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'Race for the White House with David Gregory' for Monday, December 1, 2008

Read the transcript to the Monday show

Guests: Eugene Robinson, John Harwood, Harold Ford, Jr., Joe Sestak, David Sanger, Katty Kay, Marin Indyk, Jean Chatzky

DAVID GREGORY, HOST: Tonight, Obama unveil his national security team with Hillary Clinton as the marquee player, while Wall Street reacts to news that the economy has been in recession since late last year. The road ahead on financial matters and foreign policy is difficult and unpredictable for the man who prepares to settle in at 1600 PENNSYLVANIA AVENUE. ifty days until the inauguration of President-elect Obama. elcome to the program tonight. I'm David Gregory. he headline, "Snapped." fter a steady decline through the day, stocks sharply snapped Wall Street out of its five-day winning streak. The Dow Jones Industrial Average tumbling nearly 700 points, hitting almost 8 percent by the ring of the closing bell today. This, as the National Bureau of Economic Research confirmed today what so many have already believed to be true, that the U.S. is officially in a recession. And we've been in it since December 2007. More bad news came as the manufacturing index fell to a 26-year low. And Fed chairman Ben Bernanke declared that, despite the government's efforts to get the economy back on track, this economic crisis will continue for some time. All of this on a day that President-elect Obama delivered some headlines of his own, calling for a new dawn of American leadership, as the Vice President-elect Joe Biden and he presented the national security team to the world for the first time. The first announcement was to tap a madam secretary, calling on one-time bitter rival Hillary Clinton to serve as secretary of state. He expressed great faith in her, making it clear he had no reservations about this new partnership.


SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: She is an American of tremendous stature who will have my complete confidence, who knows many of the world's leaders, who will command respect in every capital, and who will clearly have the ability to advance our interests around the world. Hillary's appointment is a sign to friend and foe of the seriousness of my commitment to renew American diplomacy and restore our alliances.


GREGORY: Senator Clinton said she is looking forward to what will be a "difficult and exciting adventure." Alongside Senator Clinton, stood the rest of the national security team, this newly assembled team of rivals. It's a war cabinet that includes current Defense Secretary Robert Gates, who will remain at his post, at least for a time in this new administration; General James Jones, former NATO supreme allied commander, will serve as national security adviser; Republican Governor of Arizona Janet Napolitano will serve as secretary of homeland security; former adviser Susan Rice has been tapped to be the ambassador to the United Nations; and Eric Holder will serve as attorney general. He was made official today as well. Let's turn now to our panel: CNBC Chief Washington Correspondent and "New York Times" correspondent John Harwood; "Washington Post" columnist Gene Robinson; and Democratic Leadership Council chairman Harold Ford, Jr. Both Gene and Harold, MSNBC political analysts. John, I want to start with you. Let's talk about the grim economic news of the day as reflected by the Wall Street's real plunge. The Dow's plunge on Wall Street today. What was the reaction to?

JOHN HARWOOD, CNBC CHIEF WASHINGTON CORRESPONDENT: Well, look, the retail number are not very encouraging for people. The fact that we have affirmed that we're in a recession, that's not a surprise to anybody, but the reality is really setting in and providing a cold shower for Barack Obama as to how difficult it's going to be to turn this economy around. Optimistic scenarios, if a stimulus works, are that we get to zero growth next year. Not positive growth, but zero growth. That shows how tough it's going to be for Barack Obama. And the challenges, as you suggested in the intro, span domestic and foreign policy as well.

GREGORY: Right. And Harold, he has to realize that, if he tries to create some confidence, as he did last week with the announcement of his economic team, how quickly that can be pulled away. Which is to say that confidence is so low across the board when it come to the economy.

HAROLD FORD, JR., MSNBC POLITICAL ANALYST: The president-elect has 50 days before he officially becomes president. He will probably have to make a few more signals, give a few more definitive signals, his economic team. And I might add, the foreign policy team matches this economic team in its ability, its capacity and its imagination. We will test the imagination of this economic team right away. The president-elect enjoyed a great day with his team, from Susan Rice to Jim Jones, and the continuity with Secretary Gates staying on as the defense secretary. But front and center, as it was in his campaign, remains the economy and the markets, and the president-elect is fortunate to have a dynamic and incredibly creative team, and that creativity and dynamism, again, will be tested right away.

GREGORY: But more to the point, Gene, on this question of what this economic team does, you've got a presentation today of a foreign policy team that's very strong, and we'll get into that. But the economy is what's going to dominate his agenda early on. I mean, it could be for most of the first term, even as he looks ahead to a second term. What has he got to be thinking about that he can actually do?

EUGENE ROBINSON, MSNBC POLITICAL ANALYST: Well, I think what he has to think about right now, David, is treading water. President-elect Obama, I think, will consider himself lucky if the economy doesn't further deteriorate seriously in the time before his inauguration. As he has said, his economic team is devising a stimulus plan that he hopes will stop the bleeding, at least, if not turn actually turn things around and make everything better. So I think they will probably orchestrate some of their deliberations and discussions. They'll probably leak some of that, or let some of that come out, and see if the market can be reassured that help is on the way.

FORD: David, two things. I'm sorry. I didn't mean to not answer your question specifically.


FORD: But one, a trillion-dollar stimulus looks more likely. I mean, we were looking at a half trillion to a trillion, and many arguments have been made over the weekend, I would imagine even by this incredible team he's assembled, too. You're going to have to look at how you redefine the principles of TARP, and be clear and, for that matter, lay out the formula.

GREGORY: That, of course, is the bailout plan.

FORD: Right.

GREGORY: We should clear-that's the bailout plan for Wall Street and beyond.

FORD: And as a part of that, part of really a bailout plan for Main Street, as well as Wall Street, but it's going to have to probably include now something that will allow TARP or some government facility to help stabilize the mortgage markets, either by buying outstanding securitizations or buying mortgages directly. But I don't want to get ahead of this economic team, but they're going to have to begin to think-not only think, but begin to share, as Eugene was saying, to give the markets some confidence-more confidence, rather, in this economic team. Last week was great as soon as we saw the market as a scoreboard react. But today, and heading into this week, as John said, the retail numbers don't look good. And for one of the economic bureaus to declare that we've been in a recession since December of last year is very troubling.

GREGORY: All right. Panel, we'll get back to you a little bit later in the hour. Thanks very much. I want to bring in another guest. But today, on a farewell tour in London, Secretary of State Condoleezza Rice had high praise for her successor now, Hillary Clinton. Listen.


CONDOLEEZZA RICE, SECRETARY OF STATE: I know that she will bring enormous energy and intellect and skill to the position. And most importantly, I know her to be somebody who has what you need most in this job, which is a deep love for the United States of America and for its values, respect for differences that we may have with friends and allies.


GREGORY: Joining me now is Congressman Joe Sestak, Democrat from Pennsylvania. He is also a three-star admiral and former director for defense policy for the National Security Council under President Clinton. Congressman, welcome.

REP. JOE SESTAK (D), PENNSYLVANIA: Thanks, David. Good to be here.

GREGORY: I want to play a portion of the press conference today from President-elect Obama, where he addressed this question of a strong team of people, different political backgrounds, people that he's disagreed with. Namely, Hillary Clinton on the campaign trail. How does he work with such a diverse group of people with different views? Here was his answer.


OBAMA: So I'm going to be welcoming a vigorous debate inside the White House. But understand, I will be setting policy as president. I will be responsible for the vision that this team carries out, and I expect them to implement that vision once decisions are made. So as Harry Truman said, the buck will stop with me.


GREGORY: "The buck will stop with me," Congressman. What do these picks say about President Obama's leadership style?

SESTAK: I think it says a lot. Here's a gentleman who truly has self-confidence. Not arrogance, but self-confidence to listen and make a decision. Also note that of the four principal defense security individuals he chose, three of them actually served in the White House. Secretary Gates, as you know, was deputy NSA. Mrs. Clinton was there, as well as Susan Rice, who I served with in the White House. All three of them understand that there is a president, but there's the presidency. They left that White House, as I did, understanding that they are working for the presidency which is occupied by a man. So I think you're going to see a change from the tumultuous regime you had at times in the early years, particularly in the Bush administration, to one where there really is a comity of coming together to work together, because there's respect for that.

GREGORY: All right. Well, but let's analyze that a little bit, because certainly the Bush national security team also had a great deal of experience, experience within the White House, experience within prior administrations. And they, too, had pretty diverse views on the projection of U.S. power, on foreign policy generally. And you had a pretty decisive president. So what are the differences going to be?

SESTAK: I think you'll find that there's two specific differences. One, setting aside the confidence and a little bit more hands-on of this president, he has chosen for the very first time in U.S. history a member of the Joint Chiefs of Staff, a four-star general, to be his national security adviser. We haven't had that before. Without a question, there's going to be accountability from this, who is a diplomat warrior.

Number two, note who he chose as his chief of staff. A lot of people had their feelings of why they believed he was chosen, Rahm Emanuel. Uh-uh. He was chosen particularly to keep the trains running. I think you're going to see what happened to the ideas often in the Bush administration is there wasn't the accountability of bringing the team together and holding them accountable for the execution of policy. That's changed with General Jones. Without a question, this man who has a Silver Star, but led scores of at least two scores of nations overseas understands that to accomplish anything, you need to make the process work. So you're going to see the trains running on time here. And you're going to see Rahm and him bringing people together. That's a change of accountable teamwork that will be different.

GREGORY: And process internally matters a great deal. But let's talk about philosophy, because we know, the American people know, that there were some significant differences with regard to the Iraq War, with regard to the roll of diplomacy and engagement with some of our enemies, even targeted strikes against Pakistan to target al Qaeda if necessary, between Senator Obama and Senator Clinton on the campaign trail. What happened in the course of this transition that creates the melding of the minds?

SESTAK: What you see is what happened before. You remember President Bush at the time, running for presidency, called President Reagan-soon-to-be President Reagan's economics voodoo economics. Yet they came together to work as a team. No, the differences actually, David, were marginal. Think about it. They both said we need to change our strategy in Iraq. One wanted a date that was more certain than the other, but that was the only change. They both wanted to put more troops into Afghanistan. Mr. Obama did ask to go more covert operation to Pakistan. But their overall approach to the world, a strategy of engagement, is very similar. Finally, I think, and Mr. Obama pointed this out, Senator Clinton is going to bring something that she really did understand, even as first lady. Where did she go, David? She went to China, the strategic center of gravity in this century. And number two, the southwest continent and Africa, where the beds of terrorism are now growing. In fact, the military has established an African command to address the issue. So you have someone here who truly understands we need a transformation of it, has respect for the presidency. There is some marginal difference, but it goes back to your first question. The confidence of this new leader of ours that he can broker differences and yet lead by his aegis and his judgment, I think is what best comes out today.

GREGORY: All right. We'll leave it there. Congressman Joe Sestak, thanks very much for the time tonight.

SESTAK: Thanks, David, for having me.

GREGORY: Coming next, a closer look at the president-elect and his team of rivals, including Senator Hillary Clinton. Will the two find a way to work together? You're watching 1600 PENNSYLVANIA AVENUE on MSNBC. It's the place for politics.



OBAMA: I have known Hillary Clinton as a friend, a colleague, a source of counsel, and a tough campaign opponent. I think she is going to be an outstanding secretary of state. And if I didn't believe that, I wouldn't have offered her the job.


GREGORY: Welcome back to 1600 PENNSYLVANIA AVENUE. That, of course, the president-elect announcing his national security team today, taking questions at a press conference about the relationship that he had with Hillary Clinton on the campaign trail, which sounded a lot different than the relationship he is talking about going forward. We want to talk about management style now, goals for U.S. foreign policy. And joining me to talk about it, the BBC's Washington correspondent, Katty Kay, and "New York Times" chief Washington correspondent David Sanger. David is also the author of the forthcoming book "The Inheritance: The World Obama Confronts and the Challenges to American Power," which is going to be a terrific read. David and I, of course, covered the White House together. David, I want to start with you, because we were just talk about a bit of evasiveness on the part of the president-elect dealing with tough questions about where he and Hillary Clinton really clashed during the campaign. But those clashes will really matter now when you talk about execution of foreign policy.

DAVID SANGER, "THE NEW YORK TIMES": Well, they may matter. I mean, this is moment where we're going to learn, David, the difference between what you and I used to hear on the campaign trail and what happens when you get into the White House.  One of their arguments was that-one of their biggest arguments was whether then-Senator Obama was naive in thinking that he could negotiate directly at a fairly high level with the Iranians, which, of course, was Hillary Clinton's charge. My guess is that as soon as you see her in place, she is going to begin to set up the mechanism to do just that. I don't think you're going to see President Obama involved in those negotiations, but I suspect you probably will see the new secretary of state involved directly in those negotiations.

GREGORY: Well, and it's interesting, Katty, because it was Bob Woodward who observed over the weekend, with the economy bearing down on this new administration so hard, in effect, Obama is giving the world to Bill and Hillary Clinton.

KATTY KAY, BBC NEWS WASHINGTON CORRESPONDENT: Well, whoever is going to be the next secretary of state. I mean, if Hillary gets confirmed, it's an incredibly important job, because he's got to focus on what's happening here. And so having somebody that the world already knows-what is it, she's been to 82 different countries during her eight years as first lady? Having somebody who is already known around the world is already a big help. But look, you know, in a sense, whoever takes over on the Obama administration is being offered a very nice gift as secretary of state, because the world is so thrilled to have Barack Obama as the president of the United States. So that helps also.

GREGORY: Let's pull back a little bit, because, David, you wrote about this on the front page of The Times today. What does this national security team say about the foreign policy direction of this new president?

SANGER: I think there are two interesting things. One, most of the people who he surrounded himself with are more hawkish than he was on the campaign trail. That doesn't mean they're more hawkish than he is, but the way he sounded.  But the more interesting thing, I think, is that each one of them, but especially Defense Secretary Gates and Jim Jones, the new national security adviser, have both been advocates of a huge shift of resources toward diplomacy, toward nation building, toward going into countries and helping prop up failed states. Jim Jones wrote the most searing analysis of what went wrong in Afghanistan that I've ever read. And basically, what it came down to was, we would take over villages, we would do nothing to rebuild them, we would leave, and then we would act shocked that the Taliban came right in behind us. And I think you're going to begin to see that resource shift happen if we have the money for it. Because as Katty said, that's going to be a tough issue.

GREGORY: And yet, Katty, I always felt that the Obama speech that he gave in Germany was about saying, look closely at this face, because there will be a much different face and approach to foreign affairs, the idea of alliances, the idea of repairing relationships with Europe and others so that then the United States can call upon countries and say, look, you've got to get on board for some of these projects. We spent so much of the Bush administration with the Bush administration knowing they couldn't rely on so many countries in Iraq.

KAY: And, you know, I think the good will is there, David. And I've got a sense over the last year or so that the world kind of wants to like America again. They want to be on board again. They want to have those alliances. They want to work in partnership.  The question that's going to come is when some of those issues over which the Europeans, for example, and the Americans are going to have differences, when they come up. How to deal with the war on terrorism, how to deal with Afghanistan, there's still going to be problems there. Barack Obama can go to the Europeans and say, OK, now we're all on the same side, now we have alliances. Give me the troops. re they actually going to step up with more front line troops to be fighting in Afghanistan? An issue like trade, for example, that's another thorny-so there is still going to be complications, but what you have, and you heard it in Obama's words today, is a willingness on the part of America to reach out that the world hasn't heard for the last eight years and really wants to hear again now.

GREGORY: Let's talk about the specific of Iraq, because this question came up to the president-elect today. He made it clear saying, I told this team there's a new mandate, which is to end the war. He promised to do in it 16 months on the campaign trail. Now he is suggesting, David, well, I'm going to consult with this team to see when it's really feasible. And the new-or the continuing defense secretary, Gates, will be a big part of that.

SANGER: He will, but, you know, I think this is the one area where President Bush has given his successor a gift. And the gift is that the status of forces agreement that was finally approved last week sets a date certain.


SANGER: The thing that President Bush told us we would never see they've signed on to. So, to some degree, it takes the political heat out of the withdrawal issue. At the same time, you heard President-elect Obama create a number of off-ramps today. He said, I was only talking about combat battalions.


SANGER: Well, there are 14 of those left. Do the math. That still leaves 60,000 or 70,000 people who he can withdraw on some different schedule.

KAY: And even within that, you know, the status of forces agreement says three years' time. We're looking at a president who says, I want to withdraw troops in half that amount of time. This is going to have to be negotiated now between two sovereign governments. It's going to be-I think, you know, there's still some room there, even though he has left himself wiggle room, on what exactly those troops are that are going to remain behind. You know, there's still 18 months.

GREGORY: We're going to leave it there. This is going to be continued, to be sure. Thanks to Katty Kay and David Sanger. I look forward to both books, actually, from these two great journalists. Coming up, today Alaska Governor Sarah Palin made her first campaign appearance since the GOP lost the election and was greeted likea rock star in the Deep South. Could another shot at 1600 PENNSYLVANIA AVENUE be in her future? Coming up after this.


GREGORY: And we're back with a look at what's going on inside The Briefing Room tonight. Even though we are entering the month of December, the election season is not yet officially over. The Georgia Senate race is still undecided, and tomorrow voters go back to the polls to vote in a runoff election between Republican incumbent Saxby Chambliss and Democratic challenger Jim Martin. Today, former vice presidential hopeful Sarah Palin helped campaign for Chambliss, telling the crowd that this election is the first stop in rebuilding the GOP.


GOV. SARAH PALIN ®, ALASKA: If we are to lead again in changing Washington for the better, and to put government back on your side, it takes rebuilding. And I say, let that begin here in Georgia tomorrow.


GREGORY: Challenger Jim Martin is campaigning today with Congressman John Lewis of Atlanta and hip-hop artist Ludacris. This Georgia Senate race is critical, as you know, because of the delicate balance of power in Washington. Democrats are currently just two votes shy of the 60 needed in the Senate to prevent a Republican filibuster. Also in The Briefing Room tonight, Senator Ted Kennedy joins a pretty elite group today, honored with a degree from Harvard University, recognizing his lifelong commitment to public service and social issues. Kennedy was originally scheduled to receive the degree at Harvard's commencement last spring, but the award was postponed so that he could recuperate from brain surgery. Only George Washington, Winston Churchill and Nelson Mandela have received similar honors. President-elect Obama announces more members of his cabinet, including Hillary Clinton as secretary of state and Robert Gates as defense secretary. The foreign policy challenges that this new team must tackle when 1600 PENNSYLVANIA AVENUE continues after this.


GREGORY: Tonight, challenges at home and abroad.President-Elect Obama announces his national security team including former rival Hillary Clinton and President Bush's Defense Secretary Robert Gates. Will this group be able to get behind a common vision? And is the change Obama promised voters?Plus, stocks took another beating today as the prominent economic report says the U.S. has been in a recession for a year. All this and more as 1600 PENNSYLVANIA AVENUE continues. e're back on 1600 PENNSYLVANIA AVENUE. Today security and foreign policy took center stage as President-Elect Obama rolled out his national security team. He officially announced that Hillary Clinton is his nominee for secretary of state and laid out a laundry list of foreign policy challenges the U.S. is facing.


SEN. BARACK OBAMA, PRESIDENT-ELECT: There is much to do from preventing the spread of nuclear weapon to Iran in North Korea to seeking a lasting peace between Israel and the Palestinians, to strengthening international institutions. I have no doubt that Hillary Clinton is the right person to lead our State Department and to work with me on tackling this ambitious foreign policy agenda.


GREGORY: Joining me now, Martin Indyk, former ambassador to Israel and assistant secretary of state. He is currently a senior fellow at the Brookings Institution and the director of the Saban Center for Middle East policy. Martin is also the co-author of a new book that will be essential reading for those following the foreign policy of this administration. It is called "Restoring the Balance, a Middle East Strategy for the New President." Martin, welcome.


GREGORY: Let's talk about the president-elect's priorities. Because this was striking to you. He talk about the need to head off nuclear programs in North Korea and Iran and to engage and seek a lasting peace between Israel and the Palestinians. That struck you as important. That list of priorities.

INDYK: I thought it was noticeable that he was only specific about those three things. He talked about building international institutions and rebuilding America's reputation. But when it got down to the specifics of what he wanted the secretary of state to be involved in, it was Iran, Israeli Palestinian issues, and of course, North Korea.

GREGORY: If you were a new president and you have witness what had is going on in the Clinton administration and the Bush administration, and you're looking at the tableau of Israeli Palestinian peace and the troubles with the political leadership in Israel, why would you want to take this on right away?

INDYK: I think it is because the president-elect, and certainly from what I know, Secretary of State-Designate Clinton, they understand that the Palestinian issue is a very important in terms, not just of trying to resolve this long festering conflict but because it affects so many other things. Particularly America's relations with the Arab world and with the Muslim world. And there's a real sense the chances of the peaceful resolution for the Palestinian state alongside Israel, those chances are evaporating. The hope of that is evaporating.

And so I think that the president-elect really sees this is a priority for him. Even though he can't move quickly on it until there is a new Israeli government in place. He intends to pick it up early. nd I think he saw in President Bush's approach, which was essentially to leave it aside and neglect the issue for seven years, that was a real mistake. Because it really had such a powerful impact in terms of the anger quotient with the Arab and Muslim world.

GREGORY: And it was at the Saban Forum in Jerusalem last year when Secretary of State Rice made the point that we're running out of time to deal with moderate Arab leaders, moderate Palestinian leaders with whom the Israelis and the United States can do business. We've sustain Mumbai terror attacks, different tactics. Radical Islam spreading its influence. The influence of Iran, etc. Is that a key motivator here? Which is the loss of moderate leadership across the Arab world?

INDYK: I think there is a real challenge for Iran and its proxies, Hezbollah and Hamas. They're saying basically our way works which is violence, terrorism, defiance of the United States and the international community, trying to acquire nuclear weapons and so on.

And the moderates, the peace camp, as it were, in Israel and the Arab world, it is very much on the defensive as is the United States. And I think President-Elect Obama will have to get off the defense here and pursue a series of initiatives. One towards Iran for which he has a mandate to engage Iran. One on the Palestinian issue and one on the Israeli-Syrian negotiations. Because that in a way becomes the lynchpin of Iran's efforts to use its influence to spread its influence into the Middle East heartland. Lebanon-Palestinian arena.

GREGORY: What strikes you about this foreign policy team, the way he's constructed it?

INDYK: I think that first one has to be impressed by the rock star quality of it. The heavy hitting power of Hillary Clinton and of course Secretary Gates and Jim Jones. That is really quite an indication I think of the president-elect's armed confidence in himself, first of all, that he would have such strong people around him. But also a recognition that it is going to need powerful personalities to rebuild America's reputation and to confront the immense challenges in the foreign policy arena that he is going to face.

GREGORY: There tends to be a new administration's, an attempt to correct for mistakes perceived from the previous administration. You saw in this ABC, Anything But Clinton approach in the early Bush years. Now there seems to be a correction for what in this foreign policy team in the Bush years?

INDYK: Ironically, and I think this is really missed in the heat of the debate, during the election campaign. The Bush administration has actually shifted away from almost all of its hard-line and problematic approaches. o for instance, in the Palestinian issue, after neglecting it for seven years, President Bush and Secretary Rice have been working to put the process back on track. The president made a mistake in saying we are going to have a peace treaty by the end of the year. Nobody believed it was possible but it did, they did succeed in setting up a process that President Obama and Secretary of State Clinton will be able to pick up and move forward. Hopefully toward resolution.He made a mistake, I think, in not engaging with Israel and Syria. They both wanted to make peace. There was an advantage to do. I think Barack Obama will pick that up early on. That will start to put Iran on the defensive at the moment when he is going to be reaching out to Iran and saying, look know you want to be part of a new Middle Eastern order. You're welcome. But if you want to go on with violence, terrorism, and the attempt to acquire nuclear weapons, we're going to oppose you. And we're going to have a phalanx. And international phalanx and an Arab-Israeli phalanx that's going to be against you.

GREGORY: Quickly, final question on Hillary Clinton. For those critics who would challenge her credentials for the job of secretary of state, what would you say will define her stewardship of the State Department and of foreign policy?

INDYK: I think that it is the series of initiatives that I believe that she will take just because it is part of Obama's approach and I think that she believes it. That is, on the Palestinian issue. Trying to engage with Iran to head off their nuclear program. India, Pakistan. Where there is a real need to try engage diplomatically. nd of course, dealing with North Korea as well. So she is actually going to be running I think four or five initiatives simultaneously. A huge challenge to coordinate her reforms. And she's going to have to look where she can succeed. Because that will enhance America's reputation in the diplomatic arena which is so critical to any of these initiatives coming off. So I think she has a real challenge ahead. But some opportunities to show that when America leads with its diplomacy it can actually succeed in helping to heal the world.

GREGORY: All right. Martin Indyk. Thank you very much, Martin.  Appreciate it. Let me bring our panel back in now. John Harwood of the "New York Times" and CNBC. "Washington Post" Gene Robinson and Democratic Leadership Council Chairman Harold Ford Junior. ene, let me turn to you. The notion here that an Obama administration is going to usher in a new era of diplomacy after what we've seen in the Bush years which has been, especially in that first turn, such an emphasis after 9/11 on the military's role in confronting the problems of terrorism around the world. That is going to be a stark change. And you're going to have a Hillary Clinton as secretary of state who is going to be leading that effort.

ROBINSON: There are potential other changes as well, David. There are grand ideas that that the Bush team had about foreign policy. Particularly about the Middle East. I remember talking to Secretary of State Rice. Condoleezza Rice and how she explained here theory about they had separated moderates from immoderate or radical regimes in the Middle East and separated out various factions and how all this was constructive rather than destructive. don't think the incoming team is going to see what the Bush team did in the Middle East as particularly constructive. And I think there is a lot of undoing that they're going to want to do. It starts with talking with enemies. Which is something, or adversaries, which is something that the Bush administration just refused to do.

GREGORY: When you cover process, John Harwood, in the foreign policy arena. It can be taken to a new level. If the politics is injected in in the way that it has been trying to understand the relationship between Obama and Clinton. And in this regard, there will be a constant focus in terms of whether there is any daylight between them on some of the major matters of the day. Because you saw what happened early in the Bush administration between Secretary Powell and the rest of the foreign policy team where frankly, Powell was undermined in a lot of ways.

HARWOOD: No question about it. And you saw Barack Obama quite skillfully kind of laughing that off today when he got a question from my colleague, Peter Baker of the "New York Times" about things Hillary Clinton said about him and vice versa. And he said that's fun and games for you in the press. And Peter said, yeah. But those were your quotes. And Obama responded, yeah, but you're having fun with it. How long can he do that? There is going to be a fine tooth comb focus on whether or not there is daylight. He tried to deal with that in a peremptory sort of fashion today when he started out in his statement by saying, she has his complete confidence. In that bite you played earlier. That's pretty important. Because the secretary of state to be effective has to have that. But everybody is going to be watching. Especially on this question about dialogue with Iran which is a subject where they conspicuously disagreed in the primaries.

GREGORY: Let me ask you a leadership question, Harold. Because I really tried to focus on this with the president-elect. Because when you have a team, this team of rivals idea where people disagree and there are strong views and they are well known players. It is not enough to say the president can be decisive. Because lots of leaders can be decisive. It is a question of judgment and temperament and leadership ability that brings the team around. That focuses a team on goals and ultimately, proper execution. What does Obama bring to this group where you say there is that leadership capability?

FORD: Number one, he organized this group. There is a central organizing theme of the group, that's engagement. Jim Jones across the board probably the most popular NATO-one of the more popular NATO commanders across Europeans. We will need European allies. I thought Martin's comments in the segments before this were fascinating as he talked about the multiplier effect of Israeli-Syrian talks and some agreement that can be reached and how it will further isolate Iranians. You look at Susan Rice at the United Nations. It was Obama in his introduction of her that said the UN is indispensable and imperfect, meaning it is a tool that has to be used as we seek to eradicate or at least control the spread of poverty and disease and parts of the world are seeking to bring some stability. When you look at Gates. He's been with Barack. He said from the outset Afghanistan was where this war started and where it would end. Barack has assembled the team on foreign policy and national security. Not to leave out Holder and Napolitano at all. But he has assembled a team with Hillary Clinton and that group. She is a known quantity, Clinton is around the world. You put that team together. You have engagement, an imagination, you have a creativity. And frankly, I think you will do what essentially the theme of that press conference was which Barack opened with. A new era of American leadership. He is the quarterback of that team and I think the country not only enjoyed the fact that he is the leader of that team but he is waiting for him to act.

HARWOOD: And David, one last point. We can't forget that a lot of that diplomacy and the changed relationship with the rest of the world comes when he raises his hand and is sworn in on January 20th.

FORD: I would agree.

GREGORY: All right. We have got to take a break here. Thanks to all of you, it is official, we are in a recession. Is there any hope as we enter the holiday shopping season? We're going to ask CNBC's Erin Burnett and financial expert Jean Chatzky for advice coming up next.



Today the Dow Jones Industrial Average dropped nearly 700 points or eight percent, breaking a streak of five consecutive days of gains. The S&P 500 Index and NASDAQ each also ended down almost nine percent. All of this after the National Bureau of Economic Research officially declared that the U.S. economy has been in recession since December 2007. Joining me now, Erin Burnett, anchor of CNBC's STREET SIGNS and SQUAWK ON THE STREET and Jean Chatzky, financial advisor and TODAY SHOW contributor. Gene is also the author of the book "Pay It Down." Pay that debt down. Thanks to both of you for being here. Erin, let me start with you today. I raised this question at the top of the program which is, we have seen this confidence ebb and flow. From Obama's point of view as the president-elect, a new economic team was reason to get some confidence going again among consumers. On Wall Street and others in the economy we saw that and then we see it fall off a cliff again today.

ERIN BURNETT, CNBC HOST: Yeah, the silver lining obviously was over the weekend, David, that people spent more money than anyone thought they would. It is still grim out there. I am not trying to read too much into that. But the reality of it is you could say last week was more the anomaly. Markets really did rise rather sharply, you're getting some but not all of that back today. Really most of it. But considering nothing has fundamentally changed in the economic outlook over the past week, it would make sense that such a surge as we saw last week wouldn't be sustained. I'm not trying to be a wet blanket here but maybe just telling you not to be too sad when you see drop like today. And obviously the lower we go, the bigger those percents look. Especially down side. Jean, if you think about this from the consumer's point of view, as they think about a new administration coming into Washington, there is so much anxiety about one's personal situation. And then the sense of, what is the government really capable of doing about it? Because we've seen so much activity on the part of the government and it seems to be chasing a crisis without really responding to it in a way that's having a real impact on people's lives yet.

JEAN CHATZKY, FINANCIAL ADVISOR: I think this is as much a crisis of confidence as anything else. You're absolutely right. It feels like the government has been in there doing its best and it certainly seem to be doing a lot of good. At least not yet.

We're getting some signs from the new administration of what they are going to trying including, what looks like a major stimulus package that will put an awful lot of people back to work. And if that gets into the soup, if that gets into the mix, that looks like it will be additive to the economy. But it's going to take some time. And right now, what people need to do, sitting at home if they're having trouble, is to hunker down and look where they are and just get back on a very basic spending plan. So that they don't go overboard. Not this holiday season and not as we head into next year.

GREGORY: And you made that point on THE TODAY SHOW last week, I thought smartly, because the reality is, that unlike the credit boom that is now burst, the bubble that has burst, there really isn't a lot of backstop here for consumers who get in trouble with debt.

CHATZKY: The one silver lining right now is that you may have a small opportunity to refinance your mortgage. Mortgage rates have now dropped to about 5.5 percent. If you're sitting with a loan above six percent you may want to look at a refi just to free up some cash. But don't by all means start thinking this is yet another opportunity to use your home as a piggy bank. It is not. It is another opportunity to perhaps put a little bit of money away in the form of an emergency cushion so that if you're one of those unfortunate people who does lose a job or who is apt to take a salary cut, you'll be able to weather the downturn.

GREGORY: Also, Erin, quickly, the consumer report survey indicating voters' feelings about the economy and the government's role in all of this. These are some of the findings. Fifty-six percent surveyed, saying that the government should do more to help citizens. Twenty-nine percent thought the government went far in bailing out Wall Street. Seventeen percent felt they should do more to help Wall Street. More than they actually have. Regardless, the desire for a stimulus plan is huge. And it only goes to the point, the stimulus plan may have to be bigger still than even what Obama is anticipating now.

BURNETT: It is true. I've been saying this the past couple weeks. You look at the 2.5 million jobs over two years the president-elect has proposed. That seems to be a very cautious number. When you look at immigration and people getting into working age in this country. You have about four million. People coming into the work force. So obviously, some people would say it needs to be much more aggressive on the job creation front. Although exactly where those jobs will be created is a very big question. Everyone looks at the WPA and FDR when all those jobs were created to build tunnels. That is not what got this economy out of the Great Depression. It was World War II. So he has a tough road ahead of him. I think Jean is right. The price tag on the eventual stimulus, the Main Street stimulus, will be a lot higher. The question is, how do you spend it to make a difference? And it is clear, he is trying to take the time to find out the right answer to that question. But nobody honestly knows.

GREGORY: All right. More with Erin Burnett and Jean Chatzky right after this quick break when 1600 returns after this.



HENRY PAULSON, TREASURY SECRETARY: I have been asked repeatedly are we in a recession? And I've always answered and said I'm not the decider there. The economists are. The thing that we've known and I've known is that we are in an economy that has slowed down significantly. The American people know that. And I think the American people have known that for some time. So I don't think that this is going to be big news.


GREGORY: That was Treasury Secretary Henry Paulson regarding today's announcement that the economy has been in recession since last December. Back with us now, Erin Burnett, anchor of CNBC's STREET SIGNS and SQUAWK ON THE STREET. And Jean Chatzky, financial advisor and TODAY SHOW contributor. Jean also author of the book "Pay it Down." Erin, you heard the treasury secretary today. The larger question here is what the American people have to expect about this economy. It is not going to be a shock to most people that the economy has actually been in recession. But to what extent do they have to be prepared for a complete reordering of the economy?

BURNETT: I think they should expect that. That's something I know Jean focuses a lot on. I will say one thing here David as you talk about it. And he sort of laughed. I've been asking these questions, as have you. And he dodges it in terms of the recession. But Ben Bernanke spoke today and he really is the most preeminent scholar in the country on the Great Depression. Happens to also to be the Fed chief. And he was asked directly, are we going to have a Great Depression? And I've not seen him be so black and white in his response. He said, "There is no comparison between now and a Great Depression." That's a quote. And he continued to say, "You can put that out of your mind." A direct quote as well. So yes, a reordering but as of now a pretty strong statement that we're not heading in the D word direction.

GREGORY: Right. And Jean, that's the question then for consumers here. I've asked this of Secretary Paulson and other political figures. Which is what kind of sacrifice will be necessary on the part of the American people as this reordering, this readjustment of the economy occurs over the next period of time? How long, we don't really know.

CHATZKY: Big sacrifices. And it all comes down to controlling the things that you can control. We can't control the markets. We cannot clearly control gas prices and food prices. You can control how much you're spending on cable and Internet and so many other things and if you can get yourself to start paying attention all of the sudden you have much more control over your whole financial life.

GREGORY: Right. And then - but it's that taking control that may happen at the consumer level, Erin, but it's also at other levels as well, whether the government has some real impact in investing in America's banks, whether liquidity returns to the market in a significant way that gets institutional lenders playing ball again. These are the things that are really going to matter.

BURNETT: Right. And the big question on that front is going to be will Barack Obama stick with what the government has done so far which is give money to the banks without demanding anything specific in return in terms of increased lending.

You can argue till you're blue in the face as to whether those terms should be applied. The question is whether Barack Obama will go ahead and do that and that is going to be significant not just for regular consumers but for the banks. And that's a big one to watch.

GREGORY: All right. Erin Burnett, Jean Chatzky, thanks to both of you. That is the view from 1600 PENNSYLVANIA AVENUE tonight, I'm David Gregory. Thanks for watching. I'm going to see you back here tomorrow night, same time, 6:00 p.m. Eastern only on MSNBC. HARDBALL WITH CHRIS MATTHEWS coming your way next.


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