This is a rush transcript of "Special Report With Brit Hume" from May 7, 2007.

BRIT HUME, FOX NEWS ANCHOR: Next on SPECIAL REPORT, the sun may have set on the British empire, but when the queen comes to Washington, it is still a very big deal, especially at the W hite House.

The French, meanwhile, have put a pro-American president in the Elizee palace.

Barack Obama goes to Detroit to talk about kicking the gasoline habit. Anything new here?

The man many Republicans want to see bring some law and order to the presidential race makes hi s first big speech. We'll analyze.

And a really radical idea about how to save the planet. All of that right here, right now.

Welcome to Washington. I'm Brit Hume. President Bush took a break today from domestic policy and from politics for most of the day, in order to entertain roy alty. The president and Mrs. Bush welcomed Queen Elizabeth of Great Britain and Prince Philip to the White House with much ceremony, plus some fan fare. White House correspondent Wendell Goler reports.


WENDELL GOLER, FOX NEWS WHITE HOUSE COR RESPONDENT (voice-over): A royal wave from the Truman Balcony from the queen and her hosts to more than 7,000 people gathered below crowned the day of the highest ceremony at the White House since George W. Bush took office. This fifth state visit of the Bush presidency was an opportunity t o take stock in the U.S. and Britain's special relationship.

QUEEN ELIZABETH, GREAT BRITAIN: We're taking pleasure from its strengths, while never taking this for granted.

GOLER: On her fifth visit to this country, the queen spoke of renewing the commitment to a safer and freer world. And while not mentioning Iraq by name, the president recalled the U.S. and British partnership in the war.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The fruits of our work have been difficult for many to see. Yet our work remains the surest path to peace.

GOLER: Preparations for the visit of Queen Elizabeth and Prince Philip have been underway for weeks and reached a fever pitch in the past few days. Executive Chef Chris Commoford (ph) supplemented her staff with a dozen extra assistants for the Dover Soul Amandine and saddle of lamb she's serving.

Pastry Chef Bill Yassa (ph) has temporarily hired a dozen more workers to help him create individual rose blossom cakes for each diner. One hundred thirty have been offered the toughest ticket in town. Senate Majority Leader Harry Reid turned his down. White tie and tails not his thing, says a spokesperson. And the first lady says it wasn't easy to convince her husband.

LAURA BUSH, FIRST LADY: Dr. Rice and I took it upon ourselves to talk him into it. Because we thought if we were ever going to have a white tie event, this would be the one.

GOLER: Tonight, the president is sitting between the queen and former first lady Nancy Reagan, with Mrs. Colin Powell and Chief Justice John Roberts also at the table. The last time the queen was here, in 1991, President Bush's mother, then first lady Barbara Bush, says in her memoirs she seated them as far apart as possible. She says she hoped they wouldn't talk, but of course they did.

Mr. Bush had admitted to being the black sheep of his family and asked the queen who was the black sheep of hers. And if Barbara Bush was watching the morning arrival ceremony, she may have winced at the thought of the evening's conversation.

BUSH: You helped our nation celebrate its bicentennial in 17 — 1976. She gave me a look that only a mother could give a child.


GOLER: The president's mother and father won't be at the dinner tonight. They will be at a reciprocal dinner tomorrow that Queen Elizabeth and Prince Philip are hosting at the British ambassador's residence. That will end two very full days of royals watching here in Washington, so much it's hard to show you all the pictures. For example, the British hosted a garden party this afternoon. One of the guests, Washington managing editor Brit Hume, another guest, 87 year old actor Mickey Rooney, who apparently did not listen to the protocol about greeting the queen. A light hand shake is recommended, not the kiss.

One final note, Brit, the queen's visits have all come during Republican administrations, Eisenhower, Gerald Ford, Ronald Reagan, and Bush's 41 and 43. What do you suppose that means, Brit?

HUME: I haven't got a clue, Wendell. But I'll tell you this: I didn't kiss her hand at the garden party. Thank you Wendell.

French conservative Nicolas Sarkozy was leading in the polls going into yesterday's presidential elections here, but this is France and Sarkozy's opponent was a glamorous feminist socialist, who would have made history by winning. In the end though, she did not even carry the women's vote, and for the first time in a long time, an unabashed pro-American will be president of France. Correspondent Greg Palkot reports.


GREG PALKOT, FOX NEWS CORRESPONDENT (voice-over): French President elect Nicolas Sarkozy on the go this morning. He's said to be already planning his first 100 days in office after a winning a solid 53 percent of the vote over socialist rival Segaline Royale in elections yesterday.

CHRISTIAN MALAR, POLITICAL ANALYST: He won big. He has a real mandate, given by the French people, to lead this country for the future with a new vision.

PALKOT: That vision, as he explained it last night, is to change France, domestically, to help fix a range of economic and social problems. Internationally, to repair frayed relations between the France and the U.S. His message to America —

NICOLAS SARKOZY, FRENCH PRESIDENT-ELECT (through translator): I want to tell our American friends that they can count on our friendship. France will always be at their side whenever they need help.

PALKOT: Music to the ears of the White House which has endured a less than cordial relationship with French President Jacques Chiraq. Cautious optimism on display today.

TONY SNOW, WHITE HOUSE SPOKESMAN: The president is happy with any democratic election. He has congratulated President elect Sarkozy, and looks forward to meeting him at the G8 next month.

PALKOT: maybe equally encouraging for the U.S., a good reception to the Sarkozy message, including that pro-American stance, by his supporters at Place de la Concorde last night.

(on camera): He likes Americans? Is that OK?


UNIDENTIFIED MALE: This is one of the reason why I chose to vote for him, because I am fed up with hearing so many bad things about the United States.

PALKOT: Here in Paris, it's a tale of two cities. While people happy about the victory of Nicolas Sarkozy celebrate on one side, here, just above Place de la Bastille, police clashing with rioters.

(voice-over): Disappointed supporters of socialist candidate Royal and simply angry young people made trouble in Paris, as well as in other cities through the night. In the last days of the campaign, Royal had been hitting hard, slamming Sarkozy's ties to the U.S., even warning of such disturbances if Sarkozy, tough on crime and criminals, was elected.

She had one parting shot after conceding defeat on Sunday.

SEGOLENE ROYAL, SOCIALIST PRESIDENTIAL CANDIDATE (through translator): I hope that the next president of the republic will accomplish his mission in the service of all of the French people.

PALKOT: Bringing together a polarized French population is one of Sarkozy's first tasks, as well as getting reforms passed without civil unrest or labor union strikes scuttling them, and maybe even tempering his pro-American instincts for broader French consumption. Referring to U.S.-

French ties, he added last night —

SARKOZI: But I am going to tell them too that friendship is also that a friend can think differently.

PALKOT: Viva la difference? In Paris, Greg Palkot, Fox News.


HUME: The World Bank panel that has been looking into how Bank President Paul Wolfowitz handled a personnel matter has sent him its report and plans discuss the matter with the banks board tomorrow. "The New York Times" is reporting on its website tonight that the panel has found Wolfowitz involved in a conflict of interest in arranging a pay raise and promotion for his companion Shaha Riza. But the panel is reportedly still deciding what punishment to recommend, and in the meantime, a top Wolfowitz adviser is quitting.

Kevin Kellum (ph) says the atmosphere surrounding the bank's leadership makes it impossible or at least difficult to be effective.

General David Petraeus, the top U.S. commander in Iraq, said today he is greatly concerned by the findings of a recent Pentagon. The report concluded that many combat troops in Iraq would not report a member of their unit for killing or wounding an innocent civilian. Only 40 percent of U.S. Marines and 55 percent of Army soldier said they would make such a report. Petraeus spoke from Baghdad.


GEN. DAVID PETRAEUS, MULTI-NATL FORCE IRAQ CMDR: I was very concerned by the results, because they indicated a willingness on a fair proportion of Soldiers and Marines to not report the illegal actions, if you will, of buddies. And also. it indicated that some relatively very small percentage believe they might have actually mistreated civilians or detainees.


HUME: Later on our program, what does immigration reform have to do with biblical values. We'll tell you. But when we come back, a closer look at Democrat Barack Obama's energy plan. That is next.


HUME: Democratic presidential candidate Barack Obama today told an audience in the town known as Motor City that if he were president, American car makers would have to change their gas-guzzling ways. Obama said American energy policy is not just a matter of helping the environment and saving money, but he said a tool in the fight against terrorism. Chief Washington correspondent Jim Angle reports.


JIM ANGLE, FOX NEWS CHIEF WASHINGTON CORRESPONDENT (voice-over): The U.S. addiction to oil is sending hundreds of millions of dollars to repressive regimes, such as Iran, encouraging terrorists and contributing to climate change. That is what Senator Barack Obama told the Detroit Economic Club today.

SEN. BARACK OBAMA (D), ILLINOIS: We need to drastically change our energy policy. It is no longer a debatable proposition. It is not a question of whether, but how. It is not a question of if, but when.

ANGLE: The age of oil must end in our time, he said. One proposal is to force U.S. automakers to build more fuel-efficient cars, increasing the water called CAFE Standards, a government mandate for how many miles per gallon a car must get. Obama would increase fuel economy by four percent each year, one mile per gallon per year, unless regulators prove it can't be done.

OBAMA: The only way that auto makers can avoid meeting its goal is if the National Highway Traffic and Safety Administration can prove that the increase is not safe, not cost-effective, or not technologically possible.

ANGLE: His proposal, originally put forward by Obama and Republican Senator Richard Lugar, is now supported by many senators in both parties. In fact, President Bush embraced almost exactly the same thing in his last State of the Union.

BUSH: At the same time, we need to reform and modernize fuel economy standards for cars the way we did for light trucks, and conserve up to eight and a half billion of gasoline by 2017.

ANGLE: Obama also wants to create incentives to get the U.S. auto industry to build more alternative vehicles. To do so, he would help them pay the costs of health care for their many retirees, which add about 1,500 dollars to the cost of every car. So Obama offers to strike a bargain with auto makers.

OBAMA: We will help to partially defray those health-care costs, but only if the manufacturers are willing to invest the savings right back into the production of more fuel-efficient cars and trucks.

ANGLE: He would also push for far greater use of ethanol to reduce gasoline consumption, but one analyst says there is a more direct way.

PETER VAN DOREN, CATO INSTITUTE: If you really think that gasoline dependence from abroad is a problem and you are really serious about doing something about it, then you ought to tax the heck out of gasoline prices.


ANGLE: But no politician wants to do anything that controversial. Senator Obama has been criticized for giving feel-good speeches about setting aside differences, while not offering much in the way of specific proposals. But he said today this is only the first of several speeches on energy policy.

In Washington, Jim Angle, Fox News.

HUME: Former Tennessee Republican Senator Fred Thompson appears to be making all the right moves for a man who is considering a run for president. Thompson has not yet declared himself a candidate, so he did not participate in last week's GOP debate. But he did speak to a Republican gathering in nearby Orange county, California later. Chief political correspondent Carl Cameron reports reactions were mixed.


CARL CAMERON, FOX NEWS CHIEF POLITICAL CORRESPONDENT (voice-over): Entering to his TV show theme song, former Tennessee Senator Fred Thompson faced high expectations for his debut speech as a likely presidential candidate. He is third in many polls, and fully aware that many Republicans seem dissatisfied with the rest of the crowded GOP field.

FRED THOMPSON (R), FORMER TENNESSEE SENATOR: Did you ever wonder why when our problems seem to be getting larger, that so many of our politicians seem to be getting smaller?

CAMERON: His low-key, country-fide remarks were generally well received on substance, but some thought they lacked sizzle. Of Iraq, he said finish the job, because America's role in the world matters. He called for tax cuts, spending restraint and entitlement reform. He made no mention of social issues like abortion or gay marriage. He did not criticize his party for recent corruption scandals.

He avoided religion in politics and made only a passing reference to god. Some critics said Thompson did not live up to hype, and missed an opportunity with some of the most influential Republicans in Orange County, California.

ROBERT NOVAK, FOX NEWS CONTRIBUTOR: He gave what was an ordinary speech. Nothing wrong with it, but not much pizzazz. And they went away very disappointed, at least the ones I talked to.

CAMERON: Aides dismissed criticism that Thompson was too laid back, saying that several audience members, quote, volunteered to raise millions for Thompson's campaign after the event. But during his remarks, he never once mentioned the presidential campaign, his own ambitions, or even ask for support.

Political critics say he can be lazy, perhaps in contrast to some of the generally more energetic movie roles he has played.

THOMPSON: Now if you'll excuse me, I'm in the middle of a campaign here.

CAMERON: Thompson advisers have yet to compile a short list of possible campaign managers. There is no fund raising apparatus or plan. The red meat speeches are slated to begin in June, with an announcement expected in July. In an interview with Fox News Channel, it appeared all systems are go.

THOMPSON: I am seriously considering running for president, no question about that.

CAMERON (on camera): Have you seen or heard anything that could possibly dissuade you at this point?

THOMPSON: Not so far.

CAMERON: So you have to pretty much be in soon?

THOMPSON: Well, your logic is very compelling.

CAMERON: Thompson likes to say he won't run a typical presidential campaign, that he instead envisions something unique to brand of celebrity, southern country roots and common sense conservatism. The notion of his candidacy clearly stirs GOP passions in the polls. Now all he has to do is heat up the rhetoric to match all the anticipation.

In Washington, Carl Cameron, Fox News.


HUME: Still ahead on SPECIAL REPORT, if your family helps out your business voluntarily, do you still have obligations to them as an employer? We will examine that question. And in a moment, the Senate gets ready to act on a hate crimes bill. We'll tell you who will be covered and why the White House says the bill is not needed. Stay tuned.


HUME: Some conservative religious leaders say that if a new federal hate crimes bill becomes law, ministers who preach against homosexuality may find themselves under investigation. The White House says if the bill makes it to the president's desk, he is likely to veto it. Congressional correspondent Major Garrett looks into the controversy.


MAJOR GARRETT, FOX NEWS CONGRESSIONAL CORRESPONDENT (voice-over): The Bush White House said proposed hate legislation seeks special victims status for gays and transgenders.

SNOW: If you suddenly start getting into sort of a situation where you start trying to tick off each and every class that may think it's aggrieved, what you'll do is create an endless cycle, where somebody else wants inclusion.

GARRETT: In that vein, the Virginia Tech massacre has become part of the debate. Critics say Seung Hui Cho's rampage may have been prompted by economic envy, but no one is looking to classify the dead and wounded as victims of Cho's hate crime.

TOM MINNERY, FOCUS ON THE FAMILY: He did not commit a hate crime. Although everybody saw the hate on his face and heard the hate in his voice. It is not a violation of the federal hate crimes bill to shoot a rich kid.

GARRETT: Proponents call the Virginia Tech argument a diversion.

JOE SOLMONESE, HUMAN RIGHTS CAMPAIGN PRES: I think it's a sad commentary when those working against this legislation would seek to exploit the murders at Virginia Tech in the way that they did.

UNIDENTIFIED MALE: On this bill, the yeahs are 237. The nays are 180. The bill is passed.

GARRETT: The House passed the bill last week. Proponents deny it seeks special rights. Instead, they argue it provides special protection for women, gays and transgenders by making hate crimes against them federal cases.

SOLMONESE: This bill simply seeks to expand the categories, to add sexual orientation, gender identity, disability and gender to the same level as other types of hate crimes that are committed.

GARRETT: Social conservatives like Tom Minnery allege the bill threatens religious leaders who denounce homosexual with intimidation and possible prosecution.

MINNERY: I believe that there will be intimidation of pastors who preach the word of god from their pulpits like we have not seen it before.

GARRETT: The bill would add Justice Department resources to local and state law enforcement investigations of hate crimes motivated by sexual violence. Advocates say the bill has no effect on religious speech against homosexuality.

SOLMONESE: This legislation deals with action, violent action, not thought, not speech. It only seeks to address violent actions against individuals.

GARRETT: Hate crimes based on sexual orientation are statistically rare. Of the 22 million violent crimes committed in America since 1991, only 6,000 have been hate crimes against women, gays and transgenders. But several have captured national attention, such as the 1998 murder of Matthew Shepard near Laramie, Wyoming, and the 1993 rape and subsequent murder of Brandon Teena, a girl who lived as a transgender boy and man.

Police did not arrest the suspects in Teena's rape, the same suspects who later murdered Teena and two others.

SOLMONESE: That case was not investigated to nearly the degree that it should have been.


GARRETT: The Senate is due to take up the hate crimes legislation in July. It is likely to pass. And if that veto comes, there won't be enough votes in either the House or the Senate to override the president's veto, so that piece of the domestic agenda for Democrats, like many of the other parts of it, are likely to remain stalled. Brit?

HUME: Major, thank you. The Justice Department will not oppose the House Judiciary Committee's offer of immunity to a former DOJ employee for her testimony. The committee wants to hear from the department's former White House liaison, Monica Goodling, seen in an old photo here, about the dismissal of eight U.S. attorneys. The DOJ's inspector general and an ethics attorney say they recognize the, quote, significant public interest in the problem.

New Jersey Governor John Corzine is back on the job. Corzine is still recovering from a traffic accident on the Garden State Parkway last month. The governor again took responsibility for failing to wear his seat belt. He said he hopes others will learn from his bad example. He thank acting Governor Richard Cody for his service, but Corzine says he can do the essential parts of his work from the governor's mansion, called Drumthwacket (ph).


GOV. JOHN CORZINE (D), NEW JERSEY: I feel strong enough to feel sure that I can perform the constitutional roles. I am not going to be high-

tailing it all over the state to the four corners for a while. The representational role of government will be somewhat less, although we can have the public and individuals come to Drumthwacket.


HUME: The state of California had a case to make when it found a Sacramento businesswoman violating the law, but it did not make itself any friends in the process. A new store owner was getting a helping hand from some family members when the state came in with a heavy hand. Correspondent Claudia Cowan explains.


CLAUDIA COWAN, FOX NEWS CORRESPONDENT (voice-over): Like many small-

business owners, Stephanie Nisikawa relied on family members like her cousin Kelly to pitch in to help her get her paper and crafts store off the ground in Sacramento.

STEPHANIE NISHIKAWA, SMALL BUSINESS OWNER: I was starting a new business. I did not have the income to even hire anybody at the time. And they're family, so they just wanted to help me out.

COWAN: But in the eyes of the state, she was breaking the law because she hadn't bought workers' compensation insurance.

RENEE BACCHINI, CA DEPT OF INDUSTRIAL RELATIONS: If an employee is there for half a day or for a month, they are working in the work place establishment. They're doing work for the employer. And they need to be covered by workers' comp.

COWAN: Early this year, a workplace inspector found five of Stephanie's relatives volunteering at the Paper Garden, but paid or not, they were benefiting the business, which makes them employees. Five uninsured workers resulted in a 5,000 dollar fine, no warning, no grace period, a lot of bad feelings.

SCOTT HAUGE, SMALL BUSINESS CALIFORNIA PRES: The state comes down looking like big brother in a gotcha mentality, instead of we are trying to work with you.

COWAN: By law, workers compensation is required to cover employees who get hurt on the job and protect owners from getting sued. Yet a recent survey shows as many as 10 percent of California employers ignore the law, giving them an unfair business advantage over those who play by the rules. That, state officials say, makes random inspections, like the one that cost Stephanie 5,000 dollars, necessary.

NISHIKAWA: I just wanted to open a store with pretty paper. I did not expect the government to be over my shoulder.

COWAN (on camera): Since losing an appeal and paying her 5,000 dollar fine, Stephanie has hired her cousin and bought worker's comp insurance, a move the state argues will protect her and her family if somebody gets hurt. But at a time when California is looking to encourage small entrepreneurs, critics charge a case like this is just bad business.

In Sacramento, Claudia Cowan, Fox News.


HUME: We've got to take a break here to hear from sponsors and update other headlines. When we come back, wait until you hear what one activist says is the only way to save the Earth. Do not miss this. It's next on the Grape Vine.


Click here to read the "Political Grapevine."

In the meantime, an update on an item we told you about several weeks ago. The House last week amended its ethics package to fix a rule that had essentially kept members of Congress from flying their own private airplanes. The measure was originally intended to stop members from taking trips on corporate jets, but was not clearly written. The new version exempts members and their families who own or lease private planes.

The Christian community in Iraq, a minority of only three percent has little political or military clout. What it does have, however, is a haven; the semi-autonomous state of Kurdistan in northern Iraq has welcomed Christians fleeing violence elsewhere in Iraq and invited others to help form a homeland of their own. Correspondent Anita McNaught reports.


ANITA MCNAUGHT, FOX NEWS CORRESPONDENT (voice-over): Toma Habib Aissa tells his story over hot tea. He was in the prime of his life when in back in 1976 Saddam Hussein decided to wiped out the ancient Christian communities of Northern Iraq.

TOMA HABIB AISSA, KURDISH CHRISTIAN (through translator): At the beginning, they brought bulldozers to raise this place, but it didn't work, so they put TNT in the houses — a blew put the whole village so nothing was left.

MCNAUGHT: Most of the Christian community fled south, but Toma stayed behind, dreaming of his village rebuilt. Now, something remarkable is happening in Kurdistan's remote mountainous north, a massive reconstruction program, thousands of new houses on the ruins of old villages, each costing around 20,000 American dollars, and for each new community a church.

A Christian homeland is being created, more than 100 new villages, every Christian family given a special welfare payment to help them reclaim their ancient birthright. It's costing millions, organized and bankrolled by one man, the mysterious and elusive minister of finance in the Kurdish government, Sarkis Aghajan.

Seen here in a promotional film for his homeland project, he would only talk freely to FOX NEWS off-camera about his vision.

SARKIS AGHAJAN, FINANCE MINISTER KURDISH RGNL GVMT (through translator): Historically, this whole region was ours...as a nation, we've reached the conviction that this is the only way we can maintain our people. We want the rights of a nation on our land. We are not only building with stones...we are building the new man.

MCNAUGHT: Many of Iraq's Christians are now refugees once more, fleeing the sectarian violence that's wrecking the country. Sarkis Aghajan believes there's never been eight time like this to call people home, and they're responding.

EVLIN HABIB AISSA, KURDISH CHRISTIAN: We have a very happy life here, thanks to God and Mr. Sarkis.

MCNAUGHT (on camera): Here is what some Iraqi Christians, lead by Sarkis Aghajan, are planning for within Kurdistan, a new autonomous province, a Christian one, in the north and west of the country, with its own parliament, its own laws, its own schools, its own police force, and it's own flags. The problem is going to be selling this to the Kurds, because even if all the exiled Christians returned home, they still won't be the majority.

(voice-over): Christians minority rights are already protected by law in Kurdistan. Some argue the Christians should put patriotism ahead of religion affiliation or risk a new sectarian conflict.

AZAD ASLAN, KURDISH GLOBE POLITICAL EDITOR: Is what will happen to the Kurdish, Turkmen, Arab Muslim community? How they are going to — what will be their relation with the Christian homeland or a Christian government? That will create problems.

MCNAUGHT: But Christians and Iraq are tired of living in fear, and for the first time in literally centuries, under Sarkis Aghajan, they've got the money and the leadership to make a standard.

In Kurdistan, Anita McNaught, FOX NEWS.


HUME: In Iraq today, a pair of car bombs went off at a market in a police checkpoint on the outskirts of Ramadi. The explosions killed at least 13 people, plus the drivers, at least eight people were killed and at least 13 injured in the attack on the market. About 15 minutes later, the second attack killed at least five and wounded a dozen others. That violence came a day after roadside bombs killed eight American soldiers including six who died in a single blast in the surrounding province of Diyala.

White House Spokesman Tony Snow today said that heavier U.S. casualties may be expected as U.S. troops get into what he called the greatest — the grittiest security operations in Iraq.

Here at home, an Evangelical Christian group is calling for comprehensive immigration reform consistent with biblical values. Its member say they support legislation that includes border enforcement that takes into account what they call humanitarian values, along with reduced waiting time for separated families and a path to citizenship for immigrant workers and families already in the U.S.


REV SAMUEL RODRIGUEZ, NATL HISP CHSTN LEADERSHIP CONF: As Christians, we want everyone to respect the rule of law and enter this country legally. We need to protect our borders, we need to stop illegal immigration. Yet, there's also something that is not tangible that we must similarly protect — our values and faith heritage. How to deal with the immigrant is not just a matter of political will or legislative acumen. At the end of the day, how we deal with the immigrant is a diagnostic of the spiritual health of our nation.


HUME: Next on SPECIAL REPORT, the FOX all-stars are on their way. We'll talk about how Americans react to a visit from the Her Majesty, the Queen or their Majesty, the Queen. Stay with us.



GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Your Majesty, I appreciate your leadership during these times of danger and decision. The American people are proud to welcome You Majesty back to the United States, a nation you've come to know very well.

QUEEN ELIZABETH II, ENGLAND: A state visit provides us with a brief opportunity to step back from our current preoccupations to reflect on the very essence of our relationship. It gives us the chance to look back at how the stories of our two countries have been inextricably woven together.


HUME: Well, well, well, there she was. That was the hat she had this morning, but by this afternoon the hat had given way along with a — with her suit to a pink ensemble and tonight for the state dinner at the White House, doubtless there will be yet another outfit.

Some thoughts on all this goings — all these goings on now, from Mort Kondracke, executive editor of Roll Call, Mara Liasson, national political correspondent of National Public Radio; and the syndicated columnist Charles Krauthammer, FOX NEWS contributors, all.

Well, as I said earlier, the sun has set long since on the British Empire, but when the Queen comes to town, it's a big deal in Washington and this is no exception. I was at this garden party this afternoon, to which I guess some journalists from each organization is invited, and it was mobbed. All sorts of the — the entire Washington establishment and even some journalistic hangers-on were there. Quite a big deal. Mort, should it be?

MORT KONDRACKE, ROLL CALL: Our buddy, Fred Barnes, who's not here, regards...

HUME: Can we do away with that? Seems to be a picture of Segolene Royal. I don't think it has anything to do with what we're talking about.


We'll get to her in the next segment. Go ahead, Mort.

KONDRACKE: I guess Charles too regards royal mania as one the less — the least attractive aspects of American life. Actually, I think it's a harmless form of celebrity worship. I mean, it beats chasing around after movie stars on runways at the Academy Awards, I think, because some of them are pretty low-life people. I mean, this is sort of like — we follow this like we follow soap operas, the comings and goings of the royals. They have no influence, there's no sentiment to monarchy in the United States, it's no danger to our system, or any such thing. So you know, I think, you know, fine. Who cares? I mean, she'll be gone and we'll be no worse for the wear.

MARA LIASSON, NATIONAL PUBLIC RADIO: Yeah. I completely agree. This is a substance-free, feel-good event, and I think a lot of it is about the hats and the outfits, and the purse always on her arm, and I think that's about it and it's exact — it's just about a celebrity. It's not — it's doesn't have any political content, which I think people are happy to indulge themselves in.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well look, I have — I love Britain, I went to school there, have relatives there and I find the Queen a perfectly nice lady with an awesome collection of hats, but I find a way that Americans get gaga, weak-kneed act, how do I curtsy correctly, irreverent in the presence of what is one of the most preposterous institutions on the planet, truly amazing. After all, what is her job description? She spent the last 50 years taking the tea and cutting ribbons, it's enough to make a person homicidal. You know, and her one speech, the speech from the throne, is something that the prime minister has written and for which she acts as a ventriloquist dummy.

And her sons, imagine being the Prince of Wales, it's like being sentenced to the vice-president of the United States for life.

LIASSON: Only worse.

KRAUTHAMMER: You know, and look, I salute all my friends in the press who are tonight in white tie and tails, curtsying and sashaying in front of the Queen, but having spent the fist 18 years of my life singing God Save the Queen at every school assembly...

HUME: As a native of...

KRAUTHAMMER: Of Canada, where I grew up. I've had my reverence of the royalty is done. And I'm through. I've bended knee for long enough. I am now a firm republican, small "r" and pledge my allegiance here.


LIASSON: Well, I don't think that's what's going on here. Maybe the experience of growing up in Canada was completely different. I don't think of anybody thinks there's any reverence for the institution. It's fun. It's almost like going to Williamsburg.

KONDRACKE: No, it's that serious, I mean, you could learn something...


Look, it's a quaint institution that we looked at from a distance, it's very expensive for the Brits, but they seem to think that it's a tourist attraction and it's also...

HUME: I think it is a tourist attraction.


HUME: I mean, I was — when I was there for the funeral of Diana, Princess of Wales, I was astonished at the level of feeling for her and about the Royal Family. I mean, I knew it was a big preoccupation for the tabloid press, the tabloid press is paying to very real — the very real taste of the British people, and my sense is there's nothing that provides more national entertainment in that country, and maybe in some others as well, than the Royal Family, and the soap opera that has become their recent history has been just too delicious to pass up. And I think a very good case could be made, based on tourism alone, but the combination of tourism and entertainment value, that this is an institution worth preserving?

KRAUTHAMMER: Well, at least they don't poison each other as in the olden days. And I agree they're a perfectly harmless institution. If the Brits want them and Americans want to go gaga, perfectly OK with me. But I find it just a little bit absurd.

KONDRACKE: It is a little absurd...

LIASSON: But that's part of the fun.

KONDRACKE: But quaint is the word for it. And look, I do think that there may be something in Britain of the unifying factor, it could bet that Scotland and Wales would have gone someplace else if they didn't have the Queen in common.

HUME: OK, we're going to make a shift here in the next topic from the Buckingham Palace we're going to got the Elysee Palace and talk about the new occupant there of Nicolas Sarkozy or Sarkozee as they say. Stay tuned.



NICOLAS SARKOZY, FRENCH PRESIDENT-ELECT (through translator): I want to tell our American friends that they can count on friendship which was forged in the tragedy of history of that we confronted together. I want to tell them that France will always be on their side whenever they need help. But I'm going to tell them too, that friendship is also that a friend can think differently, and that a big nation like the United States has the obligation to not obstruct the fight against global warming fight.


HUME: All right, Americans, you got a new friend in the Elysee Palace in France, Nicolas Sarkozy, who says, well, you just heard what he says about — it is not easy, always, in France, to be unabashedly pro-American, which he is. So, what about this man, what difference will he make? And why did he win — Mort.

KONDRACKE: Well, I think that he won because the French are down in the dumps about their economy and also, apparently, they — psychologically. I mean, he said that he was going to restore France's pride and self-respect. Now, from this side of the Atlantic it looks like...

HUME: I never really thought they'd lost it.

KONDRACKE: Exactly. Exactly, I though Chirac, you know, oozed arrogance, but not so for the population because of the high unemployment rate and the sagging GDP growth rate and so on. And what he's promising is that people will be allowed to work harder, if they want to, and make some money and that this will lift the economy.

Now this is not — it's not exactly Thatcher and Reagan, because he's also a believes in government subsidies, he's not a total free marketeer, but at least he's pushing them in the right direction please use in the right direction. And she offered — Segolene Royal offered nothing more of the — of stagnation, so I think it is a great thing for France and also the fact that he's pro-American, and you saw that applause when he said that he was a friend of America before he talked about global warming. I think that's great for the Atlantic relationship.

LIASSON: Yeah, I think that he ran because he convinced — he won because he convinced French voters that he was the agent of change, that he was the one who was going to reform the economy...

HUME: Are you surprised that didn't carry the female vote?

LIASSON: That I don't understand...

HUME: This very glamorous, feminist.

LIASSON: Yeah, I don't understand that, although she didn't do worse than (INAUDIBLE) had done when he ran the last time...

HUME: I know, but...

LIASSON:But yeah, why she didn't carry the female vote I don't quite understand that, I would expect if there was a male chauvinism in France it would have been the opposite, that she wouldn't have done well among men, but she apparently did better than even she had expected. You know, didn't even have the support of her own party — the leaders of her own party were constantly undercutting her. But, yeah, I don't understand why she didn't carry the female vote and I think...

HUME: And it was a decisive win, what, 53-47, was it?

LIASSON:Oh, clearly decisive, yeah.

KRAUTHAMMER: She lost because she offered nothing new, except the old socialism for a country that's the sick man of Europe. Germany has cut taxes, economy is strong and the French are lagging an every respect, that's why Sarkozy offered something that was attractive.

What's really interesting is who, in his acceptance speech, he went out of his way to talk about America and friendship, which he didn't have to do. Which is not that popular in his country, but he did it because he meant it. Now, he threw a bone to the left by mentioning global warming, and you don't want us to obstruct, but that's not what's important. What we need from France on is Iran and Iraq, we need them Hezbollah and Lebanon and we need them on Russia and missile defenses and we need them on Hamas and Palestine...

HUME: Do we have a sense of where he is on that basket of issues?

KRAUTHAMMER: We don't know, precisely, but we know his sympathies are with America. He's actually a pro-Israeli, amazingly so, he said so, openly (INAUDIBLE) has claimed him as a friend. I mean, this is a new kind of French policy. Remember, he ran against the mindless anti-Americanism Royal and her socialists, and also against the Gaullist anti-Americanism of his predecessor, Chirac.

HUME: Is this elation in any sense a rebuke to those to have claimed that this administration or this country, through this administration, has alienated traditional friends? It seems an odd development to have somebody who's so openly pro-American elected...

LIASSON:Well, he didn't run on a — I mean...

KRAUTHAMMER: He ran openly on pro-American...

LIASSON:I mean, but it wasn't the main issue in the election, France is still against the war in Iraq.

KRAUTHAMMER: No it was not. Absolutely — look, it was an election run on domestic issues. But look, in Germany, Merkel, who's more pro-

American defeated Schroeder, who played the anti-American card all the time.

HUME: To the hilt, yeah.

KRAUTHAMMER: The British are still pro-American. The whole gravity -

- the whole center of gravity in the E.U. with France shifting from Gaullist anti-Americanism to at least a neutravity (ph) of Sarkozy. It's going to have a huge effect on how it Europe works with us, and have a huge effect on our success in the world.

KONDRACKE: I think the most important thing is on Iran policy. U.N. sanctions are never going to do anything to restrain the Iranians. What could work is really tough European sanctions, and if Sarkozy is willing to lead in that regard, you could probably get the Brits and Germans to go along and really put the whammy to the Iranians, economically.

HUME: And that's it for the panel, but stay tuned to see an all new presidential debate format we're thinking of trying out. That's next.


HUME: Finally tonight, there've been a lot of complaints about how that Republican presidential debate, the other night, was handled. A lot of people thought the questioners were too overbearing, so we at FOX are considering a new format in which the candidates would question themselves. We already tried it out with Senator McCain.


SEN JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Do I — do I like sometimes what I read — that's written about me?

Of course not.

Can I get angry about it?

Of course not.

Do I get angry at corruption when I see it?


Do I get angry when I see this poor trail spending?

Of course.

Do I get angry when I see people not acting up to standards that the American people expect us to do?

Of course.

Do I have the, quote, "temper tantrums?"

No, I don't.


HUME: He covered a lot of ground and it didn't take very long. And that's SPECIAL REPORT for this time, please join us next time, and in the meantime, more news is on the way — fair, balanced, and unafraid.

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

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