Transcript: 'Special Report with Brit Hume,' May 1, 2007

This is a rush transcript of "Special Report With Brit Hume" from May 1, 2007.

BRIT HUME, FOX NEWS ANCHOR: Next on SPECIAL REPORT, Democrats send that Iraq withdrawal bill to the president, who promptly vetoes it. He'll make a statement to the nation in a matter of minutes and we'll have live. In the meantime, 10s of thousands of immigrants and their supporters take to the street across the country to demand that laws be changed or at least not enforced. We'll have a full report, plus analysis.

And we'll have the latest on whether the head of Al Qae da in Iraq had been killed. All that right here, right now.

Welcome to Washington. I'm Brit Hume. You are looking at the White House there, where President Bush is expected to address the nation in just minutes, and explain his reasons for vetoing that war spending bill, a bill that would ha ve imposed timelines for U.S. troop withdrawal from Iraq. We'll have that event for you when it happens.

Meanwhile, the other big story of the day, immigration reform advocates staged marches, meetings, and voter registration drives from New York to California, demanding a path to citizenshi p for millions of illegal immigrants. Correspondent William La Jeunesse has the story.

(BEGIN VIDEOTAPE)

WILLIAM LA JEUNESSE, FOX NEWS CORRESPONDENT (voice-over): In cities nationwide, undocumented workers and their supporters are taking to the streets, walking off the job in Arizona, boycotting businesses in Detroit, waving banners and flags in Los Angeles, demonstrations marchers hope will translate into action on Capitol Hill.

EDDIE GARCIA, U.S. CITIZEN: I want the people that are here to stay here. I want the families to stay together. I want a comprehensive path to legalization for all the Mexicans that are here now.

LA JEUNESSE: Senate Majority Leader Harry Reid has scheduled debate on an immigration bill in two weeks, but negotiations have stalled. Reform advocates fear if debate is held up any longer, the presidential campaign will eclipse it entirely.

XIOMARA CORPENO, IMMIGRANT ADVOCATE: What we to do is to bring attention to the fact that we need legalization and human rights for everyone here in this country. We need family reunification. We need peace and dignity for our families as well. That means a stop to the deportation, to the raids, and also police harassment.

LA JEUNESSE: Congress is juggling a number of issues. First, what to do with the 12-20 million illegal immigrants already here. Next, how to structure a temporary worker program, and whether to provide a path to citizenship. Hard-liners want to end so-called chain migration, through which a single immigrant can legally bring in dozens of relatives. Some also favor a touchback provision that forces illegals to go home before they can legally return to the U.S.

Another sticking point, interior enforcement of immigration laws away from the border. In the past year, more than 200,000 illegals who made it to jobs and neighborhoods in the United States were deported, up 20 percent from the previous year.

NICK SMITH, IMMIG & CUSTOMS ENFORCEMENT: Certainly, the community is welcome to lobby Congress and the president. But if the message is stop enforcing our immigration laws, as a law-enforcement agency, I can tell you that that is not an answer.

MICHAEL CHERTOFF, HOMELAND SECURITY SECY: Allowing unrestricted illegal immigration through uncontrolled borders in this post September 11th world is a recipe for trouble.

LA JEUNESSE: Critics charge that immigration authorities have made highly publicized arrests of illegal workers to show that enforcing immigration law is a priority of the administration. But if that were so, they say, illegals would not be so emboldened to hold marches.

RICK OLTMAN, ILLEGAL IMMIGRATION OPPONENT: This should show Americans just how flagrant and unafraid the illegal aliens in our country are. They have sneaked into our country. They are working illegally. They have committed frauds by getting these jobs using document fraud. And now they are marching in the streets, making demands on the host country.

LA JEUNESSE: Three out of four foreigners now in the country are here illegally. And undocumented workers represent about 8 percent of the U.S. work force. Half of those are paid under the table. Advocates say they have earned the right to stay, but others insist that we must enforce our laws, and as jobs dry up, illegal immigrants and their families will simply go home on their own.

In fact, march organizers blame this year's relatively small turnout on the fact that illegals were afraid of being arrested and deported.

(END VIDEOTAPE)

LA JEUNESSE: Turnout is down considerably nationwide. Here in Los Angeles, this rally pulled a 10,000, whereas last year it was over 200,000. Other reasons for the low turnout, I'm told, number one, some local laws that basically say you cannot hire illegals. That's a criminal behavior on the employer's part. Secondly, Spanish-language media, both TV and radio, Brit, encouraged people not to show up, in some cases, other times they were simply ambivalent. And finally, that bill last year that criminalized being here illegally, by James Sensenbrenner, well that was a main motivator. And, of course, that didn't exist today.

The question is, will this lower turnout diminish their message? Well, we will have to see. Back to you.

HUME: One question, William, since these people are not citizens and cannot vote, what do they think the source of their political leverage is?

LA JEUNESSE: They basically think their numbers, Brit. I mean, they're not going home. They saying that. They do not believe that they are going to self deport, even if certain jobs dry up. So therefore, they believe they are writing to their congressmen, they are emailing. They are trying to make a show of force that way, as well as, of course, articulating themselves in this way as well. They hope there will be a positive a result on the Hill. Back to you.

HUME: OK, thanks very much. There was no sign of a convalescing Fidel Castro as hundreds of thousands of Cubans marched through Revolution Plaza to celebrate International Workers Day, also known in the communist world as May Day. Castro has attended the parade for decades, but the 80- year-old revolutionary has not appeared in public in the nine months since he underwent surgery. Fidel Castro temporarily ceded his duties to his 75- year-old brother Raul last July.

And President Hugo Chavez's government took over Venezuela's last privately run oil fields today, intensifying a struggle with international firms over the development of the world's largest known petroleum deposits. The oil companies have agreed to hand over operations, but are still discussing compensation and share holding issues. Chavez says the takeovers are necessary to give the government control of sectors he terms, quote, strategic to Venezuela's national interest.

It was a case of irresistible force meeting immovable object. The Democratically controlled Congress sent an emergency war funding bill to the White House today, one that required combat troop withdrawals from Iraq, and President Bush was waiting for it, veto pen in hand. Congressional correspondent Major Garrett reports.

(BEGIN VIDEOTAPE)

MAJOR GARRETT, FOX NEWS CONGRESSIONAL CORRESPONDENT (voice-over): Displaying the ceremonial and constitutional trappings of congressional might, Democratic leaders sent the long-awaited war funding bill to President Bush, emphasizing benchmarks of Iraqi progress, not troop withdrawal time lines.

REP. NANCY PELOSI (D-CA), HOUSE SPEAKER: For the benchmarks to hold the Iraqi government accountable. This legislation respects the wishes of the American people to end the Iraq war.

SEN. HARRY REID (D-NV), SENATE MAJORITY LEADER: This bill holds Iraqis accountable for finding political solutions. It helps us more effectively fight terrorism and strengthens United States security. It redeploys our troops out of a tractable civil war.

GARRETT: But the war funding debate has never been about benchmarks or measuring political, economic or security achievements of a fragile Iraqi government. It has been about when to withdraw U.S. combat forces. The Democrat's bill requires withdrawals begin this summer at the earliest, this fall at the latest. It seeks removal of all combat forces by spring of next year, tactical meddling, the White House says.

TONY SNOW, WHITE HOUSE SPOKESMAN: The president is not going to sign anything that prevents our troops from doing their jobs, or create a situation that is going to strengthen Al Qaeda and weaken the Democratic forces.

GARRETT: Congressional leaders rarely sign bills before sending them to the president, but Democrats wanted to maximize the collision course visuals. Another spark of drama, the bill's journey in special vehicle from the Capital grounds straight to the White House.

Meanwhile, U.S. forces continue their perilous patrols in Baghdad, fighting sectarian militias and Al Qaeda operatives. Negotiations at some point must commence on funding their deadly work, but not before more rhetorical fireworks.

REP. JOHN LARSON (D), CONNECTICUT: The only reason that we are there and continue to lose lives is because there is no mission other than arrogance and hubris.

REP. DAN LUNGREN (R), CALIFORNIA: This declaration of defeat from the Democrats that is sent to the president's desk today ought to be vetoed by this president.

GARRETT: In the end, the Democrats say won't make a deal that includes the status quo.

SEN. DICK DURBIN, (D-IL), MAJORITY WHIP: We hope we can find a way to reach an agreement to fully fund the troops, which we are going to do, but to make sure that we start changing the direction, change the policy in Iraq.

GARRETT: The White House says it sees room for a workable compromise.

SNOW: You know, I think we're going to get something acceptable.

(END VIDEOTAPE)

GARRETT: Senior Congressional Democratic sources tell Fox News that after the president vetoes this bill, as he has just done, they will drop troop withdrawal timelines, focus their attention instead on benchmarks to measure Iraqi governmental progress. As one Democrat told Fox, we're going to shift the debate from when do we leave to the conditions under which we stay. Brit?

HUME: Major, thank you. As we noted, we have been awaiting a statement from the president. He's expected to get in front of television cameras in just a few minutes to explain his veto. In the meantime, let's bring in our chief White House correspondent, Bret Baier, who is on the North Lawn, just outside they are where the president is going to make these comments.

Bret, the president has asked for time for this, which is unusual. What does he expect to achieve by a further statement here?

BRET BAIER, FOX NEWS WHITE HOUSE CORRESPONDENT: Well, basically, Brit, he is going to lay out the reasons that he vetoed this bill. This is just the second veto of this presidency and he will -- he has, rather, signed the veto message that will be attached to the house spending bill, sent back to the House tomorrow.

Basically, we are told to expect a nine to 10 minutes statement tonight, where he will vow to continue to veto any spending bill that ties the hands of his generals on the ground in Iraq. We're told the president will express confidence that this standoff can be worked out with Congressional Democrats. But his senior aides say bipartisan talks tomorrow will be key.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Good evening. Twelve weeks ago I asked the Congress to pass an emergency war spending bill that would provide our brave young men and women in uniform with the funds and flexibility they need. Instead, members of the House and the Senate passed a bill that substitutes the opinions of politicians for the judgment of our military commanders. So a few minutes ago, I vetoed the bill.

Tonight, I will explain the reasons for this veto and my desire to work with Congress to resolve this matter as quickly as possible. We can begin tomorrow with a bipartisan meeting with the congressional leaders here at the White House. Here's why the bill Congress passed is unacceptable.

First, the bill would mandate a rigid and artificial deadline for American troops to begin withdrawing from Iraq. That withdrawal could start as early as July 1st, and it would have to start no later than October 1st, regardless of the situation on the ground.

It makes no sense to tell the enemy when you plan to start withdrawing. All the terrorists would have to do is mark their calendars and gather their strength and begin plotting how to overthrow the government and take control of the country of Iraq.

I believe setting a deadline for withdrawal would demoralize the Iraqi people, would encourage killers across the broader Middle East, and send a signal that America will not keep its commitments. Setting a deadline for withdrawal is setting a date for failure, and that would be irresponsible.

Second, the bill would impose impossible conditions on our commanders in combat. After forcing most of our troops to withdraw, the bill would dictate the terms on which the remaining commanders and troops could engage the enemy. That means America's commanders in the middle of a combat zone would have take fighting directions from politicians 6,000 miles away in Washington, D.C. This is a prescription for chaos and confusion, and we must not impose it on our troops.

Third, the bill is loaded with billions of dollars in non-emergency spending that has nothing to do with fighting the war on terror. Congress should debate these spending measures on their own merits, and not as a part of an emergency funding bill for our troops.

The Democratic leaders know that many in Congress disagree with their approach and that there are not enough votes to override the veto. I recognize that many Democrats saw this bill as an opportunity to make a political statement about their opposition to the war. They've sent their message, and now it is time to put politics behind us and support our troops with the funds they need.

Our troops are carrying out a new strategy with a new commander, General David Petraeus. The goal of this new strategy is to help the Iraqis secure their capital so they can make progress toward reconciliation and build a free nation that respects the rights of its people, upholds the rule of law, and fights extremists and radicals and killers alongside the United States in this war on terror.

In January, General Petraeus was confirmed by a unanimous vote in the United States Senate. In February, we began sending the first of the reinforcements he requested. Not all these reinforcements have arrived in Baghdad. And as General Petraeus has said, it will be the end of the summer before we can assess the impact of this operation.

Congress ought to give General Petraeus's plan a chance to work. In the month since our military has been implementing this plan, we've begun to see some important results. For example, Iraqi and coalition forces have closed down an Al Qaeda car bomb network. They've captured a Shia militia leader implicated in the kidnapping and killing of American soldiers. They've broken up a death squad that had terrorized hundreds of residents in a Baghdad neighborhood.

Last week, General Petraeus was in Washington to brief me, and he briefed members of Congress on how the operation is unfolding. He noted that one of the most important indicators of progress is the level of sectarian violence in Baghdad. And he reported that since January, the number of sectarian murders has dropped substantially.

Even as sectarian attacks have declined, we continue to see spectacular suicide attacks that have caused great suffering. These attacks are largely the work of Al Qaeda, the enemy that everyone agrees we should be fighting. The objective of these Al Qaeda attacks is to subvert our efforts by reigniting the sectarian violence in Baghdad and breaking support for the war here at home.

In Washington last week, General Petraeus explained it this way: Iraq is, in fact, the central front of all Al Qaeda's global campaign. Al Qaeda's role makes the conflict in Iraq far more complex than a simple fight between Iraqis. It's true that not everyone taking innocent life in Iraq wants to attack America here at home. But many do.

Many also belong to the same terrorist network that attacked us on September the 11th, 2001, and wants to attack us here at home again. We saw the death and destruction Al Qaeda inflicted on our people when they were permitted a safe haven in Afghanistan. For the security of the American people, we must not allow Al Qaeda to establish a new safe haven in Iraq.

We need to give our troops all the equipment and the training and protection they need to prevail. That means that Congress needs to pass an emergency war-spending bill quickly. I've invited leaders of both parties to come to the White House tomorrow and to discuss how we can get these vital funds to our troops. I'm confident that with good will on both sides we can agree on a bill that gets our troops the money and flexibility they need, as soon as possible.

The need to act is urgent. Without a war-funding bill, the military has to take money from some other account or training program so the troops in combat have what they need.

Without a war-funding bill, the armed forces will have to consider cutting back on buying new equipment or repairing existing equipment.

Without a war-funding bill, we add to the uncertainty felt by our military families. Our troops and their families deserve better, and their elected leaders can do better.

Here in Washington, we have our differences on the way forward in Iraq, and we will debate them openly. Yet, whatever our differences, surely we can agree that our troops are worthy of this funding and that we have a responsibility to get it to them without further delay.

Thank you for listening.

May God bless our troops.

HUME: So the president in a picturesque setting there, in what's called the Crossing. That's, as you walk in the White House, under the columns there, you can see all the way through the building there. As you can see, to the Jefferson Memorial out back.

Now everyone has done their part. With some ceremony and statements, the congressional leaders have sent the bill to the president. Democrats, of course, control the Congress. The president has now vetoed it and told us why. What is next? For that, let's bring back Major Garrett, our Congressional correspondent. What is expected to happen now?

GARRETT: Well, as I said before we heard the president's remarks, Brit, Congressional Democrats are now beginning to lay the foundation to back peddle away from these timelines. They know they simply don't have the votes to override the president's veto. So now Washington is going to have what may end up being a very Talmudic sort of debate about what is a benchmark and what isn't a benchmark, what's a benchmark for success, what's a benchmark for failure.

What Republicans and the Bush White House want to avoid in this debate is any sort of benchmarks for Iraqi government reform, be it political, economic, or security that are impossible to meet. And they do not want it to be binding either, because they do not want Democrats the opportunity, by using the word benchmark, to hamstring the political reforms or the military strategy on the ground. And there is going to be an intense debate over what is a helpful benchmark to measure Iraqi success and what is a painful or injurious one. That's the next stage of all this.

Democrats will also push on the White House military readiness and training standards that the president can wave. But they hope that there will be some political cost that the president will suffer if, in fact, he has to wave those to keep the troops surge and the new security strategy going.

HUME: OK, Major, thank you. So we will look forward to all of that and your reporting on it.

Later on SPECIAL REPORT, meanwhile, the latest ruling in the case of two Congressmen fighting over a taped cell phone call that became public. But first, U.S. and Iraqi officials feverishly trying to confirm reports that al Qaeda's top man in Iraq is dead. We'll get the latest on that after a break.

(COMMERCIAL BREAK)

HUME: U.S. and Iraqi officials are trying to chase down reports today that the leader of Al Qaeda in Iraq was killed by rivals north of Baghdad. U.S. authorities, however, urged caution and warned that even if the claim was true, his death would not spell the end of the terror movements in Iraq. National security correspondent Jennifer Griffin reports.

(BEGIN VIDEOTAPE)

JENNIFER GRIFFIN, FOX NEWS NATIONAL SECURITY CORRESPONDENT (voice- over): Is he or isn't he dead? Was he or wasn't he killed in a fight north of Baghdad? The leader of Al Qaeda in Iraq, Abu Ayyub al Masri, had a five million-dollar bounty on his head. Now, a Sunni sheikh, who's tribal fighters have recently allied themselves with U.S. forces in Anbar province, says his Sunni tribesmen killed the Al Qaeda leader near Taji, claiming to have handed a body over to U.S. forces for DNA testing.

BARHAM SALEH, IRAQI DEPUTY PRIME MINISTER: There is preliminary reports that he was killed probably yesterday in the Taji area, in a battle involving a couple of insurgent groups and possibly some tribal people who have been having problems with al Qaeda.

GRIFFIN: Al Qaeda in Iraq issued a statement denying their leader was dead. Twice in the last year, Iraqi officials have claimed to have killed the Al Qaeda chief. In both cases, they were wrong. Pentagon officials were cautious.

ROBERT GATES, DEFENSE SECRETARY: We are trying with the Iraqis to confirm whether or not it is true. I think we do not know the answer to that at this point.

GRIFFIN: According to the CIA, al-Masri began his terrorism career in Egypt in 1982, joining bin Laden's now right hand, Ayman Zawahiri in Egypt's Islamic Jihad. After training in Afghanistan, Masri is said to have entered Iraq in 2003, where he specialized in car bombs, the kind he is assembling in this video. He also recruited foreign suicide bombers, providing them safe houses until they carried out their attacks against Iraqi civilians for the most part.

That activity is what made Sunni tribal leaders turned against Al Qaeda, that combined with the efforts of Army and Marine officers, who helped entice the Sunni sheikhs to work with them.

LT. GEN. TOM MCINERNEY, US AIR FORCE (RET): If in fact al-Masri was killed and killed by tribal sheikhs, that is very significant.

GRIFFIN: Anbar Province, once Al Qaeda's stronghold has turned in recent months, thanks to U.S. military counter-insurgency efforts.

MCINERNEY: Six months ago, if you went there, some people would say it was hopeless. It means we are turning the corner in Anbar Province.

GRIFFIN: Masri took over from Abu Musab al Zarqawi when Zarqawi was killed by U.S. troops last June. Zawahiri in Pakistan pronounced him the new head of Al Qaeda in Iraq. Few think if Masri is in fact dead, that Al Qaeda attacks in Iraq will end.

SEAN MCCORMACK, STATE DEPARTMENT SPOKESMAN : That does not mean that the threat goes away or that the organization won't generate another leader.

(END VIDEOTAPE)

GRIFFIN: As one coalition spokesman put it to us, "we seem to capture or kill al-Masri almost every month." He said we will be very careful before we confirm or deny anything. Pentagon sources here not telling us tonight whether U.S. forces actually have a body, or whether any DNA tests are taking place tonight. Brit?

HUME: Jennifer, thank you. Iran is playing down expectations ahead of a possible encounter between its foreign minister and Secretary of State Rice later this week. The country says the idea of negotiations is, quote, not serious at the moment. The two could cross paths at an international conference on Iraq security issues being held in Egypt. A spokesman for the Iranian government said the problems between the two countries will not be solved until the U.S. renounces what he calls its, quote, attitude and oppressive and satanic vision.

French far right leader Jean Marie Le Pen is calling on his supporters to abstain from voting in Sunday's presidential runoff election. Le Pen told a crowd in Paris that neither candidate deserves the support of the 3.8 million voters who backed him in the first round. He says the two represent thee parties and policies responsible for bringing France to what he called, quote, the brink of political, economic, social, cultural and moral abyss. Le Pen came in fourth in the first round with about 10.5 percent of the vote nationally. There he is.

We will take a break now to give our sponsors some time and check the other headlines. When we come back, why one of liberal magazine is taking the Democrats to task over their knowledge of Iraq. That's next on the Grape Vine.

(COMMERCIAL BREAK)

HUME: More SPECIAL REPORT in a moment. First, though, let's get a look at the day's other headlines and a look ahead at tonight's FOX REPORT from Shepard Smith in our New York newsroom. Shep?

(NEWSBREAK)

Click here to read the "Political Grapevine."

HUME: Senior Bush administration intelligence officials faced tough questions they when they took the proposal for modernizing U.S. surveillance legislation in front of skeptical senators on Capitol Hill. Chief Washington correspondent Jim Angle reports.

(BEGIN VIDEOTAPE)

JIM ANGLE, FOX NEWS CORRESPONDENT (voice-over): Intelligence officials urged the Senate to approve new legislation governing eavesdropping on terrorists, a program they say is critical.

MIKE MCCONNELL, NATIONAL INTELLIGENCE DIRECTOR: Today it is probably the most significant ability we have to target and be successful in preventing attacks.

LT. GEN. KEITH ALEXANDER: It is the key on war on terrorism. It is the key that helps us get there. Having said that, there's a lot more that we could and should be doing.

ANGLE: So the intelligence community is proposing to update FISA, the Foreign Intelligence Surveillance Act, which governs communication intercepts.

Director of national intelligence Mike McConnell said new rules are needed because of widespread changes in communications since the law was passed in 1978, making it obsolete and counterproductive.

MCCONNELL: FISA was enacted before cell phones, before e-mail and before the Internet was a tool used by hundreds of millions of people worldwide every day.

ANGLE: The law was aimed at protecting the privacy of American citizens but the technology changes have so perverted the application of the law it now result in some bizarre circumstances never intended by the original law.

MCCONNELL: To state the case plainly, when seeking to monitor foreign persons suspected of involvement in terrorist activity who are physically located in foreign countries, the intelligence community is required under today's FISA to obtain a court order to conduct surveillance.

ANGLE: So officials want to change the focus of the law from the technology itself to the targets of surveillance.

KENNETH WAINSTEIN, ASSISTANT ATTORNEY GENERAL: Rather than focusing as FISA does today on how communication travels or where it is intercepted, we should define FISA scope by who is the subject of the surveillance which really is the critical issue for civil liberties purposes.

ANGLE: In a rare open session of the Senate Intelligence Committee, some senators were a little skeptical having criticized the administration for expanding the program after September 11th and doing some outside FISA. In January, the president ordered all intercepts to go before a court, which drew this question.

SEN. RON WYDEN, (D) OR: Does this mean that the federal government is now obtaining warrants before listening to American's phone calls?

MCCONNELL: Sir, the way you are framing question is that the intent is to listen to American's phone calls. That is totally incorrect.

WYDEN: Simply .

MCCONNELL: The purpose is to listen to foreign phone calls. Foreign intelligence, that is the purpose of the whole - think of the name of the act. Foreign Intelligence Surveillance Act. Not domestic, not U.S.

(END VIDEOTAPE)

ANGLE: A new privacy and civil liberties oversight board is now watching over the program to give the public a greater assurance that terrorists can be listened to without treading on the privacy of Americans.

Also today, the Justice Department said the FISA court which issues warrants for wiretaps, approved a record number last year, 2,176, rejecting only one.

Brit?

HUME: Jim, thank you.

The U.S. Court of Appeals for the District of Columbia has upheld a decision awarding what is believed to be more than $700,000 in damages to House Minority Leader John Boehner. The money coming from Democratic Congressman Jim McDermott. This comes out of a long-running case regarding a taped cell phone conversation between Boehner and other House Republican leaders back in 1996.

McDermott disclosed that conversation to the media. The nine judge appellate panel ruled today that McDermott did not have a First Amendment right to disclose the conversation which concerned a House Ethics Committee investigation into then speaker Newt Gingrich.

Federal prosecutors have decided not to file insider trading charges against former Senate majority leader Bill Frist for his sales of stock in a family-owned chain of hospitals. The U.S. attorney in the southern district of New York and the Securities and Exchange Commission staff have sent Frist letters indicating that they have closed their joint 18 month investigation and cleared him of any wrongdoing.

At issue was a long-running investigation into the sale of Frist's, HCA shares in the summer of 2005 just days before a downbeat forecast sent the stock price tumbling.

Next on SPECIAL REPORT, it is back to the drawing board for congressional Democrats now that President Bush has vetoed the Iraq War funding bill.

The Fox all stars we will take a look at where to go from here and who is ahead. Stay tuned.

(COMMERCIAL BREAK)

HUME: Well, it all came to a head today. The Democrats went ahead and send the bill as they had to, passed by the Congress, to the president. The bill that contained funds for the troops but also a timetable for their withdrawal from Iraq.

And the president promptly vetoed it. Some thoughts on this now from Mort Kondracke, executive editor of "Roll Call," Mara Liasson, national political correspondent of National Public Radio and the syndicated columnist Charles Krauthammer, Fox News contributors all.

For a while today it was the question of who would have the last word on the day. The Democrats had a ceremony for the unrolling of the bill, which is purely a formality which is rarely remembered in a ceremony, or observed in ceremony. They did, they made a statement.

The president did not veto the bill in public, but he came out and made a 10-minute statement and requesting time from the networks for it. Since that time, the Democrats came back for another bite at the apple as well and we may see some of that later on but I think we all know what the state of play is here. So, now what?

Mort?

MORT KONDRACKE, "ROLL CALL": Well, they are going to have a meeting tomorrow, as we know and they are going to try to work something out.

The president did not say among his reasons for vetoing the bill that there were benchmarks in it to hold the Iraqis responsible, or to set guideposts for the future, so that, as Major Garrett indicated, is an area where you could possibly reach agreement if you can define benchmark in a .

HUME: Non-binding way?

KONDRACKE: Non-punitive way which does not lead to troop withdrawals and doesn't lead to withdrawals of money, I would think, from the Iraqi government, thereby disenabling them to do what they are supposed to be doing.

I talked to our ambassador to Iraq today, Ryan Crocker, long distance phone call long interview and he says that what is going on in Congress really is hurting his ability to get the sides in Iraq to make agreements with one another. That it hardens the sectarian divisions and it reduces the…

HUME: How you explain that?

KONDRACKE: Well, because they think we are bugging out. That they think we are going to leave and that instead of reaching across lines and making agreements with the adversary, they are getting ready to go to the mattresses.

HUME: To fight it out. Mara?

MARA LIASSON, NPR: I don't know whether we are leaving or staying has had any effect at all on their ability to reconcile, but I do think the debate is now going to move to these benchmarks. The whole debate is going to be about what are the consequences if the benchmarks are not met. The benchmarks themselves are benchmarks that the Bush administration.

HUME: The president can accept.

LIASSON: Yeah. They are actually benchmarks that the administration has said and has tried to.

HUME: And indeed, even the Maliki government has accepted certain benchmarks.

LIASSON: I think the only question is what happens.

HUME: If they don't live up to them.

LIASSON: And it certainly true that they have not been living up to them and they have been out there for some time.

KONDRACKE: On that point, Crocker said that there actually is some movement, like on the electoral commission to have regional elections. There are proposals for constitutional amendments. You just don't see it reported in the media.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: The argument is going to be about the benchmark and I think the Democrats cleverly have chosen an issue where there might be weakness on the part of Republicans in the Congress. You have got some Republican leaders in the House who are seemingly amenable to the idea of imposing benchmarks.

The Democrats want to impose them with the threat of reducing the amount of nonmilitary aid that we are now giving to the Iraqi government. Apart from the war in Iraq, the one thing in Congress that is the most unpopular of all is foreign aid, always the easiest to oppose.

So they will propose that if the Maliki government, which is problematic, everybody understands, doesn't meet the benchmarks then you will cut out of the 5.7 billion. I am not sure Republicans in the House would accept that but you could get some defections on that. I'm sure that the president would oppose it, but if some Republicans defect in the Congress, it will weaken his position.

HUME: Now the Democrats in the Congress -- Harry Reid said in a statement in the last day or so is that the increased terrorism there is another reason why we need a new approach in Iraq. Of course, that terrorism is coming, as we all know from Al Qaeda.

Is the war so on popular now that it does not matter what the arguments are for continuing? It does not matter if the Democrats want to leave, it will appear they are willing to run away from a fight with Al Qaeda, does that not matter anymore?

KRAUTHAMMER: I think that matters.

HUME: You do?

KRAUTHAMMER: If you can make the case, maybe the president cannot ever speak to the American people again on this, but I think Petraeus can. And when he comes back in September, if he makes the case that we are succeeding against Al Qaeda and we have had remarkable developments in Anbar, a province which had been declared lost to al Qaeda.

HUME: An al Qaeda haven.

KRAUTHAMMER: Completely lost. We now see the Sunnis in Anbar rebelling against Al Qaeda and taking up arms against them. And that's remarkable.

If he returns and says we're making progress and if we leave Al Qaeda wins Iraq, that will make the case.

LIASSON: I actually think that opinion have really hardened. I do not know if anybody is going to be able to convince the American people something other than what they think.

I think the one thing that will work is not so much arguments but if they perceive that Iraq looks better, that the violence is subsiding, that some kind of reconciliation is under way and that, ironically, would lead to the ability of the administration to pull down troops anyway.

HUME: So if the sectarian violence subsides.

LIASSON: And the terrorist activity.

HUME: And the terrorist activity mounted by Al Qaeda. Nobody seems to be arguing that it isn't Al Qaeda.

LIASSON: Yeah.

HUME: Continues .

LIASSON: Sectarian violence is already lessening.

HUME: Yes.

LIASSON: I think you have to have.

HUME: Progress.

LIASSON: Yeah. You have to have progress on both fronts.

KONDRACKE: The question is with the total number of civilian casualties at the moment, it is true that the Shia militia are not killing as many Sunnis as they were, but outside as blowing up as many Shia as they ever were. And we have not reduced civilian casualties. That has got to go down.

HUME: Next on SPECIAL REPORT, demonstrators across the nation take to the streets demanding a path to citizenship for illegal immigrants and other things as well. The Fox All Stars on that next.

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ELANA CHAVEZ, DENVER PROTESTER: We should all empathize; see what these people are going through. (inaudible) taking away from their little babies, husbands and wives, being separated. Having a life for 20 years and all of the sudden it being ripped apart. It's not right, we shouldn't be doing this. We should be united.

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HUME: That's a sample of the voices that were heard across the country today in city after city where immigrants and their supporters, many of them no doubt illegal took to the streets to demand immigration reform which would allow them who got here illegally to stay here and become citizens in the form (ph) of some time.

Listen, Morton, do they really have political leverage, these illegals and their supporters when they can't vote, they don't elect members of Congress, and yet they turn out in the streets as if they do?

The turnout was down, it must be recognized from last year. They didn't have a bogeyman bill to be opposed to they way they did last year. But where does this stand politically?

KONDRACKE: I don't think it does the cause all that much good. You have certain places were, like Mayor Daley was involved in this year's demonstration. But in L.A., for example, where I don't know if that person was from L.A.

HUME: She was in Denver.

KONDRACKE: But the National Immigration Solidarity Network which, sponsored this May Day demonstration is a far left group. And the fact that that the pro immigration forces are divided at the moment and this group wanted absolute amnesty, wants no border enforcement, wants to tear down the wall, wants no employer sanctions, wants no guest-worker program. That's not what the main line pro immigration groups are advocating in Washington.

And as I understand it, negotiations are not going well between Senator Kyl representing the Republicans and Senator Kennedy representing the Democrats because the Republicans are demanding I guess a worker program that requires everybody to leave.

HUME: To touch base at home.

KONDRACKE: No, to go back home and stay there. After three years of working in the United States, go back home, stay there, and then maybe after a year they can come back. This is not something that the pro immigration people are going to accept.

LIASSON: Well, and it's also not something that George Bush, John McCain, Rudy Giuliani, who I heard speak today before the Latino Coalition, which is a group of small business people.

HUME: He is basically pro immigration.

LIASSON: Yeah. Sure. He says I'm not for amnesty, as every other candidate from both parties would say, but he thinks there should be a path to earned legalization hat includes paying back taxes and fines and getting in the back of the line and learning English.

That is more or less the consensus view if you looked at leading Democrats, the president, and at least McCain and Giuliani, if not Romney. The question is what can come out of Congress right now, but something has to be done with the 12 million people who are here.

KRAUTHAMMER: Look, last year in L.A. there was a demonstration of 650,000. Today it was 10,000. Part of it is because illegals are worried about, there's been an increase in enforcement and raids and deportations.

But another reason is that last year these demonstrations backfired politically. The first demonstrations people showed up waiving Mexican flags. That's not going to endear you to Americans. And then the memo went out and in the subsequent demonstration everyone had American flags.

HUME: Today it was USA, USA.

KRAUTHAMMER: USA. Last year you had T-shirts that said, "I'm an illegal, so what?" That's not exactly the way to appeal to America's better angels. As a result, what I think happened is there was a hardening of positions after these demonstrations.

And you get today's demonstrations demanding not just that people who have been here for 20 years be accepted, but no deportation, no enforcement, open borders. And it's preposterous.

But there are people like me who are sympathetic to the illegals already here and would like to see them ultimately legalized. But only if you stop the border crossings today.

LIASSON: That's why they passed legislation for a fence.

KRAUTHAMMER: You have to have enforcement first. And unless you have that, you will never have a consensus in the country. If you have a fence.

LIASSON: Charles, that's why they passed the bill for the fence only.

HUME: Isn't that being defunded?

KRAUTHAMMER: It's being defunded. All kinds of excuses. Everybody is backing away. Until that happens you are never going to have a majority of the country who welcome ultimate legalization, that's why it's deadlocked.

KONDRACKE: The question is with a Democratic Congress, can you reach a deal on this issue? And at the moment, the Senate has got to go first. The House is not going to do anything unless the Senate reaches an agreement on it.

And at the moment although there was progress, it's bogged down. And the clock is ticking. It's going to have to happen this year. If it goes into next year, we'll never get any kind of a deal.

HUME: You think, Mara, that this can be pulled off? The president really obviously hopes -- the White House -- obviously, you've probably got a majority - a number of Democrats that can pass a bill.

LIASSON: I think you have the majority right now.

HUME: But you'd have to have the Senate Republicans to go along because they could block it with a filibuster, right?

LIASSON: They could block it if they wanted to. I thought the last time around we had a consensus. We had the president, the Democrats, the business community. Now the Democrats are in power, you'd think you'd be able to do this one thing.

KRAUTHAMMER: The bad faith on the fence is undermining confidence in the president and that's why it's stopped.

HUME: That's it for the panel, but stay tuned for a government announcement about the food supply you should not miss.

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HUME: Finally, tonight, Americans can rest assured that their government is doing all they can to keep the nation's food supply safe.

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ANNOUNCEMENT: The Food and Drug Administration regretfully announce it is expansion of an earlier nationwide recall to include products manufactured by Natural Balance Pet Food. The recall now includes all products made with the company's low-grade deer meat, such as venison and brown rice dog treats, venison and green pea dry cat food and Arby's beef and cheddar sandwich. This is a message from the FDA.

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HUME: Just kidding, folks. Arby's is fine. And that's SPECIAL REPORT for this time. Please tune us in next time and in the meantime, more news is on the way. Fair, balanced and unafraid.

Watch "Special Report With Brit Hume" weeknights at 6 p.m. EST.

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