The following is a partial transcript of the June 3, 2007, edition of "FOX News Sunday With Chris Wallace":

"FOX NEWS SUNDAY" HOST CHRIS WALLACE: Well, joining us now, someone who's always interesting and often controversial. But these days, former Speaker of the House Newt Gingrich is directing his fire not at Democrats but at problems within his own Republican Party.

Mr. Speaker, welcome back to "Fox News Sunday."

GINGRICH: It's good to be with you.

WALLACE: Let's start with your interview in The New Yorker magazine this week. And I want to quote from it at length. Let's put it up. "Newt Gingrich is one of those who fear that Republicans have been branded with the label of incompetence. He says that the Bush administration has become a Republican version of the Jimmy Carter presidency when nothing seemed to go right."

And later, there's this. "Not since Watergate," Gingrich said, "has the Republican Party been in such desperate shape. Let me be clear: 28 percent approval of the president, losing every closely contested Senate seat except one, every one that involved an incumbent — that's a collapse."

Jimmy Carter? Watergate? Collapse? Are things really that bad?

GINGRICH: Well, let me say, first of all, nothing that I said in The New Yorker disagrees with things I said as early as December of '03 when I talked about having gone off the cliff in Iraq, things I said all through '04 in trying to get the Bush campaign team to shift from attacking Kerry personally to forcing a genuine choice over values and policies, to concerns I raised in December of '04, January and February of '05, about how they were approaching Social Security reform, through what happened at Katrina.

I mean, so what I said in The New Yorker may be compressed, but in fact, it is things that for the last three years I've talked — I've warned all last year that I suspected we were drifting into a catastrophic defeat. I don't see any other way to read '06 except it was a defeat.

And if we don't have a serious, open discussion of where we are, I don't see how we're going to change.

Just take this week. An American with tuberculosis shows up at the border. We're in the middle of a debate over immigration and controlling the border. He shows up at the border. The computer says do not let him enter and only deal with him in a hazardous suit.

And the border patrol currently is so ill-trained, or the immigration service is so ill-trained, that the guy lets him in — looks at him with his eyeballs and says, "you know, I don't think he looks sick," and lets him in.

You learn that there are three illegal terrorists in New Jersey who were in the U.S. for 23 years illegally, intercepted by the police 75 times in the last six years, and it was never indicated that they were here illegally.

You go through this list. You say to yourself this government — I mean, not just the president. This is not about the presidency. The government is not functioning. It's not getting the job done.

WALLACE: But you compare George W. Bush to Jimmy Carter, which, as you well know, is fighting words among Republicans.

GINGRICH: Look, the functional effect in public opinion is about the same. Now, Republicans need to confront this reality.

If you were at 28 percent, 29 percent, 30 percent approval, and if things aren't working, and now you have a fight which splits your own party — and this immigration fight goes to the core of where we are.

If you read Peggy Noonan's column last Friday, which was devastating — and I think it resonates with where the base of this party is right now. The base of this party is looking up going, "What are we in the middle of — why are we ramming through an omnibus Teddy Kennedy bill, and attacking Republicans who criticize it, and calling us," for example, as one senator did, "bigots, when all we're saying is this government couldn't possibly implement this bill?"

There's no evidence at all that this government is capable of executing this.

WALLACE: We're going to get to immigration in a second. But White House spokesman Tony Snow pushed back at your comments this week.


WALLACE: And let's take a look at them. Here they are.


TONY SNOW, WHITE HOUSE PRESS SECRETARY: When it comes to presidential politics, you know that the first rule is if you're running even in your own party, the first thing you do is you try to differentiate your product, and you always use the president as somebody that you're sort of measuring yourself against.


WALLACE: He says you're trying to carve out a place in the Republican debate by knocking the president.

GINGRICH: Look, Tony Snow is a great friend, and I admire him a great deal, and it's a nice try. In 1988, no one running for president on the Republican nomination tried to differentiate themselves from Ronald Reagan.

There's a lesson there. Ronald Reagan was enormously popular. The fact is that — forget presidential politics. We as a country over the next 1.5 years have to do dramatically better.

You just had a report from Iraq that's very sobering. You have a comment from General Sanchez that should alarm every American. You have the report today of the terrorists being picked up in New York who were trying to blow up the jet fuel.

And by the way, one of those terrorists was picked up on the way to Iran for a conference on Islamic behavior around the world.

WALLACE: Basically, what do you think is wrong with George W. Bush?

GINGRICH: Look, I think that he means very, very well. I think he's very, very sincere. But I don't think that he drives implementation and looks at the reality in which he's trying to implement things.

And I think that's why you ended up with, "Brownie, you're doing a great job," when it was obvious to the entire country at Katrina that the Federal Emergency Management Agency had collapsed and was not capable of doing any job at that point.

And I think as a result, the administration has very, very high goals — Democracy throughout the Middle East — and very weak bureaucratic support for those goals, and the result is an enormous mismatch in just sheer implementation.

And this is, in the end, a practical country. Americans want their government to work.

WALLACE: You say that this president doesn't solve anything.

GINGRICH: He doesn't methodically insist on changing things. I mean, again, take the example last week. If somebody with tuberculosis, who is actually in the computer system, can't be stopped at the border; if you have three terrorists in New Jersey who have been here illegally for 23 years — and the Senate, by the way, voted to sanction cities and counties not asking if you're illegal, an amendment to this — what I think is an absolute disaster of immigration legislation — you have to look at that and say, "We're not serious."

I just did, as you know, a novel on the second world war. I was out recently at Pearl Harbor and looking at the Missouri and looking at the Arizona, and they're sitting right next to each other. And the Missouri was our answer to Pearl Harbor.

We built an entire navy. We built an entire air force. We created the atomic bomb. We mobilized 16.5 million people in uniform. We won the entire war in less than four years.

Now, you look at the ruthlessness, the aggressiveness, the energy that we put into that war, and here we are 5.5 years after 9/11, and the fact is I would argue we're losing the war around the world with Islamist extremists and they are, in fact, gaining ground.

WALLACE: Let's talk about what may be the biggest problem that conservatives have right now with President Bush, and that is his support for comprehensive immigration reform.

Mr. Bush said this week that critics like yourself on the right are misrepresenting the plan. Let's watch.


PRESIDENT GEORGE W. BUSH: If you want to scare the American people, what you say is, "The bill is an amnesty bill." It's not an amnesty bill. That's empty political rhetoric trying to frighten our fellow citizens.


WALLACE: Empty rhetoric trying to frighten the American people. Your response?

GINGRICH: Well, the bill explicitly grandfathers in somewhere between 10 million and 20 million people. We don't know the number because the government has no idea how many there are — again, an example of incompetence.

The government doesn't know within a million how many people will be grandfathered in.

They're all, in effect, made permanent temporary workers the day the bill is signed. They have to go through one day of filling out a form. There is zero possibility the federal government will be able to process those forms.

And it's simply, I think, disingenuous. I'm assuming that the president and his staff understand what this bill does. And if they do, what the president said is disingenuous.

This bill, in effect, grandfathers somewhere between 12 million and 20 million people. We don't know who they are. It would have grandfathered the three terrorists in New Jersey.

WALLACE: But some conservatives say, "You know, there's a lot to like in this bill." There is tougher border enforcement in the bill. Let me just ask the question. There is tougher border enforcement in the bill — that it creates a temporary guest worker program, that it puts an end to the chain migration of families in.

Isn't a bill with those features better than no bill at all?

GINGRICH: No, because this bill creates a brand new system that gives between 10 million and 20 million people guaranteed access to the United States without any recourse.

I was in Dallas doing a book signing two weeks ago, and a federal prosecutor walked up to me, career bureaucrat, civil servant, not a political appointee, and said to me, with anger, the most effective tool they have in dealing with illegal gang members is deportation.

This bill would, in effect, guarantee 30,000 illegal gang members that they can stay in the U.S. by the following. You sign a paper that says I promise not to be in the gang anymore. Now, that is so out of touch with reality.

WALLACE: But the Bush administration — and I know Commerce Secretary Gutierrez has said this, "Look, we're not going to deport 12 million to 20 million people."


WALLACE: Let me finish. It isn't going to happen. And so as a result, if you do nothing, if you stay with the system you have now, the 12 million people are going to stay here, and what you have is amnesty. It's just silent amnesty.

GINGRICH: Yes, but what they're saying, in effect, is we either have to do nothing or we have to do something fairly dumb.

Now, why can't we do a series of small, smart steps? Why couldn't they — I'll give you another example. Democratic Governor Napolitano of Arizona wrote a column this week pointing out that they are cutting the number of National Guard supporting the border before they have actually met their goals at the border.

So the average American looks up and says, "Why can't you control the border tomorrow morning? Why can't you enforce the law?" I mean, you don't have to deport anybody. All you have to say is to American businesses, who are American citizens, "Obey American law or face economic penalties."

Now, the morning you do that, you begin to dry up the market for hiring people illegally.

Why couldn't you make sure that there was a fairly easy way to verify somebody was legally here so that, as rapidly as you do with an automatic teller machine with your credit card, you're able to know that you're hiring somebody legally?

Those things drive people — you don't have to deport anybody. All you have to do is make it dramatically harder to get in the U.S. and dramatically harder to hire people illegally.

WALLACE: Let's turn to 2008. You suggest that the only way that a Republican in this current political climate is going to win the presidency is to run against President Bush the same way that Nicolas Sarkozy was just elected president of France running against the incumbent, Jacques Chirac, even though he was a member of Chirac's cabinet.

Do you really think the Republicans will nominate someone who is running against George W. Bush?

GINGRICH: No, I don't think you need to run — in fact, I don't think you should run against President Bush. I think most of his major decisions have been very sincere, and most of them are decisions the average American actually would endorse.

I think what you do have to do is run in favor of radically changing Washington and radically changing government. And I think that all you have to do is look at the examples I've given you today where the government simply fails.

Look at New Orleans today and you can't possibly believe this is an effective federal program. And so I think ...

WALLACE: But if you're not running against the president, you're certainly running against his record.

GINGRICH: Well, what Sarkozy said was that without — he never attacked President Chirac. He never took him on at all. He said simply, "We have to have dramatically bigger changes."

I think the average American will tell you they want Washington changed very dramatically, and that doesn't always involve the president.

Eighty-two percent of the country believes we ought to have a dramatic change in earmarks in the Congress, for example. And I think 85 percent of the country believes English ought to be the official language of government. Those are not necessarily involving President Bush.

WALLACE: We've got a couple of minutes left. Fred Thompson all but announced this week that he is running for president. Are you satisfied with his credentials? Does the Republican field now have a true conservative?

GINGRICH: Well, first of all, there are several candidates who each bring their own unique strengths to this, and in terms of offering a very bold, dramatic vision, Governor Romney would be capable of it. I think Mayor Giuliani would be capable of it. I think Fred Thompson will be capable of it.

These are solid people. And over the next three months or four months, we'll see what they do. My entire focus — despite Tony Snow's comment, my entire focus is on creating a solutions day on Sept. 27.

I'm going to be giving a speech at the American Enterprise Institute this Friday outlining the scale of change I'm describing. It is not pro- or anti-Bush. It is beyond the current presidency.

And it argues that in order for us to be effective, in order for us to apply the World War II standard of effectiveness, we have to have very relentless, dramatic change in American government.

WALLACE: Let me ask you, because the question a lot of people are asking is, "Is there still room for Newt Gingrich in the race?" You have been dropping a lot of hints recently, and let's put them up on the screen.

Two weeks ago, you said, "It is a great possibility" that you'll run. Then a few days ago, you said, "I'll probably end up running."

Mr. Speaker, it sure sounds like you want to get in this race.

GINGRICH: Well, I think when you see that there's nobody yet — and we're giving all of our material from American Solutions to every candidate in both parties.

But when you look at — for example, all the Democrats' proposals on health care sadly represent more big government, more bureaucracy, more Washington controls, which is a denial of the whole underlying reality of...

WALLACE: Right. I wouldn't expect the Democrats to adopt your strategy, but how about the Republicans?

GINGRICH: I would have to say that you have to look — and I'm waiting — I mean, I'm not out here trying to crowd anybody on anything.

I'm simply suggesting we need to have some very bold proposals for fundamental change, and so far I don't see much of that.

I see some encouraging signs, but I think the key question is, is somebody prepared to stand up and say that the American people deserve fundamental change in Washington, and to outline a set of those fundamental changes that are big enough that people look up and say, "That's what I want."

WALLACE: And if you don't see that, you're getting in?

GINGRICH: I think after Sept. 29 — we're going to have two days of workshops on Sept. 27 on the Internet and again on Sept. 29, available to anybody in the country, Democrat, Republican, independent.

After those two days of solutions-oriented approach, I'll start looking at it, you know, on Sept. 30.

WALLACE: Mr. Speaker, come on back and tell us what you decide.

GINGRICH: All right.

WALLACE: Thank you, as always, for coming in.

And we also want to note that you have a new book out, which you mentioned — you can see it up there on the screen — called "Pearl Harbor", a historical novel. And good luck with that, sir.

GINGRICH: Thank you.