This is a rush transcript of "Special Report With Brit Hume" from August 1, 2008. This copy may not be in its final form and may be updated.


REP. MIKE PENCE, (R) INDIANA: Republicans are dedicated to continuing to fight on the House floor, because it's not a Democratic House. It's not a Republican House. It's the people's House, and the people deserve to know Republicans are fighting for energy independence.


BRET BAIER, GUEST HOST: Republican congressman Mike Pence there talking about Republicans sticking around after the lights were turned off, the microphones were turned off. The Democrats had adjourned the House.

There you see some video FOX was able to get exclusively from the floor after the cameras were shut off.

And, basically, they're doing it in protest, the Republicans were, of Democratic inaction on energy bills.

In the meantime, on the other side, a group called the "gang of ten," a bipartisan group, tried to come up with some compromised legislation, and talked about that.


SEN. KENT CONRAD, (D) NORTH DAKOTA: This represents, as we say, real compromise on both sides. Both of us went back to our leadership, gave them briefings on where we were headed. And I think it's fair to say, our leaderships on both sides are somewhat uncomfortable with what we've come up with.


BAIER: Democratic Senator Kent Conrad there. That legislation won't be introduced until Congress gets back from its recess.

So what about all of this today? Some analytical observations from Fred Barnes, Executive Editor of The Weekly Standard, Mort Kondracke, Executive Editor of Roll Call, and syndicated columnist Charles Krauthammer, FOX News contributors all.

Fred, what did you think about the Republican move to talk after the lights and microphones were shut off?

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: That was a stunt. Sometimes stunts work. It depends on what sort of attention they get from the press. It's usually liberal stunts that the press likes, and conservative stunts, which this is, they don't. But we'll see. It was worth a try.

But I think what has really happened is Democrats are cracking. They're falling apart, because they know that the public detests their position of no more exploration and drilling offshore in Alaska, in the Rockies.

They have a losing position, and so you see Democrats, the group of ten or gang of ten, coming up with a compromise.

And Barack Obama, in particular, coming forward and saying, well, maybe it's ok to drill offshore in some of these states.

Then Democrats are falling apart because they have a losing issue that is, amazingly they stuck to this position, you know, no votes for drilling or anything, giving Republicans, who completely lacked any issues this year, giving them a big one.

BAIER: You mentioned Barack Obama. That was from a Palm Beach Post interview in which he "We have to compromise in terms of a careful, well thought out drilling strategy without significant environmental damage.

He said "Republicans and the oil companies have been really beating the drums on drilling. We don't want gridlock. We have to get something done."

Mort is, he changing positions?


The Wall Street Journal had a poll a couple of weeks ago that Fred was lampooning me about, but it was correct, that Obama had a 65-35 lead on the energy issue.

Last week—this week, the Quinnipiac organization came out in Pennsylvania, Ohio, and Florida, and said it's now one third, one third, one third. In other words, the climate has changed in McCain's direction, and now you're seeing Obama realizing that he's menaced by this energy issue, and I think he's making adjustments—not big adjustments.

And it will be fascinating to see how the environmental community responds to this yielding, and to the position of the "gang of ten." I mean, what they want to do—the "gang of ten" senators are willing to drill only 50 miles offshore, which is much closer to shore than the Republicans' position.

Now, I would say that the environmental movement will go crazy about that, and come out against the measure.

BAIER: [You] mention the politics of this. As we look at the Gallup tracking polls, and we have been looking at them pretty much every day, the latest Gallup tracking polls, Charles, has it tied, literally tied: 44 percent to 44 percent.

Now, Sunday, Barack Obama was up nine points, 49-40. Do you think energy has a part of this move?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I'm not sure it's had an impact yet on the presidential race. I think the sagging of Obama has to do with the sagging of Americans' opinion of him, slightly, after the way he overreached in Europe.

I think the sheen from earlier this year, where he was seen as a streaking meteor and he was the candidate of hope—I think it was Brit Hume who said he started the year by selling hope, but now he's selling audacity.

And I think there's a sourness setting in. And you see it even in mainstream press when you get Dana Milbank of The Washington Post writing a brilliant article in which he says said that Obama started out as the presumptive Democratic nominee, and now he's the "presumptuous" Democratic nominee. So there is a sort of a turn in the zeitgeist.

Where the energy issue is hitting is in congress. The Democrats have made a huge mistake here, the stubbornness of Pelosi and Reid in not allowing a vote.

The Democrats know it is a losing issue. It's manna from heaven because Republicans were running uphill on all the economic issues, and they are clearly on the side of public opinion on this.

It's going to be hammered over the month of August as the Representatives return home, and I'm sure that in September there's going to be a compromise, because there's going to be rebellion among Democrats.

This is the one hope the Republicans have of avoiding a sweep and a landslide, a Democratic landslide in congress. And I think it's a card well played so far.

KONDRAKE: But you know, the Republicans are convinced that the reason Harry Reid blocked the votes in the Senate was to protect Barack Obama, to prevent him from having to go and vote on these things.

Now, all of a sudden, this is Obama sort of pulling the rug out from are the senators who were protecting him all this time.

BAIER: Fred, quickly—a compromise in September?

BARNES: I doubt it. I want to hear the same thing Mort wants to hear, what the environmental community says, because they have a strong grip on the vast majority of Democrats in congress, and they won't like any sort of compromise.

BAIER: That's it for this topic, more with the panel after a break. We will go talk about the ongoing progress in Iraq and what that means for the troops there.



GEORGE BUSH, PRESIDENT OF THE UNITED STATES OF AMERICA: Violence is down to its lowest level since the spring of 2004, and we are now in our third consecutive month with reduced violence levels holding steady.

General Petraeus and Ambassador Crocker caution that the progress is still reversible, but they report that there now appears to be a degree of durability to the gains that we have made.


BAIER: President Bush talking about the progress on the ground in Iraq, what it means for troops in there.

This comes as new polls are indicating that the American public believes the troop surge has been working, whether it has made the situation better.

There you see July—48 percent, 40 percent March, 22 percent July of '07.

We're back with the panel. This comes, Charles, after the fewest killed in action since the beginning of the war.

KRAUTHAMMER: I mean, this is a remarkable event in American history. I mean, people do not quite want to say it because it is not over, however, if the trajectory of what has been happening continues, and if the trends continue by inauguration day, the American end of this war, the combat end, could essentially be over.

And the big debate between Obama and McCain over it essentially moot because the Iraqis are taking over.

This is the biggest turnaround in the fortunes of Americans in war since 1864. This is not exactly as dramatic as the taking of Atlanta and Sherman's march, but what you have is a turnaround from a war that was being lost two years ago, and nobody quite knowing how to win it, to a war that could be won by next year.

And it is was done by Iraqis, which is why it is not as dramatic. Iraqis operating in the lead in Basra, in the lead in Baghdad and Amara, and, today, in the lead in Diyala. That's a remarkable development, but the lag between the actual even and it's affect on public opinion is about six months.

BAIER: Will this public opinion shift, Mort, affect the way that Barack Obama deals with the situation on the ground in Iraq?

KONDRAKE: I think it has already effected what he is saying about it.

BAIER: Moving forward from here...

KONDRAKE: The deadline is fuzzier and fuzzier. The number of troops that would be left behind is less determinate. It is more of a goal— you know, withdrawal is a goal, not an immediate necessity.

One problem he has got is that his economic plan calls for massive savings in Iraq, which sort of require the withdrawal. Now he has to get himself around that one.

But, you know, he said that he would be more responsible getting in than we were reckless — more responsible getting out than we were going in. And, you know, and I believe that that is what he would try to do.

Sure. I do not think he wants to lose this on his watch after a victory is nearly in hand.

BARNES: Despite opposing, fervently, the new strategy, the strategy that President Bush took, that is actually winning the war in Iraq.

Look, at some point, Barack Obama has to come to terms with the surge, which wasn't just the addition of troops, it was an entirely new counterinsurgency strategy that has worked everywhere in Iraq.

And you know, he says, he would still vote against the surge. That is mind-boggling, an intellectual conflict that is crazy.

But it looks like if he is elected president, he is going to get one of the greatest gifts that any new president has ever gotten, and that will be a situation in Iraq that was horrible and will be very good, and one he can deal with very easily.

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