The following is a rush transcript of the March 1, 2009, edition of "FOX News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

CHRIS WALLACE, HOST: President Obama made good on a campaign promise Friday laying out how he intends for the U.S. war in Iraq to end. Here now to explain exactly how that will work is the nation's top military officer, Admiral Mike Mullen, chairman of the Joint Chiefs.

And, Admiral, welcome back to "FOX News Sunday."

ADM. MIKE MULLEN, CHAIRMAN OF THE JOINTS CHIEFS: Thank you. Good morning.

WALLACE: Let's start with President Obama's announcement Friday that the U.S. combat mission in Iraq will end in August of 2010 and that he will pull roughly two-thirds of our troops out.

You and I discussed that scenario when you were last on the show.

MULLEN: Right.

WALLACE: Let's take a look.

(BEGIN VIDEO CLIP)

WALLACE: If I were to say to you let's set a time line of getting all of our combat troops out within two years, what do you think would be the consequences of setting that kind of a time line?

MULLEN: I think the consequences could be very dangerous in that regard. I'm convinced at this point in time that coming — making reductions based on conditions on the ground are very important.

(END VIDEO CLIP)

WALLACE: Admiral, why was a time line dangerous in July but not now?

MULLEN: Well, conditions have changed fairly dramatically since last July. In particular, the military situation as a result the surge has gotten a lot better. Iraq security forces have improved. And those kinds of things — all those trends are in the right direction.

Additionally, we have a timetable since that time. In fact, the status of forces agreement requires us to be out of Iraq by the end of 2011.

And most importantly, at this point in time, is we have a new mission, and it's important for us to recognize that mission and carry it out safely over the period of time that we've been given, which is to get to a new mission of no more combat forces in Iraq at the end of August in 2010.

WALLACE: Back in July, when we talked, and you made it clear that any decision should be based on conditions on the ground — now, you are, between now and August of 2010, going to be continuing to monitor conditions with General Odierno, our commander on the ground.

Has the president assured you that if conditions change and you so advise him, he is prepared to slow down or stop this withdrawal?

MULLEN: What — and I'll use this process as an example. The president listened to General Odierno, General Petraeus, all the chiefs, throughout this process, which was — which was very thorough and very deliberate. And I have a great deal of confidence in that process.

And as we look down the road and execute this plan over the next 18 months, I am sure that I'll be able to address any issues that come up with respect to change in conditions.

However, I mean, I'm — I'm optimistic that conditions continue to improve. We just had a good set of elections in Iraq, well supported by the Iraqi security forces — and that as those conditions continue to improve, we'll be able to execute this mission.

WALLACE: Now, you said you're confident you'll be able to address if conditions change. Has the president assured you that he'll listen and that he is prepared to alter the timetable depending on conditions? MULLEN: The president has listened extensively in the time up to making this decision. And if past is prologue, I certainly expect that he would do so in the future.

WALLACE: One of the things I noticed in the president's speech at Camp Lejeune on Friday is that he didn't talk — and in fact, he almost never talks — about our winning in Iraq. He never talks about victory in Iraq. Why not?

MULLEN: I think he focused very specifically on the success that has occurred, and a great deal of that success has been generated as a result of the military success that we've enjoyed there.

And I'm — I'm a little bit reluctant to talk specifically about winning and losing. We've turned it around over the last two years, and in great part that's because of our incredible young men and women who served us so well.

And they've created the conditions that look to the possibility that the Iraqi people and the Iraqi government can have a better future. There's still...

WALLACE: But are you prepared to say we're winning in Iraq right now?

MULLEN: I'm prepared to say that we have achieved a great deal of success, and we literally turned it around from what was headed to be exactly the opposite two years ago.

WALLACE: And does it bother you that the president isn't willing to make those same declarations?

MULLEN: Not at all.

WALLACE: Why not?

MULLEN: Because I think it's very difficult in these kinds of wars to pick a term that's that specific. This isn't going to be crossing the goal line or a situation like that.

It — clearly, the conditions are much more positive than they were two years ago, and the conditions are set for the Iraqi government, the Iraqi people, to take over their own country and be responsible for it and have a very, very positive outcome.

WALLACE: Let me ask you a related question to this, and we'll move on. Does it bother you that the president isn't willing to say the surge has worked?

MULLEN: The president was very clear that with the military effort over the last couple of years that conditions have improved dramatically from the security perspective, and then he's laid out what he thinks the challenges that are out there that still exist from a diplomatic standpoint, political standpoint and an economic development standpoint.

WALLACE: The White House says that one way it's going to be able to cut the budget deficit is by saving hundreds of billions of dollars by dialing back in Iraq. Did you ever project that we would be spending $183 billion on into 2019?

MULLEN: I haven't looked out that far in terms of the specific projections. Certainly, we review routinely the costs as best we are able to project it in the budgets over the — over the next several years, and we've done that.

And actually, you know, there will be considerable costs, certainly in the near term, even as we draw down. It's not just the costs of being there, but it will be the costs of coming home, in addition to the increasing costs of the war in Afghanistan, and taking...

WALLACE: Well, I'm going to — I'm going to get to that in a moment, but the question I'm asking is — and you're saying as chairman of the Joint Chiefs, you did not have a projection — excuse me — of spending $183 billion in Iraq up through the next decade.

MULLEN: No.

WALLACE: So when the Obama budget says that it's going to save hundreds of billions of dollars because it's not going to be spending $183 billion in 2019, that's a gimmick.

MULLEN: Well, I'm — I'm not sure it's a gimmick. Looking out to 2019 so far, there are certainly uncertainties associated with that. I have a very clear understanding in the near term of what we think it's going to cost us for these two wars, and in the long term I think...

WALLACE: But you didn't have that number, is what I'm saying.

MULLEN: No, I didn't have that number.

WALLACE: OK. Meanwhile, the White House is budgeting the cost of the wars in Iraq and Afghanistan at $50 billion a year starting in 2011.

Given the fact that you're anticipating a serious escalation in Afghanistan, isn't that number unrealistically low?

MULLEN: I think the projections that have been made have been based on our best estimates thus far, and that conditions certainly could change one way or the other, and that over time we'll certainly adjust those estimates.

The budget projections that are out right — out there right now are more contingency-based. They're certainly not an exact science, certainly, the further you get out to the right in terms of our budget.

So I think they're an approximation, and I'm confident that over — that over time they'll become as accurate as needed to — to carry out the mission, and I think that's really an important part of this as well.

WALLACE: The president has announced that he's sending another 17,000 troops to Afghanistan. Two questions. Is that it, or do you expect you're going to have to send more troops beyond the 17,000 the president has announced?

And have we — is the mission in Iraq — or in Afghanistan, rather, still to create and help prop up a democracy, a centralized democracy, or have we scaled back the mission to simply trying to prevent Al Qaeda and the Taliban from establishing safe havens?

MULLEN: The president has directed a strategic review which has been ongoing for a while and will be completed here in the next couple of weeks.

The 17,000 troops he recently approved, 12,000 of which had been ordered, are part of the upwards of 30,000 troops that General McKiernan has asked for. Those troops will be focused principally on providing security for the Afghan people.

And then the overall objectives of what our strategy will be in the future will be part of this review, and I certainly wait for it to finish to see what the outcome will be and what the president's decisions will be.

WALLACE: Meanwhile, we have continued drone attacks against Taliban targets in the tribal region inside Pakistan. In fact, there's a report that there was another drone attack just today. And there seems to have been a steady drumbeat of these.

Has our policy of taking the fight to the Taliban and Al Qaeda inside Pakistan escalated since Mr. Obama became president?

MULLEN: Well, I'm not going to talk a lot about our operations specifically. There is a continuing concern with the existence of the safe haven in the FATA in Pakistan, and that has to be addressed, has been addressed, and needs to continue to be addressed.

We've brought pressure on both sides of the border, Pakistani military as well as coalition forces and Afghan forces, and we did towards the end of 2008, and that will continue to happen, and we need to continue to bring that pressure on both sides and continue to coordinate that — those operations.

WALLACE: Has there been any change in policy in the sense that it is a more aggressive policy, an escalation, in terms of our going after — without getting into detail, going after those targets inside Pakistan?

MULLEN: I think there's clear recognition that that threat, where Al Qaeda leadership lives, is — is every bit as dangerous as it has been, and that it needs to be continued — we need to continue to address it and address it as rapidly as possible.

WALLACE: Is there any difference between the policy under President Obama and President Bush?

MULLEN: I've got guidance right now from President Obama, and we're carrying out that guidance very specifically.

WALLACE: The North Koreans are talking about launching a missile soon with a communications satellite, and the commander of American forces in the Pacific says the U.S. is prepared to shoot down that missile.

Why isn't North Korea entitled to a non-military space program?

MULLEN: Well, I've certainly read reports of what the North Koreans might be doing. I also am aware of the — the potential that — you know, down the road, that that could offer based on what they've done historically.

But we've made no decisions. The president's made no decisions. I've made no recommendations with respect to anything the North Koreans might do.

I would hope that the North Koreans would not be provocative in their actions. And in fact, we're keeping a very, very close eye on what they're doing.

WALLACE: And would firing a missile with a communications satellite be provocative?

MULLEN: Well, again, I'm not going to go into hypotheticals. The North Koreans have — have claimed — essentially asserted that they intend to put a satellite in orbit.

And again, we're just watching it very carefully, and I wouldn't presume that — ahead of anything to happen of what we might do.

WALLACE: Iran also launched a satellite recently. During the campaign, Barack Obama, then Senator Obama, expressed serious doubts about missile defense.

Have you been given any instructions to either slow down or stop the U.S. antimissile system, the plans to install one in Eastern Europe, or is it still full speed ahead?

MULLEN: I haven't been given any instructions one way or the other at this point.

WALLACE: So is — given the orders you had under President Bush, does that mean it's full speed ahead?

MULLEN: Well, again, there are an awful lot of reviews that are ongoing under President Obama, and there's an awful lot on the — on all of our plates. So that's a review that will, I think, take place. And over time, that's much more a policy area than it is mine, per se. But again, I haven't been given any...

WALLACE: So you're saying — you're saying that the question of U.S. antimissile defense is under review.

MULLEN: Clearly, over time, it will be. And then I think decisions will be made. The policy decisions will be made, and we'll follow them accordingly.

WALLACE: Finally, let's talk a little bit about the new president. During the campaign, Barack Obama made a lot of statements, including about Iraq, that he has since modified.

How would you describe the way he is dealing with and listening to the Pentagon brass and commanders on the ground?

MULLEN: Actually, I think you captured it. He's been very consistent to listen to us. He has come to the Pentagon, and we had a great two-hour session with him in which we had a terrific exchange across a host of issues.

He clearly has sought my advice. I feel very comfortable that as a senior military officer and adviser to the president that he is giving me the time and the opportunity to advise him accordingly.

WALLACE: Having said that, a lot of people have noticed that both the president and top advisers very seldom talk about the war on terror. Why is that?

From your conversations with him, does he see our fight against Islamic radicals differently than President Bush did?

MULLEN: It's very clear in my engagement with him that he is very focused on the terrorist extremist threat, and my guidance is to continue to pursue that in every possible way.

WALLACE: Does — do you have any explanation as to why he doesn't talk about the war on terror?

MULLEN: No, I don't. I mean, I don't. I just told you what he's told me to do is focus very specifically on this threat, led by Al Qaeda, but certainly it's a top priority to focus on the terrorism and terrorists and the extremists that are out there who would — who would do us harm.

WALLACE: Last question. As the nation's top military man, do you believe you are still leading a war against terrorism?

MULLEN: There is — there are an awful lot of elements of terrorists and terrorism which threaten us, and we continue to very clearly pursue them, and we will until they're no longer a threat.

WALLACE: Admiral Mullen, I want to thank you so much for coming in today. It's always a pleasure, sir.

MULLEN: Thank you, Chris. Good to be with you.

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