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This is a partial transcript from The Beltway Boys, Jan.. 11, 2003, that has been edited for clarity. Click here to order the complete transcript.

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MORT KONDRACKE, CO-HOST: I'm Mort Kondracke.

FRED BARNES, CO-HOST: And I'm Fred Barnes, and we're The Beltway Boys.

And Mort, I've got two words for you, Bush rules.

KONDRACKE: And you love it.

BARNES: He...well, I'm just describing it, the situation here and around the world. I mean, Bush is the agenda-setter. Mort, you have often said that the Iraq issue would not be an issue in the world at all, the U.N. wouldn't need sending inspectors there, the European countries and everything wouldn't be, you know, cracking down on Iraq absent Bush's decision to say so, to say...to threaten unilateral military force in the first place, and that got the world involved.

The same thing is true domestically, where the president decided last October that, Look...I think the economy's going to need a stimulus, so he came out with this large tax cut package a few days ago, and what's the result of that? Tax cuts are the big domestic issue for 2003, Democrats have had to come up with an alternative. They didn't want to. They regard tax cutting as enemy turf.

They don't want to be on that issue, because they always lose, and they've come up with one. but it's dwarfed by the Bush tax cut, the Democratic tax cut is, you know, one year...it doesn't do very much. And the Bush one is a long-term growth package that I think mostly is going to pass.

KONDRACKE: Well, and we've got some, we've got some film here to...

BARNES: Yes.

KONDRACKE: ... demonstrate what the, what the two sides are saying. Let's watch it.

BARNES: Right, starting with Daschle and then Bush.

KONDRACKE: Yes, right.

(BEGIN VIDEO CLIPS)

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: This plan is obscene. It is wrong in how it is directed to the wealthy. It is wrong in how it is timed to benefit the rich not this year but years beyond this year. It is wrong in that it doesn't target stimulus at all. This is the wrong plan, and I think the president really ought to be embarrassed.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: You hear a lot of talk in Washington, of course, about, you know, this benefits so-and-so or this benefits this, the kind of, the class warfare of politics. Let me just give you the facts that under this plan, a family of four with an income of $40,000 will receive a 96 percent reduction in federal income taxes.

Now, that may not mean a lot of money to some of the big shots. It means a lot of money for the family of four making $40,000.

(END VIDEO CLIPS)

KONDRACKE: Yes, well, you know, people making $200,000...

BARNES: Right.

KONDRACKE: ... will make out, will, will, will feel pretty good too or a, a million dollars.

BARNES: And then there are big shots like you...

KONDRACKE: Who get even more. Anyway...

BARNES: Yes.

KONDRACKE: ... you know, look, the Democrats, unfortunately, are focused only on 2003...

BARNES: Right.

KONDRACKE: ... which is not an election year. George Bush is focused on 2004 and to, to, to credit his ideology beyond, beyond...

KONDRACKE: And....

KONDRACKE: ... I mean, he does believe in what, in, in what he's putting over, it's not just an election ploy. But when it comes to economic policy, this man is not the son of his father, he is the son of Ronald Reagan, you know.

BARNES: Yes.

KONDRACKE: Blow the deficit, deficits don't matter, you know, tax, cut taxes, defense spending, all that kind of stuff, and it worked in 1984...Reagan was triumphantly reelected. His father, on the other hand, thought that deficits were a problem, raised taxes, lost the election, and so, and that's what he's going to avoid.

Now, and, and, and it may very well work. It seems to me that the Democratic counterargument should not be class warfare, like you heard from Tom Daschle, it should not be this abstruse interest rates, although there may be something to it, interest rates will go up...

BARNES: Yes.

KONDRACKE: ... that, no, people don't understand that. What they should, what the, the Democratic argument should be is, you cut $674 billion in taxes, and you can't have quality education, you can't have a prescription drug benefit, you can't help the uninsured, you can't do adequately by homeland security. You choose. Which would you like?

And I think people will choose what the Democrats want to do.

BARNES: Do you believe all that?

KONDRACKE: I do, I do.

BARNES: I thought you did.

KONDRACKE: Now, the other, the other hot story of the week is Korean kabuki. And here, I'm afraid, Bush does not rule. I mean, what the North Koreans are calling the shots in this, in this game at the moment, and Bush is backing off. Bush's original position is, we're not going to talk, talk to the North Koreans, I loathe Kim Jong Il, et cetera, et cetera.

BARNES: Yes.

KONDRACKE: Now suddenly we're going to start talking to them. We've got some film on this.

(BEGIN VIDEO CLIP)

BUSH: We expect North Korea to adhere to her obligations. She did an agreement with the United States and said that she would not develop nuclear weapons, and we expect people to keep their word. We will have dialogue. We've had dialogue with North Korea.

(END VIDEO CLIP)

KONDRACKE: Well, and I, I assume that we're going to, you know, enter -- now enter dialogue after refusing it, because...

BARNES: Yes.

KONDRACKE: ... what, what Bush wants to do is to start talking to North Korea in the context of a massive victory in, in Iraq, say...

BARNES: Yes.

KONDRACKE: ... about March, and he'll...be in a better position. But he has mistakenly ruled out any military option against North Korea. I mean, taken it completely off the table...

BARNES: Yes.

KONDRACKE: ... which means that, that we're going to have -- unless the U.N. and the Chinese are willing to join with us in, in stiff economic sanctions, we may end up bribing the North Koreans to get rid of their nuclear....

BARNES: Yes, no, yes, we don't want to do that, I mean, Bush is, is acting like one of your heroes, Bill Clinton, in North Korea. Now, what do you want to do? What do you want to do? You want to put the military option back on the table for sure, because what will happen? What will happen is what exactly happened with Iraq, as I was mentioning earlier.

Everybody else will join in their countries there that in the region, China, Russia, South Korea, Japan, that have a lot of leverage with North Korea, but they're not doing anything now. To get them to really tighten the screws on North Korea, we...Bush needs to say, If you all don't act, I have the military option, and I'm going to have to act.

KONDRACKE: So are you ...

BARNES: ...work.

KONDRACKE: ... are you disappointed in Bush's leadership on North Korea?

BARNES: Extremely disappointed. I mean...and then his secretary of state, Colin Powell, says it's not a crisis. It is a crisis if North Korea, which sells arms to everybody in the world it can, has nuclear weapons. We cannot tolerate that at all.

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