Updated

The following is a rush transcript of the August 2, 2010, edition of "Special Report With Bret Baier." This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIPS)

PRESIDENT BARACK OBAMA: I made it clear by August 31, 2010, America's combat mission in Iraq would end.

(APPLAUSE)

And that is exactly what we are doing, as promised, and on schedule.

SEN. MITCH MCCONNELL, R-KY.: In fact, the agreement with the Iraqis to go down to 50,000 troops was made under the previous administration.

(END VIDEO CLIPS)

BRET BAIER, ANCHOR: The speech in Atlanta today, president Obama speaking to a convention of disabled American veterans, saying he is going to meet a vow he made on the campaign trail. You heard the Senate minority leader saying it was really a decision made by President Bush on the previous administration.

What about the situation on the ground in Afghanistan and in Iraq?  Let's bring in our panel, Steve Hayes, senior writer for the Weekly Standard, Juan Williams, news analyst for National Public Radio, and syndicated columnist Charles Krauthammer.

Steve, we will start in Iraq, which is primarily what the president talked about today. There are some question marks on the ground about the politics there. But the drawdown will continue as scheduled.

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: It will. I thought overall it was a disappointing speech. The president spent a lot of time talking about the politics, as we just played in that clip, saying "I made this campaign promise, I'm keeping it."

Fine. It's a political point and he is making a political argument and he is a politician, we should expect that. The problem is what we're seeing on the ground in Iraq today isn't primarily a political problem.  It's a substantive problem.

You have a government isn't yet formed. You have real serious and potentially increasing security problems. You have a question of the U.S. long term strategic commitment to the people of Iraq. You have broader questions about liberty and democracy.

We did not hear anything about any of those issues from the president in his speech today, a speech that was described as a major Iraq policy address.

And the question is, if you are sitting in Iraq today and you are responsible, you are charged with putting a government so that the United States can withdraw and withdraw in a way that leaves a stable political system, the question if you're an Iraqi politician is what's the president telling you today, what did he say in public that gives you any guidance where he wants Iraq to be going? None.

BAIER: And Juan, we have been around this block before, but there was a mention of the previous president's decision, or the previous administration's tough decision that then Senator Obama opposed in the Iraq surge that got him to the point where he is today. This was really no mention of that. Do you have a problem with any of that?

JUAN WILLIAMS, NEWS ANALYST, NATIONAL PUBLIC RADIO: I think he should acknowledge it. But on the other hand, I thought when we heard the senator minority leader Mitch McConnell say, you know what, this was a decision made by the previous administration made under a great deal of pressure from people who opposed the war and who were upset -- why were we in Iraq at the time, there were no weapons of mass destruction, and all the rest.

And then, of course, there was the success of the surge. And I think that is where President Obama comes up short in terms of being graceful and saying, you know what, the surge, it turned out was a success, and we have to give thanks, because, and he did say in the speech today, that if you look at the goals that the United States set for itself in terms of creating some sort of stability and building the framework for a permanent government, that has happened. We have achieved that goal.

Steve is right when he says these people are at war with themselves, the five major parties have yet to really put together a ruling government. And I might add we have seen terrible civilian deaths over the last month.

But in terms of what the U.S. can do, I think this is the time for the U.S. to start coming down, and I would expect that a politician like President Obama would say I kept my promise. The Iraqi force is huge, I think it's almost 700,000 that we will leave there who are trying to hold that country together. So it is not vulnerable to attack from the outside.  These are issues for Iraqis to settle, not Americans.

BAIER: But the sectarian violence, Charles, has always been and is continuing to be a problem.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Right. It simmers beneath the surface. I think Obama -- McConnell was right when he aid that the withdrawal of the troops, the drawdown was negotiated by the Bush administration in response to Iraqi demands, not as a concession to the American left. He made the decisions on what he thought were the American national interests.

Also the surge was something that Obama opposed, and that is the only reason, the success of the surge is the only reason we are now in a position that we can drawdown.

However, what is really disturbing is in Obama's speech he spoke about ending the war four times. He did not use the word "success" or anything of the sort, and he did not speak about a vision for a future of America and Iraq together.

When the Iraqis only hear "end the war" from the president, the president has not given a single speech on Iraq, the president has essentially washed his hands of the war. All he has ever spoken of is ending it and getting out. The only influence he has exerted is by sending Biden over to the region, and he is not exactly exerting his authority on the warring parties, the five who are disputing who will rule Iraq now are not taking any orders or influence from Washington.  The problem is this -- the Saudis are exerting influence on the parties, the Iranians are exerting influence, and the Turks are, but the Americans have not because the Iraqis understand all this administration wants is out rather than shaping the future.

As a result, Obama had one task, not succeeding in the surge that already happened, not announcing a timetable that was already established.  He had one task -- getting elections done and having a stable government established. On that he has not succeeded.  It is not all his fault. The majority of the fault lies with the Iraqis themselves. But on that he has not succeeded, and as a result the entire enterprise with all the blood and suffering involved is now in jeopardy.

BAIER: On to Afghanistan. General David Petraeus, the new commander on the ground there, issuing new rules for troops inside Afghanistan.  This weekend the Defense Secretary Robert Gates speaking again about that deadline that was talked about, July of 2011. Take a listen.

(BEGIN VIDEO CLIP)

ROBERT GATES, U.S. SECRETARY OF DEFENSE: I think we need to reemphasize the message that we are not leaving Afghanistan in July of 2011. My personal opinion is that draw-downs early on will be fairly limited numbers, and as we are successful we will probably accelerate. But, again, it will depend on the conditions on the ground.

(END VIDEO CLIP)

BAIER: Steve?

HAYES: That's just more mixed messaging from the administration. Not long ago you had Joe Biden saying yes, we will withdraw significant numbers of troops in July of 2011. And then over the weekend a New York Times article that has Washington D.C. buzzing right about the so-called failure of the counterinsurgency strategy and the success of counterterrorism operations, which is what Joe Biden has been pushing.

People on the ground in Afghanistan are not talking about it that way.  They are not talking counterterrorism versus counterinsurgency. They are talking about winning the war, securing the population. So when you see from New York Times or elsewhere consistent references to counterterrorism strategies, that is coming from Washington, not from people on the ground.

BAIER: Juan?

WILLIAMS: I think that, in fact, what we are seeing is they have success with the counterterrorist strategy, Steve, and that is now, I think, the direction General Petraeus wants, to move on military strategy to something that will require...

HAYES: It's the same strategy, though.

(CROSSTALK)

HAYES: But you do not have to stop fighting.

WILLIAMS: What I'm saying is as a matter of American politics, American people, he does not want to lose American support, so he needs to have a strategy that does not require as large a force. We're going to have 100,000 on the ground.

KRAUTHAMMER: Unless you have the Afghans on your side, you are going to not win. The administration spent six months walking around and back the president's statement about a withdrawal in July of 2011. A peasant in Kandahar is not watching "This Week" on ABC. What he knows is when the president announced last year the surge in Afghanistan, the next sentence was about a withdrawal, and that's a message that the president himself has to undo. Nobody else can.

BAIER: General Petraeus' bullet points seem to loosen the rules of engagement a bit from General McChrystal as well.

Tell us what you think will happen in the Iraq drawdown. Go to our homepage at Foxnews.com/SpecialReport and vote in our online poll. Next up, the commonwealth of Virginia takes on the White House.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

KEN CUCCINELLI, R-VA. ATTORNEY GENERAL: He issued an opinion at the request of one of our legislators addressing the ability of law enforcement officials in Virginia to make arrests for violations of federal immigration law.

And the distinction we drew was they clearly have arrest authority when there is a criminal violation of the federal immigration law, but that it is not clear they have arrest authority when there is a mere civil violation of the federal immigration laws.

(END VIDEO CLIP)

BAIER: After the judge's ruling in Arizona, the federal judge's temporary injunction of that Arizona immigration law, essentially Virginia, the commonwealth of Virginia is saying -- just not buying that decision.

The attorney general in a legally binding decision today saying it is his opinion that Virginia law enforcement officers may, like Arizona police officers, inquire into the immigration status of persons stopped or arrested.

That is not all. They also dealt with health care today, and we will get to that in a bit.

Back with the panel. Charles?

KRAUTHAMMER: Stopped or arrested -- here's what I think the attorney general was changing the existing status quo. As I understand it, up until this ruling, you could -- if you took someone into custody you could ask them at that point if they were legal or illegal immigrants as to their status.

What Cuccinelli is doing, I think, is to say you can ask before arrest when you merely stop someone, let's say, for a traffic violation.

I'm -- I think that's OK as a policy but I have a problem with the process. I think if you change immigration procedure it ought to be done by the legislature. It is not something that ought to be done administratively.

Last week here I criticized the Obama administration for a Homeland Security memo which would loosen immigration laws by the fiat of the administrators, by the bureaucrats, which would allow illegal immigrants who are here to stay who otherwise under existing law would be expelled. I thought that was wrong.

And I think it is wrong also if it's done on the other side even in pursuit of a policy which I would otherwise support.

BAIER: Juan, is this the beginning of an outpouring of different states perhaps doing the same thing?

WILLIAMS: We have seen an outpouring, Bret, of states trying to pass laws or resolutions about immigration. I'm told that there is a national legislature counsel, I think it's 1,400 this year, and that for the record it was actually last year with more. So there is a tremendous rush into a vacuum which is that the federal government has not acted.

But here is the larger point to me about the Ken Cuccinelli. He did not challenge the basis of the Arizona decision, which is that the U.S. federal government has the supreme authority to affect the law. And he didn't say they are required, which is what the judge in Arizona said. You cannot block the idea that the police are required to ask about your immigration status.

Cuccinelli even said you can't just hold someone because you think their immigration status is dubious. You can't arrest them for it. so I don't want to over-blow what is done here. I think he is simply, you know what, you can ask if you choose to ask if you have the discretion to ask.  But I think Judge Bolton gave them the same latitude.

BAIER: Steve, quickly on this.

HAYES: I think the reason that he drew it a little bit more narrowly is because he was asked specifically by a delegate, Robert Marshall, to give his opinion on a specific ordinance, and that's why he didn't go further.

BAIER: Another legal issue -- Virginia's lawsuit against the Obama administration's health care reform law, saying it is essentially unconstitutional, this mandate, that everyone has to purchase health care.

But a U.S. district judge there, Henry Hudson's ruling today, denied the Justice Department's attempt to get this case dismissed, saying further hearings were needed to weigh the merits of the case.

I guess if you are the White House you look at it saying this is about the merits -- not about the merits. This is about finding more information. But for people who want this law overturned, this was at least a legal victory.

HAYES: It was a fascinating decision, and there are all sorts of disputes about who has standing, who can bring the arguments and things like that.

What I find most interesting and potentially most relevant as we go forward is the fact that the administration is now making, basing its argument at least in part on the anti-injunction act, which prevents people from bringing suit to stop the assessment or collection of any tax.

So the administration is in fact saying at this point that would be imposed if you don't buy insurance pursuant to the individual mandate is, in fact, a tax, which is something that the Republicans were arguing the entire time during health care. They are now being forced to concede that because it fits their legal argument.

BAIER: And the president denied that in multiple interviews. Much more on this, we guarantee it.