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STATE OF THE UNION WITH JOHN KING

Attempted Bombing of a Northwest Airlines Jet

Aired December 27, 2009 - 11:00   ET

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


CROWLEY: This is CNN's "State of the Union" report for Sunday, December 27th. I'm Candy Crowley. John King is off.

We are following developments on several fronts this Sunday morning, involving the Christmas Day attempted bombing of a Northwest Airlines Flight 263.

Joining us with perspective on all the angles of this story, CNN's senior White House correspondent Ed Henry. He's traveling with the president in Honolulu. Here in Washington, CNN Pentagon correspondent Barbara Starr and CNN national security analyst Peter Bergen.

Ed, I want to start with you because there's some new information coming from the Obama administration.

HENRY: Well, that's right. Good morning, Candy.

You know, obviously, when you have Robert Gibbs, the White House spokesman, coming out on these Sunday talk shows and saying they're now going to have a review of these watch lists and the procedures; why wasn't this suspect -- you know, officials tipped off that maybe this suspect could be up to something? They want to also have a review of all the Transportation Security Administration's procedures that have been put in place in recent years.

Part of that is just getting ahead of some of their fellow Democrats on Capitol Hill, finally. They really had no choice, when you have Democrats like Jay Rockefeller already saying that, very early in January, when Congress gets back together after the new year, they're going to start holding hearings. They're going to find out, how did this person get these explosives on to this airplane?

So there is certainly a lot of troubling questions. The administration was a bit on the defensive this morning. And I think this announcement from Robert Gibbs and other officials like Secretary Napolitano is an attempt to, sort of, push back and get ahead of what is going to be some tough hearings ahead and some tough questions about what went wrong here.

CROWLEY: Let me bring you all into this as well.

It does seem that every time some incident happens, and luckily no one was fatally wounded in any of this, although there were some wounds. We're always reviewing everything. And you, kind of, wonder why aren't they reviewing -- isn't there, like, an office of reviews some place where these people could be looking at things exactly like this?

Why -- why does it always take something like this?

BERGEN: I think it is just human nature. I mean, it's closing the barn door after the horse left, right? That happened after 9/11. We only reinforced cockpit doors after 9/11.

If this plane had gone down, you know, we'd be doing a lot more things. In fact, it would be very hard, very onerous to get on a flight anywhere because you'd be either looking at a full-body, including cavity searches, by the way, or you'd be looking at puffer machines all over the world, which are very expensive and difficult to maintain.

So, you know, there will be changes. But they could have been much more extreme.

CROWLEY: So, Barbara, one of the angles we haven't actually looked at, at this point, is the military. When something like this happens, are there -- you know, are there troops put on alert in any way, shape or form?

Is more attention being paid to countries like Yemen, Ethiopia, Northern Africa?

STARR: Yes. I've got to tell you, this is the place where the U.S. military and the CIA, the U.S. intelligence community, has been terrified, I would say, for weeks and months that something like this might happen.

This is the new silent war on terror across North Africa and across the Horn of Africa. I think most of our sources will say, and they have been saying for some time, Al Qaida has moved beyond the 9/11 Al Qaida just in Afghanistan, just in Pakistan. They have spread out.

Yemen, for months now, has been in the crosshairs of the U.S. intelligence community and the U.S. military. There have been air strikes. There have been commando operations, off and on across North Africa and the Horn of Africa, troops on the ground trying to go after this Al Qaida network in Africa and especially in Yemen.

General Petraeus has said for months now, Yemen is the new headquarters of Al Qaida in the Persian Gulf. And worries just could not be at a higher level about it all.

CROWLEY: And so what is the military role? Like, if you look at as place like Yemen -- we were talking earlier with Peter. He said they're pretty much are doing a lot of things already in Yemen.

Is there some next step that they're looking at? Or is this just worry? STARR: Well, there is a covert war going on that is not acknowledged by the Obama administration. News reports for the last several weeks have talked about air strikes in Yemen. No one will say whether those air strikes were launched by the Yemenis or covertly by U.S. warplanes or U.S. unmanned drones. But they have gone after several Al Qaida targets in Yemen. And what the focus now is to try and get the Yemeni government to really step up and go after these networks.

And why is that? It is because Yemen is becoming a failed state. There's a rebellion in the north. There's a rebellion in the south. And the government of Yemen barely controls its own country. If you look at the map, Somalia is on one side; Saudi Arabia on the other side. It's a target-rich environment for Al Qaida.

And this incident, whether this Nigerian man really was tied to Yemen or not may be irrelevant. What it demonstrates is Al Qaida in Yemen has the ability now to reach out and touch.

CROWLEY: And we -- following on what Barbara has just said is that we've talked a lot about, OK, here's what we're now going to do, in terms of homeland security here in the U.S. I've got to assume that the administration is probably also looking at our policy toward Yemen, our policy toward northern Africa. Is that kind of diplomatic, military reassessment going on, do you think?

HENRY: Absolutely. And in fact, in recent weeks they have been stepping it up, as Barbara notes, is that, you know, one of the things this morning that the administration is trying to tout is that they have been taking out Al Qaida leaders in Yemen, in Pakistan, all around the world.

And this gets back to the campaign, as you well know, when Barack Obama as a candidate kept saying he could wage a smarter war on terror, and that you didn't have to do it the way George W. Bush was. And so they seem to be targeting areas where they're going after these leaders. And they think they're getting some success.

Nevertheless, there still is the question, you know, as to whether or not we are safer. And after this incident, there are certainly going to be Americans wondering how these explosives got in and how close we did come to a horrific attack.

As you noted, thankfully nobody had a major injury. No one died. But this could have been a horrific tragedy on Christmas Day.

CROWLEY: (inaudible) are we safer?

BERGEN: Are we safer? Look, I mean -- let's accept that Major Hasan was probably a jihadist terrorist, motivated by jihadi ideology. He killed 13 people. That's really the only significant terrorist attack that has happened since 9/11.

So, yes, I think that, you know, a lot of things have changed since 9/11 to make us safe. But eventually somebody is going to detonate a PETN bomb on a commercial jet unless you change the way that global aviation conducts business. And then we'll say, well, we're not safer. So they go in, sort of, waves. STARR: You know, I think it's a gamble. By all accounts, there's limited resources. We have spent, as a country, billions of dollars in Iraq and Afghanistan over the last eight years. Can insurgents in those countries, again, reach out and touch the United States?

Can they attack in the United States?

Who in the Al Qaida network or the Al Qaida-inspired network or motivated network, the lone Al Qaida operative -- who can really reach out and touch the United States and conduct an attack against U.S. interests?

And that's what's so concerning about this. Lone operative or not, he was able to do something. It didn't work, thankfully. But that's now the concern.

The question may be, for the White House, is, do they need to rebalance? You know, hard as it is to say, is the war in Afghanistan and the war in Iraq -- is that now something to be wrapped up and move on to where Al Qaida may pose a different threat in the world?

CROWLEY: We'll talk to Ed Henry about that when we come back with Peter Bergen, Barbara Starr, Ed Henry, right after this break.

(COMMERCIAL BREAK)

CROWLEY: We are back with CNN's White House correspondent Ed Henry, CNN's Pentagon correspondent Barbara Starr and our terrorist analyst, Peter Bergen. Ed, I promised right before the break, Barbara was talking about how is there some recalibration needed here in terms of where the U.S. puts its resources, monetarily, diplomatically. Is it really Afghanistan now? Should more attention be put on Pakistan, be put on Yemen, Somalia, all the places that we talk about as sort of the areas that are brewing terrorism? Do you sense that the administration is now looking at what eventually are going to be limited resources saying do we need to back this up a little and move elsewhere?

HENRY: Yes. I mean Barbara is exactly right. In fact, this was playing out, I'm told, by top aides in recent months as the president weighed whether to send more troops to Afghanistan. That argument from Vice President Biden and others about can we continue to pour more resources into Afghanistan and also Vice President Biden behind closed doors was very firm in saying that as you put more into Afghanistan, you have got to put more into Pakistan.

What we put into Pakistan relative to Afghanistan is a fraction in terms of U.S. aide, in terms of manpower along the border in terms of dealing with al Qaeda and others. And so that did play out behind the scenes. This administration would argue and is arguing I can tell you right now behind the scenes that they're already recalibrating by pulling out of Iraq.

And that is on schedule for them to be out in the months ahead and so they believe we'll be spending obviously a lot less money in Iraq. Clearly, the president has stepped up the resources, however going to Afghanistan. He says he's going to be recalibrating there in 18 months. Obviously, that still remains to be seen. But they think they're heading on the right path. We'll see.

CROWLEY: One of the things when we were talking earlier with a former FBI expert, he said there just are not the resources that he believes are needed to be in places like Yemen to say here's how you go after these guys. Give them -- giving them guidance if not more than that. That there aren't enough of them. And that they don't have the money to do what they need. Do you hear those complaints? I should ask you if you see it on the ground.

BERGEN: I mean, you know, I -- that was Tom Fuentes who made those points and obviously he was in charge of that program. I think everybody says we don't have enough resources to do the job that we've been given to do. That is a fairly common statement.

CROWLEY: You say that at CNN.

BERGEN: Well, we say that at CNN, yes. But I did want to make a point, Candy, that I believe that this is al Qaeda. And I believe it's al Qaeda for two reasons.

PETN, which is the kind of explosive that was used is very rarely used in terrorist attacks. And I can only think of three. One was Richard Reid, the so-called shoe bomber. Another one was a recent attempt to kill the deputy interior minister in Saudi Arabia, who is a main al Qaeda target because he's in charge of counterterrorism.

Prince Muhammad bin Naif, on August 28th, the guy came in saying he was willing to surrender. He secreted in his underwear, very similar to the case on the Northwest flight. Was PETN, he detonated, he killed himself. The prince narrowly survived the assassination attempt. This bomb and the prince assassination was assembled in Yemen. And according to the federal complaint against the gentleman who tried to blow up the Northwest flight, he has told investigators that he was given the device in Yemen.

So it's the same type of bomb making material. It is the same modus operandi in terms of concealment and the bomb was assembled in Yemen. That all says to me that al Qaeda in Yemen was behind this, maybe even the same cell, maybe even the same bomb maker. This is not something you just cook up with the Internet recipe. This is military grade explosives.

CROWLEY: So if you -- I mean can you tell us in terms of how a connection would work? Is this something like he'd be in Yemen and there would be al Qaeda leaders and they would say, OK, here's what you need. We're going to give you these chemicals. You need to get on this flight on this day and as they did at 9/11, they had a specific day. Or is this kind of when you can, we need you to get on a flight? I mean, how specific are the directions?

BERGEN: Here is what I think happened. He was -- he attended university in London. There is no country in the world, western country with more al Qaeda sympathizers and plots than the United Kingdom. He became radicalized at college in the United Kingdom, a story we have seen many times before. He then decided to go to Yemen, against the advice of his family.

He is already in contact with people on the fringes of al Qaeda. They see this guy as a good recruit. He speaks English. He has a multiple entry visa to the United States. That's not an easy thing to get and they just give him the materials.

We know from our correspondent in Lagos that he books the flight on the 16th of December. Very interestingly, the day after an al Qaeda -- the al Qaeda affiliate in Yemen releases a videotape saying a very generally, we're putting a bomb that's going to attack the United States or the west in general.

And this sort of thing, you don't really notice because there are so many of these kinds of threats. But the day after this guy booked his ticket for the United States, the al Qaeda affiliate in Yemen says we're going to do some kind of bombing against our enemies. And I think as the investigation goes forward, people will be looking at that tape very carefully.

CROWLEY: Ed, let me ask you because obviously Peter knows whereof he speaks because he has been covering this sort of thing for a very long time. Does the White House see this same sort of connection and possibility so clearly?

I think the other thing I would add to that mix is just that it happened on Christmas Day which is a fairly major Christian holiday. And it seems to me that it was -- that the day that it was picked was for maximum exposure and maximum impact. Do they see a connection there? We talked to Napolitano. She was very, well, we're letting the investigation go forth. What you are finding out from your sources?

HENRY: That's what I'm picking up as well from the White House. I mean, with good reason, in part because this investigation is still playing out. And Peter was pointing out based on his experience what sort of his educated guess or, you know, at least sort of the scenario he's playing out.

But I believe obviously he would acknowledge that this investigation, there is still more that has to come out. And what White House officials are saying is when people first get arrested, like this suspect and starts saying, look, al Qaeda did this. They told me to do that. People say all kinds of things after they've been arrested. It may or may not be true.

Nevertheless, you know, the White House says one job to sort of be cautious, let the investigation play out as Peter points out. When you look and you start putting the pieces together, there certainly is a lot of circumstantial evidence that would point you towards al Qaeda. But obviously the White House has a higher responsibility to be careful and let this investigation play out, Candy.

CROWLEY: Barbara, do you hear talks from your sources about what they think this was, whether it's got these kind of earmarks? STARR: You know, what people tell us is whether this man was al Qaeda affiliated or al Qaeda inspired, this is the new al Qaeda. It is the individual operations. Al Qaeda, again, they don't need any more to do the mess because it will be very hard for them, attack as they did on 9/11. The world is fairly protected against that sort of thing.

But if they can send out these lone operatives, they did it in London, they did it in Glasgow, they did it here. These people that are inspired or motivated by al Qaeda, this is the kind of target that they're going after. And this is what is so hard.

Are you going to send the U.S. Army after, you know, an individual jihadi who is determined as a single lone person to conduct an attack? Life doesn't work that way.

STARR: This new war is about intelligence gathering, covert operations, training operatives, training intelligence forces in these other countries like Yemen and Pakistan to try and go after these networks, it's not something that the U.S. is going to be able to do alone.

CROWLEY: Barbara Starr, Peter Bergen, Ed Henry, stick us with, because we have a lot more to discuss with our panel. STATE OF THE UNION will be back right after this break.

(COMMERCIAL BREAK)

CROWLEY: We are back with CNN's Ed Henry, Barbara Starr, and Peter Bergen. Thank you all so much. I want to play you something first that Janet Napolitano said earlier in an interview we did with her.

(BEGIN VIDEO CLIP)

CROWLEY: If he was not improperly screened or properly screened and, yet, you want Americans to feel safe on the planes, and so if he was properly screened and got on anyway with that, it doesn't feel that safe.

NAPOLITANO: Well, you know, it should. This was one individual, literally thousands that fly and thousands of flights every year. He was stopped before any damage could be done.

(END VIDEO CLIP)

CROWLEY: So, Ed Henry, I'm thinking this is probably not the White House message today, that, you know, he was stopped before anything was done. But the truth is, he was stopped by passengers on that plane. What is the message the White House wanted out today?

HENRY: Well, I think they were trying to reassure the public by putting the homeland security secretary out there. But one question really hanging over the administration today is why the president of the United States has not said a word about this publicly yet. You heard Peter King, the Republican congressman, in recent days saying that that it's an abdication of leadership. That he himself should be reassuring the public. And Robert Gibbs pushed back a little bit today saying, why do we have to make terror a political game? Make it non-partisan. Stop the back and forth. And that is a fair point. But on other hand, I think Peter King raises a fair point about the fact that in a crisis, and here we had a situation where over 200 people could have been and came close to being killed on Christmas Day, that is normally something where you expect the president of the United States to step forward and reassure the public.

I know from covering George W. Bush, he certainly would have been out there. This White House pushes back on that pretty hard, saying, they have a much different style from the past administration. That was certainly fought out in the campaign. It is a different approach.

But you have to wonder whether that exchange you just played really does reassure the American public. And maybe it would have helped to put out the president for a short statement the last couple of days, just telling the public we're on top of this.

CROWLEY: And let's get real, we can't stop -- an individual person who is a step ahead of whatever the government is doing or trying to protect against can get on a plane. So in reality, she's -- that's truthful. This is one individual. But was there a failure here? Was there a failure of screening? Or was this just, it happens?

BERGEN: This was not a failure, unfortunately. This is what happened because the only way to have detected this was to do a full body and possibly cavity search of this guy or to put him through some kind of imaging machine that would have shown the device. But those devices don't exist at most airports.

And they certainly -- what happened at Amsterdam is he probably went through another metal detector and some small level of level of search. But this is plastic explosive, it's not going to show up.

CROWLEY: But what about watch lists? I mean, should he have been watched more carefully? Or do we not have enough information at this point?

BERGEN: You know, the problem about the watch list is there is a no-fly list of which is about, let's say, 50,000 people. So you cannot get on a flight. There are watch lists that involve 500,000 people. He was on some form of a watch list.

But that doesn't mean that you're necessarily barred from a flight. It might mean that you'll get selected for secondary screening. That didn't happen, clearly. So that may be where the problem is.

STARR: I just wanted to mention, we came back a week ago from Kabul and Dubai. And our CNN team, everybody on the planes we flew on got a considerable pat-down, I might say. Very thorough, every piece of baggage opened and searched. And, still, these things do happen.

I think that what remains to be seen here is something Peter was talking about which is the forensics of the device. What kind of detonation? What kind of initiator? Exactly how big was it? Could it have, in fact, theoretically punctured and got into the fuel tank and exploded this plane and made the plane come down if it had all worked?

That will take all of this to a considerable new level if, in fact, this could have been a functioning device that would have brought the plane down and it only malfunctioned because this man was unable to detonate it appropriately.

But I wonder, just as a tax-paying American citizen here, if the message is, when I go on a plane, when all of us go on airplanes, are we individually now responsible for keeping an eye on our fellow passengers and if we see them doing something suspicious, taking them down? That's a new chapter in American history if that is the way it's supposed to work.

CROWLEY: Well, it is. And I must say there have been instances, one of them on 9/11, that obviously did not end well, of passengers taking over. Because in the end, that's what you do. If there is no one else around. There is no U.S. marshal on this plane. And so somebody has to move.

Peter, I wanted to ask you a question on a slightly different line. And that is, this is not -- if this indeed is an al Qaeda -- there is an al Qaeda connection, this young man doesn't fit, I think what people's stereotype is of an al Qaeda member. And that is punished by poverty. A lot of disenfranchisement. This was a rich young man who grew up quite privileged. What is the -- what's the reality of what al Qaeda is?

BERGEN: Well, typically a lot of the recruits in al Qaeda and the leaders are quite prosperous individuals. And, in fact, terrorism through history has tended to be a bourgeois endeavor. Poor people have other things on their mind. But middle class people, you know, have the leisure, you know, to head revolutionary movements and al Qaeda is no different.

After all, it's headed by the son of a Saudi billionaire, the number two is an Egyptian surgeon. Mohamed Atta, the operational commander on 9/11, he speaks four languages, he had a Ph.D. from a German university. So this guy...

CROWLEY: But these don't tend to be the people that blow themselves up, right?

BERGEN: Well, I mean, Mohamed Atta did commit suicide on 9/11. The leaders, you know, have not committed suicide. But so this guy, the fact, look, he's a guy, he has gone through a very prominent English university. He studied mechanical engineering. This is a very common degree for terrorists.

Ramzi Yousef, the first Trade Center attacker, had a degree in engineering from England. Khalid Sheikh Mohammed, his uncle, who was behind the 9/11 attack, had an engineering degree from a North Carolina university. You know, speaks good English, educated, comes from a prosperous background. This is not untypical.

On the other hand, we've seen very different things.

BERGEN: Najibullah Zazi, who we haven't talked about so far today, the Afghan-American who looked like he was planning bombs made out of hydrogen peroxide in Manhattan -- here's a guy who's a high school, kind of, dropout. He was -- you know, he was an airport limo driver.

So, you know, there's no particular profile. But the idea that rich people won't be involved, that doesn't make any sense.

CROWLEY: All right. CNN terrorism analyst extraordinaire, Peter Bergen, thank you very much. Our CNN Pentagon correspondent Barbara Star. Ed Henry, have fun out there in Honolulu. Thank you very much for joining us.

(LAUGHTER)

HENRY: Thanks, Candy.

CROWLEY: Coming up, we'll look at the top stories this hour, including the latest on the violent clashes between security forces and protesters in Iran.

(COMMERCIAL BREAK)

CROWLEY: I'm Candy Crowley and this is "State of the Union." Here are stories breaking this Sunday morning.

President Obama has ordered a review of airline security screening procedures after Friday's attempted terror attack on a U.S. airliner.

Homeland Security Secretary Janet Napolitano says, at this point, there's no indication the botched attack is part of a larger terrorist plot.

The suspect has been charged with trying to destroy a Northwest jet by igniting a small explosive in his lap.

Tension's running high in Iran, where a massive police crackdown is under way. Hundreds are patrolling the streets of Tehran, to try to put down anti-government rallies that have cropped up during a major religious observance.

An opposition Web site says three people were killed in the fighting, but Tehran's police chief denied it.

Those are your top stories here on "State of the Union."

Coming up next, John King, Mary Matalin, and James Carville tackle the best "Sound of Sunday" from the year. You can only see it here on CNN, and we'll be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

KING: Hundreds of government officials, politicians and analysts have had their say this year, from the president of the United States, his top advisers, key Republicans and Democrats on Capitol Hill. We've watched them all year so you don't have to. This is a special look back at the best of this year's "Sound of Sunday."

On our very first program, just before he took the oath of office, Barack Obama promised an ambitious agenda and said he would go full speed ahead.

PRESIDENT BARACK OBAMA: We've got to make some tough decisions. And I'm going to be using a significant amount of political capital.

What I want to do is lay out the situation for the American people. And this is going to be a general principle of governing: no spin, play it straight, describe to the American people the state that we're in and then provide them and Congress a sense of direction.

KING: Early and late in the first year of the Obama presidency, the Republicans had a constant theme: the president is ignoring us and spending too much of your money.

SEN. MITCH MCCONNELL, R-KY., SENATE MINORITY LEADER: I must say I'm disappointed after two months. The president has not governed in the middle, as I hoped he would. But it's not too late. He's only been in office a couple of months. Still before him are the opportunities to deal with us on a truly bipartisan basis.

REP. JOHN A. BOEHNER, R-OHIO, HOUSE MINORITY LEADER: Why don't we do something about the spending that's going on right now?

BOEHNER: It's out of control. You can't have trillion dollar deficits for as far as the eye can see. And that's what the budget is that's been passed by the liberals here in Washington.

(END VIDEO CLIP)

KING: As we have been all year long, we've been watching all the other Sunday shows so maybe you don't have to. Joining me now here in Washington where you can find them together only here on STATE OF THE UNION, the Democratic strategist and CNN political strategist James Carville and Republican strategist and CNN political contributor Mary Matalin. Some highlights of the year's sound there, the contentious partisanship and big debates we had. Let me ask you, before we get to more of it, ladies first, the defining moment of 2009?

MARY MATALIN, CNN POLITICAL CONTRIBUTOR: You know, I -- according to the polls and according to feelings, OK, this wasn't a defining moment, but the stimulus was a pivot moment. This president upon his election enjoyed unprecedented bipartisan support including a significant number of Republicans. I remember the spin in town. Half my friends say give him a chance and the other half saying right from the get go that looking back at his record. But when the stimulus package turned out to be not timely targeted and temporary, but the porkulus package and that in conjunction with Republicans going to the -- I remember, you remember, Eric Cantor going down there with his talk to us talk to us and he said, hey, I won. I don't need to consider these ideas.

So the combination of the stewing bipartisanship right out of the box and the stimulus being the same porkulus Christmas tree, no pun intended, was shift in not just the sentiment here but I think around the country.

KING: The White House would argue on the stimulus, and we'll get more to of the substance, it at least cushioned the blow. But we'll get to the substance in a minute. James Carville, your defining moment of 2009?

JAMES CARVILLE, CNN POLITICAL CONTRIBUTOR: Well the Tiger Woods thing or when the unemployment rate hit 10 percent. I suspect it's when the unemployment rate hit 10 percent because that put the economy absolutely front and center ahead of everything else. And we'll see where it is 11 months from now. But I think that that's going to be one of the things that we look back and the banking crisis and everything else. The thing that affects people the most is unemployment. And when it went to double digits. Now where it grows here, I'm pretty encouraged.

KING: Mary mentions the stimulus. You mention the unemployment rate. Both of you, dollars and cents, pocketbook issues. So let's take an extended look back on the administration's views on the state of the economy and how they are trying to make it better.

(BEGIN VIDEO CLIP)

OBAMA: We're going to have a tough year, 2009. I don't think that any economist disputes that we're in the worst economic crisis since the Great Depression. The good news is that we're getting a consensus around what needs to be done. We've got to have a bold, aggressive, reinvestment and recovery package. It's working its way through Congress. That's going to help create or save three million or four million new jobs.

PETER ORSZAG, WHITE HOUSE BUDGET DIRECTOR: The free fall on the economy seems to have stopped. And we're, I guess the analogy is there is some glimmers of sun shining through the trees, but we're not out of the woods yet.

OBAMA: I want to be clear that probably the jobs picture is not going to improve considerably and it could even get a little bit worse over the next couple of months. And we're probably not going to start seeing enough job creation to deal with a rising population until some time next year.

KING: Do you think jobs will not grow? You'll not be adding jobs until next year? OBAMA: I think we'll be adding jobs. But you need 150,000 additional jobs each month just to keep pace with a growing population. So if we're only adding 50,000 jobs, that's a great reversal from losing 700,000 jobs early this year. But, you know, it means that we still got a ways to go.

LAWRENCE SUMMERS, DIRECTOR, NATIONAL ECONOMIC COUNCIL: Most professional forecasters expect job growth by spring. And I think that's a reasonable judgment in an uncertain world.

(END VIDEO CLIP)

KING: So let's break it down. From beginning to end, they know the number one challenge is the economy. As you mentioned, James, unemployment as we close the year, 10 percent. Nationally higher than that in some states. First from the substance, the policy, how have they handled the defining challenge of any presidency, the economy of the United States?

MATALIN: Well, keep going back to the polls and the polls are important because that's how you dialogue in a democracy. All the polls suggest that citizens, the public, is not happy with the way this president is handling the economy.

I think part of it is the way they handled the politics. The stimulus was oversold as going to cap unemployment at 8 percent. That it was going to be temporary, it was going to be targeted. It was none of those things. That it would save jobs. There is no mechanism to measure saved jobs.

And then they came back, Joe Biden infamously came out and said well it's worth not working because it's worse than we thought it was. There was a lot of stop, go, stop, go. And that's when people -- that was the beginning of the stepping back and saying these guys are -- I don't want to say they don't know what they're doing. But they show -- they put a light on the role of government. That's a very positive thing.

What's the role of government? Spend all that money? I'm going to say something they said about Bush, the most fiscally irresponsible president in history, documentable by the numbers.

CARVILLE: Obviously I'm going to disagree and in this instance, I'm going to disagree pretty good. If you look at the numbers where we are right now at this year's end, they're significantly and substantially better than they were a year ago by every measure.

And I think going in, I think the stimulus has done a really good job. Remember, we have two-thirds of this left to go. And I agree with Secretary Summers. We're going to -- look, I think we're going to see some real job growth come in here in 2010. And what this president -- what they did in terms of the banking system and in terms of these things, I think it going to show off to be pretty productive. And I think these guys are actually have a decent hand going in 2010. And I'm the one to acknowledge when the unemployment rate hit 10 percent, that's a reference point for every American to know where this was. And I'm willing to accept that reference point when it comes to the election in 2010.

KING: One of the criticisms, you picked this up when you travel, is that people whether you're left or right are worried about the deficits and some worry about the spending levels. One of the constant criticisms from the Republican Party has been that this president, yes, he inherited big deficits from the Bush administration. But the Republicans say he is doing nothing to make it any better. Let's listen to Mitt Romney.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), FORMER MASSACHUSETTS GOVERNOR: I think he's make something very serious errors. I think if you will looking at his responsibility for the stimulus and passing it along to Nancy Pelosi and Harry Reid was a mistake. If that's going to come back to haunt him. And I think the budget he's put forward really sows the seeds of economic distress down the road which will also be a problem for him.

(END VIDEO CLIP)

KING: The politics of the economy. Do the Republicans have that right? Deficits and maybe giving Congress too much control in writing this legislation? Is that a problem for this president? How has he been as a leader in his first year? MATALIN: It's not just the deficits. It's the dud. It's incomprehensible. And it's the Bush fashion in perpetuity. Never gives a speech where he doesn't explicitly or implicitly look backwards.

I was there. We inherited a recession from President Clinton and we inherited the most tragic attack on our own soil in our nation's history. And President Bush dealt with it. And within a year of his presidency at this comparable time, unemployment was at 5 percent. And we were creating jobs.

So there are two different ways to deal with this. He's choosing the way that Democrats always deal with it. But doing it at such a magnitude. The spending is unprecedented. The debt is unprecedented. And whatever the recession was that he inherited that was global did not -- the response is such an overkill that we will be settled with this forever.

CARVILLE: There's not a single analyst that looks at this that says Obama is infinitesimally responsible for what we have as the long-term debt in this country. And the other thing is this president is, if you believe the CBO, by the way, they're bending the cost curve on the health care thing. So what Governor Romney said just doesn't fit with the facts.

But his first real budget is going to come out I think it is in February. And let's see where that budget is because when they take office, they're still dealing with the predecessor's budget. So, and again, you know, I was reading something on the Peterson Institute, which is probably the most aggressive people on the deficit there is and they're not for pulling back the stimulus because that's a one- time expenditure. What they're going to have to do is something in these out years. I think these guys are going to put a budget out there that's going to be pretty reasonable. But you've got to give them some enormous credit here. They have got this economy in a lot better shape today than it was a year ago. And that's for a fact. And they've done it with all Democratic votes at every juncture. I think they can really take some pride in that.

KING: You worked for George W. Bush. He was a governor when he came to the Oval Office. You worked for Bill Clinton. He was a governor beforehand. You worked for H.W. Bush before that. He was the vice president. This president came to office with zero executive experience. And one of the big questions was, how would he handle that role. The end of the first year?

MATALIN: He's got his own model, I guess, which is to, you know, hit it up in the air and bounce it to Congress. That's -- that's just -- all of these guys have their own way of getting it done. And whatever works for them, I never liked comparing the two Bushes or comparing Clinton to the two Bushes. The proof is in the pudding and some things are working.

But I think the one political downside of throwing it to Congress is that Nancy Pelosi and Harry Reid have a lower poll rating than anybody. And they've become the face of the Democratic Party. So that's a problem politically.

CARVILLE: Yeah, I mean I think we talked about last week is obviously, change Washington the way that the interest groups have influence here is not going very well.

CARVILLE: But it never goes well.

Everybody comes to town promising that they're going to change something. But I think if you look back over the year, they can take some justifiable credit and pride in the fact that the economic situation of the country is improving, and -- and by more than just a little bit.

And it tackles some pretty tough questions like Afghanistan. They are the first administration that has ever -- that has gotten as far as they got on health care. And so they've got some things that they can look back on. But you know, a year doesn't make a presidency. But I would say that at the end of the year, there are more things that they can take pride in than -- than not.

KING: Our viewers have watched throughout the year. And so you come in here exclusively with us. And they often ask, how can these two disagree so much, and get along? So we asked people to text in a question for James and Mary. And here's what we got from Indiana. "Love you both. Can you show both houses of Congress your secret for compromise?

MATALIN: Well, we're not a democracy. We're an enlightened "mom-archy." That's what we are.

(CROSSTALK)

CARVILLE: I don't -- my thing is, as long as one person is not arguing, there's nothing to argue about. I don't have a...

(LAUGHTER)

CARVILLE: I don't have a position on anything domestically. So I just say yes, and then go on and do it. I mean it -- I would say the three ingredients to a successful marriage are surrender, capitulation, and retreat. If you've got those three things...

(LAUGHTER)

(CROSSTALK)

MATALIN: Spoken like a true liberal. What a martyr. Faith, family, and good wine. That's how we do it.

KING: Faith, family, and good wine, huh? All right. As we round out our year here, we thank James and Mary for coming in to assess things that have happened in months past. And as we say good bye to you, we want to share with our viewers and you a little best of James and Mary.

(BEGIN VIDEOTAPE)

MATALIN: He's completely wrong. Talking points, blah, blah, blah.

CARVILLE: She wouldn't know the difference between a football, bat, and a hockey court.

Yes, that was a great moment to be a Clinton person.

MATALIN: I don't even know what he's talking about.

I don't get the talking points like you do. Check, check, check.

CARVILLE: Hey, if I had to spend a little time with Sarah Palin, that wouldn't be the worst thing in the world.

MATALIN: You're the most compelling, handsome, manly man. He looked like a girly girl.

If mom ain't happy, nobody is happy. So that's just kind of a -- you, hey, how about your household?

KING: Huh. There's a good time to go to break.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

KING: The president and his family going home to his home state of Hawaii for the holidays, we thought it might be nice to travel there, as well, to take a peek, try to retrace some of the steps young Barry Obama took before he entered politics.

One of the places he went, very influential in his life, the Punahou School. Barack Obama, Barry he was called then, attended Punahou from 1971 to 1979. Ninety-nine percent of its graduates go on to college, that is very impressive. And it is ranked first in high school athletics by Sports Illustrated in 2008 and 2009.

A quick peek here, you might recognize that guy in the middle. That's Barack Obama, again, Barry, his friends called him, when he played basketball at Punahou. We thought it might be nice to visit the campus, and it is spectacular. And we sat down with two students and one teacher who just happened to be a student when Barry was there to get a sense of what it's like.

(BEGIN VIDEOTAPE)

KING: What's it like to go to school where the president went to school?

DANIEL DANGARAN, JUNIOR IN PUNAHOU: Well, it does inspire me, I think, to know that someone from our school could become such a large figure in our country.

CALLA CHANG, JUNIOR IN PUNAHOU: You get this feeling like I can do whatever I want and, you know, nothing is really going to hold me back.

KING: This is -- this is where he said that he learned about diversity and about people of very different backgrounds getting along. Is that true in your experience here?

KEHAULANI KEALOHA-SCULLION, TEACHER AT PUNAHOU: I think so, definitely, yes. I was a student here just a year behind Barack Obama and our classroom was filled with, you know, the face of Hawaii. My best friend was as I grew up here was Korean-Japanese and my next best friend was Filipino. And, you know, so the classroom was very diverse, it was always very diverse.

I think one of the great things about growing up here is you don't realize that the color of your skin doesn't matter here.

KING: Is there a downside to having a president who's a graduate of this school? Is it -- you know, maybe it's a tourist destination, is there added pressure on students? Is there any kind of a downside at all or is it all up?

KEALOHA-SCULLION: We definitely have more media attention. You know, I think the kids -- I haven't heard them in a classroom say, wow, does that mean I have to be, you know, a leader of a country? Does that mean I have to, you know, go to Harvard Law?

CHANG: I haven't seen any detrimental effects of him coming from our school and becoming president. I think it is mostly beneficial for us because we have, as students, someone to look to who followed his dreams and his passions and found his own place within society. DANGARAN: It's definitely a motivation, I think, instead of something to be scared of or a pressure. He just inspires all of us to dream big.

KING: If I just showed up here randomly and didn't know he was from here, and was wandering around, is there evidence now that Barack Obama went to school here that might not have been here before he became a senator or a president?

KEALOHA-SCULLION: Yearbooks.

CHANG: Yearbooks, yes.

KING: So you'd have to go looking for it, though? There is nothing -- nothing has been added that says...

CHANG: No.

KEALOHA-SCULLION: No. And that's -- I think that's intentional on the part of the whole school, is that while he is in his own right accomplished, every person counts here. And we didn't put banners up during the campaign or after the election. And we celebrated, I think, more American politics and that this young man had this dream in front of him and pursued it.

KING: Now, he was Barry when he was here and now he's Barack. What do we like better, Barry or Barack?

DANGARAN: I don't know, Barack has kind of a ring to it for me.

KING: A little more presidential?

CHANG: Yes.

DANGARAN: Yes.

KEALOHA-SCULLION: I think both, actually. He's still the same person. He built on Barry to become Barack.

KING: You remember him? You say you were the class behind him?

KEALOHA-SCULLION: I did remember him, yes, yes.

KING: What do you remember?

KEALOHA-SCULLION: My best friends played basketball with him and my best girlfriend was the water girl. So I was always at the basketball games and I remember that he was always a team player. And even if he didn't start that game, that he was with the team.

I remember him being funny, you know, doing antics on the court before the game and in warm-ups. Yes, that's what I remember most about him.

(END VIDEOTAPE)