This is a rush transcript of "Special Report With Brit Hume" from July 11, 2008. This copy may not be in its final form and may be updated.

SEN. BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: No matter what you do for a living, I think we can all agree that raising our children and caring for our loved ones is one of the most important jobs that he we have. It's time we started making that job a little bit easier, especially for working women.

SEN. JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: Juggling family and career can be hard, hard enough, but now you have to deal with the rising cost of both running a business and raising a family. I have a plan to grow this economy, create more and better jobs, get America moving again.

(END VIDEO CLIP)

BRET BAIER, GUEST HOST: There you see Senators Barack Obama and John McCain courting female voters.

So where is this race right now? Where does it stand? Let's first look at some polls, the recent average of all the polls — Barack Obama at 48 percent, John McCain at 42.5 percent, according to Real Clear Politics.

Then you have the other interesting stat, and this fundraising. The McCain campaign putting out their fundraising numbers for June — $22 million for John McCain. There you see the Republican National Committee and McCain totaling $95 million.

We don't have a number for Barack Obama yet. The Wall Street Journal is estimating June numbers at $30 million, though the campaign is not putting out those numbers yet.

So what about this race? Some analytical observations of where we stand from Fred Barnes, Executive Editor of The Weekly Standard, Juan Williams, Senior Correspondent of National Public Radio, and syndicated columnist Charles Krauthammer, FOX News contributors all.

Juan, let's start with you, your take on where things stand right now.

JUAN WILLIAMS, SENIOR CORRESPONDENT, NATIONAL PUBLIC RADIO: Well, I think the problems that beset the McCain campaign are what stand out to me, especially over the past week. He is trying to develop a message. He's trying to be clear about what he stands for, which has been a muddle.

And then, all of a sudden, here comes Phil Gramm to say if you're concerned about economic anxiety, really, you're a whiner and you don't understand what is going on.

Someone told me today he was really talking about the way the press treats all these economic stories, but even so, it came across, I think, in a very negative way to voters, and at a time when John McCain, again, is trying to develop a message.

That's what's missing for McCain. You can talk about the money, but right now, as you just pointed out, Bret, the money is coming in for McCain. It looks as if he's starting to secure some of that base. And I think the base will come together as we get farther along in the summer and go to the fall.

But the key is who is McCain and what does he stand for? He is still a picture that is being painted.

BAIER: Fred, what do you think of that?

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: I think Obama is ahead. And I think, more important, what Obama has is all the larger forces that will determine the outcome of the election are pointed in his direction.

You look at the party. The Republican Party has eroded, it's base has eroded. And the Democratic Party has grown. The economy, obviously that's something that works in the benefit of the Democrats.

You look at things like where are we in the political cycle? Well, we're sort of at what looks like the end of a Republican era and heading into a Democratic era.

So all those big things really point to Obama or any other Democrat. He happens to be the nominee winning in the fall.

BAIER: Today, Charles, we saw the two candidates go head to head over energy, and John McCain saying, essentially, that Barack Obama says no to everything.

Barack Obama is shooting back that McCain says this energy problem was 30 years in the making, but McCain has been in Washington for 26 of them.

What about the energy back and forth? Is there one candidate who is making ground here?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: It would be an area where you would expect a Republican would. It was an issue handed to McCain on a platter — high prices make people aware of the fact that we need drilling. There has been a huge change in public opinion on this issue, a swing towards drilling for American oil to make us independent and lower the price.

And McCain has been rather ineffective in pushing that. He should be out there every day on this. But, in fact, he has been rather flat.

I think the larger issue is the one that Juan pointed to, which is he is sort of very fuzzy and undefined. And the way that I put it is that you could say he doesn't have a message. I don't think he has a reason why he's running. He hasn't sort of explained why he is. I don't know. I'm not sure he knows. And if he knows, he hasn't really told us.

There isn't a theme in his pudding. And he's running, I guess, on his reputation that he had years ago as a maverick. And he is known, people like him, and that is why he's close in a Democratic year.

But he's the challenger here. He is way behind in the sense that the mood is all Democratic, and he has to start to define himself and to argue on issues. He has been weak on energy.

He ought to be attacking on Iraq, for example. Iraq is an issue where you can see Obama shifting in his direction. He knows Obama knows that the old position, the withdrawal on a fixed timetable, is a losing issue. It's the way to lose a war that Americans are beginning to understand is winnable.

He ought to hit him now before Obama moves. But he's been weak on this. He hasn't hit him hard on this. Obama will end up in a position where he will be able to cover himself on Iraq and it will be neutralized.

And then what is left is what Fred is talking about, all the conditions in the country which makes it go Democratic in this kind of year.

BAIER: Juan, as you look at the polls, most of them have it within six, six or seven. And you look at the states. According to Karl Rove looking at electoral votes, 279 to 199 electoral votes. Potentially this race could get increasingly tighter as we go into the conventions, and not separate, get tighter.

WILLIAMS: There are two ways to look at. One is you could say this could be a blowout year if the conditions apply.

What Fred was talking about, this looks like a Democratic year. If you look at all the political prognosticators, they say that the congress, the House and Senate are going to pick up seats for the Democrats. Does that flow attach to the White House?

But the other way to look at it is this-and Fred is going to make fun of me in a second, so I anticipate the mockery.

BARNES: All right, I'm ready!

WILLIAMS: But McCain is running ahead of generic averages for a Republican at this moment, and Barack Obama is running behind where a generic Democrat would be at this moment. So is it possible that Barack Obama is the one who will stall, and that John McCain could pick up as he defines that message.

If, for example, the situation with Iran becomes more difficult, does that benefit McCain? I think it does.

BARNES: I think it does, too. You don't get the White House just by running ahead of the generic standee of your party, for sure.

But, look, what Charles was saying is right. McCain, if he runs a spectacular campaign, an aggressive campaign, a challenger campaign — he's running like an incumbent, or as what a lot of Republicans say, this is the second coming of the Bob Dole campaign. That's not a compliment. He really has to go at a pace and exploit issues the way he hasn't yet.

BAIER: Last word on this topic.

So, who are the respective nominees going to choose as their running mates? The all important "Veep stakes" is back. We're closing in on some names, or maybe we're not, but we'll talk about them all with the panel when we come back.

(COMMERCIAL BREAK)

BAIER: Well, it's a favorite parlor game here in D.C. A lot of people are talking about who the nominees will choose as V.P. So let's play it here on the panel where the clock is ticking.

Fred, let's start with Barack Obama — two names.

BARNES: I think the one that makes most sense right now, since he will probably win the presidency, is Governor Sabellius of Kansas. Showing up at the convention with a woman who is not Hillary Clinton I think would be very popular.

If the race is close, and Pennsylvania is close, a state he needs, Ed Rendell, the governor, would be good.

BAIER: Ed Rendell, Clinton supporter, Pennsylvania Governor?

BARNES: Yes.

BAIER: OK — Juan?

WILLIAMS: I think Hillary Clinton. I think that Sabellius is just a proxy for Hillary Clinton. Hillary Clinton is the dream ticket. That's the one everyone wants to see.

BAIER: Still in/

WILLIAMS: It's still in, absolutely in.

And concern about whether or not she has been vetted or not, apparently Howard Wolfson, who is now one of the FOX contributors said he doesn't know if she has been vetted, but the fact is everybody has been talking about her, and the polls indicate she still would be the one.

And there is a certain percentage of her voters who have yet to switch over to Obama.

And after that, I think Joe Biden. Despite his demurrals, I think Joe Biden, the Senator from Delaware, a strong foreign policy background, a real personality, energetic, fun. I think he would be an interesting pick for Senator Obama.

BAIER: OK — Charles?

KRAUTHAMMER: I would start with Sam Nunn, because he is a former Senator from Georgia, sage. He has been on every bilateral, bipartisan commission in the history of the world. He is considered a moderate. He's older, of course. He's a sort of a stabilizing anchor. I think he would be a safe choice if Obama is ahead, as I suspect he will be. It would be a good choice for him.

Second, on putting up Hillary, I don't think he will pick her, I don't think he should. But I just wanted her picture up there because I miss her face, and because of one thought I had, that if Obama loses, Hillary and Bill will be out there right away on the next cycle.

And just imagine the vengeance they will wreak on all the Democrats who betrayed them, starting with Bill Richardson. It will be a bloodbath unseen since the Roman days. It will make "I, Claudius" look like Sunday school picnic.

And I just wanted that as a way to cheer up people out there who have had a lousy week in the market and with Iranian missiles. This ought to comfort you over the weekend.

BAIER: How about a long shot here — Chuck Hagel, Senator from Nebraska. He is traveling with Barack Obama, we are told, to Iraq. Any chance that Obama reaches across the aisle to Chuck Hagel?

BARNES: Why would he? I can't think of any reason why he would. He probably wouldn't win Nebraska anyway-that's where Hagel is from. So why pick him? I don't think it would help him.

BAIER: Fred has just closed the door on that.

Charles, let's talk about McCain's V.P. choices.

KRAUTHAMMER: I think Romney is the obvious one, even though there is a little bit of an interpersonal problem. But he has been vetted. You want a guy who is not going to have any surprises.
He is a guy who is known for his economic strength. He's the guy that turned around the Olympics, so he's got a reputation. He's stable. He doesn't have any skeletons in his closet. I think he would he would be a good backup, and he's young and attractive.

BAIER: OK.

KRAUTHAMMER: Long shot, if McCain is behind-Bloomberg, Mayor of New York. He's competent, rich. He is a Ross Perot who is sane. I think that would be helpful.

BAIER: All right. Juan, your two picks for McCain?

WILLIAMS: Again, I'm going to pick someone that is way outside the mainstream here in saying Colin Powell, the former Secretary of State. I think if he was added on to McCain's ticket, he would blow Barack Obama out of the water.

BAIER: You think he would he do it?

WILLIAMS: Would he do it, is the question. But, boy, what a ticket. And just think-it eliminates all the risk factors that attach to a young, liberal, inexperienced senator.

BAIER: Fred?

BARNES: Romney-I agree with Charles. Romney is obviously the guy who would make the best vice president. He's smart, he knows a lot, he is experienced.

But, look, McCain may have to throw the long ball. If he does, I think Bobby Jindal, the young Governor of Louisiana would help. He is very popular with conservatives.

BAIER: I should point out that was Juan's second pick as well. There we go. The V.P. stakes-we shall see. The weeks are closing and the clock is ticking.

That's it for the panel.

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