This is a rush transcript from "The Beltway Boys", April 5, 2008, that has been edited for clarity.

FRED BARNES, FOX CO-HOST: Coming up on the "The Beltway Boys," while the Democrats continue to duke it out, John McCain quietly makes inroads on the electoral map. And we'll show you.

MORT KONDRACKE, FOX CO-HOST: Hillary Clinton digs in her heels amid new calls for her to get out of the presidential race.

BARNES: Al Gore could be ready to make a comeback on the political stage. We'll tell you what he might be up to.

KONDRACKE: And General Petraeus returns to Washington to give an update on the Iraq war. We'll have a preview.

BARNES: "The Beltway Boys" are next, after the headlines.

(FOX NEWS BREAK)

KONDRACKE: I'm Mort Kondracke.

BARNES: I'm Fred Barnes. We're the "The Beltway Boys."

Mort, tonight's top story is McCain's mojo — mojo as in McCain momentum. And he's had a lot of it.

I expected McCain to be five or ten percentage points behind Barack Obama or Hillary Clinton. It's very favorable to Democrats in 2008, no question. But no, McCain surged over the past several weeks in a way almost invisible because there was concentration on the death match between Hillary Clinton and Barack Obama.

Who is watching is Karl Rove. That's President Bush's political advisor, but since leaving the White House, he's a cold-blooded, non- partisan political observer. Of course, he's been of FOX on election nights. And he does these maps...

KONDRACKE: You think he's not rooting for McCain?

BARNES: Of course, he's rooting for McCain. But that's not shaping his judgment on how the race stands now. Democrats can dismiss it if they want. I think they realize that Karl's very smart and this makes sense.

He has maps showing how McCain does against Hillary and Obama but McCain has gained in nine states, either going from toss-up to McCain, or Obama or anyway, the toss-up.

Look at the maps. We start with the map to show McCain against Obama. You can see the red is the Republican area and Obama is winning Illinois. Some of the key things that have happened, both Pennsylvania and Michigan have gone from Democratic states to being toss-up states. That's the yellow.

We can show where Karl Rove has it standing in the electoral vote, with 270 electoral votes needed to win the presidency, McCain's getting up there. This is seven months ahead of time. We'll read too much, but that's our job.

Hillary — you notice he does better against Hillary Clinton than against Obama. Not many blue states there. She's losing the South. That looks like it's tough for Clinton.

When we switch to the Electoral College vote, McCain is almost there, eight short of 270. Democrats, there is a lot of time to gain.

What is the cause? I think it's this brutal fight between Obama and Clinton hurting both of them, bringing both of them down. As they go down, McCain goes up.

I think it's safe to say, and you'll agree, that McCain is settling in as the Republican nominee more comfortably and effectively than I thought he would.

KONDRACKE: I thought what was interesting about those numbers is how much Hillary lost in the last couple weeks compared to Obama and McCain. She lost more. Part of the penalty she paid for dodging sniper bullets. They both realize McCain is a threat and they're spending time attack him as well as each other.

Here is Obama, first, going after McCain on the war in Iraq and McCain's response. Watch.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA, (D), PRESIDENTIAL CANDIDATE: Senator McCain has been saying I don't understand national security. But he wants to keep tens of thousands of United States troops in Iraq for as long as 100 years, even though the war has not made us safer.

SEN. JOHN MCCAIN, (R), PRESIDENTIAL CANDIDATE: We have huge differences. He's the most liberal senator in the United States Senate. I understand that. Let's talk about our differences, rather than distorting, clearly distorting in a disingenuous fashion the comments that I made concerning after we win the war, the fact that American presence may be there for a long time.

(END VIDEO CLIP)

KONDRACKE: Yeah. Well, at least Obama has quit accusing McCain of planning 100-years war in Iraq, which was frankly demagogic on his part and unworthy of the high-minded campaign he presumes to be running.

What McCain really means in a peacetime situation like in Japan, or Korea, or Germany, we might keep the troops for a time.

BARNES: He was explicit about that. Citing...

KONDRACKE: Exactly.

On Friday, another Obama aide said that Obama — even Obama as president might keep 60-70,000 troops in Iraq, at least until 2010.

BARNES: That was good news. I hope he believes that. He doesn't sound like it when he talks in public.

I thought McCain, at least marginally, won that round with Barack Obama over national security and what McCain said.

We have another round with Hillary Clinton that was a little different. Watch the new Hillary ad and McCain's response.

(BEGIN VIDEO CLIP)

AD NARRATOR: There is a phone ringing in the White House and this time the crisis is economic — home foreclosures mounting; markets teetering. John McCain said the government shouldn't take real action in the housing crisis. He'd let the phone keep ringing.

AD NARRATOR: There is a phone ringing in the White House, this time the crisis is economic — home foreclosures mounting; markets teetering. Hillary Clinton and Barack Obama just said they'd solve the problem by raising your taxes, more money out of your pocket.

(END VIDEO CLIP)

BARNES: I don't think McCain really needed to respond to that one, but he did. The phone ringing at 3:00 a.m. You know, if it's about housing problems, I think they could have waited until the next morning. It's just not credible. Wake up the president at 3:00 a.m.?

KONDRACKE: Don't you think Hank Paulson called up President Bush at 3:00 and told him about the Bear Stearns deal?

BARNES: He probably knew it before that. Paulson and Ben Bernanke deserve credit, and Bush and John Bolton and the administration for bringing them in. They've done a great job. That was very, very important and will save Americans a lot of agony.

But going back to the ad — when you interrupted me. You remember the ad. That's based on the ad, the phone ringing, the ad against Obama, the phone ringing at 3:00 a.m. and it's national security issue. That worked. But 3:00 a.m., the talk about housing. Please! That doesn't fly.

KONDRACKE: And on the merits, McCain truly did not say that he would do absolutely nothing about the crisis, but I do think we better hear pretty soon exactly what McCain would do. I think he's got to get traction on the economy.

Now, in the Democratic race, Hillary is vowing never to give up. She's using the Rocky analogy. Watch this.

(BEGIN VIDEO CLIP)

SEN. HILLARY CLINTON, (D), PRESIDENTIAL CANDIDATE: Could you imagine if Rocky Balboa had gotten halfway up the art museum stairs and said well, I guess that's about far enough. That's not the way it works. Let me tell you something. When it comes to finishing the fight, Rocky and I have a lot in common.

(END VIDEO CLIP)

BARNES: By the way, Sylvester Stallone endorsed McCain.

KONDRACKE: And Rocky Balboa, in the first movie, loses to a black guy in the first fight.

I really think the sniper gaff really hurt Hillary more than the Jeremiah Wright situation did Obama among Democrats for this.

Look at the Pennsylvania results. Less than a month ago, just a week ago, as a matter of fact, Hillary Clinton was 16 points ahead in Pennsylvania. Now she's only ahead by a little over six points. People were talking about her winning this 60-40, by 20 points.

If she carries Pennsylvania only by six points, what — I think what will happen is you'll start to see a flood of superdelegates to Obama and this race could be over pretty fast.

BARNES: I'd say, absent a surge like we've never seen in primaries, never the last ten primaries here, a surge for Hillary, Obama is going to win it.

Look, I think the superdelegates will want to go for him anyway, thinking that if they give it to Hillary, it's going to split the party. The Obama people, who will be ahead in delegates, they'll think they were cheated. But all this is hurting Obama, all this campaign now. He's — he was in the heavens. Now he's campaigning down here like a normal politician.

Coming up, we'll tell you if Al Gore is getting ready to inject himself in the Democratic presidential race.

And Congress weighs in on the mortgage mess. Will new legislation help or make matters worse?

(COMMERCIAL BREAK)

KONDRACKE: Welcome back to the "The Beltway Boys." Let's check out the "Ups and Downs" for week.

Down, the housing crisis. While Congress looks for a quick fix to the mortgage mess, there are fresh signs that the housing collapse is dragging down the economy.

Fed Chief Ben Bernanke isn't declaring a recession yet, but he came close in his testimony earlier this week on Capitol Hill. Watch this.

(BEGIN VIDEO CLIP)

BEN BERNANKE, CHIEF, FEDERAL RESERVE: We're currently in a period of slow growth that began in the fourth quarter of last year. We expect it to continue through the first half of this year. It's possible, not certain, but possible the first half of this year will be slightly contractionary.

(END VIDEO CLIP)

KONDRACKE: I would say we're going, we're in a recession. But we'll have to see it develop.

What happened on this housing situation is the Republicans were home for a recess, and they got panicked when they came back and they decided they couldn't do nothing about the housing crisis.

Now, what they did do, so far, at least — the debate is not over in the Senate — is to keep the Democrats from having big bail-outs of either the housing industry or mortgage holders. But the bill then, when it passes the Senate, and in its present form, I guess the White House would sign the present Senate bill. Then it will go to the house.

And Barney Frank there wants to subsidize not only people who are facing big adjustments in their adjustable rate mortgages and might not be able to keep their home, but even people with fixed-rate mortgages, which makes no sense at all. That, I think, the White House would veto if it comes to that.

BARNES: Yeah, the problem for the Republicans is I think they know, and you may know, you're suggesting it, and I think that if they did nothing, it would be better. That would be the best thing to do. It's not politically something you can do. And Republicans did find people want something.

You can't go to the voters this fall and say the housing crisis, and we boldly did nothing. Though that might be the right thing to do.

And I think the question now is whether — going back to what Bernanke said — whether we have a mild recession, or a deep recession. I don't think there's any evidence we have a deep recession. We had one in 1981- '82 when Ronald Reagan came in and this is when they were squeezing inflation out of the economy. The Fed tightened like crazy. Then unemployment went to 11 percent.

Some in the media have been hysterical in the last couple days, because unemployment went to 5.1 percent. You know, they used to be a name for 5.1 percent unemployment — full employment.

KONDRACKE: Full employment is 4 percent.

BARNES: No, no. People estimate it as high as 6 percent.

Anyway, there's no reason to be alarmed yet. And I think we'll get through this thing easily.

Anyway, up, Al Gore. He solidified his role as the Democratic Party elder statesman. In recent weeks, he's been floated as a presidential candidate, vice presidential candidate, cabinet member. Who knows, he could join "The Beltway Boys" if Mort leaves.

(LAUGHTER)

The party wants him to play tie-breaker between Clinton and Obama, a role he clearly doesn't relish.

In an interview on "60 Minutes" last week, Leslie Stahl asked, quote, "What about the idea of the honest broker who goes to the two candidates and pushes one or the other off to the side?" Gore replied — "yes, kind of a modern "Boss" Tweed." Except his name would be Al Gore. Gore: Well, I'm not applying for the job of broker."

Mort, if he were going to step in and be the broker, he wouldn't break up this race in favor of Hillary Clinton for sure. He'd definitely go for Obama, but my guess is he won't do that. He has his mind on other things. He doesn't want to be a political king maker. He wants to be a world opinion changer.

I'll have to say, even though he's a wild exaggerator on global warming, he's changed public opinion in America about global warming. And I think he's more interested in the $300 million ad campaign on global warming that he begins when? This summer, spring? Soon anyway. I hope he's not hysterical about global warming in the ads. I'm not getting my hopes up.

KONDRACKE: The idea of a cabinet position after he's been vice president? That's ridiculous. Why would he. An Academy Award winner, Nobel Prize winner and a saint — want to be a mere cabinet officer? Barack Obama says he will consult Gore about global warming. And Hillary Clinton, would she? I don't know.

BARNES: A spot on the "The Beltway Boys" would be a big honor.

KONDRACKE: Coming up, America's top Iraq general gets ready to deliver an important update on the war. We'll have that preview next.

(COMMERCIAL BREAK)

BARNES: Welcome back to "The Beltway Boys." We're continuing with our "Ups and Downs" for the week.

Up, Iraqi Prime Minister Nouri al-Maliki. He's got a long way to go, but al-Maliki is starting to show new signs of independence, first by personally overseeing the Iraqi Army battle with insurgents in Basra, and in helping to shepherd political progress in the parliament.

KONDRACKE: Yeah, well, I got to say that the execution of the Basra- Baghdad attack on Muqtada al-Sadr could have been a lot better than it was. He did not coordinate with the United States. And the United States had to come in and bail him out. It's not even clear yet that he's brought Muqtada al-Sadr to heel, and that's a necessary task to achieve stability in Iraq.

BARNES: I think al-Sadr didn't come back from Iran, I think he's still over there. He's bringing him to heel. And a lot of the militias, Shia militias now — it's a Shia government, mainly. He's a Shia, al- Maliki is, and these are Shia militias. This was one of the final steps to attack them and wipe them out and if you're going to pacify the country. It shows how far we've gone and he wants to do it on its own. The execution was not very good, I agree. But this is the kind of thing we want al-Maliki to be doing on his own.

Another thing is, of course, which is, the White House has not played up and should of, they're in line with the frequent complaints about their lack of good public relations effort, but at least Fred Kagan, has taken an honest and cautious, conservative assessment says, now they've met 12 of the 18 benchmarks, you know, on security and political reconciliation, moving ahead on four. And there are two they really haven't done much on.

This is real progress, particularly toward the political reconciliation, really. It's quite impressive. And I think we'll hear more about it on Tuesday and Wednesday when General Petraeus and Ambassador Ryan Crocker come to Capitol Hill.

KONDRACKE: Right.

Down, Detroit. First, the mayor, Kwame Kilpatrick, is indicted for his role in allegedly covering up a sexual affair with his former chief of staff. A new study shows the Motor City has the lowest graduation rate of any city in the country.

Disclosure, this study was put out by America's Promise, Colin Powell's youth organization, now chaired by his wife, Alma, and my wife is the president.

That said, this study shows that in the 50 biggest cities in the United States, 51 percent of the kids starting out in ninth grade graduate from high school. In Detroit, the average is — the number is 24.9 percent. That's followed closely behind by Indianapolis, Cleveland, Baltimore and Columbus, Ohio.

Detroit says that it's actually graduating 66 percent of the kids. That's the seniors. That's the kids who start out in the senior year and manage to graduate. The kids who start out in ninth grade, 25 percent.

BARNES: That's horrible. Congratulations to Mort Kondracke bringing it to our attention. That's a sad case.

They need more charter schools, school choice. They need better superintendents and principals to keep the kids in school.

Even if you have to require them to stay in school, one thing that's overlooked is training people in high school who aren't going to go to college — train them to be auto mechanics and things where we have a shortage of, but don't require a college education.

KONDRACKE: Don't go anywhere. "The Buzz" is coming up next.

(COMMERCIAL BREAK)

KONDRACKE: What's "The Buzz," Fred?

BARNES: We learned, and I would say barely learned, Tom Athens, the husband of Michigan Senator Debbie Stabenow, was grabbed by police in February in Michigan after he paid a prostitute $150 for sex at some motel in Michigan. Now, he is a liberal talk radio executive very involved in politics.

And my point here is not to judge him. He wasn't charged with any. My point is to judge the media. And I think this is another of a long list of media bias cases in which, because Debbie Stabenow is a Democrat, we barely learned this. It was not a big story around the country. Barely got in the newspapers outside of Detroit, yet, if this had been a conservative, a conservative Republican Senator in particular, a woman or a man whose wife or husband got tied up somehow with a prostitute, it would have been a huge story and you know it would have been.

Once again we say because it is a Democrat then, you know, who cares. If it is a Republican, then it is some act of high hypocrisy and the press goes crazy. It happens all the time.

KONDRACKE: This is the 25th anniversary of the landmark report "A National at Risk," the famous report that says if a foreign power inflicted our lousy school system on us, it would be an act of war. Well, we are still at risk and the problem is that only 29 questions out of 500 — 500 questions in these debates have been asked about education.

This is both a civil rights issue and competitive issue. The way to honor Dr. Martin Luther King is to do something about these horrific rates of school dropouts among inner-city kids that I referred to earlier, and even African-American kids, at the end of their high school careers, finish 4 grades behind the average white kid in America.

Now, I think President Bush did a lot with No Child Left Behind. Guess who is in favor of No Child Left Behind and who is not? McCain is in favor. Hillary Clinton is against it. And Barack Obama is question mark, question mark.

It is a competitive issue because on international tests across-the- board against European countries and Asian countries, we finish 29th in ability to solve math problems out of 41 industrialized countries. It is a tragedy and we have not address it had.

BARNES: Indeed.

All right. That's all for "The Beltway Boys" this week. Join us next week when the boys will be 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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