This is a rush transcript of "Special Report With Brit Hume" from July 1, 2008. This copy may not be in its final form and may be updated.

BRIT HUME, HOST: Here is what U.S. Ambassador to Iraq Ryan Crocker had to say about the political situation with the Iraqi government just a day or two ago: "We've seen that through a string of legislation through much better budget execution, a dramatic improvement over just a year ago.

I'm increasingly confident that we're in a climate where Iraqis are going to be able to progressively build their country not just in security terms but in political and economic as well."

This occurred as the administration sent to Congress at a particular House member's request a report on the benchmarks. Remember the political benchmarks that were made a part of the debate on Iraq by Congress, really? And last year the administration reported satisfactory progress on only about eight of 18 benchmarks.

This year, says the administration, there has been satisfactory progress on 15 of the 18, and on one of the others that has to do with an oil law, there is at least an oil revenue distribution program if not a law.

Some thoughts on all this now from Mort Kondracke, Executive Editor of Roll Call, Mara Liasson, National Political Correspondent of National Public Radio, and syndicated columnist Charles Krauthammer, FOX News contributors all.

Well, I have to say that I'm glad I was able to discover this story, because when it first hit the wires, the wire story lead about it was all about how much trouble the next president is going to have with the slow pace of the Iraqi government.

Only down in the story did one find out that this new report on the benchmarks had come out, reporting a dramatic change from a year ago. So what to make of all this, Mort?

MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: The congressman who asked for the report, Mike McIntyre, Democrat of North Carolina, dismissed it, said, you know, that this is only progress on the benchmarks and that the benchmarks haven't been achieved, and all that. So that's one point of view.

HUME: But, Mort, the issue of using the words "met" or "unmet," Congress specifically requested that this all be framed in terms of progress. So that was the administration'—

KONDRACKE: That is going to be, I think, the dominant response to all reports of progress—they are not enough, if we got out earlier, the progress would have been greater. That's what Carl Levin, the Chairman of the Senate Armed Services Committee said, and so on.

There as been one piece of progress reported after another, including control of the militias and violence down, and even this new oil agreement. The Iraqi government feels confident enough to not just give the United States no bid contracts for development of the oilfields. They're going to spread it around the world.

HUME: They're going to open up the bidding.

KONDRACKE: Yes. So it's big.

But I think that this provides a great opportunity for Barack Obama—when he goes to visit there, he can do the old George Aiken thing. Remember from 1966 during the Vietnam war, the Senator from Vermont said let's declare victory and pull out.

So he can declare victory, he can say has all this really has been done, the sacrifice of our brave troops have been rewarded, and now we're free to leave. We'll leave responsibly, but we're out.

MARA LIASSON, NATIONAL CORRESPONDENT, NATIONAL PUBLIC RADIO: I think the big question is going to be how fast are we going to leave? I think both a President McCain and a President Obama will bring down troop levels a certain amount. The question is how fast.

HUME: Let me ask you a question, Mara, before we get to that. Both of you suggest that the word of this progress is going to get through. I suspect that this broadcast tonight, and maybe others on this channel, are not the only ones that will make a headline out of this, that this is not going to be a big story elsewhere.

LIASSON: I think over time, if the violence goes down—

HUME: It has gone down.

LIASSON: Yes, and if it continues to that will change people's opinions.

The majority of the American people still think the war was a mistake. What they're divided on is what to do now, and whether they think the progress is tenuous enough that we have to stay there to maintain it.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I think you're right. I saw a media report that the number of reports on Iraq in the last year on network news is down by, I think, about 90 percent as the news has been improving.

The progress is absolutely undeniable on the military and political front, which is why the only people who are denying it are really on the fringes. But this obsession with the benchmarks is really quite remarkable. It's a Democratic obsession which reflects an American obsession on legalism, parchment and paper, and laws.

Look at the two benchmarks that the administration says are as yet unmet—legislation to disarm the militias. Militias are not disarmed by legislation. They are disarmed by an army. And the Iraqi army has evicted Muqtada al-Sadr and the Mahdi army out of Basra, taken over Amarra, taken over Sadr City, battling guerillas in Mosul.

This is actually happening on the ground. Who cares if it is enshrined in law?

And as Mort indicated on oil, yes, you do not have an oil law which divides the revenues for eternity. But what is happening year after year is that in the budget, it is actually ending up in the hands of the provinces.

So all of this stuff is actually happening on the grown, but this obsession with is in law or not, I think, is silly. What we can see undeniably is a government under Maliki taking control of Iraq and getting the support of the Sunnis, who are going to rejoin the government. This is amazing.

HUME: This might raise this question—what then is left of the argument that the surge has not fulfilled its purpose?

KONDRACKE: I think there's nothing left to the argument. Even the Democrats have been saying for some weeks now, or months even, that, oh, well, everybody knew if we added more troops that we could bring violence down.

Of course that's not what they said at the time. They said that it was going to be a catastrophe, that he we would all be targets—

HUME: In the middle of a civil war.

KONDRACKE: Exactly. There were just dead wrong, and the surge has been a triumph.

HUME: So the question then becomes, they said we shouldn't have done the surge, we should have gotten out. Now that the surge has succeeded, that becomes an argument for getting out? Do you think that will sell?

KONDRACKE: I think they will try it. You watch.

HUME: You think so, Mara?

LIASSON: I think that McCain has to make the argument that getting out faster than he thinks is a good drawdown would endanger all the progress that we have made.

KRAUTHAMMER: Obama understands that if he argues for fixed withdrawal at a time when everything is going our way, it would be a political disaster. He will change. Between now and Election Day he will adopt the McCain position cleverly, slowly, but gradually—meaning withdrawal if conditions are right.

HUME: That takes care of Iraq. What about Iran's threat to close the Straight of Hormuz? The worry is that Israel may act on its own to take out Iran's nukes. We'll discuss that next.



QUESTION: This apparently anonymous official also said that it's possible that Iran would have enough enriched uranium by the end of the year for a nuclear bomb.

TOM CASEY, STATE DEPT. SPOKESMAN: I need to find this guy, because apparently he is an expert on the Israeli military, an expert on Iran, and an expert on nuclear issues at the same time. Let's get him a Nobel Prize.


HUME: A sarcastic reaction from a State Department spokesman today that drew reports of several things. One is that Iran could have a nuclear weapon by the end of the year; two, that Israel may attack Iran to prevent that from coming to pass.

And then, of course, you heard earlier in our program the Iranian warnings that they might close the Strait of Hormuz if it's under attack. The Strait of Hormuz is, of course, a choke point for the world's oil supplies, as you can see there from the map.

So what to make of all of this war talk about Iran—Charles?

KRAUTHAMMER: Well, look, I don't think it's a mystery the Israelis are scared to death. They think this is an existential threat. But from all information that we have, they really don't have the physical capacity to carry out a really successful strike. They don't have enough stuff. The country—

HUME: You mean enough planes and enough bombs?

KRAUTHAMMER: Planes and bombs and intelligence. And it is also a long way, and refueling tankers to get the pilots back. It's a long way.

America does. It's got missiles. It's got a huge fleet of airplanes. It has all the tankers it needs.

But on our end, of course, we're calculating the unbelievable effects of such an attack, which might include the closing of the Straits of Hormuz, which would double the price of oil overnight. It would be an oil shock of the kind that we had never seen.

It will also precipitate a war against Israel. You will have Hezbollah launching tens of thousands of rockets, Hamas was saying, and you may get a lot of increased activity in Iraq. So this can be a serious event.

The fact is that whether it will happen is up to a small number of officials in Israel and a very small number of officials in America. And they are talking about it.

HUME: In your view, would Israel go forward with it because it felt it had to try, even though the odds, as you suggest, are against it?

KRAUTHAMMER: I think that's likely, yes.

HUME: Really?

KRAUTHAMMER: I think it's probably slightly over even chance, because it is—look, the Jews in the '30's heard that there was a dictatorship out to destroy all Jews in the world, but did not believe it. It happened in Europe—6 million dead.

There are 6 million Jews, and the Israelis are sensitive about this because of their history. They believe the people who say they want to exterminate them.

And even though the strike might not be successful to the point where it sets Iran back two decades or so, I think, even a few years might be enough to induce Israel to do it.

HUME: What about the intelligence? U.S. intelligence seems dubious of the possibility that Iran is as close to having a nuclear weapon as Israeli officials seem to fear. What should we believe?

KONDRACKE: What the Israelis say is that it's not when they have a bomb, it's when they have perfected the technique to get highly enriched uranium. And then making a bomb after that is just a turn of the switch practically, not completely, but virtually, so that the red line is a lot closer than the actual having a bomb.

And the people that I've talked to who either are in intelligence or are talking to the Israelis who are in intelligence, who used to say that the chances were 50/50, are now saying 55/45.

They think that the Israelis when they conducted this test run with 100 planes over the eastern Mediterranean going the same distance that it would take to go to Iran were warming up, practicing to do this.

And the latest theory I've heard about this, who knows whether it's correct or not, is that the Israelis would do it before the United States election and not between the election and inauguration, because if Barack Obama—

HUME: Before the election?

KONDRACKE: Before the election, because if—

HUME: I've heard the other.

KONDRACKE: Well, so have I. But the logic of this is that Barack Obama could not risk offending the American Jewish community, would have to endorse the raid. McCain certainly would, and thereby the entire United States government would be bound.

HUME: Do you think, Mara, that the U.S. would profoundly not want Israel to do this?

LIASSON: You would think they would not want Israel to do this because of the blowback. On the other hand, the Israelis know this government. They don't know who they will be working with Barack Obama as president.

HUME: That's true, but do you think the United States would then in some way cooperate? It certainly would help Israel pull this off if the U.S. did?

LIASSON: I think there would have to be some cooperation in terms of refueling and flying over Iraq. But I think whether the U.S. cooperates or not and how much that cooperation is is almost irrelevant. We will be seen as a partner in Israel's attack no matter what we do, and we're not going to be exempt from whatever blowback the Iranians try to enact.

HUME: Do you think it will happen?

LIASSON: I have no idea.

HUME: Charles?

KRAUTHAMMER: A year or two, thought it would happen. Right now I'm inclined to think that we will not do it, but I'm inclined to think the Israelis probably will.

HUME: Before the election? After the election, before the inauguration? After the inauguration? This is all speculation, we realize that.

KRAUTHAMMER: I think their timing is less political than technical—what is happening in Iran, how close are they to achieving the critical mass of having enough uranium.

HUME: Do you agree with that?

KONDRACKE: I believe my 55-45, yes.

HUME: That's it for the panel,

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