updated 12/8/2008 5:01:51 PM ET 2008-12-08T22:01:51

Guest: E.J. Dionne, Jamie Rubin, Jeffrey Goldberg, John Harwood, Tony Blankley, John Harwood, James Surowiecki, Jim Press, Paul Kanjorski, Scott Garrett

DAVID GREGORY, HOST: Tonight, the depth of a recession. New unemployment numbers underscore how much trouble this economy is in. The president talks about it and a new president will face it head on at 1600 PENNSYLVANIA AVENUE. Forty-six days until the inauguration of President-elect Obama. Welcome to the program. I'm David Gregory. The headline tonight, "Out of Work."As the ailing automotive industry's CEOs return to Capitol Hill for an 11th hour plea for that $34 billion they say it will take to stay in business, dramatic new job loss numbers illustrate the depth of the recession this nation now faces. The Department of Labor statistics reported today that 533,000 people lost their jobs last month. That is the largest drop we have seen in the past 34 years. The net loss of more than half a million jobs is much worse than analysts expected it to be and brings the country's unemployment rate up to 6.7 percent, a number which some predict has the potential to climb has high as 8.5 percent by the end of next year. Since the start of the recession, a word the president used, by the way, for the first time today to describe the state of this economy, the total number of unemployed people has increased by 2.7 million and has spread across several sectors. In recent days alone, layoffs have been announced from AT&T, Dupont, JPMorgan Chase, Pratt & Whitney, Viacom. The list goes on and on. Following the jobless report, the president issued a statement from the White House south lawn during which he expressed concern about these job losses but then attempted to reassure Americans that the country is on the road to recovery.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: A market that was frozen is thawing. There is still more work to do, but there are some encouraging signs. It's going to take time for all the actions we've taken to have their full impact. But I am confident that the steps we're taking will help fix the problems in our economy and return it to strength.


GREGORY: Hopeful words spoken on the same day that the bad news just seemed to keep on coming. The Mortgage Bankers Association reporting that a record one in 10 American homeowner were either in foreclosure or behind on mortgage payments. While we anxiously wait to see what is coming around the bend, the president-elect issued a statement today warning that it's going to stay ugly for some time, saying, "It's likely to get worse before it gets better." Joining me now, John Harwood, CNBC's chief Washington correspondent and political writer for "The New York Times," and James Surowiecki, who writes the financial page for "The New Yorker." Welcome to both of you. John, let me start with you. The hits just keep on coming. The depth of this recession, as I mentioned, something the president talked about using the "R" word, seems to deepen almost day by day.

JOHN HARWOOD, CNBC CHIEF WASHINGTON CORRESPONDENT: No question about it. And there was something that hit really hard about these job numbers today, David. Not quite twice as much, but hugely over what the consensus forecast had been -- 533,000 jobs. They revised the numbers and said 200,000 more job were lost in September and October as well, 1.9 million this year. And what it tells you is that, you know, they've now dated the start of this recession at 2007, but now one year into it, the job losses are accelerating. It's reason for everybody to be deeply worried right now.

GREGORY: And James, why? Why is that the case?

JAMES SUROWIECKI, "NEW YORK TIMES": Well, I think there are two things. I mean, the economy has been weak for a long time. I mean, the recession started maybe a year ago. We've been losing jobs for 10 months. And I think the way I sort of think about it is, the economy was very fragile going into the fall. It was fragile because of the credit losses, because of the weakness in the housing market and so on. And I think the collapse of Lehman Brothers, and then the first failure to enact the rescue plan, it was sort of a massive trauma to the economy. I mean, the one thing that's really striking about this economy is exactly what you just talked about, which is the acceleration we've seen in the last two months. When you listen to company executives in particular talking about their businesses, what they all say is that, really, since mid-September, early October, things have kind of fallen off a cliff. And I think that's really a direct result of the sort of real freezing up of credit markets that happened beginning in mid-September.

GREGORY: Right. The state of the economy being what it is, John, we don't know what it will be next week, next month, when a new president takes office. What we're able to assess accurately is that President Obama will take office at a time when the world has changed dramatically, when the economy has changed dramatically, where the role of government is different and the expectations of the American people and leaders in Washington will be different. How does this news today impact his decision-making about what he does in the course of this transition?

HARWOOD: Well, I think everything so far has told us, David, that rather than shrinking his domestic ambitions, he's growing them. So this stimulus is getting larger. He's going to try to take advantage of this desire for action, the anxiety that people feel, to propel his program forward-alternative energy, his investments in infrastructure. I think he's going to of course pursue those tax cuts, those refundable tax cuts for middle and lower working class Americans. And so I think this president sees this as an opportunity. But he's got to move very fast and hope that Congress moves. He's also got to hope that these auto companies don't go down in December before he takes office, because that's going to make his job that much steeper.

GREGORY: Right. Let me play the president today talking about the automakers and this issue of the bailout. Listen to this.


BUSH: I am concerned about the viability of the automobile companies. I'm concerned about those who work for the automobile companies and their families. And likewise, I am concerned about taxpayer money being provided to those companies that may not survive.


GREGORY: That's a very strong point, James. And it is one at odds with those who think that the companies cannot go under, especially at this time, as John just said. There is more pressure for the president-elect now to try to push this across the finish line even before he takes office.

SUROWIECKI: Well, I mean, I think it really is this fascinating period. You know, if you go back to the Great Depression, not to make too-dark parallels, you know, there was that long period between the time that Roosevelt was elected and the time he actually took office. And during that time, things got significantly worse. And I think there is this concern that we still have about another two months I think before Obama gets elected. And I think John's right to wonder aloud, you know, what's going to happen to the auto companies.


SUROWIECKI: I mean, Bush's comments today were kind of curious because on the one hand-well, he's saying on the one hand, on the other. And he had actually said, you know, he is still continuing to push this idea that they should use the $25 billion that's already been allotted. The thing to me that's most striking about what's happening with the auto companies the last couple days really is the fact that a lot of what seem to be happening is that it's getting locked up with a certain kind of political debates about where the funds are going to come from, who's going to be held responsible for the bailout, and so on. And, you know, my personal opinion is I do think this would be a dramatically negative blow to the economy if they actually did go under.


SUROWIECKI: And it certainly seems possible, at least with General Motors, in the next month or so.

GREGORY: All right. James Surowiecki, we're going to leave it there.

John Harwood, thanks to both of you. I do want to move on to this issue of the automobile industry bailout. This week, a top Chrysler executive suggested the price of not helping Detroit could be total economic collapse, saying, "If we have a catastrophic failure of one of these car companies, in this tender environment for the economy, it's a huge blow. It could trigger a depression."That executive joins me now. Jim Press is the vice president-chairman, rather, and president of Chrysler. Welcome, sir.

JIM PRESS, VICE CHAIRMAN, CHRYSLER: Thank you. Good evening.

GREGORY: Very difficult circumstances in which to make this appeal to Congress. Do the devastating numbers today about job losses in the country improve your pitch, improve your chances of making that case to Congress, do you think?

PRESS: Well, it really validates the case we've been making. And the fact is the auto market started into its recession earlier than the rest of the economy. For the first six months of the year, we were doing pretty well. But starting in April and May, the world dropped out and the industry has collapsed. And it really shows how tender the economy is. And if the auto industry go down as well, it could really push us over the cliff. You don't even want to think about what could happen. And that's why we're fighting for this.

GREGORY: But you heard the president just a couple of moments ago. Senators, mostly Republican senators on Capitol Hill, saying, why should taxpayers get involved in funding a bailout package for companies whose survival remains very much in doubt?

PRESS: Well, survival in doubt isn't really the issue. The fact of the matter is, it's a bridge loan for working capital. And we also need to free up some credit so customers can buy cars. And we've really got plans together. We've got products in the pipeline. We've got a solution to the problem, we can get through this, but we need to get this bridge loan together. And it's something urgent, because the business is getting more difficult. And it's almost like, you know, the house is on fire and the fire department is trying to figure out which fire department is going to come to the rescue.

GREGORY: But can you imagine under different economic circumstances in the country that you would have any sort of chance of getting the sort of bailout of the magnitude that you're speaking of when there has been such obvious underperformance on the part of management and on the part of these companies when there are other automakers that are doing better?

PRESS: Well, you know, that's a great question. Obviously, I think the public is sort of fed up with all the bailout. It's fatigue that started with Wall Street bailouts. We really separate from that, but obviously we're next in line. And second, we wouldn't be here. We don't want to be here. It's not a handout, it's a bridge loan, but the extraordinary conditions of the industry is what has forced our hand. From a standpoint of management, I mean, that's something that is not really true because all the car companies are having trouble right now. You go take pictures of the ports of any place in the country, and they're full of cars. They can't find places to park the Hyundais, the Toyotas. The same thing is happening in Asia and Europe. So this is a worldwide calamity.

GREGORY: You're a private company, of course. It's worth reminding our viewers that Chrysler is not a public company. So you have private sources of capital for the company. And as was asked on Capitol Hill yesterday-I'm going to play an exchange here with Mr. Nardelli, who is, of course, the CEO-grilled why Cerberus, who is a major provider of capital to the company, wouldn't provide funds at this particular time. Let's watch that and talk about it on the other side.


UNIDENTIFIED MALE: Why don't your equity owners provide the equity necessary for your company to go on? I don't want to hear whether they're pension funds or they have obligations. Isn't the truth of the matter they do not feel that the presently structured auto industry of the United States is not survivable in its present form?

ROBERT NARDELLI, CEO, CHRYSLER: Sir, they never conveyed that to me.

UNIDENTIFIED MALE: Well, then why didn't they give you any money?

NARDELLI: I'm sorry?

UNIDENTIFIED MALE: Why won't they give you any money?

NARDELLI: I assume they have no access to additional funds.


GREGORY: I mean, if they're not providing funds to you, why is it reasonable that taxpayers should?

PRESS: Well, first of all, they're our major investor. It's been a great company. They've allowed us to operate without Wall Street looking over our shoulder. We're making good long-term decisions.

They hold companies for the long term. You know, companies like Air Canada or Albertson's. I mean, it's a real corporation. They're all in. They've really stepped up to the bat for the auto industry with the finance companies. They just put, I think, about another $2 billion in during the summer. They've shown that they've been willing to take some of the debt and turn it into equity. They're fully into this. There is no question. And the second part is, separating it from the ownership, the employees, the customers. This company is fully invested and committed, the guts of the company, to make this work in concert with our investors.

GREGORY: All right. Chairman-Chrysler Vice Chairman Jim Press, thanks for being on tonight. We appreciate your views.

PRESS: I appreciate the opportunity. Thank you.

GREGORY: Coming next, the big question, should taxpayers be the ones to bail out the auto industry? We'll have a face-off coming up next as the debate rolls on. Congressmen Paul Kanjorski and Scott Garrett when 1600 returns after this.


GREGORY: Back now on 1600. Today the CEOs of the big three U.S. automakers took their case for a $34 billion government bailout to the House, testifying before the Financial Services Committee. Although President Bush and Democratic leaders inn Congress generally support helping Detroit, they disagree about where the money should come from. And lawmakers and taxpayers alike remain rather skeptical of yet another government bailout. So should the government rescue the automakers this time? And what kind of conditions should a rescue package carry? Joining me now for a "Face-Off," Congressman Paul Kanjorski, Democrat from Pennsylvania, Congressman Scott Garrett, Republican from New Jersey. Both serve on the Financial Services Committee and participated in today's hearing. Congressman Kanjorski, both of you, welcome. Let me start with you. We've been talking so far on the program about these job loss numbers today which are in excess of what the expectations were. They hit pretty hard. Do they only validate the case? Do they underscore the case for a bailout for Detroit? REP. PAUL KANJORSKI (D), PENNSYLVANIA: Well, I don't think we should really compare the rescue plan of Wall Street and the automotive plan, because they're really two divergent and two different things. We had to do the financial bailout...


KANJORSKI: ... in order to prevent a worldwide meltdown. And as a result, its numbers are much higher than what would be spent to save the American auto industry.

GREGORY: But the job losses today and the potential job losses if these companies go under would only add to the sort of news we saw today.

KANJORSKI: Well, I think what you should really look at is, say, how cheap this preservation of job cost would be, only $34 billion to save about three million jobs. And if you related that to the $700 billion, you're talking about it would take 40 million jobs to be saved with that expenditure. So from that standpoint, it's much more economically efficient to use $34 billion.

GREGORY: And necessary.

KANJORSKI: Right. Absolutely.

GREGORY: Congressman?

REP. SCOTT GARRETT ®, NEW JERSEY: Well, you know, your opening comment was, the only thing in dispute right now is to where the money comes from, whether it comes from the TARP funds or-the $25 billion. You know, at the end of the day, the answer to that question is very simple. The money comes from the American taxpayer. And when you think about it, I think right now, after the $700 billion, after the $7 trillion that's being lent out there, there is a sense out there in the American public, the American taxpayer, the American family, of bailout fatigue, if you will. And this is just one more bailout that people are...

GREGORY: OK. Well, I mean, that's all well and good, fatigue and there's frustration. It's still possible that this is vital. In other words, the downside of not acting may be so severe for an economy that is already in deep recession, the prospect of the GDP being down dramatically for the fourth quarter, shouldn't we be able to get over the idea of fatigue if it's really necessary?

GARRETT: Well, I think you have to get over-well, get over it or not? I think you have to get into the weeds on exactly what we've been hearing today.


GARRETT: And we've heard different things. As you know, a couple of weeks ago, they came with $25 billion. Now it's up to $34 billion. And in the Senate hearing, it was something, what, around $70 billion or $75 billion at the end of the day, or maybe even more on top of that. Those are questions that we all need to have answers to, and we really haven't gotten...


GREGORY: And that, Congressman, is a big issue, which is, where does it end? The president today said we can't let them fail, we shouldn't let them fail, but we have to ask ourselves about whether they can really survive, even with this bailout.

KANJORSKI: Absolutely. So it's really a question of how. And that's what I was hoping with the two hearings, the Senate hearing yesterday and the house Hearing today, would really generate the ideas that could occur. You know, our mistake is we're leaving regular order and regular process. And when you do that, you get into this dangerous emergency reaction mode of acting within seven days. And that tends to have an unthoughtful process to resolve something. Very dangerous. And I think, really, the dissatisfaction with the plan to rescue Wall Street was as a result of it was done in too great a haste. If we had more deliberate thought to it, if we would have put it in the conditions that wouldn't have allowed the money to be spun off and spent in an entirely different way, or the banks not to spend to lend, as we would like them to do, because we didn't make that a condition of the loan.

GREGORY: What is the most efficient way to help these companies survive?

GARRETT: Well, I think you heard some of the ways today, but I think some of the argument that we heard on the other side was, should it not be a top-down approach, should it be a bottom-up approach?

One of the big questions that was raised was, if you do all these things that they say, A, will it solve the problem? And B, will it get the American consumer buying cars again? I think the numbers were roughly around 19 million cars or so that they're selling right now. They used to be selling around 15 million cars in years past. Well, you do all these reforms and everything-they restructured, they changed the business model-if you don't actually see those numbers go up, we may be in the same situation right here. So some of the proposals are-and I have some legislation, other people as well-maybe what we need to do, bottom up, give a tax credit to the American public so they actually go out and start buying American cars again. And that can get it going up. And on the point as however we do it, I think he has an excellent point here, is to do it in the proper format. And by that I mean, here we are today sitting here talking about this. We don't even have a bill to look at. We're talking about maybe coming next week, next Tuesday, and voting on something without even something to look at.

GREGORY: A final point before we leave it, handicap this. Is the bailout going to happen in some form?

KANJORSKI: Hard to predict. I would say-it's my opinion, we need and should do something. We will. I think we're going to do a bridge bridge loan, something that will carry us over for 90 days or six months.

GREGORY: And let President Obama tackle this.

KANJORSKI: Well, not only President Obama-and the Congress to really put a package together.


KANJORSKI: Because it's not only for the auto industry. It's setting the precedent for-look, I think we're into a serious meltdown potentially. And this isn't going to be the first problem we have. And we're going to have to develop a mechanism as a country and as a world economy to deal with this. And we need the time to do that, and that's what we should do.

GREGORY: To be continued. We appreciate you coming on the program.

GARRETT: Appreciate the chance.

GREGORY: Thank you very much.

Still ahead, President-elect Obama took a gamble on public financing and won. We're going to reveal tonight the grand total of this huge roll of the dice. And who will fill Hillary Clinton's Senate seat when she become secretary of state, if confirmed? Could it be a Kennedy? It's all straight ahead, inside "The Briefing Room," on 1600 after this.


GREGORY: Back, going inside "The Briefing Room" now for a look at what else is making headlines today. First up, could the Senate soon have two Senator Kennedys? New York State Democratic Party sources tell NBC News that Caroline Kennedy has spoken to New York's governor, possibly about filling the Senate seat being vacated by Hillary Clinton, if nominated for secretary of state. Clinton, of course, expected to vacate her seat to become secretary of state in the Obama cabinet. If chosen, Caroline Kennedy would join Uncle Ted Kennedy in the halls of Congress. Her uncle, Robert F. Kennedy, of course, also served as senator from New York. And her father was a senator from Massachusetts. Other names being mentioned for Clinton's seat, New York Attorney General Andrew Cuomo; Nassau County executive Thomas Suozzi; and Congresswomen Kirsten Gillibrand and Carolyn Maloney as well. Also tonight, the numbers are out and it's official. President-elect Obama has shattered presidential fund-raising records. The Obama campaign released its final fund-raising numbers today. In October and the first few days of November, the campaign raised $104 million. His fund-raising total for the entire run, $745 million. Money is the mother's milk of politics, for sure. The Obama camp says nearly four million individual donors contributed to his effort. The president-elect was the first presidential candidate to turn down public financing and rely on private donations for the general election. Coming next here, President-elect Obama inherits an economy in crisis, but at least one important voice in Washington says there are some serious advantages to taking over during these troubled economic times. E.J. Dionne of "The Washington Post" joins me next on 1600.


GREGORY: Tonight, can President-elect Obama parlay the economic crisis into an opportunity for sweeping reform? And as President Bush makes a speech defending his policies in the Middle East, we're looking at how President Obama and his team might approach the region when he takes office at 1600 PENNSYLVANIA AVENUE. Back on the program now to The Labor Department revealed a shocking statistic. The U.S. cut more than half a million jobs in November. The worst one-month loss in more than three decades and it has caused the overall U.S. unemployment rate to jump to 6.7 percent. That's the highest rate since 1993. The worsening economic crisis presents an enormous challenge for the president-elect and his team. But also a potential opportunity. "Washington Post" columnist E.J. Dionne writes about that today and he joins me now. E.J., always good to see you.

E.J. DIONNE, WASHINGTON POST: Good to be with you.

GREGORY: This is a portion of what you wrote today. You talk about the real fear in the country. Let's put it up on the screen. "What we should fear most is not that Obama will get to keep some of his campaign pledges, but that the stimulus will fall victim to classic logrolling. With so much cash on the table, the temptation will be enormous to lard the package with a slew of unproductive projects and all manner of narrow tax breaks for interests you probably never knew existed." I mean, this is the classic way of Washington. The question is, does he come in with the sort of mandate on the economy to cut through all of that and essentially, as much as this is possible in Washington, get a blank check on the economy?

DIONNE: Well, I don't go about a blank check. But I think he has enormous authority coming in. What I talked about in the column is contrast Obama's situation with Bill Clinton's situation when he came in in '92. Bad economy, but everybody then, most of the experts said the deficit is a real problem. So Clinton had to cut all kinds of promises, break all kinds of promises he made in order to balance the budget, including a promise for a middle class tax cut. Obama come in and even conservative economists are begging him to spend a ton of money, $350, $500 billion. That gives you a lot of money to keep your promises, including that politically powerful middle class tax cut and a whole lot of other programs. I think it would be far better to have a package of things that are forward looking. Where if you're going to spend that much money, you'd better have something down the road five years from now and say, well, gee, we used that money for some good thing.

GREGORY: Nobody is talking about deficits at the moment.

DIONNE: No. And that I think what Obama is going to do is a kind of two-step. Which is to say we have to spend this money now. Here's how I'm thinking about cutting it later. I thought it was interesting when he had those back to back news conferences. First he announced the economic team. Then he announced his budget team, Peter Orzsag and others saying look, they're going to look at the budget very carefully. He won't go for both political reasons in the short run and substantive reasons in the long run, he's going to have to talk about eventually getting this back in order.

GREGORY: Let's hear Obama from last Monday, the big economic rollout, he talked about the kind of stimulus plan that would be necessary. Let's play that.


OBAMA: We have a consensus, which is pretty rare, between conservative economists and liberal economists that we need a big stimulus package that will jolt the economy back into shape. And that is focused on the 2.5 million jobs that I intend to create during the first part of my administration.


GREGORY: With the jobs picture that he'll be inheriting, which is worse than analysts even predicted, can he stick to that number? Can he have that kind of narrow targeted approach to the creation of jobs?

DIONNE: Well you know, I don't think that any number a presidents throws out on job creation, I don't take all that seriously. Because the economy, even in bad times, is going to create some bunch of new jobs, even as it may destroy more jobs. But I think he's going to argue in defending whatever package he ends up putting together that for X, Y and Z reasons, these are probably going to be more productive of employment. But I think it will stick to that number as long as its plausible. It's a nice round number.

GREGORY: Quickly, the role of government is going to change under President Obama. The expectation is that the role of government should change in this economy. Do you agree with that?

DIONNE: I do. And you could make the case that I thought the role of government should have changed a while ago. But I think in a down turn, people look less to the private sector, which is failing. The problems are in the private sector. And it's an old Bill Cohen line, the former Republican senator, "Government is the enemy, until you need a friend."

GREGORY: And right now, people are saying well that's not working. We'd better turn to the government. Even if we don't fully trust it, even if we don't think it always work, it is what we have now to get us out of this mess we're in. All right, E.J. Dionne with the "Washington Post," always good to have you on the program. Thank you very much.

DIONNE: Nice to be with you.

GREGORY: I want to turn now to our panel, Eugene Robinson, columnist, associate editor for the "Washington Post" and an MSNBC political analyst. John Harwood, CNBC's chief Washington correspondent, political writer for the "New York Times." And Tony Blankley, syndicated columnist. Welcome to all of you. Tony, I want to play a piece of sound from Barney Frank, a Democrat, who is talking about the role of Barack Obama, specifically with regard to the automotive companies, the big three, and the economy generally. Listen to this.


REP. BARNEY FRANK (D), MASSACHUSETTS: I'm a great fan of the president but I think it is probably the case that he is going to have to be more assertive than he's been. And I know what he says is well, we only have one president at a time. My problem is at a time of great crisis with mortgage foreclosures and autos, he says we only have with one president at a time. I'm afraid that overstates the number of presidents we have. I think we've got to-he's got to remedy that situation.


GREGORY: John Harwood, the question is, what can do to be more assertive now?

JOHN HARDWOOD, CHIEF WASHINGTON CORRESPONDENT, CNBC: Well, I think what he can do really is lobby at the same time. The Bush Treasury with whom he's cooperating and exchanging information with on a constant basis and Democrats in Congress. Keep in mind, the troops behind Barney Frank and Barney Frank has been working very, very hard on this issue, as has Chris Dodd and other members of the leadership, but they don't want to vote for this auto bailout. And yet, they realize that the consequences of these auto companies collapsing if General Motors goes down in December, that makes it much tougher for Barack Obama when he takes office. So there is a bit of a game of chicken going on. Everybody is saying somebody else solve this problem. President Bush came out today and said Congress needs to vote and use the money as I suggested, the money that they already appropriated. Congress wants the Bush administration to use T.A.R.T money or to use the Federal Reserve. And Barney Frank is saying, well, OK, Barack Obama, you step in and help us.

GREGORY: Tony Blankley, I spoke to a business who said today that in the end, in a crisis like this, the government always wins. Which is to say it's the government that can solve an economic problem this big. Do you think conservatives are going to buy into that line of thinking with a President Obama?

TONY BLANKLEY, SYNDICATED COLUMNIST: There's going to be a split. But let me say, I completely agree with Barney Frank. We desperately need presidential leadership. Bush can't do that because he can't project his will more than another six weeks. We can't have another indirect number like we had between November 29 32 and March of 33. Obama has to step forward and say here's where we're going. We obviously need a vast stimulus. We need to solve in the short term at least, the auto industry problem. We need a huge stimulus package to get the velocity of money speaking going up. And I think that Obama can't indulge as E.J. suggested, in his favorite programs. Our government spending has got to do what the consumers and the business are not doing. Consumers and business are hoarding money. We have a liquidity track. The government has got to go out and be the consumer, buy the cars, buy the computers, hire the accounting services and boost this economy before we have a catastrophe.

GREGORY: All right. Well Gene, to that point, and history tells us that in fact, FDR did not want to join Hoover in any kind of economic bailout package. He wanted to wait until he was in office to get the New Deal going. And that's exactly what he did. In this case, isn't the auto bailout a real test for Obama? He lobbied the president directly. He said you've got to do this when they had the first meeting. Now it seems to be slipping from their fingers. At most, there could be a kind of bridge loan to another bridge loan, which is some kind of stop-gap before a new Congress.

EUGENE ROBINSON, MSNBC POLITICAL ANALYST: Really, that's absolutely true. And I think that ultimately, while he would not want to jump in at this point, I think the president-elect probably will have to. I'm sure he doesn't want to take office in January, having watched the auto industry collapse and being left with some sort of mess, just because of the inaction. I think it is fairly clear that there is probably a willingness in Washington to come up with kind of money in some sort of way, shape or form. Whatever you call it, a restructuring or whatever the terminology is. And I think Barack Obama may ultimately be the one who has to determine what that terminology is, what the dollar amount is. What the conditions are that will be attached, which should be, I think quite..

HARWOOD: Hey, David?

GREGORY: Yes, quickly, John.

HARWOOD: David, I just wanted to make one point about your conversation with E.J. You talked with E.J. about is the role of government going to be different? The important thing for Obama and the advantage for him going into office, is the role of government already is different. Because what the Congress and the president have done this fall, that creates a lot of latitude for Barack Obama to drive his program through.

GREGORY: Right. You had a Republican administration ushering in the era of new big government at a level that we haven't seen in quite a long time. All right panel, thank you very much. We'll leave it there. Coming next, President-elect Obama ran his campaign on the idea of change. We're going to take a closer look at the differences in foreign policy between the Bush and Obama administrations. President Bush making a big speech in the Middle East today. We'll go through it, right after this.


GREGORY: Coming next, President Bush talks about his foreign policy successes in the Middle East, made the case for that, his comments, and the challenges the next administration will face when 1600 returns after this.



GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: On our overall approach to the Middle East these past eight years, America has been ambitious in vision. We have been bold in action and we have been firm in purpose. Not every decision I've made has been popular, but popularity was never our aim. Our aim was to help a troubled region take the difficult first steps on the long journey to freedom and prosperity and hope.


GREGORY: We're back on 1600 PENNSYLVANIA AVENUE. That, of course, President Bush speaking tonight at the Saban Forum here in Washington about how he believes the Middle East has been transformed during his presidency. Now it is up to President-elect Obama to define a new relationship with the region. Joining me now, Jeffrey Goldberg, national correspondent for the "Atlantic" magazine. Jamie Rubin is former assistant secretary of state under Bill Clinton. And Andrea Mitchell, of course, NBC's chief foreign affairs correspondent. Welcome all. Andrea, let me start with you. This was an interesting speech today to the Saban Forum, which is a gathering here in Washington and every other year in Jerusalem, dealing with these issues of the Middle East. And for a new administration, and a new national security team as they think about the Middle East, how much do they want to run away from Bush in the same way that Bush ran away from the Clinton administration?

ANDREA MITCHELL, NBC CHIEF FOREIGN AFFAIRS CORRESPONDENT: They want to run as far away from Bush's record in the Middle East as possible, David, because there was no accomplishment on the Israeli-Palestinian front. Despite what the president said in this very optimistic, rosy kind of scenario that he has outlined at the Saban Forum, they are so far from any kind of peace accord and they through a lot of mistakes that have been acknowledged quietly by people, they have Hamas to deal with in Gaza, the West Bank is no sooner or no closer to being a Palestinian state, and there can be no political agreement right now because you don't have political leadership on either side to really negotiate. People from Tony Blair to Jim Jones are really despairing of any progress unless a completely new direction is taken.

GREGORY: Let's hear the president also talking about the broader issues in the Middle East and particularly Iraq, including a concession. Let's listen to this.


BUSH: The fight in Iraq has been longer and more costly than expected. The reluctance of entrenched regime to open their political systems has been disappointing. There have been unfortunate setbacks at key points in the peace process, including the illness suffered by Prime Minister Sharon, the Hamas victory in the Palestinian elections and the terrorist takeover of Gaza.


GREGORY: Jeffrey, a concession there from the president about some of the obvious setbacks in his Middle East policy. But I want to ask you the same question. Is it a mistake for a new administration to necessarily say there has to be a break from almost all of the approach to the Middle East?

JEFFREY GOLDBERG, THE ATLANTIC: Well, it is not necessarily a mistake but you shouldn't just cast everything aside. One of the interesting things that unmentioned in this speech, is that the Israelis are actually making some progress on Syrian peace negotiations. But the Bush administration, because it declares Syria a terrorist state, doesn't want anything to do with that. The Israelis have been ahead of the U.S. on that. And I think the Obama administration on this is going to move pretty fast to get some progress there. Especially because they recognize that the Palestinian track is a disaster right now.

GREGORY: Jamie Rubin, let me bring you into this. How does this national security team compete, for one thing, with the attention that the economy will take a new president in the new year and much of the first administration arguably. How does this team go about assessing priorities in the Middle East?

JAMIE RUBIN, FORMER ASSISTANT SECRETARY OF STATE: Well, I think the issue of withdrawing American forces from Iraq will be a top priority for the president. In addition to the economy, it is what the president-elect said he was going to accomplish at his news conference earlier this week. And I think it is very clear that that is going to have to take a lot of attention from the entire team, working together, to make sure that the withdrawal from Iraq is done as quickly but as carefully as possible.

GREGORY: Go ahead, Andrea.

MITCHELL: I was just going to say that the one thing that I think you will see from the new team, is and this is certainly what Blair would want them to do. And he's been talking to them all week. He's been in Washington.

GREGORY: Tony Blair.

MITCHELL: Tony Blair, negotiating for the Palestinians and Israeli, at least the economic side of the accord. What he would like to see is some connection to Hamas. That you've got to deal with Gaza. And the fact that the administration has refused to deal with Syria or with Hamas and Gaza has really walled off major areas of negotiation. And now with the political situation on the ground with Israel, you are likely to have maybe Netanyahu as the next prime minister. He certainly is the front runner.

GREGORY: Hamas obviously, a social group to some in the Palestinian area, in Gaza. A terrorist group as well, that is bent on the destruction of Israel, Jeffrey. How do you incentivize Hamas to come into the process? Is there a way?

GOLDBERG: Whoever can figure that one out will get the Nobel Peace Prize. This is just because you want them to join, just because you want to engage them? The same problem you have with Iran, of course. Just because you might want to engage them doesn't mean they necessarily want to engage with you. And so my strong feeling and based on some reporting is that the Obama team is going to say, you know what? Let's not focus on this at the moment. Obviously, they have plenty of things to do with the economy. But let's talk about Syria. Let's even talk about Iran before we talk with the Palestinian track.

GREGORY: You set me up perfectly. I want to take a break here, come back and talk out Iran, engagement with Iran, which is one of Barack Obama's promises. We'll be back on 1600 right after this.



OBAMA: All those watching tonight from beyond our shores, from parliaments and palaces, to those who are huddled around radios in the forgotten quarters of the world, our stories are singular but our destiny is shared. The new dawn of American leadership is at hand.


GREGORY: We're back on 1600 talking about the foreign policy of the Obama administration as compared to the Bush administration here, with Jeffrey Goldberg of the "Atlantic" magazine, our chief foreign affairs correspondent Andrea Mitchell and Jamie Rubin as well. I want to talk about Iran, but you picked up something Jeffrey, about the issue of the freedom agenda which is something the president is so very proud of and talked about today. The question is, where does it go under new administration?

GOLDBERG: Right, well this is why the Obama administration might not be so eager to push elections and push this freedom agenda. There is a huge unexplored contradiction in the president's speech today which is that the freedom agenda, the push to bring more democracy to the Middle East, is what brought Hamas to power to Gaza in the first place. Which has led us to this vexing situation we have today. So there is a, this is unexplored. The president doesn't talk about the difficulties of enacting the freedom agenda and the idea that some people might vote in ways that disagree with you.

GREGORY: Right but Jamie, this is the question about whether you abandon a lot of these initiatives from the Bush administration. Doesn't necessarily this idea of the freedom agenda have to continue under a President Obama?

RUBIN: Well I was at the Saban Forum when President Bush gave the speech. He didn't really mention Hamas, other than that very brief sentence, until very much at the end. And I think people were waiting for, to see how he would deal with the fundamental contradiction there. Look, on democracy, my guess, and this is just a guess at this point, is that the idea that democracy building, the freedom agenda, is about elections, is what has been tarnished in the sense that I think all administrations want to promote democracy. I think the Bush administration, the Obama administration that follows it, will want to push freedom in the Middle East. But I think they will do it the next administration with an understanding that elections are not necessarily the best first thing you want to do. You want to build up a society. You want to get the rule of law so that you don't have this outcome every time.

GREGORY: Let me turn to the issue of Iran, also a subject Andrea that the president addressed today. Let's watch that.


BUSH: We and our partners have offered Iran diplomatic and economic incentives to suspend enrichment. We have promised to support a peaceful civilian nuclear program. While Iran has not accepted these offers, we have made our bottom line clear. For the safety of our people and the peace of the world, America will not allow Iran to develop a nuclear weapon.


GREGORY: Andrea, how do you envision that bottom line changing under President Obama?

MITCHELL: I don't envision it changing. The bottom line is that the United States does not want Iran to have a nuclear weapon. I think that the process will change because there will be some effort at engagement. We've seen that recommendation from Bob Gates in the past. And also, from Brent Scowcroft and others who have talked to President-elect Obama and certainly, Jim Jones and Hillary Clinton took a hard line during the campaign. That was one of their biggest differences.

But I think she will have to accommodate herself to some sort of engagement with Iran. How he proceeds is going to be a very challenging-probably the most challenging part.

GREGORY: The fear, Jeffrey, is that Iran uses any sort of engagement to their advantage to continue enrichment, to build the problem.

GOLDBERG: Right. In President Bush's defense and in the defense of anyone who raises skeptical questions about engaging Iran, we've failed to recognize that Iran is an independent variable in this formula. That just because we engage them doesn't mean they want to engage us. Remember that the Iranian revolution was built on a platform of anti-Americanism. It is very hard for them ideologically to move away from that. So people who think that oh, we just say, let's sit down and talk, it might not be as easy as that.

GREGORY: Jamie, comment?

RUBIN: Yes, I don't think anyone thinks it is going to be easy. The question is whether the new administration and the indications are that it will, will remove the precondition, will begin negotiating directly with Iran.

MITCHELL: And in fact, Iran found it in its interests to help the United States on Afghanistan early in the Bush administration. Before the axis of evil speech and before the administration really put Iran in that position where it was the enemy, the adversary.

GOLDBERG: I would point out one thing though, which is across the Iranian political theological spectrum, there is wide support for the Iranian nuclear program. This is not just a matter of Ahmadinejad or Khomeini. This is everybody.

GREGORY: And if you're President Obama, you have to understand the prospect of a nuclear Iran could change the balance strategically in the Middle East against the United States dramatically.

GOLDBEGR: Right. From the Iranian perspective, they're in a battle for domination of the Middle East.

MITCHELL: Of course what people are telling the incoming administration is, that the Saudis and others in the Gulf are very much against Iran having a nuclear weapon. But if Iran does get a nuclear weapon, then you'll see Egypt, the Saudis and others all climb on board and try to get their own.

GREGORY: We'll leave it there. Andrea Mitchell, Jeffrey Goldberg, Jamie Rubin, thank you all very much. That's the program for tonight, the view from 1600 PENNSYLVANIA AVENUE. I'm David Gregory. Thank you for watching. Have a peaceful Friday night. "HARDBALL" with Chris Matthews is next. Good night.



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