No, I’m not making that up. No, it’s not out of context — you can listen to it yourself. From the audio (for some unimaginable reason, this quote didn't make the print edition — more on that soon) from a new interview in TIME magazine with John McCain :
Q: Some members of the [Iraqi] government have made it clear in the last month or two that they might want to withdraw before complete stability, before totally secure borders, before some of the completeness of victory as you described. Is there any change, do you think there is some wiggle room there because what you described with Petraeus was an end point that was rather complete — a peaceful, stable country.When do you go from simply being “out-of-touch” to being insane, delusional, or a pathological liar? “Out-of-touch” is simply too kind of a description for someone who would describe Iraq as either peaceful or stable. And what about all those warnings the Repubs keep spouting that Iraq is on the edge where one false move could send the country spiraling into further chaos? And if Iraq is "peaceful and stable," why the hell are we still there? And why didn't the idiots at TIME put this in the printed article?
MCCAIN: It’s a peaceful and stable country now.
Hey Obama: Check your calendar — Christmas just came early. I’m sure you can find some space in tonight’s speech for this doozy. Please digg it so it gets the attention it deserves!
ThinkProgress has some info on how Iraq is neither peaceful nor stable.

Is it a war?
Are we at war?
-Not even as many as are STILL
just missing in action from 2 years
in Korea.
Two years that saved millions of lives
-and created the only democracy in the
history of continental north Asia.
Is it a war?
So inconvenient.
Get a passport. Get up. Get out.