This is a rush transcript from "Hannity & Colmes," October 10, 2008. This copy may not be in its final form and may be updated.

MICHAEL STEELE, GUEST CO-HOST: "The Failure Factory" is a brand-new book by Bill Gertz that details how unelected bureaucrats are the true power players in Washington. FOX's Griff Jenkins has the inside story.

(BEGIN VIDEOTAPE)

RONALD REAGAN, FORMER PRESIDENT OF THE UNITED STATES: Mr. Gorbachev, tear down this wall.

GRIFF JENKINS, FOX NEWS CORRESPONDENT (voice-over): Two years after that iconic 1987 speech, the Berlin Wall did come down. Yet that memorable line was almost never spoken. Why? Bureaucrats in the State Department tried three times to convince President Reagan not to say it.

REAGAN: Tear down this wall.

JENKINS: In "The Failure Factory," author Bill Gertz writes that unelected bureaucrats are the real power players in Washington.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: And the people who knocked these buildings down.

JENKINS: They are quickly undermining America's security and actually leading us to war.

One controversial example is the 2007 National Intelligence Estimate on Iran. One of the reports' key judgments was that, quote, "Tehran had not restarted its nuclear weapons program as of mid-2007."

Bill Gertz argues that these judgments did not reflect the views of the entire intelligence community. Instead, they merely represented the opinions of three high-level liberal bureaucrats who wrote the report.

The three were taking the word of the Iranians to try and prevent what they regarded as an out-of-control president from using military action against Iran.

In February 2008 Iran tested a long-range missile. Two months later President Mahmoud Ahmadinejad claimed that Iran had installed 6,000 centrifuges for uranium enrichment, thumbing his nose at the international community and the flawed National Intelligence Estimate.

Gertz also goes after what he calls "America's enemy allies," like Saudi Arabia. The Saudis proclaim themselves to be friends of the United States, while at the same time promoting Wahhabism, the ultra conservative branch of Islam that preaches hatred towards the west.

Yet our politicians and unelected officials both turn a blind eye to the dangers posed by extremist Saudis, and business as usual continues inside the failure factory.

(END VIDEOTAPE)

STEELE: With us now is the author of "The Failure Factory," Washington Times columnist Bill Gertz.

Welcome, Bill. How are you, buddy?

BILL GERTZ, AUTHOR, "THE FAILURE FACTORY": Good to be with you.

Video: Watch the interview with Bill Gertz

STEELE: Good to be with you. I'll get right to it. Who — how entrenched are these entrenched bureaucrats? And in the words of Seinfeld, who are these people?

GERTZ: Well, you know, this is a little different book than my earlier books which kind of focused on threats from abroad: you know, China, Iran, North Korea.

This is really about the problem of what I describe as a highly politicized, out-of-control government bureaucracy. That is, they've kind of usurped the political authority.

You know, we elect a president. And then he's supposed to appoint 3,000 to 4,000 political appointees. But in the last two administrations, that power has been taken over by the bureaucrats and has given us policies that are really undermining our security.

STEELE: So these are just staffers? These are — these are everyday bureaucrats who come into work, who have been there for five, ten, 20 years, who are basically setting the course of this nation?

GERTZ: Well, basically I say that this — when I talk about highly politicized, I'm talking about it politicized to the left. I didn't do any polling data, but from my unofficial surveys something like 95 percent of all bureaucrats are to the left liberal political perspective, and that's really — that's really a problem.

COLMES: Oh, no.

GERTZ: We've got to get a handle on it. The next president is going to have to deal with this problem before they can deal with Russia or China or Iran or North Korea.

STEELE: Well, you're saying that they're left to the political spectrum. Alan just got excited over here, so, you know...

COLMES: I thought that was good.

STEELE: Not in my world it's good. And clearly not for — not for the American people, certainly, in dealing with some of the critical issues that we've got to face in this country. That there is not this balance that should come to the public policy of the nation, is what you're saying.

GERTZ: Right, and you know, you pointed out in the lead-in piece about the Iran NIE. We're seeing the same thing happen now. There's a new National Intelligence Estimate on Afghanistan, and oh, surprise, surprise, this manages to leak out just before — weeks before the presidential election, with again, bad news.

COLMES: Bill, it's Alan. Welcome back to our show.

You know what I find very amusing about the book was that you were — all the bad guys are liberals. And you referred to, for example, liberals in the White House, liberals at State. Condi Rice is a RINO — Republican In Name Only. Andy Card, liberal Republican. Stephen Hadley conducted liberal policies at State. Dan Bartlett, communication director for Bush, you call — had a liberal political outlook. Karen Hughes, Bush advisor, a liberal Republican.

These aren't just entrenched bureaucrats. These are people Bush chose to be around. I didn't know Karen Hughes was a liberal or Dan Bartlett was a liberal or Condi was a Republican in name only, as you say in the book.

GERTZ: Well, I think — I think very important to point out that, beyond just being liberal, they're anticonservatives. That is, they regard conservatives as worse than liberals. And that puts them, to me, in the liberal camp

COLMES: Condi does? Dan Bartlett? Andy Card? The people who ran the Bush White House?

GERTZ: Oh, yes. Yes, they facilitated this liberal bureaucracy which is now out of control.

COLMES: So are you saying that Bush is not in control of his own White House?

GERTZ: Well, he cast himself as a compassionate conservative, and I argue that he's neither, that his administration is neither. He's done tremendous damage to the conservative movement.

COLMES: Is Bush a liberal?

GERTZ: No, I wouldn't say that. I'd say but he violated the fundamental principle of policy in Washington. If you pick the wrong people, you get the wrong policies.

COLMES: How can you say that Karen Hughes was a liberal, or Andy Card, or the people who Bush chose to be around him who worked in a Republican administrations time and time again? At least, Andy Card did.

I mean, it's like everything's left, right, and liberals are bad. And all the people around Bush who Bush apparently couldn't control had all these liberal policies in the Bush White House.

GERTZ: Well, I would tell you read the book, because that's the case I make.

COLMES: I did.

GERTZ: And I think that's accurate.

COLMES: So you also go after Bush for Saudi Arabia and his relationship with the Saudis. What's that all about?

GERTZ: Well, you know, the problem with Saudi Arabia comes down to one world: oil. And the problem is that they have done some things domestically to try to rein in terrorism. But from the interviews I did, you know, Saudi money to the tune of tens of millions or hundreds of millions of dollars is being funneled around the world to groups that are sympathetic to terrorists.

COLMES: By the way, John McCain's liberal positions on terrorist detainees raised questions about him. Is he a liberal, John McCain?

GERTZ: No, I didn't say he was a liberal. But I said that he's going to be eaten alive by the liberal bureaucracy.

COLMES: Probably his liberal positions on terrorists detainees.

Anyway, thank you very much for being with us, Bill.

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