The following is a transcribed excerpt from 'FOX News Sunday,' July 4, 2004:

CHRIS WALLACE, HOST: Saddam Hussein is brought to justice as Iraqis take control of their country. Today, in an exclusive interview, we'll talk with the man who just stepped down after running Iraq for the past 13 months, Ambassador Paul Bremer (search).

Bush vs. Kerry: where does the race stand now? We'll ask two top pollsters about the key battleground states: Democrat Celinda Lake and Republican Ed Goeas.

Plus, John Kerry is getting close to picking to a running-mate. Who will it be? We'll talk with our panel. Brit Hume, Mara Liasson, Bill Kristol, and Ceci Connolly.

And our power player of the week puts on an explosive show, all on the July 4th edition of Fox News Sunday.

Good morning and happy Independence Day from Fox News in Washington. We begin as always with a check of the latest headlines. An Iraqi terrorist group said on their web site that they had killed Marine Corporal Wassef Ali Hassoun (search). But it now says it has not executed him. There's been no official word yet from the U.S. government.

The presidential contenders hit the campaign trail today. President Bush will celebrate the Fourth of July in West Virginia while Democratic candidate John Kerry will march in a parade and watch the fireworks in Cascade, Iowa.

And at ground zero in New York City today, they will lay the 20- ton cornerstone of the freedom tower, a sky scraper that will be 1776 feet tall and stand where the twin towers of The World Trade Center once stood.

First up this morning, an exclusive interview we taped late this week with Ambassador Paul Bremer. He's just back from serving as the U.S. administrator who ran Iraq. Before having power over the Iraqis, Bremer set that country on the path to Democratic government, but he also faced criticism for not doing enough to handle the security situation there. We discussed all of that when we talked with Bremer at the Old Executive Office Building next to the White House. One of the first things we noticed is that the man who wore his famous boots for the last year has now traded them in for a diplomat's loafers.

Mr. Ambassador, welcome back. You must be very happy to be home.

BREMER: Well, it feels good to be out of the war zone, I must say.

WALLACE: You've had a number of diplomatic postings over the years all over the world. How hard was this job?

BREMER: Well, this was a lot harder than anything I'd done before. It obviously is quite a different order of magnitude to be in effect running a country than anything you do as a diplomat. But it was exciting and exhilarating. And I think we made substantial progress in the last year.

WALLACE: Before we discuss your 13 months in Iraq, let's begin with Saddam Hussein's appearance this week in a courtroom. What impact do you think that is having on the Iraqi people?

BREMER: I think it's a very healthy thing. The emotions surrounding Saddam's capture were really quite extraordinary even for those of us who were living in Iraq and the jubilation of the fact that he was captured. Actually, the jubilation of the death of his sons was also quite dramatic. So the fact this week that they saw him beginning the process of standing trial, I think, will be very helpful.

WALLACE: During his time in court, Saddam said, quote, "This is all theater. The real criminal is Bush." Do you worry at all that these pictures, this whole process, will spur on the terrorists?

BREMER: The terrorists, the Zarqawi, al Qaida terrorists, don't need any spurring on. They see correctly that as we go forward towards representative government in Iraq, it takes the entire base of their operations out from under them. Why should they be attacking a sovereign Iraqi government? Why should they be attacking a representative Iraqi government? So I don't think it affects it even at the margins. I mean they're at war.

WALLACE: And for the Saddam Hussein dead-enders, the Baathists?

BREMER: Well, there's a different argument there. It could have two effects. Some of them may finally realize that it's really over, that Saddam's days are really over and he's now going to stand trial. Others may be angry about it and may try to increase their attacks. It could have a mixed impact.

WALLACE: Alright. Let's take a look at the big picture. 13 months of trying to rebuild Iraq after two decades of dictatorship. What do you think he got right?

BREMER: Well, first of all, the most important thing we got right was getting rid of Saddam. And it's an incomparably better place than it was when he was there. Secondly, I think we made progress in developing political institutions that will serve Iraq well as it moves toward pluralism: the idea of representative government, the devolution of power out of Baghdad, the principles of the bill of rights that are in the temporary constitution.

We also got right a lot of the economics. We opened up the economy to trade, basically free trade, gave them very good rules on foreign direct investment. We gave them fiscal responsibility and the elements needed for a responsible monetary policy. These are not insignificant achievements. And on reconstruction, I wish we could have done more in the security situation, particularly in the last couple of months. Certainly, it slowed things down.

But, you know, over the last year, we completed over 18,000 individual reconstruction projects all over the country, a lot of little projects but very important: repainting a school, putting windows in a municipal center, building an orphanage, putting a generator in a hospital -- done by the men and women of our armed services and the men and women in the Coalition Provisional Authority.

BREMER: Those are not unimportant things.

WALLACE: And with perfect 20/20 hindsight, are there some decisions that you wish you had another crack at?

BREMER: I think we needed to pay more attention, as we built up the Iraqi security forces, to the quality of those forces, and a little less attention to the quantities. This was a problem particularly in the fall, when we were bringing lots and lots of policemen onto the rolls. But as we saw when the uprising happened in April, it was not really a very professional force.

WALLACE: Let's go back even further. Let's go back to before you even got the job.

General George Marshall began planning for the post-war occupation of Germany two years before D-Day. The Bush administration was still planning for post-war Iraq when you invaded. And in fact the administrator, your predecessor in the job, was fired within weeks after he got there.

Was there a failure of planning for this occupation?

BREMER: You know, it's very hard for me to judge that, Chris. I was, you know, a businessman running my own company right up to and through the war, and until about a week before I wound up in Baghdad.

Let me just say a word about Jay Garner, who was my predecessor.

He is a marvelous man and a great public servant. He did a terrific job under very difficult circumstances. People forget, you know, even when I got there, but especially when Jay was there, the city was on fire. There was gunfire and looting going on. We had no electricity, no water. The whole country was generating 300 megawatts of power, less than a tenth of what it needed.

So he was there under extraordinarily difficult circumstances.

WALLACE: But someone would say, you know, that all should have been prepared for, there should have been more military police there.

BREMER: Possibly.

WALLACE: I mean, didn't the looting, the infrastructure problems, didn't that send the wrong message at the beginning?

BREMER: Well, the looting was a problem. And it's unfortunate that it went on, because it did set a pattern of lawlessness, and also, I might add, you know, destroyed a number of buildings that still haven't been rebuilt, because you can't rebuild a building in a year.

I frankly am going to leave the question about whether the pre- war planning could have been better or worse to the scholars and the historians. I really frankly didn't have a lot of time to look backwards. As you said, 20/20 hindsight, it's a great thing, especially if you've got the time to look back. I really didn't have a lot of time to examine the pre-war planning. I'm sure plenty of people will.

WALLACE: Let's talk about what certainly was your most controversial decision, and that was to disband the army, to ban almost all the Baathists from the old government.

Would it have been wiser to do then what in fact you ended up doing the last few months, which was to try to find some members of the old regime that you could work with?

BREMER: Well, there are three factual errors in your statements.

WALLACE: Oh great.

BREMER: Let me correct them.


BREMER: First of all, I didn't ban the majority of Baathists. I banned 1 percent of the Baath Party. The Baath Party had 2 million members. The ban that I put into effect, affected 25,000 of them. And they were only banned from public service, in the public sector.

Secondly, I did not demobilize the army. The army was demobilized by itself. It didn't exist. It would have had to have been called back to service. There were no barracks to put it into. And calling the army back into service three weeks after they've been shooting Americans, and 35 years after they've been suppressing the Shia and Kurds, could very well have set off a civil war.

So I stand by those two decisions.

WALLACE: But you did issue an order to disbanding the army?

BREMER: I issued an order to disbanding an army that in fact was already disbanded. The point was to say, we're going to build a new army, and at the time I also said, in the same order, we were going to find a way to pay the members of the old army, which we did; and that we were going to create a new army, which we also did.

WALLACE: But the argument is -- and I don't have to tell you, I'm sure you've heard it many times -- the argument is that you ended up creating hundreds of thousands of potential enemies who didn't have a stake in the new Iraq.

BREMER: Yes. I've heard the argument, I simply don't buy it. Those people have been on salary since last June. It's a convenient way to avoid saying the problem we have is we have not had good enough intelligence to know how to pick apart the insurgency.

BREMER: That has been our problem. And it continues to be a problem and we have just got to keep working at it. It's hard intelligence to get.

WALLACE: Mr. Ambassador, let's look at some of the numbers. The Iraqi army is one-third the size that U.S. officials promised it would be at this point. Seventy percent of Iraqi police officers have not received training. Eighty percent of the $18 billion approved by Congress last year for reconstruction is still unspent. Three months ago you promised 50,000 jobs for Iraqis by now. In fact, fewer than 20,000 have jobs. Should you have moved faster on both reconstruction and security?

BREMER: It's a little hard to know how we could have moved faster on reconstruction when you consider that we put in the request for the reconstruction aid in the middle of September and it became law on November 4th, which by anybody's calculation is about as fast as could happen.

Now we then ran into problems in the Washington bureaucracy, getting that moved forward. And I was certainly among the most critical of that process. And we ran into problems with the contracting which requires a 90-day turnaround for any contract let. And that was, I grant, a problem, but that was the law. And we wanted to obey the law.

So it's a little hard to know how you could have done more.

By the way, in terms of the $18 billion, actually $10 billion of that has been committed, so about half of it actually was committed in June 30.

In terms of jobs...

WALLACE: But a lot of that hasn't actually gone into operation.

BREMER: You have to commit the money and you have to then obligate the money. We said we would have obligated about $5 billion. We obligated a little bit more than $5 billion.

In terms of jobs, by the way, the best estimate of the unemployment rate at the end of the war was about 60 percent. The best estimate of the unemployment rate today is about 20 percent, which means that it's one-third what it was at liberation. And that means that in fact something on the order of 3 to 4 million jobs were created over the last year.

WALLACE: Are there moments, are there events that stand out over the course of the last 13 months that you think of now, that you've thought of over -- as you've been reflecting back where you say: You know what, we really made lives better for a lot people here?

BREMER: I think apart from the liberation itself, some of the most important moments were the capture of Saddam Hussein, which was an extremely important moment because it drew down a curtain on the Baathist history.

The signing of the temporary constitution on March 8th with its very robust list of rights that are protected now by law was an important moment. And of course, the introduction of the new government on June 1st was a great moment for the Iraqi people.

All of these things helped make Iraq a better place than it was, certainly much better than it was a year ago.

WALLACE: Is this going to work? Are we going to end up with a stable, secure, democratic Iraq?

BREMER: I think we will. Of course, nothing in the world is certain, but I give this government very high marks for its approach to the security problem, which the most important problem, for its commitment to hold elections according to plan in January. And I believe that in working together with the multinational force, which is us and the other partners, I think we will succeed in getting the security under better control and the elections will go forward.

It isn't going to be an American-style democracy. We shouldn't kid ourselves. It will be sloppy and messy at the beginning. People forget it took us 12 years to write our own Constitution. It wasn't very pretty around here either between 1776 and 1787. It took a while and the Iraqis are going to have work their way through it. And there will be ups and downs, but the direction is right.

WALLACE: What do you worry about more, events in Iraq, the possibility of the various tribal factions splitting apart, the mess at Fallujah, or do you worry more about events in this country and the possibility of a failure of political will here in Washington?

BREMER: You know, I don't see signs of a failure of will here. So I don't lose a lot of sleep over that. I haven't seen anybody who has plan other than success there. I know it's a political year here. But my view is the vast majority of American people want us to succeed. And we'll go forward and we'll do that.

There are lot of different events that could happen in Iraq. The continued terrorism by Zarqawi and al Qaida obviously is a significant threat and not one that's easy to deal with as we found fighting terrorism around the world.

WALLACE: A couple of final questions. I can't help but notice that you have retired your desert boots. What are you going to do with them?


BREMER: That's not sure. There have been proposals from family members to bronze them for grandchildren and so forth. I don't know, we'll see. But the family has said, enough with the boots.

WALLACE: They have said, enough with the boots?


WALLACE: So where are they now? In a closet somewhere?

BREMER: They're sitting in a closet, right.

WALLACE: What are your plans?

BREMER: Well, I'm going to try to, first of all, reconnect with my family. It's my wife, after all, and my kids -- but particularly my wife, who's had the real sacrifice this last year. Living alone here has not been easy.

I've had a lot of companionship in work. Of course, I've also had people shooting at me. But she's had to think about that back here.

So I'm going to reconnect with them, try to get some rest, and then I'll turn to writing a book about my experiences.

WALLACE: Speeches?

BREMER: I'll probably do some speaking, yes, in the fall.

WALLACE: I have heard a story that you plan to enroll in the Academy of Cuisine?

BREMER: Well, that's true. I'm a chef. I've studied already. I did night school for five years. And I'd like to kind of perfect my cooking. So I'd like to do that.

WALLACE: Iraqi dishes or...

BREMER: No, no, this will be French cuisine.

WALLACE: Really?


WALLACE: So you're going to go work on sauces?

BREMER: Work on the sauces, right. And as somebody pointed out to me, sauces are easy, the real test is pastry. But since I'm not a desert eater, it's going to be mostly sauces.

WALLACE: Well, you know how to make an omelet, which to break some eggs, right?


BREMER: Yes, that's for sure.

WALLACE: Mr. Ambassador, thank you so much for talking with us.

BREMER: Nice to see you again.

WALLACE: And I know I speak for a lot of Americans when I say, thank you for your service to our country.

BREMER: Thank you. Appreciate it.

WALLACE: Ambassador Paul Bremer, here exclusively on "Fox News Sunday."

When we return, a look at the presidential campaign from two of the nation's top pollsters. We'll look inside the numbers when we come back.