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CNN LATE EDITION WITH WOLF BLITZER

Year in Review

Aired December 28, 2008 - 11:00   ET

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


WOLF BLITZER, HOST: This is LATE EDITION, the last word in Sunday talk.
(BEGIN VIDEOTAPE)

PRESIDENT-ELECT BARACK OBAMA: If there is anyone out there who still doubts that America is a place where all things are possible, tonight is your answer.

BLITZER (voice-over): An historic election and now a U.S. administration takes shape under extraordinary times. During a global economic crisis and the wars in Iraq and Afghanistan and other flash points around the world, we covered it all and reporting from St. Paul, Minnesota. Reporting from the Pepsi Center here in Denver -- this is LATE EDITION. From the first political contest in January.

MIKE HUCKABEE, FORMER PRESIDENTIAL CANDIDATE: I think we're going to end up better than a lot of people ever thought we would.

BLITZER: To election night in November, in-depth interviews.

SEN. HILLARY RODHAM CLINTON, D-N.Y.: It's very emotional.

BLITZER: With major newsmakers.

GOV. SARAH PALIN, R-ALASKA: I don't want to point fingers backwards and play the blame game.

BLITZER: Probing for answers.

SEN. JOHN MCCAIN, R-ARIZ.: By the way, you still ask the best and toughest questions, about more than anybody.

BLITZER: From the world's sharpest minds.

BILL GATES, ENTREPRENEUR: We're certainly going to have a fairly serious recession.

BLITZER: And we still managed to have a little fun along the way. Join me and the best political team on television as we look at 2008, a remarkable year in news and tell you what's in store for 2009.

(END VIDEOTAPE)

BLITZER: And welcome to LATE EDITION. I'm Wolf Blitzer in Washington. It's 11:00 a.m. here, 8:00 a.m. in Los Angeles, 7:00 p.m. in Baghdad. Wherever you're watching from around the world, thanks very much for joining us for this special LATE EDITION, a look back at 2008. And perhaps as all of us I think will agree, the most historic years. At least one of them, of our lives. And a look ahead to the challenges and opportunities in the year ahead. Without a doubt, the battle for the presidency was the number one story of 2008 and the two issues that dominated the campaign, the war in Iraq and the struggling economy will be President-elect Barack Obama's primary concerns in the years to come. Only days before the election, I spoke to candidate Obama about both these issues.

(BEGIN VIDEOTAPE)

OBAMA: The war in Iraq, we can achieve some significant savings. It's not going to come immediately. I have said I want a responsible drawdown. We're still going to have to reset our military. We're still going to have to deal with rising veterans' costs. Post-traumatic stress disorder, for example, I think has been under-diagnosed. We've got to make sure treatment is...

BLITZER: So the $12 billion the United States is spending a month right now on Iraq, that's going to go on at least for what, a year, a year-and-a-half?

OBAMA: My hope is, is that we draw down that money over time, it's drastically reduced. But the point is, is that we're not going to be able to take that $12 billion and suddenly automatically apply it all to domestic stuff.

We've got to take care of our troops. And we're still going to have expenditures in Afghanistan because we need to hunt down bin Laden and al Qaeda and put them finally out of business.

BLITZER: At a time of economic crisis, as it is right now, the worst since the Great Depression, people want to know who you'll be surrounded with on these important decisions.

Who do you think will be your secretary of the treasury?

(LAUGHTER)

OBAMA: Well, I am not going to make that kind of news, because I...

(CROSSTALK)

BLITZER: Give me an example of the folks that you're thinking about.

OBAMA: I haven't won yet. But I will tell you who is already part of my senior economic advisory group, because you've seen them. Paul Volcker, former Federal Reserve Board chairman; Larry Summers, former treasury of the -- secretary of the treasury; Warren Buffett, who has been a great friend and a great adviser and talked to me a lot during this recent economic crisis. Those are the kinds of people that I expect will surround me, will help me make decisions. But it's getting ahead of ourselves for me to identify particular cabinet posts. BLITZER: Will you raise the capital gains tax, the tax when people sell stocks or mutual funds, their 401(k)s?

OBAMA: Right.

BLITZER: Will you raise it from 15 percent, that capital gains tax?

OBAMA: I have said early in this campaign that it makes sense for us to go from 15 to 20 percent. Now, frankly, people aren't experiencing a lot of capital gains right now. People are having a lot of capital losses.

But, you know, I've talked to people like Warren Buffett and asked him, you know, will that modest increase in the capital gains tax have an impact on the real economy, on investment, on business growth?

And he assures me that's not going to be an impediment to capital formation and us being able to move forward on the economy. That's...

BLITZER: Will a middle class family be exempted from that increase in capital gains tax?

OBAMA: Well, what I've said is small businesses are going to be exempted and anybody who is making less than $250,000 a year. I've said they're not going to get their capital gains taxes increased. They're not going to get...

BLITZER: So they will be exempt?

OBAMA: They will be exempted from that, as well as any income tax increase, any payroll tax increase. My attitude is, is that middle class families need a tax cut. And 95 percent of American families and workers are going to get reduced taxes.

In fact, you know, we -- there was an article today in The New York Times that laid out in very stark terms the fact that I give much more tax relief to middle class families than John McCain does.

BLITZER: At a time of economic distress, is it wise to increase the corporate -- the corporate tax rate?

OBAMA: Well, we're not increasing the corporate tax rate.

BLITZER: I know. But there's some talk that you want to increase it. What, it's 35 percent right now. And you've talked about --

OBAMA: Where is that --

BLITZER: (INAUDIBLE)

OBAMA: Where is that talk coming from?

BLITZER: I don't know.

(LAUGHTER)

BLITZER: I mean, you tell me.

OBAMA: I have --

BLITZER: You want to keep it at 35 percent?

OBAMA: I have no plans for increasing the corporate tax rate. And, in fact, you can make an argument for lowering the corporate tax rate, but only if you, at the same time, close all of the corporate loopholes. The problem we have right now is on paper, we've got a high corporate tax rate. In actual terms, corporations aren't paying their fair share. We've got some of the laws --

BLITZER: Exxon Mobil will stay pay 35 percent, is that right?

OBAMA: Exxon Mobil will still pay 35 percent, although I've talked about previously the idea that we should have windfall profits tax similar to the one that Sarah Palin imposed on oil companies to benefit Alaska.

I'm going to give you five issues. You tell me which one of these five would be your top priority after you're inaugurated on January 20th, if you're inaugurated: health care reform, energy independence, a new tax code, including tax cuts for middle class, education spending, or comprehensive immigration reform?

OBAMA: Well...

BLITZER: Top priority?

OBAMA: ... top priorities may not be any of those five. It may be continuing to stabilize the financial system. We don't know yet what's going to happen in January.

And none of this can be accomplished if we continue to see a potential meltdown in the banking system or the financial system. So, that's priority number one, making sure that the plumbing works in our capitalist system.

Priority number two of the list that you have -- have put forward, I think, has to be energy independence. We have to seize this moment, because it's not just an energy independence issue; it's also a national security issue, and it's a jobs issue.

And we can create 5 million new green energy jobs with a serious program.

Priority number three would be health care reform. I think the time is right to do it.

Priority number four is making sure that we have tax cuts for the middle class as part of a broader tax reform effort.

Priority number five, I think, would be -- would be making sure that we have an education system that works for all children. One thing I want to make a point of, though. The tax cut that I talked about may be part of my priority number one, because I think that's going to be part of stabilizing the economy as a whole. I think we are going to need a second stimulus. One of my commitments is to make sure that that stimulus includes a tax cut for 95 percent of working Americans. That may be the first bill that I introduce.

(END VIDEOTAPE)

BLITZER: In the short time since the election, the economy has gone into a nose dive and indications are now that the president-elect will taking much more drastic actions in January than anyone thought necessary on Election Day. One of Barack Obama's first transition announcements was his economic team. Timothy Geithner, the president of the New York branch of the Federal Reserve. For Treasury secretary, former Treasury Secretary Lawrence Summers will head his national economic council. And New Mexico's Governor Bill Richardson is picked for commerce secretary.

So, how will President-elect Obama deal with what many are calling the worst economic crisis since the Great Depression? Right now I'm joined here in our Washington studio by our Democratic strategist James Carville and Republican strategist Ed Rollins is joining us from our New York studio. It has gone from bad to worse and might even get worse by the time he's inaugurated, James.

CARVILLE: You know, people will insist that 2008 had 366 days. I don't believe it. I think it had 36,066 days. This feels much longer than any year that I've ever experienced. And you're right, if we talk about $17 billion for the auto bailout, that money is going to be gone I guarantee you some time in February at most. And it's just not any good news out there and it will is going to be very interesting to see -- he has first class personality and it's going to be fascinating and interesting to see what policy follows the personnel. As of yet, we don't know that.

BLITZER: A lot of Republicans, I think it's fair to say, Ed, were reassured by this transition team on the economic front.

ROLLINS: There's no question. He put an all-star team together. He did it quicker than anybody has ever done it before. I think what Republicans have to be concerned about, is there now an opposition party? For the first time really with the exception of two years since 1980, they don't control any element of the government and are they going to be a positive opposition party in the sense of going with the president when it's in the best interest of the country or are they going to step up when they think that you have an ideologically in a way that's not in the best interest of the country. That's a whole new position for them and we'll have to see how they perform.

BLITZER: And you see Newt Gingrich, the former speaker, Ed, he made the point to his fellow Republicans, don't get crazy with all the nit-picking, if you will. Take a look at the big picture.

ROLLINS: Don't throw rocks against the window. I think the reality here is if you have serious objections and obviously this is going to be a whole new administration and a different ideological positioning. If you strenuously object to things, make your case in an objective way.

ROLLINS: If you don't and it's in the best interest of the country, support the president, support the country.

BLITZER: You know, it's interesting to recall. You remember this better than anyone, James, when Bill Clinton was elected at the end of '92, took office in '93, those first two years set the stage for a Republican comeback in that first mid-term election. How worried should the Obama team be right now about that possibility?

CARVILLE: You know, it's just, it's a different time. I remember we had a $17 billion stimulus package that didn't pass. It almost sounds, it's so different that it defies almost comprehension. Sure, they should be worried. I mean, you've had two big Democratic elections in a row. I don't think there is any doubt there will likely be some kind of pullback in 2010. If it's something on the scale of '94, I don't know that. They're going to be trying a lot of things. I think it would not be very good for the country if we had a big, it wouldn't be just bad for the Democrats, it would be bad for the country if we had a big, big pullback in 2010.

BLITZER: What is the biggest mistake that was made then that we have to avoid now?

CARVILLE: Well, I that they have avoided some of them in a sense that they paid a little more attention earlier to the White House staff than they did. I think that they've done some things. I think President Clinton had a pretty strong cabinet come out of the chute and I think they're going about, they have a crisis of the first magnitude. We had a bad economy then, but nothing like what we are experiencing now. So the public has got a lot more going to give to the Obama administration, as it well should, a lot more leeway and a lot more time to get things done.

BLITZER: And you heard the president-elect, Ed, say he has to prioritize. There are so many issues he'd like to deal with health care, like to deal with education, like to deal with immigration. But he's got to pick and choose really carefully his opening shots.

ROLLINS: Well if he does -- first of all, the economy is the overarching thing and he has got to finish this war. If we're sitting here two years, four years from now still debating troops in Afghanistan and troops in Iraq, then he's going to be attacked from his own left. I think the critical thing here is fix this economy, do everything you can. There's no short-term solutions, but I think getting himself on a straight and narrow path and the good plan the country understands and using those great communication skills that he has and tell the American public over and over again, this is what I'm doing and this is why I'm doing it and build support among them and I think he'll be OK.

BLITZER: OK guys, don't go away. Ed Rollins, James Carville, we have a lot more to talk about. Both of you will be coming back throughout our special LATE EDITION. We have a lot of ground to cover. Straight ahead, Senator John McCain talks about the foreign policy tests they're almost certain to face the United States in the year ahead. And later, very different views of the economy from four of the nation's richest men. LATE EDITION continues right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. JOSEPH I. LIEBERMAN, I-CONN.: I think John McCain is the best prepared to be the commander-in-chief. We need now, not just to take us to victory in the war on terrorism, but to better relate to countries around the world and some sense to rebuild bridges.

(END VIDEO CLIP)

BLITZER: Independent Senator Joe Lieberman back in April supporting his friend John McCain right here on LATE EDITION. During the campaign, Republicans brought up the issue of Barack Obama's relative lack of experience in foreign affairs, especially after Obama's running mate Joe Biden told an audience they should expect enemies would manufacturer a crisis to test the medal of the Democrat in his first six months. I spoke to Senator McCain about that and much more back in October.

(BEGIN VIDEOTAPE)

BLITZER: If you're elected president, of the United States, do you believe America's enemies, whether terrorists or hostile governments, would test you during the first six months of your presidency?

MCCAIN: I've already been tested. And I'm astonished and amazed to hear Senator Obama pre -- Senator Biden predict that the untried, untested President Obama will be tested by our enemies. And we may not agree -- his own backers may not agree.

Look, I've been tested. Senator Biden referred to the Cuban missile crisis. I was there. We came that close, as historians say, to a nuclear exchange.

Senator Biden expects his own running mate, expects Senator Obama to be tested in that way?

I mean that's a remarkable statement.

BLITZER: Because usually (INAUDIBLE)...

MCCAIN: That should concern all Americans.

BLITZER: ...they are tested early on by hostile powers out there.

MCCAIN: They know I've been tested. They know I've been tested. I've been tested many times.

BLITZER: The U.S. -- the Bush administration... MCCAIN: And the thing that probably may encourage them a little is that Senator Obama has been wrong. He was wrong about the surge in Iraq. He still fails to acknowledge that he was wrong. I mean remarkable.

He was wrong when he said the Georgians should show restraint. He was wrong when he said he would sit down across the table from Ahmadinejad, Chavez and the Castro brothers. He was wrong about those.

So I can understand why the American people might be concerned, particularly when his own running mate says he's going to be tested.

BLITZER: We have to wrap up the interview, but I...

MCCAIN: Sure.

BLITZER: I was reminded walking in, coming here to Manchester, June of 2007, I moderated one of the early Republican debates. You were up on the stage.

MCCAIN: You did a great job.

BLITZER: I don't know about that.

(LAUGHTER)

BLITZER: But there were eight or 10 of you Republican candidates.

And, at that point, it didn't look very good, if you remember, for John McCain. Your poll numbers were not very good. There were some formidable challengers.

MCCAIN: They were in the tank.

(LAUGHTER)

BLITZER: But you came back.

We only have a few days left to go right now. Can you come back from what the polls are saying and be elected on November 4?

MCCAIN: Sure, Wolf, and we will. And we are moving up rather significantly.

But I think we will be up late. It's going to be a tough race, and -- but we're working hard. And I am confident of victory. And, by the way, you still ask the best and toughest questions about -- more than anybody. And, so, I am glad to be on with you again.

(END VIDEOTAPE) BLITZER: That was back in October. No one will ever accuse John McCain of self-doubt, but let's return to his first point. Will the relatively young president Barack Obama, like John F. Kennedy before him, be tested when it comes to 2009?

Joining us to run through some of the most dangerous scenarios are two members of the best political team on television. Our senior political analyst Bill Schneider is in Los Angeles and our national political correspondent Jessica Yellin is here in Washington. I think it's fair to say the enemies of the United States will, in fact, test this new president. Don't you think, Bill?

SCHNEIDER: I'm pretty sure. Of course, one doesn't want to make pessimistic or dire predictions but it's often happened with new presidents, happened with Kennedy, with many new presidents, Reagan, that they get tested very early on, particularly with a relatively inexperienced president.

The rest of the world basically wants to answer this question. How tough is it he? How resolute is he? So we're going to see something very quickly. I remember in Reagan's case one of his first tests wasn't in foreign policy, it was the PATCO strike, the air traffic controllers and that is where he really demonstrated that he was a guy who had to be contended with.

BLITZER: Let's not forget Jessica, this President Bush in his first year had 9/11. That was a major test, as well.

YELLIN: And look, they know that they're going to be hit with surprises. That's one of the reasons he has such a fearsome national security team. I mean he really does have an impressive group of people around him. And Hillary Clinton, who can go around the world on his behalf while he's dealing with an economic crisis.

YELLIN: He staffed up well. And if I can say one other thing, Wolf, John McCain is right. People might not know this about you, but, during this election season, when they were watching you, you really are the best.

(LAUGHTER)

They don't know that you do those marathon session with no Teleprompter. You make us reporters look good. It was a pleasure.

BLITZER: Well, thank you very much. That's nice of you to say that.

You know, there's no doubt that the decision to keep Robert Gates at the Pentagon, a Republican, a holdover -- some had expected that, but I guess, in these trying times of national security emergencies out there, maybe -- maybe he had no choice, Bill.

SCHNEIDER: Well, I'm not sure he had no choice. He's the new president. But he decided that it was better to provide continuity, partly because he doesn't have a long record in international affairs, and that's an area where people had some questions about him.

He wanted to have continuity, but there was one commitment he made that, I think, will be very important. That was the commitment that really helped get him the nomination. It propelled him to victory over Senator Clinton. And that was the commitment to withdraw American troops in 16 months.

I think his supporters, his constituency, will hold him to that, will expect to see that, unless, of course, there is some dramatic change in the situation which involves a threat to the United States.

But, under any other circumstances, I think that's a commitment he has to keep.

BLITZER: And that commitment was involving combat troops. So there is a little bit of wiggle room there, combat versus noncombat forces.

I'm going to have both of you stand by, because we're going to continue this conversation throughout this special "Late Edition."

And as we hear from all sides, everyone from Hillary Clinton and Condoleezza Rice to those veteran political analysts Magic Johnson and Charles Barkley -- they're are coming up. But in just a moment, David Gergen and Ed Rollins will look back and look ahead. What's going to happen in these first 100 days of an Obama administration?

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. HARRY REID, D-NEV.: I think that, if we do our job -- that is, Obama and the Congress -- we do our job -- how do we do our job? By letting the American people know that this was not a mandate for the Democratic Party, not a mandate for some ideology, but a mandate to stop the divisiveness and to roll up our sleeves and get some work done.

(END VIDEO CLIP)

BLITZER: The Senate majority leader, Harry Reid, here on "Late Edition," just after Barack Obama's historic victory.

But are Washington politicians really capable of rolling up their sleeves and getting some real work done?

Let's take a hard look at what we can expect in the first 100 days of an Obama administration, with two CNN contributors. Once again, Republican strategist Ed Rollins is joining us from New York; and in Boston, our senior political analyst, David Gergen, who has been through this before, as an adviser to four presidents.

What is realistic, Ed, in these first 100 days?

ROLLINS: Well, first of all, he inherits a budget that he has to put his own imprint on, that will probably have a trillion dollar deficit. And he's got to do that right off the bat. That's got to be up there in a few weeks. And that, sort of, sets a tone.

Secondly, I think that he's made a lot of commitments, in the course of the campaign. Some sort of a comprehensive health care -- certainly with Senator Kennedy's closing days in the Senate, I think that's going to be, sort of, a hallmark that he will want to move forward.

He made a commitment for the card check to the unions in the course of the campaign.

And, probably, the most difficult one, right now, is what does he do to basically give that middle, lower-income tax cut?

That's not been detailed out. And, certainly, in a time of economic crisis, how do you offset the revenue on that?

And I think those are three big things, and a lot of other little things that he'll have to deal with immediately.

BLITZER: Yes. And I think he's also made it clear, David, that he wants to hit the ground running, on January 20th, with a new economic stimulus package that he's hoping the Democratic majority in the House and the Senate can get passed, even before he's sworn in.

GERGEN: Absolutely. These 100 days don't start on January 20th, for Barack Obama. They really start on January 6th, when Congress comes back. And he hopes to have a package in front of them, immediately, for a huge stimulus package.

And I think what we're going to see, Wolf, is the first 100 days will not bring the kind of legislative enactments we saw in, say, Roosevelt's first 100 days, but they will bring the most fateful series of decisions by any president in a long, long time, the decisions that could well affect the next 20 years.

On the economic front alone, just look at this, the stimulus package nearly $800 billion. He's got to do -- to figure out what he's going to do about the automobile industry in the first 100 days.

He's got to revisit the financial package for the financial industry, because that's running out of money and he's got to restart that in the first 100 days.

He's got to figure out what he's going to do about housing and how he's going to stimulate the housing market and save people in the homes today.

And, finally, as Ed Rollins pointed out, he's got to come forward with a budget with a trillion-dollar hole in it.

So that's a lot of work, right there, and doesn't get to health care and the energy and the like. He has a huge, huge agenda ahead of him.

BLITZER: You know, I'm getting dizzy just thinking about it, Ed, because it is enormous. And, remember, there are two wars out there, in Iraq and Afghanistan. There's potential for more. There's tension between India and Pakistan. And then there's always the threat of Al Qaida and international terrorism.

ROLLINS: One of the positive things that he has done, I think, is that, even though it's a commitment he's made to get our troops out of Iraq within an 18-month period, he is going to make an investment, a serious investment in Afghanistan. And I think it's a precarious investment. A lot of people are very concerned about that. You put 30,000 more troops into Afghanistan; you don't turn around and pull them out in the next month or two. It's a much more difficult battlefield. And I think, to a certain extent, that's a danger zone.

But, more important, I think, long term, is he understands that the $12 billion that we're spending on our troops and our wars isn't going to be able to be shifted to domestic policy.

And I would doubt very seriously if, any time in the next four years, taking care of the health care, rebuilding the troops, rebuilding the equipment that's been used up, that money is pretty much going to be committed. And he's going to have to find other alternative sources of revenue to do other things.

BLITZER: All right. David and Ed are not going anywhere. They're staying with us throughout this special "Late Edition." We'll be right back with you guys.

Also coming up, we're going to hear from the Alaska governor, Sarah Palin, without a doubt, one of the most intriguing political figures of 2008.

And in just a moment, we'll look at the men and women who will soon be dealing with massive problems, Barack Obama's Cabinet choices. Are they up to the task? We'll ask the best political team on television. "Late Edition" continues after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. JOSEPH R. BIDEN JR., D-DEL.: I'm not looking for a job and, so, I'm going to help whoever the nominee is and they both know that. Immediately when I get out of the race in Iowa, they each asked me almost the same day to join them. I told them I would not. I would not endorse either one. I kept that commitment and I'm helping them when they call me.

BLITZER: You seem to have a pretty good job right now as chairman of the Foreign Relations Committee.

BIDEN: I do, it's like the best job.

(END VIDEO CLIP)

BLITZER: That was Senator Joe Biden right after he abandoned his run for the presidency back in April. He may not have been looking for a new job, but he got one anyway. I think it's fair to say that Vice President Biden will play a major role in the Obama cabinet. The cabinet and an inner circle that was chosen in record time and many of whom joined us right here on LATE EDITION.

(BEGIN VIDEOTAPE) RAHM EMANUEL, OBAMA CHIEF OF STAFF: You have to fundamentally change the economic policy of this country, which is what Barack Obama offers. One, that if you work, you have health care. Two, that we have to have a universal saving strategy. Three, you have to build a hybrid economy that strengthens our alternative energy and four, that we have a tax cut to reward the middle class for the hard work that they do to strengthen this economy.

BILL RICHARDSON, COMMERCE SECRETARY DESIGNATE: Under Barack Obama's tax plan for the American people, 85 percent of working families of Americans get a tax cut under Senator Obama's plan, about $1,000, middle class families. He also has rebates to help them with high gas prices, about $1,000 per family. Senator Obama has said he's going to make a major effort to balance a budget. He's going to make a major effort to equalize our tax system. He is going to create jobs by infrastructure, by roads and highways and mass transit to put people to work right away. And find ways that we have a real tax break for the middle class. JANET NAPOLITANO, HOMELAND SECURITY SECRETARY DESIGNATE: I'm the governor who deals with illegal immigration more than any governor in the country and what Senator Obama's real immigration platform is is one that recognizes the necessity for comprehensive immigration reform. And you can't have immigration reform unless you, "A" secure the border and, "B" enforce the law with employers who consistently and intentionally hire illegal labor.

That's creating this huge demand for what is going on in our country. And you have to have an immigration plan that deals with that and sustains it over time. Not just a surge mentality during an election year, but one that is a real immigration system, working from the border, inward to the interior of the country. And I believe that Senator Obama's plan is very realistic and very positive in that regard.

(END VIDEOTAPE)

BLITZER: OK, lots of confident talk there from the inner circle of the incoming Obama team. Here's the question, can they deliver? Joining us, once again, our CNN political contributors. Tara Wall is the deputy editorial page editor at the "Washington Times." And Democratic strategist James Carville. The expectations for Barack Obama, James, are enormous right now.

CARVILLE: I think that he's going to do a very good job of handing the country a real dose of reality. And I think what every American that I talked to is afraid of, is that look, these are very talented people. They are very smart people. They're going to do a lot of things that are very smart. I just hope that they work, that we're not so much debt and so much leverage that somehow or another we can't dig ourselves out. I mean at some point, we will. We sure want to see it faster. I detect -- Tara and I were having a conversation, I talked to my sister and her and her husband down in Baton Rouge and hard core Republicans. And they say, we're praying for this president every night here. I mean, people are. People are scared out there.

BLITZER: I think it's true, a lot of Republicans are really hoping he can get something done because the economic distress out there is enormous.

WALL: And whether they voted for him or not, I think everyone wants to see him succeed regardless because this is the country we're talking about and the running of the country and I think there are those who hope and believe that he will do the right thing. There are others who just hope he will do the right thing.

But I think if you see, you know, essentially most of the disagreements or the criticisms about his cabinet are coming more from Democrats than Republicans at this point. At least for now, I think there is a consensus that he has made some very strong, decisive, good decisions early on as it relates to his cabinet. Obviously bipartisan as we've noted but I think again, only time will tell what that amounts to and how that fleshes out.

I think that what you are seeing too though is I said this after the election, he has to now, he won, he's a Democrat, but he now has to be president for all Americans and that means, essentially, he's realizing that he may run on -- may have run on a Democrat platform, but he also has realized he has to be more centrist because you have to kind of govern from the center and that's why you're starting to see this bipartisan network he's created.

CARVILLE: Nothing matters if they can't create some demand out there. It doesn't matter if you're liberal or conservative or anything and we can argue about down the line or we can argue about some of these regulations that people get passionate by. But if there's no demand in this economy, if people are not buying anything and the hope is that there's no business demand or there's no consumer demand, that the government can come in and conservatives and everything, that's what they're going to try. Pray every night that this works and let Tara and I get back and we can argue about stem cell regulations. We can argue about labor regulations. We can argue about some of these things. But until there's some demand is created in this economy.

BLITZER: Because there's no doubt that as bad as the economy is, Tara, right now, it could get a whole lot worse.

WALL: Well by all accounts, most experts say it will probably get worse before it gets better. I think what Obama has done by these early decisions and these decisive decisions is like James said, try to instill a sense of confidence or a feeling that, look, there's hope, things will get better. It may be tough for a while but I want you to know I'm on it, I'm selecting people. I'm going to be on the job on day one and instilling back into Americans a sense of confidence that will restore that notion of we got it, we got to feel like we have to get back out there.

BLITZER: And so much of this is psychological. He is a great communicator.

CARVILLE: He's a pro communicator and people like the idea that he's talking to Paul Volcker or talking to be Warren Buffet, if you will, or Larry Summers or Tim Geithner and all these kinds of people around him. But again, and we're holding our breath here because somebody's got to go out and start creating some demand in this economy to get it going and that's our great fear right now.

BLITZER: Because without doubt, it's going to get a whole lot worse and we don't even dare thing about the possibilities. All right, guys, don't go away. We are going to continue this conversation. Much more ahead coming up on our special LATE EDITION. The GOP governor of California, Arnold Schwarzenegger talks about his willingness to work with Barack Obama. And next, how the economy looks to thwart people with a whole lot to lose. LATE EDITION continues after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SECRETARY OF THE TREASURY HENRY M. PAULSON JR.: We're making progress, but it's not going to come in a straight line. There are going to be some bumps in the road.

(END VIDEO CLIP)

BLITZER: And welcome back to our special "Late Edition."

In July the Treasury secretary, Henry Paulson, was certainly not alone in thinking that there were only some bumps in the road ahead for the economy. Virtually no one was prepared for the fiscal meltdown that would begin only a few weeks later.

This fall I discussed the dangers ahead for the economy with four veteran observers with one thing in common. They all have billions of dollars at stake.

(BEGIN VIDEOTAPE)

BLITZER: How worried are you about the U.S. economy, right now?

BILL GATES, PHILANTHROPIST, BILL AND MELINDA GATES FOUNDATION, AND CO-FOUNDER OF MICROSOFT: Well, we're in unchartered territory. And we're certainly going to have a fairly serious recession. I think the right things are being discussed about stimulus and, you know, I'm sure we'll come out of it. But it -- it could be a tough period.

BLITZER: What worries you the most?

GATES: Well, a recession has a way of building on itself. And as people cut back on spending, that means jobs get cut back. And the federal government is one of the few sources that can be countercyclical.

Figuring out how to do that in a way so that the incentive structure is right, and so you come out of it the right way -- and it's a challenge because it's a global downturn.

BLITZER: What was the crucial turning point, in your opinion, that resulted in this collapse, if you want to call it that, of the economy?

GATES: Well, collapse is a little strong, fortunately.

BLITZER: But it's arguably the worst crisis since the Great Depression.

GATES: Well, there are various economic statistics that -- some of them should cause concern. You know, we had a credit expansion, over a 50-year period. And so, more than looking at the particular things that (inaudible) first, you have to say, OK, how far out do we get, in terms of the consumer's balance sheet?

And what is it going to take to bring that back in line?

You know, clearly, we'll have a few years where consumers are spending less and their savings picture gets to be far more healthy. The U.S. was actually at a much higher level of consumption than any of the other rich economies.

BLITZER: So, if you were going to give Barack Obama, right now, one piece of advice, in dealing with the immediate economic crisis, what would that be?

GATES: Well, clearly, we need a stimulus that doesn't undermine the incentives for businesses to be careful about their spending, in making those investments.

You know, the key point I'd make is that, in addition to that stimulus, you've got to fund the kind of scientific work and educational investments that can really have us be a much better country as we emerge from the recession.

(END VIDEOTAPE)

(BEGIN VIDEOTAPE)

BLITZER: Who's to blame, Ted, for this current economic crisis in the United States?

TED TURNER, FOUNDER, CNN: All of us. Because we spent more money, for years, than we made. And you can do that for a while, but you can't do it forever. And, all of a sudden, it's come time to pay the piper.

We -- George Soros, on CNN, a couple weeks ago, said the average American, over the past five years, has spent 6 percent more than they made, per year.

And that just is sustainable. We're going to have to pay down our debt, some.

BLITZER: Can Barack Obama, as the incoming president -- can he turn this around after January 20th, or is that overly raising expectations?

TURNER: I -- you know, I don't think that just -- that, unless there's something I don't know about, that there's not going to be a miracle solution to this. It took us a long time to get into this mess and I don't know how long it will take us to get out. I hope it's short.

I mean, like everybody else, I'm an optimist. But -- but I think, you know, it's going to be a really tough job. And I think he's probably as good as anybody to -- to lead us out.

(END VIDEOTAPE)

(BEGIN VIDEOTAPE)

BLITZER: How worried are you about the financial crisis and its impact on New York City, given the fact that so much of the financial world is based in New York City, whether on Wall Street or elsewhere.

Are you looking at a scenario of New York as it was in the 70s, when, you know, there was that headline, that famous headline in the New York Daily News, Ford to New York, something along the lines of "Drop Dead?"

MAYOR MICHAEL BLOOMBERG, I-NEW YORK CITY: Well, we're in much better shape than that, thank you. I think that we are going to have some tough times. We're going to have to look around for alternative revenue sources. We're going to have to look around for ways to do things more efficiently with less.

But we are not going to go back to the 70s. We're not going to walk away from the safe streets and clean streets. We're not going to walk away from improving public education and helping our cultural institutions.

That was the mistake made back then. And New Yorkers, Wolf, if you think about it, we are a highly taxed city, but New Yorkers pay those taxes and they pay it because they like what it buys them. It buys them a great standard of living, a quality of life and future for their kids and grandchildren, and that's just too important.

(END VIDEOTAPE)

(BEGIN VIDEOTAPE)

BLITZER: I want you to, in your Donald Trump style, some quick analysis, but give me some grades for these people, how they've done in dealing with the economic crisis that we're all going through right now.

OK, grades? A is the best; F is failing. President Bush?

DONALD TRUMP: Well, I would certainly not give him an F, and I guess you can't give you him an A because, unfortunately, look at the mess we're in.

But I think he's been dealing with the crisis pretty well. And he's got some very smart people -- I'm sure Paulson's going to be on your list -- in Paulson and Ben B., as the expression goes. I mean, they're pretty smart people. They're very smart people. So, I would give him a B.

BLITZER: Really?

TRUMP: Aren't you shocked to hear me say that?

BLITZER: Yes, I am pretty surprised.

TRUMP: You're talking about dealing with the crisis. You're not talking about getting us into the crisis.

BLITZER: No...

TRUMP: You're talking about dealing with it. So I'd give him a B.

BLITZER: ... how they've dealt with this financial crisis.

TRUMP: I would give him a B.

BLITZER: All right, Henry Paulson?

TRUMP: I would give him an A.

BLITZER: Really?

TRUMP: I would give him an A. And I know a lot of people are saying, oh, this and that. But the fact is, he came into a mess. He didn't create the mess, and he's helping us to...

BLITZER: So if Obama were elected, you would advise him to keep Paulson on the job?

TRUMP: I wouldn't, necessarily. He's got his own people. And he's got some very, very smart people with him. But I think, Paulson, I would give an A, because he really took something very strong.

Now, you could say the U.K. came up with the first plan, but Paulson's the one that got us there in the first place, in terms of the concept.

(END VIDEOTAPE)

BLITZER: So can the Obama administration keep the current recession from deepening into a depression in 2009?

We have a lot more on that in the second hour of this special year-end "Late Edition." But straight ahead, we'll talk to two of CNN's top political analysts about the role Republicans will play in the new administration. It all sound pretty good right now, but can they really all just get along?

We'll be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: We wanted to make sure that he is the successful, because then the country's successful. It has absolutely nothing to do with politics. I'm all about getting the job done, whatever party it is. Let's work together, Democrats and Republicans, and then a lot can be accomplished.

(END VIDEO CLIP)

BLITZER: Welcome back to LATE EDITION. I'm Wolf Blitzer reporting from Washington. President-elect Obama has picked two Republicans for his cabinet, former Congressman Ray Lahood from Illinois will head the transportation department. And Robert Gates will stay on as the secretary of defense. So should we expect a full- blown bipartisan partnership in 2009? Or will things quickly get back to politics as usual?

Once again, we're joined by Bill Schneider and Jessica Yellin, two of the best political team on television. What's the answer, Bill?

SCHNEIDER: Well, the answer is the Republicans can't really impose anything like their own agenda. They had a big setback in the election. They are a very weak minority in both the House and Senate, but they can stop things if they choose. My guess is under the crisis circumstances we're facing now, Republicans don't want to be seen as the party of "no." I don't think they're going to stop things. I think they're going to try to cooperate with his administration. They're going to try to make deals where they can. They're going to try to influence Obama's policy, but this president comes in with an enormous amount of good will as well as a crisis atmosphere that Republicans acknowledge.

BLITZER: Jessica, you spent a lot of time covering this transition in Chicago. Are they expecting a honeymoon of sorts?

YELLIN: They expect a honeymoon, certainly, and they do agree with what Bill says, that Congress knows they have to get along on these issues. But I think that you'll see the Republicans, especially the Republicans in Congress, stake out key issues within the larger economic framework to stand their ground and stake out who they will be going into the next election. So, they won't get an easy free ride from the Republican Party. Obama will have to contend with some resistance.

BLITZER: Because even in their last few weeks, as you know, Bill, we've seen the Republican leadership in the House and Senate stand up to the Republican president of the United States, so I would assume they would be more than happy to stand up to a Democratic president of the United States.

SCHNEIDER: That's right. They really have no love lost for George Bush. They figure he's led them into the wilderness. And they do believe, most Republicans do believe, that they have to stand up for conservative principles, which are not very popular right now.

The problem is they really don't have a lot of power. The moment is not with them. Their ideas have been tried and tested and really have failed. And I think they acknowledge that. So they're waiting for an opportune moment. They have to choose the moments where they want to oppose President Obama when he becomes president. They have to choose the opportune moments. They just can't blindly oppose whatever he says and does.

BLITZER: I guess we get an early sense of some direction on the Republican front, Jessica, when the confirmation hearings begin in January for President-elect Obama's nominees.

YELLIN: And I know on Capitol Hill they're expecting Holder, the attorney general nominee's hearing to be particularly contentious. Of course we'll give Hillary Clinton a hard time a little bit because she's the big show.

So, there will be some fiery back and forth over that to put up the show, but I think that this cabinet will be confirmed to the end. And he'll be able to work with this Congress, but they will have to take these key issues, and maybe it's a little recapping his spending, his stimulus, resisting a big ticket on that. Because as Bill says, we are the party of conservatives, we're getting back to who we were before George Bush.

BLITZER: And there's no doubt that in terms of confirmation, the Democrats will have in the Senate, Bill, at least 58 Democrats. There could be 59 if Norm Coleman loses to Al Franken in Minnesota, and that's very much still up main the air right now.

But it would be an enormous challenge for the Republicans to try to get any of these nominees rejected given that lopsided majority that the Democrats have.

SCHNEIDER: That's right. Normally it's a majority vote to confirm these nominees. They would have to stage a filibuster really to stop a couple of them. I don't think they'll do that unless more damaging information comes out. As Jessica said, the confirmation hearing of Eric Holder, Hillary Clinton, are likely to be the most contentious. But I don't think -- again, I don't think Republicans at a time of dire national emergency are going to want to be seen as standing in the president-elect's way at the very beginning of this administration. BLITZER: Especially two Republicans who are from Maine, Olympia Snowe and Susan Collins. They could clearly prevent the filibuster from going forward if they want to. Already, guys. Don't go away. We're going to continue much more here on our special year-end LATE EDITION.

A very personal interview with Senator Hillary Clinton. Then, Secretary of State Condoleezza Rice talks about what will be the enduring legacy of the Bush administration. And Barack Obama's cabinet will have more basketball players than any in history. We'll get analysis from some of the NBA's all-time stars. Stay with us, we'll be right back. (COMMERCIAL BREAK)

BLITZER: This is LATE EDITION, the last word in Sunday talk.

(BEGIN VIDEOTAPE)

OBAMA: If there is anyone out there who still doubts that America is a place where all things are possible, tonight is your answer.

BLITZER: An historic election. And now a U.S. administration takes shape under extraordinary times.

BLITZER: During a global economic crisis and the wars in Iraq and Afghanistan and other flash points around the world, we covered it all and reporting from St. Paul, Minnesota. Reporting from the Pepsi Center here in Denver -- this is LATE EDITION. From the first political contest in January.

HUCKABEE: I think we're going to end up better than a lot of people ever thought we would.

BLITZER: To election night in November, in-depth interviews.

CLINTON: It's very emotional.

BLITZER: With major newsmakers.

PALIN: I don't want to point fingers backwards and play the blame game.

BLITZER: Probing for answers.

MCCAIN: By the way, you still ask the best and toughest questions, about more than anybody.

BLITZER: From the world's sharpest minds.

GATES: We're certainly going to have a fairly serious recession.

BLITZER: And we still managed to have a little fun along the way. Join me and the best political team on television as we look at 2008, a remarkable year in news and tell you what's in store for 2009.

(END VIDEOTAPE)

BLITZER: And welcome back to our special LATE EDITION. I'm Wolf Blitzer in Washington, and we're looking at the people and events of 2008 and discussing what to expect in the year ahead. For most of 2008, the top story was the pitched battle for the White House and a conflict between some very different views on foreign policy.

In May, I spoke about that with the candidate who would become Secretary of State Designate Senator Hillary Clinton.

(BEGIN VIDEOTAPE)

BLITZER: When it comes to the war in Iraq, another issue on the minds of Americans right now, you've criticized Senator McCain for suggesting U.S. troops could stay there perhaps for 100 years. But you yourself back in 2005 suggested, you know what? If there's a peaceful environment like along the lines of Korea or Germany or Okinawa, maybe it wouldn't be that bad for a long-term U.S. military presence in that kind of environment. Is the criticism of Senator McCain, who's made similar comments, is it warranted? CLINTON: Well, I think it is for this reason, that there isn't any significant milestone that the Iraqi government has met. It's a very different situation than Germany or Korea. BLITZER: But if they were to meet those milestones and if there were a new peaceful environment? CLINTON: But Wolf, I don't think though -- I think you're confusing kind of cause and effect. I don't believe that they will seriously attempt to meet those milestones until they are absolutely convinced we are going to withdraw. I believe that is the best way to focus their attention. Everything we've tried, including the most recent effort with the surge, has not resulted in the gains that were either hoped for or forecasted. I believe we've got to bring our troops home. There are continuing missions -- guarding our embassy, Special Forces perhaps dealing with al Qaeda -- but that's a very different scenario than what we have today. Therefore, I would begin to bring our troops home. BLITZER: The Israelis are celebrating their 60th anniversary right now as an independent state. Here is what McCain said about Barack Obama. And I want to get your reaction. He said, "I think" -- this is McCain -- "I think it's very clear who Hamas wants to be the next president of the United States. I think that people should understand that I will be Hamas' worst nightmare. If Senator Obama is favored by Hamas, I think people can make judgments accordingly." McCain was referring to a statement by the North American spokesman for Hamas endorsing, in effect, Barack Obama. Is McCain right? CLINTON: No, I think that that's really, you know, just an overstatement, an exaggeration of any kind of, you know, political meaning. And I don't think that anybody should take that seriously. BLITZER: But you have confidence in Barack Obama as president would be a strong supporter of Israel? CLINTON: I would -- yes, I do. I would believe that that would be the policy of the United States, and it's been our policy for 60 years. BLITZER: Because the criticism he gets from McCain and his supporters -- McCain's supporters -- is that he would be willing to meet unconditionally with the leader of Iran, Mahmoud Ahmadinejad, and given the statements that Ahmadinejad has made about destroying Israel, that doesn't -- that doesn't reassure, let's say, Israel. CLINTON: Well, I think that's a different issue. You know, I objected when that statement was made back in an early debate, because I don't believe that a United States president should commit to meet unconditionally with leaders of rogue nations. That doesn't mean you don't eventually meet with them under appropriate circumstances, but not without conditions.

(END VIDEOTAPE)

BLITZER: Even with the economy clearly priority number one for the Obama administration, all the foreign policy issues you just heard about any plenty more are still front and center.

Let's take a closer look right now at the new foreign policy team. Hillary Clinton for secretary of state. Retired U.S. Marine Corps Commandant General James Jones will be the national security adviser. And Republican Robert Gates has agreed to stay on as the secretary of defense. Certainly, some would call this a team of rivals. Joining us now to discuss all of this and more, once again, two of CNN's political contributors, Tara Wall of the "Washington Times," and Democratic strategist James Carville. Were you surprised when he reached out to your friend, Hillary Clinton, and invited her to join the cabinet? CARVILLE: A little bit, yeah.

BLITZER: What went through your mind at that time when you heard that that was even in the realm of possibility?

CARVILLE: You know what? What went through my mind is, this is a hell of an idea. This is a pretty good idea. I said it must be Rahm's hand at work but I didn't really think of it. And the first time I heard of it was probably in a conversation and somebody brought it up and I went, hey, you know what? That makes a lot of sense. I wish I would have thought of that. With General Jones, I did, I looked it up in April of this year, I suggested that he should be the Democratic vice presidential nominee.

BLITZER: Really?

CARVILLE: So, I can take some credit for that, but I wish I would have been -- yeah, when first I heard about Senator Clinton being secretary of state, I said wow, that's a pretty good idea.

BLITZER: Republicans reacted generally very favorably, Tara, to that national security team, including Hillary Clinton.

WALL: Well, because, you know, I think that throughout the campaign, conservative Republicans said that, you know, Barack Obama was a novice in foreign affairs, and that essentially there were people who supported Hillary Clinton for that very reason, not that she had so much experience, but she is recognized and respected around the world.

She did draw the distinction between herself and Barack Obama on the issue and where she would draw the line, and she had a grasp and an understanding that some believe was stronger than what he had. So I think with Robert Gates, it was, you know, look there are certain concessions Barack Obama has realized he's had to make and he's going to have to make in moving forward.

He said on day one he wants to end the war. Day one as president. He wants to put an end to the war. I think he's had to come off of that somewhat in realizing that given the surge strategy is working, given the man in charge right now, it may be a year, may be two years, I don't know how long he keeps Robert Gates on, but I think he recognizes right now he cannot end that consistency with the troops on the ground, with the challenges that are facing in Afghanistan and with what's going on in Iraq. Robert Gates said we still have our foot on the neck of al Qaeda, and I think given what's happened with Mumbai, that that is an indication that you can't lose sight of what we're dealing with, these terrorists here.

BLITZER: Where, James, where does Joe Biden fit into all of this? The outgoing chairman of the Senate Foreign Relations Committee, the incoming vice president.

CARVILLE: I think when history records this, I think the new vice president is going to be a real hero. And the reason I say that is you would normally expect the chairman of the Senate Foreign Relations Committee to really prefer to have a weak secretary of state, which is something that's been the norm in modern American government.

But he understands that he wanted to return some promises to the State Department. He actually fought very hard to have Senator Clinton be appointed secretary of state.

I think he -- you don't hear a lot from him. I think he was very effective in the campaign. I think he really helped Senator Obama in a lot of states. He ended up winning big anyway, but we didn't know that when it started. And he -- I think he showed himself to be a pretty big person in all of this. And I think it's pretty secure in about what he's going about. I would like love to see him -- my wife had this idea, which I think is a terrific idea, to make him some kind of infrastructure czar and really get a grip on all this money they're going to be spending and have it under some kind of control right there in the White House.

BLITZER: He's going to be a very influential vice president, even if he takes a lower profile.

WALL: I think he probably will take a bit of a lower profile. I think they actually are working out just what kind of a role he will play. I think it will be different than any vice president we've probably seen in history, and I happen to agree with your wife, I think that might make a good idea.

You know, I think they've got the foreign affairs and the national security thing down pat between the Secretary of State Clinton and Robert Gates, Jim Jones. I think he's got a solid team there. I think Joe Biden can focus on some of those nuts and bolts issues to deal with infrastructure. And even just the day-to-day domestic issues.

CARVILLE: I'm just saying if he was willing to really, you know, do something, because the problem is with some exceptions, we generally haven't been that strong at the State Department. And I think that's one of the reasons that they wanted Senator Clinton to take that job.

BLITZER: All right, guys. Stand by. You're not going away. We have a lot more to talk about on this special year-end LATE EDITION. The Alaska governor, Sarah Palin, she talks to us about her campaign for the vice presidency.

And later, Secretary of State Condoleezza Rice defends the Bush administration's foreign policy record. We'll be back in just a moment.

But first, listen to this. A rare emotional moment from my conversation with Senator Hillary Clinton.

(BEGIN VIDEO CLIP)

BLITZER: We have one final question, because we're out of time and it involves your daughter Chelsea. I've been watching her since she was a little girl, she came to Washington back in '93, in the '92 campaign. And now she's a grown woman and she's out there campaigning for you every single day. I think she's in Puerto Rico right now. And I know you talk to her every single day.

CLINTON: Right. Right.

BLITZER: And, you know, what goes through your mind when you see -- you have your own daughter out there working as hard for you as she is?

CLINTON: Well, it's one of the most incredibly gratifying experiences of my life, as a person and as a mother.

You're going to make me get very emotional. She is an exceptional person. And she's worked so hard, and she's done such a good job that I'm just filled with pride every time I look at her.

You know, obviously, you know, we are very close. We are in communication all the time.

But, you know, she is doing this because she believes I'd be a good president but also because she cares so much about our country's future. She did grow up in the White House. She knows what a difference a president makes.

If anybody ever doubted what difference a president makes, after seven years of George Bush, I think the doubt should be put to rest.

So she's doing it because she's my daughter, but she's doing it because, as she says, she's a young American who cares about our future.

BLITZER: And she's doing it because she loves you.

CLINTON: Absolutely.

BLITZER: Senator Clinton, thank you very much.

CLINTON: Thanks.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

FORMER GOV. MIKE HUCKABEE, R-ARK.: We're going to keep going, and until somebody has 1,191 delegate, I'm still on the stage. You know, you're not going to force me out. I've worked too hard to be here.

(END VIDEO CLIP)

BLITZER: A confident statement by the former Arkansas governor, Mike Huckabee, on "Late Edition," back in February. He abandoned his presidential campaign almost exactly a month later. The surprise candidate of 2008 was certainly Alaska's governor, Sarah Palin, John McCain's choice for vice president. I sat down with her just a few days after Election Day.

(BEGIN VIDEOTAPE)

GOV. SARAH PALIN, R-ALASKA: It's historic. And I think this time is full of optimism. And it's an opportunity for everybody to get it together and start working together for us, as Republicans, to reach out to Barack Obama and the new administration that will be ushered in and offer the solutions that we see for meeting some of America's great challenges, right now.

This is an opportunity to all be working together. And, of course, President-elect Obama had promised, also, bipartisan efforts to meet the challenges. So let's seize this opportunity. Let's take him up on that offer. And let's all start working together.

BLITZER: Are you ready to help him?

PALIN: Absolutely, especially on energy independence, energy security that we need for this nation. Being a governor of an energy- producing state, knowing that we have the domestic solutions, there in our states and in other energy-producing states, I'm more than willing and able to help President-elect Obama to start tapping into the domestic solutions that we have now, so we can quit being so reliant on foreign sources of energy.

BLITZER: So if he reaches out to you and says, Governor Palin, I need your help on energy or some other issues, kids with special needs, for example...

PALIN: Yes.

BLITZER: ... and says, I want you to be part of a commission, you would be more than happy to say "Yes, Mr. President?"

PALIN: It would be my honor to assist and support our new president and the new administration.

BLITZER: During a campaign, every presidential campaign, things are said. It's tough. As you well know, it gets, sometimes, pretty fierce, out there.

And during the campaign, you said this. You said, "This is not a man who sees America as you see it, and how I see America" -- and then you went on to see say, "someone who sees America, it seems, as being so imperfect that he's palling around with terrorists who would target their own country."

PALIN: Well, I still am concerned about that association with Bill Ayers, and if anybody still wants to talk about it, I will, because this is an unrepentant domestic terrorist who had campaigned to blow up, to destroy our Pentagon and our U.S. Capitol. That's an association that still bothers me, and I think it's still fair to talk about it. However, the campaign is over. That chapter is closed. Now is the time to move on, and to, again, make sure that all of us are doing all that we can to progress this nation, keep us secure, get the economy back on the right track.

And many of us do have some ideas on how to do that. And I hope we will be able to put all that wisdom and experience to good use together.

BLITZER: So, looking back, you don't regret that tough language during the campaign?

PALIN: No, and I do not think that it is off-base nor mean- spirited nor negative campaigning to call someone out on their associations and on their record, and that's why I did it.

BLITZER: And just one historic footnote: Was that your idea, or did somebody write those lines for you?

PALIN: It was a collaborative effort, there, in deciding how do we start bringing up some of the associations that perhaps would be impacting on an administration and on the future of America?

But again, though, Wolf, knowing that, really, at this point, I don't want to point fingers backwards and play the blame game, certainly, on anything that took place, in term of strategy or messaging in the campaign. Now is the time to move forward together, start progressing America.

(END VIDEOTAPE)

BLITZER: And I suspect that certainly will not be the last time we'll see or hear from Sarah Palin on the national political scene.

Let's get some assessment from our guests, once again, two of the best political team on television, our senior political analyst, David Gergen, and our national political correspondent Jessica Yellin.

What is her future, in the short, medium, and long term, David, on the national political scene?

GERGEN: Short term, I think she'll disappear for a while, Wolf, because the focus will be on Washington and Obama and working out this economic plan.

Middle term, she may -- I think she'll have a presence in the 2010 off-year elections. She'll be out there. She'll be campaigning. She helped Saxby Chambliss a lot in that special runoff election in Georgia, helped him get to a victory.

The big question is 2012. And I think that's unknowable. Clearly, she has -- she has an impressive staying power within the conservative base of the Republican Party.

For most independents and Democrats, she was a sugar high during the campaign. They're glad to see her off the stage, and I think she'll face a lot of opposition. But 2010, I think we'll be hearing -- definitely hearing from her in the off-year elections.

BLITZER: She certainly, Jessica, has huge name recognition out of this campaign. Probably 99.9 percent of the American people know who she is. So, if she wants to position herself for 2012, she has an opportunity.

YELLIN: She certainly does, and she has -- she's well aware of that, quite clearly. I think David's right. She'll disappear for a while. She needs to develop a more, sort of, polished public persona, to smooth over some of those bumps.

But one of the things you hear from top Republicans in this town is they really see her as part of the conservative end of the Republican spectrum.

If she comes back in 2012, a lot of people talk about her more like a Pat Buchanan kind of figure, a galvanizing force for the right but not necessarily the sort of centrist mainstream figure who could win an election, at this point.

At least that's what a lot of the Republicans are hoping. They think that she is too polarizing.

BLITZER: I spoke to a lot of Republicans, David, who think what she needs to do, in the next year or even two, is study a lot, get really up to speed on some of these critical issues, so that when she does do interviews, down the road, she speaks with some more authority.

GERGEN: Absolutely. You know, we have seen comebacks in American politics a lot, someone, you know, going all the way back to Richard Nixon. And then, after his significance series of defeats, then we had the new Nixon.

And I would imagine that, down the road, we're probably going to be talking about the new Palin. And can she live up to that? We'll have to wait and see. There's going to so much -- there's going to some new stars arising in the Republican Party, other than Sarah Palin, in the fights ahead, in the Congress, over the Obama plans.

BLITZER: And I think David makes an excellent point, Jessica. You know, we've heard the names of the guys who ran the last time, Mitt Romney and Mike Huckabee, to be sure, but there are other names out there, some emerging stars, including some young governors out there, in Louisiana, Bobby Jindal, for example. His name is generating lots of buzz in Republican circles.

YELLIN: Absolutely. And there will be more to contend with, especially as Republicans try to define themselves against the Obama administration, maybe even some of the people in Congress who will emerge as new voices, the new Eric Cantor and these personalities.

YELLIN: We have a lot to see evolve between now and 2012, and also the question of women in politics. How will that change in the coming years? Hillary and Palin cut a new path, but things have to change a little bit for women to really cut through if they're going to the next four years.

BLITZER: With the historic 20/20 hindsight right now, David, would it have made a difference, do you think, if, let's say, John McCain had selected Tim Pawlenty, for example, or Mitt Romney to be his running mate, given the enormity of the economic crisis that developed really in September and October?

GERGEN: Mitt Romney might have made a difference. When the attention turned to the economy, and that was really from McCain's point of view the turning point, was in mid-September, the last two weeks in September. Lehman Brothers went down. Everything went into crisis. We had the rescue package.

You know, John McCain rushes back to Capitol Hill, seen as being too impulsive. Had he had Mitt Romney at his side during those two weeks, perhaps he might have come out of this economic crisis stronger than he did. I don't think he would have won. I think that the economic turn really just swept away his candidacy. He'd been an underdog all along, and I think that just ended it right there.

BLITZER: Yeah.

GERGEN: But he might have done a little better.

BLITZER: OK, guys, don't go away, stand by. We have a lot more to talk about. We're also going to be hearing about the foreign policy legacy of the Bush administration from Condoleezza Rice. And taking a closer look at what we can expect from Barack Obama's first 100 days. Stick around, LATE EDITION will be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI (D-CA), SPEAKER: I think in these stimulus packages, you have to look at what helps stimulate the economy without spending more money than you should because you break the economy down going deeper into debt.

(END VIDEO CLIP) BLITZER: The speaker of the House, Nancy Pelosi, on LATE EDITION earlier this year. It's an easy bet she wasn't thinking of an economic stimulus package perhaps approaching $1 trillion. No one was thinking of that back then. But that's now what's being discussed. Perhaps $600 billion, $700 billion, $800 billion, and that's approaching $1 trillion.

Faced with economic disaster back in 1933, President Franklin Delano Roosevelt laid out the foundations of the New Deal in his first 100 days of his presidency. Since then, it's been the benchmark every administration is judged against.

How will Barack Obama do in his first 100 days? Let's bring back our senior political analyst, Bill Schneider. He's in Los Angeles. And Jessica Yellin, our national political correspondent, she's with me here in Washington. It's an enormous benchmark, that 100 days. How is he going to do? What should he focus in on if we look at history for some guidance, Bill?

SCHNEIDER: The economy, the economy, the economy. And he's got a very high-powered economic team there, particularly with Larry Summers in the White House in his position as the White House economic adviser, he's really going to be the linchpin of Obama's economic strategy, along with the new secretary of the treasury, who used to work for Larry Summers.

It's a very high-powered team, and it's going to be centralized as it was under Roosevelt really, in the White House. This president has said many times that he's comfortable dealing with the team of rivals. Where is the vision going to come from? He says it's going to come from me, it's going to come from him, President Obama. There is every indication that the White House is the center of the action, not the cabinet, and that Larry Summers is going to have a major voice in this new economic policy.

BLITZER: The enormity of the challenge on the economy is much greater now than it was just envisioned only a few weeks ago.

YELLIN: Yes, and one of the jokes inside the transition office is that the economic dream team got the best press, better reputed than Barack Obama at this point, and they are very worried they're in for a big fall, because how can you live up to these expectations?

Look, they're going to have a big fight with Congress over the size of the stimulus package. Our Capitol Hill team is reporting that Democrats leading Congress are looking for something closer to $600 billion, where we're hearing, Barack Obama, as you say, edging from $700 billion towards $800 billion, so there's a fight shaping up. And how are they really going to make a difference immediately? Psychologically they will by doing a big-bang approach, but will it trickle down? Will it have an immediate impact? It's hard to say.

BLITZER: Let's get to some of the other issues that were so much of subject during the campaign. For example, healthcare reform in the first 100 days, Bill. SCHNEIDER: Well, health care, he has Tom Daschle, a very experienced former majority leader in Congress as the health care czar, so to speak, in the White House.

I'm not sure this is going to be -- much will be done in the first 100 days because there are so many other challenges with the economy, and particularly with the reorganization of the auto industry, they're going to lay the groundwork and they've learned a lot from the experience of Hillary Clinton and her health care plan in the early 1990s about what to do, and particularly what not to do, namely, don't threaten middle-class people who are satisfied with their health care and with their health insurance but want to make sure they can continue to afford it. So I think they're going to be a little cautious on the health care issue.

BLITZER: There's no doubt that it's impossible to do universal health care or anything approaching health care reform in the first 100 days, but what about the first four years of an Obama administration? Do they think they can really do that?

YELLIN: They insist that they do. And they insist that they will start on health care reform immediately. One of the things they can do in the first 100 days is S-CHIP, the Children's Health Insurance Program. That was one of those things that Congress passed, President Bush vetoed. So, that's an easy gimme. They'll pass that. They can do stem cell research. That was another Bush veto. They can pass that. So they can take these incremental steps as they say we continue to outline our health care, broader health care approach. They want to do it in the first two years, maybe, not even the first four. I don't know if it's realistic.

BLITZER: All right, guys. Stand by. We have more to talk about include a closer look at the foreign policy legacy of the Bush administration. And political analysis, get this, from Magic Johnson and Charles Barkley, the kind of interviews you won't see anywhere else, right here on LATE EDITION. We'll be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ROBERT GATES, DEFENSE SECRETARY: Our hope had been to coax Russia into closer relationships with the west, integration economically, greater democracy at home, and so on. The actions that the Russians have taken in Georgia suggest that we have not been as successful at that as we had hoped we were.

(END VIDEO CLIP)

BLITZER: In August, Defense Secretary Robert Gates was here on LATE EDITION to deliver a rather tough message to Russia after its forces invaded the tiny republic of Georgia. Foreign policy was a primary focus on LATE EDITION throughout 2008. In December, we wrapped up the year in a wide-ranging conversation with the Secretary of State Condoleezza Rice.

(BEGIN VIDEOTAPE)

CONDOLEEZZA RICE, SECRETARY OF STATE: We found the Israeli- Palestinian conflict in full force, with a Second Intifada, with hundreds of Israelis and Palestinians dying, with suicide bombings at Israeli restaurants and a Passover massacre, with Israelis running large-scale operations in the West Bank and occupying Palestinian towns; Yasser Arafat stealing the people blind and refusing to make peace. And now you have a decent Palestinian government, devoted to doing better for its people, at least in the West Bank, with Salam Fayad and President Abbas. RICE: You have the first full-fledged negotiations between these two parties on the core issues -- all of the core issues to end the conflict. You have international support for that, including Arab support, after all, the Saudis were at Annapolis under their own flag for the first time. And you have on the ground the training of Palestinian security forces thanks to a number of generals, including General Jim Jones... BLITZER: Who is going to be Barack Obama's national security adviser. RICE: Yes. And you have now decent Palestinian security forces deploying in places like Jenin and Hebron and Nablus. This is a fundamentally different situation than we found. And because of the strong support of President Bush for Israeli security concerns, Ariel Sharon, who was brought to power not to make peace, but to defeat the Intifada, said that Israel must divide the land. And for the first time you have a broad acceptance in the international community that a two-state solution is the only solution. BLITZER: So you think that there is a potential there... RICE: I absolutely do. BLITZER: ... not necessarily on your watch, but under Hillary Clinton's watch... RICE: The foundation is there. The foundation is there. Many of the pieces are in place. Obviously the political circumstances in the region and in the countries made it difficult. Israel is in an election campaign. But I don't think that there is any doubt that this is so much further along, really, than it has ever been. BLITZER: Have you sat down with Hillary Clinton yet, who is going to be your successor? RICE: Well, I was leaving town the day after she was named. And -- it was actually the day that she was named. I talked with her and we're going to sit down and I'm really looking forward to it. I've known her a long time and she is someone that I admire. BLITZER: Do you think she'll be a good secretary of state? RICE: I do. BLITZER: You have confidence in this new national security team that Barack Obama is putting together? RICE: They're all people I know and they are all people of substance. And the most important thing is that they are all people who are going to have the fundamental interests and values of the United States at the core of what they do. BLITZER: I know you were watching when we reported that Barack Obama would become the 44th president of the United States. What went through your mind as you saw that dramatic historic moment in the United States? RICE: Well, I'll tell you, from -- a kid from Birmingham, Alabama -- in segregated Birmingham, Alabama, it was quite a moment. It means this country has come an enormous distance. It means that the United States of America is what it claims to be, which is a place of opportunity for all. I don't think, by the way, that we're still color-blind. It's remarkable that we have an African- American president. We've had back-to-back African-American secretaries of state. We have African-American heads of major corporations. But still, we see race and that's fine. But increasingly we don't see race as all-defining, of who one is and what one can be. As long as we pay attention to opportunity -- to making educational opportunities available, which is really what got me to where I am and I think President-elect Obama would tell you the same thing. BLITZER: So if he asks you for some help... RICE: I think we'll do -- I think America will do all right.

(END VIDEOTAPE)

BLITZER: Secretary Rice, a deeply personal reflection on the historic election of Barack Obama. Let's go over the Bush administration's legacy and the problems we can expect the Obama team will face. Once again joining us Tara Wall, the deputy editorial page editor of the "Washington Times." And in New York, Republican strategist Ed Rollins. Ed, what do you think? Will history be kinder to the Bush administration than contemporary critics are, shall we say, right now?

ROLLINS: It depends on what whether the history is written in 20 years or 100 years. I think that the bottom line is this president's foreign policy legacy was particularly measured on the success of Iraq. This was a war of choice. This was not a war that we were forced into. It was one that the president made a decision to go into for a variety of reasons.

If that becomes a stable region, if that becomes a real democracy and from that democracy other pars of the region become stable, then obviously historians will treat more kindly. If it erupts in a year or two or five years, as we pull back, then certainly his legacy will be extremely tarnished.

I think the most important thing is that America is not been attacked since 9/11. There's some stability in the world. But I think to a certain extent our role as a fixer historically, we've been the ones that could go make Israeli peace talks take place and what have you, has somewhat been diminished in the last several years.

BLITZER: His job approval numbers, Tara, as you know, going into the election, after the election, they were really at almost historic lows, going down to near Richard Nixon, for example. He gets very little credit for what Ed just pointed out on that, since 9/11, there hasn't been a major terrorist attack on U.S. soil.

WALL: Well, I think that, you know, even in those numbers, he still does rank very favorably high among conservatives within the party, within the Republican Party, despite the overall sentiment. I think, yeah, there's going to be this -- I think there's going to be a dual kind of feeling going into the next few years.

I think longer term if he is going to have more positive -- there is going to be a more positive look at what he's done and the successes. Right now, there is still disappointment. There's hurt. You know, you hear disappointment within, you know, the party itself. And I think you're going to have some of that early on.

I think longer term, when you look at the success and the fact that right now last week alone we saw Iraqi's industry celebrating publicly Christmas for the very first time. So you have that in juxtaposition to the mistakes that were made that Condi Rice herself has come out now in these last few weeks as talking about some of the mismanagement they recognized going in, afterwards.

And so, I think there's going to be -- there will be a dual look at this as far as the successes as well as the disappointments. And that's what we're seeing. I think she -- she did put a positive, optimistic spin on it, a gracious way, the way she is. I think longer term historians will treat George Bush much more fairly than he's being treated right now.

BLITZER: Ed Rollins, who is the leader, if there is a leader, of the Republican Party right now?

ROLLINS: There's not a leader in the sense that for the first time in my lifetime or as a Republican, which goes back 40 years, there's not an heir apparent to the next presidential election. The congressional leadership, obviously, is -- and the Senate is the same.

SCHNEIDER: But there's not giant differences. There's not Howard Bakers, there's not Bob Doles. There's not the Bushes, the Doles, the Ted Stevens. The people that have been around a long time are gone.

We have some nice capable governors throughout who may emerge -- Haley Barbour, Mitch Daniels, some others and some of the ones you mentioned. But I think it's really an evolutionary process. I've been at Ground Zero after Watergate, as David Gergen has seen us come back, but right now there's no Ronald Reagan out there to lead us out of the wilderness.

BLITZER: Tara, I didn't hear him mention the two leaders in the Congress, John Boehner in the House, Mitch McConnell in the Senate. Are they not the leaders of the Republican Party right now?

WALL: They'd like to be. I think John Boehner is in a little bit of trouble. I think that he's had his problems, he's had his issues, and I think that, you know, given the situation we are in this economic crisis and the bailout, you know, I think that there's a feeling that there really isn't leadership and who's managing this. Whether it's Congress, whether it's national leaders, whether it's, you know, the government itself.

BLITZER: We have to leave it there, guys. Thanks very much. Straight ahead, members of the dream team talk about the dream ticket. And later, the best political team on television puts the dreams aside to predict what we can really expect in 2009. This special year-end LATE EDITION will be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GRANT HILL, BASKETBALL PLAYER: I was inspired, as well to see so many athletes come out and support. I think the last 10, 15 years, the last four or five elections, athletes haven't really participated. And to see guys come out and play their part in the political process, you know, have fundraisers and speak at rallies. It was really good to see for me as a colleague of many of them.

(END VIDEO CLIP)

BLITZER: Basketball great Grant Hill on LATE EDITION in November. President-elect Barack Obama is a devoted basketball player. He could probably form a pretty good team just drafting from his proposed cabinet. Here on LATE EDITION, we spoke to two professional players who also have a hand in the political arena, NBA legends Charles Barkley and Magic Johnson.

(BEGIN VIDEOTAPE)

BLITZER: I know you support Obama. Tell us why you decided to go with him as opposed to, let say, Hillary Clinton. CHARLES BARKLEY, NBA LEGEND: Well, I think first and foremost, I consider him a friend of mine. And when I look at him, he represents everything that's good in the black community. He's intelligent, he's articulate, he's -- we need that. You know, most of our role models are athletes or entertainers. We got to get more black kids to be educated, carry themselves with great class and dignity. And he's perfect for what we need. Because we've got so much black on black crime in this country right now. We got a lot of kids who are not getting their education. That's why I'm supporting him. BLITZER: A few years ago you were a Republican. I know you're a Democrat now, but when you were a Republican, you were asked why you were a Republican and you said something along the lines that the Democrats want to raise my taxes, the Republicans don't. Obama wants to raise your taxes. BARKLEY: Well, you know what, it won't affect me at all. But what I really said, I'm rich like a Republican. I never voted for a Republican. I am actually an independent. But I'm supporting Barack because I have to look at the big picture. This country is divided by economics between the rich and the poor. And I'm going to support him all the way to the wall, and I really like our chances right now. BLITZER: What about you and politics? At one point you were thinking of running back in Alabama, what do you think? BARKLEY: Well, I just bought a house in 2007, and in 2014, I promise you I'm going to run for governor of Alabama. BLITZER: When will you run for governor of Alabama? BARKLEY: 2014. You have to have residency for seven years, and I bought my house at the end of last year, and I'll be eligible in 2014. BLITZER: You've got to be proud... MAGIC JOHNSON, NBA LEGEND: I'm very proud. BLITZER: ... that an African-American has reached this level, that he's on the verge potentially of being the Democratic presidential nominee. JOHNSON: Wolf, I'm just probably like a lot of others. I never thought he would do this well right now, and rally non-blacks around him. Because if you look at a lot of the states that he has won, there had been a lot of states that very little blacks live in those states. BLITZER: The Midwest and... JOHNSON: Exactly. So he's done an amazing job and I am proud. And I hope really that both of them end up on the same ticket... BLITZER: Really? JOHNSON: ... at the end of the day. I would really love seeing that. And I think a lot of other people would love seeing it as well. BLITZER: Seeing that -- and from your perspective, a Clinton-Obama ticket? JOHNSON: Yes. BLITZER: That's the so-called dream ticket. JOHNSON: That's like dream -- it's just like Michael Jordan, Larry Bird and Magic all playing together on the dream team. BLITZER: We'll leave it on that note... JOHNSON: Exactly. BLITZER: Magic Johnson, thanks very much. JOHNSON: Thank you, Wolf. (END VIDEOTAPE)

BLITZER: And who knows, maybe we'll see some of those guys on the presidential basketball court one of these days.

When we come back, we'll try to dispel the political rhetoric and campaign promises and get an idea of where Barack Obama can really score in 2009. This very special LATE EDITION will be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

QUARTET SPECIAL ENVOY TONY BLAIR: I wouldn't presume to give a advice, but I -- I think there was another Democrat politician, Mario Cuomo, who once said that you campaign in poetry but you govern in prose.

(END VIDEO CLIP)

BLITZER: A few words of post-election wisdom from the former British prime minister, Tony Blair.

So, putting aside all the campaign promises and slogans, what can we really expect to see when Barack Obama begins work on January 20th?

And I'm joined, once again, by two of the best political minds in the business, Ed Rollins and James Carville.

What do you think? What's realistic, in 2009, for this incoming president?

CARVILLE: Well, what we know is that there's going to be an enormous stimulus package. And just pushing this money out, imagine this kind of money, and trying to get things started, to create demand, is really going to really occupy a vast majority of everything they do, domestically.

Secondly, you have the Biden prophesy. And, unfortunately, I think most people around foreign policy think that the vice president- elect was correct, in the campaign. He said, they're going to test this new president.

I mean, I would be surprised -- I'd glad to see what Ed has to say on this -- if there's not some kind of major foreign policy test in the midst of this, sort of, economic meltdown that we're having.

We know very little about the new president's policies. I mean, to be fair to him, he's put together a first-class team, where his focus is, but we're going to be introduced to a lot of new policies, awfully fast, here.

BLITZER: What do you think -- what do you think about all that, Ed? ROLLINS: Well, I think James is absolutely right. I think, first of all, we're going to find a very -- a great deal of good will. There hasn't been any good will towards President Bush, probably, since Hurricane Katrina. And I think the American public really wants this president to succeed.

Equally as important, we're going to find a very, very disciplined, very bright man who has a great ability to communicate with the American public.

The problems are immense. The talent around him is immense. And I, to a certain extent -- hopefully they can all hit the road at the same time.

I think -- I think we're going to see a lot of -- it's going to be a long, hard battle out here, but I think this president has the potential of being an historic president, and hopefully our prayers and our good will is all with him.

BLITZER: Will America's enemies, Ed, test this president, early on?

ROLLINS: I think that will come, I think, in the crazy world we live in today. But I'm very confident that, if John McCain would have been elected, at least two of the three members -- I don't think Secretary of State Clinton would be there, but I think, certainly Bill (sic) Gates and Jim Jones would be there, so it would be the same kind of team. And I think, to a certain extent, Americans rally behind a president in a time of national crisis. And if we get tested, whoever tests us better beware.

BLITZER: How worried, James, are you that this economy, as bad as it is right now, it may be good compared to what could happen?

CARVILLE: I don't know. You know, I'm like anybody else. I just want them to do what's working. And obviously, like I say, they're getting ready to throw a lot of money at this.

And I think most economists, conservative, liberal, everybody agrees a big challenge is -- you know, it's one of these things that it's not easy to spend that much money that fast. And these infrastructure projects -- a lot of this money is going to be going to the states. And they're going to be very, very preoccupied with getting this done and getting this done right.

Another point, in terms of being a Democrat, is we -- I was -- the Senate, we have 17, maybe 18 senators with two years' experience or less.

We're losing Senator Obama, Senator Biden. We're losing Senator Clinton. All right? There's going to be -- Senator Kennedy has health issues. Senator Byrd -- and we have plenty of people who are older. You know, the Senate is s going to be making a lot of really important decisions and there's going to be some new Democrats that are going to emerge in there with some -- you know, I mean, obviously, Senator Reid is the majority leader, but a lot of these committee chairs and stuff like that are going to have to bring on a lot of new senators, here. We're going to have to get up to speed pretty quick.

BLITZER: Knowing the splits in Washington, and as you do, is it automatic to assume that whatever Barack Obama wants, the Democratic leadership in the Senate and the house, Nancy Pelosi, Harry Reid, they're simply going to say, yes, sir?

ROLLINS: No, absolutely not. I think -- I think this president and his team will learn the lessons of some other presidents that didn't succeed, and that is, they'll communicate with that leadership.

They don't own that leadership. And if there's any place that may be a trouble spot, it may be the Democrats and the Congress. It won't be the Republicans.

So, you've got to sit down. You've got to tell them what you want to do; you've hear what they want to do, and move together as a team. If you that, the votes are there, you can get done what you want to get done. If you fight them or you try and dictate, as Bush did to the Republicans, sooner or later, you'll find some balking.

And I think there's a lot of very smart Democrats who waited a long time for this day, and there's some things that they want that may be not exactly what the new president wants. And there has to be some -- some communication. BLITZER: Ed Rollins and James Carville, guys, thanks very much.

And we'll be back, just in a moment, with a word of a big change coming up on Sunday mornings. Stay with us.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BLITZER: Three of the best political team on television, standing by to analyze this surprising campaign. Let's get a wide shot of these two senators. Go ahead. You can do it. There we go. All right. Good work.

(END VIDEO CLIP)

BLITZER: A light moment with Senator Dianne Feinstein and Kay Bailey Hutchison, back in June, just one of the many moments that have made anchoring "Late Edition" a pleasure.

This was an especially exciting year to be a journalist, right here in Washington. The political story was amazing. I was thrilled to have a front-row seat to all the history, covering the early presidential primaries, moderating five presidential debates, anchoring our coverage of the party conventions, and of course, Election Day itself. What a great year to be a reporter.

And I have no doubt that 2009 will be an amazing year, as well. Here at CNN, by the way, we are also pumped, and we promise to bring you the best and most comprehensive coverage anywhere.

There will be some changes coming up. On January 18th, two days before the inauguration of Barack Obama, CNN will launch an exciting new change on Sunday mornings.

Our chief national correspondent, John King, the master of the magic board and so much more -- he will host four hours of programming on Sundays from 9:00 a.m. to 1:00 p.m. Eastern. We're going to be telling you much more about that in the coming days. Stay tuned.

Be assured, by the way, that I'm not going away. I'll be anchoring "The Situation Room," Monday through Friday from 4:00 p.m. to 7:00 p.m. Eastern.

And that is your "Late Edition" for this Sunday, December 28th. Please be sure to join me again next Sunday at 11:00 a.m. Eastern for the last word in Sunday talk. Until then, thanks very much for watching. Have a very happy new year. I'm Wolf Blitzer in Washington.

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