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CNN LARRY KING LIVE

It's Official: U.S. in Recession; Obama's National Security Team

Aired December 1, 2008 - 21:00   ET

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


LARRY KING, HOST: Tonight, they were bitter political enemies. Now, she'll be one of his closest confidantes. President-Elect Barack Obama nominates Hillary Clinton as his secretary of state.
(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT-ELECT OF THE UNITED STATES: She's an American of tremendous stature who will have my complete confidence.

(END VIDEO CLIP)

KING: Can they become partners in power?

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON (D), FORMER PRESIDENTIAL CANDIDATE: I am proud to join you on what will be a difficult and exciting adventure in this new century.

(END VIDEO CLIP)

KING: Whose foreign policy will she pursue -- his, hers or theirs?

And who's going to get her Senate seat?

Could it be Bill?

Plus, the Dow nosedives, as the economy continues to crumble and the United States is officially in a recession.

So what do you do with your money now -- if you've got any left?

Next on LARRY KING LIVE.

Good evening.

Just when you think it can't get worse, it does. The Dow was down 680 points today on more bad news for the economy. We are officially in a recession -- have been for a year. And the tough times aren't going anywhere soon. So get used to financial pain.

Joining us in New York, Jean Chatzky. She's a personal finance expert, financial editor for "The Today Show," contributor to "The Oprah Winfrey Show" and the best-selling author of "Pay It Down."

And our own Ali Velshi, CNN's chief business correspondent, host of "Your Money".

Jean, why do we now know it's a recession?

JEAN CHATZKY, MONEY EXPERT & AUTHOR, "PAY IT DOWN": There is a group of economists who are charged with essentially telling us when we've hit the point where we're in a recession. There are a lot of numbers in this soup. People mistakenly think it's two quarters of no growth. That actually isn't it.

It's a lot of different things, including retail sales, including unemployment. They all factor in together in this group. And then this group of economists tell us that we have essentially hit the barometer, which, by the way, is something that Americans have known for a very long time.

KING: Yes. You're not kidding -- Ali, OK, the stock market had booming days at the end of the week.

Why did it go down 680 today?

ALI VELSHI, CNN CORRESPONDENT: Probably because it had booming days last week. We had a banner week last week -- one of the best in 75 years. Now, Larry, there are a lot of people who can't access credit and they're short of money. Their investments are in the stock market. Sol after you see a run-up like you did last week -- and this is going to happen for months.

You're going to find people taking that opportunity, they think this is as good as it gets for a while, they cash out their stocks and they use that cash to pay their bills or do whatever they have to do.

It's best that our viewers don't get caught up in that swing. Unless you're a professional trader, your long-term strategy is the one that you need to stick with. This kind of stuff is going to happen for months. I'm going to for months be telling you about new unemployment numbers and new housing lows. That's the way it is. You can only control your house payment. You can only control your job. And you can only control your credit. That's the message people should take from this.

KING: Jean, do you see a depression coming?

CHATZKY: No, absolutely not. And neither does Ben Bernanke, by the way, who was on the record today saying that is not something that people need to worry about.

But I agree with Ali that people need to really control the things they can control, which means your short-term assets do not belong in this market -- the money that you need for the next three, four years. It never did belong in this market, by the way. But if you've still got it in there, you probably want to move at least some of it to safety.

And your longer-term assets, if you're smart, you've got an asset allocation strategy that is based on your age and your risk tolerance and you're sticking with it in these times. KING: Now, Ali, I thought -- it's probably a misconception -- that if times -- if you feel good, times will get better.

(LAUGHTER)

KING: The economy is helped by how you feel. Well, the America is supposed to be feeling great with a new president, a new administration...

VELSHI: Right.

KING: ...announcements every day.

Why aren't we, therefore, up with the economy?

VELSHI: It's half -- it's half the equation. I mean we first found at CNN, with our Opinion Research polls last December, that more than half of Americans thought were in a recession. Last November -- November of 2007 is when Americans first told us that the economy is issue number one. So they've been feeling it for a year.

Larry, we've lost jobs every month in 2008 -- 1.2 million so far. On Friday, we're getting a new jobs report for November. We'll have lost another 300,000.

So the reality is, as much as you might be inspired by the message in the economic team of President-Elect Barack Obama -- and I think he's got a solid, all-star team going in there -- the bottom like is, he's not bringing back your job immediately. He said he could create 2.5 million jobs by 2011. We'll have lost 2.5 million jobs in this country by springtime. So he might just net out even.

What do you do if it's your job and your house?

That's why people are despondent.

KING: Jean, did Black Friday help?

CHATZKY: Black Friday probably didn't help as much as the numbers might indicate that it did. People shopped more this Black Friday than they did last Black Friday, which was a good sign, except when you look at both the number of days that we have until the shopping season ends and the number of people who said they've already completed more of their shopping, it's pretty clear people don't have that much shopping left to do.

Plus, I think people are really reining it in a little bit. They're starting to ask themselves the really important question, which is, can I afford this?

And if the answer is no, they're sitting down with their own children around the kitchen table and saying, hey, everybody, we are not going on vacation this year. It is not going to be a Christmas like it has been the last couple of years. We will have fun, we will be together, but you shouldn't necessarily expect as many things under the tree. KING: Ali, for a person of average means, would you say don't use your credit card?

VELSHI: Yes, you know, as a business reporter, I like the fact that there's economic activity when people go and spend. But I can't possibly counsel anyone to overextend themselves. Extending yourself and helping the economy is a good thing if you can afford it. We have found out what happens when you can't afford it.

With the danger of losing your job, Larry, I think you have to be very, very careful. So as Jean said, while some people might be reining themselves in, their inability to get credit might actually be reining them in, as well. People just can't over extend themselves. And those who can should really think twice before doing that right now. Protect yourself.

KING: Jean, what's it...

CHATZKY: That's absolutely...

KING: OK, Jean, what's a good...

CHATZKY: I was going to say that's...

KING: I was going to ask, what's a good piece of advice to give the average person?

CHATZKY: Well, when it comes to those credit cards, ask yourself how you're using them.

And if you're using them as a tool that you're paying off on a month to month basis -- that's how I use my credit cards. I'm sure that's how Ali uses his. That's an OK thing to do.

But if you're getting yourself into a situation where you know you're going to be paying it off into January, February, March, then you want to pull back a little bit.

And I think that the best piece of advice right now, the most aggressive good piece of advice that we could give people is to look at their mortgage. Mortgage rates have dipped down to about 5.5 percent. And if you're sitting with a loan that's anywhere above 6 percent, you may be able to free up a little bit of cash flow by going back to the well, by refinancing -- which is not to say, by the way, that you want to use that home as a piggy bank once again. It's just to give yourself a little bit more of an emergency cushion.

KING: We'll be -- we'll be calling on both of you lots of days ahead, which means that's not too optimistic. You're not here on good days.

Jean Chatzky and Ali Velshi.

President-Elect Obama's national security team is in place.

Has he drafted the right players? That's next.

(COMMERCIAL BREAK)

KING: A return visit with two of our crack journalists.

In Washington, Bob Woodward of "The Washington Post," the number one "New York Times" best-selling author. His latest book is "The War Within

A Secret White House History."

And in Manchester, New Hampshire is David Gergen, CNN's senior political analyst. He served as White House political adviser to Presidents Nixon, Ford, Reagan and Clinton.

We'll start with Bob.

The national security team named today.

What strikes you most about it?

BOB WOODWARD, AUTHOR, "THE WAR WITHIN": It's bold. It's, you know, this is something Dave Gergen would know. Hillary Clinton has really got an incredible amount of experience. And when Gergen went to work in the Clinton White House, as I recall, his first substantive conversation with anyone about what the job -- I guess he was going to become the counselor -- was with Hillary Clinton, who -- my conclusion at the time was that Hillary was the de facto chief of staff for her husband.

So Obama not only gets a secretary of State, but he gets somebody who's really seen the White House from the inside, Washington and politics. And if the relationship nurtures and stabilizes, he could get a lot of very good advice from her...

KING: David, every...

WOODWARD: ...on other matters.

KING: David, every time we saw Obama speak at any kind of rally, there was one word behind him. The word was change.

Is this change?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST, FORMER PRESIDENTIAL ADVISER: That's a very valuable and good question, Larry.

Let me just say, first of all, Bob Woodward, as usual, is right on target in his -- in his memories and in his reporting.

And I do think that Barack Obama has got a point in that he himself represents change and he's going to be setting the overall direction.

But I also think it's true that Hillary Clinton represents a strong, sharp departure from the policies of George W. Bush, whether it's trying to wind down the war in Iraq or talking directly to Iran or having a more constructive engagement with Russia or tackling global warming.

In all of those areas, both Hillary Clinton and Barack Obama have stood for a major departure from the Bush administration. And I think the differences between Hillary Clinton and Barack Obama are much, much smaller than the agreement -- areas of agreement.

KING: OK.

The president-elect addressed the issue of potential differences among members of the team.

Watch and we'll get your comment.

(BEGIN VIDEO CLIP)

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

(END VIDEO CLIP)

KING: President Kennedy loved disagreement among his higher echelon. He liked the exchange of ideas.

Do you think we'll have the same with Barack Obama?

WOODWARD: Well, I think he's a man of his word on that. I think he does likes intellectual debate.

What's interesting about that statement is he put himself up there and said, look, I'm going to be the decider, as Bush said of himself, and these are the people that are going to implement and execute his vision, his policies. He made it very clear that he's going to be the boss. And by agreeing to take all of these positions -- Jim Jones, his national security adviser, or Bob Gates remaining Defense secretary, they understand these are the terms of engagement. They're going to execute what the president says.

KING: How about progressive liberals, David, who appear to be -- not en masse -- disappointed with some of this?

For example, they'll say why keep Gates?

GERGEN: Well, I do think that the progressive liberals have a reason to be disappointed so far in the appointments. These have mostly been much more pragmatic, centrist type appointments, and they have not represented the left.

On the other hand, I think if Obama had gone left, to the extent that they wanted, he would be alarming much of the country, because he promised, essentially, a bipartisan approach, especially to foreign policy.

But I do want to emphasize, Larry -- and I think Bob would -- I'd be interested in hearing Bob's views on this. I think there are very -- there are risks associated with him taking this national security team. There's a risk that he and Hillary won't get along, that they'll squabble and there will be all sorts of leaks, there will be opposing camps.

And with regard to Bob Gates and Jim Jones, I think superb appointments, but, you know, he's a little bit -- just as they've linked their fortunes to him, he's linked their fortune -- his fortunes to them. He's a little bit held hostage.

If Bob Gates or Jim Jones and/or both were to decide to walk because they thought he was in retreat on various foreign policy issues, that would be devastating to him.

KING: Yes.

GERGEN: So I think that they -- there are some risks here. And he's going to have to -- it's going to require skillful management.

WOODWARD: Well, if...

KING: We'll get the comments of Bob Woodward on that point right after these words.

(COMMERCIAL BREAK)

KING: All right, Bob, what about David's point about a possible retreat here if Jones and Gates say good-bye?

WOODWARD: Well, David's quite right -- high risk, high reward. I think you have to look at the experience that these people have had. And it really is a very extraordinary group.

If I can take a minute to tell a story about General Jones, who's going to be the national security adviser. It involves the time he was the NATO commander -- the old Eisenhower post in Europe. And he was visiting one of the Eastern European countries as the NATO commander. And, of course, this country wanted to join NATO. And so they put on a military exercise for him. And it was marksmanship. And they had targets and then real soldiers between the targets. And the marksmen went around and shot and then they literally shot between their legs at the targets.

And the defense minister asked General Jones, what do you think?

And he kind of -- he was proud of it. And Jones had a way of not parading his own ego and just said, well, you need to train the way you're going to fight. And when you fight, you don't shoot between your legs.

(LAUGHTER)

WOODWARD: And that -- this isn't a circus. KING: That's funny.

WOODWARD: And I just want -- because you asked, I wanted to tell you, you know, think about how you're going to feel when one of those soldiers standing between the targets gets killed and you have to write a letter to the parents or the wife.

And then Jones said, we will come help you train the way you want to fight. And that happened and the country joined NATO.

KING: That's a great story.

David, you know all these folks.

How is Hillary going to do, David?

GERGEN: Well, I'm a bit of a contrarian on this. There are others -- David Broder, a colleague of Bob Woodward at "The Washington Post," and Tom Friedman have both have been quite skeptical about this Hillary appointment and think it's going to lead to trouble that there are these big egos involved.

But, you know, Larry, if you look back, the skeptics have been wrong about Hillary in the past. They thought, you know, she'll never campaign for Barack Obama. She's going to be -- have her nose put out (ph) and one thing and another.

And she was hugely loyal during the campaign -- made 70 some appearances, raised a lot of money for him, really gave a stirring speech at the convention for him.

People say that about Bill Clinton, you know, he's an uncontrollable force here. Well, look at what Bill Clinton has done. I mean he basically has put his whole career and -- on the line here, in terms of his current career, saying this -- it's her turn. And, you know, his -- every single speech -- I mean all three of us here on this show, you know, we all know what the speech circuit is like. We've been there and they've been there. They've been waving big bucks at Bill Clinton. He can make $400,000 in one speech. He won't be able to do that anymore and -- especially on foreign speeches.

And, you know, so I think that -- I think both Bill Clinton and Hillary Clinton have shown a lot of class here in the last few weeks.

KING: I want another political question.

Our gentlemen will remain with us.

Christiane Amanpour will be joining us.

We'll discuss some international things.

But, Bob, are you surprised that Obama did not go to Georgia?

That election is tomorrow. Every major Republican went. He did not go. Are you surprised?

WOODWARD: I'm not sure what the dynamic is there, but, you know, if I can just answer on the Hillary question, because I think it's really -- you know, the big thing that pulses through all of this is why -- why did she do it?

And I think the first thing, it tells you so much about Obama. It is an act of utter -- even extreme self-confidence to take somebody like Hillary and say, I want you to be my secretary of State.

The other thing is it tells you a lot about the Senate. The Senate -- the opportunity that Hillary had in the Senate was dreary at best. She didn't have a committee chairmanship, a subcommittee chairmanship, apparently not. That is -- I don't -- I didn't look up the number but her rank in seniority is, you know, 60, 70 or 80, somewhere in there. And it was going to be an awful time. And now she gets to be one of the stars. A big difference.

GERGEN: I agree with that.

KING: And we'll take a break and ask whether Mumbai can recover after last week's terror attacks and did they have to happen?

The very latest from India, next.

(COMMERCIAL BREAK)

KING: Welcome back.

CNN is reporting tonight that the United States warned the Indian government about a potential act by sea against Mumbai at least a month ago.

CNN's senior international correspondent, Nic Robertson, is on top of all of this -- Nic, what can you tell us?

NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, Indian officials, Larry, have been telling us they not only got one warning from the United States about the possibility of a sea-borne attack here, but two warnings. They did increase their security threat levels here. They did go on alert -- on the lookout for such an attack.

But then it appears at least the hotels and the city police did allow that -- did allow their guard to come down.

And we're seeing a backlash against that on the streets here. People are telling us they're frustrated with their politicians, frustrated with the government for not doing more, knowing this information, to provide for their security.

The government did get one thing right here. They picked up a satellite phone call about 40 kilometers out to sea about a week before the attack went off. They put out increased patrols. That does, according to Indian security officials here, it did seem to deter the attackers on that day. It did seem that they were headed to Mumbai on that day. It only put them off and they came back a week later.

And, of course, that's why people are angry. They let down. The security forces didn't protect them when they knew the attack could come -- Larry.

KING: Nic, what do we know about the attacker who is in custody?

Is he speaking?

ROBERTSON: He's speaking a lot, if all the intelligence leaks that we're getting are to believed. He's telling security officials here that he was a Pakistani, that he got training from an outlawed Pakistani terror group inside Pakistan, that the other nine attackers that came with him were also Pakistanis, had also had training in this -- in this terror camp.

And this seems to add up to the other information that the Indians officials are telling us here and that is that this e-mail of responsibility also was generated in Pakistan -- Larry.

KING: All right.

And, also, Condoleezza Rice is going to India, what, this month?

ROBERTSON: She'll be here in -- on Wednesday, which it is Tuesday morning here. She'll be here in just a day's time. There's a huge political concern here. Just today, the Indian foreign minister called in Pakistan's highest diplomat in the country, in India, to tell him that there are elements who are responsible for the attacks inside Pakistan and India expects Pakistan to do something about this.

The two countries have fought three wars in the past 60 years. And diplomats here are very, very concerned that they need to lower the sort of rhetoric and temperature of the debate between India and Pakistan right now. People on the streets here also expect their government to take tough action with Pakistan.

KING: All right.

That's CNN senior national -- or international correspondent, Nic Robertson.

We call on him often.

He is always, always on top of the scene.

CNN's Christiane Amanpour will join us after the break and we'll get her take on how the world will respond to a Secretary of State Clinton.

Don't go away.

(COMMERCIAL BREAK)

KING: We're back.

Bob Woodward and David Gergen remain with us.

We're joined now in New York by Christiane Amanpour, CNN's chief international correspondent.

Her CNN PRESENTS special is this Thursday night in this time slot -- "Scream Bloody Murder." It premiers at 9:00 p.m. Eastern on Thursday.

A quick question on that for Christiane and then we'll have our panel discuss the situation in India.

Susan Rice is going to be the ambassador to the U.N.. "The New York Times" said, Christiane, that she -- "She will bring dramatic action against genocide."

Your special deals with that. Tell us a bit about it.

CHRISTIAN AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: Well, it does. And, actually, I was interested in the speech she made today in accepting the nomination as ambassador or permanent representative to the U.N..

She ticked off a list of challenges, including "to end genocide." Of course, Barack Obama has used the word genocide as a challenge and as something that he will tackle, all throughout the campaign, in just about every public foreign policy speech.

So we are doing this documentary, which airs on Thursday. But it really is to coincide with the 60th anniversary of the Prevention of Genocide Convention at the U.N.. And we're looking at genocide from the Holocaust to today in Darfur and really doing it through the perspective of those few heroes who stood up, risked everything -- not just their lives, but their professions, their standing, their names -- to stand up at try to tell those who would listen to do something about it and to stop it. And of course people didn't listen and it went on.

KING: We anxiously await it. Bob Woodward, did the situation in India surprise you?

WOODWARD: Well, it's always a surprise. You never can tell where the next incident is going to be. I was interested in the report about the Indian government getting kind of a heads-up apparently from the U.S.

As best I can tell about that, it's the sort of generalized warning that doesn't give place, time or method. As you may recall, a month before 9/11, the CIA presented Bush with one of those top-secret presidential briefings in a headline on one item was bin Laden determined to strike in the United States.

So the question is, when you're in the preventing terrorism business, it's very difficult. You get these warnings, you hear things, but you rarely get that detail where you can stop something.

KING: David, were you shocked? GERGEN: I was very surprised, Larry. There have been a number of incidents, bombings in Mumbai and elsewhere, but especially in Mumbai in recent years.

What was surprising about this was that it was such a coordinated multipoint attack that was so well planned out in advance, 10 different locations, all at the same time, and just 10 gunmen were able to bring death, slaughter to about 170 or so. So that was surprising.

The other thing, Larry, was how troubling this was as a new development. Increasingly we have been thinking about Afghanistan being a big problem. Then it became Pakistan, then suddenly it was Afghanistan and Pakistan, sort of what Richard Holbrooke calls Afpak. And now we've got India increasingly wrapped into that regional trouble in south Asia.

And if we terrorism going back and forth in these three countries, two of them with nuclear weapons, in this roiling sea of terror and anxiety and unrest, that's very, very dangerous and it will have to be right at the top of what Hillary Clinton is looking at as secretary of state.

KING: Christiane, no one knows the international picture better than you. What did you make of this?

AMANPOUR: Well obviously breathtaking in its scope, and really very, very dangerous that we don't fully know who it was and why precisely. But obviously it has so many implications not just for India and Pakistan, the two nuclear rivals who as Nic said, and as we all know, have fought three wars since independent.

But because also it plays right to the heart of U.S. strategy. They want to -- the Americans want to get India and Pakistan to warm up relations so that Pakistan can move its troops away from its confrontation with India, move them towards the Afghan border and combat Taliban and al Qaeda.

So that's the big strategic picture, at least one of them to try to combat Taliban and al Qaeda in Afghanistan. So it's going to be extremely important for Condoleezza Rice right now, and obviously for the next administration to cool the temperature between India and Pakistan, and figure out some way that certainly Kashmir, which is the eternal irritant, has to be dealt with.

KING: Bob, doesn't this war on terror at times seem futile?

WOODWARD: No, I think it's necessary.

KING: No? I mean, it exists, but -- a terrorist was born today somewhere in the world.

WOODWARD: Yes, certainly, but look at -- we haven't had a terrorist attack, not a single one in this country since 9/11. If the day after 9/11 if you asked everyone do you think there will be another attack, the people that supposedly knew the most in the intelligence business said it is almost a certainty. So it is possible to do things to prevent it, and we're the walking, living case study of that.

KING: But it occurs somewhere in the world all the time.

WOODWARD: And I would not have -- if somebody had given me a list of 20 countries and said where is the next major terrorist incident going to be? I would not have picked India, quite frankly. So you never know, and you never know the technique. I mean Dave's summary there is exactly right. I mean, very coordinated. It had a smell of al Qaeda, somebody who knows something about really inflicting mass casualties.

KING: Thanks to all of you. We'll be calling you on again. We'll watch Christiane's -- don't forget her special Thursday night, 9 Eastern. Bob Woodward, David Gergen, Christiane Amanpour, we'll be right back with more. Don't go away.

(COMMERCIAL BREAK)

KING: All right, let's discuss today's event with four top panelists. In Washington, Paul Begala, Democratic strategist, CNN political contributor. In Stamford, Connecticut, Ari Fleischer, he was White House press secretary for President George W. Bush. Also now in Washington is Joe Lockhart, who was White House press secretary for President Bill Clinton. Good seeing Joe again. And in New York, Karen Hughes, former counselor to President George W. Bush. She served also as his undersecretary of state for public diplomacy and public affairs.

What did you make, Paul, of the group today?

PAUL BEGALA, CNN POLITICAL CONTRIBUTOR: Well, very, very impressive, Larry. You had both diplomatic star power and military firepower. You had Democrats and Republicans. By the way, you had men and women. You had as strong a team as I think any president's put together in the modern era. So far so good. You've got to say, this is a guy who, what, five, six years ago was an obscure state senator. And today, he looks as presidential as if he's been in office for one term already.

KING: Ari, what did you make of it?

ARI FLEISCHER, FORMER WHITE HOUSE PRESS SECRETARY: Well, I like that he's keeping Secretary Gates at the Pentagon, obviously. I think that's a smart move and a good move. The Hillary Clinton thing, Larry, it just befuddles me. Frankly, I have a hard time seeing how it's going to work. I'm all for politicians burying the hatchet, but this one is going to require a really deep hole. It was probably unnecessary for Barack Obama and unwise for Hillary Clinton to accept it, as I think it will turn out inevitably.

KING: Joe Lockhart, what's your view?

JOE LOCKHART, FORMER WHITE HOUSE PRESS SECRETARY: I think it says a lot about Barack Obama. If you look at the economic team and now the national security team, they've gotten a lot done quickly, quicker than any other transition.

I think is says a lot about Barack Obama. You have to give a lot of credit to John Podesta, my old boss, for getting this stuff done while no one was paying attention and allowing him to be ready.

I disagree with Ari. I think campaigns are about magnifying differences. Overall, there aren't a big different world view between Hillary Clinton and Barack Obama. And I think when she stood there today, she was saying "I'm on the team." You heard "team" over and over again. And I don't think that will be the problem.

KING: Karen Hughes, what do you think?

KAREN HUGHES, FORMER COUNSELOR, G.W. BUSH: Larry, it's a strong and capable team and I find it very reassuring. And I think it probably was designed for reassurance. But you have to think, who would have thought that President-elect Obama would have chosen as his three national -- chief national security officials individuals who all supported the war in Iraq?

But I think he needs Secretary Gates to bring about a successful conclusion to that war. He needs Hillary Clinton around the world. She's well-known, she's traveled the world as first lady, she became very well-known during the presidential campaign. And General Jones is known to our NATO allies, and very familiar with the very challenging situation in Afghanistan.

KING: While it was all togetherness today, group, let's not forget that Obama and Clinton did have some sharp foreign policy sniping during the campaign. Let's watch.

(BEGIN VIDEO CLIP)

SEN. HILLARY CLINTON (D), NEW YORK: I have said that Senator McCain will bring a lifetime of experience to the campaign. I will bring a lifetime of experience, and Senator Obama will bring a speech that he gave in 2002.

BARACK OBAMA, PRESIDENT-ELECT: If she wants to tout her experience by having visited countries, that's fine. I don't think that Madeleine Albright would think that Hillary Clinton was the face of foreign policy during the Clinton administration.

(END VIDEO CLIP)

KING: Paul, does that soothe easy?

BEGALA: Ah, those were the days. Yes, very easily. I actually do know that Ari wants or country to succeed, but these differences, as Joe pointed out, were actually pretty minor.

The big difference Karen points out was that Barack Obama, I think wisely, opposed the war from the beginning. Hillary Clinton six years ago supported it. But today, they both want a timely redeployment of troops out of Iraq. They both want to have more robust diplomacy, as I know something Karen worked on when she was at the State Department.

So Hillary, you heard her today, she said "I'm honored to serve this president." And let me tell you, Hillary wouldn't say that if Hillary didn't mean it. She could have told him no. She could have returned to the state she loves and the job she loves, but she took on this assignment, because I think she believes in the mission.

KING: Ari, why won't it work?

FLEISCHER: Well, this is the easy week, Larry. The week of appointments and the whole time leading up to January 20th, and even a little bit after January 20th, things will be easy, and they'll flow nicely for President-elect Obama.

But when the rubber hits the road and the foreign policy crises begin and she says I won't go through the national security adviser, I want to talk directly to the president, the national security adviser's nose will start to get out of joint. When she starts to get in the middle of intractable problems, when Israel tanks roll back into the West Bank after another intifada, God forbid, or another crisis hits around the world and she might not be able to solve it.

And the pressure starts to build, I think there will be inevitable sniping between the White House and State Department. That's the history of these two. You hope it won't happen, you hope they get along, but history suggests it's not that easy.

KING: We're going to take a break. We'll be right back. Go to our Web site for our Deepak Chopra Web exclusive, a controversial, provocative take on the life of Jesus Christ. It's only at CNN.com/LarryKing. And we'll be back with more politics in just 60 seconds.

(COMMERCIAL BREAK)

KING: Joe Lockhart, a couple of intriguing possibilities. Bill Clinton could be named to the Senate seat, or at the crux of it, Joe, why did he pick her?

LOCKHART: Listen, I -- I think, you know, Karen before said that Barack Obama needed General Jones and Gates. And I actually think politically, he didn't need them. He scored a decisive victory, he's way up in the polls, but I think the country needs them. We're in a terrible position in the world right now. Economic crisis, we're fighting two wars and I think he made the decision that this isn't about politics, this is about getting things done, and that's why he won the election. So that's why he picked her.

KING: Karen, you were at State. Will she be a good secretary of state?

HUGHES: I hope so. I think she certainly can be. I think she will work around the world to reach out to people. She certainly did that as first lady.

I do think it's important that our country listen to people around the world, listen to their concerns, and of course she started her campaign for the Senate on a listening tour. I tried to do that at the State Department and I tried to reach out to the world. Today is World AIDS Day. And it's a reminder that our country has been so -- under President Bush has been so engaged in this humanitarian effort.

I really think we need to emphasize that more as a country, to reach out to the rest of the world, talking about the health programs that we bring, the education programs that we bring and the economic opportunities. The good that our country does around the world. And I think Hillary Clinton will be very effective in helping to highlight that on behalf of our country.

KING: As first lady, she visited 85 countries. We'll be back with lots more right after this.

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KING: Noted swimmer Anderson Cooper is with us -- he will be hosting -- I saw that -- hosting the news at the news of "A.C. 360" at the top of the hour. What's up?

ANDERSON COOPER, CNN ANCHOR: I'm not going to quit my day job or my night job. Larry, tonight on "360" we're following breaking news, overseas market reacting to another massive sell-of sell-off, the Dow losing nearly 700 points on dismal economic words. And official word, the U.S. is in a recession and has been since last December. We'll give you all the details on that.

Also tonight, President-elect Obama unveiling his national security team, nominating Senator Hillary Clinton for secretary of state. We'll tell you what she and Bill Clinton gave up to get the post.

And Sarah Palin taking center stage on the campaign front while stumping for Georgia Senator Saxby Chambliss, reigniting talk about a Palin run at 2012. All that and more, Larry, at the top of the hour on "360."

KING: That's Anderson Cooper, "A.C. 360," 10 Eastern, 7 Pacific.

Back with our panel. By the way, Brad Pitt will be with us on Wednesday night and tomorrow night, Paul Krugman, the Nobel Prize winner in economics. Paul Krugman tomorrow, Brad Pitt on Wednesday.

Paul, Anderson just mentioned it. It's a political question. Why didn't Barack Obama go down to Georgia for that Senate race? Everybody else in the world, top politicians. Hillary went, all the major Republicans went. Why didn't he go?

BEGALA: I think a couple of things. First, he was there in the sense he cut an ad. He made a radio ad for Jim Martin, the Democratic candidate there.

Second, you know, look I think probably some of the his political advisers are worried about spending his political capital too early in a state that he did not carry, Georgia.

But also, third, he has been kind of busy, you know? This is even no ordinary transition. He's had to assemble his team so quickly and he's really done a first-rate job with that. And I think the politics will take care of itself, if he focuses most importantly on the job of president. So I understand why they made the decision he made.

KING: Ari, what kind of role do you think Joe Biden is going to have?

FLEISCHER: I think he'll have a good behind the scenes role. I think they're going to feel their way forward. Clearly, the two know each other from their time in the Senate. And I think he's going to be an all-around consular on a lot of issues. He'll be one of several voices at the table who will have the president's ear. And you'll just have to see what President-elect Obama wants him to specialize in, if anything. It just could be overall, all around.

KING: Joe, we discussed this earlier. A lot of progressive liberals are disappointed with what they look at as kind of status quo. How do you react to that?

LOCKHART: I think maybe there's a few progressive liberals. I think that there's a rare kind of excitement about this president- elect and what he's doing. And I think he's delivering so far. I agree with Ari that things get tougher once you get into the Oval Office and you have to actually make the decisions.

But I think that with the exception of a few lone voices, people across the political spectrum are excited. There is a sense of anticipation that we haven't seen for probably a generation in this country.

KING: Karen, with less than two months to go in office, your old boss, George W. Bush is working to frame a presidential legacy. In an interview with ABC News, watch.

(BEGIN VIDEO CLIP)

CHARLIE GIBSON, ABC NEWS ANCHOR: Let's talk a little bit about eight years as being president. What were you most unprepared for?

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Well, I think I was unprepared for war. In other words, I didn't campaign and say, please vote for me, I'll be able to handle an attack. In other words, I didn't anticipate war. Presidents -- one of the things about the modern presidency is that the unexpected will happen.

(END VIDEO CLIP)

KING: Karen, is this a change?

HUGHES: No, I don't see it as a change at all, Larry. In fact, one of the things that always struck me as a great irony is that we went through the entire presidential campaign, some 18 months or so, asked every question imaginable in the world and never once was the president asked about al Qaeda or Osama bin Laden.

And seven months into his presidency, we were attacked by them. It always struck me that that shows how unpredictable the nature of the presidency is. And I don't think any president, really, until you have to be the one to make that decision, until you have to be the one to send America's sons and daughters into harm's way that any president can really be prepared for the gravity of that situation.

KING: Paul, why is the transition going so well from one administration to another? Apparently going so well?

BEGALA: Well, first, President-elect Obama knows what he heck he's doing. He knows why he ran, he knows why he won and what he knows what he wants to do. And he's actually keeping his campaign promises. And that's a good start.

Second, he began early. Joe Lockhart mentioned his boss, my boss, John Podesta was the chief of staff for President Clinton, was recruited very early on, during the campaign, to set up a transition for Barack Obama. Senator McCain, to his credit, asked others to do the same for him, should he win.

Third, from all reports from Obama land, the Bush administration had been very helpful, with briefings and cooperation. I'm a professional Bush critic, but Karen and Ari's old boss is doing a really fine job of making sure -- you want two things actually and they're almost impossible to get both of them in equal measure. You know a smooth hand-off, but you also have to have a clean break.

In this case, at least the country wanted one. We wanted to switch parties. But I have to say both the president-elect and the current president have done a fine job on this.

KING: Those two things seem contradictory. We'll be back with more of this outstanding panel right after this.

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(BEGIN VIDEO CLIP)

OBAMA: I have known Hillary Clinton as a friend, a colleague, a source of counsel and a tough campaign opponent. She possesses extraordinary intelligence and a remarkable work ethic. I am proud that she will be our next secretary of state.

(END VIDEO CLIP)

KING: Ari Fleischer, earlier you praised the appointment of Robert Gates to remain as secretary of defense. First, does he have to be reconfirmed?

FLEISCHER: He does not, Larry.

KING: And, two, did that surprise you? And why do you like it so much? FLEISCHER: Well, there was a lot of buzz about it. I like it because the continuity at a time the nation is at war. And make no mistake, Barack Obama was right when he says that the cabinet will carry out his policies. That is their job to do so. So there will be changes, but the continuity is important.

One thing that is terribly important to our nation now especially is that President-elect Obama, President Obama needs to nominate and get confirmed within the first 30 days all his deputy secretaries and assistant secretaries particularly in the national security and homeland security areas.

With a Democratic Senate, I think that's likely to happen. But the delays and the dragging on of months is not good for the nation. We need to have that done quickly. I think President Obama will do that.

KING: Joe, what do you think of the Jones appointment?

LOCKHART: I think it's an outstanding appointment. He's got the exact kind of experience. One of the things I think today indicates is you need diversity of opinion. You know, I think one of the things we suffered through in the last eight years is discipline was overrated and a lot of differing opinions coming and you know, policy is hard to make. And, you know, sometimes it's ugly. Sometimes it's done in the newspapers. But I think the best ideas come from the smartest minds, intellectually slugging it out. And I think he's put together a team that can do that.

KING: Karen, does it appear to you this team is less ideological and more pragmatic?

HUGHES: I would say centrist and pragmatic which actually makes me feel very comfortable. You mentioned earlier that liberal progressives might not be too happy with some of the aspects of this. One of the things that I've been very concerned about for our country is I think it's very important that we, as we conclude the war in Iraq, that we bring it to a conclusion in victory rather than in defeat.

And I think, frankly, President-elect Obama owes a debt of gratitude to President Bush for making the decision at the height of the unpopularity of the war to support General Petraeus and the surge and to make a decision that was very difficult politically for him to make, but has now paved the way for President-elect Obama to have the hope of ending this war successfully and bringing our troops home in victory. And I think that's crucial for the future of our country.

KING: Paul, have any of these appointments thus far to this minute surprised you?

BEGALA: Oh, a lot of them. Look, he's keeping George Bush's defense secretary as Ari and Karen have mentioned. He's reached out to a four-star marine general who I'm pretty sure supported John McCain in the campaign. And of course, most astonishingly, his primary rival -- this was the longest and closest -- most closely contested primary in the modern era. And his ability to persuade all of them. These were all people who had really good lives going on, right? And he persuaded these folks to leave what they were doing, including the governor of Arizona, Janet Napolitano, Eric Holder has a very successful law practice. Susan Rice, going to the United Nations. His ability to take people who didn't need the job and persuade them to come and serve their country. Very impressive to me.

KING: Thank you all very much. Paul Begala, Ari Fleischer, Joe Lockhart, good to see Joe back with us, and Karen Hughes.

And before we go, some happy news. The LARRY KING LIVE family got a little bigger this weekend. Senior producer Lisa Durham gave birth to a daughter, Emily Ingrid (ph) early Sunday morning. Ingrid, by the way, is her grandmother's name. Emily is 7 pounds, 6 ounces of cuteness and mom and baby are doing fine. So is the new dad Tim and big brother Shawn. Congratulations, Lisa. Welcome to the world, Emily. We are glad to have you aboard.

Go to CNN.com/LarryKing for all the arrest. We've got my new "King's Things. It's my two cents. New copy today. And if you want to blog, you can catch that, too. It's time now for Anderson Cooper and "A.C. 360." Do two laps, Anderson.