, the political reconciliation that Pelosi has said here hasn't happened.

But just yesterday the parliament in Iraq passed a law which distributes the oil revenues into the provinces -- Kurdistan will get 1/6 of it -- which allows for amnesty for a lot of the prisoners, 80 percent of which are Sunni, and which most importantly allows elections in the provinces which will allow Sunnis to feel control over their areas in a new Shiite Iraq, with essential government being Shiite, and which will allow the Anbar awakening Sheikhs who are American allies can assert real legitimate control in the provinces, exactly what the Democrats have demanded.

And you haven't heard a word about an acknowledgment of a change in the situation.

KONDRACKE: I certainly hope next week when there is a Democratic debate that this gets put to them. What about this? The political reconciliation is being made not in a context of withdrawal, which, as they said, was necessary -- the threat of withdrawing the American troops -- in order to get this political progress, but quite the contrary being made possible by the surge. What about that?

I just want to see whether they are going to continue, and I'm sure they will, because they're still competing in Democratic primaries, to withdraw the troops and withdraw them hastily.

BAIER: But we have been around this block before. The answer is the reconciliation isn't happening. This is what Democrats will say.

BARNES: OK. Well, they can say that. There that famous line I think Charles mentioned a few weeks ago of Daniel Patrick Moynihan: "You're entitled to your own opinion, but you're not entitled to you own facts." And the facts are reconciliation is taking place.

Now, six months ago, the Democratic complaint, even when the surge was already reducing violence of Americans and Iraqi civilians and clearing Baghdad, and so on, they had a legitimate complaint to say the reconciliation hasn't started. There is none of it.

There is a lot of it. There is an enormous amount, and particularly by the parliament, but earlier with the Sunni awakening. When the elections happen it will be a whole different Iraq with a whole new set of democratically elected leaders, not just ones chosen by their parties.

So I think Democrats will change their views. They'll have to, because the facts will murder them otherwise.

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