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'Race for the White House with David Gregory' for Monday November 17, 2008

Read the transcript to the Monday show

Guests: Richard Wolffe, Pat Buchanan, Lawrence O'Donnell, Niall Ferguson, Kathleen Parker, Sen. John Tester, Rep. Jeb Hensarling, Gary Berntsen

DAVID GREGORY, HOST: Tonight, Obama's hard choices ahead. As he fills out his cabinet, he faces more difficult challenges with an economy in worldwide recession. Will he bail out the automakers? What will he do with the rest of the bailout money left behind by the Bush administration? That, and Mr. Obama's first post-election meeting today with the man who tried to deny his change of address to 1600 PENNSYLVANIA AVENUE. Sixty-four days until the inauguration of President-elect Obama. Welcome to the program. I'm David Gregory. The headlines tonight, "Face to Face."Less than two weeks after their long, bruising battle for the presidency came to an end, former rivals Senator John McCain and President-elect Barack Obama together today for a face-to-face meeting. United by the spirit of change, the two men spent about 40 minutes together at Obama's transition headquarters in Chicago. Also joining them today, McCain's close friend, Republican Senator Lindsey Graham, and Obama's new chief of staff, Rahm Emanuel. Before the closed-door session began, there appeared to be an air of camaraderie between them as they faced reporters together. President-elect Obama pledged to work with Senator McCain as this nation faces an economic crisis.


SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: We're just going to have a good conversation about how we can do some work together to fix up the country. And also to offer thanks to Senator McCain for the outstanding service he's already rendered.


GREGORY: Afterward, they released a joint statement in which they called for a "new era of reform and bipartisanship," pledging that at this defining moment in history, they're going to come together to change Washington. The statement said in part, "It is in this spirit that we have had a productive conversation today about the need to launch a new era of reform where we take on government waste and bitter partisanship in Washington in order to restore trust in government, and bring back prosperity and opportunity for ever hard-working American family. We hope to work together in the days and months ahead on critical challenges like solving our financial crisis, creating a new energy economy, and protecting our nation's security."Today's meeting came unusually soon after an election in comparison to reconciliation of other former presidents-elect and their opponents, although adviser to Senator Obama-President-elect Obama, rather-say they do not expect Senator McCain to be offered a job in the new administration. Speculation swirls around just how specifically the two will work as allies. The door of Obama's transition office has been a swiftly revolving one these days as he has also met with New Mexico Governor Bill Richardson and Senator Hillary Clinton while he carefully weighs the heavy decision that comes with assembling a presidential team. Joining me now, "Newsweek" Senior White House Correspondent, MSNBC political analyst Richard Wolffe. He has, of course, extensively covered the president-elect throughout this campaign.

So, Richard, what did you get out of this meeting today?

RICHARD WOLFFE, MSNBC POLITICAL ANALYST: Well, of course a lot of it is that symbolism, David. They are trying to be nice, magnanimous, generous after the election, but remember that McCain is the go-to guy for Democrats on the Hill anyway. And look at the people in that room. Lindsey Graham and Rahm Emanuel have a very good working relationship and friendship that is going to be crucial to making this thing work. So there are areas of common ground on the global warming, on the financial crisis, on national security, but, more importantly, the people around these principal players get on and know how to work together.

GREGORY: Are there some political points for Obama here that he gets a meeting with McCain so quickly?

WOLFFE: Oh, sure. Absolutely. A big win for him. He can seem magnanimous. It's happening right now.


WOLFFE: He can say that he's changing things, but really, the tougher position here is for John McCain. I mean, this is a very short space of time for him to swallow his pride and recover.

Of course he's doing a lot of media interviews. He is trying to recapture the old McCain spirit. And this is an important marker for him.

GREGORY: Let me put up something that you wrote in "Newsweek" this week, this idea of the team of rivals. "Obama has made clear that he wants a bipartisan look and cast to his administration." You wrote, "The transition team has been told to hire Republicans at all levels of government, not just as token cabinet appointments. 'Team of rivals' has become a term of art here,' says a senior Obama staffer who refused to be identified discussing strategy. He also said that Obama believes he can by force of character bring Republicans into the fold without sacrificing some of his Democratic principles." Does he necessarily see someone like Senator McCain as vital to that?

WOLFFE: Well, I think he's taking McCain's counsel on which kind of Republicans would work in this. But remember, it's a really big thing to open up the sub-cabinet to Republicans, as well as having a token Republican in the positions that we've seen members of other parties fill in recent administrations. So there is an opportunity. We don't know if they're going to take it, but there is an opportunity here for good people, qualified people to move in very different levels.  It's not about McCain, himself. It's the people who are in his orbit. As I said before, these are the kinds of people who are used to working with Democrats already. They have to be the right kind of Republicans.


WOLFFE: This is not a sign that Obama is going to cave on some of the campaign promises he made over the last 18 months.

GREGORY: All right. Let me get the rest of the panel in here now.

Joining me, Pat Buchanan, former Reagan White House communications director, Nixon speechwriter, and former presidential candidate. Also Lawrence O'Donnell on board, former chief of staff to the Senate Finance Committee. Pat and Lawrence also MSNBC political analysts. Pat, does John McCain at this point have the kind of power base that he did after he lost to George Bush in 2000?

PAT BUCHANAN, MSNBC POLITICAL ANALYST: I think McCain's base is different now. He's not a prospective candidate in the future.

I think what he's going to do is, he's got about six or seven Republican senators. I think he can deliver to Barack Obama for a price of some kind and give him full-proof majorities there in the Senate. I think he sees himself as Arthur Vandenberg, who played that role, as you know, with Harry Truman, when he moved over and supported Truman decisively. McCain, if you take climate change, you take the immigration issue, you take on foreign policy, rebuilding the military, McCain can be Barack Obama's Republican point man up there.

I think McCain is moving back to the role he played as sort of a maverick contra, the conservative Republicans, and working with an administration. So I think he's carving out an ideal role, and he had to go to Chicago to get it.


Lawrence O'Donnell, here's my question. They put out a statement today, if you talk about what aspects of the McCain agenda does he want the president-elect to hear about, it's reform in government. Maybe they can come to some sort of agreement there in terms of lobbyist influence in Washington. I don't know whether there's any room on the potential for campaign finance and committing the size of government, which is what Senator McCain ran on here.In this economic climate, with the kind of proposals that Obama is talking about, bailing out the automakers and other spending he'll do under the TARP program, where there will be money left over, it doesn't seem to me like there's going to be a natural alliance there.

LAWRENCE O'DONNELL, MSNBC POLITICAL ANALYST: No. And there's going to be a big expansion in healthcare bureaucracy in the federal government if Obama has his way in healthcare reform. And you know, those kinds of issues would be symbolic, to say to John McCain, yes, we agree with you on that, let's see if we can do something. They're not going to come up with anything to do. And immigration reform, John McCain's position isn't what it used to be. I'm not really sure anymore what it is, but it certainly morphed during the campaign. And so I'm not sure what role he has other than that role he'd been playing already and that Gang of 14 sort of thing on Supreme Court confirmations. I'm not sure there's even a role like that that's going to make any sense in the Senate for McCain at this time.

BUCHANAN: David, let me disagree with that.

GREGORY: Yes. Go ahead, Pat.

BUCHANAN: We've had McCain-Kennedy, McCain-Feingold, McCain-Lieberman. As Lawrence mentioned, Gang of 14. And those things-I think McCain is going to move away from the role of candidate and leader, if you will, of a conservative Republican Party, back into that role. And frankly, there is a position there in the Senate. Some Republican is going to come forward and lead the group that's going to work with the president who's got 58 or 59 votes, and I think McCain just nominated himself for that post, and I think that Barack Obama will designate him that man.


Let me move on to the other big transition headline here. Let me just move on. We have a couple of minutes here.


O'DONNELL: ... real policy differences where it counts though.

That's the problem.

Go ahead.

GREGORY: OK. Let me move on to this question of Hillary Clinton as secretary of state. And Richard, you've been following all of this. The transition team for Obama is moving forward presumably on this. Is there a way they can unring the bell at this point? Are they moving forward with some real vetting questions for the former president, which seems to be one of the big areas of speculation now?

WOLFFE: I don't think there is a way to dial this one back now. It's so far out there and the expectations are high. And hey, look, that's a very vigorous dispute about who leaked this and why. Whoever did, it doesn't really matter anymore, because Hillary Clinton, as secretary of state, has become a fixed idea around Washington. And there are lots of benefits for both sides in making that happen. Of course there are-there's a bit of arm twisting on both sides. The vetting team wants to know more about Bill Clinton's finances, his donations, the people behind him. And, of course, Hillary Clinton wants to maybe lock in a job that isn't quite there.

So this is where the debate, the murky area is. But I think she's clearly the kind of star power that President-elect Obama is looking for. And again, it fits into this team of rivals image, which is important to him.

GREGORY: Yes. There are some-Pat, there are some hawkish credentials that Hillary Clinton could bring to the State Department, but there is also the very real possibility of distraction with her husband in the vetting process, and then once she's in office. No?

BUCHANAN: Well, the vetting process has already started.


BUCHANAN: And look, Barack Obama has-look, he's already discounted the Bill problem down the road, and he's accepted it. I think he's made a very good decision, quite frankly. She's the largest figure in the Democratic Party besides him. She beat him in the late primaries. She's a formidable figure. And frankly, she's a more impressive figure than the others who have been suggested for the job.

However, I do agree that Barack Obama's up on that high dive now. And if he doesn't get Hillary Rodham Clinton as his secretary of state, it's going to be a long way climbing down that ladder with everybody watching and talking about it. So, I mean, I think this thing has gone so far, it's got to be concluded positively or it's going to be a pretty bad mess.

GREGORY: Lawrence, comment on this?

O'DONNELL: Well, you know, it couldn't be more ironic that the vetting issue is Bill Clinton and what has he been up to? And we find him making his first public comment on this in Kuwait. Who paid for him to be in Kuwait? Whose plane did he fly on? Those are the questions they're wrestling with. You know, is he over there making a lot of personal income? Is he over there pulling in a lot of money for his foundation? This is complicated, and it's right up to the present day. Literally, what is Bill Clinton doing today is a vetting question.

GREGORY: All right. We're going to leave it there. Thanks, panel. See you a little bit later on in the program. Coming next, President-elect Obama calling for a "spirit of shared sacrifice" to deal with the economic challenges for the country and the world that they are both facing, but how long will it take to get the economy moving again? We're going to be talking about that in the briefing section when 1600 returns after this.


GREGORY: It's all about the politics of the economy for the new administration. The economic news continues to be bleak tonight.

Citigroup announcing today it would cut 53,000 jobs from its global workforce. The world's second largest economy, Japan, officially fell into recession.With U.S. consumer spending at an all-time low and jobless claims at a 25-year high, what is ahead for the global economy? Joining me now is Niall Ferguson, professor of history at Harvard University and author of "The Ascent of Money: A Financial History of the World." Sir, welcome to the program.

NIALL FERGUSON, PROFESSOR OF HISTORY, HARAVARD: It's a pleasure to be here, David.

GREGORY: You know, some of this economic news goes to the fact that in America, the consumer is spooked. There's a lot of foreign governments who have got to be spooked as well waiting for a new administration to come in as everything seems to get worse. What do foreign governments sit back and wait for at this point as they watch this transition of power?

FERGUSON: Well, I guess it depends which foreign governments you mean. The ones that interest me are the ones that have been financing the U.S. current deficit through the good times. They're reading in the papers that the U.S. federal deficits for the coming year could be north of a $1 trillion, maybe $1.5 trillion, and I think they're asking themselves, are we supposed to pay for this? Are we paying for the bailout and the reflation, the stimulus package? What about our interests? The big question that wasn't really addressed at the Washington summit of the G-20 was the global imbalances and who finances the U.S. deficit, because it clearly can't be the U.S. with the savings rate as low as it's become.

GREGORY: Right. And what is a country like China, which has its own economic stimulus package that it's passed in the last couple of weeks, what is it worried about all of a sudden in terms of financing all of this?

FERGUSON: Well, China's worry, number one, is creating jobs for the huge population that keeps migrating from the countryside to China's cities. And they are going to put that priority right at the top of their agenda. And if that means diverting resources away from exports and into growing domestic demand, that's exactly what they're going to do. They do face a dilemma, though, because much as they would like to boost domestic consumption and shift the emphasis away from exports, they can't do it too quickly because there still are a huge number of jobs tied up in the export sector. So they're watching very carefully their exchange rate. They don't want to see their currency appreciate too rapidly. That means they don't want to see the dollar go into free-fall. They've got to strike a balance between their own domestic priorities and the question of the global economy, which they are very much a stakeholder in. They have more than a trillion dollars of U.S. bonds in the People's Bank of China reserves. Are they going to carry on accumulating those bonds? That is a big question that nobody really knows the answer to.


Let's go back to the issue of the U.S. economy and the bailout, and whatever has been achieved in getting money to flow again, capital through the market, getting lending to increase. Whatever may be happening inside the economy, the consumer remains incredibly skeptical and highly anxious.

The president-elect was asked about this on CBS last night, about why the bailout package hasn't worked. Listen to his response.


OBAMA: There's no doubt that we have not been able yet to reset the confidence in the financial markets and in the consumer markets, and among businesses that allow the economy to move forward in a strong way. And my job as president is going to be to make sure that we restore that confidence.


GREGORY: Well, and part of restoring the confidence, though, Niall, is talking straight to the American people. What is it that the American people, in your judgment, have to understand about how much more pain is necessary in the course of this recession or, perhaps, worse, perhaps depression?

FERGUSON: Well, President-elect Obama has the opportunity to do rather earlier in the crisis what Franklin Roosevelt did with his inaugural in early 1933, which is to say Wall Street screwed up. The only thing, however, that we have to fear is fear itself.

Roosevelt was in many ways better at speeches and fireside chats than he was in fact at generating an economic recovery. We shouldn't exaggerate what the New Deal achieved. World War II achieved a great deal more. But I do think Obama's great talent as a speaker, as a mood changer, is going to be much in demand come January.

He really does need to try and change the national mood, because Americans know that they have much more to fear than just fear itself. They have to fear losing their jobs and losing their houses. And this economic crisis is in its early stages, believe me. There's a lot worse to come. It's going to be tough for him I think to ride this out.

GREGORY: This goes to the question of this bailout for the automakers as well, and whether there's a real choice here for policymakers-rather for politicians to make about whether they bail out companies that have been in trouble for a long time just to avoid the short-term pain of what it would mean to lose these major automakers in this country.

FERGUSON: It makes me very nervous that the automakers have stood right at the front of the line asking for a piece of the bailout action, because we're in danger of losing sight of what the bailout was supposed to be for. The aim of the bailout is to prevent a full-scale banking crisis of the sort that was so devastating in the depression. There's been constant chopping and changing at the Treasury about how this is suppose today happen. First, it was going to be buying distressed assets from the banks. Then it was to help recapitalize the banks, which struck me as a much better idea. Now it looks as if it's a free-for-all and anybody who's in trouble can have a piece of the action.

That just can't work. There is a danger here that we lose control of public spending. The bailout starts to multiply. Soon there's another bailout, soon there's a stimulus package.


FERGUSON: Pretty soon we have a deficit the size of a world war era deficit. And I think...


GREGORY: But what makes the consumer feel good again?

FERGUSON: It's very hard to see how consumers are going to feel good when house prices are still falling, and falling as steeply as they did in the early '30s, and unemployment is heading up towards 10 percent. I mean, nothing short of free drugs is going to make consumers feel good in a situation like that, frankly.

GREGORY: All right. Niall Ferguson, thank you very much for your insights tonight. Appreciate it.

FERGUSON: My pleasure.

GREGORY: And coming next, the lion of the Senate, Ted Kennedy. He returned to the Senate today. What he said about the prospect of working with President-elect Obama on healthcare-that's his passion-it's coming next in "The Briefing Room."


GREGORY: Back with the latest from "The Briefing Room."

Exactly six months after having a seizure which led to the discovery of a malignant brain tumor, Senator Ted Kennedy was back on Capitol Hill today, accompanied by his wife Victoria and their two dogs. The senator told reporters who were there he's feeling good and is looking forward to working with President-elect Obama on healthcare, one of his long-time signature issues.


SEN. EDWARD KENNEDY (D), MASSACHUSETTS: I'm very hopeful that this will be a prime item on the agenda. Barack has indicated that this would be a prime issue, and I believe that it will be. There are some major issues, obviously the economy, and also environmental issues, but the president-elect has indicated that this is going to be a priority, and I certainly hope it will.


GREGORY: He is expected to return to Capitol Hill tomorrow for leadership votes. Still with me, Lawrence O'Donnell, MSNBC political analyst, former chief of staff for the Senate Finance Committee. Lawrence, it's great to see Senator Kennedy. Obviously his passion for healthcare is well known, and he has the ability, sick or not sick, to make this a big part of the agenda on Capitol Hill. I guess my question is, given how perilous the economy is, is there going to be any room for this in a first year for Obama?

O'DONNELL: Well, David, six months ago I would have said no because of the massive deficits that have been run up during the Bush years. But when you listen to President-elect Obama last night talking about how we need to spend the money now without worrying about balancing the budget, that is a new atmosphere for this subject. And the last time it was tried, the budget deficit was one of the inhibitors on trying to do it. I think the Democrats are now going to be willing to go forward without worrying that much about how this healthcare reform might be paid for in current accounts. So, in a strange way, the crisis, the economic crisis, is so big now, it may actually open the way for some healthcare reform to be done, and to be done, spoken of in terms of a stimulus for the economy.


O'DONNELL: Healthcare is a very large sector of our economy, and in some places it's the biggest sector of the economy. And it can drive some real consumer recovery in certain places. So look for that argument to develop.

GREGORY: OK. We're going to take a break here. A short segment. Coming next, a team of former rivals. President-elect Obama is considering Hillary Clinton for secretary of state. We've talked about it before, we'll talk about it again here. What kind of relationship would they have? And what roles would Vice President Joe Biden and former President Clinton play?

We'll look at all of that when 1600 PENNSYLVANIA AVENUE returns after this.


GREGORY: Tonight, President-Elect Obama is considering Hillary Clinton for secretary of state, but vetting former President Bill Clinton is proving to be a challenge. And the auto industry says it can't wait for a bailout, but would government intervention set a risky precedent, as 1600 PENNSYLVANIA AVENUE continues.

Welcome back to the program. I'm David Gregory. President-Elect Obama met with Senator John McCain in Chicago this morning, but the buzz today has centered once again on his other former rival, Hillary Clinton becoming secretary of state. The Obama transition team is reportedly vetting Senator Clinton, but it's running into many of the same issues raised during her presidential bid: what role would her husband play, and does his post-presidential work pose a conflict of interest?

Joining me now to discuss it, Kathleen Parker, syndicated columnist for the "Washington Post" Writers Group, and still with us, Richard Wolffe, "Newsweek" senior White House correspondent and an MSNBC political analyst. Welcome to both of you. We talked about this before, the fact that former President Clinton in Kuwait over the last couple of days, which is part of the issue here, responded to the idea of his wife becoming secretary of state. Let's listen to that.


CLINTON: She loves doing what she's doing and she's really good at it. She's a really very fine member of the Senate and her grasp of

economics is quite important in the U.S. Congress now. But if she decided if he decided to ask her to do it and they did it together, I think she'd be really great at being secretary of state. But I have no Earthly idea what is going to happen. I have been here. If I did have any idea, I wouldn't tell you. I have no business talking about this.


GREGORY: All right. I love the idea that he has no idea because he's been there, as if he couldn't pick up the phone. Do you like this idea?

KATHLEEN PARKER, "THE WASHINGTON POST": They have no telephones in Kuwait. I do like this idea. I think it's actually fairly brilliant on Obama's part for lots of reasons. I mean, he-it makes him look wise and courageous. I think it's a serious consideration. I don't think this is just a pay off. Clearly, he thinks she's smart and capable and, you know, as a by product, he sort of gets her out of the Senate and out of the political realm. So it's a plus-plus-plus for him.

GREGORY: A lot of these questions about former President Clinton, in the narrow sense, have to do with his foundation, the foreign money that he's attracted, a lot of Arab countries and others, and the question of influence peddling. Are they buying influence with the former president to get to the secretary of state. How does the Obama team get past that?

PARKER: Well, you know, as always, the big problem for Hillary is Bill. What they're going to have to do is I'm sure they'll have some sort of arrangement where he has to agree up front that he will not do business in any country while she is secretary of state, should she accept and it be offered. And there would have to be some sort of-

GREGORY: But how limiting for his philanthropic work around the world.

PARKER: Well, it may not be limiting in terms of the philanthropy. Perhaps there will be some sort of approval process that he'll have to go through. But as a preliminary measure, he is going to have to open his books to some degree, and maybe it's under one of these sort of arrangements like McCain's health plan, where you can look at them for 90 minutes and not take notes. But there has to be some kind of arrangement up front.

GREGORY: What's interesting, Richard, is since we've talked about all of this, what has not been talked a lot about is the fact that he ran against Hillary Clinton for her hawkish views, saying that she got it wrong, that her judgment was wrong. What does that say about the kind of foreign policy team that he might be building?

WOLFFE: Well, remember that a lot of his arguments, a lot of his positioning was backward looking, as the Clinton people ultimately exploited in the end. It wasn't forward looking, because on the forward looking stuff, what you do about Iraq and about negotiations, they were really in the same place. In his one area where they disagreed, which was actually discussing with foreign leaders, sitting down in the first year without preconditions, the Obama campaign fudged it. In the end, they said, well, we'll have preparations, but maybe the whole preconditions thing we'll talk about later. So the differences between them on foreign policy was not great. What there really was was a difference on a political style.

GREGORY: If anything, she was more-she was a lot harsher on him about this talk of negotiation. I mean, she was to the right of him on most of these issues of diplomatic issues and Iraq.

WOLFFE: Right. The question here on style is what kind of manager would she be. There's not just a foreign policy piece to this. As you say, I think she will toe the line. She sticks to her briefs. She is very disciplined. She'll follow his policy, because it's pretty close to her own position anyway. But there's a big management element to that job. How do you manage the Foreign Service? The Obama folks are very keen to set up a better management process for the National Security Council inside the White House. They want to make that a serious management position, which they think has been lacking in the Bush years. But the Foreign Service, the State Department is a big bureaucracy in and of itself. It needs a good management hand on top of it.

GREGORY: Here's the question about personality. I mean, you know, Richard and I covering the Bush White House, where you had such huge figures all around, you know, a vice president who loomed so large, as Joe Biden will on the areas of foreign policy, Don Rumsfeld over at the Pentagon and then Colin Powell at State. You know, for all the talk that he was marginalized, he did get the president to go to the United Nations in the run-up to the war in Iraq. So my question is what kind of players, if he keeps Gates, for instance, what kind of personalities is he setting around himself on foreign policy, where he's going to have two huge issues, Afghanistan and Iraq, to get started.

PARKER: Yes, well, that's all yet to be seen. You know, Hillary-I want to just touch a moment on what Richard was saying. Hillary's a tough personality in her steely sort of core. It's going to be a good thing because Obama has this softer, kind of laid back feel, and he can sort of send her out as his advance warrior, you know. And I love the idea of her sitting at the table and negotiating with some of these people and being sort of the stern-

GREGORY: Is it a problem, though, is she too much of a superstar?

Does it detract from his star power on the international stage?

WOLFFE: Listen, the man who can get 200,000 Germans to listen to a speech when he's a candidate? I think he'll have no problem getting attention. There is another piece of this, though, which is about the sort of three-headed monster of Biden, Bill Clinton and Hillary here. These people will all be dealing with each other. They get on. They like each other, but that may be a problem he doesn't want to deal with. How do you occupy these people? Who does Bill Clinton report to? How do they interface with Joe Biden, who has his own foreign policy background? This is a neat solution of tying them all together.

GREGORY: If you've got a Republican potentially still at the Pentagon in this group-

WOLFFE: Who do they get on with too? Hillary Clinton and Secretary Gates do get on. So there is a neatness to this, if you can square the problem of Bill Clinton and his donors.

PARKER: This is also all part of this approach that Obama has promised to take, which is that we're all on the same team; we have very serious problems; we're going to work together. I think that's part of this gesture toward Hillary.

GREGORY: We're going to take a break here. Thanks to both of you. Coming next, the auto industry wants a bail out. Democrats pushing for it tonight, and the White House is considering it, but doesn't like how the Democrats have gone about it. Should Detroit get a 25 billion dollar boost in the middle of this economic meltdown? We'll debate it with two members of Congress when 1600 returns after this.


GREGORY: Back now on 1600. Big debate about the auto makers. Should the troubled auto industry get a 25 billion dollar bail out? And can it happen before the 110th Congress ends its lame duck session? Tomorrow, auto industry executives plead their case to Congress, as Democrats and Republicans line up on either side of the debate. Tonight, the White House reacted to the Democratic proposal saying this, "we are surprised that Senate Democrats would propose a bailout that fails to require auto makers to make the hard decisions needed to restructure and become viable."

Joining me to discuss whether aid should go to the auto makers are the Jon Tester, Democratic senator from Montana and a member of the Banking Housing and Urban Affairs Committee, and Jeb Hensarling, Republican congressman from Texas. Senator Tester, let me begin with you. Why do this? Why bail out the auto makers at this time?

SEN. JON TESTER (D), MONTANA: I think, David, we're in a situation in this country where we're seeing significant economic turndown and the auto industry plays a key role in our economy. That being said, we've got a Banking hearing tomorrow, as you said. I'll be asking some tough questions to the big three auto companies in-when they're at the Banking Committee. For example, what is the money going to be spent on? Is it going to be spent in this country or some other country? Executive compensation?

Back in '79, when we bailed out Chrysler, Lee Iacocca said, I'll take one dollar, and then we'll meet some criteria to move the companies forward. You know, if there was anything that was wrong with the 700 billion dollar bail out, and there was plenty wrong with it, the fact that there were no strings attached and we end up spending money-giving money to banks, for example, to buy out banks, instead of putting liquidity into the credit market, and giving AIG executives more executive compensation than they deserve, I think, is a prime example. We don't want to make that mistake again. In fact, I just sent a letter off to Secretary Paulson today, saying I need some questions answered in regard to, you know, consolidation of the banking industry, using taxpayer dollars to do it.

GREGORY: Why isn't the bail out not working? We have one bail out on the books right now, which is to buy these distressed assets. They decided we're not going to do that. Then they're putting capital directly into the banks. And the consumer, I don't have to tell you, is totally shell shocked right now. Investors are not coming back. People are not buying anything. Retailers are preparing for an awful holiday season.

TESTER: I think the reason the bail out hasn't worked up to now, and I hope it does at some point in time, is I don't think we invested it where it needed to be, and that's in infrastructure and the middle class, small business and working families. I think if we invest in infrastructure, sewer, water systems, roads, bridges, that employs people, makes the economy is stronger, and really invests money into the small businesses and working families. I think if they've got jobs and they've got money, they're going to do things like buy automobiles and spend money in the market places, especially with Christmas season coming on.

GREGORY: But when it comes to the auto makers, specifically, isn't this more than executive compensation? Isn't it about the viability, as the White House statement indicated, the very viability of these companies that should be established, a real long-term plan before you give them a bridge loan of 25 billion dollars? It just seems so politically motivated to say, well, we just can't experience any more of this pain. How much pain are we going to tell Americans they can avoid before we face the reality of what this economy is dealing us?

TESTER: It's a two-edged sword, David. There's real impacts if the auto industry goes down. On the other hand, there's impact on the taxpayers if we put forth a bail out package. That's why I will tell you that I'm not opposed to a bail out package, but it has to be structured right. It has to be specific. There has to be strings attached, so we make sure it does the job that we want it to do. I think that's really the bottom line.

GREGORY: Why couldn't a bankrupt auto maker survive in the market place? Would people not buy cars from him anymore?

TESTER: It's interesting you say that. I just bought a pickup here about a week ago, and, to be honest with you, the identical pickup to what it was in 2004 and the mileage on it is not what the 2004 model was. I don't think the industries have lived up to the expectations of the public, and I think that they need to revamp their business model and hopefully they will. If they don't, I don't think any amount of money to bail them out will get the job done.

GREGORY: All right. Senator Jon Tester of Montana, a pleasure to have you on the program.

TESTER: Thank you.

GREGORY: Let's turn now to the Jeb Hensarling, Republican Congressman from Texas. Congressman, where do you stand on this bail out idea?

REP. JEB HENSARLING ®, TEXAS: David, it's a very serious situation but the economy, everybody is hurting. Show me an industry that isn't hurting. I don't understand why we are going to specifically help the auto industry, as opposed to the airline industry, as opposed to some other industry.

You start to ask the question, where will the bail outs finally end? Again, I know of no industry that isn't in some type of hurt. And to some extent, Detroit has brought it upon themselves. They are paying roughly two thirds more on their labor costs than their competitors. At any survey of consumer satisfaction, they score toward the bottom.

Now, I drove an American made car over here to this interview, but, clearly, a lot of folks don't believe they're getting high quality. They don't believe they're getting good value. And as you brought up in the earlier conversation with the senator, nobody wants to see them go bankrupt, but sometimes bankruptcy allows reorganization and allows them to come out a stronger, better, leaner model that maybe can survive.

GREGORY: And that all may be true. I read an analysis today, though, about the proposition; there is short-term pain for longer-term gain if you can live that long, metaphorically speaking. In other words, the short-term pain of losing our auto makers and the spill over effect to their suppliers and to other economies that depend on this industry could be so severe, could be so intense at a time when the consumer is already reeling, the economy, perhaps, just cannot absorb it right now.

HENSARLING: Well, David, that's the too big to fail argument. And it's not one I buy into. We've heard about it about airlines too. There used to be a brand of airlines, a Pan Am, Texas International, they didn't work out too well. But ultimately, somebody went in and bought up the assets, and the airplanes, and reorganized them, and people are still flying. People are going to end up making cars. Now, I wish they were made by American made companies, but Toyota employs almost 2,000 people in San Antonio, Texas, in my state, producing cars that people like. And another important point, David, is two thirds-actually more than two thirds of the new jobs in America are created by small business. And where is the aid package for small businesses? I mean, we could create two million small businesses with what we're talking about with this bail out package. The average capitalization is 25,000 dollars for a small business. Detroit just got 25 billion on another incentive package. There is no plan in place. There's no guarantee this is going to work. If you're going to spend Washington Monday in this way, and it's really the taxpayers' money, why don't you give it to small business? That's the job engine in America.

GREGORY: All right. Congressman, thank you very much. The auto makers, the CEOs, are going to be on Capitol Hill tomorrow. They're going to be pleading their case. We'll be watching. Thanks very much for being here tonight.

HENSARLING: Thanks for having me.

GREGORY: Coming next, fighting al Qaeda. How will President-Elect Obama's approach differ from that of President Bush? Will he be able to bring Osama bin Laden to justice? We're going to look at that on the program.



UNIDENTIFIED MALE Where does capturing or killing Osama bin Laden fall?

OBAMA: I think it is a top priority for us to stamp out al Qaeda, once and for all. And I think capturing or killing Osama bin Laden is a critical aspect of stamping out al Qaeda. He is not just a symbol. He's also the operational leader of an organization that is planning attacks against U.S. targets.


GREGORY: The president-elect, last night on "60 Minutes," speaking of his desire to capture or kill Osama bin Laden. Another top priority for Obama selecting his national security team. The president-elect has noted that during White House transition periods there can be, quote, times of vulnerability to terrorist attacks. Joining me now is Gary Berntsen. Gary is a retired senior CIA operations officer, who has served as a counter-insurgency advisor in Afghanistan. He just returned from a year-long trip to that region. He's also the author of "Human Intelligence, Counter-Terrorism and National Leadership, a Practical Guide." Welcome to the program.


GREGORY: Gary, if he wants to stamp out al Qaeda, a new president, where does he start?

BERNTSEN: Well, he starts with looking at Afghanistan and Pakistan as a single entity. And he needs to recognize that we're not just fighting the Taliban. We're fighting the Taliban, al Qaeda, the Hakani (ph) network, Lashkari Taiba (ph). There's a lot of groups there.

We're going to need an approach in the tribal areas that was very much like the approach that we used in Iraq in al Anbar province. You are going to have to buy some of these people off. We're going to work with them. We're going to have to develop relationships. There's going to be risks in doing this. But we are going to have people working on the ground in Pakistan with the Pakistani tribes.

GREGORY: But that's where his focus has to be? In other words, we've spent the last several years talking about the al Qaeda threat in Iraq and yet Afghanistan seems-Afghanistan-Pakistan seems to be where you're going after Osama bin Laden specifically, and al Qaeda more generally.

BERNTSEN: During that period in Iraq, we lost control there, and Iraq made that the center in the war on terror. They were sending in thousands of people. They've stopped sending thousands of people because they know they've lost there. Their focus now is the Pakistani tribal areas, because they're using it to destabilize the Afghan government, which we're trying to hold up.

So Obama recognizes what he's going to have to do there, and he's got people that-some of his advisers are clearly focused on that.

GREGORY: What can he accomplish? What can a new administration accomplish in the tribal areas that the Bush administration was not able to accomplish, with the head of Pakistan, Pervez Musharraf, who was an ally, who was on board, doing as much as he could do to fight terrorism?

BERNTSEN: Part of the problem with Musharraf is that not only was he allied with us, to stay in power he had to ally himself with the MMA, the Muhatahded Monjala Somal (ph). It was a conglomeration of six religious groups that themselves were allied with the Taliban. He'd do something for us. He'd do something for them. Something for us, something for them. This relationship now has ended with Zardari in office. And the MMA, during that period with Musharraf, had power in the northwest frontier province. They lost the local election three months ago. So bin Laden and al Qaeda are going to receive a lot less local support on the ground. And Zardari is now using the Pakistani army. There's been a lot of fighting there recently. These things did not occur during the Musharraf period.

GREGORY: We haven't heard from bin Laden in quite sometime. He tried to intervene in 2004's general election there at the end of the election. Indeed, he did have some impact, if you looked at the polling. We didn't have a return of that in 2008. Is he the kind of priority that he was in the past?

BERNTSEN: Of course he's a priority. Anyone that killed 3,000 people in the United States will be hunted until his last days, until we can prove he is dead. The Bush administration made significant efforts. They made mistakes, too. There's going to be challenges for Obama. To do this, there are going to be challenges and risks and dangers on the ground in Pakistan. Remember, in Afghanistan, we can bring a full weight of the U.S. military to bear because we're there. Our advisers in Pakistan are going to be at risk as they do this.

GREGORY: What kind of fears do you have about al Qaeda or other affiliated terrorist groups trying to test a new administration? We saw the kind of-in retrospect, the kind of planning going on in the first year of the Bush administration leading up, of course, to 9/11. What kind of activity is out there now?

BERNTSEN: The planning for 9/11 began well before the Bush administration was in office. And if they were able to execute something against an Obama administration, it would have begun before his administration. These guys do operations over many years. I think that many people would never have believed seven years ago that we would have gone this long without an attack. And I know a lot of people have been very critical of the Bush administration for the Patriot Act and some other things that they've done. But the point is they've made the United States, in the eyes of terrorists, to be a denied operating environment. They're nervous here. They don't have the same sort of support on the ground. Places like London, where many, many more people went through training camps and are back in the west-Europe is a much more dangerous place than the U.S. That's more vulnerable and we're likely to see U.S. interests outside of the U.S. be attacked before they attack them here, because we have done a lot of work here.

GREGORY: Quickly, how would you define the difference in the counter-terrorism approach that you are seeing develop in an Obama administration?

BERNTSEN: Well, I don't think we've seen yet what's been developed. But of course his advisors are, on the political side, Lee Hamilton and Tim Roemer. They're both great guys. I've never met Hamilton, but I know Tim Roemer and I respect him deeply. From inside the agency, former agency officers, you're looking at John McLaughlin and John Brennen (ph), who are mainstays of the agency that were very closely tied to George Tenet. You know, they're professional intel officers, have done this a long time. They're smart guys. And I don't see real change per se. What I see Obama having done is reached back for experience on this. You know, he may be talking change in terms of the economy or domestic policy, but with the people he's got around him, it looks like he's staying fairly conservative.

GREGORY: Gary Berntsen, thanks very much for your expertise tonight. Appreciate it.

BERNTSEN: It's been a pleasure.

GREGORY: That's the view from 1600 PENNSYLVANIA AVENUE tonight. I'm David Gregory. Thank you for watching the program. "HARDBALL" with Chris Matthews is next.


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