Meet the Press, December 28, 2008

Transcript, Video Link at the bottom

MR. DAVID GREGORY: Our issues this Sunday: He helped secure Barack Obama's presidential
campaign victory as chief strategist. Now he prepares to serve as a senior adviser to the
president-elect in the White House. How is the transition shaping up? The president-elect and
some of his aides have already been interviewed by special prosecutors in the Blagojevich
scandal. Have they managed to put it behind them, or are there more unanswered questions?
And how will Obama deal with an economic meltdown now in full swing? We'll ask our guest,
David Axelrod.

Then, Obama's prescriptions for solving the nation's economic problems. Can American workers
afford to wait? Can American businesses survive in this tough climate? Plus, a closer look at
how history will judge the Bush administration as the president prepares to leave office in just 23
days. Our roundtable weighs in: Rich Lowry, editor of the National Review; Todd Purdum,
national editor for Vanity Fair; Michelle Singletary, financial columnist for The Washington Post;
and Richard Wolffe, senior White House correspondent for Newsweek.

But first, an Israeli air offensive against Hamas in Gaza has entered its second day. So far some
280 Palestinians have been killed and 600 wounded in the largest Gaza operation since 1967.
This morning Israel is taking steps that could lead to a ground invasion, amassing tanks on the
Gaza border and calling up army reservists. In response, Hamas has promised a new wave of
suicide bombing attacks against Israel. A short while ago, after an emergency Cabinet meeting
in Jerusalem, I spoke with Israel's foreign minister, Tzipi Livni, and asked her how long the
offensive would last.

MS. TZIPI LIVNI: Until we can, until we can change realities on the ground. The situation is a
situation in which Israeli citizens are targeted from Gaza Strip, a place that we left few years ago
in order to create a new horizon for peace. But we got Hamas in return.

MR. GREGORY: A lot of people are watching what's playing out, this air assault, and wondering
why now?

MS. LIVNI: Oh, why now? Because after Israel decided to leave Gaza Strip a few years ago and
we got Hamas in return. About a half a year ago, according to the Egyptian Initiative, we
decided to enter a kind of a truce and not to attack Gaza Strip. Hamas violated, on a daily basis,
this truce. They targeted Israel, and we didn't answer. But unfortunately, Hamas misunderstood
the fact that Israel didn't retaliate, and only last week we had in a day 80 rockets, missiles,
mortars on Israeli civilians. More than that, they used the field of truce in order to rearm
themselves. They smuggled weapon, they built a small army in Gaza Strip, so the situation was
unbearable.

MR. GREGORY: What is Israel's goal right now? Is it to re-establish the cease-fire, or is it to
invade Gaza and remove Hamas from power?

MS. LIVNI: Our goal is not to reoccupy Gaza Strip. We left Gaza Strip. We took off for the
south. We dismantled all the settlements. But since Gaza Strip has been controlled by the
extremists and since Gaza Strip has been controlled by Hamas and since Hamas is using Gaza
Strip in order to target us, we need to give an answer to this.

MR. GREGORY: Foreign Minister, aren't you making the case for pushing Hamas from power?
The cease-fire, according to Israel, simply hasn't worked. It hasn't stopped the bombing of
Sderot and Israel in the southern areas. So only the replacement of Hamas by Fatah, by more
moderate leaders, appears to be the only answer.

MS. LIVNI: The goal is to give an answer to our citizens, to give them the possibility to live in
peace like any other citizen in the world, and Hamas needs to understand it.

MR. GREGORY: Is it acceptable to Israel for Hamas to remain in power in Gaza?

MS. LIVNI: It is acceptable only in time, only if and when Hamas accepts the requirements of
the international community. Right now Hamas didn't accept, is not willing to accept the
requirements of the international community, is not willing to accept the right of Israel to exist.
It violates any kind of understandings and is using terror against Israeli civilians. So it cannot be
legitimate and acceptable right now.

MR. GREGORY: Let me ask you--I know you were in Egypt this past week, you met with Hosni
Mubarak. What did you hear...

MS. LIVNI: Yes.

MR. GREGORY: ...in the course of those meetings--the foreign minister of Egypt has criticized
Hamas--and what is your message to the Arab world this morning?

MS. LIVNI: You know that Hamas doesn't serve the interests of the Palestinians or the moderate
Arab world. You know that Hamas doesn't represent the national aspiration of the Palestinians.
You know that Hamas represent this kind of ideology of hatred that they want to spread in the
region. You know that Hamas stands on the--in the way of the Palestinians to create their own
state. So put your--in, in a way, put your mouth--put, put your, put your money where, where,
where your mouth is. I mean, say the right things right now.

MR. GREGORY: The Bush administration has been supportive of the campaign so far in Gaza but
has warned Israel about avoiding civilian causalities. What kinds of consultations have you had
with Secretary of State Rice?
MS. LIVNI: Well, of course, we are in a very close connection. I am in a very close connection
with Secretary Rice, and we had some talks only last night. The idea--and this is according also
to our values--we are targeting Hamas, we are not looking for civilians to kill. More than that,
during this military operation, we are trying to avoid any kind of civil casualty. Israel called the
population of Gaza to leave places in which they know that Hamas has its own headquarters.
Since Hamas is using the civilian population and is acting and targeting Israel from civilian
population centers, we called the civilians to leave these places. We are trying to make all the
effort in order to target only terrorists and Hamas headquarters and places. But unfortunately,
in war, like any war, sometimes also civilian pays the price.

MR. GREGORY: But if the goal is to change realties on the ground, to change the behavior of
Hamas, how much international condemnation...

MS. LIVNI: Yes.

MR. GREGORY: ...is Israel prepared to accept and at what level of civilian casualties?

MS. LIVNI: You know, this is--the one who need to be condemned by the international
community is Hamas. This is a designated terrorist organization, is, is not willing even to give an
answer to the international courts to recognize the right of Israel to exist. He uses terror. Israel
is a state that implements its right to defend itself and its citizens. So I expect the international
community to work accordingly since the moment in which Hamas sees that the international
community condemn--condemns Israel and not Hamas, these are--this is the moment in which
they become stronger and holding and trying to avoid any kind of changes until the international
community forces Israel to stop. So I expect the international community, including the entire
Arab world, to send a clear message to Hamas, "It's your fault. It's your responsibility. You're
the one who is being condemned. You are not going to get legitimacy from the international
community this way or the other. The responsibility for the life of civilians in Gaza Strip is in
your hands." And then we have some chance, chances to see a change in their, in not only their
position, but in their behavior.

MR. GREGORY: Foreign Minister Tzipi Livni, thank you very much for your time.

Ms. LIVNI: Thank you.

MR. GREGORY: And turning back home, we are now joined from Chicago by senior adviser to
President-elect Obama, David Axelrod. Welcome back to MEET THE PRESS.

MR. DAVID AXELROD: Thanks, David. Good to be here.

MR. GREGORY: What is the president-elect's position on this offensive against Gaza by Israel?

MR. AXELROD: Well, obviously, it's a very serious situation. He spent some time on the phone
with Secretary Rice yesterday, and he is monitoring the situation. But we've said repeatedly
through this transition period that we--there's only one president at a time, and President Bush
speaks for the United States of America until January 20th, and we're going to honor that
moving forward.

MR. GREGORY: But in the course of the campaign, the now president-elect visited Sderot...

MR. AXELROD: He did.

MR. GREGORY: ...in fact, in southern Israel, and he said that Israel had a right to defend itself
against rocket attacks from Hamas.

MR. AXELROD: Indeed, he did.

MR. GREGORY: Does he believe it's appropriate for Israel, if it takes his decision, to push Hamas
from power?

MR. AXELROD: He did, as you said, visit Sderot in July, and he said then that he thought that
when bombs are raining, raining down on your citizens, it is--it's obviously unacceptable and
there is an urge to act. And so--but again, I don't want to go beyond that because we only have
one government and one president at a time. And he's going to continue to consult with
Secretary Rice and the president and the administration on this and monitor these events. And
he'll be prepared to take over on the 20th and, and, and discharge his responsibilities then.

MR. GREGORY: OK. Let's move on to the ongoing saga of Governor Rod Blagojevich in Illinois
and questions about the vacancy left and created by the president-elect in that Senate seat.
This week the Obama team released a report that was compiled by incoming White House
counsel Greg Craig to detail what contacts the Obama team had with Governor Blagojevich or his
aides. And this was the conclusion to the report as compiled and, and put together by Greg
Craig. "The accounts of Obama transition staff contain no indication of inappropriate discussions
with the governor or anyone from his office about a `deal' or a quid pro quo arrangement in
which he would receive a personal benefit in return for any specific appointment to fill the Senate
vacancy."

Now, back on December 17th, the president-elect seemed a bit frustrated, in fact, that he wasn't
able to do more to shed light on this situation. This is what he said then.

(Videotape)

President-elect BARACK OBAMA: It's a little bit frustrating. There's been a lot of speculation in
the press that I would love to correct immediately. We are abiding by the request of the U.S.
attorneys office, but it's not going to be that long. By next week you guys will have the answers
to all your questions.

(End videotape)
MR. GREGORY: And yet, there are still lingering questions. There are no notes provided. There
are no transcripts of the interviews that Mr. Craig did with aides to the president-elect. This is
just a four-page narrative that was released two days before Christmas. Is this consistent with
the promise of, of a--an historic level of transparency by the Obama team?

MR. AXELROD: Well, David, the--first of all, the reason it was released two days before
Christmas was because we were abiding by a request from the U.S. attorneys office, and we
released it when they told us we, we could release it. They also reviewed it. But it reflects the
full record of, of contacts between members of the transition around the president-elect and,
and, and Governor Blagojevich's office. And it reflects everything that the president-elect has
said about it. There's really nothing more to it. There were conversations, there was no
discussion of a quid pro quo. President-elect sent a, a list of names over there of, of many people
in our state who he felt would be good representatives of the state, and that was the extent of it.

MR. GREGORY: Will the president-elect produce those notes and transcripts with staff interviews,
as well as, perhaps, hold a press conference to answer any question associated with this?

MR. AXELROD: Well, obviously, he's going to be holding press conferences, and you guys are
free to ask whatever you want to ask. This is a--there, there's nothing more, really, to release.
The, the story is reflected in that, in that narrative, and I think that events moving forward will,
will support that.

MR. GREGORY: So no to the idea of, of releasing notes or transcripts from the investigation
internally?

MR. AXELROD: David, you've got, you've got the full narrative of, of what happened. It's, it's a
complete account of all those contacts.

MR. GREGORY: Let's move into some of the substance. In the criminal complaint filed by the
U.S. attorney, the following is written: "On November 11th, 2008, Rod Blagojevich talked with
John Harris," that was his chief of staff, "about the Senate seat," again, the one being vacated by
the president-elect. "Blagojevich said he knows that the president-elect wants Senate Candidate
1," we find out later that that's Valerie Jarrett, senior adviser to the president-elect, "for the
Senate seat but `they're not willing to give me anything except appreciation. Bleep them.'" The
USA Today editorialized that exchange this way: "Obama's report says none of his aides was
offered any illegal pay-to-play deal, so there would not have been anything to report to
authorities. That might well be true, but it doesn't quite explain how Blagojevich knew that all
the Obama people intended to give him was `appreciation.' Doesn't that suggest the governor or
his aides at least hinted at" wanted "something more?" Do you have an answer to that?

MR. AXELROD: No. The--I don't think that the governor's people hinted that they wanted
something. There, there was no discussion of quid pro quos. There was no--and by the way, I
mean, my contact with the president-elect never suggested that he was pushing one particular
candidate over another. Valerie Jarrett, who was identified as, as the Senate Candidate 1, is a
close friend and adviser to the president-elect. He wanted her in the White House. I never heard
him express an interest in putting her in the Senate.

MR. GREGORY: And yet there was a conversation that Rahm Emanuel, the incoming chief of
staff, had with both Governor Blagojevich and his chief of staff during which there was a
conversation about whether there would be anything beyond appreciation from the president-
elect, and Rahm Emanuel apparently said no, nothing more than that, just, just appreciation. So
there was no feeling among Obama's inner circle here that there was some hint, some
suggestion that they wanted more?

MR. AXELROD: No, there was not. There was not. And this, of course, was the subject of
interviews with the, the U.S. attorney. There was never any suggestion at, that I heard
discussed, of any interest in a quid pro quo. No one could have imagined the scenario that
unfolded after that.

MR. GREGORY: Did you or anybody working for the president-elect speak to the U.S. attorney or
other investigators about contacts with the governor's office prior to the criminal charges being
brought? In other words, did anything come to light in your dealings with the governor's office
that made you report to authorities?

MR. AXELROD: Well, I personally had no contacts with the governor's office. But no, absolutely
not. There was no reason to believe that there was any--anything unusual or untoward going on
that would require a contact with the U.S. attorneys office.

MR. GREGORY: We know that the president-elect also sat down for an interview with the U.S.
attorney. What was the nature of that interview?

MR. AXELROD: Well, he--they just--they wanted to know anything that he knew about it. As
he--as was described in the report that was released, he had no contact with the governor or the
governor's staff. He had some conversations with his own staff. Those were all reflected in that,
in that report. And they just wanted to, to, to probe and see if there's anything more he could
add.

MR. GREGORY: Bottom line, does the president-elect believe that the governor of Illinois was
attempting to sell his Senate seat, in effect, to the highest bidder?

MR. AXELROD: Well, David, I'm not going to answer that question. I mean, obviously we're all
reading the same accounts, and this is the subject of a criminal investigation. So we'll see how
that all--how, how that all turns out. But it wouldn't be appropriate for me to answer that
question.
MR. GREGORY: Let me turn to issue one for this new administration, and that, of course, is the
economy. Lawrence Summers, who is the incoming director of national--the National Economic
Council penned an op-ed piece for The Washington Post today in which he promises big things
from this administration. Let's put it on the screen for our viewers. "In this crisis, doing too
little," he writes, "poses a greater threat than doing too much. Any sound economic strategy in
the current context must be directed at both creating the jobs that Americans need and doing
the work that our economy requires. Any plan geared toward only one of these objectives would
be dangerously deficient. Failure to create enough jobs in the short term would put the prospect
of recovery at risk. Failure to start undertaking necessary long-term investments would
endanger the foundation of our recovery and, ultimately, our children's prosperity."

Rahm Emanuel, who we talked about just a moment ago, said that you don't want to waste a
serious crisis. By that he meant there were short, short-term problems you can address, but
also long-term problems that were ignored for too long that you can also tackle. What does the
president-elect hope and intend to do in the first few weeks to try to restore confidence?

MR. AXELROD: Well, I think it's, it's absolutely essential that we move not just to restore
confidence--and that's, that's important--but to do substantive things that will get this economy
moving again. The other thing that Larry Summers said in that piece was that, untended, that
we could be looking at double-digit unemployment by the end of next year, and that's something
nobody wants to see. So we have to act--every economist from left to right agrees that we have
to do something big in terms of job creation, but we want to do it in a way that will leave a
lasting footprint. So we're talking about investing in alternative energy projects that will help us
achieve energy independence. We're talking about rebuilding the nation's classrooms to bring
them into the 21st century, and labs and libraries so our kids can compete. Health: In the area
of health, IT, so that we can computerize medical records, which will cut costs, reduce errors and
improve, and improve care. And of course, infrastructure...

MR. GREGORY: Yeah.

MR. AXELROD: ...rebuilding our crumbling bridges and roads and waterways. These are things
that will put people to work, but also that will strengthen our economy in the long run, and that's
where we're focusing our attention.

MR. GREGORY: As the economy quickly deteriorates and continues to move in the wrong
direction almost on a daily basis, has the president-elect changed his view about taxes? And by
that I mean has he made a decision to put off any tax increases or even a middle-class tax cut,
as he talked about for the, for the short term?

MR. AXELROD: No. Look, we feel it's important that, that middle-class people get some relief
now. He's promised a middle-class tax cut. This package will include a, a portion of that tax cut
that will become part of the permanent tax cut he'll have in his, his upcoming budget. It's, it's,
it's vital people are, are--need money in their pockets to, to spend. That'll help get our economy
going again.

MR. GREGORY: But will you hold off on any tax increases?

MR. AXELROD: Well, look, the question is on the Bush tax cuts for the very wealthiest
Americans, and it's something that we plainly can't afford moving forward. And whether it, it, it
expires or whether we repeal it a little bit early we'll determine later, but it's going to go. It has
to go.

MR. GREGORY: All right, but that is an increase. You're saying you won't--you would just let it
expire, you wouldn't try to repeal it early?

MR. AXELROD: I'm saying we'll make that decision moving forward here.

MR. GREGORY: All right, but you're not--because the commitment was to, to lower those taxes
to definitely--excuse me, I mean to raise those taxes on people by letting those tax cuts expire.
You're saying you'll hold on and see. You won't make a decision yet.

MR. AXELROD: Yes, I'm saying that. But I'm also--I also want to stress that what the president-
elect proposed during the campaign amounted to a net tax cut. In other words, when you add
up the tax cuts and the change--the expiration or the repeal of, of the tax cut for the wealthy, it'll
amount to a net tax cut for the American people. It'll just restore some balance, David, which
we badly need.

MR. GREGORY: Let me turn, in our remaining moments, to the issue of politics. I don't have to
tell you that the president-elect has been criticized by some of his supporters for naming Rick
Warren to give the invocation at the inauguration, the evangelical figure, preacher, pastor in
California who is opposed to gay rights and supported Prop 8 in California, which overturned gay
rights in California. Frank Rich in The New York Times wrote this that was critical of the
president-elect this morning. "Obama may not only overestimate his ability to bridge some of
our fundamental differences but also underestimate how persistent some of those differences
are. ... When Obama defends Warren's words by calling them an example of the `wide range of
viewpoints' in a `diverse and noisy and opinionated' America, he is being too cute by half. He
knows full well that a `viewpoint' defaming any minority group by linking it to sexual crimes like
pedophilia is unacceptable." Let me just point out that Rick Warren did liken gay marriage to a
brother and sister marrying or to an older guy marrying a daughter. Do you think that the
president-elect has risked offending the very people who put him into office?

MR. AXELROD: Well, look, Rick Warren and the president-elect have had a dialogue for some,
some time, David. They've had a dialogue about things on which they agree, such as fighting
poverty and reducing the terrible plight of--the terrible disease that, that crosses Africa. And
they've, and they've had a dialogue about things on which they disagree, such as civil rights for
gays and lesbians and a woman's right to choose. But the important point here is that you have
a conservative evangelical pastor who's coming to participate in the inauguration of a progressive
president, and this is a healthy thing and a good thing for our country. We have to be--we have
to find ways to work together on the things on which we do agree, even when we profoundly
disagree on other things. And that's how we are going to build bridges of understanding and
move this country forward. And that's what Barack Obama promised as a candidate. That's
what he's going to deliver as president.

MR. GREGORY: But is--isn't the question for all those progressives, all of those new registrants
to the Democratic Party, when you promised a progressive presidency with a progressive
candidate, and then you get this. Pat Robertson, the televangelist who said in praise of Obama
this week, "I am remarkably pleased with Obama. ... He's picked a middle-of-the-road
Cabinet." Again, do you think Obama supporters would think that that's the kind of praise they
want to hear?

MR. AXELROD: David, we've got to get beyond this sort of politics where we're each on the
jagged edge of a great divide, shaking our fists at each other. We do have a great Cabinet.
We're proud of that Cabinet. It's diverse. It represents great talent and experience from inside
Washington and outside Washington. It's going to move this country forward. And if that
pleases people, whether they're from the right or the left, that's fine. But the, the bottom line is
watch what we do, watch the policies that we implement. We're going to move this country
forward.

MR. GREGORY: Has Barack Obama become a moderate now that he's become president?

MR. AXELROD: I think Barack Obama--one of the great virtues of Barack Obama is consistency.
He is exactly who he's always been. He's always worked across ideological lines, partisan lines
to try and achieve progressive goals, and that's what he's going to do as president.

MR. GREGORY: Finally, let's talk about your role in the White House. The last major political
figure in a campaign to have a big portfolio in the White House was, of course, Karl Rove. You've
described your role this way. "I'm a kibitzer with a broad portfolio." Here's my question: Will
you begin working on Barack Obama's re-election from day one?

MR. AXELROD: No, I'm working on--my, my job, David, is, is different from Mr. Rove's job was.
I see my job simply as helping disseminate the message of Barack Obama, working with the
communications team to make sure that we're true to the, to, to the ideals and the values and
the programs that he wants to advance in this country. And that, that's the extent of my
involvement. We've got plenty of good talented, political people who, who are not coming into
the administration. And when the time comes, we'll run the campaign. But our, our, our view is
that we've got tremendous challenges in this country right now, and what we should be thinking
about is how we're going to address those and not the next election. And if we do that well, the
next election will take care of itself.

MR. GREGORY: Are you saying you're not interested in political realignment in this country that
would help to achieve those goals that you hope to achieve?

MR. AXELROD: David, I'm interested in--and we as an administration are interested in solving
these profound problems that are facing the American people right now. And, you know, there's
an old saying that good, good government is good politics. I think that's more true today then
ever. The American people are not looking for more politics, they're looking for solutions, and
that's what we want to provide.

MR. GREGORY: David Axelrod in Chicago this morning. Happy new year and thank you for
coming on.

MR. AXELROD: Happy new year to you. Thank you.

MR. GREGORY: Coming next, how will the Obama administration solve our economic problems?
And how will history judge the Bush administration? Our roundtable weighs in. Rich Lowry, Todd
Purdum, Michelle Singletary and Richard Wolffe, all here only on MEET THE PRESS.

(Announcements)

MR. GREGORY: Our MEET THE PRESS roundtable weighs in on the economy and President
Bush's legacy after this brief station break.

(Announcements)

MR. GREGORY: We're back with our roundtable this morning, joined by Richard Wolffe of
Newsweek, Todd Purdum of Vanity Fair, Michelle Singletary of The Washington Post, and Rich
Lowry of the National Review.

Welcome to all of you. The new year is going to be a hard year when it comes to the economy.
Look at some of the headlines that we pulled just from the last couple of days: "States Cut
Medicaid Coverage Further," "Like Many States, Ohio Reaches for a Lifeline" from the federal
government, "Downturn Ends New York's Boom in Construction," "Retail Sales Plummet" after
the holidays.

This is what Jeff Immelt said--he's the CEO, of course, of General Electric, the parent company of
NBC--at a speech in November: "The economic crisis doesn't represent a cycle; it represents a
`reset.' It's an emotional, social, economic reset. ... People who understand that will prosper.
Those who don't will be left behind."

Michelle, what do you think that means?

MS. MICHELLE SINGLETARY: I think that--I love that he said "reset," because--I am actually
glad that we had this recession because we were on a path that we couldn't get off, and we did
need that reset. We need, we needed people to step back and stop taking on so much debt and
really go back to the basics. The basics are the basics because they always work no matter what
the economy is. Live below your means, don't take on so much debt and save.

MR. GREGORY: And that's not just advice for individuals, but for businesses.

MS. SINGLETARY: Well, I mean, you know, we, we, we bought into this. I say we drank the
Kool-Aid that "Let's use other people's money." Well, the problem is we ran out of other people's
money. And so, you know, look at the companies that went down. Why did they go down? It's
not because they didn't have a good business premise, it's because they had too much debt and
not enough cash. They had all these high-rolling times, but they weren't setting aside all this
money that they were earning.

MR. GREGORY: Well, what happens to the psychology of the country, as David Axelrod
suggested, if we get into double-digit unemployment?

MS. SINGLETARY: Well, you know, in some communities, we are already in double-digit
employment.

MR. GREGORY: Right.

MS. SINGLETARY: You look at the African-American community, Hispanic community, we are
already there. And, and, and it's going to be bad. It's going to be bad. But, you know, there's
hope. This, too, shall pass. And if people do the right thing, take the message that you can't
keep on the same path that you were before, we will be OK.

MR. GREGORY: Rich Lowry, the role of government has been vastly expanded in a Republican
administration. Has the public's view of what the government should and can be doing to fix the
economy changed? And will it change under this new president?

MR. RICH LOWRY: Well, at least, at least temporarily, David. And the way I look at this, and this
is a uncomfortable observation for someone who sits where I do on the political spectrum, but
big paradigm shifts in terms of how we view our politics and our economy, they usually happen
before the figure who's associated with them in history. So, arguably, in the '20s and the '30s
there was a bigger break between Coolidge and Hoover, who's a real activist president, than it
was between Hoover and FDR. You look at the late '70s, Congress passed tax cuts, Carter
deregulated before Ronald Reagan came into office, who's associated with those sort of
changes. And now we have a conservative Republican president who supported this massive
financial bailout, and then has used it to bail out the auto companies before the liberal activist
president has even taken office. So that's a sign to me that this might be a big, historic shift.
MR. GREGORY: One of the questions, Richard Wolffe, is what specifically does the new president
believe should be done about housing? A lot of people in the economy feel that until you do
something about housing prices or to ease the correction in housing, that psychology won't
change, people won't spend money if they feel like their number one asset is declining in value.
But there's a debate, I understand, within the Obama team about what specifically they can and
should do to ease that correction for the homeowner. Where do you think he'll fall down on that?

MR. RICHARD WOLFFE: Well, there is a debate here and, and partly because they've spent so
much money not changing anything--or at least the current administration has. If the focus is
on psychology, I think they are on a very long and difficult path. We're halfway through this
recession by many conservative estimates. It will be a long time before the psychology turns
around. It's about confidence in the marketplace, for sure. But also growth. What they're really
focusing on is growth in the broader economy. Until that really moves on, nobody's going to be
spending money. Companies are not going to be investing capital. So the question is, not just
specifically about the housing market. Of course there are troubled institutions, troubled pieces
of paper. So much money has been thrown at that.

MR. GREGORY: Right.

MR. WOLFFE: Moving that forward is going to take a much bigger group of policies.

MR. GREGORY: Is he going to get a blank check from both Democrats and Republicans in
Congress to do what he feels he needs to do?

MR. TODD PURDUM: I don't know that he'll get a blank check, but I think he'll probably have
pretty broad support. And partly because no one should be invested, no one will be invested in
his failure. Every member of Congress has to deal with his or her district. And look what
happened with the initial refusal to support the bailout. That was because of pressure coming
from their districts. So I don't think anybody wants to, to dig us deeper here. And if, if the
Obama Administration comes forward with some, you know, reasonably creative ideas for going
forward, I think the Congress will go along.

MR. GREGORY: I want to talk about what we learned from this bubble. Because everybody's
talking about that for new regulation and lessons learned from what we experienced in this
housing crash--no. This is what--Henry Blodget, in Atlantic magazine wrote the cover story, on
why Wall Street always blows it. He was a Merrill Lynch analyst during the, the Internet bubble.
He writes, "Why did Bear Stearns, Lehman Brothers, Fannie Mae, Freddie Mac, AIG and the rest
of an ever-growing Wall Street hall of shame take so much risk that they ended up blowing their
firms to kingdom come? Because in a bull market, when you borrow and bet $30 for every $1
you have in capital, as many firms did, you can do mind-bogglingly well. And when your
competitors are betting the same $30 for every $1, and your shareholder start demanding that
you do better, and your bonus is tied to how much money your firm makes--not over the long
term, but this year--the downside to refusing to ride the bull market comes into sharp relief."

Michelle, it's not so easy to put the brakes on when everybody's making money.

MS. SINGLETARY: It's not. But you have to. You have to. The companies and individuals did
the same thing. You know, Proverbs says that the borrower is slave to the lender. And if we just
internalized that message, we would all be much better right now. And, and it, it's a shame that
we had to get to this point, but we have got--I mean, you talked about the psychological
change. We have got to do this. We have got--we--you know, you and I talked about this. You
know, we have this whole Ponzi scheme of shifting money around, and no one is saving, no one's
doing the things that they're supposed to do. It is critical that we address the housing issue.
Some people will lose their home, and they should lose their home. But if you're in your home
right now and the value is going down, and you have no intention on selling or refinancing, what
do you care what it's worth? It's where you live. It's not a bank. It's not an ATM. So stop
worrying about that. If you got savings, and you have a decent job and you've got health care,
go ahead and spend. It's OK.

MR. GREGORY: Well, you actually write about something that Congress should take up in a
recent column. You say, in terms of passing the buck, "There's some good that could be had,"
you write, "from the current crisis in corporate America. When someone is pleading for a
handout, you can get something in exchange for rescuing them. It would be idiotic if Congress
didn't take advantage of this crisis"--(Gregory coughs) excuse me--"and find a way to better
control the way executives are compensated. If we now have an economy in which we cannot
allow certain industries or companies to fail, then we need better governance over executive
compensation."

Rich, is that really where Congress should be spending its time?

MR. LOWRY: Well, look, the problem is--and I think Michelle's on to something here--when
you're a company and you take government money, you've sort of lost the moral claim to control
yourself. And that's why Detroit is going to end up producing green cars, basically mandated by
Congress. That's why the banks are going to face, I think, really serious pressure, kind of
mandated lending regulation. And if things continue to go south, it wouldn't surprise me if we
begin to see really serious proposals to nationalize the banks.

MR. GREGORY: Is that something that would, that would fly in Congress?

MR. WOLFFE: Well, they're not, they're not going to use that language, but, de facto, that's
what's really already taking place. The question is, you know, you can focus on these individual
industries, you can look at the housing market. But there is a fundamental question that
undermines the philosophy that we have looked at for the last 20 years about unfettered free
markets, whether it's safe to put money into the stock market. Are the banks going to be
there? Are the regulators doing their job? Are the credit agents performing their tasks? To
rebuild all of that is not just a monumental task, it has a huge impact on the politics, because
conservatives have put their confidence in an ideology that is as broken now as the big
government philosophy was in the early '90s. The era of big business, in many ways, is over.
Politics in Congress across the country's going to have to deal with that, just as homeowners are
going to have to deal with their own personal budgets.

MR. GREGORY: Rich, is that fair, do you think?

MR. LOWRY: Well, this--we're, we're definitely probably seeing an end to a 25-year era that ran
right through Reagan, through Clinton, and through Bush that depended on free markets, free
trade and deregulation. Now, how far we're going to go in the other direction is one of the big
questions. And I would counsel against going too far in the other direction. But there is, as I
was saying earlier, a big possibility of a paradigm shift here.

MR. GREGORY: Let's talk about the political dimension to all of this. This week Newt Gingrich,
former speaker of the House, of course, said the Republicans are in a tough spot when it comes
to criticizing the new president. This what he said: "I think the country is so tired right now of a
style of Republican attack politics that has become a caricature of itself, they instinctively go,
`I'm tired of that.' It's ineffective against Barack Obama right now. The country is faced with
serious problems and is about to have a brand new president. You'd have to be irrational not to
want the new president to succeed."

MR. PURDUM: I think, as usual, Speaker Gingrich puts his finger on something pretty essential.
I mean, he's about the smartest guy in Washington in many ways. And, you know, he has his
problems, but he's always been out there being able to see when the wind is changing, and this
is one of those times, I think. President-elect Obama has this metronomic kind of regularity. He
never gets too excited when things are going well, he never gets too upset when things are
going badly. And I think in some ways the public, over time, over the length of his campaign
responded to that, and that's effectively what answered a lot of doubts about experience and
other qualifications. So I think, you know, the, the sort of Rovian style of "demonize your
opponents, say they're bad," that, that has passed a little bit from the scene for the moment, I
think.

MR. GREGORY: But, Michelle, how much patience does the public really have? He's got a big
honeymoon here, the President-elect does, but people are going to expect him to turn over those
cards to bring recovery pretty quickly.
MS. SINGLETARY: I think they will, absolutely. You know, you, you quoted Larry Summers
editorial and at the very end, if you read to the end, he said what we can't do is go back to
saying, "Consumers, spend, spend, spend to get us out of this."

MR. GREGORY: Mm-hmm.

MS. SINGLETARY: And so I think that Barack Obama has to get in there and has to do some
hard work right away, because that's right, we're not going to wait. Because if you lost your job,
if you don't have health care, if you can't feed your kids and you're out on the street, and you've
been kicked to the curb, you're not going to wait for the president to, to, to do whatever. You've
got to have something happen right now and soon. And, you know, I think he needs to get in
there and, and make some hard decisions and, you know, you know, get in there. And, and
we've ignored HUD for a long time. You know, we've got to get in there and, and--I tell people
HUD--we ought to be fearful of HUD as we are of the IRS.

MR. GREGORY: The Department of Housing and Urban Development.

MS. SINGLETARY: That's right. You know, look at that they did. I mean, it's crazy how they
weren't really policing the way they should have, and they don't have enough policing power. So
those kinds of things is what he's going to have to get in there and do, I think.

MR. LOWRY: It's, it's really an extraordinary moment, because Michelle talked about how debt
got us into this problem and the solution that's being offered is more, more debt, government
debt, debt. If you look at the Federal Reserve, you know, there's a water main break here in
suburban Washington. I think everyone saw on, on cable news millions of gallons of water
flowing down the street. That's what the Federal Reserve has done.

MR. GREGORY: Right.

MR. LOWRY: Just opened the spigots in terms of liquidity, and now--that's what we're doing in
monetary policy. And now Barack Obama is going to do a version of it with fiscal policy. You
know, the defense budget is about $500 billion. We're going double that amount roughly in a
couple of weeks. Total discretionary spending by the federal government is about $1 trillion.
We're almost going to double that in a couple of weeks. And I think this is where the Republican
opposition is going to come in. They're going to tamp the brakes...

MR. GREGORY: Mm-hmm.

MR. LOWRY: ...and say, "Look, there's no way you can spend that much money responsibly."

MR. GREGORY: But wasn't it--weren't--wasn't it conservatives who said that deficits don't
matter?

MR. LOWRY: Exactly. You're going to hear that--I was talking to a top Republican aide just over
the weekend, and I heard the D word more than I ever have like in eight years.
MR. GREGORY: Suddenly they're back, they matter.

MR. LOWRY: Exactly.

MR. GREGORY: Let's talk about something else that, that a couple of you have written about this
week, and that is the legacy of the Bush administration.

Todd Purdum in Vanity Fair, a big spread, an oral history of the Bush administration. If this is a
first draft of a history of this administration, what does it show?

MR. PURDUM: Well, I think the main point is, is what President Bush's pollster and former
strategist in the 2004 election said, which is "Missed opportunity." It was amazing--my editor
Cullen Murphy and I did this, we conducted probably close to 60 interviews--and from Bush
insiders to foreign diplomats, the common theme was tremendous elegiac regret at opportunities
that were missed. That opportunity after 9/11 when the president had, you know, the country in
the palm of his hand and foreign newspapers were saying, "We're all Americans," somehow that
moment was never exploited to move forward and the Iraq war, of course, became an incredibly
divisive issue for the, for the country and for the world.

MR. GREGORY: If there wasn't that sense of--I mean, there was a sense of national purpose, but
if there was not a specific call for national sacrifice, the president essentially said, "Look, we will
worry about this, you should go about living your lives."

Richard, what was that space filled by?

MR. WOLFFE: National service. You know, I, I, I'm not sure that the call to service was what
was missing. It was a tone in politics that actually Governor Bush, as he ran for office, talked
about bringing in, this idea that Barack Obama is now picking up about, ending the partisan
squabbling.

MR. GREGORY: Uh-huh.

MR. WOLFFE: And, and he actually exacerbated it. And 9/11 was a moment to reset the clock,
to go back to those campaign themes. And instead Iraq wasn't just divisive politically. I think
people are still today scratching their heads and trying to figure out why it happened. The
rationale changed so many times. The decision to move from al-Qaeda to Saddam Hussein has
never been made clear. I think we are still waiting for a sufficient explanation of it. And his
legacy is, to some extent, going to be defined by that. But using war and national security for
political purposes in those first midterms, in the 2004 election, really, it took us to a new level of
partisan squabbling.

MR. GREGORY: You talk about the tone.

Michelle, what was striking, Ari Fleischer, interviewed in this piece, the first press secretary for
President Bush, said this in the Vanity Fair piece: "After the recount, the disputed election, a lot
of people said you needed to start to trim your sails: What are you going to cut back on as a
way to show outreach to the other party? The president rejected that line of thinking." Why, do
you think, and was it a mistake?

MS. SINGLETARY: I think it was. And, and you know, if I--you talked about his legacy, his
economic legacy is selfishness. You know, you look at what they wanted to do to Social
Security. Imagine if our money was in the markets right now, which is one of the things that he
wanted to do. I think this, this administration failed on so many levels when it came to the
economy, including not regulating the banks and letting things happen that shouldn't have
happened with the mortgage industry. And, you know, he should be ashamed of what he, what
he has left us.

MR. GREGORY: Overall that change in tone, missed opportunity there. There was a real feeling
that he would never be accepted. Karl Rove and others said, "You know what, the country--the
left will never accept you. You've got to put your pedal to the metal here and go for the
agenda." And that's what they did.

MR. LOWRY: Well, I would say a couple things. One, Bush had a very simple view of how this
works. You run on your agenda, and then you're elected and you try to pass your agenda. And
that seems pretty straightforward and basically admirable to me. But a couple things happened
with the tone. One, he entered into a Washington where there was this ongoing revenge warfare
between the parties, where Republicans were going to get revenge for Iran-Contra with, with
Whitewater and the Monica scandal, and then the Democrats were going to get revenge for that.
And you had about a 16-year period where neither side would really accept the legitimacy of the
other party's president. And then also, I think, it, it goes more broadly to Bush's capabilities.
You know, he was much better as a decider than a persuader. You know, he was never good at
making the argument, and therefore he didn't, didn't put much effort into making the argument.

MR. GREGORY: We'll come back to Iraq in just a second, but one--what, what, what's
underneath all of this, of course, was the response to 9/11 and the question of, of terrorism. He
gave a speech December 17th at the U.S. Army War College, during which he said this.

(Videotape)

PRES. GEORGE W. BUSH: Here at home we prevented numerous terrorist attacks. We'll never
know how many lives have been saved. But this is for certain, since 9/11, there's not been
another terrorist attack on American soil.

(End videotape)

MR. GREGORY: Richard Wolffe, that cannot be denied.

MR. WOLFFE: Sure. But on American soil is the operative phrase here. There have been many
terrorist attacks on foreign soil that are the direct outgrowth of what we've seen of, of American
foreign policy, to be blunt. And it's true that terrorism is what is responsible for those attacks,
not American foreign policy. But that policy has exacerbated it and has taken the problem
elsewhere. So al-Qaeda has, has grown into a multiheaded beast which is now extremely
difficult to control. Afghanistan is actually in a weaker situation than it was after the Taliban was
overthrown. So, you know, there are--he has a, he has a, a historic record in terms of his
response to 9/11, no question. People were looking for leadership, and he filled that vacuum in
those very, very troubled moments. But longer term, America is--has, has fundamental
problems now that are really being kicked to this new administration.

MR. PURDUM: Well, that's another point that people we interviewed made to us is the credibility
problem. Former Senator Bob Graham, who was chairman of the Intelligence Committee and
voted against the war, one of the relatively few Democrats to do so, made the point that
American credibility around the world is really shot on a lot of important questions now because
people say, "If you got Iraq so wrong, how can we trust you on this?" He also pointed out that
the threat of al-Qaeda is arguably greater than it was on September 10th, 2001, because of this
resurgence. And other people polled--General Alberto Mora, who was the general counsel of the
Navy, said that generals on the ground in Iraq believe that the two worst causes of American
casualties there are Guantanamo and Abu Ghraib, because of the spur they gave to recruiting
jihadists.

MR. GREGORY: The detention...

MR. PURDUM: Exactly. Exactly.

MR. GREGORY: The detention facility in Guantanamo for, for people picked up on the battlefield.

Rich Lowry, you write--well, first, the--we'll talk about what you, what you wrote in the National
Review about Bush exiting. But the, the theme of the second inaugural, and indeed, much of
what we hear the president talk about in terms of Iraq, has to do with the freedom agenda,
bringing freedom so that terrorism cannot flourish. This is what the president said in part during
his second inaugural.

(Videotape, January 20, 2005)

PRES. BUSH: There is only one force of history that can break the reign of hatred and
resentment and expose the pretensions of tyrants and reward the hopes of the decent and
tolerant, and that is the force of human freedom.

We are led by events and common sense to one conclusion: The survival of liberty in our land
increasingly depends on the success of liberty in other lands.
The best hope for peace in our world is the expansion of freedom in all the world.

(End videotape)

MR. GREGORY: The National Review cover that I mentioned says "Bush Exits," and your
particular piece, Rich, is headlined this way: "`The Freedom Speech' in Retrospect. It was not
the grossly simplistic vision of the second inaugural that saved Iraq."

MR. LOWRY: Yeah. Look, all inaugural addresses are aspirational at a certain level, so you have
to factor that in. But I think this was overreaching. Yes, freedom is a important drive in all of
human beings. But there are lots of other important drives. You know, for honor, for, you know,
your way of life, for your ethnicity, your religion. All those sort of things were ignored. And one
of Todd's interviewees in this Vanity Fair piece, an intelligence official, was asked, you know, why
didn't they have more interest in the aftermath of Iraq? And he said, "Well, if you believe that
freedom is inevitably going to triumph and if you just scratch beneath the surface of everyone,
you basically have a Western liberal there, you're not going to be that interested in the aftermath
because you think it's going to work out." And unfortunately, I think there's a fair amount of
truth to that.

I just want to go back to Richard's point about the no attacks on U.S. soil. U.S. soil is a big
caveat. I mean, that is a key thing. And in our exit interview with President Bush, you're just
struck by the extent to which he was a war president. I mean, that's what drove him most
passionately. And when you talk to him about it, you feel as though he's just sort of been left
behind by the public and by history. And I think that's because of the very success in preventing
another attack on U.S. soil...

MR. WOLFFE: But you can't...

MR. LOWRY: ...which allowed, which allowed the public to move on to, to other issues that they
found more urgent.

MR. GREGORY: Mm-hmm.

MR. WOLFFE: You can't take America's national security across oceans to other continents and
then only care about its impact on American soil. It's grossly irresponsible.

I--just a point about the, the second inaugural, though. Yes, grossly simplistic, but where's the
follow through here? You say freedom is, is the most important thing, and everyone agrees with
that. But again, America has a unique position on the international stage. Sustained
involvement with fighting tyranny would, say, take you into Egypt where the president was
saying he was going to stand with the dissidents and deal with jihadism. Well, you know, the
dissidents in Egypt's jails are still there, and they are actually still the sworn enemies of the
United States. So simplistic in conception and execution, and you cannot just say, "Well, here we
are in America, we're just doing great. What about"...

MR. GREGORY: Let me...

MR. LOWRY: Well, it's, it's--yeah.

MR. GREGORY: Go ahead.

MR. LOWRY: It was impractical on a certain level. But, look, it's not as though the United States
does not care about terror attacks overseas. And I think perhaps you're exaggerating the extent
to which al-Qaeda has been strengthened. Al-Qaeda just suffered a severe defeat in the Arab
heartland in Iraq, and that is a huge benefit to the United States strategically, and President
Bush basically was--is responsible for that alone. His opponents wanted to quit from Iraq and
basically hand the country over to terrorists. And Bush, you know, there are two sides to Bush;
there's courage and there's stubbornness. Sometimes, you know, you saw him stubbornly
sticking to the wrong course. The surge in Iraq, which saved the war there and dealt a blow to
al-Qaeda, was a hugely courageous act.

MR. GREGORY: Just have about a minute left.

And, Richard, I just want to touch our top story briefly. David Axelrod didn't want to talk about
what the Obama response would be to this offensive into Gaza by Israel, but what's coming
potentially is a long, protracted war, a ground invasion. Where do you think Obama will stand on
these issues? And how does it complicate whatever diplomatic turn he'd like to make in the
Middle East?

MR. WOLFFE: Well, there's an eerie parallel with what happened with President Bush, because,
remember, the Second Intifada started in 2000 just before he took office. And everyone, every
president has this idea of being the peacemaker in the Middle East. Obama wants to have a
more sustained engagement. Again, one of the things we didn't see through the Bush years. But
his capacity to move here is severely curtailed because the Palestinian territory is so deeply
divided. He clearly has some room, the Israelis have some room to try and remake the Gaza
Strip, but it's not going to happen by military force. There needs to be a new political settlement
there between Palestinians, otherwise, to use that tired phrase, there's no partner for peace
there for Americans or Israelis.

MR. GREGORY: Todd.

MR. PURDUM: Well, it's just--I mean, look at the situation there now. There were elections.
Hamas won the elections. So, I mean, it's a complicated reality in the world when you start
opening the, the can of democracy, and we'll see what happens.

MS. SINGLETARY: If...

MR. GREGORY: Yeah.

MS. SINGLETARY: You know, I listen to this conversation, and I'm sort of thinking, you know, as
the, as the regular, you know, mom and, and churchgoer, and I'm thinking, you know, all this--
I'm just so disheartened by what Bush did to us, and, and all this focus on fighting a war that we
couldn't win. I mean, all the generals sort of told you that going in. And you said sometimes
stubborn. He wasn't sometimes stubborn, he was always stubborn. And, and he did all of this, I
think, at the detriment of our country, our economy. And I think the regular American people
are sitting here going, "We're in this war, and you said you couldn't afford health care, and yet all
these billions of dollars are over there. And I have no job, no health care and probably no
house."

MR. GREGORY: And one of the issues, obviously, that the president himself has said that it will
take time for some of that vision, particularly in foreign affairs and in Iraq, to be vindicated if it's
ever vindicated. But the reality is a cruel economic reality as he leaves office.

We're going to leave it there, thank you very much. We'll be right back.

(Announcements)

MR. GREGORY: That's all for today. We'll be back next week. If it's Sunday, it's MEET THE
PRESS. Happy new year, everyone.

Video of Meet the Press, 12-28-08