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CNN Late Edition with Wolf Blitzer

Karzai Discusses Goals of Interim Government; Hastert Weighs in on War on Terror; Boxer, Inhofe Debate Economic Stimulus

Aired December 23, 2001 - 12:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WOLF BLITZER, HOST: It's noon in Washington and Boston; 9:00 a.m. in Los Angeles, 6:00 p.m. in Paris; and 9:30 p.m. in Kabul, Afghanistan. Wherever you're watching from around the world, thanks for joining us for this three-hour LATE EDITION.

We're standing by for a news conference with the New York City mayor, Rudy Giuliani, who today was named "TIME" magazine's Person of the Year. When that happens, we will bring it to you live.

We also will have an exclusive interview with the leader of Afghanistan's new interim government, Hamid Karzai, in just a moment. But, first, let's check the latest development on that American Airlines flight that was diverted to Boston's Logan Airport, after a passenger said he had explosives in his shoe.

(NEWSBREAK)

BLITZER: We shift now to the war in Afghanistan. After five years of Taliban rule, and just over 100 days since the September 11 terrorist attacks against the United States, Afghanistan has a new government. It held its first cabinet meeting earlier today.

Joining us now from Kabul, in his first television interview since taking office as Afghanistan's new leader, is Hamid Karzai.

Welcome to LATE EDITION, and congratulations to you, Mr. Chairman. Good to have you on our program.

And let me begin by asking you the question that many people around the world are asking: Do you and your government control all of Afghanistan right now? Or are there still pockets of potential al Qaeda or Taliban forces at large?

HAMID KARZAI, LEADER, AFGHAN INTERIM GOVERNMENT: Generally, the Taliban movement, or that regime, has completely gone away from Afghanistan. The main terrorist bases associated with them have been removed. There may be individuals hiding in parts of Afghanistan; we are looking for them. Recently some have been arrested, and we are looking for more.

We will see to it that terrorism is completely finished in Afghanistan in all its form, and we are also looking to it to cooperate internationally to finish this menace all over. BLITZER: Do you know at this point, Chairman Karzai, where the Taliban leader, Mullah Muhammed Omar, might be?

KARZAI: I don't have precise information as to where he may be exactly. Two days ago I was given some indication of his whereabouts. We'll look on that, and if we find him there, he will be arrested.

BLITZER: What will you do with him after he's arrested? In other words, will you keep him and try him and deal with him inside Afghanistan, or hand him over, let's say, to the United States?

KARZAI: We have a national case against him. He's responsible for the killing of thousands of innocent Afghans, for the destruction of our country, and for bringing into Afghanistan terrorists and for delivering our country to terrorists, and from bringing too much suffering to our people. We will do that here in Afghanistan as well.

But if there's a case against him internationally, and if he's required internationally, an international court of justice, or with the United States for the act of terror that's been committed in America, we will deliver him there, too. He has no protection whatsoever.

BLITZER: You believe that Mullah Muhammad Omar is still alive, is that right?

KARZAI: Well, as I mentioned earlier, two days ago I received a report. It's not yet very confirmed if he's still alive. And if we find where he is, we will arrest him.

BLITZER: What about Osama bin Laden? Do you believe he's alive? And what will do you with him if you find him?

KARZAI: We will deal with him exactly in the same way. He, too, is responsible for lots of suffering in Afghanistan. He was a close associate of Mullah Omar. The two of them together committed murder and the destruction of the Afghan land and people. There's no way that he can go unpunished. If we arrest him, we will deliver him to international justice.

BLITZER: But you will not necessarily deliver him immediately to U.S. authorities, who obviously want him in connection with the September 11 terrorists attacks against the United States?

KARZAI: We strongly condemn those attacks against the United States. They killed very innocent people. I saw on television the way people jumped off 80th floor of the Twin Towers. It's a criminal thing that they did. We will deliver him to the United States.

BLITZER: All right. And do you believe, as the Pakistani President Pervez Musharraf said only the other day, that it's very possible that Osama bin Laden was in fact killed in the Tora Bora caves during the extensive U.S. airstrikes?

KARZAI: I have no information about that. If he's been killed, then it's good news for the people all over the world to know that a menace in the name of terrorism in the form of that person is no longer there.

BLITZER: The British are leading what's called an international security force, a peace-keeping force if you will, inside Afghanistan right now with representatives from several other European and Asian nations.

How long do you believe it will be necessary for them to remain in your country?

KARZAI: Well, just today I had a meeting with a very large group of some of my countrymen who had come from southeastern parts of Afghanistan. They asked for the presence of the international peace- keeping forces.

It was the first time after assuming my responsibility that the people of Afghanistan from (UNINTELLIGIBLE) province asked me for that thing. And the international peace-keeping force has the commitment of the international community for peace and civility in Afghanistan are a good thing. They're welcome here. And they should be here with us for as long as it takes and for as long as we need to have them here in order to have the commitment of the international community.

We need to have the instruments of controlling law and order within Afghanistan. And we hope to have a national minister of defense and a police force. And as soon as we have the means to protect our citizens ourselves and to bring security to the whole country, then there will be no need for those forces.

BLITZER: Chairman Karzai, what do you see as the U.S. military role in Afghanistan in the next few days, weeks, perhaps months? Because, as you know, the U.S. is not part of that international peace-keeping force.

KARZAI: The United States' assistance during the past two months to the people of Afghanistan in fighting terrorism has been very, very valuable. Without that kind of assistance, it would have been impossible for us to win against terrorism and remove the Taliban. We are grateful to the U.S. people and government for having provided us this sort of assistance, as they in fact did when we were fighting the former Soviet Union. It was almost the same way of assistance. We're grateful.

And, yes, the U.S. forces are not part of the peace-keeping forces, but as long as there are these terrorist elements hideouts in Afghanistan, and as long as we think there are remnants of terrorists in Afghanistan, those forces can stay and fight terrorism.

KARZAI: We have a commitment to free our country and the rest of the world from this scourge of terrorism, and we will see to it that that is completed by whatever means.

BLITZER: Two and a half months since the U.S. airstrikes began. Were you surprised how quickly the Taliban has been effectively destroyed and the al Qaeda inside your country has been uprooted?

KARZAI: As a matter of fact, no. When I went into Afghanistan, two and a half, three months ago, when I saw the people there, I recognized that our people were extremely eager to have this oppressive structure go away from Afghanistan, that they were extremely eager to have the terrorism go away from Afghanistan.

They recognized the presence of terrorism in Afghanistan. They suffered as a consequence of that. They were the first victims of terrorism. And the Taliban were seen as the associates of terrorism and, as part, the people who were supporting them.

So they were eager to get rid of them, and as soon as they got the opportunity, with that kind of help that the United States and its friends provided to us, the people saw to it that they should go.

And you notice that the Afghan people were very effective in dealing and fighting terrorism, and the Taliban go away from Afghanistan.

BLITZER: Chairman Karzai, I wonder if you could clarify something for me. I've seen all sorts of conflicting accounts of what may have happened to you personally in the southern part of Afghanistan during that so-called friendly fire incident, the U.S. hitting its own forces in Afghanistan.

There were some reports you were injured in that and had to be evacuated by U.S. military helicopters. What precisely did happen?

KARZAI: I wasn't really injured. I mean, you can't call that an injury. I just had a slight scratch on my face and a little scratch on my head. But that's gone away.

But we did have some casualties. Some of our friends died. Some American troops died. And we had casualties; two in the form of wounded.

I was not evacuated. I didn't need to be evacuated. As a matter of fact, soon after that incident, we received the news that I was officially nominated as the chairman of the interim government. And also the same day, I got a message from the Taliban that they wanted to surrender. So soon I got busy with things that made me forget, you know, the thing that we are gone through.

And you will be surprised, Mr. Blitzer, that soon after that incident some of our fellow Afghans came to talk to me, to say that -- to convey to the Americans that things like that happen, that they should not worry about it, that the struggle will go on.

BLITZER: Our viewers around the world, Chairman Karzai, know that women in Afghanistan were brutally oppressed during the rule of the Taliban. Now two women are in your government, in your cabinet.

What will be the role? Will women have equal rights in Afghanistan under your leadership?

KARZAI: Women have had a role before, too, in Afghanistan. Afghan history is full of examples of women playing a leading role in Afghanistan. I'm not going into details on that. But very -- in the recent past, something like 30 years ago, we had Afghan women in the parliament, we had them in the government. We had a major part of the civil service, in the sectors of education and health, formed by women. And more than 50 percent of those ministries were actually women. Now, too, as you mentioned, we have two women in our cabinet.

In accordance with Islam, in accordance with our tradition, they will have their role, and that will be a significant role.

BLITZER: You have an enormous task ahead of you at rebuilding Afghanistan. Do you have a ballpark figure, an estimate, how much money Afghanistan needs from the United States, indeed from donors around the world, to help you in this rebuilding process?

KARZAI: Well, probably, we are going to need billions of dollars. This country has been systematically destroyed for so many years. All aspects of life have been either damaged or destroyed or, in some cases, nearly destroyed.

So we are a people in need of reconstruction in all walks of life. We are a people who have suffered a lot in the hands of terrorism, in the hands of interferences. And naturally, the country needs to be helped, and to be helped strongly by the international community and, on top of that, by your own country, the United States.

It should run into billions, but we hope we'll get money for the reconstruction of Afghanistan. And we hope that we will not be left alone, and this country would receive the help that it deserves.

BLITZER: Hamid Karzai, the new leader of Afghanistan, the chairman of the interim government, congratulations, once again, to you. Good luck to you. And thank you so much for joining us on LATE EDITION.

KARZAI: Thank you very much, Mr. Blitzer. Thank you.

BLITZER: Thank you.

And still to come, we'll talk with "TIME" magazine's managing editor, Jim Kelly, about the magazine's selection for Person of the Year, the New York City mayor, Rudy Giuliani.

We're also standing by for a news conference with the mayor. When that happens, we'll bring that to you live.

But when we return, how close is the United States to tracking down Osama bin Laden and other terrorists? We'll talk about the war against terrorism, the slumping U.S. economy and much more with Republican Senator James Inhofe of Oklahoma and Democratic Senator Barbara Boxer of California.

LATE EDITION will continue right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I don't know where he is. I hadn't heard much from him recently. But I will tell you this: We're going to find him.

(END VIDEO CLIP)

(AUDIO GAP)

BLITZER: ... Select Intelligence Committee, as well as the Armed Services.

(AUDIO GAP)

BLITZER: Senator Inhofe, let me begin with you and get your reaction to what you just heard from the new leader of Afghanistan, Hamid Karzai. Is he the man who can get the job done in that country?

(AUDIO GAP)

SEN. JAMES INHOFE (R), OKLAHOMA: ... him. And I knew a little bit about him before and I think he's the one can do it. He is man of peace. He's one who's very knowledgeable, and he has the roots, he can bring the tribes together, I think, better than anyone else who had been mentioned.

BLITZER: He is, Senator Boxer, a Pashtun, the majority, the largest ethnic group inside Afghanistan. From what you heard, from you were know about him, do you have confidence that he can work with the United States and bring some semblance of stability to Afghanistan?

SEN. BARBARA BOXER (D), CALIFORNIA: I'm very optimistic as to what I have seen. I think he can bring people together. We have reports that the head of the Northern Alliance gave him a hug and a kiss on the cheek, and that meant something because this is a country that has so many different ethnicities.

I like what he had to say about women. You know, women have been so brutally oppressed, and he's obviously dedicated to giving them back their equality that they had before the Taliban came into power.

BLITZER: Senator Inhofe, you also heard him say that Afghanistan's going to need a lot of money, billions of dollars in order to rebuild that country. How generous do you believe that U.S. Senate is going to be in allocating funds for rebuilding Afghanistan?

INHOFE: Well, you know, Wolf, it's going to take some re- shuffling of funds that we have out there right now. But, you know, we're almost out of funds. In all of the costs that we've incurred in New York, in other places, it's going to be very, very difficult. And we're going to have to get back there and look at it.

But I don't think that the United States is going to be in a position to carry this thing. We're going to depend on our allies, and others are going to have to belly up the same as we are. Because, you know, we've been hit with a lot of expenses since the 11th of September.

BLITZER: Senator Boxer, there are some who want the allies, some of the wealthier nations out there, perhaps some of the oil-rich nations, the European nations, Japan, to come in and provide some of the funds, the expenditures for this war on terrorism, just as many of those nations did during the Gulf War, not just make it a U.S. expenditure.

BOXER: I have long been a believer in burden sharing, and if ever there was a case for it, it was this.

Every nation in the world has a stake in what happens to Afghanistan, what happens within Afghanistan. You know, it was a hotbed for terrorism. So, yes, we're all going to have to step up to the plate.

And we can't forget the fact that it was the Cold War that brought us, into Afghanistan. We really in many ways created mujahedeen. We supported Osama bin Laden in those years against the Soviet Union, then we walked away. So we have a very, it seems to me, special obligation.

And as a member of the Foreign Relations Committee, I can tell you that on both sides of the aisle people are committed.

And, you know, my colleague Senator Inhofe is right. It's going to be expensive. We've had a lot of expenses. But because we didn't go ahead with that huge so-called stimulus plan, which I felt was so ill-advised, we in essence saved $200 billion over the next three years, will give us some more tools.

BLITZER: We'll going to get to that economic stimulus plan in a second, but you wanted to weigh in Senator Inhofe, go ahead.

INHOFE: Yes, I just want to say one other thing, Wolf, because during the Clinton years I think we all know what happened to our military. Now, all of sudden, the wake-up call of 9/11 has allowed the people to put pressure on those who are not really supportive of the military.

We have huge military expenses. In order for us to get up to meet the minimum standards of two MTWs, defending America on two fronts, our modernization program for the first time in contemporary history, we have a lot of our military vehicles that are not as good as what potential adversaries have.

So we have huge expenses that we're going to have to plan for right now, and they're going to be competing for those dollars.

BLITZER: All right. And we're going to talk about that...

BOXER: And if I could just say, we...

BLITZER: Go ahead, Senator Boxer.

BOXER: I was just going to say that we need to spend more on intelligence. And under Bill Clinton, we spent more on the military as well as more on intelligence. And clearly we have to do more there as well.

BLITZER: All right...

INHOFE: Now, that's not exactly right. Under, you know, we were down to one-half the force strength that we had in 1991 at the end of the Persian Gulf War. And so that's what we have to...

BOXER: Well, I'll show you the numbers.

INHOFE: We have to start building back up again. And also building for a national missile defense system...

BOXER: The numbers went up.

INHOFE: ... which, due to his vetoes, we no longer have. And let's keep in mind the ultimate weapon of a terrorist is a nuclear warhead on a missile. So we're going to have to be, you know, preparing for that.

BLITZER: All right. We're not going to have a debate now on the nuclear, on the defense shield...

(LAUGHTER)

... on some of the other issues that you talked about. But I do want to get your reaction to the hunt for Osama bin Laden.

And, Senator Boxer, let me begin with you on this question. Let me read to you from editorial in the "New York Times" earlier this week. It said this: "The war in Afghanistan, not to mention the war against terrorism, will never seem complete without the capture or confirmed death of Osama bin Laden and his two top surviving deputies, Ayman al- Zawahiri and Abu Zubayda.

Are you convinced that the United States is going to capture or kill these top al Qaeda leaders?

BOXER: Eventually, I think we absolutely will. We have focused on this like I've never seen us before.

But, you know, I want to say this. We had a hearing just the other day in my subcommittee on terrorism. And I think the important thing to note, and for the American people to note, is that that will not be the end of it, because this al Qaeda organization and other terrorist organizations are pretty deep into many countries.

So, yes, we need to get the top leaders, that will absolutely disrupt. But in order to really dismantle and make sure this never happens again, it's a long fight ahead.

BLITZER: Senator Inhofe, the American public, at least a large chunk of it, will never think this is a victory unless the U.S. finds or kills Osama bin Laden. Do you believe it will be a victory without that, without that achievement? INHOFE: Well, if we don't find him, it's still going to be victory.

I think we're going to find him, Wolf, I really do. I think there's a good possibility that bin Laden is already dead, the way they are working on the impact bombs they're using on the caves. I think that there's a good possibility that he is already dead. But I do believe that we will find him eventually.

And I agree with Senator Boxer, that we -- that's the beginning. We've got to go after -- you know, we have Hamas, Hezbollah, we have other terrorist groups. And we also have a lot more al Qaeda in different parts of the world. So, we're going to have to keep this going until we rout them all out.

BLITZER: Well, Senator Inhofe, you mentioned Hamas, which is in the West Bank and in Gaza, largely designed to attack against Israel. Hezbollah, Syrian-backed, Iranian-backed, largely in Lebanon.

Do you believe the U.S. should directly target those organizations?

INHOFE: I believe we should. Now, and I come from a different perspective perhaps than some others do. But I have served on the Intelligence Committee for quite a number of years now. And I just, I believe that there is a network that's out there, and you've got to get them all in order to resolve the problem. It's not all just in one group.

BLITZER: Senator Boxer, Secretary Kissinger, the former secretary of state, had some blunt words about what the U.S. should do if they find Osama bin Laden.

I want you to listen to what he had to say, and then tell me if you agree with his assessment.

(BEGIN VIDEO CLIP)

HENRY KISSINGER, FORMER SECRETARY OF STATE: ... if they find him, because I think if he's in an American prison, we will have years of hijackings, dozens of demonstrations, and we would lose American and other lives in order to keep him in prison.

(END VIDEO CLIP)

BLITZER: Kissinger bluntly said, "I'd like to see him," referring to Osama bin Laden, "killed if they find him." Do you agree?

BOXER: Well, you know, it depends on the circumstances.

As my colleague said, he already may be dead. And if we do get into a confrontation with him out in the field there, in the theater, it would -- the theater of the war there, it would probably work out that way. The other option is a military tribunal away from this country, which I have already said I think is a good idea for someone like that. So that would mean we wouldn't have to bring him back to this country.

I think the former secretary did make good point about that. It could create a whole other problem for us back here.

Look, the most important thing is to get these top leaders, and not stop, because nobody in the world who is a peace-loving person could say that we can live with terrorism. I don't care what country you live in.

And so we need to get those top leaders, and, yes, don't bring them back here, the top leaders, military tribunal, and let justice take its course.

BLITZER: And so, just to nail down that point, Senator Boxer, you would favor the death penalty if he's convicted in a military tribunal for Osama bin Laden. Is that correct?

BOXER: Without question.

BLITZER: And, Senator Inhofe, do you want him dead or alive?

INHOFE: I want him dead. You know, I worked many, many years ago, when I was in the Army, I worked in the military court system, and I think that would be the right place for him. I think that it takes two-thirds instead of unanimity, and I think that that is what should happen.

I really believe that -- I think he's going to be deceased before he comes to that point. But if not, we need to go in there and certainly ask for the death penalty, do all we can.

BLITZER: Senator Inhofe, Senator Boxer, stand by. We're going to take a quick break.

When we return, more of our conversation, as well as your phone calls for the two senators. LATE EDITION will be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION.

We're standing by a for a news conference with the mayor of New York City, Rudy Giuliani, just selected as "TIME" magazine's Person of the Year. When that news conference begins, we will bring it to you live.

In the meantime, we're continuing our discussion with Oklahoma Republican Senator James Inhofe and California Democratic Senator Barbara Boxer.

Senator Inhofe, let me begin with you on this round. On the whole question of the Osama bin Laden videotape, which we all watched this past week, later we learned that there were some problems in the Arabic translation.

You're a member of the Intelligence Committee. Do you have confidence that the administration, the Pentagon, the intelligence community, was accurate in that original translation, even though chunks of it were not included in the translation from Arabic into English?

INHOFE: Yes, I was fairly comfortable with that, Wolf. I had seen it before. They showed it to some members of our committee. And I think when the retranslation came up, it actually made it worse, rather than better, in terms of his participation, his pride in what happened. And I'm satisfied with it.

BLITZER: You know, Senator Boxer, there was some suggestion that maybe there was a deliberate omission of some of the translation in order to protect Saudi Arabia and U.S.-Saudi relations. Did you get any sense of that when you look back on this issue?

BOXER: It may well be, but, you know, I doubt it, because I think the administration understands the importance of every single thing they do because this is a campaign that is being waged against terrorism with a lot of coalition members. And I think that they know they're going to be watched.

They also know this is about the hearts and minds of the Muslim world, as well as the non-Muslim world. So they have to be very careful.

And I would agree with Senator Inhofe when he points out what was left out is even more, if you will, damning of Osama bin Laden.

So I think the administration is being careful. They weighed back and forth, should they release it? I'm really glad they did, because I do believe that any logical person, anyone with any common sense can see, you know, just how evil this individual is and, frankly, immoral.

BLITZER: Senator Boxer, one of your famous constituents now is a 20-year-old man from northern California named Jon Walker, the American who fought with the Taliban and, later in a videotaped interview that was aired here on CNN, said he was actually supportive of the al Qaeda network as well.

Do you believe he committed treason and he should be subject to the death penalty?

BOXER: If you read the definition of treason in the Constitution, knowing just what we know now -- and I want to be clear, we don't know every single fact -- but on the surface, what we know now, and if you read the definition of treason, it looks like a match to me. Because we're talking about someone who gave aid and comfort to the enemy, who took up arms against the United States.

And if in fact, he was trained by al Qaeda, as our president says he was, and I believe he alluded to that, there was no mystery there that al Qaeda's mission was to torture, to kill, to destroy Americans. And so it looks to me like a match.

Now, they say it's very, very hard to prove treason, and this is something they are going to have to weigh. But there's a range of options that the administration. And unless there is some other information that we don't know about, this young man is in deep, deep trouble.

BLITZER: Senator Inhofe, as far as you know, is he cooperating with U.S. authorities in the debriefings, providing everything he knows about the Taliban and al Qaeda, providing useful information to the U.S.?

INHOFE: I doubt that he is, Wolf. But I can't think of any subject where Barbara Boxer and I would agree more than we have during this time.

When I read Article III, Section 3 of the Constitution, to me there is no doubt in my mind that he was comforting, he was aiding the enemy. He was carrying an AK-47. He said he was proud and he approved of what happened on the 11th of September. And that's a running start for a treason verdict, I believe.

BLITZER: On the whole issue, Senator Inhofe, of the next U.S. steps in this war on terrorism, a lot of debate on under way both inside and outside of the government.

Let me read to you what Thomas Freidman, a foreign affairs columnist for the "New York Times," wrote this week. He said, "Unlike bin Laden, Saddam" -- referring to Saddam Hussein -- "may not make himself an easy, obvious target. That doesn't mean American can't or shouldn't look for ways to oust him, but it does mean we should start by planning to do it alone."

Are you among those who wants to take on Iraq next?

INHOFE: Yes, that is -- I have said that publicly several times, and for one very good reason: Back when Saddam Hussein kicked out, and our president allowed him to kick out, our weapons inspectors, to me, that was really egregious that could have happened. It's the first time, I think, it's every happened in contemporary history.

But that told us a number of things. First of all, it told us that there are weapons back there. We know what Saddam Hussein said in 1991 at the conclusion of the Persian Gulf War. He said, "If we had waited for 10 years to go into Kuwait, America would not have come to their aid because we'd have a missile to lob at them." Well, here it is 10 years later.

So I think we need to get in there for more than just one reason, more than just routing out terrorism, but going after Saddam Hussein and finding those weapons. And we need to go back with that resolution that we have in hand from the U.N. and start searching.

BLITZER: That's obviously a formidable challenge, Senator Boxer. Are you with Senator Inhofe when it comes to taking on Iraq next?

BOXER: We may have some differences on the sequencing of what to do next.

I think what the Senate did and what the House did, when we gave the president his authority, was to go after those people who perpetrated 9/11. And I think that means following the trail to whatever nation it will lead us.

Now, it may lead us -- and this may surprise you -- to the Philippines. It may lead us to Somalia, to Sudan. It may lead us to Iraq. We have some circumstantial evidence there.

But I think Iraq is another situation which demands our attention. I totally agree with Senator Inhofe. It is unacceptable that we cannot have a U.N. force go in there and look for these weapons of mass destruction.

We know that he is making these weapons. We know that he has gone away from having big massive armies and he's really concentrating on weapons of mass destruction.

So it is, in many ways, a matter of, can we keep together the coalition, should we go there next?

But should we go there at all? Yes, we should. And we should demand that he do away with those weapons of mass destruction, and, if not, then we're just going to have to make sure that it happens.

It's a very interesting time that we're in. But it is something we must do.

BLITZER: OK, Senator Boxer and Senator Inhofe, we have to leave it right there. Thanks to both of you for joining us. Happy Holidays, Happy New Year to both of you.

And this reminder, we're still standing by for a news conference by New York City Mayor and "TIME" Person of the Year Rudy Giuliani. When that happens, we'll bring it to you live.

Just ahead, we'll hear from the other side of the Capitol Hill. The House speaker, Dennis Hastert, will weigh in on the war against terrorism and more. LATE EDITION will be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION. "TIME" magazine's Man of the Year, Rudy Giuliani, mayor of New York, is about to hold a news conference. We'll go to it live in New York once it begins.

In the meantime, the U.S. Senate and the House of Representatives are now in recess until the end of January. But even as there is strong bipartisan support for President Bush's war on terrorism, there's bitter debate on several domestic issues.

Earlier today, I spoke with the speaker of the House of Representatives, Dennis Hastert.

(BEGIN VIDEOTAPE) BLITZER: Mr. Speaker, welcome to LATE EDITION. Good to have you back on our program.

REP. DENNIS HASTERT (R-IL), HOUSE SPEAKER: Thank you. Great to be here.

BLITZER: A lot of people thought this president, with 85 percent job-approval rating, could push through an economic stimulus package, but it didn't get through. A lot of Democrats, of course, blaming you, House Republicans in particular, for trying to push big corporate tax rates.

HASTERT: Well, you know, three things we wanted to do with the stimulus package.

First of all, we wanted to bring consumer confidence forward. That's the unemployment insurance, the rebates, those things were -- even one of those tax packages were families that make between $27,000 and $42,000 a year -- clearly middle-class. We think that was the important thing, to get people buying again, make house payments, know that they could make the house payments and the car payments and pay their insurance.

The next thing we wanted to do is, we've lost a lot of value, American families have. Almost every American family that works has some kind of savings, either a pension or a 401(k) or, you know, mutual fund or something, and it lost a lot of value. We're trying to get the markets up, so...

(END VIDEOTAPE)

BLITZER: Interrupt this conversation with the speaker of the House. The New York City mayor, Rudy Giuliani, is in New York. We'll get back to the speaker in just a few moments, but let's listen to what Rudy Giuliani has to say as he gets ready for this news conference. He, of course, was selected as "TIME" magazine's Person of the Year.

(NEWS CONFERENCE)

BLITZER: New York Mayor Rudy Giuliani clearly thrilled that he was selected earlier today as "TIME" magazine's Person of the Year, saying that everyone who works for New York City deserves this award.

He says he was especially thrilled that Osama bin Laden did not receive "TIME" magazine's Person of the Year. "That makes it really nice, much better," he said. "It's much better than I was selected as a representative of the people of New York City."

The mayor also going on to say that, on that first day at ground zero, it was clear to him that Osama bin Laden would be defeated, because, in his words, of the spirit of America as reflected at ground zero.

When he said he first heard of the news from "TIME" magazine, he said, "I was stunned a little. I said, `Wow.'" He clearly was very excited.

BLITZER: Earlier today, I had a chance to speak with "TIME" magazine's managing editor, Jim Kelly, and I asked him what separated the outgoing mayor of New York from the magazine's other candidates.

(BEGIN VIDEOTAPE)

BLITZER: Jim Kelly, thanks for joining us.

And tell us why you picked Rudy Giuliani as your person of the year.

JIM KELLY, EDITOR, "TIME": Sure. September 11, two things happened: There was the attack, and there was the response. And in reviewing the tapes of that day, it really struck me how much we were tested that day, and that Rudolph Giuliani rose to that test, to that challenge, and passed it with flying colors.

And then the way he dealt with this hour by hour that day, you could see how much courage he was giving other people, not just here in New York, but giving people around the country their cues on how to react to this.

KELLY: And at the time, I, like you, Wolf, and like so many of your viewers, were just sitting here transfixed by the TV and watching all of this.

And it was only watching the tapes a couple of months later did it really come through to me just how extraordinary Rudolph Giuliani acted and how much hie rose to the occasion. So we decided in the end, to make him the person of the year.

BLITZER: Is it strictly your decision, or who else is involved in the decision?

KELLY: Well, I consult lots of folks, the editors at "TIME." I consult Norm Perlstein (ph) and John Uey (ph), who are the editorial -- editor-in-chief and editorial director at Time, Inc., respectively. I read the letters from readers.

Basically, though, ultimately you close the door and you make the decision. And I was fully comfortable with naming Giuliani, and not bin Laden, as Person of the Year.

BLITZER: Well, who were the other finalists, the two or three finalists? I assume, given the criteria, the historic criteria, the person who had the most impact for good or for ill, Osama bin Laden was one of the finalists, right?

KELLY: Yes. Well, it's funny, normally we really start getting serious about this around Thanksgiving each year. But this year, when I went home September 11, I knew that somehow, whoever we picked, would be related to this event.

So, obviously, we considered the president of the United States. We considered bin Laden, we considered a fireman, a particular fireman. We considered the whole group, the whole category of firemen and policemen.

We talked a little bit about naming New York the City of the Year. We even talked about naming September 11 as the Day of the Year. But we decided not to go that somewhat gimmicky route, frankly, and to stick with just one person.

We also talked about making maybe two people share the title. In 1998, Bill Clinton and Ken Starr were Couple of the Year, so to speak. But basically we decided to go with a single person.

And again, there's -- picking the mayor of New York does not mean, you know, no one should read anything into that about why we didn't pick, say, the president. It was just that, in those -- if you think of September 11 as an intensely personal day, a day in which, you know, decades from now, we're going to be asking each other, "Where were you on September 11?" That was a day of high emotion.

And Giuliani managed to make an emotional connection to people in those few hours that no one else was able to. And reviewing those tapes, it really is an extraordinary performance.

BLITZER: You know, a lot of people, critics of yours will say you wimped out because if it wouldn't have been for Osama bin Laden, Giuliani would have never become the Person of the Year, that for political reasons, concern about advertisers, that "TIME" magazine was just afraid to pick Osama bin Laden, even though in the history of "TIME," Hitler, the Ayatollah, Stalin, all have been Men of the Year.

KELLY: Right. No, look, we will argue forever what was more important on September 11, the actual -- the terrorist event or the way we responded? And I could easily see where, if the response by the mayor and by others had not been what it was, that we would be sitting here still talking about a different choice.

But when you look at now that bin Laden is either dead or on the run, the war in Afghanistan has gotten much better than people might have suspected just two months ago, and to name Giuliani Person of the Year, rather the bin Laden, is the same reason that we named Churchill person of the half century in 1950 and not Hitler. I mean, bin Laden has lost. I think it would be actually perverse to name someone who clearly is on the losing end of things as Person of the Year.

BLITZER: So the criticism that it was simply too hot to handle the notion of naming bin Laden person of the year, you dispute that?

KELLY: We've made, you know, we've made tough calls before and come down on the side of doing something quite, you know, controversial.

The controversy really -- the events of the last three months, especially the last few weeks, have made it clear to me that bin Laden is not of the stature of -- he doesn't stride the world stage the way, say, a Hitler or Stalin of Ayatollah Khomeni did.

I mean, you saw the tape obviously, Wolf, last week, and many of your viewers did too. This is not a man of towering strength. He struck me as a moral pipsqueak who didn't even think what he had launched would be as horrific as it was. I mean, this is not someone who deserves to be Person of the Year.

BLITZER: OK. Jim Kelly, the managing editor of "TIME" magazine. There it is. There's the cover, Rudy Giuliani, Person of the Year. "TIME" magazine, our sister publication. We're both, of course, part of the AOL-Time Warner family.

Thanks very much, Jim Kelly, for joining us.

KELLY: Thanks, Wolf.

(END VIDEOTAPE)

BLITZER: And when we return, we'll return to the war in Afghanistan, with the military campaign in Afghanistan and new so- called mop-up phase. Is the war against terrorism moving to another country?

We'll get some insight from former Secretary of State Lawrence Eagleburger, former House International Relations Committee Chairman Lee Hamilton and former CIA Director James Woolsey.

It's all ahead, when LATE EDITION continues.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

PAUL WOLFOWITZ, DEPUTY SECRETARY OF DEFENSE: I think any country in the world that would knowingly harbor bin Laden would be out of their minds.

(END VIDEO CLIP)

BLITZER: Blunt comments by the deputy secretary of defense, Paul Wolfowitz, earlier this week.

Welcome back to LATE EDITION.

With us now to help sort out where the war on terror stands and where it might be headed are three distinguished guests. Joining us from Charlottesville, Virginia, the former Bush secretary of state, Lawrence Eagleburger -- that would be the first George Bush. And here in Washington, the former Indiana congressman, chairman of the House International Relations Committee, Lee Hamilton; and the former CIA director James Woolsey.

Gentlemen, welcome back to LATE EDITION.

And, Secretary Eagleburger, let me begin with you. Where is this war on terrorism heading next?

LAWRENCE EAGLEBURGER, FORMER SECRETARY OF STATE: Well, if I could answer that, Wolf, I'd take your job. The best thing I can tell you now is that, obviously, it's not over, and the president's made that clear. And now the debate seems to be over whether we go after somebody like Iraq or something else.

My own view is Iraq has to be in this plan, but I'm not at all sure it ought to be next.

BLITZER: Lee Hamilton, you may have heard President Musharraf of Pakistan speculate on what happened to Osama bin Laden in an interview with Chinese television. I'll play that soundbite, listen to what he said.

(BEGIN VIDEO CLIP)

PERVEZ MUSHARRAF, PRESIDENT OF PAKISTAN: Maybe he is dead, because all the operations that have been conducted, the bombardment of all these caves that have been conducted, there is a great possibility that he may have lost his life there.

And if he does enter, if we identify him, he will be handed over.

(END VIDEO CLIP)

BLITZER: He's speculating he may be dead. We heard Hamid Karzai earlier in this program also speculate that he might be dead.

Do you think he's dead?

LEE HAMILTON, FORMER U.S. REPRESENTATIVE: I have no idea, and neither do they. And we should not base our policy on speculation about his being dead. We should continue to go after him, hunt for him.

But just as important, I think we tend to personalize this too much. Osama bin Laden may be dead or alive -- he's certainly out of commission for a while -- but that does not remove the terrorist threat. Al Qaeda still remains.

BLITZER: A lot of Americans, Mr. Woolsey, are going to think this war is not over until there's proof that he's either dead or that he's captured Osama bin Laden.

JAMES WOOLSEY, FORMER CIA DIRECTOR: Well, even if he's -- his body's found or he's captured, it's just the first installment of the war that's over. And certainly we'll be starting -- we already have started helping the Philippines against their Islamic extremist rebellion.

BLITZER: Abu Sayyaf.

WOOLSEY: Abu Sayyaf.

There are a number of things we're already moving on, apparently, looking at what to do with Somalia and the like.

So, to me, it doesn't really matter much whether we find him this week or this month or even this year. We keep going and destroy al Qaeda and, I think, remove regimes where they would prove to be recalcitrant that have supported terror and continue to support terror.

BLITZER: Larry Eagleburger, what's your take on the mood of the country, though, right now? Does the country, now that the war apparently inside Afghanistan per se is over with, at least the military action by and large, is the country ready to continue this struggle against terrorism?

EAGLEBURGER: Well, Wolf, so far as I can tell, there's really no question that they are.

But the previous speakers have made one very serious point: Unless the American people understand that Osama bin Laden is only a small part of this thing, and whether we get him or not, let's assume we do get him, that's just the beginning, as has been said. And I think the American people understand all that.

Now, whether they still will six months from now, we'll have to see. But again I think it will depend to some degree on the steps that the administration decides to take now or over the next few weeks and whether they are successful, whether they again prove that there are terrorists out there that we can handle, I think that will also make a difference.

BLITZER: And the secretary of defense, Donald Rumsfeld, made clear earlier in the week that the struggle against al Qaeda, while it perhaps is over inside Afghanistan, continues around the world. I want you to...

EAGLEBURGER: Absolutely.

BLITZER: ... listen, I want you to listen to what Secretary Rumsfeld said.

(BEGIN VIDEO CLIP)

DONALD RUMSFELD, SECRETARY OF DEFENSE: I would think that it would be a mistake to say that the al Qaeda is finished in Afghanistan at this stage. They certainly aren't functioning well. But a large number of them seem to behave in a fanatical way, and I suspect that we'll hear more of them.

(END VIDEO CLIP)

BLITZER: You suspect that, as well, especially, Congressman Hamilton, as the country, a lot of people are getting ready to travel. We had this incident on this flight from Paris to Miami diverted to Boston. Someone shows up with apparently some explosives in his shoe. No one knows, obviously, if that's directly related to al Qaeda; it may not be.

But has the country heard the last word from al Qaeda yet?

HAMILTON: I think we have to work, Wolf, on the assumption that there are people out there plotting against us, wanting to do us grave damage, are going to do everything they can to do grave damage to us. And that probably means the al Qaeda network.

HAMILTON: My own take on all of this at the moment is that the challenge before us is to identify the next target. And then the tactics we use against that target is, to some degree, a matter of sequencing these events.

I answer the question where you go next, by saying you go where the evidence takes you. Right at the moment, on basis of what I know, I would say al Qaeda represents the gravest present threat to Americans. And, after all, our target here is to protect Americans.

BLITZER: And there are al Qaeda cells, presumably, out there in what, 60, 70 countries, including still at large here in the United States. Condi Rice, the president's national security adviser, Condoleezza Rice, was on this program last week, and she said bluntly that she believes there are still al Qaeda sleeper cells at large in the United States.

WOOLSEY: I think that's probably -- certainly true. We really have to be very careful that somebody doesn't do what this fellow did who boarded the plane in Paris. There are all sorts of ways in which, Wolf, this country can suffer serious terrorist attacks.

Look, we're a nation of networks, of all sorts: food delivery, Internet, bank transfers, oil and gas pipelines, and virtually none of these have been put together with a single thought being given to being defended against terrorism.

Now, we've had two of them turned against us to kill Americans -- civil air transport and the mail delivery system -- and somebody may try with another one. We need a long-term approach to reduce the vulnerability and improve the resiliency of all these networks. We're going to be at this a long time in one way or another.

BLITZER: Secretary Eagleburger, on the sequencing of the next steps in this U.S. war against terrorism, do you think the administration, the Bush administration, would be better off going after, let's say, terrorist cells, terrorist targets in places like Somalia or Yemen or the Philippines, or go directly after Iraq in the near future?

EAGLEBURGER: I think, Wolf, to some degree, that depends on what the experts say is possible. I'm out of date, in terms of -- when I remember Iraq, it was a powerful place and we had to go in on the ground to make it successful in our campaign against them.

My prejudice -- and that's all it is at this stage -- is, we ought to be very care-- and I think sequencing is important, by the way, as the congressman said. But I think we need to be therefore very careful about what we do pick next. And I'm not at all sure that Iraq and going in there like gangbusters, if that's what it takes, is necessarily the next best step.

There is Somalia, there is Yemen, there are all of these other places. And the point here again is, sequence them. But I think, frankly, in sequencing now, the attitude ought to be, we pick a target that we're relatively confident we can deal with and that will not tie us up for the next six or eight months.

You're going to have to get to Iraq sooner or later, there's no question about that. I'm not at all sure it's the next step that we ought to be taking, though.

BLITZER: All right, gentlemen, stand by. We're going to pick up that thought when we come back, but we have to take a quick break.

A lot more to discuss with Larry Eagleburger, Lee Hamilton and James Woolsey. They'll also be taking your phone calls. LATE EDITION will be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION.

We're talking about the next phase in the war against terrorism. And joining us, the former secretary of state, Lawrence Eagleburger; the former House International Relations Committee chairman, Lee Hamilton; and the former CIA director, James Woolsey.

Let me begin with you, Mr. Woolsey. On this whole issue of Iraq, you've been outspoken, you've been very blunt over these past several months, the United States has to target Saddam Hussein and get rid of him. Any rethinking of that on your part?

WOOLSEY: No. And not just him, his regime. I think we need to bring democracy to Iraq.

I think one of the worst things we could do is try to bomb the weapons-of-mass-destruction sites, because we've known, through the inspectors and now know through a defector that was in the "New York Times" in a Judy Miller piece the other day, that these sites are dispersed throughout the country and they're under hospitals and schools and office buildings and the like. So I think we need to remove the regime.

The timing -- I agree with Larry Eagleburger and Lee -- I think that the timing is something that the experts need to assess. It may have to do with things like stockpiles of smart weapons. It may be whether some of the same special forces are involved in doing things in places like Somalia and the like.

But, you know, the war, so far, has gotten us a lot of converts. Gadhafi, from the beginning, has been sounding like Tony Blair. And Yemen has suddenly decided that it wants to help a lot more than it did back in '98 and last year, so...

BLITZER: And even the Iranians have been fairly supportive of the U.S. effort.

WOOLSEY: Well, not only that, the demonstrations of the Iranian students in the streets around the soccer games, pro-American and so forth. My favorite chant that they had, not too long ago, was "Death to the Taliban in Kabul and in Tehran."

BLITZER: The secretary of state, Colin Powell, though, Lee Hamilton, said earlier in the week in an interview you may have seen in The "Washington Post," that the Afghan model, what the U.S. did to overthrow the Taliban and to disperse al Qaeda, get rid of al Qaeda in Afghanistan was not necessarily applicable in Iraq, which has a different opposition force, a different nature of the military threat.

HAMILTON: Well, there's no doubt at all that the military capabilities in Afghanistan were just absolutely remarkable. I don't know that any of us really foresaw the efficiency and the deadliness of that military operation. And we do have to rethink, after each of these wars, what our capabilities are.

It strengthens the case, obviously, for going after, in a military sense, another country. But you don't begin going after Iraq by sending the bombers to Baghdad. You have to build the effort up politically, diplomatically, economically.

When the president said the other day, for example, "We want those inspectors in there, Mr. Saddam Hussein," I thought that was a good move, because what it does is it shifts burden, in effect, the political burden, over to Saddam Hussein. He won't accept that; he doesn't want them in there. But it's the right move.

In other words, there are a series of steps you have to take to build support for an effort against Iraq...

BLITZER: All right.

HAMILTON: ... and I think it'll take time.

BLITZER: Let's take some callers from our viewers in the United States and around the world.

We have a caller from Toronto. Go, ahead, please.

CALLER: Hi. I was wondering, why wasn't more military deployed in advance of the bombings in the Tora Bora hills along the Pakistani- Afghan border, knowing that that was the only outcome of the al Qaeda to be fleeing into the Pakistani area, along with the Pakistani military themselves?

BLITZER: You want to handle that, Secretary Eagleburger?

EAGLEBURGER: Thank you, Wolf.

First place, I don't know how much we had there, but I will tell you this, once in that area, it is like a sieve under any circumstances. And we could have put two divisions in along the border and we still wouldn't have been able to police it that well.

So, on the basis of what I know, I would say to you that we probably tried as hard as we could, but it's such a sieve, I'm not at all sure we could have done anything about it, more than we did do. BLITZER: Jim Woolsey, you know, there are some suspicions out there that there may have been some deals, whether in the south to let Mullah Omar disappear, if you will, and in Tora Bora region of eastern Afghanistan to let the al Qaeda disappear, knowing the history of the various factions inside Afghanistan.

Do you believe there was any of those kinds of winks and nods and basically telling the enemy, get out of here?

WOOLSEY: Well, certainly it's possible with Mullah Omar that some Taliban-light, in a way, in the south, might have cooperated in helping him get away -- people who've changed sides at the last minute, but were in the Pashtuns, but were not -- were really still fairly friendly to him.

I think Pakistan, though, is going to work hard to make sure if he or bin Laden gets out, that they are found. Certainly, there's sympathy still for the Taliban and even al Qaeda in some parts of Pakistan intelligence. But Musharraf moved promptly to get rid of the head of the ISI, Pakistani intelligence, right after the war started, who was really a Taliban, even an al Qaeda sympathizer. And the top leadership there has been very helpful.

And I think, if they got into Pakistan, which would be most the likely place, we'll get them from there.

BLITZER: All right. Let's take another caller from New York. Go ahead, please.

CALLER: Hi, Wolf. My question is kind of a long-term one. It has to do with the list of countries that could be target down the road. Could North Korea possibly be on that list?

BLITZER: Well, let me ask Lee Hamilton. He knows a lot about international affairs.

HAMILTON: A lot of countries are on the list, possibly. But it just depends, I think, how the evidence builds up.

Obviously, we've got a lot of problems, with North Korea, and they have been identified as a state that sports terrorism in the past.

So I think you've got Saddam, Somalia, Yemen, North Korea, probably several others, and maybe even some countries that are friendly to us that are harboring terrorists. North Korea would certainly be high on the suspect list.

BLITZER: All right. Go ahead, Dr. Woolsey.

WOOLSEY: North Korea...

BLITZER: Stand by, Secretary. I just want to let Director Woolsey in.

WOOLSEY: North Korea is -- the main problem with them is their development of weapons of mass destruction.

WOOLSEY: Their terrorist support has been substantial, but much of it is somewhat in the past. There is a chance that they have kind of leveled off on that side of things. The nuclear weapons development is the main thing that we worry about them with.

BLITZER: Secretary Eagleburger, go ahead.

EAGLEBURGER: Well, first of all, this is a very important question. Glad he asked it.

Secondly, the answers so far are quite correct. If you look through the list, you have to include Syria as potential because of the Hezbollah in the Bekaa Valley. You have got all of the other countries that they have named and perhaps some more -- Somalia, all sorts of countries.

But here is again the point on the sequencing. What are the most dangerous ones now? What are the ones that harbor the most dangerous terrorists or do the most damage in terms of training and so forth?

Pick those things out, add those against the question of who can we most easily handle, and I think you begin to get some sense of what the sequencing will probably be.

BLITZER: All right, stand by, gentlemen. We're going to take another quick break.

More phone calls for our guests. And LATE EDITION will be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back.

We're continuing our discussion with former Secretary of State Lawrence Eagleburger; former House International Relations Committee Chairman Lee Hamilton; and former CIA Director James Woolsey.

Gentlemen, let's take a caller from Chicago. Go ahead, please.

CALLER: Hello. Since 9/11, I have listened hundreds of talks shows where places like Iraq and North Korea are mentioned. And I've yet to hear a serious discussion of the pros and cons of using a low- yield nuclear weapon in this areas.

BLITZER: All right, well, let me ask the former director of the Central Intelligence Agency. A low-yield nuclear weapon?

WOOLSEY: I don't think there are many pros, and there are an awful lot of cons. They cons are that you would kill a lot of innocent Iraqis, and we don't have anything against the Iraqi people. It's the regime.

If a target absolutely has to be destroyed and could only be destroyed by, say, an earth-penetrating nuclear weapon, one would have to think about it. But Saddam doesn't have his weapons of mass destruction facilities concentrated at one place and buried deep underground. They're dispersed under hospitals and schools and the likes.

So I think a nuclear weapon would be a very bad idea in Iraq. We have to get in there and change the regime.

BLITZER: All right, without nuclear weapons.

Let's take another caller from Louisiana. Go ahead, please.

CALLER: Wolf, if we all know that we have to go to Iraq -- everybody seems to agree at some point or another that we're going to have to go into Iraq -- why worry about Somalia? Why worry about Yemen? Why worry about North Korea? Why give Iraq all that time to prepare for us coming? Why not go straight to them?

BLITZER: All right. What about that, Lee Hamilton?

HAMILTON: That depends on what the evidence is.

If the key point here is -- the objective of all of this is to keep the American people secure and safe. And you go where the threat is the most imminent. If Iraq is most imminent threat to the United States, we go after them. If it's somewhere else, we go after them. And that depends on the evidence.

But even if you make the decision to go after someone, you still have to decide how you're going to do it, and you have to put into place a very carefully laid-out plan. I presume the administration's working on these plans for a number of places.

The president now has a very tough call in front of him, and that is, where does he go next? And he's going to have to make that judgment fairly soon. But he will do it on the basis of the best intelligence we have and of his top advisers' recommendations.

BLITZER: And, Secretary Eagleburger, there are potentially other complications out there in the world of international affairs. I want you to listen to what the Pakistani ambassador to United States, Maleeha Lodhi, told me earlier this week. Listen to this.

(BEGIN VIDEO CLIP)

MALEEHA LODHI, PAKISTANI AMBASSADOR TO THE UNITED STATES: ... to remain to important down the road is to continue a campaign which is aimed at the hearts and minds of people in the Muslim world and to also address the substance of the unresolved political disputes that litter part of the Muslim world. I mean, I refer, of course, to Palestine. I also refer to Kashmir.

(END VIDEO CLIP)

BLITZER: Secretary Eagleburger, you're very familiar with the problems of Kashmir, the disputed territory between India and Pakistan, the fact that both India and Pakistan are now nuclear powers. You're, of course, familiar with the Israeli-Palestinian conflict.

How could those two conflicts, those two issues affect the U.S. war on terrorism?

EAGLEBURGER: They can have some serious effects.

First of all, if India and Pakistan, for some reason or another, fall out even more than they already have, for instance over some incident in the Kashmir, this could have terrible consequences, because we're trying to use both of them to one degree or another as allies in this campaign.

The one that I think is in many ways most dangerous is the question of the Middle East, of Israel and its surrounding neighbors and the Palestinians.

As I indicated earlier, I don't see how we can walk away from the fact that Syria has been intimately involved, in the past at least, in supporting terrorism in and around Israel. And there can be an argument, I suppose, that we should just isolate the Israeli issue and leave it alone. I don't think you can do that. Terrorists are terrorists.

Again, if things get worse between the Israelis and the PLO, the Palestinians, this clearly is going to have an impact on whether the other Arab nations are prepared to support us in this general campaign against terrorism. They can be very serious problems.

BLITZER: All right. An annual tradition here on LATE EDITION, ending the year with Lee Hamilton and Larry Eagleburger. We've added Jim Woolsey to that tradition, as well.

Thanks to all three of you for joining us. Merry Christmas, Happy Holidays, Happy New Year to all of you. And of course we'll be anxious to have you back at the end of next year, although you'll probably be back a lot earlier than that, as well. Thank you very much.

Just ahead, is September 11 giving a new meaning to this holiday season? We'll talk about the role of faith in the aftermath of the terrorist attacks with the former education secretary, Bill Bennett, and Dallas minister Bishop T.D. Jakes.

LATE EDITION will be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: My wish for Christmas, for the holiday season, is for our country to be at peace.

(END VIDEO CLIP)

BLITZER: President Bush expressing a sentiment undoubtedly shared by his fellow Americans. Welcome back to LATE EDITION.

September 11 has given a poignancy to this year's holiday season. And in the aftermath of the terrorist attacks, many Americans are turning to their religious faith for strength and solace.

Joining us now to talk about that are two guests: In Dallas, Bishop T.D. Jakes. He's the pastor of the very popular Potter's House, which has 2,000 members. Bishop Jakes is also the author of several books. And here in Washington, the former education secretary, the drug czar, Bill Bennett. He's also the cofounder of the group Empower America. He's written many books.

Gentlemen, thank you so much for joining us on this special holiday week.

And, Bishop Jakes, let me begin with you. Is celebrating Christmas this holiday season any different because of what happened on September 11?

T.D. JAKES, BISHOP: I certainly think that the ramifications of September 11 have caused Americans to appreciate to a greater degree their families, their values. And their spirituality has really come to the forefront of our lives than never before.

BLITZER: Is that is your sense as well, Bill Bennett?

WILLIAM BENNETT, EMPOWER AMERICA: Yes, a catastrophe, a disaster like this makes people focus on what's most important.

And I think the president, the other day in his radio address, said, this is a time especially, since September 11, for faith, family, friends. And there's even some indication that there's less party-going and more time at home with the kids and more prayer, more reflection.

BLITZER: In your research, was there a similar phenomenon that happened after Pearl Harbor, which of course there's been a lot of comparisons to September 11 and Pearl Harbor?

BENNETT: I don't know about since Pearl Harbor, but there's some preliminary stuff in since September 11. I'd be interested what the bishop has heard too.

Very clear evidence that Bible sales are way up. Some interesting evidence that divorce rates are down, that people going to divorce lawyers, they're reporting less business, which is a good thing. And, third, a friend of mine who's in Alcoholics Anonymous tells me that there's a saying in AA, there's always a chair. Well, apparently there isn't always a chair, now that they're getting standing-room only meetings. Same in drug treatment centers.

This kind of thing shakes up a life. Saint Augustine has a phrase. He says, the ordo amorum, the order of the loves, and something like this shakes up the order of the loves and reminds people, I think, of what's most important. BLITZER: Bishop Jakes, give us your practical, your personal experiences in these areas that Bill Bennett just discussed. What's happened differently since September 11 with your congregants?

JAKES: Well, it's been certainly a huge difference in our local congregation. Our church has been thriving. Even before, we run about 28,000 members at the Potter's House in Dallas, but we've seen a influx far behind our membership into serving the community.

And I think, from a religious perspective, it's very, very important, as a Christian leader, to understand that we are there to serve our community, much as the emergency workers were on 9/11, each in their own perspective. It's just that our perspective is to provide spiritual support and fortification.

Sales of gospel music are going up, new surges of interest in Bibles. People are communicating, both in secular papers and religious papers, about spirituality. Ecumenical understandings of other faiths have become a premiere interest of conversation.

There's a tremendous change as we seek out to strengthen our roots, our spirituality, and to fortify ourselves.

Americans have been shaken to the very core of its existence, but it's good to know that, in the midst of being shaken, we've been shaken to our...

(AUDIO GAP)

BLITZER: ... how does God allow this terrible terrorist attack, this tragedy to have occurred, with all these very good people killed at the World Trade Center, at the Pentagon, aboard that flight that crashed in Pennsylvania?

JAKES: I think it's very, very important that we as people of faith, and even those who are searching out the depths of their faith, that we do not begin to blame God for something that we enjoyed normally and the privilege, and that is being a free moral agent, having the right to choose, to choose which car I want to drive, where I want to live, what woman I choose to marry. To have these choices are very, very important.

What happened on September 11 was the abuse of that choice. It is not indicative of the attitude of God, but it shows how horrendous the heart of man can be when he's not attended by some spiritual component in his life.

And so what comes to play here is, we have for years enjoyed the fact that God allows us to choose. He didn't make robots out of us, he didn't make us computers. He gave us a free will.

But what we must be careful to do is to train people at every stage of life to respect values, to respect human life, to appreciate one another, to support one another. Because if we don't take the time to make that investment in training people, we can see the terrible devastation that results from that neglect. BLITZER: Bill Bennett, I want to show you some new poll numbers, our CNN/"TIME" magazine poll that is just out this weekend. We asked about the year 2001, "Did it bring the country closer together?" Eighty-three percent said yes. "Did it change everything forever?" Seventy-six percent said yes. "Did it make you feel more religious?" Seventy-four percent said yes.

Are you surprised by those numbers?

BENNETT: I am not surprised. I think it remains to be seen, number two, whether it's changed everything forever. It certainly changed things for now.

You know, it's hard to improve on what Bishop Jake said, but it's an interesting teaching of Christianity, that although we do not seek out suffering, we learn more from suffering than we do from success. Suffering catastrophe, even this vile slaughter, has a way of reminding us of the things that matter and the things that matter most.

BLITZER: If some families of victims of the World Trade Center bombing lost faith, you really couldn't argue with them, given what they've had to endure.

BENNETT: Well, the question is, for how long do we lose faith? I mean, there's an awful lot of precedence for losing faith and then regaining it.

I am just struck by how remarkable these families are, most of the ones at least that I've seen on TV. We do not see the ones on TV who have lost it, but when you see people like Lisa Beamer and other people.

And they point out, as Mrs. Beamer, whose husband was on Flight 93, she points out, "There will not be a day that goes by that our children will not know that their father was a hero." This is finding incredible strength in this tragedy.

There is a dark night of the soul. I think most people who believe have experienced a dark night of the soul, even many dark nights of the soul. The question is what happens at the end of the game, what happens at the end of the day?

And again, I don't think there's any question that September 11 and its aftermath reminded us, if you will, of a world that God created, a world not just of faith and religion but a world of right and wrong, a world of good and evil. And this was a world, I think, that many had lost sight of in the last 20 or 30 years.

BLITZER: Bishop Jakes, what was your main message to your congregants on this Sunday before Christmas?

JAKES: One that would encourage them to gather around them their families and to celebrate their faith and to get back to the business of living and going forward. I think it's very, very important that we, as people of faith, begin to look out of the windows of our church and become involved in our community.

And I think that the church has done a tremendous job, universally, around the country, around of the world, of showing love and support even for people on foreign soils. And I've encouraged our membership to continue to do that.

But while we're global in our vision, we must also be domestic in our touch and reach our own children, fortifying them, answering many, many questions that our children have, because they too have been shaken. They've seen the news. They're a little intimidated, and they need the support of present fathers and present mothers who are there on the scene giving them the support and the spiritual fortification that enables you.

To me, faith becomes so real when facts and reasoning cannot answer questions. Faith becomes the conduit for us to hold on through the vicissitudes of life.

BLITZER: All right, Bishop Jakes, stand by. Bill Bennett, stand by. We're going to take a quick break.

Coming up, the third hour of LATE EDITION. We'll check the top stories. We'll also continue our discussion with Bill Bennett and Bishop T.D. Jakes. Plus, LATE EDITION's "Final Round." It's all ahead in the next hour of LATE EDITION.

But first, here's Bruce Morton's weekly essay.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN CORRESPONDENT (voice-over): September 11, 2001, like December 7, 1941, when the Japanese attacked Pearl Harbor, is a date that will live in infamy.

The terrorist attacks killed more people, in fact, than the Japanese attack. And all of us will always remember where we were and what we were doing when we heard the news.

War had come again. War is with us this holiday season, and its end is not in sight.

Is this the worst year in recent times? Maybe. The other candidate, if you are as old as I am, is 1968. Martin Luther King murdered, Robert Kennedy murdered, American cities burning bright, the fires fueled by race.

Police clubbing and beating young people at the Democratic Convention in Chicago; "a police riot," an investigation later labeled it. The kids' crime was opposition to the Vietnam War, a giant killing machine claiming Vietnamese and American lives alike, a killing machine which showed no signs of slowing down.

But something else happened in 1968. It happened at Christmastime.

Apollo VIII, one of the flights which proceeded Apollo XI's landing on the moon, Apollo VIII became the first manned space craft to fly around the moon, during Christmas week, as it happened.

These astronauts saw for the first time ever -- and so did we all, thanks to their television cameras -- saw from a quarter of a million miles away the small blue and white planet which held the hopes and dreams of all of us.

They saw not sunrise, but earthrise from out there by the moon. And Frank Borman, the mission commander, read some old words.

(BEGIN VIDEO CLIP)

FRANK BORMAN: And in the beginning, God created the heaven and the earth. And the earth was without form and void and darkness was upon the face of the deep. And the spirit of God moved upon the face of the waters, and God said, let there be light. And there was...

(END VIDEO CLIP)

MORTON: We on the small planet watched and listened. And for a short while, magic replaced the awful memories of the year.

Borman ended this way.

(BEGIN VIDEO CLIP)

BORMAN: Good night, God bless, a Merry Christmas, and God bless all of you, all of you on this earth.

(END VIDEO CLIP)

MORTON: And so say all of us.

I'm Bruce Morton.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

BLITZER: Welcome back. We're talking about the impact of September 11 and the holiday season. Joining us, Bishop T.D. Jakes and Bill Bennett, the co-founder of Empower America.

Bill Bennett, let me begin with you. I want you to pick you up where Bishop Jakes left off on the whole issue of this particular holiday season and the lessons learned from September 11.

BENNETT: Well, I think there's lessons learned at the level of faith and then at the level of life and life choices.

It's very interesting to me, I've heard from a number of former students and people I know in their 20s, mid-20s, Wall Street types who, you know, successful careers, are writing about, do I know anybody in homeland security, do I know anybody in government? A view of government and of government service that's very different.

The CIA, apparently, received more applications, Wolf, in two months -- October, November -- than it receives in a normal year. So again, this is the rethinking about one's life.

And I think it's particularly acute at this time of year, when people are together with family, when they pause from work. And I think you're going to see even more resolve of this sort after the holidays.

BLITZER: All right. Let's take a caller from South Dakota. Please go ahead with your questions for Bill Bennett and Bishop Jakes. Go ahead, South Dakota.

CALLER: Hi. My question is about faith and the spirit of the season, how we enter this season, moving for peace and how this season represents peace and love -- and we have that on one hand. On the other hand, we have violence and war, not just in Afghanistan, but in terms of, you know, well, basically, the School of the Americas and other policies that our country perpetrates on the planet as well. And how we can have faith in not only routing out the terrorism that was perpetrated against us, in terms of Afghanistan, in terms of the Taliban, but routing out the terrorism we're perpetrating in other parts of the world, in terms of School of the Americas and our policies.

BLITZER: Let's Bishop Jakes handle that first. Go ahead, Bishop.

JAKES: Well, there are several things I think are very, very important. I think most people of faith in this country support peace on earth. That's what we want.

But the process to peace is often riddled with conflict and adversity. And I think that that's what we are seeing right now, not only in Afghanistan, but all around the world. And that has always been the case. The dichotomies of life, of good and evil growing up simultaneously, has been a reality.

As it relates to terrorism, terrorism has been a reality around the world and even in this country. We've seen terrorism on various groups, through racism, through abuse, through genderism. And those issues will continue to be.

But what is important is that we minimize them wherever possible, and our pursuit is peace. Our process might take us in other directions but, ultimately, the goal is to have peace between men.

BLITZER: You're very familiar, Bill Bennett, with what the caller was talking about, the School of the Americas, a former -- you're a former drug czar. The whole issue of, how do you justify talk of peace and faith at a time when the United States is engaged, in effect, in violence?

BENNETT: Because the enemy of terrorism is justice. And I disagree with the caller, I don't think the United States practices terrorism. The United States has certainly done some terrible things in its past -- the legacy of slavery and other things. But the United States is not a terrorist country; it is not a terrorist country overseas. And it's very important that we make that plain.

BENNETT: There's been some ridiculous comments made in the last couple of weeks by some Americans saying about, you know, the terrorism of the Bush administration against workers, or, you know, the terrorism being practiced in economic policy. Let's have a certain precision about language in these times.

What we saw on September 11, those two buildings, the Pentagon, what happened on flight 93, is different from having political disagreements. It's different even from discrimination, which obviously is to be condemned.

The United States, in terms of the world, is a force for good. Now, there is terrorism in the world other than that related to al Qaeda, and I take it this is a terrorism United States seeks to rout out.

But when one looks at faith and at war, understand that in most religions, certainly in Christianity, certainly in Judaism, taking up arms is not the enemy of faith. Often arms must be taken up in order to preserve peace and to achieve justice.

In my tradition, the Catholic tradition, there's something called just war. It doesn't means all war is just, but it means war is just under circumstances. And I think the current circumstances justify this use of force. We are, in fact, saving, I believe, saving an awful lot of lives by being as tough as we have been.

BLITZER: Bishop Jakes, as you know, Rudy Giuliani, the mayor of New York, was named "TIME" magazine's person of the year. He was interviewed earlier today on Meet the Press, a taped interview a few days ago. I want you to listen what he said, what his sense, what his feeling is right now.

(BEGIN VIDEO CLIP)

RUDY GIULIANI, MAYOR OF NEW YORK CITY: There's no question this generation is just as strong, just as determined, just as brave, and maybe it's because we know why we were attacked. We were attacked because we're America, because we believe in freedom of religion, we believe in political freedom. And we've been attacked for who we are.

(END VIDEO CLIP)

BLITZER: Do you believe that "TIME" magazine did the right thing in naming him Person of the Year?

JAKES: I certainly do. I think that he's done an outstanding job of pulling a city together in the midst of a crisis, not only a city but indirectly this whole country as we've watched with fascination the significance of good leadership, which has been exemplified in this case, if in no other cases, in Giuliani's career.

So I certainly think it's very, very important that we applaud good leadership when we see it. And I agree with what he said, America is rallying and we're coming together.

And I think it's very, very important, because one of the things that 9/11 has really heightened our own awareness of is that we are one nation under God. We have diversity, we have different religions, different cultures. And I think a new-found appreciation for that diversity is seen around the nation, certainly in New York, where it's such a melting pot of different cultures.

It is essential there. But even around the country we're beginning to understand that the terrorists did not come against one group of people but against all of us and against our philosophy of which we all readily race to defend.

BLITZER: All right. You know, Bill Bennett, you're a very familiar figure to our viewers here in the United States and around the world. And I guess they'd be interested in knowing how do you feel about this, Rudy Giuliani being selected as "TIME" magazine's Person of the Year.

BENNETT: Well, I should admit bias. I'm both a Republican and a New Yorker, you know, so.

(LAUGHTER)

Look, I think it was fine that he got it. I liked the way he got it too, and I liked the way he received it, by saying, I stand for all New Yorkers. I think that's right.

I think there are other good candidates, and maybe that's the most important thing to say and maybe one of the best things to say at this season, Wolf. There are so many good candidates for Man of the Year this year.

There's Rudy Giuliani. There's the president. There are the brave men and woman in uniform in New York and Washington, firefighters and the police officers. The American soldier. And how about just the much-abused, much-criticized American business guy. You know, the guy who's ridiculed in so many Hollywood movies and sitcoms, who gets on flight 93 and huddling with some of his colleagues says, "Let's roll." That's an American hero, too.

I remember about 15 years ago a poll of American teenagers asked them who was their hero, who do they admire the most. And the number- one vote-getter was the drummer from Kiss and the number-two vote- getter was nobody. We're not in that situation anymore.

Out of evil can come great good, and great good that has come out of this is we have an abundance of heroes. We have an abundance of candidates of Man and Woman of the Year, and that's something I think our children can benefit from enormously.

BLITZER: All right. Let's take a caller from Connecticut. Go ahead with your question, please.

QUESTION: Hi. I just wanted to ask a question for both men. I was wondering with the latest tragedy in our country, what they themselves have contributed to supporting our country, not just New Work, Washington, D.C., but what have you done to support our country, and what have you told your congregations in this time?

BLITZER: All right. Well, Bill Bennett doesn't have a congregation, but Bishop Jakes does have a congregation. Go ahead, Bishop.

JAKES: Well, there are several things I rush to do, that 28,000 members of our church ran out to the church immediately to hear what we had to say. I've certainly expressed how important it is for us to have unity with our nation, with our country at this particular time as we face this plight. We've used television to be able to reach people in need. We've donated to the Red Cross, we support it financially. Various institutions that we're very interested in supporting, these families who have been victimized and traumatized.

JAKES: I've been deeply involved in writing letters to various partners and people in New York to encourage them and to support them. I've spent hours and hours on television answering questions, there to support people in a global sense as they struggle with grief. We used our Web sites to support people who are agonized.

But I think, beyond what we've done individually, the -- and I certainly don't want to sound like we're tooting our own horns. I think what impresses me is that all Americans around the country, around the globe have used whatever sphere of influence -- if they didn't have television, as we did, they used just sitting in the barbershop, encouraging one another through the storm.

And I think that there's much more to be done in the days ahead. Many are jobless, many are struggling economically, many are struggling with the first Christmas they've had with their sons or daughters overseas. We have continued to provide counseling and support groups because there's much more ahead for America to face.

BLITZER: All right. Let's ask Bill Bennett, what else is there for America to face right now?

BENNETT: Well, there's plenty to face. The ongoing business of life.

It's interesting you're giving fuel to my critics here, Wolf. They'll say, you know, Bill Bennett's crazy, but at least he doesn't have a congregation.

(LAUGHTER)

You know, that's one good thing, there's no church yet.

Look, the business of life goes on, but it goes on, I think, in somewhat different terms. I think I heard somebody this morning on an earlier show say, well, you know, that's it for the folks who just think Starbucks and yoga is the way to answer all of life's questions. The resilience of the traditional faiths I think has shown itself very clearly.

And I find most young people, you know, not very small children, but kids above the age of nine or 10, to be pretty strong and pretty clear about this.

One other very important thing, I think, we've had a sense of nostalgia in this country for the last 10 years about the greatest generation, the heroes who've gone before us. I now think a lot of young people believe that that's not necessarily nostalgia, that maybe the greatest generation is the generation that's among us now, and that they, not just make a profit, not just have a good life, but they can find some nobility and honor in life, like these heroes we're celebrating.

BLITZER: All right. Bill Bennett, leaving us with an optimistic note, and, Bishop Jakes, thanks to both of you very much for joining us.

Merry Christmas, Happy New Year to you and of course to all of our viewers in the United States and around the world.

JAKES: Thank you.

BLITZER: Just ahead, we'll have our interview with the House Speaker Dennis Hastert. Speaker Hastert will weigh in on the war against terrorism, the failed economic stimulus package and a lot more.

LATE EDITION will be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION.

The United States Senate and the House of Representatives are now in recess until the end of January. But even as there is strong bipartisan support for President Bush's war on terrorism, there is bitter debate on several domestic issues here in the United States.

Earlier today I spoke with the speaker of the House, Dennis Hastert.

(BEGIN VIDEOTAPE)

BLITZER: Mr. Speaker, welcome to LATE EDITION. Good to have you back on our program.

REP. DENNIS HASTERT (R-IL), HOUSE SPEAKER: Thank you. Great to be here.

BLITZER: A lot of people thought this president, with 85 percent job-approval rating, could push through an economic stimulus package, but it didn't get through. A lot of Democrats, of course, blaming you, House Republicans in particular, for trying to push big corporate tax rates.

HASTERT: Well, you know, three things we wanted to do with the stimulus package.

First of all, we wanted to bring consumer confidence forward. That's the unemployment insurance, the rebates, those things were -- even one of those tax packages were families that make between $27,000 and $42,000 a year -- clearly middle-class. We think that was the important thing, to get people buying again, make house payments, know that they could make the house payments and the car payments and pay their insurance.

The next thing we wanted to do is, we've lost a lot of value, American families have. Almost every American family that works has some kind of savings, either a pension or a 401(k) or, you know, mutual fund or something, and it lost a lot of value. We're trying to get the markets up, so people that invest in the markets, the confidence back there.

And the third thing we tried to do is to amass some capital so people will invest in jobs, new ideas, and create jobs. If people -- certainly, unemployment insurance, it's nice to know that the checks are coming in, but they really want a job. And so what we tried to do in the tax breaks for business, not just big money for business, but to amass the capital and then the incentive to invest that capital, so we're creating jobs. And that's what it's all about.

BLITZER: That was the old trickle-down formula that was popular, of course, in the Reagan administration, that was highly controversial.

But even the White House pulled the rug out from the House Republicans on this whole retroactive issue of the alternative minimum tax.

On this program last week, the budget director at the White House, Mitch Daniels, said that that was never the president's conception. Listen to what he had to say.

(BEGIN VIDEO CLIP)

MITCH DANIELS, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: That was never part of the president's proposal. It's something that appeared in the House bill. And my guess is, it's not realistic to expect it to be there at the end. In the interest of getting people back to work in this country, it may just have to be jettisoned.

(END VIDEO CLIP)

BLITZER: He was clearly distancing himself from what the House wanted, namely, to let some of those big corporations, like IBM or GM or Ford, have this kind of retroactive tax bonanza which Republicans in the Senate and the White House thought was a bad idea. HASTERT: And it wasn't there in the end. I mean, but still, even though, a cut-down package we couldn't get across the Senate floor, after we passed it in the House, and that's unfortunate.

BLITZER: So that idea has gone away, at least for the time being? If there is ever an economic stimulus package that you attempt to revive, including an alternative minimum tax retroactive benefits, tax cuts, that's going to stay out of it?

HASTERT: Well, we'll have to look at each package as it comes and what's needed. I'm sure that the next stimulus package may have some different ingredients, depending on what the times are and what the needs are.

BLITZER: When you come back January 23 from your recess, are you going to try to get this economic stimulus package back on the table? Because, as you know, some economists say it's no longer needed, the economy -- there are some indicators suggesting the economy's already starting to come back.

HASTERT: Well, you know, I taught economics for 16 years, but never fancied myself as an economist. I've known a lot of different opinions there.

We're going to have to see where we are in the first month of this year, of the new year, and then kind of make our assessments from there. But I don't discount anything at this point.

BLITZER: The other point that Mitch Daniels made last week on this program was that the budget surpluses, which of course were so highly touted only a few months ago, now have all turned into deficits, at least as far as they can project the U.S. economy as being.

And, as a result, that all of the money that's going to be going for all of these economic stimulus packages -- the emergency recovery operations, the military -- that's just going to be costing the U.S. taxpayers so much money. They've got to start looking -- start to be a little bit more fiscally responsible.

Listen to what Representative Peter DeFazio, a Democrat, said earlier this week.

(BEGIN VIDEO CLIP)

REP. PETER DEFAZIO (D), OREGON: $250 billion, that's what this bill costs. And it isn't going to be paid for by Santa Claus. It's going to be paid for by that huge sucking sound, one massive withdrawal of the working people's retirement, Social Security trust fund, shifted all at once to the wealthiest and largest corporations in this country.

(END VIDEO CLIP)

HASTERT: Well, I wouldn't expect anything less from Peter. But anyway, the fact is, that's why we need an economic stimulus package: to get the economy going, to create the wealth. The reason that we have deficits today is not because of spending or tax cuts or anything else, it's because of a downturn in the economy producing wealth.

So, I think it's important to try to gin this economy up. We think that there is some recovery on its own, but to help it a little bit would be very helpful.

And of course there's different things you do at different times in an economy. When you have a downturn in the economy, you need to do some spending, as we said, to get the economy going.

And when you talk about the security out here, to make sure -- Peter was wrong, it's about $100 billion, it wasn't $250 billion. He tends to exaggerate from time to time.

But, you know, what we need to do is to make sure that our homeland is safe, that our airports are safe, airplanes can fly, people can have trust in the mail.

And we have men and women that are putting their life on the line right now in different parts of the world. We need to make sure that they have the equipment and the wherewithal and the training to be able to do those things. So we're going to do that.

BLITZER: When you come back in January, will that be your top priority or the economic stimulus package?

HASTERT: Well, I think the homeland, they're going to ask for a little bit more money, but we're going to do a supplemental and that's something that we said we would do.

They wanted to spend more money. The Democrats wanted to spend more money in the appropriation bill as we went through, probably up to $50 billion more, before we passed the series of appropriation bills and the supplemental. And I said no, let's wait and see what -- get some of that money out of the pipeline and see what the real needs are, and that's what we're going to do.

So, we're going to do the supplemental. We'll do what we have to do for homeland security.

Then I think there's four areas that we need to focus on: First of all, we need to get back and look at the health care of the American people to make sure that that's secure. That seniors are getting the health care and the pharmaceutical needs, we're going to take a look at that.

And we need to do a little reorganization of Medicare to make sure it's sound and secure.

We also need to follow-up on education. There's some things in education to build on what the president's been able to do in education. We want to do something in energy. Energy is so important. That's just as important as the stimulus package for the economy, I think. And we need to extricate ourselves, I believe, from energy dependence in the Middle East and to try to build a North American alliance on energy so that we can rely on our own and we don't have to worry about shipping. Because every time we get involved in the Middle East, it's not just with energy, but it's politics, it's economics, it's diplomacy and we get mired into that.

BLITZER: You're obviously well briefed on the course of the U.S. war in Afghanistan. How close is the United States to finding Osama bin Laden?

HASTERT: Well, you know, the war is basically, for all practical purposes, done in Afghanistan. But it's mopping up, and the mopping up is trying to find Osama bin Laden.

I heard an estimate last night that either he's dead or hiding in a cave or he's moved to another location or he's escaped. So, I mean, there's some place -- he's either dead or he's some place in the universe.

I think we'll find him eventually, but I think now we have to make sure that that government that is a newly established government in Afghanistan is established and solid and can bring those factions together.

But I think basically we'll go from a overt war to more of a covert operation in the rest of the world, because there's still 60 countries that have al Qaeda cells in them. And I think you need to rout them out; you need to take -- disassemble their financial sustenance and those types of things.

BLITZER: Is that overt war going to be the next U.S. objective, places like Somalia, the Philippines, where there are al Qaeda cells, or, as some are suggesting, Iraq which is a much more robust traditional military campaign potentially?

HASTERT: Well, I think it's too premature to look at Iraq, my personal opinion. But I think what you need to do is dissemble al Qaeda and those types of terrorists organizations, and you can do that in a very systematic way in an overt operation. We ought to get at it.

BLITZER: A lot of interest in John Walker, the American Taliban fighter. What is your bottom line as far as what he should be charged with?

HASTERT: Well, I'll tell you, when somebody joins an organization like that and you perpetrate acts against the United States and, you know, you have to take the responsibility for your actions. And I think he'll have to do that.

BLITZER: So, do you think that capital punishment, being charged with particularly the death penalty around his neck, is that a good idea? HASTERT: I think he has to stand trial or military trial or a civil trial, whatever we decide to do. But he has to stand up for his actions and whether he -- you know, that will remain to be seen. Whether he was an operative or whether he was just a foot soldier, that makes a lot of difference.

BLITZER: Did he commit treason?

HASTERT: I think he did.

BLITZER: You know that Rudy Giuliani is "TIME" Magazine's Person of the Year. You didn't get it this year, Mr. Speaker. I know you must be very disappointed.

HASTERT: I'll pass.

BLITZER: But do you think he deserved that, that honor?

HASTERT: Absolutely. You know, there are probably a couple of people deserved honors this year. But Rudy Giuliani, you know, I guess it's a -- use the illusion of New York, but that was probably a great curtain call for him. He did an extraordinary job during this time of crisis and terror in New York. I think he pulled people together. He showed the leadership, and certainly that was a great honor for him but he deserved it.

BLITZER: He has a future in the Republican Party someplace?

HASTERT: I think he does have a future.

BLITZER: What would you like to see him do?

HASTERT: Well, we'll wait and see what happens.

BLITZER: All right, Mr. Speaker. Merry Christmas.

HASTERT: My pleasure, and to you. Thank you.

BLITZER: Thank you.

HASTERT: Have a good one.

(END VIDEOTAPE)

BLITZER: Coming up immediately after LATE EDITION at 3:00 p.m. Eastern, "Business Unusual" with Willow Bay. This week's program features the opening of Toys 'R' Us flagship stores in Times Square -- a profile of America's biggest boxed-candy maker and one of New York's sidewalk Santas. That's "Business Unusual" with Willow Bay, 3:00 p.m. Eastern, right after this program.

But when we return, LATE EDITION's "Final Round." They'll also be taking your phone calls. Stay with us.

(COMMERCIAL BREAK) BLITZER: Welcome back to LATE EDITION's "Final Round." Joining me: Donna Brazile, the former manager of the Al Gore presidential campaign; Peter Beinart, the editor of the "New Republic"; Jonah Goldberg, the contributing editor for the "National Review"; and Robert George, a columnist for the "New York Post."

We also want to hear from you. You can e-mail us questions. You can just go to LATEEDITION@CNN.com.

Right in the midst of the Christmas travel crush, a new scare in the skies, an American Airlines flight from Paris to Miami made an emergency landing in Boston yesterday after a passenger tried to set fire to his shoes that contained explosive materials. Flight attendants and other passengers overpowered the man, who's in custody now of the FBI.

Earlier today, the Alabama Senator Richard Shelby said the man's motives appear clear.

(BEGIN VIDEO CLIP)

SEN. RICHARD SHELBY (R), ALABAMA: It'd be my judgment, from what I have observed, that this man was trying to blow himself up, and blow the plane up, and we're very fortunate it didn't happen.

(END VIDEO CLIP)

BLITZER: Jonah, have we made progress in air safety, or is the future vigilante passengers?

GOLDBERG: Well, actually both things can be true. Actually for the piece in the "National Review," I flew around to five different airports, testing airline security, and much of it is still stupid. I mean, they're confiscating nail clippers and cuticle scissors and all of these things, and basically rousting people at the security gates.

But I do think that the vigilantism thing is a good thing. First of all, it underscores the point that the answer to a lot of this is never going to be big government, that people are going to have to take responsibility for themselves.

But I also think this incident, more than anything else, underscores the reality that there is a case, a very strong case to be made for racial profiling. This guy was an Arab young man. You don't need to be rousting members of the Mormon soccer team, you know.

BRAZILE: Well, I hope there is never a case for racial profiling in the airline industry or anywhere else in this country or in the world.

But clearly we must do everything we can to ensure the safety of our airlines and our airplanes. And perhaps it's time to speed up some of the technology that Congress has appropriated now in the defense bill, so that we can have the best technology to track some of these devices. GEORGE: Part of the big problem is, if you've got a terrorist who's dedicated to doing something, he's going to, in a sense, be a step ahead, because nobody's going to be able to exactly anticipate that somebody's going to put explosives in their shoes and to be checking their shoes.

However, I mean, I think we are fortunate that we had a flight attendant who was, you know, aware and alert, as we've been told by our leaders to be alert of what's going on, noticing the smoke and so forth, and certainly -- I mean, it's like flight 93, where you had passengers who, you know, stepped up to help out.

BEINART: There's a better answer than profiling, I think, and this is, we need -- one of it is, we need to focus on passports. We know this guy had a very sketchy passport from Britain, we know that al Qaeda -- they found a lot of British and American passports in those caves. It's very clear that, particularly from countries in the Middle East, there's not very good passport security. I think that, probably more than racial profiling, and without engendering all of the ill will, might help here.

GOLDBERG: But, Peter, passports are essentially a stalking horse for profiling.

BEINART: But, Jonah, this guy wasn't even Arab, he's Sri Lankan. Most Sri Lankans are not even Muslim. It just shows...

GOLDBERG: He also wasn't a blonde old lady from Norway. I mean, you can be discriminating in some of these points, and still...

(CROSSTALK)

BEINART: But most people in the world are not blonde.

GOLDBERG: I understand.

BEINART: The reality is, you have to cast a very, very wide and disturbing net.

GOLDBERG: Yes. And so what you do is, you start, like Occam's razor, cutting out those things that are unnecessary.

And the fact of matter remains, I think Robert is right. Whether he agrees with me about profiling or not, I don't know, but these guys themselves, if they're willing to kill themselves, they are the weapons.

BLITZER: We'll find out next week if he agrees with you on profiling.

(LAUGHTER)

We're going to move on right now. Earlier in the week, the Defense Secretary, Donald Rumsfeld warned it was too early to declare victory in Afghanistan. But the House Speaker Dennis Hastert sees things very differently. Listen to what he told me earlier today. (BEGIN VIDEO CLIP)

HASTERT: The war is basically, for all practical purposes, done in Afghanistan. But it's mopping up, and the mopping up is trying to find Osama bin Laden. I heard an estimate last night that either he's dead or hiding in a cave, or he's moved to another location, or he's escaped.

(END VIDEO CLIP)

BLITZER: Robert, could the speaker's words come back to haunt him?

GEORGE: Partly. I mean, I think he's pretty accurate. I mean, it's 90 percent done in Afghanistan. Obviously, we don't know where bin Laden is. And so there's going to be certainly American troops who will be in there tracking him down there.

But really, the war is expanding. It's going to be expanding possibly into Pakistan, at least in terms of tracking al Qaeda there, possibly Sudan, Somalia, Iraq, et cetera.

I mean, in terms of our razor focus on Afghanistan, it is basically done.

BLITZER: Donna, we heard earlier this week, at least some officials, told us that this may be an especially dangerous period and one reason why the alert has continued through at least January 2, a full-scale alert because there may be an act of desperation. They may see themselves on the ropes. They want to lash out right now.

BRAZILE: Well, let me tell you something, I believe our military, especially the Marines that have been deployed over there, will be able to finish up their campaign in Afghanistan, and perhaps, hopefully find some more intelligence so that we can stop some of this nonsense from taking place.

BLITZER: How dangerous is the situation right now, Peter?

BEINART: It's very dangerous. And I think the real concern now for the United States is we need to broaden our understanding of the war on terrorism.

One of the byproducts of this has been more tension between Israel and the Palestinians and much more tension between India and Pakistan than we have seen in a very long time.

American can't only focus on this as a military question. We have to be much more engaged diplomatically, for instance in Kashmir, or else we're going to find -- because what's happening is countries like India are taking the same response that the U.S. did, very harsh military response to terrorism. Unless we do something about it, proactively, we will see new flair-ups.

GEORGE: Which is why Bush froze the assets of a group attacking in Kashmir and also another group with ties to nuclear scientists that have been helping bin Laden with nuclear and chemical weapons.

BLITZER: If this were a 15-round fight, the war on terrorism, what round are we in right now?

GOLDBERG: Round two, three?

I mean, it was a war on terrorism. It wasn't a war on Afghanistan, which is a point we tried to make through all of our diplomatic channels. And so this phase of it is coming to an end.

But this incident last night with explosive shoes shows that it's terrorism that we're at war with and not the people or the country of Afghanistan.

BLITZER: But we don't know anything about this alleged Sri Lankan. We have no idea whether he was acting alone. We don't know if he was associated with any group. We probably will be finding out very soon.

GEORGE: It won't stop until they've got the signal though, that it's not going to be tolerated anywhere.

GOLDBERG: But we do know he's a terrorist. We don't know what his cause is. And if our war is on terrorism, are war is against people like him whatever his cause is.

BLITZER: All right, let's move on.

Whether the war is nearly over not, Afghanistan does have a new government. Earlier today I spoke with Hamid Karzai. He's the chairman of Afghanistan's interim administration. He told me his government would cooperate with the United States in tracking down Osama bin Laden.

(BEGIN VIDEO CLIP)

KARZAI: We strongly condemn those attacks against the United States. They killed very innocent people. I saw on television the way people jumped off the 80th floor of the Twin Towers. It was a criminal thing that they did. We will deliver him to the United States.

(END VIDEO CLIP)

BLITZER: Peter, can the United States trust Hamid Karzai?

BEINART: I think so. I think we're very lucky to have someone who is so good at combining liberal values, a deep understanding of liberal values and a deep understanding of Afghan tradition.

I think the better question is actually whether he can trust us, because the United States so far has been very weak on this peacekeeping force. It needs to expand outside of Kabul to a lot of loyalist territories. And the United States is holding that up. He should ask us where we are. BLITZER: Well, on that point, Jonah, as far as the United States is concerned, without the U.S., Hamid Karzai would still be in Pakistan someplace.

GOLDBERG: Well, that's exactly right. And I think the real question in many ways is, trust him for what?

In many ways, we have a positive national security interest in making Afghanistan a better place and teaching the world that it's good to be on our side. But as the war in Afghanistan comes to end, basically it's national-building, and this is what the EU and all of the other people are good for, and they're stepping into the breach. And so our phase in Afghanistan maybe coming to an end anyway.

BLITZER: President Bush during the campaign, as you probably well remember, Donna, he didn't want to get the U.S. engaged in national building.

BRAZILE: Well, let me tell you, the president said a lot of things last year that he's no longer saying this year.

One of things that he must continue to do is to support the people of Afghanistan, to help Mr. Karzai rebuild that country, to restore peace and order, and to hopefully get the country back on the road to some form of government.

BLITZER: What's going to happen there?

GEORGE: Well, I think what you're going to have to do is, our forces have to stay there because as we know, in Afghanistan people can switch sides all of the time. And I think Karzai is going to have -- he is going to need certain people, American forces, to help in a sense protect him, to make sure that he's going to have the time to reconstruct the country.

BLITZER: All right, stand by. We're going to take a quick break.

We've got a lot more to talk about, including your phone calls for our panel. LATE EDITION's "Final Round." We'll be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION. We're continuing our conversation with the panelists of the "Final Round." They're also taking your questions by phone or e-mail.

New York Mayor Rudy Giuliani is now part of a very select group. "TIME" magazine has chosen him as its Person of the Year for his handling of the September 11 attacks. A short while ago the mayor talked about what his selection meant.

(BEGIN VIDEO CLIP)

RUDY GIULIANI, MAYOR OF NEW YORK CITY: New York City has been selected as the people of year, and I don't think there's any question that New York City and New Yorker's are the people of the year, and we represent America.

(END VIDEO CLIP)

BLITZER: Donna, is Giuliani a good or bad choice?

BRAZILE: He's a good choice. I think it's a -- look, he's done a remarkable job. It's not how you start a job, it's how you finish a job. And with one week left in his term, Mayor Giuliani did a good job on September 11 and the aftermath.

BLITZER: We got an e-mailer, Jonah. Somebody writes us this: "I think that "TIME" magazine copped out to pressure, political and/or otherwise, by selecting Rudy Giuliani as their Person of the Year in 2001. Without Osama bin Laden's master-minded attacks, Mr. Giuliani would have been just another good mayor for New York City, not "TIME"'s person of the year."

GOLDBERG: Well, to borrow a phrase from Bart Simpson, I do think "TIME" folded faster than Superman on laundry day on this one.

(LAUGHTER)

GOLDBERG: And the truth is, I think "TIME" basically -- I don't know if "folded to pressure" -- that sounds awfully conspiratorial. But the reality is that Osama bin Laden really is sort of the Gavrilo Princip of the 21st century. We all remember Gavrilo being the man who shot Archduke Ferdinand, launched World War I and brought in a new era.

And it really does look like we're in the beginning of a new era, and Osama bin Laden brought it in. And if Stalin and Hitler can be Men of the Year, so can Osama bin Laden.

GEORGE: Yes. I have to agree. I mean, he's a -- Rudy Giuliani is my mayor, and he's certainly my -- the New Yorker of the year.

But he was forced into a reactive pose and -- I mean, he handled it masterfully. But the Person of the Year, it's either Osama bin Laden or it's George W. Bush, who had to, in a sense, kind of turn on a dime, restructure politics domestically, get a whole coalition together and then launch a war on terrorism.

BLITZER: Peter, you're the editor of a magazine. Give us your sense.

BEINART: No, I think this was a kind of a People magazine choice...

(LAUGHTER)

... a kind of -- the person who made us feel best, but not the person who impacted the news the most.

That was bin Laden, and with an honorable mention I think the Crown Prince Abdullah of Saudi Arabia.

GOLDBERG: Huh?

BEINART: Saudi Arabia created this culture of al Qaeda and bin Laden. It was Saudi money that allowed -- that allowed him. There's much, much more complicity than of us realized. I think that's -- going forward to the future, I think it's another place we need to look.

BLITZER: All right. Who would have been your pick?

GOLDBERG: It would have been Osama, with maybe George Bush if we wanted to be a little cheerier about it.

But I kind of like Peter's approach to these things. Maybe we can get FDR and Churchill on there for creating the entire Middle East to begin with, which set up the Saudi families, so.

BLITZER: Donna?

BRAZILE: Jim Jeffords, Senator Jim Jeffords who changed the American political dynamic this year.

BLITZER: A non-partisan, objective analysis.

BRAZILE: Absolutely.

(LAUGHTER)

BLITZER: Your pick?

GEORGE: Yes, I would have either gone, either gone with bin Laden or Bush.

BLITZER: You know, Bob Schieffer said something very interesting today. He said if you have a choice between poison and the person who created some invention to destroy the poison, who gets the award? He likened Osama bin Laden to poison. Of course George W. Bush or Rudy Giuliani to the anti-poison. You give the award to somebody who destroys the poison.

BEINART: We haven't, haven't extinguished the poison yet altogether. And that's, I mean, that's what this war's about.

BLITZER: All right, stand by.

Congressional Republicans and Democrats have been showing a bipartisan spirit in the war against terrorism, but they're still fighting each other in a host of domestic issues, especially the economy. Congress adjourned for the year without approving an economic stimulus package.

The centrist Democratic senator, John Breaux of Louisiana, today said he's fed up with the finger-pointing.

(BEGIN VIDEO CLIP)

SEN. JOHN BREAUX (D), LOUISIANA: That's the blame game. I mean, I totally reject it. I mean, we blame Republicans, they blame Democrats. We blame the president. And the American people must scratch their heads and say, what's going on up there? I mean, these are grown men and women. Can't they reach reasonable compromises and get something done for everybody?

(END VIDEO CLIP)

BLITZER: Peter, why can't Democrats and Republicans just simply get along?

BEINART: Because some times they disagree about important things. I mean, John Breaux is one of those politicians who thinks it's always better for politicians to come to agreement, no matter what they agree on.

The truth is, this was a bad stimulus bill. Conservatives understood it as well as liberals. We've used monetary policy to try to deal with this recession. That's the right thing to do. Tax cuts, it's shown from the Bush tax cut of this summer, don't tend to have a very good short-term stimulus effect. Thank goodness this failed.

BLITZER: Some economists think, Jonah, that it's a good thing it failed because the economy's beginning to show some signs of coming back, and spending all this money for this stimulus package would have been, in the long run, hurtful.

GOLDBERG: Yes, I don't like stimulus packages. I don't -- I think it sends a bad message that the government drives the economy, and it doesn't.

I do think that -- I agree with Peter that in a democracy you want people -- you want more arguments, not less.

And -- but, you know, the credit does go to Tom Daschle more than anybody else, because he really didn't want to stimulus package because he wants to run on the politics of the "Bush recession," quote, unquote.

BLITZER: Is that true, Donna?

BRAZILE: No. Tom Daschle stopped this bad bill that the House rushed to produce on Wednesday night. This bill would have given more money to corporate special interests and would have blew an even larger hole in the deficit. So...

GEORGE: My good friend Donna over here.

(LAUGHTER)

First of all, the bill that the House passed was one that had unemployment benefits, which I think that you liked; various health care benefits as well.

The fact is, Daschle didn't want it, even though you had at least 52, 52 votes in the Senate for this, because, as you said...

(CROSSTALK)

BRAZILE: We have 317 days to even the score from 2000.

But for the time being, this bill would have blown the deficit even larger, and this bill was filled with giveaways to corporate interests and special interests. And we didn't...

BLITZER: All right. The Bush White House learned on this particular vote that didn't happen what the Clinton White House learned in '93: On any important piece of legislation in the Senate, you need 60, you don't need 51.

BRAZILE: Absolutely.

BLITZER: All right, we're going to take a quick break.

When we come back, the final round of the "Final Round." Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back to the "Final Round."

Hollywood has recruited Muhammed Ali to help bolster the United States' image in the Muslim world. Should The Champ help sell the war on terrorism? Peter?

BEINART: No. I think this is fluff. The truth is the reason there's hostility in the United States is that we haven't well explained our policy in Iraq, which is a just policy, and we haven't changed our policy toward companies like Saudi Arabia and Egypt, where we're on the wrong side of democracy.

GEORGE: What I find interesting about this story, which was on the front page of the "New York Times" today, was that the movie "Ali" is coming out on Christmas day, on Tuesday. So it sounded like Hollywood was doing a little bit of -- getting a little bit of sort of free play for that.

I think it's not -- it may not be a bad idea. Ali is well respect in the world. What I think is rather interesting, though, is with the movie coming out, people are being reminded of Ali's sort of, at that time, anti-American sensibilities, how that's going to play in the current atmosphere.

BRAZILE: But he's an American hero, and our heroes sometimes have a little -- have a flaw, too. And he's the greatest, and I think he would be a great goodwill ambassador for this country.

BLITZER: Jonah?

GOLDBERG: I don't know if it's going to work. But anything that gets a bunch of Hollywood types to say nice things about America for a little while, rather than what they normally do, is fine by me.

BLITZER: All right. The September 11 victims will receive an average of $1.5 billion from the government and other sources. Is the payout distribution fair? Robert?

GEORGE: It's about as fair as you can get under the circumstances.

You have to keep in mind, under normal cases of murder, victims are lucky to get anything. And I think it's a good idea for the government to try and step in, to try and forestall some of the lawsuits.

BLITZER: Should they take the money or hold out for more?

BEINART: No. I think they should take the money. No one really wants to see this go into court. The truth is, money can never heal these people's pain. Only time and the love of families can do that. It seems to me better off to be done with this. Nothing could truly be fair.

BLITZER: What about that?

BRAZILE: I agree with Peter and Robert on this. I mean, some people are hurting out there, and they need the money, and they should go ahead and accept it and move on.

BLITZER: All right.

GOLDBERG: Yes. I mean, look, the guys -- the victims from Oklahoma City didn't get anything at all. So, in a sense, these guys getting anything is in a sense, unfair, too, and it's unfair that the members of their families died.

So, you know, this is one of these things where they -- let's just put it all behind us. You know, there's no way it can be perfect.

BLITZER: Thirteen years later, the victims of Pam Am 103 are still waiting for some money, as well.

Meanwhile, the former President Bill Clinton plotted strategy with a group of advisers this past week in an effort to highlight his accomplishments.

Is redemption possible, Donna Brazile?

BRAZILE: Absolutely. He -- years from now, we will -- Jonah will actually come on this show...

(LAUGHTER)

... and say Bill Clinton was a remarkable president, and he was a remarkable president.

BLITZER: What about that meeting? You were not at that meeting, were you?

BRAZILE: No, I was not. I was not invited.

BLITZER: If Al Gore had called a meeting like that, you'd be happy to go join him...

BRAZILE: Absolutely, if he would have paid my way.

(LAUGHTER)

GEORGE: Donna, I don't think anyone disagrees that Bill Clinton was a remarkable president. The question is, was he a good president?

GOLDBERG: And what remarks are appropriate.

GEORGE: Yes, exactly. Whether he was a good president.

It seemed, actually, it's more of about it being him, about ego and so forth. And I think, especially in the current political dynamic...

BRAZILE: No. It's about his record. It's about his record of accomplishments on reducing the deficit, ending welfare as we know it, reducing crime...

(CROSSTALK)

GEORGE: You know, the real story....

BRAZILE: ... creating 22 million jobs.

GEORGE: The real story that's going to come out...

BRAZILE: You know, it's about what he accomplished...

GEORGE: The real story is going to come out over the next...

BRAZILE: ... along with Al Gore.

GEORGE: ... over the next year is the battle between the new Democrats and Hillary Clinton and Al Gore, who will become old Democrats. That's a big story.

BEINART: I think Bill Clinton would have gone down as a great president. The problem is, his legacy went up in smoke on September 11, because he will now be seen forever as having slept -- being sleeping at the wheel.

The truth is that Republicans were sleeping at the wheel in Congress just as much as Bill Clinton was. But all of the -- as Donna is absolutely right -- the remarkable achievements on the home front, in some sense, will now be lost.

BLITZER: He had eight years to do something about al Qaeda and Osama bin Laden. Did he?

GOLDBERG: Well, the series we've recently seen in the "Washington Post" show that there was a lot of memos going around, which may have scared the hell out of Osama bin Laden. But other than that, it doesn't show that he did much. And I don't think that Peter's right that he would ever go down in history as a great president. He might have gone down in history as a good president. But much to the chagrin of Clinton-bashers like me -- and the day I get on CNN and say he was a wonderful guy, we'll also have to duck from the pigs flying...

(LAUGHTER)

... but, much to the chagrin of conservatives like me, and from liberals like Donna, his whole record has been rescrambled.

And in many was, you know, Neville Chamberlain wasn't Neville Chamberlain in 1940. History made him Neville Chamberlain. And it looks like Bill Clinton has a real problem that he may go down in history as the guy who set up September 11.

BLITZER: No, that may be...

BRAZILE: I totally disagree. I think that Bill Clinton will go down not only as a remarkable president, but a president who helped to bring this country back.

BLITZER: All right, let's move on and talk about this, finally. 'Tis the season for peace an Earth and good will towards men -- and women.

Is it possible in our lifetime, Jonah?

GOLDBERG: Peace is possible, but, as a good conservative, I must say that the crooked timber of humanity will not make good will possible at all times.

But, other than that, I will always have good will even for Donna.

(LAUGHTER)

BLITZER: What about that, Donna?

BRAZILE: Well, my -- our faith teaches us that weeping may endure for a night, but joy cometh in the morning.

So, I'm an eternal optimist, and I believe that peace is possible and good will toward all, including conservatives.

BLITZER: I think, Robert, you're optimistic by nature too, aren't you?

GEORGE: I am.

BLITZER: Look at that tie.

GEORGE: I have my "How the Grinch Stole Christmas" tie on. But, you know, the Grinch didn't steal Christmas, and the terror and so forth that's happened the last few months I don't think can spoil the goodwill that we all do share. And, in fact, I think we have all come together much stronger as a country.

BLITZER: Peter?

BEINART: Absolutely right, although with one caveat: What this has also shown -- and I think conservatives have been good in reminding us -- there are some peaces that are worse than war. There are some things that are worth fighting for. There are some wars that you need to fight to have a just peace in the end. And I think we've learned that from September 11, as well as learning about a new kind of peace and good will at home.

GOLDBERG: Would you like a job at "National Review"?

(LAUGHTER)

BEINART: What does it pay?

(LAUGHTER)

BLITZER: (OFF-MIKE), that'll be another occasion.

Peter, Robert, Donna, Jonah, thank you very much. See you next week.

GOLDBERG: Merry Christmas, Wolf.

BLITZER: Thank you very much, and to all of our viewers.

That's your LATE EDITION for Sunday, December 23. Please join us again next Sunday and every Sunday at noon Eastern for the last word in Sunday talk.

During the week, I'll see you twice a day at both 5:00 and 7:00 p.m. Eastern, two editions of Wolf Blitzer Reports.

Until then, thanks very much for watching. Have a Merry Christmas and a Happy New Year. I'm Wolf Blitzer in Washington.

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