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CNN LATE EDITION WITH WOLF BLITZER

Interview With Dick Cheney; Interview With Nancy Pelosi

Aired January 11, 2009 - 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)

CHENEY: The most important thing that any vice president needs to know is to understand what it is the president he works for wants him to do.

BLITZER (voice-over): In an exclusive one-on-one conversation with Vice President Dick Cheney, he talks about the ailing U.S. economy, the war on terror, and the criticisms of him and the Bush administration.

PELOSI: We want a repeal of the tax cut to the highest income people in America, I don't think we can wait until they expire.

BLITZER: And in another exclusive interview, House Speaker Nancy Pelosi talks about her legislative priorities as she prepares to lead a new Congress with a Democratic president.

PRESIDENT-ELECT BARACK OBAMA: Nothing is done, economists from across the spectrum tell us that this recession could linger for years.

BLITZER: President-elect Barack Obama makes his biggest pitch yet for rescuing the U.S. economy. Will Congress support his plan? Insight and analysis on all of the week's politics from James Carville, Tara Wall, David Gergen, and three of the best political team on television.

The first hour of LATE EDITION begins right now.

(END VIDEOTAPE)

ANNOUNCER: Live from CNN in Washington, this is LATE EDITION WITH WOLF BLITZER.

BLITZER: It's 11:00 a.m. here in Washington, 8:00 a.m. in Los Angeles, and 7:00 p.m. in Baghdad. Wherever you're watching, from around the world, thanks very much for joining us for LATE EDITION.

When the Bush administration ends nine days from now, it will leave behind a country fighting two wars and a U.S. economy in deep recession. It's also leaving a nation that hasn't been hit by terrorists since the 9/11 attacks. I touched on all of these topics and more in my exclusive interview with the vice president, Dick Cheney. We began with the number one issue for Americans, the troubled economy.

(BEGIN VIDEOTAPE)

BLITZER: Mr. Vice President, thanks very much for joining us. CHENEY: It's good to see you again, Wolf. BLITZER: Thank you. Let's talk a little about the economy right now because it's, in the words of Barack Obama, "dire" right now and the economic numbers, the jobs lost, just reported as we speak right now, 524,000 lost in December, 2.6 million jobs lost last year alone, since you took office eight years ago, 5.1 million jobs lost. What's going on? CHENEY: Well, we're in the middle of a recession, obviously. It started in a major way last year, coupled with the crisis in the financial sector. I think those two things interacted together, produced significant job losses.

And the numbers that were released this week show an unemployment rate now 7.2 percent. And that's -- obviously it's a very, very serious problem that is going to be one of the first items that the new administration has to deal with. BLITZER: And it looks like it could get a whole lot worse unless something dramatic happens. CHENEY: Well, I don't want to -- I'm not an economist and I don't want to predict that, but clearly we're in the middle of a serious recession and we've worked hard on the financial problem which is the first one that hit last summer.

The president put together a program, the so-called TARP program, and I think we've had significant positive impact in terms of being able to guarantee liquidity of the financial system, adequate capital in the banking system and so forth ... BLITZER: Does that TARP program, that $700 billion program, you spent half of it, about half of it so far, 350 ... CHENEY: Well, we've committed about half of it. Not all of that has been spent. BLITZER: All right. Well, you've committed -- but has it delivered what you really wanted? CHENEY: I think it has. We've seen interest rates decline. We've seen a pickup in the ability, for example, of companies to get the short-term borrowing to finance their business operations. The interbank lending rate is significantly below what it was what back when we had the crisis. So I think we've had a positive impact. I don't think... BLITZER: Because, you know, a lot of your fellow Republicans on the Hill, they don't like it. CHENEY: Well, that's true. But I... BLITZER: But you have no regrets. CHENEY: No -- well, regrets, you'd rather there hadn't been a financial crisis. But it's a worldwide crisis, it's not one that affects only the United States. And I think it's important, too -- I'm a conservative, Wolf, and one of the first things I did when I got elected to Congress in '79 was testify against the Chrysler bailout.

So I've got concerns about how deeply involved the government gets in the private sector. But financing is different. The financial system is different. That is a federal responsibility with the Federal Reserve, the Treasury, the producer and keeper of the value of our currency and regulation that's involved, the SEC and so forth. When the financial system is threatened, only the federal government can fix it and that's what we've been doing. BLITZER: So you had no choice, basically. CHENEY: Yes. So even though I'm a conservative, I feel very strongly that we did the right thing by getting actively and involved when we did. BLITZER: As a conservative, someone who wants to see the federal government smaller, more constrained, how painful is it for you to see this federal deficit explode the way it has? When you took office eight years ago you inherited $100 billion or $200 billion budget surplus. Now it's projected for the coming year to be $1.2 trillion deficit. And the national debt has gone what, from $5 trillion to about $11 trillion? That most be really painful for a conservative who wants a smaller government. CHENEY: Well, I would rather see a smaller government, but we've always said, and I firmly believe that you do make exceptions for budget restraint. And those exceptions are wars, for example, national crises.

We've had to prosecute the global war on terror, we had to recover from 9/11, we had to make major investments in homeland security, we had to pay for our operations in Afghanistan and Iraq, and then more recently, obviously, to deal with the financial crisis in the financial sector.

So there have been reasons why we've had to commit those funds and to run up the deficit. I'd rather it hadn't been necessary but I do think it was necessary given the problems we're facing. BLITZER: What would you have done different? Looking back, obviously we're all smarter with hindsight, on this economic issue? CHENEY: Well, I think I am a big believer in tax policy. I think we've -- if you look back at what we were able to do in the aftermath of 9/11 when we lost a million jobs in a manner of weeks there, we were able to cut taxes for everybody in the country who paid income taxes, and to reduce the rate on cap gains and on dividends.

And that put in place policies that supported 52 months of consistent, continuing job creation. That was good policy and a good sound, solid economy. I think what has happened since, we ran into problems, for example, with Fannie Mae and Freddie Mac, two federally- supported financial institutions that a great many banks around the world had invested in that we tried to reform.

We offered legislation up some years ago to reform Fannie Mae and Freddie Mac as there was a concern about a financial crisis and we couldn't get it through the Congress. I wish that legislation had been adopted then. BLITZER: Because Robert Shiller who is a Yale economist, he is one of the few that predicted this housing bubble out there and he says this, in the new issue of Vanity Fair. He says: "The Bush strategists were aware of the public enthusiasm for housing and they dealt with it brilliantly in the 2004 election by making the theme of the campaign 'the ownership society.'" I guess the question is was the Bush administration complicit in this -- these low mortgages, people who couldn't afford these mortgages, and this housing bubble that developed? CHENEY: Well, I think like all administrations in recent memory and both political parties, we've been strongly supportive of the notion of home ownership for as many people as possible. That wasn't new on our watch, but it is something we believed in... BLITZER: Did you go too far in allowing this unregulated industry to explode the way it did? CHENEY: As I say, I wish the legislation we recommended that would have repaired the situation or imposed significant reforms had been adopted some years ago. It wasn't because we couldn't get it through the Congress. So the -- I can remember talking to Alan Greenspan, for example, when he was still chairman of the Federal Reserve. Alan expressed concern about the potential for systemic crisis because of Fannie Mae and Freddie Mac and the way they were structured and relatively unregulated. Those are the issues we tried to deal with... (CROSSTALK)

BLITZER: So that was the biggest mistake, that there was no regulation? CHENEY: Well, in terms of coming up with a problem you can point to that was governmental in origin, that's the one I'm most inclined to point to but I'm not an economist, I'm not an expert, I think the jury is still out in terms of the studies that need to be done and will be done over exactly what happened and why it happened so that we can avoid it in the future. BLITZER: As you know, the president-elect, Barack Obama, is thinking of a $775 billion economic recovery or stimulus package himself right now. Do you think that's a good idea? CHENEY: I haven't seen it, so it's a little hard to judge without knowing exactly... BLITZER: In principle. CHENEY: ... what's going to be in it. Well, I do think we do need to do everything we can to address the downturn in the economy. There are really two separate problems here, although they are obviously related.

One is the financial sector where I do think there's a major role for the federal government to play. The other is with respect to the recession and the overall performance of the economy and there historically there have been differences in terms of how we approach it. And Democrats traditionally want to spend more money, public works projects, et cetera. We Republicans more often want to pursue tax policy as the best alternative to promote growth and to turn around an economic downturn.

Now, again, fairness to the president-elect, I haven't seen his proposal yet so I can't really judge it. But if I had to make a choice myself I'd say we ought to be looking at tax policy as our first priority. BLITZER: He says maybe half of his recovery plan or stimulus plan would involve tax cuts for the middle class.

CHENEY: Right. But what about the total economy? What about business? What about those sectors of the economy that create the jobs that everybody depends on?

You know, those are key pieces of...

BLITZER: Is this the worst economic crisis the United States has faced since the Great Depression?

CHENEY: I can't say that. I don't think we know that yet. I think, certainly, if you look at some earlier periods in our history -- I remember, back in the late '70s, when we had a high rate of inflation, stagflation, in effect, and a high rate of unemployment. I can remember when I was in Congress and you were covering me on the Hill we had homebuilders, for example, mail in two-by-fours. They chopped up two-by-fours in 18-inch lengths and put postage on them and mailed them in to protest what was going on in the housing industry.

So we've -- we've had some difficult times. Is this the worst since World War II? I can't say that. I don't believe the data shows that yet, but it is clearly a serious recession.

BLITZER: I remember those days. My dad was a homebuilder in Buffalo, New York...

CHENEY: Probably sending me two-by-fours.

BLITZER: ... in the late '70s. And interest rates were 15 percent, 18 percent, 20 percent. And we thought, you know, it was all over. We survived that. But it was a rough patch, you're right...

CHENEY: It was.

BLITZER: ... a rough patch, though. You're not ready to say this is the worst economic crisis since the Great Depression?

CHENEY: No.

(END VIDEOTAPE)

BLITZER: All right. That was part one of my interview with the vice president, Dick Cheney. In our next hour, we get into all the controversy. The vice president talks about why Osama bin Laden hasn't been captured, the criticisms leveled against him and the Bush administration for handling -- for their handling of the war in Iraq. And we also talk about this historic election of Barack Obama. That's coming up in the next hour.

But up next, we'll go to the other end of Pennsylvania Avenue. We'll hear from the House speaker, Nancy Pelosi. She talks to us about Congress's plans for turning around this very troubled economy.

"Late Edition" continues right after this.

(COMMERCIAL BREAK)

BLITZER: That's Linda Roth, and you saw Lucy Spiegel, our producers, getting ready for this, the final "Late Edition." We'll talk, a little bit more, about that later. Welcome back to "Late Edition." I'm Wolf Blitzer in Washington.

President-elect Barack Obama wants to spend nearly $800 billion to rescue the U.S. economy. And that number could go up. Some Democrats are already expressing concerns about parts of this plan.

In my exclusive interview with the House speaker, Nancy Pelosi, she talked about where the economic stimulus package stands.

(BEGIN VIDEOTAPE) BLITZER: Madam Speaker, thanks very much for joining us.

PELOSI: My pleasure.

BLITZER: The president-elect is talking, I take it, of an economic recovery package of about $775 billion over two years. Some say that's not enough to get the job done. They think $1 trillion, maybe even more. What do you think?

PELOSI: I think we should do the package that is necessary to turn our economy around. We've been working with the administration to make sure that any appropriations that are in this bill can be used immediately. And that's one of the criteria that we have, is, can it be put to work immediately to create jobs?

BLITZER: When you say "the administration," you mean the Obama incoming administration?

PELOSI: Yes. Yes.

BLITZER: That's what you're talking about?

PELOSI: That's what I'm talking about.

BLITZER: Because there seems to be some tension developing among Democrats over what should be in this plan, what shouldn't be in this plan, especially on the Senate side, and I'm sure you've heard a lot of that.

PELOSI: Well, there -- let's put it this way. We in the Congress of the United States have spent a long time working on these issues. People have strong views on certain proposals that they feel strongly should be in the legislation. And this is the natural legislative process.

The administration, the Obama administration, will propose. Congress will work its will. We'll come to terms and we will have legislation before we leave for the President's Day...

BLITZER: What I hear you saying is that you don't want the Democratic majority in the House -- and you can only speak for the House; you can't speak for the Senate...

PELOSI: That's right. I appreciate that.

BLITZER: ... to be simply a rubber stamp for the Obama White House.

PELOSI: And I don't think the Obama White House wants that, either. They have been very receptive to our conversations about where we think the resources can be deployed more rapidly, or some changes in priorities in the legislation.

These meetings are ongoing, hour to hour. And I'm so -- I'm so proud of the dialogue that is taking place. And of course, we want that dialogue to include the Republicans as well. BLITZER: Well, I want to get to that in a moment, but -- so the $775 billion price tag -- is that about something you like or...

PELOSI: Well, I'm not -- I'm not making any announcement about a number because we haven't finished with the legislation.

BLITZER: But you think you can get that done, you're saying, by mid-February, end of February?

PELOSI: It has to be. It has to be.

BLITZER: There's no way it could be done by the time he's inaugurated? You can't get it done in the House by then?

PELOSI: Well, when the package was smaller, we could, but the fact that the economy is worsening by the day; 524,000 people lost their jobs in the month of December; over, what, 2.6 million people lost their jobs in the year 2008.

And as these numbers are revealed, the urgency is increased; the size grows; and it will take a little more time.

BLITZER: Might it still grow beyond the $775 billion?

PELOSI: It might.

BLITZER: Really?

PELOSI: It might.

BLITZER: So you're still in a dialogue with the incoming administration? PELOSI: Well, they're in a dialogue with the House and the Senate. And they have -- the president-elect reached out to Republicans as well.

BLITZER: Speaking of Republicans, John Boehner, the Republican leader, the minority leader in the House, he says this.

(BEGIN VIDEO CLIP)

REP. JOHN A. BOEHNER, R-OHIO, HOUSE MINORITY LEADER: It's very important, as we go ahead, that we find the right balance. Yes, our economy needs help. But at the end of the day, how much debt are we going to pile on future generations?

(END VIDEO CLIP)

BLITZER: As you know, they're already projecting a $1.2 trillion deficit for the coming year, which is unheard of.

PELOSI: Thank you, George Bush and the Republicans in Congress for that debt.

I have great respect for Mr. Boehner and I enjoy a working relationship with him. But they, for a long time, have not talked about the debt as it accumulated under President Bush. What I will say about it is, of course it is a consideration. And that's why the size of the package -- of course, you can think of many more ways to make investments or more tax breaks, but there has to be a calibration between not going so deeply in debt that the benefit of the recovery is not weighted down by a big -- a big deficit.

BLITZER: How worried are you about this exploding deficit, right now?

PELOSI: Well, I'm so worried about it that that's why I want a repeal of the tax cuts for the highest-income people in America. I don't think we can wait until they expire. I think they need to be repealed -- not in this legislation. That's a subject for another day.

But that is the biggest contributor to the national debt than any other subject...

(CROSSTALK)

BLITZER: You're...

PELOSI: We can no longer afford -- I didn't think we could, in many respects, but we can no longer afford the war in Iraq.

PELOSI: There are things we can change.

BLITZER: Well, let's get through the tax cut first. What you're talking about is the tax level for those making more than $250,000 a year. Right now, it went down under the Bush tax cuts. It's supposed to expire at the end of 2010. Is that right? PELOSI: Yes. BLITZER: And what you're saying is, pass legislation right away this year to make it expire for those earning more than $250,000 year, to go from, what, 39 percent to 35 percent?

PELOSI: What I'm saying is that the sooner they are repealed, it doesn't have to be right away, because right away we have to do the economic recovery package. But what I'm saying is the sooner they are repealed, the less negative impact they will have on growing our deficit.

BLITZER: Because the concern among some economists is that in a time of economic depression you don't raise taxes, and in effect, what you would be doing would be raising taxes. PELOSI: What we're doing is correcting a mistake which has contributed enormously to the tremendous deficit that we have. But, on the other hand, we will be giving a tax cut to 95 percent of the American people. We're saying this focus of the tax cut should be on America's middle class. The backbone of our democracy who have gotten really the royal shaft in the past eight years, instead of catering to those in the high end, we should be focusing on the middle class... BLITZER: But it would be a tax increase for those richer Americans. PELOSI: It's not a tax increase. We're repealing something they should never have had in the first place. BLITZER: Well, you would go from 35 percent to 39 percent. That's a tax increase. PELOSI: Well, you maybe would call that a tax increase, but what we're saying is, for all Americans, we want a tax cut. And we do not want to do that in a way that increases the deficit. So let's have some fairness in our tax system. BLITZER: Because President-elect Obama in recent weeks has suggested that, you know what, maybe just let those tax cuts expire at the end of 2010, and not take separate initiative in separate legislation to get them removed right now. PELOSI: I have not heard that as a hard proposal...

(CROSSTALK) BLITZER: It's not a hard proposal, but he sort of left that open. PELOSI: Well, of course it's open. Everything is open. He is becoming president of the United States. He will be new to the job. He has to make many difficult decisions. And we want to support him in them. But it doesn't mean we have erased any points of view that we have from our mind, and Democrats in '04, '06, and '08 have campaigned for fairness in our tax code, tax cuts for 95 percent of the American people, for the middle class. BLITZER: So this is a high priority for you to get those tax rates increased for the wealthiest Americans? PELOSI: Well, my priority is to turn the economy around, to do so in a way that is fiscally sound. While we can't pay for all of it today, we must make the investments today. And we have to figure out how we balance it out. BLITZER: You have a significant majority in the House of Representatives, the Democrats. You don't really need Republican support. But I hear you saying you want Republicans involved... PELOSI: Of course. BLITZER: ... and the president-elect says he wants bipartisan support. But you could do it with just the Democrats, couldn't you? PELOSI: Well, in issues of this size, you really want as much legitimacy as possible, and sustainability. You want to try to bring people together. And these investments are absolutely necessary.

Economists from right to left, whether it's Martin Feldstein, an adviser to President Reagan, Mark Zandi, economic adviser to John McCain, and all the way across the board, everyone says we need to have a recovery package. They also tell us that more jobs are created by investments, and especially Mark Zandi makes that point... BLITZER: But to bring in the Republicans, you've got to give them something. PELOSI: Well, the point is, is that we all want to come to agreement on what it is that we are doing. We're not going to miss an opportunity to grow the economy. For example, we will have a major investment in education in this legislation. Nothing brings more money to the Treasury than investing in education, early childhood, K through 12, higher ed, post-grad, lifetime learning, nothing brings more money to the Treasury.

So it's an investment that has a return. It grows our economy. It brings personal fulfillment to people, but it also helps to reduce the deficit. So we have to make judgments about what we get for the dollars spent. We owe that to the taxpayer.

(END VIDEOTAPE)

BLITZER: And that was part one of my interview with the house speaker, Nancy Pelosi. In the next hour, she talks about talking the exploding U.S. deficit and much more. And you're going to want to see her raise her right hand and we'll hear her take the pledge. She makes a pledge to the American people. Stand by for that. Also coming up, James Carville and Tara Wall and David Gergen, they're standing by live with their take on Barack Obama's transition to power.

Plus, my colleague Campbell Brown on what the president-elect isn't saying about the economy. Stay with us, LATE EDITION continues right after this.

(COMMERCIAL BREAK)

BLITZER: And welcome back to LATE EDITION. I'm Wolf Blitzer in Washington. On Thursday, President-elect Obama gave a dramatic speech on the economy, stressing the gravity of the current recession and an overview of the actions he intends to take to confront it. My colleague Campbell Brown, the host of "CAMPBELL BROWN: NO BIAS NO BULL," she's in our New York studios right now.

And, Campbell, after the speech, you still had a lot of questions. Listen to what you said.

(BEGIN VIDEO CLIP)

BROWN: What exactly does the president-elect want us to do? If you stimulus plan passes, many people are going to soon be getting a $500 tax cut or $1,000 for couples. I mean, what do we do with it? Invest in American products? Save towards the future? Buy bonds as was the rallying cry during World War II? Volunteer, enlist? What about sacrifice?

This is a massive spending plan and no one wants to talk about what ultimately will get cut in order to pay for all of this. Now let me be clear here, this is no slam on the president-elect, just a call for a lot more specifics.

(END VIDEO CLIP)

BLITZER: Like a lot of people, Campbell, I take it you were disappointed to a certain degree that in that speech on Thursday, he didn't deliver those specifics. BROWN: Well, I'm not too disappointed because I think they're coming, Wolf. The point to me was -- what struck me about the speech was that in so many ways it was a call to action, a call for Americans to do something.

And in fact, he used language that was very reminiscent of President Kennedy in "ask not what your country can do for you." It was clear that -- to me, that there is going to have to be sacrifice, I mean, given the crisis we're all facing right now.

And there seems to be a willingness on the part of many Americans, a recognition that we are going to have to make sacrifices and a willingness to do it. And you remember that time period after 9/11, when there was a similar moment, when the country was very united in recognizing the need for all of us give something.

And President Bush asked people to go shopping, you know, it never felt like enough, obviously, for so many people. BROWN: And this in many ways seems to me a very similar moment and a real opportunity for this new incredibly popular president to really tell Americans, here's what you're going to have to do. There's going to be suffering in order to pay for all of the spending that I am proposing. Here's what I need from you.

And to be clear, I don't want to slam him too much here, because I do think, very soon, possibly as early as his inaugural speech, we should get some detail, because it's pretty clear that that's the direction he's headed, asking very specifically for sacrifice from people.

BLITZER: I think you're probably right. I think in that inaugural address, we'll hear a lot more about this. All right, Campbell, thanks very much. And to our viewers, remember, you can see "Campbell Brown: No Bias, No Bull" Monday through Friday 8:00 p.m. Eastern right here on CNN.

Don't go away. "Late Edition" will be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: It is true that we cannot depend on government alone to create jobs or long-term growth. But at this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe.

(END VIDEO CLIP)

BLITZER: That was the president-elect, Barack Obama, on Thursday. He rounded out his national security team with key appointments to head the CIA and the national intelligence community, but that was largely overshadowed by the worsening U.S. economy.

Let's talk about that and more with our CNN contributors. In New Orleans, our Democratic strategist, James Carville. In Boston, our CNN senior political analyst and former presidential adviser, David Gergen. And here in Washington, Tara Wall, she's deputy editorial page editor of the "Washington Times." They're all part of the best political team on television.

David, it's so much worse, apparently now, the economy, that only a few weeks ago, and it doesn't look like it's going to get better any time soon, which represents an enormous, an enormous challenge on day one for Barack Obama.

GERGEN: It sure does, Wolf. And we've lost 500,000 jobs a month over the last three months.

But even so, Wolf, in some ways, this gives -- this strengthens Barack Obama's hand with the Congress and with the public. It's so urgent, that it's going to be very, very hard, I think, for people who don't like parts of this package to vote against it, because it's so clear that the economy needs a shot in the arm, and this package is the only thing going.

So I think he's going to get it. I think he's going to have -- I think he's been smart, contrary to Campbell Brown just a few minutes ago, I think he's been smart not to be too specific at this point, because he wants to bring Congress to the table. He wants to listen to them and let their ideas be incorporated as well.

You know, we've seen presidents in the past who have put up very extensive, very detailed packages, and they get picked apart on Capitol Hill and they ultimately fail. This seems to me is a better approach.

BLITZER: You know, James, what was surprising to me -- I don't know if it was surprising to you this week -- was some of the criticism coming in, some of the sniping, I guess that's a fair word, not necessarily from Republicans, that wouldn't be surprising, but from fellow Democrats, especially some in the Senate. Were you surprised by that?

CARVILLE: Yes, I think it was Will Rogers who said I don't belong to an organized political party, I'm a Democrat. No, not really. And I think that the Democrats saw what happened to the Republicans in Congress under President Bush, where they just went into lockstep and they went right over the cliff, and so it's a little bit the last, you know, the last lesson is one everybody in politics remembers.

But I think some of this stuff is normal and to be expected. But as David pointed out, as this news continues to deteriorate, and deteriorate it will, the public is going to like expect them all to sit down and get something, agree on something, get something done pretty quickly here. Patience is going to run pretty thin here, because you know, we're seeing these enormous job losses. People are, you know, 401(k)s hammering down to nothing, and it just doesn't look very bright in the short term. And people are going to really want action here. I think it will be -- I think a lot of people will be forced to do some unpleasant things here.

BLITZER: Is this one of those moments, Tara, after 9/11, when the country rallied around the president, Democrats and Republicans, working together to get the job done? Do you see that happening in these first few weeks of the Obama administration?

WALL: I do see that happening early on, certainly, and I think what you don't want to happen is, as dire as this situation is being described and as serious as it really is, is not using it as an excuse for just out-of-control spending. And what some of the questions that are coming up have been about is, is the accountability, the transparency, the how we're going to pay for it, what are we leaving to future generations? Those are the kind of discussions I think that are going to come forward, and I think that's the accountability the public expects.

But yes, early on, there will be a consensus. There will be works and efforts for bipartisanship. But I think this is part -- I agree partially with James -- this is a part of the sausage making process that takes place. At the same time, I think, though, Democrats are starting -- some of the more liberal Democrats are frustrated at the fact that Obama has been more centrist in some of his positions, and willing to look at things that are also going to help the economy by way of private and small business, not just simply more government spending.

BLITZER: I will tell you one thing, David, and I think you'll agree with me on this, that would pretty much undermine that bipartisan spirit if in fact Barack Obama accepted the advice of Nancy Pelosi, and you just heard her here on "Late Edition," and decided that this year, he was going to go forward and repeal that Bush tax cut that is supposed to expire at the end of 2010, on the wealthiest Americans, those making more than $250,000 a year.

GERGEN: I think that's right, Wolf. There are a couple of things he could do that would really break apart the consensus and drive the Republicans the other way. One would be to try to raise taxes right now on the wealthy. I don't think that's going to happen. I see no sentiment for it within the Obama camp.

The second thing would be a push forward on this unionization card check bill that is really important to the AFL-CIO and to the labor unions in general, but is -- it's just like poison seen by the business community.

My sense is they're going to wait on that in the Obama team. They're going to push it back a little bit, wait until later in the year, because they do see it as something that will break up the consensus.

At this point, they have -- I think to go back to James' point, on the pushback we saw this week from the Democrats, in particular, that was very natural. They had been -- you know, during the Bush years, it was almost as if the Bush White House dismissed Article I of the Constitution, as if Congress was not important. And the Democrats are telling -- and Harry Reid in particular telling the White House -- look, we want a collaborative approach. We are a co-equal branch. If we're at the table, we'll work with you, but don't try to run over us. And I think that's smart.

I think what the Obama people first sent a message to the Democrats late in the week on Friday, saying, if you've got differences, don't go to the New York Times with it, don't necessarily go to the press, come to us. If you've got good things to say, go to the press.

I think you're going to see things calm down a little bit in the next few days.

BLITZER: I suspect you might be right. You know, there was a meeting in the Oval office, James, this week, and we've got a picture of the current president, the future president, the former presidents, they all got together and had an opportunity to talk about what's coming up, I guess, for Barack Obama.

BLITZER: It would have been great to hear what they had to say over lunch. But Jimmy Carter, the former president, he did tell our Jim Clancy this, and I'll play a little clip of what he said after the meeting.

(BEGIN VIDEO CLIP)

JIMMY CARTER, 39TH PRESIDENT OF THE UNITED STATES: I have to say that we spent at least half that time talking about what was happening and what might happen in the Middle East. The only thing I can say is what he said publicly, and that he will take an active role in trying to bring peace to the Middle East very early in his administration and not wait until the last year as was the case with President Bill Clinton and President George W. Bush, they waited until the last year, which is really too late.

(END VIDEO CLIP)

BLITZER: All right. When you hear that, what do you think, James?

CARVILLE: Well, I happen to have gone to the Florida-Oklahoma game with one of those former presidents this week, but I think it was -- I was standing by President Carter's description of a lot of things but from what I understand in very general things, it was pretty productive and a pretty open and frank meeting.

And I think the public likes to see the new president talking to former presidents and, you know, getting some ideas as to what it's like. I think it was overall a pretty positive thing.

BLITZER: I think they -- it's a unique club, you have to admit, Tara, and not a whole lot of members there.

WALL: Well, it is a very unique club. And the former -- both the former President Bush and the current President Bush talked about even as a father/son relationship, you know, having to go to his father at times to talk to him, in ways that he wouldn't be able to talk the others because of that presidential experience.

I think certainly tapping the other more experienced leaders ahead of him, Obama did a very good thing. And I think for them to accept him that way and to give him some of the advice was a very good thing.

At the same time, though, former President Bush also said, look, he doesn't need to hear from us on a consistent basis. He just wants to be -- you know, to get his footing, go forward and be able to listen to the people that surround him. So far he has done a good job. Both -- I think all of the presidents agree that he has done a good job on his selections and now it's time for him to go forward and govern.

BLITZER: David, you're a former adviser to some of those presidents, when you saw that picture, and you know what the enormous challenge is facing Barack Obama right now, what went through your mind? GERGEN: Well, I thought -- among other things, I thought, that's a picture that helps Barack Obama because he looks so much younger. There's a generational change that's coming. Don't you know? There's sort of a sense of vigor coming to the office. I thought that was positive.

I think -- listen, I think overall he has handled his transition very, very well. He has been a de facto president. He has filled in the void on the economic front. I -- with that comes the messiness of governing. And so there have been some hits back at him. There has been some pushback this week.

It has taken a little bit of the romance out of the Inauguration, I think, because it's like he's already at work. He's already acting like he has got his shirt sleeves rolled up. And I think that's what most Americans want.

They don't care about the romance so much as, hey, we really care about jobs, let's get going. And I think that overall this has been very -- worked very effectively with the public. I think he comes in with an enormous groundswell of support around the country for moving forward on the economy.

He's going to encounter a lot of questions about what he's going to do on foreign policy. I think Hillary Clinton is ready to move on January 20th. I think the team is ready to move. The Obama people had very good early sessions with Bob Gates. They're positive about that.

But I think on January 20th, they're going to have their hands full in the Middle East, there is no question about that.

BLITZER: Oh, there is no question about that. Hillary Clinton's confirmation hearings, by the way, start on Tuesday, before the Senate foreign relations committee, and he may look younger than the other presidents, Barack Obama, but he certainly looks older today than he did only two years ago. The job has a tendency to make people age rather quickly, as we all know.

All right. Guys, don't leave, stay with us. We have a lot more to talk about, including the Alaska governor, Sarah Palin, she has some tough talk about her treatment as a vice presidential candidate. Our panel will weigh in on that and more when LATE EDITION continues.

(COMMERCIAL BREAK) BLITZER: We're back. We're talking politics with James Carville, Tara Wall, and David Gergen. They're all part of the best political team on television.

Tara, Sarah Palin, she gave an interview, she is speaking out. I want to play this little clip for you and James and David. Listen to this.

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN, R-ALASKA: I've been interested also to see how Caroline Kennedy will be handled and if she'll be handled with kid gloves or if she will be under such a microscope also. It's going to be interesting to see how that plays out and I think that, as we watch that, we will perhaps be able to prove that there is a class issue here also that was such a factor in the scrutiny of my candidacy.

(END VIDEO CLIP)

BLITZER: I have to tell you, though, as I think you'll agree, Caroline Kennedy has been not getting a pass, certainly not from the New York news media, by any means.

WALL: Well, she certainly -- Caroline Kennedy has certainly had her share of criticism by the media, rightfully so. I mean, I think she had a -- she bumbled her way out of that. She is trying to make amends for that.

But I think Sarah Palin raises a good point about the double standard and -- and the issue of class that was presented. I mean, she was presented as this kind of, you know, know-nothing from nowhere kind of backwards person during the campaign.

And I don't think that was -- you know, I don't think that that was a good characterization of who she was as a governor of a state, no matter where she was coming from. And so it is a legitimate point to bring up.

You know, whether Caroline Kennedy is being handled that same way, she has been criticized mainly because of this idea, is she entitled to this position as opposed to characterizing herself, you know, who she is, where she comes from, and that distinction between the two of those. I think it is certainly a legitimate question.

BLITZER: James, was Sarah Palin given bad treatment? Was she unfairly treated by the mainstream news media?

CARVILLE: Well, first of all, what she said was profoundly silly. A vice president candidate is not going to be treated the same way as a Senate candidate. The person in my lifetime I've seen with the most favorable press coverage is Barack Obama, who is hardly from the upper class. He was raised by his grandmother.

So, furthermore, the press has been -- The New York Times in particular, has been pretty tough on Caroline Kennedy. They did the interview, put it on the front page. They slammed her for not making certain financial disclosures and things like that.

But, you know, I think the country is just worn out on all of this. It's the press this, the press that. I'm not a defender of the press, but it seems like -- it strikes me that we've got a lot more important things in this country to deal with as to whether some perceived egregious thing that the press has based on class.

I just -- I don't buy that at all. And, you know, she couldn't answer the names of the newspapers that she read or where she got information from. I mean, that's hardly anything new in American politics. But look at the way they treated Dan Quayle, who came from a very respected, well-known upper class family. He got slammed pretty hard, too.

WALL: I think the issue is fairness in coverage. I mean, that's the issue overall, our people being covered fairly?

BLITZER: Well, what about that, David?

When you heard Sarah Palin in this interview, this most recent interview -- they released the extended excerpts out on YouTube, did it sound like someone who was positioning herself, perhaps, to run in 2012 for the Republican presidential nomination?

GERGEN: Absolutely. I think she's been positioning herself right through the campaign.

But I want to go back to this class question. I don't think she was treated unfairly because of her class. If anything, she and John McCain and the Republicans tried to glamorize that and make it a strength in the campaign, that she was -- that she did come from average America, that she was out there, you know, killing moose and things like that.

And in the beginning it worked. I mean, you know, that's when John McCain got this huge surge in his campaign.

As it turned out, when you got beyond the surface impressions of who she was -- and she was this fresh face -- she didn't -- her knowledge base was so thin. And that appeared in the interviews with the press.

The press did do its job in asking questions of her about substance, and she came up short. And when people saw that, I think that's when the turn came, in her popularity.

And the press, after that, I do agree, was very tough on her. I think it looked -- because once you start building up a narrative, going the other way, it does get tougher. I think, on that -- she's got a fair point on that.

But, generally speaking, you know, this was a Republican Party that wanted Joe the plumber out there, that wanted to appeal to people on that basis. And they seized upon her class. I think that was one of her -- one of the reasons they chose her.

BLITZER: James, the state of Illinois -- it's got a lot of problems, right now, Rob Blagojevich, the governor, impeached. The man he nominated to become the junior senator from Illinois, Roland Burris, he said this -- he says he's determined to become the senator. I want to play this little clip for you.

(BEGIN VIDEO CLIP) FORMER ILLINOIS ATTORNEY GENERAL ROLAND BURRIS: I'm supposed to be in that seat, working with Durbin, right now, to help our 13 million citizens of this state. And, based on that, I'm ready, willing and able to go to work. (END VIDEO CLIP)

BLITZER: He's coming back to Washington tomorrow to get his job done, I think. Is he going to be the senator from Illinois?

CARVILLE: Well, presumably, he is. I agree with the Democrats at the beginning. I don't think it's good for the country, good for the Democratic Party.

And everybody in the press is praising Blagojevich for being so shrewd in sport and Burris being a part of this. And he probably has his legal credentials in place.

I agree, originally, with Senator Reid and Senator Durbin. It's still very doubtful on this. I think the country can do better, and Illinois can do better than the way this is going, or presumptive Senator Burris, or whatever this is.

I'm -- I'm not very impressed with the way this whole thing is coming about. And I'm not very impressed with his campaign to, sort of, force himself in the Senate.

I think there's a very large issue, here, and the governor is about ready to get impeached. And I think we would all be a lot better off if this task were left to the next governor of Illinois.

BLITZER: He has been impeached. We'll see if he's convicted by the state senate in Illinois.

Guys, we've got to leave it on that note. Thanks to James Carville, Tara Wall and David Gergen.

Bill Cosby shared his thoughts about the impact of Barack Obama on one of the other Sunday morning talk shows. We're going to bring you what he had to say in our very popular "In Case You Missed It" segment. Stay with us. "Late Edition" continues after this.

(COMMERCIAL BREAK)

BLITZER: And now, in case you missed it, let's check some of the highlights from the other Sunday morning talk shows here in the United States.

On NBC, the comedian Bill Cosby was asked about his expectations for the country's first African-American president.

(BEGIN VIDEO CLIP)

BILL COSBY, COMEDIAN: Change; challenge for all of us. I -- I believe he's asking us to be honest. I believe he's asking us to look around and see, in all honesty, what we can do and what makes sense, as opposed to what will go into our pockets or make us feel good or who we can punish.

(END VIDEO CLIP) BLITZER: All right. We're going to have more highlights from the other Sunday morning talk shows, coming up in our next hour. Also coming up, much more of my exclusive interviews with both the vice president, Dick Cheney, and the House speaker, Nancy Pelosi. "Late Edition" continues, right at the top of the hour.

(COMMERCIAL BREAK)

BLITZER: This is "Late Edition," the last word in Sunday talk.

(BEGIN VIDEOTAPE)

PELOSI: Many of us have worked for a long time to elect a Democratic president and a Democratic Congress.

BLITZER: In an exclusive interview, House Speaker Nancy Pelosi weighs in on the challenges facing the next Congress, the auto industry bailout, and the election of Barack Obama as president.

CHENEY: The real tragedy, as I look at it, Wolf, is happening to the Palestinian people.

BLITZER: In a wide-ranging exclusive one-on-one conversation, Vice President Dick Cheney talks about the war between Israel and Hamas, the hunt for Osama bin Laden, and the legacy of the Bush administration.

GOV. ROD R. BLAGOJEVICH, D-ILL.: I am not guilty of any criminal wrongdoing.

BLITZER: Illinois's embattled governor is impeached. We'll discuss the week in politics with three of the best political team on television. LATE EDITION's second hour begins right now.

(END VIDEOTAPE)

ANNOUNCER: Live from CNN in Washington, this is LATE EDITION WITH WOLF BLITZER.

BLITZER: Welcome back to LATE EDITION. In the last hour, the speaker of the house, Nancy Pelosi, told me she would reach across the aisle to her Republican counterparts to build bipartisan support for a sustainable economic recovery package.

In the second part of the interview, she takes a hard line on the kind of purely political, her words, "spending," that has tarnished the reputations of so many lawmakers in the past.

Here's part two of my interview with Nancy Pelosi.

(BEGIN VIDEOTAPE)

BLITZER: At what point do you think the Congress should take up entitlement spending, because, as you know, if you're going to really start dealing with the national debt and deficit spending, you've got to deal with Social Security and Medicare and Medicare? That's the biggest chunk of the Federal budget right there. PELOSI: Well, let me just say this first before we leave the recovery, because it's very important for us to have a recovery of such size that will create 2.5 million to 3 million jobs, that will do it in a way that will be quick, with some speed here, not haste, but speed, and that we will do it in a way that is transparent and has accountability for the American people, again, sensitive to the fiscal impact of it, what it means to our budget.

You bring up another subject that has an impact on our budget, and I believe that this is appropriately the work of the Congress and that we should soon -- we have issues that we have to deal with. This administration has left the country in a sorry situation in terms of the economy, in terms of the war, in terms of challenges to our Constitution.

You name it, they have made -- they have done harm to the country. And we have to dig our way back from that. In the course of doing that, we also have to address the entitlement issue. BLITZER: Do you think that this year? PELOSI: Well, I don't know -- well, we'll see how it pans out. We certainly have to plan for it so that if it's not this year, it's in the course of this Congress. BLITZER: In this nearly trillion dollar legislation that you're talking about right now, can you assure the American people that there will be no pork barrel spending, none of these earmarks, these bridges to nowhere, these phony deals that are going on, that legislators won't be able to bury stuff for their districts, the stuff that has been so highly publicized? PELOSI: I can pledge to you that no earmark or any of that, any description you want to make of it will be in the bill that passes the House. BLITZER: Flat. PELOSI: Absolutely flat out. BLITZER: And you've got -- you think you've got the support? Because, you know, this is the bread and butter for a lot of your members, Democrats and Republicans. PELOSI: There will be no earmarks in the economic recovery package that passes the House. BLITZER: OK. Good to know that. Let's talk a little bit about the bailout of the auto industry. If Chrysler and General Motors come back at the end of March and say, you know what, we need more money. Are you on board? PELOSI: Well, it depends on what they need more money for. As I have said before, we're willing to give them a lifeline so that we can have a viable -- viability is the test, a viable industry, but this is not going to be a life support to keep them alive for a few more months, to use their money to not be viable.

So, but it's my hope that with the decisions that have been made thus far, that they have been able to now get on their feet. I hope that they will use the money that we had in the energy bill for innovation, so that they can be on the forefront of a new era of greatness in the automotive industry in our country, to make them preeminent in the world again.

BLITZER: So you still think the American auto industry has a future? PELOSI: I definitely do. BLITZER: And it's worth investing more of American taxpayers' money to help them get through this crisis? PELOSI: As long as they're on the path of viability. But as I said, it's a lifeline, it's not life support. BLITZER: So in other words, they have to come up with a plan to convince you that they know what they're doing? PELOSI: Well, we insisted on that before any money was distributed before, but now they have to go to the next step. BLITZER: What is it like for you to get ready for the Inauguration of a president of the United States who is an African- American? PELOSI: It is so thrilling that -- it's the combination of so many things. First of all, many of us have worked for a long time to elect a Democratic president and a Democratic Congress so that we could be accountable to the American people with no excuse. This is what we said needed to be done, here are the results. And so I am absolutely delighted that we have a Democratic president, and we had several good ones to choose from in the campaign. BLITZER: And you like the team he has put together? PELOSI: And the fact that Barack Obama also happens to be an African-American for many of us here is so thrilling, it's so thrilling that we have a spirit about us that we are really a part of history in a completely different way. But as important as that is that we have a president of great intellect, with great vision, with great strategic thinking and the ability to attract people to him, to serve, and to attract people to him to support what he wants to do. I like the team that he has put together, yes.

BLITZER: Enough women on the team? Because I'll read to you what Kim Gandy, the president of the National Organization for Women said. "When you are looking at a cabinet and you have such a small number of women in the room when the big decisions are being made, there need to be a lot more women's voices in this administration." PELOSI: We always want more. There is no question about it. And not to minimize Kim's statement, we always want more. I said when I went to my first meeting at the White House as a leader and looked around and saw that I was the first woman in history to be seated at that table, my first thought was, we want more.

We do. But I feel confident that the diversity in the cabinet and among the advisers to the president, who, as you know, are as important in many ways as members of the cabinet.

But today in the House of Representatives, today, Friday, we passed the pay equity bill and the Lilly Ledbetter bill. This means that your daughters' work in the workplace will be respected. That she will -- if our bill becomes law, not receive 79 cents compared to a dollar that a man might make there. So this is our first substantive legislation in the new Congress, and that was to remove discrimination against women in the workplace. And next week we will bring up the Children's Health Insurance -- the State Children's Health Insurance Program.

So we're about children and families and we believe that every issue is a woman's issue, whether it's national security, our national economy, any challenge that our country faces. So sure, we always want more. BLITZER: You've got a tough assignment ahead of you. Good luck, Madam Speaker, thanks very much. PELOSI: Thank you. It was my pleasure. Thank you. And, Wolf, congratulations to you for keeping American informed for so many years on Sunday mornings. I don't know what we're going to do without Mr. Sunday Morning. It comes on earlier in California, but I look forward to seeing you on THE SITUATION ROOM. BLITZER: Thank you very much. You'll have me all week. PELOSI: There we go.

BLITZER: Thank you very much.

BLITZER: And coming up, more of my interview with the vice president, Dick Cheney. You won't want to miss his take on the man who orchestrated the 9/11 attacks, Osama bin Laden.

(BEGIN VIDEO CLIP)

BLITZER: Why haven't you been able to capture or kill bin Laden or Ayman al-Zawahiri, the number two al Qaeda leader?

CHENEY: Well, we have got a few days left yet, Wolf.

(COMMERCIAL BREAK)

BLITZER: In the last hour, we had part one of my exclusive interview with the vice president, Dick Cheney. Now, in part two, he talks extensively about what President-elect Barack Obama has called the new central front in the war on terrorism, Afghanistan.

But I began by asking him about a more immediate subject, the worsening conflict, right now, between Israel and Hamas.

(BEGIN VIDEOTAPE)

BLITZER: Let's move on to foreign policy, a little bit, Gaza, right now. It's a mess, as all of us know.

Hamas was -- correct me if I'm wrong -- democratically elected by the Palestinians. The U.S. supported those elections and certified that they were fair.

So the question is this. Should the U.S. be dealing with the Hamas element of the Palestinian society?

CHENEY: I don't believe so. Because Hamas has been designated a terrorist organization, and it is.

BLITZER: So why did you let them participate in the elections?

CHENEY: Well, remember what transpired here. Israel unilaterally withdrew from Gaza, took out all of their troops, moved out the settlers who had settled there, turned it all back to the Palestinians.

At that point, the Palestinian Authority was nominally in control. Of course, Hamas came in and, in effect, first won an election, but then kicked all the others out.

And then, instead of building Gaza, creating the genesis for a Palestinian state, they turned it into a launching pad for terrorist attacks and, in the next three years, launched 7,000 rockets at Israel. And Israel finally reached the point where they felt they had no choice but to go in and go after Hamas and take down that threat that they perceived to their country.

We have always defended Israel's right to defend themselves against terror attacks. So it's what Hamas did, once they got into office, obviously, that's created the current crisis.

BLITZER: So is there any prospect of a cease-fire, from the U.S. perspective, a truce?

What do you say? Because the U.N. Security Council did pass a resolution, with the U.S. abstaining.

CHENEY: Right. They -- they did pass a resolution. I think we've learned, from watching over the years, that there's a big difference between what happens at the United Nations in their debates and the facts on the ground in major crises around the world.

This is a situation where I think there's not likely to be a cessation of hostility, if you will, until we see the -- Hamas agree to end their terrorist activities and their rocket launches, for example, against Israel; until we come up with a durable, sustainable cease-fire, find a way, for example, to limit the resupply of Hamas by their main supporters, Syria and Iran.

So there's a lot that needs to be done here. The real tragedy, as I look at it, Wolf, is what's happening to the Palestinian people. They're innocent bystanders.

This is not a struggle between Israel and the Palestinians. This is a struggle where Israel is trying to defend itself against what's been designated by many people as a terrorist organization.

BLITZER: Let's talk about Afghanistan, right now. Senator Bob Grant, former senator from Florida, former chairman of the Intelligence Committee -- he says this, right now, and I want to get your reaction: "The Taliban and Al Qaida have relocated, have strengthened, have become a more nimble and a much more international organization. The threat is greater today than it was on September the 11th."

Is the threat from the Taliban and Al Qaida greater today than it was September 11?

CHENEY: Well, first of all, I'd make a distinction between those two organizations. I don't think lumping them together lets you reach the right conclusion on what's happened.

We've had a major impact on Al Qaida. We have captured and killed a good portion of the senior leadership. They are under the gun on a consistent basis.

There was a story in The Washington Post this morning that makes reference to -- to the operations that have succeeded, to some extent, in terms of going after Al Qaida. Al Qaida, I believe, for the most part, has been driven out of Afghanistan. What they have done now is found safe haven and refuge, if they will -- if you will, in Pakistan.

Taliban is still very much focused on the situation in Afghanistan. They operate back and forth across the border from Pakistan. I don't believe that they're any stronger than they were on 9/11, but they're still actively involved.

Now, we've made progress in Afghanistan. We overthrew the original Taliban government that was there that had sheltered Osama bin Laden. We've had a constitution written. We've had national elections. We've got a good start on building up the Afghan National Army.

And so I think we've made significant progress. But we're going to be there for a long time.

BLITZER: Why? Why haven't you been able to capture or kill bin Laden or Ayman al-Zawahiri, the number two Al Qaida leader?

CHENEY: Well, we've got a few days left yet, Wolf. And...

BLITZER: Something happening we should know about?

CHENEY: Well, no...

(LAUGHTER)

... I can't predict that, obviously. We -- we would like very much to -- to capture or kill Osama bin Laden. But I'm -- my guess is, at this point, he's operating in an area that's very difficult, very hard to get to, that he's not an effective leader at this stage; he just can't really engage his organization without coming out of whatever hole he's hiding in.

And the key thing for us, even if we got bin Laden tomorrow, is to take down his organization. And that's what we've been actively doing.

BLITZER: How frustrating is this to you personally, though, that he's still at large?

CHENEY: You know, obviously, I would like to solve that problem. But a much bigger problem, a much more important problem, is keeping the country safe. And we've done that, now, for 7 1/2 years.

In fact, we were able, through our terrorist surveillance program, interrogation program of high-value detainees, the Patriot Act -- all of those steps we took in the aftermath of 9/11, had, I think, a remarkable impact, in that there has not been another mass casualty attack on the United States since -- since 9/11.

That's a great achievement, and I think that's more important than getting any one individual man, although obviously, I'd like very much to get Osama bin Laden. I'm sure the hunt will go on after we leave.

BLITZER: Up next, more of my conversation with the vice president, Dick Cheney. He responds to charges that the Bush administration embellished connections between Saddam Hussein and the 9/11 attacks.

And we also talk about Curveball, the Downing Street memo, and torture. "Late Edition" continues, right after this.

(COMMERCIAL BREAK)

BLITZER: And welcome back to LATE EDITION. In the next part of my interview with the vice president, Dick Cheney, I asked him about his defense some of highly controversial interrogation tactics, including waterboarding.

But I began the conversation by asking about the intelligence reports he received in the days leading up to the 9/11 attacks.

(BEGIN VIDEOTAPE)

BLITZER: Let's go through some of the criticisms that have been leveled against you and the administration. The Presidential Daily Briefing memo that the president received on August 6th, 2001. That's before 9/11. It showed that bin Laden was determined to strike in the United States. The question -- the criticism has been, what did you do between August 6th and September 11th to try to stop bin Laden and al Qaeda? CHENEY: Well, there were a series of policies put in place before August 6th. But the information that came in, in that memo on August 6th... BLITZER: You saw that memo? CHENEY: Yes. You know, I see the PDB every day. And it has been a subject of a lot of debate since. But it didn't provide you with any actionable intelligence. It didn't talk anything about timing. It didn't say anything about targets or where they might strike -- try to strike. None of that information was available. (CROSSTALK) BLITZER: But the 9/11 Commission did say there was -- you know, the FBI knew things about pilots flying, wanting to land but not take off. CHENEY: Well, there were things that had occurred that were the result of problems that were built into the intelligence community that we inherited, that we've tried to address since then. There was, for example, two of the hijackers in California, that one of the agencies, I think the CIA, knew about, but that the FBI didn't know about. There was no communication -- or effective communication between those two bureaus. That's one of the issues that we've addressed since.

So there's no question there were things that needed to be done in order to prevent that kind of an attack. But to say that the August 6th PDB gave us something we should have acted upon is simply not the case. There was not sufficient information there to take any action that would have prevented 9/11. BLITZER: The -- your -- at that time, your chief White House counterterrorism adviser, Richard Clarke, who became a major critic of the administration after he left the government, he said on that night of 9/11, there was a meeting, and the then-defense secretary, Donald Rumsfeld, was there. And then he says this. He says: "And I made the point, certainly that night, and I think Powell acknowledged it, that Iraq had nothing to do with 9/11. That didn't seem to faze Rumsfeld in the least." Was there an immediate sort of knee-jerk reaction after 9/11, you know what, Saddam Hussein has got to go? CHENEY: Well, the question on Saddam Hussein, I think, can be and should be considered separate and apart from 9/11. But if you're talking about whether or not there was any information connecting Iraq to 9/11, initially there was.

The CIA produced the first report that came in, oh, a week after 9/11 that said, in fact, Mohamed Atta had been in Prague, Czechoslovakia (sic), and met with a senior official of the Iraqi intelligence service at that time. BLITZER: And that proved to be false? CHENEY: Proved to be false, but the agency didn't put out a report saying it was false, that it was officially declared false, for several years. And in fact, as late as -- as a year later after 9/11, they were still credibly reporting, or assigning credibility to the report that Mohamed Atta had been in Prague on that date. So we were getting information that turned out not to be true, but it certainly was available at the time. We -- they gave us pictures at one time, photographs that came from the agency of Mohamed Atta, allegedly taken in Prague, and said there is a 70 to 80 percent chance this is Mohamed Atta. BLITZER: So but when you launched the war against Saddam Hussein, did you know then that Saddam Hussein had nothing to do with 9/11? CHENEY: We did not base going after Saddam Hussein on any connection with 9/11. There was a history of a relationship with terror. He had been a prime state sponsor of terror, as designated by the State Department. He was paying suicide bombers $25,000 to their families, to attack Israel. He provided a safe haven and sanctuary for Abu Nidal. George Tenet, who was the director of the CIA, had been before the Congress of the United States saying there was a relationship, a relationship. He didn't say that they were responsible for 9/11, but said there was a relationship between al Qaeda and Iraq that went back 10 years. That's the information we had. So the question of whether or not we went in, for example, because there was some connection between Saddam Hussein and 9/11, that was not our motive. What we were concerned about was that Saddam Hussein was one of the worst actors in that part of the world, that he had started two wars, that he produced and used weapons of mass destruction, that he was a sponsor of terror, that he provided sanctuary and safe harbor for terror.

And we thought he had constituted a significant threat, not only to the governments in the region, but also to us. And based on that, the president made the decision he did. And frankly, I think the world and the United States are better off today, and Iraq, because Saddam is gone. BLITZER: And the charge that you, quote, "cherry-picked" the intelligence to make the case for weapons of mass destruction in Iraq, stockpiles of weapons of mass destruction, the charge amplified in that famous Downing Street Memo, you're familiar with that British memo that Sir Richard Dearlove, the head of British intelligence, came to Washington, returned to London, briefed the British government, and wrote in this memo on July 23rd, 2002, this is before the war. He said: "Bush wanted to remove Saddam through military action justified by the conjunction of terrorism and WMD. But the intelligence and facts were being fixed around the policy." CHENEY: Well, it's not true. And I haven't seen the Breedlove (sic) memo, but I do know that the Senate Intelligence Committee, for example, conducted an exhaustive review of all of the material, especially in connection with the NIE that was done on weapons of mass destruction, the Robb-Silberman Commission did. Everybody came to the same conclusion, that there was no manipulation of the process or pressure brought to bear on the analysts who prepared those reports to in any way change or shape or effect what they reported. BLITZER: How much were your... CHENEY: Every single person who was asked in that process, both of those commissions run by Americans, Democrat and Republican alike, said that the administration had not attempted to shape or alter their reporting. BLITZER: How much of the information, including that sensitive issue of those mobile biological warfare labs that Colin Powell spoke about at the United Nations Security Council, was the result of information or disinformation from that guy known as "Curveball," that Iraqi who the Germans had access to who was saying all sorts of things which turned out to be baloney? CHENEY: What was the question? BLITZER: The question on "Curveball." How much were you relying on his information? I'll read to you...

CHENEY: It was...

BLITZER: ... what the German foreign minister at the time, and Vice Chancellor Joschka Fischer says. He says: "I was astonished that the Americans used 'Curveball,' really astonished. This was our stuff. But they presented it in a way we knew it not to be true. They presented it as a fact and not as a way of intelligence assessment is -- could, but could not be. We don't know." In other words, he was couching it. But he says the U.S. took it as hard fact, what "Curveball" was saying. CHENEY: I -- from our perspective, we were not involved in dealing with "Curveball" or dealing with the Germans on this matter. That's the kind of intelligence that would be fed into the intelligence community. And our intelligence community would deal with that. That is, it wasn't for the policy types to say, well, you know, here's the reporting from "Curveball." I had never heard of "Curveball" until after the NIE had turned sour sometime later. I do know -- for example, I recall very clearly that in March of '03, after we already had troops in Iraq, as we're on the way to Baghdad, we got reporting from our intelligence community, said be careful of the WMD, that when you get close to Baghdad there was every reason to believe Saddam Hussein would use weapons of mass destruction, i.e., chemicals or biological agents against our forces. So it was as late as March of '03 when we were already in there, the intelligence community is still providing us with intelligence, and the commanders in the field in effect saying Saddam has WMD. Now it turned out he didn't have it. It turned out he had the capacity to produce it that he had in the past, probably would have in the future once sanctions were lifted. But he did not have stockpiles. He did not have active programs at the time. The NIE was just wrong. And that happens from time to time. But there wasn't anything the administration did to create that inaccuracy on the part of the intelligence. We did the best we could with what we had. But I still think and would argue aggressively that even knowing what we know now about that NIE, we did the right thing when we went in and got rid of Saddam Hussein. BLITZER: We're out of time, but a quick couple of questions and then I'll let you go. Waterboarding, it was used how many times? CHENEY: It was on three different individuals. BLITZER: And the information you believe that was received was valid?

CHENEY: I do. BLITZER: It stopped -- you stopped using it after, what, 2003? CHENEY: There has not been an occasion since. BLITZER: Why? CHENEY: There has not been an occasion. BLITZER: Is it -- there no need? CHENEY: I'm just going to leave it that way. You know, when we get into talking about the application of specific techniques to prisoners, then we get into the business of signaling to our adversaries what we might or might not do and they can train for it. It has been publicly acknowledged that we did use waterboarding. That we did use it on three different individuals. And I believe it was Khalid Sheikh Mohammed and Abu Zubaydah, and one other, I think al-Nashiri. Those three individual were subjected to waterboarding during the course of their interrogation. But that's it. BLITZER: Because I've always been perplexed, if it is so good and so useful, there are bad guys out there right now, why not continue to use it? CHENEY: Well, you don't use it on somebody because he's a bad guy. What we were attempting to do, and what we did was to persuade these individuals who had a lot of intelligence and information about al Qaeda -- remember, we captured Khalid Sheikh Mohammed in, I think it was, spring, March of '03, in Karachi. At the time we didn't know a lot about al Qaeda. On 9/11 we didn't know a lot about al Qaeda. If Dick Clarke was such an expert, how come he didn't have all of this information about al Qaeda when he was running the counterterrorism program? The fact of the matter is that we were able to persuade them to cooperate, to give us the intelligence we needed, and to give us the base of understanding about al Qaeda, about personnel and operations and financing and geography and so forth that was essential in terms of defending our country against further attacks. Now you don't go in and pull out somebody's toenails in order to get them to talk. This is not torture. We don't do torture. BLITZER: John McCain says it's torture. CHENEY: Well, John is wrong. He and I have a fundamental disagreement on this point. But what the agency did was they sought formal guidance from the senior leadership of the administration, as well as the Justice Department in terms of what was appropriate and what wasn't. And they got that guidance. And they followed that guidance, as far as I know. I have no reason to believe anybody out at the agency violated any tenet of the obligations and responsibilities we have in terms of statutes or our treaty obligations. I think it was done very professionally. I think it was done very few times, when it was necessary. I think it produced good results. I think there are Americans alive today because we used that technique on those three individuals. BLITZER: And if necessary, would you authorize it again? CHENEY: Well, I'm not in the chain of command, but if necessary, I would certainly recommend it again. BLITZER: Waterboarding? CHENEY: Yes.

(END VIDEOTAPE)

BLITZER: And coming up, the interview continues and concludes. The vice president has some words of advice for Joe Biden and some other words of praise for the president-elect, Barack Obama. And later, we'll talk about the new administration with the best political team on television. Stick around, LATE EDITION continues right after this.

(COMMERCIAL BREAK)

BLITZER: The final part of my interview with the vice president, Dick Cheney, he shares some personal highlights from his 40 years in Washington, some advice for the next man to take on number two job in the U.S. government as well.

(BEGIN VIDEOTAPE) BLITZER: Let's end it on a different note. You've been in government for a long time. Looking back, all... CHENEY: Come on now. Don't make it sound that long. BLITZER: Well, you know, I've been coming here for a long time. CHENEY: Forty years. BLITZER: Yes, let's -- what was the best job you ever had in government? CHENEY: Well, I've loved being vice president, obviously, in this particular time. But I look back on my experiences, I also enjoyed very much being secretary of defense, especially during Desert Storm, having the opportunity to work that closely with our men and women in uniform and in charge of some 4 million people. And the other thing, the other period -- well, two other periods that were -- had their -- their own special appeal. One was 10 years in the Congress, representing Wyoming. And the other was signing on with Gerry Ford when he took over the presidency under extraordinarily difficult circumstances and serving as his chief of staff. Those have all been highlights, if you will. They were all very different. I hate to rank one over another, but I've been, I think, extraordinarily fortunate to be able to serve in those positions in those periods. BLITZER: So what -- what's next? CHENEY: Well, I don't have any immediate plans. Giving some thought to writing a book. Haven't made any commitments yet at this point. I will spend more time with the family. We'll split our time between Wyoming and -- our home in Wyoming and here in Washington. We'll continue to have interests here, I guess. Our kids and grandkids all live here. So I look forward to the future. I've been through these transitions out about four times now. And there are always good things down the road that will occupy my time and interest. BLITZER: Do you have one piece of advice for Joe Biden? CHENEY: I -- the most important thing that any vice president needs to know was to understand what it is the president he works for wants him to do. That really will determine everything in terms of the kind of meetings he attends, the policy issues he gets involved in, the kind of assistance or advice he's asked for by the president and others. It's a very different kind of a job from being an executive, running a big organization, or being a senator. You really are there in -- as sort of a combination staff capacity, sometimes surrogate for the president, active in doing all those things the vice president does: fundraising, et cetera.

But the degree of influence you have, whether or not it's a consequential vice presidency, if you will, is going to depend almost solely upon the president and what he wants. BLITZER: And finally, as you leave office, are you encouraged or worried about the Obama administration? CHENEY: I -- obviously, I didn't vote for Barack Obama. I voted for John McCain. I'm a Republican, a conservative. He's a liberal Democrat. On the other hand, I have the same feeling that I think many Americans have, that it's really remarkable that -- what we're going to do here in a few days, is swear in the first African-American president of the United States.

When I came to town in 1968, we'd had the Martin Luther King assassination, Bobby Kennedy assassination, riots in the cities, major, major disturbances, a lot of it racially motivated around the country. And in fact, things have changed so dramatically that we're now about to swear in Barack Obama as the president of the United States.

That's really a remarkable story and I think a record of tremendous success and progress for the United States.

BLITZER: Pretty historic, pretty exciting.

CHENEY: It is.

BLITZER: Mr. Vice President, thanks very much.

CHENEY: Thank you, Wolf. Enjoyed it.

BLITZER: Thank you. I did, too.

(END VIDEOTAPE)

BLITZER: And as the vice president just said, we are witnessing a period of unprecedented change, here in the United States. So what can we expect in the immediate days to come, not only in this historic inauguration but in the first 100 days of the Obama administration?

Three of the best political team on television -- they're standing by, live. We'll assess the week's events. We'll look ahead as well. "Late Edition" continues after this.

(COMMERCIAL BREAK)

BLITZER: Welcome back to "Late Edition." I'm Wolf Blitzer in Washington. A lot happening, right now, so let's get to three of the best political team on television.

Joining us, our chief national correspondent John King, our senior political correspondent Candy Crowley, and our senior political analyst Gloria Borger.

Gloria, I want to play a little clip of what Barack Obama said on Friday, because it indicates he's open to new ideas. Listen to this.

(BEGIN VIDEO CLIP)

OBAMA: One of the things that I think I'm trying to communicate, in this process, is for everybody to get past the habit that sometimes occurs in Washington of whose idea is it; what ideological corner does it come from?

Just show me. If you can show me that something's going to work, I will welcome it.

(END VIDEO CLIP)

He was responding to some of the criticisms he's been getting from some fellow Democrats.

BORGER: Right.

BLITZER: He got slapped, a little bit, on some of his ideas.

BORGER: He got slapped a lot. I mean, his advisers went to Capitol Hill. They got an earful from Democrats, saying, you're bending over backwards too much, giving corporate tax cuts to the Republicans; we want some more jobs programs in the stimulus package.

And Obama is saying, look, you know, we're starting from zero here, and if you have a great idea that I think can work, just bring it to me and we'll -- we'll deal with it.

I'm not quite sure how many great ideas he's heard. But that's what he says.

BLITZER: And he's leaving a lot of the details -- and the devil is in the details of this $700 billion or $800 billion recovery plan -- open, right now. Presumably, members of his own party are going to weigh in.

CROWLEY: Absolutely. Look, they're going to move the figures around. But the broad overview of this package -- I mean, here's the figure you have to keep in mind: Barack Obama's popularity. That's what moves Capitol Hill. He's going to get much of what he wants.

And when he says, oh, I'm open to all; let's have this discussion, he wants a quick discussion. That's the...

(LAUGHTER)

... that's the key here -- sure, tell me, but then let's move on.

BLITZER: And he's already saying, John -- and you and I remember Bill Clinton had to scale back, after he was elected, some of those campaign pledges.

He's already saying, you know what, I might not be able to do, right away, everything I promised during the campaign.

KING: A dramatic effort, and a smart effort, to lower expectations, because you're right. He promised so much during the campaign, health care reform right out of the box, these climate change initiatives, including the green jobs.

And he realizes he has a huge economic problem, a hole of gigantic proportions that he has to fill in first. And it's going to take money, time, and political capital away from all those other things he promised. So he has these supporters, out there, who have been waiting, now, nine of the 10 weeks since the election, saying, when he takes his hands off the Bible, what's going to change?

And he's trying to say, this is going to take a lot of time. He's also, by that "I'll take any idea," trying to bring some Republicans, Democrats into the table, too.

Because, look, he has great popularity, as Candy said. But once you drop that "elect" and he's President Obama, then it's his economy; it's his unemployment rate. And he will start getting the baggage that every president does when people get mad.

BORGER: But what his folks are telling Democrats is, look, it's good for all of you and it's good for us if we pass this stimulus package quickly and if we have a lot of Republican votes with us.

They just don't want two or three Republicans. They want to start out with a real bipartisan package so that they can set the tone.

And so they're telling Democrats, you know what; you may not get all of what you want this time, but we have a lot of other things coming down the road; we've got health care, for example.

BLITZER: When the speaker of the House raised her hand in that interview I did with her, like this, her right hand, and said, there will be no earmarks, none of that pork-barrel spending, in this new economic recovery plan -- can she deliver on that?

CROWLEY: Well, did you ask her for a definition?

(LAUGHTER)

I think that's where we're -- I think that's where we're headed. What is pork-barrel? Is this a museum in Las Vegas? Or, if that is put into the bill, that, by definition, is not an earmark.

So the question is, will there be things in there that people question? Yes. Will, in the dark of night, someone slip in their favorite road project? No. Because that's a totally different thing.

But I think we're going to look at this and go, well why do they really need this? So everybody's projects are going to look more important or be sold as more important than the other guy's.

BLITZER: And, you know, I don't think we can overemphasize how dire this economic situation is, right now. The unemployment numbers went up to 7.2 percent, the highest in 16 years; more than about 2.5 million jobs lost, last year alone.

KING: And there are economists saying it could go as high as 9 percent before it starts to get better.

So Barack Obama, for all his popularity, for all the good will, even from the vice president, the conservative vice president you just interviewed, who disagrees with a lot of his policies; good will across the country, knows he's in for several -- six, probably, at a minimum -- tough months, from an economic standpoint.

And at some point, whether it is the president's fault or not, he begins to take on the responsibility for that. And I think that's why Barack Obama's trying to lower expectations, bring people in. CROWLEY: I think he gets a longer -- I think he gets a longer honeymoon than most get.

BORGER: Absolutely, absolutely.

CROWLEY: I think he gets a benefit of the doubt. And, honestly, he's been drawing the (inaudible) because, in addition to saying, holy cow, this is a terrible situation -- I mean, it's almost this, kind of, Armageddon talk that he's been doing this whole week.

There's also, oh, and by the way, a trillion dollars of that deficit isn't my fault. So, I mean, I think you're -- he's buying time, here.

BORGER: And he may take this -- you know, out of crisis comes opportunity. And they're thinking, well, you know, as long as we're not paying so much attention to the deficit this year and next year, why not go for it all; why not do what we -- what we want to do on health care, on energy, get it done, and with the understanding that, two or three years down the road, we're going to have to start paying for this...

BLITZER: But if he wants to deal, Gloria, with the deficit, the national debt, he's got to deal with those entitlements, Social Security, Medicare, Medicaid.

BORGER: And this is the opportunity. This is the opportunity. Because everybody understands, right now, we don't have the money. So this is what you call a teachable moment, here, right, for Barack Obama and the American public. We can't keep these entitlements...

(CROSSTALK)

BLITZER: Hold on, John. Because we're on a transition, here on "Late Edition," to a new show that starts next Sunday morning at 9:00 a.m. Eastern.

Tell our viewers. You came up with a name.

KING: "State of the Union" is our name.

KING: It will start at 9:00 a.m. And I was in bed at 9:00 a.m. this morning watching the early shows, thinking, what idiot agreed to be on television starting at 9:00 a.m. next Sunday?

We're going to have four hours of real estate, including Howie Kurtz's "RELIABLE SOURCES" program will be part of it. And we're going to do many of the things you have done best in your more than a decade here at LATE EDITION: have the big newsmaker interviews and have the analysis with our great colleagues. One of the things we want to do that's a little different is get out in the country as well. So as we try to teach the country about what is going on in Washington, sometimes we are going to teach Washington about what people are thinking out in the country. This past week I was in a community in South Carolina.

BLITZER: And you'll have one of those little magic things to show what the state of the union is, is that what you're saying?

KING: We're going to build our magic wall from the campaign right into the set in the studio here with the construction under way. Our first show will be really mostly about the inaugural. It will be at the Newseum. Every other week we'll sometimes go out on the road with the show itself. But I'll travel just about every week and we'll be in the studios here most of the time.

And we're going to use our technology. We're going to use our people. And I'm going to use my feet and get out of Washington on occasion and just try to do a lot of what we did in the campaign.

Yes, cover Washington, do the big newsmaker interviews. But remember that we sometimes speak a different language than the people out in the country. So let's go talk to them and see what they think on these very questions.

Are they tired of Barack Obama? Do they think he is doing the right thing? Do they have the patience? And how's the economy in the town where they live? We're going to try look at it that way too.

BLITZER: And we wish you only, only the most success. Good luck, John.

Gloria, I'm sure you'll be joining John on stage. You'll be in ""THE SITUATION ROOM" with me as will Candy Crowley, guys. All of you, the best political team on television.

BORGER: And you'll be sleeping in, Wolf.

BLITZER: I'll be watching. I'll be watching.

Up next, the economy was the number one issue for the president- elect on the -- one of the other Sunday morning talk shows today. We're going to show you what he had to say in case you missed it. That's coming up next.

(COMMERCIAL BREAK)

BLITZER: And now in case you missed it, let's check some of the other highlights from the other Sunday morning talk shows here in the United States. On ABC, the president-elect, Barack Obama, spoke about pulling the country out of the current economic mess.

(BEGIN VIDEO CLIP)

OBAMA: I think we can fix it. But it's going to take some time. It's not going to happen overnight. And what we tried to do this week was, first of all, explain where we are in the economy.

What we tried to do was put forward a plan that says, let's act boldly, let's act swiftly, let's not only provide a jump-start to the economy and immediately create or save 3 million jobs, but let's also put a down payment on some of the structural problems that we have in our economy.

(END VIDEO CLIP)

BLITZER: On FOX, President Bush and his father, the former president, shared their reflections.

(BEGIN VIDEO CLIP)

PRESIDENT GEORGE W. BUSH: I'm proud of the accomplishments of this administration. I'm thankful for the people that have worked so hard to serve our country. I know I gave it my all for eight years. And I did not sell my soul for the sake of popularity.

And so when I get back home and look in the mirror, I will be proud of what I see.

GEORGE H.W. BUSH, 41ST PRESIDENT OF THE UNITED STATES: He has been tested unlike any other president with this 9/11. So he passed the test.

(END VIDEO CLIP)

BLITZER: Highlights from some of the other Sunday morning talk shows here on LATE EDITION, the last word in Sunday talk. When we come back, I'll share some final thoughts about a remarkable 11 years of hosting LATE EDITION.

(COMMERCIAL BREAK)

BLITZER: This final word about LATE EDITION. It all began back on October 3rd, 1993, when my friend Frank Sesno began anchoring the last word in Sunday talk. He turned that responsibility over to me on January 18th, 1998. Now, 11 years later, it's time to move on. I've loved every single minute of LATE EDITION. I'm very proud of what we did.

From day one, I have to tell you I was blessed with a really great team. Rick Davis, Sam Feist, Pam Stevens, they were all there at the very start and they helped me understand this special world of Sunday morning television.

Lucy Spiegel, she has been with me throughout these 11 years, has been a really solid source of support. There she is. In more recent years, Ted Metzger, he has been rock steady in making sure we do a serious and smart and watchable program.

I don't want to forget my world class technical team, among them, the best in the business, Reza Baktar and Dan Taylor. And finally, over these past eight years, my executive producer Linda Roth. She has been with me every single step of the way. There she is. Never, ever letting me down. Never letting our viewers down. You may not see her, but I can assure you, you have felt her presence.

As I said, I've been blessed with a truly, truly great team. And so for the last time, that's your LATE EDITION for this Sunday, January 11th. Next Sunday at 9:00 a.m. Eastern, the premier of "STATE OF THE UNION WITH JOHN KING." A special Inauguration preview.

Don't forget, I'm not going away. I'll still be in "THE SITUATION ROOM," 15 hours of live television a week. I'll see you tomorrow in "THE SITUATION ROOM." Thanks very much for joining. I'm Wolf Blitzer in Washington. Until tomorrow.

"FAREED ZAKARIA: GPS" starts right now.

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