This is a rush transcript of "Special Report With Brit Hume" from January 3, 2008. This copy may not be in its final form and may be updated.

HUME: Some thoughts on this very tight Republican race now from Fred Barnes, Executive Editor of "The Weekly Standard," Juan Willia ms, Senior Correspondent of National Public Radio, Bill Kristol, Editor of "The Weekly Standard," and Nina Easton, Washington Bureau Chief of "Fortune" magazine, FOX News contributors all.

You can sense around town today here in Des Moines that the Romney people by no means without hope in t his, but they're worried. Is that a fair assessment, Nina?

NINA EASTON, WASHINGTON BUREAU CHIEF, "FORTUNE" MAGAZINE: Full disclosure: my husband is one of those nerved wracked political strategist running around.

HUME: That's why I asked you.

EASTON: But I think all the camps are nerve wracked. I think Hillary's people on the Democratic side, I think everyone is nerve wracked.

HUME: Let's talk about the Republican's first.

EASTON: But on the Republicans, I think it's too close to call. I think this is a really interesting moment because we thought a year ago or six months ago, that New Hampshire and Iowa wouldn't matter. And guess what? They matter.

We thought because there is this front loading of all these big states—California, New York, Florida—and Rudy Giuliani banked his strategy on that. And it turns out that we're all watching with bated breath what is going to happen in Iowa.

It helped carve the fortunes of Mitt Romney. It created Mike Huckabee, the Christian conservatives here created Mike Huckabee's phenomenon. New Hampshire provided the stance for John McCain for a potential comeback.

So these states matter, and they weren't going to matter six months ago. Everyone was saying they wouldn't matter as much.

BILL KRISTOL, EDITOR, "THE WEEKLY STANDARD": Some of us were saying six months ago that in fact this new schedule made Iowa and New Hampshire more important than ever. I've always thought the momentum theory of the campaign was true, not the national poll theory of the campaign.

Rudy Giuliani has found that out to his distress, and he is now trying to figure out how he jumps back in after not being in the top three or four in the first two, three, or four states. It is pretty interesting developments on the Republican side.

I do think with Mike Huckabee, that it is incredible impressive what he has done, which is to say this is this moment whether he gets first or second. He has spent very little money. He came from nowhere, had no national name I.D.

And I think it's a good thing for American democracy that you don't have to have $20 million, you don't have to be personally wealthy, you don't have to be the governor of a huge state, you don't have to have the establishment media in love with you. And he has managed to pull this off. It's really impressive.

JUAN WILLIAMS, SENIOR CORRESPONDENT FOR NATIONAL PUBLIC RADIO: I'm glad to hear that Bill has changed his tune, because he was pretty hard on the former governor of Arkansas.

I think it is a story that Huckabee has come up in this way with no money, up against what is big money in the form of Mitt Romney, who has his personal fortune to contribute. Mitt Romney said in that little bit that we played before the start of this segment that he doesn't know how it is going to come out. I think his fortune cookie is basically crumbling, and if he loses here, what you will see is the end of Mitt Romney and the end of that effort, because even as he goes forward into New Hampshire, he will have to fight John McCain.

HUME: So you don't think he has a ticket out of here?

WILLIAMS: If he wins.

HUME: Let's assume he doesn't. You don't think he goes on to fight in New Hampshire?

WILLIAMS: He goes on to fight, but he does not go on to win.

FRED BARNES, EXECUTIVE EDITOR, "THE WEEKLY STANDARD": I think if he goes on, fine. It's not as good as if he wins, but if he is second, Romney will still be one of the Republicans who has a chance of winning the nomination. There are a number who don't, but he does.

Mike Huckabee is playing the expectations game, too. He said yesterday that if you look up the word "underdog" in the dictionary, there is a picture of him there. And Huckabee says also, that, look, even if I'm second, I'm still in the hunt, and we'll move on. They're both coming out of here very strong.

Huckabee does not have a political organization, but what people have to recognize is that these evangelical conservative Christians are organized—home schoolers who are for Huckabee, they're organized. And they all talk to each other, and I think they're going to turn out in large and organized numbers.

HUME: If they do, though, isn't it fair to say this would be an historic achievement, that we can't, looking back over the years at the Iowa caucuses, point to a time when a candidate was carried to victory by an organization that was basically put together on his behalf and wasn't his own organization? Is that fair?

BARNES: Yes. And that is quite amazing.

HUME: That being the case is, is it not fair to wonder whether that can really work—Nina? Whether this build under him organization of volunteers can get the job done?

EASTON: I think it's a fair question to raise. I think it is a question to raise for—particularly for Huckabee beyond Iowa.

One of the things I was going to say, it isn't just the appeal to Christian conservatives that I think has helped Huckabee. It's something else that I think has also helped with John Edwards, which we will talk about later, is this populism, this economic populism . He has gone after Romney as the rich guy that wants to buy votes.

HUME: Is that a message that resonates elsewhere among Republicans?

EASTON: No, it's very interesting, because in Iowa, the economy here is doing quite well. It's 3.9 percent unemployment. It's lower than the national rate, and yet this populist, anti-corporate rhetoric is resonating among the basing in both parties.

KRISTOL: I think it helps Huckabee that he didn't have to organize all these people. One of the characteristics of American history is that things happen from the bottom up, and you don't have some guy at the top saying this is how I want it to happen.

Again, Juan thinks I'm changing my mind: I'm not. I'm not a huge fan of Huckabee's positions on some issues, but you have to admire that he was able to find a reservoir of sentiment out there to tap into and, in a sense, let these people organize themselves for them. And I think he can carry on after Iowa.

HUME: You are going to see, by the way, a little bit of his performance on Jay Leno last night, and perhaps we can assess for ourselves, and perhaps the viewers can, too, whether it was worth the time out from the campaigning to make it. But the man has a way of delivering, doesn't he?

BARNES: He has a dazzling performance. He played the guitar with the band to begin with, and then was funny. I think he may have a problem with being presidential, but he is certainly likable and funny and ingratiating.

HUME: Can he be elected president of the United States in your view?


HUME: Juan, in your view?

WILLIAMS: Yes, he can. And look at the numbers—

HUME: Elected President?

WILLIAMS: Yes, I think he can be elected president of the United States. I think there are lots of people that belittle him, belittle his educational credentials, belittle him as not having sufficient foreign policy experience.

But if you look at these national polls that have come out: Mike Huckabee, 17 percent in the national polls, Mike Huckabee in the latest Pew research poll, 17 percent. Those numbers didn't exist a few weeks ago, much less months ago. He was a non-factor.

KRISTOL: Here's my two word answer to your question: Jimmy Carter. Once every 30 years, someone comes from nowhere gets elected president of the United States.

HUME: Here we go. When we come back the panel will review the state of affairs in the Democratic presidential race. Stay tuned.



BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: Can you believe in a better America? We will not just win in caucus, we will not just win this primary, we will win the general election, and you and I together will create a better America. Let's get to work. Thank you, Waterloo!


HUME: Barack Obama has emerged as the candidate of hope, really, and of a hope for an idealistic kind of change. But can he win this state, and indeed, if he does win the state, where does all of this go from here?

Let's take a quick look at the average of the polling here done by Real Clear Politics for the Iowa Democratic caucus, this, from our friends at Real Clear politics.

As you can see, he has a very narrow lead, within the margin of error, even if you combine all these polls, there is still got to be a margin of error there that this is within.

So the question becomes—who turns out? We hear that Hillary Clinton has the biggest organization in terms of sheer number of people perhaps in the history of caucuses, but will that be enough—Fred?

BARNES: No. As you heard me say before, momentum, if you are a serious candidate, beats organization. I will give you a couple of anecdotes that have convinced me that he going to defeat Hillary Clinton tonight. And it will be the biggest story tomorrow in the entire world, not just the U.S., knocking off somebody who is supposed to be a part of a dynasty, the Clinton dynasty.

And one is I ran into a woman today, a Democrat, who is maxed out for Hillary Clinton, given her all she can.

HUME: All the money?

BARNES: All the money. She's for Obama now.

And the other thing is, Republicans who have called and making calls to Republican voters have found that a significant minority—not significant, maybe 5 or 10 percent, or something like that—are actually not going to caucus with the Republicans, they're going to caucus with the Democrats for Obama.

And I think it's partly because they like Obama, and it's partly because they would like to see Hillary Clinton lose.

HUME: We are hearing, Juan, from a number of quarters, that the independents, who are eligible to vote in either caucus with either party tonight, are much more interested in the Democratic side. Does that appear to you to translate into support for Obama or more likely for Clinton, or possibly Edwards?

WILLIAMS: Obama. I think it's Obama who would benefit most greatly if you have a surge of new people coming into the game, because, as I have gone around town in the last two days, there is an overwhelming and tremendous energy for Obama in this town among Democrats.

He has captured the young people without a doubt. I was at an event last night at a high school—the high school setting was just incidental— but it seemed to me that more than half of the crowd were young people, some of them I don't think old enough to caucus.

But when he speaks about his belief that he has to win here and the he is going to win in New Hampshire, it is a little bit of a Peter Pan fantasy at some point, because he has got to deliver, and I don't think that that has translated yet nationally. Nationally, Hillary Clinton still has the big numbers.

HUME: Let's look at the Teal Clear Politics average, this is an average of current national polls with the four or five latest polls. And there you can see, that's huge lead.

Now, look, we all have seen this happen, that once people start to vote and people start to react to how other people vote, these national polls begin to become less meaningful. But that is still a significant lead.

WILLIAMS: Right, and that's what Fred was saying a moment ago, that it will be world news. I think it will be world news, actually, if Huckabee beats the money from Romney.

But on the Democratic side, it is not that Obama would have forever defeated the sent the wicked witch of the east back home. No—it is that he will have won one race here in Iowa and therefore have some momentum going into New Hampshire. And we'll see what happens.

HUME: That's good question, Bill. If Romney is beaten and Hillary is beaten, which of those two candidates is more wounded by losing?

KRISTOL: Hillary.

HUME: Why so?

KRISTOL: She was the inevitable winner. Romney, to me, also deserves credit, incidentally. Romney has run a very competent campaign. He wasn't a frontrunner a year ago. He has worked his way up.

HUME: He has never been a frontrunner in any national polls.

KRISTOL: Right. And now today for the first time he is even with the frontrunners in the national polls. So he has worked his way up in Iowa and elsewhere.

But to get back to the Democrats, no, Juan is way underestimating the impact of an Obama victory over Hillary Clinton, especially if she wins third, which I think is quite possible. She is in deep trouble and Obama will beat her in New Hampshire. I think Obama could well beat her in Nevada. Then we go to South Carolina. Does anyone believe Hillary Clinton's lead holds up in South Carolina against Barack Obama, who could be the first African-American nominee for president of the United States?

I have always been for Obama in the sense that I always thought he was stronger than people thought, but I do think Juan is on to something. When you talk to Democrats here, there is real enthusiasm for Obama.

Now, he has to sustain it. This will be a huge test over the next few weeks. But he is now in position, I think, if he wins tonight, he is in the position to win the nomination.

HUME: On that score, there really is a distinct parallel between the Obama and the Huckabee campaigns. The are the ones that have generated the street level passion.

EASTON: That's true, but Obama is far and away—he has a huge organization. When 22-state vote on February 5, he has presence in 17 of them. He has a lot of money. He has 475,000 donors who haven't maxed out. And this guy has a real organization.

I completely disagree, however, that this will be fatal for Hillary Clinton to lose Iowa or even New Hampshire. As a Democratic strategist said to me today, "Look, you don't get out until you run out of money." She's got money.

She is going to be in this for the long haul. Yes, she will be wounded, yes it will be a setback. But they will flog it out.

The real danger, tonight, the one that you really have to worry about is John Edwards, because he really doesn't have the resources to go beyond Iowa very far if he loses.

HUME: Do you agree with that, Fred?

BARNES: Not about Hillary.

HUME: What about Edwards, though? Is he a goner if he loses here?

BARNES: If he comes in third, probably.

But, look, Hillary Clinton has a base in the party. But that base—if she loses here and loses in New Hampshire, that base is going to start to erode tremendously.

WILLIAMS: If she loses by two or three points, what difference does that make?

HUME: There is a possibility that we could have a push-out here.


BARNES: He can win by one point, a half point—if he wins, if he knocks off the inevitable next president, then that's the story.

HUME: Juan, you disagree with that?

WILLIAMS: I disagree.

HUME: Bill, what do you think.

KRISTOL: I ran into Bill Clinton in the lobby of our hotel today.

HUME: I'm sure he was thrilled to see you.

KRISTOL: He was very affable.

HUME: He always is. He is a charming man.

KRISTOL: We rode up in the elevator together and we chatted, and he said he didn't know that the caucus system was different for the Republicans from the Democrats. And then he proceeded to tell a story which implication is the fact was that these caucuses are messed up, and Iowa is not really a representative state, so don't put too much weight on it.

It was very subtle, he don't dot the i's and cross the t's. But I would say that, just reading into Clinton's body language, they are confident that they will win tonight.

HUME: And?

KRISTOL: And he sends his best to you, and he loves "Special Report."

HUME: I'm sure he's watching out.

EASTON: And he wants to point out that he didn't win until Georgia.

KRISTOL: Right, that's one of his lines, too. But he didn't compete in Iowa, he lost New Hampshire. He waited until Georgia. Hillary has all the time in the world to win, Brit.

BARNES: Yes, but he wasn't running against Barack Obama, he was running against Paul Tsongas. Obama is much more formidable.

HUME: That, friends, is it for the panel, but stay tuned to find out more about Mike Huckabee, what he used to look like, and where he once lived. That's next.

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