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PARKER SPITZER

How Would GOP Balance the Budget?; Stockman's Contrarian View on Tax Cuts; Another Israeli Settlement Announcement Raises Hackles

Aired November 10, 2010 - 20:00   ET

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


KATHLEEN PARKER, CO-HOST: Good evening. I'm Kathleen Parker.

ELIOT SPITZER, CO-HOST: And I'm Eliot Spitzer. Welcome to the program, another outstanding show tonight. Among the stories we're covering, a moving one about the Medal of Honor, the military's highest award. And Kathleen, for the first time since the Vietnam war, a living soldier will receive it. Tonight we meet him in person.

PARKER: Also on the program, growing anger between America and Israel, a sharp exchange between President Obama and Prime Minister Netanyahu. The Israeli ambassador to the U.S., Michael Oren, joins us to defend his government's policy.

SPITZER: But first, Kathleen, every night on this show, we've been challenging our guests to "Name Your Cuts." It's our call to arms, our effort to help find solutions to the country's greatest threat, the exploding deficit. Today President Obama's debt commission, co-chaired by Erskine Bowles and Alan Simpson, release some of their cuts. And although preliminary, it does provide us with insight into their thinking.

PARKER: Hot dog, Eliot. I am excited. But guess what? This has been your obsession since the show began, so at a great sacrifice, personal sacrifice, I'm going to toss this to you.

SPITZER: All right. You know, Kathleen, obsession is a strong word, but you know what? This is, in fact, what matters for our fiscal future. So let's get a couple things straight. Yes, they're going to raise the retirement age for Social Security and slow the rate of increase in payments, do some stuff with Medicaid and Medicare, as they have to. But also, get this, they're going to raise taxes.

So let's bring in our headliner, Republican congressman Jeb Hensarling of Texas. He's on the bipartisan deficit commission we've just told you about, but he disagrees with some of the cuts, and that's why I was so anxious to speak with him about his proposals, to see how he would balance the budget. I think you'll want to listen to what he says.

SPITZER: I want to begin with a constitutional amendment that you proposed and are supportive of which would limit the federal budget to 20 percent of GDP, which is the size of economy. And we're going to throw some numbers up here on the screen. The current economy is about $14.5 trillion, so you just do the simple past. Twenty percent of that would be about $2.9 trillion. And then you look at the size of our federal budget, which is about $3.8 trillion, so we've got to cut about $900 billion out of that $3.8 trillion, about 24 percent or 25 percent, to come down where you think we should be. I mean, is my mathematics right here?

REP. JEB HENSARLING (R), TEXAS: Well, I have no idea because I don't have the benefit of seeing your screen. But let me say this. The federal government on average since World War II has spent 20 percent of our economy. That's the post-war average. But right now under current law, over the course of the next generation, my 8-year- old daughter, my 7-year-old son, they're going to see government double -- double over the roughly next 25 years, to 40 percent of our economy.

SPITZER: Well, so what we need to figure out is how we're going to cut about $900 billion to a trillion dollars out of this budget. And I want to ask you some questions...

HENSARLING: Well, let me get started...

(CROSSTALK)

HENSARLING: ... if I could.

SPITZER: Well, sure. I'll give you a chance to answer the questions. I want to go through category by category so the public can understand where we are. $2.3 trillion of this $3.8 trillion is in couple of areas, Social Security, Medicare, Medicaid, interest on the debt and defense spending, right? We can agree on that, I presume, right? That's straight out of the federal budget. Now, are you willing to cut Social Security 25 percent this year?

HENSARLING: Oh, absolutely not. And again, Eliot, you know that you don't have to cut one penny out of these programs. What you do have to do is ensure they don't grow faster than the economy's ability to pay for them. We can't have Social Security, Medicare and Medicaid grow at 5, 6 and 7 percent and the economy grow at 1.5 percent.

SPITZER: Congressman, I'm just trying to...

HENSARLING: You just can't do it.

SPITZER: No, Congressman, I'm just trying to...

HENSARLING: No, but...

(CROSSTALK)

SPITZER: No, no, no!

HENSARLING: ... you say cut -- no, no, no.

SPITZER: Congressman...

(CROSSTALK) HENSARLING: ... is misleading. You have to bend the growth curve so they don't grow as fast. I have co-sponsored Paul Ryan's "Roadmap for America's Future." Not one penny of these programs is cut and...

SPITZER: Congressman...

(CROSSTALK)

HENSARLING: ... misleading to say so.

SPITZER: I'm trying to apply your constitutional amendment, which set a firm cap on spending. And I'm trying to apply it to this year's budget so the public can understand it. You've just said you're not cutting Social Security, if I heard you right. And yet that...

HENSARLING: Right. I've put...

SPITZER: Did I hear you right?

HENSARLING: I have co-sponsored a plan -- I've co-sponsored a plan, along with Paul Ryan -- you can read it on the Internet...

SPITZER: I've read it.

HENSARLING: ... "Roadmap for America's Future." What I'm trying to do here -- and listen, I wish we would adopt this constitutional amendment because it would hasten -- it would hasten the opportunity to reform programs that have been important to my parents and grandparents but are going to bankrupt my children. Now, I'm...

SPITZER: Congressman...

(CROSSTALK)

SPITZER: I want to ask a simple question, sir. You said you would not cut a penny from Social Security, did I hear you right?

HENSARLING: Yes, you don't have to.

SPITZER: OK. OK, now...

(CROSSTALK)

HENSARLING: You don't have to cut to save the programs.

SPITZER: You just -- will you cut defense by 25 percent this year?

HENSARLING: I will look for savings in the Defense Department. I'm willing to look at savings everywhere. The program I put on the table, though, does not, quote, unquote "cut." But what it does do is it saves our children from having from to have their taxes almost doubled, where we know that they will look at a future of living in smaller homes... SPITZER: But Congressman...

HENSARLING: ... competing for fewer jobs, with shrinking paychecks, and losing the American dream! Eliot, you've got to own the other side of this equation, and that is own up to the tax increases that are necessary if we don't constrain spending to its historic norms.

SPITZER: But Congressman, here's the problem...

HENSARLING: And we are making -- more than doubling taxes on our children and grandchildren.

SPITZER: We're not raising taxes. In fact, I agree with you about both how you articulate extending the Bush tax cuts, all that. What I'm just trying to do is understand how your constitutional amendment requires cutting a trillion dollars, and yet I've just gone through the programs that are the overwhelming majority of the budget, and you're not willing to cut anything. So where will you cut $1 trillion out of this year's budget? Answer that question -- this year's budget, $1 trillion.

HENSARLING: Well, I put out a plan -- I put out a plan in May, along with Paul Ryan, that, frankly, cuts a trillion-and-a-half. We start out by rolling back -- it's on the Internet. You can find it. We want to roll back our discretionary spending to the pre-bail-out levels, the pre-stimulus levels. We freeze government hiring.

SPITZER: Sir...

HENSARLING: We put out an entire plan.

SPITZER: ... with all due respect...

HENSARLING: It's got a trillion-and-a-half...

SPITZER: Sir, with all due respect, that doesn't come within anything close to the trillion dollars. You know that as well as I do. Total discretionary spending is several hundred billion dollars. You roll it back to the '08 levels, you're talking small numbers compared to the trillion dollars your amendment requires us to cut. Where will you cut?

HENSARLING: Well, I don't -- I don't...

(CROSSTALK)

HENSARLING: I don't have your numbers at my fingertips.

SPITZER: Sir, you have a degree in economics...

HENSARLING: I'm willing to cut...

SPITZER: You have a degree in economics, am I correct?

HENSARLING: Yes, I recall that. SPITZER: That's right. Well...

HENSARLING: And again, I put out a plan that...

SPITZER: But your plain...

HENSARLING: ... will continue (ph) a budget window would save a trillion-and-a-half dollars.

SPITZER: No, sir...

HENSARLING: And what I'm saying is...

SPITZER: No, sir, it won't. If you're not willing to cut Social Security...

HENSARLING: According to the Congressional Budget Office, it does.

SPITZER: No. Not...

HENSARLING: Maybe you know something that they don't.

SPITZER: Not in this year's budget, sir. Not in this year's budget.

(CROSSTALK)

SPITZER: You said in the budget window...

HENSARLING: Well, I said...

SPITZER: You're opening a big window.

(CROSSTALK)

HENSARLING: What I said was in the 10-year budget -- listen, I'm happy to be invited to your show, but if you'd let me speak? I said the 10-year budget window would save a trillion-and-a-half dollars. Ultimately, members of Congress have to make painful decisions about, How do we restrain the growth of government? And if you're saying today, you know, Can you give us the plan, I'm not sure I can give you the plan. I've got a plan. A plan is the "Roadmap to America." But I'm trying to force Congress into making tough decisions. And I do believe it is important to have a national debate. Should there be a limit on the size of government? And should it be enshrined into the Constitution?

SPITZER: Sir, you have said you will save $1-plus trillion over 10 years. We need to save $11 trillion over 10 years. But let's get into Social Security...

HENSARLING: OK, but are you ready -- are you ready...

SPITZER: Absolutely.

HENSARLING: ... to cut Social Security 22 percent for the next generation?

SPITZER: What I'm ready to do...

HENSARLING: Because that's what current law says, and if you don't put forth a plan, that's what you're defending.

SPITZER: No. But what I'm ready to do, sir -- let me see if you're willing to match me on this -- is increase the retirement age. And declare right now are you for increasing the retirement age for everybody under the age of 55?

PARKER: I'm willing to put everything on the table...

SPITZER: No, sir!

HENSARLING: ... including increasing the retirement age on a gradual basis...

SPITZER: I'm not...

HENSARLING: ... for those under 55.

SPITZER: I'm not talking about putting it on the table, I'm talking about saying you are for it. I don't want to hear words...

(CROSSTALK)

HENSARLING: As part of a plan -- as a part of a plan -- as part of a plan to save Social Security for future generations, absolutely, the answer is yes.

SPITZER: OK, then...

(CROSSTALK)

HENSARLING: I'm willing to do a whole lot of things, but are you willing to support personal accounts that ultimately uses what Albert Einstein called the greatest invention that he's known about, compound interest, to help grow our way out of this problem because, ultimately, you're going to be looking at benefit cuts, you're going to be looking at greater taxes or you're going to have to use the ability to grow our way out of this. And so are you willing to support personal accounts?

SPITZER: Congressman, I've said for years -- you can ask people who've heard my speeches -- compound interest is the eighth wonder of the world. But no, I do not believe in privatizing Social Security.

HENSARLING: OK.

SPITZER: It is wrong. It's bad policy...

HENSARLING: No, no.

SPITZER: ... and it would increase...

HENSARLING: No, no, no. As long...

SPITZER: It would increase the deficit.

HENSARLING: As long as you keep the government...

SPITZER: Congressman, it would increase the deficit in the next decade by over a trillion dollars because all that money that would have gone into Social Security won't be there. And you understand this in terms of the cash flows. It would increase the deficit by a trillion dollars. Is that correct?

HENSARLING: And over the 75-year budget...

SPITZER: Well!

HENSARLING: ... we know it would reduce it and save the program.

SPITZER: Well, you...

HENSARLING: It's a generational program, Eliot, and you have to start on it today.

SPITZER: Does it increase the deficit...

HENSARLING: And if you don't, again...

SPITZER: Does it increase the deficit by a trillion dollars over the next decade, your plan?

(CROSSTALK)

HENSARLING: If you plan -- if you plan -- I will say no, it will not increase the deficit over the long term. Can you pick a short- term window where it will increase the deficit? Yes. I agree with that. Over the long term, and look at the CBO scores, you will find out over the long term, it will help save it. The bottom line is, unless Republicans and Democrats start acting together as Americans, I hope we can at least agree that these programs aren't going to be around for our children and our grandchildren. The question is, is that something we're willing to accept, or you know, is this a matter of exploiting a national problem or solving a national problem?

SPITZER: Congressman, it's actually because I want us to get to that solution that I'm giving you a bit of a hard time here to make sure we can get to the hard decisions. So Congressman, thank you. We hope you'll come back.

HENSARLING: Thank you.

SPITZER: We'll be right back.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: It's very bittersweet. I mean, it's such a huge honor. It's a great thing. By it is a great thing that has come out of personal loss to myself and so many other families. (END VIDEO CLIP)

(COMMERCIAL BREAK)

SPITZER: Conservative congressman, budget director for President Reagan, truth teller, and to many within his party, a heretic. That is David Stockman. He has been perhaps the lone conservative Republican for 25 years to say that the theology of tax cuts without spending cuts would lead to exploding deficits. When he said this to the Reagan administration, he was taken to the woodshed. Today he continues to be outspoken. He joins us tonight in our "Constitution Avenue" segment. David, thank you for being here, and thank you for being so outspoken. It is good for the nation and good for TV.

DAVID STOCKMAN, FMR. REAGAN BUDGET DIRECTOR: Well, thank you.

SPITZER: The immediate issue facing us, the extension of the Bush -- what is called the Bush tax cuts. Should Congress extend them? And if it does, does it have to make equal and offsetting cuts in spending?

STOCKMAN: No, I think we cannot afford them, pure and simple. They shouldn't have been enacted in 2001 and 2003. It's $300 billion a year of revenue that we desperately need, $3 trillion over a decade. And therefore, we have to level with the public and tell them that the revenue that we're going to need to pay for government, unfortunately, is going to come out of their pockets. For 30 years, both parties have been telling the public that we could have this massive government, 24 percent of GDP, all these programs, we could be an imperial power policing the world, and we don't have to raise the tax revenue needed to support it.

SPITZER: Even if the tax cuts were permitted to expire, would we need to cut the federal deficit -- cut the federal budget somewhere?

STOCKMAN: Oh, absolutely. I mean...

SPITZER: And where would you do that?

STOCKMAN: I think we have to cut across the board, but I'll start with defense, OK? We have now experimented with a kind of adventurism for the last two decades of trying to police the world in a much different world than we had in the cold war. As far as I can tell, it's been largely a failure, and we have built up an $800 billion homeland security and defense establishment for a world that we cannot (INAUDIBLE)

SPITZER: You're talking specifically, I gather, about Afghanistan and...

STOCKMAN: I'm talking about Afghanistan and Iraq. I'm talking about the kind of imperialist pretensions that led to preemption, that led to nation building, that led to us getting involved in the two worst places in the world you could get involved.

SPITZER: I just want to remind folks who are listening, you're a conservative Republican. I don't want them to think that you're (INAUDIBLE) all dressed up like David Stockman! Now, let's come back to the entitlement programs, Social Security. What would you do with Social Security?

STOCKMAN: Well, unfortunately, it needs to be means tested. In other words, it's a $700-billion-a-year program. It's the heart of the budget. And we're going to have to say to the better-off elderly, people already retired -- and this is -- will be seen as unfair, but it's unavoidable. You're going to have your benefits means tested...

SPITZER: Explain that what means.

STOCKMAN: That means we'll look at your private assets, we'll look at your private income, and if they're above a certain level, let's say $50,000 a year of private income, we're going to have a ratcheting back of your Social Security check in order -- as a contribution to solving this problem.

SPITZER: What would you do to Medicare to control spending?

STOCKMAN: Well, there's two things. One, the means test needs to be extended to the Medicare side -- it's the same people...

SPITZER: Right.

STOCKMAN: ... in terms of the premiums they pay for Part B, the physicians insurance. But more importantly, we really have to be willing to take on what I call the "sick care lobby," the sick care cartel, the doctors, the hospitals, the pharmaceutical companies, the scooter chair manufacturers, all of whom live off this program and control it. And reimbursements are not efficient, and there is an enormous amount that needs to be done to cut that back. It would be very tough politically because these organizations more or less own the program and have made massive contributions to both Republicans and Democrats.

SPITZER: Now, let's drill down for a moment on what has been proposed, if anything, by the Tea Party and some of the newly-elected Republicans. Have they articulated with this specificity these types of cuts?

STOCKMAN: No, I don't believe they have. I think there's a lot of good intention there. I think they're very earnest, but I think they're naive. And the two things they're naive about are, one, they don't understand the terrible legacy of 30 years of the Republican Party waving the white flag of surrender on spending. And as a result of that, there's too many people in the party, in both houses, too much of the organization committed to farm subsidies or ethanol subsidies or never touching Social Security or the housing complex. And as a result of that, they're going to be surprised about how little there is left on the table that they can go after.

The second thing is they have a wrong view of the fraud, waste and abuse issue. They keep talking about earmarks. I believe that's a very bad practice, but you know, it's $8 billion a year. It is basically 15 hours of federal spending annually. SPITZER: Right. Right.

STOCKMAN: If we got rid of all the earmarks...

SPITZER: Earmarks don't even show up on the balance sheet...

STOCKMAN: Yes.

SPITZER: ... if you're serious about...

(CROSSTALK)

STOCKMAN: That's exactly right.

SPITZER: Now, let's switch gears for a moment. You have written that really only what will bring us back is an economy that begins to churn and show the dynamism of the past. Where do we look to begin to bring the economy back at this point in time? Do you believe this QE2, this quantitative easing that the Fed has talked about of buying up T-bills and trying to drive down interest rates will work?

STOCKMAN: This is the most dangerous, reckless policy that I think we've had in the last 50 years. I believe that what the Fed is doing with the QE2 and the zero interest rates and the massive money printing and bond buying is really borderline lunacy. And it's true from both a progressive and a conservative point of view. As a conservative, I'm opposed to money printing, I'm opposed to monetizing the debt. I'm opposed to the idea that we can simply inject this monetary heroin -- and that's really what it is -- into the economy and expect to it grow.

SPITZER: Fiscal policy is not on the table because Congress won't spend anymore, and you would say shouldn't.

STOCKMAN: Yes.

SPITZER: Monetary policy is exhausted because interest rates are at zero. What do you do in that case to begin to drive this engine of our economy?

STOCKMAN: Well, the first thing is that we have to recognize the 30-year debt binge, and it's going to be a long slog and haul to work our way out from under it. Second, we have to let markets clear. All of this meddling in the housing market is helping no one. It's just creating artificial distortions and windfalls every type.

Third, we have to recognize that this is a $14.5 trillion economy in an open world, and it can't be macro-managed by the Fed or by the budget. And we need to basically step back, let the economy heal itself, and get our own financial house in order, which means the Fed's job is to stabilize the value of the dollar and avoid this descent (ph), where we're going, and the government needs to get its budget in balance or we're going to end up having China own the country.

SPITZER: Which they may already do. STOCKMAN: Yes.

SPITZER: But let's circle back, then, to two years ago because if I hear you properly, you do not believe that the bail-out of the banks was either appropriate or certainly not handled properly.

STOCKMAN: I think that was the Waterloo. I think that was almost the point of no return. It was a terrible policy.

SPITZER: What would you have done differently?

STOCKMAN: I think we should have basically allowed whatever banks that were going to go down to go down. If Goldman Sachs had gone down, it would have gone down. I don't think the country would be any worse off today. If several of the banks had to go into receivership with the FDIC, we could have done that because that's why the FDIC was set up, and the taxpayer backing was already there.

It is an urban legend -- it is an urban legend that was fostered by panicky people on Wall Street, including people in the Bush administration and Paulson in particular, that said the next day, you know, the ATM machines aren't going to open. That was never remotely possible, and we ended up doing something, bailing out Wall Street, that will make fiscal governance almost impossible for a decade to come.

SPITZER: David, we will have to continue this some other time. I think everybody now can see why you were viewed by some as a heretic, and also by many more as a truth teller. David Stockton, thank you so much for joining us.

We'll be right back.

(BEGIN VIDEO CLIP)

SPITZER: Is Israel going to ask permission to launch a military strike against Iran, should they move forward with their capacity to create a nuclear weapon?

MICHAEL OREN, ISRAELI AMBASSADOR TO THE UNITED STATES: The position of the government of Israel, as the position of the government of the United States, is that all options should remain on the table. And we hope that those options will be made credible in the eyes of Iranian leaders, that they know that we're serious.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

PARKER: Mounting tension tonight surrounding Middle East peace talks. Israeli prime minister Benjamin Netanyahu has dismissed a warning from President Obama regarding the building of more settlements in East Jerusalem. Secretary of State Hillary Clinton has scheduled a sit-down with Netanyahu here in New York tomorrow.

Earlier, we sat down with Israel's ambassador to Washington, Michael Oren. We plan to talk with Palestinians in the coming weeks, as well. But first, this revealing conversation.

(BEGIN VIDEOTAPE)

SPITZER: It seems to me that just in recent history, there have been three moments were settlements have been inopportunely announced and moved forward in a way almost designed to destroy the peace process. First, when Vice President Biden was in Israel, there was an announcement of additional settlement construction almost as if to embarrass the vice president. Second, the 60-day settlement freeze was permitted to expire. And then third, right at the moment when people (ph) and the secretary of state is trying to bring things back together, another 1,000 settlements in East Jerusalem are announced.

Why does the Israeli government not recognize that the timing of these announcements has been horrendous and is viewed by the world, rightly or wrongly, as nothing more than an effort to throw a monkeywrench into these peace talks?

MICHAEL OREN, ISRAELI AMBASSADOR TO THE UNITED STATES: Well, let me first clarify a lot of confusions on that question, Eliot. Jerusalem has no settlements. Jerusalem has neighborhoods. It has Arab neighborhoods. It has Jewish neighborhoods. And in both the incident you mentioned first with Vice President Biden last winter, or the recent announcement, we're talking about Jewish neighborhoods in Jerusalem where there are various houses or units being built. These aren't settlements. These are part of the united capital of the city of Jerusalem and (INAUDIBLE) of the state of Israel. And these are neighborhoods that have long been understood both by the United States and by Israel and by the Palestinians that will remain part of Israel in any peace settlement.

Regarding the settlements in the West Bank, the Israeli government committed to a one-time 10-month moratorium to get the Palestinians back to the negotiating table. They didn't come to the negotiating table. They squandered that 10-month period, waited to the ninth month. You know, it's like a football game. And a player -- you know, they stall -- they're on the clock down (ph) for the last minute, and then they ask for overtime. They didn't utilize that period.

And even then, the Israeli government has committed not to build any new settlements, not to expand the settlements in a way that would impact any peace map, not to even incentivize Israelis to move to these settlements, all in an effort to get the Palestinians to sit at the negotiating table, but they won't sit at the negotiating table.

SPITZER: Yes, but let me ask one follow-up because as somebody who has been a loud and fervent supporter of Israel through so many rounds of negotiations and justified settlements when it was tough to do so, there gets to be a point in the negotiating process where the Israeli government has to say, We will show the world we will do anything and everything not to be the ones who can be blamed for foiling the next step. Why could the Israeli government and Prime Minister Netanyahu not just say, We will not announce these (INAUDIBLE) We will put everything on ice for the next two months? OREN: Well, for the very simple reason that we're talking about hundreds of thousands of our citizens. It would be the equivalent of millions of Americans and saying that they cannot build an extra room into their house. If they have children born, they can't build a nursery school or a hospital. You can't do that in a state. It's not fair to anybody.

And we don't say to the Palestinians, Listen, you have to prove to us that you're willing to do peace. We don't say to them that, you know, you have Hamas is ruling half of the Palestinian people, why don't you get your house in order first before you sit down and negotiate with us? We don't say to them that you have to stop naming squares in downtown Ramallah after terrorists.

The leading Palestinian negotiator, Saeb Erekat, this week wrote a letter praising a Palestinian terrorist who killed an Israel minister in cold blood and praising him as a great martyr. We don't say you have to stop all that or we won't talk to you. We say sit down. Negotiate. Everything's on the table, but come and talk to us.

SPITZER: Ambassador, you are correct in all those points. But what you know and we all know is that when you then announce settlements, that becomes the entire conversation. So why not just say stop it.

OREN: Or why not just change the nature of the conversation? If the Palestinians understand that they can't end-run the peace process -- they can't go to the U.N., that there is no alternative but to sit and talk with us and reach a negotiation with us bilaterally, face to face, and not allow them -- give them an excuse to get out of the peace process, not to give them an excuse not to have -- not a peace -- not a peace process but an excuse for exit, then we can move forward, I believe.

PARKER: But I just want to ask, can't you see sort of how it looks to Americans that knowing how important these settlements were to Obama, to President Obama in this process, and at this particular moment, that it looks like there's more -- more loyalty to radicals within Israel than to the peace process, and it seems to sort of undermine President Obama's place in this process, no?

OREN: Prime Minister Netanyahu made this gesture of the moratorium the 10th month, in large measure as I mentioned earlier to incentivize the Palestinians to back the negotiating table. That's also out of respect to President Obama's position. And once again, the Palestinians did not avail themselves of that opportunity.

The prime minister has undertaken also to inform the administration about building projects in Jerusalem and we've undertaken to do that and we're trying to uphold that. Now this is a living city of close to a million people. And there are many, many building projects going on at any given time. But Jerusalem was never part of the moratorium and that was understood by the Palestinians. IT was understood by the administration. And we're again, we're waiting for the Palestinians to join us at the table. SPITZER: One further question on this and then there are so many other issues that are equally important. It has been said that the prime minister's office was not aware of the announcements that were forthcoming either when Vice President Biden was in Israel or the announcements today. Had his official been aware of it, would he have asked them to stop?

OREN: No. First of all, the announcement, the current announcement was made on October 20th, more than two weeks ago. It was published in the Israeli papers. It was fully transparent and fully known. And the answer to your question is, there's no moratorium, no freeze in the city of Jerusalem. Jerusalem is the undivided capital of the state of Israel. That is a policy that existed not under the current Israeli government, but in every Israeli government going back 43 years. It was the policy of Golda Meir, Yitzhak Rabin and Ehud Olmert, and it hasn't changed. What has changed and this I think is going to be interesting for you to hear, what has changed under the current government is the current government knows that the Palestinians also have a position on Jerusalem, and they know that Palestinians are going to be bring that position to the negotiating table, again, if the Palestinians will come to the table.

SPITZER: The issue of Iran, and this is an existential issue to the state of Israel, of course, seems to be deteriorating. We seem to be getting closer and closer to some decision point. And in the conversation with Secretary of State Hillary Clinton and Prime Minister Netanyahu that is scheduled to take place very shortly, is Israel going to ask permission to launch a military strike against Iran should they move forward with their capacity to create a nuclear weapon?

OREN: The position of the government of Israel as the position of the government of the United States is that all options should remain on the table and we hope that those options will be made credible in the eyes of Iranian leaders that they know that we're serious when we say that all options are on the table.

SPITZER: Well, let's parse that word. Those options will be made credible, what do you mean?

OREN: We would like the Iranian regime to understand that these options are real and that the sanctions, you know, there's no getting around the resolution of the United States and of the like-minded countries in the world to prevent Iran from acquiring nuclear weapons.

PARKER: All right, I hate to call it quits because it's been so interesting. Thank you, Ambassador Michael Oren, for joining us.

OREN: Thank you. A pleasure.

PARKER: We'll be right back.

(BEGIN VIDEO CLIP)

STEPHEN A. SMITH, RADIO HOST: To answer your question seriously, regardless of whether we disagree with her or that we agree or disagree with her, the reality is if you're the leader and you lose, don't try to still maintain leadership. Have the decency to walk away.

UNIDENTIFIED MALE: Sarah Palin might --

(END VIDEO CLIP)

(COMMERCIAL BREAK)

PARKER: Tomorrow is Veterans Day. Veterans Day is celebrated, of course, on the anniversary of the end of World War I which ended on the 11th hour of the 11th day of the 11th month of 1918.

SPITZER: Ahead of the day when we honor the men and women who have served, we bring you a special story from CNN's Barbara Starr. Barbara has an exclusive report on the firefight which resulted in the nation's first living Medal of Honor recipient since the Vietnam war.

(BEGIN VIDEOTAPE)

STAFF SGT. SAL GIUNTA, MEDAL OF HONOR RECIPIENT: The whole time frame maybe lasted anywhere between like two minutes, three minutes and five or six lifetimes. I don't know.

BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): But in those two, three minutes, Army Staff Sergeant Sal Giunta went from a self described mediocre soldier to a hero.

(on camera): We've come to Afghanistan to find the men that Sal Giunta fought with. Many of them are here on this remote combat outpost. But their thoughts and memories are with Sal and what happened that night.

(voice-over): That October night, Giunta was walking along the ridgeline with other members of his unit assigned to protect other soldiers as they were walking back to their base.

SGT. FRANKLIN ECKRODE: We opened up into a small clearing out of a lightly forested area. And a single shot rang out.

STARR: It was what the military calls an l-shaped ambush sprung by the Taliban, which means Taliban fighters are both in front of the men and to their side.

GIUNTA: There's not just one of them and it's not two of them, it's not 10 of them, it's probably more than 10 and they're really not that far away.

UNIDENTIFIED MALE: It's actually watching the guy pulling the trigger who was aiming at you.

GIUNTA: It seems like your world is exploding in bullets and RPGs and everything.

ECKRODE: Just a bad situation. GIUNTA: We looked and it was along our whole side. It was along, you know, our flank.

STARR: Every soldier that night was shot.

UNIDENTIFIED MALE: You know, I got shot running backwards. You get the aim, and I can see them.

ECKRODE: They started coming out of the trees and getting closer. I shoved over a berm on my back and got hit a fourth time.

STARR: Hit eight times with the man in front walking point as the military says Sergeant Josh Brennan of McFarland, Wisconsin. He talked to his dad Mike only a few days before.

UNIDENTIFIED MALE: Actually he had volunteer for that mission that day.

STARR: On that ridgeline, Josh Brennan was down, severely wounded. Sal Giunta raced ahead into face of Taliban fire.

ECKRODE: He got to the front. He killed one of guys that was dragging my team leader away, Sgt. Brennan. Wounded another one, recovered Sergeant Brennan, brought him back to an area where we could secure him and continue the fight. Started the aid on him. I mean, for all intents and purposes, the amount of fire that was so going on in the conflict at that time, we shouldn't be alive right now.

STARR: Six hours later, Josh Brennan died. Also killed that night was the medic, Hugo Mendoza of El Paso, Texas. It's that act of bravery that was above and beyond with Sal Giunta running into enemy fire and getting to Josh to help save him.

GIUNTA: I think about it and it hurts. But to say it out loud makes it that much more real. And I feel like I've said it enough and I know it's real, but sometimes I can trick myself and just not think about it for a while.

It's very bittersweet. I mean it's such a huge honor. It's a great thing, but it is a great thing that has come out of personal loss to myself and so many other families.

STARR (on camera): And that is what you want people to know.

GIUNTA: Absolutely.

STARR (voice-over): Extraordinary and Staff Sergeant Sal Giunta would want you to know, part of an extraordinary group of soldiers.

(END VIDEOTAPE)

PARKER: We're happy to have Barbara Starr join us now to tell us more about Staff Sergeant Giunta. But first, thank you so much for that beautiful report. It was so lovely, well done.

STARR: Well, thank you, it's good to see both of you. PARKER: Good to see you, too, and welcome back safely. I wanted to ask you about the fact that this is the first living military personnel honored with the Medal of Honor since Vietnam. Why is that?

STARR: Well, it is just extraordinary, you know, and there's not a good answer right now. People will give you different answers. They'll say soldiers really aren't involved in this sort of hand to hand combat that would lead to this. They'll say that, you know, soldiers, the war is a little less personal right now, IEDs, roadside bombs, but in fact it is all about close combat, as we saw on this ambush. Not a good answer, it's something that Secretary Gates, the defense secretary has talked about.

PARKER: Is it possible that conventional -- we don't have conventional warfare anymore. We don't have the big pitch battles and so --

STARR: Exactly.

PARKER: But the rules for the award are unchanged.

STARR: The rules are very strict. There has to be sworn testimony. There has to be eyewitnesses. It has to be very specific evidence that someone acted with great valor, courage, character, above and beyond the call.

SPITZER: It is amazing when you just think and hear the descriptions of all those but what's coming right at him, every human instinct is to run back. He ran forward.

STARR: This is it, Eliot. This is a young man who just a couple of years ago was, you know, working the fast food circuit in the Midwest, just out of high school, didn't know what he wanted to do with his life, joined the Army, found himself in this place, the Korengal Valley of Afghanistan, that was so deadly it did become known as the "valley of death" on a terrible night. All the cliches are true. He ran to the sound of the guns, and has now stepped into American history. Next Tuesday, President Obama will present him with the Medal of Honor.

SPITZER: In your sense, you spent -- you've been over there, what, nine, 10 times. You've visited with the troops. You feel for them and understand them as well as anybody can. He is a remarkable individual, but there's so many there who have that same instinct and step into the breach and what about them?

STARR: This is it and what makes -- and they are generally men, young men involved in close combat. What makes a young soldier or Marine able not to curl up in a catatonic ball, like many of us would under fire, but to run into the fire, to be organized, to think, to know what to do, to act appropriately and do it with such valor?

PARKER: Yes.

STARR: What makes a soldier able to do that? That's what results in a medal of honor. PARKER: We appreciate all of them. Happy Veterans Day. Barbara, thanks so much for being with us and sharing the story. We'll be right back.

(BEGIN VIDEO CLIP)

NARRATOR: Forged on our taxpayers dollars, Pelosi has grown into a power hungry life to find the will of the American people. Who has the power to stop her?

(END VIDEO CLIP)

(COMMERCIAL BREAK)

SPITZER: It is time for "Fun with Politics." Listen to these numbers, Kathleen. More money was spent. More commercials were run against Nancy Pelosi in this midterm election cycle than against any other congressional leader since Newt Gingrich in 1996. $65 million, let me repeat that.

PARKER: Wow.

SPITZER: The GOP spent 65 million bucks to terminate the speaker's contract. That's 161,000 ads from January 1st to last weeks' election. They really must hate her. Let's take a look at one of those ads.

(BEGIN VIDEO CLIP)

NARRATOR: Forged on our taxpayer dollars, Pelosi has grown into a power hungry life to find the will of the American people. Who has the power to stop her?

(END VIDEO CLIP)

PARKER: Well, look, I mean, Nancy Pelosi had her fingerprints all over health care. That was the association. And she was toxic in this election. The GOP game was simple. It was to make every election, local and state, a referendum on Nancy Pelosi.

In Pennsylvania alone, they spent over $8 million. That's eight million bucks to pay for 15,000 anti-Pelosi ads. And guess what, Eliot? It worked. When they added up the score in Pennsylvania, five House Democrats went down to defeat.

SPITZER: All right. So the GOP and the Tea Party make Nancy Pelosi their target. No big surprise there. But what is amassing is that Democrats put a bull's-eye on her too. Remember when Ed Rollins was on our show a couple of weeks before the election, he told us that Pelosi actually had told vulnerable Democrats run from me, I don't care, but just make sure you win the election.

PARKER: Well, it seems a lot of Blue Dogs were listening. Here's one incumbent Democrat who was glad to throw Madam Speaker under the bus.

(BEGIN VIDEO CLIP)

NARRATOR: A long way from San Francisco. And Jim Marshall is a long way from Nancy Pelosi. Jim Marshall doesn't support Nancy Pelosi. He voted the same as Republican leaders 65 percent of the time.

(END VIDEO CLIP)

SPITZER: Well, that was subtle. He ran as quick and as far as he could from Nancy Pelosi. But you know what? Mr. Marshall lost anyway. But you know what? I think Nancy Pelosi is one tough cookie. She's picked herself up, dusted herself off and now, she's running for minority leader of the House.

PARKER: Well, no question she's a tough cookie and whatever you think of her, she's got lots of guts. I love that word. Something tells me though we haven't heard the last of Nancy Pelosi which could be real good news for the GOP.

SPITZER: Oh, my goodness. Even the cartoonists are going after her now.

PARKER: Well, see, all the people wanted to say are the Republicans.

SPITZER: Yes.

PARKER: Kind of reminds me about how you're always, you know, building up Sarah Palin.

SPITZER: Oh, come on, we're not that devious.

PARKER: So we all have our favorites on either side.

SPITZER: We'll be right back with "Our Political Party." Stay right there.

(COMMERCIAL BREAK)

JOE JOHNS, CNN SENIOR CORRESPONDENT: I'm Joe Johns. More of "PARKER SPITZER" in a moment. First, the latest.

A third and final day of riveting testimony from Elizabeth Smart. She described her accused kidnapper, Brian David Mitchell, as crude, vulgar, self-serving and an unholy hypocrite. Tonight on "360," John Walsh, host of "America's Most Wanted" who played a key role in Mitchell's capture, weighs in on that trial.

In another high profile trial, an FBI biologist testified that former U.S. Congressman Gary Condit's semen was found on underwear belonging to former Washington intern Chandra Levy. The evidence was found in Levy's apartment after she disappeared in 2001. Condit who's never been a suspect in Levy's murder has admitted he had a close friendship with her but has refused to say whether they had sex.

And the Pentagon now says those mysterious streaks seen in the Southern California sky on Monday were an aircraft condensation trail. Some people thought it was a rocket launch.

That's the latest. "PARKER SPITZER" is back after this.

(COMMERCIAL BREAK)

SPITZER: Welcome to "Our Political Party," a conversation with a diverse group of opinionated guests, the kind of people you'd like to sit next to at any good party. Let's meet them. Pete Dominick is a comedian and political commentator and host of CNN's new Saturday show "WHAT THE WEEK."

PETE DOMINICK, HOST, "WHAT THE WEEK": That's right. What's the talk of the week? We take a look at the week. We have fun.

SPITZER: A week.

DOMINICK: No, the week.

SPITZER: The week.

DOMINICK: Now we look at January 1979.

SPITZER: I don't know.

DOMINICK: We talk to strangers on the street.

SPITZER: What do I know? All right.

(CROSSTALK)

DOMINICK: The year you were born.

SPITZER: That's a good place to start.

Julie Menin is a host of "Give and Take" on WNBC in New York and a founder of Lower Manhattan advocacy group Wall Street Rising. And Stephen Smith is a sports analyst, a commentator and a nationally syndicated radio host.

Welcome, everyone.

PARKER: OK, gang. A new Canadian study says that middle aged kids who interact with babies are less likely to bully their peers. So our question to you is, to whom would you like to give a baby?

DOMINICK: The obvious thing here, we're 8:00 CNN, I think we give babies to 8:00 hosts on MSNBC and FOX. Give babies to Olbermann and O'Reilly. They're mean guys. My fear though, of course, is that O'Reilly might actually eat one of the babies. That is something you have to take that into consideration. I'm just saying.

SPITZER: He looks hungry to you.

DOMINICK: If you ever watch Colbert talk about him.

JULIE MENIN, "GIVE AND TAKE," WNBC: I would give it to Michelle Bachmann because I think she is so outrageous and really in need of a reality check. I mean, last week, she said that President Obama's trip to India was going to cost $200 million a year.

SPITZER: No, a day.

MENIN: I'm sorry, a day.

SPITZER: Right.

MENIN: She had no factual basis whatsoever for that. I mean, she just makes up facts willy-nilly. I think it's problematic not to mention -- but in the health care debate, remember, she said that people should come armed and dangerous to Washington, D.C. Armed and dangerous? So I think she's in need of a baby.

SPITZER: And she needs a baby.

MENIN: And perhaps more than a baby.

(CROSSTALK)

PARKER: You don't need to tell when they need to have a baby, although I just kind of agree with you.

STEPHEN A. SMITH, RADIO HOST: The name that comes to my mind is Nancy Pelosi. I think that she's somebody that should have that. I know she's got about 7,000. I think she has been a bully in the past. I also believe that, you know, now hostile, wanting to be, you know, the voice of the Democratic Party as a minority leader. The fact is, you lost. You need to go away. You need to go home.

DOMINICK: First of all, she has babies. She has like eight grandkids. So it doesn't actually work.

SMITH: She needs another one.

DOMINICK: Eight might be enough.

(CROSSTALK)

SPITZER: You live in New York. I have a pleasure of meeting. Charming. And Nancy Pelosi will go down in history as one of the most effective speakers. You may disagree but effective.

SMITH: And one of the most disliked.

SPITZER: Effective is what I said because she's got a lot done. Anyway --

SMITH: OK.

PARKER: We have time for one more question. There's been lots of back and forth lately about American exceptionalism. Conservatives claim to believe in it. They think liberals don't have any sense of it. But was it your -- of all the things that are great about this country, what's the coolest thing about America? MENIN: Honestly, I think it's free speech. I think what's we're doing right now. The idea that we can be political pundits, that we can criticize President Obama, that we can criticize President Bush, that Glenn Beck who I vehemently disagree with can go to Washington and have a rally, that Jon Stewart can do the same. That is what makes this country great.

PARKER: I'm with you here. That's absolutely the greatest.

SMITH: To me what stands out in my mind is diversity. Obviously, you have an African-American that's the president of the United States. You look at immigration reform, a subject that needs to be addressed. Obviously, you have a lot of Hispanics out there that are influencing the political fabric of this country because you have a lot of people feeling the need to cater to them because they can be particularly influential in the upcoming elections. You take all of those things into consideration, you just look at the country. We call it a gorgeous mosaic. That's what we call New York City, but in reality America, some would argue that that's what America personifies and I agree with that.

SPITZER: You know, this all comes back to the same notion which is democracy works.

SMITH: Yes.

SPITZER: And when we formed this nation, we, they, whoever it was, forefathers, whatever we call them a couple of 100 years, we're the only one in the world. And now, two-thirds of the world depending on how you count it, that's pretty cool.

SMITH: Yes.

SPITZER: And the idea works.

SMITH: Yes, I agree.

PARKER: It's messy, but it works.

One last thing I've got to put on the table, of all the stuff that CNN covers all over the world, crises, one big myth we're running out of chocolate.

UNIDENTIFIED MALE: Listen, stop. PARKER: You heard this. We're running out of chocolate.

SMITH: I'm a Snickers guy and a Nestle crunch guy. This is very, very bad news. I'm very depressed about it. It needs to be addressed. We need to tell Congress about this.

(CROSSTALK)

MENIN: A campaign issue for Sarah Palin because we saw her in Pennsylvania last week reaming the Department of Ed in Pennsylvania for taking away sweets from schools. So, I mean, this might be her new issue. You never know. PARKER: I love it. You know, Eliot cannot talk about the budget --

(CROSSTALK)

Nothing gets past him without touching Goldman-Sachs. Of course, now it's Sarah Palin. OK. Even when we're talking about diminishing supply of chocolate.

DOMINICK: I see chocolate, I walk right past it to the pineapple.

PARKER: All right. I hate to do it. I hate to be the party pooper. Pete Dominick, Julie Menin and Stephen A. Smith, thank you all so much for being with us.

MENIN: Thank you.

SMITH: No problem.

PARKER: Chocolate for everyone.

SMITH: Yes.

PARKER: And thank you for being here.

Good night from New York. "LARRY KING LIVE" starts right now.