This is a rush transcript from "The Beltway Boys", November 15, 2008, that has been edited for clarity.

FRED BARNES, FOX CO-HOST: Coming up on "The Beltway Boys." Should your tax dollars go to bail out the auto industry? That debate comes to a head next week in Congress. Then we'll tell you what's at stake.

JEFF BIRNBAUM, FOX GUEST CO-HOST: Sarah Palin goes on a media blitz lashing back on her critics. We'll tell you how she did and how it could play in 2012.

BARNES: Barack Obama tries to mend fences with former rivals Hillary Clinton and John McCain.

BIRNBAUM: And Minnesota's still unresolved senate race gets weirder and nastier by the second.

BARNES: That's straight ahead on "The Beltway Boys" right now!

I'm Fred Barnes.

BIRNBAUM: And I'm Jeff Birnbaum, in for Mort Kondracke. Tonight, we're "The Beltway Boys."

Hot story number one, bailout nation.

Fred, Congress looks like it's coming back next week and its issue number one will be what to do about the ailing auto industry and whether to send more billions of dollars to help out the Detroit big three. What's going to happen basically on Monday is the Democratic leader in the Senate is going to file a cloture petition to try to get the debate rolling in the Senate. The House may or may not come back. Everything is very much up in the air.

My guess is that there will not be enough votes in the Senate to bail out the auto industry. Even if there is, even if they manage to get the number 60 votes and the House passes something, president Bush is going to say no and nothing ultimately is going to happen.

You know what, Fred, I think that's the right outcome. It's not a good idea to bail out every industry in trouble. You cannot repeal the laws of the economic cycles no matter how many billions of dollars you throw at it.

BARNES: Well, the auto industry is not just any industry. So I disagree. And I say this as a free market conservative. I just think there has to be a way to save the big three in Detroit, the American auto industry, obviously where the foreign auto makers are building cars all over the south and so on, they're doing quite well. But there has to be a way to save the Detroit auto industry without — somewhere between bankruptcy, which we'd like to avoid, and just mailing a check say for $25 billion to them.

And I think any bailout would have to include certain things to make General Motors and Chrysler and Ford economically viable, which they should be now or they wouldn't need the money. And one of them is there's going to have to be some new management. Its clear management has not done a good job with these companies.

And, secondly, there has to be some flexibility on the part of labor so we can reopen these labor contracts which are a big part in the lack of economic competitiveness felt by the big three. Now, I'm not sure that flexibility's there.

After a meeting last week with House Speaker Nancy Pelosi, the president of United Auto Workers said, "Strategic assistance to a critical manufacturing industry makes sense for U.S. taxpayers. The alternative is lost jobs, business failures and a shortfall in pension and health care obligations, all of which will cost far more in the future than the assistance we are requesting now." That's not exactly an invitation to reopen the contracts.

Now, you know, as I say, I think there has to be some way to deal with this huge problem with the American auto industry. And I think what would be nice to have — would be someone who could come in and be the auto czar, someone who could turn around or try to turn around these industries. And there is somebody who I think might be available. America's greatest turn- around artist who's revived company after company after company and knows a lot about Detroit because he grew up there, and that person is Mitt Romney.

BIRNBAUM: That's intriguing and high-minded, Fred, but actually most of this...

BARNES: I'm not often accused of being high-minded.

BIRNBAUM: Happens occasionally and it does tonight. But I think a lot is politics, pure and simple. I think — let's listen to what a Democratic congressman from Michigan, Sandy Levin, had to say about this whole thing.

(BEGIN VIDEO CLIP)

REP. SANDY LEVIN, (D), MICHIGAN: We're going to provide some money to the financial institutions that give loans to the big three. There is money that they've applied for and I think will be forthcoming. But in order for that loan money to be useful, you have to have the big three alive and thriving. And this is not a bailout. It's a bridge loan to the domestic auto companies.

(END VIDEO CLIP)

BIRNBAUM: That is what Democrats are saying. But I do think that the Democrats are really playing politics with this. They're trying basically to grab the issue for themselves to say that they want to help the big three, prevent them from going into bankruptcy, which helps them with the United Auto Workers unions and unions in general, which help them win larger majorities and the White House this time.

I think the Democrats don't even need to win the legislation in order to win the issue. Simply by saying they want a bailout, they put the Republicans on the wrong side of a very popular issue, to help millions of people who might be out of a job. And they do, once again, something that they have always loved to do, which is to scapegoat President Bush and cause a real problem for the Republican Party. So I think the politics of this is perfect for the Democrats.

BARNES: I think they'll probably still be trying to scapegoat president Bush long after he's left the White House because Democrats aren't going to blame Obama for anything.

Look, Jeff, I think there's too much at stake here. We do want an American auto industry. So there's too much at stake to let narrow politics prevail. That may well happen. I'm not disputing your political analysis. It may well happen.

Look, I'll tell you one thing that's not going to happen and that's what Sandy Levin is talking about: a bridge loan. What good would a bridge loan do? It would do nothing to change the trajectory which is all downward by these companies. It would mean they would stay alive a few more months. But a straight bridge loan, that would encourage every other industry to come in and try to get a bailout from the government. You already see the mayors of Philadelphia, Atlanta and Phoenix trying to get money.

Now, then of course, we can't expect anything to help the auto industry from the 20 world leaders meeting here today about the economic crisis around the world. It's not on their agenda. I don't think they'll do much anyway.

But, Jeff, there's one person who I think could help here — President-elect Barack Obama. He doesn't want to get involved. He's not obligated to get involved but he could help and that is promote some sort of responsible solution that would do the things that I've talked about. Because, look, in his cases, situation would just be worse on January 20 when he takes over than it is now.

BIRNBAUM: You know what, I don't know whether it's really the responsible answer. I think what Obama would like and many of his fellow Democrats would like really puts the U.S. on the course to, in effect, take over the auto industry. They will put all sorts of demands, mandates on — they'd have to build smaller cars, more fuel efficient cars. Why don't they just say the cars can only be yellow and red and not gray and brown. I think this is a slippery slope and the downward path you're talking about, that's what we're talking about, that slippery slope.

BARNES: That's a legitimate fear. I agree.

All right. Coming up, will Hillary Clinton become a member of the Obama administration? But first, Sarah Palin makes a splash at this week's Republican governor's conference.

(COMMERCIAL BREAK)

(FOX NEWS BREAK)

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN, (R), ALASKA: As far as we're concerned, the past is the past. It's behind us. And I, like all of our governors, we're focused on the future. and the future for us is not that 2012 presidential race.

(END VIDEO CLIP)

BARNES: Welcome back to "The Beltway Boys."

Hot story number two, Palin's party.

She may not be interested in 2012, Jeff, but certainly the press that attended the Republican governors conference in Miami this week was and — it was — the presidential race of 2012, it's at least in the back of the mind of some of the governors there.

Look, this was — this conference was Palin's party because she dominated the whole thing. I mean, she would — proved once again she is a real political star. She was the one the media was interested in. She is the only one that gave a full-blown speech. It was an awkward moment when she lined up there for a press conference with all the other governors and she was the only one the press asked questions of. So they ended it pretty quickly.

Any thought that Palin is just going to quietly fade into the Alaska wilderness I think is not going to happen. She can just do things that attract the national press's attention I think whether she is in Wasilla, here hometown, or Juneau, Fairbanks or wherever. Her task now is be a good governor. And if a player in national politics, to bone up and study the areas where her knowledge is not — where there's a knowledge gap. I mean, foreign policy comes to mind. No question about that.

And, anyway, watch this. See what you think of her at the governor's conference. Watch.

(BEGIN VIDEO CLIP)

PALILN: We are now the minority party, but let us resolve not to become the negative party too eager to find fault or unwilling to help in this time of crisis and war. Losing an election does not have to mean losing our way. I promise you, Americans will be looking to their governors for reaction, for stepped up leadership and for our abilities to unite and to progress.

(END VIDEO CLIP)

BARNES: She even reads a speech pretty well.

BIRNBAUM: I generally agree with you, Fred, but not completely. It was almost all Palin all the time down there in Miami, but not all the time. There were plenty of governors who were fighting to get in front of the cameras down there. The chances are that these will be the up and comers of the Republican Party, a party that really does need some new life, some new star power, some new leaders.

And I think it's interesting that most of the people who were vying for the camera and the attention of the Republican rank and file were all people on the long list of the — of John McCain when he was looking for a vice presidential candidate. These were names we heard this week and we'll probably hear for a long time: Rick Perry of Texas; Charlie Crist of Florida; Bobby Jindal of Louisiana; and Tim Pawlenty of Minnesota, who was, by many accounts, was second maybe on the list to be chosen for the vice presidency by John McCain right after Sarah Palin. They were all auditioning in various ways.

Let's listen to Tim Pawlenty's attempt to capture the imagination of the Republican Party.

(BEGIN VIDEO CLIP)

GOV. TIM PAWLENTY, (R), MINNESOTA: We cannot be a majority governing party when we essentially cannot compete in the northeast. We are losing our ability to compete in the Great Lakes states. We cannot compete on the West Coast.

(END VIDEO CLIP)

BIRNBAUM: There you go.

BARNES: He's pretty good.

BIRNBAUM: You know, and the other thing I want to say, Fred, is that it's not just a matter of personality. I agree that Sarah Palin is the rising star of the aurora borealis, if you will, of the Republican Party. But it's a matter of principle that matters. I think that under John McCain, the party was running against itself, the whole maverick notion.

The Republican Party, to revive itself — and that is the question here — has to go back to basics. It has to, "A," stand for something, smaller taxes, some other twist we haven't seen yet. When it turns to principles, that's when people can look to it as a real alternative to the Democrats now in charge.

BARNES: Aurora borealis?

BIRNBAUM: There you go.

(LAUGHTER)

BARNES: Geez. I wrote that one down. Sarah Palin. Whoa!

Look, Republicans have an impressive list of governors. You mentioned a number of them: Bobby Jindal and Tim Pawlenty and Mitch Daniels of Indiana, who was not there at that meeting. They really are — Haley Barbour of Mississippi. But — oh, and these are people who have governed very effectively.

BIRNBAUM: Yeah.

BARNES: No question about it. But I would add one thing. The only political star, who sparkles on stage and excites crowds, was Sarah Palin. She has the quality. She may have shortcomings but she does have star quality.

Wait a minute. I just want to say one other thing. There are not many politicians who can invite television crews into their kitchen and look at ease and shine and sparkle. And yet Sarah Palin did that.

BIRNBAUM: Don't you think though that more than Sarah Palin needs the — the Republican Party needs more than Sarah Palin.

BARNES: Of course.

(CROSSTALK)

BIRNBAUM: Also, if you look at some of the numbers, she really has to fight back. She was, I think, savaged by the mainstream press and needs to return to more popularity if she's going to rise in national prominence.

BARNES: I agree. She's on her way though.

Coming up, Obama makes nice with Hillary Clinton and John McCain. And what the heck is going on in Minnesota? We'll tell you who's ahead in that disputed Minnesota race.

(COMMERCIAL BREAK)

BARNES: Welcome back to "The Beltway Boys." Let's check out our "Ups and Downs" for the week.

Up, President-elect Barack Obama. He's getting high marks for a smooth transition so far and he's wasting no time reaching out to former rivals Hillary Clinton and John McCain.

BIRNBAUM: That's right. There are plenty of reports — and I think these are pretty serious, Fred, that he's considering Hillary Clinton to be his secretary of state. And I think she is certainly as good, or better than the other names we have heard about: Senator John Kerry; Senator Richard Lugar, who's a Republican; or Chuck Hagel, also a Republican. Also, we've heard Bill Richardson, the governor of New Mexico, a Democrat. I think this may be a good way for him to make amends with the Clinton part of the Democratic Party, and may be a role that's a good fit for her, give her something to do.

I think there's a danger here, Fred. If this is dangled out there, we know they met in Chicago. If he does not give her the secretary of state job, then he could really have an enemy, a powerful enemy in the U.S. Senate.

BARNES: You mean raise her up and then throw her down?

BIRNBAUM: That would be a very big problem I think.

BARNES: I think, politically speaking, picking Hillary Clinton to be secretary of state makes a lot of sense. It would bring somebody who's a potential thorn in Barack Obama's side in the Senate inside the tent, and bring her husband Bill along. That would help, too.

But, also, I agree that, specifically with you, that she would be the best of these candidates you mentioned. She's tough. She's smart. She knows world leaders. And so, she's obviously well qualified for the job.

Now, I'd prefer to see Senator Joe Lieberman of Connecticut be secretary of state. But for that to happen, McCain would have had to win.

BIRNBAUM: We would have had to have a different election. That's for sure.

BARNES: Indeed.

BIRNBAUM: Down, Minnesota. The Senate race between incumbent Norm Coleman and funnyman Al Franken couldn't be closer enough to trigger an automatic recount. But that hasn't kept either side from questioning the legitimacy of the outcome. This is really no good for anybody, basically, this extended problem.

There are already new accusations or renewed accusations about Norm Coleman perhaps getting too close to a former fundraiser of his. Calls for investigations into whether money was channeled from the fundraiser's company to Norm Coleman and his wife, charges that are denied by the Colemans. But nonetheless this is getting very nasty and a lot is at stake in the outcome. If Coleman wins, it could really be a problem for him even if he does win.

BARNES: I'm not worried. I don't think those lawsuits are going to amount to much. But it's clear now which of the parties, whether the Coleman campaign or the Franken campaign, thinks the process is working on their side. We've seen, under some questionable circumstances, Franken gaining. 32 ballots from the trunk of somebody's car that had been sitting there for a few days. I find that a bit suspicious. And some other things too where he gains. There's all these more Franken votes in certain districts but no votes for other offices that weren't affected.

But what drives the party crazy is the guy in charge of the recount. That's Secretary of State Mark Ritchie, who's an ally of ACORN. I don't need to describe them. Republicans just regard it as someone who would do anything to get a Democrat elected, and that's Franken. Every Republican I know thinks they're going to discover more ballots. And they'll favor Franken.

Up, Howard Dean. The former Vermont governor will not seek a second term as chairman of the Democratic National Committee. But he leaves with a large list of accomplishments, including huge margins in the House and Senate and helping to elect a Democrat president. You know, better than I thought he's do.

BIRNBAUM: Yes, he actually did quite well. He raised plenty of money in corporation with Barack Obama. He deserves credit I think for a big win for the Democrats this time around.

But the more interesting battle is on the Republican side. The Republican National Committee, the fight to replace Mr. Duncan, who most people would have never heard of, but is the chairman there nonetheless. It looks like former Lieutenant Governor of Maryland, Michael Steele, is running for the post. We heard Newt Gingrich might be, but apparently he's not. He's throwing his support behind Steele. Steele apparently has the edge there and might be a much more articulate Republican leader.

BARNES: No doubt about that.

On the other hand, what they need is somebody to get the Republican Party up to speed technologically for the 21st century. They're getting killed and they need to get involved in these social networks on the Internet and even get more people, more e-mail addresses.

BIRNBAUM: That's for sure.

Don't go anywhere. "The Buzz" is coming up next.

(COMMERCIAL BREAK)

BARNES: What's the buzz, Jeff?

BIRNBAUM: We're hearing a lot of names for all sorts of Cabinet posts, including labor secretary. One you might have heard is former House Democratic Leader Dick Gephardt for that job. Don't believe it. Dick Gephardt is now a very prosperous lobbyist and investment banker living out in Sonoma, California. He doesn't want to come back into government. He's not going to be labor secretary. Cross that one off your list, Fred.

BARNES: I like Dick Gephardt, a very decent guy.

You know why Republicans are so confident about winning this runoff in Georgia for the Senate seat now held by Saxby Chambliss? The main reason is they just don't think Democrats can get that huge turnout particularly of African-American voters that they got in the general election, so they think they're going to win.

That's all 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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