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RICK SANCHEZ: And welcome back. I'm Rick Sanchez.

All right. Here we go. This is always a tough subject, because we all want success in Iraq for our troops. But the report card tonight seems to be saying otherwise. What would you do, for example, if your kid brought home a report card with only eight out of 18 passing grades? You'd say what, you'd say, go back and you better fix this, right? You better do better the next time around.

So, what if the next report card that your kid brought home was even worse?

Tonight, a special look at the government's own report card on Iraq.

(BEGIN VIDEOTAPE)

SANCHEZ (voice-over): Even back in July, it wasn't a glowing report card. Iraq got an S for satisfactory in only eight of 18 subjects. That's fewer than half. Now, these are the benchmarks that were set by Congress when it went along with the plan to approve extra money for the war.

Now to the new report. It's not due for release by the White House until mid-September, but "The Washington Post" has gotten a sneak peek. And it reports that the Government Accountability Office, or GAO, is giving Iraq even lower scores than it got in July.

This one gives Iraq passing grades in just three of 18 areas or benchmarks to measure progress. Two important unsatisfactory grades stand out: violence has not been reduced, and the Iraqi military brigades are not ready to do the job.

This is not a report that will be well-received by the Pentagon. In fact, a spokesperson confirms the Defense Department is now talking with the GAO, trying to get some of the new grades brought up. Meanwhile, over at the White House, the president's spokesman seems to be trying to lower expectations.

TONY SNOW, WHITE HOUSE PRESS SECRETARY: There are going to be a number of areas where they have not met the benchmarks but, in fact, there is significant progress and that deserves to be noted as well.

(END VIDEOTAPE)

SANCHEZ: Joining us now are Tom Ricks, one of "The Washington Post"'s reporters who broke today's story, along with a colleague, on the report card. By the way, he's also the author of a book called "Fiasco: The American Military Adventure in Iraq." And also joining us from Baghdad, CNN's Michael Ware.

Tom, let me begin with you.

This is not a satisfactory report, at least the way we read it, and even worse, though, if you compare it to the July report, correct?

THOMAS RICKS, MILITARY CORRESPONDENT, "THE WASHINGTON POST": That's right.

In its current draft, it's a pretty pessimistic assessment, much more than what the White House put out in July.

SANCHEZ: All right.

Michael, if this is an unsatisfactory report card, the question to you has to be, you are on the ground. You see things with your own eyes and ears. Does what you see on the ground jibe with what this report says?

MICHAEL WARE, CNN CORRESPONDENT: Absolutely.

In fact, anyone who has had to endure this war day by day, be they Iraqi or non-Iraqis, knows what's in that report is patently fact. We don't need yet another report, like a broken record during this season of pre-September 15 reports, to tell us this.

I mean, militarily, yeah, there's some successes. The surge is the surge. The real success is coming from the tradeoff with the Sunni insurgency. But, politically, it's an absolute disaster.

SANCHEZ: Well, you know what I want to do? I want to see if we can get specific here. There's two areas that I think are significant here. You guys tell me if I'm wrong.

Look at number nine there, viewers. I know there's a lot of stuff on there, but if you're sitting at home and you're watching this, look at number nine. The July report has an S next to it. That means satisfactory. That's Iraqi brigades, the building up of Iraqi brigades. This report says a big U, unsatisfactory.

Go to the next screen, Will, if you could. There's another area I think is significant, and, Tom, I am going to get your response to this. Look at reduced violence. Remember, the surge, if it was working, this is one of the areas it was supposed to concentrate on. The July report said mixed. This report seems to indicate, again, a big U, unsatisfactory.

Tom, to you. How significant is this?

RICKS: Oh, I think they are both very significant. I think you put your finger on the two sharpest differences between the White House assessment and the GAO assessment.

It's on security where it says, no, the Iraqi army is not living up to its billing. In fact, the GAO report quite precisely points out that there used to be 10 Iraqi units capable of independent operations. Now there are only six.

SANCHEZ: Well, look, anybody who lives in this country as an American wants this thing to work. Whether it is or isn't is something that we need to all study.

But obviously the White House wants this to work. Here is what they had to say.

And, Michael, I want you to respond on the other side of Tony Snow's comments.

(BEGIN VIDEO CLIP)

SNOW: The idea that somehow your standard is everything completed or nothing completed seems to me to be a pretty high standard to meet. On the other hand, if you're trying to figure out are you making progress toward the goals that you have set out, that's probably the proper way to look at it.

(END VIDEO CLIP)

SANCHEZ: Well, how do you respond to that, Michael?

WARE: I would respond to that by inviting Tony Snow to come and spend just one day with an Iraqi family in their house. Then he can tell me if there's any hint of progress.

I mean, honestly, he's misleading the American public. And what we are seeing here is, the differences, these nuances, these conflicts within these reports, this is more a Washington, D.C., story. No one here on the ground in an American uniform needs to be told how hopeless the Iraqi army is or how riven by sectarian divisions it is.

SANCHEZ: Tom, I want to go back to you before we run out of time.

There is a report out that says that the Pentagon seems to be trying to put the squeeze on GAO to have them maybe improve the grade, so to speak. Wouldn't that be like me going to my kid's principal and saying, I don't like his grades, and you need to fix it, because, obviously, it is not his fault?

RICKS: It would be more like the gym teacher going and saying, the kid is not as stupid as he looks. He has better coordination. He has improved more than you think.

But I think Michael's point is very good. When the White House talks about progress, the problem is, they have talked about progress for five years now. In Iraq, progress seems to be like the horizon: it's always out there, but it never gets any closer.

SANCHEZ: Tom Ricks, Michael Ware, my thanks to both of you.