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Special Report

Transcript: 'Special Report with Brit Hume,' May 2, 2007

This is a rush transcript of "Special Report With Brit Hume" from May 2, 2007.

BRIT HUME, FOX NEWS ANCHOR: Next on "Special Report," immigrant protesters who got violent in Los Angeles last night now claim they were mistreated by the cops. We'll look into that.

The House failed by a wide margin to override President Bush's veto of that bill mandating troop withdrawals from Iraq. Republicans show remarkable unity on the issue. Why is that, we will look into that as well.

And we will also look at what George Tenet told Bill O'Reilly about weap ons in Iraq. And we'll look at what some of today's war critics said about that too. Don't miss this.

Plus, the World Bank, somebody's lying. All that right here, right now.

Welcome to Washington. I'm Brit Hume. Officials in Los Angeles tonight are taking a look at what happened during that immigrant's rights protest that turned ugly yesterday, with violence by protesters leading to a use of force from officers. While most of the rallies held around the country were peaceful, the march in L.A. ended in a near-riot. Correspondent William La Jeunesse reports.

(BEGIN VIDEOTAPE)

WILLIAM LA JEUNESSE, FOX NEWS CORRESPONDENT (voice-over): After the official end of Tuesday's immigration rally in Los Angeles, the crowd spilled onto Wilshire Boulevard. Police ordered the stragglers to disperse, first by helicopter and siren, then loud speaker and bull horn. That is when some protesters began throwing bottles and rocks at police, knocking officer off his motorcycle.

UNIDENTIFIED FEMALE: It's a group of young guys that started provoking the police. And then (INAUDIBLE) what was happening.

LA JEUNESSE: Riot police were called in to control the crowd, using rubber bullets and batons.

UNIDENTIFIED FEMALE: A photographer, when rushing over to tell the people at the microphone to announce that this is happening. They did not give an order.

LA JEUNESSE: News crews reporting from inside the crowd were among those ordered to move before the police skirmish line caught up to reporters and photographers from Telemundo and KTTV, the Fox station in Los Angeles. Video shows officers pushing a camerawoman to the ground with a baton. And when reporter tries to help her, she too is violently shoved aside. Cops also grabbed the Telemundo camera and smashed it to the ground.

PEDRO SEVCEC, TELEMUNDO TV ANCHOR: If you're looking at the camera, and suddenly you are being hit by police, what kind of danger can I be, can the photographer be to police? At that moment, it was clearly excessive use of force.

JORGE CAREVEN, CENTRAL AMERICAN RESOURCE CENTER: The movement will go on. The movement has spirit, passion. And as community leaders, we need to make sure that the community knows that this incident is unique and that passage of an immigration reform will take a long time. And we need to continue representing our voices and our contributions to the economy.

(END VIDEOTAPE)

LA JEUNESSE: Now Brit, I was told also that a source at the police department said the spark for all of this occurred actually hours earlier with the arrest of a man for shoplifting. Members of the gang came over here and started agitating the group of largely illegal immigrants, who are already about government raids, both at the work place and in the home. Basically, at that point, police had ordered this crowd to disperse, to try to regain control, but when that happened, that includes reporters, the riot police showed up. People did not leave. They moved in.

Now their investigation is under way by the Police Commission and the Police Department. Back to you.

HUME: OK William, thank you. Back here in Washington, the big question for administration officials and Congressional leaders tonight appears to be where do we go from here concerning funding for the troops in Iraq. Talks aimed at reaching a compromise began shortly after a veto override attempt failed in what all sides agreed was foregone conclusion. A look at what happened and what's next from chief White House correspondent Bret Baier.

(BEGIN VIDEOTAPE)

BRET BAIER, FOX NEWS CHIEF WHITE HOUSE CORRESPONDENT (voice-over): Well before the hour of debate on the House floor —

REP. NANCY PELOSI, D-CALIF., HOUSE SPEAKER: Now into the fifth year of a failed policy, this administration should get a clue. It is not working.

REP. DAVID OBEY, D-WISC.: It is about how we get troops out of the war.

BAIER: Democrats knew they did not have the votes.

REP. STENY HOYER, D-MD., HOUSE MAJORITY LEADER: It is our duty now, as the elected representatives of the people, to try to override the president's veto, even though we may not succeed.

UNIDENTIFIED MALE: The yeas are 222, the nays at 203.

BAIER: The effort fell short of the two-thirds majority needed to override. So the president's veto of a war spending bill that include a timeline for U.S. withdrawal from Iraq was sustained. Just 10 minutes after that vote closed, leaders of both parties had already made their way to the White House to meet with President Bush, who called for compromise.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I'm confident that we can reach agreement.

BAIER: The president said his chief of staff, Josh Bolten, national security advisor, Stephen Hadley, and budget director, Rob Portman, will handle the negotiations going forward.

BUSH: Yesterday was a day that highlighted differences. Today is a day where we can work together to find common ground.

BAIER: Those two words became the main talking point after the meeting, as Democrats and Republicans talk to reporters in two separate waves.

PELOSI: We owe it to the American people to find our common ground.

UNIDENTIFIED MALE: It's time for us to put our differences aside and find a common ground.

PELOSI: We must strive to find that common ground.

UNIDENTIFIED MALE: We need to work together to try to find common ground.

BAIER: But as for details of a compromise.

SEN. MITCH MCCONNELL, R-KY, SENATE MINORITY LEADER: No, we really did not discuss the deal.

BAIER: Both sides agreed to try to complete a new bill by Memorial Day, but talked less about specifics and more about atmospherics.

SEN. HARRY REID, D-NEV., SENATE MAJORITY LEADER: The tone of this meeting was positive. I think it was also clear that the president understands that there is a separate unit of government that he has to deal with called the Congress.

BAIER: While Democrats emphasize they are committed to ending the war in Iraq, privately both sides acknowledged withdrawal time lines are off the table. Sources say placing benchmarks for Iraqi progress in the new bill is likely. But so far White House officials have not been ready to accept the idea of punishing Iraqis if they don't meet benchmarks.

TONY SNOW, WHITE HOUSE SPOKESMAN: You can treat them as the wayward party that you are going to punish, or you can treat them as the partner you want to assist.

BAIER: At a speech to construction contractors earlier in the day, President Bush said the U.S. troop surge has helped bring down sectarian killings in Baghdad. And he called al Qaeda, quote, public enemy number one in Iraq.

BUSH: For America the decision we face in Iraq is not whether we ought to take sides in a civil war. It is whether we stay in the fight against the same international terrorist network that attacked on 9/11. I strongly believe it is in our national interest to stay in the fight.

(END VIDEOTAPE)

BAIER: The president also said Iraqi leaders must know that the U.S. will not just pack up and leave. But tonight, senior Republicans say anger is boiling over about word that the Iraqi parliament is planning a two month recess this summer, with key legislation still pending. Senior officials tell Fox the Bush administration is planning to send a high-level message to Iraqi Prime Minister Nouri al-Maliki that such a move would be unacceptable. Brit?

HUME: Bret, thank you. And we will have more on the Iraqi parliament later in this broadcast. In the meantime, Democratic Senator Ben Nelson and Republican Congressman Chris Shays are examples of two lawmakers who have supported the war in Iraq. And now they are looking for ways to work out a compromise with the White House on troop funding and changing the direction of the war. Congressional correspondent Major Garrett profiles these men and their strategies.

(BEGIN VIDEOTAPE)

MAJOR GARRETT, FOX NEWS CONGRESSIONAL CORRESPONDENT (voice-over): Ben Nelson and Chris Shays, defying political stereotypes on pulling troops out of Iraq. Shays is a Republican from Connecticut, where the president's approval ratings are among the lowest in the country. Voter fury last year over Iraq nearly cost Shays his seat in Congress. In the heat of that campaign, Shays endorsed a troop withdrawal timeline. But today Shays voted to sustain President Bush's veto of a bill setting just that, an Iraq troop withdrawal timeline, illustrating better than most how Republicans, even those in political peril, have stuck with the Bush White House.

REP. CHRIS SHAYS, R-CONN.: To say that we have to start and maybe even a complete a draw down by the first quarter of next year, or under another scenario the second quarter of next year, and at the most the third quarter of next year, I mean, that is crazy.

GARRETT: Shays told FOX he was willing to negotiate timelines with Democrats, but never got a call, for that he blames hardball politics.

SHAYS: How about reaching out to someone like me. But the challenge they have is, I am one of their targets, and if they work with me, they give me more credibility.

GARRETT: Shays has traveled to Iraq 16 times. He said the situation there remains fluid, but the surge can work if given time. As for anger back home about backing Bush —

SHAYS: What happens to me in election, I could care less.

GARRETT: For contrast there's Senator Ben Nelson, a Democrat from red state Nebraska. On national security Nelson is usually with Republicans, but he provided anti-war Democrats crucial support in sending a troop-withdrawal timeline to President Bush.

SEN. BEN NELSON, D-NEB.: We softened the date for withdrawal, and I can live with that, knowing that he was going to veto it, and then we would have been another shot at it. And I can assure you that whatever I support in the future is not going to have a date on it.

GARRETT: Nelson, who just returned from Iraq, said his goal is to force a debate on benchmarks of success in Iraq. But to get there, he said, he had to back troop withdrawals.

(on camera): If someone were to say the timeline vote was a throw away vote, you would say, what?

NELSON: Yes, it was a throw away vote, in a sense that I never expected it to come. It's not going to become law. It didn't and won't. So it seemed to me that it was far more important to get a compromise of getting benchmarks solidified in the package than not.

GARRETT (on camera): Nelson also told FOX that up until now theatrics, not policy-making, have dominated the war founding debates. Shay's agrees. Both say they feel trapped in a polarized debate they say has yet to get real or seek a real solution.

In Washington, Major Garrett, Fox News.

(END VIDEOTAPE)

HUME: Later on "Special Report," as Tony Blair prepares to leave the stage, we will look at the reviews he has been getting on ten years as prime minister. But first, former CIA director George Tenet's book renews the debate over pre-war Iraqi intelligence. He talked to Bill O'Reilly. We'll take a closer look at the issue after a break.

(COMMERCIAL BREAK)

HUME: Former CIA director George Tenet has told Fox News' Bill O'Reilly that yes, he was sure that Iraq had weapons of mass destruction. But he says there were reasons for that. And as our chief Washington correspondent Jim Angle reports, Tenet was nowhere near the only person who thought so back at the time.

(BEGIN VIDEOTAPE)

JIM ANGLE, FOX NEWS CHIEF WASHINGTON CORRESPONDENT (voice-over): In an interview with Bill O'Reilly, former CIA director George Tenet explained why he and others were so convinced that Saddam Hussein had weapons of mass destruction.

GEORGE TENET, FORMER CIA DIRECTOR: I believed it going back to my time in the Clinton administration, when we were concerned about Iraq. I believed on the basis of 10 years of following it, data that we had seen, his deception, his denial, his thwarting of the U.N. I believed it in my core that he had them. Here is a guy that basically, — you know, here's a guy that basically was going to have his country destroyed because he was not honest about it.

ANGLE: Indeed, President Clinton got Congress to pass a law making regime change in Iraq official U.S. policy in 1998, and that December announced to the nation he had just launched air strikes against Iraqi weapons sites.

WILLIAM JEFFERSON CLINTON, FORMER PRESIDENT OF THE UNITED STATES: Their mission is to attack Iraq's nuclear, chemical and biological weapons programs and its military capacity to threaten its neighbors.

ANGLE: No wonder then that many Democrats, including some on the Senate Intelligence Committee, took the same view during the debate to go to war in 2003.

SEN. JOHN ROCKEFELLER, D-W.VA.: There is unmistakable evidence that Saddam Hussein is working aggressively to develop nuclear weapons, and will likely have nuclear weapons within the next five years.

SEN. HILLARY CLINTON, D-N.Y.: If left unchecked, Saddam Hussein will continue to increase his capacity to wage biological and chemical warfare and will keep trying to develop nuclear weapons.

ANGLE: Though anti-war critics often accuse the Bush administration of lying about WMD in order to justify military action, many prominent Democrats harbored no doubts in the run up to the war.

SEN. CHRIS DODD, D-CONN.: There's no question that Iraq poses biological and chemical weapons. That is not in doubt. And that he seeks to acquire additional weapons of mass destruction, including nuclear weapons. That's not in debate.

SEN. JOHN KERRY, D-MASS.: So the threat of Saddam Hussein with weapons of mass destruction is real.

ANGLE: On the question of Iraq's contacts with al Qaeda, Tenet believes some officials pushed the idea too far, suggesting Iraq controlled the terrorists. But Tenet does say there was a decade of contacts between the two, including some specific examples.

TENET: There was an issue of training. The one issue that concerned us was this fellow that we captured, Ibn Sheikh al Libbi, who is an al Qaeda senior operational trainer, told us that they may have acquired some chemical training from the Iraqis. We believed that.

ANGLE: And the Clinton administration said so in public statements, noting in 1999 that "Iraq continued to plan and sponsor international terrorism. It continued to provide safe haven and support to various terrorist groups."

H. CLINTON: He has also given aid, comfort and sanctuary to terrorists, including al Qaeda members.

ANGLE (on camera): So the conviction that Saddam was a threat was widely held. Though the WMD assessments turned out to be wrong, almost everyone believed them at the time. Senator Rockefeller even warned that we had always underestimated Saddam's progress. He also noted the debate over whether Iraq posed an imminent threat and said he believed it did, but went on to say that after September 11, even the question was outdated.

In Washington, Jim Angle, Fox News.

(END VIDEOTAPE)

HUME: And can see the rest of Bill O'Reilly's interview with former CIA chief Tenet tonight on "The Factor" at 8:00 p.m. Eastern. The Justice Department is investigating whether former official Monica Goodling asked job candidates about their political affiliations and preferences during interviews. Hiring based on such information could have been illegal. Goodling invoked her Fifth Amendment rights and then resigned after being called to testify before Congress about the firings of eight U.S. attorneys. She had been chief counsel to Attorney General Alberto Gonzales. That obviously was a much older photograph.

Later on "Special Report," John McCain may be down in the national polls, but he is making a surge in key caucus and primary states. We'll tell you about that. But first, World Bank President Paul Wolfowitz has a paper trail backing him up in his fight to keep his job. We will explain that after a break.

(COMMERCIAL BREAK)

HUME: Some new polls to tell you about now. The latest American Research Group survey confirms that while Arizona Senator John McCain continues to trail nationally in the race for the Republican presidential nomination, he is doing well in the early states. McCain leads the field in Iowa, as you can see, where he has opened up a seven point lead over Rudy Giuliani. In New Hampshire McCain leads Mitt Romney by five and Giuliani by 12. And in South Carolina, McCain has opened up a 13 point lead over Rudy Giuliani, all indications the McCain may, may be back on track.

Meanwhile, on the Democratic side, the latest player Rasmussen National poll shows someone than New York Senator Hillary Clinton on top. Illinois Senator Barack Obama holds a narrow two point advantage over the former first lady, 32 percent to 30. Former North Carolina Senator John Edwards remains in third, with support holding steady at 17 percent.

The embattled World Bank President Paul Wolfowitz has maintained that he followed the rules regarding the job switch for a female companion of his who worked at the institution. And now there is some documentation that appears to back him up. National correspondent Catherine Herridge has the last on Wolfowitz's fight to keep his job.

(BEGIN VIDEOTAPE)

CATHERINE HERRIDGE, FOX NEWS CORRESPONDENT (voice-over): Speaking to reporters in Belgium, the president of the World Bank Paul Wolfowitz deflected questions about his future, saying the focus must remain on the bank's important mission.

PAUL WOLFOWITZ, WORLD BANK PRESIDENT: The work of the bank goes on. It is critical. There are millions of poor people around the world who depend on us. And we will make sure that we do what we need to for them.

HERRIDGE: This week an ad hoc committee at the World Bank continues to investigate Wolfowitz and the transfer of his girlfriend, Shaha Riza, a long time World Bank employee, to a new position at the State Department in 2005.

WOLFOWITZ: I had a chance on Monday to give my full explanation to the board and it is available to all of you if you want to read it. We need to follow due process.

HERRIDGE: In his remarks to investigators, the former head of the ethics committee on the bank's board, Ad Melkert, claimed that "the Ethics Committee was not consulted, nor did it approve, the terms and conditions of the 2005 deal for Riza," which included a significant raise, reportedly 36 percent, to 180,000 dollars a year, on par with the salary of Secretary of State Condoleezza Rice, and guarantees of future raises.

However, internal World Bank documents show there was significant correspondence between Melkert and Wolfowitz about Riza leading up to and after her transfer to the State Department. In a memo to Wolfowitz, the then Ethics Committee Chairman Melkert writes in July of 2005, "Having considered different options, the Ethics Committee advises that the staff member will be relocated to a position beyond supervising influence by the president."

When Wolfowitz tried to remove himself from the decisions about Riza's career, he was told by Melkert in a letter the following month, "The Ethics Committee cannot interact directly with staff member situations," and advised Wolfowitz that the vice-president of human resources would carry out his instructions.

In a memo three days later, Wolfowitz complained about rules World Bank which said he could not recuse himself because the president, not the board or committees, must deal with staffing issues. And in what appears to be an effort to confirm the agreed course of action with the head of human-resources, Wolfowitz writes, "I understand you preference would be to offer her a financial settlement that would compensate her for both the lost opportunities related to promotion and the pain, suffering and damage to her professional reputation that has been involved in her forced departure."

(END VIDEOTAPE)

HERRIDGE: But Melkert now tells investigators that it was never necessary for Shaha Riza to leave the World Bank, and moved to state the Ethics Committee recommendation was apparently that she just needed to be out of the bank president's zone of influence. Supporters of Wolfowitz claim that criticism of his performance reflects his aggressive efforts to reform the World Bank. Brit?

HUME: Catherine, thank you. The State Department is rejecting suggestions that terrorists could have easy access to the U.S. because of rules that do not require citizens of certain countries to obtain a visa. State Department spokesman Tom Casey says residents in a visa waiver country does not guarantee access to America, and a whole series of tools are in place to stop people of concern. Question about access to the U.S. arose this week following the sentence of five Britons to life prison terms in a London terrorist bomb plot. Britain is one of the countries on that waiver list.

Tony Blair took the United Kingdom's reigns a decade ago and now the British prime minister is heading into political retirement. As he enters his final day in office, Blair's tenure is being judged against the backdrop of the war in Iraq and his friendship with the U.S. Correspondent Greg Palkot has that story.

(BEGIN VIDEOTAPE)

GREG PALKOT, FOX NEWS CORRESPONDENT (voice-over): Ten years ago today, 43-year-old British Prime Minister Tony Blair arriving at 10 downing street, following a landslide victory for him and his Labor Party. He would win over Americans as well following 9/11, when Blair showed that his relationship with the U.S. was special and his friendship with President Bush was strong. How does he feel about that support now? That's a question I put to Blair at a recent press conference.

TONY BLAIR, BRITISH PRIME MINISTER: America felt, from that moment on, it was at war. And I believed the most important thing for us was to be with them in that fight. And I believe that still.

PALKOT: Feelings important as the war on terror led to the war in Iraq.

ROBIN NIBLETT, POLITICAL ANALYST: The kind of political support and articulation of the coalition position, especially on Iraq, has been extremely valuable for the Bush administration.

PALKOT: But it has been political poison at home. Sixty percent of the British public is opposed to the war in Iraq. Blair's critics see his support of Bush as poodle like, influence with the U.S. minimal, but payback for Britain the same.

UNIDENTIFIED FEMALE: We could do a lot better.

PALKOT (on camera): How about his relationship with the United States? How would you characterize that?

UNIDENTIFIED FEMALE: He is a lap dog.

UNIDENTIFIED MALE: He did a silly thing by sort of going against what the majority of people in Britain wanted, and that is not to go to war in Iraq.

PALKOT: Blair is expected to announce next week he will be stepping down as prime minister by mid-year.

(on camera): What about the next tenant here at number 10 Downing Street, the presumed successor to U.K. Prime Minister Tony Blair, Gordon Brown? Observers say that the basic substance of the U.S.-U.K. special relationship should stay the same, though the style, the accent, could change.

(voice-over): British treasury chief Brown is described as an Atlanticist. He likes the U.S., vacations in Cape Cod, even got some time with President Bush during a recent Washington visit. He is also described as deliberate, consultative and interested in making a break with the past.

NIBLETT: He probably is going to want to look to be able to send some type of signal to his political base that this is a different environment, that it will be a different tone.

PALKOT: An important signal, as Laborite Brown might face off against Conservative party leader David Cameron for the prime minister job a few years down the road. Cameron is also trying to change the face of his party, and has even called Blair a slave to the U.S.

Regardless of who is in 10 Downing Street or the White House, the U.S.-U.K. relationship should remain special, maybe just a bit diluted, like a cup of British tea.

In London, Greg Palkot, FOX News.

(END VIDEOTAPE)

HUME: Back here at home, the Commerce Department says orders to U.S. factories surged in March by the largest amount in the year. That is an encouraging sign that the recent slow down in manufacturing may be ending. Total factory orders rose by 3.1 percent in March, fueled by a big jump in demand for commercial aircraft. It was also the biggest rise in two and a half years for business investment in new equipment.

We're going to step aside to pay some bills and check headlines. When we come back, first it was Livestock. Wait until you hear what is threatening the planet and causing global warming. We'll have the answer coming up next on that segment we call The Grapevine.

(COMMERCIAL BREAK)

Click here to read The Grapevine

Secretary of State Rice expressed concern today that Iraq's neighbors are not serious about supporting the new democracy there, either politically or financially. She told reporters in Egypt at the region has everything at stake. Correspondent James Rosen is traveling with her.

(BEGIN VIDEOTAPE)

JAMES ROSEN, FOX NEWS CORRESPONDENT (voice-over): A senior aide to Secretary Rice says she hopes to persuade Sunni Arab states like Saudi Arabia that the minority Sunni population in Iraq is better off, safer, and more directly involved in governing the country than it was just four months ago.

"I think the Baghdad security plan is demonstrating that [Prime Minister Maliki and his allies] are prepared to try and defend all Iraqis equally." Secretary Rice told reporters, "But let's not have overreaching expectations," she warned, "It's going to take time to overcome suspicions with Iraq, and those suspicions within Iraq then feed suspicions in the region."

U.S. officials say Iraqi Prime Minister Nouri al Maliki, a Shiite, in turn desires, "legitimization," validation from his Sunni Arab neighbors, most of whom have yet to establish formal diplomatic ties with the new post-Saddam Hussein's Iraq.

NOURI AL MALIKI, IRAQ PRIME MINISTER (through translator): There's a need to support politically, Iraq's Democracy and to stand along side Iraq against terrorism, which is also spreading outside of Iraq to Saudi Arabia, Algeria, Morocco and other areas.

ROSEN: In 90 minutes they met today, Rice and al Maliki, according to aides, agreed on the need for swift action by Iraq to pass it comprehensive oil revenue-sharing plan, part of a larger effort in Baghdad to use the country's natural economic strengths to speed up political reconciliation and tamp down violence.

At the core of the economic plan is the international compact with Iraq, a 50-nation accord to be finalized Thursday, the first multilateral agreement Iraq has signed since the 1950s.

ROBERT KIMMITT, DEPUTY TREASURY SECRETARY: The successful launch of the compact will lead to stronger economic reform inside Iraq to the benefit of all the Iraqi people, I think that will also produce political and security benefits.

ROSEN: The compact calls for major financial institutions, like the

World Bank and the International Monetary Fund, to join with political organizations like the group of eight industrialized nations to forgive Iraqi debt and extend new loan and lines of credit in exchange for Baghdad's adheres to a tough five-year set of benchmarks, in areas like legal and market reforms, anti-corruption initiatives and swift passage of that elusive oil revenue package. But President Bush's special envoy to the compact says, the Iraqis have already proved such benchmarks are within reach.

KIMMITT: They've been living for almost three years now, under very difficult IMF programs, International Monetary Fund programs, that have required a number of very difficult steps on their part, not least, reducing fuel subsidies, raising the price of gasoline in the midst of the difficult political and security environment they face, that was a tough economic reform decision. They took it, we think they'll continue to do that under the compact.

ROSEN (on camera): A senior aide to Secretary Rice says she has so far had no run-ins with the Iranians, however the aide refused to answer directly when asked if any other State Department personnel have engaged their Iranian counterparts at this conference.

In Sharm el Sheikh, Egypt, James Rosen, FOX News.

(END VIDEOTAPE)

HUME: U.S. senators of both parties have urged the Iraqi parliament not to take a planned two-month summer recess before it completes some pending business, including a series of benchmarks such as a date for provincial elections. Today some Republican senators threatened to withdraw support for funding and troops over the issue. Ohio Republican Senator George Voinovich warned that "all hell will break loose" if parliament goes on vacation. Correspondent Anita McNaught has a closer look at what the parliament has actually been doing.

(BEGIN VIDEOTAPE)

ANITA MCNAUGHT, FOX NEWS CORRESPONDENT (voice-over): The Iraqi parliament, symbol of the new nation, the great democratic hope of the Middle East. That's the speaker of the House, he's saying, "you only want to make a fuss. What is this mess?," he's asking.

Saddam Hussein was never a big on consultation, and before that, it was a monarchy, and before that, tribal law. But even allowing for novelty, Iraqi's are questioning whether their council of representatives is up to running the country.

UNIDENTIFIED MALE: You have quite capable people in between, and somehow they are not capable, some other have been brought in by this party or that party without caring for if they are capable or not, but they are loyal to the party.

MCNAUGHT: Then there are questions of procedure. With no fixed schedule or agenda, it's hard for anyone, even lawmakers, to gauge when a piece of legislation will make it through the parliamentary process. When legislation is hotly disputed, that process seems to stretch out indefinitely.

UNIDENTIFIED MALE: We are still at the beginning of our institutional life of the Iraq.

MCNAUGHT: But MPs in Iraq faces perils their Western counterparts do not, an explosive reminder delivered three weeks ago when a suicide bomber hit the parliamentary cafeteria, killing one lawmaker. Staff and MPs soldiered on in the aftermath, attendance not affected. Even so, with debates averaging only three hours a day, three days a week, that's just nine hours, parliamentary time a week, not enough to get much done.

UNIDENTIFIED MALE: First of all it's risky, that's right, you could us killed anytime. Secondly, you feel that you are not able to change the situation. That's another point which is worse than being killed.

MCNAUGHT: No time for holidays this year, despite temperatures of 110 to 120 degrees, ventured the new American ambassador to Iraq.

RYAN CROCKER, U.S. AMBASSADOR TO IRAQ: As we expect, there are going to be some very important legislative issues before them.

MCNAUGHT: America has a list of priorities, the oil law, reform of de-Baathification laws, whether Iraq should federalize, all controversy for Iraqis, all still pending.

The speaker is protesting, "This isn't the parliament, this is a coffee shop."

Iraq's lawmakers have their own way of doing things right now, they're working on pensions and compensation for injured in the fighting, something the 12 million ordinary Iraqis who voted for Democracy will appreciate.

Anita McNaught, Baghdad, FOX News.

(END VIDEOTAPE)

HUME: Israeli Prime Minister Ehud Olmert won support at a meeting Kadima Party lawmakers today, for his decision to stay in office despite calls for his resignation. Deputy Prime Minister Shimon Peres told reporters that Olmert had unprecedented backing.

Israeli Foreign Minster Tzipi Livni told Olmert, earlier this week, he should resign, and expressed interest in taking over as leader of his party.

Next on "Special Report," he's behind in the national polls, but John McCain has surged ahead in early primary and caucus states. FOX all-stars will tell you what it means after a break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, R-ARIZ., PRESIDENTIAL CANDIDATE: I'm very happy with where we are. We have very strong, political strength and political apparatus in the early states; we are leading here in South Carolina. I'm very happy and comfortable where we are.

(END VIDEO CLIP)

HUME: Well, he's trailing in national polls and has been for some time, is John McCain, but look at these numbers from the American Research Group, these are just out and there are about some of the early states.

This is Iowa, the first number: McCain 26 to 19 over Giuliani and even further ahead, as you can see, of Mitt Romney.

In New Hampshire, we have a similar situation, McCain at 29, Romney closer he's of course from next door Massachusetts and ahead of Giuliani, there as well.

And in South Carolina, McCain appears to have an even larger lead and a fewer number of undecided voters.

So, based on that situation, it's a little better for John McCain, in deed, a lot better than it looks on the national situation.

Some thoughts on all 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.

So, what accounts for the discrepancy, and which members matter most?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, since it's a year-and-a-half away and we're all speculating wildly on these rather small changes in polls, allow me to speculate wildly on the cause of this.

I believe these polls. I think it is true.

HUME: I think you're speculating quite intelligently. And I insist that you do.

KRAUTHAMMER: Well, I just begun to speculate. Wait how wild I can get here. I would assume that the national polls reflect what — a population that is less involved in the issues and in the candidates, than those in the primary states: Iowa, South Carolina, New Hampshire, who watched the candidates, who have been exposed to a lot more information.

If you've been exposed to less information, as you have in national polls, you'd be less aware, perhaps, of Giuliani's positions on social issues, which are quite at variance with most conservatives on abortion, gay rights, gun control, et cetera.

The other part of it is, I think, that the national media, which were in love with McCain eight years ago when he took after the favorite targets of the national media, social conservatives, and Southern governors who wear cowboy boots, today has soured on McCain, and the national coverage of McCain has a sense of weariness and disappointment.

So, if you're following the campaign entirely on national — the media, you're less likely to support him. If you're more involved, as you are in the primary states, you'd be more aware of what his positions are,

Giuliani's positions are, and you might be less willing to support him and less exposed to the disdain and the disappointment that you find in national media with John McCain. So, that's pretty wild speculation.

HUME: Pretty good. Pretty good.

Mara, can you top that wild speculation?

MARA LIASSON, NATIONAL PUBLIC RADIO: Yeah, yeah, I will try my best. First of all, in the past, we used to always say, in a primary, who cares about the national polls, we only care about Iowa and New Hampshire, and South Carolina. This year it's a little different, we're going to have something pretty close to a national primary.

Now, I'm not saying that doesn't meant that Iowa, New Hampshire and South Carolina don't give somebody — a winner out of that, a real slingshot boost, but I think the national polls are something that we can to look at now.

I tend to — I would like to see other polls from the early states to see if McCain's position is changing. South Carolina is consistent. He's been ahead there for some time in a number of different polls, but when you look at the Real Clear Politics average, which is something that's useful to do...

HUME: Do we have a graphic of that? Real Clear Politics — yeah, there it is. Look at that now, that's...

LIASSON: That's a — what they do, which is interesting, because they average everything, as you think it would be corrective for a poll that's an outlier, and they still have Giuliani ahead...

HUME: Thirty-two points.

LIASSON: Yeah, by quite a bit, although he has come down. I think McCain has seen a little bit of a rise. He's trying to give his campaign a second chance. I think the big question for McCain is going to be at the end of this quarter, can he — will he have raised enough money...

HUME: Enough money. Really?

LIASSON: Yes, I really do, they — the campaign...

HUME: You think he could be in a position where he would not be able to go forward because he...

LIASSON: No, no, no I don't think he could not go forward, but the campaign set a bar very high for him, they said we're going to do great this quarter, we're going to raise $20 million. Let's see how close he gets to that.

MORT KONDRACKE, ROLL CALL: Now, Real Clear Politics does keep an average of other polls in Iowa and New Hampshire, and McCain is doing well there. This is consistent with other findings.

HUME: New ARG poll.

KONDRACKE: Yeah, the new ARG poll is. It doesn't keep a poll in South Carolina, but...

(CROSSTALK)

So, I think that Charles's speculation is probably right. I mean, these people do pay close attention in New Hampshire, Iowa, and South Carolina...

HUME: And of course, they get to see the candidates.

KONDRACKE: Yeah, they're there all the time and they're hearing what they're saying, and there's a lot of back-and-forth, and I — and South Carolina I just wonder if there isn't a little remorse, as well, I mean, South Carolina was the place where John McCain was put through the wringer by allies of George Bush, whether it was the Bush campaign or not, accused of all kinds of nefarious things, and in retrospect I wonder, if — I'd love to see a poll, if you had to do it over again, if the 2000 primaries were happening today, would you vote for George Bush or John McCain. I'd love to see that poll.

HUME: Mort — for more, there's always a certain appeal in the idea — appeal in the idea of the politics of guilt.

KRAUTHAMMER: Yeah.

(LAUGHTER)

HUME: All right, let's look ahead now. Israeli Prime Minister Ehud Olmert is under pressure to quit after a report cites serious failures during last year's Lebanon war. He says he's not going anywhere. We'll talk about that next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

TZIPI LIVNI, ISRAELI FOREIGN MINISTER, (through translator): I told him that resignation would be the right thing to do. I know they were rumors that I was trying to topple the prime minister or that I am trying to topple the prime minister. It's not true. I'm not working to topple the prime minister. It's a decision that he must take.

(END VIDEO CLIP)

HUME: Yeah, it might be a decision he must take, but she told him ought to get out and of course, this is in the midst of a very major crisis for the Olmert government over there. Livni, of course, a part of the panel and some people think she might — is a likely successor.

Charles, this is an area in which you have great interest. What are your thoughts about what's happening to Ehud Olmert and what should be happening and what he ought to do?

KRAUTHAMMER: He's dead man walking. He's finished. He may hang on for a few days or even a few weeks, and that's only because, ironically, his coalition is so unpopular that other members of parliament know that if his government collapses with, they're going to lose the next election, they're going to be out of jobs, they're not going to have a cause or any benefits...

(CROSSTALK)

HUME: ...how great a factor is this recent new report, really, on the Lebanon-Hezbollah war?

KRAUTHAMMER: Well, Olmert was already at a level of approval so low that it bumped against the margin of error, it was conceivable that there wasn't a single Israeli who supported him, before this report.

After this report, he's finished. This is the most scathing report in the history of Israel after a bad war, and there were reports, after the Yom Kippur war and the first Lebanon war, and ministers resigned. He's resisting. But remember, the worst part about this report is that it's only part one, it's only the first five days of the war. The rest of the war was even worse, with rockets coming in and then the final ground assault, which was useless, bumping up against a cease-fire resolution, losing a lot of soldiers needlessly.

The second half of that report happens in July and August, and the first half hints of what it's going to recommend. It's says that in the second report, it will talk about personal recommendations, meaning his resignation.

He's done. The only question is, will Livni come in here as his successor, hold the coalition together, or will the government collapse, new elections and Netanyahu will become the prime minister?

HUME: Mara, the U.S. pretty much stood by the Olmert government during that war. What implications for American policy here?

LIASSON: I don't know if it has any implications for American policy toward Israel. I think it will be the same, but it is a kind of object lesson about how, if you go to war, you should succeed. You know, in the case of Israel, the threat is more existential and more close by, but in a way, the Lebanon war against Hezbollah was in miniature like the work in Iraq. It didn't succeed in the way it was supposed to.

KONDRACKE: Now, it's a good thing that American doesn't have a parliamentary system or there might be similar incidents in this country too, but it's not going to happen.

What is going to happen is that there are going to be demonstrations tomorrow, and how fast Olmert goes may be partly determined by how big those demonstrations are. If it's 50,000, maybe he can survive a few weeks, if it's 250,000, he maybe — the whole thing may collapse.

Also, one of the parties in his coalition is Labor, and Labor is going to have a party conference the end of May, in which the current defense minister, who's in his coalition, may get kicked out as the party leader and if the former head of the Shin Bet, Ayalon, becomes...

HUME: Shin Bet being?

KONDRACKE: Their intelligence service, becomes the new Labor party leader, he had said "I will not serve with Olmert," in which case the coalition falls apart and there would have to be new elections and Benjamin Netanyahu is the liquid candidate and far in the lead, ahead of the other candidates.

HUME: So, what do we get out of this in the end, a harder-line government, or not?

KRAUTHAMMER: We're going to have instability for months as the coalition attempts to hold itself together, knowing that it's going to be whipped out, if there are elections. You're going to have the weakest and most unpopular government in Israeli history over the next months. At time when America is trying to arrange negotiations with the Palestinian, which means that those negations are doomed.

HUME: So, this is an unappetizing prospect of Middle East diplomacy, isn't it?

KRAUTHAMMER: It's unappetizing and it reflects a parliamentary system, which is dysfunctional. That government ought to resign today, and have new elections, because in the polls, two thirds of Israelis — two-thirds of Israelis say that Olmert should resign, today.

HUME: That's it for the panel, but stay tuned to see why President Bush sent Paul Wolfowitz to the World Bank and the first place. That's next.

(COMMERCIAL BREAK)

HUME: Finally tonight, the word around Washington is that the World Bank bureaucratic wants to get rid of Paul Wolfowitz as president because he wants to get rid of the way the place does business. Here's an example.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: What's the matter poor foreign government.

UNIDENTIFIED FEMALE: How am I ever going to build this hydro electric dam, with these bad bricks, and with my bad credit, I can't afford new one.

ANNOUNCER: Bad credit, no credit? Who cares? With a World Bank loan, you'll have that dam built in few short decades with money left over.

UNIDENTIFIED FEMALE: Count me in.

UNIDENTIFIED MALE: Lost another loan to the World Bank.

(LAUGHTER)

(END VIDEO CLIP)

HUME: 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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