This is a rush transcript of "Special Report With Brit Hume" from July 24, 2007. This copy may not be in its final form and may be updated.

BRIT HUME, FOX NEWS ANCHOR: Next on SPECIAL REPORT, Attorney General Gonzales te lls his side of that late night hospital meeting. Remember that? And ends up being called untrustworthy and a liar by Senate Democrats.

The president, using newly declassified information, argues that Al Qaeda was in Iraq before we got there and this is no time to run from them.

In Iraq, a tense face to face between the U.S. ambassador and his counterpart in Iran.

Did Barack Obama stumbled badly in that YouTube debate?

Plus, Congressional Democrats would like you to know how great they have been in their achievements. All that right here, right now.

Welcome to Washington. I'm Brit Hume. Attorney General Alberto Gonzalez faced the most intense Congressional grilling yet and the harshest criticism. The subject was a dramatic late-night visit to then Attorney General Ashcroft's hospital room and the events leading up to it. Chief Washington correspondent Jim Angle reports.


JIM ANGLE, FOX NEWS CHIEF WASHINGTON CORRESPONDENT (voice-over): In another contentious hearing, Attorney General Alberto Gonzalez told senators today that in an emergency meeting at the White House in March 2004, eight key members of Congress were briefed on a classified intelligence program aimed at terrorists and urged the administration to continue it over the objections of then acting Attorney General James Comey.

ALBERTO GONZALES, ATTORNEY GENERAL: The consensus in the room from Congressional leadership is that we should continue the activities, at least for now, despite the objections of Mr. Comey.

ANGLE: Comey, who testified in May about the controversy, was acting in place of Attorney General John Ashcroft , who was in the hospital and who had previously approved the same program. That was the day before the Madrid bombings and the intelligence community was on edge and worried about losing a key tool in the fight against terrorists. Gonzalez said the gang of eight, the leaders of Congress from both parties and of the Intelligence Committees, urged officials to continue the program uninterrupted, but said they couldn't help with emergency legislation.

GONZALES: There was also consensus that it would be very, very difficult to obtain legislation without compromising this program, that we should look for a way ahead.

ANGLE: So Gonzalez and former White House Chief of Staff Andy Card went to see John Ashcroft in the hospital.

GONZALES: We felt it important that the attorney general knew about the views and the recommendations of the Congressional leadership.

ANGLE: But Ashcroft refused to overrule Comey. One official who attended the Gang of Eight meeting tells Fox the Gonzalez account is accurate, that members of Congress asked penetrating questions about safeguards, but agreed on the value of the program and the consequences of not continuing it.

Senator Jay Rockefeller was a ranking Democrat at the time on the Senate Intelligence Committee and has never argued the program should be stopped. But he told reporters today the eight officials were briefed but not told about impending crisis; "We had meetings to brief us on certain programs, but there was never, ever brought up the question of whether or not they all agree in terms of legality. We never even discussed it."

He went on to accuse Gonzalez of committing perjury and others urged the attorney general to correct his testimony, vaguely warning of legal action.

SEN. ARLEN SPECTER (R), PENNSYLVANIA: The chairman has already said that the committee is going to review your testimony very carefully to see if — if your credibility has been breached to the point of being actionable.

ANGLE: On the question of the firing of U.S. attorneys, Specter also suggested members might be willing to interview officials in private as White House has insisted. But he rejected White House assertions Congress can't even seek contempt citations for officials who refuse to appear. And he warned that if there is no other way to get to the bottom of the firings of U.S. attorneys, other options are available.

SPECTER: The attorney general has the authority to appoint a special prosecutor. You're recused, but somebody else could do it.


ANGLE: Gonzalez also endured another round of accusations and insults. One senator asked him flatly why he insists on staying on the job. Gonzalez said that's a good question, but he to decide whether it would be better to leave or stay and try to fix the problems. He said he chose the latter and gave no indication he is thinking about leaving. Brit?

HUME: Jim, thank you. President Bush said today that Al Qaeda in Iraq is the real Al Qaeda and anyone who claims there is some difference between them is mistaken. The president declassified some intelligence reports to back him up. Chief White House correspondent Bret Baier reports.


BRET BAIER, FOX NEWS CHIEF WHITE HOUSE CORRESPONDENT (voice-over): At Charleston Air Force base in South Carolina, President Bush called Al Qaeda in Iraq an alliance of killers directly tied to Usama bin Laden's al Qaeda network. The president declassified intelligence reports to answer critics who he said are trying to separate the two groups.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Some will tell you that Al Qaeda in Iraq is not really Al Qaeda and not really a threat to America. Well, that's like watching man walk into a bank with a mask and a gun and saying he is probably just there to cash a check.

BAIER: The president cited intelligence reports that Al Qaeda in Iraq's senior leadership includes a Syrian, a Saudi, an Egyptian, a Tunisian and a Turk, some of whom have met personally with Usama bin Laden or other top Al Qaeda leaders in Afghanistan. Al Qaeda in Iraq was founded by Jordanian Abu Musab al Zarqawi, who pledged allegiance to bin Laden.

After Zarqawi was killed by U.S. troops in 2006, an Egyptian named Abu Ayub al Masri took control. The president cited intel reports that al Masri worked alongside Al Qaeda's number two man, Ayman al Zawahiri, for more than two decades. And before the 9/11 attacks, al-Masri taught al Qaeda's radical ideology to recruits in Afghanistan.

The president said last year intelligence officials got word that bin Laden was sending terrorist leader Abd al Hadi al Iraqi to help al Masri. Al Hadi was described as a senior adviser to bin Laden and a top commander in Afghanistan. He never made it to Iraq though. Al Hadi was captured by U.S. forces and transferred to the U.S. naval base at Guantanamo Bay, Cuba.

BUSH: The fact that Usama bin Laden risked sending one of his most valued commanders to Iraq shows the importance he places on the success of Al Qaeda's Iraqi operations.

BAIER: The president said the intelligence community believes al Qaeda is the most dangerous jihaddist group in Iraq because it is behind most of the spectacular high casualty attacks that get so much attention. Al Qaeda attacks are designed to spark sectarian violence, to trigger reprisal attacks and civil war.

Al Qaeda in Iraq wants to make the country a base for external attacks. Bombings and rocket attacks in neighboring Jordan were seen as just a start. And Al Qaeda wants to make Iraq a base for its radical Islamic empire and a safe haven for attacks on America.

BUSH: We are fighting bin Laden's Al Qaeda in Iraq. Iraq is central to the war on terror. And against this enemy, America can accept nothing less than complete victory.

BAIER: In Washington, top Democrats responded quickly, saying the president was again trying to scare the American people into continuing the war.

SEN. JOHN KERRY (D), MASSACHUSETTS: Al Qaeda is not the principle killer of American forces in Iraq. Those forces are dying because of IED's, because of insurgents, and because of the struggle between Shiite and Sunni.


BAIER: Meantime, U.S. officials confirm that the top U.S. commander in Iraq and the U.S. ambassador in Baghdad are making final edits in what's being called the joint campaign plan that envisions establishing security at the local level throughout Iraq by summer 2008, with a goal of Iraqis sustaining that security by mid-2009. But we are told this plan does not make assumptions on U.S. troop levels over the next two years. Brit?

HUME: Bret, thank you. In Baghdad today, the American and Iranian ambassadors had a long sit down over U.S. complaints that Iranian meddling is destabilizing Iraq and leading to the deaths of American troops. The discusses were tense at times. But what, if anything, was accomplished? Correspondent James Rosen has a look.


JAMES ROSEN, FOX NEWS CORRESPONDENT (voice-over): Following an appeal for unity by Iraqi President Nouri al Maliki, the U.S. and Iranian ambassadors engaged in several heated exchanges over seven hours of meetings. The stormy session came two months after a fruitless first round of talks and gave U.S. envoy Ryan Crocker the chance to renew Washington's allegations that Iran has been helping sectarian militias in Iraq kill American troops.

RYAN CROCKER, US AMBASSADOR TO IRAQ: What we have seen on ground over the last couple of months has in many respects represented an escalation, not a de-escalation.

ROSEN: In a conference call with reporters, Crocker pointed to a recent surge of indirect fire into Baghdad's Green Zone.

CROCKER: The overwhelming majority of that fear emanates from Sadr City and is carried out, again, by the special groups and the secret cells of Jaish al-Mahdi that we know Iranian — has a connection to. And again, it's not guess work.

ROSEN: Despite this, the two sides agreed to form a joint security subcommittee, size and composition to be determined. But few held out hope it will produce be real changes on the ground.

CROCKER: This discussion has to be measured in results, not in principles or promises.

ROSEN: The Bush administration has charged for months that the Quds Force, an elite units of Iran's Revolutionary Guards Corps, has been training and arming extremist Islamic fighters in Iraq, Lebanon and the Gaza Strip.

The U.S. military has implicated Iran in the deaths of at least 200 American service members. Crocker said he told the Iranians all that has to stop and delivered this threat if it does not.

CROCKER: Quds Force officers and their surrogates are not going to be safe in Iraq.

ROSEN: The testiness and apparent futility of the exercise also raised serious questions about the value of engagement with a nation Secretary Rice has called a rogue state. Today, her spokesman said U.S. forces are working on multiple fronts to contain Iranian aggression, but made clear the U.S. has no plans to use force to change or punish Iran's bad behavior.

SEAN MCCORMACK, STATE DEPARTMENT SPOKESMAN: We can't compel them to change their policies.


ROSEN: The Iranians, for their part, accuse the U.S. of blaming Iran for everything in the Middle East and claim they have no desire to, quote, defeat the U.S. in Iraq. Brit?

HUME: James, thank you. The Treasury Department says it is shutting down an alleged Hezbollah support network in the U.S. The Bush administration is freezing U.S. assets of what is called the Martyr's Foundation, which is based in Iran, as well as a fund raising arm of the foundation in Michigan. Also targeted is a group called the Goodwill Charitable Organization, which the Treasury Department says is a front authorities for Hezbollah. The financial sanctions bar any American citizen from doing business with those organizations.

The military commander in charge of defending the U.S. homeland, Air Force General Victor Renuart, says he believes there are Al Qaeda cells in the United States right now or people working to create them. Renuart is head of the U.S. Northern Command. But he says while the terrorism threat has increased in the past year, so has intelligence sharing. The general suggests the Pentagon should create two more brigade sized units of about 3,500 troops each to react to possible biological, chemical or nuclear attacks in the U.S.

Later in our program, is there more to Spitzer/Bruno spat in New York State than the governor says? This is quite a story. After a break, we'll tell you the shocking details of the court documents now reveal about the case of that Liberian immigrant accused of repeatedly raping and molesting a little girl. Stay tuned.


HUME: Police in Montgomery County, Maryland, north of Washington, acknowledge today the West African immigrant we told you about last night, who is accused of repeatedly raping and molesting a seven-year-old girl, is totally a free man. A judge dismissed charges against him last week because no suitable translator had been found. Now the court documents are out and the case appears even more striking. Correspondent Molly Henneberg is standing by in Rockville, Maryland. Molly?

MOLLY HENNEBERG, FOX NEWS CORRESPONDENT: Brit, court documents reveal that there is apparently a second alleged victim in addition to that seven- year-old girl. Prosecutors charged Mahamu Kanneh with sexually assaulting another girl, a toddler, a year and a half old. Both girls are said to be the defendant's nieces.

Court records show 23 year old Kanneh initially pleaded guilty by reason of insanity to the nine charges against him, after he was arrested in August of 2004. But a court found him competent to stand trial. And since then he has been fighting the charges.

Another part of the case revealed in the court documents indicates that Kanneh's stepfather, with whom Kanneh once lived in a Maryland apartment building, is serving two years probation for sexually assaulting the same seven-year-old girlfriend that Kanneh is accused of raping. By the way, that stepfather; he's in the process of being deported, according to immigration officials.

But legal analysts say even if that stepfather connection influences an appeals court to set a trial for Kanneh, it won't necessarily bolster the case against him.


LIS WIEHL, FOX NEWS LEGAL ANALYST: The problem for the prosecution is if this does get to trial, the stepfather really isn't going to be germane. What he does and what his predilections are really have nothing to do with this guy. But another victim absolutely would come in at trial.


HENNEBERG: As Kanneh awaits the verdict from the appeals court to see if his trial could go forward, Maryland police are calling him a free man and Maryland Department of Corrections told us that they have not asked him to surrender a passport. Brit?

HUME: OK, Molly, thank you. Still ahead, Congressional Democrats celebrate their accomplishment on the minimum wage. We will look into their achievements so far. But first, we'll review how the Democratic presidential candidates did in last night's debate with questions from YouTube and whether any of them gained or lost any ground.


HUME: The Democratic presidential candidates are back on the campaign trail tonight after their first official debate in South Carolina with questions submitted to them by YouTube videos. So who scored points and did anyone stumble? Chief political correspondent Carl Cameron has a wrap- up.


CARL CAMERON, FOX NEWS CHIEF POLITICAL CORRESPONDENT (voice-over): Trailing in the polls, John Edwards took in a soul food lunch the day after the Democratic presidential candidates debated in Charleston, South Carolina.

JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE: We had a great debate last night.

CAMERON: The event was billed as the first major intersection of new and old media because questions were posed via YouTube videos. There was some weirdness.

UNIDENTIFIED MALE: Mainstream media seems awful interested in old Al Gore these days.

UNIDENTIFIED MALE: Is he losing weight? What's it say in his book? Is he still worried about us?

UNIDENTIFIED MALE: I have been growing concerned that global warming, the single most important issue to the snowmen of this country, is being neglected.

UNIDENTIFIED MALE: Pay taxes on my clothes and food, taxes on my plates. I pay taxes on my moisturizer. I mean, taxes on my weights.

CAMERON: But on substance, the debate focused on the premier issue of the entire campaign, the war and national security. Barack Obama was asked if he would agree without precondition to meet the leaders of the Iran, Syria, North Korea, Cuba and Venezuela in the first year of his administration. He said he would.

SEN. BARACK OBAMA (D), ILLINOIS: The notion that somehow not talking to countries is punishment to them, which has been the guiding diplomatic principle of this administration, is ridiculous.

CAMERON: Hillary Clinton, eager to contrast her experience and judgment to Obama's relative lack of it, immediately took the opposite path, underscoring the risk of Obama's willingness to meet with despots unconditionally.

SEN. HILLARY CLINTON (D), NEW YORK: Well, I will not promise to meet with the leaders of these countries during my first year. I don't want to be used for propaganda purposes. I don't want to make a situation even worse.

CAMERON: The debate took place at the Citadel, the military college of South Carolina, steeped in military tradition. And the Democratic field seemed to divide into two factions with regard to Iraq; Hillary Clinton and Senator Joe Biden, chairman of the Foreign Relations Committee, took a go slow approach to withdrawal.

CLINTON: So, with all due respect to some of my friends here, yes we want to begin moving the troops out. But we want to do so safely and orderly and carefully.

SEN. JOE BIDEN (D), DELAWARE: You know we can't just pull out now. Let's get something straight. It's time to start to tell the truth.

CAMERON: The other side included Barack Obama and Bill Richardson, who seemed to be in a race to get out first.

GOV BILL RICHARDSON (D), NEW MEXICO: I believe we should bring all the troops home by the end of this year, in six months, with no residual forces, no residual forces.

OBAMA: So we have to begin a phased withdrawal, have our combat troops out by March 31st of next year. At this point, I think we can be as careful getting out as we were careless getting in.


CAMERON: And today, Hillary Clinton called Barack Obama, quote, naive and irresponsible for his insistence that he would met with the nations despots without condition in the first year of his presidency. In response, Barack Obama said that Hillary Clinton is naive and irresponsible for having voted for the war.

On the Republican side of the race tonight, some growing pains and potentially a bump on the campaign trail for the as yet unofficial candidacy of Fred Thompson. Today it was revealed that as part of his testing the waters organization, a senior official, Tom Collamore, is stepping aside. The reason, it is said, is because of friction with the candidate's spouse, Jeri Kehn.

When Fox News contacted the testing the waters campaign of Fred Thompson today, they adamantly denied that there was any such rift. We now know that that is, in fact, not the case and, in fact, it was a clash between the candidates spouse and a top staffer. Questions tonight not only about who will run the campaign, but how they will run the message in the future. Brit?

HUME: OK Carl, thank you. South Carolina State Treasurer Thomas Ravenel — Republican state treasurer — resigned today more than a month after he was indicted on a federal cocaine charge. Ravenel has also stepped down as state campaign chairman for presidential candidate Rudy Giuliani.

He spent 30 days in a rehab program before returning home this week to face charges. His attorneys entered a not guilty plea on his behalf. Prosecutors say he did not sell cocaine but shared it with friends.

Democratic leaders on Capitol Hill today took the occasion of a rally celebrating the minimum wage increase to trumpet what they considered a record of accomplishment in the 200 days since they became the majority party. Congressional correspondent Major Garrett looks at what has been done and what is, as yet, not done.


MAJOR GARRETT, FOX NEW CONGRESSIONAL CORRESPONDENT (voice-over): With an approval rating in the high teens and more U.S. troops fighting in Iraq now than when they took power, Congress' Democratic leadership marched today from Capital an into the warm embrace of organized labor.

LARRY COHEN, COMMUNICATIONS WORKERS OF AMERICA: We say that to Harry Reid, to Nancy Pelosi; you are on the march. You are doing the right thing. But we got a long way to go.

GARRETT: Democrats and big labor held a rally to celebrate themselves and today's increase in the federal minimum wage, the one and only campaign promise so far fulfilled on this the 202nd day of the 110th Congress.

REP. NANCY PELOSI (D-CA), HOUSE SPEAKER: This is the day that signals change, because people who went to work this morning, who went to work every day to provide for their families, today will have their work rewarded more fully.

GARRETT: The minimum wage rises today from 5.15 an hour to 5.85 an hour. It will rise again to 6.55 an hour a year from today and once more to 7.25 an hour two years from today. Democrats passed the bill two months ago, but felt they needed to cheer its enactment to paper over record low approval ratings and to rally a base demoralized by lack of progress in bringing U.S. troops home from Iraq.

On that point, Democrats sought credit for round upon round of Iraq war hearings.

SEN. HARRY REID (D-NV), MAJORITY LEADER: We have had 100 hearings on Iraq and we are going to have 100 more and we are proud of it. That is in preparation for us to get our valiant troops to come home.

GARRETT: But even the accomplishment of raising the minimum wage came at a price. Democrats tucked the minimum wage increase into a bill funding President Bush's troop surge to soften the blow of giving up on a troop withdrawal timeline Democrats had originally demanded.

Republicans say Democrats have precious little to celebrate.

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: We have had excessive Iraq votes, excessive investigations and not much legislation.

REP. JOHN BOEHNER (R-OH), MINORITY LEADER: The Democrats, all year, have broken every promise they made during the election cycle last year. And I think Americans expect that Democrats will work with Republicans to deal with the issues that they care about.

GARRETT: Democrats will now try to address other campaign promises, lowering energy prices, implementing remaining 9/11 Commission recommendations, providing more college tuition assistance.


GARRETT: Democrats have complained all year that Republicans keep blocking their attempts to pass domestic legislation. Having seen that argument largely fail, Democrats are now madly trying to pass bills before Congress leaves next week for a month long break. But to do that, Democrats have to cut some deals. And that has given Republicans more clout in Congress than at any time since they lost the majority last November. Brit?

HUME: Thank you, Major. We take a break here to give our sponsors a word and update the other headlines. When we come back, we tell you how a certain journalist defines staunch Republicans. You may surprised how that journalist — what that journalist thinks a staunch Republican is. And that story is coming up next on the grapevine.


Governor Eliot Spitzer disciplined two of his aides this week for an effort to discredit the Republican State Senate Majority Leader. But Spitzer's critics say he knew more about what his aides were up to than he has let on, and should face the music himself.

Correspondent Eric Shawn reports.


ERIC SHAWN, FOX NEWS CORRESPONDENT: New York's Democratic Governor Eliot Spitzer was elected on a vow to clean up the State capital, Albany. But only seven months into office, he faces a growing scandal, and is doing his best to try and stem the political damage.

A state investigation found two of his top advisers improperly used the state police to try and smear the governor's rival, Senate Majority Leader Joe Bruno, the most powerful Republican in the state.

Spitzer Communication Director Darren Dopp has been suspended indefinitely without pay, and Assistant Secretary for Homeland Security William Howard has been reassigned. Spitzer, who claimed he was unaware of plan, apologized to Bruno, and promised the mistakes won't be repeated.

GOV ELIOT SPITZER, (D) NEW YORK: I asked for an investigation the moment we heard there was something that potentially was amiss. I have imposed sanctions. We are ready to stand for integrity in government.

SHAWN: The report from State Attorney General Andrew Cuomo, son of the former governor, claims no laws were broken, but found that Governor Spitzer's aides wrongly utilized the state police to investigate Bruno's use of state aircraft, and falsely claimed the request for the inquiry came from the news media.

In the end, the report said, Bruno didn't do anything wrong. Republicans doubt Spitzer's defense.

MARTIN GOLDEN, (R) NEW YORK STATE SENATOR: You Chief of Staff not keeping you in the loop. My chief of staff would be fired. Anybody's chief of staff would have been fired that would have done that.

HANK SHEINKOPF, POLITICAL CONSULTANT: He has become toxic and radioactive momentarily.

SHAWN: Former Spitzer advisor, Democratic Political consultant Hank Sheinkopf, thinks Spitzer will survive, because the next gubernatorial election is not until 2010.

SHEINKOPF: Elliot Spitzer still has support of the public. He is still well regarded in public opinion polls. If he could get back to the agenda that the people elected him to do and reduce the personality crisis he has, and problems with others in state government, then, frankly, he will just be fine.

SHAWN: For Spitzer it could get worse. The Republican-controlled State Senate is considering its own investigation, and some think the feds will step in. And then there is the report's author Andrew Cuomo. He once ran for governor himself, and already knows firsthand what it is like to live in the Governors mansion.

In New York, Eric Shawn, Fox News.


HUME: A grand jury in New Orleans today refused to indict a surgeon who is accused of murdering four seriously ill hospital patients with high does of painkillers in the days after Hurricane Katrina.

Dr. Anna Poe, and eye, ears, nose, and throat surgeon, says she did everything she could to keep the patients comfortable while they waited four days for rescue at Memorial Medical Center. The hospital had no electricity, and its lower level was under 10 feet water after the storm.

And a new poll from Harvard University finds that nearly one third of the people who live in the southern coastal areas say that if a storm threatened their community, they would ignore hurricane evacuation orders. That's more than last year, when about one in four said the same thing.

Their reasons, however, remain the same. They believe their homes are safe, that roads would be too crowded, and that fleeing would be dangerous.

Next up on Special Report, were there any clear winners and losers in last night's Democratic debate? Thoughts from the FOX all-stars when we return.



UNIDENTIFIED MALE: Would you be willing to meet separately, without precondition, during the first year of your administration in Washington, or anywhere else, with the leaders of Iran, Syria, Venezuela, Cuba and North Korea in order to bridge the gap that divides our countries?

SEN BARACK OBAMA (D) ILLINOIS, : I would. And the reason is this, that the notion that somehow not talking to countries is punishment for to them, which has been the guiding diplomatic principle of this administration, is ridiculous.

SEN HILLARY CLINTON, (D) NEW YORK: I will not promise to meet with the leaders of these countries during my first year. I will promise a very vigorous diplomatic effort, because I think it is not that you promise a meeting at that high a level before you know what the intentions are.


HUME: Well, that was thought by many to be a moment last night—Obama saying that, without any preconditions, he would sit down with all the tyrants that the questionnaire had listed.

And Senator Clinton followed up today, saying she though of his answer "I thought that was irresponsible and, frankly, naive."

Obama, for his part, responded to that by saying "What she somehow is maintaining is my statement could be construed as not having asked what the meeting was about. I didn't say they were going to come over for a cup of coffee some afternoon."

"Continuing," he said "from what I heard, the point was, well, I wouldn't do that, because it might allow leaders like Hugo Chavez to score propaganda points. I think that is absolutely wrong."

So Obama, apparently, stands by what he said last night in the debates. And thoughts on all this now from our Fred Barnes, executive editor of The Weekly Standard, Mort Kondracke, same job at Roll Call, and the syndicated columnist Charles Krauthammer, FOX News contributors all three.

Well, what about this? Is this a moment to remember? A moment that gives Obama something that he is going to have to live with for a while? Or is this just background noise?

FRED BARNES, EXECUTIVE EDITOR, WEEKLY STANDARD: Sure, he will have to live with it for a little while. I watched all two hours of this debate, it the one thing that just jumped out at you.

And I think he was, basically, na<ve. He showed his lack of depth in foreign policy. And, on the other hand, Hillary Clinton responded in a very measured way.

Then we got the third person, then, was the bellwether, John Edwards, he spoke after, and he sided with Hillary. So her answer must have been better.

Obama was also wrong when he cited the example of Ronald Reagan. He said Ronald Reagan, he met with the leader of Soviets, he called them an "Evil Empire," but still met with them. It was in the fourth or fifth year of his administration as president when Reagan first met with Mikhail Gorbachev, he hadn't met with the earlier one.

So this was clearly a moment where Hillary Clinton did better than Barack Obama.

MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: I thought Hillary did much better than Obama—

HUME: With a Democratic audience, did she?

KONDRACKE: I think so.

HUME: And the questioner might have—clearly, the questioner seemed to get from Barack Obama the answer he was looking for. The questioner, or does Hillary reflect the sentiments of the Democratic Party at the moment?

KONDRACKE: I'm sure that there are lots of Democrats who would look to negotiate right away with Hugo Chavez and Fidel Castro. But I don't think that that represents—

HUME: And Kim Jong Il, right?

KONDRACKE: —that represents the bedrock of the democrat party, which I think is still, more or less, centrist. And I think she gave a presidential answer.

However, I would note, in both cases, neither one of them said—she was talking about still defensive kind of diplomacy. I don't want to be used as a propaganda tool. The real answer is I won't negotiate with those people until I have leverage to get from them what is in America's interest. That's right answer, and that's the Reagan answer. Reagan did not negotiate with the Soviets until he had missile deployment that we were going to make in order to countervail their missiles and get them to stand down.

HUME: Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, look, it pains me to say this, but even Democrats are not silly enough to think that the president ought to be in a summit with Hugo Chavez, who is a clown, and that would only elevate him.

I don't think this helps Obama, and particularly because it is not first time he has stumbled in an answer on national security. In the debate in South Carolina in April he was asked a question, if Al Qaeda attacked two American cities, what would you do?

His response was I would make sure our first responders are ready as they were not in Katrina. Hillary answered shortly afterwards and said I would retaliate. And Obama knew it was a mistake. It hadn't even occurred to him.

Now if it happens once, it is, perhaps, a blip. If it happens twice, it tells you something about him. The only person on that stage who could be a competent Commander in Chief tomorrow is Clinton. And Obama is not.

She is right that it was a naive answer, and not just because it would elevate these tin pot dictators, but because if you go into a summit unprepared, and without the outcome wired in advance, you could end up in a catastrophe.

When Nixon had his outreach to China, he was all wired in advance. You had to have an outcome, and China was a real enemy. But when Clinton had his summit at Camp David with the Palestinians and the Israelis, it was not wired in advance, it collapsed, and the result was that the Palestinians started a war six years later.

This was not an incidental question. It is a serious question of national security, and if you can't answer it, you are a novice.

HUME: Fred?

BARNES: Some of us remember when John F. Kennedy met with Nikita Khrushchev in Kennedy's first year as president in 1961, and Kennedy, obviously, was not either psychologically or otherwise prepared for this. Khrushchev drew from that that he was faced with a weak president who he planned to take advantage of, and did.

KONDRACKE: I thought the hero of the debate, actually, was Joe Biden last night, who embraced Obama and Hillary about their votes against the wartime supplemental, which would have provided, among other things, anti- IED vehicles for the troops in Iraq, and also said that you could not get out the way Bill Richardson was saying, you know, overnight, but it would take months and months, and, in fact, we have to leave residual troops behind.

HUME: You think Biden gained any ground with Democrats by saying those things?

KONDRACKE: I don't care whether he did or not. He did with me.

HUME: My question, now, and I got to ask the questions—

KONDRACKE: I know, I know.

HUME: You have to try to answer them anyway.

KONDRACKE: Of course not.

HUME: I didn't ask whether you cared—

KONDRACKE: Of course it didn't help him.

HUME: All right. It works better that way.

When we come back, Democrats are touting their achievements in their first 200 days of Congress. The panel will look more closely at that after a break. (COMMERCIAL BREAK)


REP NANCY PELOSI, (D) CALIFORNIA: Here we are one week later, gathered here to observe a remarkable thing, an increase in the minimum wage.

SEN HARRY REID, SENATE MAJORITY LEADER, (D) NEVADA: We have had 100 hearings on Iraq, and we are going to have 100 more, and we are proud of it. That's in preparation for us to get our valiant troops to come home.


HUME: Well, that was the sense today at this event. It was sort of a labor sponsored event to celebrate the enactment of the actual taking effect of the new minimum wage increase, which is the one item on the Democrats political agenda from the campaign last year that they have succeeded in getting passed.

But, as you heard Senator Reid, point out, they have done a number of things on Iraq. They have certainly kept the pressure up, and kept the complaints coming about our presence in Iraq, although there are more troops now in Iraq fighting than there were when the Democrats came to power.

So the question, what about the Democrats? How well have they done? How badly they have done, or what? Charles?

KRAUTHAMMER: They have done badly. And I think this will give the Republican the one opening they are going to have in 2008. Everything is running against the Republicans, but I think they have a chance if they argue that the Democrats have been in charge, and they are the do nothing congress.

Just like Truman in 1948, who had the luck of losing the House and Senate two years earlier, he ran against it, and said these guys have accomplished nothing.

Look, the Democrats have done two things—hearings, without any success, unlike Watergate, Iran Contra. You have to have a trophy at the end of it, you have to be holding a head and put it on a spike, and they don't have any.

Lots of hearings on the CIA leak, on the NSA eves dropping program. Lots of hearings on all kinds of stuff—nothing. And people, the way to frame it is to say, is this how you want Congress spending its time and your tax money?

And, secondly, even on the war, Republicans can say, if you believe that the war ought to end, the Congress has the power to do it, hasn't had the courage to do it. If you believe the war ought to be won, all that Congress has done is to impede our attempts to actually win.

KONDRACKE: I agree that after both parties said after the 2006 elections, the lesson of this election is that we got to work together, and the public wants us to work together. And I think that is true.

They haven't worked together, and they haven't gotten much done. They are going to get a few things done—lobbying and ethics reform done before they go home for the August recess. They will probably get an SCHIP—they might get an SCHIP Children's Health Bill pass, which the president is vowing to veto.

HUME: Will that, therefore, not be an accomplishment, or what?

KONDRACKE: I think that that works against the Republicans, actually. If the president vetoes children's health after the Congress had approved $400 billion over a five year period for senior's prescription drugs, but they won't approve $50 billion for children's health? And it's the president veto that blocks it? I think that hurts the Republicans.

BARNES: It would if it were a bill that didn't have so many horrible things on it—a bill that would go way up 400 percent of poverty. And yet, that's what the Bill does. Mort, read the bill and you will see what it does.

KONDRACKE: I read it.

BARNES: Ok, but you got it wrong then.

KONDRACKE: Well, you read it.

HUME: No, you read it. Have you read it?

BARNES: What it would do, it would attract an awful lot of people who want private insurance just to take a government handout insurance, that's what it would do. And it doesn't apply.

And it's the Bush administration's fault on this. They have given all kind of waivers to states. This SCHIP money for children has gone to adults in many, many states. So the program is not a great program.

Judge the Democrats by—Mort says it's they, Republicans and Democrat have to work together. Democrats are in charge. They said—in the House, Nancy Pelosi and the rest of them said—we are going to have six in 2006. They got one passed this year, one. That's the minimum wage, and it had to be tacked on to the Iraq Supplemental Bill.

Harry Reid had 10 top items—one he has achieved, the minimum wage.

If you are a quarterback, you are supposed to complete 50 percent of your passes to do OK. If you are a baseball player, you need to hit 300 to be doing well. They are way below those averages.

The fact is they just haven't accepted the fact, particularly in the Senate, that Republicans have 49 votes. And I think anybody in the Democratic Party will tell you privately, would you rather have Mitch McConnell as your leader in the Senate, or Harry Reid? And they would all say Mitch McConnell.

BARNES: I want to quote a distinguished authority on this whole subject, namely Fred Barnes.

"In Washington, the Democrats are stymied, foiled, and frustrated. Republicans have hindered or obstructed them at every turn."

BARNES: They are the minority.

KONDRACKE: That is not a fulfillment of the promise that even Mitch McConnell made at the beginning of term, that he would work with Harry Reid. Now, Harry Reid is difficult to work with, but obstructionism is what is going on.

HUME: Got to go. Got to go.

That's it for the panel. But stay tuned to find out if Bill Clinton wants to be, as he puts it, "America's first laddy." That's next.


HUME: Finally tonight, just to give you an idea of how ready Hillary Clinton is to be president, she has already picked one of her special emissaries. And it's you know who.

How does he like the idea? Well, just watch his reaction.


CLINTON: As soon as I'm elected, not even waiting for the inauguration, I'm going to asked distinguished Americans starting with my number one ambassador, to travel around the world and tell leaders and their people—


HUME: And that's Special Report for this time. Please tune us in next time. In the meantime, more news is on the way. Fair, balanced, and unafraid.

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