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'1600 Pennsylvania Avenue' for Tuesday, November 18, 2008

Read the transcript to the Tuesday show


Guests: John Harwood, Steve McMahon, Michelle Bernard, Robert Reich, Christopher Hitchens, Dylan Ratigan, Sen. James Inhofe, Sen. Debbie Stabenow

DAVID GREGORY, HOST: Tonight, turning the page or stuck on the Clinton chapter? As the president-elect adds another high-profile name to his cabinet today, he is fending off concerns about whether restoring some top Clinton figures to the administration including the likelihood of putting Senator Clinton at the State Department is really change you can believe in.

Also tonight, the Obama girls get their first tour of their new home.

That, of course, being 1600 PENNSYLVANIA AVENUE.

Let's look at the countdown. Sixty-three days to the inauguration of President-elect Obama.

Welcome to the program tonight. I'm David Gregory.

The headline, "Laying Down the Law."

NBC News has confirmed that Eric Holder has been offered and has accepted the position of attorney general in the new administration. If confirmed, Holder will make history by becoming the first African-American to lead the U.S. Department of Justice.

He's no stranger to DOJ. Holder served as deputy attorney general during the Clinton administration during Janet Reno. Before that, he spent years as a federal prosecutor, a trial court judge, and U.S. attorney. Holder also ran Obama's VP search.

Although he faces a sizeable post-election Democratic majority in the Senate, there is one possible hang-up he may face during the confirmation process. It involves what happened at the end of the Clinton administration, the controversial 2001 pardon of fugitive financier Mark Rich in the final hours of the Clinton administration. It was something that Holder said he would have done differently.

Joining me now quickly with reaction, the panel tonight: MSNBC political analyst and president of the Independent Women's Forum, Michelle Bernard; Democratic strategist Steve McMahon; as well as John Harwood, CNBC chief Washington correspondent and political writer for "The New York Times."

John Harwood, Eric Holder, how does it grab you?

JOHN HARWOOD, CNBC CHIEF WASHINGTON CORRESPONDENT: Well, he was the front-runner for the job. I think this is going to get a good reception from Democrats and Republicans.

I talked to an aide to a senior Republican senator tonight who said, well, Holder, in the confirmation process, may have to come up here and say that Mark Rich pardon was a mistake, that he shouldn't have acted the way he did. But of course, Eric Holder has already said that.

I think this is going to go through very smoothly when they choose to announce it. I do think it's evidence, though, the way it came out today, that they've lost control of their message a little bit, as they have on this Hillary Clinton story as well.

GREGORY: Yes. You have in this rollout process, Steve McMahon, something that, A, has a gotten out of their control; B, they recognize some potential downside to Holder. Pete Williams has reported that there has been an effort to sort of run some traps on Capitol Hill and see how this Rich pardon would boomerang back against them. And so far so good in terms of reaction. But nevertheless, getting out there in a way where they did it before, putting out their economic team, which is what the goal was.

STEVE MCMAHON, DEMOCRATIC STRATEGIST: Yes, this is one of those appointments where, if they were going to make it, they needed to run some traps. And, of course, as soon as you start running those traps, then the media is going to find out because everybody is going to pick up the phone and call their favorite reporter.

And that's, I'm sure, exactly what happened here. But had they not gotten back a pretty favorable report-and I think John Harwood is exactly right, they're getting it not just from Democrats, but from Republicans-then they probably wouldn't have moved forward. But I'm sure they got a good report. He's eminently qualified, he's going to make history, and I think it's a great pick.


Michelle, this is a question we'll ask throughout the program tonight, as I did at the very top. Is this change you can believe in?

The Obama team is going to face these questions about big-time Clinton administration people into the fold now in some of the biggest jobs in the cabinet. Eric Holder certainly fits that bill. He worked for Bill Clinton in Janet Reno's Justice Department.

MICHELLE BERNARD, MSNBC POLITICAL ANALYST: Yes. This is going to be a difficult thing for the Obama-President-elect Obama to get through, simply because it's not as if there is a long cast of characters for him to go to.

There's a delicate balance that they're going to have to strike between people that do have some experience, that understand how government runs, but also who do not have the taint of either being ex-Clinton aides, or just people who have been in and out of government, that people think that they're going to be getting the same old thing. You know, Bill Clinton II, so to speak. So it will be difficult.

But, you know, with the picks that he's made, particularly Eric Holder, I mean, he does have some problems in term of the Rich pardon, but he's a stand-up guy. He has got an excellent reputation as a lawmaker, as a policymaker. And I think that at least when we're talking about Eric Holder, we can say that this is change that you can believe in.

GREGORY: John Harwood, quickly here, is the Justice Department about to be back on the map in terms of domestic crime? After 9/11, a big focus on counterterrorism so that the criminal division turned away from some of the primary matters that it had been doing there before.

HARWOOD: Well, I think one of the things you're going to see a focus from the Justice Department on, in conjunction with the U.S. attorneys, is corporate crime. And especially at this period where we've got so much difficulty on Wall Street. You had a campaign where both candidates were talking about greed and corruption on Wall Street. I think that's one of the things that's squarely on Eric Holder's plate.

GREGORY: All right.

Panel, stand by. We'll get to you later on in the program.

I want to turn now to the other big news of the day. We talked about the economy and anger about this $700 billion bailout, which is really, of course, over $1 trillion if you look at some of the other money that had been committed.

Today, the House Banking Committee, led by Chairman Barney Frank, lambasted Treasury Secretary Paulson for not using any of the bailout to buy up any bad mortgages. That's what the FDIC wants, as was originally intended.

Listen to this exchange.


HENRY PAULSON, TREASUR SECRETARY: I am going to keep working on this and looking for ways to use the taxpayer money as they expect me to here with regards to foreclosure mitigation. We have been, you know, as recently as last week, taking a step which I think will have...


Mr. Secretary. Those are not substitutable, because I will tell you this -

and I apologize for taking the time-it is nobody's view that we have been as successful as we need to be for the sake of the economy in reducing foreclosures. We have a very large pot that was intended to be part of that effort that's going on tap.


GREGORY: Barney Frank and Secretary of Treasury Paulson going at it.

Meanwhile, the CEOs of the big three American automakers are before the Senate Banking Committee to beg for their own rescue package. Not just Wall Street. Democrats want to take $25 billion from the existing bailout pool of money, an idea Secretary Paulson rejected today.

Joining me now to put it under perspective, Robert Reich, secretary of labor under President Clinton and the author of "Supercapitalism: The Transformation of Business, Democracy, and Everyday Life."

Secretary Reich, welcome back.


GREGORY: Are we going to remember this period when Secretary Paulson fought for and got what amounts to $1 trillion to try to prop up the economy as the period when the government was able to stave off a full-blown depression, or not?

REICH: Well, we don't know what would have happened had there been no major bailout of Wall Street. Maybe it would have been much worse. But things are not much better than they were a month and a half ago, when Paulson went to Congress and said we need the money or there will be economic Armageddon.

Money is not flowing. Credit is not flowing, whether you are a householder in danger of losing your home, or you are a college student in danger of losing your tuition because you can't get a loan, you're a small businessperson trying to get a loan. You're almost anybody on Main Street. That money is not going from Wall Street to Main Street.

GREGORY: And why not? Where is-you know, Paulson is going around saying that we've succeeded, we've succeeded at fixing essentially the financial system. But he is not addressing this question of confidence and why confidence hasn't returned, why capital has not returned, why the investor is not yet returning to the markets, and why lending is not moving at an appreciable rate, and why the consumer is shell-shocked.

REICH: Well, one big problem, David, is that a lot of this money, the $300 billion, has already been committed by Hank Paulson. A lot of this money has gone to the banks, and the banks have turned around and increased dividends to shareholders in an effort to boost share prices, or they have paid bonuses and deferred compensation to their executives, or they are planning to buy another company with the money.

They have not committed themselves to use this money to actually make more loans. Now, that was the entire purpose of the bailout to begin with, and yet the banks really are not on board.

GREGORY: What about what come next? Paulson is saying that he's going to save about $350 billion of this, which Congress still has to authorize, for the new administration, for President-elect Obama to come in and use. What kind of challenges facing the Obama administration as it walks in the middle of this entire bailout effort-and now you have the automakers who want their piece of that pie as well, and Obama is for that. What is facing them and how quickly and how specifically do they have to act?

REICH: Well, first of all, this is my view. I think that the next administration is going to have to act very, very quickly with regard to not only the second half of this big bailout, the next $350 billion, and make sure it does get to homeowners and make sure it gets to Main Street, rather than just to the banks, but also there will probably have to be a big stimulus package going to-buying, you know, infrastructure and new jobs.

And after all, government is the last spender. I mean, consumer aren't spending any money anymore to speak of. Investors are not investing it. Exports can't pick up the looseness of the economy. You've got to rely on government at a time like this to be the spender of last resort. And ideally, the government is going to spend big and spend on things that grow the economy like infrastructure.

GREGORY: Why should-I remember during the campaign, President-elect Obama criticizing President Bush after 9/11 for telling Americans to go shopping, when, in effect, he is in the very same position. There is a lot of irrationality in the marketplace as well.

Why shouldn't President-elect Obama stand up and say to the consumer, look, Christmas is coming, go shopping, it's important for the economy?

REICH: Well, the interesting thing here, and it's a paradox, you know, what is rational for the individual right now is to hold back, to tighten your belts, not to borrow any more, even if you could borrow, to basically stop all discretionary spending because you don't know if you're going to have a job, you don't know what your income is going to be, you don't have any savings to speak of, you might be facing retirement in another five or 10 years. But it's irrational from society's standpoint.

What may be rational for the individual or the individual household when millions of people, 200 million households do it, it becomes irrational because it means that there is not enough demand in the system. There's not enough people out there buying things to keep companies making things. That's why government, as I said a moment ago, has to be the spender of last resort.

GREGORY: Right. But at the same time, the president-elect has an opportunity and a responsibility to be straight with the American people about how much worse it's going to get and what kind of sacrifice, if that's the right way to look at it, that the American people have to be prepared for as this economy continues to worsen.

REICH: Yes, I think that's absolutely right. Raising expectations about a quick turnaround would be absolutely wrong. It would be dangerous, but it also would be misleading, because I don't think there's going to be a quick turnaround.

And certainly President-elect Obama is not making that suggestion.

Just the opposite. He is urging people to be patient.

You cannot simply say, we have nothing to fear but fear itself, because there is a lot to fear out there right now. A lot of jobs are being lost. There are likely to be even more jobs lost in the future.

But things that the government can do, for example, extending unemployment insurance, making sure the people who are losing their job do have unemployment insurance to keep their families going. Making sure that state and local governments-they're now being starved and are cutting all sorts of public services-making sure that they have enough money to keep those public services going at a time when those public services are critically important.

There are things that have to be done. And government has to be, again, the one entity that is in existence that people can rely on to get these things done.

GREGORY: You're talking about the government being the spender of last resort. Does the government have to think seriously about the red ink, about the deficits that are being piled up right now, especially as President-elect Obama has some pretty big spending plans that go beyond fixing what ails the economy?

REICH: Well, yes. This is my opinion, but it seems to me that when you have an economic crisis so intensely, as we do right now, when you have so many people unemployed-unemployment is likely to go way up next year -- so many factories that are shuttered, so many offices that are not being used, you have got to go into deficits.

Deficits are dangerous when the economy is going full speed ahead. But when the economy is dead in the water, deficits are actually a good thing.

Franklin D. Roosevelt understood this, eventually. Most presidents understand it. (INAUDIBLE) is not completely outmoded.

You have to keep the economy going, and government spending is the one thing that will do it. Deficits may be good in this kind of a situation.

GREGORY: All right. Robert Reich, as always, thank you very much for being on the program.

REICH: Thanks, David.

GREGORY: And later on we're going to talk about the big three automakers. Should they get a bailout from the taxpayer? That is going on, on Capitol Hill, this afternoon.

But coming next, Christopher Hitchens on why he believes picking Hillary Clinton for secretary of state would be a "ludicrous embarrassment" for President Obama. He made those comments on "HARDBALL," here on MSNBC last night. It's something everybody is talking about today. He'll talk about it some more on 1600, right after the break.


GREGORY: You've been following the buzz on all of this. Anticipation continues to build as to whether President-elect Obama will select Senator Hillary Clinton, his nemesis of the campaign trail, to be secretary of state. Although this possibility has been applauded by many, my next guest argues strenuously that she should most definitely not be the one to represent an Obama administration on the world stage.

Joining me now, "Vanity Fair" columnist Christopher Hitchens.



GREGORY: We talk about the Obama brand. And a lot of this has been defined by this team of rivals concept, that he can have his enemies close by, and what does that say about him. But it's kind of the theme of the program tonight as you look at Eric Holder, as you look at the possibility of Hillary Clinton, to ask the question, at what point does the brand of the campaign trail, the Obama brand, get undermined with the selection, particularly of somebody like Hillary Clinton?

HITCHENS: Well, yes. Phrasing it another way, how does the idea of change hang with the idea of, let's appoint all the friends of Mark Rich?

Remember, we're just about to enter presidential pardon season in the Bush term. And by the way, speaking ahead a bit, I bet that isn't going to be pretty. I think a lot of people who would have otherwise been indicted for torture and illegality are probably going to be told they can walk.

But to remind people at this point of the lowest stage of the Clinton administration, when Eric Holder signed off at the Justice Department on the pardon of this fugitive-shall we call him financier? -- who had also given a rather large loan that didn't seem to be repaid to one of Hillary Clinton's brothers, who in turn with the other brother, had gone for a walnut monopoly-or was it a hazelnut monopoly in the Republic of Georgia, odd bits of the caucuses involved in American foreign policy here. Plus donations to the Clinton Library.

It builds up and it goes on. Is this how the president-elect really wants to start?

GREGORY: The question...

HITCHENS: If there was some foreign policy experience or brilliance Hillary Clinton had ever shown, maybe we would overlook the fact that she and her husband have never met a foreign political donor they don't like and haven't taken from, from the Riyadi (ph) family in Indonesia, to numerous Chinese donors who left this country rather than show up for the hearings on it. But I don't know of any such expertise on her part except her pretense to have been under fire in Bosnia when she had not.

GREGORY: What worries you about not just Senator Clinton, but the former president having this kind of access to the world stage? It's not that they are going to have their own portfolio. They're still going to be representing the president of the United States, who is hugely-as popular as the Clinton are on the world stage, Barack Obama is the "it" guy right now, arguably. No?

HITCHENS: Surely. And this is a couple who-it makes me wonder about whether there's a masochistic tendency in the president-elect-this is a couple who openly played the race card on him throughout the election. But even if we overlook that, just look at today's and yesterday's "New York Times," at the list of people with whom former President Clinton has acquired a tremendous burden of debt.

These are people who paid him all the time, from odd parts of the Middle East, to strange donors all over the place. My colleague at "Vanity Fair," Todd Purdum-anyone can Google this. Just put it in "Purdum, Clinton." See if you can bare to read the sort of friendships that the former president is having. It's undignified to think about it.

GREGORY: And what's the impact on a Secretary of State Clinton because of those associations? Can they not put up a firewall between them?

HITCHENS: Well, as I say, if it hadn't involved her, too, the campaign finance scandals-we're not talking about the ongoing stuff, Mr. Clinton's speaking fees in the Gulf and elsewhere. We're talking about previous convictions in the Clinton fund-raising scandal. If it wasn't for the fact that she couldn't refuse her brothers everything-sorry, anything, couldn't refuse them anything. Anything they wanted, they seem to have gotten, including some kind of deal from Mark Rich.

All of this might be forgivable. Or it might assume a different proportion, David, if it wasn't for the fact that this woman doesn't really have any foreign policy experience worth mentioning.

And what is memorable about it is pretty bad. We all remember, and we should, that when Les Aspin had then gotten the Clinton administration very nearly to do something about the horror in the Balkans that belatedly the Clinton administration did decide to stop, the Clinton/Gore administration, they delayed it because Hillary Clinton said, no, no, don't do it, it will take away attention from my brilliant, wonderful health care program that we all remember so well.

At least on health care, she knows enough about the subject to have really changed American health care for the worse in her time. But foreign policy, she doesn't even know that much.

GREGORY: But she is respected in the Pentagon.

HITCHENS: It's true if you say so.

GREGORY: She certainly has an important name on the world stage.

HITCHENS: That's true.

GREGORY: And is more hawkish than the president she might serve.

HITCHENS: It's true that she has got a major name on the world stage.

That's true by definition.

It's only true that she's respected in the Pentagon if people go around saying so. I've never heard that before, I must say.

On some things she's more hawkish than the president-elect, yes. But she tends to have a reputation in what I would call an opportunist manner. I mean, who really thinks that she felt that strongly about Iraq? She just didn't want to cast her vote the other way.

GREGORY: We'll leave it there.

HITCHENS: For example...


HITCHENS: ... that said...

GREGORY: Christopher Hitchens, thank you so much from "Vanity Fair."

Appreciate it.

HITCHENS: Thanks, David.

GREGORY: Glad to have you on the program.

Coming next, both parties have Georgia on their minds. Some of the political world's heaviest hitters are going to hit the stump in the run-off race between Republican incumbent Saxby Chambliss and Democratic challenger Jim Martin. It's an important race as the Democrats try to get 60 in the Senate, and it's coming up next in "The Daily Briefing."


GREGORY: Back now with a look at what's going on "Inside the Briefing Room" tonight.

An all-star lineup heading to Georgia in the coming days to campaign in the state's Senate runoff between Democrat Jim Martin and the incumbent, Republican Saxby Chambliss.

First up, Bill Clinton, fresh off a trip to Kuwait, will hit the trail for Jim Martin, campaigning for him in Atlanta tomorrow. Rounding out the week for Martin, Al Gore will campaign for him on Sunday.

On the Republican side, it's Mitt Romney getting into the fold. He's going to head to Georgia Friday to campaign for Chambliss in both Atlanta and Savannah. Romney's political action committee has already contributed $5,000 to Chambliss's runoff campaign.

Early voting began yesterday in the December 2nd runoff.

And in first family-elect news, Michelle, Malia and Sasha Obama, along with Michelle's mother, were in Washington today looking at schools for the girls. And at the invitation of the first lady, Laura Bush, they visited the White House once again. Malia and Sasha got their first look at what will be their new bedrooms come January when they move into 1600 Pennsylvania Avenue.

A short segment here.

Coming next, do the big three automakers deserve a big-time bailout?

That debate ahead.


GREGORY: Tonight, Detroit's big three on the edge of collapse. The auto makers came before Congress today with their hand out, arguing they are too big to fail. Might they have made it if Wall Street hadn't collapsed? The debate about the future of one of America's most critical industries and the taxpayer burden as 1600 rolls on.

The back half of the program now. I'm David Gregory. Welcome to 1600 PENNSYLVANIA AVENUE. Today, the president-elect and the vice president-elect had private meetings in Chicago during the transition, while here Washington, law makers were expressing anger and frustration about the bailout. The House Banking Committee put the Treasury Secretary, Henry Paulson, and Fed Chairman Ben Bernanke through the ringer about the trillion-dollar bailout, and the Senate Banking Committee pulled no punches, grilling the heads America's big three auto makers, who are asking for 25 billion dollars of assistance. Listen.


SEN. CHRIS DODD (D), CONNECTICUT: Their discomfort in coming to the Congress with hat in hand is only exceeded by the fact they are seeking treatment for wounds that I believe, to a large extent, were self-inflicted. No one can say that they didn't see this coming.

SEN. RICHARD SHELBY ®, BANKING COMMITTEE: Is 25 billion dollars, a lot of money to me, is that enough? Is this the end or just the beginning? Will it be used to improve their business model, which has been a failure, and product lines? Or is this just life support?


GREGORY: Joining me now, Dylan Ratigan, author of cNBC's "Fast Money." Hey Dylan, thanks for being here. I know it's kind of late for you after a long day. Put some of this in perspective for me, because the auto maker piece of this is financially small compared to the whole picture, a trillion dollars. You've got Bernanke and Paulson on Capital Hill saying, no, we've pulled the country back from the brink. Is that right, because it doesn't feel that way.

DYLAN RATIGAN, CNBC'S "FAST MONEY": Let's connect all the dots. They're actually all connected, David, and I think that's exactly where you were headed. We had rule changes that were empowered by our politicians, some of them in public, some of them secret, that allowed for the creation of massive credit around our country. We know that story. Part of that credit river flowed to the auto makers. You saw the zero percent this, zero percent that, I could get you a car. You didn't have to have a penny, much the way I could get you a house. You didn't have to have a penny.

The car makers benefited from that same thing. So you have the credit waved, just as it went to housing, went for cars. When that wave went away, it went away from the cars as sure as it went away from housing. Additionally, David, and you know this as well, the 100 billion dollars plus that is-they are already on the hook for, U.S. auto makers, is fundamentally a health care problem. That number basically goes to benefits for retired health care workers.

So you have-the auto workers are the convergence of America's health care problem, who will pay for the health care of millions of retired auto workers, and the credit problem, without credit, how do you sell cars. And then the final leg in this, a policy failure in Washington, D.C. that encouraged auto makers to make inefficient vehicles over efficient vehicles.

That is the problem, as I see it. I do have some ideas for a solution, but I don't want to talk the whole time, you know.

GREGORY: I want to get to-there is this piece of it. We're going to have a couple law makers to debate the bailout idea. But the overall picture of a trillion dollars to bailout America's economy, and, while Paulson is taking some credit for pulling the economy back from the brink, you have investors who have not come back from the market. You have consumers who are not spending. Where is a restoration of confidence coming from?

RATIGAN: The restoration of confidence will not happen until we actually know how bad it is. The fact that we have yet to define the problem, potential losses in cars, houses, private equity, municipalities, educational institutions, endowment funds at Harvard, et cetera, insurance companies; these number are calculable numbers, David, that no one really wants to deal with. I actually believe it on our backs, my back, your back and everybody else that works in journalism, to demand the answers to those very questions before we start turning on the money gun, because the cowboy approach here of showing up with the banks or with the auto makers is a disaster. It will not only not help, it will hurt, because we're wasting money we do not have.

We need to step into a slower, more deliberative decision making period here, support the mission critical aspects, people in houses, critical banks, perhaps, and perhaps some sort of a life line to allow the auto makers to perpetuate themselves briefly, until we can get concessions from the unions, concessions from management, better cars, better banks, better houses, and all the rest of it.

This country, as you know, David, is about to have to solve more problems at one time than it ever has before. It is on us to make good decisions in a deliberative manner without the cowboy approach, which has gotten us nowhere up to this point.

GREGORY: All right, tough message and a conversation that will continue. Dylan Ratigan from cNBC. Dylan, thanks for the time.

The Senate Banking Committee hearing with the CEOs of General Motors, Chrysler and Ford still going on at this hour. Just a short time ago, GM CEO Rick Wagoner told lawmakers that auto makers are victims of this financial meltdown.


RICK WAGONER, CEO GM: I do not agree with those who say we are not doing enough to position GM for success. What exposes us to failure now is not our product lineup, is not our business plan, is not our employees and their willingness to work hard, is not our long term strategy. What exposes us to failure now is the global financial crisis, which is severely restricted credit availability, and reduced industry sales to the lowest per capita level since World War II.


GREGORY: Joining me now, senators from both sides of the aisle, Senator Debbie Stabenow, Democrat of Michigan. Senator Stabenow testified at today's hearing on the auto industry. Also joining me, Senator James Inhofe, Republican from Oklahoma. Senator Inhofe, I want to start with you. Why are you not persuaded by Rick Wagoner that these companies, while troubled, were pushed to the brink of this point, to the brink of collapse, only because of what we've seen in the last couple of months of financial meltdown that hit them square on.

SEN. JAMES INHOFE ®, OKLAHOMA: First of all, my concern is with the whole 700 billion dollar bailout. This is something that fell on the heels of that. I've often wondered if this would have actually happened if it hadn't been for the fact that we voted-the of two us actually voted against it. But 75 members of the United States Senate voted to give one man, who is not even elected, total power over the-with no oversight-over 700 billion dollars.

And this is a new way of thinking for America. And I just can't-I cannot tell you how frustrating it is, knowing that we're right now in the middle of a short session, just one week. When we leave, I'm afraid all of that is going to be spent. As far as the auto industry is concerned, no, I opposed the bailout. I know, of course, Senator Stabenow will support it. But to me, if do you a bailout, you are not going to be changing the system. You have to change management. You've got to change labor. They have labor contracts that will go on the same as they have in the past. I think that's the genesis of their problem.

GREGORY: But I suspect the senator will argue to you, as she will tell me in just a couple of minutes, if nothing is done right now to head off this short term pain that would come, which bankruptcy, perhaps liquidation of the auto makers, then the impact in jobs alone, perhaps between two and three million jobs lost, affects our economy at a time when we can least afford that kind of pain.

INHOFE: You sound a little bit like Secretary Paulson. He talked about the world coming to an end unless he has the 700 billion dollars and the majority of people bought on to that. It is easy to say that everything is going to-everyone is going to die if this doesn't happen, but I'm not really sure that's true. We're very resilient. We have-companies have to get together. The boards of directors have to change management. They have to change behavioral patterns. And they're going to have change those union contracts.

If they know they're going to get bailed out, they won't do any of that.

GREGORY: Specifically about the 700 billion dollars, you raise a question that I've been raising throughout the program, which his if the financial system was pulled back from the brink, as Secretary Paulson argues, where is the confidence in the American consumer, in the American investor? Where do you, senator, think that restored confidence is going to come from? What has to happen?

INHOFE: What has to happen right now-I do agree with Paulson that things are looking better now. But right now, we have 60 billion dollars of the first 350 billion dollars that has not been spent. What about the second 350 billion dollars? That's my concern. If you want to restore confidence in the American people, we're going to give that money back and return that to the American people, because if we leave town, I can assure you, it is all going to be spent. We're talking about a huge amount of money.

GREGORY: All right. Senator Inhofe, thank you very much. Let's turn the camera to Senator Debbie Stabenow, who, as I say, testified at today's hearing. Senator, you listened to this from your colleague. You also see the political reality. Despite the pleas from the auto makers today, do you think this bailout idea is dead for now?

SEN. DEBBIE STABENOW (D), MICHIGAN: Well, I hope not, certainly. And two and a half million Americans who would lose their jobs if one of the companies went under certainly hope not. But it is tough at this point in time. We're talking about four percent of the 700 billion that Senator Inhofe was talking about, four percent to be focused on the real fundamentals in this economy, which is people working, people having jobs so they can pay for that mortgage you've been talking about.

GREGORY: But senator, it is the return on that money. What are tax payers getting when they bail out companies that have been in trouble for a long time, that, by their own admission, are only in this position because of an economic meltdown? The consumer is not prepared to spend, it doesn't seem right now, on new automobiles. What is the return for the investor, being the tax payer in this case, for companies that re so fundamentally flawed?

STABENOW: Well, first of all, the return is to have an American auto industry to make the new generation of vehicles that will get us off foreign oil. Secondly, this notion that they haven't reorganized or down sized is not true. We lost 400,000 jobs in Michigan because of downsizing, closing plants, right sizing. The UAW has created a contract now that has cut by 50 percent the wages of new hires. And, in fact, they are now, by the end of the current contract, will be comparable with their foreign competitors.

The reality is, there have been cutbacks. They are focusing on innovation, rushing to the future, and we have global financial meltdown. In fact, in Europe, automobile makers, including Toyota, have asked great Britain for 56 billion dollars to get them through this cash flow issue. That's what we're talking. And I might just add, this industry is connected to Defense, connected to Aerospace. We're not just talking about one automobile company. We're talking about the economy going down even further because of a loss of manufacturing jobs.

GREGORY: What is going to be done for these workers, who have to adjust to a new economy of manufacturing, a new market for hybrid cars, more energy efficient cars? Are you satisfied that either these companies or the government, more generally, is preparing workers for this new day, for this new economy?

STABENOW: No. In fact, I don't think we are yet. And that's one of the conversations I've had. I'm so pleased that our President-Elect Obama understands that we need to be focused on job training. We need to be focused on the future for a new kind manufacturing, investing in innovation for the future. We're always going to have manufacturing if we want a middle class in this country, but it is a different kind of manufacturing, advanced vehicles, advanced technologies, battery technologies, alternative fuel vehicles, and wind turbines and solar panels, and all those things that will create the manufacturing jobs of the future.

But if we let manufacturing go down, which is what happens when you talk about a bankruptcy from one of the auto companies, we will lose the middle class of this country. And, frankly, we can't all just have credit default swaps that we're making. Somebody has to make something in this country. And that's fundamentally what this debate is about.

GREGORY: All right. Senator Stabenow, Senator Inhofe, thanks to you both. The debate continues. Thanks for being on the program tonight. Take a break here.

Coming next, choosing Hillary Clinton to be secretary of state would bring a lot of star power to American foreign policy. Would that help or hurt U.S. diplomacy? Our panel is going to weigh in when 1600 returns.


GREGORY: We're back now on 1600 with out panel. Senate Democrats voted today to allow Joe Lieberman to keep his position as chairman of the Senate Homeland Security committee. And back with me now, Michelle Bernard, president of the Independent Women's Forum and an MSNBC political analyst, Steve McMahon, Democratic strategist, and still with us, John Harwood, cNBC's chief Washington correspondent and a political writer for the "New York Times."

Listen to Senator Lieberman about the heat of the campaign. We all know how strongly he supported Senator McCain's candidacy.


LIEBERMAN: Some of the things people have said I said about Senator Obama are simply not true. There are other statements that I made that I wish I had made more clearly. There are some that I wish I had not made at all. And obviously, in the heat of campaigns, that happens to all of us. I regret that. Now it is time to move on.

SEN. HARRY REID (D), MAJORITY LEADER: I pretty well understand anger. I would defy anyone to be more angry than I was. We're moving forward, recognizing that there is a period of time that-in Joe Lieberman's political career that I will never understand or approve. But I also recognize that he has been in public office for four decades.


GREGORY: Steve McMahon, this is incredible theater today. Here you have Joe Lieberman, who spoke at the Republican convention this year, championing Senator McCain's candidacy, attacking Barack Obama and not just on the areas of foreign policy, but delivering the zingers in a campaign speech, and campaigning with McCain around the country. And now he keeps his chairmanship. He is back caucusing with the Democrats on Capitol Hill. If you're a tried and true Obama supporter, you know the back story on this, that Obama said to Reid, let it go. I'm going to let it go. You let it go. Let him back in. How is this going down?

MCMAHON: Well, I think he kept his chairmanship because President-Elect Obama kept his word. And he is interested in moving forward and not visiting the sins of the past. What you saw from Joe Lieberman was about as close to a mea culpa as Senator Lieberman is ever going to get on this thing. I think what you saw from Harry Reid was a little bit of frustration, because, frankly, I think the Democratic caucus was ready to kick him out.

But President-Elect Obama said it is a new day in Washington. We're going to have a new tenor and a new tone. It starts right now. And I want you not to kick him out, but to let him keep his chairmanship. Let's go forward together.

GREGORY: John Harwood, how much of the new tone in Washington-how far does that get Obama versus people saying, look, at a certain point, you have a pretty big total here, and you can't betray the people who put you into this position.

HARWOOD: I think he has maximum flexibility. He made the decision, as Steve just indicated, to set that kind of tone and to set it on day one. Remember the larger promise of Obama's candidacy. It's to move past old battles. He framed in it terms of the Baby Boom generation and the post-Baby Boom generation. I think it applies in cases like this.

I have to say, it sounded a little thin for Lieberman to talk about the heat of the campaign and going too far. A lot of the Democrats see that convention speech as delivered in cold blood.

GREGORY: And yet, Michelle, there he is. He is back. There is real politics at work here as well, which is they don't want to lose Joe Lieberman at this point. They don't have a veto proof majority in the Senate. They would like the get there with some of these outstanding seats. But he is a key cog in the wheel right now for the Democrats.

BERNARD: He is a key cog in the wheel for Democrats, not only because they need his vote, but also President-Elect Obama does not want to lose the support of Senator McCain. There are some issues where Senator McCain and Senator Obama had some common ground. And I am certain-I would have loved to have been a fly on the wall in the meeting between Senator McCain and President-Elect Obama yesterday. But there are probably areas where he is going to be seeking out Senator McCain's help and assistance.

The world knows that Joe Lieberman is probably Senator McCain's closest friend, closest adviser, and he needs to keep both camps very happy and also make sure that he keep as many votes on the Democratic side of the Senate as possible. He needs him in that caucus.

GREGORY: Going to take a break here. The panel comes right back. I want to talk more about Hillary Clinton and whether she is best suited for the job as secretary of state, whether they can vet the former president, whether any of this makes sense in our remaining moments with the panel. 1600 returns after the break.


GREGORY: The debate over Hillary Clinton at the State Department as secretary of state. Our panel is back with us now, Michelle Bernard, Steve McMahon and John Harwood. John, ultimately, this becomes a question at some point of the role of Bill Clinton as well. This is what has hung over the question of her as vice president. What is his role in an Obama administration, where he is out on the world stage? And it was instructive he is asked about it in Kuwait. Rather than just saying, I'm out of it, it was as if he was right back in the middle of the campaign again, saying how darn qualified she'd be for the job. But he was staying far away from it. It took a long time and a lot of his space on the platform to discuss it.

HARWOOD: I agree with you. I think this is one of the questions they have to work through. I think we talked about this earlier in the week. I'm not sure why the consideration of being unable to control Bill and Hillary Clinton as a combo was such a stopper for vice president, but not for State. Having said that, I think she has a lot more strengths than Chris Hitchens was acknowledging in the clips you played earlier.

But I do think, David, now that we've gotten so far out, almost a week of her being in this sort of half nominated limbo state, imagine the risk you would have, the exposure you would have from former President Bill Clinton going rogue if she doesn't get the job.

GREGORY: She's pretty far out there. More to the case against her, Michelle, and then I'm going to ask you to make the case for her. David Ignatius writing in the "Washington Post," something he talked about on this program as well, making the case against Hillary Clinton. This is what he writes, "the idea of sub-contracting foreign policy to Clinton, a big, hungry, needy ego, surrounded by a team that is hungrier and needier still, strikes me as a mistake of potentially enormous proportions. It would, at a stroke, undercut much of the advantage Obama brings to foreign policy. Because Clinton is such a high visibility figure, it would make almost impossible, at least for the State Department, the kind of quiet diplomacy that will be needed to explore options." Michelle, do you have a different take?

BERNARD: I don't have a different take, but I will make the opposite argument. I agree with what Ignatius wrote. However, there is something to be said for the fact that when Senator Clinton first got elected to the United States Senate, she didn't come in as a prima donna. She really came in and buried her nose, did her work, figured out her way in the Senate. And she showed that she can be a team leader. Given that experience and given what we saw when she first got elected, as one of the senators from New York, one can argue that she would be a leader. She would be an appropriate leader. She would follow President-Elect Obama's leave with regard to foreign policy.

Also, she was an incredible advocate for women's issues. If we look at her in terms of arguing on behalf of women, in terms of international women's human rights, there is a lot of good work she could do, particularly in the Middle East on foreign policy issues at the State Department.

GREGORY: It is interesting, Steve McMahon, the vice presidency is one thing, being senator quite another, when you think about the kind of imprint you can have. At the State Department, the opportunity for a kind of shadow government is huge. The number of political appointments that she would be able to make is substantial. There are a lot of people from the Clinton foreign policy establishment who are just standing by, waiting to see if Clinton finally gets the job. What is that distinction between restoration of the Clintons in office and the idea that if you're Obama, you need some experienced Democratic hands if you want to get something done.

MCMAHON: I think that's the fine line that he is walking. Remember, he is looking at past presidents and what they did well and what they didn't do as well. I think Jimmy Carter was one example. He brought a lot of new people into government and it actually, in many instances impeded his ability to make progress. President Clinton is another example. Ronald Reagan had a pretty good model. He brought about half loyalists and half people with government and Washington experience.

I think Senator Obama is demonstrating something about his character. He is willing to take his number one rival in the primaries and bring her in very close, and give her one of the most senior and important jobs in the United States government. And I think that says something about his ability to, number one, get over these things, and, number two, his confidence as a leader.

And remember, Hillary Clinton has been first lady. The president, President Clinton, has been in the White House. They know what this job entails, and they know it requires loyalty. There won't be a shadow government. She won't fill the State Department with her people. The State Department will be filled with Obama people.

GREGORY: All right, we're going to leave it there. Thanks very much to the panel. That's the view from 1600 PENNSYLVANIA AVENUE tonight. I'm David Gregory. Thank you for watching. Back here tomorrow night. Stay tuned on MSNBC; "HARDBALL" with Chris Matthews coming up next. Have a good night.



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