This is a rush transcript of "Special Report With Brit Hume" from May 30, 2008. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

JOEL FERGUSON, CLINTON SUPPORTER: We're talking about breaking the rules, that Michigan did it, and Florida did by going early. That's fine. But then if you're going to solve breaking the rules, you can't do it by having a new set of rules. The rules are very clear that all the DNC can do is determine what our punishment should be and not change the outcome of the election.

JAMES ROOSEVELT, DNC RULES AND BYLAWS COMMITTEE CO-CHAIRMAN: There is the possibility of an appeal to the Credentials Committee of whatever happens this Saturday, if there isn't an agreement on all sides.

(END VIDEO CLIP)

BRET BAIER, GUEST HOSE: Two members of the Democratic National Committee there, the last one a member of the Rules and Bylaws Committee, which Saturday they will try to decide what to do about delegates from Florida an Michigan.

They were punished, obviously, for moving those primaries up, originally taking all their delegates away. So now what?

Some analytical observations from Bill Sammon, senior White House correspondent of The Washington Examiner, Mort Kondracke, executive editor of Roll Call, and syndicated columnist Charles Krauthammer — FOX News contributors all.

Bill, basically, it looks like there are three options — one, seat all the delegates; two, award half of them or some of them; or don't see any of them. How is this coming down?

BILL SAMMON, SENIOR WHITE HOUSE CORRESPONDENT, WASHINGTON EXAMINER: It's funny — there is not much suspense about how the committee will actually rule. I think most people expect them to seat half the delegates. Because so far they have stripped all the delegates, so it seems unlikely that they would put them all back in. So you split the baby and give them half the delegates.

The suspension is all about how Hillary will react to that decision. Will she appeal it or not appeal it? Because that's a huge decision. If she appeals that, that means we could be in for three more months of political scorched earth political warfare between her and Barack Obama, because it would go all the way to the convention.

Now she may use that as leverage to essentially force her way on the ticket, saying if you don't want three months of scorched earth political warfare, put me on the ticket now and we will form a united front against John McCain and go forward.

The only question in my mind is how she is going to react, whether she appeals or doesn't appeal.

BAIER: The math, Mort, doesn't add up for her anyway, the delegates, no matter what happens.

MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: Right. If she got everything that she's demanding, which is to say 111 delegate net gain for her out of Michigan and Florida and zero for Obama, then she still would not be catching up to him, especially because the super delegates are not drifting her way. They're all drifting Obama's way.

So he's going to be over the top eventually, I think. But Bill's right. If she decides to contest this, then what's going to have to happen — the threat would be that that this would go to the convention and the credentials committee at the convention.

Then you have this threat from Nancy Pelosi and Harry Reid that they're going to somehow step into this process and, I guess, persuade members of Congress who are still uncommitted super delegates to go to Obama and end it early so that she has no case at the convention.

What I find so ironic in all this is that when the rules committee first decided to strip Michigan and Florida, her delegates, including Harold Ickes, her chief delegate chaser, voted to strip Michigan and Florida completely. And now they have flipped because it's too her advantage. Talk about situational ethics.

BAIER: The memos have been coming out from the DNC on the Florida sanctions. Here is one — "We had the authority and its discretion to impose the additional sanctions they it did impose but by the same token now has the discretion to revoke those additional sanctions."

On Michigan "While the Rules and Bylaws Committee has the authority to revoke the discretionary additional sanctions, they RBC cannot revoke or prevent the operation of automatic sanctions."

Listen, Charles, we're getting into the weeds here, but the bottom line is they're going to have to come to some decision. And if the appeals, as Bill said, continue a long time, possibly all the way to the rules committee for the convention, the seating of the delegates, does that hurt the party, the Democratic Party?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Yes, it does, and that's why she has leverage.

People expect that — look, the math is going to work against her no matter what. There's no way she is going to get a majority of the delegates. She is not going to get the presidential nomination. People expect that because of that she ought to cash in her chips, release her delegates, and go home.

But that's absurd. She has won these delegates who are going to be half of the haul in Denver, 2,000 strong, a lot of them upset about the way their candidate was treated, accusing the other camp and media of sexism, pretty agitated. And there's a lot of things that you can do when you have that large a constituency on the floor. We saw it in 1976 where Reagan came in slightly behind Ford. There was a huge demonstration on the floor pro-Reagan, which was a huge embarrassment to the ultimate nominee who lost the election.

So she's got all of this leverage to get — and the question is to get what? Her debt needs to be paid. She could use $30 million; a primetime speech, of course; or, perhaps, to force her way onto ticket.

I think that Mort is right about that. She has that, and I think Obama is either going to have to call her bluff or give her something, and give her a lot.

BAIER: Bill, last word — if there are big protests outside this meeting Saturday, is that a major embarrassment for this Party?

SAMMON: That's the other element of suspense — will the protests be seen ginned up on Hillary's behalf or legitimate cries of complaint by disenfranchised voters?

It is hard to predict how protests will be seen on TV cameras. I think that's the wildcard here.

KRAUTHAMMER: And it will be a taste of what is to come in Denver if there's a protest on the floor of the convention.

BAIER: When we come back with the panel, is Al Qaeda really on the run in Iraq and around the world? The head of the CIA thinks so. We will examine what General Michael Hayden told Fox's Jim Angle in his exclusive interview today.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MICHAEL HAYDEN, UNITED STATES GENERAL: Well, we're making good progress against Al Qaeda. I've mentioned in other forums, for example, that Al Qaeda — and again, nothing is guaranteed and everything is reversible in this world — that Al Qaeda is on the verge of a strategic win in Iraq. I think there are clear elements of a strategic defeat in Saudi Arabia.

Globally there is also another trend, and here it's almost ideological. You are seeing significant portions of the Islamic world take issue, and take issue publicly with Al Qaeda's worldview, with Al Qaeda's tactics, and with Al Qaeda's vision for the future.

(END VIDEO CLIP)

BAIER: That's CIA Director Michael Hayden in a broadcast exclusive interview with Jim Angle in which he talked about Al Qaeda being on the run around the world.

Kind of a bold statement with some caveats in there, but the CIA director talking about Al Qaeda, it is news. Mort, when you listen to this, he sounds pretty confident.

KONDRACKE: Look, it's true.

And there are two fascinating pieces that are done separately, one in The New Yorker and one in The New Republic by people that have been following terrorists and Al Qaeda for a very long time, talking about the ideological rent that has occurred in the jihadist movement over the issue of basically butchering other Muslims and butchering innocent women and children. That's the rift.

And because of what Al Qaeda has done, they have lost popularity in Pakistan and Afghanistan and everywhere else if you measure it by polls.

However, Al Qaeda and Taliban, its ally, have been perpetrated more suicide bombings in 2007 in Afghanistan and Pakistan than they had before, and, meanwhile, Al Qaeda is down, Hezbollah and Iran, its sponsoring, are way up. And what they're doing is as dangerous to American interests as Al Qaeda.

KRAUTHAMMER: You take them on one at a time, you know — first Germany and then Japan. And what we're hearing here from Hayden is really important. He talked about the ideological issue, but it's not because these other jihadists who now hate Al Qaeda have discovered the butchery of Muslims. That was going on by these guys on both sides of this rift for 20 years.

What has really happened is that they are losing. Where are they losing? They're losing in Iraq. Bin laden has always spoken about the strong horse and the weak horse, how people will follow the strong horse. It was the strong horse in Iraq when it took over al-Anbar, and it is losing. It is on the run.

And that has demoralized the movement and made a lot of the ideologues rethink its tactics. But it has to do with the fight on the ground.

There are so many Americans who think the fight is really in Afghanistan. The jihadists have declared the central front in Iraq, that's where the war has been declared, and that's where they thought they would deal a blow against America.

BAIER: How much success is should the U.S. take in that, and how much is the Sunnis and others rising up against Al Qaeda?

KRAUTHAMMER: It is both. But the uprising against Al Qaeda would not have succeeded if it hadn't had the American support and Petraeus on the ground, and the president who said we are staying and not leaving. You don't rise up against Al Qaeda if the Americans are leaving.

It is because we were steadfast that the uprising has succeeded and Al Qaeda is now on the run. And Al Qaeda is not only on the run in Iraq, it's humiliated. And that's extremely important in changing the ideology of the movement.

SAMMON: There's two reasons, really, why Al Qaeda is losing. One because the Muslims are sick and tired of the fact that civilian Muslims are getting killed in this thing and not the hated westerners.

But, second, you have to give the American military its due. It has had great success in training the Iraqi security forces after a lot of fits and starts and a lot of problems, and it took longer than we thought. But because the Iraqi military forces are stepping up and taking more of the lead, targeting them is not as attractive to jihadists as targeting Americans.

So the Americans have been successful in training the Iraqi security forces and also building these alliances with the Sunnis and Shia, you know, the Anbar awakening. A lot of that is due to the military's success.

KONDRACKE: The political importance of this for America is that — look at the people. This would not have happened without the surge, without Bush's surge, because the Anbar awakening would have collapsed if we had indicated that we were not willing to double down, as Bush did.

So all those people who were against the surge, and that's the entire Democratic Party, probably, has to answer for the fact that Al Qaeda in Iraq is defeated. And what would have happened if their policy had succeeded and we hadn't done the surge? We would be losing to Al Qaeda.

BAIER: That's the last word.

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