This is a partial transcript of "Special Report With Brit Hume" from Dec. 23, 2005, that has been edited for clarity.

CHRIS WALLACE, GUEST HOST: As we've said, Defense Secretary Rumsfeld an nounced today that 7,000 U.S. troops who were scheduled to go to Iraq will now stay home. We want to get some answers about what this means for the U.S. mission in Iraq. And there's no one better to ask than our guest tonight, Major General Bob Scales.

General, always great to talk to you.


WALLACE: All right. This drawdown that was announced from a baseline of about 138,000 to 130,000, a little bit over, how big a deal?

SCALES: It's a huge deal. The numbers are small, but the psychological impact and the intent are absolutely enormous.

First of all, it's not a drawdown. It's a relief in place or a substitution of Iraqi soldiers for American soldiers. The total number that are engaged in defending Iraq are going up and not down.

But the psychological message that's being sent is several fold. The Iraqi people and to the Arab people, we're telling them this is not a permanent occupation. To the American soldiers saying there's a light at the end of the tunnel. You'll be going home soon. And most importantly to the enemy what we're saying is pretty soon this war will be between you and your own people. And that is probably the most significant factor, I think, of this whole issue. Small numbers but the impact is enormous.

WALLACE: The fact General Casey has the confidence to make this request. And that Secretary of Defense Rumsfeld had the confidence along with the president to agree to it, what does that say about the situation on the ground?

SCALES: Well, there are two aspects. Number one, how much better are the Iraqis? And number two, what's the enemy doing? And the answer in both camps is pretty good. The Iraqis are getting better, 210 battalions, 50 battalions actively engaged in combat.

Most importantly, Chris, 50 percent, half of Baghdad, is now under Iraqi control. The enemy action is on a steady decline — oh, you get the bumps every once in a while. Some dramatic car bombing. But for the most part, the Iraqi insurgents, at least, is beginning to stabilize.

WALLACE: Some people have suggested that instead of drawing down, or whatever the phrase you used was, U.S. troops standing down U.S. troops as the president would say as Iraqi troops stand up, what we should do is add them, make an even bigger force and use this combined U.S. and Iraqi force to crush the enemy. Now General Casey was asked about that today, and said perhaps counter intuitively to the amateurs in the group that sometimes fewer troops are better. Less is more.

SCALES: OK. Let me explain that to you. What he means that fewer troops at the tip of the spear. Fewer troops, American troops, out walking patrol, going face-to-face with the enemy is better. Better to use those American troops training and advising and helping the Iraqis, embed those American troops in the Iraqi units to make the Iraqis better so that the face you see on the street, whether it's in Fallujah or Baghdad or anywhere else, increasingly is an Iraqi face.

That has an enormous psychological impact on the Iraqis. They're going to wake up one morning and say to themselves this is not a permanent occupation. This is our country. It's our war and we're going to take it on. This is enormously important.

WALLACE: General Casey also talked about the idea that depending on conditions he could make another troop cut in three months. What are the factors that will go into deciding, you know what, even 130,000 is too much and we can go down from there?

SCALES: Oh, I think we'll go down from there in the springtime. Because, you know, all the arrows are pointing in the right direction. Iraqis are getting better. The enemy situation is stabilizing. The only thing that would cause him to slow down the pace is some catastrophic event, some overwhelming Tet-like event in Iraq.

But given the numbers and what's going on over there and the numbers of Iraqis on the street, it's just really hard to see that happening.

WALLACE: So how will we, you know, the Americans, the very concerned American citizens back home see this? Will it be that we will be giving some of the battle space that we occupied to the Iraqis? Does it mean that some of the cities we were in we'll be getting out of and the Iraqis will take over? What will it look like?

SCALES: That's why I use the term relief in place. And that's exactly what it is.

We all know where the critical areas are — the Euphrates River, the Tigris River, the Syrian border and Baghdad. And as you begin to see those areas turned over to the Iraqis, relieved by Iraqis, then that's going to tell you that the war is moving in the right direction.

Now there are 14 provinces that are fairly stable right now. It's the other four that are causing us trouble. So, look at Al-Anbar Province. Look at Baghdad. Look at those key cities along the rivers and as those begin — increasingly become Iraqi areas of operations, that tells you that the handover is well underway and an additional decrease will probably occur sometime in the spring.

WALLACE: Can you imagine — because it sounds to me like we're going to begin to see maps — you know, colored maps with a certain footprint color that's the Iraqi troops and a certain color that's the American troops and that one is going to get bigger and the other is going to get smaller.

SCALES: That's exactly what's going to happen. This isn't — we're not going to wake up one morning and find the U.S. removed from Iraq. What we are going to see is a gradual relief in place, turnover of authority, going on through 2006, so that by the end of 2006, the majority of the combat operations will be done by Iraqis not by Americans. The Americans will be in this process of supporting the communications, logistics, command and control, those things the Iraqis can't do well right now.

WALLACE: So, if this all continues, because as you say, it's all condition based, you could get a Tet offensive. We certainly hope we won't. But if it continues in this direction, where could we be in terms of U.S. troop presence in Iraq by the end of 2006?

SCALES: By the end of 2006 well under 100,000. I would say 80,000 to 100,000 maybe better depending on the....

WALLACE: Really?

SCALES: Oh, I think so.

WALLACE: This is moving faster than we've been talking about the last few months.

SCALES: I think 2006, Chris, is a pivotal year. That is really, to use another military point, that's the tip over point in this campaign. How things go in 2006 I think will determine the fate of Iraq and the Iraqi people.

WALLACE: Now, some skeptics are already suggesting there's a funny coincidence here that there's been a lot of political pressure, you began to see growing impatience not only among Democrats but also Republicans in that big white building over there. And that this drawdown, as we're heading towards just coincidentally the night of the November 2006 elections is based more on politics here in the United States than it is conditions on the ground in Iraq.

SCALES: Quick war college lesson. Clausewitz says that war is politics by another means. The center of gravity, to vulnerable point in this war is the will of the American people. So if our conclusion is that this has a political patina to it, exactly right, all war is politics. And if we lose the allegiance or the trust of the American people and the prosecution of this war, then we lose the war.

So, yes, there are some politics involved. But again, that's what wars are all about. Wars ultimately are a test of will, Chris, not a test of military might.

WALLACE: We have a test of time here. We are out of time. We want to thank you so much for your insights and Merry Christmas to you, sir.

SCALES: And Merry Christmas to you, Chris, and to all our young men and women serving in harm's way.

WALLACE: Hear, hear.

Watch "Special Report With Brit Hume" weeknights at 6 p.m. EDT.

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