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December 30, 2007

Thompson On "Fox News Sunday"

Fox News Sunday

CHRIS WALLACE, HOST: I'm Chris Wallace and this is "Fox News Sunday."

America begins choosing the president four days from now in Iowa. Fred Thompson started late. Now he's scrambling for a good showing in the caucuses. We'll talk with the former senator in a "Fox News Sunday" exclusive.

Then an insider's look at the first battleground of '08 from Iowa's political guru David Yepsen of the Des Moines Register.

And an assassination in Pakistan changes the political dynamic on the campaign trail here. Will the war on terror once again be the top issue for voters? We'll ask our Sunday regulars: Brit Hume, Mara Liasson, Bill Kristol and Juan Williams, all right now on "Fox News Sunday."

And good morning again from Fox News in Washington. Well, after months of campaigning, Americans will actually start to vote this week Thursday night in the Iowa caucuses.

Joining us now from the campaign trail in Ames, Iowa is Republican presidential candidate and former senator Fred Thompson.

And, Senator, welcome back to "Fox News Sunday."

FRED THOMPSON, FORMER U.S. SENATOR: Thank you, Chris. Good to be with you.

WALLACE: You're getting headlines in the morning papers for some comments you made on the campaign trail yesterday. Let's take a look. You said, "I'd like to say I'm only consumed by very, very few things, and politics is not one of them."

Then you went on to say, "I'm not sure in the world we live in today it's a terribly good thing that a president has too much fire in his belly." Senator, don't voters want someone who really wants to be president?

THOMPSON: Well, Chris, what you just read is just another case of me being just as open and candid as I can possibly be when average citizens ask me questions in a public forum. And you add a little journalistic malpractice to that, and this is what you get this morning.

The latter part of that comment, for example, about my not being consumed with politics, was that I am consumed -- the very next sentence, as a matter of fact -- that I am consumed with the notion of what's going to happen to my kids, my grandkids and my country, and that that's why I was running for president.

But I was very -- we had a long discussion from which they cherry- picked, of course, to try to make a little interesting story out of it, about the future of the country and why I was doing what I was doing, why my family was making the sacrifices they were making for me to be able to do this.

I've never been personally consumed. It's not a part of my identity - - politics isn't, and never will be. I've said that I don't like every aspect of the way that people have to campaign nowadays in terms of process taking precedence over substance.

But I'm in the middle of a 50-town tour in the state of Iowa, working day and night. I think that pretty much speaks for itself.

WALLACE: Senator, let's look at the latest numbers out of Iowa. According to the Real Clear Politics average of recent polls from the state, you're running third, but a distant third, trailing Huckabee and Romney by more than 2-1.

If that's the way the world turns on Thursday night, is that good enough for you to get any bounce out of Iowa? How do you have to do there?

THOMPSON: No, that would not be good if that turns out to be that way. They've got an outlier poll in there that nobody really takes seriously. It's got me at about five or something. Then they put that in the mix.

But most of the polls that have been reliable in the past have me in the teens or the high teens, still third, but pretty close and showing movement.

And if you look at the latest national poll, the Rasmussen poll, I'm within, I think, six of the top. We're all kind of bunched together. So again, it depends on the polls that you're looking at.

But we have every reason to be optimistic. We've shown movement, and I think we're going to do better than that.

WALLACE: Well, you have a better sense of it than any of us. You're in that 50-town tour. How do you think you're going to do on Thursday night?

THOMPSON: That's the first time you've ever acknowledged that, Chris. I appreciate that.

WALLACE: Well, there's a first time for everything. How do you think you're going to do, sir?

THOMPSON: No, I do get that sense. Of course, everybody's rallying around their favorites now, but we're having overflow crowds and we're having great enthusiasm. And we're going to have great representation on caucus night.

I've just been coming up the middle, being steady, being consistent with my message and pointing out that my record of a strong conservative, common-sense conservative, is -- it really stands out. Background, as far as national security is concerned, and having served on the Intelligence Committee, traveled the world, including Pakistan -- I met with Musharraf and other foreign leaders and I'm grounded and experienced in the matters that matter to us.

So while the others are fighting and squabbling and spending millions of dollars running ads against each other, I'm just steady, up the middle, and so far we've shown steady progress, so I have...

WALLACE: Well, Senator, let's talk about national security, and let's talk about the frontrunner, because after the tragic assassination of Benazir Bhutto, you took Governor Huckabee to task when he talked about wanting to bring the killers to justice. Let's take a look.

(BEGIN VIDEO CLIP)

MIKE HUCKABEE, PRESIDENTIAL CANDIDATE: The first thing I think you do is to try to make sure that we monitor closely who's behind it, who's responsible.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

THOMPSON: People talk about rounding them up and, you know, bringing the perpetrators to justice. Well, that would be great, wouldn't it? But this is not a criminal investigation. This is a war.

(END VIDEO CLIP)

WALLACE: Senator, isn't it important to find the killers and bring them to justice?

THOMPSON: Well, of course it is, if that can be done. Probably can't be done. But we're losing sight of the bigger picture. This is a part of the global conflict that we're in.

We've had a war declared against us by radical Muslims, and this is a part of that picture, just as the Middle East is, just as what's going on in North Africa and other parts of Asia. We've seen it manifest in Europe. And we need to understand that.

This is not just a local isolated action. These people are willing to kill foreign leaders, as they've done in times past in Egypt and Afghanistan, and they're certainly more than willing to kill friends and allies of the West, which they want to bring down, allies of the United States of America.

And this is another part of that pattern and it reminds us of what we need to do and the kinds of things we need to do, the unity and strength we need to show, in order to battle these people wherever we have to.

WALLACE: Well, let me ask you, though, because there was an implicit criticism in what you said about Mike Huckabee. Straight out, do you think that Mike Huckabee is prepared to be commander in chief?

THOMPSON: Well, I'm not going to throw a -- that kind of a large blanket over Mike or anybody else. I will say that people are going to have to make up their own minds. I'm not sure politicians are the best critics of their colleagues on matters like this.

I just say take a look at everybody. Take a look at the experience and what they're saying. I've been critical of Mike's statements before when he says close down Guantanamo and bring those people to the United States of America. Implicit in that is giving them habeas corpus rights and things of that nature -- enemy combatants treated as American citizens.

When he says let's deal with Castro and things like that in the past, which I think he's changed his mind on now, I disagree with those things and I point out that we need someone who understands the nature of the world that we live in and someone that certainly does not fall into the Democratic mode of blame America first for all these problems that come around.

There was an apology issued by the governor after former Prime Minister Bhutto was killed. I think he later clarified that, but I was wondering what the rest of the world thought about one of our presidential candidates apologizing after a foreign leader was assassinated.

Those kinds of things are going to have to be weighed. And clearly, he doesn't have a lot of experience in these areas.

I'm more interested in his ideas now than what he's done or said in the past on these things, but his ideas now are not consistent with someone who understands the nature of the world that we live in and the challenges we're going to face.

WALLACE: Let me ask you about the other person who's leading you in the polls. Do you think Mitt Romney is prepared to be president and has a consistent record as a conservative?

THOMPSON: Well, that's two different questions. Clearly, as far as the conservative issue is concerned, he's changed his mind and he's changed his position on a lot of different things. Most of them have to do with basic conservative principles.

He went out of his way to point out that he was not to be affiliated with Reagan-Bush in times past, and now he quotes president Reagan at the drop of a hat.

So he's changed his basic philosophy with regard to a lot of things like taxes and the original immigration proposal, and I could go on and on as far as that's concerned.

Difficult to pin Mitt down as to exactly what he does fundamentally believe and which of those beliefs he would stick with through thick and thin in the future when the strong winds are blowing.

Now, as far as -- it's not for me to judge a person's fitness. It's just objectively clear that Mitt does not have any foreign relation experience and doesn't have any experience with dealing with matters of national security.

He's got vast experience in the business community, been very successful, and I'm sure he's been a good manager. So all of us have things to bring to the table.

And I point out my background. I've had an opportunity to help cut taxes and pass welfare reform, balance the budget, fight for conservative judges. I had a 100 percent pro-life voting record. I was on the Intelligence Committee. I chaired an important committee dealing with some of these problems.

I was the Republican floor manager for the homeland security bill, which I like to think has had something to do with the fact we haven't been attacked again since September 11th. That's my background.

After I left the Senate, Condoleezza Rice asked me to chair an advisory board to her, to advise her on international security matters. So I do understand the nature of the world we live in and the challenges we face.

WALLACE: But, Senator, and you do point out that you have a considerable edge in foreign policy experience over Romney and Huckabee and Giuliani, but if voters are really looking at that, doesn't John McCain have an edge over you?

He's been at the center of every national security debate in this country for more than a decade.

THOMPSON: I can't argue with that. John has vast experience. He served on the Armed Services Committee for longer than I served in the Senate -- no question about that.

I was able to serve in some areas that John did not serve in, but his overall service has been longer and he's been involved for a long time.

I think that we have to have someone of experience in that area, and someone with sound conservative principles, and someone who has been there consistently for a long period of time.

John and I have some honest disagreements with regard to some domestic issues. We've looked at things a little differently over the years on some important things, so that has to be figured into the mix also.

But if you're strictly talking about national security, you certainly cannot avoid the fact that John McCain has vast experience.

WALLACE: You talk about your service, particularly since you left the Senate, and one of your -- you say one of the biggest foreign policy challenges is China.

In 2005, as an ex-senator, you were appointed by Congress to serve on a commission, the U.S.-China Economic and Security Review Commission. But during your two-year term, you attended only six of the 19 meetings of this panel, which monitors our economic and national security relationship with China. Senator, how come?

THOMPSON: Well, I conducted hearings there. I chaired some hearings that we had there. I had telephone conferences with them. They sent me materials. I read the materials that were there.

This was a voluntary commission to serve on. They were primarily interested in my ideas more than me sitting through hearings that might be domestic or foreign. My emphasis, my concern, was the Chinese military build-up.

Some of these economic-related issues I was not as concerned with. And I was working two full-time jobs. This was a non-paying position, a voluntary position, and I was working a couple of other jobs to earn my livelihood.

So I did this when I could, and I must say that I'm perfectly prepared to discuss anything you want to about China. I think I'm very much up to date on them and the kind of challenges they pose to us in the future.

That's the reason I was interested in being on the commission, because I think they are an important country to our future.

WALLACE: Senator, a couple of minutes left. As the Iowa caucuses draw close, any second thoughts that perhaps you should have gotten into this race earlier? Any regrets?

THOMPSON: Not really, Chris. I've always had this notion that I could get in about the same time people traditionally do and that I could do it without spending the millions of dollars that other people have spent, and that if I and my views were in sync in the American people, that it would work out and that we could have a wonderful opportunity to do some things together, and that if it wasn't in the cards, it wouldn't have anything to do with whether or not I visited Ames five or eight times. It's just the way I look at things.

Now, after this is over with, you know, one of us can second- guess the other. We don't know who it's going to be yet, and we'll see. But I feel very comfortable with the decisions that we made and the way we're going about it, and it looks like the timing is pretty good.

There's still a lot of undecided voters after people having spent all of this money and all this time and effort, and running for years in some cases, and they're open to the message that we have. They're open to me, learning more about me.

And timing is everything. This is the way we campaigned in Tennessee. We went from 20 points down to 20 points ahead on election night, and I was able to win two races in Tennessee by 20-point margins in a state that Bill Clinton carried twice.

So I like to think I know a little bit about what I'm doing. This is a different stage and a different arena, and I understand all the experts feel differently about it. They may be right. But we'll see. Won't take us long to see now.

WALLACE: Well, that's right. We'll see how the world turns on Thursday night.

Senator Thompson, we want to thank you so much for talking with us. And we'll see you there...

THOMPSON: Thank you.

WALLACE: ... in Iowa Thursday night, sir. Good luck.

THOMPSON: Thanks a lot.

WALLACE: Coming up, all those candidates, all those speeches, all those diner stops, and we have the one guy who can make sense of it, Iowa's political guru, after this quick break.

(COMMERCIAL BREAK)

WALLACE: Joining us now, the authority on the Iowa caucuses, David Yepsen, political columnist for the Des Moines Register.

And, David, welcome back to "Fox News Sunday."

YEPSEN: Good to be with you.

WALLACE: Let's get right to it and start with the Democrats. How do you see the race four days from right now?

YEPSEN: Dead heat. All these polls show this thing is a statistical tie, and so it's a dead heat. No predictions.

WALLACE: There's been some talk that the Obama surge has flattened a bit and that Edwards has the late momentum. Do you see signs of either of that?

YEPSEN: Yeah, I think that there may be something to that. There are two wild cards in this -- in the Democratic contest. One is can Hillary Clinton attract new women, older women, to the caucuses. And the second one is can Barack Obama attract a lot of young people.

They both need to add people to the electorate, because John Edwards has got such a strong base of support with a lot of party regulars. So those are the two wild cards, older women and younger voters.

WALLACE: Well, you talk about the fact that Edwards may have some late momentum. He's been there for -- it seems like he's been living there since 2005. Why would there be now a late movement towards him?

YEPSEN: Well, because Democrats like all of these candidates, Chris. You know, on the Democratic side, the party activists are having trouble deciding among six candidates they really like.

And so for a lot of people, it's a matter of coming back home to John Edwards; whereas on the Republican side, there's been a lot of concern. There isn't as much enthusiasm for some of their candidates as there is on the Democratic side. WALLACE: Who is it, do you think, on the Democratic side has the best field organization? And you mentioned the fact that Obama is trying to do something that hasn't been done, to get younger voters.

He's particularly talking even about college students coming back early from vacation. Any sign that that's actually going to work?

YEPSEN: Well, his people will tell you that they're not predicating their whole campaign on young people. They see that as primarily a lot of gravy that they'd like to add.

But it is something that they've tried to do, is to get students to either -- particularly to go home and caucus rather than caucus in their college towns.

If you're an Iowa student, it's going to leverage Barack Obama more votes, more delegates, to have them caucus at home. But these younger voters just historically have not been big caucus-goers.

There are some signs that that's changing, both in Barack Obama's case and I think in Ron Paul's case on the Republican side.

WALLACE: And of the three, as it stands right now, who's got the best field organization?

YEPSEN: You know, you can't answer that, Chris. They are all really excellent organizations. I might give a little bit of an edge to Hillary Clinton on that, but, boy, not by much.

WALLACE: After the Bhutto assassination, the three Democratic frontrunners and, in fact, all of the Republicans were scrambling to establish their foreign policy credentials.

Any sense at all that the events in Pakistan have changed this election and made it more about national security?

YEPSEN: Yes, I think so. I think it causes voters a little pause. I don't think it causes them to switch from one candidate to another. But caucus-goers -- we've had a lot of talk about how undecided they are.

These are sophisticated voters, activists in both parties. They pay attention to public affairs. This is the kind of late development that makes them say, "Hmm, let's take another look here. Let's wait a little bit longer."

I think it helps those candidates who have some portfolio on foreign policy issues, and I think it hurts those who have candidacies that are based more on domestic questions.

I think the situation with Governor Huckabee is a good example that you were talking about with Senator Thompson. Some of these later polls have shown Mike Huckabee to be dropping a little bit and Mitt Romney to be picking back up.

And the reason for that, I think, is people are saying, "Well, maybe Mike Huckabee doesn't have what it takes on national security questions." So I think it does have that effect.

We saw it four years ago, Chris, with Howard Dean sort of fumbling the capture of Saddam Hussein with something that hurt his candidacy at the end.

WALLACE: I'm going to get to the Republicans in a second. And I know you said right at the start it's too close for a prediction.

But having said that, and I know that you say that there's a deck full of wild cards here, but four days out, if I really pressed you, who do you think would win on the Democratic side?

YEPSEN: Now, Chris, four years ago, you got me to predict Howard Dean, and I'm still wiping the egg off my face. You should ask Bill Kristol that, because he's the only guy that picked John Kerry, as I recall, so I can't predict this time.

WALLACE: Well, you know, he's still dining out on that, and we'll talk to him later on. So all right. I'll take that as a definite maybe.

Let's turn to the Republicans. How do you see that race right now?

YEPSEN: Well, Mike Huckabee surged here lately, and it was quite a phenomenon. He captured the support of a lot of social conservatives. He captured a lot -- the home schoolers, the fair tax people, the national sales tax people. And he really rocketed in a nice fashion.

In the last few days, though, I think it's tightened up some. Mitt Romney clearly has the best organization. Mike Huckabee has sort of had to borrow his organization from social and religious conservatives.

So right now I think it's an -- it's whether to see if Mitt Romney can stage a comeback here in the last few days.

WALLACE: Do you think that -- you know, we've been making a big deal about misstatements by Huckabee in a variety of areas in the immediate aftermath, and one of them -- you pointed out that he said my apologies, when he meant sympathies, to the Pakistani people.

Do you think the Iowa voters are paying attention to that and that it's concerning them?

YEPSEN: Yes. I think Republican caucus-goers, like Democratic caucus-goers -- they're looking for a candidate who they think can win. They want somebody they like. And clearly, Mike Huckabee is a very endearing and likable person.

They want somebody who they see as president. And they want somebody who they see as a good candidate. Electability is a big issue with a lot of these activists.

And when something like that happens, particularly so close to the end, with all this indecision, it does make some -- I think it makes some Republican caucus-goers pause for a moment and say, "Well, maybe Mike Huckabee isn't what we want to go with. Maybe we want to look at a Fred Thompson or some other candidate."

WALLACE: Now, Romney is the only one who's running negative ads in Iowa. And there is a conventional wisdom which -- I'm going to ask you how founded in truth it is -- that going negative is poison in Iowa.

One, is it? And two, does that mean that those negative ads by Romney are backfiring?

YEPSEN: Well, people say that it's poison, and there is a lot of support for a civil campaign. But the fact of the matter is negative political commercials do work. They do make a contrast.

And Governor Huckabee has been pounded by attack ads, not just from Mitt Romney, but from these 527s, from these independent expenditure groups, from Club for Growth. And I think that has taken a toll on him in the last few days.

WALLACE: So you ducked the prediction on the Democratic side. On the Republican side, you want to pick between Romney and Huckabee?

YEPSEN: No, I'm going to duck that one, too, Chris, because, again, it is -- some of these polls now at the very end show this within the margin of error. So it's pure gambling to predict.

WALLACE: Now, there's also finishing third in Iowa, and it apparently is going to be something of a margin between the top two. And it seems like it's coming down to McCain and Thompson. Is McCain making a late surge in Iowa?

YEPSEN: Yes, I think he is. And I think these national security questions are playing a part in that. Some of the immigration debate has faded somewhat. It's still an important issue in the Republican party, but it's not quite edge of the news.

The conflict in Iraq is going better for the United States, which sort of vindicates some of John McCain's earlier positions. So I think he has enjoyed a bit of an uptick here.

And there really is a competition for third place out of here. Historically, as we all know, there's three tickets out of Iowa. And so you've got Fred Thompson and John McCain, and Rudy Giuliani is back.

And I also think that Ron Paul is a wild card in this third-place position. If he brings a lot of new people out to the electorate and there's a lot of energy there, then I think he could be competitive for that as well.

WALLACE: And explain that. I mean, if you've got Romney and Huckabee, and they're 10 or 15 points ahead of whoever finishes third, why does it matter who's third? YEPSEN: Well, it matters who's third in terms of the ability to stay in the race. Historically, anybody who finishes worse than third simply runs out of momentum.

They can't raise money. They have no energy going on to these later contests. And with these contests packed so closely together, they have no opportunity to recover.

So third place, as I always say, is the standby ticket out of Iowa to New Hampshire. It's no guarantee of anything.

WALLACE: We've got less than a minute left. You know, the big unknown in this, because we're really in uncharted water, David, is the fact that the race has gotten so tight. And where it used to be a week or two weeks to New Hampshire, it's only going to be five days.

Do you think that makes the winner in Iowa more or less important?

YEPSEN: I think it makes it more important. You know, the law of unintended consequences is at work here. All these other states that don't like Iowa and New Hampshire have moved their contests up closer to the state of Iowa and to New Hampshire.

Now, if a candidate stumbles, they've got no -- little time to recover. And if they do well, they could light their rocket and ride it all the way to the nomination, which is what John Kerry did four years ago. So winning Iowa is particularly important.

It's particularly important on the Democratic side. Hillary Clinton wins this -- she could reignite her campaign. If she loses, she stumbles, then I think Barack Obama is in a position to run the table. And certainly, John Edwards lives to fight again another day in another state.

WALLACE: David, we're going to have to leave it there, but we'll see you in a couple of days in Des Moines. And thank you so much for talking with us.

YEPSEN: Thank you, Chris.

WALLACE: Up next, the assassination of Benazir Bhutto -- the impact on American foreign policy and on the presidential campaign. We'll sit down with our Sunday regulars when we come back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

HUCKABEE: What impact does it have on whether or not there's going to be martial law continued in Pakistan, suspension of the constitution? Those are concerns that the United States certainly should have.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

HUCKABEE: There are more Pakistanis who illegally cross the border than of any other nationality except for those immediately south of our border.

(END VIDEO CLIP)

WALLACE: That was Iowa's Republican frontrunner Mike Huckabee making some misstatements this week after the assassination of Benazir Bhutto.

And it's time now for our Sunday regulars: Brit Hume, Washington managing editor of Fox News, and Fox News contributors Mara Liasson of National Public Radio, Bill Kristol of The Weekly Standard, and Juan Williams, also from National Public Radio.

Well, I think it's fair to say Mike Huckabee had a tough time with Pakistan in the Iowa caucuses this week. First, he talked about whether to continue martial law when, in fact, it had been lifted two weeks ago. Then he exaggerated how many Pakistanis are scurrying over the southern border of the U.S.

Brit, David Yepsen said that this might be hurting him now in Iowa, that voters there may be wondering whether this guy is fit to be commander in chief. Does it raise questions about his fitness to be president?

HUME: Yeah, and I think it raises further questions. I mean, Mike Huckabee is a man who, for a Republican running in a Republican primary, has some quite unorthodox views.

Add to that now this apparent lack of knowledge-ability about world affairs at a moment when the world has faced another example of the terrible and dangerous instability in one of the most dangerous countries in the world, and I think you have a picture of somebody who is vulnerable.

Now, whether it will overtake him in Iowa, I don't know, but I say here now, not for the first time, that this stuff will overtake Mike Huckabee.

WALLACE: You talked about the skier and the avalanche, the avalanche is gaining.

HUME: The avalanche is gaining. He may still be ahead of the avalanche, but it's gaining.

LIASSON: Yeah, I agree with Brit. I think that one of the big tests for Mike Huckabee is not just to win Iowa, but to win Iowa by a decisive enough number that he really wounds Mitt Romney, who still has a very strong reserve of strength in New Hampshire.

And I think these things this week don't help. Foreign policy is his weakest link. Unfortunately, there are not any debates this week where he can show his kind of affability and his wit and his charm, which is really -- I think he's ridden the debates in many ways to the position he's in now.

So I think it has hurt him.

WALLACE: Bill, taking a broader look at this, do you see the events in Pakistan as making this more of a national security election?

KRISTOL: I mean, I've always thought it would be a national security election, the first open presidential election since 9/11, not like the presidential elections of the '90s, not like '92 and '96 and 2000, which were domestic policy elections, more like the Cold War elections, where people knew they were electing a commander in chief.

I think Pakistan reminds people of what the world is like. And yes, I think this is, above all, a commander in chief election.

WILLIAMS: No, I don't think so. I think that -- you said that about '04. I think that there was such an immediate sense...

KRISTOL: And it was.

WILLIAMS: And that was the case. But I think that subsequently, I think one of the dominating factors in this election is that people are saying, "You know, on the home front, we're not content."

I think that's why you see right track, wrong track numbers so clearly saying Americans think the country is headed in the wrong direction. And it has to do with discontent over the war in Iraq but I think generally about domestic issues and domestic concerns.

And I think it's exacerbated by the economic condition of the country. People worry. They're anxious about what's to come. And I think that has benefited a lot of -- on the Democratic side, I think it's benefited people like Obama and others who are simply calling for change. WALLACE: As the voting gets closer and the races tighten up, it's getting rougher on the campaign trail. Take a look at these two ads from New Hampshire, strike and counterstrike. Here they are.

(BEGIN VIDEO CLIP)

NARRATOR: McCain opposes repeal of the death tax and voted against the Bush tax cuts twice. McCain pushed to let every illegal immigrant stay here permanently.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

NARRATOR: The Concord Monitor writes, "If a candidate is a phony, we'll know it." Mitt Romney is such a candidate.

(END VIDEO CLIP)

WALLACE: So that was Romney, who has gone almost exclusively negative, at least in his paid media, and then McCain responding to it.

Who do you think gets the better of that argument, Brit?

HUME: Well, the risk of negative campaigning is that while it may hurt the opponent, in a race with a number of candidates the beneficiary may not be the candidate who's on the attack.

So the question for Romney is whether he, by his demeanor and his manner and so forth, seems like a sufficiently decent guy that he can make these criticisms of his opponents' record on a number of issues and not be scarred by it himself in a state which has at least some reputation for being offended by negative ads.

Now, people say, always, to pollsters -- and David Yepsen kind of touched on this earlier -- that they don't like negative ads. But negative ads do plant seeds in people's minds.

WALLACE: So overall, do you think it's a good strategy for Romney?

HUME: I think it was an unnecessary strategy for Romney.

WILLIAMS: It was a kind of desperation by Romney. He's attacking Huckabee in Iowa. He's attacking McCain in New Hampshire.

His whole campaign is based on his ability to do well in those early states, and he has a ton of ads, and it really has not so far rocketed him into a substantial lead. I think he's a desperate candidate.

HUME: Which makes the point, Juan, the question is whether it has taken down his opponents. Those ads are not going to -- those ads are not ads that say come vote for me. They're saying don't vote for the other guy. WILLIAMS: Right, but on taxes and immigration, I don't think it's going to hurt Huckabee. I think it's more when Huckabee says, you know, he doesn't realize that there's a National Intelligence Estimate saying that Iran doesn't...

LIASSON: No, I think they already...

WILLIAMS: ... have nuclear weapons.

LIASSON: ... have hurt Huckabee.

HUME: The evidence is that it is hurting him. You can see it even in the polling.

LIASSON: Yeah, I think it already has hurt Huckabee. I think one of the things -- Huckabee does have a very strong base among Christian conservatives and home schoolers. And those are a very big part of the vote in Iowa.

But the other thing about Huckabee is that all the polls show that as popular as he was, he was very unknown. He was undefined. And that was a big opening for Romney to define him and to tell people information about him that they might not have known.

WALLACE: Meanwhile, we're going to bring up a name we haven't even talked about, Rudy Giuliani, who, after all, is still in the lead in the national polls, although the lead has shrunk considerably. But he's the forgotten man in all this.

Bill Kristol, where does he fit into this race at this point?

KRISTOL: I mean, I think he'll have a very tough time coming back in if he runs fifth or sixth in Iowa, fourth in New Hampshire, fourth in Michigan, fourth in South Carolina, which is now the most likely -- he's not going to be in the top three, I think, in any of those states.

How do you then get back in in Florida and run? I don't think it's there for him.

You know, on the Romney question just before, if it's trench -- it's rational for Romney to be doing what he's doing. I mean, it's not an attractive campaign, but it's an intelligent campaign.

If it's trench warfare, Romney wins. He has the most bullets. He has unlimited resources. McCain doesn't. Huckabee doesn't.

If Huckabee can elevate it to an authenticity race, which is what he was able to do, kind of identity politics, almost, with the evangelicals, he's in good shape.

If McCain can elevate it to a commander in chief election, he wins, I think.

If Romney can drag everyone down to the same level of trench warfare, he wins. And he's been trying to do that. WALLACE: But does he have an awful weakness in the sense that as he's sitting there saying, "This guy has done this, and this guy has done that," you know, as McCain did, there's the question of the consistency of Romney. What does he really stand for?

KRISTOL: Yeah, but if they're all inconsistent, Romney probably is the most acceptable to the most voters. He's the most sort of normal conservative candidate across the board.

And I think that's what he's betting on, and I think it's not -- as I say, it's an intelligent strategy. It's not an elegant strategy.

WILLIAMS: I don't think it's an effective strategy, because I think it opens the door to the flip-flop response, which is exactly what you're going to get.

Now, everybody on this panel says, "Oh, well, Huckabee has lost the momentum. He's coming down in the numbers." I think that this has more to do with people coming to a last-minute assessment about leadership. He's such a likable guy. He's a nice guy.

People wanted someone -- Republicans really don't have a candidate. They were looking and they were casting an anxious eye at Fred Thompson, who we saw earlier.

But I think it settled on Huckabee once Brownback got out of the race. I don't think anyone is saying, "Oh, yeah, it's Mitt Romney." Mitt Romney has the money. He has the organization. You're right, he has more bullets.

But I don't think people exactly are embracing Mitt Romney. And you look at the endorsements that have come. Even in New Hampshire, right next to Massachusetts, you don't see any clamoring for Mitt Romney.

WALLACE: All right. Enough talk. Yepsen ducked it, but I'm not going to let you guys duck it, except for Brit Hume, who will do what he chooses to do.

So starting with you, Juan, top three finishers, Republican, in Iowa.

WILLIAMS: Well, I think Romney has the bullets and he has the people on the ground, but I wouldn't put aside the idea that people will say, "You know what? Huckabee is the guy." So I would say Huckabee, Romney, McCain.

WALLACE: Really? And McCain gets the third, which would help him in New Hampshire.

WILLIAMS: I think McCain is the guy coming right now from behind.

WALLACE: Bill Kristol.

KRISTOL: Romney wins, I think, pretty comfortably. Huckabee fades. McCain gains on Huckabee. And I think it wouldn't be totally out of the question for McCain to sneak past Huckabee into second. But I think McCain is a strong third.

LIASSON: Yeah, I think Romney, Huckabee, McCain.

WALLACE: Romney, Huckabee...

LIASSON: Romney by a hair. I disagree with Bill on that. Romney by a hair, Huckabee, McCain.

WALLACE: And this is going to be the big surprise. Mr. Hume, what have you got to say for yourself?

HUME: Howard Dean all the way.

(LAUGHTER)

WALLACE: You and Yepsen haven't forgiven me for 2004. All right.

We need to step aside for a moment, but coming up, we'll take a look at the Democrats as they race to the finish line in Iowa. Who's up? Who's down? Our panel sorts it all out in a moment.

(COMMERCIAL BREAK)

WALLACE: On this day in 1993, Israel and the Vatican agreed to establish diplomatic ties and fight anti-Semitism. The accord was seen as historic in building mutual understanding between Catholics and Jews.

Stay tuned for more from our panel.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CLINTON: I knew Benazir Bhutto. I've known her for more than 12 years. In fact, I visited Pakistan in 1995 when she was prime minister.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: And it's that experience, that understanding, not just of what world leaders I went and talked to in the ambassador's house, who I had tea with.

(END VIDEO CLIP)

WALLACE: That was Barack Obama saying his real world experience trumps Hillary Clinton's visits over the years with foreign leaders.

And we're back now with Brit, Mara, Bill and Juan. Well, both Clinton and Obama scrambled to react to the Bhutto attack late this week. And Obama's top strategist, David Axelrod, went so far as to link the crisis in Pakistan to Clinton and Edwards voting to authorize the use of force in Iraq, saying that it distracted, diverted, U.S. attention from Al Qaida and the Taliban.

Brit, fair point or not?

HUME: The best thing about that is that the candidate itself didn't say it. It was a dopey thing to say, and it reflects that kind of reflexive Bush hatred that I think a lot of voters find unbecoming.

Having said that, however, I think it's -- you know, this business of Benazir Bhutto and who knew her is a poor test. Anybody who worked in the American media who wanted to could have gotten to know Benazir Bhutto, because this is where she spent a great deal of her time before she finally got back into the country.

And she was a certified international figure, but she was also a television news personality in the western world. So having met her is a minor qualification.

LIASSON: Yeah, I think that both in the public statements that Hillary Clinton and Barack Obama made, it was a wash. David Axelrod injected the Iraq war vote which got a lot of tut-tutting from editorial boards, but I don't know about -- in terms of voters in Iowa.

Clearly, the Obama campaign feels any time it can remind people that she voted for the war and he didn't is a good thing.

I think these are candidates that are absolutely tied. They are struggling to break out from each other, and neither of them has been able to.

WALLACE: There was an interesting addition to the argument this week, Bill, although I don't know how much attention it got in Iowa, and that was a tough article on the front page of the New York Times about Hillary Clinton's foreign policy experience.

It turns out as first lady, she never attended a national security meeting. She never received the president's daily intelligence briefing. Most surprisingly to me, she never held a security clearance.

So in fact, how much foreign policy experience does she have?

KRISTOL: Well, and it makes one wonder about the whole experience claim that she's been running on. I mean, what really is her experience? She's a one-term senator, as Edwards was.

WALLACE: Well, now in the...

KRISTOL: In her second term, right.

WALLACE: ... beginning her second term.

KRISTOL: She has slightly more years in the Senate than Edwards and more years than Obama. Yeah, I don't know that the experience card is really her strongest card.

WILLIAMS: I think it is her strongest card, and I think people see it, that she was around, that she did know Benazir Bhutto. She knows a number of the foreign leaders.

I don't think there's any getting away from the idea that she is someone who has been around the track, and it plays to her benefit to such an extent that then you saw the need for David Axelrod and Barack Obama to come back and suggest that somehow her vote on Iraq was tied to the assassination of Benazir Bhutto.

I mean, in fact, it's not been the case that Obama makes it out that somehow that she is just -- believes, as President Bush, that holding on to Musharraf is key to stability and protecting U.S. interests in that area of the world.

President Bush has been strongly pro-democracy in the Middle East and in Pakistan and all those places. So I think that's a tenuous argument on Obama's part.

KRISTOL: But look. Why isn't Obama right to say this, "You are the most experienced. Fine, Senator Clinton. What's the most important foreign policy vote that you've cast in the Senate? You voted for the Iraq war."

Do Democrats think that was the right vote? I think it was the right vote, but I think Senator Obama is totally entitled to say, "You're Mrs. Experience and you made the wrong call on the most important vote facing you in the Senate."

WILLIAMS: I don't know that it was the wrong call at the moment.

WALLACE: Wait, let Mara in.

LIASSON: I think experience is kind of a shaky foundation, as it turns out, to base your campaign on. Experience is kind of a threshold question -- do you have enough to be president?

After that, people want to know what you're going to do. And I think for Obama, it's to show that he's tough enough to be president. He can't compete with her in terms of, quote, experience.

I think the reason why she has changed her message in the final days to say I have the experience to make change happen -- in other words, she's trying to incorporate his message, change, which I think is a more powerful one in the Democratic Party.

HUME: There's a long history of experience and readiness to be president not being an effective issue in primary campaigns.

It may be different this time because of the state of the world and because of the primacy of foreign policy and defense issues in this election.

But I don't -- you know, I think when people get around to voting, particularly Democrats, who are not as preoccupied with foreign policy as many Republicans are in this primary season, I'm not sure...

WILLIAMS: You know, but when Obama does things like suggest...

WALLACE: I want to ask you a different question, because for all the talk about Clinton and Obama, we're not talking about the third person in this race, John Edwards, who, according to the polls, is right in the thick of this. How seriously do you take his chances? WILLIAMS: Oh, I think he's got a great chance. Again, you know, it's much like we talked about Romney on the GOP side. Edwards has the ground work. I mean, he's been there, as you pointed out earlier. I mean, he's got the connections. He was a fan favorite going back to '04.

I don't think there's any question that he's going to do very well and maybe surprise people, because he's been so off-putting with his attacks on big media and on corporations and all of that.

But he appeals to the kitchen table issues, the domestic issues, again, in a way -- and also, he did very well on the assassination.

He contacted -- actually got in touch with Musharraf and actually delivered a message that was, you know, very consistent, you know, we believe in democracy, we want your elections to be held January 8th.

I think he performed very well on this.

WALLACE: Mara, what do you think of Edwards' chances?

LIASSON: I think Edwards has really been remarkable. He's been consistently in third place, but he's been so consistent that he's now become a real threat.

And the fact that Obama is paying a lot of attention to Edwards tells you that his campaign feels that Edwards is a threat there. I think Edwards has an organization that he has cultivated since 2004. These are people who've been to caucuses before.

Unlike Obama and Hillary, who are really fishing in kind of new waters for new caucus-goers, I think he is potentially the sleeper in the race.

However, even if he wins Iowa, I just don't think Edwards has a lot of places to go after that in terms of money, resources, where else does he win.

WALLACE: Bill, let's talk about Friday, the day after the caucuses. Is the Democratic race, no matter what happens, the biggest story coming out of Iowa? Is that going to overshadow whatever happens on the Republican side?

KRISTOL: No, because, you know, we think of it as one story. But of course, for Republicans, there's the story of who's winning the Republican nomination, and for Democratic voters, there's the story of who's the leading Democrat.

I think New Hampshire Republicans will focus on the Republican results in Iowa and Democrats on the Democratic results. So I think they're both awfully big stories.

WILLIAMS: Well, I just think the Republicans -- you know, really, they're waiting for New Hampshire. And I think from the Giuliani -- getting back to Giuliani for a second, he's waiting for February 5th. He's waiting for Florida, California, New York, the big states where he does have the lead. You can't take that away from him.

KRISTOL: He's waiting for Godot, you know. He's going to be waiting as he drifts down in the polls.

HUME: Which other candidate is rooting hard for Hillary Clinton to win Iowa and win it big? John McCain, the belief being that the independents who would turn out to vote in either -- could vote in either race would be more inclined to...

WALLACE: You're talking about in New Hampshire.

HUME: In New Hampshire. Independents in New Hampshire, which is where McCain's making a big stand, will be more inclined to come and vote for him if the race on the other side looks like you already have a winner.

WALLACE: But let me ask you about that. Again, this is why I think the Democratic race is going to be the biggest story Friday morning. If Clinton wins, is that it? Is the nomination over?

HUME: Probably. It's a huge leg up for her because Iowa is always believed to be a weak place for her where she might have some trouble. And if she pulls that off, it seems to me that the old inevitability factor begins to return.

Now, if it's some kind of hair's breadth win and there's a three- way tie, then I think the race goes on. But if she wins decisively, I think that...

WILLIAMS: But even a tie -- I think a tie goes to the champion, and the person on the ground with the money is Hillary Clinton.

HUME: No, I'm not saying she won't win. I'm just saying that it won't be over if she wins narrowly.

WALLACE: And conversely, Mara, if either Edwards or Obama wins and beats her by whatever margin, isn't that a pretty big deal?

LIASSON: If Obama beats her, big, big, huge story. He goes into New Hampshire with a big head of steam where the polls have really tightened there and her lead has diminished.

However, if Edwards wins, all that matters is who was third. In other words, if Edwards wins -- both Obama and Hillary are happy to have Edwards win so long as the other guy is third.

WALLACE: All right. Let's go and get the videotape rolling.

Juan Williams, less than a minute left. What's going to be the order of finish, first, second and third in Iowa?

WILLIAMS: Well, I think it's Clinton, Edwards, Obama. I think, you know, when people look back on Obama saying, "Oh, let's have cross-border raids and go get bin Laden," I don't think that stuff helps with experience.

WALLACE: You can't run out the clock here.

Bill Kristol?

KRISTOL: Edwards wins, I think. Obama second. Clinton third. The second choice supporters of the other candidates go to Edwards and Obama.

WALLACE: Mara?

LIASSON: Obama, Clinton, Edwards.

WALLACE: And...

HUME: No idea.

WALLACE: Well, at least you're consistent.

We'll see the way the world turns next Thursday night, and we'll all be out there to talk about it. Thank you, panel. See you next Sunday on the campaign trail in New Hampshire.

Time now for some mail about last week's show. Mary Steele from Yorktown, Virginia writes, "I was relieved to hear General Petraeus speak up about the Iraqi government. It has been too long and has cost too much because they can't get along."

Helen Wells from St. George, Utah enjoyed our "American Leader" interview with Joel Osteen. "I especially appreciated Joel's responses to your questions, and I see in him a man without guile."

And Joanne Rothermel from Wilmington, North Carolina was touched by Morrill Worcester's wreath tribute at Arlington National Cemetery. "My emotions overcame me as I watched the pure goodness and compassion exhibited by Mr. Worcester and the many volunteers who have helped him accomplish his enormous task of honoring our fallen troops."

Be sure to let us know your thoughts by emailing us at fns@foxnews.com.

And we'll be right back for the final note.

(COMMERCIAL BREAK)

WALLACE: And that's it for us for 2007. This week we're off to Iowa for special coverage of the caucuses there. Then next Sunday we'll be live in New Hampshire.

Until then, have a happy and safe New Year's. Here now are the names of the men and women who work so hard each week to make our show possible.

And we'll see you next "Fox News Sunday."

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