This is a rush transcript from "The O'Reilly Factor," January 7, 2008. This copy may not be in its final form and may be updated.

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BILL O'REILLY, HOST: In the "Personal Story" segment tonight: We are pleased to welcome Senator Fred Thompson to "The Factor." We've been trying for a while to get the senator on the program, and he joins us now from Greenville, South Carolina.

FRED THOMPSON, GOP PRESIDENTIAL CANDIDATE: Saving the best for crunch time.

O'REILLY: That's right.

THOMPSON: Saving the best for crunch time.

O'REILLY: And you're welcome any time, Senator. As you know, I've known you for a long time.

THOMPSON: Thank you.

O'REILLY: Look, they're all slugging it out up in New Hampshire. You're down in South Carolina. Obviously you're going to make a stand there, try to, you know, win the state.


O'REILLY: But I want to know — and I think my audience wants to know, too — what is the most important issue in this campaign in your opinion?

THOMPSON: Bill, the security of this country. We're facing a different kind of enemy, a different set of enemies that we've never faced before: radical Islam's declared war on us and Western civilization, various rogue states in stages of nuclear development, different kinds of weaponry. It's going to require more commitment and unity and more resources than we've had to make in time's past. And it's got to have strong leadership that knows the world that we live in.

I spent a lot of my time in the Senate on the Intelligence Committee and traveling the world, and even after I left the Senate dealing with these matters, because I've always thought it was the most important. But it's kind of growing in importance day to day.

O'REILLY: So the terror war is No. 1.

Now, I wrote a column this week about the presidential candidates seemingly befuddled by Pakistan, and by that I mean when we got back from Afghanistan a few weeks ago all U.S. and NATO intelligence told us that Quetta, a town on the border between — in Pakistan, close to Afghanistan, was command and control for the Taliban. Musharraf isn't taking care of those guys. And as we know, the word is bin Laden, a lot of Al Qaeda, up north, more difficult up there, but not — certainly not a difficult situation.

You're president, OK? How are you going to get Pakistan to do what they have to do to protect American lives?

THOMPSON: Well, you can't make them do anything that they look at as not in their own interest. They've got a radical element in that country that they have to deal with, and they've got to be worried about what's going on in the street right now.

I'm more interested in Musharraf surviving, at least in keeping control of those nuclear weapons that that country has, the only Muslim nation in the world that has them, than anything else right now.

The point you make is of second importance though. You're right, the Taliban is in the western part of that country there. Usama bin Laden is probably there. Musharraf has tried in times past to confront them. He's lost a lot of people. He's going to have to try harder. We're going to have to help more.

O'REILLY: Yes, but I don't know how much we can help. We're sending him $1 billion a year. And you know, he's playing the game. He's taking our money, and he's doing maybe a half-hearted measure.

Would you insist that Musharraf take NATO, special forces — U.S., CIA — with him and put them with his forces? Because that's the way to solve the problem logistically? And you could say to him, "You either do it or no more money."

THOMPSON: As you may know, Bill, one of the advantages we've got here is a lot of their military are trained in the United States. We're got a relationship with them for some time.

I was over there a few years ago, sat down with their military leaders, sat down with Musharraf and talked about some of these various issues. Of course, they're more troublesome today than they were then. We cannot force him to take any specific action. We can lean on him. We can encourage him. We can cajole him.

O'REILLY: But if you cut his money, Senator, he's done.

THOMPSON: But not to the point — not to the point that we destabilize him, Bill.

O'REILLY: All right.

THOMPSON: We can't do that. The stability of that regime and the safety of those nuclear weapons has got to be paramount right now.

O'REILLY: OK. Now, how are you going to separate yourself from the conservative pack? You've got Romney, you've got Huckabee — conservative guys. More moderate are Giuliani and McCain. How are you going to break away from Romney and Huckabee?

THOMPSON: Well, I'm in South Carolina, as you said, in the very beginning. And I'm carrying a strong, consistent conservative message. And I'm the only conservative in the race, as far as I'm concerned, that has a consistent record on the federal level.

I fought for tax cuts and welfare reform and balancing the budget and strong, conservative judges and the Second Amendment my entire career. And none of the rest of them can say that. And I think that's the essence of the Reagan coalition that was successful for us before, and it's the crux of our prosperity that we've had as a nation, a strong nation.

O'REILLY: You're going to out-conservative the other conservatives? You're telling me you're going to out them on the right?

THOMPSON: I am who I am, Bill. I mean, I couldn't be any other way. That's my record. I believe that that's what has made this country great. And when we have followed those principals, not only have we been successful as a Republican Party, but the nation has benefited from it.

O'REILLY: Now last question, real quick: If you had to go to Vegas and put on your house, you're putting your house in Vegas: Obama, Clinton?

THOMPSON: Clinton.

O'REILLY: You think she's going to prevail, the machine's too strong?

THOMPSON: I think probably so. I think that their determination and their burning ambition to achieve and to keep this office is going to see them through a lot. They've got an organization out there. They've done a lot of things for a lot of people. They've been planning this for a long, long time. And I think — what Obama has done is truly remarkable, and he may pull it off. He's very...

O'REILLY: But you're betting on Clinton?

THOMPSON: If I had to, I guess I would.

O'REILLY: And you know them. All right, Senator, we appreciate...

THOMPSON: Because maybe it's — maybe it's wishful thinking. I'm not sure.

O'REILLY: We'll see you down the road, sir. Good luck to you.

THOMPSON: Thank you, Bill. Appreciate it.

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