This is a rush transcript from "The Beltway Boys", May 17, 2008, that has been edited for clarity.

FRED BARNES, FOX CO-HOST: Coming up on "The Beltway Boys," a shaken Republican party looks to John McCain to save the brand. We'll tell you how.

MORT KONDRACKE, FOX CO-HOST: Obama tussles with President Bush. And rumors fly that Hillary Clinton is forcing her way onto the Democratic ticket.

BARNES: Gay marriage could be making a comeback as a wedge issue in the fall campaign.

KONDRACKE:And Ron Paul and Bob Barr threaten to crash John McCain's party.

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

(FOX NEWS BREAK)

BARNES: I'm Fred Barnes.

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

BARNES: The hot story number one is alarm bells. And boy are they ringing in Republican circles like crazy after Republicans lost these three special House elections from seats that had long been Republican seats. And Republicans are trailing Democrats in practically any measure or indicator about how the election may go this fall in November. So, there is a lot of alarm Monday Republicans.

And I think the smartest warning has come from Tom Davis, the moderate Republican House member from Virginia, who is actually retiring and he is talking about not only the trouble now but the trouble ahead.

One thing he said is that Republicans haven't done anything in the last couple years to improve their image or standing after the devastating loss from 2006 and goes on to say this: "The political atmosphere facing House Republicans this November is the worst since Watergate and is far more toxic than the fall of 2006 when we lost thirty seats. Whether measured by polls, open seats, money, voter registration, generic ballot, presidential popularity or issues, our party faces a steep climb to maintain our current members."

Wow! That's quite a list. Now look at the three House seats and you will see why there is such alarm because of the desperate between how they have gone before. They lost three streets long been Republicans strongholds in Mississippi, which was a few days ago, the district had been won in 2004 by President Bush by 62 percent. Then the seat in Illinois, which had been held by former House Speaker Dennis Hastert, Bush won by 55 percent. And Democrats picked up a seat in Louisiana around Baton Rouge that Bush won by 69 percent.

And here's what John Boehner, the Republican House leader, said in response.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER, (R), OHIO: There are a lot of reasons for the loss of those three seats and trust me we are very disappointed in the loss of the three seats. But for us, all it should do and I told our colleagues this morning, it is time for us to get off the mat and show people that we can in fact deliver this change for them.

(END VIDEO CLIP)

BARNES: At the moment, that's a pretty hard sell for Republicans.

KONDRACKE: Yes. Well, the Democratic House Speaker Nancy Pelosi had this reaction to the blues of the Republican Party. Watch.

(BEGIN VIDEO CLIP)

NANCY PELOSI, (D), SPEAKER OF THE HOUSE: What I see coming outs of there is disarray, chaos, dissatisfaction and uncertainty about the future. I haven't the finest — I assume the Republican caucus will advance an agenda they believe from as we do with our agenda. And I think what they believe in is something far different from the mainstream of America is.

(END VIDEO CLIP)

KONDRACKE: That's the problem is the Republican agenda. Look, I think the Republican's lost the majority from 2006 because of basically Tom Delay. That is to say, total sacrifice of principle on spending and on earmarks for the sake of retaining power. Since then, John Boehner has been promising he would rebrand the party.

The problem is he and Roy Blunt, his whip, have been indulging in basically tactical maneuvers to embarrass Democrats with things like motions to recommit that never even get reported in the paper. And what they have neglected to do is lay out a party agenda.

And that's what Tom Davis, in this brilliant memo of his, said that had to be done. There ought to be a Republican agenda on loads of issues, on health care, on tax reform, on energy and the environment that the Republicans could push aggressively every day. It is not going to pass because the Democrats run the House of Representatives. But they would serve as markers for what the Republican Party stands for. And Boehner has not delivered it.

BARNES: No. They haven't delivered it. And these would be markers for something else. This Democratic Congress last year and this year has been a totally do-nothing Congress. They haven't done anything. Harry Truman accused the Republican Congress of that in the 40s. A Congress that was actually productive. This one as not been.

You mentioned just three of the issues that are big issues facing America out there, health care, taxes, the complicated tax system and energy. Then there's Social Security. There's Medicare with its $84 trillion in unfunded liabilities. There is Medicaid. There's immigration. All of the big issues are out there. And Republicans, if that's their agenda, they at to do something on the agenda and point out that Democrats have done practically nothing. It is not too late to do that. I just don't — Republicans don't seem they are up to actually doing that.

KONDRACKE: Well, fortunately, once again, we have John McCain rushing to the rescue of the Republican Party. If he weren't the nominee, as you said many times, there would be zero chance for the Republican to win the race.

So here he is. He came out this week at a speech from Columbus, Ohio. Kind of a strained speech where it was kind of a retrospective state of the union as though he's at the edged of his first term and reviewing what the bidding was. But what it amounted to was his goals for his presidency. And here is a list of them, basically the Iraq war won, tax reform, free trade, health reform and so on. What it all amounted to was that he said that he was going to try to deliver a safer, freer, wealthier more — America by the end of his first term.

But what I thought most interesting in the whole speech, a lot of it was review of his previously issued campaign points. But he made this bid to outdo, outbid Barack Obama on the issue of bipartisanship. Watch this.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, (R), PRESIDENTIAL CANDIDATE: I won't spend one hour of my presidency worrying more about my reelection than keeping my promises to the American people. There is a time to can campaign and a time to govern. If I'm elected president, the era of the permanent campaign will end. The era of problem solving will begin.

(END VIDEO CLIP)

KONDRACKE:That's great stuff. I love it. I love it. And he delivered it. He has delivered it over his career.

BARNES: Look, he is not going to have any trouble winning the battle about who has been more bipartisan, McCain or Obama, because McCain is the most bipartisan of the 100 senators. Obama, 100 percent liberal voting record. He's been the least bipartisan, no matter what he says.

Anyway, we've made our predictions about what we think will happen come election time this fall. We think the Republican Party will lose four senate seats.

KONDRACKE:You think.

BARNES: I think. OK. I think they will lose four Senate seats and ten House seats. Mort, thinks Republicans will lose six Senate seats and 18 House seats.

Coming up, the number two spot on the Democratic ticket is Hillary Clinton's for the taking? That's what one prominent statist gist thinks. We will give you our two cents, next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. HILLARY CLINTON, (D), PRESIDENTIAL CANDIDATE: So, are we in the last two minutes of a game that you don't think one or the other can win? You go to the buzzer. Maybe it goes into overtime.

(END VIDEO CLIP)

KONDRACKE:It goes into overtime.

Welcome back to "The Beltway Boys." Hot story number two is end game.

Well, it is clear even after Hillary Clinton's smashing 41 percent victory in West Virginia, this week, over — that Barack Obama is the likely Democratic nominee.

The question is: why is Hillary going on? Why is she going on? What does she want? The possibility is, you know, she wants to be vice president and if she does, can Barack Obama say no? Can he deny it to her?

Our pal, the Democratic strategist and FOX News contributor, Bob Beckel, says quote, "If Hillary Clinton wants the vice presidential nomination and her loyal delegates demand it and the Clinton machine puts its full weight behind it, she will be on the ticket. Count on it."

Well, his theory is that Bill calls up superdelegates who — lots of whom were members of his administration or are loyal to him — and said, OK, you have dumped us for Obama during the campaign. Now we want you and it will be the unity ticket, the dream ticket supposedly.

Now here is Barack Obama when asked about the possibility. What he said. Watch.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: If you become president of the United States, will Ms. Clinton be your vice president?

SEN. BARACK OBAMA, (D), PRESIDENTIAL CANDIDATE: What are you a reporter? That's what these guys have been asking all day long. You know, it is too early — Senator Clinton is still competing. We haven't resolved this nomination. I haven't won the nomination yet.

(END VIDEO CLIP)

KONDRACKE:Ducking, ducking, ducking.

Look, Obama can't want Hillary Clinton as his vice presidential candidate especially because Bill Clinton comes along with the package. Juggling two of them in the White House is going to be more than he can stand. They wouldn't always be loyal and Bill would be out talking and so on.

BARNES: Leaking.

KONDRACKE: Leaking. That's what I mean.

So what can he do? Maybe what he could do is to name a running mate as soon as he has the nomination locked up and preempt Hillary Clinton and dare the superdelegates to try to overturn his judgment at the convention. I can't believe they would even do that.

But the question is, he would want to reach into her camp to get somebody to unify the party, but if he picks somebody like he your friend, Ed Rendell, governor of Pennsylvania, does Hillary call up Ed Rendell and say you can't take that and make it a real confrontation. If she does that sort of thing, he can't pick his own vice president. what she has done is emasculate him from the beginning.

BARNES: Mort, you have been to a football or basketball game that goes into overtime. Very exciting. I am for overtime here. And look, but this is a huge problem for Obama. And I mean everybody knows, as you were suggesting, the last person he wants as his running mate and then as vice president is Hillary Clinton with Bill Clinton hanging around causing trouble. It would be a totally dysfunctional White House.

The question is whether he has the strength. Somebody introduced Hillary Clinton, the guy said she had testicular fortitude.

KONDRACKE:Why does this sort of subject keep coming up?

BARNES: We will see if Obama has the strength to say no to Hillary Clinton and Bill Clinton and Bob Beckel and these others. If he doesn't, if he knuckles under and allows Hillary Clinton to be his vice presidential running mate and Bill Clinton enters the White House, if he does, this will be a sign of weakness.

KONDRACKE:Yes. It will raise the legitimate question, if you can't handle the Clintons, can you handle Ahmadinejad.

Then this week, we had this bash up between Barack Obama and President Bush over the issue of quote, unquote "appeasement." Here is Bush at the Knesset in Israel and Obama's response in a town meeting in South Dakota. Watch.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Some seem to believe that we should northwest with the terrorists and radicals as if some ingenious argument will persuade them they have been wrong all along.

OBAMA: If George Bush and John McCain want to have a debate about protecting the United States of America, that is a debate that I am happy to have any time, any place. And that is a debate that I will win because George Bush and John McCain have a lot to answer for.

(END VIDEO CLIP)

KONDRACKE:I think it was perfectly outrageous for the president of the United States to go to another country, celebrating Israel's anniversary, and play domestic politics in the United States. You know, and it was ambiguous perhaps whether he was talking specifically about Obama, but White House aides said that he was.

BARNES: I didn't hear them say that. That's not what the press secretary said.

KONDRACKE:Well, our FOX's Wendell Goler, said that that's what they were putting out.

No, John McCain after talking about this would — would be a bipartisan future and all that, he would reach across party lines, backed up Bush to the hilt and this score. It was McCain's opportunity to separate himself from Bush on this. He is like Bush on taxes. He is like Bush on health care. He is like Bush on the Iraq war. And he is now like Bush on dirty politics.

BARNES: Please. That wasn't dirty politics. The president said something about appeasement.

KONDRACKE:Hitler.

BARNES: Appeasement — look the president can defend that. He didn't mention Obama's name. I don't care what some White House aides, whom you can't name for me, might have said. The press secretary said Bush didn't mention Obama's name. The press secretary said he wasn't public there — in public, they weren't talking about Obama. So I think there is a stretch there on your part.

And look, Obama says the president, he is playing politics with foreign policy. What is Obama doing? His whole campaign is based on some speech he gave in 2002 saying he is against the war in Iraq. That's all he talks about. He totally politicized the Iraq war.

(CROSSTALK)

It is a big issue in the election and legitimate. Having meetings with dictators with no preconditions, a statement that Obama said many times and now is trying wiggle away from, is what he was trying to do in responding to Bush.

KONDRACKE:That's not appeasement.

BARNES: It is.

KONDRACKE:Coming up, California thrusts gay marriage back into the headlines and into the political fray. We'll tell you how it could impact the fall elections.

(COMMERCIAL BREAK)

BARNES: Welcome back to "The Beltway Boys." It is time for our "Ups and Downs."

Up, gay, marriage. Gay rights advocates got a big win this week when the California Supreme Court overturned a voter-approved gay marriage ban in that state. But the fight is far from over.

This was a big victory. No question about that. It may be a parent victory because there is a movement for a constitutional amendment in California that would overturn the decision and to get it on the ballot that I think would have at least an even chance of winning. And it comes at a time when I frankly think supporters of gay marriage have been winning the argument, have been slowly gaining ground in favor of gay marriage.

And look, Arnold Schwarzenegger vetoed twice bills in California that would have legalized gay marriage. But the next governor of California will probably be a Democrat who will sign the bills. This was probably going to happen in California anyway.

Two other things. This is another example, 4-3, another example of the kind of judicial activism that drives a lot of people crazy and not just conservatives where they fabricate and dream up some right they claim was in the state constitution written years and years ago. I think it managed actually to put gay marriage in a very unfavorable light as something that it takes a split decision of unelected junction to impose on people.

KONDRACKE:You know, it could help John McCain in the sense he makes the argument we should not from a federal judiciary that makes laws like the California legislature did.

I believe that gay marriage should be legal. I don't see why gays shouldn't have the same right as straits. and you know, the idea that 2 percent of the population wanting to join an institution like marriage is going to destroy it when you have all of these Hollywood celebrities and politician who are busting up the institution of heterosexual marriage the way they are, it doesn't make sense to me.

But I agree that this is the wrong way to go about it. And the implication is that it is going to be a dominant issue in this campaign when there are more important things to be going on. And the next president — remember Bill Clinton was confronted with the issue of gays in the military and it was so preoccupying in the beginning of his administration, it could be the same for Barack Obama or John McCain whoever is elected.

Up, GOP spoilers. The entrance of Bob Barr in the presidential race this week as Libertarian candidate could rock the boat for John McCain. Barr is joining Republican long-shot Ron Paul who, believe it or not, is still in the race and is threatening to disrupt the Republican convention this summer.

Here is Paul rejecting the spoiler image.

(BEGIN VIDEO CLIP)

RON PAUL, (R), PRESIDENTIAL CANDIDATE: It is a very important process and I make no predictions. I think that should be the goal as much as presenting alternative views in the case for liberty and in the case for the Constitution.

BARNES: Well, he got a speech there. That may not be primetime, Maybe they'll put him on Monday afternoon at 1:00 p.m. when nobody is watching.

Look, as if Republicans didn't have enough problems, and now Bob Barr comes along. I don't think he's won the nomination yet. But if he does, or whoever is the Libertarian candidate, but Bob Barr is more well-known than other candidates. It wouldn't be significant, but he would offset whatever I think Ralph Nader might do to hurt the Democratic nominee, presumably Obama.

Frankly, I don't know what Ron Paul is up to, disruption at the Republican convention? I don't know. Maybe that will help his ego. Beyond that, it is a puzzle to me.

KONDRACKE:It seems to me the danger to McCain would be if Ron Paul ran as a third party candidate, instead of Bob Barr. He is much better known. He's been a national candidate. He's got this kooky following of his and he could really bite into McCain.

BARNES: He was in all presidential debates he is quite well-known. He could get, I think, 3 percent or 4 percent. And would — but he is not. He is running for the House again, right?

KONDRACKE:Yes. That's the good news.

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

(COMMERCIAL BREAK)

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

KONDRACKE:Laura Whittington, one of our ace reporters at Roll Call, had a story last week indicating that if the Republicans lose 15 to 20 seats this year, John Boehner, the leader, and Roy Blunt, the whip, will be out as leaders and will probably be replaced by Eric Kantor, who is currently the chef deputy whip, and Adam Putnam, the Republican conference chair.

BARNES: That makes sense.

KONDRACKE:Young Turks.

BARNES: Young guns, as we call them. If that happens — and heaven knows Republicans could lose a lot of seats — they will be joined somehow in the leadership because there are three other of the brightest, smartest young Republicans, Paul Rhine of Wisconsin, the policy guy; Kevin McCarthy, a freshman from California; and Jeb Hensley of Texas, who is the head of the Republican Study Committee. It will give the Republicans one heck of a new face, no question, if it happens.

KONDRACKE:That's it 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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